Coca Cola 2011 Annual Report Download - page 68

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company
had $110 million, $112 million and $94 million in interest and penalties related to unrecognized tax benefits accrued as of
December 31, 2011, 2010 and 2009, respectively. Of these amounts, $2 million of benefit, $17 million of expense and $16 million
of benefit was recognized through income tax expense in 2011, 2010 and 2009, respectively. If the Company were to prevail on all
uncertain tax positions, the reversal of this accrual would also be a benefit to the Company’s effective tax rate.
Based on current tax laws, the Company’s effective tax rate in 2012 is expected to be approximately 24.0 percent to 25.0 percent
before considering the effect of any unusual or special items that may affect our tax rate in future years.
Liquidity, Capital Resources and Financial Position
We believe our ability to generate cash from operating activities is one of our fundamental financial strengths. Refer to the
heading ‘‘Cash Flows from Operating Activities’’ below. The near-term outlook for our business remains strong, and we expect to
generate substantial cash flows from operations in 2012. As a result of our expected cash flows from operations, we have
significant flexibility to meet our financial commitments. The Company does not typically raise capital through the issuance of
stock. Instead, we use debt financing to lower our overall cost of capital and increase our return on shareowners’ equity. Refer to
the heading ‘‘Cash Flows from Financing Activities’’ below. We have a history of borrowing funds domestically and continue to
have the ability to borrow funds domestically at reasonable interest rates. Our debt financing includes the use of an extensive
commercial paper program as part of our overall cash management strategy. The Company reviews its optimal mix of short-term
and long-term debt regularly and may replace certain amounts of commercial paper, short-term debt and current maturities of
long-term debt with new issuances of long-term debt in the future. In addition to the Company’s cash balances, commercial paper
program, and our ability to issue long-term debt, we also had $4,625 million in lines of credit for general corporate purposes,
including commercial paper backup, as of December 31, 2011. These backup lines of credit expire at various times from 2012
through 2016.
We have significant operations outside the United States. Unit case volume outside the United States represented approximately
80 percent of the Company’s worldwide unit case volume in 2011. We earn a substantial amount of our consolidated operating
income and income before income taxes in foreign subsidiaries that either sell concentrate to our local bottling partners or, in
certain instances, sell finished products directly to our customers to fulfill the demand for Company beverage products outside the
United States. A significant portion of these foreign earnings is deemed to be indefinitely reinvested in foreign jurisdictions. As a
result, the majority of our cash, cash equivalents and short-term investments are held by our foreign subsidiaries. We do not
intend, nor foresee a need, to repatriate these funds. Additionally, the government in Venezuela has enacted certain monetary
policies that restrict the ability of companies to pay dividends from retained earnings. As of December 31, 2011, cash held by our
Venezuelan subsidiary accounted for approximately 2 percent of our consolidated cash and cash equivalents balance.
Net operating revenues in the United States were $18.7 billion in 2011, or approximately 40 percent of the Company’s
consolidated net operating revenues. We expect existing domestic cash, cash equivalents, short-term investments, cash flows from
operations and the issuance of debt to continue to be sufficient to fund our domestic operating activities and cash commitments
for investing and financing activities. In addition, we expect existing foreign cash, cash equivalents, short-term investments, and
cash flows from operations to continue to be sufficient to fund our foreign operating activities and cash commitments for investing
activities.
In the future, should we require more capital to fund significant discretionary activities in the United States than is generated by
our domestic operations, or is available through the issuance of debt, we could elect to repatriate future periods’ earnings from
foreign jurisdictions. This alternative could result in a higher effective tax rate.
Based on all the aforementioned factors, the Company believes its current liquidity position is strong, and we will continue to
meet all our financial commitments for the foreseeable future. These commitments include, but are not limited to, regular
quarterly dividends, debt maturities, capital expenditures, share repurchases and other obligations included under the heading
‘‘Off-Balance Sheet Agreements and Aggregate Contractual Obligations’’ below.
Cash Flows from Operating Activities
Net cash provided by operating activities for the years ended December 31, 2011, 2010 and 2009 was $9,474 million, $9,532 million
and $8,186 million, respectively.
Cash flows from operating activities decreased $58 million, or 1 percent, in 2011 compared to 2010. This decrease was primarily
attributable to an increase in contributions to our pension plans of $924 million during 2011; the temporary extension of the
Company’s credit terms in Japan as a result of the natural disasters that devastated the northern and eastern portions of the
country during the first quarter of 2011; an increase in interest payments related to long-term debt; and an increase in cash
payments related to our productivity, integration and restructuring initiatives. The unfavorable impact of these items was
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