Coca Cola 2013 Annual Report Download - page 16

We rely on our bottling partners for a significant portion of our business. If we are unable to maintain good relationships with our
bottling partners, our business could suffer.
We generate a significant portion of our net operating revenues by selling concentrates and syrups to independent bottling
partners. As independent companies, our bottling partners, some of which are publicly traded companies, make their own business
decisions that may not always align with our interests. In addition, many of our bottling partners have the right to manufacture or
distribute their own products or certain products of other beverage companies. If we are unable to provide an appropriate mix of
incentives to our bottling partners through a combination of pricing and marketing and advertising support, or if our bottling
partners are not satisfied with our brand innovation and development efforts, they may take actions that, while maximizing their
own short-term profits, may be detrimental to our Company or our brands, or they may devote more of their energy and
resources to business opportunities or products other than those of the Company. Such actions could, in the long run, have an
adverse effect on our profitability.
If our bottling partners’ financial condition deteriorates, our business and financial results could be affected.
We derive a significant portion of our net operating revenues from sales of concentrates and syrups to independent bottling
partners and, therefore, the success of our business depends on our bottling partners’ financial strength and profitability.
While under our agreements with our bottling partners we generally have the right to unilaterally change the prices we charge for
our concentrates and syrups, our ability to do so may be materially limited by our bottling partners’ financial condition and their
ability to pass price increases along to their customers. In addition, we have investments in certain of our bottling partners,
which we account for under the equity method, and our operating results include our proportionate share of such bottling
partners’ income or loss. Our bottling partners’ financial condition is affected in large part by conditions and events that are
beyond our and their control, including competitive and general market conditions in the territories in which they operate; the
availability of capital and other financing resources on reasonable terms; loss of major customers; or disruptions of bottling
operations that may be caused by strikes, work stoppages, labor unrest or natural disasters. A deterioration of the financial
condition or results of operations of one or more of our major bottling partners could adversely affect our net operating revenues
from sales of concentrates and syrups; could result in a decrease in our equity income; and could negatively affect the carrying
values of our investments in bottling partners, resulting in asset write-offs.
Increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could have a material adverse
impact on our financial results.
We are subject to income tax in the United States and in numerous other jurisdictions in which we generate net operating
revenues. Increases in income tax rates could reduce our after-tax income from affected jurisdictions. We earn a substantial
portion of our income in foreign countries. If our capital or financing needs in the United States require us to repatriate earnings
from foreign jurisdictions above our current levels, our effective tax rates for the affected periods could be negatively impacted. In
addition, there have been proposals to reform U.S. tax laws that could significantly impact how U.S. multinational corporations
are taxed on foreign earnings. Although we cannot predict whether or in what form these proposals will pass, several of the
proposals being considered, if enacted into law, could have a material adverse impact on our income tax expense and cash flow.
Our annual tax rate is based on our income and the tax laws in the various jurisdictions in which we operate. Significant judgment
is required in determining our annual income tax expense and in evaluating our tax positions. Although we believe our tax
estimates are reasonable, the final determination of tax audits and any related disputes could be materially different from our
historical income tax provisions and accruals. The results of audits or related disputes could have a material effect on our financial
statements for the period or periods for which the applicable final determinations are made.
Increased or new indirect taxes in the United States or in one or more of our other major markets could negatively affect our
business.
Our business operations are subject to numerous duties or taxes that are not based on income, sometimes referred to as ‘‘indirect
taxes,’’ including import duties, excise taxes, sales or value-added taxes, property taxes and payroll taxes, in many of the
jurisdictions in which we operate, including indirect taxes imposed by state and local governments. In addition, in the past, the
United States Congress considered imposing a federal excise tax on beverages sweetened with sugar, HFCS or other nutritive
sweeteners and may consider similar proposals in the future. As federal, state and local governments experience significant budget
deficits, some lawmakers have proposed singling out beverages among a plethora of revenue-raising items. Increases in or the
imposition of new indirect taxes on our business operations or products would increase the cost of products or, to the extent
levied directly on consumers, make our products less affordable, which may negatively impact our net operating revenues.
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