Coca Cola 2014 Annual Report Download - page 91

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Brazilian Bottling Operations
On December 17, 2012, the Company entered into an agreement with several parties to combine our Brazilian bottling operations with
an independent bottler in Brazil in a transaction involving a disposition of shares for cash and an exchange of shares for a 44 percent
minority ownership interest in the newly combined entity, which was recorded at fair value. As of December 31, 2012, our Brazilian
bottling operations met the criteria to be classified as held for sale, but we were not required to record their assets and liabilities at fair
value less any costs to sell because their fair value exceeded our carrying value. This transaction was completed on July 3, 2013, and
resulted in the deconsolidation of our Brazilian bottling operations. The Company recognized a gain of $615 million as a result of this
transaction.
The owners of the majority interest have the option to acquire up to 24 percent of the new entity’s outstanding shares from us at any
time for a period of six years beginning December 31, 2013, based on an agreed-upon formula. In December 2014, the Company
received notification that the owners of the majority interest had exercised their option to acquire from us a 10 percent interest in the
entity’s outstanding shares. During the year ended December 31, 2014, we recorded a loss of $32 million as a result of the exercise
price being lower than our carrying value. As a result of the transaction, which closed in January 2015, the Company’s ownership was
reduced to 34 percent of the entity’s outstanding shares. The owners of the majority interest have a remaining option to acquire an
additional 14 percent interest of the entity’s outstanding shares at any time through December 31, 2019, based on an agreed-upon
formula.
Assets and Liabilities Held for Sale
North America Refranchising
As of December 31, 2014, the Company had entered into agreements to refranchise additional territories in North America. These
territories met the criteria to be classified as held for sale, and we were required to record their assets and liabilities at the lower of
carrying value or fair value less any costs to sell based on the agreed-upon sale price. The Company recognized a noncash loss of
$494 million during the year ended December 31, 2014 as a result of writing down the assets to their fair value less costs to sell, which
was included in the line item other income (loss) — net in our consolidated statement of income. This loss was primarily related to the
anticipated derecognition of the intangible assets to be transferred, which we expect to recover under the CBAs through the future
quarterly payments. The Company expects these transactions to close by the end of the second quarter of 2015.
Coca-Cola Beverages Africa Limited
In November 2014, the Company, SAB Miller plc, and Gutsche Family Investments announced an agreement to combine the bottling
operations of their nonalcoholic ready-to-drink beverage businesses in Southern and East Africa. Upon completion of the proposed
merger, the Company will have an ownership of 11 percent in the bottler which will be called Coca-Cola Beverages Africa Limited.
The Company will also acquire or license several brands in exchange for cash as a result of the transaction. As of December 31, 2014,
our South African bottling operations and related equity method investments met the criteria to be held for sale, but we were not
required to record these assets and liabilities at fair value less any costs to sell because their fair value exceeded our carrying value. The
Company expects the transaction to close in the second half of 2015, subject to regulatory approval. Based on the proposed governance
structure, the Company expects to account for its resulting interest in the new entity as an equity method investment.
Monster Beverage Corporation
In August 2014, the Company and Monster Beverage Corporation (“Monster”) entered into definitive agreements for a long-term
strategic relationship in the global energy drink category. Subject to the terms and conditions of the agreements, upon the closing of
the transactions (1) the Company will acquire newly issued shares of Monster common stock representing approximately 16.7 percent
of the outstanding shares of Monster common stock (after giving effect to the new issuance) and will be represented by two directors
on Monster’s Board of Directors; (2) the Company will transfer its global energy drink business (including NOS, Full Throttle, Burn,
Mother, Nalu, Play and Power Play, and Relentless) to Monster, and Monster will transfer its non-energy drink business (including
Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s Juice Products) to the Company; and (3) the parties will amend
their current distribution coordination agreements with Monster to expand distribution of Monster products into additional territories
pursuant to long-term agreements with the Company’s existing network of Company-owned or -controlled bottling operations and
bottling and distribution partners. Upon closing, the Company will make a net cash payment of $2.15 billion to Monster. The closing
of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals, and is expected to take
place in the second quarter of 2015. Based on our anticipated representation on Monster’s Board of Directors, the Company expects
to account for its resulting interest in Monster as an equity method investment. As of December 31, 2014, the assets held by the
Company’s global energy drink business met the criteria to be held for sale, however, we were not required to record the assets at their
fair value less any costs to sell because their fair value exceeded our carrying value.