ACQUISITIONS AND DIVESTITURES
Acquisitions
During 2013, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $353 million, which primarily included our acquisition of the majority of the remaining outstanding shares of Fresh Trading Ltd. ("innocent") and a majority interest in bottling operations in Myanmar. The Company previously accounted for our investment in innocent under the equity method of accounting. We remeasured our equity interest in innocent to fair value upon the close of the transaction. The resulting gain on the remeasurement was not significant to our consolidated financial statements.
During 2012, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $1,486 million. These payments were primarily related to the following: our investments in the existing beverage business of Aujan Industries Company J.S.C. ("Aujan"), one of the largest independent beverage companies in the Middle East; our investment in Mikuni Coca-Cola Bottling Co., Ltd. ("Mikuni"), a bottling partner located in Japan; our acquisition of Sacramento Coca-Cola Bottling Co., Inc. ("Sacramento bottler"); and our acquisition of bottling operations in Vietnam, Cambodia and Guatemala. The Company's investment in Mikuni was accounted for under the equity method of accounting prior to 2013, when this investment was merged with three other bottlers as Coca-Cola East Japan Bottling Company, Ltd. ("CCEJ"). Refer to Note 17 for details on this transaction.
The Company paid $820 million during 2012 under its definitive agreement with Aujan in exchange for an ownership interest of 50 percent in the Aujan entity that holds the rights to Aujan-owned brands in certain territories and an ownership interest of 49 percent in Aujan's bottling and distribution operations in certain territories. The Company's investments in Aujan are being accounted for under the equity method of accounting.
During 2011, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $971 million. These payments were primarily related to the acquisitions of Great Plains Coca-Cola Bottling Company ("Great Plains") and Honest Tea, Inc. ("Honest Tea"), and an additional investment in Coca-Cola Central Japan Company ("Central Japan"). In addition, these activities included immaterial cash payments for the finalization of working capital adjustments related to our acquisition of the former North America business of Coca-Cola Enterprises Inc. ("CCE").
The Company acquired Great Plains on December 30, 2011. The total purchase price for the Great Plains acquisition was approximately $360 million, of which $321 million was paid at closing. The purchase price was primarily allocated to property, plant and equipment, identifiable intangible assets and goodwill. The Company finalized our purchase accounting for Great Plains during the fourth quarter of 2012.
During 2011, the Company also acquired the remaining ownership interest of Honest Tea not already owned by the Company. Prior to the Company acquiring the remaining ownership interest of Honest Tea, we accounted for our investment under the equity method of accounting. We remeasured our equity interest in Honest Tea to fair value upon the close of the transaction. The resulting gain on the remeasurement was not significant to our consolidated financial statements. The Company finalized our purchase accounting for Honest Tea during the fourth quarter of 2011.
In December 2011, the Company acquired an additional minority interest in Central Japan. As a result, the Company began to account for our investment in Central Japan under the equity method of accounting beginning in December 2011. In 2013, this investment was subsequently merged with three other bottlers as CCEJ. Refer to Note 17 for details on this transaction.
Coca-Cola Erfrischungsgetränke AG
In conjunction with the Company's acquisition of 18 German bottling and distribution operations in 2007, the former owners received put options to sell their respective shares in Coca-Cola Erfrischungsgetränke AG ("CCEAG") back to the Company on January 2, 2014. During 2013, the Company received notification that all of the outstanding put options would be exercised, which will result in the Company paying $498 million to purchase the shares.
Divestitures
During 2013, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $872 million. These proceeds primarily included the sale of a majority ownership interest in our previously consolidated bottling operations in the Philippines ("Philippine bottling operations"), and separately, the deconsolidation of our bottling operations in Brazil ("Brazilian bottling operations"). See below for further details on each of these transactions.
In 2011, proceeds from the disposal of bottling companies and other investments totaled $398 million, primarily related to the sale of our investment in Coca-Cola Embonor, S.A. ("Embonor"), a bottling partner with operations primarily in Chile, for $394 million. Prior to this transaction, the Company accounted for our investment in Embonor under the equity method of accounting. Refer to Note 17. None of the Company's other divestitures was individually significant.
Assets and Liabilities Held for Sale
On December 13, 2012, the Company and Coca-Cola FEMSA executed a share purchase agreement for the sale of a majority ownership interest in our Philippine bottling operations. As of December 31, 2012, our Philippine bottling operations 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 purchase price. Accordingly, we recorded a total loss of $107 million, primarily during the fourth quarter of 2012, in the line item other income (loss) — net in our consolidated statement of income.
This transaction was completed on January 25, 2013. The Company now accounts for our remaining 49 percent ownership interest in the Philippine bottling operations under the equity method of accounting. As a result of this transaction, we remeasured our remaining investment in the Philippine bottling operations to fair value taking into consideration the sale price of the majority ownership interest. Coca-Cola FEMSA has an option to purchase our remaining ownership interest in the Philippine bottling operations at any time during the seven years following closing based on the initial purchase price plus a defined return. Coca-Cola FEMSA also has an option exercisable during the sixth year after closing to sell its ownership interest back to the Company at a price not to exceed the initial purchase price.
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.
The following table presents information related to the major classes of assets and liabilities of the Company's Philippine and Brazilian bottling operations, both of which are included in our Bottling Investments operating segment, as of December 31, 2012 (in millions):
|
| | | | | | | | | | | |
| Philippine Bottling Operations |
| | Brazilian Bottling Operations |
| | Total Bottling Operations Held for Sale |
|
Cash, cash equivalents and short-term investments | $ | 133 |
| | $ | 45 |
| | $ | 178 |
|
Trade accounts receivable, less allowances | 108 |
| | 88 |
| | 196 |
|
Inventories | 187 |
| | 85 |
| | 272 |
|
Prepaid expenses and other assets | 223 |
| | 174 |
| | 397 |
|
Other assets | 7 |
| | 128 |
| | 135 |
|
Property, plant and equipment — net | 841 |
| | 419 |
| | 1,260 |
|
Bottlers' franchise rights with indefinite lives | 341 |
| | 130 |
| | 471 |
|
Goodwill | 148 |
| | 22 |
| | 170 |
|
Other intangible assets | — |
| | 1 |
| | 1 |
|
Allowance for reduction of assets held for sale | (107 | ) | | — |
| | (107 | ) |
Total assets | $ | 1,881 |
| | $ | 1,092 |
| | $ | 2,973 |
|
Accounts payable and accrued expenses | $ | 241 |
| | $ | 157 |
| | $ | 398 |
|
Loans and notes payable | — |
| | 6 |
| | 6 |
|
Current maturities of long-term debt | — |
| | 28 |
| | 28 |
|
Accrued income taxes | (4 | ) | | 4 |
| | — |
|
Long-term debt | — |
| | 147 |
| | 147 |
|
Other liabilities | 20 |
| | 75 |
| | 95 |
|
Deferred income taxes | 102 |
| | 20 |
| | 122 |
|
Total liabilities | $ | 359 |
| | $ | 437 |
| | $ | 796 |
|
We determined that our Philippine and Brazilian bottling operations did not meet the criteria to be classified as discontinued operations, primarily due to the continued significant involvement we will have in these operations following each transaction.
