Coca Cola 2010 Annual Report Download - page 66

portion of our ownership interest in Coca-Cola Pakistan, which resulted in its deconsolidation. Other operating
expenses reflects the impact of an increase in pension costs and higher short-term incentive costs, partially offset by
savings generated from the Company’s ongoing productivity initiatives. The increase in our pension expense was
primarily attributable to the significant decline in the value of our pension plan assets precipitated by the credit crisis
and financial system instability in 2008. As a result of this decline, along with a decrease in the discount rate, our 2009
pension costs increased by $103 million.
Other Operating Charges
Other operating charges incurred by operating segment were as follows (in millions):
Year Ended December 31, 2010 2009 2008
Eurasia & Africa $7$4$1
Europe 50 7—
Latin America ——1
North America 133 31 56
Pacific 22 1—
Bottling Investments 122 141 46
Corporate 485 129 246
Total $ 819 $ 313 $ 350
In 2010, the Company incurred other operating charges of approximately $819 million, which consisted of $478 million
associated with the Company’s productivity, integration and restructuring initiatives, $250 million related to charitable
contributions, $81 million due to transaction costs incurred in connection with our acquisition of CCE’s North
American business and the sale of our Norwegian and Swedish bottling operations to New CCE and $10 million of
charges related to bottling activities in Eurasia. The Company’s integration activities include costs associated with the
integration of CCE’s North American business, as well as the integration of 18 German bottling and distribution
operations acquired in 2007. The charitable contributions were primarily attributable to a cash donation to The
Coca-Cola Foundation. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information
related to the transaction costs.
In 2010, the Company began an integration initiative related to our acquisition of CCE’s North American business,
which resulted in total expenses of $135 million. These expenses were primarily related to both internal and external
costs associated with the development and design of our future operating framework. These charges impacted the North
America and Corporate operating segments. Our acquisition of CCE’s North American business closed on October 2,
2010. Refer to Note 2 of Notes to Consolidated Financial Statements.
We believe this acquisition will result in an evolved franchise system that will enable us to better serve the unique needs
of the North American market. The creation of a unified operating system will strategically position us to better market
and distribute our nonalcoholic beverage brands in North America. We are reconfiguring our manufacturing, supply
chain and logistics operations to achieve cost reductions over time. Once fully integrated, we expect to generate
operational synergies of at least $350 million per year. We anticipate that these operational synergies will be phased in
over the next four years, and that we will begin to fully realize the annual benefit from these synergies in the fourth
year. We currently expect to realize approximately $140 million to $150 million of these synergies in 2011.
Upon completion of the CCE transaction, we combined the management of the acquired North American business with
the management of our existing foodservice business, Minute Maid and Odwalla juice businesses, North America supply
chain operations and Company-owned bottling operations in Philadelphia, Pennsylvania, into a unified bottling and
customer service organization called CCR. In addition, we reshaped our remaining CCNA operations into an
organization that primarily provides franchise leadership and consumer marketing and innovation for the North
American market. As a result of the transaction and related reorganization, our North American businesses operate as
aligned and agile organizations with distinct capabilities, responsibilities and strengths. The Company currently expects
the total cost of these integration initiatives to be approximately $425 million and anticipates recognizing these charges
over the next three years.
64