Coca Cola 2013 Annual Report Download - page 70

restrictions, as well as certain unfunded U.S. nonqualified pension plans. These U.S. nonqualified pension plans provide, for
certain associates, benefits that are not permitted to be funded through a qualified plan because of limits imposed by the Internal
Revenue Code of 1986. The expected benefit payments for these unfunded pension plans are not included in the table above.
However, we anticipate annual benefit payments for these unfunded pension plans to be approximately $70 million in 2014 and
remain near that level through 2027, decreasing annually thereafter. Refer to Note 13 of Notes to Consolidated Financial
Statements.
In 2014, we expect to contribute an additional $175 million to our international pension plans. Refer to Note 13 of Notes to
Consolidated Financial Statements. We did not include our estimated contributions to our various plans in the table above.
In general, we are self-insured for large portions of many different types of claims; however, we do use commercial insurance
above our self-insured retentions to reduce the Company’s risk of catastrophic loss. Our reserves for the Company’s self-insured
losses are estimated through actuarial procedures of the insurance industry and by using industry assumptions, adjusted for our
specific expectations based on our claim history. As of December 31, 2013, our self-insurance reserves totaled $537 million. Refer
to Note 11 of Notes to Consolidated Financial Statements. We did not include estimated payments related to our self-insurance
reserves in the table above.
Deferred income tax liabilities as of December 31, 2013, were $6,491 million. Refer to Note 14 of Notes to Consolidated Financial
Statements. This amount is not included in the total contractual obligations table because we believe that presentation would not
be meaningful. Deferred income tax liabilities are calculated based on temporary differences between the tax bases of assets and
liabilities and their respective book bases, which will result in taxable amounts in future years when the liabilities are settled at
their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of
cash taxes to be paid in any future periods. As a result, scheduling deferred income tax liabilities as payments due by period could
be misleading, because this scheduling would not relate to liquidity needs.
On February 5, 2014, the Company entered into agreements with GMCR providing for the development and introduction of the
Company’s global brand portfolio for use in GMCR’s forthcoming Keurig ColdTM at-home beverage system and the acquisition by
the Company of an approximate 10 percent equity position in GMCR. Under the terms of the equity agreement, a wholly-owned
subsidiary of the Company agreed to purchase 16,684,139 newly issued shares in GMCR for approximately $1.25 billion. The
newly issued shares have been priced at $74.98, which represents the trailing 50-trading-day volume weighted-average price as of
the agreement date. The transaction closed on February 27, 2014.
Foreign Exchange
Our international operations are subject to certain opportunities and risks, including currency fluctuations and governmental
actions. We closely monitor our operations in each country and seek to adopt appropriate strategies that are responsive to
changing economic and political environments, and to fluctuations in foreign currencies.
In 2013, we used 81 functional currencies. Due to our global operations, weakness in some of these currencies might be offset by
strength in others. In 2013, 2012 and 2011, the weighted-average exchange rates for foreign currencies in which the Company
conducted operations (all operating currencies), and for certain individual currencies, strengthened (weakened) against the U.S.
dollar as follows:
Year Ended December 31, 2013 2012 2011
All operating currencies (5)% (6)% 6%
Brazilian real (9)% (14)% 5%
Mexican peso 4(7) 4
Australian dollar (6) —14
South African rand (13) (12) 1
British pound (2) (1) 4
Euro 3(9) 7
Japanese yen (18) 210
These percentages do not include the effects of our hedging activities and, therefore, do not reflect the actual impact of
fluctuations in foreign currency exchange rates on our operating results. Our foreign currency management program is designed
to mitigate, over time, a portion of the impact of exchange rate changes on our net income and earnings per share. The total
currency impact on operating income, including the effect of our hedging activities, was a decrease of approximately 4 percent
and 5 percent in 2013 and 2012, respectively. Based on spot rates as of the beginning of February 2014 and our hedging
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