Annual report pursuant to Section 13 and 15(d)

PRODUCTIVITY, INTEGRATION AND RESTRUCTURING INITIATIVES

v2.4.0.6
PRODUCTIVITY, INTEGRATION AND RESTRUCTURING INITIATIVES
 12 Months Ended
Dec. 31, 2011
Restructuring and Related Activities [Abstract]  
Productivity, Integration and Restructuring Initiatives Disclosure [Text Block]
PRODUCTIVITY, INTEGRATION AND RESTRUCTURING INITIATIVES
Productivity Initiatives
During 2008, the Company announced a transformation effort centered on productivity initiatives that will provide additional flexibility to invest for growth. In 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 incurred total pretax expenses of $508 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 19 for the impact these charges had on our operating segments. Other direct costs included both 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 (in millions):
 
Severance Pay
and Benefits

 
Outside Services1

 
Other
Direct Costs

 
Total

2009
 
 
 
 
 
 
 
Accrued balance as of January 1
$
14

 
$
3

 
$
—

 
$
17

Costs incurred
41

 
47

 
19

 
107

Payments
(37
)
 
(41
)
 
(12
)
 
(90
)
Noncash and exchange
—

 
—

 
(3
)
 
(3
)
Accrued balance as of December 31
$
18

 
$
9

 
$
4

 
$
31

2010
 
 
 
 
 
 
 
Costs incurred
$
71

 
$
58

 
$
61

 
$
190

Payments
(30
)
 
(61
)
 
(54
)
 
(145
)
Noncash and exchange
—

 
—

 
(2
)
 
(2
)
Accrued balance as of December 31
$
59

 
$
6

 
$
9

 
$
74

2011
 
 
 
 
 
 
 
Costs incurred
$
59

 
$
17

 
$
80

 
$
156

Payments
(50
)
 
(21
)
 
(71
)
 
(142
)
Noncash and exchange
(20
)
 
1

 
(9
)
 
(28
)
Accrued balance as of December 31
$
48

 
$
3

 
$
9

 
$
60

1 
Primarily relate to expenses in connection with legal, outplacement and consulting activities.
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 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 incurred total pretax expenses of $358 million and $135 million during 2011 and 2010, respectively, related to this initiative. Other direct costs were primarily related to internal and external costs associated with the development, design and implementation of our future operating framework. Other direct costs also included, among other items, contract termination fees and relocation costs and were recorded in the line item other operating charges. Refer to Note 19 for the impact these charges had on our operating segments. In 2011, we completed this program.
The following table summarizes the balance of accrued expenses related to these integration initiatives and the changes in the accrued amounts since the commencement of the plan (in millions):
 
Severance Pay
and Benefits

 
Outside Services1

 
Other
Direct Costs

 
Total

2010
 
 
 
 
 
 
 
Costs incurred
$
45

 
$
42

 
$
48

 
$
135

Payments
(1
)
 
(33
)
 
(34
)
 
(68
)
Noncash and exchange
4

 
—

 
(2
)
 
2

Accrued balance as of December 31
$
48

 
$
9

 
$
12

 
$
69

2011
 
 
 
 
 
 
 
Costs incurred
$
40

 
$
91

 
$
227

 
$
358

Payments
(40
)
 
(89
)
 
(210
)
 
(339
)
Noncash and exchange
—

 
—

 
3

 
3

Accrued balance as of December 31
$
48

 
$
11

 
$
32

 
$
91

1 
Primarily relate to expenses in connection with legal, outplacement and consulting activities.
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 $67 million, $94 million and $110 million of expenses related to this initiative in 2011, 2010 and 2009, respectively. The Company has incurred total pretax expenses of $292 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 $30 million and $34 million accrued related to these integration costs as of December 31, 2011 and 2010, 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 December 31, 2011, the Company has not finalized any additional plans.
Restructuring Initiatives
The Company incurred charges of $52 million, $59 million and $51 million related to other restructuring initiatives during 2011, 2010 and 2009, respectively. These other restructuring initiatives were outside the scope of the productivity, integration and streamlining initiatives discussed above and were related to individually insignificant activities throughout many of our business units. These charges were recorded in the line item other operating charges. Refer to Note 19 for the impact these charges had on our operating segments.