Significant Operating and Nonoperating Items |
9 Months Ended |
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Sep. 30, 2011 | |
| Significant Operating and Nonoperating Items | |
| Significant Operating and Nonoperating Items |
Significant Operating and Nonoperating Items
Other Operating Items
On March 11, 2011, a major earthquake struck off the coast of Japan, resulting in a tsunami that devastated the northern and eastern regions of the country. As a result of these events, the Company made a donation to a charitable organization to establish the Coca-Cola Japan Reconstruction Fund, which will help rebuild schools and community facilities across the impacted areas of the country.
The Company recorded total charges of $84 million related to these events during the nine months ended September 30, 2011. These charges were recorded in various line items in our condensed consolidated statements of income, including charges of $22 million in deductions from revenue, $12 million in cost of goods sold and $50 million in other operating charges. These charges impacted the Pacific and North America operating segments. Refer to Note 15.
The $22 million of charges recorded in deductions from revenue were primarily related to funds we provided our local bottling partners to enable them to continue producing and distributing our beverage products in the affected regions. This support not only helped restore our business operations in the impacted areas, but it also assisted our bottling partners in meeting the evolving customer and consumer needs as the recovery and rebuilding efforts advanced. The $12 million of charges in cost of goods sold were primarily related to Company-owned inventory that was destroyed or lost. The $50 million of other operating charges were primarily related to the donation discussed above and a $1 million impairment charge related to certain Company-owned fixed assets. These fixed assets primarily consisted of Company-owned vending equipment and coolers that were damaged or lost as a result of these events. Refer to Note 14 for the fair value disclosures related to the inventory and fixed asset charges described above.
During the three months ended September 30, 2011, the Company refined our initial estimates that were recorded during the first and second quarters of 2011 and recorded an additional net charge of $1 million related to the events in Japan. Refer to Note 15 for the impact this net charge had on our operating segments.
The Company is assessing its insurance coverage, and we intend to file a claim for certain of our losses in Japan. As of September 30, 2011, we have not recorded any insurance recovery related to these events, as we are not currently able to deem any amount of potential insurance recovery as probable.
Other Operating Charges
During the three months ended September 30, 2011, the Company incurred other operating charges of $96 million, which primarily consisted of $89 million associated with the Company's productivity, integration and restructuring initiatives and $9 million of costs associated with the merger of Embotelladoras Arca, S.A.B. de C.V. ("Arca") and Grupo Continental S.A.B. ("Contal"). The charges were partially offset by a $2 million reversal associated with the refinement of previously recorded accruals related to the events in Japan described above. Refer to Note 11 for additional information on our productivity, integration and restructuring initiatives. Refer to the discussion of the merger of Arca and Contal below for additional information on the transaction. Refer to Note 15 for the impact these charges had on our operating segments.
During the nine months ended September 30, 2011, the Company incurred other operating charges of $457 million, which primarily consisted of $370 million associated with the Company's productivity, integration and restructuring initiatives; $35 million of costs associated with the merger of Arca and Contal; and $50 million related to the events in Japan described above. Refer to Note 11 for additional information on our productivity, integration and restructuring initiatives. Refer to the discussion of the merger of Arca and Contal below for additional information on the transaction. Refer to Note 15 for the impact these charges had on our operating segments.
During the three months ended October 1, 2010, the Company incurred other operating charges of $100 million, which consisted of $64 million attributable to the Company's ongoing productivity, integration and restructuring initiatives and $36 million related to transaction costs incurred in connection with our acquisition of CCE's North American business and the sale of our Norwegian and Swedish bottling operations to New CCE. Refer to Note 11 for additional information on our productivity, integration and restructuring initiatives. Refer to Note 2 for additional information related to the Company's acquisition of CCE's North American business and the disposal of our Norwegian and Swedish bottling operations. Refer to Note 15 for the impact these charges had on our operating segments.
During the nine months ended October 1, 2010, the Company incurred other operating charges of $274 million, which consisted of $227 million attributable to the Company's ongoing productivity, integration and restructuring initiatives and $47 million related to transaction costs incurred in connection with our acquisition of CCE's North American business and the sale of our Norwegian and Swedish bottling operations to New CCE. Refer to Note 11 for additional information on our productivity, integration and restructuring initiatives. Refer to Note 2 for additional information related to the Company's acquisition of CCE's North American business and the disposal of our Norwegian and Swedish bottling operations. 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 nine months ended September 30, 2011, the Company recorded charges of $36 million and $40 million, respectively, in equity income (loss) — net. These charges primarily represent the Company's proportionate share of asset impairments and restructuring charges recorded by equity method investees and impacted the Bottling Investments operating segment.
During the three months ended October 1, 2010, the Company recorded a net charge of $10 million in equity income (loss) — net. This net charge primarily represents the Company's proportionate share of transaction costs incurred by CCE in connection with our acquisition of CCE's North American business and the sale of our Norwegian and Swedish bottling operations to New CCE. Refer to Note 2 for additional information related to these transactions. Our proportionate share of these charges was partially offset by our proportionate share of a foreign currency remeasurement gain recorded by an equity method investee. The components of the net charge were individually insignificant and impacted the Bottling Investments operating segment.
During the nine months ended October 1, 2010, the Company recorded a net charge of $55 million in equity income (loss) — net. This net charge primarily represents the Company's proportionate share of unusual tax charges, asset impairments, restructuring charges and transaction costs recorded by equity method investees. The unusual tax charges primarily relate to an additional tax liability recorded by Coca-Cola Hellenic Bottling Company S.A. as a result of the Extraordinary Social Contribution Tax levied by the Greek government. The transaction costs represent our proportionate share of certain costs incurred by CCE in connection with our acquisition of CCE's North American business and the sale of our Norwegian and Swedish bottling operations to New CCE. Refer to Note 2 for additional information related to the Company's acquisition of CCE's North American business and the disposal of our Norwegian and Swedish bottling operations. These charges were partially offset by our proportionate share of a foreign currency remeasurement gain recorded by an equity method investee. The components of the net charge were individually insignificant and impacted the Bottling Investments operating segment.
Other Income (Loss) — Net
During the three months ended September 30, 2011, the Company recorded a charge of $5 million in other income (loss) — net related to the finalization of working capital adjustments associated with the sale of our Norwegian and Swedish bottling operations to New CCE in the fourth quarter of 2010. This charge reduced the amount of our previously reported gain on the sale of these bottling operations. The Company also recorded a charge of $3 million in other income (loss) — net during the period related to the impairment of an investment accounted for under the equity method of accounting. These charges impacted the Corporate operating segment.
During the nine months ended September 30, 2011, the Company recognized a net gain of $417 million, primarily as a result of the merger of Arca and Contal, two bottling partners headquartered in Mexico, into a combined entity known as Arca Continental, S.A.B. de C.V. ("Arca Contal"). Prior to this transaction the Company held an investment in Contal that we accounted for under the equity method of accounting. The merger of the two companies was a non-cash transaction that resulted in Contal shareholders exchanging their existing Contal shares for new shares in Arca Contal at a specified exchange rate. The gain was recorded in other income (loss) — net and impacted our Corporate operating segment. Refer to Note 14 for additional information on the measurement of the gain. As a result, the Company now holds an investment in Arca Contal that we account for as an available-for-sale security.
In addition, the Company recorded a charge of $41 million in other income (loss) — net during the nine months ended September 30, 2011, due to the impairment of an investment in an entity accounted for under the equity method of accounting. This charge impacted our Corporate operating segment. Refer to Note 14 for additional information. The Company also recognized a gain of $102 million in other income (loss) — net during the nine months ended September 30, 2011, related to the sale of our investment in Embonor. The gain on this transaction impacted our Corporate operating segment. Refer to Note 2 for additional information.
During the three months ended October 1, 2010, the Company recorded a gain of $23 million in other income (loss) — net related to the sale of 50 percent of our investment in Leão Junior, which was a wholly owned subsidiary of the Company prior to this transaction. The gain on the transaction consisted of two parts: (1) the difference between the consideration received and 50 percent of the carrying value of our investment, and (2) the fair value adjustment for our remaining 50 percent ownership. We have accounted for our remaining investment in Leão Junior under the equity method of accounting since the close of this transaction. Refer to Note 14 for related fair value disclosures. This gain impacted the Corporate operating segment.
In addition to the gain on the sale of a portion of our investment in Leão Junior, the Company recorded a charge of $103 million in other income (loss) — net related to the remeasurement of our Venezuelan subsidiary's net assets during the nine months ended October 1, 2010. Subsequent to December 31, 2009, the Venezuelan government announced a currency devaluation, and Venezuela was determined to be a hyperinflationary economy. As a result of Venezuela being a hyperinflationary economy, our local subsidiary was required to use the U.S. dollar as its functional currency, and the remeasurement gains and losses were recognized in our condensed consolidated statements of income. This charge impacted the Corporate operating segment.
Also during the nine months ended October 1, 2010, the Company recorded charges of $26 million in other income (loss) — net related to other-than-temporary impairments. In the first quarter of 2010, the Company had several investments classified as available-for-sale securities in which our cost basis exceeded the fair value of the investment. Management assessed each of these investments on an individual basis to determine if the decline in fair value was other than temporary. Based on these assessments, management determined that the decline in fair value of each investment was other than temporary. Refer to Note 14 for the fair value disclosures related to these other-than-temporary impairment charges. These impairment charges impacted the Bottling Investments and Corporate operating segments.
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