Coca Cola 2008 Annual Report Download - page 70

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The Pension Protection Act of 2006 (‘‘PPA’’) was enacted in August 2006 and established, among other
things, new standards for funding of U.S. defined benefit pension plans. During 2008, the funded status of the
Company’s primary U.S. defined benefit pension plan declined as a result of the overall stock market decline. In
early 2009, the Company contributed approximately $175 million to this plan. Subsequent to this contribution,
the plan is sufficiently funded to maintain maximum flexibility as outlined in the PPA. However, we will consider
additional funding at a later date this year based on asset performance during the beginning of the year. We
generally expect to fund all future contributions with cash flows from operating activities.
Our international pension plans are funded in accordance with local laws and income tax regulations. We
do not expect contributions to these plans to be material in 2009 or thereafter. Therefore, no amounts have been
included in the table above.
As of December 31, 2008, the projected benefit obligation of the U.S. qualified pension plans was
$1,918 million, and the fair value of plan assets was approximately $1,442 million. The majority of this
underfunding was due to the negative impact that the recent credit crisis and financial system instability had on
the value of our pension plan assets. As of December 31, 2008, the projected benefit obligation of all pension
plans other than the U.S. qualified pension plans was approximately $1,700 million, and the fair value of all
other pension plan assets was approximately $848 million. The majority of this underfunding is attributable to an
international pension plan for certain non-U.S. employees that is unfunded due to tax law restrictions, as well as
our unfunded U.S. nonqualified pension plans. These U.S. nonqualified pension plans provide, for certain
associates, benefits that are not permitted to be funded through a qualified plan because of limits imposed by
the Internal Revenue Code of 1986. The expected benefit payments for these unfunded pension plans are not
included in the table above. However, we anticipate annual benefit payments to be approximately $40 million in
2009 and remain near that level through 2032, decreasing annually thereafter. Refer to Note 16 of Notes to
Consolidated Financial Statements.
Deferred income tax liabilities as of December 31, 2008 were approximately $914 million. Refer to Note 17
of Notes to Consolidated Financial Statements. This amount is not included in the total contractual obligations
table because we believe this presentation would not be meaningful. Deferred income tax liabilities are
calculated based on temporary differences between the tax bases of assets and liabilities and their respective
book bases, which will result in taxable amounts in future years when the liabilities are settled at their reported
financial statement amounts. The results of these calculations do not have a direct connection with the amount
of cash taxes to be paid in any future periods. As a result, scheduling deferred income tax liabilities as payments
due by period could be misleading, because this scheduling would not relate to liquidity needs.
On September 3, 2008, we announced our intention to make cash offers to purchase Huiyuan. Assuming
full acceptance of the offers, the transaction is valued at approximately $2.4 billion. Refer to the heading
‘‘Additional Information.’’ This amount is excluded from the contractual obligations table, because it is subject to
preconditions relating to Chinese regulatory approvals.
As of December 31, 2008, we have recorded approximately $383 million in the consolidated balance sheet
line item other liabilities for minority interests related to consolidated entities in which we do not have a
100 percent ownership interest. Such minority interests are not liabilities requiring the use of cash or other
resources; therefore, this amount is excluded from the contractual obligations table.
Foreign Exchange
Our international operations are subject to certain opportunities and risks, including currency fluctuations
and governmental actions. We closely monitor our operations in each country and seek to adopt appropriate
strategies that are responsive to changing economic and political environments, and to fluctuations in foreign
currencies.
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