Coca Cola 2010 Annual Report Download - page 105

Although the CCE transaction was structured to be primarily cashless, under the terms of the merger agreement, we
agreed to assume approximately $8.9 billion of CCE debt. In the event that the actual CCE debt on the acquisition date
was less than the agreed amount, we agreed to make a cash payment to New CCE for the difference. As of the
acquisition date, the debt assumed by the Company was approximately $7.9 billion. The total cash consideration paid to
New CCE as part of the transaction was approximately $1.3 billion, which included approximately $1.0 billion related to
the debt shortfall. In addition, the cash consideration paid to New CCE included estimated amounts related to working
capital. We are currently working with New CCE to finalize amounts due to or from New CCE related to working
capital adjustments. These adjustments are expected to be finalized in the first quarter of 2011 and will impact the total
purchase price. However, any adjustments resulting from the finalization of working capital amounts are not expected to
be significant.
Under the terms of the merger agreement, the Company replaced share-based payment awards for certain current and
former employees of CCE’s North American and corporate operations. The following table provides a list of all
replacement awards and the estimated fair value of those awards issued in conjunction with our acquisition of CCE’s
North American business (in millions):
Number of
Shares, Options Estimated
and Units Issued Fair Value
Performance share units 1.6 $ 192
Stock options 4.8 109
Restricted share units 0.8 50
Restricted stock 0.2 12
Total 7.4 $ 363
The portion of the fair value of the replacement awards related to services provided prior to the business combination
was included in the total purchase price. The portion of the fair value associated with future service is recognized as
expense over the future service period, which varies by award. The Company determined that approximately
$237 million ($154 million net of tax) of the replacement awards was related to services rendered prior to the business
combination.
Each CCE performance share unit (‘‘PSU’’) replaced by the Company was converted at 100 percent of target into an
adjusted PSU of The Coca-Cola Company, determined by multiplying the number of shares of each PSU by an
exchange ratio (the ‘‘closing exchange ratio’’) equal to the closing price of a share of CCE common stock on the last
day of trading prior to the acquisition date divided by the closing price of the Company’s common stock on the same
day. At the time we issued these replacement PSUs, they were subject to the same vesting conditions and other terms
applicable to the CCE PSUs immediately prior to the closing date. However, in the fourth quarter of 2010, the
Company modified primarily all of these PSUs to eliminate the remaining holding period, which resulted in
approximately $74 million of accelerated expense. Refer to Note 12 for additional information.
Each CCE stock option replaced by the Company was converted into an adjusted stock option of The Coca-Cola
Company to acquire a number of shares of Coca-Cola common stock, determined by multiplying the number of shares
of CCE common stock subject to the CCE stock option by the closing exchange ratio. The exercise price per share of
the replacement awards was equal to the per share exercise price of the CCE stock option divided by the closing
exchange ratio. All of the replacement stock options are subject to the same vesting conditions and other terms
applicable to the CCE stock options immediately prior to the closing date. Refer to Note 12 for additional information.
Each CCE restricted share unit (‘‘RSU’’) replaced by the Company was converted into an adjusted RSU of The
Coca-Cola Company, determined by multiplying the number of shares of each RSU by the closing exchange ratio. All
of the replacement RSUs are subject to the same vesting conditions and other terms applicable to the CCE RSUs
immediately prior to the closing date. Refer to Note 12 for additional information.
Each share of CCE restricted stock replaced by the Company was converted into an adjusted share of restricted stock
of The Coca-Cola Company, determined by multiplying the number of shares of CCE restricted stock by the closing
exchange ratio. All of the replacement shares of restricted stock are subject to the same vesting conditions and other
terms applicable to the CCE shares of restricted stock immediately prior to the closing date. Refer to Note 12 for
additional information.
103