Coca Cola 2007 Annual Report Download - page 82

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THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: BOTTLING INVESTMENTS (Continued)
territories. These programs are agreed to on an annual basis. Marketing payments made to third parties on behalf of
CCE represent support of certain marketing activities and programs to promote the sale of Company trademark
products within CCE’s territories in conjunction with certain of CCE’s customers. Pursuant to cooperative advertising
and trade agreements with CCE, we received funds from CCE for local media and marketing program reimbursements.
Payments made to CCE for dispensing equipment repair services represent reimbursement to CCE for its costs of parts
and labor for repairs on cooler, dispensing, or post-mix equipment owned by us or our customers. The Other
payments—net line in the table above represents payments made to and received from CCE that are individually not
significant.
In 2007, our equity income related to CCE was increased by approximately $11 million related to our
proportionate share of certain items recorded by CCE. Our proportionate share of these items included an approximate
$35 million increase to equity income, primarily related to tax benefits recorded by CCE. This increase was partially
offset by an approximate $24 million decrease to equity income, primarily related to restructuring charges recorded by
CCE. Refer to Note 19.
The Canadian Bottler’s Agreements between our Company and CCE expired on January 28, 2008. We continue to
operate under the terms of the expired agreements while we negotiate the terms of the new agreements.
In 2006, our Company’s equity income related to CCE decreased by approximately $587 million, related to our
proportionate share of certain items recorded by CCE. Our proportionate share of these items included approximately
$602 million resulting from the impact of an impairment charge recorded by CCE. CCE recorded a $2.9 billion pretax
($1.8 billion after tax) impairment of its North American franchise rights. The decline in the estimated fair value of
CCE’s North American franchise rights was the result of several factors, including but not limited to (1) CCE’s revised
outlook on 2007 raw material costs driven by significant increases in aluminum and high fructose corn syrup
(“HFCS”); (2) a challenging marketplace environment with increased pricing pressures in several high-growth
beverage categories; and (3) increased interest rates contributing to a higher discount rate and corresponding capital
charge. Our proportionate share of CCE’s charges also included approximately $18 million due to restructuring charges
recorded by CCE. These charges were partially offset by approximately $33 million related to our proportionate share
of changes in certain of CCE’s state and Canadian federal and provincial tax rates. All of these charges and changes
impacted our Bottling Investments operating segment.
In 2005, our equity income related to CCE was reduced by approximately $33 million related to our proportionate
share of certain charges and gains recorded by CCE. Our proportionate share of CCE’s charges included an
approximate $51 million decrease to equity income, primarily related to the tax liability recorded by CCE in the fourth
quarter of 2005 resulting from the repatriation of previously unremitted foreign earnings under the Jobs Creation Act
and approximately $18 million due to restructuring charges recorded by CCE. These restructuring charges were
primarily related to workforce reductions associated with the reorganization of CCE’s North American operations,
changes in executive management and elimination of certain positions in CCE’s corporate headquarters. These charges
were partially offset by an approximate $37 million increase to equity income in the second quarter of 2005 resulting
from CCE’s HFCS lawsuit settlement proceeds and changes in certain of CCE’s state and provincial tax rates. Refer to
Note 19.
Our Company and CCE have established a Global Marketing Fund, under which we expect to pay CCE
$62 million annually through December 31, 2014, as support for certain marketing activities. The term of the
agreement will automatically be extended for successive 10-year periods thereafter unless either party gives written
notice of termination of this agreement. The marketing activities to be funded under this agreement will be agreed upon
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