Coca Cola 2011 Annual Report Download - page 64

During 2011, the Company issued $2,979 million of long-term debt. We used $979 million of this newly issued debt and paid a
premium of $208 million to exchange $1,022 million of existing long-term debt that was assumed in connection with our
acquisition of CCE’s North American business in the fourth quarter of 2010. The remaining cash from the issuance was used to
reduce the Company’s outstanding commercial paper balance and exchange a certain amount of short-term debt.
The general terms of the notes issued during 2011 are as follows:
• $1,655 million total principal amount of notes due September 1, 2016, at a fixed interest rate of 1.8 percent; and
• $1,324 million total principal amount of notes due September 1, 2021, at a fixed interest rate of 3.3 percent.
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.
As of December 31, 2011, the carrying value of the Company’s long-term debt included $733 million of fair value adjustments
related to the debt assumed from CCE. These fair value adjustments will be amortized over a weighted-average period of
approximately 16 years, which is equal to the weighted-average maturity of the assumed debt to which these fair value adjustments
relate. The amortization of these fair value adjustments will be a reduction of interest expense in future periods, which will
typically result in our interest expense being less than the actual interest paid to service the debt. Total interest paid was
$573 million in 2011.
Year Ended December 31, 2010, versus Year Ended December 31, 2009
Interest expense was $733 million in 2010, compared to $355 million in 2009, an increase of $378 million, or 106 percent. The
increase was primarily due to a $342 million charge related to the premiums paid to repurchase long-term debt and the costs
associated with the settlement of treasury rate locks issued in connection with the debt tender offer. The increase also reflects the
impact of interest expense on debt assumed from CCE. In connection with the Company’s acquisition of CCE’s North American
business, we assumed $266 million of short-term borrowings and $7,602 million of long-term debt. The estimated fair value of the
long-term debt was $9,345 million as of the acquisition date. In accordance with accounting principles generally accepted in the
United States, we recorded the assumed debt at its fair value as of the acquisition date. 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
remaining cash from the issuance was used to reduce our outstanding commercial paper balance.
Equity Income (Loss) — Net
Year Ended December 31, 2011, versus Year Ended December 31, 2010
Equity income (loss) — net represents our Company’s proportionate share of net income or loss from each of our equity method
investees. In 2011, equity income was $690 million, compared to equity income of $1,025 million in 2010, a decrease of
$335 million, or 33 percent. The decrease was primarily due to the Company’s acquisition and consolidation of CCE’s North
American business during the fourth quarter of 2010. As a result of this transaction, the Company stopped recording equity
income related to CCE beginning October 2, 2010, and our 2011 consolidated statement of income reflects the full year impact of
not having an equity interest in New CCE. Refer to the heading ‘‘Structural Changes, Acquired Brands and New License
Agreements’’ above. In addition, the decrease in equity income (loss) — net was partially due to the Company’s sale of its
investment in Coca-Cola Embonor, S.A. (‘‘Embonor’’) during the first quarter of 2011. The unfavorable impact of these items was
partially offset by the Company’s proportionate share of increased net income from certain of our equity method investees and
the favorable impact of foreign currency exchange fluctuations.
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