The Coca-Cola Company Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Productivity, Integration and Restructuring Initiatives

Productivity, Integration and Restructuring Initiatives

9 Months Ended

Sep. 28, 2012

Productivity integration and restructuring initiatives

Productivity, Integration and Restructuring Initiatives

Productivity Initiatives

During 2008, the Company announced a transformation effort centered on productivity initiatives to provide additional flexibility to invest for growth. During the fourth quarter of 2011, we completed this program. The initiatives impacted a number of areas, including aggressively managing operating expenses supported by lean techniques; redesigning key processes to drive standardization and effectiveness; better leveraging our size and scale; and driving savings in indirect costs through the implementation of a "procure-to-pay" program.

The Company has incurred total pretax expenses of $499 million related to these productivity initiatives since they commenced in the first quarter of 2008. These expenses were recorded in the line item other operating charges. Refer to Note 15 for the impact these charges had on our operating segments. Outside services reported in the tables below primarily relate to expenses in connection with legal, outplacement and consulting activities. Other direct costs reported in the tables below include, among other items, internal and external costs associated with the development, communication, administration and implementation of these initiatives and accelerated depreciation on certain fixed assets.

The following table summarizes the balance of accrued expenses related to productivity initiatives and the changes in the accrued amounts as of and for the three months ended September 28, 2012 (in millions):



	Accrued Balance June 29, 2012		Costs Incurred Three Months Ended September 28, 2012			Payments			Noncash and Exchange			Accrued Balance September 28, 2012
Severance pay and benefits	$	21	$	(5	)	$	(4	)	$	—		$	12
Outside services	1		—			—			—			1
Other direct costs	6		(1		)	—			(2		)	3
Total	$	28	$	(6	)	$	(4	)	$	(2	)	$	16

The following table summarizes the balance of accrued expenses related to productivity initiatives and the changes in the accrued amounts as of and for the nine months ended September 28, 2012 (in millions):



	Accrued Balance December 31, 2011		Costs Incurred Nine Months Ended September 28, 2012			Payments			Noncash and Exchange			Accrued Balance September 28, 2012
Severance pay and benefits	$	48	$	(8	)	$	(25	)	$	(3	)	$	12
Outside services	3		—			(1		)	(1		)	1
Other direct costs	9		(1		)	(3		)	(2		)	3
Total	$	60	$	(9	)	$	(29	)	$	(6	)	$	16

Integration Initiatives

Integration of CCE's North American Business

In 2010, we acquired CCE's North American business and began an integration initiative to develop, design and implement our future operating framework. Upon completion of the CCE transaction, we combined the management of the acquired North American business with the management of our existing foodservice business; Minute Maid and Odwalla juice businesses; North America supply chain operations; and Company-owned bottling operations in Philadelphia, Pennsylvania, into a unified bottling and customer service organization called Coca-Cola Refreshments, or CCR. In addition, we reshaped our remaining Coca-Cola North America ("CCNA") operations into an organization that primarily provides franchise leadership and consumer marketing and innovation for the North American market. As a result of the transaction and related reorganization, our North American businesses operate as aligned and agile organizations with distinct capabilities, responsibilities and strengths.

The Company has incurred total pretax expenses of $488 million related to this initiative since the plan commenced. These expenses were recorded in the line item other operating charges. Refer to Note 15 for the impact these charges had on our operating segments. Outside services reported in the tables below primarily relate to expenses in connection with legal, outplacement and consulting activities. Other direct costs reported in the tables below include, among other items, internal and external costs associated with the development, design and implementation of our future operating framework; contract termination fees; and relocation costs. During the fourth quarter of 2011, the Company completed this program.

The following table summarizes the balance of accrued expenses related to these integration initiatives and the changes in the accrued amounts as of and for the three months ended September 28, 2012 (in millions):



	Accrued Balance June 29, 2012		Costs Incurred Three Months Ended September 28, 2012			Payments			Noncash and Exchange			Accrued Balance September 28, 2012
Severance pay and benefits	$	29	$	(5	)	$	(16	)	$	—		$	8
Outside services	—		—			(1		)	1			—
Other direct costs	8		—			—			(1		)	7
Total	$	37	$	(5	)	$	(17	)	$	—		$	15

The following table summarizes the balance of accrued expenses related to these integration initiatives and the changes in the accrued amounts as of and for the nine months ended September 28, 2012 (in millions):



	Accrued Balance December 31, 2011		Costs Incurred Nine Months Ended September 28, 2012			Payments			Noncash and Exchange			Accrued Balance September 28, 2012
Severance pay and benefits	$	48	$	(5	)	$	(35	)	$	—		$	8
Outside services	11		—			(13		)	2			—
Other direct costs	32		—			(22		)	(3		)	7
Total	$	91	$	(5	)	$	(70	)	$	(1	)	$	15

Integration of Our German Bottling and Distribution Operations

In 2008, the Company began an integration initiative related to the 18 German bottling and distribution operations acquired in 2007. The Company incurred expenses of $12 million and $37 million related to this initiative during the three and nine months ended September 28, 2012. The Company has incurred total pretax expenses of $329 million related to this initiative since it commenced, which were recorded in the line item other operating charges and impacted the Bottling Investments operating segment. The expenses recorded in connection with these integration activities have been primarily due to involuntary terminations. The Company had $24 million and $30 million accrued related to these integration costs as of September 28, 2012, and December 31, 2011, respectively.

The Company is currently reviewing other integration and restructuring opportunities within the German bottling and distribution operations, which, if implemented, will result in additional charges in future periods. However, as of September 28, 2012, the Company has not finalized any additional plans.

Productivity and Reinvestment

In February 2012, the Company announced a four-year productivity and reinvestment program which will further enable our efforts to strengthen our brands and reinvest our resources to drive long-term profitable growth. This program will be focused on the following initiatives: global supply chain optimization; global marketing and innovation effectiveness; operating expense leverage and operational excellence; data and information technology systems standardization; and further integration of CCE's former North America business.

As of September 28, 2012, the Company has incurred total pretax expenses of $177 million related to this program since the plan commenced. These expenses were recorded in the line item other operating charges. Refer to Note 15 for the impact these charges had on our operating segments. Outside services reported in the tables below primarily relate to expenses in connection with legal, outplacement and consulting activities. Other direct costs reported in the tables below include, among other items, internal and external costs associated with the development, communication, administration and implementation of these initiatives; accelerated depreciation on certain fixed assets; contract termination fees; and relocation costs.

The following table summarizes the balance of accrued expenses related to these productivity and reinvestment initiatives and the changes in the accrued amounts as of and for the three months ended September 28, 2012 (in millions):



	Accrued Balance June 29, 2012		Costs Incurred Three Months Ended September 28, 2012		Payments			Noncash and Exchange			Accrued Balance September 28, 2012
Severance pay and benefits	$	3	$	11	$	(2	)	$	—		$	12
Outside services	7		16		(19		)	—			4
Other direct costs	4		32		(26		)	(5		)	5
Total	$	14	$	59	$	(47	)	$	(5	)	$	21

The following table summarizes the balance of accrued expenses related to these productivity and reinvestment initiatives and the changes in the accrued amounts as of and for the nine months ended September 28, 2012 (in millions):



	Costs Incurred Nine Months Ended September 28, 2012		Payments			Noncash and Exchange			Accrued Balance September 28, 2012
Severance pay and benefits	$	18	$	(6	)	$	—		$	12
Outside services	49		(45		)	—			4
Other direct costs	110		(94		)	(11		)	5
Total	$	177	$	(145	)	$	(11	)	$	21

Other Restructuring Activities

The Company incurred expenses of $2 million and $7 million related to other restructuring initiatives during the three and nine months ended September 28, 2012. These other restructuring initiatives were outside the scope of the initiatives discussed above. These other restructuring charges were related to individually insignificant activities throughout many of our business units. None of these activities is expected to be individually significant. These charges were recorded in the line item other operating charges. Refer to Note 15 for the impact these charges had on our operating segments.

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

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