Coca Cola 2010 Annual Report Download - page 108

entered into license agreements with DPS to distribute Dr Pepper trademark brands in the U.S., Canada Dry in the
Northeast U.S., and Canada Dry and C’ Plus in Canada, and we made a net one-time cash payment of $715 million to
DPS. Under the license agreements, the Company agreed to meet certain performance obligations in order to distribute
DPS products in retail and foodservice accounts and vending machines. The license agreements have initial terms of
20 years, with automatic 20-year renewal periods unless otherwise terminated under the terms of the agreements. The
license agreements replaced agreements between DPS and CCE existing immediately prior to the completion of the
CCE transaction. In addition, we entered into an agreement with DPS to include Dr Pepper and Diet Dr Pepper in our
Coca-Cola Freestyle fountain dispensers in certain outlets throughout the United States. The Coca-Cola Freestyle
agreement has a term of 20 years.
Although these transactions were negotiated concurrently, they are legally separable and have distinct termination
provisions and penalties, if applicable. As a result, the Company recorded an asset of $865 million related to the DPS
license agreements and recorded deferred revenue of $150 million related to the Freestyle agreement. The DPS license
agreements were determined to be indefinite-lived intangible assets and classified in the line item bottlers’ franchise
rights with indefinite lives in our consolidated balance sheet. The Company reached the conclusion that these
distribution rights had an indefinite life based on several key factors, including, but not limited to, (1) our license
agreements with DPS shall remain in effect for 20 years and shall automatically renew for additional 20 year successive
periods thereafter unless terminated pursuant to the provisions of the agreements; (2) no additional payments shall be
due for the renewal periods; (3) we anticipate using the assets indefinitely; (4) there are no known legal, regulatory or
contractual provisions that are likely to limit the useful life of these assets; and (5) the classification of these assets as
indefinite-lived assets is consistent with similar market transactions. The Company will amortize the deferred revenue
related to the Freestyle agreement on a straight-line basis over 20 years, which is the length of the agreement. The
amortization will be included as a component of the Company’s net revenues.
Divestitures
In 2010, proceeds from the disposal of bottling companies and other investments totaled $972 million, primarily related
to the sale of all of our ownership interests in our Norwegian and Swedish bottling operations to New CCE for
approximately $0.9 billion in cash on October 2, 2010. In addition to the proceeds related to the disposal of our
Norwegian and Swedish bottling operations, our Company sold 50 percent of our investment in Le˜ ao Junior, S.A.
(‘‘Le˜ ao Junior’’), a Brazilian tea company, for approximately $83 million. Refer to Note 17 for information related to
the gain on these divestitures.
Our Norwegian and Swedish bottling operations (the disposal group) met the criteria to be classified as held for sale
prior to their disposal. The following table presents information related to the major classes of assets and liabilities of
the disposal group as of October 1, 2010 (in millions):
Trade receivables, less allowances for doubtful accounts $ 67
Inventories 42
Prepaid expenses and other current assets 17
Property, plant and equipment — net 315
Intangible assets 172
Total assets1$ 613
Accounts payable and accrued expenses $ 159
Accrued income taxes 10
Deferred income taxes 45
Total liabilities1$ 214
1Prior to the divestiture of our Norwegian and Swedish bottling operations, the assets and liabilities of these entities were included
in our Bottling Investments operating segment. Refer to Note 19.
We determined that our Norwegian and Swedish bottling operations did not meet the criteria to be classified as
discontinued operations, primarily due to our continuing significant involvement with these entities. Although we do not
have an ownership interest in New CCE, we have concluded that our ongoing contractual relationship, governed by the
Bottler’s Agreements, constitutes a continuing significant involvement.
106