Coca Cola 2014 Annual Report Download - page 53

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51
Selling, General and Administrative Expenses
The following table sets forth the significant components of selling, general and administrative expenses (in millions):
Year Ended December 31, 2014 2013 2012
Stock-based compensation
expense
$ 209 $ 227 $ 259
Advertising
expenses
3,499 3,266 3,342
Bottling and distribution
expenses
8,381 8,510 8,905
Other operating
expenses
5,129 5,307 5,232
Selling, general and administrative
expenses
$ 17,218 $ 17,310 $ 17,738
Year Ended December 31, 2014 versus Year Ended December 31, 2013
Selling, general and administrative expenses decreased $92 million, or 1 percent. Foreign currency fluctuations decreased selling,
general and administrative expenses by 2 percent. The decrease in stock-based compensation was primarily due to reversals in 2014
of previously recognized expenses related to the Company’s long-term incentive compensation programs. The increase in advertising
expenses reflects the Company’s increased investments to strengthen our brands. This increase was partially offset by a foreign
currency exchange impact of 4 percent. The decrease in bottling and distribution expenses is a result of the refranchising of certain
territories in North America in 2014 and the deconsolidation of our Brazilian bottling operations as a result of their combination with
an independent bottling partner in July 2013.
In 2015, our pension expense is expected to increase by approximately $100 million compared to 2014. The anticipated increase is
primarily due to a decrease in the weighted-average discount rate used to calculate the Company’s benefit obligation, unfavorable
asset performance compared to our expected return during 2014 and the adoption of more conservative mortality assumptions for
U.S. plans partially offset by the impact of approximately $90 million of contributions expected to be made by the Company to our
international plans. Refer to the heading “Liquidity, Capital Resources and Financial Position” below for information related to these
contributions. Refer to the heading “Critical Accounting Policies and Estimates — Pension Plan Valuations” above and Note 13 of
Notes to Consolidated Financial Statements for additional information related to the pension plan assumptions used by the Company.
As of December 31, 2014, we had $437 million of total unrecognized compensation cost related to nonvested share-based
compensation arrangements granted under our plans. This cost is expected to be recognized over a weighted-average period of
2.2 years as stock-based compensation expense. This expected cost does not include the impact of any future stock-based
compensation awards. Refer to Note 12 of Notes to Consolidated Financial Statements.
Year Ended December 31, 2013 versus Year Ended December 31, 2012
Selling, general and administrative expenses decreased $428 million, or 2 percent. Foreign currency fluctuations decreased selling,
general and administrative expenses by 1 percent. The decrease in stock-based compensation was primarily due to reversals in 2013 of
previously recognized expenses related to the Company’s long-term incentive compensation programs. As a result of the Company’s
revised outlook, including the unfavorable impact foreign currency fluctuations are projected to have on certain performance periods,
the Company lowered the estimated payouts associated with these periods. Advertising expenses were impacted by shifts in our
marketing and media spend strategies, primarily due to spending more marketing dollars toward in-store activations, loyalty points
programs and point-of-sale marketing. Many of these strategies impact net operating revenues instead of marketing expenses. The
decrease in bottling and distribution expenses includes the impact of the Company’s sale of a majority interest in our previously
consolidated Philippine bottling operations to Coca-Cola FEMSA in January 2013 and the deconsolidation of our Brazilian bottling
operations as a result of their combination with an independent bottling partner in July 2013, partially offset by the impact of our
acquisition of bottling operations in Vietnam, Cambodia, Guatemala and the United States in 2012.