Coca Cola 2011 Annual Report Download - page 48

During the fourth quarter of 2011, the Company extinguished long-term debt that had a carrying value of $20 million and was not
scheduled to mature until 2012. This debt was outstanding prior to the Company’s acquisition of CCE’s North American business.
In addition, the Company repurchased long-term debt during 2011 that was assumed in connection with our acquisition of CCE’s
North American business. The repurchased debt included $99 million in unamortized fair value adjustments recorded as part of
our purchase accounting for the CCE transaction and was settled throughout the year as follows:
• During the first quarter of 2011, the Company repurchased all of our outstanding U.K. pound sterling notes that had a
carrying value of $674 million;
• During the second quarter of 2011, the Company repurchased long-term debt that had a carrying value of $42 million; and
• During the third quarter of 2011, the Company repurchased long-term debt that had a carrying value of $19 million.
The Company recorded a net charge of $9 million in the line item interest expense in our consolidated statement of income
during the year ended December 31, 2011. This net charge was due to the exchange, repurchase and/or extinguishment of
long-term debt described above.
On November 15, 2010, the Company issued $4,500 million of long-term notes and used some of the proceeds to repurchase
$2,910 million of long-term debt. The Company used the remaining cash from the issuance to reduce our outstanding commercial
paper balance. The repurchased debt consisted of $1,827 million of debt assumed in our acquisition of CCE’s North American
business and $1,083 million of the Company’s debt that was outstanding prior to the acquisition. The Company recorded a charge
of $342 million in 2010 related to the premiums paid to repurchase the long-term debt and the costs associated with the
settlement of treasury rate locks issued in connection with the debt tender offer.
Refer to the heading ‘‘Interest Expense’’ below and Note 10 of Notes to Consolidated Financial Statements for additional
information related to the Company’s long-term debt balance.
In 2010, we recognized a gain of $4,978 million due to the remeasurement of our equity interest in CCE to fair value upon the
close of the transaction. This gain was classified in the line item other income (loss) — net in our consolidated statement of
income.
Although our 2010 operating results and certain key metrics were affected by these structural changes, our 2011 consolidated
financial statements reflect 12 months of operating results of the acquired CCE North American business and DPS license
agreements compared to three months in 2010. Therefore, these structural changes had a much larger impact on our operating
results and certain key metrics in 2011, when compared to 2010.
Prior to the closing of this acquisition, we had accounted for our investment in CCE under the equity method of accounting.
Under the equity method of accounting, we recorded our proportionate share of CCE’s net income or loss in the line item equity
income (loss) — net in our consolidated statements of income. However, as a result of this transaction, beginning October 2,
2010, the Company no longer records equity income or loss related to CCE; and therefore, this transaction negatively impacted
the amount of equity income the Company recorded during both 2011 and 2010. Refer to the heading ‘‘Equity Income (Loss) —
Net’’ below.
Divestiture of Norwegian and Swedish Bottling Operations
The divestiture of our Norwegian and Swedish bottling operations had no impact on our consolidated unit case volume and
consolidated concentrate sales volume, for the same reasons discussed above in relation to our acquisition of CCE’s North
American business. The divestiture of these bottling operations reduced unit case volume for the Bottling Investments operating
segment. In addition, the divestiture reduced net operating revenues and net income for our consolidated operating results and
the Bottling Investments operating segment. However, since we divested a finished products business, it had a positive impact on
our gross profit margins and operating margins. Furthermore, the impact these divestitures had on the Company’s net operating
revenues was partially offset by the concentrate revenues that were recognized on sales to these bottling operations. These
concentrate sales had previously been eliminated because they were intercompany transactions. The net impact to net operating
revenues was included as a structural change in our analysis of changes to net operating revenues. Refer to the heading ‘‘Net
Operating Revenues’’ below.
This divestiture resulted in a gain of $597 million in 2010, which was classified in the line item other income (loss) — net in our
consolidated statement of income. In 2011, the Company recorded charges of $5 million related to the finalization of working
capital adjustments in connection with the divestiture of our Norwegian and Swedish bottling operations. These charges reduced
the transaction gain the Company previously reported in 2010.
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