Coca Cola 2007 Annual Report Download - page 124

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20: ACQUISITIONS AND INVESTMENTS (Continued)
additional information the Company expects to obtain includes, among other things, valuations of property, plant and
equipment and identifiable intangible assets. On August 30, 2007, the Company announced its plans to transition to a
new distribution model for glacéau products. This new distribution model includes a mix of current glacéau distributors
and existing Coca-Cola system bottlers. Also, the Company will retain the distribution rights for certain channels. The
implementation of this plan resulted in approximately $0.2 billion in liabilities for anticipated costs to terminate
existing glacéau distribution agreements, which was reflected as an adjustment to the original allocation of acquisition
costs. The Company completed the majority of the transition in the fourth quarter of 2007, and anticipates the
remainder to be completed in the first half of 2008. The Company paid out approximately half of its originally accrued
liability to former glacéau distributors as of December 31, 2007. The acquisition of glacéau was accounted for as a
business combination, with the results of the acquired entity included in the North America operating segment as of the
acquisition date.
In addition, certain executive officers and former shareholders of glacéau invested approximately $179 million of
their proceeds from the sale of glacéau in common stock of the Company at then current market prices. These shares of
Company common stock were placed in escrow pursuant to the glacéau acquisition agreement.
As discussed below, in the second quarter of 2007, the Company divested a portion of its interest in Scarlet Ibis
Investment 3 (Proprietary) Limited (“Scarlet”), a bottling company in South Africa.
During the first quarter of 2007, our Company acquired the remaining 65 percent interest in CCBPI from San
Miguel Corporation (“SMC”) for consideration of approximately $591 million plus assumed net debt, of which
$100 million was placed in escrow until certain matters related to the closing balance sheet audit of CCBPI were
resolved. During the third quarter of 2007, the entire escrow amount was released, and our Company recovered
$70 million. The adjusted purchase price after the recovery from escrow was approximately $521 million plus assumed
debt, net of acquired cash, of approximately $79 million. Of the $521 million of consideration, the Company has
outstanding notes payable to SMC for approximately $120 million. As a result of the acquisition, the Company owns
100 percent of the outstanding stock of CCBPI. Upon closing of the acquisition, we made preliminary estimates of the
fair values of the assets and liabilities for consolidation. Our Company has prepared valuations for many of the assets
and liabilities acquired, and the preliminary estimates have been adjusted accordingly. The preliminary amount of
purchase price allocated to property, plant and equipment was approximately $319 million, franchise rights was
approximately $354 million and goodwill was approximately $152 million. The goodwill is not deductible for tax
purposes. Future adjustments necessary to finalize the purchase accounting are not expected to be significant. The
franchise rights have been assigned an indefinite life. CCBPI is included in the Bottling Investments operating
segment. Management finalized a plan to improve the efficiency of CCBPI, which included the closing of eight
production facilities during the third quarter of 2007. The acquisition of CCBPI was accounted for as a business
combination, with the results of the acquired entity included in the Bottling Investments operating segment as of the
acquisition date.
First quarter 2007 acquisition and investing activities also included approximately $327 million related to the
purchase of Fuze Beverage, LLC (“Fuze”), maker of Fuze enhanced juices and teas in the U.S., and Leao Junior S.A.
(“Leao Junior”), a Brazilian herbal beverage company. The preliminary amount of purchase price related to these
acquisitions allocated to property, plant and equipment was approximately $13 million, identifiable intangible assets,
primarily trademarks, was approximately $150 million and goodwill was approximately $163 million. The purchase
price allocations will be adjusted once additional fair value information is obtained. The acquisitions of Fuze and Leao
Junior were accounted for as business combinations, with the results of the acquired entities included in the North
America and Latin America operating segments, respectively, as of the acquisition dates.
122