Coca Cola 2008 Annual Report Download - page 92

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: BOTTLING INVESTMENTS (Continued)
infrastructure programs. The carrying value of our equity investment in CCE will not be adjusted until we have
restored our basis in these infrastructure programs.
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.
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
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.
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 each year as part of the annual joint planning process and will be incorporated into the annual
marketing plans of both companies. These amounts are included in the line item marketing payments made by
us directly to CCE in the table above.
Our Company previously entered into programs with CCE designed to help develop cold-drink
infrastructure. Under these programs, our Company paid CCE for a portion of the cost of developing the
infrastructure necessary to support accelerated placements of cold-drink equipment. These payments support a
common objective of increased sales of Company trademark beverages from increased availability and
consumption in the cold-drink channel. In connection with these programs, CCE agreed to:
(1) purchase and place specified numbers of Company-approved cold-drink equipment each year through
2010;
(2) maintain the equipment in service, with certain exceptions, for a period of at least 12 years after
placement;
(3) maintain and stock the equipment in accordance with specified standards; and
(4) annual reporting to our Company of minimum average annual unit case volume throughout the
economic life of the equipment and other specified information.
CCE must achieve minimum average unit case volume for a 12-year period following the placement of
equipment. These minimum average unit case volume levels ensure adequate gross profit from sales of
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