Coca Cola 2007 Annual Report Download - page 51

Selling, General and Administrative Expenses
The following table sets forth the significant components of selling, general and administrative expenses (in
millions):
Year Ended December 31, 2007 2006 2005
Selling expenses $ 5,029 $ 3,924 $ 3,453
Advertising expenses 2,774 2,553 2,475
General and administrative expenses 2,829 2,630 2,487
Stock-based compensation expense 313 324 324
Selling, general and administrative expenses $ 10,945 $ 9,431 $ 8,739
Total selling, general and administrative expenses were approximately 16 percent higher in 2007 versus 2006. The
increases were primarily related to continued investments in marketing, increased costs to drive growth in our
consolidated bottling operations, including a 6 percent increase related to the acquisitions and consolidations of certain
bottling operations (refer to Note 20 of Notes to Consolidated Financial Statements), increased sales and service costs
for certain brand acquisitions and a 4 percent increase due to foreign currency fluctuations. Selling and advertising
expenses increased 20 percent in 2007 compared to 2006, on a combined basis. The increases in selling and advertising
expenses were primarily related to increased investments in marketing and innovation activities, including the
reinvestment of certain general and administrative expense savings derived from productivity initiatives. Selling and
advertising expenses also increased due to costs to drive growth in our consolidated bottling operations, including a
6 percent increase related to the acquisitions and consolidations of certain bottling operations and a 4 percent increase
due to foreign currency fluctuations. General and administrative expenses increased 8 percent in 2007 compared to
2006, primarily due to increased costs in our consolidated bottling operations, including a 4 percent impact relating to
the acquisitions and consolidations of certain bottling operations, increased costs of long-term incentive plans based on
the Company’s financial performance over the plan periods, and a 3 percent increase due to foreign currency
fluctuations. These increases in general and administrative expenses were partially offset by expense savings generated
through productivity initiatives. In February and October of 2007, the Company amended its U.S. retiree medical plan
to limit the Company’s exposure to increases in retiree medical costs associated with current and future retirees. Based
on the materiality of the change in liability resulting from the amendments, we remeasured the assets and liabilities of
the U.S. retiree medical plan effective February 28, 2007 and October 31, 2007. As a result of the amendments and
remeasurements, the Company reduced its liabilities for the U.S. retiree medical plan by approximately $435 million.
In accordance with SFAS No. 158, the Company also recognized the appropriate effects of the change in accumulated
other comprehensive income (loss) and deferred taxes. In addition, annual net periodic benefits costs decreased by
approximately $82 million compared to 2006, primarily due to changes to the U.S. retiree medical plan. This reduced
expense impacted the general and administrative expenses line item. The Company anticipates receiving a similar
benefit, as a result of the changes to the U.S. retiree medical plan, in each of the five years beginning January 1, 2008.
Refer to Note 16.
As of December 31, 2007, we had approximately $441 million of total unrecognized compensation cost related to
nonvested share-based compensation arrangements granted under our plans. This cost is expected to be recognized over
a weighted-average period of 1.8 years as stock-based compensation expense. This expected cost does not include the
impact of any future stock-based compensation awards. Refer to Note 15 of Notes to Consolidated Financial
Statements.
Total selling, general and administrative expenses were approximately 8 percent higher in 2006 versus 2005. The
increases in selling and advertising expenses were primarily related to increased investments in marketing activities,
including World Cup and Winter Olympics promotions in the European Union, combined with new product innovation
activities and increased costs in our consolidated bottling investments as a result of acquisitions and consolidation of
certain bottling operations. General and administrative expenses increased due to higher costs in Bottling Investments
related to the acquisitions of CCCIL and TJC and the consolidation of Brucephil under Interpretation No. 46(R). The
acquisition of Bremer during the third quarter of 2005 also increased general and administrative expenses in 2006,
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