Coca Cola 2011 Annual Report Download - page 105

expenses in our consolidated statements of income. The total notional value of derivatives related to our economic hedges of this
type as of December 31, 2011 and 2010, was $1,165 million and $425 million, respectively.
In connection with our acquisition of CCE’s North American business, the Company assumed certain interest rate derivatives. The
Company did not designate these derivatives as hedges subsequent to the acquisition. These derivatives were originally recorded at
fair value as of October 2, 2010. As of December 31, 2010, all interest rate derivatives acquired from CCE were settled and will
have no additional impact on future earnings. In 2010, the Company recorded $5 million of losses related to these instruments in
interest expense.
The Company entered into interest rate locks that were used as economic hedges to mitigate the interest rate risk associated with
the Company’s repurchase of certain long-term debt. These hedges were not designated and did not qualify for hedge accounting,
but were effective economic hedges. The Company settled these hedges and recognized losses of $104 million in interest expense
during 2010. As of December 31, 2010, there were no outstanding interest rate derivatives used as economic hedges.
The following table presents the pretax impact that changes in the fair values of derivatives not designated as hedging instruments
had on earnings during the years ended December 31, 2011, 2010 and 2009 (in millions):
Gains (Losses)
Year Ended December 31,
Derivatives Not Designated Location of Gains (Losses)
as Hedging Instruments Recognized in Income 2011 2010 2009
Foreign currency contracts Net operating revenues $7 $ (15) $ (16)
Foreign currency contracts Other income (loss) — net (37) (46) 114
Foreign currency contracts Cost of goods sold (12) (9) —
Commodity contracts Cost of goods sold (42) 40 12
Commodity contracts Selling, general and administrative expenses (11) ——
Interest rate swaps Interest expense —(5) —
Interest rate locks Interest expense —(104) —
Other derivative instruments Selling, general and administrative expenses 821 23
Total $ (87) $ (118) $ 133
NOTE 6: EQUITY METHOD INVESTMENTS
Our consolidated net income includes our Company’s proportionate share of the net income or loss of our equity method
investees. When we record our proportionate share of net income, it increases equity income (loss) — net in our consolidated
statements of income and our carrying value in that investment. Conversely, when we record our proportionate share of a net loss,
it decreases equity income (loss) — net in our consolidated statements of income and our carrying value in that investment. The
Company’s proportionate share of the net income or loss of our equity method investees includes significant operating and
nonoperating items recorded by our equity method investees. These items can have a significant impact on the amount of equity
income (loss) — net in our consolidated statements of income and our carrying value in those investments. Refer to Note 17 for
additional information related to significant operating and nonoperating items recorded by our equity method investees. The
carrying values of our equity method investments are also impacted by our proportionate share of items impacting the equity
investee’s AOCI.
We eliminate from our financial results all significant intercompany transactions, including the intercompany portion of
transactions with equity method investees.
Coca-Cola Enterprises Inc.
On October 2, 2010, we completed our acquisition of CCE’s North American business and relinquished our indirect ownership
interest in CCE’s European operations. As a result of this transaction, the Company does not own any interest in New CCE.
Refer to Note 2 for additional information related to this acquisition.
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