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Significant Operating and Nonoperating Items
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6 Months Ended |
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Jun. 28, 2013
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| Significant Operating and Nonoperating Items | |
| Significant Operating and Nonoperating Items |
SIGNIFICANT OPERATING AND NONOPERATING ITEMS
Other Operating Items
Cost of Goods Sold
In December 2011, the Company detected that orange juice being imported from Brazil contained residues of carbendazim, a fungicide that is not registered in the United States for use on citrus products. As a result, we began purchasing additional supplies of Florida orange juice at a higher cost than Brazilian orange juice and incurred charges of $3 million and $8 million during the three and six months ended June 29, 2012, respectively. These charges were recorded in the line item cost of goods sold in our condensed consolidated statements of income.
Other Operating Charges
During the three months ended June 28, 2013, the Company incurred other operating charges of $132 million. These charges primarily consisted of $113 million due to the Company's productivity and reinvestment program as well as $20 million due to the Company's integration of our German bottling and distribution operations. Refer to Note 11 for additional information on these initiatives. Refer to Note 15 for the impact these charges had on our operating segments.
During the six months ended June 28, 2013, the Company incurred other operating charges of $253 million. These charges primarily consisted of $215 million due to the Company's productivity and reinvestment program as well as $41 million due to the Company's other restructuring initiatives and the integration of our German bottling and distribution operations. Refer to Note 11 for additional information on these initiatives. Refer to Note 15 for the impact these charges had on our operating segments.
During the three months ended June 29, 2012, the Company incurred other operating charges of $70 million. These charges consisted of $54 million due to the Company's productivity and reinvestment program; $15 million due to the Company's other restructuring and integration initiatives, including the integration of our German bottling and distribution operations; and $3 million due to costs associated with the Company detecting carbendazim in orange juice imported from Brazil for distribution in the United States. These charges were partially offset by a reversal of $2 million due to the refinement of previously established accruals related to the Company's 2008–2011 productivity initiatives. Refer to Note 11 for additional information on our productivity, integration and restructuring initiatives. Refer to Note 15 for the impact these charges had on our operating segments.
During the six months ended June 29, 2012, the Company incurred other operating charges of $169 million. These charges consisted of $118 million due to the Company's productivity and reinvestment program; $30 million due to the Company's other restructuring and integration initiatives, including the integration of our German bottling and distribution operations; $20 million due to changes in the Company's ready-to-drink tea strategy as a result of our U.S. license agreement with Nestlé S.A. ("Nestlé") terminating at the end of 2012; and $4 million due to costs associated with the Company detecting carbendazim in orange juice imported from Brazil for distribution in the United States. These charges were partially offset by a reversal of $3 million due to the refinement of previously established accruals related to the Company's 2008–2011 productivity initiatives. Refer to Note 11 for additional information on our productivity, integration and restructuring initiatives. Refer to Note 15 for the impact these charges had on our operating segments.
Other Nonoperating Items
Equity Income (Loss) — Net
During the three and six months ended June 28, 2013, the Company recorded net charges of $3 million and $42 million, respectively, in the line item equity income (loss) — net. These net charges represent the Company's proportionate share of unusual or infrequent items recorded by certain of our equity method investees. The net charge recorded during the six months ended June 28, 2013, includes a charge incurred by an equity method investee due to the devaluation of the Venezuelan bolivar. Refer to Note 15 for the impact these charges had on our operating segments.
During the three months ended June 29, 2012, the Company recorded a net charge of $1 million in the line item equity income (loss) — net. This net charge primarily represents the Company's proportionate share of unusual or infrequent items recorded by certain of our equity method investees. In addition, the Company recorded charges of $11 million due to changes in the structure of Beverage Partners Worldwide ("BPW"), our 50/50 joint venture with Nestlé in the ready-to-drink tea category. These changes resulted in the joint venture focusing its geographic scope primarily on Europe and Canada. The Company accounts for our investment in BPW under the equity method of accounting. Refer to Note 15 for the impact these charges had on our operating segments.
During the six months ended June 29, 2012, the Company recorded a net gain of $43 million in the line item equity income (loss) — net. This net gain primarily represents the Company's proportionate share of unusual or infrequent items recorded by certain of our equity method investees. In addition, the Company recorded charges of $14 million due to changes in the structure of BPW. The Company accounts for our investment in BPW under the equity method of accounting. Refer to Note 15 for the impact these charges had on our operating segments.
Other Income (Loss) — Net
During the three and six months ended June 28, 2013, the Company recorded a loss of $144 million related to the pending merger of four of its Japanese bottling partners. In 2012, the four bottlers announced their intent to merge as Coca-Cola East Japan Bottling Company, Ltd. ("CCEJ"), a publicly traded entity, through a share exchange. The merger was approved by the respective bottlers' shareowners in March 2013, and the transaction received final regulatory approval in May 2013. The terms of the merger agreement include the issuance of new shares of one of the publicly traded bottlers in exchange for 100 percent of the outstanding shares of the remaining three bottlers according to an agreed upon share exchange ratio. Based on the closing price of the shares on June 28, 2013, the value of the shares that the Company will receive in exchange for its investments in two of the non-publicly traded bottlers was less than the carrying value of those investments. As a result, we were required to write down the carrying value of these investments to their implied fair value, resulting in a loss. The merger was completed effective July 1, 2013.
During the three and six months ended June 28, 2013, the Company also recognized a gain of $139 million due to Coca-Cola FEMSA, an equity method investee, issuing additional shares of its own stock at a per share amount greater than the carrying value of the Company's per share investment. Accordingly, the Company is required to treat this type of transaction as if the Company sold a proportionate share of its investment in Coca-Cola FEMSA. Refer to Note 15 for the impact this gain had on our operating segments.
In addition, during the six months ended June 28, 2013, the Company recorded a charge of $140 million in the line item other income (loss) — net due to the Venezuelan government announcing a currency devaluation. As a result of this devaluation, the Company remeasured the net assets related to its operations in Venezuela. Refer to Note 15 for the impact this charge had on our operating segments.
During the three and six months ended June 29, 2012, the Company recognized a gain of $92 million due to Coca-Cola FEMSA issuing additional shares of its own stock at a per share amount greater than the carrying value of the Company's per share investment. Accordingly, the Company is required to treat this type of transaction as if the Company sold a proportionate share of its investment in Coca-Cola FEMSA. Refer to Note 15 for the impact this gain had on our operating segments.
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