Coca Cola 2011 Annual Report Download - page 71

Cash Flows from Financing Activities
Our cash flows provided by (used in) financing activities were as follows (in millions):
Year Ended December 31, 2011 2010 2009
Issuances of debt $ 27,495 $ 15,251 $ 14,689
Payments of debt (22,530) (13,403) (12,326)
Issuances of stock 1,569 1,666 664
Purchases of stock for treasury (4,513) (2,961) (1,518)
Dividends (4,300) (4,068) (3,800)
Other financing activities 45 50 (2)
Net cash provided by (used in) financing activities $ (2,234) $ (3,465) $ (2,293)
Debt Financing
Our Company maintains debt levels we consider prudent based on our cash flows, interest coverage ratio and percentage of debt
to capital. We use debt financing to lower our overall cost of capital, which increases our return on shareowners’ equity. This
exposes us to adverse changes in interest rates. Our interest expense may also be affected by our credit ratings.
As of December 31, 2011, our long-term debt was rated ‘‘A+’’ by Standard & Poor’s, ‘‘Aa3’’ by Moody’s and ‘‘A+’’ by Fitch. Our
commercial paper program was rated ‘‘A-1’’ by Standard & Poor’s, ‘‘P-1’’ by Moody’s and ‘‘F-1’’ by Fitch. In assessing our credit
strength, all three agencies consider our capital structure (including the amount and maturity dates of our debt) and financial
policies as well as the aggregated balance sheet and other financial information for the Company. In addition, some rating
agencies also consider financial information for certain bottlers, including New CCE, Coca-Cola Amatil, Coca-Cola Bottling Co.
Consolidated, Coca-Cola FEMSA and Coca-Cola Hellenic. While the Company has no legal obligation for the debt of these
bottlers, the rating agencies believe the strategic importance of the bottlers to the Company’s business model provides the
Company with an incentive to keep these bottlers viable. It is our expectation that the credit rating agencies will continue using
this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure, our major bottlers’
financial performance, changes in the credit rating agencies’ methodology in assessing our credit strength, or for any other reason,
our cost of borrowing could increase. Additionally, if certain bottlers’ credit ratings were to decline, the Company’s share of equity
income could be reduced as a result of the potential increase in interest expense for these bottlers.
We monitor our financial ratios and, as indicated above, the rating agencies consider these ratios in assessing our credit ratings.
Each rating agency employs a different aggregation methodology and has different thresholds for the various financial ratios.
These thresholds are not necessarily permanent, nor are they always fully disclosed to our Company.
Our global presence and strong capital position give us access to key financial markets around the world, enabling us to raise
funds at a low effective cost. This posture, coupled with active management of our mix of short-term and long-term debt and our
mix of fixed-rate and variable-rate debt, results in a lower overall cost of borrowing. Our debt management policies, in conjunction
with our share repurchase programs and investment activity, can result in current liabilities exceeding current assets.
Issuances and payments of debt included both short-term and long-term financing activities. On December 31, 2011, we had
$4,625 million in lines of credit available for general corporate purposes, including commercial paper backup. These backup lines
of credit expire at various times from 2012 through 2016. There were no borrowings under these backup lines of credit during
2011. These credit facilities are subject to normal banking terms and conditions. Some of the financial arrangements require
compensating balances, none of which is presently significant to our Company.
In 2011, the Company had issuances of debt of $27,495 million, which included $25,219 million of issuances of commercial paper
and short-term debt with maturities greater than 90 days. The Company’s total issuances of debt also included long-term debt
issuances of $2,276 million, net of the debt issued to exchange a certain amount of our existing long-term debt. The Company
issued $2,979 million of long-term debt during 2011. 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.
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