Coca Cola 2014 Annual Report Download - page 17

15
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, taxes on sugar-sweetened beverages, 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.
Increase in the cost, disruption of supply or shortage of energy or fuels could affect our profitability.
CCR and our other Company-owned or -controlled bottlers operate a large fleet of trucks and other motor vehicles to distribute and
deliver beverage products to customers. In addition, we use a significant amount of electricity, natural gas and other energy sources
to operate our concentrate, syrup and juice production plants and the bottling plants and distribution facilities operated by CCR and
our other Company-owned or -controlled bottlers. An increase in the price, disruption of supply or shortage of fuel and other energy
sources in North America, in other countries in which we have concentrate plants, or in any of the major markets in which CCR and
our other Company-owned or -controlled bottlers operate that may be caused by increasing demand or by events such as natural
disasters, power outages, or the like could increase our operating costs and negatively impact our profitability.
Our independent bottling partners also operate large fleets of trucks and other motor vehicles to distribute and deliver beverage
products to their own customers and use a significant amount of electricity, natural gas and other energy sources to operate their own
bottling plants and distribution facilities. Increases in the price, disruption of supply or shortage of fuel and other energy sources in any
of the major markets in which our independent bottling partners operate would increase the affected independent bottling partners’
operating costs and could indirectly negatively impact our results of operations.
Increase in the cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials could harm our business.
We and our bottling partners use various ingredients in our business, including HFCS, sucrose, aspartame, saccharin, acesulfame
potassium, sucralose, ascorbic acid, citric acid, phosphoric acid, caffeine and caramel color; other raw materials such as orange and
other fruit juice and juice concentrates; and packaging materials such as PET for bottles and aluminum for cans. The prices for
these ingredients, other raw materials and packaging materials fluctuate depending on market conditions. Substantial increases in
the prices of our or our bottling partners’ ingredients, other raw materials and packaging materials, to the extent they cannot be
recouped through increases in the prices of finished beverage products, would increase our and the Coca-Cola system’s operating costs
and could reduce our profitability. Increases in the prices of our finished products resulting from a higher cost of ingredients, other
raw materials and packaging materials could affect affordability in some markets and reduce Coca-Cola system sales. In addition,
some of our ingredients, such as aspartame, acesulfame potassium, sucralose, saccharin and ascorbic acid, as well as some of the
packaging containers, such as aluminum cans, are available from a limited number of suppliers, some of which are located in countries
experiencing political or other risks. We cannot assure you that we and our bottling partners will be able to maintain favorable
arrangements and relationships with these suppliers.
The citrus industry is subject to disease and the variability of weather conditions, which affect the supply of orange juice and orange
juice concentrate, which are important raw materials for our business. In particular, freezing weather or hurricanes in central Florida
may result in shortages and higher prices for orange juice and orange juice concentrate throughout the industry. In addition, greening
disease is reducing the number of trees and increasing grower costs and prices. Adverse weather conditions may affect the supply of
other agricultural commodities from which key ingredients for our products are derived. For example, drought conditions in certain
parts of the United States may negatively affect the supply of corn, which in turn may result in shortages of and higher prices for HFCS.