UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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| ý | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2012
2015
OR
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| o | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 001-02217
(Exact name of Registrant as specified in its charter)
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DELAWARE (State or other jurisdiction of incorporation or organization) | | 58-0628465 (IRS Employer Identification No.) |
One Coca-Cola Plaza Atlanta, Georgia (Address of principal executive offices) | | 30313 (Zip Code) |
Registrant's telephone number, including area code: (404) 676-2121
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | | Name of each exchange on which registered |
COMMON STOCK,Common Stock, $0.25 PAR VALUEPar Value | | NEW YORK STOCK EXCHANGENew York Stock Exchange |
| Floating Rate Notes Due 2017 | | New York Stock Exchange |
| Floating Rate Notes Due 2019 | | New York Stock Exchange |
| 1.125% Notes Due 2022 | | New York Stock Exchange |
| 0.75% Notes Due 2023 | | New York Stock Exchange |
| 1.875% Notes Due 2026 | | New York Stock Exchange |
| 1.125% Notes Due 2027 | | New York Stock Exchange |
| 1.625% Notes Due 2035 | | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No ý
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer ý | | Accelerated filer o | | Non-accelerated filer o | | Smaller reporting company o |
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Indicate by check mark if the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
The aggregate market value of the common equity held by non-affiliates of the Registrant (assuming for these purposes, but without conceding, that all executive officers and Directors are "affiliates" of the Registrant) as of June 29, 2012,July 3, 2015, the last business day of the Registrant's most recently completed second fiscal quarter, was $167,103,981,811$170,318,198,405 (based on the closing sale price of the Registrant's Common Stock on that date as reported on the New York Stock Exchange).
The number of shares outstanding of the Registrant's Common Stock as of February 25, 2013,22, 2016, was 4,456,717,996.4,329,497,778.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for the Annual Meeting of Shareowners to be held on April 24, 2013,27, 2016, are incorporated by reference in Part III.
Table of Contents
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| Part II | | |
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| Part III | | |
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| Part IV | | |
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FORWARD-LOOKING STATEMENTS
This report contains information that may constitute "forward-looking statements." Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to volume growth, share of sales and earnings per share growth, and statements expressing general views about future operating results — are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part I, "Item 1A. Risk Factors" and elsewhere in this report and those described from time to time in our future reports filed with the Securities and Exchange Commission.
PART I
ITEM 1. BUSINESS
In this report, the terms "The Coca-Cola Company," "Company," "we," "us" and "our" mean The Coca-Cola Company and all entities included in our consolidated financial statements.
General
The Coca-Cola Company is the world's largest beverage company. We own or license and market more than 500 nonalcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks. We own and market four of the world's top five nonalcoholic sparkling beverage brands: Coca-Cola, Diet Coke, Fanta and Sprite. Finished beverage products bearing our trademarks, sold in the United States since 1886, are now sold in more than 200 countries.
We make our branded beverage products available to consumers throughout the world through our network of Company-owned or -controlled bottling and distribution operations as well as independent bottling partners, distributors, wholesalers and retailers — the world's largest beverage distribution system. Of the approximately 57 billion beverage servings of all types consumed worldwide every day, beveragesBeverages bearing trademarks owned by or licensed to us account for more than 1.81.9 billion servings.of the approximately 58 billion servings of all beverages consumed worldwide every day.
We believe that our success depends on our ability to connect with consumers by providing them with a wide variety of options to meet their desires, needs and lifestyle choices.lifestyles. Our success further depends on the ability of our people to execute effectively, every day.
Our goal is to use our Company's assets — our brands, financial strength, unrivaled distribution system, global reach, and the talent and strong commitment of our management and associates — to become more competitive and to accelerate growth in a manner that creates value for our shareowners.
We were incorporated in September 1919 under the laws of the State of Delaware and succeeded to the business of a Georgia corporation with the same name that had been organized in 1892.
Acquisition of Coca-Cola Enterprises Inc.'s Former North America Business and Related Transactions
On October 2, 2010, we acquired the former North America business of Coca-Cola Enterprises Inc. ("CCE"), one of our major bottlers, consisting of CCE's production, sales and distribution operations in the United States, Canada, the British Virgin Islands, the United States Virgin Islands and the Cayman Islands, and a substantial majority of CCE's corporate segment. CCE shareowners other than the Company exchanged their CCE common stock for common stock in a new entity named Coca-Cola Enterprises, Inc. ("New CCE"), which, after the closing of the transaction, continued to hold the European operations that had been held by CCE prior to the acquisition. The Company does not have any ownership interest in New CCE. Upon completion of the CCE transaction, we combined the management of the acquired North America 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 ("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.
In contemplation of the closing of our acquisition of CCE's former North America business, we reached an agreement with Dr Pepper Snapple Group, Inc. ("DPS") to distribute certain DPS brands in territories where DPS brands had been distributed by CCE prior to the CCE transaction. Under the terms of our agreement with DPS, concurrently with the closing of the CCE transaction, we entered into license agreements with DPS to distribute Dr Pepper trademark brands in the United States, Canada Dry in the Northeastern United States, and Canada Dry and C' Plus in Canada, and we made a net one-time cash payment of $715 million to DPS. Under the license agreements, the Company agreed to meet certain performance obligations to distribute DPS products in retail and foodservice accounts and vending machines. The license agreements have initial terms of 20 years, with automatic 20-year renewal periods unless otherwise terminated under the terms of the agreements. The license agreements replaced agreements between DPS and CCE existing immediately prior to the completion of the CCE transaction. In addition, we entered into an agreement with DPS to include Dr Pepper and Diet Dr Pepper in our Coca-Cola Freestyle fountain dispensers in certain outlets throughout the United States. The Coca-Cola Freestyle agreement has a term of 20 years.
On October 2, 2010, we sold all of our ownership interests in Coca-Cola Drikker AS (the "Norwegian bottling operation") and Coca-Cola Drycker Sverige AB (the "Swedish bottling operation") to New CCE for $0.9 billion in cash. In addition, in connection with the acquisition of CCE's former North America business, we granted to New CCE the right to negotiate the acquisition of our majority interest in our German bottler at any time from 18 to 39 months after February 25, 2010, at the then current fair value and subject to terms and conditions as mutually agreed.
Operating Segments
The Company's operating structure is the basis for our internal financial reporting. As of December 31, 20122015, our operating structure included the following operating segments, the first six of which are sometimes referred to as "operating groups" or "groups":
Eurasia and Africa
Europe
Latin America
North America
Asia Pacific
Bottling Investments
Corporate
Our North America operating segment includes CCE's former North America business we acquired on October 2, 2010. Effective January 1, 2013, we transferred our India and Southwest Asia business unit from the Eurasia and Africa operating segment to the Pacific operating segment.
Except to the extent that differences among operating segments are material to an understanding of our business taken as a whole, the description of our business in this report is presented on a consolidated basis. Effective January 1, 2016, we transferred Coca-Cola Refreshments' ("CCR") bottling and associated supply chain operations in the United States and Canada from our North America segment to our Bottling Investments segment.
For financial information about our operating segments and geographic areas, refer to Note 19 of Notes to Consolidated Financial Statements set forth in Part II, "Item 8. Financial Statements and Supplementary Data" of this report, incorporated herein by reference. For certain risks attendant to our non-U.S. operations, refer to "Item 1A. Risk Factors" below.
Products and Brands
As used in this report:
"concentrates" means flavoring ingredients and, depending on the product, sweeteners used to prepare syrups or finished beverages and includes powders for purified water products such as Dasani;
"syrups" means beverage ingredients produced by combining concentrates and, depending on the product, sweeteners and added water;
"fountain syrups" means syrups that are sold to fountain retailers, such as restaurants and convenience stores, which use dispensing equipment to mix the syrups with sparkling or still water at the time of purchase to produce finished beverages that are served in cups or glasses for immediate consumption;
"sparkling beverages" means nonalcoholic ready-to-drink beverages with carbonation, including carbonated energy drinks and carbonated waters and flavored waters;
"still beverages" means nonalcoholic beverages without carbonation, including noncarbonated waters, flavored waters and enhanced waters, noncarbonated energy drinks, juices and juice drinks, ready-to-drink teas and coffees, and sports drinks;
"Company Trademark Beverages" means beverages bearing our trademarks and certain other beverage products bearing trademarks licensed to us by third parties for which we provide marketing support and from the sale of which we derive economic benefit; and
"Trademark Coca-Cola Beverages" or "Trademark Coca-Cola" means beverages bearing the trademark Coca-Cola or any trademark that includes Coca-Cola or Coke (that is, Coca-Cola, Coca-Cola Life, Diet Coke and Coca-Cola Zero and all their variations and any line extensions, including Coca-Cola Light, caffeine free Diet Coke, Cherry Coke, etc.). Likewise, when we use the capitalized word "Trademark" together with the name of one of our other beverage products (such as "Trademark Fanta," "Trademark Sprite" or "Trademark Simply"), we mean beverages bearing the indicated trademark (that is, Fanta, Sprite or Simply, respectively) and all its variations and line extensions (such that "Trademark Fanta" includes Fanta Orange, Fanta Zero Orange, Fanta Apple, etc.; "Trademark Sprite" includes Sprite, Diet Sprite, Sprite Zero, Sprite Light, etc.; and "Trademark Simply" includes Simply Orange, Simply Apple, Simply Grapefruit, etc.).
Our Company markets, manufactures and sells:
beverage concentrates, sometimes referred to as "beverage bases," and syrups, including fountain syrups (we refer to this part of our business as our "concentrate business" or "concentrate operations"); and
finished sparkling and still beverages (we refer to this part of our business as our "finished product business" or "finished product operations").
Generally, finished product operations generate higher net operating revenues but lower gross profit margins than concentrate operations.
In our concentrate operations, we typically generate net operating revenues by selling concentrates and syrups to authorized bottling and canning operations (to which we typically refer as our "bottlers" or our "bottling partners"). Our bottling partners either combine the concentrates with sweeteners (depending on the product), still water and/or sparkling water, or combine the syrups with sparkling water to produce finished beverages. The finished beverages are packaged in authorized containers bearing our trademarks or trademarks licensed to us — such as cans and refillable and nonrefillable glass and plastic bottles — bearing our trademarks or trademarks licensed to us and are then sold to retailers directly or, in some cases, through wholesalers or other bottlers. Outside the United States, we also sell concentrates for fountain beverages to our bottling partners who are typically authorized to manufacture fountain syrups, which they sell to fountain retailers such as restaurants and convenience stores which use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers who in turn sell and distribute the fountain syrups to fountain retailers.
Our finished product operations consist primarily of the production, sales and distribution operations managed by CCR and our Company-owned or -controlled bottling, and distribution operations. CCR is included in our North America operating segment, and our Company-owned or -controlled bottlingsales and distribution operations, are included in our Bottling Investments operating segment.including CCR. Our finished product operations generate net operating revenues by selling sparkling beverages and a variety of still beverages, such as juices and juice drinks, energy and sports drinks, ready-to-drink teas and coffees, and certain water products, to retailers or to distributors, wholesalers and bottling partners who distribute them to retailers. In addition, in the United States, we manufacture fountain syrups and sell them to fountain retailers, such as restaurants and convenience stores who use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers or bottling partners
who resell the fountain syrups to fountain retailers. In the United States, we authorize wholesalers to resell our fountain syrups through nonexclusive appointments that neither restrict us in setting the prices at which we sell fountain syrups to the wholesalers nor restrict the territories in which the wholesalers may resell in the United States.
For information about net operating revenues and unit case volume related to our concentrate operations and finished product operations, respectively, refer to the heading "Our Business — General" set forth in Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this report, which is incorporated herein by reference.
Most of our brandedWe own numerous valuable nonalcoholic beverage products, particularly outside of North America, are manufactured, sold and distributed by independent bottling partners. However, from time to time we acquire or take control of bottling or canning operations, often in underperforming markets where we believe we can use our resources and expertise to improve performance. Owning such a controlling interest enables us to compensate for limited local resources; help focusbrands, including the bottler's sales and marketing programs; assist in the development of the bottler's business and information systems; and establish an appropriate capital structure for the bottler. The Company-owned or -controlled bottling operations, other than those managed by CCR, are included in our Bottling Investments group.
In line with our long-term bottling strategy, we may periodically consider options for reducing our ownership interest in a Bottling Investments group bottler. One such option is to combine our bottling interests with the bottling interests of others to form strategic business alliances. Another option is to sell our interest in a bottling operation to one of our other bottling partners in which we have an equity method investment. In both of these situations, our Company continues to participate in the bottler's results of operations through our share of the strategic business alliance's or equity method investee's earnings or losses.
The following are our most significant brands:following:
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| Coca-Cola | Fanta | Dasani | Minute Maid Pulpy | Aquarius | Bonaqua/Bonaqa |
| Diet Coke/Coca-Cola Light | Minute Maid | Glacéau Vitaminwater | Del Valle3
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Coca-Cola Zero | Powerade | Georgia1 | AyatakaMinute Maid Pulpy4
| Gold Peak6 |
SpriteCoca-Cola Zero | AquariusPowerade | Dasani | SimplyFUZE TEA7
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| Fanta | Del Valle2 | I LohasSimply5
| Glacéau Smartwater8 |
| Sprite | Schweppes3 | Glacéau Vitaminwater | Ice Dew9 |
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1 | Georgia is primarily a coffee brand sold mainly in Japan. |
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2 | We manufacture, market and sell juices and juice drinks under the Del Valle trademark primarily in Mexico and Brazil through joint ventures with our bottling partners. |
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3 | Schweppes is owned by the Company in certain countries other than the United States. |
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4 | Minute Maid Pulpy is a juice drink brand sold primarily in Asia Pacific. |
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5 | Simply is a juice and juice drink brand sold in North America. |
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| The Company manufactures, markets and sells juices and juice drinks under the Del Valle trademark through joint ventures with our bottling partnersGold Peak is primarily a tea brand sold in Mexico and Brazil.North America. |
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| AyatakaFUZE TEA is a green tea brand sold in Japan.outside of North America. |
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| I LohasGlacéau Smartwater is a vapor-distilled water with added electrolytes which is sold mainly in North America and Great Britain. |
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9 | Ice Dew is a water brand sold in Japan.China. |
In addition pursuant to master distributionthe beverage brands we own, we also provide marketing support and coordination agreements withotherwise participate in the sales of other nonalcoholic beverage brands through licenses, joint ventures and strategic partnerships, including, but not limited to, the following:
We and certain of our bottlers distribute certain brands of Monster Beverage Corporation (“Monster”("Monster"), we distribute certain Monster brands, primarily Monster Energy, beverages,in designated territories in the United States, Canada and other international territories pursuant to distribution coordination agreements between the Company and Monster and related distribution agreements between Monster and Company-owned or -controlled bottling operations, including CCR, and independent bottling and distribution partners.
We produce and/or distribute certain other third-party brands, including brands owned by Dr Pepper Snapple Group, Inc. ("DPSG"), which we produce and distribute in designated territories in the United States and Canada and certain of our bottlers distribute such Monster brands in designated U.S. and international territories. Pursuantpursuant to license agreements with DPS, we distribute certain DPS brands in designated territories in the United States and Canada. Prior to and during 2012, we also distributed Nestea products in the United States underDPSG.
We have a sublicense from a subsidiary of Nestlé S.A. ("Nestlé"), and in various other markets worldwide through Beverage Partners Worldwide ("BPW"), the Company's joint venturestrategic partnership with Nestlé. The Nestea trademark is owned by Société des Produits Nestlé S.A. The Company and Nestlé terminated the sublicense agreement for Nestea in the United States and phased out the BPW joint venture in all territories other than markets in Europe, Canada, Australia, Hong Kong, Macau and Taiwan by the end of 2012.
In 2012, the Company invested in the beverage business of Aujan Industries Company J.S.C. ("Aujan"), one of the largest independent beverage companies in the Middle East. As a result of this transaction, the Company acquiredWe own 50 percent of the Aujan entity that holds the rights in certain territories to Aujan-owned brands produced and distributed by Aujan, including Rani, a juice brand, and Barbican, a flavored malt beverage brand,brand.
We have a joint venture with Nestlé S.A. ("Nestlé") named Beverage Partners Worldwide ("BPW") which markets and distributes Nestea products in certain territories.Europe and Canada under agreements with our bottlers. The Nestea trademark is owned by Société des Produits Nestlé S.A.
Consumer demand determines the optimal menu of Company product offerings. Consumer demand can vary from one locale to another and can change over time within a single locale. Employing our business strategy, and with special focus on core brands, our Company seeks to build its existing brands and, at the same time, to broaden its historical family of brands, products and services in order to create and satisfy consumer demand locale by locale.
During 2012, our Company introduced a variety of new brands, brand extensions and new beverage products. The Company launched Fuze Tea, a new international tea brand, in 24 countries. In the Latin America group, leveraging our existing portfolio, we launched Andina Del Valle Sabores Caseros, a juice nectar targeted to capture the homemade juice category, in Chile and
two extension flavors of Del Valle juice (Del Valle Maracuyá & Nada and Del Valle Limón & Nada) in Brazil. The introduction of the new Fuze Tea brand in the Latin America group was successful, and we captured consumer brand preference in key countries such as Chile, Mexico, Costa Rica, Colombia, Ecuador and El Salvador. In addition, we launched Glacéau Vitaminwater in Chile and Colombia, and launched Blak Coffee in Costa Rica and Colombia. In the Pacific group, we launched Fuze Tea, a fruit-flavored black tea beverage, in Korea and Mongolia. In China, we introduced a new 300 mL PET pack for Coca-Cola, Fanta and Sprite sparkling beverages, and Guo Qing Xin, a fruit-flavored beverage, under the Minute Maid brand. In Japan, we introduced Mate Cha, a mate tea inspired by the traditional South American tea drink. In the Europe group, we were very active on product launches containing stevia, a non-nutritive sweetener. Numerous tea formulations under the Nestea brand were rolled out across the European continent, while in France and Switzerland a new Sprite containing 30 percent less sugar was made possible through the use of stevia.
In furtherance of our commitments to sustainability and innovation, our PlantBottle™ packaging technology, which is PET plastic that contains up to 30 percent renewable material from plants, is becoming more widely used around the world. By the end of 2012, we had distributed nearly 13 billion PlantBottle packages in 24 countries. Also, in 2012, we continued expansion of Coca-Cola Freestyle, our revolutionary fountain dispenser that offers over 100 drink choices at the touch of a button, to thousands of outlets across the United States and internationally.
We measure the volume of Company beverage products sold in two ways: (1) unit cases of finished products and (2) concentrate sales. As used in this report, "unit case" means a unit of measurement equal to 192 U.S. fluid ounces of finished beverage (24 eight-ounce servings);, and "unit case volume" means the number of unit cases (or unit case equivalents) of Company beverage products directly or indirectly sold by the Company and its bottling partners (the "Coca-Cola("Coca-Cola system") to customers. Unit case volume primarily consists of beverage products bearing Company trademarks. Also included in unit case volume are certain products licensed to, or distributed by, our Company, and brands owned by Coca-Cola system bottlers for which our Company provides marketing support and from the sale of which we derive economic benefit. In addition, unit case volume includes sales by certain joint ventures in which the Company has an equity interest. We believe unit case volume is one of the measures of the underlying strength of the Coca-Cola system because it measures trends at the consumer level. The unit case volume numbers used in this report are derived based on estimates received by the Company from its bottling partners and distributors. Concentrate sales volume represents the amount of concentrates and syrups (in all casesinstances expressed in equivalent unit cases) sold by, or used in finished beverages sold by, the Company to its bottling partners or other customers. Unit case volume and concentrate sales volume growth rates are not necessarily equal during any given period. Factors such as seasonality, bottlers' inventory practices, supply point changes, timing of price increases, new product introductions and changes in product mix can impact unit case volume and concentrate sales volume and can create differences between unit case volume and concentrate sales volume growth rates. In addition to the items mentioned above, the impact of unit case volume from certain joint ventures in which the Company has an equity interest but to which the Company does not sell concentrates or syrups may give rise to differences between unit case volume and concentrate sales volume growth rates.
Distribution System and Bottler's Agreements
We make our branded beverage products available to consumers in more than 200 countries through our network of Company-owned or -controlled bottling and distribution operations, as well as independent bottling partners, distributors, wholesalers and retailers — the world's largest beverage distribution system. Consumers enjoy finished beverage products bearing our trademarks owned by or licensed to us at a rate of more than 1.81.9 billion servings each day. We continue to expand our marketing presence andin an effort to increase our unit case volume and net operating revenues in developed, developing and emerging markets. Our strong and stable system helps us to capture growth by manufacturing, distributing and marketing existing, enhanced and new innovative products to our consumers throughout the world.
The Coca-Cola system sold approximately 27.729.2 billion, 26.728.6 billion and 25.528.2 billion unit cases of our products in 2012, 20112015, 2014 and 2010,2013, respectively. The number of unit cases sold in 2012 does not include BPW unit case volume for those countries2015 and 2014 reflects the impact of the transfer of distribution rights with respect to non-Company-owned brands that were previously licensed to us in which BPW was phased outNorth American refranchised territories and the discontinuance of certain brands owned by our Russian juice company in 2012, nor does it includeconnection with the transition in 2014 of our Russian juice operations to an existing joint venture with an unconsolidated bottling partner (for information about these structural changes, refer to the heading "Operations Review — Structural Changes, Acquired Brands and Newly Licensed Brands" set forth in Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this report). The Company eliminated the unit case volume of products distributed inrelated to these structural changes from the United States under a sublicense from a subsidiary of Nestlé which terminated at the end of 2012.base year, as applicable, when calculating 2015 versus 2014 and 2014 versus 2013 unit case volume growth rates. Sparkling beverages represented approximately 7573 percent, 7573 percent and 7674 percent of our worldwide unit case volume for 2012, 20112015, 2014 and 2010,2013, respectively. Trademark Coca-Cola Beverages accounted for approximately 4846 percent, 4946 percent and 5047 percent of our worldwide unit case volume for 2012, 20112015, 2014 and 2010,2013, respectively.
In 2012,2015, unit case volume in the United States ("U.S. unit case volume") represented approximately 19 percent of the Company's worldwide unit case volume. Of the U.S. unit case volume for 2012, approximately 702015, 67 percent was attributable to sparkling beverages and approximately 3033 percent to still beverages. Trademark Coca-Cola Beverages accounted for approximately 4844 percent of U.S. unit case volume for 2012.2015.
Unit case volume outside the United States represented approximately 81 percent of the Company's worldwide unit case volume for 2012.2015. The countries outside the United States in which our unit case volumes were the largest in 20122015 were Mexico, China, Brazil and Japan, which together accounted for approximately 31 percent of our worldwide unit case volume. Of the non-U.S. unit case volume for 2012, approximately 762015, 74 percent was attributable to sparkling beverages and approximately 2426 percent to still beverages. Trademark Coca-Cola Beverages accounted for approximately 4846 percent of non-U.S. unit case volume for 20122015.
Our five largest independent bottling partners based on unit case volume in 2015 were:
Coca-Cola FEMSA, S.A.B. de C.V. ("Coca-Cola FEMSA"), which has bottling and distribution operations in a substantial portion of central Mexico, including Mexico City, and the southeast and northeast of Mexico, including the Gulf region; Guatemala City and the surrounding areas in Guatemala; Nicaragua (nationwide); Costa Rica (nationwide); Panama (nationwide); most of Colombia; Venezuela (nationwide); a major part of the states of São Paulo and Minas Gerais, the states of Paraná and Mato Grosso do Sul and part of the states of Rio de Janeiro and Goiás in Brazil; Buenos Aires and surrounding areas in Argentina; and the Philippines (nationwide);
Coca-Cola HBC AG ("Coca-Cola Hellenic"), which has bottling and distribution operations in Armenia, Austria, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, the Former Yugoslav Republic of Macedonia, Greece, Hungary, Italy, Latvia, Lithuania, Moldova, Montenegro, Nigeria, Northern Ireland, Poland, Republic of Ireland, Romania, Russia, Serbia, Slovakia, Slovenia, Switzerland and Ukraine;
Arca Continental, S.A.B. de C.V., which has bottling and distribution operations in northern and western Mexico, northern Argentina, Ecuador and Peru;
Coca-Cola Enterprises, Inc. ("CCE"), which has bottling and distribution operations in Belgium, continental France, Great Britain, Luxembourg, Monaco, the Netherlands, Norway and Sweden; and
Coca-Cola İçecek A.Ş., which has bottling and distribution operations in Turkey, Pakistan, Kazakhstan, Azerbaijan, Kyrgyzstan, Turkmenistan, Jordan, Iraq and Tajikistan and distribution operations in Syria.
In our concentrate operations, we typically sell concentrates and syrups to our2015, these five bottling partners who use the concentrate to manufacture finished products which they sell to distributorscombined represented 34 percent of our total unit case volume.
Being a bottler does not create a legal partnership or joint venture between us and other customers. Separateour bottlers. Our bottlers are independent contractors and are not our agents.
Bottler's Agreements
We have separate contracts ("Bottler's Agreements") exist between our Company andwith each of our bottling partners regarding the manufacture and sale of Company products. Subject to specified terms and conditions and certain variations, the Bottler'sBottler’s Agreements generally authorize the bottlers to prepare specified Company Trademark Beverages, to package the same in authorized containers, and to distribute and sell the same in (but, subject to applicable local law, generally only in) an identified territory. The bottler is obligated to purchase its entire requirement of concentrates or syrups for the designated Company Trademark Beverages from the Company or Company-authorized suppliers. We typically agree to refrain from selling or distributing, or from authorizing third parties to sell or distribute, the designated Company Trademark Beverages throughout the identified territory in the particular authorized containers; however, we typically reserve for ourselves or our designee the right (1) to prepare and package such beveragesCompany Trademark Beverages in such containers in the territory for sale outside the territory, and (2) to prepare, package, distribute and sell such beveragesCompany Trademark Beverages in the territory in any other manner or form. Territorial form (territorial
restrictions on bottlers vary in some cases in accordance with local law.
Being a bottler does not create a legal partnership or joint venture between uslaw), and our bottlers. Our bottlers are independent contractors and are not our agents.(3) to handle certain key accounts (accounts that cover multiple territories).
While as described below, under most of our Bottler's Agreements we generally have complete flexibility to determine the price and other terms of sale of the concentrates and syrups we sell to our bottlers, as a practical matter, our Company's ability to exercise its contractual flexibility to determine the price and other terms of sale of its syrups, concentrates and finished beverages is subject, both outside and within the United States, to competitive market conditions.
Bottler's Agreements Outside the United States
The Bottler's Agreements between us and our authorized bottlers outside the United States generally are of stated duration, subject In addition, in some cases to possible extensions or renewals of the term of the contract. Generally, these contracts are subject to termination by the Company following the occurrence of certain designated events. These events include defined events of default and certain changes in ownership or control of the bottler.
In certain parts of the world outside the United States, we have not granted comprehensive beverage production rights to the bottlers. In such instances we or our authorized suppliers sell Company Trademark Beverages to the bottlers for sale and distribution throughout the designated territory, often on a nonexclusive basis. Most of the Bottler's Agreements in force between us and bottlers outside the United States authorize the bottlers to manufacture and distribute fountain syrups, usually on a nonexclusive basis.
Our Company generally has complete flexibility to determine the price and other terms of sale of the concentrates and syrups we sell to bottlers outside the United States. In some instances, however, we have agreed or may in the future agree with a bottler with respect to concentrate pricing on a prospective basis for specified time periods. InAlso, in some markets, in an effort to allow our Company and our bottling partners to grow together through shared value, aligned incentives and the flexibility necessary to meet consumers' always changing needs and tastes, we worked with our bottling partners to develop and implement an incidence-based pricing model for sparkling and still beverages. Under this model, the concentrate price we charge is impacted by a number of factors, including, but not limited to, bottler pricing, the channels in which the finished products are sold and package mix. Outside the United States,
Under our Bottler's Agreements, in most cases, we have no obligation to provide marketing support to the bottlers. Nevertheless, we may, at our discretion, contribute toward bottler expenditures for advertising and marketing. We may also elect to undertake independent or cooperative advertising and marketing activities.
As further discussed below, our Bottler's Agreements for territories outside of the United States differ in some respects from our Bottler's Agreements for territories within the United States.
6Bottler's Agreements Outside the United States
The Bottler's Agreements between us and our authorized bottlers outside the United States generally are of stated duration, subject in some cases to possible extensions or renewals of the term of the contract. Generally, these contracts are subject to termination by the Company following the occurrence of certain designated events. These events include defined events of default and certain changes in ownership or control of the bottler. Most of the Bottler's Agreements in force between us and bottlers outside the United States authorize the bottlers to manufacture and distribute fountain syrups, usually on a nonexclusive basis.
In certain parts of the world outside the United States, we have not granted comprehensive beverage production rights to the bottlers. In such instances, we or our authorized suppliers sell Company Trademark Beverages to the bottlers for sale and distribution throughout the designated territory, often on a nonexclusive basis.
Bottler's Agreements Within the United States
During the year ended December 31, 2012, CCR,2015, our bottling and customer service organization for North America,Company-owned operations manufactured, sold and distributed approximately 8882 percent of our U.S. unit case volume in the United States.volume. The discussion below regarding the terms of Bottler's Agreements and other contracts relates to Bottler's Agreements and other contracts for territories in the United States that are not covered by CCR.Company-owned operations.
In the United States, with certain very limited exceptions, the Bottler's Agreements for Trademark Coca-Cola Beverages and other cola-flavored beverages have no stated expiration date. Our standard contracts for other sparkling beverage flavors and for still beverages are of stated duration, subject to bottler renewal rights. The Bottler's Agreements in the United States are subject to termination by the Company for nonperformance or upon the occurrence of certain defined events of default that may vary from contract to contract.
Under the terms of the Bottler's Agreements, bottlers in the United States are authorized to manufacture and distribute Company Trademark Beverages in bottles and cans. However, these bottlers generally are not authorized to manufacture fountain syrups. Rather, in the United States, our Company manufactures and sells fountain syrups to authorized fountain wholesalers (including certain authorized bottlers) and some fountain retailers. These wholesalers in turn sell the syrups or deliver them on our behalf to restaurants and other retailers.
Certain of the Bottler's Agreements for cola-flavored sparkling beverages in effect in the United States give us complete flexibility to determine the price and other terms of sale of concentrates and syrups for Company Trademark Beverages. In some instances, we have agreed or may in the future agree with a bottler with respect to concentrate pricing on a prospective basis for specified time periods. Certain Bottler's Agreements, entered into prior to 1987, provide for concentrates or syrups for certain Trademark Coca-Cola Beverages and other cola-flavored Company Trademark Beverages to be priced pursuant to a stated formula. Bottlers that accounted for approximately 5.66.9 percent of totalU.S. unit case volume in the United States in 20122015 have contracts for certain Trademark Coca-Cola Beverages and other cola-flavored Company Trademark Beverages with pricing formulas that generally provide for a baseline price. This baseline price may be adjusted periodically by the Company, up to a maximum indexed ceiling price, and is adjusted quarterly based upon changes in certain sugar or sweetener prices, as applicable. Bottlers that accounted for approximately 0.3 percent of totalU.S. unit case volume in the United States in 20122015 operate under our oldest form of contract, which provides for a fixed price for Coca-Cola syrup used in bottles and cans. This price is subject to quarterly adjustments to reflect changes in the quoted price of sugar.
We have standard contracts with bottlers in the United States for the sale of concentrates and syrups for non-cola-flavored sparkling beverages and certain still beverages in bottles and cans, and, in certain cases, for the sale of finished still beverages in bottles and cans. All of these standard contracts give the Company complete flexibility to determine the price and other terms of sale.
In an effort to allow our Company and our bottling partners to grow together through shared value, aligned incentives and the flexibility necessary to meet consumers' always changing needs and tastes, we worked with bottling partners that produce and distribute most of our non-CCR unit case volume in the United States to develop and implement an incidence-based pricing model, primarily for sparkling beverages. Under this model, the concentrate price we charge is impacted by a number of factors, including, but not limited to, bottler pricing, the channels in which the finished products are sold and package mix. We expect to use an incidence-based pricing model in 2013 with bottlers that produce and distribute most of our non-CCR unit case volume in the United States.
Under most of our Bottler's Agreements and other standard beverage contracts with bottlers in the United States, our Company has no obligation to participate with bottlers in expenditures for advertising and marketing. Nevertheless, at our discretion, we may contribute toward such expenditures and undertake independent or cooperative advertising and marketing activities. Some U.S. Bottler's Agreements entered into prior to 1987 impose certain marketing obligations on us with respect to certain Company Trademark Beverages.
In conjunction with implementing a new beverage partnership model in North America, the Company has entered into comprehensive beverage agreements ("CBAs") with certain bottling partners pursuant to which we granted to these bottlers certain exclusive territory rights for the distribution, promotion, marketing and sale of Company-owned and licensed beverage products as defined by the CBA. In some cases, the Company has entered into, or agreed to enter into, manufacturing agreements that authorize certain bottlers that have executed CBAs to manufacture certain beverage products. If a bottler has not entered into a specific manufacturing agreement, then under the CBA for the applicable territories, CCR retains the rights to produce these beverage products and the bottlers will purchase from CCR (or other Company-authorized manufacturing bottlers) substantially all of the related finished products needed in order to service the customers in these territories. Each CBA generally has a term of 10 years and is renewable, in most cases by the bottler and in some cases by the Company, indefinitely for successive additional terms of 10 years each. Under the CBA, each bottler will make ongoing quarterly payments to CCR based on its gross profit in the refranchised territories throughout the term of the CBA, including renewals, in exchange for the grant of the exclusive territory rights. For more information about the North America refranchising transactions, refer to Note 2 of Notes to Consolidated Financial Statements set forth in Part II, "Item 8. Financial Statements and Supplementary Data" of this report.
Promotions and Marketing Programs
In addition to conducting our own independent advertising and marketing activities, we may provide promotional and marketing services and/or funds to our bottlers. In most cases, we do this on a discretionary basis under the terms of commitment letters or agreements, even though we are not obligated to do so under the terms of the bottling or distribution agreements between our Company and the bottlers. Also, on a discretionary basis in most cases, our Company may develop and introduce new products, packages and equipment to assist the bottlers. Likewise, in many instances, we provide promotional and marketing services and/or funds and/or dispensing equipment and repair services to fountain and bottle/can retailers, typically pursuant to marketing agreements. The aggregate amount of funds provided by our Company to bottlers, resellers or other customers of our Company's products, principally for participation in promotional and marketing programs, was $6.1$6.8 billion in 2012.2015.
Significant Equity Method Investments in Bottling Operations
WeMost of our branded beverage products are manufactured, sold and distributed by independent bottling partners. However, from time to time we acquire or take control of bottling operations, often in underperforming markets where we believe we can use our resources and expertise to improve performance. Owning such a controlling interest enables us to compensate for limited local resources; help focus the bottler's sales and marketing programs; assist in the development of the bottler's business and information systems; and establish an appropriate capital structure for the bottler. In line with our long-term bottling strategy, we may periodically consider options for divesting or reducing our ownership interest in a Company-owned or -controlled bottler, typically by selling our interest in a particular bottling operation to an independent bottler to improve Coca-Cola system efficiency. When we sell our interest in a bottling operation to one of our other bottling partners in which we have an equity method investment, our Company continues to participate in the bottler's results of operations through our share of the equity method investee's earnings or losses.
In addition, from time to time we make equity investments representing noncontrolling interests in selected bottling operations with the intention of maximizing the strength and efficiency of the Coca-Cola system's production, distributionmarketing, sales and marketingdistribution capabilities around the world.world by providing expertise and resources to strengthen those businesses. These investments are intended to result in increases in unit case volume, net revenues and profits at the bottler level, which in turn generate increased concentrate sales for our Company's concentrate and syrup business. When this occurs, both we and our bottling partners benefit from long-term growth in volume and improved cash flows and increased shareowner value. In cases where our investments in bottlers represent noncontrolling interests, our intention is to provide expertise and resources to strengthen those businesses.flows. When our equity investment provides us with the ability to exercise significant influence over the investee bottler's operating and financial policies, we account for the investment under the equity method, and we sometimes refer to such a bottler as an "equity method investee bottler" or "equity method investee."
Our significant equity method investee bottlers include the following:
Coca-Cola FEMSA, in which as of December 31, 2015, we had an equity ownership interest of 28 percent, Coca-Cola Hellenic, Bottling Company S.A. ("Coca-Cola Hellenic")
Coca-Cola FEMSA, S.A.B. de C.V. ("Coca-Cola FEMSA")
Coca-Cola Amatil Limited ("Coca-Cola Amatil")
Ourin which as of December 31, 2015, we had an equity ownership interest of 24 percent, and Coca-Cola İçecek A.Ş., in Coca-Cola Hellenic was 23 percentwhich as of December 31, 2012. Coca-Cola Hellenic has bottling and distribution rights, through direct ownership or joint ventures, in Armenia, Austria, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, the Former Yugoslav Republic of Macedonia, Greece, Hungary, Italy, Latvia, Lithuania, Moldova, Montenegro, Nigeria, Northern Ireland, Poland, Republic of Ireland, Romania, Russia, Serbia, Slovakia, Slovenia, Switzerland and Ukraine. Coca-Cola Hellenic estimates that the area in these 28 countries which it serves through its bottling and distribution rights has a combined population of 581 million people. In 2012, 47 percent of the unit case volume of Coca-Cola Hellenic consisted of Trademark Coca-Cola Beverages; 50 percent of its unit case volume consisted of other Company Trademark Beverages; and 3 percent of its unit case volume consisted of beverage products of Coca-Cola Hellenic or other companies.
Our2015, we had an equity ownership interest in Coca-Cola FEMSA was 29 percent as of December 31, 2012. Coca-Cola FEMSA is a Mexican holding company with bottling subsidiaries in a substantial part of central Mexico, including Mexico City and the southeast and northeast parts of Mexico; greater São Paulo, Campinas, Santos, the state of Matto Grosso do Sul, part of the state of Minas Gerais and part of the state of Goias in Brazil; central Guatemala; most of Colombia; all of Costa Rica, Nicaragua, Panama and Venezuela; and greater Buenos Aires, Argentina. Coca-Cola FEMSA estimates that the territories in which it markets beverage products contain 55 percent of the population of Mexico, 22 percent of the population of Brazil, 99 percent of the population of Colombia, 35 percent of the population of Guatemala, 100 percent of the populations of Costa Rica, Nicaragua, Panama and Venezuela, and 32 percent of the population of Argentina. In 2012, 60 percent of the unit case volume of Coca-Cola FEMSA consisted of Trademark Coca-Cola Beverages and 40 percent of its unit case volume consisted of other Company Trademark Beverages.
Our ownership interest in Coca-Cola Amatil was 29 percent as of December 31, 2012. Coca-Cola Amatil has bottling and distribution rights, through direct ownership or joint ventures, in Australia, New Zealand, Fiji, Papua New Guinea and Indonesia. Coca-Cola Amatil estimates that the territories in which it markets beverage products contain 100 percent of the populations of Australia, New Zealand, Fiji and Papua New Guinea, and 98 percent of the population of Indonesia. In 2012, 44 percent of the unit case volume of Coca-Cola Amatil consisted of Trademark Coca-Cola Beverages; 42 percent of its unit case volume consisted of other Company Trademark Beverages; and 14 percent of its unit case volume consisted of beverage products of Coca-Cola Amatil or other companies.20 percent.
Seasonality
Sales of our nonalcoholic ready-to-drink beverages are somewhat seasonal, with the second and third calendar quarters accounting for the highest sales volumes. The volume of sales in the beverage business may be affected by weather conditions.
Competition
Our Company competes in the nonalcoholic beverage segment of the commercial beverage industry. The nonalcoholic beverage segment of the commercial beverage industry is highly competitive, consisting of numerous companies.companies ranging from small or emerging to very large and well established. These include companies that, like our Company, compete in multiple geographic areas, as well as businesses that are primarily regional or local in operation. Competitive products include numerous nonalcoholic sparkling beverages; various water products, including packaged, flavored and enhanced waters; juices and nectars; fruit drinks and dilutables (including syrups and powdered drinks); coffees and teas; energy and sports and other performance-enhancing drinks; filtered milk and other dairy-based drinks; functional beverages, including vitamin-based products and relaxation beverages; and various other nonalcoholic beverages. These competitive beverages are sold to consumers in both ready-to-drink and other than ready-to-drink form. In many of the countries in which we do business, including the United States, PepsiCo, Inc. ("PepsiCo"), is one of our primary competitors. Other significant competitors include, but are not limited to, Nestlé, DPS,DPSG, Groupe Danone, Mondelēz International, Inc. ("Mondelēz"), Kraft Foods Group, Inc. ("Kraft"), Suntory Beverage & Food Limited ("Suntory") and Unilever. In certain markets, our competition also includes beer companies. We also compete against numerous regional and local companies and, in some markets, against retailers that have developed their own store or private label beverage brands.
Competitive factors impacting our business include, but are not limited to, pricing, advertising, sales promotion programs, product innovation, increased efficiency in production techniques, the introduction of new packaging, new vending and dispensing equipment, and brand and trademark development and protection.
Our competitive strengths include leading brands with high levels of consumer acceptance; a worldwide network of bottlers and distributors of Company products; sophisticated marketing capabilities; and a talented group of dedicated associates. Our competitive challenges include strong competition in all geographic regions and, in many countries, a concentrated retail sector with powerful buyers able to freely choose among Company products, products of competitive beverage suppliers and individual retailers' own store or private label beverage brands.
Raw Materials
Water is a main ingredient in substantially all of our products. While historically we have not experienced significant water supply difficulties, water is a limited natural resource in many parts of the world, and our Company recognizes water availability, quality and sustainability, for both our operations and also the communities where we operate, as one of the key challenges facing our business.
In addition to water, the principal raw materials used in our business are nutritive and non-nutritive sweeteners. In the United States, the principal nutritive sweetener is high fructose corn syrup ("HFCS"), a form of sugar, which is nutritionally equivalent to sugar. HFCS is available from numerous domestic sources and ishas historically been subject to fluctuations in its market price. The principal nutritive sweetener used by our business outside the United States is sucrose, another form ofi.e., table sugar, which is also available from numerous sources and ishas historically been subject to fluctuations in its market price. Our Company generally has not experienced any difficulties in obtaining its requirements for nutritive sweeteners. In the United States, we purchase HFCS to meet our and our bottlers' requirements with the assistance of Coca-Cola Bottlers' Sales & Services Company LLC ("CCBSS"). CCBSS is a limited liability company that is owned by authorized Coca-Cola bottlers doing business in the United States. Among other things, CCBSS provides procurement services to our Company for the purchase of various goods and services in the United States, including HFCS.
The principal non-nutritive sweeteners we use in our business are aspartame, acesulfame potassium, saccharin, cyclamate, sucralose and sucralose.a sweetener derived from the stevia plant. Generally, these raw materials are readily available from numerous sources. However, our Company purchases aspartame, an important non-nutritive sweetener that is used alone or in combination with other important non-nutritive sweeteners such as saccharin or acesulfame potassium in our low-calorielow- and no-calorie sparkling beverage products, primarily from The NutraSweet Company and Ajinomoto Co., Inc. and SinoSweet Co., Ltd., which we consider to be our primary sources for the supply of this product. We currently purchase acesulfame potassium from Nutrinova Nutrition Specialties & Food Ingredients GmbH, which we consider to be our primary source for the supply of this product, and from one additional supplier. Our Company generally has not experienced any difficulties in obtaining its requirements for non-nutritive sweeteners.
Our Company sells a number of products sweetened with sucralose, a non-nutritive sweetener.sweeteners and we do not anticipate such difficulties in the future. We work closely with Tate & Lyle PLC, our primary sucralose supplier, to maintain continuity of supply, and we do not anticipate difficulties in obtaining our requirements. We also sell beverage products sweetened with a non-nutritive sweetener derived from the stevia plant. We do not anticipate difficulties sourcing stevia-based ingredients.supply.
With regard to juice and juice drink products, juiceJuice and juice concentrate from various fruits, particularly orange juice and orange juice concentrate, are ourthe principal raw materials. Thematerials for our juice and juice drink products. We source our orange juice and orange juice concentrate primarily from Florida and the Southern Hemisphere (particularly Brazil). We work closely with Cutrale Citrus Juices U.S.A., Inc., our primary supplier of orange juice from Florida and Brazil, to ensure an adequate supply of orange juice and orange juice concentrate that meets our Company's standards. However, the citrus industry is subject toimpacted by greening disease and the variability of weather conditions. In particular, freezing weather or hurricanes in central Florida may result in shortages and higher prices for orange juice and orange juice concentrate throughout the industry. We source our orange juiceIn addition, greening disease is reducing the number of trees and orange juice concentrate primarily from Floridaincreasing grower costs and the Southern Hemisphere (particularly Brazil). Therefore, we typically have an adequate supply of orange juice and orange juice concentrate that meets our Company's standards.prices.
Our Company-owned or consolidated bottling and canning operations and our finished product business also purchase various other raw materials including, but not limited to, PETpolyethylene terephthalate ("PET") resin, preforms and bottles; glass and aluminum bottles; aluminum and steel cans; plastic closures; aseptic fiber packaging; labels; cartons; cases; post-mixpostmix packaging; and carbon dioxide. We generally purchase these raw materials from multiple suppliers and historically have not experienced materialsignificant shortages.
Patents, Copyrights, Trade Secrets and Trademarks
Our Company owns numerous patents, copyrights and trade secrets, as well as substantial know-how and technology, which we collectively refer to in this report as "technology." This technology generally relates to our Company's products and the processes for their production; the packages used for our products; the design and operation of various processes and equipment used in our business; and certain quality assurance software. Some of the technology is licensed to suppliers and other parties. Our sparkling beverage and other beverage formulae are among the important trade secrets of our Company.
We own numerous trademarks that are very important to our business. Depending upon the jurisdiction, trademarks are valid as long as they are in use and/or their registrations are properly maintained. Pursuant to our Bottler's Agreements, we authorize our bottlers to use applicable Company trademarks in connection with their manufacture, sale and distribution of Company products. In addition, we grant licenses to third parties from time to time to use certain of our trademarks in conjunction with certain merchandise and food products.
Governmental Regulation
Our Company is required to comply, and it is our policy to comply, with all applicable laws in the numerous countries throughout the world in which we do business. In many jurisdictions, compliance with competition laws is of special importance to us, and our operations may come under special scrutiny by competition law authorities due to our competitive position in those jurisdictions.
In the United States, the safety, production, transportation, distribution, advertising, labeling and sale of many of our Company's products and their ingredients are subject to the Federal Food, Drug, and Cosmetic Act; the Federal Trade Commission Act; the Lanham Act; state consumer protection laws; competition laws; federal, state and local workplace health and safety laws; various federal, state and local environmental protection laws; and various other federal, state and local statutes and regulations. Outside the United States, our business is subject to numerous similar statutes and regulations, as well as other legal and regulatory requirements.
AUnder a California law known as Proposition 65, requiresif the state has determined that a substance causes cancer or harms human reproduction, a warning must appear on any product sold in California that contains a substance that, in the view of the state causes cancer or birth defects.that exposes consumers to that substance. The state maintains lists of these substances and periodically adds other substances to these lists.them. Proposition 65 exposes all food and beverage producers to the possibility of having to provide warnings on their products in California because it does not provide for any generally applicable quantitative threshold below which the presence of a listed substance is exempt from the warning requirement. Consequently, the detection of even a trace amount of a listed substance can subject an affected product to the requirement of a warning label. However, Proposition 65 does not require a warning if the manufacturer of a product can demonstrate that the use of that product exposes consumers to a daily quantity of a listed substance that is:
below a "safe harbor" threshold that may be established;
naturally occurring;
the result of necessary cooking; or
subject to another applicable exemption.
One or more substances that are currently on the Proposition 65 lists, or that may be added in the future, can be detected in certain Company products at low levels that are safe. With respect to substances that have not yet been listed under Proposition 65, the Company takes the position that listing is not scientifically justified. With respect to substances that are already listed, the Company takes the position that the presence of each such substance in Company products is subject to an applicable exemption from the warning requirement. The Statestate of California orand other parties, however, may takehave in the past taken a contrary position.position and may do so in the future.
Bottlers of our beverage products presently offer and use nonrefillable recyclable containers in the United States and various other markets around the world. Some of these bottlers also offer and use refillable containers, which are also recyclable. Legal requirements apply in various jurisdictions in the United States and overseas requiring that deposits or certain ecotaxes or fees be charged forin connection with the sale, marketing and use of certain nonrefillable beverage containers. The precise requirements imposed by these measures vary. Other types of statutes and regulations relating to beverage container deposits, recycling, ecotaxes and/or product stewardship also apply in various jurisdictions in the United States and overseas. We anticipate that additional similarsuch legal requirements may be proposed or enacted in the future at local, state and federal levels, both in the United States and elsewhere.
All of our Company's facilities and other operations in the United States and elsewhere around the world are subject to various environmental protection statutes and regulations, including those relating to the use of water resources and the discharge of wastewater. Our policy is to comply with all such legal requirements. Compliance with these provisions has not had, and we do not expect such compliance to have, any material adverse effect on our Company's capital expenditures, net income or competitive position.
Employees
As of December 31, 20122015 and 20112014, our Company had approximately 150,900123,200 and 146,200129,200 employees, respectively, of which approximately 4,4003,300 and 4,700,3,800, respectively, were employed by consolidated variable interest entities ("VIEs"). The increasedecrease in the total number of employees in 20122015 was primarily due to the acquisitionrefranchising of certain territories that were previously managed by CCR to certain of the Company's unconsolidated bottling operationspartners. For more information about the North America refranchising transactions, refer to Note 2 of Notes to Consolidated Financial Statements set forth in Vietnam, Cambodia, GuatemalaPart II, "Item 8. Financial Statements and the United States.Supplementary Data" of this report. As of December 31, 20122015 and 20112014, our Company had approximately 68,30060,900 and 67,40065,300 employees, respectively, located in the United States, of which approximately 500 and 600, respectively, were employed by consolidated VIEs.VIEs in both years.
Our Company, through its divisions and subsidiaries, is a party to numerous collective bargaining agreements. As of December 31, 20122015, approximately 17,90017,500 employees, excluding seasonal hires, in North America were covered by collective bargaining agreements. These agreements typically have terms of three years to five years years.. We currently expect that we will be able to renegotiate such agreements on satisfactory terms when they expire.
The Company believes that its relations with its employees are generally satisfactory.
Securities Exchange Act Reports
The Company maintains a website at the following address: www.coca-colacompany.com. The information on the Company's website is not incorporated by reference in this annual reportAnnual Report on Form 10-K.
We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the Securities and Exchange Commission (the "SEC"("SEC") in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange("Exchange Act"). These include our annual reportsAnnual Reports on Form 10-K, our quarterly reportsQuarterly Reports on Form 10-Q and our current reportsCurrent Reports on Form 8-K. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the following factors, which could materially affect our business, financial condition or results of operations in future periods. The risks described below are not the only risks facing our Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods.
Obesity and other health concerns may reduce demand for some of our products.
Consumers,There is growing concern among consumers, public health officialsprofessionals and government officials are highly concernedagencies about the public health consequencesproblems associated with obesity, particularly among young people.obesity. In addition, some researchers, health advocates and dietary guidelines are encouraging consumers to reducesuggesting that consumption of sugar-sweetened beverages, including those sweetened with HFCS or other nutritive sweeteners.sweeteners, is a primary cause of increased obesity rates and are encouraging consumers to reduce or eliminate consumption of such products. Increasing public concern about these issues;obesity; possible new or increased taxes on sugar-sweetened beverages;beverages by government entities to reduce consumption or to raise revenue; additional governmental regulations concerning the marketing, labeling, packaging or sale of our sugar-sweetened beverages; and negative publicity resulting from actual or threatened legal actions against us or other companies in our industry relating to the marketing, labeling or sale of sugar-sweetened beverages may reduce demand for or increase the cost of our sugar-sweetened beverages, which could adversely affect our profitability.
Water scarcity and poor quality could negatively impact the Coca-Cola system's production costs and capacity.
Water is thea main ingredient in substantially all of our products, and is neededvital to producethe production of the agricultural ingredients on which our business relies.relies and is needed in our manufacturing process. It also is alsocritical to the prosperity of the communities we serve. Water is a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing demand for food and other consumer and industrial products whose manufacturing processes require water, increasing pollution, poor management and the effects of climate change. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, ourthe Coca-Cola system may incur increasing productionhigher costs or face capacity constraints that could adversely affect our profitability or net operating revenues in the long run.
Changes in the nonalcoholic beverageIf we do not anticipate and address evolving consumer preferences, our business environment and retail landscape could impact our financial results.suffer.
The nonalcoholic beverage business environment isConsumer preferences are evolving rapidly evolving as a result of, among other things, changes in consumer preferences, including changes based on health and nutrition considerations, especially the perceived undesirability of artificial ingredients and obesity concerns; shifting consumer demographics, including aging populations; changes in consumer tastes and needs; changes in consumer lifestyles; and competitive product and pricing pressures. In addition, the nonalcoholic beverage retail landscape is very dynamic and constantly evolving, not only in emerging and developing markets, where modern trade is growing at a faster pace than traditional trade outlets, but also in developed markets, where discounters and value stores, as well as the volume of transactions through e-commerce, are growing at a rapid pace. If we are unabledo not successfully anticipate these changing consumer preferences or fail to successfully adapt to the rapidly changing environment and retail landscape,address them by timely developing new products or product extensions through innovation, our share of sales, volume growth and overall financial results could be negatively affected.
Increased competition and capabilities in the marketplace could hurt our business.
The nonalcoholic beverage segment of the commercial beverage industry is highly competitive. We compete with major international beverage companies that, like our Company, operate in multiple geographic areas, as well as numerous companies that are primarily regional or local in operation. In many countries in which we do business, including the United States, PepsiCo Inc. is a primary competitor. Other significant competitors include, but are not limited to, Nestlé, DPS,DPSG, Groupe Danone, Mondelēz, Kraft, Foods Group, Inc.,Suntory and Unilever. In certain markets, our competition also includes major beer companies. Our beverage products also compete against local or regional brands as well as against private label brands developed by retailers, some of which are Coca-Cola system customers. Our ability to gain or maintain share of sales in the global market or in various local markets may be limited as a result of actions by competitors. If we do not continue to strengthen our capabilities in marketing and innovation to maintain our brand loyalty and market share while we selectively expand into other product categories in the nonalcoholic beverage segment of the commercial beverage industry, our business could be negatively affected.
Product safety and quality concerns could negatively affect our business.
Our success depends in large part on our ability to maintain consumer confidence in the safety and quality of all of our products. We have rigorous product safety and quality standards which we expect our operations as well as our bottling partners to meet. However, we cannot assure you that despite our strong commitment to product safety and quality we or all of our bottling partners will always meet these standards, particularly as we expand our product offerings through innovation or acquisitions of products, such as value-added dairy products, that are beyond our traditional range of beverage products. If we or our bottling partners fail to comply with applicable product safety and quality standards and beverage products taken to the market are or become contaminated or adulterated, we may be required to conduct costly product recalls and may become subject to product liability claims and negative publicity, which could cause our business to suffer.
Public debate and concern about perceived negative health consequences of certain ingredients, such as non-nutritive sweeteners and biotechnology-derived substances, and of other substances present in our beverage products or packaging materials, may reduce demand for our beverage products.
Public debate and concern about perceived negative health consequences of certain ingredients in our beverage products, such as non-nutritive sweeteners and biotechnology-derived substances; substances that are present in our beverage products naturally or that occur as a result of the manufacturing process, such as 4-methylimidazole, or 4-MEI (a chemical compound that is formed during the manufacturing of certain types of caramel coloring used in cola-type beverages); or substances used in packaging materials, such as bisphenol A, or BPA (an odorless, tasteless food-grade chemical commonly used in the food and beverage industries as a component in the coating of the interior of cans), may affect consumers' preferences and cause them to shift away from some of our beverage products. In addition, increasing public concern about actual or perceived health consequences of the presence of such ingredients or substances in our beverage products or in packaging materials, whether or not justified, could result in additional governmental regulations concerning the marketing and labeling of our beverages, negative publicity, or actual or threatened legal actions against us or other companies in our industry, all of which could damage the reputation of, and may reduce demand for, our beverage products.
If we are not successful in our innovation activities, our results may be negatively affected.
Achieving our business growth objectives depends in part on our ability to successfully develop, introduce and market new beverage products. The success of our innovation activities in turn depends on our ability to correctly anticipate customer and consumer acceptance and trends, obtain, maintain and enforce necessary intellectual property protections and avoid infringing on the intellectual property rights of others. If we are not successful in our innovation activities, we may not be able to achieve our growth objectives, which may have a negative impact on our financial results.
Increased demand for food products and decreased agricultural productivity as a result of changing weather patterns may negatively affect our business.
We and our bottling partners use a number of key ingredients that are derived from agricultural commodities such as sugarcane, corn, sugar beets, citrus, coffee and tea in the manufacture and packaging of our beverage products. Increased demand for food products and decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of such agricultural commodities whichand could impact the food security of communities around the world. If we are unable to implement programs focused on economic opportunity and environmental sustainability to address these agricultural challenges and fail to make a strategic impact on food security through joint efforts with bottlers, farmers, communities, suppliers and key partners, as well as through our increased and continued investment in turn may negatively affectsustainable agriculture, the affordability of our products and ultimately our business and results of operations.operations could be negatively impacted.
ConsolidationChanges in the retail channellandscape or the loss of key retail or foodservice customers could adversely affect our financial performance.
Our industry is being affected by the trend toward consolidation in the retail channel, particularly in Europe and the United States. Larger retailers may seek lower prices from us and our bottling partners, may demand increased marketing or promotional expenditures, and may be more likely to use their distribution networks to introduce and develop private label brands, any of which could negatively affect the Coca-Cola system's profitability. In addition, in developed markets, discounters and value stores, as well as the volume of transactions through e-commerce, are growing at a rapid pace. The nonalcoholic beverage retail landscape is also very dynamic and constantly evolving in emerging and developing markets, where modern trade is growing at a faster pace than traditional trade outlets. If we are unable to successfully adapt to the rapidly changing environment and retail landscape, our share of sales, volume growth and overall financial results could be negatively affected. In addition, our success depends in part on our ability to maintain good relationships with key retail and foodservice customers. The loss of one or more of our key retail or foodservice customers could have an adverse effect on our financial performance.
If we are unable to expand our operations in developingemerging and emergingdeveloping markets, our growth rate could be negatively affected.
Our success depends in part on our ability to grow our business in developingemerging and emergingdeveloping markets, which in turn depends on economic and political conditions in those markets and on our ability to acquire bottling operations in those markets or to form strategic business alliances with local bottlers and to make necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology. Moreover, the supply of our products in developingemerging and emergingdeveloping markets must match consumers'consumers’ demand for those products. Due to product price, limited purchasing power and cultural differences, there can be no assurance that our products will be accepted in any particular developingemerging or emergingdeveloping market.
Fluctuations in foreign currency exchange rates could affecthave a material adverse effect on our financial results.
We earn revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar, including the euro, the Japanese yen, the Brazilian real and the Mexican peso. In 2012,2015, we used 8071 functional currencies in addition to the U.S. dollar and derived $28.3$23.9 billion of net operating revenues from operations outside the United States. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other major currencies affect our net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies. In addition, unexpected and dramatic devaluations of currencies in developing or emerging markets could negatively affect the value of our earnings from, and of the assets located in, those markets. Because of the geographic diversity of our operations, weaknesses in some currencies might be offset by strengths in others over time. We also use derivative financial instruments to further reduce our net exposure to foreign currency exchange rate fluctuations. However, we cannot assure you that fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies or the currencies of large developing countries, would not materially affect our financial results.
If interest rates increase, our net income could be negatively affected.
We maintain levels of debt that we consider prudent based on our cash flows, interest coverage ratio and percentage of debt to capital. We use debt financing to lower our cost of capital, which increases our return on shareowners' equity. This exposes us to adverse changes in interest rates. When and to the extent appropriate, we use derivative financial instruments to reduce our exposure to interest rate risks. We cannot assure you, however, that our financial risk management program will be successful in reducing the risks inherent in exposures to interest rate fluctuations. Our interest expense may also be affected by our credit ratings. In assessing our credit strength, credit rating agencies consider our capital structure and financial policies as well as the consolidated balance sheet and other financial information forof the Company. In addition, some credit rating agencies also consider financial information of certain of our major bottlers. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure; our major bottlers' financial performance; changes in the credit rating agencies' methodology in assessing our credit strength; the credit agencies' perception of the impact of the continuing unfavorable credit market conditions on our or our major bottlers' current or future financial performance and financial condition; or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottlers in which we have equity method investments were to be downgraded, such bottlers' interest expense could increase, which would reduce our equity income.
We rely on our bottling partners for a significant portion of our business. If we are unable to maintain good relationships with our bottling partners, our business could suffer.
We generate a significant portion of our net operating revenues by selling concentrates and syrups to independent bottling partners. As independent companies, our bottling partners, some of which are publicly traded companies, make their own business decisions that may not always align with our interests. In addition, many of our bottling partners have the right to manufacture or distribute their own products or certain products of other beverage companies. If we are unable to provide an appropriate mix of incentives to our bottling partners through a combination of pricing and marketing and advertising support, or if our bottling partners are not satisfied with our brand innovation and development efforts, they may take actions that, while maximizing their own short-term profits, may be detrimental to our Company or our brands, or they may devote more of their energy and resources to business opportunities or products other than those of the Company. Such actions could, in the long run, have an adverse effect on our profitability.
If our bottling partners' financial condition deteriorates, our business and financial results could be affected.
We derive a significant portion of our net operating revenues from sales of concentrates and syrups to ourindependent bottling partners and, therefore, the success of our business depends on our bottling partners' financial strength and profitability. While under our agreements with our bottling partners we generally have the right to unilaterally change the prices we charge for our concentrates and syrups, our ability to do so may be materially limited by our bottling partners' financial condition and their ability to pass price increases along to their customers. In addition, we have investments in certain of our bottling partners, which we account for under the equity method, and our operating results include our proportionate share of such bottling partners' income or loss. Our bottling partners' financial condition is affected in large part by conditions and events that are beyond our and their control, including competitive and general market conditions in the territories in which they operate; the availability of capital and other financing resources on reasonable terms; loss of major customers; or disruptions of bottling operations that may be caused by strikes, work stoppages, labor unrest or natural disasters. A deterioration of the financial condition or results of operations of one or more of our major bottling partners could adversely affect our net operating
revenues from sales of concentrates and syrups; could result in a decrease in our equity income; and could negatively affect the carrying values of our investments in bottling partners, resulting in asset write-offs.
Increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could have a material adverse impact on our financial results.
We are subject to income tax in the United States and in numerous other jurisdictions in which we generate net operating revenues. Increases in income tax rates could reduce our after-tax income from affected jurisdictions. We earn a substantial portion of our income in foreign countries. If our capital or financing needs in the United States require us to repatriate earnings from foreign jurisdictions above our current levels, our effective tax rates for the affected periods could be negatively impacted. In addition, there have been proposals to reform U.S. tax laws that could significantly impact how U.S. multinational corporations are taxed on foreign earnings. Although we cannot predict whether or in what form these proposals will pass, several of the proposals being considered, if enacted into law, could have a material adverse impact on our income tax expense and cash flow.flows.
Our annual tax rate is based on our income and the tax laws in the various jurisdictions in which we operate. Significant judgment is required in determining our annual income tax expense and in evaluating our tax positions. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related disputes could be materially different from our historical income tax provisions and accruals. The results of audits or related disputes could have a material effect on our financial statements for the periodor periods for which the applicable final determinations are made.made and for periods for which the statute of limitations is open. For instance, the United States Internal Revenue Service ("IRS") is seeking to increase our U.S. taxable income for tax years 2007 through 2009 by an amount that creates a potential additional U.S. federal income tax liability of approximately $3.3 billion for the period, plus interest. The IRS may add a claim for penalties at a later time. The disputed amounts largely relate to a transfer pricing matter involving the appropriate amount of taxable income the Company should report in the United States in connection with its licensing of intangible property to certain related foreign licensees regarding the manufacturing, distribution, sale, marketing and promotion of products in overseas markets. We are currently contesting the IRS' claims in the U.S. Tax Court. If the IRS were to prevail on its assertions, it would likely also seek transfer pricing adjustments of a similar nature for subsequent tax years. Consequently, if this dispute were to be ultimately determined adversely to us, the additional tax, interest and any potential penalties could have a material adverse impact on the Company's financial position, results of operations or cash flows.
Increased or new indirect taxes in the United States or in one or more of our other major markets could negatively affect our business.
Our business operations are subject to numerous duties or taxes that are not based on income, sometimes referred to as "indirect taxes," including import duties, excise taxes, sales or value-added taxes, taxes on sugar-sweetened beverages, property taxes and payroll taxes, in many of the jurisdictions in which we operate, including indirect taxes imposed by state and local governments. In addition, in the past, the United States Congress considered imposing a federal excise tax on beverages sweetened with sugar, HFCS or other nutritive sweeteners and may consider similar proposals in the future. As federal, state and local governments experience significant budget deficits, some lawmakers have proposed singling out beverages among a plethora of revenue-raising items. Increases in or the imposition of new indirect taxes on our business operations or products would increase the cost of products or, to the extent levied directly on consumers, make our products less affordable, which may negatively impact our net operating revenues.revenues and profitability.
Increase in the cost, disruption of supply or shortage of energy or fuels could affect our profitability.
CCR our North America bottling and customer service organization, and our other Company-owned or -controlled bottlers operate a large fleet of trucks and other motor vehicles to distribute and deliver beverage products to customers. In addition, we use a significant amount of electricity, natural gas and other energy sources to operate our concentrate, syrup and juice production plants and the bottling plants and distribution facilities operated by CCR and our other Company-owned or -controlled bottlers. An increase in the price, disruption of supply or shortage of fuel and other energy sources in North America, in other countries in which we have concentrate plants, or in any of the major markets in which CCR and our other Company-owned or -controlled bottlers operate that may be caused by increasing demand or by events such as natural disasters, power outages, or the like wouldcould increase our operating costs and negatively impact our profitability.
Our independent bottling partners also operate large fleets of trucks and other motor vehicles to distribute and deliver beverage products to their own customers and use a significant amount of electricity, natural gas and other energy sources to operate their own bottling plants and distribution facilities. Increases in the price, disruption of supply or shortage of fuel and other energy sources in any of the major markets in which our independent bottling partners operate would increase the affected independent bottling partners' operating costs and could indirectly negatively impact our results of operations.
Increase in the cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials could harm our business.
We and our bottling partners use various ingredients in our business, including HFCS, sucrose, aspartame, saccharin, acesulfame potassium, cyclamate, sucralose, a non-nutritive sweetener derived from the stevia plant, ascorbic acid, citric acid, phosphoric acid, caffeine and caramel color,color; other raw materials such as orange and other fruit juice and juice concentrates, as well asconcentrates; and packaging materials such as PET for bottles and aluminum for cans. The prices for these ingredients, other raw materials and packaging materials fluctuate depending on market conditions. Substantial increases in the prices of our or our bottling partners' ingredients, other raw materials and packaging materials, to the extent they cannot be recouped through increases in the prices of finished beverage products, would increase our and the Coca-Cola system's operating costs and could reduce our profitability. Increases in the prices of our finished products resulting
from a higher cost of ingredients, other raw materials and packaging materials could affect affordability in some markets and reduce Coca-Cola system sales. In addition, some of our ingredients, such as aspartame, acesulfame potassium, sucralose, saccharin and ascorbic acid, as well as some of the packaging containers, such as aluminum cans, are available from a limited number of suppliers, some of which are located in countries experiencing political or other risks. We cannot assure you that we and our bottling partners will be able to maintain favorable arrangements and relationships with these suppliers.suppliers.
The citrus industry is subject to disease and the variability of weather conditions, which affect the supply of orange juice and orange juice concentrate, which are important raw materials for our business. In particular, freezing weather or hurricanes in central Florida may result in shortages and higher prices for orange juice and orange juice concentrate throughout the industry. In addition, adversegreening disease is reducing the number of trees and increasing grower costs and prices. Adverse weather conditions may affect the supply of other agricultural commodities from which key ingredients for our products are derived. For example, drought conditions in certain parts of the United States may negatively affect the supply of corn, which in turn may result in shortages of and higher prices for HFCS.HFCS.
An increase in the cost, a sustained interruption in the supply, or a shortage of some of these ingredients, other raw materials, packaging materials or cans and other containers that may be caused by a deterioration of our or our bottling partners' relationships with suppliers; by supplier quality and reliability issues; or by events such as natural disasters, power outages, labor strikes, political uncertainties or governmental instability, or the like could negatively impact our net operating revenues and profits.
Changes in laws and regulations relating to beverage containers and packaging could increase our costs and reduce demand for our products.
We and our bottlers currently offer nonrefillable recyclable containers in the United States and in various other markets around the world. Legal requirements have been enacted in various jurisdictions in the United States and overseas requiring that deposits or certain ecotaxes or fees be charged forin connection with the sale, marketing and use of certain nonrefillable beverage containers. Other proposals relating to beverage container deposits, recycling, ecotax and/or product stewardship have been introduced in various jurisdictions in the United States and overseas, and we anticipate that similar legislation or regulations may be proposed in the future at local, state and federal levels, both in the United States and elsewhere. Consumers' increased concerns and changing attitudes about solid waste streams and environmental responsibility and the related publicity could result in the adoption of such legislation or regulations. If these types of requirements are adopted and implemented on a large scale in any of the major markets in which we operate, they could affect our costs or require changes in our distribution model, which could reduce our net operating revenues orand profitability.
Significant additional labeling or warning requirements or limitations on the availabilitymarketing or sale of our products may inhibit sales of affected products.
Various jurisdictions may seek to adopt significant additional product labeling or warning requirements or limitations on the availabilitymarketing or sale of our products relating to the contentas a result of what they contain or perceivedallegations that they cause adverse health consequences of certain of our products.effects. If these types of requirements become applicable to one or more of our major products under current or future environmental or health laws or regulations, they may inhibit sales of such products. One
Under one such law which is in effect in California, and is known as Proposition 65, requiresif the state has determined that a substance causes cancer or harms human reproduction, a warning must appear on any product sold in California that contains a substance that, in the view of the state causes cancer or birth defects.that exposes consumers to that substance. The state maintains lists of these substances and periodically adds other substances to these lists.them. Proposition 65 exposes all food and beverage producers to the possibility of having to provide warnings on their products in California because it does not provide for any generally applicable quantitative threshold below which the presence of a listed substance is exempt from the warning requirement. Consequently, the detection of even a trace amount of a listed substance can subject an affected product to the requirement of a warning label. However, Proposition 65 does not require a warning if the manufacturer of a product can demonstrate that the use of the product in question exposes consumers to a daily quantity of a listed substance that is below a "safe
"safe harbor" threshold that may be established, is naturally occurring, is the result of necessary cooking or is subject to another applicable exception. One or more substances that are currently on the Proposition 65 lists, or that may be added to the lists in the future, can be detected in certain Company products at low levels that are safe. With respect to substances that have not yet been listed under Proposition 65, the Company takes the position that listing is not scientifically justified. With respect to substances that are already listed, the Company takes the position that the presence of each such substance in Company products is subject to an applicable exemption from the warning requirement. The Statestate of California orand other parties, however, may takehave in the past taken a contrary position.position and may do so in the future. If we were required to add Proposition 65 warnings on the labels of one or more of our beverage products produced for sale in California, the resulting consumer reaction to the warnings and possible adverse publicity could negatively affect our sales both in California and in other markets.
If we are unable to protect our information systems against service interruption, misappropriation of data or breaches of security, our operations could be disrupted and our reputation may be damaged.
We rely on networks and information systems and other technology ("information systems"), including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing and collection of payments.payments, mergers and acquisitions and research and development. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between Company personnel and our bottlers and other customers, suppliers and consumers. Because information systems are critical to many of the Company's operating activities, our business processes may be impacted by system shutdowns, service disruptions or service disruptions.security breaches. These disruptionsincidents may be caused by failures during routine operations such as system upgrades or user errors, as well as network or hardware failures, malicious or disruptive software, computerunintentional or malicious actions of employees or contractors, cyberattacks by common hackers, criminal groups or nation-state organizations or social-activist (hacktivist) organizations, geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. In addition, such eventsincidents could result in unauthorized disclosure of material confidential information. If our information systems suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results, and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments for concentrate or finished products. Misuse, leakage or falsification of information could result in a violationviolations of data privacy laws and regulations, and damage to the reputation and credibility of the Company, loss of opportunities to acquire or divest of businesses or brands and loss of ability to commercialize products developed through research and development efforts and, therefore, could have a negative impact on net operating revenues. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, our current or former employees, or to our bottling partners, other customers, suppliers or consumers.consumers, and may become subject to legal action and increased regulatory oversight. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a security breach or to repair or replace networks and information systems.systems.
Like most major corporations, the Company's information systems are a target of attacks. Although the disruptions to our information systemsincidents that we have experienced to date have not had a material effect on our business, financial condition or results of operations, there can be no assurance that such disruptionsincidents will not have a material adverse effect on us in the future. In order to address risks to our information systems, we continue to make investments in personnel, technologies, cyberinsurancecyber insurance and training of Company personnel, bottlers and third parties.personnel. The Company maintains an information risk management program which is supervised by information technology management and reviewed by a cross-functional committee. As part of this program, reports whichthat include analysis of emerging risks as well as the Company's plans and strategies to address them are regularly prepared and presented to senior management.management and the Audit Committee of the Board of Directors.
Unfavorable general economic conditions in the United States could negatively impact our financial performance.
In 2012,2015, our net operating revenues in the United States were $19.7$20.4 billion, or 4146 percent, of our total net operating revenues. Unfavorable general economic conditions, such as a recession or economic slowdown, in the United States could negatively affect the affordability of, and consumer demand for, some of our beverages in our flagship market. Under difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases of our products or by shifting away from our beverages to lower-priced products offered by other companies, including private label brands. Softer consumer demand for our beverages in the United States could reduce our profitability and could negatively affect our overall financial performance.
Unfavorable economic and political conditions in international markets could hurt our business.
We derive a significant portion of our net operating revenues from sales of our products in international markets. In 2012,2015, our operations outside the United States accounted for $28.3$23.9 billion, or 5954 percent, of our total net operating revenues. Unfavorable economic conditions and financial uncertainties in our major international markets the financial uncertainties in the eurozone and unstable political conditions, including civil unrest and governmental changes, in certain of our other international markets could undermine global consumer confidence and reduce consumers' purchasing power, thereby reducing demand for our products. Product boycotts resulting from political activism could reduce demand for our products, while restrictions on our ability to transfer earnings or capital across borders, price controls, limitation on profits, import authorization requirements and other restrictions on business activities which have been or may be imposed or expanded as a result of political and economic instability or otherwise could impact our profitability. In addition, U.S. trade sanctions against countries suchdesignated by the U.S. government as Iran and Syriastate sponsors of terrorism and/or financial institutions accepting transactions for commerce within such countries could increase significantly, which could make it impossible for us to continue to make sales to bottlers in such countries. Without limitingcountries, while the generalityimposition of the preceding sentences, the unfavorable business environment in Venezuela; the current unstable economic and political conditions and civil unrest and political activism in the Middle East, India, Pakistan or the Philippines; the civil unrest and instability in Egypt and othersanctions against U.S. multinational corporations by countries in North Africa; the unstable situationwhich our products are manufactured, distributed or sold could negatively affect our business in Iraq; or the continuation or escalation of terrorist activities could adversely impact our international business.such markets.
Litigation or legal proceedings could expose us to significant liabilities and damage our reputation.
We are party to various litigation claims and legal proceedings. We evaluate these litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish reserves and/or disclose the relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. We caution you that actual outcomes or losses may differ materially from those envisioned by our current assessments and estimates. In addition, we have bottling and other business operations in markets with high-risk legal compliance environments. Our policies and procedures require strict compliance by our associates and agents with all United States and local laws and regulations and consent orders applicable to our business operations, including those prohibiting improper payments to government officials. Nonetheless, we cannot assure you that our policies, procedures and related training programs will always ensure full compliance by our associates and agents with all applicable legal requirements. Improper conduct by our associates or agents could damage our reputation in the United States and internationally or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines as well as disgorgement of profits.
Failure to adequately protect, or disputes relating to, trademarks, formulae and other intellectual property rights could harm our business.
Our trademarks, formulae and other intellectual property rights (refer to the heading "Patents, Copyrights, Trade Secrets and Trademarks" in "Item 1. Business" above) are essential to the success of our business. We cannot be certain that the legal steps we are taking around the world are sufficient to protect our intellectual property rights or that, notwithstanding legal protection, others do not or will not infringe or misappropriate our intellectual property rights. If we fail to adequately protect our intellectual property rights, or if changes in laws diminish or remove the current legal protections available to them, the competitiveness of our products may be eroded and our business could suffer. In addition, we could come into conflict with third parties over intellectual property rights, which could result in disruptive and expensive litigation. Any of the foregoing could harm our business.
Adverse weather conditions could reduce the demand for our products.
The sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold or rainy weather during the summer months may have a temporary effect on the demand for our products and contribute to lower sales, which could have an adverse effect on our results of operations for such periods.
Climate change may have a long-term adverse impact on our business and results of operations.
There is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important sources of ingredients for our products, and could impact the food security of communities around the world. Climate change may also exacerbate water scarcity and cause a further deterioration of water quality in affected regions, which could limit water availability for ourthe Coca-Cola system's bottling operations. Increased frequency or duration of extreme weather conditions could also impair production capabilities, disrupt our supply chain or impact demand for our products. As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations.
If negative publicity, even if unwarranted, related to product safety or quality, human and workplace rights, obesity or other issues even if unwarranted, damages our brand image and corporate reputation, our business may suffer.
Our success depends on our ability to maintain consumer confidence in the safety and quality of our products. Our success also dependslarge part on our ability to maintain the brand image of our existing products, build up brand image for new products and brand extensions and maintain our corporate reputation. We cannot assure you, however, that our continuing investment in advertising and marketing and our strong commitment to product safety and quality and our continuing investment in advertising and marketinghuman rights will have the desired impact on our products' brand image and on consumer preferences. Product safety or quality issues, actual or perceived, or allegations of product contamination, even when false or unfounded, could tarnish the image of the affected brands and may cause consumers to choose other products. Allegations of product safety or quality issues or contamination, even if untrue, may require us from time to time to recall a beverage or other product from all of the markets in which the affected production was distributed. Such issues or recalls could negatively affect our profitability and brand image. In some emerging markets, the production and sale of counterfeit or "spurious" products, which we and our bottling partners may not be able to fully combat, may damage the image and reputation of our products. FromIn addition, from time to time, we and our executives engage in public policy endeavors that are either directly related to our products and packaging or to our business operations and the general economic climate affecting the Company. These engagements in public policy debates can occasionally be the subject of backlash from advocacy groups that have a differing point of view and could result in adverse media and consumer reaction, including product boycotts.In addition, Similarly, our sponsorship relationships could subject us to negative publicity as a result of actual or alleged misconduct by individuals or entities associated with organizations we sponsor or support financially or through in-kind contributions. Likewise, campaigns by activists attempting to connectconnecting us, or our bottling system or supply chain, with human and workplace rights issues in certain emerging markets could adversely impact our corporate image and reputation. For example,Furthermore, in June 2011, the United Nations Human Rights Council endorsed the Guiding Principles on Business and Human Rights, which outlines how businesses should implement the corporate responsibility to respect human rights principles included in the United Nations "Protect, Respect and Remedy" framework on human rights. Through our Human Rights Statement and Workplace Rights Policy, Code of Business Conduct and Supplier Guiding Principles, and our participation in the United Nations Global Compact, and its LEAD program, as well as our active participation in the Global Business Initiative on Human Rights and the Global Business Coalition Against Human Trafficking, we made a number of commitments to respect all human rights. Allegations, even if untrue, that we are not respecting anyone or more of the 30 human rights
found in the United Nations Universal Declaration of Human Rights, even if untrue, could have a significant impact onRights; actual or perceived failure by our corporate reputationsuppliers or other business partners to comply with applicable labor and long-term financial results. Also,workplace rights laws, including child labor laws, or their actual or perceived abuse or misuse of migrant workers; and adverse publicity surrounding obesity and health concerns related to our products, water usage, environmental concerns,impact, labor relations or the like could negatively affect our Company's overall reputation and brand image, which in turn could have a negative impact on our products'products’ acceptance by consumers.
Changes in, or failure to comply with, the laws and regulations applicable to our products or our business operations could increase our costs or reduce our net operating revenues.
Our Company's business is subject to various laws and regulations in the numerous countries throughout the world in which we do business, including laws and regulations relating to competition, product safety, advertising and labeling, container deposits, recycling orand product stewardship, the protection of the environment, and employment and labor practices. In the United States, the production, distribution, marketing and sale of many of our products are subject to, among others, the Federal Food, Drug, and Cosmetic Act, the Federal Trade Commission Act, the Lanham Act, state consumer protection laws, the Occupational Safety and Health Act, and various environmental statutes, as well as various state and local statutes and regulations. Outside the United States, the production, distribution sale, advertising and labelingsale of many of our products are also subject to various laws and regulations. Changes in applicable laws or regulations or evolving interpretations thereof, including increased government regulations to limit carbon dioxide and other greenhouse gas emissions as a result of concern over climate change, or regulations to limit or eliminate the use of bisphenol-A,bisphenol A, or BPA (an odorless, tasteless food-grade chemical commonly used in the food and beverage industries as a component in the coating of the interior of cans)can liners and other packaging materials), or regulations to limit or impose additional costs on commercial water use due to local water scarcity concerns, may result in increased compliance costs, capital expenditures and other financial obligations for us and our bottling partners, which could affect our profitability, or may impede the production, or distribution, marketing and sale of our products, which could affect our net operating revenues. In addition, failure to comply with environmental, health or safety requirements, U.S. trade sanctions, the U.S. Foreign Corrupt Practices Act and other applicable laws or regulations could result in the assessment of damages, the imposition of penalties, suspension of production or distribution, costly changes to equipment or processes due to required corrective action, or a cessation or interruption of operations at our or our bottling partners' facilities, as well as damage to our and the Coca-Cola system's image and reputation, all of which could harm our and the Coca-Cola system's profitability.
Changes in accounting standards could affect our reported financial results.
New accounting standards or pronouncements that may become applicable to our Company from time to time, or changes in the interpretation of existing standards and pronouncements, could have a significant effect on our reported financial results for the affected periods.
If we are not able to achieve our overall long-term goals,growth objectives, the value of an investment in our Company could be negatively affected.
We have established and publicly announced certain long-term growth objectives. These objectives were based on, among other things, our evaluation of our growth prospects, which are generally driven by volume andthe sales potential of many product types, some of which are more profitable than others, and on an assessment of the potential price and product mix. There can be no assurance that we will achieverealize the required volume or revenue growth orsales potential and the price and product mix of products necessary to achieve our long-term growth objectives.
Continuing uncertainty in theIf global credit markets may adversely affect our financial performance.
Global credit market conditions continue todeteriorate, our financial performance could be uncertain in large part because of unfavorable economic environment conditions in much of the world and the unsustainable sovereign debt burden affecting various countries in the European Union. adversely affected.
The cost and availability of credit vary by market and are subject to changes in the global or regional economic environment. If the current uncertain conditions in themajor credit markets continue or worsen,deteriorate, our and our bottling partners' ability to access credit marketsobtain debt financing on favorable terms may be negatively affected, which could affect our and the Coca-Cola system's profitability as well as our share of the income of bottling partners in which we have equity method investments. TheA decrease in availability of consumer credit resulting from uncertainunfavorable credit market conditions, as well as general unfavorable economic conditions, may also cause consumers to reduce their discretionary spending, which wouldcould reduce the demand for our beverages and negatively affect our net operating revenues and the Coca-Cola system's profitability.
IfDefault by or failure of one or more of our counterparty financial institutions default on their obligationscould cause us to us or fail, we may incur significant losses.
As part of our hedging activities, we enter into transactions involving derivative financial instruments, including forward contracts, commodity futures contracts, option contracts, collars and swaps, with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default or to retrieve our assets that are deposited or held in accounts with such counterparty may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default by or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition.
If we are unable to timely implement our previously announced actions to reinvigorate growth, or we do not realize additionalthe economic benefits targeted bywe anticipate from these actions, our results of operations for future periods could be negatively affected.
In October 2014, we announced that we were taking actions to reinvigorate growth, including streamlining and simplifying our operating model to speed decision making and enhance local market focus; expanding our productivity and reinvestment program by targeting additional productivity; refocusing on our financialcore business model; strategically targeting brand and growth investments that leverage our global strengths; and driving revenue and profit growth with clear portfolio roles across our markets while providing local operations with a clear line of sight and aligned compensation targets. We have begun implementing these actions and have incurred, and we expect will continue to incur, significant costs and expenses with the associated programs, initiatives and activities. If we are unable to implement some or all of these actions fully or in the envisioned timeframe, or otherwise we do not timely capture the efficiencies, cost savings and revenue growth opportunities we anticipate from these actions, our results of operations for future periods could be negatively affected.
We believe that productivity gains are essentialIf we fail to achieving our long-term growth objectives and, therefore,realize a leading prioritysignificant portion of the anticipated benefits of our Company isstrategic relationship with Monster, our financial performance could be adversely affected.
In August 2014, we entered into definitive agreements with Monster for a long-term strategic relationship in the global energy drink category, and upon the closing of the transactions contemplated by the agreements in June 2015 we purchased newly issued shares representing approximately 17 percent of Monster’s issued and outstanding shares of common stock (after giving effect to designthe issuance). (For more information regarding our agreements with Monster and implement the most effectiverelated transactions, refer to Note 2 of Notes to Consolidated Financial Statements set forth in Part II, "Item 8. Financial Statements and efficient business system possible. As partSupplementary Data" of our efforts to become more efficient, leaner and adaptive to changing market conditions, in February 2012 we announced a productivity and reinvestment program consisting of (i) a new productivity initiative focused on global supply chain optimization, global marketing and innovation effectiveness, operating expense leverage, operational excellence and data and information technology systems standardization; and (ii) an expansion of our initiative to capture CCR integration synergies in North America, focused primarily on our North American product supply. We expect to incur significant costs to capture these savings and additional synergies. We intend to invest the savings generated by this program to enhance ongoing systemwide brand-building initiatives and to mitigate potential incremental near-term commodity costs.report.) If we are unable to capturesuccessfully manage our complex relationship with Monster, or if for any other reason we fail to realize all or a significant part of the savingsbenefits we expect from this strategic relationship and additional synergies targeted by our productivity and reinvestment program,the related investment, our financial resultsperformance could be negativelyadversely affected.
If we are unable to renew collective bargaining agreements on satisfactory terms, or we or our bottling partners experience strikes, work stoppages or labor unrest, our business could suffer.
Many of our associates at our key manufacturing locations and bottling plants are covered by collective bargaining agreements. While we generally have been able to renegotiate collective bargaining agreements on satisfactory terms when they expire and regard our relations with associates and their representatives as generally satisfactory, negotiations in the current environment remain challenging, as the Company must have competitive cost structures in each market while meeting the compensation and benefits needs of our associates. If we are unable to renew collective bargaining agreements on satisfactory terms, our labor costs could increase, which wouldcould affect our profit margins. In addition, many of our bottling partners' employees are represented by labor unions. Strikes, work stoppages or other forms of labor unrest at any of our major manufacturing facilities or at our bottling operations' or our major bottlers' plants could impair our ability to supply concentrates and syrups to our bottling partners or our bottlers' ability to supply finished beverages to customers, which wouldcould reduce our net operating revenues and could expose us to customer claims. Furthermore, from time to time we and our bottling partners restructure manufacturing and other operations to improve productivity. Restructuring activities and the announcement of plans for future restructuring activities may result in a general increase in insecurity among some Company associates and some employees in other parts of the Coca-Cola system, which may have negative implications on employee morale, work performance, escalation of grievances and successful negotiation of collective bargaining agreements. If these labor relations are not effectively managed at the local level, they could escalate in the form of corporate campaigns supported by the labor organizations and could negatively affect our Company's overall reputation and brand image, which in turn could have a negative impact on our products' acceptance by consumers.
We may be required to recognize impairment charges that could materially affect our financial results.
We assess our goodwill, trademarks and other intangible assets as well as our other long-lived assets as and when required by accounting principles generally accepted in the United States to determine whether they are impaired and, if they are, we record appropriate impairment charges. Our equity method investees also perform impairment tests, and we record our proportionate share of impairment charges recorded by them adjusted, as appropriate, for the impact of items such as basis differences, deferred taxes and deferred gains. It is possible that we may be required to record significant impairment charges or our proportionate share of significant impairment charges recorded by equity method investees in the future and, if we do so, our operating or equity income could be materially adversely affected.
We may incur multi-employer plan withdrawal liabilities in the future, which could negatively impact our financial performance.
We participate in certain multi-employer pension plans in the United States. Our U.S. multi-employer pension plan expense totaled $31$40 million in 2012.2015. The U.S. multi-employer pension plans in which we currently participate have contractual arrangements that extend into 2017.2020. If, in the future, we choose to withdraw from any of the multi-employer pension plans in which we currently participate, we will likelywould need to record the appropriate withdrawal liabilities at that time, which could negatively impact our financial performance in the applicable periods.
If we do not successfully integrate and manage our Company-owned or -controlled bottling operations or other acquired businesses or brands, our results could suffer.
From time to time we acquire or take control of bottling operations, often in underperforming markets where we believe we can use our resources and expertise to improve performance. In addition, we routinely evaluate opportunities to acquire other businesses or brands to expand our beverage portfolio and capabilities. We may incur unforeseen liabilities and obligations in connection with acquiring, taking control of or managing acquired bottling operations, other businesses or brands and may encounter unexpected difficulties and costs in restructuring and integrating them into our Company's operating and internal control structures. We may also experience delays in extending our Company's internal control over financial reporting to newly acquired or controlled bottling operations or other businesses, which may increase the risk of failure to prevent misstatements in such operations'their financial records and in our consolidated financial statements. Our financial performance depends in large part on how well we can manage and improve the performance of Company-owned or -controlled bottling operations.operations and other acquired businesses or brands. We cannot assure you, however, that we will be able to achieve our strategic and financial objectives for such bottling operations.operations or other acquisitions. If we are unable to achieve such objectives, our consolidated results could be negatively affected.
If we do not successfully manage our refranchising activities, our business and results of operations could be adversely affected.
As part of our strategic initiative to refocus on our core business of building brands and leading our system of bottling partners, we are accelerating our refranchising activities in North America and have expanded our refranchising efforts to Company-owned or -controlled bottling operations in Europe, Africa and China. Our refranchising activities require significant attention and effort on the part of, and therefore may become a distraction for, senior management. In addition, in connection with refranchising transactions in North America, we recorded, and we expect will continue to record, noncash losses related to the derecognition of intangible assets transferred or that will be transferred to bottling partners. There is no assurance that we will be able to complete refranchising transactions on our expected timetable and on terms and conditions favorable to us; that our refranchising bottling or joint venture partners will be efficient and aligned with our long-term vision for the Coca-Cola system; or that we will be able to maintain good relationships with the refranchised bottling operations. If we are unable to complete contemplated refranchising transactions timely, on favorable terms and with partners who share our long-term vision for the Coca-Cola system, our business and results of operations could be adversely affected.
If we are unable to successfully manage the possible negative consequences of our productivity initiatives, our business operations could be adversely affected.
We believe that improved productivity is essential to achieving our long-term growth objectives and, therefore, a leading priority of our Company is to design and implement the most effective and efficient business model possible. For information regarding our productivity initiatives, refer to the heading "Operations Review — Other Operating Charges — Productivity and Reinvestment Program" set forth in Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this report. Some of the actions we are taking in furtherance of our productivity initiatives may become a distraction for our managers and employees and may disrupt our ongoing business operations; cause deterioration in employee morale which may make it more difficult for us to retain or attract qualified managers and employees; disrupt or weaken the internal control structures of the affected business operations; and give rise to negative publicity which could affect our corporate reputation. If we are unable to successfully manage the possible negative consequences of these actions, our business operations could be adversely affected.
If we are unable to attract or retain a highly skilled workforce, our business could be negatively affected.
The success of our business depends on our ability to attract, train, develop and retain a highly skilled workforce. We may not be able to successfully compete for and attract the high-quality and diverse employee talent we want and our future business needs may require. In addition, unexpected loss of experienced and highly skilled associates due to insecurity resulting from our ongoing productivity initiatives, refranchising transactions and organizational changes could deplete our institutional knowledge base and erode our competitiveness. Any of the foregoing could have a negative impact on our business.
Global or regional catastrophic events could impact our operations and financial results.
Because of our global presence and worldwide operations, our business can be affected by large-scale terrorist acts, especially those directed against the United States or other major industrialized countries; the outbreak or escalation of armed hostilities; major natural disasters; or widespread outbreaks of infectious diseases. Such events could impair our ability to manage our business around the world, could disrupt our supply of raw materials and ingredients, and could impact production, transportation and delivery of concentrates, syrups and finished products. In addition, such events could cause disruption of regional or global economic activity, which can affect consumers' purchasing power in the affected areas and, therefore, reduce demand for our products.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Our worldwide headquarters is located on a 35-acre office complex in Atlanta, Georgia. The complex includes our 621,000 square foot headquarters building and an 870,000 square foot building in which our North America group'sgroup’s main offices are located. The complex also includes several other buildings, including our 264,000 square foot Coca-Cola Plaza building, technical and engineering facilities a learning center and a reception center. We also own an office and retail building at 711 Fifth Avenue in New York, New York. These properties, except for the North America group'sgroup’s main offices, are included in the Corporate operating segment.
We own or lease additional facilities, real estate and office space throughout the world which we use for administrative, manufacturing, processing, packaging, packing, storage, warehousing, distribution and retail operations. These properties are generally included in the geographic operating segment in which they are located.
In the North America operating segment's geographic area, as of December 31, 2012,2015, we owned 6963 beverage production facilities, 10 principal beverage concentrate and/or syrup manufacturing plants, one facility that manufactures juice concentrates for foodservice use, two bottled water facilities, and one container manufacturing facility; we leased one beverage production facility, one bottled water facility and four container manufacturing facilities; and we operated 281224 principal beverage distribution warehouses, of which 9880 were leased and the rest were owned. Also included in the North America operating segment is a portion of the Atlanta office complex consisting of the North America group'sgroup’s main offices.
Additionally, outsideOutside of the North America operating segment's geographic area, as of December 31, 2012,2015, our Company owned and operated 18 principal beverage concentrate manufacturing plants, of which fourthree are included in the Eurasia and Africa operating segment, three are included in the Europe operating segment, five are included in the Latin America operating segment, and sixseven are included in the Pacific
operating segment; and owned a majority interest in and operated one beverage concentrate manufacturing plant included in theAsia Pacific operating segment.
We own or hold a majority interest in or otherwise consolidate under applicable accounting rules bottling operations that, as of December 31, 2012,2015, owned 10576 principal beverage bottling and canning plants located throughout the world. These plants are included in the Bottling Investments operating segment.
Management believes that our Company's facilities for the production of our products are suitable and adequate, that they are being appropriately utilized in line with past experience, and that they have sufficient production capacity for their present intended purposes. The extent of utilization of such facilities varies based upon seasonal demand for our products. However, management believes that additional production can be obtained at the existing facilities by adding personnel and capital equipment and, at some facilities, by adding shifts of personnel or expanding the facilities. We continuously review our anticipated requirements for facilities and, on the basis of that review, may from time to time acquire additional facilities and/or dispose of existing facilities.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, including the proceedings specifically discussed below. Management believes that the total liabilities to the Company that may arise as a result of currently pending legal proceedings will not have a material adverse effect on the Company taken as a whole.
Aqua-Chem Litigation
On December 20, 2002, the Company filed a lawsuit (The Coca-Cola Company v. Aqua-Chem, Inc., Civil Action No. 2002CV631-50) in the Superior Court of Fulton County, Georgia (the "Georgia("Georgia Case"), seeking a declaratory judgment that the Company has no obligation to its former subsidiary, Aqua-Chem, Inc., now known as Cleaver-Brooks, Inc. ("Aqua-Chem"), for any past, present or future liabilities or expenses in connection with any claims or lawsuits against Aqua-Chem. Subsequent to the Company's filing but on the same day, Aqua-Chem filed a lawsuit (Aqua-Chem, Inc. v. The Coca-Cola Company, Civil Action No. 02CV012179) in the Circuit Court, Civil Division of Milwaukee County, Wisconsin (the "Wisconsin("Wisconsin Case"). In the Wisconsin Case, Aqua-Chem sought a declaratory judgment that the Company is responsible for all liabilities and expenses not covered by insurance in connection with certain of Aqua-Chem's general and product liability claims arising from occurrences prior to the Company's sale of Aqua-Chem in 1981, and a judgment for breach of contract in an amount exceeding $9 million for costs incurred by Aqua-Chem to date in connection with such claims. The Wisconsin Case initially was stayed, pending final resolution of the Georgia Case, and later was voluntarily dismissed without prejudice by Aqua-Chem.
The Company owned Aqua-Chem from 1970 to 1981. During that time, the Company purchased over $400 million of insurance coverage, which also insures Aqua-Chem for some of its prior and future costs for certain product liability and other claims. The Company sold Aqua-Chem to Lyonnaise American Holding, Inc., in 1981 under the terms of a stock sale agreement. The 1981 agreement, and a subsequent 1983 settlement agreement, outlined the parties' rights and obligations concerning past and future claims and lawsuits involving Aqua-Chem. Cleaver-Brooks, a division of Aqua-Chem, manufactured boilers, some of which contained asbestos gaskets. Aqua-Chem was first named as a defendant in asbestos lawsuits in or around 1985 and currently has approximately 40,000 active claims pending against it.
The parties agreed in 2004 to stay the Georgia Case pending the outcome of insurance coverage litigation filed by certain Aqua-Chem insurers on March 26, 2004. In the coverage action, five plaintiff insurance companies filed suit (Century Indemnity Company, et al. v. Aqua-Chem, Inc., The Coca-Cola Company, et al., Case No. 04CV002852) in the Circuit Court, Civil Division of Milwaukee County, Wisconsin, against the Company, Aqua-Chem and 16 insurance companies. Several of the policies that were the subject of the coverage action had been issued to the Company during the period (1970 to 1981) when the Company owned Aqua-Chem. The complaint sought a determination of the respective rights and obligations under the insurance policies issued with regard to asbestos-related claims against Aqua-Chem. The action also sought a monetary judgment reimbursing any amounts paid by the plaintiffs in excess of their obligations. Two of the insurers, one with a $15 million policy limit and one with a $25 million policy limit, asserted cross-claims against the Company, alleging that the Company and/or its insurers are responsible for Aqua-Chem's asbestos liabilities before any obligation is triggered on the part of the cross-claimant insurers to pay for such costs under their policies.
Aqua-Chem and the Company filed and obtained a partial summary judgment determination in the coverage action that the insurers for Aqua-Chem and the Company were jointly and severally liable for coverage amounts, but reserving judgment on other defenses that might apply. During the course of the Wisconsin insurance coverage litigation, Aqua-Chem and the Company reached settlements with several of the insurers, including plaintiffs, who have paid or will pay funds into an escrow account for payment of costs arising from the asbestos claims against Aqua-Chem. On July 24, 2007, the Wisconsin trial court entered a final declaratory judgment regarding the rights and obligations of the parties under the insurance policies issued by
the remaining defendant insurers, which judgment was not appealed. The judgment directs, among other things, that each insurer whose policy is triggered is jointly and severally liable for 100 percent of Aqua-Chem's losses up to policy limits. The court's judgment concluded the Wisconsin insurance coverage litigation.
The Company and Aqua-Chem continued to pursue and obtain coverage agreements for the asbestos-related claims against Aqua-Chem with those insurance companies that did not settle in the Wisconsin insurance coverage litigation. The Company anticipated that a final settlement with three of those insurers (the “Chartis insurers”("Chartis insurers") would be finalized in May 2011, but suchthe Chartis insurers repudiated their settlement commitments and, as a result, Aqua-Chem and the Company filed suit against them in Wisconsin state court to enforce the coverage-in-place settlement or, in the alternative, to obtain a declaratory judgment validating Aqua-Chem and the Company's interpretation of the court's judgment in the Wisconsin insurance coverage litigation.
In February 2012, the parties filed and argued a number of cross-motions for summary judgment related to the issues of the enforceability of the settlement agreement and the exhaustion of policies underlying those of the Chartis insurers. The court granted defendants' motions for summary judgment that the 2011 Settlement Agreement and 2010 Term Sheet were not binding contracts, but denied their similar motions related to plaintiffs' claims for promissory and/or equitable estoppel. On or about May 15, 2012, the parties entered into a mutually agreeable settlement/stipulation resolving two major issues: exhaustion of underlying coverage and control of defense; and, ondefense. On or about January 10, 2013, the parties reached a settlement of the estoppel claims and all of the remaining coverage issues, with the exception of one disputed issue relating to the scope of the Chartis insurers' defense obligations in two policy years. The trial court granted summary judgment in favor of the Company and Aqua-Chem on that one open issue and entered a final appealable judgment to that effect following the estoppel claims. Theparties' settlement. On January 23, 2013, the Chartis insurers have filed a notice of appeal with respect to certain issues that wereof the subjecttrial court's summary judgment ruling. On October 29, 2013, the Wisconsin Court of Appeals affirmed the grant of summary judgment orders earlierin favor of the Company and Aqua-Chem. On November 27, 2013, the Chartis insurers filed a petition for review in the case. WhateverSupreme Court of Wisconsin, and on December 11, 2013, the outcomeCompany filed its opposition to that petition. On April 16, 2014, the Supreme Court of that appeal, these three insurance companies will remain subject toWisconsin denied the court's judgment in the Wisconsin insurance coverage litigation.Chartis insurers' petition for review.
The Georgia Case remains subject to the stay agreed to in 2004.
U.S. Federal Income Tax Dispute
On June 30, 2005, Maryann ChapmanSeptember 17, 2015, the Company received a Statutory Notice of Deficiency ("Notice") from the IRS for the tax years 2007 through 2009, after a five-year audit. In the Notice, the IRS claims that the Company's United States taxable income should be increased by an amount that creates a potential additional federal income tax liability of approximately $3.3 billion for the period, plus interest. No penalties were asserted in the Notice; however, the IRS has since taken the position that it is not precluded from asserting penalties and notified the Company that it may do so. The disputed amounts largely relate to a transfer pricing matter involving the appropriate amount of taxable income the Company should report in the United States in connection with its licensing of intangible property to certain related foreign licensees for use in connection with the manufacturing, distribution, sale, marketing and promotion of products in overseas markets.
The Company has followed the same transfer pricing methodology for these licenses since the methodology was agreed with the IRS in a 1996 closing agreement that applied back to 1987. The closing agreement provides prospective penalty protection as long as the Company follows the prescribed methodology and material facts and circumstances and relevant Federal tax law have not changed. On February 11, 2016, the IRS notified the Company, without further explanation, that the IRS has determined that material facts and circumstances and relevant Federal tax law have changed and that it may assert penalties. The Company does not agree with this determination. The Company's compliance with the closing agreement was audited and confirmed by the IRS in five successive audit cycles covering the subsequent 11 years through 2006, with the last audit concluding as recently as 2009.
The Notice represents a repudiation of the methodology previously adopted in the 1996 closing agreement. The IRS designated the matter for litigation on October 15, 2015. Therefore, the Company will be prevented from pursuing any administrative settlement at IRS Appeals or under the IRS Advance Pricing and Mutual Agreement Program.
The Company firmly believes that the IRS' claims are without merit and plans to pursue all available administrative and judicial remedies necessary to resolve this matter. To that end, the Company filed a purported shareholder derivative action (Chapman v. Isdell, et al.)petition in the SuperiorU.S. Tax Court of Fulton County, Georgia, alleging violations of state law by certain individual current and former members of the Board of Directors of the Company and senior management, including breaches of fiduciary duties, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment, between January 2003 and the date of filing of the complaint that have caused substantial losses to the Company and other damages, such as to its reputation and goodwill. The defendants named in the lawsuit include Neville Isdell, Douglas Daft, Gary Fayard, Ronald Allen, Cathleen Black, Warren Buffett, Herbert Allen, Barry Diller, Donald McHenry, Sam Nunn, James Robinson, Peter Ueberroth, James Williams, Donald Keough, Maria Lagomasino, Pedro Reinhard, Robert Nardelli and Susan Bennett King.on December 14, 2015. The Company intends to vigorously defend its position and is also named a nominal defendant. The complaint further alleges that the September 2004 earnings warning issued by the Company resulted from factors known by the individual defendants as early as January 2003 that were not adequately disclosedconfident in its ability to the investing public until the earnings warning. The factors cited in the complaint include (i) a flawed business strategy and a business model that was not working; (ii) a workforce so depleted by layoffs that it was unable to properly react to changing market conditions; (iii) impaired relationships with key bottlers; and (iv) the fact that the foregoing conditions would lead to diminished earnings. The plaintiff, purportedly on behalf of the Company, seeks damages in an unspecified amount, extraordinary equitable and/or injunctive relief, restitution and disgorgement of profits, reimbursement for costs and disbursements of the action, and such other and further relief as the Court deems just and proper. The Company's motion to dismiss the complaint and the plaintiff's response were filed and fully briefed. The Court heard oral argumentprevail on the Company's motion to dismiss on June 6, 2006. Following the hearing, the Court took the matter under advisement and the parties are awaiting a ruling. On March 30, 2012, the Court dismissed the case for lack of prosecution.merits.
Environmental Matters
The Company's Atlanta Syrup Plant (“ASP”) discharges wastewater to a City of Atlanta wastewater treatment works pursuant to a government-issued permit under the U.S. Clean Water Act and related state and local laws and regulations. The Company became aware that wastewater-related reports filed by ASP with regulators may contain certain inaccurate information and made self-disclosure to the City of Atlanta regarding the matter as required by applicable law. As a result, regulatory authorities may seek monetary and/or other sanctions against the Company, although the Company believes that any sanctions that may ultimately be imposed will not be material to its business, financial condition or results of operations.
The Company's bottling plant in Suape, Brazil discharges wastewater to a local water body pursuant to a government-issued permit under Brazilian environmental law. The Company is working with environmental regulators in the State of Pernambuco to address certain compliance-related issues at the Suape facility, including with respect to the building of a new wastewater treatment plant. The Brazilian regulatory authorities may pursue monetary and/or other sanctions against the Company as a result of this matter, although the Company believes that if any sanctions are pursued they will not be material to its business, financial condition or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM X. EXECUTIVE OFFICERS OF THE COMPANY
The following are the executive officers of our Company as of February 25, 2013:
Ahmet C. Bozer, 52, is Executive Vice President of the Company and President of Coca-Cola International, which consists of the Company's Eurasia and Africa, Europe and Pacific operating groups. Mr. Bozer joined the Company in 1990 as a Financial Control Manager. In 1992, he became the Region Finance Manager in Turkey. In 1994, he joined Coca-Cola Bottlers of Turkey (now Coca-Cola İçecek A.Ş.) as Finance Director and was named Managing Director in 1998. In 2000, Mr. Bozer rejoined the Company as President of the Eurasia Division, which became the Eurasia and Middle East Division in 2003. In 2006, Mr. Bozer assumed the additional leadership responsibility for the Russia, Ukraine and Belarus Division. In 2007, with the addition of the India and South West Asia Division under his responsibilities, Mr. Bozer was named President of the Eurasia Group. From July 1, 2008 until December 31, 2012, Mr. Bozer served as President of the Eurasia and Africa Group. He was appointed President of Coca-Cola International effective January 1, 2013 and was elected Executive Vice President of the Company on February 21, 2013.
Steven A. Cahillane, 47, is Executive Vice President of the Company and President of Coca-Cola Americas, which consists of the Company's North America and Latin America operating groups. Mr. Cahillane joined the Company in October 2010 as President and Chief Executive Officer of Coca-Cola Refreshments, the Company's bottling and customer service organization for North America, and served in this role until December 31, 2012. Before joining the Company, Mr. Cahillane served as President of Coca-Cola Enterprises Inc.'s Europe Group until July 2008 and then as President of the North America Business Unit of Coca-Cola Enterprises Inc. from July 2008 until October 2010. Prior to joining the Coca-Cola system, from 2003 until 2005, Mr. Cahillane served as the Chief Executive for Interbrew UK and Ireland, a division of InBev S.A. In 2005, he became Chief Commercial Officer of InBev S.A. and served in that capacity until 2007. Mr. Cahillane was appointed President of Coca-Cola Americas effective January 1, 2013 and was elected Executive Vice President of the Company on February 21, 2013.2016:
Alexander B. Cummings, Jr., 56,59, is Executive Vice President and Chief Administrative Officer of the Company. Mr. Cummings joined the Company in 1997 as Deputy Region Manager, Nigeria. In 1998, Mr. Cummings was named Managing Director/Region Manager, Nigeria, and in 2000, he became President of the North West Africa Division based in Morocco. In 2001, Mr. Cummings became President of the Africa Group and served in this capacity until June 2008. Mr. Cummings was appointed Chief Administrative Officer of the Company effective July 1, 2008, and was elected Executive Vice President of the Company effective October 15, 2008. Mr. Cummings began his careerwill be retiring from the Company on March 31, 2016.
Marcos de Quinto, 57, is Executive Vice President and Chief Marketing Officer of the Company. Mr. De Quinto first joined the Company in 1982 with The Pillsburyin the marketing department of Coca-Cola Spain, where he held positions including District Manager and Merchandising Manager. In 1988, he left the Company to be Regional Manager for Southern Publicity Agencies ALAS BATES/BSB Advertising before rejoining Coca-Cola Spain in 1990 as Marketing Services Manager. From September 1992 to September1994, Mr. De Quinto served as Senior Vice President, Marketing Operations Manager, Coca-Cola Southeast and held various positions within Pillsbury,West Asia, and from September 1994 to February 1995, he served as Regional Manager for Singapore and Malaysia. From February 1995 to October1996, Mr. De Quinto served as Marketing Manager, Central Europe Division, and from October 1996 to January 2000, he served as Regional Manager, Coca-Cola Spain. In January 2000, he was appointed President of the lastIberia Business Unit and served in that role until his appointment to the position beingof Chief Marketing Officer effective January 1, 2015. He also served as Vice President, Europe Group from May 2007 to December 2012. Mr. De Quinto was elected Executive Vice President of Finance and Chief Financial Officer for all of Pillsbury's international businesses.the Company effective February 19, 2015.
J. Alexander M. Douglas, Jr., 51,54, is SeniorExecutive Vice President and Global Chief Customer OfficerPresident of the Company.Coca-Cola North America. Mr. Douglas joined the Company in January 1988 as a District Sales Manager for the Foodservice Division of Coca-Cola USA. In May 1994, he was named Vice President of Coca-Cola USA, initially assuming leadership of the CCE Sales and Marketing Group and eventually assuming leadership of the entire North American Field Sales and Marketing Groups. In 2000, Mr. Douglas was appointed President of the North American Retail Division within the North America Group. He served as Senior Vice President and Chief Customer Officer of the Company from 2003 until 2006 and continued serving as Senior Vice President until April 2007. Mr. Douglas was President of the North America Group from August 2006 through December 31, 2012. He was appointedserved as Global Chief Customer Officer effectiveof the Company from January 1, 2013 through March 2015 and was electedas Senior Vice President of the Company onfrom February 21, 2013.2013 until his election as Executive Vice President of the Company effective April 30, 2015. Mr. Douglas was appointed President of Coca-Cola North America effective January 1, 2014.
Ceree Eberly, 50,53, is Senior Vice President and Chief People Officer of the Company, with responsibility for leading the Company's global People Function (formerly Human Resources).Function. Ms. Eberly joined the Company in 1990, serving in staffing, compensation and other roles supporting the Company's business unitsdivisions around the world. From 1998 until 2003, she served as Human Resources Director for the Latin Center Division. From 2003 until 2007, Ms. Eberly served as Vice President of the McDonald's Division. She was appointed Group Human Resources Director for Europe in July 2007 and served in that capacity until she was appointed Chief People Officer effective December 1, 2009. Ms. Eberly was elected Senior Vice President of the Company effective April 1, 2010.
Gary P. Fayard, 60, is Executive Vice President and Chief Financial Officer of the Company. Mr. Fayard joined the Company in 1994. In July 1994, he was elected Vice President and Controller. In December 1999, he was elected Senior Vice President and Chief Financial Officer. Mr. Fayard was elected Executive Vice President of the Company in February 2003.
Irial Finan, 55,58, is Executive Vice President and President, Bottling Investments and Supply Chain. Mr. Finan joined the Company and was named President, Bottling Investments in 2004. Mr. Finan joined the Coca-Cola system in 1981 with Coca-Cola Bottlers Ireland, Ltd., where for several years he held a variety of accounting positions. From 1987 until 1990, Mr. Finan served as Finance Director of Coca-Cola Bottlers Ireland, Ltd. From 1991 to 1993, he served as Managing Director of Coca-Cola Bottlers Ulster, Ltd. He was Managing Director of Coca-Cola bottlers in Romania and Bulgaria until late 1994. From 1995 to 1999, he served as Managing Director of Molino Beverages, with responsibility for expanding markets, including the Republic of Ireland, Northern Ireland, Romania, Moldova, Russia and Nigeria. Mr. Finan served from 2001 until 2003 as Chief Executive Officer of Coca-Cola Hellenic. He was elected Executive Vice President of the Company in October 2004.
Bernhard Goepelt, 50,53, is Senior Vice President, General Counsel and Chief Legal Counsel of the Company. Mr. Goepelt joined the Company in 1992 as Legal Counsel for the German Division. In 1997, he was appointed Legal Counsel for the Middle and Far East Group and in 1999 was promoted toappointed Division Counsel, Southeast and West Asia Division, based in Thailand. In 2003, Mr. Goepelt was appointed Group Counsel for the Central Europe, Eurasia and Middle East Group. In 2005, he assumed the position of General Counsel for Japan and China, and in 2007, Mr. Goepelt was appointed General Counsel, Pacific Group. In April 2010, he moved to Atlanta, Georgia, to become Associate General Counsel, Global Marketing, Commercial Leadership & Strategy. In September 2010, Mr. Goepelt took on the additional responsibility of General Counsel for the Pacific Group. In addition to his functional responsibilities, he also managed the administration of the Legal Division. Mr. Goepelt was elected Senior Vice President, General Counsel and Chief Legal Counsel of the Company in December 2011.
Glenn G. Jordan S., Julie Hamilton,56, 50, is Senior Vice President and Chief Customer and Commercial Leadership Officer of the Pacific Group. Mr. JordanCompany. Ms. Hamilton joined the Company in 19781996 as a field representative forBrand Development Manager of Still Beverages with Coca-Cola de Colombia where, for several years, he held various positions, including Region Manager from 1985USA. From January 1998 to 1989. Mr. JordanApril 1999, she served as Franchise Manager of Independent Bottlers with Coca-Cola USA, and from April 1999 to October 2000, she served as Group Manager for the Worldwide Marketing Operations Manager, PacificPartnership with Blockbuster. From October 2000 to January 2003, Ms. Hamilton served as Director of Franchise Sales & Marketing-Northwest U.S. Region. From January 2003 to October 2005, she served as Group Directorfor Global On-Premise Customers, and from 1989October 2005 to 1990 andJune 2007, she served as Vice President, of Coca-Cola International and Executive Assistant to the Pacific Group President from 1990 to 1991. HeGlobal Customer Development. She served as SeniorGroup Vice President, Marketing and Operations, for the Brazil DivisionNorth America Wal-Mart Team from 1991June 2007 to 1995; as President of the River Plate Division, which comprised Argentina, Uruguay and Paraguay, from 1995 to 2000;January 2009, and as President of the South Latin America Division, comprising Argentina, Bolivia, Chile, Ecuador, Paraguay, Peru and Uruguay,Global Wal-Mart Group from 2000January 2009 to 2003. In February 2003, Mr. JordanMarch 2011. She was appointed Executive Vice PresidentAssistant to Muhtar Kent, the Chairman and DirectorChief Executive Officer of Operations for the Latin America GroupCompany, in March 2011 and served in that capacity until February 2006. Mr. Jordanshe was appointed Chief Customer and Commercial Leadership Officer effective April 1, 2015. Ms. Hamilton was elected Vice President of the Company in April 2015 and Senior Vice President effective February 18, 2016.
Brent Hastie, 42, is Senior Vice President, Strategy and Planning for the Company. Mr. Hastie first joined the Company in 2006 as Vice President, Strategy and Planning for Coca-Cola North America. From March 2009 to July 2009, he served as Vice President, Commercial Leadership, Still Beverages. From August 2009 to December 2010, he served as President and General Manager, Active Lifestyles Brands. From January 2011 to April 2012, he served as Chief Strategy Officer for CCR. In April 2012, he left the Company to join Bain Capital, a global private investment firm, where he was Executive Vice President in the Private Equity group until July 2013, when he returned to the Company as Vice President, Strategy and Planning. Mr. Hastie was elected Senior Vice President of the Company effective February 18, 2016.
Ed Hays, PhD, 57, is Senior Vice President and Chief Technical Officer of the Company. Dr. Hays joined the Company in 1985 as a scientist in Corporate Research and Development. He served as Director of Product Development in Corporate Research and Development from 1992 to 1995 and as Director, Research and Development for the Middle East South Asia and Pacific RimFar East Group from August 1995 to January 1998. He served as Director of Corporate Research and Development from July 1998 to December 1999. He was named Vice President, Global Science, Regulatory and Formula Governance in February 2006. The East, South AsiaDecember 2000 and Pacific Rim Group was reconfigured and renamedserved in that role until his appointment as Chief Technical Officer of the Pacific Group,Company effective JanuaryMarch 1, 2007.2015. He continued to serve as Vice President until his election as Senior Vice President of the Company effective April 30, 2015.
Nathan Kalumbu, 48,51, is President of the Eurasia and Africa Group. Mr. Kalumbu joined the Company in 1990 as the Central Africa region's External Affairs Manager and served in numerous roles in marketing operations and country management in Zimbabwe, Zambia and Malawi from 1992 to 1996. He held the role of Executive Assistant to the South Africa Division President from 1997 to 1998 and Region Manager for Central Africa from 1998 to 2000 and for Nigeria from 2000 to 2004. In 2004, Mr. Kalumbu was appointed Business Planning Director and Executive Assistant to the Retail Division President, North America. He returned to the Africa Group as Director of Business Strategy &and Planning for the East and Central Africa Division in 2006. In 2007, he was named President of the Central, East and West Africa (CEWA) Business Unit,business unit and served in that role until his appointment to his current position effective January 1, 2013.
Muhtar Kent, 60,63, is Chairman of the Board of Directors and Chief Executive Officer and President of the Company. Mr. Kent joined the Company in 1978 and held a variety of marketing and operations roles throughout his career with the Company. In 1985, he was appointed General Manager of Coca-Cola Turkey and Central Asia. From 1989 to 1995, Mr. Kent served as President of the East Central Europe Division and Senior Vice President of Coca-Cola International. Between 1995 and 1998, he served as Managing Director of Coca-Cola Amatil-Europe, covering bottling operations in 12 countries, and from 1999 until 2005, he served as President and Chief Executive Officer of Efes Beverage Group, a diversified beverage company with Coca-Cola and beer operations across Southeast Europe, Turkey and Central Asia. Mr. Kent rejoined the Company in May 2005 as President and Chief Operating Officer, North Asia, Eurasia and Middle East Group, an organization serving a broad and diverse region that included China, Japan and Russia. He was appointed President, Coca-Cola International in January 2006 and was elected Executive Vice President of the Company in February 2006. He was elected President and Chief Operating Officer of the Company in December 2006 and was elected to the Board of Directors in April 2008. Mr. Kent was elected Chief Executive Officer of the Company effective July 1, 2008, and was elected Chairman of the Board of Directors of the Company in April 2009. He served as President of the Company until August 2015.
James Quincey, 48,51, is President and Chief Operating Officer of the Europe Group.Company. Mr. Quincey joined the Company in 1996 as Director, Learning Strategy for the Latin America Group. He moved to Mexico as Deputy to the Division President in 1999, and became Region Manager for Argentina &and Uruguay in 2000, and then served as General Manager of the South Cone region (Argentina, Chile, Uruguay &and Paraguay) in 2003. Mr. Quincey was appointed President of the South Latin Division in December 2003 and President of the Mexico Division in December 2005. In October 2008, he was named President of the Northwest Europe and Nordics Business Unit,business unit and served in that role until his appointmenthe was appointed President of the Europe Group in January 2013. He was elected to his current position effective January 1, 2013.positions in August 2015.
José Octavio Reyes, Atul Singh,60, 56, is Vice Chairman, The Coca-Cola Export Corporation.President of the Asia Pacific Group. Mr. Reyes began his career withSingh joined the Company in 1980 at Coca-Cola de México1998 as Vice President, Operations of the India Division. In 2001, he moved to the China Division and served as Region Manager of Strategic Planning. In 1987, he was appointed Manager of the Sprite and Diet Coke brands at Corporate Headquarters. In 1990, he was appointed Marketing Director for the Brazil Division, and later became Marketing and OperationsEast China from 2001 to 2002, Vice President for the Mexico Division. Mr. Reyes assumed the role of Operations from 2002 to 2003, Deputy Division President forof the MexicoChina Division in 1996from 2003 to 2004 and was namedPresident of the East, Central and South China Division President for the Mexico Division later that year. from January to August 2005.From December 2002 until December 31, 2012, Mr. ReyesSeptember 2005 to June 2013, he served as President of the Latin AmericaIndia and South West Asia business unit. Mr. Singh served as Deputy President, Pacific Group, from July 2013 to December 2013 and served in that role until his appointmentas Group President, Asia, which is part of the Asia Pacific Group, from January 2014 to August 2014. Mr. Singh was appointed to his current position effective January 1, 2013.in September 2014.
Brian Smith, 57,60, is President of the Latin America Group. Mr. Smith joined the Company in 1997 as Latin America Group Manager for Mergers and Acquisitions, a role he held until July 2001. From 2001 to 2002, he worked as Executive Assistant to Brian Dyson, then Chief Operating Officer and Vice Chairman of the Company. HeMr. Smith served as President of the Brazil Division from 2002 to 2008 and President of the Mexico Business Unitbusiness unit from 2008 to 2011.through December 2012. Mr. Smith was appointed to his current position effective January 1, 2013.
Joseph V. Tripodi, Ed Steinike,57, 58, is Senior Vice President and Chief Information Officer of the Company. He joined the Company in 2002 as Chief Technology Officer. From May 2004 to November 2007, Mr. Steinike served as Chief Development Officer and Chief Information Officer for Coca-Cola North America. From February 2007 to November 2007, he served as Vice President of the Company. From November 2007 to April 2010, he served as Executive Vice President and Chief Marketing and CommercialInformation Officer at ING Insurance, part of the Company. Mr. Tripodi joinedING Groep N.V. He rejoined the Company in April 2010 as Chief MarketingInformation Officer and Commercial Officer effective September 2007 andwas elected Vice President in July 2010. He was elected Senior Vice President of the Company in October 2007, a capacity in which he served until July 2009, when he was elected Executive Vice President of the Company. Prior to joining the Company, Mr. Tripodi served as Senior Vice President and Chief Marketing Officer for Allstate Insurance Co. Prior to joining Allstate in 2003, Mr. Tripodi was Chief Marketing Officer for The Bank of New York. From 1999 until 2002, he served as Chief Marketing Officer for Seagram Spirits & Wine Group. From 1989 to 1998, he was the Executive Vice President for Global Marketing, Products and Services for MasterCard International. Previously, Mr. Tripodi spent seven years with the Mobil Oil Corporation in roles of increasing responsibility in planning, marketing, business development and operations in New York, Paris, Hong Kong and Guam.December 2013.
Clyde C. Tuggle, 50,53, is Senior Vice President and Chief Public Affairs and Communications Officer of the Company. Mr. Tuggle joined the Company in 1989 in the Corporate Issues Communications Department. In 1992, he was named Executive Assistant to Roberto C. Goizueta, then Chairman and Chief Executive Officer of the Company, where he managed external affairs and communications for the Office of the Chairman. In 1998, Mr. Tuggle transferred to the Company's Central European Division Office in Vienna, where he held a variety of positions, including Director of Operations Development, Deputy to the Division President and Region Manager for Austria. In 2000, Mr. Tuggle returned to Atlanta, Georgia, as Executive Assistant to then Chairman and Chief Executive Officer Douglas N. Daft and was elected Vice President of the Company. In February 2003, he was elected Senior Vice President of the Company and appointed Director of Worldwide Public Affairs and Communications. From 2005 until September 2008, Mr. Tuggle served as President of the Russia, Ukraine and Belarus Division. In September 2008, he returned to Atlanta, as Senior Vice President, Corporate AffairsGeorgia, to lead the Company's productivity efforts and Productivity. In May 2009, Mr. Tuggle was named Senior Vice President, Globaloversee the Company's Public Affairs and Communications of the Company.
Glen Walter, 44, is President and Chief Operating Officer of Coca-Cola Refreshments, the Company's bottlingStrategic Security and customer service organization for North America.Aviation functions. Mr. Walter joined the Company in 2010 as Coca-Cola Refreshments' Vice President of Region Sales, and served in this role until his appointment to his current role effective January 1, 2013. Before joining the Company, Mr. Walter was Central Business Unit Vice President and General Manager for Coca-Cola Enterprises Inc. in North America from November 2008 to October 2010. Prior to joining the Coca-Cola system, he served as President of InBev USA from 2006 to 2008 and as Vice President of InBev USA from 2004 to 2006. Mr. Walter started his career in the beverage industry in 1991 as a member of the E&J Gallo Management Development Program.
Guy Wollaert, 53, is Senior Vice President and Chief Technical Officer of the Company. Mr. Wollaert joined the Company in 1992 in Brussels, Belgium as a Project Manager and has held various positions of increasing responsibility in the technical and supply chain fields. From 1997 to 1999, he served as Technical Director for the Indonesia region based in Jakarta. In 1999, Mr. Wollaert relocated to Atlanta where he held the position of Value Chain Account Manager for the Asia Pacific region. In late 2000, he joined Coca-Cola Tea Products Co. Ltd. ("CCTPC"), a Company subsidiary based in Tokyo. Mr. Wollaert became President of CCTPC in January 2002. From 2003 to 2006, he was President of Coca-Cola National Beverages Ltd., a national supply management Company subsidiary that managed the Company's Japan supply business. In 2006, Mr. Wollaert returned to Atlanta as Vice President, Global Supply Chain Development, and from January 2008 until December 2010, he served as General Manager, Global Juice Center. Mr. Wollaert was appointed Chief Technical Officer effective January 2011 andTuggle was elected Senior Vice President in October 2008 and in May 2009 was named to his current position.
Kathy N. Waller, 57, is Executive Vice President and Chief Financial Officer of the Company. Ms. Waller joined the Company in 1987 as a senior accountant in the Accounting Research Department and has served in a number of accounting and finance roles of increasing responsibility. From July 2004 to August 2009, Ms. Waller served as Chief of Internal Audit. In December 2005, she was elected Vice President of the Company, and in February 2011.August 2009, she was elected Controller. In August 2013, she became Vice President, Finance and Controller, assuming additional responsibilities for corporate treasury, corporate tax and finance capabilities, and served in that position until April 23, 2014, when she was appointed Chief Financial Officer and elected Executive Vice President.
All executive officers serve at the pleasure of the Board of Directors. There is no family relationship between any of the Directors or executive officers of the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The principal United States market in which the Company's common stock is listed and traded is the New York Stock Exchange.
The following table sets forth, for the quarterly reporting periods indicated, the high and low market prices per share for the Company's common stock, as reported on the New York Stock Exchange composite tape, and dividend per share information:
| | | | Common Stock Market Prices | | | Common Stock Market Prices | | |
| | High |
| | Low |
| | Dividends Declared |
| High |
| | Low |
| | Dividends Declared |
|
| 2012 | | | | | | |
| Fourth quarter | $ | 38.83 |
| | $ | 35.58 |
| | $ | 0.255 |
| |
| Third quarter | 40.66 |
| | 37.11 |
| | 0.255 |
| |
Second quarter1 | 39.10 |
| | 35.92 |
| | 0.255 |
| |
First quarter1 | 37.20 |
| | 33.29 |
| | 0.255 |
| |
2011 — As Adjusted1 | | | | | | |
| 2015 | | | | | | |
| Fourth quarter | $ | 35.15 |
| | $ | 31.67 |
| | $ | 0.235 |
| $ | 43.91 |
| | $ | 40.43 |
| | $ | 0.330 |
|
| Third quarter | 35.89 |
| | 31.80 |
| | 0.235 |
| 42.25 |
| | 36.56 |
| | 0.330 |
|
| Second quarter | 34.39 |
| | 32.22 |
| | 0.235 |
| 41.69 |
| | 39.12 |
| | 0.330 |
|
| First quarter | 33.74 |
| | 30.65 |
| | 0.235 |
| 43.83 |
| | 39.61 |
| | 0.330 |
|
| 2014 | | | | | | |
| Fourth quarter | | $ | 45.00 |
| | $ | 39.80 |
| | $ | 0.305 |
|
| Third quarter | | 42.57 |
| | 39.06 |
| | 0.305 |
|
| Second quarter | | 42.29 |
| | 38.04 |
| | 0.305 |
|
| First quarter | | 41.23 |
| | 36.89 |
| | 0.305 |
|
| |
1
| On July 27, 2012, the Company's certificate of incorporation was amended to increase the number of authorized shares of common stock from 5.6 billion to 11.2 billion and effect a two-for-one stock split of the common stock. The record date for the stock split was July 27, 2012, and the additional shares were distributed on August 10, 2012. Each shareowner of record on the close of business on the record date received one additional share of common stock for each share held. All per share data presented above reflects the impact of the stock split.
|
While we have historically paid dividends to holders of our common stock on a quarterly basis, the declaration and payment of future dividends will depend on many factors, including, but not limited to, our earnings, financial condition, business development needs and regulatory considerations, and isare at the discretion of our Board of Directors.
As of February 25, 2013,22, 2016, there were 243,575224,780 shareowner accounts of record. This figure does not include a substantially greater number of "street name" holders or beneficial holders of our common stock, whose shares are held of record by banks, brokers and other financial institutions.
The information under the principal heading "EQUITY COMPENSATION PLAN INFORMATION" in the Company's definitive Proxy Statement for the Annual Meeting of Shareowners to be held on April 24, 201327, 2016, to be filed with the Securities and Exchange Commission (the "Company's 2013("Company's 2016 Proxy Statement"), is incorporated herein by reference.
During the fiscal year ended December 31, 20122015, no equity securities of the Company were sold by the Company that were not registered under the Securities Act of 1933, as amended.
The following table presents information with respect to purchases of common stock of the Company made during the three months ended December 31, 20122015, by the Company or any "affiliated purchaser" of the Company as defined in Rule 10b-18(a)(3) under the Exchange Act.
|
| | | | | | | | | | | | |
| Period | Total Number of Shares Purchased1 |
| | Average Price Paid Per Share |
| | Total Number of Shares Purchased as Part of Publicly Announced Plans2 |
| | Maximum Number of Shares That May Yet Be Purchased Under the Publicly Announced Plans3 |
|
| September 29, 2012 through October 26, 2012 | 4,241,041 |
| | $ | 37.53 |
| | 4,240,000 |
| | 563,008,144 |
|
| October 27, 2012 through November 23, 2012 | 8,326,995 |
| | 36.88 |
| | 8,134,100 |
| | 554,874,044 |
|
| November 24, 2012 through December 31, 2012 | 11,936,130 |
| | 37.21 |
| | 11,930,900 |
| | 542,943,144 |
|
| Total | 24,504,166 |
| | $ | 37.15 |
| | 24,305,000 |
| | |
|
|
| | | | | | | | | | | | |
| Period | Total Number of Shares Purchased1 |
| | Average Price Paid Per Share |
| | Total Number of Shares Purchased as Part of Publicly Announced Plan2 |
| | Maximum Number of Shares That May Yet Be Purchased Under the Publicly Announced Plan |
|
| October 3, 2015 through October 30, 2015 | 6,247,561 |
| | $ | 42.50 |
| | 6,024,200 |
| | 268,168,951 |
|
| October 31, 2015 through November 27, 2015 | 22,030,953 |
| | 42.28 |
| | 22,027,278 |
| | 246,141,673 |
|
| November 28, 2015 through December 31, 2015 | 8,210,439 |
| | 42.95 |
| | 8,209,731 |
| | 237,931,942 |
|
| Total | 36,488,953 |
| | $ | 42.47 |
| | 36,261,209 |
| | |
| |
1 | The total number of shares purchased includes: (i) shares purchased pursuant to the 20062012 Plan described in footnote 2 below, and (ii) shares surrendered to the Company to pay the exercise price and/or to satisfy tax withholding obligations in connection with so-called stock swap exercises of employee stock options and/or the vesting of restricted stock issued to employees, totaling 1,041223,361 shares, 192,8953,675 shares and 5,230708 shares for the fiscal months of October, November and December 2012,2015, respectively. |
| |
2 | On July 20, 2006, we publicly announced that our Board of Directors had authorized a plan (the "2006 Plan") for the Company to purchase up to 300 million shares of our Company's common stock. This column discloses the number of shares purchased pursuant to the 2006 Plan during the indicated time periods. |
| |
3
| On October 18, 2012, the Company publicly announced that our Board of Directors had authorized a new plan (the "2012("2012 Plan") for the Company to purchase up to 500 million shares of our Company's common stock. The 2012 Plan will allowThis column discloses the Company to continue repurchasing shares following the completion of the 2006 Plan. The maximum number of shares that may yet be purchased pursuant to the 2012 Plan during the indicated time periods (including shares purchased pursuant to the terms of preset trading plans meeting the requirements of Rule 10b5-1 under the publicly announced plans reflects the combined total available under both the 2006 Plan and the 2012 Plan.Exchange Act). |
Performance Graph
Comparison of Five-Year Cumulative Total Return Among
The Coca-Cola Company, the Peer Group Index and the S&P 500 Index
Total Return
Stock Price Plus Reinvested Dividends
| | | December 31, | 2007 |
| 2008 |
| 2009 |
| 2010 |
| 2011 |
| 2012 |
| 2010 |
| 2011 |
| 2012 |
| 2013 |
| 2014 |
| 2015 |
|
| The Coca-Cola Company | $ | 100 |
| $ | 76 |
| $ | 99 |
| $ | 118 |
| $ | 129 |
| $ | 137 |
| $ | 100 |
| $ | 109 |
| $ | 117 |
| $ | 137 |
| $ | 144 |
| $ | 151 |
|
| Peer Group Index | 100 |
| 76 |
| 92 |
| 108 |
| 128 |
| 142 |
| 100 |
| 119 |
| 131 |
| 166 |
| 191 |
| 218 |
|
| S&P 500 Index | 100 |
| 63 |
| 80 |
| 92 |
| 94 |
| 109 |
| 100 |
| 102 |
| 118 |
| 157 |
| 178 |
| 181 |
|
The total return assumes that dividends were reinvested quarterlydaily and is based on a $100 investment on December 31, 2007.2010.
The Peer Group Index is a self-constructed peer group of companies that are included in the Dow Jones Food and Beverage Group and the Dow Jones Tobacco Group of companies, from which the Company has been excluded.
The Peer Group Index consists of the following companies: Altria Group, Inc., Archer-Daniels-MidlandArcher Daniels Midland Company, B&G Foods, Inc., Beam Inc., Brown-Forman Corporation, Bunge Limited, Campbell Soup Company, Coca-Cola Enterprises, Inc., ConAgra Foods, Inc., Constellation Brands, Inc., Darling InternationalIngredients Inc., Dean Foods Company, Dr Pepper Snapple Group, Inc., Flowers Foods, Inc., Fresh Del Monte Produce Inc., General Mills, Inc., Green Mountain Coffee Roasters, Inc., H.J. Heinz Company, The Hain Celestial Group, Inc., Herbalife Ltd., The Hershey Company, The Hillshire Brands Company, Hormel Foods Corporation, Ingredion Incorporated, The J.M. Smucker Company, Kellogg Company, Keurig Green Mountain, Inc., The Kraft Foods Inc.,Heinz Company, Lancaster Colony Corporation, Lorillard, Inc.,Leucadia National Corporation, McCormick & Company, Inc., Mead Johnson Nutrition Company, Molson Coors Brewing Company, Mondelēz International, Inc., Monsanto Company, Monster Beverage Corporation, PepsiCo, Inc., Philip Morris International Inc., Post Holdings,Pinnacle Foods Inc., RalcorpPost Holdings, Inc., Reynolds American Inc., Smithfield Foods, Inc., TreeHouse Foods, Inc., Tyson Foods, Inc., and Universal Corporation.The WhiteWave Foods Company.
Companies included in the Dow Jones Food and Beverage Group and the Dow Jones Tobacco Group change periodically. This year, the groups include B&GPinnacle Foods Inc., The Hillshire Brands Company, Ingredion Incorporated, Mondelēz International, Inc. and Post Holdings, Inc., all of which werewas not included in the groups last year. Additionally, this year the groups do not include Corn Products International,Lorillard, Inc., Diamond Foods, Inc., Sara Lee Corporation and Tootsie Roll Industries, Inc., all of which werewas included in the groups last year.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and consolidated financial statements and notes thereto contained in "Item 8. Financial Statements and Supplementary Data" of this report.
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 1 |
| | 2009 |
| | 2008 |
| 2015 |
| | 2014 |
| | 2013 |
| | 2012 |
| | 2011 |
|
| (In millions except per share data) | | | As Adjusted2,3 | | | |
| SUMMARY OF OPERATIONS | | | | | | | | | | | | | | | | | | |
| Net operating revenues | $ | 48,017 |
| | $ | 46,542 |
| | $ | 35,119 |
| | $ | 30,990 |
| | $ | 31,944 |
| $ | 44,294 |
| | $ | 45,998 |
| | $ | 46,854 |
| | $ | 48,017 |
| | $ | 46,542 |
|
Net income attributable to shareowners of The Coca-Cola Company | 9,019 |
| | 8,584 |
| | 11,787 |
| | 6,797 |
| | 5,819 |
| 7,351 |
| | 7,098 |
| | 8,584 |
| | 9,019 |
| | 8,584 |
|
| PER SHARE DATA | | | | | | | | | | | | | | | | | | |
| Basic net income | $ | 2.00 |
| | $ | 1.88 |
| | $ | 2.55 |
| | $ | 1.47 |
| | $ | 1.26 |
| $ | 1.69 |
| | $ | 1.62 |
| | $ | 1.94 |
| | $ | 2.00 |
| | $ | 1.88 |
|
| Diluted net income | 1.97 |
| | 1.85 |
| | 2.53 |
| | 1.46 |
| | 1.25 |
| 1.67 |
| | 1.60 |
| | 1.90 |
| | 1.97 |
| | 1.85 |
|
| Cash dividends | 1.02 |
| | 0.94 |
| | 0.88 |
| | 0.82 |
| | 0.76 |
| 1.32 |
| | 1.22 |
| | 1.12 |
| | 1.02 |
| | 0.94 |
|
| BALANCE SHEET DATA | | | | | | | | | | | | | | | | | | |
| Total assets | $ | 86,174 |
| | $ | 79,974 |
| | $ | 72,921 |
| | $ | 48,671 |
| | $ | 40,519 |
| $ | 90,093 |
| | $ | 92,023 |
| | $ | 90,055 |
| | $ | 86,174 |
| | $ | 79,974 |
|
| Long-term debt | 14,736 |
| | 13,656 |
| | 14,041 |
| | 5,059 |
| | 2,781 |
| 28,407 |
| | 19,063 |
| | 19,154 |
| | 14,736 |
| | 13,656 |
|
| |
1The Company's results are impacted by acquisitions and divestitures. Refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information. | Includes the impact of the Company's acquisition of CCE's former North America business and the sale of our Norwegian and Swedish bottling operations to New CCE. Both of these transactions occurred on October 2, 2010. This information also includes the impact of the deconsolidation of certain entities, primarily bottling operations, on January 1, 2010, as a result of the Company's adoption of new accounting guidance issued by the Financial Accounting Standards Board ("FASB"). Refer to Note 1 and Note 2 of Notes to Consolidated Financial Statements.
|
| |
2
| Effective January 1, 2012, the Company elected to change our accounting methodology for determining the market-related value of assets for our U.S. qualified defined benefit pension plans. The Company's change in accounting methodology has been applied retrospectively, and we have adjusted all prior period financial information presented herein as required. |
| |
3
| On July 27, 2012, the Company's certificate of incorporation was amended to increase the number of authorized shares of common stock from 5.6 billion to 11.2 billion and effect a two-for-one stock split of the common stock. The record date for the stock split was July 27, 2012, and the additional shares were distributed on August 10, 2012. Each shareowner of record on the close of business on the record date received one additional share of common stock for each share held. All share and per share data presented herein reflect the impact of the increase in authorized shares and the stock split, as appropriate.
|
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand The Coca-Cola Company, our operations and our present business environment. MD&A is provided as a supplement to — and should be read in conjunction with — our consolidated financial statements and the accompanying notes thereto contained in "Item 8. Financial Statements and Supplementary Data" of this report. This overview summarizes the MD&A, which includes the following sections:
Our Business — a general description of our business and the nonalcoholic beverage segment of the commercial beverage industry,industry; our objective,objective; our strategic priorities,priorities; our core capabilities,capabilities; and challenges and risks of our business.
Critical Accounting Policies and Estimates — a discussion of accounting policies that require critical judgments and estimates.
Operations Review — an analysis of our Company's consolidated results of operations for the three years presented in our consolidated financial statements. Except to the extent that differences among our operating segments are material to an understanding of our business as a whole, we present the discussion in the MD&A on a consolidated basis.
Liquidity, Capital Resources and Financial Position — an analysis of cash flows; off-balance sheet arrangements and aggregate contractual obligations; foreign exchange; the impact of inflation and changing prices; and an overview of financial position.
Our Business
General
The Coca-Cola Company is the world's largest beverage company. We own or license and market more than 500 nonalcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks. We own and market four of the world's top five nonalcoholic sparkling beverage brands: Coca-Cola, Diet Coke, Fanta and Sprite. Finished beverage products bearing our trademarks, sold in the United States since 1886, are now sold in more than 200 countries.
We make our branded beverage products available to consumers throughout the world through our network of Company-owned or -controlled bottling and distribution operations, as well as independent bottling partners, distributors, wholesalers and retailers — the world's largest beverage distribution system. Of the approximately 57 billion beverage servings of all types consumed worldwide every day, beveragesBeverages bearing trademarks owned by or licensed to us account for more than 1.81.9 billion servings.of the approximately 58 billion servings of all beverages consumed worldwide every day.
We believe our success depends on our ability to connect with consumers by providing them with a wide variety of choices to meet their desires, needs and lifestyle choices. Our success further depends on the ability of our people to execute effectively, every day.
Our goal is to use our Company's assets — our brands, financial strength, unrivaled distribution system, global reach, and the talent and strong commitment of our management and associates — to become more competitive and to accelerate growth in a manner that creates value for our shareowners.
Our Company markets, manufactures and sells:
beverage concentrates, sometimes referred to as "beverage bases," and syrups, including fountain syrups (we refer to this part of our business as our "concentrate business" or "concentrate operations"); and
finished sparkling and still beverages (we refer to this part of our business as our "finished product business" or "finished product operations").
Generally, finished product operations generate higher net operating revenues but lower gross profit margins than concentrate operations.
In our concentrate operations, we typically generate net operating revenues by selling concentrates and syrups to authorized bottling and canning operations (to which we typically refer as our "bottlers" or our "bottling partners"). Our bottling partners either combine the concentrates with sweeteners (depending on the product), still water and/or sparkling water, or combine the syrups with sparkling water to produce finished beverages. The finished beverages are packaged in authorized containers bearing our trademarks or trademarks licensed to us — such as cans and refillable and nonrefillable glass and plastic bottles — bearing our trademarks or trademarks licensed to us and are then sold to retailers directly or, in some cases, through wholesalers or other bottlers. Outside the United States, we also sell concentrates for fountain beverages to our bottling partners who are typically authorized to manufacture fountain syrups, which they sell to fountain retailers such as restaurants and convenience stores which use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers who in turn sell and distribute the fountain syrups to fountain retailers.
Our finished product operations consist primarily of the production,Company-owned or -controlled bottling, sales and distribution operations, managed by CCR andincluding CCR. Until December 31, 2015, our Company-owned or -controlled bottling, sales and distribution operations.operations, other than CCR, iswere included in our Bottling Investments operating segment; and CCR was included in our North America operating segment, and our Company-owned or -controlledsegment. Effective January 1, 2016, we transferred CCR's bottling and distributionassociated supply chain operations are included in the United States and Canada from our North America segment to our Bottling Investments operating segment. Our finished product operations generate net operating revenues by selling sparkling beverages and a variety of still beverages, such as juices and juice drinks, energy and sports drinks, ready-to-drink teas and coffees, and certain water products, to retailers or to distributors, wholesalers and bottling partners who distribute them to retailers. In addition, in the United States, we manufacture fountain syrups and sell them to fountain retailers such as restaurants and convenience stores who use the fountain syrups to produce beverages for immediate consumption or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. In the United States, we authorize wholesalers to resell our fountain syrups through nonexclusive appointments that neither restrict us in setting the prices at which we sell fountain syrups to the wholesalers nor restrict the territories in which the wholesalers may resell in the United States.
The following table sets forth the percentage of total net operating revenues related to concentrate operations and finished product operations:
| | | Year Ended December 31, | 2012 |
| 2011 |
| 2010 |
| 2015 |
| 2014 |
| 2013 |
|
Concentrate operations1 | 38 | % | 39 | % | 51 | % | 37 | % | 38 | % | 38 | % |
Finished product operations2.3 | 62 |
| 61 |
| 49 |
| |
| Net operating revenues | 100 | % | 100 | % | 100 | % | |
Finished product operations2 | | 63 |
| 62 |
| 62 |
|
| Total | | 100 | % | 100 | % | 100 | % |
| |
1 | Includes concentrates sold by the Company to authorized bottling partners for the manufacture of fountain syrups. The bottlers then typically sell the fountain syrups to wholesalers or directly to fountain retailers. |
| |
2 | Includes fountain syrups manufactured by the Company, including consolidated bottling operations, and sold to fountain retailers or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. |
| |
3
| Includes net operating revenues related to our acquisition of CCE's former North America business for the full year in 2012 and 2011. In 2010, the percentage includes net operating revenues from the date of the CCE acquisition on October 2, 2010. |
The following table sets forth the percentage of total worldwide unit case volume related to concentrate operations and finished product operations:
| | | Year Ended December 31, | 2012 |
| 2011 |
| 2010 |
| 2015 |
| 2014 |
| 2013 |
|
Concentrate operations1 | 70 | % | 70 | % | 76 | % | 73 | % | 73 | % | 72 | % |
Finished product operations2,3 | 30 |
| 30 |
| 24 |
| |
| Total worldwide unit case volume | 100 | % | 100 | % | 100 | % | |
Finished product operations2 | | 27 |
| 27 |
| 28 |
|
| Total | | 100 | % | 100 | % | 100 | % |
| |
1 | Includes unit case volume related to concentrates sold by the Company to authorized bottling partners for the manufacture of fountain syrups. The bottlers then typically sell the fountain syrups to wholesalers or directly to fountain retailers. |
| |
2 | Includes unit case volume related to fountain syrups manufactured by the Company, including consolidated bottling operations, and sold to fountain retailers or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. |
| |
3
| Includes unit case volume related to our acquisition of CCE's former North America business for the full year in 2012 and 2011. In 2010, the percentage includes unit case volume from the date of the CCE acquisition on October 2, 2010. |
Acquisition of CCE's Former North America Business and Related Transactions
Pursuant to the terms of the business separation and merger agreement entered into on February 25, 2010, as amended (the "merger agreement"), on October 2, 2010 (the "acquisition date"), we acquired CCE's former North America business, consisting of CCE's production, sales and distribution operations in the United States, Canada, the British Virgin Islands, the United States Virgin Islands and the Cayman Islands, and a substantial majority of CCE's corporate segment. We believe this acquisition will result in an evolved franchise system that will enable us to better serve the unique needs of the North American market. The creation of a unified operating system will strategically position us to better market and distribute our nonalcoholic beverage brands in North America.
Under the terms of the merger agreement, the Company acquired the 67 percent of CCE's former North America business that was not already owned by the Company for consideration that included: (1) the Company's 33 percent indirect ownership interest in CCE's European operations; (2) cash consideration; and (3) replacement awards issued to certain current and former employees of CCE's corporate operations and former North America business. At closing, CCE shareowners other than the Company exchanged their CCE common stock for common stock in a new entity, which was renamed Coca-Cola Enterprises, Inc. (which is referred to herein as "New CCE") and which continues to hold the European operations held by CCE prior to the acquisition. At closing, New CCE became 100 percent owned by shareowners that held shares of common stock of CCE immediately prior to the closing, other than the Company. As a result of this transaction, the Company does not own any interest in New CCE.
As of October 1, 2010, our Company owned 33 percent of the outstanding common stock of CCE. Based on the closing price of CCE's common stock on the last day of trading prior to the acquisition date, the fair value of our investment in CCE was $5,373 million, which reflected the fair value of our ownership in both CCE's European operations and its former North America business. We remeasured our equity interest in CCE to fair value upon the close of the transaction. As a result, we recognized a gain of $4,978 million, which was classified in the line item other income (loss) — net in our consolidated statement of income. The gain included a $137 million reclassification adjustment related to foreign currency translation gains recognized upon the disposal of our indirect investment in CCE's European operations. The Company relinquished its indirect ownership interest in CCE's European operations to New CCE as part of the consideration to acquire the 67 percent of CCE's former North America business that was not already owned by the Company.
Although the CCE transaction was structured to be primarily cashless, under the terms of the merger agreement, we agreed to assume $8.9 billion of CCE debt. In the event the actual CCE debt on the acquisition date was less than the agreed amount, we agreed to make a cash payment to New CCE for the difference. As of the acquisition date, the debt assumed by the Company was $7.9 billion. The total cash consideration paid to New CCE as part of the transaction was $1.4 billion, which included $1.0 billion related to the debt shortfall.
In contemplation of the closing of our acquisition of CCE's former North America business, we reached an agreement with DPS to distribute certain DPS brands in territories where DPS brands had been distributed by CCE prior to the CCE transaction. Under the terms of our agreement with DPS, concurrently with the closing of the CCE transaction, we entered into license agreements with DPS to distribute Dr Pepper trademark brands in the United States, Canada Dry in the Northeastern United States, and Canada Dry and C' Plus in Canada, and we made a net one-time cash payment of $715 million to DPS. Under the license agreements, the Company agreed to meet certain performance obligations to distribute DPS products in retail and foodservice accounts and vending machines. The license agreements have initial terms of 20 years, with automatic 20-year renewal periods unless otherwise terminated under the terms of the agreements. The license agreements replaced agreements between DPS and CCE existing immediately prior to the completion of the CCE transaction. In addition, we entered into an agreement with DPS to include Dr Pepper and Diet Dr Pepper in our Coca-Cola Freestyle fountain dispensers in certain outlets throughout the United States. The Coca-Cola Freestyle agreement has a term of 20 years.
On October 2, 2010, we sold all of our ownership interests in our Norwegian and Swedish bottling operations to New CCE for $0.9 billion in cash. In addition, in connection with the acquisition of CCE's former North America business, we granted to New CCE the right to negotiate the acquisition of our majority interest in our German bottler at any time from 18 to 39 months after February 25, 2010, at the then current fair value and subject to terms and conditions as mutually agreed.
The Nonalcoholic Beverage Segment of the Commercial Beverage Industry
We operate in the highly competitive nonalcoholic beverage segment of the commercial beverage industry. We face strong competition from numerous other general and specialty beverage companies. We, along with other beverage companies, are affected by a number of factors, including, but not limited to, cost to manufacture and distribute products, consumer spending, economic conditions, availability and quality of water, consumer preferences, inflation, political climate, local and national laws and regulations, foreign currency exchange fluctuations, fuel prices and weather patterns.
Our Objective
Our objective is to use our formidable assets — our brands, financial strength, unrivaled distribution system, global reach, and the talent and strong commitment of our management and associates — to achieve long-term sustainable growth. Our vision for sustainable growth includes the following:
People: Being a great place to work where people are inspired to be the best they can be.
Portfolio: Bringing to the world a portfolio of beverage brands that anticipates and satisfies people's desires and needs.
Partners: Nurturing a winning network of partners and building mutual loyalty.
Planet: Being a responsible global citizen that makes a difference.
Profit: Maximizing return to shareowners while being mindful of our overall responsibilities.
Productivity: Managing our people, time and money for greatest effectiveness.
Strategic Priorities
We have four strategic priorities designed to create long-term sustainable growth for our Company and the Coca-Cola system and value for our shareowners. These strategic priorities are driving global beverage leadership; accelerating innovation; leveraging our balanced geographic portfolio; and leading the Coca-Cola system for growth. To enable the entire Coca-Cola system so that we can deliver on these strategic priorities,us to achieve our objective, we must further enhance our core capabilities of consumer marketing; commercial leadership; franchise leadership; and bottling and distribution operations.
Core Capabilities
Consumer Marketing
Marketing investments are designed to enhance consumer awareness of, and increase consumer preference for, our brands. This producesSuccessful marketing investments produce long-term growth in unit case volume, per capita consumption and our share of worldwide nonalcoholic beverage sales. Through our relationships with our bottling partners and those who sell our products in the marketplace, we create and implement integrated marketing programs, both globally and locally, that are designed to heighten consumer awareness of and product appeal for our brands. In developing a strategy for a Company brand, we conduct product and packaging research, establish brand positioning, develop precise consumer communications and solicit consumer feedback. Our integrated marketing activities include, but are not limited to, advertising, point-of-sale merchandising and sales promotions.
We have disciplinedare focusing on marketing strategies that focus on drivingto drive volume growth in emerging markets, increasing our brand value in developing markets and growing profit in our developed markets. In emerging markets, we are investing in infrastructure programs that drive volume through increased access to consumers. In developing markets, where consumer access has largely been established, our focus is on differentiating our brands. In our developed markets, we continue to invest in brands and infrastructure programs but generally at a slower rate than revenuegross profit growth.
We are focused on affordability and ensuring we are communicating the appropriate message based on the current economic environment.
Commercial Leadership
The Coca-Cola system has millions of customers around the world who sell or serve our products directly to consumers. We focus on enhancing value for our customers and providing solutions to grow their beverage businesses. Our approach includes understanding each customer's business and needs — whether that customer is a sophisticated retailer in a developed market or a kiosk owner in an emerging market. We focus on ensuring that our customers have the right product and package offerings and the right promotional tools to deliver enhanced value to themselves and the Company. We are constantly looking to build new beverage consumption occasions in our customers' outlets through unique and innovative consumer experiences, product availability and delivery systems, and beverage merchandising and displays. We participate in joint brand-building initiatives with our customers in order to drive customerconsumer preference for our brands. Through our commercial leadership initiatives, we embed ourselves further into our retail customers' businesses while developing strategies for better execution at the point of sale.
Franchise Leadership
We must continue to improve our franchise leadership capabilities to give our Company and our bottling partners the ability to grow together through shared values, aligned incentives and a sense of urgency and flexibility that supports consumers' always changing needs and tastes. The financial health and success of our bottling partners are critical components of the Company's success. We work with our bottling partners to identify system requirementsprocesses that enable us to quickly achieve scale and efficiencies, and we share best practices throughout the bottling system. Our system leadership allows us to leverage recent acquisitions to expand our volume base and enhance margins. With our bottling partners, we work to produce differentiated beverages and packages that are appropriate for the right channels and consumers. We also design business models for sparkling and still beverages in specific markets to ensure that we appropriately share the value created by these beverages with our bottling partners. We will continue to build a supply chain network that leverages the size and scale of the Coca-Cola system to gain a competitive advantage.
Bottling and Distribution Operations
Most of our Company beverage products are manufactured, sold and distributed by independent bottling partners. However, over the past several years the amountfrom time to time we acquire or take control of Company beverage products that are manufactured, sold and distributed by consolidated bottling and distribution operations, has increased. We often acquire bottlers in underperforming markets where we believe we can use our resources and expertise to improve performance. Owning such a controlling interest enables us to compensate for limited local resources; help focus the bottler's sales and marketing programs; assist in the development of the bottler's business and information systems; and establish an appropriate capital structure for the bottler.
Our Company has a long history of providing world-class customer service, demonstrating leadership in the marketplace and leveraging the talent of our global workforce. In addition, we have an experienced bottler management team. All of these factors are critical to build upon as we manage our growing bottling and distribution operations.
The Company has a deep commitment to continuously improving our business. This includes our efforts to develop innovative packaging and merchandising solutions which help drive demand for our beverages and meet the growing needsevolving preferences of our consumers. As we further transform the way we go to market, the Company continues to seek out ways to be more efficient.
Challenges and Risks
Being global provides unique opportunities for our Company. Challenges and risks accompany those opportunities. Our management has identified certain challenges and risks that demand the attention of the nonalcoholic beverage segment of the commercial beverage industry and our Company. Of these, fivesix key challenges and risks are discussed below.
Obesity
The rates of obesity affecting communities, cultures and Inactive Lifestyles
Increasingcountries worldwide continue to be too high. There is growing concern among consumers, public health professionals and government agencies ofabout the potential health problems associated with obesity, andwhich results from poor diets that are too high in calories combined with inactive lifestyleslifestyles. This concern represents a significant challenge to our industry. We understand and recognize that obesity is a complex public health problemchallenge and are committed to being a part of the solution. This commitment is reflected through our broad portfolio, with a beverage to suit every caloric and hydration need.
All of our beverages can be consumed as part of a balanced diet. Consumers who want to reduce the calories they consume from beverages can choose from our continuously expanding portfolio of more than 800 low- and no-calorie beverages, nearly 25 percent of our global portfolio, as well as our regular beverages in smaller portion sizes. We believe in the importance and power of “informed choice,” and we continue to support the fact-based nutrition labeling and education initiatives that encourage people to live active, healthy lifestyles. Our commitment also includes creating and adhering to responsible policies in schools and in the marketplace; supporting programs to encourage physical activity and promote nutrition education; and continuously meeting changing consumer needs through beverage innovation, choice and variety. We recognize the healthuniqueness of consumers' lifestyles and dietary choices. We are working to pair commercial actions with community engagement to bring together business, government and civil society to help pursue solutions that address obesity. Commercially, we continue to:
offer reduced-, low- or no-calorie beverage options;
provide transparent nutrition information, featuring calories on the front of all of our business is interwoven with the well-beingpackages;
provide our beverages in a range of packaging sizes; and
market responsibly, including no advertising to children under 12.
The heritage of our consumers, our employeesCompany is to lead, and the communities we serve, andinnovation is critical for leadership. As such, we are resolute in continuing to innovate and are committed to partnering to find winning solutions in the area of noncaloric sweeteners. This includes working to reduce caloric sweeteners, and therefore the calories, in cooperation with governments, educatorsour beverages. We want to be a more helpful and consumers.credible partner in the fight against obesity. Across the Coca-Cola system, we are mobilizing our assets in marketing and in community outreach to increase awareness and spur action.
Water Quality and Quantity
Water quality and quantity is an issue that increasingly requires our Company's attention and collaboration with other companies, suppliers, governments, nongovernmental organizations and communities where we operate. Water is thea main ingredient in substantially all of our products, and is neededvital to producethe production of the agricultural ingredients on which our business relies.relies and is needed in our manufacturing process. It also is critical to the prosperity of the communities we serve. Today, waterWater is a limited natural resource facing unprecedented challenges from overexploitation, flourishing food demand, increasing pollution, poor management and the effects of climate change.
Our Company has a robust water stewardship and management program and continues to work to improve water use efficiency, treat wastewater prior to discharge and to achieve our goal of replenishing the water that we and our bottling partners source and use in our finished products. We regularly assess the specific water-related risks that we and many of our bottling partners face and have implemented a formal water risk management program. We are actively collaborating with other companies, governments, nongovernmental organizations and communities to advocate for needed water policy reforms and action to protect water availability and quality around the world. We are working with our global partners to develop and implement sustainability-related water projects.projects that address local needs. We are encouraging improved water efficiency and conservation efforts throughout our system. Through these integrated programs, we believe that our Company is in an excellent position to leverage the water-related knowledge we have developed in the communities we serve — through source water availability assessments and planning, water resource management, water treatment, wastewater treatment systems and models for working with communities and partners in addressing water and sanitation needs. As demand for water continues to increase around the world, we expect commitment and continued action on our part will be crucial to the successful long-term stewardship of this critical natural resource.
Evolving Consumer Preferences
Consumers want more choices. We are impacted by shifting consumer demographics and needs, on-the-go lifestyles, aging populations in developed markets and consumers who are empowered with more information than ever. As a consequence of these changes, consumers want more choices. We are committed to meeting their needs and to generating new avenues for growth through our coreportfolio of more than 500 brands with a focus on diet and lightmore than 3,800 beverage products, including more than 1,100 low- and no-calorie products, new product offerings, innovative packaging and ingredient and packaging material education efforts. We are also committed to continuing to expand the variety of choices we provide to consumers to meet their ever-changing needs, desires and lifestyle choices.lifestyles.
Increased Competition and Capabilities in the Marketplace
Our Company is facing strong competition from some well-established global companies and many local participants. We must continue to strengthen our capabilities in marketing and innovation in order to maintain our brand loyalty and market share while we selectivelystrategically expand into other profitable segmentscategories of the nonalcoholic beverage segment of the commercial beverage industry.
Product Safety and Quality
34As the world's largest beverage company, we strive to meet the highest of standards in both product safety and product quality. We are aware that some consumers have concerns and negative viewpoints regarding certain ingredients used in our products. Our system works every day to share safe and refreshing beverages with the world. We have rigorous product and ingredient safety and quality standards designed to ensure safety and quality in each of our products, and we drive innovation that provides new beverage options to meet consumers' evolving needs and preferences. Across the Coca-Cola system, we take great care in an effort to ensure that every one of our beverages meets the highest standards for safety and quality.
We work to ensure consistent safety and quality through strong governance and compliance with applicable regulations and standards. We stay current with new regulations, industry best practices and marketplace conditions and engage with standard-setting and industry organizations. Additionally, we manufacture and distribute our products according to strict policies, requirements and specifications set forth in an integrated quality management program that continually measures all operations within the Coca-Cola system against the same stringent standards. Our quality management system also identifies and mitigates risks and drives improvement. In our quality laboratories, we stringently measure the quality attributes of ingredients as well as samples of finished products collected from the marketplace.
We perform due diligence to ensure that product and ingredient safety and quality standards are maintained in the more than 200 countries where our products are sold. We consistently reassess the relevance of our requirements and standards and continually work to improve and refine them across our entire supply chain.
Food Security
Increased demand for commodities and decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit the availability or increase the cost of key agricultural commodities, such as sugarcane, corn, sugar beets, citrus, coffee and tea, which are important sources of ingredients for our products and could impact the food security of communities around the world. We are committeddedicated to implementing our sustainable sourcing commitment, which is founded on principles that protect the environment, uphold workplace rights and help build more sustainable communities. To support this commitment, our programs focusedfocus on economic opportunity, with an emphasis on female farmers, and environmental sustainability designed to help address these agricultural challenges. Through joint efforts with farmers, communities, bottlers, suppliers and key partners, as well as our increased and continued investment in sustainable agriculture, we can together help make a positive strategic impact on food security.
All of these challenges and risks — obesity and inactive lifestyles,obesity; water quality and quantity,quantity; evolving consumer preferences,preferences; increased competition and capabilities in the marketplace,marketplace; product safety and quality; and food security — have the potential to have a material adverse effect on the nonalcoholic beverage segment of the commercial beverage industry and on our Company; however, we believe our Company is well positioned to appropriately address these challenges and risks.
See also ''Item 1A. Risk Factors'' in Part I of this report for additional information about risks and uncertainties facing our Company.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require management to make estimates, judgments and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We believe our most critical accounting policies and estimates relate to the following:
Principles of Consolidation
Purchase Accounting for Acquisitions
Recoverability of Current and Noncurrent Assets
Pension Plan Valuations
Revenue Recognition
Income Taxes
Management has discussed the development, selection and disclosure of critical accounting policies and estimates with the Audit Committee of the Company's Board of Directors. While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. For a discussion of the Company's significant accounting policies, refer to Note 1 of Notes to Consolidated Financial Statements.
Principles of Consolidation
Our Company consolidates all entities that we control by ownership of a majority voting interest as well as VIEsvariable interest entities for which our Company is the primary beneficiary. Generally, we consolidate only business enterprises that we control by ownership of a majority voting interest. However, there are situations in which consolidation is required even though the usual condition of consolidation (ownership of a majority voting interest) does not apply. Generally, this occurs when an entity holds an interest in another business enterprise that was achieved through arrangements that do not involve voting interests, which results in a disproportionate relationship between such entity's voting interests in, and its exposure to the economic risks and potential rewards of, the other business enterprise. This disproportionate relationship results in what is known as a variable interest, and the entity in which we have the variable interest is referred to as a "VIE." An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both (a)(1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (b)(2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
Our Company holds interests in certain VIEs, primarily bottling and container manufacturing operations, for which we were not determined to be the primary beneficiary. Our variable interests in these VIEs primarily relate to profit guarantees or subordinated financial support. Refer to Note 11 of Notes to Consolidated Financial Statements. Although these financial arrangements resulted in usour holding variable interests in these entities, they did not empower us to direct the activities of the VIEs that most significantly impact the VIEs' economic performance. Our Company's investments, plus any loans and guarantees, related to these VIEs totaled $1,7762,687 million and $1,1832,274 million as of December 31, 20122015 and 20112014, respectively,
representing our maximum exposures to loss. The Company's investments, plus any loans and guarantees, related to these VIEs were not significant to the Company's consolidated financial statements.
In addition, our Company holds interests in certain VIEs, primarily bottling and container manufacturing operations, for which we were determined to be the primary beneficiary. As a result, we have consolidated these entities. Our Company's investments, plus any loans and guarantees, related to these VIEs totaled $234221 million and $199266 million as of December 31, 20122015 and 20112014, respectively, representing our maximum exposures to loss. The assets and liabilities of VIEs for which we are the primary beneficiary were not significant to the Company's consolidated financial statements.
Creditors of our VIEs do not have recourse against the general credit of the Company, regardless of whether they are accounted for as consolidated entities.
Purchase Accounting for AcquisitionsRecoverability of Current and Noncurrent Assets
TheOur Company applies the acquisition method of accounting in a business combination. In general, this methodology requires companiesfaces many uncertainties and risks related to record assets acquiredvarious economic, political and liabilities assumed at their respective fair market values at the date of acquisition. We estimate fair value using the exit price approach, which is defined as the price that would be received if we sold an asset or paid to transfer a liability in an orderly market. The value of an exit price is determined from the viewpoint of all market participants as a whole and may resultregulatory environments in the Company valuing assets at a fair value that is not reflective of our intended use of the assets. Any amount of the purchase price paid that iscountries in excess of the estimated fair values of net assets acquired is recordedwhich we operate, particularly in the line item goodwill in our consolidated balance sheets. Management's judgment is used to determine the estimated fair values assigned to assets acquired and liabilities assumed, as well as asset lives for property, plant and equipment and amortization periods for intangible assets, and can materially affect the Company's results of operations.
Transaction costs, as well as costs to reorganize acquired companies, are expensed as incurred in the Company's consolidated statements of income.
On October 2, 2010, the Company acquired CCE's former North America business and recorded total assets of $22.2 billion as of the acquisition date. The assets we acquired included a material amount of intangible assets that were subject to the significant estimates described above. During our purchase accounting measurement period, which concluded during the third quarter of 2011, the Company made adjustments to certain amounts that resulted in a final balance of $22.0 billion of total assets being recorded in our consolidated balance sheets related to the CCE acquisition.developing or emerging markets. Refer to the heading "Recoverability"Our Business — Challenges and Risks" above and "Item 1A. Risk Factors" in Part I of Noncurrent Assets" belowthis report. As a result, management must make numerous assumptions which involve a significant amount of judgment when completing recoverability and Note 2impairment tests of Notes to Consolidated Financial Statements for further information related to this acquisition.
Recoverability of Noncurrent Assetscurrent and noncurrent assets in various regions around the world.
We perform recoverability and impairment tests of current and noncurrent assets in accordance with accounting principles generally accepted in the United States. For certain assets, recoverability and/or impairment tests are required only when conditions exist that indicate the carrying value may not be recoverable. For other assets, impairment tests are required at least annually, or more frequently, if events or circumstances indicate that an asset may be impaired.
Our equity method investees also perform such recoverability and/or impairment tests. If an impairment charge is recorded by one of our equity method investees, the Company records its proportionate share of such charge as a reduction of equity income (loss) — net in our consolidated statements of income. However, the actual amount we record with respect to our proportionate share of such charges may be impacted by items such as basis differences, deferred taxes and deferred gains.
Management's assessments of the recoverability and impairment tests of noncurrent assets involve critical accounting estimates. These estimates require significant management judgment, include inherent uncertainties and are often interdependent; therefore, they do not change in isolation. Factors that management must estimate include, among others, the economic life of the asset, sales volume, pricing, cost of raw materials, delivery costs, inflation, cost of capital, marketing spending, foreign currency exchange rates, tax rates, capital spending and proceeds from the sale of assets. These factors are even more difficult to predict when global financial markets are highly volatile. The estimates we use when assessing the recoverability of current and noncurrent assets are consistent with those we use in our internal planning. When performing impairment tests, we estimate the fair values of the assets using management's best assumptions, which we believe would be consistent with what a hypothetical marketplace participant would use. Estimates and assumptions used in these tests are evaluated and updated as appropriate. The variability of these factors depends on a number of conditions, including uncertainty about future events, and thus our accounting estimates may change from period to period. If other assumptions and estimates had been used when these tests were performed, impairment charges could have resulted. As mentioned above, these factors do not change in isolation and, therefore, we do not believe it is practicable or meaningful to present the impact of changing a single factor. Furthermore, if management uses different assumptions or if different conditions occur in future periods, future impairment charges could result. Refer to the heading "Operations Review" below for additional information related to our present business environment.
Certain factors discussed above are impacted by our current business environment and are discussed throughout this report, as appropriate.
Our Company faces many uncertainties and risks related to various economic, political and regulatory environments in the countries in which we operate, particularly in developing or emerging markets. Refer to the heading "Our Business — Challenges and Risks" above and "Item 1A. Risk Factors" in Part I of this report. As a result, management must make numerous assumptions which involve a significant amount of judgment when completing recoverability and impairment tests of noncurrent assets in various regions around the world.
Investments in Equity and Debt Securities
The carrying values of our investments in equity securities are determined using the equity method, the cost method or the fair value method. We account for investments in companies that we do not control or account for under the equity method either at fair value or under the cost method, as applicable. Investments in equity securities, other than investments accounted for under the equity method, are carried at fair value if the fair value of the security is readily determinable. Equity investments carried at fair value are classified as either trading or available-for-sale securities. Realized and unrealized gains and losses on trading securities and realized gains and losses on available-for-sale securities are included in net income. Unrealized gains and losses, net of deferred taxes, on available-for-sale securities are included in our consolidated balance sheets as a component of accumulated other comprehensive income (loss) ("AOCI")., except for the change in fair value attributable to the currency risk being hedged, if applicable, which is included in net income. Trading securities are reported as either marketable securities or other assets in our consolidated balance sheets. Securities classified as available-for-sale are reported as either marketable securities or other investments in our consolidated balance sheets, depending on the length of time we intend to hold the investment. Investments in equity securities that do not qualify for fair value accounting or equity method accounting are accounted for under the cost method. In accordance with the cost method, our initial investment is recorded at cost and we record dividend income when applicable dividends are declared. Cost method investments are reported as other investments in our consolidated balance sheets.
Our investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale.
The following table presents the carrying values of our investments in equity and debt securities (in millions):
| | | December 31, 2012 | Carrying Value |
| | Percentage of Total Assets |
| |
| December 31, 2015 | | Carrying Value |
| | Percentage of Total Assets |
|
| Equity method investments | $ | 9,216 |
| | 11 | % | $ | 12,318 |
| | 14 | % |
| Securities classified as available-for-sale | 4,593 |
| | 5 |
| 8,606 |
| | 10 |
|
| Securities classified as trading | 266 |
| | * |
| 322 |
| | * |
|
| Cost method investments | 145 |
| | * |
| 190 |
| | * |
|
| Total | $ | 14,220 |
| | 17 | % | $ | 21,436 |
| | 24 | % |
| |
* | Accounts for less than 1 percent of the Company's total assets. |
Investments classified as trading securities are not assessed for impairment, since they are carried at fair value with the change in fair value included in net income. We review our investments in equity and debt securities that are accounted for using the equity method or cost method or that are classified as available-for-sale or held-to-maturity each reporting period to determine whether a significant event or change in circumstances has occurred that may have an adverse effect on the fair value of each investment. When such events or changes occur, we evaluate the fair value compared to our cost basis in the investment. We also perform this evaluation every reporting period for each investment for which our cost basis has exceeded the fair value in the prior period.value. The fair values of most of our Company's investments in publicly traded companies are often readily available based on quoted market prices. For investments in nonpublicly traded companies, management's assessment of fair value is based on valuation methodologies including discounted cash flows, estimates of sales proceeds and appraisals, as appropriate. We consider the assumptions that we believe hypothetical marketplace participants would use in evaluating estimated future cash flows when employing the discounted cash flow or estimates of sales proceeds valuation methodologies. The ability to accurately predict future cash flows, especially in developingemerging and emergingdeveloping markets, may impact the determination of fair value.
In the event the fair value of an investment declines below our cost basis, management is required to determine if the decline in fair value is other than temporary. If management determines the decline is other than temporary, an impairment charge is recorded. Management's assessment as to the nature of a decline in fair value is based on, among other things, the length of time and the extent to which the market value has been less than our cost basis, the financial condition and near-term prospects
of the issuer, and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value.
In 2012,2013, four of the Company's Japanese bottling partners merged as Coca-Cola East Japan Bottling Company, Ltd., now known as Coca-Cola East Japan Co., Ltd. ("CCEJ"), a publicly traded entity, through a share exchange. The terms of the agreement included 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. As a result, the Company recognized impairment chargesrecorded a net charge of $16$114 million as a result for those investments in which the Company's carrying value was greater than the fair value of the other-than-temporary decline in the fair values of certain cost method investments.shares received. These impairment charges were recorded in the line item other income (loss) — net in our consolidated statement of income and impacted the Corporate operating segment. Refer to the heading "Operations Review — Other Income (Loss) — Net" below as well as Note 16 and Note 17 of Notes to Consolidated Financial Statements.
In 2011, the Company recognized impairment charges of $17 million as a result of the other-than-temporary decline in the fair values of certain available-for-sale securities. In addition, the Company recognized charges of $41 million during 2011 related to the impairment of an investment in an entity accounted for under the equity method of accounting. These impairment charges were recorded in the line item other income (loss) — net in our consolidated statement of income and impacted the Corporate operating segment. Refer to the heading "Operations Review — Other Income (Loss) — Net" below as well as Note 16 and Note 17 of Notes to Consolidated Financial Statements.
In 2010, the Company recognized impairment charges of $41 million as a result of the other-than-temporary decline in the fair values of certain available-for-sale securities and an equity method investment. These impairment charges were recorded in the line item other income (loss) — net in our consolidated statement of income and impacted the Bottling Investments and Corporate operating segments. Refer to the heading "Operations Review — Other Income (Loss) — Net" below as well as Note 16 and Note 17 of Notes to Consolidated Financial Statements.
The following table presents the difference between calculated fair values, based on quoted closing prices of publicly traded shares, and our Company's cost basis in investments in publicly traded bottlerscompanies accounted for asunder the equity method investments (in millions):
| | | December 31, 2012 | Fair Value |
| | Carrying Value |
| | Difference |
| |
| December 31, 2015 | | Fair Value |
| | Carrying Value |
| | Difference |
|
| Monster Beverage Corporation | | $ | 5,071 |
| | $ | 3,118 |
| | $ | 1,953 |
|
| Coca-Cola FEMSA, S.A.B. de C.V. | $ | 8,601 |
| | $ | 2,074 |
| | $ | 6,527 |
| 4,360 |
| | 1,853 |
| | 2,507 |
|
| Coca-Cola HBC AG | | 1,851 |
| | 1,105 |
| | 746 |
|
| Coca-Cola Amatil Limited | 3,133 |
| | 1,125 |
| | 2,008 |
| 1,496 |
| | 685 |
| | 811 |
|
| Coca-Cola Hellenic Bottling Company S.A. | 1,865 |
| | 1,368 |
| | 497 |
| |
| Coca-Cola İçecek A.Ş. | 1,055 |
| | 215 |
| | 840 |
| 653 |
| | 202 |
| | 451 |
|
| Coca-Cola East Japan Co., Ltd. | | 627 |
| | 448 |
| | 179 |
|
| Coca-Cola Bottling Co. Consolidated | | 453 |
| | 104 |
| | 349 |
|
| Embotelladora Andina S.A. | 787 |
| | 389 |
| | 398 |
| 396 |
| | 275 |
| | 121 |
|
| Coca-Cola Central Japan Co., Ltd. | 188 |
| | 176 |
| | 12 |
| |
| Coca-Cola Bottling Co. Consolidated | 165 |
| | 84 |
| | 81 |
| |
| Mikuni Coca-Cola Bottling Co., Ltd. | 106 |
| | 105 |
| | 1 |
| |
| Corporación Lindley S.A. | | 191 |
| | 83 |
| | 108 |
|
| Total | $ | 15,900 |
| | $ | 5,536 |
| | $ | 10,364 |
| $ | 15,098 |
| | $ | 7,873 |
| | $ | 7,225 |
|
Other Assets
Our Company invests in infrastructure programs with our bottlers that are directed at strengthening our bottling system and increasing unit case volume. Additionally, our Company advances payments to certain customers for distribution rights as well as to fund future marketing activities intended to generate profitable volume and expenses such payments over the periods benefited. Advance payments are also made to certain customers for distribution rights. Payments under these programs are generally capitalized and reported in the line items prepaid expenses and other assets or other assets, as appropriate, in our consolidated balance sheets. When facts and circumstances indicate that the carrying value of these assets (or asset groups) may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of sales volume and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value.
As a result of our acquisition of CCE's former North America business, the Company recorded charges of $266 million related to preexisting relationships during the year ended December 31, 2010. These charges were primarily related to the write-off of our investment in infrastructure programs with CCE. Our investment in these infrastructure programs with CCE did not meet the criteria to be recognized as an asset subsequent to the acquisition. Refer to Note 2 and Note 6 of Notes to Consolidated Financial Statements.
Property, Plant and Equipment
As of December 31, 20122015, the carrying value of our property, plant and equipment, net of depreciation, was $14,47612,571 million, or 1714 percent of our total assets. Certain events or changes in circumstances may indicate that the recoverability of the carrying amount or remaining useful life of property, plant and equipment should be assessed, including, among others, the manner or length of time in which the Company intends to use the asset, a significant decrease in market value, a significant change in the business climate in a particular market, or a current period operating or cash flow loss combined with historical losses or projected future losses. When such events or changes in circumstances are present and an impairment review is performed, we estimate the future cash flows expected to result from the use of the asset (or asset group) and its eventual disposition. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. We use a variety of methodologies to determine the fair value of property, plant and equipment, including appraisals and discounted cash flow models, which are consistent with the assumptions we believe hypothetical marketplace participants would use.
Goodwill, Trademarks and Other Intangible Assets
Intangible assets are classified into one of three categories: (1) intangible assets with definite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization and (3) goodwill. For intangible assets with definite lives, tests for impairment must be performed if conditions exist that indicate the carrying value may not be recoverable. For intangible assets with indefinite lives and goodwill, tests for impairment must be performed at least annually or more frequently if events or circumstances indicate that assets might be impaired.
The following table presents the carrying values of intangible assets included in our consolidated balance sheet (in millions):
| | | December 31, 2012 | Carrying Value |
| | Percentage of Total Assets |
| |
| December 31, 2015 | | Carrying Value |
| | Percentage of Total Assets1 |
|
| Goodwill | $ | 12,255 |
| | 14 | % | $ | 11,289 |
| | 13 | % |
| Bottlers' franchise rights with indefinite lives | 7,405 |
| | 9 |
| 6,000 |
| | 7 |
|
| Trademarks with indefinite lives | 6,527 |
| | 8 |
| 5,989 |
| | 7 |
|
| Definite-lived intangible assets, net | 1,039 |
| | 1 |
| 690 |
| | 1 |
|
| Other intangible assets not subject to amortization | 111 |
| | * |
| 164 |
| | * |
|
| Total | $ | 27,337 |
| | 32 | % | $ | 24,132 |
| | 27 | % |
| |
* | Accounts for less than 1 percent of the Company's total assets. |
| |
1 | The total percentage does not add due to rounding. |
When facts and circumstances indicate that the carrying value of definite-lived intangible assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of sales volume and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset (or asset group), we recognize an impairment loss. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. We use a variety of methodologies to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumptions we believe hypothetical marketplace participants would use.
We test intangible assets determined to have indefinite useful lives, including trademarks, franchise rights and goodwill, for impairment annually, or more frequently if events or circumstances indicate that assets might be impaired. Our Company performs these annual impairment reviews as of the first day of our third fiscal quarter. We use a variety of methodologies in conducting impairment assessments of indefinite-lived intangible assets, including, but not limited to, discounted cash flow models, which are based on the assumptions we believe hypothetical marketplace participants would use. For indefinite-lived intangible assets, other than goodwill, if the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess.
The Company has the option to perform a qualitative assessment of indefinite-lived intangible assets, other than goodwill, prior to completing the impairment test described above. The Company must assess whether it is more likely than not that the fair value of the intangible asset is less than its carrying amount. If the Company concludes that this is the case, it must perform the testing described above. Otherwise, the Company does not need to perform any further assessment. During 20122015, the Company only performed qualitative assessments on less than 1025 percent of the carrying value of our indefinite-lived intangible assets balance.other than goodwill.
We perform impairment tests of goodwill at our reporting unit level, which is one level below our operating segments. Our operating segments are primarily based on geographic responsibility, which is consistent with the way management runs our business. Our operating segments are subdivided into smaller geographic regions or territories that we sometimes refer to as "business units." These business units are also our reporting units. The Bottling Investments operating segment includes all Company-owned or consolidated bottling operations, regardless of geographic location, except for bottling operations managed by CCR, which are included in our North America operating segment. Generally, each Company-owned or consolidated bottling operation within our Bottling Investments operating segment is its own reporting unit. Goodwill is assigned to the reporting unit or units that benefit from the synergies arising from each business combination.
The goodwill impairment test consists of a two-step process, if necessary. The first step is to compare the fair value of a reporting unit to its carrying value, including goodwill. We typically use discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are consistent with those we believe hypothetical marketplace participants would use. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment test must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill.
The Company has the option to perform a qualitative assessment of goodwill prior to completing the two-step process described above to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill and other intangible assets. If the Company concludes that this is the case, it must perform the two-step process. Otherwise, the Company will forego the two-step process and does not need to perform any further testing. During 20122015, the Company only performed qualitative assessments on less than 10 percent of our consolidated goodwill balance. As of December 31, 2015, we did not have any reporting unit with a material amount of goodwill for which it is reasonably likely that it will fail step one of a goodwill impairment test in the near term.
Intangible assets acquired in recent transactions are naturally more susceptible to impairment, primarily due to the fact that they are recorded at fair value based on recent operating plans and macroeconomic conditions present at the time of acquisition. Consequently, if operating results and/or macroeconomic conditions deteriorate shortly after an acquisition, it could result in the impairment of the acquired assets. A deterioration of macroeconomic conditions may not only negatively impact the estimated operating cash flows used in our cash flow models but may also negatively impact other assumptions used in our analyses, including, but not limited to, the estimated cost of capital and/or discount rates. Additionally, as discussed above, in accordance with accounting principles generally accepted in the United States, we are required to ensure that assumptions used to determine fair value in our analyses are consistent with the assumptions a hypothetical marketplace participant would use. As a result, the cost of capital and/or discount rates used in our analyses may increase or decrease based on market conditions and trends, regardless of whether our Company's actual cost of capital has changed. Therefore, if the cost of capital and/or discount rates change, our Company may recognize an impairment of an intangible asset in spite of realizing actual cash flows that are approximately equal to, or greater than, our previously forecasted amounts.
As of our most recent annual impairment review,On June 12, 2015, the Company had no significant impairmentsclosed a transaction with Monster. Under the terms of its intangible assets, individually orthe transaction, the Company was required to discontinue selling energy products under one of the trademarks included in the aggregate. In addition,glacéau portfolio. During the year ended December 31, 2015, the Company recognized impairment charges of $418 million, primarily as a result of discontinuing these products. The total combined fair value of the various trademarks in the glacéau portfolio significantly exceeds the remaining combined carrying value of $2.9 billion as of December 31, 2012, we did2015. However, the fair value of the individual trademark that was the subject of the impairment charges currently equals its carrying value. If the future operating results of
this trademark do not have any reporting unit with a material amount of goodwill for which it is reasonably likely that it will fail step one of a goodwill impairment test insupport the near term. However,current near-term financial projections, or if macroeconomic conditions worsen,change causing the cost of capital and/or discount rate to increase without an offsetting increase in the operating results, it is possiblelikely that we may experience significant impairments of some of our intangible assets, which would require usbe required to recognize an additional impairment charges.charge related to this trademark.
During 2015, the Company also recorded a charge of $55 million related to the impairment of a Venezuelan trademark. The Venezuelan trademark impairment was due to the Company's revised expectations regarding the convertibility of the local currency.
These charges were recorded in our Corporate operating segment in the line item other operating charges in our consolidated statement of income and were determined by comparing the fair value of the trademarks, derived using discounted cash flow analyses, to the respective carrying value. Management will continue to monitor the fair value of our intangible assets in future periods.
We acquired CCE's former North America business on October 2, 2010,The Company did not record any significant impairment charges related to intangible assets during the year ended December 31, 2014. During 2013, the Company recorded charges of $195 million related to certain intangible assets. These charges included $113 million related to the impairment of trademarks recorded in our Bottling Investments and Asia Pacific operating segments. These impairments were primarily due to a strategic decision to phase out certain local-market brands, which resulted in a change in the Company recording $14,327 millionexpected useful life of the intangible assets, including goodwill. Refer to Note 2and were determined by comparing the fair value of Notes to Consolidated Financial Statements. The acquired intangible assets included $5,850 million of bottler franchise rights, which consisted of $5,200 million of franchise rights with indefinite lives and $650 million of franchise rights with definite lives. The franchise rights with indefinite lives represent franchise rights that had previously provided CCE with exclusive and perpetual rights to manufacture and/or distribute certain beverages in specified territories. The franchise rights with definite lives relate to franchise rights that had previously provided CCE with exclusive rights to manufacture and/or distribute certain beverages in specified territories for a finite period of time and, therefore, have been classified as definite-lived intangible assets.
The Company recorded $8,050 million of goodwill in connection with this acquisition that was assignedthe trademarks, derived using discounted cash flow analyses, to the North Americacurrent carrying value. Additionally, the remaining charge of $82 million related to goodwill recorded in our Bottling Investments operating segment. This charge was primarily the result of management's revised outlook on market conditions and volume performance. The total impairment charges of $195 million were recorded in our Corporate operating segment in the line item other operating charges in our consolidated statements of which $170 million has been, and will continue to be, amortized for tax purposes. This goodwill is primarily related to synergistic value created from having a unified operating system that will strategically position us to better market and distribute our nonalcoholic beverage brands in North America. It also includes certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce.income.
Pension Plan Valuations
Our Company sponsors and/or contributes to pension and postretirement health care and life insurance benefit plans covering substantially all U.S. employees. We also sponsor nonqualified, unfunded defined benefit pension plans for certain associates and participate in multi-employer pension plans in the United States. In addition, our Company and its subsidiaries have various pension plans and other forms of postretirement arrangements outside the United States.
Management is required to make certain critical estimates related to actuarial assumptions used to determine our pension expense and related obligation.obligations. We believe the most critical assumptions are related to (1) the discount rate used to determine the present value of the liabilities and (2) the expected long-term rate of return on plan assets. All of our actuarial assumptions are reviewed annually. Changes in these assumptions could have a material impact on the measurement of our pension expense and related obligation.obligations.
At each measurement date, we determine the discount rate primarily by reference to rates of high-quality, long-term corporate bonds that mature in a pattern similar to the future payments we anticipate making under the plans. As of December 31, 20122015 and 2011,2014, the weighted-average discount rate used to compute our benefit obligationpension obligations was 4.004.25 percent and 4.753.75 percent, respectively.
During the years ended December 31, 2015, 2014, and 2013, for plans using the yield curve approach, the Company measured the related service and interest components of net periodic benefit cost for pension and other postretirement benefit plans utilizing the single weighted-average discount rate derived from the yield curve. Effective January 1, 2016, the Company changed the method used to calculate the service and interest components and will measure these costs by applying the specific spot rates along the yield curve to the plans' projected cash flows. The Company believes the new approach provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and the corresponding spot yield curve rates. The change does not affect the measurement of the Company's pension and other postretirement benefit obligations for those plans and is accounted for as a change in accounting estimate, which is applied prospectively. In 2016, we expect the change in estimate to reduce pension and other postretirement net periodic benefit plan costs by $73 million.
The expected long-term rate of return on plan assets is based upon the long-term outlook of our investment strategy as well as our historical returns and volatilities for each asset class. We also review current levels of interest rates and inflation to assess the reasonableness of our long-term rates. Our pension plan investment objective is to ensure all of our plans have sufficient funds to meet their benefit obligations when they become due. As a result, the Company periodically revises asset allocations, where appropriate, to improve returns and manage risk. The weighted-average expected long-term rate of return used to calculate our net periodic benefit costpension expense was 8.25 percent in 20122015 and 2011.2014.
In 2012,2015, the Company's total pension expense related to defined benefit plans was $251$305 million. In 2013,2016, we expect our total pension expense to be approximately $191$105 million. The anticipated decrease is primarily due to approximately $640settlement and special termination costs incurred in 2015 of $169 million, of contributions the Company expectsnew method to make to various plans in 2013 as well as the impact of favorable returns on plan assets in 2012. The favorable impact of these items will be partially offset by the unfavorable impact of a decreasecalculate service and interest costs described above, an increase in the weighted-average discount rate used to calculate the Company's benefit obligation.obligations and the impact of $471 million of contributions the Company made in early 2016 to U.S. pension plans. The impact of these items will be partially offset by unfavorable asset performance compared to our expected return during 2015 and a decrease in the expected return on assets for U.S. plans. The estimated impact of an additional 50-basis-pointa 50 basis-point decrease in the discount rate on our 20132016 pension expense iswould be an increase to our pension expense of approximately $47$34 million. Additionally, the estimated impact of a 50-basis-point50 basis-point decrease in the expected long-term rate of return on plan assets on our 20132016 pension expense iswould be an increase to our pension expense of approximately $29 million.
The sensitivity information provided above is based only on changes to the actuarial assumptions used for our U.S. pension plans. As of December 31, 2012,2015, the Company's primary U.S. plan represented 59 percent and 6462 percent of the Company's consolidated projected pension benefit obligation and pension assets, respectively. Refer to Note 13 of Notes to Consolidated Financial Statements for additional information about our pension plans and related actuarial assumptions.
Effective December 31, 2014, the Company revised our mortality assumptions used to determine the projected benefit obligation of the U.S. defined benefit pension plans. The revised assumptions were derived from the mortality tables and the mortality improvement scales published by the Society of Actuaries in October 2014. The change in mortality assumptions for the U.S. plans resulted in an increase in the projected benefit obligation at December 31, 2014 of $210 million.
Revenue Recognition
We recognize revenue when persuasive evidence of an arrangement exists, delivery of products has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. For our Company, this generally means that we recognize revenue when title to our products is transferred to our bottling partners, resellers or other customers. Title usually transfers upon shipment to or receipt at our customers' locations, as determined by the specific sales terms of each transaction. Our sales terms do not allow for a right of return except for matters related to any manufacturing defects on our part.
Our customers can earn certain incentives which are included in deductions from revenue, a component of net operating revenues in our consolidated statements of income. These incentives include, but are not limited to, cash discounts, funds for promotional and marketing activities, volume-based incentive programs and support for infrastructure programs. Refer to Note 1 of Notes to Consolidated Financial Statements. The aggregate deductions from revenue recorded by the Company in relation to these programs, including amortization expense on infrastructure programs, were $6.16.8 billion, $5.87.0 billion and $5.06.9 billion in 20122015, 20112014 and 20102013, respectively. In preparing the financial statements, management must make estimates related to the contractual terms, customer performance and sales volume to determine the total amounts recorded as deductions from revenue. Management also considers past results in making such estimates. The actual amounts ultimately paid may be different from our estimates. Such differences are recorded once they have been determined and have historically not been significant.
Income Taxes
Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax expense and in evaluating our tax positions. We establish reserves to remove some or all of the tax benefit of any of our tax positions at the time we determine that the positions become uncertain based upon one of the following: (1) the tax position is not "more likely than not" to be sustained, (2) the tax position is "more likely than not" to be sustained, but for a lesser amount, or (3) the tax position is "more likely than not" to be sustained, but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether or not a tax position is uncertain, (1) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information, (2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings and case law and their applicability to the facts and circumstances of the tax position, and (3) each tax position is evaluated without considerations of the possibility of offset or aggregation with other tax positions taken. We adjust these reserves, including any impact on the related interest and penalties, in light of changing facts and circumstances, such as the progress of a tax audit. Refer to the heading "Operations Review — Income Taxes" below and Note 14 of Notes to Consolidated Financial Statements.
On September 17, 2015, the Company received a Notice from the IRS for the tax years 2007 through 2009, after a five-year audit. In the Notice, the IRS claims that the Company's United States taxable income should be increased by an amount that creates a potential additional federal income tax liability of approximately $3.3 billion for the period, plus interest. No penalties were asserted in the Notice; however, the IRS has since taken the position that it is not precluded from asserting penalties and notified the Company that it may do so. The disputed amounts largely relate to a transfer pricing matter involving the
appropriate amount of taxable income the Company should report in the United States in connection with its licensing of intangible property to certain related foreign licensees regarding the manufacturing, distribution, sale, marketing and promotion of products in overseas markets. The IRS designated the matter for litigation on October 15, 2015. The Company firmly believes that the IRS' claims are without merit and plans to pursue all available administrative and judicial remedies necessary to resolve this matter. To that end, the Company filed a petition in U.S. Tax Court on December 14, 2015. The Company believes that the final adjudication of this matter will not have a material impact on its consolidated financial position, results of operations or cash flows and that it has adequate tax reserves for all tax matters. However, if this dispute were to be ultimately determined adversely to us, the additional tax, interest and any potential penalties could have a material adverse impact on the Company's financial position, results of operations or cash flows. Refer to Note 11 of Notes to Consolidated Financial Statements for additional information.
A number of years may elapse before a particular matter for which we have established a reserve is audited and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction. The tax benefit that has been previously reserved because of a failure to meet the "more likely than not" recognition threshold would be recognized in our income tax expense in the first interim period when the uncertainty disappears under any one of the following conditions: (1) the tax position is "more likely than not" to be sustained, (2) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation, or (3) the statute of limitations for the tax position has expired. Settlement of any particular issue would usually require the use of cash.
Tax law requires items to be included in the tax return at different times than when these items are reflected in the consolidated financial statements. As a result, the annual tax rate reflected in our consolidated financial statements is different from that reported in our tax return (our cash tax rate). Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences reverse over time, such as depreciation expense. These timing differences create deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities. The tax rates used to determine deferred tax assets or liabilities are the enacted tax rates in effect for the year and manner in which the differences are expected to reverse. Based on the evaluation of all available information, the Company recognizes future tax benefits, such as net operating loss carryforwards, to the extent that realizing these benefits is considered more likely than not.
We evaluate our ability to realize the tax benefits associated with deferred tax assets by analyzing our forecasted taxable income using both historical and projected future operating results; the reversal of existing taxable temporary differences; taxable income in prior carryback years (if permitted); and the availability of tax planning strategies. A valuation allowance is required to be established unless management determines that it is more likely than not that the Company will ultimately realize the tax benefit associated with a deferred tax asset. As of December 31, 20122015, the Company's valuation allowances on deferred tax assets were $487477 million and primarily related to uncertainties regarding the future realization of recorded tax benefits on tax loss carryforwards generated in various jurisdictions. Current evidence does not suggest we will realize sufficient taxable income of the appropriate character within the carryforward period to allow us to realize these deferred tax benefits. If we were to identify and implement tax planning strategies to recover these deferred tax assets or generate sufficient income of the appropriate character in these jurisdictions in the future, it could lead to the reversal of these valuation allowances and a reduction of income tax expense. The Company believes it will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets in our consolidated balance sheets.
The Company does not record a U.S. deferred tax liability for the excess of the book basis over the tax basis of its investments in foreign corporations to the extent that the basis difference results from earnings that meet the indefinite reversal criteria. These criteria are met if the foreign subsidiary has invested, or will invest, the undistributed earnings indefinitely. The decision as to the amount of undistributed earnings that the Company intends to maintain in non-U.S. subsidiaries takes into account items including, but not limited to, forecasts and budgets of financial needs of cash for working capital, liquidity plans, capital improvement programs, merger and acquisition plans, and planned loans to other non-U.S. subsidiaries. The Company also evaluates its expected cash requirements in the United States. Other factors that can influence that determination are local restrictions on remittances (for example, in some countries a central bank application and approval are required in order for the Company's local country subsidiary to pay a dividend), economic stability and asset risk. As of December 31, 2012,2015, undistributed earnings of the Company's foreign subsidiaries that met the indefinite reversal criteria amounted to $26.9 billion.$31.9 billion. Refer to Note 14 of Notes to Consolidated Financial Statements.
The Company's effective tax rate is expected to be approximately 24.022.5 percent in 2013.2016. This estimated tax rate does not reflect the impact of any unusual or special items that may affect our tax rate in 2013.2016.
Recent Accounting Standards and Pronouncements44
Refer to Note 1 of Notes to Consolidated Financial Statements for a discussion of recent accounting standards and pronouncements.
Operations Review
Our organizational structure as of December 31, 20122015, consisted of the following operating segments, the first six of which are sometimes referred to as "operating groups" or "groups": Eurasia and Africa; Europe; Latin America; North America; Asia Pacific; Bottling Investments; and Corporate. For further information regarding our operating segments, refer to Note 19 of Notes to Consolidated Financial Statements.
Structural Changes, Acquired Brands and New License AgreementsNewly Licensed Brands
In order to continually improve upon the Company's operating performance, from time to time, we engage in buying and selling ownership interests in bottling partners and other manufacturing operations. In addition, we also acquire brands or enter into license agreements for certain brands to supplement our beverage offerings. These items impact our operating results and certain key metrics used by management in assessing the Company's performance.
Unit case volume growth is a key metric used by management to evaluate the Company's performance because it measures demand for our products at the consumer level. The Company's unit case volume represents the number of unit cases (or unit case equivalents) of Company beverage products directly or indirectly sold by the Company and its bottling partners to customers and, therefore, reflects unit case volume for consolidated and unconsolidated bottlers. Refer to the heading "Beverage Volume" below.
Concentrate sales volume represents the amount of concentrates and syrups (in all cases expressed in equivalent unit cases) sold by, or used in finished products sold by, the Company to its bottling partners or other customers. Refer to the heading "Beverage Volume" below.
Our Bottling Investments operating segment and our other finished product operations, including the finished product operations in our North America operating segment, typically generate net operating revenues by selling sparkling beverages and a variety of still beverages, such as juices and juice drinks, energy and sports drinks, ready-to-drink teas and coffees, and certain water products, to retailers or to distributors, wholesalers and bottling partners who distribute them to retailers. In addition, in the United States, we manufacture fountain syrups and sell them to fountain retailers such as restaurants and convenience stores who use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. For these consolidated finished product operations, we recognize the associated concentrate sales volume at the time the unit case or unit case equivalent is sold to the customer. Our concentrate operations typically generate net operating revenues by selling concentrates and syrups to authorized bottling and canning operations. For these concentrate operations, we recognize concentrate revenue and concentrate sales volume when we sell concentrate to the authorized unconsolidated bottling and canning operations, and we typically report unit case volume when finished products manufactured from the concentrates and syrups are sold to the customer. When we analyze our net operating revenues we generally consider the following four factors: (1) volume growth (unit case volume or concentrate sales volume, as appropriate), (2) acquisitions and divestitures (including structural changes defined below), as applicable, (3) changes in price, product and geographic mix and (4) foreign currency fluctuations. Refer to the heading "Net Operating Revenues" below.
"Structural changes"We generally refersrefer to acquisitions or dispositionsacquisition and divestitures of bottling, distribution or canning operations and consolidation or deconsolidation of bottling and distribution entities for accounting purposes.purposes as structural changes ("structural changes"). Typically, structural changes do not impact the Company's unit case volume on a consolidated basis or at the geographic operating segment level. We recognize unit case volume for all sales of Company beverage products regardless of our ownership interest in the bottling partner, if any. However, the unit case volume reported by our Bottling Investments operating segment is generally impacted by structural changes because it only includes the unit case volume of our consolidated bottling operations.
The"Acquired brands" refers to brands acquired during the past 12 months. Typically, the Company has not reported unit case volume or recognized concentrate sales volume related to acquired Great Plains Coca-Cola Bottlingbrands in periods prior to the closing of a transaction. Therefore, the unit case volume and concentrate sales volume from the sale of these brands is incremental to prior year volume. We do not generally consider acquired brands to be structural changes.
"Licensed brands" refers to brands not owned by the Company, ("Great Plains") in December 2011, bottling operations in Vietnambut for which we hold certain rights, generally including, but not limited to, distribution rights, and Cambodia in February 2012, and bottling operations in Guatemala in June 2012. Accordingly,from which we derive an economic benefit when these brands are ultimately sold. Typically, the impact to net operating revenuesCompany has not reported unit case volume or recognized concentrate sales volume related to these acquisitions wasbrands in periods prior to the beginning of the term of a license agreement. Therefore, in the year that the licenses are entered into, the unit case volume and concentrate sales volume from the sale of these brands is incremental to prior year volume. We do not generally consider newly licensed brands to be structural changes.
In 2015, the Company closed a transaction with Monster ("Monster Transaction"), which has been included as a structural change (a component of acquisitions and divestitures) in our analysis of changes to net operating revenues.revenues on a consolidated basis as well as for the Eurasia and Africa, Europe, Latin America, North America, Asia Pacific and Corporate operating segments. This transaction consisted of multiple elements including, but not limited to, the acquisition of Monster's non-energy brands and the expansion of our distribution of Monster products into additional U.S. territories. These elements of the transaction impacted the Company's unit case volume and concentrate sales volume and therefore, in addition to being included as a structural change (a component of acquisitions and divestitures), they are also considered acquired brands. See further discussion of this transaction in Note 2 of Notes to Consolidated Financial Statements. Also during 2015, the Company acquired a South African bottler, which has been included as a structural change (a component of acquisitions and divestitures) in our analysis of net operating revenues on a consolidated basis as well as for the Bottling Investments operating segment. Refer to "Net Operating Revenues" below.
In 2014, the Company began refranchising territories in North America that were previously managed by CCR to certain of our unconsolidated bottling partners. The impact of these refranchising activities has been included as a structural change (a component of acquisitions and divestitures) in our analysis of net operating revenues on a consolidated basis as well as for our North America operating segment. In addition, for non-Company-owned and licensed beverage products sold in the refranchised territories, we have eliminated the unit case volume and associated concentrate sales from the base year when calculating volume growth rates on a consolidated basis as well as for the North America operating segment. Refer to the headings "Beverage Volume" and "Net Operating Revenues" below.
In 2014, the Company made a decision to change our process of buying and selling recyclable materials in North America. Also during 2014, the Company transitioned our Russian juice operations to an existing joint venture with an unconsolidated bottling partner and acquired a majority interest in bottling operations in Sri Lanka and Nepal. The impact of these changes is included as a structural change (a component of acquisitions and divestitures) in our analysis of net operating revenues on a consolidated basis as well as for our North America and Bottling Investments operating segments. Refer to the heading "Net Operating Revenues" below.
In January 2012,2014, the Venezuelan government enacted a new law ("Fair Price Law") that imposes limits on profit margins earned in the country, which limited the amount of revenue the Company announced that BPW, our joint venture with Nestléwas able to recognize in the ready-to-drink tea category, will focus its geographic scope primarily on Europe and Canada. The joint venture was phased out in all other territories by the end of 2012, and the Company's agreement2014 as compared to distribute products in the United States under a sublicense from a subsidiary of Nestlé terminated at the end of 2012.2013. The impact to net operating revenues for North America related toof the termination of our license agreementFair Price Law has been included as a structural change in our analysis of changesoperating results for our Latin America segment for the year ended December 31, 2014. Refer to the heading "Net Operating Revenues" below.
In 2013, the Company acquired a majority interest in bottling operations in Myanmar, sold a majority interest in our previously consolidated bottling operations in the Philippines and deconsolidated our bottling operations in Brazil as a result of their combination with an independent bottling partner. Accordingly, the impact to net operating revenues. In addition, we have eliminated the BPWrevenues related to these transactions is included as a structural change (a component of acquisitions and Nestlé licensed unit case volume and associated concentrate salesdivestitures) in our analysis of net operating revenues for the year endedDecember 31, 2012, in those countries impacted by these structural changes. We have also eliminated the BPW and Nestlé licensed unit case volume and associated concentrate sales from the base year, where applicable, when calculating 2012 versus 2011 volume growth rates.our Bottling Investments segment. Refer to the headings "Beverage Volume" andheading "Net Operating Revenues" below.
The Company sells concentrates and syrups to both consolidated and unconsolidated bottling partners. The ownership structure of our bottling partners impacts the timing of recognizing concentrate revenue and concentrate sales volume. When we sell concentrates or syrups to our consolidated bottling partners, we are not able to recognize the concentrate revenue or concentrate sales volume until the bottling partner has sold finished products manufactured from the concentrates or syrups to a third party or independent customer. When we sell concentrates or syrups to our unconsolidated bottling partners, we recognize the concentrate revenue and concentrate sales volume when the concentrates or syrups are sold to the bottling partner. The subsequent sale of the finished products manufactured from the concentrates or syrups to a customer does not impact the timing of recognizing the concentrate revenue or concentrate sales volume.
"Acquired brands" refers to brands acquired during When we account for an unconsolidated bottling partner as an equity method investment, we eliminate the past 12 months. Typically, the Company has not reported unit case volume or recognized concentrate sales volume related to acquired brands in periods prior to the closing of the transaction. Therefore, the unit case volume and concentrate sales volume from the sale of these brands is incremental to prior year volume. We do not generally consider acquired brands to be structural changes.
In 2012, the Company invested in the existing beverage business of Aujan, one of the largest independent beverage companies in the Middle East. Under our definitive agreement with Aujan, the Company now owns 50 percent of the Aujan entity that holds the rights to Aujan-owned brands in certain territories and 49 percent of Aujan's bottling and distribution operations in certain territories. Accordingly, the volume associated with the Aujan transaction, subsequent to our initial equity investment during the second quarter of 2012, is considered to be from acquired brands. Refer to the heading "Beverage Volume" below.
"License agreements" refers to brands not owned by the Company, but for which we hold certain rights, generally including, but not limited to, distribution rights, and from which we derive an economic benefit when these brands are ultimately sold. Typically, the Company has not reported unit case volume or recognized concentrate sales volumeintercompany profit related to these brands in periods prior totransactions until the beginning of the term of the license agreement. Therefore, the unit case volume and concentrate sales volume from the sale of these brands is incremental to prior year volume. We do not generally consider new license agreements to be structural changes.
On October 2, 2010, in legally separate transactions, we acquired CCE's former North America business and entered into a license agreement with DPS. We also sold all of our ownership interests in our Norwegian and Swedish bottling operations to New CCE. Although each of these items does not have an impact on the comparability of the Company's 2012 and 2011 consolidated financial statements, the sections below are intended to provide an overview of the impact these items had on the comparability of our 2011 and 2010 consolidated financial statements.
Acquisition of CCE's Former North America Business and the DPS License Agreements
Immediately prior to our acquisition of CCE's former North America business on October 2, 2010, the Company owned 33 percent of CCE's outstanding common stock. This ownership represented our indirect ownership interest in both CCE's former North America business and its European operations. On October 2, 2010, the Company acquired the remaining 67 percent of CCE's former North America business not already owned by the Company for consideration that included the Company's indirect ownership interest in CCE's European operations. As a result of this transaction, the Company now owns 100 percent of CCE's former North America business and does not own any interest in New CCE's European operations. The operating results of CCE's former North America business were included in our consolidated financial statements starting October 2, 2010. The operating results of New CCE do not directly impact the Company's consolidated financial statements, since we have no ownership interest in this entity. Refer to the heading "Our Business — General" above and Note 2 of Notes to Consolidated Financial Statements for additional details related to the acquisition.
On October 2, 2010, the Company also entered into an agreement with DPS to distribute certain DPS brands in territories where these brands were distributed by CCE prior to our acquisition of CCE's former North America business. The license agreements replaced agreements between DPS and CCE existing immediately prior to the acquisition. Refer to the heading "Our Business — General" above and Note 2 of Notes to Consolidated Financial Statements for additional details related to these new license agreements.
Prior to the acquisition and entering into the DPS license agreements, the Company's North America operating segment was predominantly a concentrate operation. As a result of the acquisition and the DPS license agreements, the North America operating segment is now predominantly a finished product operation. Generally, finished product operations produce higher net operating revenues but lower gross profit margins and operating margins compared to concentrate operations. Refer to "Item 1. Business — Products and Brands" for additional discussion of the differences between the Company's concentrate operations and our finished product operations. These transactions resulted in higher net operating revenues but lower gross profit margins and operating margins for the North America operating segment and our consolidated operating results.
Prior to the acquisition, the Company reported unit case volume for the sale of Company beverage products sold by CCE. After the transaction closing, we report unit case volume of Company beverage products just as we had prior to the transaction.
Prior to the acquisition, the Company recognized concentrate sales volume at the time we sold the concentrate to CCE. Upon the closing of the transaction, we do not recognize the concentrate sales volume until CCRequity method investee has sold finished products manufactured from concentratethe concentrates or syrups to a third party or independent customer.
The DPS license agreements impact both the Company's unit case and concentrate sales volumes. Sales made pursuant to these license agreements represent acquired volume and are incremental unit case volume and concentrate sales volume to the Company only during the 12-month period following the acquisition. Prior to entering into the license agreements, the Company did not include the DPS brands as unit case volume or concentrate sales volume, as these brands were not Company beverage products. Refer to the heading "Unit Case Volume" below for additional information.
Prior to the acquisition, we recognized the revenues and profits associated with concentrate sales when the concentrate was sold to CCE, excluding the portionis currently pursuing certain transactions that, was deemed to be intercompany due to our previous ownership interest in CCE. However, subsequent to the acquisition, the Company does not recognize the revenues and profits associated with concentrate sold to CCE's former North America business until the finished products manufactured from those concentrates are sold. For example, in 2010, most of our pre-Easter concentrate sales to CCE impacted our first quarter operating results. In 2011, our Easter-related finished product sales had a greater impact on our second quarter operating results. As a result of this transaction, the Company does not have an indirect ownership interest in New CCE's European operations. Therefore, we are no longer required to defer the portion of revenues and profits associated with concentrate sales to New CCE.
The acquisition of CCE's former North America business has resulted in a significant adjustment to our overall cost structure, especially in North America. The following inputs represent a substantial portion of the Company's total cost of goods sold: (1) sweeteners, (2) metals, (3) juices and (4) polyethylene terephthalate ("PET"). The majority of these costs are included within our North America and Bottling Investments operating segments. The Company increased our hedging activities related to certain commodities in order to mitigate a portion of the price risk associated with forecasted purchases. Many of the derivative financial instruments used by the Company to mitigate the risk associated with these commodity exposures do not qualify for hedge accounting. As a result, the changes in fair value of these derivative instruments have been, andif completed, will continue to be included as a componentstructural changes for the applicable periods. In November 2014, the Company and two of net incomeour existing bottling partners entered into an agreement to combine each of the parties' bottling operations in Southern and East Africa. In August 2015, the Company entered into an agreement to merge our German bottling operations with the bottling operations of two of our existing bottling partners. Subject to receiving any required regulatory and shareholder approvals, we expect each reporting period. Referof these transactions to close during the heading "Gross Profit Margin" below and Note 5second quarter of Notes2016. Additionally, in 2016 we announced our intent to Consolidated Financial Statements for additional information regarding our commodity hedging activity.
In 2010, the gross profit for ourrefranchise 100 percent of Company-owned North America operating segment was negatively impacted by $235 million, primarily due to the elimination of gross profit in inventory on intercompany sales and an inventory fair value adjustment as a result of the acquisition. Refer to the headings "Gross Profit Margin" and "Operating Income and Operating Margin" below.
The acquisition of CCE's former North America business increased the Company's selling, general and administrative expenses, primarily due to delivery-related expenses. Selling, general and administrative expenses are typically higher, as a percentage of net operating revenues, for finished product operations compared to concentrate operations. Selling, general and administrative expenses were also negatively impactedbottling territories by the amortizationend of definite-lived intangible assets acquired in the acquisition.2017. The Company recorded $650 millionalso announced that we have entered into a non-binding letter of definite-lived acquired franchise rights that are being amortized over a weighted-average lifeintent to refranchise Company-owned bottling operations in China to two of approximately eight years from the date of acquisition, which is equal to the weighted-average remaining contractual term of the acquired franchise rights. In addition, the Company recorded $380 million of customer rights that are being amortized over 20 years. We estimate the amortization expense related to these definite-lived intangible assets to be approximately $100 million per year for the next several years, which will be recorded in selling, general and administrative expenses.
In connection with the Company's acquisition of CCE's former North America business, we assumed $7,602 million of long-term debt, which had an estimated fair value of $9,345 million as of the acquisition date. In accordance with accounting principles generally accepted in the United States, we recorded the assumed debt at its fair value as of the acquisition date. Refer to the heading "Liquidity, Capital Resources and Financial Position — Cash Flows from Financing Activities — Debt Financing" below and Note 2 of Notes to Consolidated Financial Statements.our existing bottling partners.
In 2010, the Company recognized a gain of $4,978 million due to the remeasurement of our equity interest in CCE to fair value upon the close of the transaction. This gain was classified in the line item other income (loss) — net in our consolidated statement of income.
Prior to the closing of this acquisition, we had accounted for our investment in CCE under the equity method of accounting. Under the equity method of accounting, we recorded our proportionate share of CCE's net income or loss in the line item equity income (loss) — net in our consolidated statements of income. However, as a result of this transaction, beginning October 2, 2010, the Company no longer records equity income or loss related to CCE, and therefore, this transaction negatively impacted the amount of equity income the Company recorded during both 2011 and 2010. Refer to the heading "Equity Income (Loss) — Net" below.
Divestiture of Norwegian and Swedish Bottling Operations
The divestiture of our Norwegian and Swedish bottling operations had no impact on our consolidated unit case volume and consolidated concentrate sales volume, for the same reasons discussed above in relation to our acquisition of CCE's former North America business. The divestiture of these bottling operations reduced unit case volume for the Bottling Investments operating segment. In addition, the divestiture reduced net operating revenues and net income for our consolidated operating results and the Bottling Investments operating segment. However, since we divested a finished product business, it had a positive impact on our gross profit margins and operating margins. Furthermore, the impact these divestitures had on the Company's net operating revenues was partially offset by the concentrate revenues that were recognized on sales to these bottling operations. These concentrate sales had previously been eliminated because they were intercompany transactions. The net impact to net operating revenues was included as a structural change in our analysis of changes to net operating revenues. Refer to the heading "Net Operating Revenues" below.
This divestiture resulted in a gain of $597 million in 2010, which was classified in the line item other income (loss) — net in our consolidated statement of income. In 2011, the Company recorded charges of $5 million related to the finalization of working capital adjustments in connection with the divestiture of our Norwegian and Swedish bottling operations. These charges reduced the transaction gain the Company previously reported in 2010.
Beverage Volume
We measure the volume of Company beverage products sold in two ways: (1) unit cases of finished products and (2) concentrate sales. As used in this report, "unit case" means a unit of measurement equal to 192 U.S. fluid ounces of finished beverage (24 eight-ounce servings); and "unit case volume" means the number of unit cases (or unit case equivalents) of Company beverage products directly or indirectly sold by the Company and its bottling partners to customers. Unit case volume primarily consists of beverage products bearing Company trademarks. Also included in unit case volume are certain products licensed to, or distributed by, our Company, and brands owned by Coca-Cola system bottlers for which our Company provides marketing support and from the sale of which we derive economic benefit. In addition, unit case volume includes sales by certain joint ventures in which the Company has an equity interest. We believe unit case volume is one of the measures of the underlying strength of the Coca-Cola system because it measures trends at the consumer level. The unit case volume numbers used in this report are derived based on estimates received by the Company from its bottling partners and distributors. Concentrate sales volume represents the amount of concentrates and syrups (in all casesinstances expressed in equivalent unit cases) sold by, or used in finished beverages sold by, the Company to its bottling partners or other customers. Unit case volume and concentrate sales volume growth rates are not necessarily equal during any given period. Factors such as seasonality, bottlers' inventory practices, supply point changes, timing of price increases, new product introductions and changes in product mix can impact unit case volume and concentrate sales volume and can create differences between unit case volume and concentrate sales volume growth rates. In addition to the items mentioned above, the impact of unit case volume from certain joint ventures in which the Company has an equity interest but to which the Company does not sell concentrates or syrups may give rise to differences between unit case volume and concentrate sales volume growth rates.
Information about our volume growth by operating segment is as follows:
| | | | Percent Change | Percent Change | |
| | 2012 vs. 2011 | | 2011 vs. 2010 | 2015 vs. 2014 | | 2014 vs. 2013 | |
| Year Ended December 31, | Unit Cases1,2 |
| | Concentrate Sales |
| | Unit Cases1,2 |
| | Concentrate Sales |
| Unit Cases1,2 |
| | Concentrate Sales |
| | Unit Cases1,2 |
| | Concentrate Sales |
| |
| Worldwide | 4 | % | | 4 | % | | 5 | % | | 5 | % | 2 | % | | 2 | % | 3 | 2 | % | | 2 | % | 4 |
| Eurasia & Africa | 11 | % | | 10 | % | | 6 | % | | 5 | % | 3 | % | | 2 | % | | 4 | % | | 3 | % | |
| Europe | (1 | ) | | (2 | ) | | 2 |
| | 1 |
| 2 |
| | 2 |
| | (2 | ) | | (2 | ) | |
| Latin America | 5 |
| | 5 |
| | 6 |
| | 5 |
| 1 |
| | 1 |
| | 1 |
| | — |
| |
| North America | 2 |
| | 2 |
| | 4 |
| | 4 |
| 1 |
| | 2 |
| 3 | — |
| | (1 | ) | |
| Pacific | 5 |
| | 3 |
| | 5 |
| | 6 |
| |
| Asia Pacific | | 4 |
| | 2 |
| | 5 |
| | 5 |
| |
| Bottling Investments | 10 |
| | N/A |
| | — |
| | N/A |
| 8 |
| | N/A |
| | (2 | ) | | N/A |
| |
| |
1 | Bottling Investments operating segment data reflects unit case volume growth for consolidated bottlers only. |
| |
2 | Geographic segment data reflects unit case volume growth for all bottlers, both consolidated and unconsolidated, and distributors in the applicable geographic areas. |
| |
3 | After considering the impact of structural changes, concentrate sales volume both worldwide and for North America for the year ended December 31, 2015 grew 1 percent. |
| |
4 | After considering the impact of structural changes, worldwide concentrate sales volume for the year ended December 31, 2014 grew 1 percent. |
Unit Case Volume
The Coca-Cola system sold approximately 27.729.2 billion, 28.6 billion and 28.2 billion unit cases of our products in 2012, approximately 26.7 billion unit cases in 20112015, 2014 and approximately 25.5 billion unit cases in 2010.2013, respectively. The number of unit cases sold in 20122015 and 2014 does not include BPW unit case volume for those countries in which BPW was phased out in 2012, nor does it include unit case volume of products distributedcertain licensed beverage brands sold in the United States under a sublicense from a subsidiary of Nestlé which terminated at the end of 2012. In addition, the Company eliminated BPWNorth American refranchised territories and Nestlé licensed unit case volume from the base year, where applicable, when calculating 2012 versus 2011 volume growth rates below.certain brands owned by our Russian juice company. Refer to the heading "Structural Changes, Acquired Brands and New License Agreements"Newly Licensed Brands" above. The Company eliminated the unit case volume related to these structural changes from the base year, where applicable, when calculating the volume growth rates.
Year EndedDecember 31, 2012,2015 versus Year EndedDecember 31, 20112014
InUnit case volume in Eurasia and Africa unit case volume increased 113 percent, which consisted of 92 percent growth in sparkling beverages and 196 percent growth in still beverages. The group's sparkling beverage growth was led by 10 percent growth in brand Coca-Cola, 11included 3 percent growth in Trademark SpriteCoca-Cola, and 6 percentthe growth in Trademark Fanta. Growth in still beverages was primarily due toled by packaged water and juices and juice drinksdrinks. Eurasia and included an 8 percentage point benefit attributable to acquired volume, primarily related to our investments in Aujan. India reported 16 percent unit case volume growth, reflecting the impact of strong integrated marketing campaigns and primarily consisted of 33 percent growth in brand Coca-Cola, 20 percent growth in Trademark Sprite, 13 percent growth in Trademark Thums Up and 26 percent growth in our Maaza juice drink brand. In addition, Russia reportedAfrica benefited from unit case volume growth of 8 percent, driven by growth of 206 percent and 2 percent in brand Coca-Cola. Still beverage growth in Russia included growththe Central, East & West Africa, Southern Africa, and Middle East & North Africa business units, respectively, partially offset by a decline of 13 percent and 234 percent in our juice brands Dobriy and Rich, respectively. Eurasia and Africa also benefited fromthe Russia, Ukraine & Belarus business unit.
In Europe, unit case volume growth of 21 percent in the Company's Middle East and North Africa business unit, including a 9 percentage point benefit attributable to acquired volume, primarily related to our investments in Aujan. South Africa had unit case volume growth of 6grew 2 percent, reflecting our increased marketing initiatives7 percent growth in still beverages and 1 percent growth in sparkling beverages. The growth in still beverages was driven by the current yeargroup's performance in packaged water, teas, sports drinks and the impactexpansion of the volume decline reportedinnocent brand. The group's sparkling beverage growth included 9 percent growth in 2011 due to unfavorable weather conditionsCoca-Cola Zero and higher pricing.4 percent growth in Trademark Fanta.
Unit case volume in Europe declinedLatin America grew 1 percent which consistedas a result of a 2 percent decline in sparkling beverages and minimal growth in still beverages. Germany reported unit case volume growthbeverages of 14 percent reflecting the Company's strong commercial campaigns such as our 2012 Olympic Games partnership and the Coca-Cola Christmas Truck Tour, music-themed integrated marketing campaigns and a continued focus on low-calorie and no-calorieeven sparkling beverages.beverage volume. The favorable impact of growth in Germany was more than offset by volume declines in other markets. The group reported a decline in unit case volume of 3 percent in the Northwest Europe and Nordics business unit and a volume decline of 1 percent in the Iberia business unit, reflecting the challenges of continued weak consumer confidence, adverse weather and aggressive competitive pricing.
In Latin America, unit case volume increased 5 percent, which consisted of 3 percent growth in sparkling beverages and 12 percent growth in still beverages. The growth reported across Latin America was driven by continued investments in our brands, strong activation of holiday programming, and a continued focus on a differentiated occasion-based package, price and channel strategy. The group's growth in sparkling beverages was led by 3 percent growth in brand Coca-Cola, 6 percent growth in Trademark Fanta and 5 percent growth in Trademark Sprite. Still beverage growth in Latin America reflected 34 percent growth in ready-to-drink teas as a result of the newly launched Fuze Tea, 28 percent growth in sports drinks, 9 percent growth in packaged water, and 12 percent growth in juices and juice drinks and sports drinks. BrazilThe Latin Center and South Latin business units reported unit case volume growth of 6 percent, which consisted of 3 percent growth in brand Coca-Cola, 11 percent growth in Trademark Fanta and 16 percent growth in still beverages. Latin America also benefited from unit case volume growth of 4 percent and 3 percent, respectively. The Mexico business unit reported unit case volume growth of 3 percent, reflecting growth in Trademark Coca-Cola of 3 percent. The growth in the Latin Center, South Latin and Mexico and 7business units was partially offset by a unit case volume decline of 4 percent in the Brazil business unit.
In North America, unit case volume grew 1 percent. This increase reflects 5 percent growth in Argentina.
Unit casestill beverage volume in North America increased 2 percent, led by growth of 8 percent inand even sparkling beverage volume. The still beverages. Still beverage growth in North America included 16 percent growth in ready-to-drink teas, 12 percent growth in sports drinks, 9the group was led by 8 percent growth in packaged water and 26 percent growth in juicesteas. After considering the impact of the acquired volume resulting from the Monster Transaction, North America unit case volume growth remained 1 percent.
Unit case volume in Asia Pacific increased 4 percent, which consisted of 4 percent growth in both sparkling and juice drinks.still beverage volume. The group reported 11sparkling beverage volume growth was led by a 5 percent increase in Trademark Coca-Cola, a 4 percent increase in Trademark Sprite and a 6 percent increase in Trademark Fanta. Still beverage volume growth was led by increases in packaged water and teas of 12 percent and 6 percent, respectively. China's unit case volume grew 5 percent during the year, led by 12 percent growth in Trademark Powerade, reflecting the benefit of a strong 2012 Olympic Games activation. Growth in ready-to-drink teas included the continued strong growth of Gold Peak,Coca-Cola and the group's juices and juice drinks benefited from 73 percent growth in Trademark Simply. Dasani hadSprite. India reported unit case volume growth of 104 percent and maintained its premium pricing position, supported by our PlantBottle PET packaging. The group'sJapan reported even volume during the year.
Unit case volume for Bottling Investments increased 8 percent. This increase primarily reflects the growth in still beverages was partially offset by a volume decline of 1 percent in sparkling beverages. Although overall sparkling beverage volume declined in North America, the group benefited from growth in Coca-Cola ZeroChina and Trademark Fanta of 7 percent and 6 percent, respectively.
India. In Pacific,addition, unit case volume in Germany grew 2 percent. The Company's consolidated bottling operations accounted for 34 percent, 69 percent, and 100 percent of the unit case volume in China, India and Germany, respectively.
Year Ended December 31, 2014 versus Year Ended December 31, 2013
Unit case volume in Eurasia and Africa increased 54 percent, which consisted of 43 percent growth in sparkling beverages and 8 percent growth in still beverages. The group's volume resultssparkling beverage growth included 42 percent growth in China, despite the impact of an economic slowdownTrademark Coca-Cola, 3 percent growth in Trademark Sprite, and 2 percent growth in Trademark Fanta. Growth in the country, extremely wet weather in July and August and the shift in timing of the 2013 Chinese New Year. Sparkling beverage growth in Chinagroup's still beverages was led by packaged water, juices and juice drinks and teas. The group's growth of 21 percentreflects a continued focus on improved marketplace execution and providing greater consumer choice in Trademark Fanta. Still beverage growth in China was primarily due to volume growth in packaged water. Japan's unit case volume increased 2 percent, which included a 3 percent increase in still beverages, partially offset by a 2 percent decline in sparkling beverages. Still beverages in Japan benefited primarily from growth in the Company's ready-to-drink teapackage and coffee categories. The Pacific group alsoprice options. Eurasia and Africa benefited from unit case volume growth of 227 percent in Thailand, 20 percent in South Korea and 56 percent in the Philippines.Middle East & North Africa and Central, East & West Africa business units, respectively. This growth was partially offset by a decline in unit case volume of 1 percent in the Russia, Ukraine & Belarus business unit.
In Europe, unit case volume declined 2 percent as a result of a decline in sparkling beverages of 3 percent, partially offset by growth in still beverages of 1 percent. The decline in sparkling beverages reflects the softness in the macroeconomic environment and continuing competitive pressures in the market. The growth in still beverages was led by growth in juices and juice drinks.
Unit case volume for Bottling Investmentsin Latin America increased 10 percent. The group had1 percent reflecting growth in key markets where we own or otherwise consolidate bottling operations, includingstill beverages of 6 percent and even sparkling beverage volume. The growth in still beverages was led by packaged water, value-added dairy and sports drinks. Latin America benefited from unit case volume growth of 46 percent in China, 16 percent in India, 5and 2 percent in the PhilippinesLatin Center and Brazil business units, respectively, partially offset by a volume decline of 1 percent in Germany.the Mexico business unit. The Company's consolidated bottling operations accounted for 34 percent, 65 percent, 100 percent and 100 percentdecline in Mexico was primarily due to the impact of thea new excise tax that went into effect on January 1, 2014.
In North America, unit case volume was even, reflecting 1 percent growth in China, India, the Philippinesstill beverages offset by a decline of 1 percent in sparkling beverages. The still beverage growth was led by 8 percent growth in packaged water and Germany, respectively. The group's volume4 percent growth included a benefit of 3 percentage points attributable to the acquisition of bottling operations in Vietnam, Cambodia and Guatemala during the year ended December 31, 2012.teas.
Year EndedDecember 31, 2011, versus Year EndedDecember 31, 201048
In Eurasia and Africa, unit
Unit case volume in Asia Pacific increased 65 percent, which consisted of 5 percent growth in sparkling beverages and 134 percent growth in still beverages. The group'sgrowth in sparkling beverages was led by a 5 percent increase in Trademark Sprite, a 4 percent increase in Trademark Fanta and a 3 percent increase in brand Coca-Cola. Still beverage volume growth was led by packaged water and growth in teas and value-added dairy of 6 percent and 10 percent, respectively. China's unit case volume growth was largely due togrew 4 percent, led by 5 percent growth in our key markets, includingbrand Coca-Cola and 6 percent growth in Trademark Fanta. India and Turkey. India experienced 12 percent unit casereported double-digit volume growth, which consistedand Japan reported a volume decline of 121 percent, reflecting 1 percent growth in sparkling beverages and 11offset by a 1 percent growthdecline in still beverages. India's growth in sparkling beverages was primarily due to 17 percent growth in Trademark Sprite, 15 percent growth in Trademark Thums Up and 11 percent growth in Trademark Coca-Cola. Still beverages in India benefited from 14 percent growth in our Kinley water brand and 11 percent growth in Maaza, a component of our juice portfolio in India. The group also benefited from unit case volume growth of 10 percent in Turkey, which included strong growth in brand Coca-Cola. Unit case volume grew 5 percent in Russia, primarily due to our acquisition of OAO Nidan Juices ("Nidan") in the third quarter of 2010. Excluding the impact of the acquired Nidan juice, Russia's overall unit case volume declined 2 percent in 2011. Eurasia and Africa also benefited from unit case volume growth of 8 percent in the Company's Middle East and North Africa business unit despite ongoing geopolitical challenges in the region. The group's unit case volume growth in the markets described above was partially offset by a 2 percent unit case volume decline in South Africa. This decline was primarily due to the impact of unfavorable weather conditions during our peak summer selling season as well as higher pricing in the marketplace.
Unit case volume in Europe increased 2 percent, despite an unseasonably cold and rainy summer selling season and moderate consumer confidence. The Company achieved these results by strategically tailoring our price and package offerings to meet the needs of each market with consideration for the current economic environment. The group benefited from the Company's successful launch of our 125th anniversary marketing campaign as well as other integrated marketing campaigns. The group had 2 percent growth in sparkling beverages, including 3 percent growth in Trademark Coca-Cola and growth of 14 percent in Coca-Cola Zero. Unit case volume for still beverages increased 2 percent, led by growth in energy drinks and tea. Germany's unit case volume increased 6 percent, primarily attributable to 6 percent growth in Trademark Coca-Cola and 13 percent growth in Trademark Fanta. Our German business continued to benefit from the Company's bottler restructuring efforts and our effective marketing campaigns. In addition, France and Great Britain had growth of 5 percent and 4 percent, respectively, each led by growth in Trademark Coca-Cola.
In Latin America, unit case volume increased 6 percent, which consisted of 4 percent growth in sparkling beverages and 15 percent growth in still beverages. The group's sparkling beverage unit case volume growth was led by 4 percent growth in brand Coca-Cola. Still beverages benefited from the successful performance of Del Valle as well as strong growth in other still beverages, including water and tea. Mexico had unit case volume growth of 9 percent, led by 7 percent growth in sparkling beverages, which included 7 percent growth in Trademark Coca-Cola. In addition, Argentina had 10 percent growth in Trademark Coca-Cola which contributed to its overall unit case volume growth of 10 percent. Argentina's unit case volume growth benefited from strong integrated marketing campaigns, including sponsorship of the Copa America soccer tournament in July. Brazil's unit case volume increased 1 percent despite a general slowdown in the country's economy. The group's unit case volume growth in the markets described above was partially offset by a 10 percent volume decline in Venezuela. The decline in Venezuela is a reflection of the continued economic and political pressures affecting the country.
Unit case volume in North America increased 4 percent, including 3 percent growth attributable to the new license agreements with DPS. The group's unit case volume growth was driven by 3 percent growth in sparkling beverages, primarily due to the sale of Dr Pepper brands under the new license agreements. Coca-Cola Zero continued its strong performance in North America with 11 percent unit case volume growth. Unit case volume for still beverages in North America increased 4 percent, including 12 percent growth in Trademark Powerade, 10 percent growth in Trademark Dasani and 48 percent growth in Gold Peak. The growth in still beverages in North America was partially offset by a decline of 2 percent in juice and juice drinks, a reflection of increased pricing to offset commodity costs. In December 2011, the Company acquired Great Plains in the United States. As a result of this acquisition, we report volume from cross-licensed brands, primarily Dr Pepper, that were previously distributed by Great Plains. Unit case volume for these cross-licensed brands was 12 million unit cases for full year 2011. The Company began reporting unit case volume for these cross-licensed brands in December 2011.
In Pacific, unit case volume increased 5 percent, which consisted of 4 percent growth in sparkling beverages and 8 percent growth in still beverages. The group's volume growth was led by 13 percent growth in China, which included 12 percent growth in sparkling beverages attributable to strong growth in Trademark Sprite, Coca-Cola and Fanta. The group also benefited from China's 16 percent growth in still beverages, including strong growth in Minute Maid Pulpy and other still beverages, including water. In Japan, unit case volume growth was even, reflecting the impact of the earthquake and tsunami that devastated the northern and eastern portions of the country on March 11, 2011. The group's unit case volume growth in the markets described above was partially offset by a 9 percent volume decline in the Philippines.
Unit case volume for Bottling Investments decreased 2 percent. This decrease primarily reflects the deconsolidation of our bottling operations in Brazil during July 2013 as a result of their combination with an independent bottling partner. The unfavorable impact of these transactions on the group's unit case volume results was even when compared to the prior year. The group hadpartially offset by growth in other key markets, including China and India, where we own or otherwise consolidate bottling operations, including unit case volume growth of 13 percent in China, 12 percent in India and 6 percent in Germany.operations. The Company's consolidated bottling operations accounted for 34 percent, 6635 percent and 10065 percent of the unit case volume in China and India, and Germany, respectively. However, growth in these markets was offset by the unfavorable impact of the Company's sale of our Norwegian and Swedish bottling operations to New CCE during the fourth quarter of 2010 as well as a unit case volume decline of 9 percent in the Philippines where we own 100 percent of the country's bottling operations.
Concentrate Sales Volume
In 2012,2015, worldwide concentrate sales volume and unit case volume both grew 42 percent compared to 2011. Likewise, in 2011,2014. After considering the impact of structural changes, concentrate sales volume grew 1 percent during the year ended December 31, 2015. In 2014, worldwide concentrate sales volume and unit case volume both grew 52 percent compared to 2010.2013. After considering the impact of structural changes, concentrate sales volume grew 1 percent during the year ended December 31, 2014. The differences between concentrate sales volume and unit case volume growth rates worldwide and for individual operating segments in 20122015 and 20112014 were primarily due to the timing of concentrate shipments and the impact of unit case volume from certain joint ventures in which the Company has an equity interest, but to which the Company does not sell concentrates, syrups, beverage bases or powders.
Analysis of Consolidated Statements of Income
| | | | | | | | | | Percent Change | | | | | | | Percent Change |
| Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| | 2012 vs. 2011 | | 2011 vs. 2010 | 2015 |
| | 2014 |
| | 2013 |
| | 2015 vs. 2014 | | 2014 vs. 2013 |
| (In millions except percentages and per share data) | | | As Adjusted1,2 | | | | | | | | | | | |
| NET OPERATING REVENUES | $ | 48,017 |
| | $ | 46,542 |
| | $ | 35,119 |
| | 3 | % | | 33 | % | $ | 44,294 |
| | $ | 45,998 |
| | $ | 46,854 |
| | (4 | )% | | (2 | )% |
| Cost of goods sold | 19,053 |
| | 18,215 |
| | 12,693 |
| | 5 |
| | 44 |
| 17,482 |
| | 17,889 |
| | 18,421 |
| | (2 | ) | | (3 | ) |
| GROSS PROFIT | 28,964 |
| | 28,327 |
| | 22,426 |
| | 2 |
| | 26 |
| 26,812 |
| | 28,109 |
| | 28,433 |
| | (5 | ) | | (1 | ) |
| GROSS PROFIT MARGIN | 60.3 | % | | 60.9 | % | | 63.9 | % | | |
| | |
| 60.5 | % | | 61.1 | % | | 60.7 | % | | |
| | |
| Selling, general and administrative expenses | 17,738 |
| | 17,422 |
| | 13,194 |
| | 2 |
| | 32 |
| 16,427 |
| | 17,218 |
| | 17,310 |
| | (5 | ) | | (1 | ) |
| Other operating charges | 447 |
| | 732 |
| | 819 |
| | * |
| | * |
| 1,657 |
| | 1,183 |
| | 895 |
| | 40 |
| | 32 |
|
| OPERATING INCOME | 10,779 |
| | 10,173 |
| | 8,413 |
| | 6 |
| | 21 |
| 8,728 |
| | 9,708 |
| | 10,228 |
| | (10 | ) | | (5 | ) |
| OPERATING MARGIN | 22.4 | % | | 21.9 | % | | 24.0 | % | | |
| | |
| 19.7 | % | | 21.1 | % | | 21.8 | % | | |
| | |
| Interest income | 471 |
| | 483 |
| | 317 |
| | (2 | ) | | 52 |
| 613 |
| | 594 |
| | 534 |
| | 3 |
| | 11 |
|
| Interest expense | 397 |
| | 417 |
| | 733 |
| | (5 | ) | | (43 | ) | 856 |
| | 483 |
| | 463 |
| | 77 |
| | 4 |
|
| Equity income (loss) — net | 819 |
| | 690 |
| | 1,025 |
| | 19 |
| | (33 | ) | 489 |
| | 769 |
| | 602 |
| | (36 | ) | | 28 |
|
| Other income (loss) — net | 137 |
| | 529 |
| | 5,185 |
| | * |
| | * |
| 631 |
| | (1,263 | ) | | 576 |
| | * |
| | * |
|
| INCOME BEFORE INCOME TAXES | 11,809 |
| | 11,458 |
| | 14,207 |
| | 3 |
| | (19 | ) | 9,605 |
| | 9,325 |
| | 11,477 |
| | 3 |
| | (19 | ) |
| Income taxes | 2,723 |
| | 2,812 |
| | 2,370 |
| | (3 | ) | | 19 |
| 2,239 |
| | 2,201 |
| | 2,851 |
| | 2 |
| | (23 | ) |
| Effective tax rate | 23.1 | % | | 24.5 | % | | 16.7 | % | | |
| | |
| 23.3 | % | | 23.6 | % | | 24.8 | % | | |
| | |
|
| CONSOLIDATED NET INCOME | 9,086 |
| | 8,646 |
| | 11,837 |
| | 5 |
| | (27 | ) | 7,366 |
| | 7,124 |
| | 8,626 |
| | 3 |
| | (17 | ) |
| Less: Net income attributable to noncontrolling interests | 67 |
| | 62 |
| | 50 |
| | 8 |
| | 24 |
| 15 |
| | 26 |
| | 42 |
| | (40 | ) | | (38 | ) |
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY | $ | 9,019 |
| | $ | 8,584 |
| | $ | 11,787 |
| | 5 | % | | (27 | )% | $ | 7,351 |
| | $ | 7,098 |
| | $ | 8,584 |
| | 4 | % | | (17 | )% |
BASIC NET INCOME PER SHARE3 | $ | 2.00 |
| | $ | 1.88 |
| | $ | 2.55 |
| | 6 | % | | (26 | )% | |
DILUTED NET INCOME PER SHARE3 | $ | 1.97 |
| | $ | 1.85 |
| | $ | 2.53 |
| | 6 | % | | (27 | )% | |
BASIC NET INCOME PER SHARE1 | | $ | 1.69 |
| | $ | 1.62 |
| | $ | 1.94 |
| | 4 | % | | (16 | )% |
DILUTED NET INCOME PER SHARE1 | | $ | 1.67 |
| | $ | 1.60 |
| | $ | 1.90 |
| | 5 | % | | (16 | )% |
| |
* | Calculation is not meaningful. |
| |
1 | Effective January 1, 2012, the Company elected to change our accounting methodology for determining the market-related value of assets for our U.S. qualified defined benefit pension plans. The Company's change in accounting methodology has been applied retrospectively, and we have adjusted all prior period financial information presented herein as required. |
| |
2
| On July 27, 2012, the Company's certificate of incorporation was amended to increase the number of authorized shares of common stock from 5.6 billion to 11.2 billion and effect a two-for-one stock split of the common stock. The record date for the stock split was July 27, 2012, and the additional shares were distributed on August 10, 2012. Each shareowner of record on the close of business on the record date received one additional share of common stock for each share held. All share and per share data presented herein reflect the impact of the increase in authorized shares and the stock split, as appropriate.
|
| |
3
| Calculated based on net income attributable to shareowners of The Coca-Cola Company. |
Net Operating Revenues
Year Ended December 31, 20122015, versus Year Ended December 31, 20112014
The Company's net operating revenues increased $1,475decreased $1,704 million, or 34 percent.
The following table illustrates, on a percentage basis, the estimated impact of key factors resulting in the increase (decrease) in net operating revenues for each of our operating segments:
| | | | Percent Change 2012 vs. 2011 | Percent Change 2015 vs. 2014 |
| | Volume1 |
| | Structural Changes |
| | Price, Product & Geographic Mix |
| | Currency Fluctuations |
| | Total |
| Volume1 |
| | Acquisitions & Divestitures |
| | Price, Product & Geographic Mix |
| | Currency Fluctuations |
| | Total |
|
| Consolidated | 4 | % | | 1 | % | | 1 | % | | (3 | )% | | 3 | % | 1 | % | | — | % | | 2 | % | | (7 | )% | | (4 | )% |
| Eurasia & Africa | 10 | % | | — | % | | 4 | % | | (9 | )% | | 5 | % | 2 | % | | (1 | )% | | 3 | % | | (14 | )% | | (10 | )% |
| Europe | (2 | ) | | — |
| | — |
| | (4 | ) | | (6 | ) | 2 |
| | (1 | ) | | 1 |
| | (9 | ) | | (7 | ) |
| Latin America | 5 |
| | (1 | ) | | 7 |
| | (8 | ) | | 3 |
| 1 |
| | — |
| | 9 |
| | (23 | ) | | (13 | ) |
| North America | 2 |
| | 1 |
| | 2 |
| | — |
| | 5 |
| 1 |
| | (1 | ) | | 3 |
| | (1 | ) | | 2 |
|
| Pacific | 3 |
| | (1 | ) | | — |
| | 1 |
| | 3 |
| |
| Asia Pacific | | 2 |
| | — |
| | (3 | ) | | (8 | ) | | (9 | ) |
| Bottling Investments | 6 |
| | 3 |
| | 1 |
| | (6 | ) | | 4 |
| 6 |
| | 3 |
| | (3 | ) | | (10 | ) | | (4 | ) |
| Corporate | * |
| | * |
| | * |
| | * |
| | * |
| * |
| | * |
| | * |
| | * |
| | * |
|
* Calculation is not meaningful.
| |
1 | Represents the percent change in net operating revenues attributable to the increase (decrease) in concentrate sales volume for our geographic operating segments (expressed in equivalent unit cases). after considering the impact of structural changes. For our Bottling Investments operating segment, this represents the percent change in net operating revenues attributable to the increase (decrease) in unit case volume after considering the impact of structural changes. Our Bottling Investments operating segment data reflects unit case volume growth for consolidated bottlers only. Refer to the heading "Beverage Volume" above. |
Refer to the heading "Beverage Volume" above for additional information related to changes in our unit case and concentrate sales volumes.
"Acquisitions and Divestitures" refers to acquisitions and divestitures of brands or businesses, some of which the Company considers to be structural changes. Refer to the heading "Structural Changes, Acquired Brands and New License Agreements"Newly Licensed Brands" above for additional information related to the structural changes that impacted our Latin America, North America, Pacificchanges. The acquisitions and Bottling Investments operating segments.divestitures percent change for 2015 versus 2014 in the table above consisted entirely of structural changes.
Price, product and geographic mix had a favorable 1favorable 2 percent impact on our consolidated net operating revenues. Price, product and geographic mix was impacted by a variety of factors and events including, but not limited to, the following:
Our consolidated results were unfavorably impacted by geographic mix as a result of growth in our emerging and developing markets which are recovering from the global recession at a quicker pace than our developed markets. The revenue per unit sold in our emerging markets is generally less than in developed markets;
Eurasia and Africa was— favorable price mix in most of the segment's business units, partially offset by unfavorable geographic mix;
Latin America — favorable price mix in all four of the segment's business units and the impact of inflationary environments in certain markets;
North America — favorably impacted as a result of price increases across a number of our key marketsand package mix;
Asia Pacific — unfavorable product and channel mix as well as improvedunfavorable geographic mix; and
Bottling Investments — unfavorable price mix attributable to channel, product mix;
Latin America was favorably impacted as a result of price increases across a number of our key markets; and
North America was favorably impacted as a result of price increases, including positive pricing for sparkling beverages. package mix.
The unfavorable impact of foreign currency fluctuations decreased our consolidated net operating revenues by 37 percent. TheThis unfavorable impact of changes in foreign currency exchange rates was primarily due to a stronger U.S. dollar compared to certain other foreign currencies, including the euro, Mexican peso, Brazilian real, British pound, South African rand, andeuro, U.K. pound sterling, Brazilian real, Mexican peso, Australian dollar and Japanese yen, which impacted thehad an unfavorable impact on our Eurasia and Africa, Europe, Latin America, Asia Pacific and Bottling Investments operating segments. The unfavorable impact of a stronger U.S. dollar compared to the currencies listed above was partially offset by the impact of a weaker U.S. dollar compared to certain other foreign currencies, including the Japanese yen, which had a favorable impact on our Pacific operating segment. Refer to the heading "Liquidity, Capital Resources and Financial Position — Foreign Exchange" below.
Net operating revenue growth rates are impacted by sales volume; acquisitions and divestitures; price, product and geographic mix; and foreign currency fluctuations. The size and timing of acquisitions and divestitures are not consistent from period to period. The Company currently expects acquisitions and divestitures to have a mid single-digit unfavorable impact on full year 2016 net operating revenues. Based on current spot rates and our hedging coverage in place, we expect currencies will continue to have an unfavorable impact on our full year 2016 net operating revenues.
Year EndedDecember 31, 2011,2014 versus Year EndedDecember 31, 20102013
The Company's net operating revenues increased $11,423decreased $856 million, or 332 percent.
Net operating revenues for the North America operating segment increased $9,366 million, or 84 percent. This increase primarily reflects the impact of structural changes related to the acquisition of CCE's former North America business in addition to the impact of our license agreements with DPS. Net operating revenues for the North America operating segment also included a 1 percent increase in pricing to retailers, driven by a 2 percent increase in pricing on sparkling beverages, and a 1 percent favorable impact due to foreign currency exchange fluctuations.
The following table illustrates, on a percentage basis, the estimated impact of key factors resulting in the increase (decrease) in net operating revenues for each of our international and Bottling Investments operating segments:
| | | | Percent Change 2011 vs. 2010 | Percent Change 2014 vs. 2013 |
| | Volume2 |
| | Structural Changes |
| | Price, Product & Geographic Mix |
| | Currency Fluctuations |
| | Total |
| Volume1 |
| | Acquisitions & Divestitures |
| | Price, Product & Geographic Mix |
| | Currency Fluctuations |
| | Total |
|
International (including Bottling Investments)1 | 5 | % | | (3 | )% | | 2 | % | | 4 | % | | 8 | % | |
| Consolidated | | 1 | % | | (2 | )% | | 1 | % | | (2 | )% | | (2 | )% |
| Eurasia & Africa | 5 | % | | — | % | | 7 | % | | (1 | )% | | 11 | % | 3 | % | | — | % | | 4 | % | | (8 | )% | | (1 | )% |
| Europe | 1 |
| | — |
| | — |
| | 3 |
| | 4 |
| (2 | ) | | — |
| | 4 |
| | 2 |
| | 4 |
|
| Latin America | 5 |
| | (2 | ) | | 7 |
| | 4 |
| | 14 |
| — |
| | (4 | ) | | 8 |
| | (10 | ) | | (6 | ) |
| Pacific | 6 |
| | — |
| | (2 | ) | | 7 |
| | 11 |
| |
| North America | | (1 | ) | | (1 | ) | | 1 |
| | — |
| | (1 | ) |
| Asia Pacific | | 5 |
| | 1 |
| | (2 | ) | | (6 | ) | | (2 | ) |
| Bottling Investments | 4 |
| | (8 | ) | | 3 |
| | 4 |
| | 3 |
| 5 |
| | (9 | ) | | (2 | ) | | (2 | ) | | (8 | ) |
| Corporate | | * |
| | * |
| | * |
| | * |
| | * |
|
* Calculation is not meaningful.
| |
1 | Represents the total change in net operating revenues for Bottling Investments and each of our geographic operating segments, excluding North America. |
| |
2
| Represents the percent change in net operating revenues attributable to the increase (decrease) in concentrate sales volume for our geographic operating segments (expressed in equivalent unit cases). after considering the impact of structural changes. For our Bottling Investments operating segment, this represents the percent change in net operating revenues attributable to the increase (decrease) in unit case volume after considering the impact of structural changes. Our Bottling Investments operating segment data reflects unit case volume growth for consolidated bottlers only. Refer to the heading "Beverage Volume" above. |
Refer to the heading "Beverage Volume" above for additional information related to changes in our unit case and concentrate sales volume.volumes.
The"Acquisitions and Divestitures" refers to acquisitions and divestitures of brands or businesses, some of which the Company considers to be structural change in the Bottling Investments operating segment was primarily related to the sale of all our ownership interests in our Norwegian and Swedish bottling operations to New CCE on October 2, 2010.changes. Refer to the heading "Structural Changes, Acquired Brands and New License Agreements" above. The structural change in the Latin America operating segment wasNewly Licensed Brands" above for additional information related to the salestructural changes. The acquisitions and divestitures percent change for 2014 versus 2013 in the table above consisted entirely of 50structural changes. The impact of the Venezuelan Fair Price Law reduced our Latin America segment revenues by 5 percent of our investment in Leão Junior, S.A. ("Leão Junior") during the third quarter of 2010.2014.
Price, product and geographic mix had a favorable 2favorable 1 percent impact on our international and Bottling Investmentsconsolidated net operating revenues. Price, product and geographic mix was impacted by a variety of factors and events including, but not limited to, the following:
Our international and Bottling Investments operating segments' results were unfavorably impacted by geographic mix as a result of growth in our emerging and developing markets. The revenue per unit sold in those markets is generally less than in developed markets;
Eurasia and Africa was favorably impacted by— favorable price mix as a resultin all of pricing increases in a number of key markets;the segment's business units;
Europe's price mix was even, including a negative 1 percentEurope — favorable impact as a result of a changeconsolidating the juice and smoothie business of Fresh Trading Ltd. ("innocent") in our concentrate pricing strategyMay 2013 and favorable price mix in Germany with our consolidated bottler;all of the segment's business units;
Latin America was favorably impacted by— favorable price mix as a resultin all four of pricing increasesthe segment's business units and the impact of inflationary environments in a number of key markets. Also, still beverages grew faster than sparkling beverages in Latin America, bolstered by the strong performance of Del Valle;
Pacific was unfavorably impacted by geographic mix due to the growth in emerging and developing markets. The revenue per unit sold in those markets is generally less than in developedcertain markets;
Pacific was unfavorably impacted by channel and product mix due to the earthquake and tsunami that devastated northern and eastern Japan on March 11, 2011; and
Bottling Investments was favorably impacted by price mix as a result of pricing increases in a number of key markets, including China, India and Latin America.Asia Pacific — unfavorable geographic mix.
The favorableunfavorable impact of foreign currency fluctuations increaseddecreased our consolidated net operating revenues forby 2 percent. The unfavorable currency impact was primarily due to a stronger U.S. dollar compared to certain other foreign currencies, including the South African rand, Mexican peso, Brazilian real, Australian dollar and Japanese yen, which had an unfavorable impact on our internationalEurasia and Africa, Latin America, Asia Pacific and Bottling Investments operating segments by 4 percent.segments. The favorableunfavorable impact of changes in foreign currency exchange ratesa stronger U.S. dollar compared to the currencies listed above was primarily due topartially offset by the impact of a weaker U.S. dollar compared to certain other foreign currencies, including the euro Japanese yen, Mexican peso, Brazilian real,and British pound, South African rand and Australian dollar, which had a favorable impact on the Eurasia and Africa,our Europe Latin America, Pacific and Bottling Investments operating segments. Refer to the heading "Liquidity, Capital Resources and Financial Position — Foreign Exchange" below.
Net Operating Revenues by Operating Segment
Information about our net operating revenues by operating segment as a percentage of Company net operating revenues is as follows:
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| Eurasia & Africa | 5.9 | % | | 5.8 | % | | 6.9 | % | 5.5 | % | | 5.9 | % | | 5.9 | % |
| Europe | 9.3 |
| | 10.3 |
| | 12.6 |
| 10.3 |
| | 10.5 |
| | 9.9 |
|
| Latin America | 9.5 |
| | 9.4 |
| | 11.0 |
| 9.0 |
| | 10.0 |
| | 10.1 |
|
| North America | 45.1 |
| | 44.2 |
| | 31.7 |
| 49.2 |
| | 46.7 |
| | 46.1 |
|
| Pacific | 11.6 |
| | 11.7 |
| | 14.1 |
| |
| Asia Pacific | | 10.6 |
| | 11.4 |
| | 11.5 |
|
| Bottling Investments | 18.3 |
| | 18.3 |
| | 23.4 |
| 15.1 |
| | 15.2 |
| | 16.2 |
|
| Corporate | 0.3 |
| | 0.3 |
| | 0.3 |
| 0.3 |
| | 0.3 |
| | 0.3 |
|
| | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| Total | | 100.0 | % | | 100.0 | % | | 100.0 | % |
The percentage contribution of each operating segment fluctuates over time due to net operating revenues in certain operating segments growing at a faster rate compared to other operating segments. Net operating revenue growth rates are impacted by sales volume, structural changes,volume; acquisitions and divestitures; price, product and product/geographic mix,mix; and foreign currency fluctuations. In 2012,For additional information about the percentage contributionimpact of each operating segment did not change significantly when compared to 2011. In 2011, the percentage of the Company's net operating revenues contributed by our North America operating segment increased 12.5 percentage points when compared to 2010 as a result of our acquisition of CCE's former North America business on October 2, 2010. The CCE acquisition resulted in a decrease in the proportionate share of the Company's consolidated net operating revenues contributed by our operating segments outside of North America for both 2011 and 2010. In addition, the percentage of the Company's net operating revenues contributed by our Bottling Investments operating segment decreased 5.1 percentage points in 2011 when compared to 2010, primarily due to the sale of our Norwegian and Swedish bottling operations to New CCE and the segment's proportionate decrease in the Company's consolidated net operating revenues due to the CCE acquisition in North America. Referforeign currency fluctuations, refer to the heading "Structural Changes, Acquired Brands"Liquidity, Capital Resources and New License Agreements" above.
The size and timing of structural changes are not consistent from period to period. As a result, anticipating the impact of such events on future net operating revenues, and other financial statement line items, usually is not possible. We expect structural changes to have an impact on our consolidated financial statements in future periods.Financial Position — Foreign Exchange" below.
Gross Profit Margin
Year EndedDecember 31, 2012, versus Year EndedDecember 31, 2011
Our gross profit margin decreased to 60.3 percent in 2012 from 60.9 percent in 2011. This decrease reflected the unfavorable impact of continued increases in commodity costs during 2012 as well as temporary shifts in channel and package mix across markets asAs a result of the impact of current global economic conditions on consumers. In addition, our gross profit margin was unfavorably impacted as a result of ongoing fluctuationsfinished goods operations, which are primarily included in foreign currency exchange rates and the impact of our acquisition of Great Plains in North America as well as our acquisition of bottling operations in Vietnam, Cambodia and Guatemala. The impact of these items was partially offset by favorable geographic mix as well as price increases in many of our key markets.
TheBottling Investments operating segments, the following inputs represent a substantial portion of the Company's total cost of goods sold: (1) sweeteners, (2) metals, (3) juices and (4) PET. The majority of these costs are included in our North America and Bottling Investments operating segments. The cost to purchase these inputs continued to increase in 2012 when compared to 2011, and as a result the Company incurred incremental costs of $225 million related to these inputs during 2012. The Company anticipates that the cost of underlying commodities will continue to face upward pressure in 2013. We currently expect the incremental impact of increased commodity costs related to these inputs, after considering our hedge positions, to be approximately $100 million on our full year 2013 consolidated results.
In recent years, the Company has increased ourenters into hedging activities related to certain commodities in order to mitigate a portion of the price and foreign currency risk associated with forecasted purchases. Many of the derivative financial instruments used by the Company to mitigate the risk associated with these commodity exposures, including any related foreign currency exposure, do not qualify or are not designated, for hedge accounting. As a result, the changechanges in fair value of these derivative instruments hashave been, and will continue to be, included as a component of net income in each reporting period. The Company recorded losses related to these derivatives of $110$206 million, $8 million and $54 million and a gain of $31$120 million during the years ended December 31, 2012, 20112015, 2014 and 20102013, respectively, in the line item cost of goods sold in our consolidated statements of income. Refer to Note 5 of Notes to Consolidated Financial Statements. We do not currently expect changes in commodity costs to have a significant impact on our 2016 gross profit margin as compared to 2015.
Year EndedDecember 31, 2015 versus Year EndedDecember 31, 2014
Our gross profit margin decreased to 60.5 percent in 2015 from 61.1 percent in 2014. The decrease was primarily due to the impact of acquisitions and divestitures and the unfavorable impact of foreign currency exchange rate fluctuations, partially offset by positive price mix and slightly lower commodity costs. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information related to acquisitions and divestitures.
Year Ended December 31, 2014 versus Year Ended December 31, 2013
Our gross profit margin increased to 61.1 percent in 2014 from 60.7 percent in 2013. The increase was partially due to the deconsolidation of our Brazilian bottling operations in July 2013 as well as lower commodity costs, primarily in our North America finished goods business, and favorable geographic mix. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information regarding the impact of the deconsolidation of our Brazilian bottling operations.
The favorable geographic mix was primarily due to many of ourgrowth in emerging markets recovering from the global recession at a quicker pace than our developed markets. Although this shift in geographic mix has a negative impact on net operating revenues, it generally has a favorable impact on our gross profit margin due to the correlated impact it has on our product mix. The product mix in the majority of our emerging and developing markets is more heavily skewed toward our sparkling beverage products, which generally yield a higher gross profit margin compared to our still beverages and finished products. Refer to the heading "Net Operating Revenues" above.
Year EndedDecember 31, 2011, versus Year EndedDecember 31, 2010
Our gross profit margin decreased to 60.9 percent in 2011 from 63.9 percent in 2010. The decrease was primarily due to the full year impact of consolidating CCE's former North America business as well as a significant increase in commodity costs. The unfavorable impact of these items was partially offset by favorable geographic mix as a result of growth in our emerging and developing markets, favorable product mix, price increases in many of our key markets and foreign currency exchange fluctuations. In addition, the sale of our Norwegian and Swedish bottling operations during the fourth quarter of 2010 had a favorable impact on our full year 2011 gross profit margin.52
The Company's acquisition of CCE's former North America business during the fourth quarter of 2010 resulted in a significant adjustment to our overall cost structure, especially in North America. Finished product operations typically have lower gross profit margins and greater exposure to fluctuations in the cost of raw materials when compared to concentrate operations. The following inputs represent a substantial portion of the Company's total cost of goods sold: (1) sweeteners, (2) metals, (3) juices and (4) PET. The majority of these costs are included in our North America and Bottling Investments operating segments. The cost to purchase these inputs increased significantly in 2011 when compared to 2010, and as a result the Company incurred incremental costs of $800 million related to these inputs during 2011.
Selling, General and Administrative Expenses
The following table sets forth the significant components of selling, general and administrative expenses (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| | | | As Adjusted | |
| Stock-based compensation expense | $ | 259 |
| | $ | 354 |
| | $ | 380 |
| $ | 236 |
| | $ | 209 |
| | $ | 227 |
|
| Advertising expenses | 3,342 |
| | 3,256 |
| | 2,917 |
| 3,976 |
| | 3,499 |
| | 3,266 |
|
| Bottling and distribution expenses | 8,905 |
| | 8,502 |
| | 3,902 |
| |
| Selling and distribution expenses | | 6,025 |
| | 6,412 |
| | 6,419 |
|
| Other operating expenses | 5,232 |
| | 5,310 |
| | 5,995 |
| 6,190 |
| | 7,098 |
| | 7,398 |
|
| Selling, general and administrative expenses | $ | 17,738 |
| | $ | 17,422 |
| | $ | 13,194 |
| $ | 16,427 |
| | $ | 17,218 |
| | $ | 17,310 |
|
Year EndedDecember 31, 2012,2015 versus Year EndedDecember 31, 20112014
Selling, general and administrative expenses increased $316decreased $791 million, or 25 percent. ForeignDuring the year ended December 31, 2015, fluctuations in foreign currency fluctuations decreased selling, general and administrative expenses by 36 percent. The decreaseincrease in stock-based compensation expense in 2012 was primarily due to the reversalreversals in 2014 of previously recognized expenses related to the Company's long-term incentive compensation programs. Asprograms as performance criteria were not achieved. The increase in advertising expenses reflects the Company's increased investments to strengthen our brands, partially offset by a resultforeign currency exchange impact of 13 percent. The decrease in selling and distribution expenses reflects the impact of acquisitions and divestitures. The decrease in other operating expenses reflects the shift of the Company's revised outlook of the unfavorablemarketing spending to more consumer-facing advertising expenses as well as savings from our productivity and reinvestment initiatives. Foreign currency exchange rate fluctuations have a more significant impact foreign currency fluctuations are projectedon both advertising and other operating expenses as compared to have on certain performance periods, the Company lowered the estimated payouts associated with these periods. Advertising expenses increased during the year and reflect the Company's continued investment in the health and strength of our brands and building market execution capabilities while simultaneously capturing incremental marketing efficiencies. The increase in bottlingselling and distribution expenses includes the full year impact of the Company's acquisition of Great Plainssince they are generally transacted in December 2011 as well aslocal currency. Our selling and distribution expenses are primarily related to our acquisition ofCompany-owned bottling operations, of which the majority of expenses are attributable to CCR and are primarily denominated in Vietnam, CambodiaU.S. dollars. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information related to acquisitions and Guatemala during 2012. Other operating expenses decreased during the year, partially reflecting the impact of the Company's productivity and integration initiatives.divestitures.
In 2013,2016, our pension expense is expected to decrease by approximately $60$200 million compared to 2012.2015. The anticipated decrease is primarily due to approximately $640settlement and special termination costs incurred in 2015 of $169 million, of contributions the Company expectsnew method to make to various plans in 2013, as well as favorable returns on plan assets in 2012. The favorable impact of these items will be partially offset by the unfavorable impact of a decreasecalculate service and interest costs, an increase in the weighted-average discount rate used to calculate the Company's benefit obligation.obligations and the impact of $471 million of contributions the Company made in early 2016 to U.S. pension plans. The impact of these items will be partially offset by unfavorable asset performance compared to our expected return during 2015 and a decrease in the expected return on assets for U.S. plans. Refer to the
heading "Liquidity, Capital Resources and Financial Position" below for information related to these contributions. Refer to the heading "Critical Accounting Policies and Estimates — Pension Plan Valuations" above and Note 13 of Notes to Consolidated Financial Statements for additional information related to the discount ratespension plan assumptions used by the Company.
As of December 31, 2012,2015, we had $467$319 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under our plans. This cost is expected to be recognized over a weighted-average period of 1.8 years as stock-based compensation expense. This expected cost does not include the impact of any future stock-based compensation awards. Refer to Note 12 of Notes to Consolidated Financial Statements.
Year EndedDecember 31, 2011,2014 versus Year EndedDecember 31, 20102013
Selling, general and administrative expenses increased $4,228decreased $92 million, or 321 percent. Foreign currency fluctuations increaseddecreased selling, general and administrative expenses by 32 percent. The decrease in stock-based compensation expense was primarily due to reversals in 2014 of previously recognized expenses related to the impact of modifications made to certain replacement performance share unit awards on our prior year results, partially offset by higher estimated payouts tied to performance in conjunction with ourCompany's long-term incentive compensation programs. Advertising expenses increased during the year and reflect the Company's continued investment in the health and strength of our brands and building market execution capabilities. The increase in bottling and distributionadvertising expenses was primarily duereflects the company's increased investment to the full year impact of consolidating CCE's former North America business in addition tostrengthen our continued investments in our other bottling operations around the world.brands. This increase was partially offset by the full yeara foreign currency exchange impact of 4 percent. The decrease in selling and distribution expenses is a result of the salerefranchising of certain territories in North America in 2014 and the deconsolidation of our Norwegian and SwedishBrazilian bottling operations to New CCE during the fourth quarteras a result of 2010. Other operating expenses decreased during the year, partially reflecting the impact of the Company's productivity and integration initiatives.their combination with an independent bottling partner in July 2013.
Other Operating Charges
Other operating charges incurred by operating segment were as follows (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| Eurasia & Africa | $ | — |
| | $ | 12 |
| | $ | 7 |
| $ | 16 |
| | $ | 26 |
| | $ | 2 |
|
| Europe | (3 | ) | | 25 |
| | 50 |
| (25 | ) | | 111 |
| | 57 |
|
| Latin America | — |
| | 4 |
| | — |
| 40 |
| | 295 |
| | — |
|
| North America | 255 |
| | 374 |
| | 133 |
| 384 |
| | 281 |
| | 277 |
|
| Pacific | 1 |
| | 54 |
| | 22 |
| |
| Asia Pacific | | 3 |
| | 38 |
| | 47 |
|
| Bottling Investments | 164 |
| | 89 |
| | 122 |
| 357 |
| | 247 |
| | 194 |
|
| Corporate | 30 |
| | 174 |
| | 485 |
| 882 |
| | 185 |
| | 318 |
|
| Total | $ | 447 |
| | $ | 732 |
| | $ | 819 |
| $ | 1,657 |
| | $ | 1,183 |
| | $ | 895 |
|
In 2012,2015, the Company incurred other operating charges of $447$1,657 million. These charges included $691 million, which primarily consisted of $270 million associated with due to the Company's productivity and reinvestment program; $163program and $292 million due to the integration of our German bottling operations. In addition, the Company recorded impairment charges of $418 million primarily due to the discontinuation of the energy products in the glacéau portfolio as a result of the Monster Transaction and incurred a charge of $100 million due to a cash contribution we made to The Coca-Cola Foundation. The Company also incurred a charge of $111 million due to the write-down we recorded related to the Company's other restructuringreceivables from our bottling partner in Venezuela and integration initiatives; $20 millionan impairment of a Venezuelan trademark primarily due to changes in the Company's ready-to-drink tea strategyexchange rates as a result of our U.S. license agreement with Nestlé terminating at the endestablishment of 2012; and $8 million duethe new open market exchange system. Refer to costs associated with the Company detecting carbendazim in orange juice imported from BrazilNote 18 of Notes to Consolidated Financial Statements for distribution in the United States. These charges were partially offset by reversals of $10 million associated with the refinement of previously established accruals related toadditional information on the Company's 2008–2011 productivity, initiatives, as well as reversals of $6 million associated with the refinement of previously established accruals related to the Company's integration of CCE's former North America business.and restructuring initiatives. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on the Monster Transaction. Refer to Note 1 of Notes to Consolidated Financial Statements for additional information on the Venezuelan currency change. Refer to Note 19 of Notes to Consolidated Financial Statements for the impact these charges had on our operating segments.
In 2014, the Company incurred other operating charges of $1,183 million. These charges primarily consisted of $601 million due to the Company's productivity and reinvestment program and $208 million due to the integration of our German bottling operations. In addition, the Company incurred a charge of $314 million due to a write-down we recorded related to receivables from our bottling partner in Venezuela and an impairment of a Venezuelan trademark primarily due to higher exchange rates. The write-down was recorded as a result of our revised assessment of the U.S. dollar value we expect to realize upon the conversion of the Venezuelan bolivar into U.S. dollars by our bottling partner to pay our concentrate sales receivables. The Company also recorded a loss of $36 million as a result of the restructuring and transition of the Company's Russian juice operations to an existing joint venture with an unconsolidated bottling partner. Refer to Note 18 of Notes to Consolidated Financial Statements and see below for additional information on our productivity and reinvestment program as well as the Company's other productivity, integration and restructuring initiatives. Refer to Note 1 of Notes to Consolidated Financial Statements for additional information on the Venezuelan currency rate change. Refer to Note 19 of Notes to Consolidated Financial Statements for the impact these charges had on our operating segments.
In 2013, the Company incurred other operating charges of $895 million, which primarily consisted of $494 million associated with the Company's productivity and reinvestment program; $195 million due to the impairment of certain intangible assets; $188 million due to the Company's other productivity, integration and restructuring initiatives; and $22 million due to charges associated with certain of the Company's fixed assets. Refer to Note 17 of Notes to Consolidated Financial Statements for further information on the impairment charges. Refer to Note 18 of Notes to Consolidated Financial Statements and see below for further information on the Company's productivity and reinvestment program, as well as the Company's other productivity, integration and restructuring initiatives.
In 2011, the Company incurred other operating charges of $732 million, which primarily consisted of $633 million associated with the Company's productivity, integration and restructuring initiatives; $50 million related to the events in Japan; $35 million of costs associated with the merger of Embotelladoras Arca, S.A.B. de C.V. ("Arca") and Grupo Continental S.A.B. ("Contal"); and $10 million associated with the floods in Thailand that impacted the Company's supply chain operations in the region. Refer to Note 17 of Notes to Consolidated Financial Statements for additional information related to the merger of Arca and Contal. Refer to Note 19 of Notes to Consolidated Financial Statements for the impact these charges had on our operating segments. Refer to Note 18 of Notes to Consolidated Financial Statements and see below for additional information on the Company's productivity, integration and restructuring initiatives.
In 2010, the Company incurred other operating charges of $819 million, which consisted of $478 million associated with the Company's productivity, integration and restructuring initiatives; $250 million related to charitable contributions; $81 million due to transaction costs incurred in connection with our acquisition of CCE's former North America business and the sale of our Norwegian and Swedish bottling operations to New CCE; and $10 million of charges related to bottling activities in Eurasia. The Company's integration activities included costs associated with the integration of CCE's former North America business, as well as the integration of 18 German bottling and distribution operations acquired in 2007. The charitable contributions were primarily attributable to a cash donation to The Coca-Cola Foundation. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information related to the transaction costs. Refer to Note 19 of Notes to Consolidated Financial Statements for the impact these charges had on our operating segments. Refer to Note 18 of Notes to Consolidated Financial Statements and see below for additional information on the Company's productivity, integration and restructuring initiatives.
Productivity and Reinvestment Program
In February 2012, the Company announced a new four-year productivity and reinvestment program. This program willdesigned to further enable our efforts to strengthen our brands and reinvest our resources to drive long-term profitable growth. The first component of thisThis program is a new global productivity initiative that will target annualized savings of $350 million to $400 million. This initiative will be focused on four primary areas:the following initiatives: global supply chain optimization; global marketing and innovation effectiveness; operating expense leverage and operational excellence; and data and information technology systems standardization; and the integration of Coca-Cola Enterprises Inc.'s ("IT"Old CCE") systems standardization. Theformer North America business.
In February 2014, the Company is inannounced the process of defining the costs associated with this initiative.
The second componentexpansion of our new productivity and reinvestment program involves beginning a new integration initiativeto drive an incremental $1 billion in North America related to our acquisitionproductivity by 2016 that will primarily be redirected into increased media investments. Our incremental productivity goal consists of CCE's former North America business. The Company has identified incremental synergies, primarily intwo relatively equal components. First, we will expand savings through global supply chain optimization, data and information technology system standardization, and resource and cost reallocation. Second, we will increase the areaeffectiveness of our North American product supply operations, which will better enable usmarketing investments by transforming our marketing and commercial model to serviceredeploy resources into more consumer-facing marketing investments to accelerate growth.
In October 2014, the Company announced that we are further expanding our customers and consumers. We believe these efforts will create annualized savings of $200 million to $250 million.
As a combined productivity and reinvestment program and extending it through 2019. The expansion of the productivity initiatives will focus on four key areas: restructuring the Company's global supply chain, including manufacturing in North America; implementing zero-based work, an evolution of zero-based budget principles, across the organization; streamlining and simplifying the Company's operating model; and further driving increased discipline and efficiency in direct marketing investments. The Company expects that the expanded productivity initiatives will generate an incremental $2 billion in annualized productivity. This productivity will enable the Company anticipates generating annualized savings of $550 million to $650 million, whichfund marketing initiatives and innovation required to deliver sustainable net revenue growth and will be phased inalso support margin expansion and increased returns on invested capital over time. We expect to begin fully realizingachieve total annualized productivity of approximately $3.6 billion by 2019 from the annual benefit of these savings in 2015, the final year of the program. The savings generated byinitiatives implemented under this program will be reinvestedsince it began in brand-building initiatives, and2012.
We have incurred total pretax expenses of $2,056 million since the initiative commenced in the short term will also mitigate potential incremental commodity costs.2012. Refer to Note 18 of Notes to Consolidated Financial Statements.
Productivity Initiatives
During 2011, the Company successfully completed our four-year global productivity program and exceeded our target of providing $500 million in annualized savings from these initiatives. These savings have provided the CompanyStatements for additional flexibility to invest for growth. The Company generated these savings in a number of areas, which include 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. In realizing these savings, the Company incurred total costs of $498 million related to these productivity initiatives since they commenced during the first quarter of 2008. Refer to Note 18 of Notes to Consolidated Financial Statements.information.
Integration of CCE's Former North America Business
In 2010, the Company began an integration initiative related to our acquisition of CCE's former North America business on October 2, 2010. Upon completion of the CCE transaction, we combined the management of the acquired North America 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 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. Refer to Note 2 of Notes to Consolidated Financial Statements.
In 2011, we completed this program. The Company incurred total pretax expenses of $487 million related to this initiative since the plan commenced in the fourth quarter of 2010, and we realized nearly all of the $350 million in annualized savings by the end of 2011. Refer to Note 18 of Notes to Consolidated Financial Statements.
Integration of Our German Bottling and Distribution Operations
The Company's integration initiatives include costs related toIn 2008, the Company began the integration of 18our German bottling and distribution operations acquired in 2007. We incurred expenses of $148 million in 2012 related to this initiative. The expenses recorded in connection with theseSince the integration activities have been primarily due to involuntary terminations. Thecommenced, the Company began these integration initiatives in 2008 and has incurred total pretax expenses of $440$1,127 million since they commenced. The Company is primarily related to involuntary terminations. We are currently reviewing other integration andadditional restructuring opportunities within the German bottling operations, including integration costs related to information technology and distribution operations, which ifother initiatives. If implemented, these initiatives will result in additional charges in future periods. However,Our German bottling operations are now classified as of December 31, 2012, the Company had not finalized any additional plans.held for sale. Refer to Note 18 of Notes to Consolidated Financial Statements.
Operating Income and Operating Margin
Information about our operating income contribution by operating segment on a percentage basis is as follows:
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| Eurasia & Africa | 10.8 | % | | 10.7 | % | | 11.6 | % | 11.3 | % | | 11.2 | % | | 10.6 | % |
| Europe | 27.5 |
| | 30.4 |
| | 35.4 |
| 33.1 |
| | 29.4 |
| | 28.0 |
|
| Latin America | 26.7 |
| | 27.7 |
| | 28.6 |
| 24.9 |
| | 23.8 |
| | 28.4 |
|
| North America | 24.1 |
| | 22.8 |
| | 18.1 |
| 28.5 |
| | 25.2 |
| | 23.8 |
|
| Pacific | 22.5 |
| | 21.1 |
| | 24.3 |
| |
| Asia Pacific | | 25.1 |
| | 25.2 |
| | 24.2 |
|
| Bottling Investments | 1.3 |
| | 2.2 |
| | 2.7 |
| — |
| | 0.1 |
| | 1.1 |
|
| Corporate | (12.9 | ) | | (14.9 | ) | | (20.7 | ) | (22.9 | ) | | (14.9 | ) | | (16.1 | ) |
| Total | 100.0 | % | | 100.0 | % | | 100.0 | % | 100.0 | % | | 100.0 | % | | 100.0 | % |
Information about our operating margin on a consolidated basis and by operating segment is as follows:
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| Consolidated | 22.4 | % | | 21.9 | % | | 24.0 | % | 19.7 | % | | 21.1 | % | | 21.8 | % |
| Eurasia & Africa | 41.5 | % | | 40.6 | % | | 40.4 | % | 40.7 | % | | 39.7 | % | | 39.3 | % |
| Europe | 66.1 |
| | 64.7 |
| | 67.3 |
| 63.6 |
| | 58.9 |
| | 61.5 |
|
| Latin America | 63.1 |
| | 63.9 |
| | 62.0 |
| 54.3 |
| | 50.4 |
| | 61.3 |
|
| North America | 12.0 |
| | 11.3 |
| | 13.6 |
| 11.4 |
| | 11.4 |
| | 11.3 |
|
| Pacific | 43.6 |
| | 39.4 |
| | 41.4 |
| |
| Asia Pacific | | 46.5 |
| | 46.6 |
| | 46.1 |
|
| Bottling Investments | 1.6 |
| | 2.6 |
| | 2.8 |
| — |
| | 0.1 |
| | 1.5 |
|
| Corporate | * |
| | * |
| | * |
| * |
| | * |
| | * |
|
| |
| * | Calculation is not meaningful. |
As demonstrated by the tables above, the percentage contribution to operating income and operating margin by operating segment fluctuated from year to year. Operating income and operating margin by operating segment were influenced by a variety of factors and events, including the following:55
Year Ended December 31, 2015 versus Year Ended December 31, 2014
In 2012,2015, foreign currency exchange ratesrate fluctuations unfavorably impacted consolidated operating income by 512 percent. This unfavorable impact was primarily due to a stronger U.S. dollar compared to certain foreign currencies, including the South African rand, euro, U.K. pound sterling, Brazilian real, Mexican peso, Australian dollar and Japanese yen, which had an unfavorable impact on our Eurasia and Africa, Europe, Latin America, Asia Pacific and Bottling Investments operating segments. Refer to the heading "Liquidity, Capital Resources and Financial Position — Foreign Exchange" below.
During the year ended December 31, 2015, the Company's operating income was unfavorably impacted by the refranchising of additional territories in North America and the sale of the Company's energy brands as part of the Monster Transaction. The refranchising activities unfavorably impacted our North America operating segment and the sale of the energy brands unfavorably impacted our Eurasia and Africa, Europe, Latin America, North America and Asia Pacific operating segments. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information.
Operating income for Eurasia and Africa for the years ended December 31, 2015 and 2014 was $987 million and $1,084 million, respectively. The segment was unfavorably impacted by fluctuations in foreign currency exchange rates of 16 percent, partially offset by favorable pricing across most of the segment's business units.
Operating income for Europe for the years ended December 31, 2015 and 2014 was $2,888 million and $2,852 million, respectively. The Europe group was favorably impacted by a reduction in other operating charges primarily related to the Company's productivity and reinvestment program. The favorable impact of the reduction in other operating charges was partially offset by the unfavorable impact of foreign currency exchange rate fluctuations of 3 percent.
Operating income for the Latin America segment for the years ended December 31, 2015 and 2014 was $2,169 million and $2,316 million, respectively. Foreign currency exchange rate fluctuations unfavorably impacted operating income by 31 percent, partially offset by the reduction in other operating charges and favorable price mix in all of the segment's business units.
North America's operating income for the years ended December 31, 2015 and 2014 was $2,490 million and $2,447 million, respectively. The segment was favorably impacted by price increases and product and package mix, partially offset by an increase in other operating charges.
Operating income in Asia Pacific for the years ended December 31, 2015 and 2014 was $2,189 million and $2,448 million, respectively. Operating income for the segment reflects the unfavorable impact of foreign currency exchange rate fluctuations of 8 percent.
Our Bottling Investments segment's operating income for the years ended December 31, 2015 and 2014 was zero and $9 million, respectively. The Bottling Investments segment was unfavorably impacted by an increase in other operating charges partially offset by the favorable impact of acquisitions and divestitures. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information related to acquisitions and divestitures.
The Corporate segment's operating loss for the years ended December 31, 2015 and 2014 was $1,995 million and $1,448 million, respectively. Operating loss in 2015 was unfavorably impacted by an impairment charge of $418 million primarily related to the discontinuation of the energy products in the glacéau portfolio as a result of the Monster Transaction, a charge of $100 million due to a cash contribution we made to The Coca-Cola Foundation and a $111 million charge due to an impairment of a Venezuelan trademark and a write-down the Company recorded on receivables from our bottling partner in Venezuela.
Year Ended December 31, 2014 versus Year Ended December 31, 2013
In 2014, foreign currency exchange rate fluctuations unfavorably impacted consolidated operating income by 6 percent. The unfavorable impact of changes in foreign currency exchange rates was primarily due to a stronger U.S. dollar compared to certain other foreign currencies, including the euro,South African rand, Mexican peso, Brazilian real, British pound, South African rand and Australian dollar and Japanese yen, which impacted thehad an unfavorable impact on our Eurasia and Africa, Europe, Latin America, Asia Pacific and Bottling Investments operating segments. The unfavorable impact of a stronger U.S. dollar compared to the currencies listed above was partially offset by the impact of a weaker U.S. dollar compared to certain other foreign currencies, including the Japanese yen,euro and British pound, which had a favorable impact on our Pacific operating segment. Refer to the heading "Liquidity, Capital Resources and Financial Position — Foreign Exchange" below.
In 2012, operating income was unfavorably impacted by fluctuations in foreign currency exchange rates by 11 percent for Eurasia and Africa, 4 percent for Europe, 10 percent for Latin America, 19 percent for Bottling Investments and 1 percent for Corporate. Operating income was favorably impacted by fluctuations in foreign currency exchange rates by 2 percent for Pacific. Fluctuations in foreign currency exchange rates had a minimal impact on operating income for North America.
In 2012, our consolidated operating margin was favorably impacted by geographic mix. The favorable geographic mix was primarily due to many of our emerging markets recovering from the global recession at a quicker pace than our developed markets. Although this shift in geographic mix has a negative impact on net operating revenues, it generally has a favorable impact on our gross profit margin and operating margin due to the correlated impact it has on our product mix. The product mix in the majority of our emerging and developing markets is more heavily skewed toward products in our sparkling beverage portfolio, which generally yield a higher gross profit margin compared to our still beverages and finished products. Consequently, the shift in our geographic mix is driving favorable product mix from a global perspective.
In 2012, our consolidated operating income and operating margin were favorably impacted by the reversal of previously recognized expenses related to the Company's long-term incentive compensation programs. As a result of the Company's revised outlook of the unfavorable impact foreign currency fluctuations are projected to have on certain performance periods, the Company lowered the estimated payouts associated with these periods.
In 2012, operating income increased for Eurasia and Africa due to volume and revenue growth across the operating segment.
In 2012, operating income declined for Europe as a result of lower sales volume and shifts in product, package and channel mix across markets, partially offset by efficient expense management.
In 2012, operating income increased for Latin America, reflecting solid volume growth and favorable pricing across the group, partially offset by continued investments in the business, including some initial investments related to the 2014 World Cup.
In 2012, operating income increased for North America, primarily due to positive volume growth and favorable pricing, partially offset by higher commodity costs and ongoing investment in marketplace executional capabilities.
In 2012, operating income was reduced by $21 million for North America due to costs associated with the Company detecting residues of carbendazim, a fungicide that is not registered in the United States for use on citrus products, in orange juice imported from Brazil for distribution in the United States. As a result, the Company began purchasing additional supplies of Florida orange juice at a higher cost than Brazilian orange juice.
In 2012, operating income was reduced by $20 million for North America due to changes in the Company's ready-to-drink tea strategy as a result of our current U.S. license agreement with Nestlé terminating at the end of 2012.
In 2012, operating income was reduced by $1 million for Europe, $227 million for North America, $3 million for Pacific, $164 million for Bottling Investments and $38 million for Corporate due to charges related to the Company's productivity and reinvestment program as well as other restructuring initiatives.
In 2012, operating income was increased by $4 million for Europe, $1 million for Pacific and $5 million for Corporate due to the refinement of previously established accruals related to the Company's 2008–2011 productivity initiatives.
In 2012, operating income was increased by $6 million for North America due to the refinement of previously established accruals related to the Company's integration of CCE's former North America business.
In 2011, foreign currency exchange rates favorably impacted consolidated operating income by 4 percent. The favorable impact of changes in foreign currency exchange rates was primarily due to a weaker U.S. dollar compared to most foreign currencies, including the Japanese yen, Mexican peso, Brazilian real, British pound, South African rand and Australian dollar, which had a favorable impact on the Eurasia and Africa, Europe, Latin America, Pacific and Bottling Investments operating segments. Refer to the heading "Liquidity, Capital Resources and Financial Position — Foreign Exchange" below.
In 2011, operating income was favorably impacted by fluctuations in foreign currency exchange rates by 2 percent for Europe, 4 percent for Latin America, 1 percent for North America, 7 percent for Pacific, 7 percent for Bottling Investments and 1 percent for Corporate. Operating income was unfavorably impacted by fluctuations in foreign currency exchange rates by 1 percent for Eurasia and Africa.
In 2011, our consolidated operating margin was favorably impacted by geographic mix. The favorable geographic mix was primarily due to many of our emerging markets recovering from the global recession at a quicker pace than our developed markets. Although this shift in geographic mix has a negative impact on net operating revenues, it generally has a favorable impact on our gross profit margin and operating margin due to the correlated impact it has on our product mix. The product mix in the majority of our emerging and developing markets is more heavily skewed toward products in our sparkling beverage portfolio, which generally yield a higher gross profit margin compared to our still beverages and finished products.
In 2011, operating income and operating margin for Europe were unfavorably impacted by a change in our concentrate pricing strategy in Germany with our consolidated bottler.
In 2011, operating income and operating margin for Latin America were favorably impacted by volume growth across all of the group's business units and pricing increases in key markets, partially offset by continued investments in the business.
In 2011, the operating margin for North America was unfavorably impacted by the full year impact of the Company's acquisition of CCE's former North America business. Generally, bottling and finished product operations have higher net operating revenues but lower operating margins when compared to concentrate and syrup operations. The impact of this transaction was also reflected in the Company's operating margin. Refer to the heading "Structural Changes, Acquired Brands and New License Agreements" above.
In 2011, operating income and operating margin for North America were unfavorably impacted by higher commodity costs in the segment's finished product businesses.
In 2011, operating income was reduced by $19 million for North America due to the amortization of favorable supply contracts acquired in connection with our acquisition of CCE's former North America business.
In 2011, operating income and operating margin for Pacific and North America were unfavorably impacted as a result of the earthquake and tsunami that devastated northern and eastern Japan on March 11, 2011. Operating income was reduced by $82 million and $2 million for Pacific and North America, respectively. The charges were primarily related to the Company's charitable donations in support of relief and rebuilding efforts in Japan as well as funds we provided to certain bottling partners in the affected regions.
In 2011, operating income was reduced by $10 million for Corporate due to charges associated with the floods in Thailand that impacted the Company's supply chain operations in the region.
In 2011, operating income was reduced by $12 million for Eurasia and Africa, $25 million for Europe, $4 million for Latin America, $374 million for North America, $4 million for Pacific, $89 million for Bottling Investments and $164 million for Corporate, primarily due to the Company’s productivity, integration and restructuring initiatives as well as costs associated with the merger of Arca and Contal.
In 2010, foreign currency exchange rates favorably impacted consolidated operating income by 3 percent. The favorable impact of changes in foreign currency exchange rates was primarily due to a weaker U.S. dollar compared to most foreign currencies, including the Japanese yen, Mexican peso, Brazilian real, South African rand and Australian dollar, which had a favorable impact on the Eurasia and Africa, Latin America, Pacific and Bottling Investments operating segments. The favorable impact of a weaker U.S. dollar compared to the aforementioned currencies was partially offset by the impact of a stronger U.S. dollar compared to certain other foreign currencies, including the euro and British pound, which had an unfavorable impact on the Europe and Bottling Investments operating segments. Refer to the heading "Liquidity, Capital Resources and Financial Position — Foreign Exchange" below.
In 2010, operatingOperating income was favorably impacted by fluctuations in foreign currency exchange rates by 7 percent for Eurasia and Africa 3 percent for Latin America, 8 percent for Pacificthe years ended December 31, 2014 and 9 percent for Bottling Investments. Operating income2013 was $1,084 million and $1,087 million, respectively. The segment was unfavorably impacted by fluctuations in foreign currency exchange rates by 1 percent for Europe. Fluctuations inof 12 percent. The unfavorable impact of the foreign currency exchange rates had a minimal impact onwas offset by favorable pricing across many of the segment's markets.
Europe’s operating income for North Americathe years ended December 31, 2014 and Corporate.
In 2010, our consolidated operating margin2013 was $2,852 million and $2,859 million, respectively. The Europe group was favorably impacted by geographic mix.foreign currency exchange rate fluctuations of 2 percent. The favorable geographic miximpact of the foreign currency exchange rate fluctuations was primarily due to many of our emerging markets recovering from the global recession at a quicker pace than our developed markets. Although this shift in geographic mix has a negative impact on net operating revenues, it generally has a favorable impact on our gross profit marginoffset by lower concentrate sales volume and operating margin dueincreased charges related to the correlated impact it has on our product mix. The product mixCompany’s productivity and reinvestment program.
Operating income in Latin America for the majority of our emergingyears ended December 31, 2014 and developing markets is more heavily skewed toward products in our sparkling beverage portfolio, which generally yield a higher gross profit margin compared to our still beverages2013 was $2,316 million and finished products.
In 2010, our consolidated$2,908 million, respectively. Foreign currency exchange rate fluctuations and the Venezuelan Fair Price Law unfavorably impacted operating marginincome by 12 percent and 9 percent, respectively. Operating income was favorablyalso unfavorably impacted by the deconsolidationwrite-down of certain entities as a resultreceivables from our local bottling partner in Venezuela. Refer to Note 1 of Notes to Consolidated Financial Statements for additional information on the write-down of receivables. The impact of these items was partially offset by favorable price mix in all of the Company's adoption of new accounting guidance issued by the FASB. These entities are primarily bottling operations and have been accounted for under the equity method of accounting since they were deconsolidated on January 1, 2010. Generally, bottling and finished product operations produce higher net revenues but lowersegment's business units.
North America's operating margins compared to concentrate and syrup operations. The majority of the deconsolidated entities had previously been included in our Bottling Investments operating segment.
In 2010, the operating marginincome for the Latin America operatingyears ended December 31, 2014 and 2013 was $2,447 million and $2,432 million, respectively. The segment was favorably impacted by positive price mix and lower commodity costs, partially offset by increased marketing investments.
Operating income in Asia Pacific for the saleyears ended December 31, 2014 and 2013 was $2,448 million and $2,478 million, respectively. Operating income was favorably impacted by a 5 percent increase in concentrate sales and a reduction in operating expenses, offset by the unfavorable impact of 50 percentforeign currency exchange rate fluctuations of our ownership interest8 percent.
Our Bottling Investments segment's operating income for the years ended December 31, 2014 and 2013 was $9 million and $115 million, respectively. The primary reason for the decrease in Leão Junior, resulting in its deconsolidation, as well asoperating income was the deconsolidation of certain entities as a result of the Company's adoption of new accounting guidance issuedBrazilian bottling operations in July 2013 and increased restructuring expenses incurred by our German bottling operations. In addition, fluctuations in foreign currency unfavorably impacted the FASB. Price and product mix also favorably impacted Latin America'ssegment's 2014 operating income andby 4 percent.
The Corporate segment's operating margin during the year.
In 2010, the operating marginloss for the North America operating segmentyears ended December 31, 2014 and 2013 was $1,448 million and $1,651 million, respectively. Operating loss in 2013 was unfavorably impacted by the Company's acquisition of CCE's former North America business. Generally, bottling and finished product operations have higher net operating revenues but lower operating margins when compared to concentrate and syrup operations. Refer to the heading "Structural Changes, Acquired Brands and New License Agreements" above. Refer to Note 2 of Notes to Consolidated Financial Statements.
In 2010, operating income for the North America operating segment was reduced by $74a $195 million charge due to the accelerationimpairment of expense associated with certain share-based replacement awards issued in connection with our acquisition of CCE's former North America business. Refer to Note 2 of Notes to Consolidated Financial Statements.intangible assets.
In 2010, operating income for the North America operating segment was negatively impacted by $235 million, primarily due to the elimination of gross profit in inventory on intercompany sales and an inventory fair value adjustment as a result of our acquisition of CCE's former North America business. Prior to the acquisition, we recognized the profit associated with concentrate sales when the concentrate was sold to CCE, excluding the portion that was deemed to be intercompany due to our previous ownership interest in CCE. However, subsequent to the acquisition, the Company does not recognize the profit associated with concentrate sold to CCE's legacy North America business until the finished beverage products made from those concentrates are sold. Refer to Note 2 of Notes to Consolidated Financial Statements.
In 2010, operating income for the North America operating segment was reduced by $20 million due to the amortization of favorable supply contracts acquired in connection with our acquisition of CCE's former North America business.
In 2010, operating income was reduced by $7 million for Eurasia and Africa, $50 million for Europe, $133 million for North America, $22 million for Pacific, $122 million for Bottling Investments and $485 million for Corporate, primarily due to the Company's productivity, integration and restructuring initiatives; charitable donations; transaction costs incurred in connection with our acquisition of CCE's former North America business and the sale of our Norwegian and Swedish bottling operations to New CCE; and other charges related to bottling activities in Eurasia. Refer to the heading "Other Operating Charges" above.
Interest Income
Year Ended December 31, 20122015, versus Year Ended December 31, 20112014
Interest income was $471613 million in 20122015, compared to $594 million in 2014, an increase of $19 million, or 3 percent. The increase primarily reflects higher average cash and investment balances and higher average interest rates in certain of our international locations, partially offset by the unfavorable impact of fluctuations in foreign currency exchange rates due to a stronger U.S. dollar against most major currencies.
Year EndedDecember 31, 2014 versus Year EndedDecember 31, 2013
Interest income was $594 million in 2014, compared to $534 million in 2013, an increase of $60 million, or 11 percent. The increase primarily reflects higher cash balances and higher average interest rates in certain of our international locations, partially offset by the unfavorable impact of fluctuations in foreign currency exchange rates due to a stronger U.S. dollar against most major currencies.
Interest Expense
Year EndedDecember 31, 2015 versus Year EndedDecember 31, 2014
Interest expense was $856 million in 2015, compared to $483 million in 20112014, a decreasean increase of $12$373 million, or 277 percent. The decrease wasincrease is primarily due to charges of $320 million the Company recorded on the early extinguishment of certain long-term debt. These charges included the difference between the reacquisition price and the net carrying amount of the debt extinguished, including the impact of lower average interest rates, partially offset by higher average cash, cash equivalentsthe related fair value hedging relationship. Interest expense also increased as a result of an overall increase in the total debt balances and a shift in the mix of our debt portfolio from short-term investment balances. The majorityto long-term debt. During the year ended December 31, 2015, the Company issued SFr1,325 million, €8,500 million and $4,000 million of long-term debt. Refer to Note 5 of Notes to Consolidated Financial Statements for additional information related to the Company's cash, cash equivalentshedging program. Refer to the heading "Liquidity, Capital Resources and short-term investments is held by our international locations.Financial Position — Cash Flows from Financing Activities — Debt Financing" below and Note 10 of Notes to Consolidated Financial Statements for additional information related to the Company's long-term debt.
Year Ended December 31, 20112014, versus Year Ended December 31, 20102013
Interest incomeexpense was $483 million in 20112014, compared to $317463 million in 20102013, an increase of $166$20 million, or 524 percent. The increase was primarily due to the impact of higher average cash, cash equivalents and short-term investment balances in addition to higher average interest rates, particularly in international locations. The majority of the Company's cash, cash equivalents and short-term investments is held by our international locations.
Interest Expense
Year EndedDecember 31, 2012, versus Year EndedDecember 31, 2011
Interest expense was $397 million in 2012, compared to $417 million in 2011, a decrease of $20 million, or 5 percent. This decrease reflects the impact of long-term debt maturities during the second quarter of 2012 and a net benefit related to interest rate swaps on our fixed-rate debt, partially offset by the impact of additional long-term debt the Company issued during late 2013 and 2014 as well as the first quarterunfavorable impact of 2012.interest rate swaps. In addition, interest expense in 2013 included charges related to the Company's early extinguishment of long-term debt. Refer to Note 5 of Notes to Consolidated Financial Statements for additional information related to the Company's hedging program. Refer to the heading "Liquidity, Capital Resources and Financial Position — Cash Flows from Financing Activities — Debt Financing" below for additional information related to the Company's long-term debt activity.
Year EndedDecember 31, 2011, versus Year EndedDecember 31, 2010
Interest expense was $417 million in 2011, compared to $733 million in 2010, a decrease of $316 million, or 43 percent. This decrease was primarily due to a $342 million charge recorded in 2010 related to the premiums paid to repurchase long-term debt and the costs associated with the settlement of treasury rate locks issued in connection with the Company's debt tender offer in 2010. The decrease was partially offset by the full year impact of increased interest expense on long-term debt assumed in connection with the Company's acquisition of CCE's former North America business as well as additional long-term debt issued by the Company in 2011. The Company's interest expense also includes the impact of interest rate swap agreements. Refer to Note 5 of Notes to Consolidated Financial Statements for additional information related to our interest rate swaps. Refer to the heading "Liquidity, Capital Resources and Financial Position — Cash Flows from Financing Activities — Debt Financing" below for additional information related to the Company's long-term debt activity.debt.
Equity Income (Loss) — Net
Year Ended December 31, 20122015, versus Year Ended December 31, 20112014
Equity income (loss) — net represents our Company's proportionate share of net income or loss from each of our equity method investees. In 2015, equity income was $489 million, compared to equity income of $769 million in 2014, a decrease of $280 million, or 36 percent. This decrease reflects, among other items, the unfavorable impact of the challenging economic conditions around the world where many of our equity method investees operate and fluctuations in foreign currency exchange rates due to a stronger U.S. dollar against most major currencies. The impact of these items was partially offset by the impact of acquisitions of equity investees. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information.
Year EndedDecember 31, 20142012 versus Year EndedDecember 31, 2013
In 2014, equity income was $819769 million, compared to equity income of $690602 million in 20112013, an increase of $129$167 million, or 1928 percent. This increase was primarily due to more favorable operating results reported by certainseveral of our equity method investees, a decrease in the impact of unusual or infrequent charges recorded by certain of our equity method investees, and the Company's acquisitiondeconsolidation of our Brazilian bottling operations during 2013, which is now an equity ownership interest in Aujan during 2012,method investee. This increase was partially offset by the unfavorable impact of foreign currency fluctuations. Refer to Note 17 of Notes to Consolidated Financial Statements for additional information related to the unusual or infrequent charges recorded by certain of our equity method investees.
Year EndedDecember 31, 2011, versus Year EndedDecember 31, 201058
In 2011, equity income was $690 million, compared to equity income of $1,025 million in 2010, a decrease of $335 million, or 33 percent. This decrease was primarily due to the Company's acquisition and consolidation of CCE's former North America business during the fourth quarter of 2010. As a result of this transaction, the Company stopped recording equity income related to CCE beginning October 2, 2010, and our 2011 consolidated statement of income reflects the full year impact of not having an equity interest in New CCE. Refer to the heading "Structural Changes, Acquired Brands and New License Agreements" above. In addition, the decrease in equity income (loss) — net was partially due to the Company's sale of its investment in Coca-Cola Embonor, S.A. ("Embonor") during the first quarter of 2011. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on the Company's acquisition and divestiture activities. The unfavorable impact of these items was partially offset by the Company's proportionate share of increased net income from certain of our equity method investees and the favorable impact of foreign currency fluctuations.
Other Income (Loss) — Net
Other income (loss) — net includes, among other things, the impact of foreign currency exchange gains and losses; dividend income; rental income; gains and losses related to the disposal of property, plant and equipment; gains and losses related to business combinations and disposals; realized and unrealized gains and losses on trading securities; realized gains and losses on available-for-sale securities; other-than-temporary impairments of available-for-sale securities; and the accretion of expense related to certain acquisitions. The foreign currency exchange gains and losses are primarily the result of the remeasurement of monetary assets and liabilities from certain currencies into functional currencies. The effects of the remeasurement of these assets and liabilities are partially offset by the impact of our economic hedging program for certain exposures on our consolidated balance sheets. Refer to Note 5 of Notes to Consolidated Financial Statements.
In 2012,2015, other income (loss) — net was income of $137631 million. This income included a net gain of $1,403 million as a result the Monster Transaction, primarily due to the difference in the recorded carrying value of the assets transferred, including an allocated portion of goodwill, compared to the value of the total assets and business acquired. Other income (loss) — net also included net foreign currency exchange gains of $149 million and dividend income of $83 million. This income was partially offset by noncash losses of $1,006 million due to refranchising activities in North America. The net foreign currency exchange gains included a gain of $300 million associated with our foreign-denominated debt partially offset by a charge of $27 million due to the initial remeasurement of the net monetary assets of our Venezuelan subsidiary using the SIMADI exchange rate. The Company determined that based on its economic circumstances, the SIMADI rate best represented the applicable rate at which future transactions could be settled, including the payment of dividends. As such, the Company remeasured the net assets related to its operations in Venezuela using the current SIMADI rate. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on the Monster Transaction and North America refranchising. Refer to the heading "Liquidity, Capital Resources and Financial Position — Foreign Exchange" below and Note 1 of Notes to Consolidated Financial Statements for additional information on the charge due to the change in Venezuelan exchange rates.
In 2014, other income (loss) — net was a loss of $1,263 million, primarily due to noncash losses of $799 million related to the refranchising of certain territories in North America and foreign exchange losses of $569 million, including a charge of $372 million due to the remeasurement of the net monetary assets of our Venezuelan subsidiary using the SICAD 2 exchange rate. These charges were partially offset by dividend income of $51 million and net gains of $45 million related to fluctuations in the carrying value of the Company's trading securities and sales of available-for-sale securities. Refer to Note 1, Note 2 and Note 17 of Notes to Consolidated Financial Statements.
In 2013, other income (loss) — net was income of $576 million, primarily related to a gain of $185$615 million due to the mergerdeconsolidation of Embotelladora Andina S.A. ("Andina") and Embotelladoras Coca-Cola Polar S.A. ("Polar");our Brazilian bottling operations as a result of their combination with an independent bottling partner; a gain of $92$139 million the Company recognized as a result of Coca-Cola FEMSA, an equity method investee, issuing additional shares of its own stock at per share amounts greater than the carrying value of the Company's per share investment; and dividend income of $44 million; and net gains of $31 million related to fluctuations in the fair value of the Company's trading securities and the sale of available-for-sale securities.$70 million. The favorable impact of the previousthese items was partially offset by a charge of $108$140 million due to the loss we recognized ondevaluation of the pending sale ofVenezuelan bolivar, which resulted in the Company remeasuring the net assets related to its operations in Venezuela, and a majority ownership interest in our consolidated Philippine bottling operations to Coca-Cola FEMSA; anet charge of $82$114 million related to the premium we paidour investment in excess of the publicly traded market pricefour bottling partners that merged during 2013 to acquire an ownership interest in Mikuni Coca-Cola Bottling Co., Ltd. ("Mikuni"); and charges of $16 million due to other-than-temporary declines in the fair values of certain cost method investments.form CCEJ through a share exchange. Refer to Note 2 andNote 17 of Notes to Consolidated Financial Statements.
In 2011, other income (loss) — net was income of $529 million, primarily related to a net gain of $417 million the Company recognized due to the merger of Arca and Contal; a net gain of $122 million the Company recognized due to Coca-Cola FEMSA issuing additional shares of its own stock at per share amounts greater than the carrying value of the Company's per share investment, partially offset by charges associated with certain of the Company's equity method investments in Japan; and a gain of $102 million due to the sale of our investment in Embonor. Other income (loss) — net also included $10 million of realized and unrealized gains on trading securities. The net favorable impact of the previous items was partially offset by foreign currency exchange losses of $73 million; charges of $41 million due to the impairment of an investment in an entity accounted for under the equity method of accounting; $17 million due to other-than-temporary declines in the fair value of certain of the Company's available-for-sale securities; and $5 million due to the finalization of working capital adjustments associated with the sale of our Norwegian and Swedish bottling operations to New CCE during the fourth quarter of 2010. Refer to Note 17 of Notes to Consolidated Financial Statements.
In 2010, other income (loss) — net was income of $5,185 million, primarily related to a $4,978 million gain due to the remeasurement of our equity investment in CCE to fair value upon the close of our acquisition of CCE's former North America business and a $597 million gain related to the sale of all our ownership interests in our Norwegian and Swedish bottling operations to New CCE. Refer to the heading "Structural Changes, Acquired Brands and New License Agreements" above and Note 2 of Notes to Consolidated Financial Statements. These gains were partially offset by a $265 million charge related to preexisting relationships with CCE and foreign currency exchange losses of $148 million. The charge related to preexisting relationships was primarily due to the write-off of our investment in infrastructure programs with CCE. The foreign currency exchange losses were primarily due to a charge of $103 million related to the remeasurement of our Venezuelan subsidiary's net assets. Refer to the heading "Liquidity, Capital Resources and Financial Position — Foreign Exchange" below. In addition to the items mentioned above, other income (loss) — net also included a $23 million gain on the sale of 50 percent of our investment in Leão Junior and $48 million of charges related to other-than-temporary impairments and a donation of preferred shares in one of our equity investees. Refer to Note 17 of Notes to Consolidated Financial Statements.
Income Taxes
Our effective tax rate reflects the tax benefits of having significant operations outside the United States, which are generally taxed at rates lower than the U.S. statutory rate of 3535.0 percent. As a result of employment actions and capital investments made by the Company, certain tax jurisdictions provide income tax incentive grants, including Brazil, Costa Rica, Singapore and Swaziland. The terms of these grants expire from 20152016 to 20202023. We expect each ofanticipate that we will be able to extend or renew the grants in these grants to be renewed indefinitely.locations. Tax incentive grants favorably impacted our income tax expense by $168223 million, $193265 million and $145279 million for the years ended December 31, 20122015, 20112014 and 20102013, respectively. In addition, our effective tax rate reflects the benefits of having significant earnings generated in investments accounted for under the equity method of accounting, which are generally taxed at rates lower than the U.S. statutory rate.
A reconciliation of the statutory U.S. federal tax rate and our effective tax rate is as follows:
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| | 2015 |
| | 2014 |
| | 2013 |
| |
| | | | As Adjusted | |
| Statutory U.S. federal tax rate | 35.0 | % | | 35.0 | % | | 35.0 | % | | 35.0 | % | | 35.0 | % | | 35.0 | % | |
| State and local income taxes — net of federal benefit | 1.1 |
| | 0.9 |
| | 0.6 |
| | 1.2 |
| | 1.0 |
| | 1.0 |
| |
| Earnings in jurisdictions taxed at rates different from the statutory U.S. federal rate | (9.5 | ) | 1,2 | (9.5 | ) | 5,6,7 | (5.6 | ) | 15 | |
| Reversal of valuation allowances | (2.4 | ) | 3 | — |
| | — |
| | |
| Earnings in jurisdictions taxed at rates different from the statutory U.S. federal tax rate | | (12.7 | ) | 1 | (11.5 | ) | 6,7 | (10.3 | ) | 10,11,12 |
| Equity income or loss | (2.0 | ) | | (1.4 | ) | 8 | (1.9 | ) | 16 | (1.7 | ) | 2 | (2.2 | ) | | (1.4 | ) | 13 |
| CCE transaction | — |
| | — |
| | (12.5 | ) | 17,18 | |
| Sale of Norwegian and Swedish bottling operations | — |
| | — |
| 9 | 0.4 |
| 19 | |
| Other operating charges | 0.4 |
| 4 | 0.3 |
| 10 | 0.4 |
| 20 | 1.2 |
| 3,4 | 2.9 |
| 8,9 | 1.2 |
| 14 |
| Other — net | 0.5 |
| | (0.8 | ) | 11,12,13,14 | 0.3 |
| 21,22 | 0.3 |
| 5 | (1.6 | ) | | (0.7 | ) | |
| Effective tax rate | 23.1 | % | | 24.5 | % | | 16.7 | % | | 23.3 | % | | 23.6 | % | | 24.8 | % | |
| |
1 | Includes a pretax charge of $27 million (or a 0.1 percent impact on our effective tax rate) due to the remeasurement of the net monetary assets of our local Venezuelan subsidiary into U.S. dollars using the SIMADI exchange rate. Refer to Note 1 and Note 17 of Notes to Consolidated Financial Statements. |
| |
2 | Includes a tax benefit of $5 million on a pretax charge of $87 million (or a 0.3 percent impact on our effective tax rate) related to our proportionate share of unusual or infrequent items recorded by our equity method investees. Refer to Note 17 of Notes to Consolidated Financial Statements. |
| |
3 | Includes a tax benefit of $45 million on a pretax charge of $225 million (or a 0.3 percent impact on our effective tax rate) primarily due to an impairment of a Venezuelan trademark, a write-down of receivables from our bottling partner in Venezuela, a cash contribution to The Coca-Cola Foundation and charges associated with ongoing tax litigation. Refer to Note 1 and Note 17 of Notes to Consolidated Financial Statements. |
| |
4 | Includes a tax benefit of $259 million on pretax charges of $983 million (or a 0.9 percent impact on our effective tax rate) primarily related to the Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 18 of Notes to Consolidated Financial Statements. |
| |
5 | Includes tax expense of $133$150 million on pretax income of $77 million (or a 1.11.3 percent impact on our effective rate) primarily due to the gain related to the Monster Transaction, offset by charges related to the refranchising of certain territories in North America and charges associated with the early extinguishment of long-term debt. Refer to Note 2 and Note 17 of Notes to Consolidated Financial Statements. |
| |
6 | Includes tax expense of $6 million on a pretax net charge of $372 million (or a 1.5 percent impact on our effective tax rate) due to the remeasurement of the net monetary assets of our local Venezuelan subsidiary into U.S. dollars using the SICAD 2 exchange rate. Refer to Note 1 of Notes to Consolidated Financial Statements. |
| |
7 | Includes tax expense of $18 million (or a 0.2 percent impact on our effective tax rate) related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions. |
| |
28
| Includes a tax expense of $57$55 million on a pretax net gainscharge of $76$352 million (or a 0.31.9 percent impact on our effective tax rate) relatedprimarily due to an impairment of a Venezuelan trademark, a write-down on receivables from our bottling partner in Venezuela, a charge associated with certain of the following: a gain recognizedCompany's fixed assets, and as a result of the merger of Andinarestructuring and Polar; a gain recognized as a result of Coca-Cola FEMSA, an equity method investee, issuing additional shares of its own stock at a per share amount greater than the carrying valuetransition of the Company's per share investment; the loss recognized on the pending sale of a majority ownership interest in our consolidated Philippine bottlingRussian juice operations to Coca-Cola FEMSA; and the expense recorded for the premium the Company paid over the publicly traded market price to acquire an ownership interest in Mikuni.existing joint venture with an unconsolidated bottling partner. Refer to Note 1 and Note 17 of Notes to Consolidated Financial Statements. |
| |
3
| Relates to a net tax benefit of $283 million associated with the reversal of valuation allowances in certain of the Company's foreign jurisdictions. |
| |
49
| Includes a tax benefit of $95$191 million on pretax charges of $416$809 million (or a 0.41 percent impact on our effective tax rate) primarily related to the Company's productivity and reinvestment program as well as other restructuring initiatives; the refinement of previously established accruals related to the Company's 2008–2011 productivity initiatives; and the refinement of previously established accruals related to the Company's integration of CCE's former North America business.initiatives. Refer to Note 18 of Notes to Consolidated Financial Statements. |
| |
5
| Includes a tax benefit of $6 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions.
|
| |
6
| Includes a zero percent effective tax rate on pretax charges of $17 million due to the impairment of available-for-sale securities. Refer to Note 3 and Note 17 of Notes to Consolidated Financial Statements.
|
| |
7
| Includes a tax expense of $299 million on pretax net gains of $641 million (or a 0.7 percent impact on our effective tax rate) related to the net gain recognized as a result of the merger of Arca and Contal; the gain recognized on the sale of our investment in Embonor; and gains the Company recognized as a result of Coca-Cola FEMSA, an equity method investee, issuing additional shares of its own stock at per share amounts greater than the carrying value of the Company's per share investment. These gains were partially offset by charges associated with certain of the Company's equity method investments in Japan. Refer to Note 17 of Notes to Consolidated Financial Statements.
|
| |
8
| Includes a tax benefit of $7 million on pretax net charges of $53 million (or a 0.1 percent impact on our effective tax rate) related to our proportionate share of asset impairments and restructuring charges recorded by certain of our equity method investees. Refer to Note 17 of Notes to Consolidated Financial Statements.
|
| |
9
| Includes a tax benefit of $2 million on pretax charges of $5 million related to the finalization of working capital adjustments on the sale of our Norwegian and Swedish bottling operations. Refer to Note 2 and Note 17 of Notes to Consolidated Financial Statements.
|
| |
10 | Includes a tax benefit of $224 million on pretax charges of $732$26 million (or a 0.3 percent impact on our effective tax rate) primarily related to the Company's productivity, integration and restructuring initiatives; transaction costs incurred in connection with the merger of Arca and Contal; costs associated with the earthquake and tsunami that devastated northern and eastern Japan; and costs associated with the flooding in Thailand. Refer to Note 17 of Notes to Consolidated Financial Statements. |
| |
11
| Includes a tax benefit of $8 million on pretax charges of $19 million related to the amortization of favorable supply contracts acquired in connection with our acquisition of CCE's former North America business.
|
| |
12
| Includes a tax benefit of $3 million on pretax net charges of $9 million related to the repurchase and/or exchange of certain long-term debt assumed in connection with our acquisition of CCE's former North America business as well as the early extinguishment of certain other long-term debt. Refer to Note 10 of Notes to Consolidated Financial Statements.
|
| |
13
| Includes a tax benefit of $14 million on pretax charges of $41 million related to the impairment of an investment in an entity accounted for under the equity method of accounting. Refer to Note 17 of Notes to Consolidated Financial Statements.
|
| |
14
| Includes a tax benefit of $2 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in certain domestic jurisdictions.
|
| |
15
| Includes a tax expense of $265 million (or a 1.9 percent impact on our effective tax rate) primarily related to deferred tax expense on certain current year undistributed foreign earnings that are not considered indefinitely reinvested and amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties.
|
| |
16
| Includes a tax benefit of $9 million on pretax net charges of $66 million (or a 0.1 percent impact on our effective tax rate) related to charges recorded by our equity method investees. Refer to Note 17 of Notes to Consolidated Financial Statements.
|
| |
17
| Includes a tax benefit of $34 million on a pretax gain of $4,978 million (or a reduction of 12.5 percent on our effective tax rate) related to the remeasurement of our equity investment in CCE to fair value upon our acquisition of CCE's former North America business. The tax benefit reflects the impact of reversing deferred tax liabilities associated with our equity investment in CCE prior to the acquisition. Refer to Note 2 of Notes to Consolidated Financial Statements.
|
| |
18
| Includes a tax benefit of $99 million on pretax charges of $265 million related to the write-off of preexisting relationships with CCE. Refer to Note 2 of Notes to Consolidated Financial Statements.
|
| |
19
| Includes a tax expense of $261 million on a pretax gain of $597 million (or a 0.4 percent impact on our effective tax rate) related to the sale of our Norwegian and Swedish bottling operations. Refer to Note 2 of Notes to Consolidated Financial Statements.
|
| |
20
| Includes a tax benefit of $223 million on pretax charges of $819 million (or a 0.4 percent impact on our effective tax rate) primarily related to the Company's productivity, integration and restructuring initiatives, transaction costs and charitable contributions. Refer to Note 17 of Notes to Consolidated Financial Statements.
|
| |
21
| Includes a tax benefit of $114 million on pretax charges of $493 million (or a 0.5 percent impact on our effective tax rate) related to the repurchase of certain long-term debt and costs associated with the settlement of treasury rate locks issued in connection with the debt tender offer; the loss related to the remeasurement of our Venezuelan subsidiary's net assets; other-than-temporary impairment charges; and a donation of preferred shares in one of our equity method investees. Refer to Note 17 of Notes to Consolidated Financial Statements.
|
| |
22
| Includes a tax expense of $31 million (or a 0.2 percent impact on our effective tax rate) related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions.
|
| |
11 | Includes tax expense of $279 million on pretax net gains of $501 million (or a 0.9 percent impact on our effective tax rate) related to the deconsolidation of our Brazilian bottling operations upon their combination with an independent bottler and a loss due to the merger of four of the Company's Japanese bottling partners. Refer to Note 2 and Note 17 of Notes to Consolidated Financial Statements. |
| |
12 | Includes tax expense of $3 million (or a 0.5 percent impact on our effective tax rate) related to a charge of $149 million due to the devaluation of the Venezuelan bolivar. Refer to Note 19 of Notes to Consolidated Financial Statements. |
| |
13 | Includes a tax benefit of $8 million on a pretax charge of $159 million (or a 0.4 percent impact on our effective tax rate) related to our proportionate share of unusual or infrequent items recorded by our equity method investees. Refer to Note 17 of Notes to Consolidated Financial Statements. |
| |
14 | Includes a tax benefit of $175 million on pretax charges of $877 million (or a 1.2 percent impact on our effective tax rate) primarily related to impairment charges recorded on certain of the Company's intangible assets and charges related to the Company's productivity and reinvestment program as well as other tax matters in certain domestic jurisdictions.restructuring initiatives. Refer to Note 17 and Note 18 of Notes to Consolidated Financial Statements. |
In 2010, the Company recorded a $4,978 million pretax remeasurement gain associated with the acquisition of CCE's former North America business. This remeasurement gain was not recognized for tax purposes and therefore no tax expense was recorded on this gain. Also, as a result of this acquisition, the Company was required to reverse $34 million of deferred tax liabilities which were associated with our equity investment in CCE prior to the acquisition. In addition, the Company recognized a $265 million charge related to the settlement of preexisting relationships with CCE, and we recorded a tax benefit of 37 percent related to this charge.
As of December 31, 2012,2015, the gross amount of unrecognized tax benefits was $302 million.$168 million. If the Company were to prevail on all uncertain tax positions, the net effect would be a benefit to the Company's effective tax rate of $187$148 million,, exclusive of any benefits related to interest and penalties. The remaining $115$20 million,, which was recorded as a deferred tax asset, primarily represents tax benefits that would be received in different tax jurisdictions in the event the Company did not prevail on all uncertain tax positions.
A reconciliation of the changes in the gross balanceamount of unrecognized tax benefit amountsbenefits is as follows (in millions):
|
| | | | | | | | | | | |
| Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
|
| Beginning balance of unrecognized tax benefits | $ | 320 |
| | $ | 387 |
| | $ | 354 |
|
| Increases related to prior period tax positions | 69 |
| | 9 |
| | 26 |
|
| Decreases related to prior period tax positions | (15 | ) | | (19 | ) | | (10 | ) |
| Increases related to current period tax positions | 23 |
| | 6 |
| | 33 |
|
| Decreases related to current period tax positions | — |
| | (1 | ) | | — |
|
| Decreases related to settlements with taxing authorities | (45 | ) | | (5 | ) | | — |
|
| Reductions as a result of a lapse of the applicable statute of limitations | (36 | ) | | (46 | ) | | (1 | ) |
| Increase related to acquisition of CCE's former North America business | — |
| | — |
| | 6 |
|
| Increases (decreases) from effects of foreign currency exchange rates | (14 | ) | | (11 | ) | | (21 | ) |
| Ending balance of unrecognized tax benefits | $ | 302 |
| | $ | 320 |
| | $ | 387 |
|
|
| | | | | | | | | | | |
| Year Ended December 31, | 2015 |
| | 2014 |
| | 2013 |
|
| Beginning balance of unrecognized tax benefits | $ | 211 |
| | $ | 230 |
| | $ | 302 |
|
| Increase related to prior period tax positions | 4 |
| | 13 |
| | 1 |
|
| Decrease related to prior period tax positions | (9 | ) | | (2 | ) | | (7 | ) |
| Increase related to current period tax positions | 5 |
| | 11 |
| | 8 |
|
| Decrease related to settlements with taxing authorities | (5 | ) | | (5 | ) | | (4 | ) |
| Decrease due to lapse of the applicable statute of limitations | (23 | ) | | (32 | ) | | (59 | ) |
| Increase (decrease) due to effect of foreign currency exchange rate changes | (15 | ) | | (4 | ) | | (11 | ) |
| Ending balance of unrecognized tax benefits | $ | 168 |
| | $ | 211 |
| | $ | 230 |
|
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company had $113$111 million,, $110 $113 million and $112$105 million in interest and penalties related to unrecognized tax benefits accrued as of December 31, 20122015, , 20112014 and 20102013, respectively. Of these amounts, $33$8 million of expense $2and $8 million of benefit and $17 million of expense were recognized through income tax expense in 2012, 20112014 and 20102013, respectively. For the year ended December 31, 2015, an insignificant amount of interest and penalties were recognized through income tax expense. If the Company were to prevail on all uncertain tax positions, the reversal of this accrual would also be a benefit to the Company's effective tax rate.
Based on current tax laws, the Company's effective tax rate in 20132016 is expected to be approximately 24.022.5 percent before considering the effect of any unusual or special items that may affect our tax rate in future years.rate.
Liquidity, Capital Resources and Financial Position
We believe our ability to generate cash flows from operating activities is one of our fundamental financial strengths. Refer to the heading "Cash Flows from Operating Activities" below. The near-term outlook for our business remains strong, and we expect to generate substantial cash flows from operations in 2013.2016. As a result of our expected cash flows from operations, we have significant flexibility to meet our financial commitments. The Company does not typically raise capital through the issuance of stock. Instead, we use debt financing to lower our overall cost of capital and increase our return on shareowners' equity. Refer to the heading "Cash Flows from Financing Activities" below. We have a history of borrowing funds domestically and continue to have the ability to borrow funds domestically at reasonable interest rates. In addition, our domestic entities have recently borrowed and continue to have the ability to borrow funds in international markets at reasonable interest rates. Our debt financing includes the use of an extensive commercial paper program as part of our overall cash management strategy. The Company reviews its optimal mix of short-term and long-term debt regularly and may replace certain amounts of commercial paper, short-term debt and current maturities of long-term debt with new issuances of long-term debt in the future. In addition to the Company's cash balances, commercial paper program, and our ability to issue long-term debt, we also had $6,3148,340 million in lines of credit for general corporate purposes as of December 31, 20122015. These backup lines of credit expire at various times from 20132016 through 2017.2019.
We have significant operations outside the United States. Unit case volume outside the United States represented approximately 8081 percent of the Company's worldwide unit case volume in 2012.2015. We earn a substantial amount of our consolidated operating income and income before income taxes in foreign subsidiaries that either sell concentrate to our local bottling partners or, in certain instances, sell finished products directly to our customers to fulfill the demand for Company beverage products outside the United States. A significant portion of these foreign earnings is considered to be indefinitely reinvested in foreign jurisdictions where the Company has made, and will continue to make, substantial investments to support the ongoing development and growth of our international operations. Accordingly, no U.S. federal and state income taxes have been provided on the portion of our foreign earnings that is considered to be indefinitely reinvested in foreign jurisdictions. The Company's cash, cash equivalents, short-term investments and marketable securities held by our foreign subsidiaries totaled $15.3$17.9 billion as of December 31, 2012.2015. With the exception of an insignificant amount, for which U.S.
federal and state income taxes have already been provided, we do not intend, nor do we foresee a need, to repatriate these funds. Additionally, the absence of a government-approved mechanism to convert local currency into U.S. dollars in Argentina and Venezuela restricts the Company's ability to pay dividends from these locations. As of December 31, 2012, the Company's subsidiaries in Argentina and Venezuela held $247 million and $353 million, respectively, of cash, cash equivalents, short-term investments and marketable securities. Subsequent to December 31, 2012, the Venezuelan government devalued its currency, which will result in the Company remeasuring the net assets of our subsidiary in Venezuela. Based on the carrying value of our assets and liabilities denominated in Venezuelan bolivar as of December 31, 2012, we anticipate recognizing a remeasurement loss of $100 million to $125 million during the first quarter of 2013.
Net operating revenues in the United States were $19.7$20.4 billion in 2012,2015, or 4146 percent of the Company's consolidated net operating revenues. We expect existing domestic cash, cash equivalents, short-term investments, marketable securities, cash flows from operations and the issuance of domestic debt to continue to be sufficient to fund our domestic operating activities and cash commitments for investing and financing activities. In addition, we expect existing foreign cash, cash equivalents, short-term investments, marketable securities and cash flows from operations to continue to be sufficient to fund our foreign operating activities and cash commitments for investing activities.
In the future, should we require more capital to fund significant discretionary activities in the United States than is generated by our domestic operations orand is available through the issuance of domestic debt, we could elect to repatriate future periods' earnings from foreign jurisdictions. This alternative could result in a higher effective tax rate.rate in the future. While the likelihood is remote, the Company could also elect to repatriate earnings from foreign jurisdictions that have previously been considered to be indefinitely reinvested. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to additional U.S. income taxes (net of an adjustment for foreign tax credits) and withholding taxes payable to various foreign jurisdictions, where applicable. This alternative could also result in a higher effective tax rate in the period in which such a determination is made to repatriate prior period foreign earnings. Refer to Note 14 of Notes to Consolidated Financial Statements for further information related to our income taxes and undistributed earnings of the Company's foreign subsidiaries.
Based on all the aforementioned factors, the Company believes its current liquidity position is strong, and we will continue to meet all of our financial commitments for the foreseeable future. These commitmentsobligations and anticipated cash outflows include, but are not limited to, regular quarterly dividends, debt maturities, capital expenditures, share repurchases and other obligations included under the heading “Off-Balance"Off-Balance Sheet AgreementsArrangements and Aggregate Contractual Obligations”Obligations" below.
Cash Flows from Operating Activities
Net cash provided by operating activities for the years endedDecember 31, 2012, 20112015, 2014 and 20102013 was $10,645$10,528 million,, $9,474 $10,615 million and $9,532$10,542 million,, respectively.
Cash flows from operating activities increased $1,171decreased $87 million, or 121 percent, in 20122015 compared to 2011.2014. This increasedecrease primarily reflects higher receipts from customers, lower tax payments and the favorable impact of the Company discontinuing its temporary extension of credit terms in Japan. The favorable impact of the previous items was partially offset by the unfavorable impact of foreign currency fluctuations and an increase in contributionstax payments, partially offset by the efficient management of working capital. Refer to our pension plans.the heading "Operations Review — Net Operating Revenues" above for additional information on the impact of foreign currency fluctuations. Refer to Note 14 of Notes to Consolidated Financial Statements for additional information on the tax payments.
The Company discontinued the temporary extension of its credit terms in Japan during the first quarter of 2012. We originally extended our credit terms in Japan during the second quarter of 2011 as a result of the natural disasters that devastated portions of the country on March 11, 2011. This change resulted in an increase in cash from operations during the year ended December 31, 2012.
Cash flows from operating activities decreased $58increased $73 million, or 1 percent, in 20112014 compared to 2010.2013. This decrease wasincrease primarily attributable to an increasereflects the incremental pension contributions that were made in contributions to our pension plans of $924 million during 2011, compared to contributions of $77 million in 2010; the temporary extension of the Company's credit terms in Japan as a result of the natural disasters that devastated the northern and eastern portions of the country during the first quarter of 2011; an2013 compared to 2014 as well as efficient management of working capital. The increase in interest payments related to long-term debt; and an increase in cash payments related to our productivity, integration and restructuring initiatives. The unfavorable impact of these items was partially offset by an increase in cash receipts from customers, a decrease in tax payments, andunfavorable impact of currency exchange rates during 2014. Refer to the favorableheading "Operations Review — Net Operating Revenues" above for additional information on the impact of foreign currency exchange rates on operations. Refer to the heading "Net Operating Revenues" above.fluctuations.
Cash Flows from Investing Activities
Our cash flows provided by (used in) investing activities are summarized as follows (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| Purchases of short-term investments | $ | (9,590 | ) | | $ | (4,057 | ) | | $ | (4,579 | ) | |
| Proceeds from disposals of short-term investments | 5,622 |
| | 5,647 |
| | 4,032 |
| |
| Acquisitions and investments | (1,535 | ) | | (977 | ) | | (2,511 | ) | |
| Purchases of other investments | (5,266 | ) | | (787 | ) | | (132 | ) | |
| Proceeds from disposals of bottling companies and other investments | 2,189 |
| | 562 |
| | 972 |
| |
| Purchases of investments | | $ | (15,831 | ) | | $ | (17,800 | ) | | $ | (14,782 | ) |
| Proceeds from disposals of investments | | 14,079 |
| | 12,986 |
| | 12,791 |
|
| Acquisitions of businesses, equity method investments and nonmarketable securities | | (2,491 | ) | | (389 | ) | | (353 | ) |
| Proceeds from disposals of businesses, equity method investments and nonmarketable securities | | 565 |
| | 148 |
| | 872 |
|
| Purchases of property, plant and equipment | (2,780 | ) | | (2,920 | ) | | (2,215 | ) | (2,553 | ) | | (2,406 | ) | | (2,550 | ) |
| Proceeds from disposals of property, plant and equipment | 143 |
| | 101 |
| | 134 |
| 85 |
| | 223 |
| | 111 |
|
| Other investing activities | (187 | ) | | (93 | ) | | (106 | ) | (40 | ) | | (268 | ) | | (303 | ) |
| Net cash provided by (used in) investing activities | $ | (11,404 | ) | | $ | (2,524 | ) | | $ | (4,405 | ) | $ | (6,186 | ) | | $ | (7,506 | ) | | $ | (4,214 | ) |
Net cash used in investing activities increased $8,880 million in 2012 compared to 2011. This increase was primarily related to a change in the Company's overall cash management program. In an effort to manage counterparty risk62
Purchases of Investments and diversify our assets, the Company began to make additional investments in high-quality securities. These investments are primarily classified as available-for-sale securities. Refer to Note 3 of Notes to Consolidated Financial Statements for additional information. Refer to the headings "Short-Term Investments," "Purchases of Other Investments" and "ProceedsProceeds from Disposals of Bottling Companies and Other Investments" below for the impact this change had on our consolidated statements of cash flows. Refer to the heading "Overview of Financial Position" below for the impact this change had on our consolidated balance sheets.
Short-Term Investments
In 2012,2015, purchases of short-term investments were $9,590$15,831 million, and proceeds from disposals of short-term investments were $5,622 million.$14,079 million. This activity resulted in a net cash outflow of $3,968$1,752 million during 2012.2015. In 2011,2014, purchases of short-term investments were $4,057$17,800 million and proceeds from disposals of short-term investments were $5,647$12,986 million,, resulting in a net cash inflow of $1,590 million. In 2010, purchases of short-term investments were $4,579 million and proceeds from disposals of short-term investments were $4,032 million, resulting in a net cash outflow of $547$4,814 million. In 2013, purchases of investments were $14,782 million and proceeds from disposals of investments were $12,791 million, resulting in a net cash outflow of $1,991 million. These short-term investments areinclude time deposits that have maturities of greater than three months but less than one year and are classified in the line item short-term investments in our consolidated balance sheets.
Acquisitions The purchases during the years ended December 31, 2015 and Investments
In 2012, the Company's acquisition and investment activities totaled $1,535 million. These activities were primarily related to the following:2014 include our investments in Keurig Green Mountain, Inc. ("Keurig") of $830 million and $1,567 million, respectively, partially offset by the existing beverage businessnet purchases and proceeds of Aujan, oneour short-term investments that were made as part of the largest independent beverage companies in the Middle East;Company's overall cash management strategy. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on our investment in Mikuni,Keurig. In December 2015, Keurig announced that it had entered into an agreement with JAB Holding Company ("JAB") under which a JAB-led investor group will acquire Keurig for $92 per share in cash. The transaction is expected to close in the first quarter of 2016, subject to customary closing conditions, including receipt of regulatory approvals. Upon the sale of its shares, the Company will receive proceeds of approximately $2,380 million.
Acquisitions of Businesses, Equity Method Investments and Nonmarketable Securities
In 2015, the Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $2,491 million, which primarily included our equity investments in Monster and in Indonesian bottling partner locatedoperations and the acquisition of a controlling interest in Japan;a South African bottling operation.
In 2014, the Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $389 million, which primarily included a joint investment with one of our bottling partners in a dairy company in Ecuador.
In 2013, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $353 million. These activities primarily included our acquisition of Sacramento Coca-Cola Bottling Co., Inc. ("Sacramento bottler"); and our acquisition of bottling operations in Vietnam, Cambodia and Guatemala. None of the Company's other acquisitions or investments were individually significant.
In 2011, the Company's acquisition and investment activities totaled $977 million. These activities were primarily related to the acquisitions of Great Plains and Honest Tea, Inc. ("Honest Tea"), and an additional investment in Coca-Cola Central Japan Company ("Central Japan"). In addition, the Company's acquisition and investment activities during 2011 included immaterial cash payments for the finalization of working capital adjustments related to our acquisition of CCE's former North America business. Refer to our discussion of this transaction below. None of the Company's other acquisitions or investments were individually significant.
In 2010, our Company's acquisition and investment activities totaled $2,511 million, which was primarily related to our acquisition of CCE's former North America business; DPS license agreements; our acquisition of Nidan, a Russian juice company; and our additional investment in Fresh Trading Ltd. ("innocent"). The Company and the existing shareowners of innocent have a series of outstanding put and call options for the Company to potentially acquire the remaining shares not already owned by the Company. The put and call options are exercisable in stages between 2013 and 2014. The Company anticipates acquiring the majority of the remaining outstanding shares of innocent and a majority interest in the second quarter of 2013. None of the Company's other acquisitions or investments were individually significant.bottling operations in Myanmar.
Refer to the heading "Operations Review — Structural Changes, Acquired Brands and New License Agreements" above and Note 2 of Notes to Consolidated Financial Statements for additional information related to our acquisitions during the years endedDecember 31, 2012, 20112015, 2014 and 2010.2013.
PurchasesProceeds from Disposals of OtherBusinesses, Equity Method Investments and Nonmarketable Securities
In 2012, purchases2015, proceeds from disposals of otherbusinesses, equity method investments and nonmarketable securities were $5,266$565 million,, primarily due which included cash received as a result of a Brazilian bottling entity's majority interest owners exercising their option to a change inacquire from us an additional equity interest. The proceeds from disposals of businesses, equity method investments and nonmarketable securities during 2015 also included the proceeds from the sale of the Company's overall cash management program. In an effortdistribution assets, certain working capital items, and the grant of exclusive rights to manage counterparty risk and diversify our assets,distribute certain beverage brands not owned by the Company, beganbut distributed by CCR, to make additional investments in high-quality securities.certain unconsolidated bottling partners as part of the North America refranchising. Refer to Note 32 of Notes to Consolidated Financial Statements for additional information.
In 2011, purchases of other investments were $787 million, primarily related to long-term investments made by the Company for nonoperating activities. These investments are primarily classified as available-for-sale securities.
Proceeds from Disposals of Bottling Companies and Other Investments
In 2012,2014, proceeds from disposals of bottling companiesbusinesses, equity method investments and other investmentsnonmarketable securities were $2,189$148 million,. These which represented the proceeds were primarily related tofrom the sale of investments associated with the Company's cashdistribution assets, certain working capital items, and risk management programs and werethe grant of exclusive rights to distribute certain beverage brands not relatedowned by the Company, but distributed by CCR, to certain unconsolidated bottling partners as part of the disposal of bottling companies.North America refranchising. Refer to Note 2 and Note 3 of Notes to Consolidated Financial Statements for additional information.
In 2011,2013, proceeds from disposals of bottling companiesbusinesses, equity method investments and other investmentsnonmarketable securities were $562 million.$872 million. These proceeds were primarily related to the sale of a majority ownership interest in our investment in Embonor for $394 million.previously consolidated Philippine bottling operations, and separately, the deconsolidation of our Brazilian bottling operations. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information.
In 2010, proceeds from disposals of bottling companies and other investments were $972 million. These proceeds were primarily related to the sale of our Norwegian and Swedish bottling operations to New CCE for $0.9 billion and the sale of 50 percent of our investment in Leão Junior for $83 million. Refer to the heading "Operations Review — Structural Changes, Acquired Brands and New License Agreements" above and Note 2 of Notes to Consolidated Financial Statements for additional information.
Property, Plant and Equipment
Purchases of property, plant and equipment net of disposals for the years endedDecember 31, 2012, 20112015, 2014 and 20102013 were $2,637$2,468 million, $2,819$2,183 million and $2,081$2,439 million, respectively.
Total capital expenditures for property, plant and equipment (including our investments in information technology) and the percentage of such totals by operating segment were as follows (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| Capital expenditures | $ | 2,780 |
| | $ | 2,920 |
| | $ | 2,215 |
| $ | 2,553 |
| | $ | 2,406 |
| | $ | 2,550 |
|
| Eurasia & Africa | 3.2 | % | | 2.9 | % | | 2.7 | % | 0.7 | % | | 1.3 | % | | 1.6 | % |
| Europe | 1.1 |
| | 1.3 |
| | 1.5 |
| 1.4 |
| | 2.2 |
| | 1.3 |
|
| Latin America | 3.2 |
| | 3.6 |
| | 4.2 |
| 2.7 |
| | 2.3 |
| | 2.5 |
|
| North America | 52.0 |
| | 46.7 |
| | 32.1 |
| 52.5 |
| | 53.7 |
| | 53.9 |
|
| Pacific | 2.5 |
| | 3.2 |
| | 4.6 |
| |
| Asia Pacific | | 3.2 |
| | 3.2 |
| | 4.6 |
|
| Bottling Investments | 31.2 |
| | 35.6 |
| | 42.5 |
| 28.8 |
| | 26.1 |
| | 25.2 |
|
| Corporate | 6.8 |
| | 6.7 |
| | 12.4 |
| 10.7 |
| | 11.2 |
| | 10.9 |
|
We expect our annual 20132016 capital expenditures to be approximately$2.5 billion to $3.0 billion as we continue to make investments to enable growth in our business and further enhance our operational effectiveness.
Other Investing Activities
In 2012,2015, cash used in other investing activities were primarilyincluded a $530 million payment related to the Monster Transaction, partially offset by the cash flow impact of the Company's consolidated Philippine and Brazilian bottling operations being classifiedderivative contracts designated as held for sale as of December 31, 2012.net investment hedges. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on these transactions. The cash flow impactthe Monster Transaction and Note 5 of these transactions inNotes to Consolidated Financial Statements for additional information on the Company's derivative contracts designated as net investment hedges.
In 2014, other investing activities represents the balance of cash and cash equivalents held by these entities being transferredwere primarily related to assets held for sale.loans to Fairlife, LLC, a value-added dairy joint venture, as well as local investments in Argentina.
In 2011,2013, other investing activities were primarily related to the Company's investments in joint ventures.acquisition of trademarks and certain other intangible assets. None of these investments werewas individually significant.
In 2010, other investing activities were primarily related to the deconsolidation of certain entities due to the Company's adoption of new accounting guidance issued by the FASB. Refer to the heading "Operations Review — Structural Changes, Acquired Brands and New License Agreements" above and Note 1 of Notes to Consolidated Financial Statements for additional information. The cash flow impact in other investing activities primarily represents the balance of cash and cash equivalents on the deconsolidated entities' balance sheets as of December 31, 2009.
Cash Flows from Financing Activities
Our cash flows provided by (used in) financing activities were as follows (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| Issuances of debt | $ | 42,791 |
| | $ | 27,495 |
| | $ | 15,251 |
| $ | 40,434 |
| | $ | 41,674 |
| | $ | 43,425 |
|
| Payments of debt | (38,573 | ) | | (22,530 | ) | | (13,403 | ) | (37,738 | ) | | (36,962 | ) | | (38,714 | ) |
| Issuances of stock | 1,489 |
| | 1,569 |
| | 1,666 |
| 1,245 |
| | 1,532 |
| | 1,328 |
|
| Purchases of stock for treasury | (4,559 | ) | | (4,513 | ) | | (2,961 | ) | (3,564 | ) | | (4,162 | ) | | (4,832 | ) |
| Dividends | (4,595 | ) | | (4,300 | ) | | (4,068 | ) | (5,741 | ) | | (5,350 | ) | | (4,969 | ) |
| Other financing activities | 100 |
| | 45 |
| | 50 |
| 251 |
| | (363 | ) | | 17 |
|
| Net cash provided by (used in) financing activities | $ | (3,347 | ) | | $ | (2,234 | ) | | $ | (3,465 | ) | $ | (5,113 | ) | | $ | (3,631 | ) | | $ | (3,745 | ) |
Debt Financing
Our Company maintains debt levels we consider prudent based on our cash flows, interest coverage ratio and percentage of debt to capital. We use debt financing to lower our overall cost of capital, which increases our return on shareowners' equity. This exposes us to adverse changes in interest rates. Our interest expense may also be affected by our credit ratings.
As of December 31, 2012,2015, our long-term debt was rated "AA-""AA" by Standard & Poor's, "Aa3" by Moody's and "A+" by Fitch. Our commercial paper program was rated "A-1+" by Standard & Poor's, "P-1" by Moody's and "F-1""F1" by Fitch. In assessing our credit strength, all three agencies consider our capital structure (including the amount and maturity dates of our debt) and financial policies as well as the aggregated balance sheet and other financial information of the Company. In addition, some rating agencies also consider the financial information of certain bottlers, including New CCE, Coca-Cola Amatil Limited, Coca-Cola Bottling Co. Consolidated, Coca-Cola FEMSA and Coca-Cola Hellenic. While the Company has no legal obligation for the debt of these bottlers, the rating agencies believe the strategic importance of the bottlers to the Company's business model provides the Company with an incentive to keep these bottlers viable. It is our expectation that the credit rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure,
our major bottlers' financial performance, changes in the credit rating agencies' methodology in assessing our credit strength, or for any other reason, our cost of borrowing could increase. Additionally, if certain bottlers' credit ratings were to decline, the Company's share of equity income could be reduced as a result of the potential increase in interest expense for those bottlers.
In February 2016, Standard & Poor's downgraded the Company's long-term debt rating to AA- with a stable outlook. The Company does not believe that this downgrade will have a material adverse effect on our cost of borrowing.
We monitor our financial ratios and, as indicated above, the rating agencies consider these ratios in assessing our credit ratings. Each rating agency employs a different aggregation methodology and has different thresholds for the various financial ratios. These thresholds are not necessarily permanent, nor are they always fully disclosed to our Company.
Our global presence and strong capital position give us access to key financial markets around the world, enabling us to raise funds at a low effective cost. This posture, coupled with active management of our mix of short-term and long-term debt and our mix of fixed-rate and variable-rate debt, results in a lower overall cost of borrowing. Our debt management policies, in conjunction with our share repurchase programsprogram and investment activity, can result in current liabilities exceeding current assets.
Issuances and payments of debt included both short-term and long-term financing activities. On December 31, 2012, we had $6,314 million in lines of credit available for general corporate purposes. These backup lines of credit expire at various times from 2013 through 2017. There were no borrowings under these backup lines of credit during 2012. These credit facilities are subject to normal banking terms and conditions.
In 2012,2015, the Company had issuances of debt of $42,791$40,434 million,, which included $40,008net issuances of $25,923 million of commercial paper and short-term debt with maturities greater than 90 days. The Company's total issuances of debt also included long-term debt issuances of $14,511 million, net of related discounts, premiums and issuance costs.
During 2015, the Company made payments of $37,738 million, which included net payments of $208 million of commercial paper and short-term debt with maturities of 90 days or less, $31,711 million of payments of commercial paper and short-term debt with maturities greater than 90 days and long-term debt payments of $5,819 million. The long-term debt payments included the extinguishment of $2,039 million of long-term debt prior to maturity, which resulted in associated charges of $320 million that were recorded in the line item interest expense in our consolidated statement of income. These charges included the difference between the reacquisition price and the net carrying amount of the debt extinguished, including the impact of the related fair value hedging relationship.
In 2014, the Company had issuances of debt of $41,674 million, which included net issuances of $317 million of commercial paper and short-term debt with maturities of 90 days or less and $37,799 million of issuances of commercial paper and short-term debt with maturities greater than 90 days. The Company's total issuances of debt also included long-term debt issuances of $2,783$3,558 million, net of related discounts and issuance costs.
During the first quarter of 2012,2014, the Company issued $2,750 million of long-term debt. The general terms of the notes issued are as follows:
$1,000 million total principal amount of notes due March 14, 2014, at a variable interest rate equal to the three-month London Interbank Offered Rate ("LIBOR") minus 0.05 percent;
$1,000 million total principal amount of notes due March 13, 2015, at a fixed interest rate of 0.75 percent; and
$750 million total principal amount of notes due March 14, 2018, at a fixed interest rate of 1.65 percent.
In 2012, the Company hadmade payments of debt of $38,573$36,962 million,. Total payments of debt which included $1,553$35,921 million of net payments of commercial paper and short-term debt with maturities of 90 days or less, and $35,118 million offor payments of commercial paper and short-term debt with maturities greater than 90 days. The Company's total payments of debt also includeddays or less and long-term debt payments of $1,902$1,041 million.
In 2011,2013, the Company had issuances of debt of $27,495$43,425 million,, which included $25,219$35,944 million of issuances of commercial paper and short-term debt with maturities greater than 90 days. The Company's total issuances of debt also included long-term debt issuances of $2,276$7,481 million, net of the debt issued to exchange a certain amount of our existing long-term debt. The Company issued $2,979 million of long-term debt during 2011. We used $979 million of this newly issued debtrelated discounts and paid a premium of $208 million to exchange $1,022 million of existing long-term debt that was assumed in connection with our acquisition of CCE's former North America business in the fourth quarter of 2010. The remaining cash from the issuance was used to reduce the Company's outstanding commercial paper balance and exchange a certain amount of short-term debt.costs.
The general terms of the notes issued during 2011 are as follows:
$1,655 million total principal amount of notes due September 1, 2016, at a fixed interest rate of 1.8 percent; and
$1,324 million total principal amount of notes due September 1, 2021, at a fixed interest rate of 3.3 percent.
During the fourth quarter of 2011,2013, the Company extinguished long-term debt that had a carrying value of $20 million and was not scheduled to mature until 2012. This debt was outstanding prior to the Company's acquisition of CCE's former North America business. In addition, the Company repurchased long-term debt during 2011 that was assumed in connection with our acquisition of CCE's former North America business. The repurchased debt included $99 million in unamortized fair value adjustments recorded as part of our purchase accounting for the CCE transaction and was settled throughout the year as follows:
During the first quarter of 2011, the Company repurchased all of our outstanding U.K. pound sterling notes that had a carrying value of $674 million;
During the second quarter of 2011, the Company repurchased long-term debt that had a carrying value of $42 million; and
During the third quarter of 2011, the Company repurchased long-term debt that had a carrying value of $19 million.
In 2011, the Company hadmade payments of debt of $22,530$38,714 million,, including the repurchased debt discussed above. Total payments of debt which included $91$70 million of net payments of commercial paper and short-term debt with maturities of 90 days or less, and $20,334$35,199 million of payments of commercial paper and short-term debt with maturities greater than 90 days. The Company's total payments of debt also includeddays and long-term debt payments of $2,105$3,445 million. The Company recorded a net chargelong-term debt payments included the extinguishment of $9$2,154 million of long-term debt prior to maturity, which resulted in associated charges of $53 million, including hedge accounting adjustments reclassified from accumulated other comprehensive income, in the line item interest expense in our consolidated statement of income during the year ended December 31, 2011. This net charge was due to the exchange, repurchase and/or extinguishment of long-term debt described above.2013.
In 2010, the Company had issuances of debt of $15,251 million, which included $1,171 million of net issuances of commercial paper and short-term debt with maturities of 90 days or less, and $9,503 million of issuances of commercial paper and short-term debt with maturities greater than 90 days. We also assumed $7.9 billion of debt as a result of our acquisition of CCE's former North America business. In addition, on November 15, 2010, the Company issued $4,500 million of long-term notes. The proceeds from the debt issuance were used to repurchase $2,910 million of long-term debt, and the remainder was used to reduce our commercial paper balance. The long-term notes issued on November 15, 2010, had the following general terms:
$1,250 million total principal notes due May 15, 2012, at a variable interest rate of three-month LIBOR plus 0.05 percent;
$1,250 million total principal notes due November 15, 2013, at a fixed interest rate of 0.75 percent;
$1,000 million total principal notes due November 15, 2015, at a fixed interest rate of 1.5 percent; and
$1,000 million total principal notes due November 15, 2020, at a fixed interest rate of 3.15 percent.
In 2010, the Company had payments of debt of $13,403 million, including the repurchased long-term debt discussed above. Total payments of debt also included $9,667 million related to commercial paper and short-term debt with maturities greater than 90 days. The Company recorded a charge of $342 million related to the premiums paid to repurchase the long-term debt and the costs associated with the settlement of treasury rate locks issued in connection with the debt tender offer.
The carrying value of the Company's long-term debt included fair value adjustments related to the debt assumed from Old CCE of $617$411 million and $733$464 million as of December 31, 20122015 and 2011,2014, respectively. These fair value adjustments are being amortized over the number of years remaining until the underlying debt matures. As of December 31, 2012,2015, the weighted-average maturity of the assumed debt to which these fair value adjustments relate was approximately 1720 years. The amortization of these fair value adjustments will be a reduction of interest expense in future periods, which will typically result in our interest expense being less than the actual interest paid to service the debt. Total interest paid was $574$515 million,, $573 $498 million and $422$498 million in 2012, 20112015, 2014 and 2010,2013, respectively. Refer to Note 10 of Notes to Consolidated Financial Statements for additional information related to the Company's long-term debt balances.
Issuances of Stock
The issuances of stock in 2012, 20112015, 2014 and 20102013 were primarily related to the exercise of stock options by Company employees.
Share Repurchases
On July 20, 2006, the Board of Directors of the Company authorized a share repurchase program of up to 600 million shares of the Company's common stock. The program took effect on October 31, 2006. Although there arewere approximately 43 million shares that maywere yet to be purchased under this share repurchase program, the Board of Directors authorized a new share repurchase program of up to 500 million shares of the Company's common stock on October 18, 2012.2012 ("2012 Plan"). The new share repurchase program will allow2012 Plan allowed the Company to continue repurchasing shares following the completion of the prior program. The table below presents annual shares repurchased and average price per share:
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| | | | As Adjusted | |
| Number of shares repurchased (in millions) | 121 |
| | 127 |
| | 98 |
| 86 |
| | 98 |
| | 121 |
|
| Average price per share | $ | 37.11 |
| | $ | 33.73 |
| | $ | 31.92 |
| $ | 41.33 |
| | $ | 40.97 |
| | $ | 39.84 |
|
Since the inception of our initial share repurchase program in 1984 through our current program as of December 31, 2012,2015, we have purchased approximately 3.03.3 billion shares of our Company's common stock at an average price per share of $12.75.$15.36. In addition to shares repurchased under the stockshare repurchase plansprogram authorized by our Board of Directors, the Company's treasury stock activity also includes shares surrendered to the Company to pay the exercise price and/or to satisfy tax withholding obligations in connection with so-called stock swap exercises of employee stock options and/or the vesting of restricted stock issued to employees. In 2012,2015, we repurchased $4.5$3.5 billion of our stock. However, due to the timing of settlements, the total amount of treasury stock purchases that settled during 20122015 was $4.6$3.6 billion, which includes treasury stock that was purchased and settled during 20122015 as well as treasury stock purchased in December 20112014 that settled in early 2012.2015. The net impact of the Company's treasury stock issuance and purchase activities in 20122015 resulted in a net cash outflow of $3.1$2.3 billion. We currently expect to repurchase an additional $3.0$2.0 billion to $3.5$2.5 billion of our stock during 2013,2016, net of proceeds from the issuance of treasury stock due to the exercise of employee stock options.
Dividends
The Company paid dividends of $5,741 million, $5,350 million and $4,969 million during the years ended December 31, 2015, 2014 and 2013, respectively.
At its February 20132016 meeting, our Board of Directors increased our quarterly dividend by 106 percent, raising it to $0.28$0.35 per share, equivalent to a full year dividend of $1.12$1.40 per share in 2013.2016. This is our 5154stth consecutive annual increase. Our annual common stock dividend was $1.02$1.32 per share, $0.94$1.22 per share and $0.88$1.12 per share in 2012, 20112015, 2014 and 2010,2013, respectively. The 20122015 dividend represented an 8.58 percent increase from 2011,2014, and the 20112014 dividend represented a 79 percent increase from 2010.2013.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Off-Balance Sheet Arrangements
In accordance with the definition under SEC rules, the following qualify as off-balance sheet arrangements:
any obligation under certain guarantee contracts;
a retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;
any obligation under certain derivative instruments; and
any obligation arising out of a material variable interest held by the registrant in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the registrant, or engages in leasing, hedging or research and development services with the registrant.
As of December 31, 2012,2015, we were contingently liable for guarantees of indebtedness owed by third parties of $671$572 million,, of which $294$263 million was related to VIEs. These guarantees are primarily related to third-party customers, bottlers, vendors and container manufacturing operations and have arisen through the normal course of business. These guarantees have various terms, and none of these guarantees werewas individually significant. The amount represents the maximum potential future payments that we could be required to make under the guarantees; however, we do not consider it probable that we will be required to satisfy these guarantees. Management concluded that the likelihood of any significant amounts being paid by our
Company under these guarantees is not probable. As of December 31, 2012,2015, we were not directly liable for the debt of any unconsolidated entity, and we did not have any retained or contingent interest in assets as defined above.
Our Company recognizes all derivatives as either assets or liabilities at fair value in our consolidated balance sheets. Refer to Note 5 of Notes to Consolidated Financial Statements.
As of December 31, 2012,2015, the Company had $6,314$8,340 million in lines of credit for general corporate purposes. These backup lines of credit expire at various times from 20132016 through 2017.2019. There were no borrowings under these backup lines of credit during 2012.2015. These credit facilities are subject to normal banking terms and conditions. Some of the financial arrangements require compensating balances, none of which are presently significant to our Company.
Aggregate Contractual Obligations
As of December 31, 20122015, the Company's contractual obligations, including payments due by period, were as follows (in millions):
| | | | Payments Due by Period | Payments Due by Period |
| | Total |
| | 2013 |
| | 2014-2015 |
| | 2016-2017 |
| | 2018 and Thereafter |
| Total |
| | 2016 |
| | 2017-2018 |
| | 2019-2020 |
| | 2021 and Thereafter |
|
Short-term loans and notes payable:1 | | | | | | | | | | | | | | | | | | |
| Commercial paper borrowings | $ | 16,204 |
| | $ | 16,204 |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 13,035 |
| | $ | 13,035 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Lines of credit and other short-term borrowings | 93 |
| | 93 |
| | — |
| | — |
| | — |
| 95 |
| | 95 |
| | — |
| | — |
| | — |
|
Current maturities of long-term debt2 | 1,490 |
| | 1,490 |
| | — |
| | — |
| | — |
| 2,679 |
| | 2,679 |
| | — |
| | — |
| | — |
|
Long-term debt, net of current maturities2 | 14,082 |
| | — |
| | 4,970 |
| | 3,048 |
| | 6,064 |
| 28,150 |
| | — |
| | 6,660 |
| | 6,232 |
| | 15,258 |
|
Estimated interest payments3 | 4,477 |
| | 408 |
| | 658 |
| | 562 |
| | 2,849 |
| 6,011 |
| | 553 |
| | 1,022 |
| | 899 |
| | 3,537 |
|
Accrued income taxes4 | 471 |
| | 471 |
| | — |
| | — |
| | — |
| 331 |
| | 331 |
| | — |
| | — |
| | — |
|
Purchase obligations5 | 14,274 |
| | 9,297 |
| | 1,481 |
| | 586 |
| | 2,910 |
| 16,365 |
| | 9,812 |
| | 1,303 |
| | 840 |
| | 4,410 |
|
Marketing obligations6 | 4,461 |
| | 2,331 |
| | 886 |
| | 554 |
| | 690 |
| 4,260 |
| | 2,302 |
| | 914 |
| | 546 |
| | 498 |
|
| Lease obligations | 1,084 |
| | 273 |
| | 337 |
| | 207 |
| | 267 |
| 900 |
| | 212 |
| | 254 |
| | 172 |
| | 262 |
|
Held-for-sale obligations7 | 688 |
| | 615 |
| | 58 |
| | 6 |
| | 9 |
| 838 |
| | 675 |
| | 87 |
| | 40 |
| | 36 |
|
| Total contractual obligations | $ | 57,324 |
| | $ | 31,182 |
| | $ | 8,390 |
| | $ | 4,963 |
| | $ | 12,789 |
| $ | 72,664 |
| | $ | 29,694 |
| | $ | 10,240 |
| | $ | 8,729 |
| | $ | 24,001 |
|
| |
1 | Refer to Note 10 of Notes to Consolidated Financial Statements for information regarding short-term loans and notes payable. Upon payment of outstanding commercial paper, we typically issue new commercial paper. Lines of credit and other short-term borrowings are expected to fluctuate depending upon current liquidity needs, especially at international subsidiaries. |
| |
2 | Refer to Note 10 of Notes to Consolidated Financial Statements for information regarding long-term debt. We will consider several alternatives to settle this long-term debt, including the use of cash flows from operating activities, issuance of commercial paper or issuance of other long-term debt. |
| |
3 | We calculated estimated interest payments for our long-term fixed-rate debt based on the applicable rates and payment dates. For our variable rate debt, we have assumed the December 31, 2015 rate for all years presented. We typically expect to settle such interest payments with cash flows from operating activities and/or short-term borrowings. |
| |
4 | Refer to Note 14 of Notes to Consolidated Financial Statements for information regarding income taxes. As of December 31, 2012,2015, the noncurrent portion of our income tax liability, including accrued interest and penalties related to unrecognized tax benefits, was $410$267 million, which was not included in the total above. At this time, the settlement period for the noncurrent portion of our income tax liability cannot be determined. In addition, any payments related to unrecognized tax benefits would be partially offset by reductions in payments in other jurisdictions. |
| |
5 | Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including long-term contractual obligations, open purchase orders, accounts payable and certain accrued liabilities. We expect to fund these obligations with cash flows from operating activities. |
| |
6 | We expect to fund these marketing obligations with cash flows from operating activities. |
| |
7 | Refer to Note 2 of Notes to Consolidated Financial Statements for information regarding the assets andRepresents liabilities of our consolidated Philippine and Brazilianthe Company's North American territories, German bottling operations beingand South African bottling operations that are classified as held for sale.
|
The total accrued benefit liability for pension and other postretirement benefit plans recognized as of December 31, 2012,2015, was $3,406$2,619 million. Refer to Note 13 of Notes to Consolidated Financial Statements. This amount is impacted by, among other items, pension expense, funding levels, plan amendments, changes in plan demographics and assumptions, and the investment return on plan assets. Because the accrued liability does not represent expected liquidity needs, we did not include this amount in the contractual obligations table.
The Pension Protection Act of 2006 ("PPA") was enacted in August 2006 and established, among other things, new standards for funding of U.S. defined benefit pension plans. We generally expect to fund all future pension contributions with cash flows from operating activities. Our international pension plans are generally funded in accordance with local laws and income tax regulations.
As of December 31, 2012,2015, the projected benefit obligation of the U.S. qualified pension plans was $6,604$6,405 million, and the fair value of plan assets was $5,549$5,628 million. The majority of this underfunding was due to the negative impact that the recent credit crisis and financial system instability had on the value of our pension plan assets and the decrease in the weighted-average discount rate used to calculate the Company's benefit obligation.
As of December 31, 2012, the projected benefit obligation of all pension plans other than the U.S. qualified pension plans was $3,089$2,754 million, and the fair value of all other pension plan assets was $2,035$2,061 million. The majority of this underfunding is attributable to an international pension plan for certain non-U.S. employees that is unfunded due to tax law restrictions, as well as ourcertain unfunded U.S. nonqualified pension plans. These U.S. nonqualified pension plans provide, for certain associates, benefits that are not permitted to be funded through a qualified plan because of limits imposed by the Internal Revenue Code of 1986. The expected benefit payments for these unfunded pension plans are not included in the table above. However, we anticipate annual benefit payments for these unfunded pension plans to be approximately $65$72 million in 20132016 and remain near that level through 2025,2031, decreasing annually thereafter. Refer to Note 13 of Notes to Consolidated Financial Statements.
In 2013, we expectThe Company expects to contribute an additional $640$512 million to variousour global pension plans, the majority of which will be allocated to our U.S. plans. Refer to Note 13 of Notes to Consolidated Financial Statements. We did not include our estimated contributions to our various plans in the table above.
In general, we are self-insured for large portions of many different types of claims; however, we do use commercial insurance above our self-insured retentions to reduce the Company's risk of catastrophic loss. Our reserves for the Company's self-insured losses are estimated through actuarial procedures of the insurance industry and by using industry assumptions, adjusted for our specific expectations based on our claim history. As of December 31, 2012,2015, our self-insurance reserves totaled approximately $508 million.$560 million. Refer to Note 11 of Notes to Consolidated Financial Statements. We did not include estimated payments related to our self-insurance reserves in the table above.
Deferred income tax liabilities as of December 31, 2012,2015 were $5,312$5,434 million. Refer to Note 14 of Notes to Consolidated Financial Statements. This amount is not included in the total contractual obligations table because we believe that presentation would not be meaningful. Deferred income tax liabilities are calculated based on temporary differences between the tax bases of assets and liabilities and their respective book bases, which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods. As a result, scheduling deferred income tax liabilities as payments due by period could be misleading, because this scheduling would not relate to liquidity needs.
Foreign Exchange
Our international operations are subject to certain opportunities and risks, including currency fluctuations and governmental actions. We closely monitor our operations in each country and seek to adopt appropriate strategies that are responsive to changing economic and political environments, and to fluctuations in foreign currencies.
In 2012,2015, we used 8172 functional currencies. Due to the geographic diversity of our global operations, weakness in some of these currencies might be offset by strength in others. In 2012, 20112015, 2014 and 2010,2013, the weighted-average exchange rates for foreign currencies in which the Company conducted operations (all operating currencies), and for certain individual currencies, strengthened (weakened) against the U.S. dollar as follows:
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| All operating currencies | (6 | )% | | 6 | % | | 3 | % | (15 | )% | | (5 | )% | | (5 | )% |
| Brazilian real | (14 | )% | | 5 | % | | 11 | % | (27 | )% | | (10 | )% | | (9 | )% |
| Mexican peso | (7 | ) | | 4 |
| | 6 |
| (16 | ) | | (4 | ) | | 4 |
|
| Australian dollar | — |
| | 14 |
| | 13 |
| (17 | ) | | (7 | ) | | (6 | ) |
| South African rand | (12 | ) | | 1 |
| | 11 |
| (15 | ) | | (12 | ) | | (13 | ) |
| British pound | (1 | ) | | 4 |
| | (2 | ) | (8 | ) | | 6 |
| | (2 | ) |
| Euro | (9 | ) | | 7 |
| | (5 | ) | (17 | ) | | 1 |
| | 3 |
|
| Japanese yen | 2 |
| | 10 |
| | 6 |
| (14 | ) | | (8 | ) | | (18 | ) |
These percentages do not include the effects of our hedging activities and, therefore, do not reflect the actual impact of fluctuations in foreign currency exchange rates on our operating results. Our foreign currency management program is designed to mitigate, over time, a portion of the impact of exchange rate changes on our net income and earnings per share.
The total currency impactimpacts on net operating income,revenues, including the effect of our hedging activities, was a decreasewere decreases of approximately 57 percent and an increase of approximately 42 percent in 20122015 and 2011,2014, respectively. BasedThe total currency impacts on spot rates asincome before income taxes, including the effect of the beginning of February 2013, our hedging coverageactivities, were decreases of 6 percent in place,2015 and the impact of Venezuela's currency devaluation discussed below, the Company
expects currencies to have a 49 percent negative impact on operating income for the first quarter of 2013 and a 1 percent negative impact on operating income for the full year of 2013.in 2014.
Foreign currency exchange gains and losses are primarily the result of the remeasurement of monetary assets and liabilities from certain currencies into functional currencies. The effects of the remeasurement of these assets and liabilities are partially offset by the impact of our economic hedging program for certain exposures on our consolidated balance sheets. Refer to Note 5 of Notes to Consolidated Financial Statements. Foreign currency exchange gains and losses are included as a component of other income (loss) — net in our consolidated financial statements. Refer to the heading "Operations Review — Other Income (Loss) — Net" above. The Company recorded foreign currency exchange gains of $149 million in 2015 and foreign currency losses of $2 million, $73$569 million and $148$162 million in 2012, 20112014 and 2010,2013, respectively.
Hyperinflationary Economies
Our Company conducts business in more than 200 countries, some of which have been deemed to be hyperinflationary economies due to excessively high inflation rates in recent years. These economies create financial exposure to the Company.
In 2010, Venezuela was determined to be aA hyperinflationary economy and the Venezuelan government devalued the bolivar by resetting the official rateis one that has cumulative inflation of exchange (“official rate”) from 2.15 bolivars per U.S. dollar to 2.6 bolivars per U.S. dollar for essential goods and 4.3 bolivars per U.S. dollar for nonessential goods. In order to utilize the official rate, entities must seek approval from the government-operated Foreign Exchange Administration Board (“CADIVI”).100 percent or more over a three-year period. In accordance with hyperinflationary accounting under accounting principles generally accepted in the United States, our local subsidiary wassubsidiaries in hyperinflationary economies are required to use the U.S. dollar as itstheir functional currency. As a result, duringcurrency and remeasure the first quarter of 2010 we remeasured the netmonetary assets of our Venezuelan subsidiaryand liabilities not denominated in U.S. dollars using the official rate applicable to conversion of a currency for nonessential goodspurposes of 4.3 bolivars per U.S. dollar which resulteddividend remittances. All exchange gains and losses resulting from remeasurement are recognized currently in income.
Venezuela has been designated as a loss of $103 million. The loss was recorded in the line item other income (loss) - net in our consolidated statement of income. We classified the impact of the remeasurement loss in the line item effect of exchange rate changes on cash and cash equivalents in our consolidated statement of cash flows.
hyperinflationary economy. In June 2010, the Venezuelan government introduced a newly regulated foreign currency exchange system known as the Transaction System for Foreign Currency Denominated Securities ("SITME"). This system, which was subject to annual limits, enabled entities domiciled in Venezuela to exchange their bolivars to U.S. dollars through authorized financial institutions (commercial banks, savings and lending institutions, etc.).
In December 2010, the Venezuelan government announced that it was eliminating the official rate of 2.6 bolivars per U.S. dollar for essential goods. As a result, the only two exchange rates available for remeasuring bolivar-denominated transactions were the official rate of 4.3 bolivars per U.S. dollar for nonessential goods and the SITME rate. As discussed above, the Company remeasured the net assets of our Venezuelan subsidiary using the official rate for nonessential goods of 4.3 bolivars per U.S. dollar starting on January 1, 2010. Therefore, the elimination of the official rate for essential goods had no impact on the remeasurement of the net assets of our Venezuelan subsidiary.
Subsequent to December 31, 2012,February 2013, the Venezuelan government devalued its currency further to an official rate of exchange ("official rate") of 6.3 bolivars per U.S. dollar. The government also announcedAt that it was discontinuingtime, the SITME foreign exchange system.Company remeasured the net monetary assets of our Venezuelan subsidiary at the official rate. As a result of the Company will remeasure the net assetsdevaluation, we recognized a loss of our local subsidiary and recognize the related gains or losses$140 million from remeasurement in the line item other income (loss) — net in our consolidated statement of income. Based on the carrying value of our assets and liabilities denominated
Beginning in Venezuelan bolivar as of December 31, 2012, we anticipate recognizing a remeasurement loss of $100 million to $125 million during the first quarter of 2013.
The Company will continue2014, the Venezuelan government recognized three legal exchange rates to useconvert bolivars to the U.S. dollar: (1) the official rate of 6.3 bolivars per U.S. dollar; (2) SICAD 1, which was available to remeasureforeign investments and designated industry sectors to exchange a limited volume of bolivars for U.S. dollars using a bid rate established at weekly auctions; and (3) SICAD 2, which applied to transactions that did not qualify for either the official rate or SICAD 1. As of March 28, 2014, the three legal exchange rates were 6.3 (official rate), 10.8 (SICAD 1) and 50.9 (SICAD 2). We determined that the SICAD 1 rate was the most appropriate rate to use for remeasurement given our circumstances and estimates of the applicable rate at which future transactions could be settled, including the payment of dividends. Therefore, as of March 28, 2014, we remeasured the net monetary assets of our Venezuelan subsidiary. Ifsubsidiary using an exchange rate of 10.8 bolivars per U.S. dollar, resulting in a charge of $226 million recorded in the official rate devalues further, it would result in our Company recognizing additional foreign currency exchange gains or lossesline item other income (loss) — net in our consolidated financial statements.statement of income.
In December 2014, due to the continued lack of liquidity and increasing economic uncertainty, the Company reevaluated the rate that should be used to remeasure the monetary assets and liabilities of our Venezuelan subsidiary. As of December 31, 2012,2014, we determined that the SICAD 2 rate of 50 bolivars per U.S. dollar was the most appropriate legally available rate and remeasured the net monetary assets of our Venezuelan subsidiary, heldresulting in a charge of $146 million recorded in the line item other income (loss) — net in our consolidated statement of income.
In February 2015, the Venezuelan government merged SICAD 1 and SICAD 2 into a single mechanism called SICAD and introduced a new open market exchange rate system, SIMADI. As a result, management determined that the SIMADI rate was the most appropriate legally available rate and remeasured the net monetary assets of approximately $450our Venezuelan subsidiary, resulting in a charge of $27 million and monetary liabilitiesrecorded in the line item other income (loss) — net in our consolidated statement of approximately $85 million.income.
In addition to the foreign currency exchange exposure related to our Venezuelan subsidiary's net monetary assets, we also sell concentrate to our bottling partner in Venezuela from outside the country. These sales are denominated in U.S. dollars. IfDuring the years ended December 31, 2015 and December 31, 2014, as a result of the continued lack of liquidity and our revised assessment of the U.S. dollar value we are unableexpect to utilize a government-approved exchange rate mechanism to settle future concentrate sales torealize upon the conversion of Venezuelan bolivars into U.S. dollars by our bottling partner to pay our concentrate sales receivables, we recorded write-downs of $56 million and $296 million, respectively, recorded in Venezuela, the Company's outstanding receivables balance related to these sales will continue to increase. In addition, weline item other operating charges in our consolidated statements of income.
We also have certain U.S. dollar denominated intangible assets associated with products sold in Venezuela. IfAs a result of the bolivar further devalues, it could resultCompany's revised expectations regarding the convertibility of the local currency, we recognized impairment charges of $55 million and $18 million, respectively, during the years ended December 31, 2015 and December 31, 2014. These charges were recorded in the impairmentline item other operating charges in our consolidated statements of these intangible assets.income.
During the year ended December 31, 2015, the Company continued to use the SIMADI rate to remeasure the net monetary assets of our Venezuelan subsidiary. As of December 31, 2012,2015, the carryingcombined value of the net monetary assets of our accounts receivableVenezuelan subsidiary, the receivables from our bottling partner in Venezuela for these concentrate sales and the intangible assets associated with products sold in Venezuela totaled $216was $100 million. Included in this combined value is $15 million of cash and cash equivalents. Despite the additional currency conversion mechanisms, the Company's ability to pay dividends from Venezuela is still restricted due to the low volume of U.S. dollars available for conversion.
The CompanyIn February 2016, the Venezuelan government devalued its currency and changed its official and most preferential exchange rate, which will continue to managebe used for purchases of certain essential goods, to 10 bolivars per U.S. dollar from 6.3. The Venezuelan government announced it will reduce its three-tier system of exchange rates to two tiers by eliminating the SICAD rate. Additionally, the government announced that the SIMADI rate will be allowed to float freely beginning at a rate of 203 bolivars per U.S. dollar. As a result, the Company expects to continue to record losses on foreign currency exposureexchange, may incur additional write-downs of receivables or impairment charges and will continue to mitigate, over time, a portionrecord our proportionate share of the impact of exchange rate changes on net income and earnings per share.any charges recorded by our equity method investee that has operations in Venezuela.
Impact of Inflation and Changing Prices
Inflation affects the way we operate in many markets around the world. In general, we believe that, over time, we arewill be able to increase prices to counteract the majority of the inflationary effects of increasing costs and to generate sufficient cash flows to maintain our productive capability.
Overview of Financial Position
The following table illustrates the change in the individual line items of the Company's consolidated balance sheet (in millions):
| | | December 31, | 2012 |
| | 2011 |
| | Increase (Decrease) |
| | Percent Change |
| 2015 |
| | 2014 |
| | Increase (Decrease) |
| | Percent Change |
|
| | | | As Adjusted |
| | | | | |
| Cash and cash equivalents | $ | 8,442 |
| | $ | 12,803 |
| | $ | (4,361 | ) | | (34 | )% | $ | 7,309 |
| | $ | 8,958 |
| | $ | (1,649 | ) | | (18 | )% |
| Short-term investments | 5,017 |
| | 1,088 |
| | 3,929 |
| | 361 |
| 8,322 |
| | 9,052 |
| | (730 | ) | | (8 | ) |
| Marketable securities | 3,092 |
| | 144 |
| | 2,948 |
| | 2,047 |
| 4,269 |
| | 3,665 |
| | 604 |
| | 16 |
|
| Trade accounts receivable — net | 4,759 |
| | 4,920 |
| | (161 | ) | | (3 | ) | 3,941 |
| | 4,466 |
| | (525 | ) | | (12 | ) |
| Inventories | 3,264 |
| | 3,092 |
| | 172 |
| | 6 |
| 2,902 |
| | 3,100 |
| | (198 | ) | | (6 | ) |
| Prepaid expenses and other assets | 2,781 |
| | 3,450 |
| | (669 | ) | | (19 | ) | 2,752 |
| | 3,066 |
| | (314 | ) | | (10 | ) |
| Assets held for sale | 2,973 |
| | — |
| | 2,973 |
| | — |
| 3,900 |
| | 679 |
| | 3,221 |
| | 474 |
|
| Equity method investments | 9,216 |
| | 7,233 |
| | 1,983 |
| | 27 |
| 12,318 |
| | 9,947 |
| | 2,371 |
| | 24 |
|
| Other investments, principally bottling companies | 1,232 |
| | 1,141 |
| | 91 |
| | 8 |
| |
| Other investments | | 3,470 |
| | 3,678 |
| | (208 | ) | | (6 | ) |
| Other assets | 3,585 |
| | 3,495 |
| | 90 |
| | 3 |
| 4,207 |
| | 4,407 |
| | (200 | ) | | (5 | ) |
| Property, plant and equipment — net | 14,476 |
| | 14,939 |
| | (463 | ) | | (3 | ) | 12,571 |
| | 14,633 |
| | (2,062 | ) | | (14 | ) |
| Trademarks with indefinite lives | 6,527 |
| | 6,430 |
| | 97 |
| | 2 |
| 5,989 |
| | 6,533 |
| | (544 | ) | | (8 | ) |
| Bottlers' franchise rights with indefinite lives | 7,405 |
| | 7,770 |
| | (365 | ) | | (5 | ) | 6,000 |
| | 6,689 |
| | (689 | ) | | (10 | ) |
| Goodwill | 12,255 |
| | 12,219 |
| | 36 |
| | 0 |
| 11,289 |
| | 12,100 |
| | (811 | ) | | (7 | ) |
| Other intangible assets | 1,150 |
| | 1,250 |
| | (100 | ) | | (8 | ) | 854 |
| | 1,050 |
| | (196 | ) | | (19 | ) |
| Total assets | $ | 86,174 |
| | $ | 79,974 |
| | $ | 6,200 |
| | 8 | % | $ | 90,093 |
| | $ | 92,023 |
| | $ | (1,930 | ) | | (2 | )% |
| Accounts payable and accrued expenses | $ | 8,680 |
| | $ | 9,009 |
| | $ | (329 | ) | | (4 | )% | $ | 9,660 |
| | $ | 9,234 |
| | $ | 426 |
| | 5 | % |
| Loans and notes payable | 16,297 |
| | 12,871 |
| | 3,426 |
| | 27 |
| 13,129 |
| | 19,130 |
| | (6,001 | ) | | (31 | ) |
| Current maturities of long-term debt | 1,577 |
| | 2,041 |
| | (464 | ) | | (23 | ) | 2,677 |
| | 3,552 |
| | (875 | ) | | (25 | ) |
| Accrued income taxes | 471 |
| | 362 |
| | 109 |
| | 30 |
| 331 |
| | 400 |
| | (69 | ) | | (17 | ) |
| Liabilities held for sale | 796 |
| | — |
| | 796 |
| | — |
| 1,133 |
| | 58 |
| | 1,075 |
| | 1,853 |
|
| Long-term debt | 14,736 |
| | 13,656 |
| | 1,080 |
| | 8 |
| 28,407 |
| | 19,063 |
| | 9,344 |
| | 49 |
|
| Other liabilities | 5,468 |
| | 5,420 |
| | 48 |
| | 1 |
| 4,301 |
| | 4,389 |
| | (88 | ) | | (2 | ) |
| Deferred income taxes | 4,981 |
| | 4,694 |
| | 287 |
| | 6 |
| 4,691 |
| | 5,636 |
| | (945 | ) | | (17 | ) |
| Total liabilities | $ | 53,006 |
| | $ | 48,053 |
| | $ | 4,953 |
| | 10 | % | $ | 64,329 |
| | $ | 61,462 |
| | $ | 2,867 |
| | 5 | % |
| Net assets | $ | 33,168 |
| | $ | 31,921 |
| | $ | 1,247 |
| 1 | 4 | % | $ | 25,764 |
| | $ | 30,561 |
| | $ | (4,797 | ) | 1 | (16 | )% |
| |
1 | Includes a decrease in net assets of $144$3,959 million resulting from foreign currency translation adjustments in various balance sheet accounts. |
The increases (decreases) in the individual line items in the table above includes the impact of the following transactionsare primarily attributable to North America refranchising and events:
Cash and cash equivalents decreased $4,361 million, or 34 percent, primarily due to a change in the Company's overall cash management program which resulted in more of our cash balances being transferred into short-term investments as well as high-quality marketable securities. As a result of this change in strategy, short-term investments increased $3,929 million and marketable securities increased $2,948 million. A majority of the Company's consolidated cash, cash equivalents, short-term investments and marketable securities are held by our foreign subsidiaries.
Assets held for sale increased $2,973 million due to our consolidated Philippine and BrazilianGerman bottling operations being classified as held for sale. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on these transactions and theirinformation. Additionally, the increases (decreases) include the impact on other line items in our consolidated balance sheet as of December 31, 2012.the following:
Equity method investments increased $1,983 million, or 27 percent, primarily due to the Company's new investmentsour investment in Aujan, one of the largest independent beverage companies in the Middle East,Monster and Mikuni, a bottling partner located in Japan. The increase was also due toIndonesia, partially offset by the unfavorable impact of the merger of Andina and Polar, foreign currency translation adjustments and additional equity income recorded during 2012.
Loans and notes payable increased $3,426 million, or 27 percent, primarily due to an increase in the Company's commercial paper balance.
Liabilities held for sale increased $796 million due to our consolidated Philippine and Brazilian bottling operations being classified as held for sale.exchange rate fluctuations. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on these transactions and their impact on other line items in our consolidated balance sheet as of December 31, 2012.
information.Long-term debt increased $1,080 million, or 8 percent,Trademarks with indefinite lives decreased primarily due to the Company's issuancesale of long-term debt duringour energy brands and the first quarterdiscontinuation of 2012.the energy products in the glacéau portfolio as a result of the Monster Transaction. Refer to the heading "Cash Flows from Financing Activities" above and Note 102 of Notes to Consolidated Financial Statements for additional information on ourinformation.
Loans and notes payable and current maturities of long-term debt balance.decreased primarily due to the payments related to commercial paper and the retirement of $3,500 million of long-term debt during the year ended December 31, 2015.
Long-term debt increased primarily due to the issuances of Swiss franc-denominated, euro-denominated and U.S. dollar-denominated debt, partially offset by the early extinguishment of debt during the year ended December 31, 2015. Refer to Note 10 of Notes to Consolidated Financial Statements for additional information.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our Company uses derivative financial instruments primarily to reduce our exposure to adverse fluctuations in foreign currency exchange rates, interest rates, commodity prices and other market risks. We do not enter into derivative financial instruments for trading purposes. As a matter of policy, all of our derivative positions are used to reduce risk by hedging an underlying economic exposure. Because of the high correlation between the hedging instrument and the underlying exposure, fluctuations in the value of the instruments are generally offset by reciprocal changes in the value of the underlying exposure. The Company generally hedges anticipated exposures up to 36 months in advance; however, the majority of our derivative instruments expire within 24 months or less. Virtually all of our derivatives are straightforward over-the-counter instruments with liquid markets.
We monitor our exposure to financial market risks using several objective measurement systems. In prior years, the Company primarily used the value at risk methodology for its quantitative and qualitative disclosures about market risk. However, with the Company's acquisition of CCE's former North America business in 2010, and the related changes to our consolidated balance sheet, the Company has providedsystems, including a sensitivity analysis to measure our exposure to fluctuations in foreign currency exchange rates, interest rates and commodity prices. Refer to Note 5 of the Notes to Consolidated Financial Statements for additional information about our hedging transactions and derivative financial instruments.
Foreign Currency Exchange Rates
We manage most of our foreign currency exposures on a consolidated basis, which allows us to net certain exposures and take advantage of any natural offsets. In 2012,2015, we used 8172 functional currencies and generated $28,285$23,934 million of our net operating revenues from operations outside the United States; therefore, weaknessweaknesses in one particular currencysome currencies might be offset by strengthstrengths in other currencies over time. We use derivative financial instruments to further reduce our net exposure to foreign currency fluctuations.
Our Company enters into forward exchange contracts and purchases currency options (principally euroeuros and Japanese yen) and collars to hedge certain portions of forecasted cash flows denominated in foreign currencies. Additionally, we enter into forward exchange contracts to offset the earnings impact related to foreign currency fluctuations on certain monetary assets and liabilities. We also enter into forward exchange contracts as hedges of net investments in international operations.
The total notional valuevalues of our foreign currency derivatives was $11,148were $18,060 million and $10,469$23,553 million as of December 31, 20122015 and 2011,2014, respectively. This total includes derivative instruments that are designated and qualify for hedge accounting as well as economic hedges. The fair value of the contracts that qualify for hedge accounting resulted in an asseta net unrealized gain of $94$692 million as of December 31, 2012.2015. At the end of 2012,2015, we estimate that an unfavorablea 10 percent change inweakening of the foreign currency exchange ratesU.S. dollar would have eliminated the net unrealized gain and created an unrealized loss of $254$486 million. The fair value of the contracts that do not qualify for hedge accounting resulted in an asseta net unrealized gain of $36$278 million, and we estimate that an unfavorablea 10 percent change in ratesweakening of the U.S. dollar would have increased ourdecreased the net losses by $372unrealized gain to $238 million. All losses were offset by changes in the underlying hedged item, resulting in no net material impact on earnings.
Interest Rates
The Company is subject to interest rate volatility with regard to existing and future issuances of debt. We monitor our mix of fixed-rate and variable-rate debt as well as our mix of short-term debt versusand long-term debt. From time to time, we enter into interest rate swap agreements to manage our exposure to interest rate fluctuations.
Based on the Company's variable-rate debt and derivative instruments outstanding as of December 31, 2012,2015, a 1 percentage point increase in interest rates would have increased interest expense by $101$252 million in 2012.2015. However, this increase in interest expense would have been partially offset by the increase in interest income related to higher interest rates.
In 2012, we changed our overall cash management program and made additional investments in highly liquid debt securities. As a result, we are exposedThe Company is subject to interest rate risk related to these investments.its investments in highly liquid securities. These investments are primarily managed by external managers within the guidelines of the Company's investment policy. Our policy requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss. In addition, our policy limits the amount of credit exposure to any one issuer. We estimate that a 1 percentpercentage point increase in interest rates would result in a $36$52 million decrease in the fair market value of the portfolio.our portfolio of highly liquid securities.
Commodity Prices
The Company is subject to market risk with respect to commodity price fluctuations, principally related to our purchases of aluminumsweeteners, metals, juices, PET and plastic, sweeteners and energy. Whenever possible, wefuels. We manage our exposure to commodity risks primarily through the use of supplier pricing agreements that enable us to establish the purchase prices for certain inputs that are used in our manufacturing and distribution business. We also use derivative financial instruments to manage our exposure to commodity risks at times. Certain of these derivatives do not qualify for hedge accounting, but they are effective economic hedges that help the Company mitigate the price risk associated with the purchases of materials used in our manufacturing processes and the fuel used to operate our extensive vehicle fleet.
Open commodity derivatives that qualify for hedge accounting had a notional valuevalues of $17$8 million and $26$9 million as of December 31, 20122015 and 2011,2014, respectively. TheseThe fair value of the contracts that qualify for hedge accounting resulted in a liabilitynet unrealized gain of $1 million. The potential change in fair value of these commodity derivative instruments, assuming a 10 percent decrease in underlying commodity prices, would have increased ourresulted in a net unrealized loss by $2of $1 million.
Open commodity derivatives that do not qualify for hedge accounting had a notional valuevalues of $1,084$893 million and $1,165$816 million as of December 31, 20122015 and 2011,2014, respectively. These contracts had aThe fair value of $28the contracts that do not qualify for hedge accounting resulted in a net unrealized loss of $170 million. The potential change in fair value of these commodity derivative instruments, assuming a 10 percent decrease in underlying commodity prices, would have eliminated ourincreased the net unrealized gain and created an unrealized loss of $142to $226 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| (In millions except per share data) | | | As Adjusted | | | |
| NET OPERATING REVENUES | $ | 48,017 |
| | $ | 46,542 |
| | $ | 35,119 |
| $ | 44,294 |
| | $ | 45,998 |
| | $ | 46,854 |
|
| Cost of goods sold | 19,053 |
| | 18,215 |
| | 12,693 |
| 17,482 |
| | 17,889 |
| | 18,421 |
|
| GROSS PROFIT | 28,964 |
| | 28,327 |
| | 22,426 |
| 26,812 |
| | 28,109 |
| | 28,433 |
|
| Selling, general and administrative expenses | 17,738 |
| | 17,422 |
| | 13,194 |
| 16,427 |
| | 17,218 |
| | 17,310 |
|
| Other operating charges | 447 |
| | 732 |
| | 819 |
| 1,657 |
| | 1,183 |
| | 895 |
|
| OPERATING INCOME | 10,779 |
| | 10,173 |
| | 8,413 |
| 8,728 |
| | 9,708 |
| | 10,228 |
|
| Interest income | 471 |
| | 483 |
| | 317 |
| 613 |
| | 594 |
| | 534 |
|
| Interest expense | 397 |
| | 417 |
| | 733 |
| 856 |
| | 483 |
| | 463 |
|
| Equity income (loss) — net | 819 |
| | 690 |
| | 1,025 |
| 489 |
| | 769 |
| | 602 |
|
| Other income (loss) — net | 137 |
| | 529 |
| | 5,185 |
| 631 |
| | (1,263 | ) | | 576 |
|
| INCOME BEFORE INCOME TAXES | 11,809 |
| | 11,458 |
| | 14,207 |
| 9,605 |
| | 9,325 |
| | 11,477 |
|
| Income taxes | 2,723 |
| | 2,812 |
| | 2,370 |
| 2,239 |
| | 2,201 |
| | 2,851 |
|
| CONSOLIDATED NET INCOME | 9,086 |
| | 8,646 |
| | 11,837 |
| 7,366 |
| | 7,124 |
| | 8,626 |
|
| Less: Net income attributable to noncontrolling interests | 67 |
| | 62 |
| | 50 |
| 15 |
| | 26 |
| | 42 |
|
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY | $ | 9,019 |
| | $ | 8,584 |
| | $ | 11,787 |
| $ | 7,351 |
| | $ | 7,098 |
| | $ | 8,584 |
|
BASIC NET INCOME PER SHARE1 | $ | 2.00 |
| | $ | 1.88 |
| | $ | 2.55 |
| $ | 1.69 |
| | $ | 1.62 |
| | $ | 1.94 |
|
DILUTED NET INCOME PER SHARE1 | $ | 1.97 |
| | $ | 1.85 |
| | $ | 2.53 |
| $ | 1.67 |
| | $ | 1.60 |
| | $ | 1.90 |
|
| AVERAGE SHARES OUTSTANDING | 4,504 |
| | 4,568 |
| | 4,616 |
| 4,352 |
| | 4,387 |
| | 4,434 |
|
| Effect of dilutive securities | 80 |
| | 78 |
| | 51 |
| 53 |
| | 63 |
| | 75 |
|
| AVERAGE SHARES OUTSTANDING ASSUMING DILUTION | 4,584 |
| | 4,646 |
| | 4,667 |
| 4,405 |
| | 4,450 |
| | 4,509 |
|
| |
1 | Calculated based on net income attributable to shareowners of The Coca-Cola Company. |
Refer to Notes to Consolidated Financial Statements.
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| (In millions) | | | As Adjusted | | | |
| CONSOLIDATED NET INCOME | $ | 9,086 |
| | $ | 8,646 |
| | $ | 11,837 |
| $ | 7,366 |
| | $ | 7,124 |
| | $ | 8,626 |
|
| Other comprehensive income: | | | | | | | | | | |
| Net foreign currency translation adjustment | (182 | ) | | (692 | ) | | (947 | ) | (3,959 | ) | | (2,382 | ) | | (1,187 | ) |
| Net gain (loss) on derivatives | 99 |
| | 145 |
| | (120 | ) | 142 |
| | 357 |
| | 151 |
|
| Net unrealized gain (loss) on available-for-sale securities | 178 |
| | (7 | ) | | 102 |
| (684 | ) | | 714 |
| | (80 | ) |
| Net change in pension and other benefit liabilities | (668 | ) | | (763 | ) | | 282 |
| 86 |
| | (1,039 | ) | | 1,066 |
|
| TOTAL COMPREHENSIVE INCOME | 8,513 |
| | 7,329 |
| | 11,154 |
| 2,951 |
| | 4,774 |
| | 8,576 |
|
| Less: Comprehensive income (loss) attributable to noncontrolling interests | 105 |
| | 10 |
| | 38 |
| (3 | ) | | 21 |
| | 39 |
|
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY | $ | 8,408 |
| | $ | 7,319 |
| | $ | 11,116 |
| $ | 2,954 |
| | $ | 4,753 |
| | $ | 8,537 |
|
Refer to Notes to Consolidated Financial Statements.
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | December 31, | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
|
| (In millions except par value) | | | As Adjusted |
| | | |
| ASSETS | | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents | $ | 8,442 |
| | $ | 12,803 |
| $ | 7,309 |
| | $ | 8,958 |
|
| Short-term investments | 5,017 |
| | 1,088 |
| 8,322 |
| | 9,052 |
|
| TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | 13,459 |
| | 13,891 |
| 15,631 |
| | 18,010 |
|
| Marketable securities | 3,092 |
| | 144 |
| 4,269 |
| | 3,665 |
|
| Trade accounts receivable, less allowances of $53 and $83, respectively | 4,759 |
| | 4,920 |
| |
| Trade accounts receivable, less allowances of $352 and $331, respectively | | 3,941 |
| | 4,466 |
|
| Inventories | 3,264 |
| | 3,092 |
| 2,902 |
| | 3,100 |
|
| Prepaid expenses and other assets | 2,781 |
| | 3,450 |
| 2,752 |
| | 3,066 |
|
| Assets held for sale | 2,973 |
| | — |
| 3,900 |
| | 679 |
|
| TOTAL CURRENT ASSETS | 30,328 |
| | 25,497 |
| 33,395 |
| | 32,986 |
|
| EQUITY METHOD INVESTMENTS | 9,216 |
| | 7,233 |
| 12,318 |
| | 9,947 |
|
| OTHER INVESTMENTS, PRINCIPALLY BOTTLING COMPANIES | 1,232 |
| | 1,141 |
| |
| OTHER INVESTMENTS | | 3,470 |
| | 3,678 |
|
| OTHER ASSETS | 3,585 |
| | 3,495 |
| 4,207 |
| | 4,407 |
|
| PROPERTY, PLANT AND EQUIPMENT — net | 14,476 |
| | 14,939 |
| 12,571 |
| | 14,633 |
|
| TRADEMARKS WITH INDEFINITE LIVES | 6,527 |
| | 6,430 |
| 5,989 |
| | 6,533 |
|
| BOTTLERS' FRANCHISE RIGHTS WITH INDEFINITE LIVES | 7,405 |
| | 7,770 |
| 6,000 |
| | 6,689 |
|
| GOODWILL | 12,255 |
| | 12,219 |
| 11,289 |
| | 12,100 |
|
| OTHER INTANGIBLE ASSETS | 1,150 |
| | 1,250 |
| 854 |
| | 1,050 |
|
| TOTAL ASSETS | $ | 86,174 |
| | $ | 79,974 |
| $ | 90,093 |
| | $ | 92,023 |
|
| LIABILITIES AND EQUITY | | | | | | |
| CURRENT LIABILITIES | | | | | | |
| Accounts payable and accrued expenses | $ | 8,680 |
| | $ | 9,009 |
| $ | 9,660 |
| | $ | 9,234 |
|
| Loans and notes payable | 16,297 |
| | 12,871 |
| 13,129 |
| | 19,130 |
|
| Current maturities of long-term debt | 1,577 |
| | 2,041 |
| 2,677 |
| | 3,552 |
|
| Accrued income taxes | 471 |
| | 362 |
| 331 |
| | 400 |
|
| Liabilities held for sale | 796 |
| | — |
| 1,133 |
| | 58 |
|
| TOTAL CURRENT LIABILITIES | 27,821 |
| | 24,283 |
| 26,930 |
| | 32,374 |
|
| LONG-TERM DEBT | 14,736 |
| | 13,656 |
| 28,407 |
| | 19,063 |
|
| OTHER LIABILITIES | 5,468 |
| | 5,420 |
| 4,301 |
| | 4,389 |
|
| DEFERRED INCOME TAXES | 4,981 |
| | 4,694 |
| 4,691 |
| | 5,636 |
|
| THE COCA-COLA COMPANY SHAREOWNERS' EQUITY | | | | | | |
Common stock, $0.25 par value; Authorized — 11,200 shares; Issued — 7,040 and 7,040 shares, respectively | 1,760 |
| | 1,760 |
| 1,760 |
| | 1,760 |
|
| Capital surplus | 11,379 |
| | 10,332 |
| 14,016 |
| | 13,154 |
|
| Reinvested earnings | 58,045 |
| | 53,621 |
| 65,018 |
| | 63,408 |
|
| Accumulated other comprehensive income (loss) | (3,385 | ) | | (2,774 | ) | (10,174 | ) | | (5,777 | ) |
| Treasury stock, at cost — 2,571 and 2,514 shares, respectively | (35,009 | ) | | (31,304 | ) | |
| Treasury stock, at cost — 2,716 and 2,674 shares, respectively | | (45,066 | ) | | (42,225 | ) |
| EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY | 32,790 |
| | 31,635 |
| 25,554 |
| | 30,320 |
|
| EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS | 378 |
| | 286 |
| 210 |
| | 241 |
|
| TOTAL EQUITY | 33,168 |
| | 31,921 |
| 25,764 |
| | 30,561 |
|
| TOTAL LIABILITIES AND EQUITY | $ | 86,174 |
| | $ | 79,974 |
| $ | 90,093 |
| | $ | 92,023 |
|
Refer to Notes to Consolidated Financial Statements.
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| (In millions) | | | As Adjusted | | | |
| OPERATING ACTIVITIES | | | | | | | | | | |
| Consolidated net income | $ | 9,086 |
| | $ | 8,646 |
| | $ | 11,837 |
| $ | 7,366 |
| | $ | 7,124 |
| | $ | 8,626 |
|
| Depreciation and amortization | 1,982 |
| | 1,954 |
| | 1,443 |
| 1,970 |
| | 1,976 |
| | 1,977 |
|
| Stock-based compensation expense | 259 |
| | 354 |
| | 380 |
| 236 |
| | 209 |
| | 227 |
|
| Deferred income taxes | 632 |
| | 1,035 |
| | 604 |
| 73 |
| | (40 | ) | | 648 |
|
| Equity (income) loss — net of dividends | (426 | ) | | (269 | ) | | (671 | ) | (122 | ) | | (371 | ) | | (201 | ) |
| Foreign currency adjustments | (130 | ) | | 7 |
| | 151 |
| (137 | ) | | 415 |
| | 168 |
|
| Significant (gains) losses on sales of assets — net | (98 | ) | | (220 | ) | | (645 | ) | (374 | ) | | 831 |
| | (670 | ) |
| Other significant (gains) losses — net | — |
| | — |
| | (4,713 | ) | |
| Other operating charges | 166 |
| | 214 |
| | 264 |
| 929 |
| | 761 |
| | 465 |
|
| Other items | 254 |
| | (354 | ) | | 512 |
| 744 |
| | 149 |
| | 234 |
|
| Net change in operating assets and liabilities | (1,080 | ) | | (1,893 | ) | | 370 |
| (157 | ) | | (439 | ) | | (932 | ) |
| Net cash provided by operating activities | 10,645 |
| | 9,474 |
| | 9,532 |
| 10,528 |
| | 10,615 |
| | 10,542 |
|
| INVESTING ACTIVITIES | | | | | | | | | | |
| Purchases of short-term investments | (9,590 | ) | | (4,057 | ) | | (4,579 | ) | |
| Proceeds from disposals of short-term investments | 5,622 |
| | 5,647 |
| | 4,032 |
| |
| Acquisitions and investments | (1,535 | ) | | (977 | ) | | (2,511 | ) | |
| Purchases of other investments | (5,266 | ) | | (787 | ) | | (132 | ) | |
| Proceeds from disposals of bottling companies and other investments | 2,189 |
| | 562 |
| | 972 |
| |
| Purchases of investments | | (15,831 | ) | | (17,800 | ) | | (14,782 | ) |
| Proceeds from disposals of investments | | 14,079 |
| | 12,986 |
| | 12,791 |
|
| Acquisitions of businesses, equity method investments and nonmarketable securities | | (2,491 | ) | | (389 | ) | | (353 | ) |
| Proceeds from disposals of businesses, equity method investments and nonmarketable securities | | 565 |
| | 148 |
| | 872 |
|
| Purchases of property, plant and equipment | (2,780 | ) | | (2,920 | ) | | (2,215 | ) | (2,553 | ) | | (2,406 | ) | | (2,550 | ) |
| Proceeds from disposals of property, plant and equipment | 143 |
| | 101 |
| | 134 |
| 85 |
| | 223 |
| | 111 |
|
| Other investing activities | (187 | ) | | (93 | ) | | (106 | ) | (40 | ) | | (268 | ) | | (303 | ) |
| Net cash provided by (used in) investing activities | (11,404 | ) | | (2,524 | ) | | (4,405 | ) | (6,186 | ) | | (7,506 | ) | | (4,214 | ) |
| FINANCING ACTIVITIES | | | | | | | | | | |
| Issuances of debt | 42,791 |
| | 27,495 |
| | 15,251 |
| 40,434 |
| | 41,674 |
| | 43,425 |
|
| Payments of debt | (38,573 | ) | | (22,530 | ) | | (13,403 | ) | (37,738 | ) | | (36,962 | ) | | (38,714 | ) |
| Issuances of stock | 1,489 |
| | 1,569 |
| | 1,666 |
| 1,245 |
| | 1,532 |
| | 1,328 |
|
| Purchases of stock for treasury | (4,559 | ) | | (4,513 | ) | | (2,961 | ) | (3,564 | ) | | (4,162 | ) | | (4,832 | ) |
| Dividends | (4,595 | ) | | (4,300 | ) | | (4,068 | ) | (5,741 | ) | | (5,350 | ) | | (4,969 | ) |
| Other financing activities | 100 |
| | 45 |
| | 50 |
| 251 |
| | (363 | ) | | 17 |
|
| Net cash provided by (used in) financing activities | (3,347 | ) | | (2,234 | ) | | (3,465 | ) | (5,113 | ) | | (3,631 | ) | | (3,745 | ) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (255 | ) | | (430 | ) | | (166 | ) | (878 | ) | | (934 | ) | | (611 | ) |
| CASH AND CASH EQUIVALENTS | | | | | | | | | | |
| Net increase (decrease) during the year | (4,361 | ) | | 4,286 |
| | 1,496 |
| (1,649 | ) | | (1,456 | ) | | 1,972 |
|
| Balance at beginning of year | 12,803 |
| | 8,517 |
| | 7,021 |
| 8,958 |
| | 10,414 |
| | 8,442 |
|
| Balance at end of year | $ | 8,442 |
| | $ | 12,803 |
| | $ | 8,517 |
| $ | 7,309 |
| | $ | 8,958 |
| | $ | 10,414 |
|
Refer to Notes to Consolidated Financial Statements.
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| (In millions except per share data) | | | As Adjusted | | | |
| EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY | | | | | | | | | | |
NUMBER OF COMMON SHARES OUTSTANDING | | | | | | | | | | |
| Balance at beginning of year | 4,526 |
| | 4,583 |
| | 4,605 |
| 4,366 |
| | 4,402 |
| | 4,469 |
|
| Purchases of treasury stock | (121 | ) | | (127 | ) | | (98 | ) | (86 | ) | | (98 | ) | | (121 | ) |
| Treasury stock issued to employees related to stock compensation plans | 64 |
| | 70 |
| | 76 |
| 44 |
| | 62 |
| | 54 |
|
| Balance at end of year | 4,469 |
| | 4,526 |
| | 4,583 |
| 4,324 |
| | 4,366 |
| | 4,402 |
|
COMMON STOCK | $ | 1,760 |
| | $ | 1,760 |
| | $ | 1,760 |
| $ | 1,760 |
| | $ | 1,760 |
| | $ | 1,760 |
|
CAPITAL SURPLUS | | | | | | | | | | |
| Balance at beginning of year | 10,332 |
| | 9,177 |
| | 7,657 |
| 13,154 |
| | 12,276 |
| | 11,379 |
|
| Stock issued to employees related to stock compensation plans | 640 |
| | 724 |
| | 855 |
| 532 |
| | 526 |
| | 569 |
|
| Replacement share-based awards issued in connection with an acquisition | — |
| | — |
| | 237 |
| |
| Tax benefit (charge) from employees' stock option and restricted stock plans | 144 |
| | 79 |
| | 48 |
| |
| Tax benefit (charge) from stock compensation plans | | 94 |
| | 169 |
| | 144 |
|
| Stock-based compensation | 259 |
| | 354 |
| | 380 |
| 236 |
| | 209 |
| | 227 |
|
| Other activities | 4 |
| | (2 | ) | | — |
| — |
| | (26 | ) | | (43 | ) |
| Balance at end of year | 11,379 |
| | 10,332 |
| | 9,177 |
| 14,016 |
| | 13,154 |
| | 12,276 |
|
REINVESTED EARNINGS | | | | | | | | | | |
| Balance at beginning of year | 53,621 |
| | 49,337 |
| | 41,618 |
| 63,408 |
| | 61,660 |
| | 58,045 |
|
| Net income attributable to shareowners of The Coca-Cola Company | 9,019 |
| | 8,584 |
| | 11,787 |
| 7,351 |
| | 7,098 |
| | 8,584 |
|
| Dividends (per share — $1.02, $0.94 and $0.88 in 2012, 2011 and 2010, respectively) | (4,595 | ) | | (4,300 | ) | | (4,068 | ) | |
| Dividends (per share — $1.32, $1.22 and $1.12 in 2015, 2014 and 2013, respectively) | | (5,741 | ) | | (5,350 | ) | | (4,969 | ) |
| Balance at end of year | 58,045 |
| | 53,621 |
| | 49,337 |
| 65,018 |
| | 63,408 |
| | 61,660 |
|
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | | | | | | | | | | |
| Balance at beginning of year | (2,774 | ) | | (1,509 | ) | | (838 | ) | (5,777 | ) | | (3,432 | ) | | (3,385 | ) |
| Net other comprehensive income (loss) | (611 | ) | | (1,265 | ) | | (671 | ) | (4,397 | ) | | (2,345 | ) | | (47 | ) |
| Balance at end of year | (3,385 | ) | | (2,774 | ) | | (1,509 | ) | (10,174 | ) | | (5,777 | ) | | (3,432 | ) |
TREASURY STOCK | | | | | | | | | | |
| Balance at beginning of year | (31,304 | ) | | (27,762 | ) | | (25,398 | ) | (42,225 | ) | | (39,091 | ) | | (35,009 | ) |
| Stock issued to employees related to stock compensation plans | 786 |
| | 830 |
| | 824 |
| 696 |
| | 891 |
| | 745 |
|
| Purchases of treasury stock | (4,491 | ) | | (4,372 | ) | | (3,188 | ) | (3,537 | ) | | (4,025 | ) | | (4,827 | ) |
| Balance at end of year | (35,009 | ) | | (31,304 | ) | | (27,762 | ) | (45,066 | ) | | (42,225 | ) | | (39,091 | ) |
TOTAL EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY | $ | 32,790 |
| | $ | 31,635 |
| | $ | 31,003 |
| $ | 25,554 |
| | $ | 30,320 |
| | $ | 33,173 |
|
| EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS | | | | | | | | | | |
| Balance at beginning of year | $ | 286 |
| | $ | 314 |
| | $ | 547 |
| $ | 241 |
| | $ | 267 |
| | $ | 378 |
|
| Net income attributable to noncontrolling interests | 67 |
| | 62 |
| | 50 |
| 15 |
| | 26 |
| | 42 |
|
| Net foreign currency translation adjustment | 38 |
| | (52 | ) | | (12 | ) | (18 | ) | | (5 | ) | | (3 | ) |
| Dividends paid to noncontrolling interests | (48 | ) | | (38 | ) | | (32 | ) | (31 | ) | | (25 | ) | | (58 | ) |
| Acquisition of interests held by noncontrolling owners | (15 | ) | | — |
| | — |
| — |
| | — |
| | (34 | ) |
| Contributions by noncontrolling interests | — |
| | — |
| | 1 |
| — |
| | — |
| | 6 |
|
| Increase due to business combinations | 50 |
| | — |
| | 13 |
| |
| Deconsolidation of certain variable interest entities | — |
| | — |
| | (253 | ) | |
| Business combinations | | (3 | ) | | (22 | ) | | 25 |
|
| Deconsolidation of certain entities | | — |
| | — |
| | (89 | ) |
| Other activities | | 6 |
| | — |
| | — |
|
| TOTAL EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS | $ | 378 |
| | $ | 286 |
| | $ | 314 |
| $ | 210 |
| | $ | 241 |
| | $ | 267 |
|
Refer to Notes to Consolidated Financial Statements.
THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The Coca-Cola Company is the world's largest beverage company. We own or license and market more than 500 nonalcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks. We own and market four of the world's top five nonalcoholic sparkling beverage brands: Coca-Cola, Diet Coke, Fanta and Sprite. Finished beverage products bearing our trademarks, sold in the United States since 1886, are now sold in more than 200 countries.
We make our branded beverage products available to consumers throughout the world through our network of Company-owned or -controlled bottling and distribution operations, as well as independent bottling partners, distributors, wholesalers and retailers — the world's largest beverage distribution system. Of the approximately 57 billion beverage servings of all types consumed worldwide every day, beveragesBeverages bearing trademarks owned by or licensed to us account for more than 1.81.9 billion servings.
On October 2, 2010, we acquired the former North America business of Coca-Cola Enterprises Inc. ("CCE"), one of our major bottlers, consisting of CCE's production, sales and distribution operations in the United States, Canada, the British Virgin Islands, the United States Virgin Islands and the Cayman Islands, and a substantial majority of CCE's corporate segment. Upon completion of the CCE transaction, we combined the managementapproximately 58 billion servings of the acquired North America 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 ("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.all beverages consumed worldwide every day.
Our Company markets, manufactures and sells:
beverage concentrates, sometimes referred to as "beverage bases," and syrups, including fountain syrups (we refer to this part of our business as our "concentrate business" or "concentrate operations"); and
finished sparkling and still beverages (we refer to this part of our business as our "finished product business" or "finished product operations").
Generally, finished product operations generate higher net operating revenues but lower gross profit margins than concentrate operations.
In our concentrate operations, we typically generate net operating revenues by selling concentrates and syrups to authorized bottling and canning operations (to which we typically refer as our "bottlers" or our "bottling partners"). Our bottling partners either combine the concentrates with sweeteners (depending on the product), still water and/or sparkling water, or combine the syrups with sparkling water to produce finished beverages. The finished beverages are packaged in authorized containers bearing our trademarks or trademarks licensed to us — such as cans and refillable and nonrefillable glass and plastic bottles — bearing our trademarks or trademarks licensed to us and are then sold to retailers directly or, in some cases, through wholesalers or other bottlers. Outside the United States, we also sell concentrates for fountain beverages to our bottling partners who are typically authorized to manufacture fountain syrups, which they sell to fountain retailers such as restaurants and convenience stores which use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers who in turn sell and distribute the fountain syrups to fountain retailers.
Our finished product operations consist primarily of the production,Company-owned or -controlled bottling, sales and distribution operations, managed by CCRincluding Coca-Cola Refreshments ("CCR"), our bottling and ourcustomer service organization for the United States and Canada. Our Company-owned or -controlled bottling, sales and distribution operations.operations, other than CCR, are included in our Bottling Investments operating segment. CCR is included in our North America operating segment, and our Company-owned or -controlled bottling and distribution operations are included in our Bottling Investments operating segment. Our finished product operations generate net operating revenues by selling sparkling beverages and a variety of still beverages, such as juices and juice drinks, energy and sports drinks, ready-to-drink teas and coffees, and certain water products, to retailers or to distributors, wholesalers and bottling partners who distribute them to retailers. In addition, in the United States, we manufacture fountain syrups and sell them to fountain retailers, such as restaurants and convenience stores who use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. In the United States, we authorize wholesalers to resell our fountain syrups through nonexclusive appointments that neither restrict us in setting the prices at which we sell fountain syrups to the wholesalers nor restrict the territories in which the wholesalers may resell in the United States.
Summary of Significant Accounting Policies
Basis of Presentation
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.States ("U.S. GAAP"). The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and accompanying notes. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result.
We use the equity method to account for investments in companies, if our investment provides us with the ability to exercise significant influence over operating and financial policies of the investee. Our consolidated net income includes our Company's proportionate share of the net income or loss of these companies. Our judgment regarding the level of influence over each equity method investment includes considering key factors such as our ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions.
We eliminate from our financial results all significant intercompany transactions, including the intercompany transactions with consolidated variable interest entities ("VIEs") and the intercompany portion of transactions with equity method investees.
Effective January 1, 2012, the Company elected to change our accounting methodology for determining the market-related value of assets for our U.S. qualified defined benefit pension plans. The market-related value of assets is used to determine the Company's expected return on assets, a component of our annual pension expense calculation. The Company previously used a smoothing technique to calculate our market-related value of assets, which reflected changes in the fair value over no more than five years. However, we now use the actual fair value of plan assets to determine our expected return on those assets for all of our defined benefit plans. Although both methods are permitted under accounting principles generally accepted in the United States, the Company believes our new methodology is preferable as it accelerates the recognition of gains and losses in the determination of our annual pension expense. The Company's change in accounting methodology has been applied retrospectively, and we have adjusted all applicable prior period financial information presented herein as required.
On July 27, 2012, the Company's certificate of incorporation was amended to increase the number of authorized shares of common stock from 5.6 billion to 11.2 billion and effect a two-for-one stock split of the common stock. The record date for the stock split was July 27, 2012, and the additional shares were distributed on August 10, 2012. Each shareowner of record on the close of business on the record date received one additional share of common stock for each share held. All share and per share data presented herein reflect the impact of the increase in authorized shares and the stock split, as appropriate.
Any prior period amounts that were revised as a result of the changes described above have been labeled "as adjusted" herein. Certain other amounts in the prior years' consolidated financial statements and notes have been revised to conform to the current year presentation.
Principles of Consolidation
Our Company consolidates all entities that we control by ownership of a majority voting interest as well as VIEs for which our Company is the primary beneficiary. Generally, we consolidate only business enterprises that we control by ownership of a majority voting interest. However, there are situations in which consolidation is required even though the usual condition of consolidation (ownership of a majority voting interest) does not apply. Generally, this occurs when an entity holds an interest in another business enterprise that was achieved through arrangements that do not involve voting interests, which results in a disproportionate relationship between such entity's voting interests in, and its exposure to the economic risks and potential rewards of, the other business enterprise. This disproportionate relationship results in what is known as a variable interest, and the entity in which we have the variable interest is referred to as a "VIE." An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both (a)(1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (b)(2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
Our Company holds interests in certain VIEs, primarily bottling and container manufacturing operations, for which we were not determined to be the primary beneficiary. Our variable interests in these VIEs primarily relate to profit guarantees or subordinated financial support. Refer to Note 11.11. Although these financial arrangements resulted in usour holding variable interests in these entities, they did not empower us to direct the activities of the VIEs that most significantly impact the VIEs' economic performance. Our Company's investments, plus any loans and guarantees, related to these VIEs totaled $1,776$2,687 million and $1,183$2,274 million as of December 31, 20122015 and 2011,2014, respectively, representing our maximum exposures to loss. The Company's investments, plus any loans and guarantees, related to these VIEs were not significant to the Company's consolidated financial statements.
In addition, our Company holds interests in certain VIEs, primarily bottling and container manufacturing operations, for which we were determined to be the primary beneficiary. As a result, we have consolidated these entities. Our Company's investments, plus any loans and guarantees, related to these VIEs totaled $234$221 million and $199$266 million as of December 31, 20122015 and 2011,2014, respectively, representing our maximum exposures to loss. The assets and liabilities of VIEs for which we are the primary beneficiary were not significant to the Company's consolidated financial statements.
Creditors of our VIEs do not have recourse against the general credit of the Company, regardless of whether they are accounted for as consolidated entities.
Assets and Liabilities Held for Sale
Our Company classifies long-lived assets (disposal groups)or disposal groups to be sold as held for sale in the period in which all of the following criteria are met: management, having the authority to approve the action, commits to a plan to sell the asset (disposal group);or disposal group; the asset (disposal group)or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (disposal groups);or disposal groups; an active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group)or disposal group have been initiated; the sale of the asset (disposal group)or disposal group is probable, and transfer of the asset (disposal group)or disposal group is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the asset (disposal group)or disposal group beyond one year; the asset (disposal group)or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair
value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
We initially measure a long-lived asset (disposal group)or disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held-for-sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset (disposal group)or disposal group until the date of sale. We assess the fair value of a long-lived asset (disposal group)or disposal group less any costs to sell each reporting period it remains classified as held for sale and report any subsequent changes as an adjustment to the carrying value of the asset (disposal group),or disposal group, as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale.
Upon determining that a long-lived asset (disposal group)or disposal group meets the criteria to be classified as held for sale, the Company ceases depreciation and reports long-lived assets and/or the assets and liabilities of the disposal group, if material, in the line items assets held for sale and liabilities held for sale, respectively, in our consolidated balance sheet.
Risks and Uncertainties
Factors that could adversely impact the Company's operations or financial results include, but are not limited Refer to the following: obesity and other health concerns; water scarcity and poor quality; changes in the nonalcoholic beverage business environment and retail landscape; increased competition; increased demand for food products and decreased agricultural productivity; consolidation in the retail channel or the loss of key retail or foodservice customers; an inability to expand operations in developing and emerging markets; fluctuations in foreign currency exchange rates; interest rate increases; an inability to maintain good relationships with our bottling partners; a deterioration in our bottling partners' financial condition; increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters; increased or new indirect taxes in the United States or in other major markets; increased cost, disruption of supply or shortage of energy or fuels; increased cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials; changes in laws and regulations relating to beverage containers and packaging; significant additional labeling or warning requirements or limitations on the availability of our products; an inability to protect our information systems against service interruption, misappropriation of data or breaches of security; unfavorable general economic conditions in the United States; unfavorable economic and political conditions in international markets; litigation or legal proceedings; adverse weather conditions; climate change; damage to our brand image and corporate reputation from negative publicity related to product safety or quality, human and workplace rights, obesity or other issues, even if unwarranted; changes in, or failure to comply with, the laws and regulations applicable to our products or our business operations; changes in accounting standards; an inability to achieve our overall long-term goals; continuing uncertainty in the global credit markets; one or more of our counterparty financial institutions defaulting on their
obligations to us or failing; an inability to realize additional benefits targeted by our productivity and reinvestment program; an inability to renew collective bargaining agreements on satisfactory terms, or we or our bottling partners experience strikes, work stoppages or labor unrest; future impairment charges; future multi-employer plan withdrawal liabilities; an inability to successfully integrate and manage our Company-owned or -controlled bottling operations; and global or regional catastrophic events.
Our Company monitors our operations with a view to minimizing the impact to our overall business that could arise as a result of the risks and uncertainties inherent in our business.Note 2.
Revenue Recognition
Our Company recognizes revenue when persuasive evidence of an arrangement exists, delivery of products has occurred, the sales price charged is fixed or determinable, and collectibility is reasonably assured. For our Company, this generally means that we recognize revenue when title to our products is transferred to our bottling partners, resellers or other customers. In particular, title usually transfers upon shipment to or receipt at our customers' locations, as determined by the specific sales terms of the transactions. Our sales terms do not allow for a right of return except for matters related to any manufacturing defects on our part.
Deductions from Revenue
Our customers can earn certain incentives including, but not limited to, cash discounts, funds for promotional and marketing activities, volume-based incentive programs and support for infrastructure programs. The costs associated with these incentives are included in deductions from revenue, a component of net operating revenues in our consolidated statements of income. For customer incentives that must be earned, management must make estimates related to the contractual terms, customer performance and sales volume to determine the total amounts earned and to be recorded in deductions from revenue. In making these estimates, management considers past results. The actual amounts ultimately paid may be different from our estimates.
In some situations, the Company may determine it to be advantageous to make advance payments to specific customers to fund certain marketing activities intended to generate profitable volume and/or invest in infrastructure programs with our bottlers that are directed at strengthening our bottling system and increasing unit case volume. The Company also makes advance payments to certain customers for distribution rights. The advance payments made to customers are initially capitalized and included in our consolidated balance sheets in prepaid expenses and other assets and noncurrent other assets, depending on the duration of the agreements. The assets are amortized over the applicable periods and included in deductions from revenue. The duration of these agreements typically ranges from 4range up to 10 years.
Amortization expense for infrastructure programs was $86$61 million,, $90 $72 million and $137$69 million in 2012, 20112015, 2014 and 2010,2013, respectively. The aggregate deductions from revenue recorded by the Company in relation to these programs, including amortization expense on infrastructure programs, were $6.1$6.8 billion,, $5.8 $7.0 billion and $5.0$6.9 billion in 2012, 20112015, 2014 and 2010,2013, respectively.
Advertising Costs
Our Company expenses production costs of print, radio, television and other advertisements as of the first date the advertisements take place. All other marketing expenditures are expensed in the annual period in which the expenditure is incurred. Advertising costs included in the line item selling, general and administrative expenses in our consolidated statements of income were $3.3$4.0 billion,, $3.3 $3.5 billion and $2.9$3.3 billion in 2012, 20112015, 2014 and 2010,2013, respectively. As of December 31, 20122015 and 2011,2014, advertising and production costs of $295$207 million and $349$228 million,, respectively, were primarily recorded in the line item prepaid expenses and other assets in our consolidated balance sheets.
For interim reporting purposes, we allocate our estimated full year marketing expenditures that benefit multiple interim periods to each of our interim reporting periods. We use the proportion of each interim period's actual unit case volume to the estimated full year unit case volume as the basis for the allocation. This methodology results in our marketing expenditures being recognized at a standard rate per unit case. At the end of each interim reporting period, we review our estimated full year unit case volume and our estimated full year marketing expenditures in order to evaluate if a change in estimate is necessary. The impact of any changes in these full year estimates is recognized in the interim period in which the change in estimate occurs. Our full year marketing expenditures are not impacted by this interim accounting policy.
Shipping and Handling Costs
Shipping and handling costs related to the movement of finished goods from manufacturing locations to our sales distribution centers are included in the line item cost of goods sold in our consolidated statements of income. Shipping and handling costs incurred to move finished goods from our sales distribution centers to customer locations are included in the line item selling, general and administrative expenses in our consolidated statements of income. As a result of our acquisition of CCE's former North America business, the amount of shipping and handling costs recorded in the line item selling, general and administrative expenses increased significantly in 2011 when compared to 2010. During the years endedDecember 31, 20122015, 2014 and 2011,2013, the Company recorded shipping and handling costs of $2.8$2.5 billion, $2.7 billion and $2.4$2.7 billion,, respectively, in the line item selling, general and administrative expenses. Our customers do not pay us separately for shipping and handling costs related to finished goods.
Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted net income per share is computed similarly to basic net income per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. Approximately 3427 million,, 32 38 million (as adjusted) and 7728 million (as adjusted) stock option awards were excluded from the computations of diluted net income per share in 2012, 20112015, 2014 and 2010,2013, respectively, because the awards would have been antidilutive for the years presented.
Cash Equivalents
We classify time deposits and other investments that are highly liquid and have maturities of three months or less at the date of purchase as cash equivalents. We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties and procedures to monitor our credit risk concentrations.
Short-Term Investments
We classify time deposits and other investments that have maturities of greater than three months but less than one year as short-term investments.
Investments in Equity and Debt Securities
We use the equity method to account for our investments in equity securities if our investment gives us the ability to exercise significant influence over operating and financial policies of the investee. We include our proportionate share of earnings and/or losses of our equity method investees in equity income (loss) — net in our consolidated statements of income. The carrying value of our equity investments is reported in equity method investments in our consolidated balance sheets. Refer to Note 6.6.
We account for investments in companies that we do not control or account for under the equity method either at fair value or under the cost method, as applicable. Investments in equity securities, other than investments accounted for under the equity method, are carried at fair value if the fair value of the security is readily determinable. Equity investments carried at fair value are classified as either trading or available-for-sale securities with their cost basis determined by the specific identification method. Realized and unrealized gains and losses on trading securities and realized gains and losses on available-for-sale securities are included in other income (loss) — net in our consolidated statements of income. Unrealized gains and losses, net of deferred taxes, on available-for-sale securities are included in our consolidated balance sheets as a component of accumulated other comprehensive income (loss) ("AOCI")., except for the change in fair value attributable to the currency risk being hedged, if applicable, which is included in other income (loss) — net in our consolidated statements of income. Trading securities are reported as either marketable securities or other assets in our consolidated balance sheets. Securities classified as available-for-sale are reported as either marketable securities, other investments or other assets in our consolidated balance sheets, depending on the length of time we intend to hold the investment. Refer to Note 3.3.
Investments in equity securities that we do not control or account for under the equity method and do not have readily determinable fair values for are accounted for under the cost method. Cost method investments are originally recorded at cost, and we record dividend income when applicable dividends are declared. Cost method investments are reported as other investments in our consolidated balance sheets, and dividend income from cost method investments is reported in the line item other income (loss) — net in our consolidated statements of income.
Our investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale.
Each reporting period we review all of our investments in equity and debt securities, except for those classified as trading, to determine whether a significant event or change in circumstances has occurred that may have an adverse effect on the fair value of each investment. When such events or changes occur, we evaluate the fair value compared to our cost basis in the investment. We also perform this evaluation every reporting period for each investment for which our cost basis exceeded the fair value in the prior period.value. The fair values of most of our investments in publicly traded companies are often readily available
based on quoted market prices. For investments in nonpublicly traded companies, management's assessment of fair value is based on valuation methodologies including discounted cash flows, estimates of sales proceeds, and appraisals, as appropriate. We consider the assumptions that we believe hypothetical marketplace participants would use in evaluating estimated future cash flows when employing the discounted cash flow or estimates of sales proceeds valuation methodologies.
In the event the fair value of an investment declines below our cost basis, management determinesis required to determine if the decline in fair value is other than temporary. If management determines the decline is other than temporary, an impairment charge is recorded. Management's assessment as to the nature of a decline in fair value is based on, among other things, the length of time and the extent to which the market value has been less than our cost basis,basis; the financial condition and near-term prospects of the issuer,issuer; and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value.
Trade Accounts Receivable
We record trade accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the trade accounts receivable balances and charged to the provision for doubtful accounts. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the contractual terms of the receivables, and our relationships with, and the economic status of, our bottling partners and customers. We believe our exposure to concentrations of credit risk is limited due to the diverse geographic areas covered by our operations. Activity in the allowance for doubtful accounts was as follows (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| Balance at beginning of year | $ | 83 |
| | $ | 48 |
| | $ | 55 |
| $ | 331 |
| | $ | 61 |
| | $ | 53 |
|
| Net charges to costs and expenses | 5 |
| | 56 |
| | 21 |
| |
Net charges to costs and expenses1 | | 45 |
| | 308 |
| | 30 |
|
| Write-offs | (19 | ) | | (12 | ) | | (18 | ) | (10 | ) | | (13 | ) | | (14 | ) |
Other1 | (16 | ) | | (9 | ) | | (10 | ) | |
Other2 | | (14 | ) | | (25 | ) | | (8 | ) |
| Balance at end of year | $ | 53 |
| | $ | 83 |
| | $ | 48 |
| $ | 352 |
| | $ | 331 |
| | $ | 61 |
|
| |
1 | Other includes acquisitions, divestitures, foreign currency translation and the impact of transferring the assets ofThe increase in 2014 was primarily related to concentrate sales receivables from our consolidated Philippine and Brazilian bottling operations to assets heldpartner in Venezuela. See Hyperinflationary Economies discussion below for sale.additional information. |
2 Other includes foreign currency translation and the impact of transferring certain assets to assets held for sale. See Note 2.
A significant portion of our net operating revenues and corresponding accounts receivable is derived from sales of our products in international markets. Refer to Note 19.19. We also generate a significant portion of our net operating revenues by selling concentrates and syrups to bottlers in which we have a noncontrolling interest, including Coca-Cola Hellenic Bottling Company S.A. ("Coca-Cola Hellenic"), Coca-Cola FEMSA, S.A.B. de C.V. ("Coca-Cola FEMSA"), Coca-Cola HBC AG ("Coca-Cola Hellenic"), and Coca-Cola Amatil Limitedİçecek A.Ş. ("Coca-Cola Amatil"İçecek"). Refer to Note 6.6.
Inventories
Inventories consist primarily of raw materials and packaging (which includes ingredients and supplies) and finished goods (which include concentrates and syrups in our concentrate operations and finished beverages in our finished product operations). Inventories are valued at the lower of cost or market. We determine cost on the basis of the average cost or first-in, first-out methods. Refer to Note 4.4.
Derivative Instruments
Our Company, when deemed appropriate, uses derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risks managed by the Company through the use of derivative instruments are foreign currency exchange rate risk, commodity price risk and interest rate risk. All derivatives are carried at fair value in our consolidated balance sheets in the following line items, as applicable: prepaid expenses and other assets orassets; other assets; accounts payable and accrued expenses, as applicable.expenses; and other liabilities. The cash flow impact of the Company's derivative instruments is primarily included in our consolidated statements of cash flows in net cash provided by operating activities. Refer to Note 5.5.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Repair and maintenance costs that do not improve service potential or extend economic life are expensed as incurred. Depreciation is recorded principally by the straight-line method over the estimated useful lives of our assets, which are reviewed periodically and generally have the following ranges: buildings and improvements: 40 years or less; and machinery, equipment and vehicle fleet: 20 years or less. Land is not depreciated, and construction in progress is not depreciated until ready for service. Leasehold improvements are amortized using the straight-line method over the shorter of the remaining lease term, including renewals that are deemed to be reasonably assured, or the estimated useful life of the improvement. Depreciation is not recorded during the period in which a long-lived asset (disposal group)or disposal group is classified as held for sale, even if the asset (disposal group)or disposal group continues to generate revenue during the period. Depreciation expense, including the depreciation expense of assets under capital lease, totaled $1,704$1,735 million,, $1,654 $1,716 million and $1,188$1,727 million in 2012, 20112015, 2014 and 2010,2013, respectively. Amortization expense for leasehold improvements totaled $19$18 million,, $18 $20 million and $16$16 million in 2012, 20112015, 2014 and 2010,2013, respectively.
Certain events or changes in circumstances may indicate that the recoverability of the carrying amount of property, plant and equipment should be assessed, including, among others, a significant decrease in market value, a significant change in the business climate in a particular market, or a current period operating or cash flow loss combined with historical losses or projected future losses. When such events or changes in circumstances are present, we estimate the future cash flows expected to result from the use of the asset (oror asset group)group and its eventual disposition. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. We use a variety of methodologies to determine the fair value of property, plant and equipment, including appraisals and discounted cash flow models, which are consistent with the assumptions we believe hypothetical marketplace participants would use. Refer to Note 7.7.
Goodwill, Trademarks and Other Intangible Assets
We classify intangible assets into three categories: (1) intangible assets with definite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization and (3) goodwill. We determine the useful lives of our identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the Company's long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have definite lives are amortized, primarily on a straight-line basis, over their useful lives, generally ranging from 1 to 20 years. Refer to Note 8.8.
When facts and circumstances indicate that the carrying value of definite-lived intangible assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of sales volume and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized is the amount by which the carrying amount of the asset (oror asset group)group exceeds the fair value. We use a variety of methodologies to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumptions we believe hypothetical marketplace participants would use.
We test intangible assets determined to have indefinite useful lives, including trademarks, franchise rights and goodwill, for impairment annually, or more frequently if events or circumstances indicate that assets might be impaired. Our Company performs these annual impairment reviews as of the first day of our third fiscal quarter. We use a variety of methodologies in conducting impairment assessments of indefinite-lived intangible assets, including, but not limited to, discounted cash flow models, which are based on the assumptions we believe hypothetical marketplace participants would use. For indefinite-lived intangible assets, other than goodwill, if the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess.
The Company has the option to perform a qualitative assessment of indefinite-lived intangible assets, other than goodwill, prior to completing the impairment test described above. The Company must assess whether it is more likely than not that the fair value of the intangible asset is less than its carrying amount. If the Company concludes that this is the case, it must perform the testing described above. Otherwise, the Company does not need to perform any further assessment. During 2012,2015, the Company only performed qualitative assessments on less than 1025 percent of our indefinite-lived intangible assets balance.
We perform impairment tests of goodwill at our reporting unit level, which is one level below our operating segments. Our operating segments are primarily based on geographic responsibility, which is consistent with the way management runs our business. Our operating segments are subdivided into smaller geographic regions or territories that we sometimes refer to as "business units." These business units are also our reporting units. The Bottling Investments operating segment includes all Company-owned or consolidated bottling operations, regardless of geographic location, except for bottling operations managed by CCR, which are included in our North America operating segment. Generally, each Company-owned or consolidated bottling operation within our Bottling Investments operating segment is its own reporting unit. Goodwill is assigned to the reporting unit or units that benefit from the synergies arising from each business combination.
The goodwill impairment test consists of a two-step process, if necessary. The first step is to compare the fair value of a reporting unit to its carrying value, including goodwill. We typically use discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are consistent with those we believe hypothetical marketplace participants would use. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment test must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill.
The Company has the option to perform a qualitative assessment of goodwill prior to completing the two-step process described above to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill and other intangible assets. If the Company concludes that this is the case, it must perform the two-step process. Otherwise, the Company will forego the two-step process and does not need to perform any further testing. During 2012,2015, the Company only performed qualitative assessments on less than 10 percent of our consolidated goodwill balance.
Impairment charges related to intangible assets are generally recorded in the line item other operating charges or, to the extent they relate to equity method investees, in the line item equity income (loss) — net in our consolidated statements of income.
Contingencies
Our Company is involved in various legal proceedings and tax matters. Due to their nature, such legal proceedings and tax matters involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. Management assesses the probability of loss for such contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate. Refer to Note 11.11.
Stock-Based Compensation
Our Company currently sponsors equity plans that provide for the grant of awards including stock option plans andoptions, restricted stock award plans.units, restricted stock and performance share units. The fair value of our stock option grants is estimated on the grant date using a Black-Scholes-Merton option-pricing model. The Company recognizes compensation expense on a straight-line basis over the period the grant is earned by the employee, generally four years.years.
The fair value of our restricted stock awardsunits, restricted stock and certain performance share units is the quoted market value of the Company's stock on the grant date less the present value of the expected dividends not received during the relevant holding period. For certain performance share units granted beginning in 2014, the Company includes a relative total shareowner return ("TSR") modifier to determine the number of shares earned at the end of the performance period. For these awards, the number of shares earned based on the certified achievement of the predefined performance criteria will be reduced or increased if total shareowner return over the performance period relative to a predefined compensation comparator group of companies falls outside of a defined range. The fair value of performance share units that include the TSR modifier is determined using a Monte Carlo valuation model.
In the period it becomes probable that the minimum performance criteria specified in the restricted stockperformance share award plan will be achieved, we recognize expense for the proportionate share of the total fair value of the award related to the vesting period that has already lapsed. The remaining costfair value of the award is expensed on a straight-line basis over the balance of the vesting period. In the event the Company determines it is no longer probable that we will achieve the minimum performance criteria specified in the plan, we reverse all of the previously recognized compensation expense in the period such a determination is made. Refer to Note 12.12.
Pension and Other Postretirement Benefit Plans
Our Company sponsors and/or contributes to pension and postretirement health care and life insurance benefit plans covering substantially all U.S. employees. We also sponsor nonqualified, unfunded defined benefit pension plans for certain associates and participate in multi-employer pension plans in the United States. In addition, our Company and its subsidiaries have various pension plans and other forms of postretirement arrangements outside the United States. Refer to Note 13.
Effective January 1, 2012, the Company elected to change our accounting methodology for determining the market-related value of assets for our U.S. qualified defined benefit pension plans. The market-related value of assets is used to determine the Company's expected return on assets, a component of our annual pension expense calculation. The Company previously used a smoothing technique to calculate our market-related value of assets, which reflected changes in the fair value over no more than five years. However, we now use the actual fair value of plan assets to determine our expected return on those assets for all of our defined benefit plans. Although both methods are permitted under accounting principles generally accepted in the United States, the Company believes our new methodology is preferable as it accelerates the recognition of gains and losses in the determination of our annual pension expense.13.
The Company's change in accounting methodology has been applied retrospectively, and we have adjusted all applicable prior period financial information presented herein as required. The cumulative effect of this change on retained earnings as of January 1, 2011, was an increase of $59 million, with an offset to AOCI. The impact of this change on the Company's income before income taxes was an increase of $4 million and $19 million and a decrease of $36 million during the years endedDecember 31, 2012, 2011 and 2010, respectively. The impact on the Company's earnings per share was not significant for any of the financial statement periods presented in this report.
Income Taxes
Income tax expense includes United States, state, local and international income taxes, plus a provision for U.S. taxes on undistributed earnings of foreign subsidiaries not deemed to be indefinitely reinvested. Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting basis and the tax basis of existing assets and liabilities. The tax rate used to determine the deferred tax assets and liabilities is the enacted tax rate for the year and manner in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. The Company records taxes that are collected from customers and remitted to governmental authorities on a net basis in our consolidated statements of income.
The Company is involved in various tax matters, with respect to some of which the outcome is uncertain. We establish reserves to remove some or all of the tax benefit of any of our tax positions at the time we determine that it becomes uncertain based upon one of the following conditions: (1) the tax position is not "more likely than not" to be sustained, (2) the tax position is "more likely than not" to be sustained, but for a lesser amount, or (3) the tax position is "more likely than not" to be sustained, but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether or not a tax position is uncertain, (1) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information; (2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings and case law and their applicability to the facts and circumstances of the tax position; and (3) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken. A number of years may elapse before a particular uncertain tax position is audited and finally resolved or when a tax assessment is raised. The number of years subject to tax assessments varies depending on the tax jurisdiction. The tax benefit that has been previously reserved because of a failure to meet the "more likely than not" recognition threshold would be recognized in our income tax expense in the first interim period when the uncertainty disappears under any one of the following conditions: (1) the tax position is "more likely than not" to be sustained, (2) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation, or (3) the statute of limitations for the tax position has expired. Refer to Note 14.11 and Note 14.
Translation and Remeasurement
We translate the assets and liabilities of our foreign subsidiaries from their respective functional currencies to U.S. dollars at the appropriate spot rates as of the balance sheet date. Generally, our foreign subsidiaries use the local currency as their functional currency. Changes in the carrying value of these assets and liabilities attributable to fluctuations in spot rates are recognized in foreign currency translation adjustment, a component of AOCI. Refer to Note 15.15. Income statement accounts are translated using the monthly average exchange rates during the year.
Monetary assets and liabilities denominated in a currency that is different from a reporting entity's functional currency must first be remeasured from the applicable currency to the legal entity's functional currency. The effect of this remeasurement process is recognized in the line item other income (loss) — net in our consolidated statements of income and is partially offset by the impact of our economic hedging program for certain exposures on our consolidated balance sheets. Refer to Note 5.5.
Hyperinflationary Economies
A hyperinflationary economy is one that has cumulative inflation of approximately 100 percent or more over a three-year period. Effective January 1, 2010, In accordance with U.S. GAAP, local subsidiaries in hyperinflationary economies are required to use the U.S. dollar as their functional currency and remeasure the monetary assets and liabilities not denominated in U.S. dollars using the rate applicable to conversion of a currency for purposes of dividend remittances. All exchange gains and losses resulting from remeasurement are recognized currently in income.
Venezuela was determined to behas been designated as a hyperinflationary economy, andeconomy. In February 2013, the Venezuelan government devalued the bolivar by resetting theits currency to an official rate of exchange ("official rate") from 2.15of 6.3 bolivars per U.S. dollar to 2.6 bolivars per U.S. dollar for essential goods and 4.3 bolivars per U.S. dollar for nonessential goods. In accordance with hyperinflationary accounting under accounting principles generally accepted indollar. At that time, the United States, our local subsidiary was required to use the U.S. dollar as its functional currency. As a result, weCompany remeasured the net monetary assets of our Venezuelan subsidiary usingat the official rate for nonessential goodsrate. As a result of 4.3 bolivars per U.S. dollar, which resulted inthe devaluation, we recognized a loss of $103$140 million during the first quarter of 2010. The loss was recorded in the line item other income (loss) - net in our consolidated statement of income. We classified the impact of the remeasurement loss in the line item effect of exchange rate changes on cash and cash equivalents in our consolidated statement of cash flows.
In June 2010, the Venezuelan government introduced a newly regulated foreign currency exchange system known as the Transaction System for Foreign Currency Denominated Securities ("SITME"). This system, which was subject to annual limits, enabled entities domiciled in Venezuela to exchange their bolivars to U.S. dollars through authorized financial institutions (commercial banks, savings and lending institutions, etc.).
In December 2010, the Venezuelan government announced that it was eliminating the official rate of 2.6 bolivars per U.S. dollar for essential goods. As a result, the only two exchange rates available for remeasuring bolivar-denominated transactions as of December 31, 2010, were the official rate of 4.3 bolivars per U.S. dollar and the SITME rate. As discussed above, the Company remeasured the net assets of our Venezuelan subsidiary using the official rate for nonessential goods of 4.3 bolivars per U.S. dollar starting on January 1, 2010. Therefore, the elimination of the official rate for essential goods had no impact on the remeasurement of the net assets of our Venezuelan subsidiary.
Subsequent to December 31, 2012, the Venezuelan government devalued its currency further to an official rate of 6.3 bolivars per U.S. dollar. The government also announced that it was discontinuing the SITME foreign exchange system. As a result, the Company will remeasure the net assets of our local subsidiary and recognize the related gains or losses from remeasurement in the line item other income (loss) — net in our consolidated statement of income. Based on the carrying value of our assets and liabilities denominated
Beginning in Venezuelan bolivar as of December 31, 2012, we anticipate recognizing a remeasurement loss of $100 million to $125 million during the first quarter of 2013.
The Company will continue2014, the Venezuelan government recognized three legal exchange rates to useconvert bolivars to the U.S. dollar: (1) the official rate of 6.3 bolivars per U.S. dollar; (2) SICAD 1, which was available to remeasureforeign investments and designated industry sectors to exchange a limited volume of bolivars for U.S. dollars using a bid rate established at weekly auctions; and (3) SICAD 2, which applied to transactions that did not qualify for either the official rate or SICAD 1. As of March 28, 2014, the three legal exchange rates were 6.3 (official rate), 10.8 (SICAD 1) and 50.9 (SICAD 2). We determined that the SICAD 1 rate was the most appropriate rate to use for remeasurement given our circumstances and estimates of the applicable rate at which future transactions could be settled, including the payment of dividends. Therefore, as of March 28, 2014, we remeasured the net monetary assets of our Venezuelan subsidiary. Ifsubsidiary using an exchange rate of 10.8 bolivars per U.S.
dollar, resulting in a charge of $226 million recorded in the official rate devalues further, it would result in our Company recognizing additional foreign currency exchange gains or lossesline item other income (loss) — net in our consolidated financial statements.statement of income.
In December 2014, due to the continued lack of liquidity and increasing economic uncertainty, the Company reevaluated the rate that should be used to remeasure the monetary assets and liabilities of our Venezuelan subsidiary. As of December 31, 2012,2014, we determined that the SICAD 2 rate of 50 bolivars per U.S. dollar was the most appropriate legally available rate and remeasured the net monetary assets of our Venezuelan subsidiary, heldresulting in a charge of $146 million recorded in the line item other income (loss) — net in our consolidated statement of income.
In February 2015, the Venezuelan government merged SICAD 1 and SICAD 2 into a single mechanism called SICAD and introduced a new open market exchange rate system, SIMADI. As a result, management determined that the SIMADI rate was the most appropriate legally available rate and remeasured the net monetary assets of approximately $450our Venezuelan subsidiary, resulting in a charge of $27 million and monetary liabilities recorded in the line item other income (loss) — net in our consolidated statement of approximately $85 million.income.
In addition to the foreign currency exchange exposure related to our Venezuelan subsidiary's net monetary assets, we also sell concentrate to our bottling partner in Venezuela from outside the country. These sales are denominated in U.S. dollars. IfDuring the years ended December 31, 2015 and December 31, 2014, as a result of the continued lack of liquidity and our revised assessment of the U.S. dollar value we are unableexpect to utilize a government-approved exchange rate mechanism for future concentrate sales torealize upon the conversion of Venezuelan bolivars into U.S. dollars by our bottling partner to pay our concentrate sales receivables, we recorded write-downs of $56 million and $296 million, respectively, recorded in Venezuela, the amountline item other operating charges in our consolidated statements of receivables related to these sales will increase. In addition, weincome.
We also have certain U.S. dollar denominated intangible assets associated with products sold in Venezuela. IfAs a result of the bolivar further devalues, it could resultCompany's revised expectations regarding the convertibility of the local currency, we recognized impairment charges of $55 million and $18 million, respectively, during the years ended December 31, 2015 and December 31, 2014. These charges were recorded in the impairmentline item other operating charges in our consolidated statements of these intangible assets.income.
During the year ended December 31, 2015, the Company continued to use the SIMADI rate to remeasure the net monetary assets of our Venezuelan subsidiary. As of December 31, 2012,2015, the carryingcombined value of the net monetary assets of our accounts receivableVenezuelan subsidiary, the receivables from our bottling partner in Venezuela and the intangible assets associated with products sold in Venezuela was $216$100 million. Included in this combined value is $15 million. of cash and cash equivalents. Despite the additional currency conversion mechanisms, the Company's ability to pay dividends from Venezuela is still restricted due to the low volume of U.S. dollars available for conversion.
In February 2016, the Venezuelan government devalued its currency and changed its official and most preferential exchange rate, which will continue to be used for purchases of certain essential goods, to 10 bolivars per U.S. dollar from 6.3. The Venezuelan government announced it will reduce its three-tier system of exchange rates to two tiers by eliminating the SICAD rate. Additionally, the government announced that the SIMADI rate will be allowed to float freely beginning at a rate of 203 bolivars per U.S. dollar. As a result, the Company expects to continue to record losses on foreign currency exchange, may incur additional write-downs of receivables or impairment charges and will continue to record our proportionate share of any charges recorded by our equity method investee that has operations in Venezuela.
Recently Issued Accounting Guidance
In June 2011,May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-052014-09, Revenue from Contracts with Customers, which will replace most existing revenue recognition guidance in U.S. GAAP and is intended to improve and converge with international standards the financial reporting requirements for revenue from contracts with customers. The core principle of ASU 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASU 2014-09 also requires companies to present net incomeadditional disclosures about the nature, timing and other comprehensive income in one continuous statement or in two separate, but consecutive, statements. In addition, ASU 2011-05 eliminates the option for companies to present the componentsuncertainty of other comprehensive income as part of the statement ofrevenue and cash flows arising from customer contracts, including significant judgments and changes in shareowners' equity. judgments. ASU 2014-09 allows for both retrospective and prospective methods of adoption and will be effective for the Company beginning January 1, 2018. The Company is currently evaluating the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements.
In December 2011,February 2015, the FASB issued ASU 2011-122015-02, Amendments to the Consolidation Analysis, which deferredchanges the requirementguidance for evaluating whether to present componentsconsolidate certain legal entities. Specifically, the amendments modify the evaluation of reclassificationswhether limited partnerships and similar legal entities are VIEs or voting interest entities. Additionally, the amendments eliminate the presumption that a general partner should consolidate a limited partnership and affect the consolidation analysis of other comprehensive income onreporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. ASU 2015-02 will be effective for the faceCompany beginning January 1, 2016. Companies have an option of the income statement.using either a full retrospective or modified retrospective adoption approach. The Company adopteddoes not believe that the non-deferred provisionsadoption of ASU 2011-05 as of January 1, 2012, which did not2015-02 will have a material impact on our consolidatedthe Company's financial statements.position, results of operations or cash flows.
In February 2013,April 2015, the FASB issued ASU 2013-022015-03, Simplifying the Presentation of Debt Issuance Costs, which requires companiesthat debt issuance costs related to provide information abouta recognized debt liability be presented in the amounts reclassified outbalance sheet as a direct deduction from the carrying amount of AOCI by component. that debt liability. The standard will be effective for the Company beginning January 1, 2016 and will be applied retrospectively. The Company expects that the only impact of the adoption of ASU 2015-03 on our consolidated financial statements will be the change in balance sheet presentation of our debt issuance costs.
In addition, companies are requiredApril 2015, the FASB issued ASU 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This amendment removes the requirement to present, eithercategorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share. This guidance will be effective for the Company beginning January 1, 2016. The Company expects that the implementation of this amendment will impact the Company's notes to the consolidated financial statements but will not have an effect on the faceCompany's financial position or results of operations.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The amendments in this update simplify the presentation of deferred income taxes and require that deferred tax liabilities and assets be classified as noncurrent in a consolidated statement of financial position. These amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The amendments will be effective for the Company beginning January 1, 2017. Earlier application is permitted for all entities as of the statement where net income is presentedbeginning of an interim or in the accompanying notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified to net income in its entirety in the sameannual reporting period. For amounts that are not required to be reclassified in their entirety to net income, companies are required to cross-reference to other disclosures that provide additional detail on those amounts. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012.
NOTE 2: 2: ACQUISITIONS AND DIVESTITURES
Acquisitions
During 2012, cash payments related to the2015, our Company's acquisitionacquisitions of businesses, equity method investments and investment activitiesnonmarketable securities totaled $1,535$2,491 million,. These payments were which primarily related to the following: our investments in the existing beverage business of Aujan Industries Company J.S.C.strategic partnership with Monster Beverage Corporation ("Aujan"Monster"), one of the largest independent beverage companies in the Middle East; our and an 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 MikuniIndonesia that is being accounted for under the equity method of accounting.
The Company's investmentsbottling partner in Aujan includeIndonesia is a subsidiary of Coca-Cola Amatil Limited, an ownershipequity method investee. We also acquired the remaining outstanding shares of a bottling partner in South Africa ("South African bottler"), which was previously accounted for as an equity method investment. We remeasured our previously held equity interest of 50 percent in the Aujan entity that holdsSouth African bottler to fair value upon the rights to Aujan-owned brands in certain territories and an ownership interestclose of49 percent in Aujan's bottling and distribution operations in certain territories. The Company completed the transaction for $980and recorded a loss on the remeasurement of $19 million in total value, of which $820 million was paid in cash by during the Company and the remainder was composed of the Company's proportionate share of underlying debtyear ended December 31, 2015. This bottler will be included in the acquired entities. TheCoca-Cola Beverages Africa Limited transaction discussed further below.
During 2014, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $389 million and primarily included a joint investment with one of our bottling partners in Aujan are beinga dairy company in Ecuador, which is accounted for under the equity method of accounting.
During 2011, cash payments related to the2013, our Company's acquisition and investment activities totaled $977 million. These payments were primarily related to the acquisitions of Great Plains Coca-Cola Bottling Company ("Great Plains")businesses, equity method investments and Honest Tea, Inc. ("Honest Tea"), and an additional investment in Coca-Cola Central Japan Company ("Central Japan"). In addition, the Company's acquisition and investment activities during 2011nonmarketable securities totaled $353 million, which primarily included immaterial cash payments for the finalization of working capital adjustments related to our acquisition of CCE's former North America business. Refer to our discussionthe majority of this transaction below.
the remaining outstanding shares of Fresh Trading Ltd. ("innocent") and a majority interest in bottling operations in Myanmar. 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, wepreviously accounted for our investment in innocent under the equity method of accounting. We remeasured our equity interest in Honest Teainnocent to fair value upon the close of the transaction. The resulting gain on the remeasurement was not significant to our consolidated financial statements.
Monster Beverage Corporation
On August 14, 2014, the Company and Monster entered into definitive agreements for a long-term strategic relationship in the global energy drink category. The transaction contemplated under these agreements ("Monster Transaction") closed on June 12, 2015. As a result of the Monster Transaction, (1) the Company finalized our purchase accounting for Honest Tea duringpurchased newly issued shares of Monster common stock representing approximately 17 percent of the fourth quarteroutstanding shares of 2011.
In December 2011,Monster common stock (after giving effect to the new issuance); (2) the Company sold its global energy drink business (including NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless) to Monster, and the Company acquired anMonster's non-energy drink business (including Hansen's Natural Sodas, Peace Tea, Hubert's Lemonade and Hansen's Juice Products); and (3) the parties amended their distribution coordination agreements to expand distribution of Monster products into additional minority interestterritories pursuant to long-term agreements with the Company's existing network of Company-owned or -controlled bottling operations and distribution partners. The Coca-Cola system also became Monster's preferred global distribution partner. The Company made a net cash payment of $2,150 million to Monster, of which $125 million is being held in Central Japan. As a result, the Company beganescrow, subject to account for our investment in Central Japan under the equity methodrelease upon achievement of accounting beginning in December 2011.
During 2010, cash payments relatedmilestones relating to the Company'stransfer of Monster's domestic distribution rights to our distribution network.
The Monster Transaction consisted of multiple elements including the purchase of common stock, the acquisition and investment activities totaled $2,511 million. These payments were primarily relateddivestiture of businesses and the expansion of distribution territories. When consideration transferred is not solely in the form of cash, measurement is based on either the cost to the Company's acquisition of CCE's former North America business and the acquisition of certain distribution rights from Dr Pepper Snapple Group, Inc. ("DPS"). See the relevant sections below for further discussion of these transactions.
In addition to the transactions listed in the preceding paragraph, our acquisition and investment activities during 2010 also included the acquisition of OAO Nidan Juices ("Nidan"), a Russian juice company, and an additional investment in Fresh Trading Ltd. ("innocent"). Total consideration for the Nidan acquisition was approximately $276 million, which was primarily allocated to property, plant and equipment, identifiable intangible assets and goodwill. The Company finalized our purchase accounting for Nidan in the third quarter of 2011. Under the termsacquiring entity (the fair value of the agreement for our additional investment in innocent, we have a seriesassets given) or the fair value of outstanding putthe assets acquired, whichever is more clearly evident and, call options with the existing shareowners of innocent for the Company to potentially acquire the remaining shares not already owned by the Company. The put and call options are exercisable in stages between 2013 and 2014. The Company anticipates acquiringthus, more reliably measurable. As the majority of the remaining outstanding shares inconsideration transferred was cash, we believe the second quarter of 2013. Currently, innocent's founders maintain operational controlfair value of the business,consideration transferred is more reliably measurable. The consideration transferred consists of $2,150 million of cash (including $125 million in escrow) and we account for our investment under the equity method of accounting.
Acquisition of Coca-Cola Enterprises Inc.'s Former North America Business
Pursuant to the terms of the business separation and merger agreement entered into on February 25, 2010, as amended (the "merger agreement"), on October 2, 2010 (the "acquisition date"), we acquired CCE's former North America business. We believe this acquisition will result in an evolved franchise system that will enable us to better serve the unique needs of the North American market. The creation of a unified operating system will strategically position us to better market and distribute our nonalcoholic beverage brands in North America. Refer to Note 18 for information related to the Company's integration initiatives associated with this acquisition.
Under the terms of the merger agreement, the Company acquired the 67 percent of CCE's former North America business that was not already owned by the Company for consideration that included: (1) the Company's 33 percent indirect ownership interest in CCE's European operations; (2) cash consideration; and (3) replacement awards issued to certain current and former employees of CCE's corporate operations and former North America business. At closing, CCE shareowners other than the Company exchanged their CCE common stock for common stock in a new entity, which was renamed Coca-Cola Enterprises, Inc. (which is referred to herein as "New CCE") and which continues to hold the European operations held by CCE prior to the acquisition. At closing, New CCE became 100 percent owned by shareowners that held shares of common stock of CCE immediately prior to the closing, other than the Company. As a result of this transaction, the Company does not own any interest in New CCE.
As of October 1, 2010, our Company owned 33 percent of the outstanding common stock of CCE. Based on the closing price of CCE's common stock on the last day of trading prior to the acquisition date, the fair value of our investmentglobal energy business of $2,046 million, which we determined using discounted cash flow analyses, resulting in CCE was $5,373 million, which reflectedtotal consideration transferred of $4,196 million. As such, we have allocated the total consideration transferred to the individual assets and business acquired based on a relative fair value basis, using the closing date fair values of each element, as follows (in millions):
|
| | | |
| | June 12, 2015 |
|
| Equity investment in Monster | $ | 3,066 |
|
| Expansion of distribution territories | 1,035 |
|
| Monster non-energy drink business | 95 |
|
| Total assets and business acquired | $ | 4,196 |
|
In addition to our ownership interest in both CCE's EuropeanMonster's outstanding common stock, the Company is represented by two directors on Monster's 10 member Board of Directors. Based on our equity ownership percentage, the significance that our expanded distribution and coordination agreements have on Monster's operations, and formerour representation on Monster's Board of Directors, the Company is accounting for its interest in Monster as an equity method investment.
As a result of the Monster Transaction, the North America business. We remeasuredCoca-Cola system obtained the right to distribute Monster products in territories for which it was not previously the authorized distributor ("expanded territories"). These distribution rights are governed by an agreement with an initial term of 20 years, after which it will continue to remain in effect unless otherwise terminated by either party and there are no future costs of renewal. As such, these rights were determined to be indefinite-lived intangible assets and are classified in the line item bottlers' franchise rights with indefinite lives in our equity interestconsolidated balance sheet. CCR is the distributor in CCEthe majority of the expanded territories. The remainder of the territories are serviced by independent bottling partners. Of the $1,035 million allocated to fair valuethe expanded distribution rights, the Company derecognized $341 million related to the expanded territories serviced by the independent bottling partners upon the close of the transaction. As consideration for these rights, the Company received an up-front payment of $28 million related to these territories, and we will receive a result, wepayment per case on all future sales made by these independent bottlers for the duration of the distribution agreements. As these payments are dependent on future sales, they are a form of contingent consideration. We elected to account for this consideration in the same manner as the contingent consideration to be received in the North America refranchising, discussed below. This resulted in a net loss of $313 million recorded in the line item other income (loss) — net in our consolidated statement of income during the year ended December 31, 2015.
During the year ended December 31, 2015, the Company recognized a gain of $4,978$1,715 million, on the sale of our global energy drink business, primarily due to the difference in the recorded carrying value of the assets transferred, including an allocated portion of goodwill, compared to the value of the total assets and business acquired. After considering the loss resulting from the derecognition of the expanded territory rights serviced by the independent bottling partners, the net gain recognized on the Monster Transaction was $1,403 million, which was classifiedrecorded in the line item other income (loss) — net in our consolidated statement of income. The gain included a $137 million reclassification adjustment related to foreign currency translation gains recognized upon the disposal of our indirect investment in CCE's European operations. The Company relinquished its indirect ownership interest in CCE's European operations to New CCE as part of the consideration to acquire the 67 percent of CCE's former North America business that was not already owned by the Company.
Although the CCE transaction was structured to be primarily cashless,Additionally, under the terms of the merger agreement,Monster Transaction, we agreedwere required to assume $8.9 billiondiscontinue selling energy products under certain trademarks, including one trademark in the glacéau portfolio. The Company recognized an impairment charge of CCE debt. In the event the actual CCE debt on the acquisition date was less than the agreed amount, we agreed to make a cash payment to New CCE for the difference. As of the acquisition date, the debt assumed by the Company was $7.9 billion. The total cash consideration paid to New CCE as part of the transaction was $1.4 billion, which included $1.0 billion$380 million upon closing, primarily related to the debt shortfall. In addition, the cash consideration paid to New CCE included amounts related to working capital adjustments which were finalized in 2011.
Under the termsdiscontinuation of the merger agreement, the Company replaced share-based payment awards for certain current and former employees of CCE's corporate operations and former North America business. The following table provides a list of all replacement awards and the estimated fair value of those awards issued in conjunction with our acquisition of CCE's former North America business (in millions):
|
| | | | | | |
| | Number of Shares, Options and Units Issued |
| | Fair Value |
|
| | As Adjusted |
| | |
| Performance share units | 3.3 |
| | $ | 192 |
|
| Stock options | 9.6 |
| | 109 |
|
| Restricted share units | 1.6 |
| | 50 |
|
| Restricted stock | 0.4 |
| | 12 |
|
| Total | 14.9 |
| | $ | 363 |
|
The portion of the fair value of the replacement awards related to services provided prior to the business combination was includedenergy products in the total purchase price. The portion of the fair value associated with future service is recognized as expense over the future service period,glacéau portfolio, which varies by award. The Company determined that $237 million ($154 million net of tax) of the replacement awards was related to services rendered prior to the business combination.
Each CCE performance share unit ("PSU") replaced by the Company was converted at 100 percent of target into an adjusted PSU of The Coca-Cola Company, determined by multiplying the number of shares of each PSU by an exchange ratio (the "closing exchange ratio") equal to the closing price of a share of CCE common stock on the last day of trading prior to the acquisition date divided by the closing price of the Company's common stock on the same day. At the time we issued these replacement PSUs, they were subject to the same vesting conditions and other terms applicable to the CCE PSUs immediately prior to the closing date. However, in the fourth quarter of 2010, the Company modified primarily all of these PSUs to eliminate the remaining holding period, which resulted in $74 million of accelerated expense. Refer to Note 12 for additional information.
Each CCE stock option replaced by the Company was converted into an adjusted stock option of The Coca-Cola Company to acquire a number of shares of Coca-Cola common stock, determined by multiplying the number of shares of CCE common stock subject to the CCE stock option by the closing exchange ratio. The exercise price per share of the replacement awards was equal to the per share exercise price of the CCE stock option divided by the closing exchange ratio. All of the replacement stock options are subject to the same vesting conditions and other terms applicable to the CCE stock options immediately prior to the closing date. Refer to Note 12 for additional information.
Each CCE restricted share unit ("RSU") replaced by the Company was converted into an adjusted RSU of The Coca-Cola Company, determined by multiplying the number of shares of each RSU by the closing exchange ratio. All of the replacement RSUs are subject to the same vesting conditions and other terms applicable to the CCE RSUs immediately prior to the closing date. Refer to Note 12 for additional information.
Each share of CCE restricted stock replaced by the Company was converted into an adjusted share of restricted stock of The Coca-Cola Company, determined by multiplying the number of shares of CCE restricted stock by the closing exchange ratio. All of the replacement shares of restricted stock are subject to the same vesting conditions and other terms applicable to the CCE shares of restricted stock immediately prior to the closing date. Refer to Note 12 for additional information.
The following table reconciles the total purchase price of the Company's acquisition of CCE's former North America business, including adjustments recorded as part of the Company's purchase accounting (in millions):
|
| | | |
| | October 2,
2010 |
|
Fair value of our equity investment in CCE1 | $ | 5,373 |
|
Cash consideration2 | 1,368 |
|
Fair value of share-based payment awards3 | 154 |
|
| Total purchase price | $ | 6,895 |
|
| |
1
| Represents the fair value of our 33 percent ownership interest in the outstanding common stock of CCE based on the closing price of CCE's common stock on the last day the New York Stock Exchange was open prior to the acquisition date. The fair value reflects our indirect ownership interest in both CCE's European operations and former North America business.
|
| |
2
| Primarily related to the debt shortfall and working capital adjustments. |
| |
3
| Represents the portion of the total fair value of the replacement awards associated with services rendered prior to the business combination, net of tax. |
The following table presents the final allocation of the purchase price by major class of assets and liabilities (in millions) as of the acquisition date, as well as adjustments made during 2011 (referred to as "measurement period adjustments"):
|
| | | | | | | | | | | |
| | Amounts Recognized as of Acquisition Date1 |
| | Measurement Period Adjustments2 |
| | Amounts Recognized as of Acquisition Date (as Adjusted) |
|
| Cash and cash equivalents | $ | 49 |
| | $ | — |
| | $ | 49 |
|
| Marketable securities | 7 |
| | — |
| | 7 |
|
Trade accounts receivable3 | 1,194 |
| | — |
| | 1,194 |
|
| Inventories | 696 |
| | — |
| | 696 |
|
Other current assets4 | 744 |
| | (5 | ) | | 739 |
|
Property, plant and equipment4 | 5,385 |
| | (682 | ) | | 4,703 |
|
Bottlers' franchise rights with indefinite lives4,5 | 5,100 |
| | 100 |
| | 5,200 |
|
Other intangible assets4,6 | 1,032 |
| | 45 |
| | 1,077 |
|
| Other noncurrent assets | 261 |
| | — |
| | 261 |
|
| Total identifiable assets acquired | $ | 14,468 |
| | $ | (542 | ) | | $ | 13,926 |
|
Accounts payable and accrued expenses4 | 1,826 |
| | 8 |
| | 1,834 |
|
Loans and notes payable7 | 266 |
| | — |
| | 266 |
|
Long-term debt7 | 9,345 |
| | — |
| | 9,345 |
|
Pension and other postretirement liabilities8 | 1,313 |
| | — |
| | 1,313 |
|
Other noncurrent liabilities4,9 | 2,603 |
| | (293 | ) | | 2,310 |
|
| Total liabilities assumed | $ | 15,353 |
| | $ | (285 | ) | | $ | 15,068 |
|
| Net liabilities assumed | (885 | ) | | (257 | ) | | (1,142 | ) |
Goodwill4,10 | 7,746 |
| | 304 |
| | 8,050 |
|
| | $ | 6,861 |
| | $ | 47 |
| | $ | 6,908 |
|
| Less: Noncontrolling interests | 13 |
| | — |
| | 13 |
|
| Net assets acquired | $ | 6,848 |
| | $ | 47 |
| | $ | 6,895 |
|
| |
1
| As previously reported in the Notes to Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2010. |
| |
2
| The measurement period adjustments did not have a significant impact on our consolidated statements of income for the years ended December 31, 2011, and December 31, 2010. Therefore, we did not retrospectively adjust the comparative 2010 financial information. |
| |
3
| The gross amount due under receivables we acquired was $1,226 million, of which $32 million was expected to be uncollectible.
|
| |
4
| The measurement period adjustments were due to the finalization of appraisals related to intangible assets and certain fixed assets and resulted in the following: a decrease to property, plant and equipment; an increase to franchise rights; and a decrease to noncurrent deferred tax liabilities. The net impact of the measurement period adjustments and the payments made to New CCE that related to the finalization of working capital adjustments resulted in a net increase to goodwill. |
| |
5
| Represents reacquired franchise rights that had previously provided CCE with exclusive and perpetual rights to manufacture and/or distribute certain beverages in specified territories. These rights have been determined to have indefinite lives and are not amortized. |
| |
6
| Other intangible assets primarily relate to franchise rights that had previously provided CCE with exclusive rights to manufacture and/or distribute certain beverages in specified territories for a finite period of time, and therefore have been classified as definite-lived intangible assets. The estimated fair value of franchise rights with definite lives was $650 million as of the acquisition date. These franchise rights will be amortized over a weighted-average life of approximately eight years, which is equal to the weighted-average remaining contractual term of the franchise rights. Other intangible assets also include $380 million of customer relationships, which will be amortized over approximately 20 years.
|
| |
7
| Refer to Note 10 for additional information.
|
| |
8
| The assumed pension and other postretirement liabilities consisted of benefit obligations of $3,544 million and plan assets of $2,231 million. Refer to Note 13 for additional information related to pension and other postretirement plans assumed from CCE.
|
| |
9
| Primarily relates to deferred tax liabilities recorded on franchise rights. Refer to Note 14.
|
| |
10
| The goodwill recognized as part of this acquisition has been assigned to the North America operating segment, of which $170 million is tax deductible. The goodwill recognized in conjunction with our acquisition of CCE's former North America business is primarily related to synergistic value created from having a unified operating system that will strategically position us to better market and distribute our nonalcoholic beverage brands in North America. It also includes certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce.
|
In a concurrent transaction, we agreed to sell all of our ownership interests in Coca-Cola Drikker AS ("Norwegian bottling operation") and Coca-Cola Drycker Sverige AB ("Swedish bottling operation") to New CCE at fair value. The divestiture of our Norwegian and Swedish bottling operations also closed on October 2, 2010. See further discussion of this divestiture below. In addition, we granted New CCE the right to negotiate the acquisition of our majority interest in our German bottling operation, Coca-Cola Erfrischungsgetränke AG ("CCEAG"), 18 to 39 months after the date of the merger agreement, at the then current fair value and subject to terms and conditions as mutually agreed.
The Company has incurred $84 million of transaction costs in connection with our acquisition of CCE's former North America business and the sale of our ownership interests in our Norwegian and Swedish bottling operations to New CCE since the transaction commenced. These costs were included in the line item other operating charges in our consolidated statementsstatement of income. Refer to Note 17 for additional information.
During the year ended December 31, 2015, based on the relative fair values of the total assets and business acquired, $1,620 million of the $2,150 million cash payment made was classified in the line item acquisitions of businesses, equity method investments and nonmarketable securities in our consolidated statement of cash flows. The remaining $530 million was classified in the line item other investing activities in our consolidated statement of cash flows.
Keurig Green Mountain, Inc.
In addition,February 2014, the Company recorded chargespurchased newly issued shares in Keurig Green Mountain, Inc. ("Keurig") for $1,265 million, including transaction costs of $$14 million. In May 2014, the Company purchased additional shares of Keurig in the market for $302 million, which represented an additional 2 percent equity position in Keurig.
Subsequent to these purchases, the Company entered into an agreement with Credit Suisse Capital LLC ("CS") to purchase additional shares of Keurig which would increase the Company's equity position to a 16 percent interest based on the total number of issued and outstanding shares of Keurig as of May 1, 2014. Under the agreement, the Company was to purchase from CS, on a date selected by CS no later than February 2015, the lesser of (1) 6.5 million shares of Keurig or (2) the number of shares that shall cause our ownership to equal 16 percent. The purchase price per share was the average of the daily volume-weighted average price per share from May 15, 2014, to the date selected by CS, as adjusted in certain circumstances specified in the agreement. CS had exclusive ownership and control over any such shares until delivered to the Company. In February 2015, the Company purchased 6.4 million shares from CS under this agreement for a total purchase price of $830 million. As this agreement qualified as a derivative, we recognized a loss of $58 million in the line item other income (loss) — net in our consolidated statement of income during the year ended December 31, 2015. The Company recognized a cumulative loss of $47 million in the line item other income (loss) — net in our consolidated statement of income over the term of the agreement.
We account for the investment in Keurig as an available-for-sale security, which is included in the line item other investments in our consolidated balance sheet. These purchases of the shares were included in the line item purchases of investments in our consolidated statement of cash flows, net of any related derivative impact.
German Bottling Operations
In conjunction with the Company's acquisition of German bottling operations in 2007, the former owners received put options to sell their respective shares in the operations back to the Company in January 2014. During the year ended December 31, 2014, the Company paid $503 million to purchase these shares, which was included in the line item other financing activities in our consolidated statement of cash flows, resulting in 100 percent ownership of our German bottling operations.
Divestitures
During 2015, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $565 million, which included proceeds from the refranchising of certain of our territories in North America and proceeds from the sale of a 10 percent interest in a Brazilian bottling partner as a result of the majority owners exercising their right to acquire additional shares from us.
During 2014, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $148 million, which primarily represented the proceeds from the refranchising of certain of our territories in North America.
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").
North America Refranchising
In conjunction with implementing a new beverage partnership model in North America, the Company refranchised territories that were previously managed by CCR to certain of our unconsolidated bottling partners. These territories generally border these bottlers' existing territories, allowing each bottler to better service local customers and provide more efficient execution. By entering into comprehensive beverage agreements ("CBAs") with each of the bottlers, we granted certain exclusive territory rights for the distribution, promotion, marketing and sale of Company-owned and licensed beverage products as defined by the CBA. 265In some cases, the Company has entered into, or agreed to enter into, manufacturing agreements that authorize certain bottlers that have executed a CBA to manufacture certain beverage products. If a bottler has not entered into a specific manufacturing agreement, then under the CBA for these territories, CCR retains the rights to produce these beverage products and the bottlers will purchase from CCR (or other Company-authorized manufacturing bottlers) substantially all of the related finished products needed in order to service the customers in these territories.
Each CBA generally has a term of 10 years and is renewable, in most cases by the bottler and in some cases by the Company, indefinitely for successive additional terms of 10 years each. Under the CBA, the bottlers will make ongoing quarterly payments to the Company based on their gross profit in the refranchised territories throughout the term of the CBA, including renewals, in exchange for the grant of the exclusive territory rights.
Contemporaneously with the grant of these rights, the Company sold the distribution assets, certain working capital items, and the exclusive rights to distribute certain beverage brands not owned by the Company, but distributed by CCR, in each of these territories to the respective bottlers in exchange for cash. These rights include, where applicable, the recently acquired Monster distribution rights discussed above. During the years ended December 31, 2015 and December 31, 2014, cash proceeds from these sales totaled $362 million and $143 million, respectively. Included in the cash proceeds for the years ended December 31, 2015 and December 31, 2014 was $83 million and $42 million, respectively, from Coca-Cola Bottling Co. Consolidated, an equity method investee. Under the applicable accounting guidance, we were required to derecognize all of the tangible assets sold as well as the intangible assets transferred, including distribution rights, customer relationships and an allocated portion of goodwill related to preexisting relationshipsthese territories.
Additionally, in September 2015, the Company announced the formation of a new National Product Supply System ("NPSS") which will facilitate optimal operation of the U.S. product supply system. Under the NPSS, the Company and several of its existing independent producing bottlers will administer key national product supply activities for these bottlers, which currently represent approximately 95 percent of the U.S. produced volume. As part of the NPSS, it is anticipated that each of these bottlers will acquire certain production facilities from CCR in exchange for cash, subject to the parties reaching definitive agreements. The transition of these production facilities is anticipated to take place by the end of 2017.
We recognized noncash losses of $1,006 million and $799 million during 2010.the years ended December 31, 2015 and December 31, 2014, respectively. These charges werelosses primarily related to the write-offderecognition of our investment in infrastructure programs with CCE. Our investment in these infrastructure programs with CCE did not meet the criteria to be recognizedintangible assets transferred or reclassified as an asset subsequent to the acquisition. In 2011, the Company recorded an additional charge of $1 million associated with these preexisting relationships. These chargesheld for sale, and were included in the line item other income (loss) — net in our consolidated statements of income. ReferSee further discussion of assets and liabilities held for sale below. We expect to Note 6recover the value of the intangible assets transferred to the bottlers under the CBAs through the future quarterly payments; however, as the payments for additional information.the territory rights are dependent on the bottlers' future gross profit in these territories, they are considered a form of contingent consideration.
CCE's former North America business contributed net revenues of approximately $3,637 million and net losses of approximately $122 million from October 2, 2010 through December 31, 2010.There is diversity in practice as it relates to the accounting for contingent consideration by the seller. The following table presents unaudited consolidated pro forma informationseller can account for the future contingent payments received as if our acquisition of CCE's former North America businessa gain contingency, recognizing the amounts in the income statement only after the related contingencies are resolved and the divestiture of our Norwegian and Swedish bottling operations had occurred on January 1, 2010 (in millions):
|
| | | |
| | Unaudited |
|
| Year Ended December 31, | 2010 |
|
Net operating revenues1 | $ | 43,106 |
|
Net income attributable to shareowners of The Coca-Cola Company2,3 | 6,839 |
|
| |
1
| The deconsolidation of our Norwegian and Swedish bottling operations resulted in a decrease to net operating revenues of approximately $433 million in 2010.
|
| |
2
| The deconsolidation of our Norwegian and Swedish bottling operations resulted in a decrease to net income attributable to shareowners of The Coca-Cola Company of approximately $387 million in 2010.
|
| |
3
| The 2010 pro forma information has been adjusted to exclude the gain related to the remeasurement of our equity interest in CCE to fair value upon the close of the transaction, the gain on the sale of our Norwegian and Swedish bottling operations, transaction costs and charges related to preexisting relationships in order to present the pro forma informationgain is realized, which in this arrangement will be quarterly as if the transactions had occurred prior to January 1, 2010. |
The unaudited pro forma financial information presented above does not purport to represent what the actual results of our operations would have been if our acquisition of CCE's former North America business and the divestiture of our Norwegian and Swedish bottling operations had occurred prior to January 1, 2010, nor is it indicative of the future operating results of The Coca-Cola Company. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, including, but not limited to, anticipated cost savings from operating synergies.
The unaudited pro forma financial information presentedbottlers earn gross profit in the table above has been adjusted to give effect to adjustments that are (1) directly related totransferred territories. Alternatively, the business combination; (2) factually supportable; and (3) expected to haveseller can record a continuing impact. These adjustments include, but are not limited to,receivable for the application of our accounting policies; elimination of related party transactions and equity income; and depreciation and amortization related tocontingent consideration at fair value adjustments to property, planton the date of sale and equipmentrecord any future differences between the payments received and intangible assets.
Dr Pepper Snapple Group, Inc. Agreements
In contemplation of the closing of our acquisition of CCE's former North America business, we reached an agreement with DPS to distribute certain DPS brands in territories where DPS brands had been distributed by CCE prior to the CCE transaction. Under the terms of our agreement with DPS, and concurrently with the closing of the CCE transaction, we entered into license agreements with DPS to distribute Dr Pepper trademark brandsthis receivable in the United States, Canada Dry inincome statement as they occur. We elected the Northeastern United States, and Canada Dry and C' Plus in Canada, and we made a net one-time cash payment of $715 million to DPS. Undergain contingency treatment since the license agreements, the Company agreed to meet certain performance obligations in order to distribute DPS products in retail and foodservice accounts and vending machines. The license agreements have initial terms of 20 years, with automatic 20-year renewal periods unless otherwise terminated underquarterly payments will be received throughout the terms of the agreements. The license agreements replaced agreements between DPS and CCE existing immediately priorCBAs, including all subsequent renewals, regardless of the cumulative amount received as compared to the completionvalue of the CCE transaction. In addition,intangible assets transferred.
Philippine Bottling Operations
98
we entered into an agreement with DPS to include Dr Pepper and Diet Dr PepperOn January 25, 2013, the Company sold a 51 percent interest in our Philippine bottling operations to Coca-Cola Freestyle fountain dispensers in certain outlets throughout the United States.FEMSA, an equity method investee. The Coca-Cola Freestyle agreement has a term of 20 years.
Although these transactions were negotiated concurrently, they are legally separable and have distinct termination provisions and penalties, if applicable. As a result, the Company recorded an asset of $865 million related to the DPS license agreements and recorded deferred revenue of $150 million related to the Freestyle agreement. The DPS license agreements were determined to be indefinite-lived intangible assets and classifiedaccounts for our remaining 49 percent ownership interest in the line item bottlers' franchise rights with indefinite lives in our consolidated balance sheet. The Company reached the conclusion that these distribution rights had an indefinite life based on several key factors, including, but not limited to, (1) our license agreements with DPS shall remain in effect for 20 years and shall automatically renew for additional 20-year successive periods thereafter unless terminated pursuant to the provisions of the agreements; (2) no additional payments shall be due for the renewal periods; (3) we anticipate using the assets indefinitely; (4) there are no known legal, regulatory or contractual provisions that are likely to limit the useful life of these assets; and (5) the classification of these assets as indefinite-lived assets is consistent with similar market transactions. The Company has been amortizing, and will continue to amortize, the deferred revenue related to the Freestyle agreement on a straight-line basis over 20 years, which is the length of the agreement. The amortization is included as a component of the Company's net operating revenues.
Divestitures
During 2012, proceeds from the disposal ofPhilippine bottling companies and other investments totaled $2,189 million. These proceeds resulted from the sale and/or maturity of investments associated with the Company's cash and risk management programs and were not related to the disposal of bottling companies. Refer to Note 3 for additional information.
In 2011, proceeds from the disposal of bottling companies and other investments totaled $562 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. NoneAs a result of this transaction, we remeasured our remaining investment in the Company's other divestitures were individually significant.
In 2010, proceeds from the disposal of bottling companies and other investments totaled $972 million, primarily related to the sale of all our ownership interests in our Norwegian and SwedishPhilippine bottling operations to New CCE for $0.9 billionfair 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 cashthe Philippine bottling operations at any time during the seven years following closing based on October 2, 2010. In additionthe 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 proceeds relatedCompany at a price not to exceed the disposalinitial purchase price.
Brazilian Bottling Operations
On July 3, 2013, the Company combined 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. This combination resulted in the deconsolidation of our NorwegianBrazilian bottling operations. As a result of this transaction, the Company recognized a gain of $615 million in the line item other income (loss) — net in our consolidated statement of income during the year ended December 31, 2013.
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. In December 2014, the Company received notification that the owners of the majority interest had exercised their option to acquire from us a 10 percent interest in the entity's outstanding shares. During the year ended December 31, 2014, we recorded an estimated loss of $32 million as a result of the exercise price being lower than our carrying value. The transaction closed in January 2015, and Swedish bottling operations, ourthe Company sold 50recorded an additional loss of $6 million during the year ended December 31, 2015, calculated based on the final option price. As a result of this transaction, the Company's ownership was reduced to 34 percent of our investment in Leão Junior, S.A. ("Leão Junior"),the entity’s outstanding shares. The owners of the majority interest have a Brazilian tea company, for $83 million. Referremaining option to Note 17 for information related toacquire an additional 14 percent interest of the gainentity's outstanding shares at any time through December 31, 2019, based on these divestitures.an agreed-upon formula.
Assets and Liabilities Held for Sale
OnNorth America Refranchising
As of December 13, 2012,31, 2015, the Company and Coca-Cola FEMSA executed a share purchase agreement for the sale of a majority ownership interesthad entered into agreements to refranchise additional territories in our consolidated bottling operations in the Philippines ("Philippine bottling operations"). As a result, our Philippine bottling operationsNorth America. These territories met the criteria to be classified as held for sale,sale. Additionally, to the extent that the parties have reached definitive agreements related to the transfer of production assets in conjunction with the new NPSS, and the related transfer is anticipated to close within a year, the related assets also met the criteria to be classified as held for sale. As such, we were required to record theirthe related assets and liabilities at the lower of carrying value or fair value less any costs to sell based on the agreed-upon purchasesale price. Accordingly, we recorded a loss of $108 million, including $1 million of related transaction costs, in the line item other income (loss) — net in our consolidated statement of income. This transaction was completed in January 2013.The Company expects these transactions to close at various times throughout 2016.
On December 17, 2012,Coca-Cola European Partners
In August 2015, the Company entered into an agreement to merge our German bottling operations with several partiesCoca-Cola Enterprises, Inc. ("CCE") and Coca-Cola Iberian Partners SA ("CCIP") to create Coca-Cola European Partners ("CCEP"). At closing, the Company will own 18 percent of CCEP, which will resultwe anticipate accounting for as an equity method investment based on our equity ownership percentage, our representation on CCEP's Board of Directors and other governance rights. The Boards of Directors of the Company, CCE and CCIP have approved the transaction. The proposed merger is subject to approval by CCE's shareowners, receipt of regulatory clearances and other customary conditions. The merger is expected to close in the mergersecond quarter of our consolidated bottling operations in Brazil ("Brazilian bottling operations") with an independent bottler in Brazil. Upon completion of the transaction, we will deconsolidate our Brazilian bottling operations in exchange for cash and a minority ownership interest in the newly combined entity.2016. As a result of this agreement, our BrazilianGerman bottling operations met the criteria to be classified as held for sale.sale as of December 31, 2015. We were not required to record theirthe related assets and liabilities at fair value less any costs to sell because their fair value exceeded our carrying valuevalue.
Coca-Cola Beverages Africa Limited
In November 2014, the Company, SAB Miller plc, and Gutsche Family Investments entered into an agreement to combine the bottling operations of each of the parties' nonalcoholic ready-to-drink beverage businesses in Southern and East Africa. Upon completion of the proposed merger, the Company will have an ownership of 11 percent in the bottler which will be called Coca-Cola Beverages Africa Limited. The Company will also acquire or license several brands in exchange for cash as a result of the transaction. As of December 31, 2012.2015, our South African bottling operations and related equity method investments met the criteria to be classified as held for sale, but we were not required to record these assets and liabilities at fair value less any costs to sell because their fair value exceeded our carrying value. The Company expects the transaction to close in the second quarter of 2016, subject to regulatory approval. Based on the proposed governance structure, the Company expects to account for its resulting interest in the new entity as an equity method investment.
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 includedthat were classified as held for sale in our Bottling Investments operating segment, as of December 31, 2012consolidated balance sheet (in millions):
| | | | Philippine Bottling Operations |
| | Brazilian Bottling Operations |
| | Total Bottling Operations Held for Sale |
| December 31, 2015 |
| | December 31, 2014 |
| |
| Cash, cash equivalents and short-term investments | $ | 133 |
| | $ | 45 |
| | $ | 178 |
| $ | 143 |
| | $ | 30 |
| |
| Trade accounts receivable, less allowances | 108 |
| | 88 |
| | 196 |
| 485 |
| | 100 |
| |
| Inventories | 187 |
| | 85 |
| | 272 |
| 276 |
| | 54 |
| |
| Prepaid expenses and other assets | 223 |
| | 174 |
| | 397 |
| 83 |
| | 7 |
| |
| Equity method investments | | 92 |
| | 141 |
| |
| Other assets | 7 |
| | 128 |
| | 135 |
| 25 |
| | 3 |
| |
| Property, plant and equipment — net | 841 |
| | 419 |
| | 1,260 |
| 2,021 |
| | 303 |
| |
| Bottlers' franchise rights with indefinite lives | 341 |
| | 130 |
| | 471 |
| 1,020 |
| | 410 |
| |
| Trademarks | | — |
| | 43 |
| |
| Goodwill | 148 |
| | 22 |
| | 170 |
| 333 |
| | 46 |
| |
| Other intangible assets | — |
| | 1 |
| | 1 |
| 115 |
| | 36 |
| |
| Allowance for reduction of assets held for sale | (107 | ) | | — |
| | (107 | ) | (693 | ) | | (494 | ) | |
| Total assets | $ | 1,881 |
| | $ | 1,092 |
| | $ | 2,973 |
| $ | 3,900 |
| 1 | $ | 679 |
| 3 |
| Accounts payable and accrued expenses | $ | 241 |
| | $ | 157 |
| | $ | 398 |
| $ | 712 |
| | $ | 48 |
| |
| Loans and notes payable | — |
| | 6 |
| | 6 |
| |
| Current maturities of long-term debt | — |
| | 28 |
| | 28 |
| 12 |
| | — |
| |
| Accrued income taxes | (4 | ) | | 4 |
| | — |
| 4 |
| | — |
| |
| Long-term debt | — |
| | 147 |
| | 147 |
| 74 |
| | — |
| |
| Other liabilities | 20 |
| | 75 |
| | 95 |
| 79 |
| | 6 |
| |
| Deferred income taxes | 102 |
| | 20 |
| | 122 |
| 252 |
| | 4 |
| |
| Total liabilities | $ | 359 |
| | $ | 437 |
| | $ | 796 |
| $ | 1,133 |
| 2 | $ | 58 |
| 4 |
| |
1 | Consists of total assets relating to CCEP of $2,894 million, North America refranchising of $589 million, Coca-Cola Beverages Africa Limited of $398 million and other assets held for sale of $19 million, which are included in the Europe, North America, Eurasia and Africa, Bottling Investments and Corporate operating segments. |
| |
2 | Consists of total liabilities relating to CCEP of $924 million, North America refranchising of $123 million and Coca-Cola Beverages Africa Limited of $86 million, which are included in the Europe, North America, Eurasia and Africa, and Bottling Investments operating segments. |
| |
3 | Consists of total assets relating to North America refranchising of $223 million, Coca-Cola Beverages Africa Limited of $333 million, the Monster Transaction of $43 million and other assets held for sale of $80 million, which are included in the North America, Eurasia and Africa, Bottling Investments and Corporate operating segments. |
| |
4 | Consists of total liabilities relating to North America refranchising of $22 million and Coca-Cola Beverages Africa Limited of $36 million, which are included in the North America, Eurasia and Africa, and Bottling Investments operating segments. |
We determined that our Philippine and Brazilian bottlingthe operations included in the table above did not meet the criteria to be classified as discontinued operations primarily due tounder the continued significant involvement we anticipate having in these operations following each transaction.applicable guidance.
NOTE 3: 3: INVESTMENTS
Investments in debt and marketable securities, other than investments accounted for under the equity method, are classified as trading, available-for-sale or held-to-maturity. Our marketable equity investments are classified as either trading or available-for-sale with their cost basis determined by the specific identification method. Our investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading securities and realized gains and losses on available-for-sale securities are included in net income. Unrealized gains and losses, net of deferred taxes, on available-for-sale securities are included in our consolidated balance sheets as a component of AOCI, except for the change in fair value attributable to the currency risk being hedged. Refer to Note 5 for additional information related to the Company's fair value hedges of available-for-sale securities.
Trading Securities
As of December 31, 20122015 and 2011,2014, our trading securities had a fair value of $266$322 million and $211$409 million,, respectively, and consisted primarily of equity securities. The Company had net unrealized gains on trading securities of $19$19 million, $40 million and $12 million as of December 31, 2012,2015, 2014 and net unrealized losses of $5 million and $3 million as of December 31, 2011 and 2010,2013, respectively.
The Company's trading securities were included in the following captionsline items in our consolidated balance sheets (in millions):
| | | December 31, | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
|
| Marketable securities | $ | 184 |
| | $ | 138 |
| $ | 229 |
| | $ | 315 |
|
| Other assets | 82 |
| | 73 |
| 93 |
| | 94 |
|
| Total trading securities | $ | 266 |
| | $ | 211 |
| $ | 322 |
| | $ | 409 |
|
Available-for-Sale and Held-to-Maturity Securities
As of December 31, 20122015 and 2011, available-for-sale and2014, the Company did not have any held-to-maturity securities. Available-for-sale securities consisted of the following (in millions):
|
| | | | | | | | | | | | | | | |
| | | | Gross Unrealized | | Estimated |
| | Cost | | Gains | | Losses | | Fair Value |
| 2012 | | | | | | | |
Available-for-sale securities:1,2 | | | | | | | |
| Equity securities | $ | 957 |
| | $ | 441 |
| | $ | (10 | ) | | $ | 1,388 |
|
| Debt securities | 3,169 |
| | 46 |
| | (10 | ) | | 3,205 |
|
| | $ | 4,126 |
| | $ | 487 |
| | $ | (20 | ) | | $ | 4,593 |
|
| Held-to-maturity securities: | | | | | | | |
| Bank and corporate debt | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| 2011 | | | | | | | |
Available-for-sale securities:1 | | | | | | | |
| Equity securities | $ | 834 |
| | $ | 237 |
| | $ | — |
| | $ | 1,071 |
|
| Debt securities | 332 |
| | 1 |
| | (3 | ) | | 330 |
|
| | $ | 1,166 |
| | $ | 238 |
| | $ | (3 | ) | | $ | 1,401 |
|
| Held-to-maturity securities: | | | | | | | |
| Bank and corporate debt | $ | 113 |
| | $ | — |
| | $ | — |
| | $ | 113 |
|
|
| | | | | | | | | | | | | | | |
| | | | Gross Unrealized | | Estimated Fair Value |
| | Cost | | Gains | | Losses | |
| 2015 | | | | | | | |
Available-for-sale securities:1 | | | | | | | |
| Equity securities | $ | 3,573 |
| | $ | 485 |
| | $ | (84 | ) | | $ | 3,974 |
|
| Debt securities | 4,593 |
| | 64 |
| | (25 | ) | | 4,632 |
|
| Total | $ | 8,166 |
| | $ | 549 |
| | $ | (109 | ) | | $ | 8,606 |
|
| 2014 | | | | | | | |
Available-for-sale securities:1 | | | | | | | |
| Equity securities | $ | 2,687 |
| | $ | 1,463 |
| | $ | (29 | ) | | $ | 4,121 |
|
| Debt securities | 3,796 |
| | 68 |
| | (106 | ) | 2 | 3,758 |
|
| Total | $ | 6,483 |
| | $ | 1,531 |
| | $ | (135 | ) | | $ | 7,879 |
|
| |
1 | Refer to Note 16 for additional information related to the estimated fair value. |
| |
22 Includes $101 million recognized in the consolidated income statement line item other income (loss) — net during the year ended December 31, 2014. The amount was primarily offset by changes in the fair value of foreign currency contracts designated as fair value hedges. Refer to Note 5 for additional information. | During 2012, the Company made a change to its overall cash management program. In an effort to manage counterparty risk and diversify our assets, the Company began to make additional investments in high-quality securities. These investments are primarily classified as available-for-sale securities. |
The sale and/or maturity of available-for-sale securities resulted in the following activity (in millions):
| | | Years Ending December 31, | 2012 |
| | 2011 |
| |
| Year Ended December 31, | | 2015 |
| | 2014 |
| | 2013 |
|
| Gross gains | $ | 41 |
| | $ | 5 |
| $ | 103 |
| | $ | 38 |
| | $ | 12 |
|
| Gross losses | (35 | ) | | (1 | ) | (42 | ) | | (21 | ) | | (24 | ) |
| Proceeds | 5,036 |
| | 37 |
| 4,043 |
| | 4,157 |
| | 4,212 |
|
The Company did not sell any available-for-sale securities during 2010.95
In 2012,2015 and 2014, the Company had investments classified as available-for-sale securities in which our cost basis exceeded the fair value of our investment. Management assessed each of these investments on an individual basis to determine if the decline in fair value was other than temporary. Management's assessment as to the nature of a decline in fair value is based on, among other things, the length of time and the extent to which the market value has been less than our cost basis; the financial condition and near-term prospects of the issuer; and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value. As a result of these assessments, management determined that the decline in fair value of these investments was not other than temporary and did not record any impairment charges.
In 2011 and 2010, theThe Company realized losses of $17 million and $26 million, respectively, due to other-than-temporary impairments of certain available-for-sale securities. These impairment charges were recorded in other income (loss) — net. Refer to Note 16 and Note 17.
During 2011, the Company began using one of itsuses insurance captives to reinsure group annuity insurance contracts that cover the pension obligations of certain of our European and Canadian pension plans. In accordance with local insurance regulations, our insurance captive is required to meet and maintain minimum solvency capital requirements. The Company elected to invest its solvency capital in a portfolio of available-for-sale securities, which have been classified in the line item other assets in our consolidated balance sheets because the assets are not available to satisfy our current obligations. As of December 31, 2012,2015 and December 31, 2011,2014, the Company's available-for-sale securities included solvency capital funds of $451$804 million and $285$836 million,, respectively.
As of December 31, 2015 and 2014, the Company did not have any held-to-maturity securities. The Company's available-for-sale and held-to-maturity securities were included in the following captionsline items in our consolidated balance sheets (in millions):
| | | | December 31, 2012 | | December 31, 2011 | |
| | Available- for-Sale Securities |
| | Held-to- Maturity Securities |
| | Available- for-Sale Securities |
| | Held-to- Maturity Securities |
| |
| December 31, | | 2015 |
| | 2014 |
|
| Cash and cash equivalents | $ | 9 |
| | $ | — |
| | $ | — |
| | $ | 112 |
| $ | 361 |
| | $ | 43 |
|
| Marketable securities | 2,908 |
| | — |
| | 5 |
| | 1 |
| 4,040 |
| | 3,350 |
|
| Other investments, principally bottling companies | 1,087 |
| | — |
| | 986 |
| | — |
| |
| Other investments | | 3,280 |
| | 3,512 |
|
| Other assets | 589 |
| | — |
| | 410 |
| | — |
| 925 |
| | 974 |
|
| | $ | 4,593 |
| | $ | — |
| | $ | 1,401 |
| | $ | 113 |
| |
| Total | | $ | 8,606 |
| | $ | 7,879 |
|
The contractual maturities of these investments as of December 31, 2012,2015 were as follows (in millions):
| | | | Available-for-Sale Securities | | Held-to-Maturity Securities | Available-for-Sale Securities |
| | Cost |
| | Fair Value |
| | Amortized Cost |
| | Fair Value |
| Cost |
| | Fair Value |
|
| Within 1 year | $ | 1,003 |
| | $ | 1,001 |
| | $ | — |
| | $ | — |
| $ | 2,496 |
| | $ | 2,496 |
|
| After 1 year through 5 years | 1,590 |
| | 1,598 |
| | — |
| | — |
| 1,709 |
| | 1,728 |
|
| After 5 years through 10 years | 270 |
| | 299 |
| | — |
| | — |
| 111 |
| | 122 |
|
| After 10 years | 306 |
| | 307 |
| | — |
| | — |
| 277 |
| | 286 |
|
| Equity securities | 957 |
| | 1,388 |
| | — |
| | — |
| 3,573 |
| | 3,974 |
|
| | $ | 4,126 |
| | $ | 4,593 |
| | $ | — |
| | $ | — |
| |
| Total | | $ | 8,166 |
| | $ | 8,606 |
|
The Company expects that actual maturities may differ from the contractual maturities above because borrowers have the right to call or prepay certain obligations.
Cost Method Investments
Cost method investments are initially recorded at cost, and we record dividend income when applicable dividends are declared. Cost method investments are reported as other investments in our consolidated balance sheets, and dividend income from cost method investments is reported in other income (loss) — net in our consolidated statements of income. We review all of our cost method investments quarterly to determine if impairment indicators are present; however, we are not required to determine the fair value of these investments unless impairment indicators exist. When impairment indicators exist, we generally use discounted cash flow analyses to determine the fair value. We estimate that the fair values of our cost method investments approximated or exceeded their carrying values as of December 31, 20122015 and 2011.2014. Our cost method investments had a carrying value of $145$190 million and $155$166 million as of December 31, 20122015 and 2011,2014, respectively.
In 2012, the Company recorded a charge of $16 million as a result of other-than-temporary declines in the fair values of certain cost method investments. This impairment was recorded in the line item other income (loss) — net in our consolidated statement of income. Refer to Note 16 for additional information related to this impairment.
NOTE 4: INVENTORIES
Inventories consist primarily of raw materials and packaging (which includes ingredients and supplies) and finished goods (which include concentrates and syrups in our concentrate operations and finished beverages in our finished product operations). Inventories are valued at the lower of cost or market. We determine cost on the basis of the average cost or first-in, first-out methods. Inventories consisted of the following (in millions):
| | | December 31, | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
|
| Raw materials and packaging | $ | 1,773 |
| | $ | 1,680 |
| $ | 1,564 |
| | $ | 1,615 |
|
| Finished goods | 1,171 |
| | 1,198 |
| 1,032 |
| | 1,134 |
|
| Other | 320 |
| | 214 |
| 306 |
| | 351 |
|
| Total inventories | $ | 3,264 |
| | $ | 3,092 |
| $ | 2,902 |
| | $ | 3,100 |
|
NOTE 5: HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS
The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company's financial performance and are referred to as "market risks." Our Company, whenWhen deemed appropriate, our Company uses derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risks managed by the Company through the use of derivative and non-derivative financial instruments are foreign currency exchange rate risk, commodity price risk and interest rate risk.
The Company uses various types of derivative instruments including, but not limited to, forward contracts, commodity futures contracts, option contracts, collars and swaps. Forward contracts and commodity futures contracts are agreements to buy or sell a quantity of a currency or commodity at a predetermined future date, and at a predetermined rate or price. An option contract is an agreement that conveys the purchaser the right, but not the obligation, to buy or sell a quantity of a currency or commodity at a predetermined rate or price during a period or at a time in the future. A collar is a strategy that uses a combination of options to limit the range of possible positive or negative returns on an underlying asset or liability to a specific range, or to protect expected future cash flows. To do this, an investor simultaneously buys a put option and sells (writes) a call option, or alternatively buys a call option and sells (writes) a put option. A swap agreement is a contract between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices. We do not enter into derivative financial instruments for trading purposes. The Company may also designate certain non-derivative instruments, such as our foreign-denominated debt, in hedging relationships.
All derivatives are carried at fair value in our consolidated balance sheets in the following line items, as applicable: prepaid expenses and other assets; other assets; accounts payable and accrued expenses; and other liabilities. The carrying values of the derivatives reflect the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. These master netting agreements allow the Company to net settle positive and negative positions (assets and liabilities) arising from different transactions with the same counterparty.
The accounting for gains and losses that result from changes in the fair values of derivative instruments depends on whether the derivatives have been designated and qualify as hedging instruments and the type of hedging relationships. Derivatives can be designated as fair value hedges, cash flow hedges or hedges of net investments in foreign operations. The changes in the fair values of derivatives that have been designated and qualify for fair value hedge accounting are recorded in the same line item in our consolidated statements of income as the changes in the fair values of the hedged items attributable to the risk being hedged. The changes in the fair values of derivatives that have been designated and qualify as cash flow hedges or hedges of net investments in foreign operations are recorded in AOCI and are reclassified into the line item in our consolidated statement of income in which the hedged items are recorded in the same period the hedged items affect earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, fluctuations in the value of the derivative instruments are generally offset by changes in the fair values or cash flows of the underlying exposures being hedged. The changes in the fair values of derivatives that were not designated and/or did not qualify as hedging instruments are immediately recognized into earnings.
For derivatives that will be accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction. In addition, the Company formally assesses, both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair values or cash flows of the related underlying exposures. Any ineffective portion of a financial instrument's change in fair value is immediately recognized into earnings.
The Company determines the fair values of its derivatives based on quoted market prices or pricing models using standard valuation models.current market rates. Refer to Note 16.16. The notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above. The amounts
exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as interest rates, foreign currency exchange rates, commodity rates or other financial indices. The Company does not view the fair values of its derivatives in isolation but rather in relation to the fair values or cash flows of the underlying hedged transactions or other exposures. Virtually all of our derivatives are straightforward over-the-counter instruments with liquid markets.
The following table presents the fair values of the Company's derivative instruments that were designated and qualified as part of a hedging relationship (in millions):
| | | | | | Fair Value1,2 | | | Fair Value1,2 |
| Derivatives Designated as Hedging Instruments | Balance Sheet Location1 | | December 31,
2012 |
| | December 31,
2011 |
| Balance Sheet Location1 | | December 31,
2015 |
| | December 31,
2014 |
|
| Assets: | | | | | | | | | | |
| Foreign currency contracts | | Prepaid expenses and other assets | | $ | 572 |
| | $ | 923 |
|
| Foreign currency contracts | Prepaid expenses and other assets | | $ | 149 |
| | $ | 170 |
| Other assets | | 246 |
| | 346 |
|
| Commodity contracts | Prepaid expenses and other assets | | — |
| | 2 |
| Prepaid expenses and other assets | | 1 |
| | — |
|
| Interest rate contracts | Prepaid expenses and other assets | | 7 |
| | — |
| Prepaid expenses and other assets | | 20 |
| | 14 |
|
| Interest rate contracts | Other assets | | 335 |
| | 246 |
| Other assets | | 62 |
| | 146 |
|
| Total assets | | | $ | 491 |
| | $ | 418 |
| | | $ | 901 |
| | $ | 1,429 |
|
| Liabilities: | | | | | | | | | | |
| Foreign currency contracts | Accounts payable and accrued expenses | | $ | 55 |
| | $ | 41 |
| Accounts payable and accrued expenses | | $ | 51 |
| | $ | 24 |
|
| Foreign currency contracts | | Other liabilities | | 75 |
| | 249 |
|
| Commodity contracts | Accounts payable and accrued expenses | | 1 |
| | 1 |
| Accounts payable and accrued expenses | | — |
| | 1 |
|
| Interest rate contracts | Other liabilities | | 6 |
| | — |
| Accounts payable and accrued expenses | | 53 |
| | 11 |
|
| Interest rate contracts | | Other liabilities | | 231 |
| | 35 |
|
| Total liabilities | | | $ | 62 |
| | $ | 42 |
| | | $ | 410 |
| | $ | 320 |
|
| |
1 | All of the Company's derivative instruments are carried at fair value in our consolidated balance sheets after considering the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. Current disclosure requirements mandate that derivatives must also be disclosed without reflecting the impact of master netting agreements and cash collateral. Refer to Note 16 for the net presentation of the Company's derivative instruments. |
| |
2 | Refer to Note 16 for additional information related to the estimated fair value. |
The following table presents the fair values of the Company's derivative instruments that were not designated as hedging instruments (in millions):
| | | | | | Fair Value1,2 | | | Fair Value1,2 |
| Derivatives Not Designated as Hedging Instruments | Balance Sheet Location1 | | December 31,
2012 |
| | December 31,
2011 |
| Balance Sheet Location1 | | December 31,
2015 |
| | December 31,
2014 |
|
| Assets: | | | | | | | | | | |
| Foreign currency contracts | Prepaid expenses and other assets | | $ | 19 |
| | $ | 29 |
| Prepaid expenses and other assets | | $ | 105 |
| | $ | 44 |
|
| Foreign currency contracts | Other assets | | 42 |
| | — |
| Other assets | | 241 |
| | 231 |
|
| Commodity contracts | Prepaid expenses and other assets | | 72 |
| | 54 |
| Prepaid expenses and other assets | | 2 |
| | 9 |
|
| Commodity contracts | | Other assets | | 1 |
| | 1 |
|
| Other derivative instruments | | Prepaid expenses and other assets | | 17 |
| | 14 |
|
| Other derivative instruments | Prepaid expenses and other assets | | 6 |
| | 5 |
| Other assets | | 3 |
| | 2 |
|
| Total assets | | | $ | 139 |
| | $ | 88 |
| | | $ | 369 |
| | $ | 301 |
|
| Liabilities: | | | | | | | | | | |
| Foreign currency contracts | Accounts payable and accrued expenses | | $ | 24 |
| | $ | 116 |
| Accounts payable and accrued expenses | | $ | 59 |
| | $ | 33 |
|
| Foreign currency contracts | Other liabilities | | 1 |
| | — |
| Other liabilities | | 9 |
| | 21 |
|
| Commodity contracts | Accounts payable and accrued expenses | | 43 |
| | 47 |
| Accounts payable and accrued expenses | | 154 |
| | 156 |
|
| Commodity contracts | Other liabilities | | 1 |
| | — |
| Other liabilities | | 19 |
| | 17 |
|
| Interest rate contracts | | Other liabilities | | 1 |
| | 2 |
|
| Other derivative instruments | | Accounts payable and accrued expenses | | 5 |
| | 11 |
|
| Other derivative instruments | Accounts payable and accrued expenses | | 2 |
| | 1 |
| Other liabilities | | 2 |
| | — |
|
| Total liabilities | | | $ | 71 |
| | $ | 164 |
| | | $ | 249 |
| | $ | 240 |
|
| |
1 | All of the Company's derivative instruments are carried at fair value in our consolidated balance sheets after considering the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. Current disclosure requirements mandate that derivatives must also be disclosed without reflecting the impact of master netting agreements and cash collateral. Refer to Note 16 for the net presentation of the Company's derivative instruments. |
| |
2 | Refer to Note 16 for additional information related to the estimated fair value. |
Credit Risk Associated with Derivatives
We have established strict counterparty credit guidelines and enter into transactions only with financial institutions of investment grade or better. We monitor counterparty exposures regularly and review any downgrade in credit rating immediately. If a downgrade in the credit rating of a counterparty were to occur, we have provisions requiring collateral in the form of U.S. government securities for substantially all of our transactions. To mitigate presettlement risk, minimum credit standards become more stringent as the duration of the derivative financial instrument increases. In addition, the Company's master netting agreements reduce credit risk by permitting the Company to net settle for transactions with the same counterparty. To minimize the concentration of credit risk, we enter into derivative transactions with a portfolio of financial institutions. Based on these factors, we consider the risk of counterparty default to be minimal.
Cash Flow Hedging Strategy
The Company uses cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in foreign currency exchange rates, commodity prices or interest rates. The changes in the fair values of derivatives designated as cash flow hedges are recorded in AOCI and are reclassified into the line item in our consolidated statement of income in which the hedged items are recorded in the same period the hedged items affect earnings. The changes in fair values of hedges that are determined to be ineffective are immediately reclassified from AOCI into earnings. The Company did not discontinue any cash flow hedging relationships during the years ended December 31, 2012, 2011 and 2010. The maximum length of time for which the Company hedges its exposure to the variability in future cash flows is typically three years.
The Company maintains a foreign currency cash flow hedging program to reduce the risk that our eventual U.S. dollar net cash inflows from sales outside the United States and U.S. dollar net cash outflows from procurement activities will be adversely affected by changes in foreign currency exchange rates. We enter into forward contracts and purchase foreign currency options (principally euros and Japanese yen) and collars to hedge certain portions of forecasted cash flows denominated in foreign currencies. When the U.S. dollar strengthens against the foreign currencies, the decline in the present value of future foreign currency cash flows is partially offset by gains in the fair value of the derivative instruments. Conversely, when the U.S. dollar weakens, the increase in the present value of future foreign currency cash flows is partially offset by losses in the fair value of the derivative instruments. The total notional valuevalues of derivatives that have been designated and qualify for the Company's foreign currency cash flow hedging program was $4,715were $10,383 million and $5,158$13,224 million as of December 31, 20122015 and 2011,2014, respectively.
The Company uses cross-currency swaps to hedge the changes in cash flows of certain of its foreign currency denominated debt due to changes in foreign currency exchange rates. For this hedging program, the Company records the change in carrying value of the foreign currency denominated debt due to changes in exchange rates into earnings each period. The changes in fair value of the cross-currency swap derivatives are recorded in AOCI with an immediate reclassification into earnings for the change in fair value attributable to fluctuations in foreign currency exchange rates. These swaps had a notional amount of $2,590 million as of December 31, 2014. During the year ended December 31, 2015, the Company discontinued the cash flow hedge relationships related to these swaps. Upon discontinuance, the Company recognized a loss of $92 million in other comprehensive income, which will be reclassified from AOCI into interest expense over the remaining life of the debt, a weighted-average period of approximately 10 years. The Company did not discontinue any cash flow hedging relationships during the years ended December 31, 2014 and 2013. During the year ended December 31, 2015, the Company entered into new cross-currency swaps, which had a notional value of $566 million as of December 31, 2015.
The Company has entered into commodity futures contracts and other derivative instruments on various commodities to mitigate the price risk associated with forecasted purchases of materials used in our manufacturing process. TheThese derivative instruments have been designated and qualify as part of the Company's commodity cash flow hedging program. The objective of this hedging program is to reduce the variability of cash flows associated with future purchases of certain commodities. The total notional valuevalues of derivatives that have been designated and qualify for this program waswere $178 million and $269 million as of December 31, 20122015 and 20112014, respectively.
Our Company monitors our mix of short-term debt and long-term debt regularly. From time to time, we manage our risk to interest rate fluctuations through the use of derivative financial instruments. The Company has entered into interest rate swap agreements and has designated these instruments as part of the Company's interest rate cash flow hedging program. The objective of this hedging program is to mitigate the risk of adverse changes in benchmark interest rates on the Company's future interest payments. The total notional valuevalues of these interest rate swap agreements that were designated and qualified for the Company's interest rate cash flow hedging program waswere $3,328 million and $1,7644,328 million as of December 31, 20122015. The Company had no outstanding derivative instruments under this hedging program as of and December 31, 20112014., respectively.
The following table presents the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on AOCI and earnings during the years ended December 31, 2012, 20112015, 2014 and 20102013 (in millions):
| | | | Gain (Loss) Recognized in Other Comprehensive Income ("OCI") |
| | Location of Gain (Loss) Recognized in Income1 | | Gain (Loss) Reclassified from AOCI into Income (Effective Portion) |
| | Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
| | Gain (Loss) Recognized in Other Comprehensive Income ("OCI") |
| | Location of Gain (Loss) Recognized in Income1 | | Gain (Loss) Reclassified from AOCI into Income (Effective Portion) |
| | Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
| |
| 2012 | | | | | | | | | |
| 2015 | | | | | | | | | |
| Foreign currency contracts | | $ | 949 |
| | Net operating revenues | | $ | 618 |
| | $ | 12 |
| |
| Foreign currency contracts | | 60 |
| | Cost of goods sold | | 62 |
| | — |
| 2 |
| Foreign currency contracts | $ | 59 |
| | Net operating revenues | | $ | (46 | ) | | $ | 2 |
| | 18 |
| | Interest expense | | (9 | ) | | — |
| |
| Foreign currency contracts | 34 |
| | Cost of goods sold | | (23 | ) | | — |
| | (38 | ) | | Other income (loss) — net | | (40 | ) | | — |
| |
| Interest rate contracts | 1 |
| | Interest expense | | (12 | ) | | — |
| 2 | (153 | ) | | Interest expense | | (3 | ) | | 1 |
| |
| Commodity contracts | (4 | ) | | Cost of goods sold | | (1 | ) | | — |
| | (1 | ) | | Cost of goods sold | | (3 | ) | | — |
| |
| Total | $ | 90 |
| | $ | (82 | ) | | $ | 2 |
| | $ | 835 |
| | $ | 625 |
| | $ | 13 |
| |
| 2011 | | | | | | | |
| 2014 | | | | | | | |
| Foreign currency contracts | | $ | 973 |
| | Net operating revenues | | $ | 121 |
| | $ | — |
| 2 |
| Foreign currency contracts | | 50 |
| | Cost of goods sold | | 34 |
| | — |
| 2 |
| Foreign currency contracts | $ | 3 |
| | Net operating revenues | | $ | (231 | ) | | $ | — |
| 2 | (218 | ) | | Other income (loss) — net | | (108 | ) | | — |
| |
| Interest rate contracts | (11 | ) | | Interest expense | | (12 | ) | | (1 | ) | | (180 | ) | | Interest expense | | — |
| | — |
| |
| Commodity contracts | (1 | ) | | Cost of goods sold | | — |
| | — |
| | — |
| | Cost of goods sold | | 3 |
| | — |
| |
| Total | $ | (9 | ) | | | | $ | (243 | ) | | $ | (1 | ) | | $ | 625 |
| | | | $ | 50 |
| | $ | — |
| |
| 2010 | | | | | | | |
| 2013 | | | | | | | |
| Foreign currency contracts | | $ | 218 |
| | Net operating revenues | | $ | 149 |
| | $ | 1 |
| |
| Foreign currency contracts | $ | (307 | ) | | Net operating revenues | | $ | (2 | ) | | $ | (2 | ) | | 52 |
| | Cost of goods sold | | 32 |
| | — |
| 2 |
| Interest rate contracts | — |
| | Interest expense | | (15 | ) | | — |
| | 169 |
| | Interest expense | | (12 | ) | | (3 | ) | |
| Commodity contracts | 1 |
| | Cost of goods sold | | — |
| | — |
| | 2 |
| | Cost of goods sold | | (2 | ) | | — |
| |
| Total | $ | (306 | ) | | $ | (17 | ) | | $ | (2 | ) | | $ | 441 |
| | $ | 167 |
| | $ | (2 | ) | |
| |
1 | The Company records gains and losses reclassified from AOCI ininto income for the effective portion and ineffective portion, if any, to the same line items in our consolidated statements of income. |
| |
2 | Includes a de minimis amount of ineffectiveness in the hedging relationship. |
As of December 31, 20122015, the Company estimates that it will reclassify into earnings during the next 12 months gains of approximately $41697 million from the pretax amount recorded in AOCI as the anticipated cash flows occur.
Fair Value Hedging Strategy
The Company uses interest rate swap agreements designated as fair value hedges to minimize exposure to changes in the fair value of fixed-rate debt that results from fluctuations in benchmark interest rates. The Company also uses cross-currency interest rate swaps to hedge the changes in the fair value of foreign currency denominated debt relating to changes in foreign currency exchange rates and benchmark interest rates. The changes in fair values of derivatives designated as fair value hedges and the offsetting changes in fair values of the hedged items are recognized in earnings. The ineffective portions of these hedges are immediately recognized into earnings. As of December 31, 20122015, such adjustments increasedhad cumulatively decreased the carrying value of our long-term debt by $27386 million. ReferWhen a derivative is no longer designated as a fair value hedge for any reason, including termination and maturity, the remaining unamortized difference between the carrying value of the hedged item at that time and the face value of the hedged item is amortized to Note 10. The changes in fair valuesearnings over the remaining life of hedges that are determined to be ineffective arethe hedged item, or immediately recognized into earnings.if the hedged item has matured. The total notional valuevalues of derivatives that related to our fair value hedges of this type waswere $6,7007,963 million and $5,7006,600 million as of December 31, 20122015 and 20112014, respectively.
During the first quarter of 2012, the101
The Company began usingalso uses fair value hedges to minimize exposure to changes in the fair value of certain available-for-sale securities from fluctuations in foreign currency exchange rates. The changes in fair values of derivatives designated as fair value hedges and the offsetting changes in fair values of the hedged items due to changes in foreign currency exchange rates are recognized in earnings. The changesAs a result, any difference is reflected in fair values of hedges that are determined to be ineffective are immediately recognized into earnings.earnings as ineffectiveness. The total notional valuevalues of derivatives that related to our fair value hedges of this type was $850were $2,159 million and $1,358 million as of December 31, 2012. The Company had no outstanding derivative instruments under this hedging program as of December 31, 2011.2015 and 2014, respectively.
The following table summarizes the pretax impact that changes in the fair values of derivatives designated as fair value hedges had on earnings during the years ended December 31, 2012, 20112015, 2014 and 20102013 (in millions):
| | | Hedging Instruments and Hedged Items | Location of Gain (Loss) Recognized in Income | Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
| Location of Gain (Loss) Recognized in Income | Gain (Loss) Recognized in Income1 |
|
| 2012 | | | |
| 2015 | | | |
| Interest rate contracts | Interest expense | $ | 89 |
| Interest expense | $ | (172 | ) |
| Fixed-rate debt | Interest expense | (42 | ) | Interest expense | 169 |
|
| Net impact to interest expense | | $ | 47 |
| | $ | (3 | ) |
| Foreign currency contracts | Other income (loss) — net | $ | 42 |
| Other income (loss) — net | $ | 110 |
|
| Available-for-sale securities | Other income (loss) — net | (46 | ) | Other income (loss) — net | (131 | ) |
| Net impact to other income (loss) — net | | $ | (4 | ) | | $ | (21 | ) |
| Net impact of fair value hedging instruments | | $ | 43 |
| | $ | (24 | ) |
| 2011 | | | |
| 2014 | | | |
| Interest rate contracts | Interest expense | $ | 343 |
| Interest expense | $ | 18 |
|
| Fixed-rate debt | Interest expense | (333 | ) | Interest expense | 11 |
|
| Net impact to interest expense | | $ | 10 |
| | $ | 29 |
|
| 2010 | | | |
| Foreign currency contracts | | Other income (loss) — net | $ | 132 |
|
| Available-for-sale securities | | Other income (loss) — net | (165 | ) |
| Net impact to other income (loss) — net | | | $ | (33 | ) |
| Net impact of fair value hedging instruments | | | $ | (4 | ) |
| 2013 | | | |
| Interest rate contracts | Interest expense | $ | (97 | ) | Interest expense | $ | (193 | ) |
| Fixed-rate debt | Interest expense | 102 |
| Interest expense | 240 |
|
| Net impact to interest expense | | $ | 5 |
| | $ | 47 |
|
| Foreign currency contracts | | Other income (loss) — net | $ | 24 |
|
| Available-for-sale securities | | Other income (loss) — net | (48 | ) |
| Net impact to other income (loss) — net | | | $ | (24 | ) |
| Net impact of fair value hedging instruments | | | $ | 23 |
|
1 The net impacts represent the ineffective portions of the hedge relationships and the amounts excluded from the assessment of hedge effectiveness.
Hedges of Net Investments in Foreign Operations Strategy
The Company uses forward contracts and non-derivative financial instruments to protect the value of our investments in a number of foreign subsidiaries. During the year ended December 31, 2015, the Company designated a portion of its euro-denominated debt as a hedge of a net investment in our European operations. The change in the carrying value of the designated portion of the euro-denominated debt due to changes in foreign currency exchange rates is recorded in net foreign currency translation adjustment, a component of AOCI. For derivative instruments that are designated and qualify as hedges of net investments in foreign operations, the changes in fair values of the derivative instruments are recognized in net foreign currency translation gain (loss), a component of AOCI,adjustment, to offset the changes in the values of the net investments being hedged. Any ineffective portions of net investment hedges are reclassified from AOCI into earnings during the period of change. The total notional value of derivatives under this hedging program was $1,718 million and $1,681 million as of December 31, 2012 and 2011, respectively.
The following table presentssummarizes the notional values and pretax impact thatof changes in the fair values of derivativesinstruments designated as net investment hedges had on AOCI during the years ended December 31, 2012, 2011 and 2010(in millions):
| | | | Gain (Loss) Recognized in OCI | Notional Amount | | Gain (Loss) Recognized in OCI |
| Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| |
| | | as of December 31, | | Year Ended December 31, |
| | | 2015 |
| 2014 |
| | 2015 |
| 2014 |
| 2013 |
|
| Foreign currency contracts | $ | (61 | ) | | $ | (3 | ) | | $ | (15 | ) | $ | 1,347 |
| $ | 2,047 |
| | $ | 661 |
| $ | 80 |
| $ | 61 |
|
| Foreign currency denominated debt | | 10,912 |
| — |
| | (24 | ) | — |
| — |
|
| Total | | $ | 12,259 |
| $ | 2,047 |
| | $ | 637 |
| $ | 80 |
| $ | 61 |
|
The Company did not reclassify any deferred gains or losses related to net investment hedges from AOCI to earnings during the years endedDecember 31, 2012, 20112015, 2014 and 2010.2013. In addition, the Company did not have any ineffectiveness related to net investment hedges during the years endedDecember 31, 2012, 20112015, 2014 and 2010.2013. The cash inflows and outflows associated with the Company's derivative contracts designated as net investment hedges are classified in the line item other investing activities in our consolidated statements of cash flows.
Economic (Non-Designated) Hedging Strategy
In addition to derivative instruments that are designated and qualify for hedge accounting, the Company also uses certain derivatives as economic hedges of foreign currency, interest rate and commodity exposure. Although these derivatives were not designated and/or did not qualify for hedge accounting, they are effective economic hedges. The changes in fair value of economic hedges are immediately recognized into earnings.
The Company uses foreign currency economic hedges to offset the earnings impact that fluctuations in foreign currency exchange rates have on certain monetary assets and liabilities denominated in nonfunctional currencies. The changes in fair value of economic hedges used to offset thethose monetary assets and liabilities are immediately recognized into earnings in the line item other income (loss) — net in our consolidated statements of income. In addition, we use foreign currency economic hedges to minimize the variability in cash flows associated with changesfluctuations in foreign currency exchange rates. The changes in fair valuevalues of economic hedges used to offset the variability in U.S. dollar net cash flows are recognized into earnings in the line items net operating revenues andor cost of goods sold in our consolidated statements of income.income, as applicable. The total notional valuevalues of derivatives related to our foreign currency economic hedges was $3,865were $3,605 million and $3,629$4,334 million as of December 31, 20122015 and 2011,2014, respectively.
The Company also uses certain derivatives as economic hedges to mitigate the price risk associated with the purchase of materials used in the manufacturing process and for vehicle fuel. The changes in fair values of these economic hedges are immediately recognized into earnings in the line items net operating revenues, cost of goods sold, and selling, general and administrative expenses in our consolidated statements of income, as applicable. The total notional valuevalues of derivatives related to our economic hedges of this type was $1,084were $893 million and $1,165$816 million as of December 31, 2012 and 2011, respectively.
In connection with our acquisition of CCE's former North America business, the Company assumed certain interest rate derivatives. The Company did not designate these derivatives as hedges subsequent to the acquisition. These derivatives were originally recorded at fair value as of October 2, 2010. As of December 31, 2010, all interest rate derivatives acquired from CCE were settled2015 and will have no additional impact on future earnings. In 2010, the Company recorded $5 million of losses related to these instruments in interest expense.2014, respectively.
The Company entered into interest rate locks that were used as economic hedges to mitigate the interest rate risk associated with the Company's repurchase of certain long-term debt. These hedges were not designated and did not qualify for hedge accounting but were effective economic hedges. The Company settled these hedges and recognized losses of $104 million in interest expense during 2010. As of December 31, 2010, there were no outstanding interest rate derivatives used as economic hedges.
The following table presents the pretax impact that changes in the fair values of derivatives not designated as hedging instruments had on earnings during the years ended December 31, 2012, 20112015, 2014 and 20102013 (in millions):
| | | | | | Gains (Losses) | | | | | | | | |
Derivatives Not Designated as Hedging Instruments | Location of Gains (Losses) Recognized in Income | | Year Ended December 31, | Location of Gain (Loss) Recognized in Income | | Year Ended December 31, |
| | 2012 |
| | 2011 |
| | 2010 |
| | 2015 |
| | 2014 |
| | 2013 |
|
| Foreign currency contracts | Net operating revenues | | $ | (7 | ) | | $ | 7 |
| | $ | (15 | ) | Net operating revenues | | $ | 41 |
| | $ | (6 | ) | | $ | 5 |
|
| Foreign currency contracts | Other income (loss) — net | | 24 |
| | (37 | ) | | (46 | ) | Other income (loss) — net | | (92 | ) | | (85 | ) | | 162 |
|
| Foreign currency contracts | Cost of goods sold | | — |
| | (12 | ) | | (9 | ) | Cost of goods sold | | 3 |
| | — |
| | 2 |
|
| Commodity contracts | Net operating revenues | | 4 |
| | — |
| | — |
| Net operating revenues | | (16 | ) | | (48 | ) | | 5 |
|
| Commodity contracts | Cost of goods sold | | (110 | ) | | (42 | ) | | 40 |
| Cost of goods sold | | (209 | ) | | (8 | ) | | (122 | ) |
| Commodity contracts | Selling, general and administrative expenses | | 9 |
| | (11 | ) | | — |
| Selling, general and administrative expenses | | (25 | ) | | (79 | ) | | 7 |
|
| Interest rate swaps | Interest expense | | — |
| | — |
| | (5 | ) | |
| Interest rate locks | Interest expense | | — |
| | — |
| | (104 | ) | |
| Interest rate contracts | | Interest expense | | — |
| | — |
| | (3 | ) |
| Other derivative instruments | | Selling, general and administrative expenses | | 1 |
| | 24 |
| | 55 |
|
| Other derivative instruments | Selling, general and administrative expenses | | 18 |
| | 8 |
| | 21 |
| Other income (loss) — net | | (37 | ) | | 39 |
| | — |
|
| Total | | | $ | (62 | ) | | $ | (87 | ) | | $ | (118 | ) | | | $ | (334 | ) | | $ | (163 | ) | | $ | 111 |
|
NOTE 6: EQUITY METHOD INVESTMENTS
Our consolidated net income includes our Company's proportionate share of the net income or loss of our equity method investees. When we record our proportionate share of net income, it increases equity income (loss) — net in our consolidated statements of income and our carrying value in that investment. Conversely, when we record our proportionate share of a net loss, it decreases equity income (loss) — net in our consolidated statements of income and our carrying value in that investment. The Company's proportionate share of the net income or loss of our equity method investees includes significant operating and nonoperating items recorded by our equity method investees. These items can have a significant impact on the amount of equity income (loss) — net in our consolidated statements of income and our carrying value in those investments. Refer to Note 17 for additional information related to significant operating and nonoperating items recorded by our equity method investees. The carrying values of our equity method investments are also impacted by our proportionate share of items impacting the equity investee's AOCI.
We eliminate from our financial results all significant intercompany transactions, including the intercompany portion of transactions with equity method investees.
Coca-Cola Enterprises Inc.
On October 2, 2010, we completed our acquisition of CCE's former North America business and relinquished our indirect ownership interest in CCE's European operations. As a result of this transaction, the Company does not own any interest in New CCE. Refer to Note 2 for additional information related to this transaction.
We accounted for our investment in CCE under the equity method of accounting until our acquisition of CCE's former North America business was completed on October 2, 2010. Therefore, our consolidated net income for the year ended December 31, 2010, included equity income from CCE during the first nine months of 2010. The Company owned 33 percent of the outstanding common stock of CCE immediately prior to the acquisition. The following table provides summarized financial information for CCE for the nine months ended October 1, 2010 (in millions):
|
| | | |
| | Nine Months Ended |
|
| | October 1, 2010 |
|
| Net operating revenues | $ | 16,464 |
|
| Cost of goods sold | 10,028 |
|
| Gross profit | $ | 6,436 |
|
| Operating income (loss) | $ | 1,369 |
|
| Net income (loss) | $ | 677 |
|
The following table provides a summary of our significant transactions with CCE for the nine months ended October 1, 2010 (in millions):
|
| | | |
| | Nine Months Ended |
|
| | October 1, 2010 |
|
| Concentrate, syrup and finished product sales to CCE | $ | 4,737 |
|
| Syrup and finished product purchases from CCE | 263 |
|
| CCE purchases of sweeteners through our Company | 251 |
|
| Marketing payments made by us directly to CCE | 314 |
|
| Marketing payments made to third parties on behalf of CCE | 106 |
|
| Local media and marketing program reimbursements from CCE | 268 |
|
| Payments made to CCE for dispensing equipment repair services | 64 |
|
| Other payments — net | 19 |
|
Syrup and finished product purchases from CCE represent purchases of fountain syrup in certain territories that have been resold by our Company to major customers and purchases of bottle and can products. Marketing payments made by us directly to CCE represent support of certain marketing activities and our participation with CCE in cooperative advertising and other marketing activities to promote the sale of Company trademark products within CCE territories. These programs were agreed to on an annual basis. Marketing payments made to third parties on behalf of CCE represent support of certain marketing activities and programs to promote the sale of Company trademark products within CCE's territories in conjunction with certain of CCE's
customers. Pursuant to cooperative advertising and trade agreements with CCE, we received funds from CCE for local media and marketing program reimbursements. Payments made to CCE for dispensing equipment repair services represent reimbursement to CCE for its costs of parts and labor for repairs on cooler, dispensing or post-mix equipment owned by us or our customers. The other payments — net line in the table above represents payments made to and received from CCE that are individually insignificant.
Our Company had previously entered into programs with CCE designed to help develop cold-drink infrastructure. Under these programs, we paid CCE for a portion of the cost of developing the infrastructure necessary to support accelerated placements of cold-drink equipment. These payments supported a common objective of increased sales of Company Trademark Beverages from increased availability and consumption in the cold-drink channel.
Preexisting Relationships
The Company evaluated all of our preexisting relationships with CCE prior to the close of the transaction. Based on these evaluations, the Company recognized charges of $265 million in 2010 related to preexisting relationships with CCE. These charges were primarily related to the write-off of our investment in cold-drink infrastructure programs with CCE as our investment in these programs did not meet the criteria to be recognized as an asset subsequent to the acquisition. These charges were included in the line item other income (loss) — net in our consolidated statements of income and impacted the Corporate operating segment. Refer to Note 17.
Other Equity Method Investments
The Company's other equity method investments include our ownership interests in Coca-Cola FEMSA, Coca-Cola Hellenic, Coca-Cola FEMSAAmatil Limited and Coca-Cola Amatil.Monster. As of December 31, 2012,2015, we owned approximately 2328 percent,, 24 percent, 29 percent and 2917 percent,, respectively, of these companies' commonoutstanding shares. As of December 31, 2012,2015, our investment in our equity method investees in the aggregate exceeded our proportionate share of the net assets of these equity method investees by $2,241 million.$4,306 million. This difference is not amortized.
A summary of financial information for our equity method investees in the aggregate other than CCE, is as follows (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| |
Year Ended December 31,1 | | 2015 |
| | 2014 |
| | 2013 |
|
| Net operating revenues | $ | 47,087 |
| | $ | 42,472 |
| | $ | 38,663 |
| $ | 47,498 |
| | $ | 52,627 |
| | $ | 53,038 |
|
| Cost of goods sold | 28,821 |
| | 26,271 |
| | 23,053 |
| 28,749 |
| | 31,810 |
| | 32,377 |
|
| Gross profit | $ | 18,266 |
| | $ | 16,201 |
| | $ | 15,610 |
| $ | 18,749 |
| | $ | 20,817 |
| | $ | 20,661 |
|
| Operating income | $ | 4,605 |
| | $ | 4,181 |
| | $ | 4,134 |
| $ | 4,483 |
| | $ | 4,489 |
| | $ | 4,380 |
|
| Consolidated net income | $ | 2,993 |
| | $ | 2,237 |
| | $ | 2,659 |
| $ | 2,299 |
| | $ | 2,440 |
| | $ | 2,364 |
|
| Less: Net income attributable to noncontrolling interests | 89 |
| | 99 |
| | 89 |
| 65 |
| | 74 |
| | 62 |
|
| Net income attributable to common shareowners | $ | 2,904 |
| | $ | 2,138 |
| | $ | 2,570 |
| $ | 2,234 |
| | $ | 2,366 |
| | $ | 2,302 |
|
| Equity income (loss) — net | | $ | 489 |
| | $ | 769 |
| | $ | 602 |
|
1 The financial information represents the results of the equity method investees during the Company's period of ownership.
| | | December 31, | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
|
| Current assets | $ | 16,054 |
| | $ | 13,960 |
| $ | 17,524 |
| | $ | 16,184 |
|
| Noncurrent assets | 32,687 |
| | 27,152 |
| 36,498 |
| | 40,080 |
|
| Total assets | $ | 48,741 |
| | $ | 41,112 |
| $ | 54,022 |
| | $ | 56,264 |
|
| Current liabilities | $ | 12,004 |
| | $ | 10,545 |
| $ | 11,820 |
| | $ | 12,477 |
|
| Noncurrent liabilities | 12,272 |
| | 11,646 |
| 14,467 |
| | 16,657 |
|
| Total liabilities | $ | 24,276 |
| | $ | 22,191 |
| $ | 26,287 |
| | $ | 29,134 |
|
| Equity attributable to shareowners of investees | $ | 23,827 |
| | $ | 18,392 |
| $ | 26,854 |
| | $ | 26,363 |
|
| Equity attributable to noncontrolling interests | 638 |
| | 529 |
| 881 |
| | 767 |
|
| Total equity | $ | 24,465 |
| | $ | 18,921 |
| $ | 27,735 |
| | $ | 27,130 |
|
| Company equity investment | $ | 9,216 |
| | $ | 7,233 |
| $ | 12,318 |
| | $ | 9,947 |
|
Net sales to equity method investees, other than CCE, the majority of which are located outside the United States, were $7.1 billion, $6.9 billion$8,984 million, $10,063 million and $6.2 billion$9,178 million in 2012, 20112015, 2014 and 2010,2013, respectively. Total payments, primarily marketing, made to equity method investees other than CCE were $1,587$1,380 million,, $1,147 $1,605 million and $1,034$1,807 million in 2012, 20112015, 2014 and 2010,2013, respectively. In addition, purchases of finishedbeverage products from equity method investees other than CCE were $392$1,131 million,, $430 $381 million and $205$415 million in 2012, 20112015, 2014 and 2010,2013, respectively. The increase in purchases of beverage products in 2015 is primarily due to purchases from Monster. Refer to Note 2 for additional information.
If valued at the December 31, 2012,2015 quoted closing prices of shares actively traded on stock markets, the value of our equity method investments in publicly traded bottlers would have exceeded our carrying value by $10.4 billion.$7,225 million.
Net Receivables and Dividends from Equity Method Investees
Total net receivables due from equity method investees were $1,1621,399 million and $1,0421,448 million as of December 31, 20122015 and 20112014, respectively. The total amount of dividends received from equity method investees was $393367 million, $421398 million and $354401 million for the years ended December 31, 20122015, 20112014 and 20102013, respectively. Dividends received included a $35 million and $60 million special dividend from Coca-Cola Hellenic during 2012 and 2011, respectively. We classifiedThe amount of consolidated reinvested earnings that represents undistributed earnings of investments accounted for under the receiptequity method as of these cash dividends in cash flows from operating activities because our cumulative equity in earnings from Coca-Cola Hellenic exceeded the cumulative distributions received; therefore, the dividends were deemed to be a return on our investment and not a return of our investment.December 31, 2015 was $3,389 million.
NOTE 7: PROPERTY, PLANT AND EQUIPMENT
The following table summarizes our property, plant and equipment (in millions):
| | | December 31, | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
|
| Land | $ | 997 |
| | $ | 1,141 |
| $ | 717 |
| | $ | 972 |
|
| Buildings and improvements | 5,307 |
| | 5,240 |
| 4,914 |
| | 5,541 |
|
| Machinery, equipment and vehicle fleet | 16,203 |
| | 15,504 |
| 16,723 |
| | 18,745 |
|
| Construction in progress | 979 |
| | 1,266 |
| |
| | 23,486 |
| | 23,151 |
| $ | 22,354 |
| | $ | 25,258 |
|
| Less accumulated depreciation | 9,010 |
| | 8,212 |
| 9,783 |
| | 10,625 |
|
| Property, plant and equipment — net | $ | 14,476 |
| | $ | 14,939 |
| $ | 12,571 |
| | $ | 14,633 |
|
NOTE 8: 8: INTANGIBLE ASSETS
Indefinite-Lived Intangible Assets
The following table summarizes information related to indefinite-lived intangible assets (in millions):
| | | December 31, | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
|
| Trademarks | $ | 6,527 |
| | $ | 6,430 |
| |
Bottlers' franchise rights1 | 7,405 |
| | 7,770 |
| |
Trademarks1 | | $ | 5,989 |
| | $ | 6,533 |
|
Bottlers' franchise rights2,3 | | 6,000 |
| | 6,689 |
|
| Goodwill | 12,255 |
| | 12,219 |
| 11,289 |
| | 12,100 |
|
| Other | 111 |
| | 113 |
| 164 |
| | 170 |
|
Indefinite-lived intangible assets2 | $ | 26,298 |
| | $ | 26,532 |
| |
| Indefinite-lived intangible assets | | $ | 23,442 |
| | $ | 25,492 |
|
| |
11 The decrease in 2015 was primarily due to the sale of our energy brands to Monster, an impairment charge recorded related to the discontinuation of the energy products in the glacéau portfolio as a result of the Monster Transaction and the impairment of a Venezuelan trademark primarily due to changes in exchange rates as a result of the establishment of the new open market exchange system. Refer to Note 2 for additional information on the Monster Transaction and Note 1 for additional information on the Venezuela currency change. | The decrease in 2012 was primarily related to the Company's consolidated Philippine and Brazilian bottling operations being transferred to assets held for sale as of December 31, 2012. This decrease was partially offset by the acquisition of the Sacramento bottler in 2012 and the finalization of purchase accounting related to our 2011 acquisition of Great Plains. Refer to Note 2 for additional information related to each of these transactions.
|
| |
2 | The decrease in 2015 was primarily related to North America refranchising and the transfer of intangible assets to assets held for sale as a result of our entering into an agreement to merge our German bottling operations to form CCEP. These decreases were partially offset by the acquisition of the Company's rights to distribute Monster products in expanded territories as a result of the Monster Transaction. The carrying value of these rights as of December 31, 2015 was $640 million. These distribution rights acquired from DPS are the only significant indefinite-lived intangiblegoverned by an agreement with an initial term of 20 years, after which it will continue to remain in effect unless otherwise terminated by either party and there are no future costs of renewal. The Company anticipates that these assets subject to renewal or extension arrangements.will be used indefinitely. Refer to Note 2. for additional information. |
3 The Company has agreements with Dr Pepper Snapple Group, Inc. ("DPSG") to distribute Dr Pepper trademark brands in the United States, Canada Dry in the Northeastern United States, and Canada Dry and C' Plus in Canada. As of December 31, 2015, the agreements have remaining terms of 15 years, with automatic 20-year renewal periods unless otherwise terminated under the terms of the agreements and there are no significant costs to renew the agreements. The Company anticipates that these assets will be used indefinitely. The carrying values of these rights as of December 31, 2015 and 2014, were $652 million and $784 million, respectively. The decrease is related to North America refranchising. Refer to Note 2 for additional information.
The following table provides information related to the carrying value of our goodwill by operating segment (in millions):
| | | | Eurasia & Africa |
| | Europe |
| | Latin America |
| | North America |
| | Pacific |
| | Bottling Investments |
| | Total |
| Eurasia & Africa |
| | Europe |
| | Latin America |
| | North America |
| | Asia Pacific |
| | Bottling Investments |
| | Total |
|
| 2011 | | | | | | | | | | | | | | |
| 2014 | | | | | | | | | | | | | | |
| Balance as of January 1 | $ | 44 |
| | $ | 695 |
| | $ | 166 |
| | $ | 9,861 |
| | $ | 112 |
| | $ | 787 |
| | $ | 11,665 |
| $ | 36 |
| | $ | 822 |
| | $ | 156 |
| | $ | 10,572 |
| | $ | 117 |
| | $ | 609 |
| | $ | 12,312 |
|
| Effect of foreign currency translation | (6 | ) | | 15 |
| | (3 | ) | | — |
| | 2 |
| | 11 |
| | 19 |
| (2 | ) | | (60 | ) | | (9 | ) | | — |
| | (2 | ) | | (26 | ) | | (99 | ) |
Acquisitions1 | — |
| | — |
| | — |
| | 195 |
| | — |
| | — |
| | 195 |
| — |
| | — |
| | — |
| | 11 |
| | 16 |
| | 3 |
| | 30 |
|
Adjustments related to the finalization of purchase accounting1 | — |
| | — |
| | — |
| | 304 |
| | — |
| | 5 |
| | 309 |
| (4 | ) | | (43 | ) | | — |
| | — |
| | — |
| | (14 | ) | | (61 | ) |
Divestitures, deconsolidations and other1 | — |
| | — |
| | — |
| | 155 |
| | — |
| | (124 | ) | | 31 |
| (3 | ) | | — |
| | — |
| | (79 | ) | | — |
| | — |
| | (82 | ) |
| Balance as of December 31 | $ | 38 |
| | $ | 710 |
| | $ | 163 |
| | $ | 10,515 |
| | $ | 114 |
| | $ | 679 |
| | $ | 12,219 |
| $ | 27 |
| | $ | 719 |
| | $ | 147 |
| | $ | 10,504 |
| | $ | 131 |
| | $ | 572 |
| | $ | 12,100 |
|
| 2012 | | | | | | | | | | | | | | |
| 2015 | | | | | | | | | | | | | | |
| Balance as of January 1 | $ | 38 |
| | $ | 710 |
| | $ | 163 |
| | $ | 10,515 |
| | $ | 114 |
| | $ | 679 |
| | $ | 12,219 |
| $ | 27 |
| | $ | 719 |
| | $ | 147 |
| | $ | 10,504 |
| | $ | 131 |
| | $ | 572 |
| | $ | 12,100 |
|
| Effect of foreign currency translation | (1 | ) | | (19 | ) | | 5 |
| | — |
| | 6 |
| | (4 | ) | | (13 | ) | (7 | ) | | (98 | ) | | (24 | ) | | — |
| | 2 |
| | (37 | ) | | (164 | ) |
Acquisitions1 | — |
| | — |
| | — |
| | 100 |
| | — |
| | 157 |
| | 257 |
| — |
| | — |
| | — |
| | 27 |
| | — |
| | — |
| | 27 |
|
Adjustments related to the finalization of purchase accounting1 | — |
| | — |
| | — |
| | (38 | ) | | — |
| | — |
| | (38 | ) | — |
| | — |
| | — |
| | — |
| | — |
| | 4 |
| | 4 |
|
Divestitures, deconsolidations and other2 | — |
| | — |
| | — |
| | — |
| | — |
| | (170 | ) | | (170 | ) | |
| Impairment | | — |
| | — |
| | — |
| | — |
| | — |
| | (4 | ) | | (4 | ) |
Divestitures, deconsolidations and other1,2 | | — |
| | (3 | ) | | — |
| | (390 | ) | | — |
| | (281 | ) | | (674 | ) |
| Balance as of December 31 | $ | 37 |
| | $ | 691 |
| | $ | 168 |
| | $ | 10,577 |
| | $ | 120 |
| | $ | 662 |
| | $ | 12,255 |
| $ | 20 |
| | $ | 618 |
| | $ | 123 |
| | $ | 10,141 |
| | $ | 133 |
| | $ | 254 |
| | $ | 11,289 |
|
| |
1 | Refer to Note 2 for information related to the Company's acquisitions and divestitures. |
| |
2 | RelatesThe decrease in 2015 for the North America operating segment was primarily due to the derecognition of goodwill as a result of the sale of our energy business to Monster and North America refranchising. The 2015 decrease in the Bottling Investments segment was primarily due to the transfer of goodwill associated with the Company's consolidated Philippine and Brazilianour German bottling operations to assets held for sale as a result of December 31, 2012.the Company entering into an agreement to merge the operations to form CCEP. Refer to Note 2 for additional information related to this transaction.
on these transactions. |
Definite-Lived Intangible Assets
The following table summarizes information related to definite-lived intangible assets (in millions):
| | | | December 31, 2012 | | December 31, 2011 | December 31, 2015 | | December 31, 2014 |
| | Gross Carrying Amount |
| Accumulated Amortization |
| Net |
| | Gross Carrying Amount |
| Accumulated Amortization |
| Net |
| Gross Carrying Amount |
| Accumulated Amortization |
| Net |
| | Gross Carrying Amount |
| Accumulated Amortization |
| Net |
|
| Customer relationships | $ | 622 |
| $ | (166 | ) | $ | 456 |
| | $ | 619 |
| $ | (126 | ) | $ | 493 |
| |
| Bottlers' franchise rights | 730 |
| (221 | ) | 509 |
| | 668 |
| (119 | ) | 549 |
| |
Customer relationships1 | | $ | 493 |
| $ | (199 | ) | $ | 294 |
| | $ | 597 |
| $ | (229 | ) | $ | 368 |
|
Bottlers' franchise rights1 | | 604 |
| (412 | ) | 192 |
| | 664 |
| (375 | ) | 289 |
|
| Trademarks | 65 |
| (43 | ) | 22 |
| | 99 |
| (70 | ) | 29 |
| 211 |
| (44 | ) | 167 |
| | 222 |
| (39 | ) | 183 |
|
| Other | 129 |
| (77 | ) | 52 |
| | 196 |
| (130 | ) | 66 |
| 97 |
| (60 | ) | 37 |
| | 96 |
| (56 | ) | 40 |
|
| Total | $ | 1,546 |
| $ | (507 | ) | $ | 1,039 |
| | $ | 1,582 |
| $ | (445 | ) | $ | 1,137 |
| $ | 1,405 |
| $ | (715 | ) | $ | 690 |
| | $ | 1,579 |
| $ | (699 | ) | $ | 880 |
|
| |
1 | The decrease in 2015 was primarily due to the derecognition of intangible assets as a result of the North America refranchising and the transfer of our German bottling operations to assets held for sale as a result of the Company entering into an agreement to merge the operations to form CCEP. Refer to Note 2 for additional information. |
Total amortization expense for intangible assets subject to amortization was $173$156 million,, $192 $168 million and $102$165 million in 2012, 20112015, 2014 and 2010,2013, respectively.
Based on the carrying value of definite-lived intangible assets as of December 31, 2012,2015, we estimate our amortization expense for the next five years will be as follows (in millions):
|
| | | | |
| | | Amortization Expense |
|
| 2013 | | $ | 161 |
|
| 2014 | | 153 |
|
| 2015 | | 148 |
|
| 2016 | | 142 |
|
| 2017 | | 90 |
|
|
| | | | |
| | | Amortization Expense |
|
| 2016 | | $ | 149 |
|
| 2017 | | 113 |
|
| 2018 | | 60 |
|
| 2019 | | 57 |
|
| 2020 | | 52 |
|
NOTE 9: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following (in millions):
| | | December 31, | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
|
| Accrued marketing | $ | 2,231 |
| | $ | 2,286 |
| $ | 2,186 |
| | $ | 2,103 |
|
| Other accrued expenses | 2,711 |
| | 2,749 |
| 3,173 |
| | 3,182 |
|
| Trade accounts payable | 1,969 |
| | 2,172 |
| 2,795 |
| | 2,089 |
|
| Accrued compensation | 1,045 |
| | 1,048 |
| 936 |
| | 997 |
|
| Sales, payroll and other taxes | 389 |
| | 405 |
| 444 |
| | 511 |
|
| Container deposits | 335 |
| | 349 |
| 126 |
| | 352 |
|
| Accounts payable and accrued expenses | $ | 8,680 |
| | $ | 9,009 |
| $ | 9,660 |
| | $ | 9,234 |
|
NOTE 10: 10: DEBT AND BORROWING ARRANGEMENTS
Short-Term Borrowings
Loans and notes payable consist primarily of commercial paper issued in the United States. As of December 31, 20122015 and 2011,2014, we had $16,204$13,035 million and $12,135$19,010 million,, respectively, in outstanding commercial paper borrowings. Our weighted-average interest rates for commercial paper outstanding were approximately 0.30.5 percent and 0.2 percent per year as of December 31, 20122015 and 2011,2014, respectively.
In addition, we had $7,768$9,771 million in lines of credit and other short-term credit facilities as of December 31, 2012, of which $854 million was related to the Company's consolidated Philippine bottling operations that were classified as held for sale.2015. The Company's total lines of credit included $93$95 million that was outstanding and primarily related to our international operations.
Included in the credit facilities discussed above, the Company had $6,314$8,340 million in lines of credit for general corporate purposes. These backup lines of credit expire at various times from 20132016 through 2017.2019. There were no borrowings under these backup lines of credit during 2012.2015. These credit facilities are subject to normal banking terms and conditions. Some of the financial arrangements require compensating balances, none of which is presently significant to our Company.
Long-Term Debt
During 2012,2015, the Company retired $1,250issued SFr1,325 million, of long-term notes upon maturity €8,500 million and issued $2,750$4,000 million of long-term debt. The general terms of the notes issued are as follows:
SFr200 million total principal amount of notes due October 2, 2017, at a fixed interest rate of 0.00 percent;
$1,000SFr550 million total principal amount of notes due December 22, 2022, at a fixed interest rate of 0.25 percent;
SFr575 million total principal amount of notes due October 2, 2028, at a fixed interest rate of 1.00 percent;
€2,000 million total principal amount of notes due March 14, 2014,9, 2017, at a variable interest rate equal to the three-month Londonthree-month Euro Interbank Offered Rate ("LIBOR"EURIBOR") minus 0.05 percent;
plus 0.15 percent;€2,000 million total principal amount of notes due September 9, 2019, at a variable interest rate equal to the three-month EURIBOR plus 0.23 percent;
$1,000€1,500 million total principal amount of notes due March 13, 2015,9, 2023, at a fixed interest rate of 0.75 percent; and
percent;$750€1,500 million total principal amount of notes due March 14, 2018,9, 2027, at a fixed interest rate of 1.65 percent.
1.125 percent;During 2011, the Company issued $2,979€1,500 million of long-term debt. We used $979 million of this newly issued debt and paid a premium of $208 million to exchange $1,022 million of existing long-term debt that was assumed in connection with our acquisition of CCE's former North America business. The remaining cash from the issuance was used to reduce the Company's outstanding commercial paper balance and exchange a certain amount of short-term debt.
The general terms of the notes issued during 2011 are as follows:
$1,655 million total principal amount of notes due September 1, 2016,March 9, 2035, at a fixed interest rate of 1.8 percent; and
1.625 percent;$1,324750 million total principal amount of notes due September 1, 2021,October 27, 2017, at a fixed interest rate of 3.3 percent.0.875 percent;
$1,500 million total principal amount of notes due October 27, 2020, at a fixed interest rate of 1.875 percent; and
$1,750 million total principal amount of notes due October 27, 2025, at a fixed interest rate of 2.875 percent.
113
During the fourth quarter of 2011,2015, the Company extinguishedretired $3,500 million of long-term debt that had a carrying valueupon maturity. The Company also extinguished $2,039 million of $20 million and was not scheduled to mature until 2012. Thislong-term debt was outstanding prior to the Company's acquisitionmaturity, incurring associated charges of CCE's former North America business. In addition, the Company repurchased long-term debt during 2011 that was assumed in connection with our acquisition of CCE's former North America business. The repurchased debt included $99$320 million in unamortized fair value adjustments recorded as part of our purchase accounting for the CCE transaction and was settled throughout the year as follows:
During the first quarter of 2011, the Company repurchased all of our outstanding U.K. pound sterling notes that had a carrying value of $674 million;
During the second quarter of 2011, the Company repurchased long-term debt that had a carrying value of $42 million; and
During the third quarter of 2011, the Company repurchased long-term debt that had a carrying value of $19 million.
The Company recorded a net charge of $9 million in the line item interest expense in our consolidated statement of income duringincome. These charges included the year ended December 31, 2011. Thisdifference between the reacquisition price and the net charge was due tocarrying amount of the exchange, repurchase and/or extinguishmentdebt extinguished, including the impact of long-term debt described above.
During 2010, in connection with the Company's acquisition of CCE's former North America business, we assumed $7,602 million of long-term debt, which had an estimatedrelated fair value of approximately $9,345 million as of the acquisition date. We recorded the assumed debt at its fair value as of the acquisition date. Refer to Note 2.
On November 15, 2010, the Company issued $4,500 million of long-term notes and used some of the proceeds to repurchase $2,910 million of long-term debt. The remaining cash from the issuance was used to reduce our outstanding commercial paper balance. The repurchased debt consisted of $1,827 million of debt assumed in our acquisition of CCE's former North America business and $1,083 million of the Company's debt that was outstanding prior to the acquisition. The Company recorded a charge of $342 million in interest expense related to the premiums paid to repurchase the long-term debt and the costs associated with the settlement of treasury rate locks issued in connection with the debt tender offer.hedging relationship. The general terms of the notes issued on November 15, 2010,that were extinguished were as follows:
$1,2501,148 million total principal amount of notes due May 15, 2012, at a variable interest rate of three-month LIBOR plus 0.05 percent;
$1,250 million total principal amount of notes due November 15, 2017, at a fixed interest rate of 5.35 percent; and
$891 million total principal amount of notes due March 15, 2019, at a fixed interest rate of 4.875 percent.
During 2014, the Company issued $3,537 million of long-term debt. The general terms of the notes issued are as follows:
$1,000 million total principal amount of notes due September 1, 2015, at a variable interest rate equal to the three-month London Interbank Offered Rate ("LIBOR") plus 0.01 percent;
$1,015 million total principal amount of euro notes due September 22, 2022, at a fixed interest rate of 1.125 percent; and
$1,522 million total principal amount of euro notes due September 22, 2026, at a fixed interest rate of 1.875 percent.
During 2014, the Company retired $1,000 million of long-term debt upon maturity.
During 2013, the Company issued $7,500 million of long-term debt. The general terms of the notes issued are as follows:
$500 million total principal amount of notes due March 5, 2015, at a variable interest rate equal to the three-month LIBOR minus 0.02 percent;
$500 million total principal amount of notes due November 1, 2016, at a variable interest rate equal to the three-month LIBOR plus 0.10 percent;
$500 million total principal amount of notes due November 1, 2016, at a fixed interest rate of 0.75 percent;
$1,250 million total principal amount of notes due April 1, 2018, at a fixed interest rate of 1.15 percent;
$1,250 million total principal amount of notes due November 1, 2018, at a fixed interest rate of 1.65 percent;
$1,250 million total principal amount of notes due November 1, 2020, at a fixed interest rate of 2.45 percent;
$750 million total principal amount of notes due April 1, 2023, at a fixed interest rate of 2.50 percent; and
$1,500 million total principal amount of notes due November 1, 2023, at a fixed interest rate of 3.20 percent.
During 2013, the Company retired $1,250 million of debt upon maturity. The Company also extinguished $2,154 million of long-term debt prior to maturity, incurring associated extinguishment charges of $50 million. The general terms of the notes that were extinguished were:
$225 million total principal amount of notes due August 15, 2013, at a fixed interest rate of 0.75 percent;
5.0 percent;$1,000675 million total principal amount of notes due NovemberMarch 3, 2014, at a fixed interest rate of 7.375 percent;
$900 million total principal amount of notes due March 15, 2014, at a fixed interest rate of 3.625 percent; and
$354 million total principal amount of notes due March 1, 2015, at a fixed interest rate of 1.5 percent; and4.25 percent.
$1,000 million total principal amount of notes due November 15, 2020, at a fixed interest rate of 3.15 percent.
Subsequent to the repurchase of a portion of the long-term debt assumed from CCE, the general terms of the debt assumed and remaining outstanding as of December 31, 2010, were as follows:
$2,594 million total principal amount of U.S. dollar notes due 2011 to 2037 at an average interest rate of 5.7 percent;
$2,288 million total principal amount of U.S. dollar debentures due 2012 to 2098 at an average interest rate of 7.4 percent;
$275 million total principal amount of U.S. dollar notes due 2011 at a variable interest rate of 1.0 percent;
$544 million total principal amount of U.K. pound sterling notes due 2016 and 2021 at an average interest rate of 6.5 percent;
$303 million principal amount of U.S. dollar zero coupon notes due 2020; and
$26 million of other long-term debt.
The Company's long-term debt consisted of the following (in millions, except average rate data):
| | | | December 31, 2012 | | December 31, 2011 | December 31, 2015 | | December 31, 2014 |
| | Amount |
| | Average Rate 1 |
| | Amount |
| | Average Rate1 |
| Amount |
| | Average Rate 1 |
| | Amount |
| | Average Rate1 |
|
| U.S. dollar notes due 2013–2093 | $ | 13,407 |
| | 1.7 | % | | $ | 12,270 |
| | 1.9 | % | |
| U.S. dollar notes due 2016–2093 | | $ | 15,899 |
| | 2.1 | % | | $ | 17,433 |
| | 1.8 | % |
| U.S. dollar debentures due 2017–2098 | 2,207 |
| | 3.7 |
| | 2,482 |
| | 4.0 |
| 2,122 |
| | 3.9 |
| | 2,157 |
| | 3.9 |
|
U.S. dollar zero coupon notes due 20202 | 135 |
| | 8.4 |
| | 130 |
| | 8.4 |
| 148 |
| | 8.4 |
| | 143 |
| | 8.4 |
|
Other, due through 20983 | 291 |
| | 4.4 |
| | 584 |
| | 4.8 |
| |
Fair value adjustment4 | 273 |
| | N/A |
| | 231 |
| | N/A |
| |
Total5,6 | $ | 16,313 |
| | 2.1 | % | | $ | 15,697 |
| | 2.3 | % | |
Euro notes due 2017–20273 | | 11,364 |
| | 0.6 |
| | 2,468 |
| | 3.7 |
|
Swiss franc notes due 2017–20283 | | 1,291 |
| | 0.9 |
| | — |
| | — |
|
Other, due through 20984 | | 307 |
| | 4.2 |
| | 380 |
| | 4.0 |
|
Fair value adjustment5 | | (47 | ) | | N/A |
| | 34 |
| | N/A |
|
Total6,7 | | $ | 31,084 |
| | 1.7 | % | | $ | 22,615 |
| | 2.2 | % |
| Less current portion | 1,577 |
| | |
| | 2,041 |
| | |
| 2,677 |
| | |
| | 3,552 |
| | |
|
| Long-term debt | $ | 14,736 |
| | |
| | $ | 13,656 |
| | |
| $ | 28,407 |
| | |
| | $ | 19,063 |
| | |
|
| |
1 | These rates represent the weighted-average effective interest rate on the balances outstanding as of year end, as adjusted for the effects of interest rate swap agreements, as well ascross currency swap agreements and fair value adjustments, if applicable. Refer to Note 5 for a more detailed discussion on interest rate management. |
| |
2 | This amount is shown net of unamortized discounts of $36$23 million and $41$28 million as of December 31, 20122015 and 2011,2014, respectively. |
| |
3 | As of December 31, 2012, theThis amount shown includes $90 million of debt instruments that areadjustments recorded due through 2022.
to changes in foreign currency exchange rates. |
| |
4 | Refer to Note 5 for additional information about our fair value hedging strategy.
As of December 31, 2015, the amount shown includes $156 million of debt instruments that are due through 2031. |
| |
5 | Amount represents changes in fair value due to changes in benchmark interest rates. Refer to Note 5 for additional information about our fair value hedging strategy. |
| |
6 | As of December 31, 20122015 and 2011,2014, the fair value of our long-term debt, including the current portion, was $17,157$31,308 million and $16,360$23,411 million,, respectively. The fair value of our long-term debt is estimated based on quoted prices for those or similar instruments. |
| |
67
| The above notes and debentures include various restrictions, none of which is presently significant to our Company. |
The carrying value of the Company's long-term debt included fair value adjustments related to the debt assumed from CCECoca-Cola Enterprises Inc.'s ("Old CCE") former North America business in 2010 of $617411 million and $733464 million as of December 31, 20122015 and 20112014, respectively. These fair value adjustments are being amortized over the number of years remaining until the underlying debt matures. As of December 31, 20122015, the weighted-average maturity of the assumed debt to which these fair value adjustments relate was approximately 1720 years. The amortization of these fair value adjustments will be a reduction of interest expense in future periods, which will typically result in our interest expense being less than the actual interest paid to service the debt.
Total interest paid was $574515 million, $573498 million and $422498 million in 20122015, 20112014 and 20102013, respectively.
Maturities of long-term debt for the five years succeeding December 31, 20122015, are as follows (in millions):
|
| | | |
| | Maturities of Long-Term Debt |
|
| 2013 | $ | 1,577 |
|
| 2014 | 2,633 |
|
| 2015 | 2,451 |
|
| 2016 | 1,705 |
|
| 2017 | 1,439 |
|
|
| | | |
| | Maturities of Long-Term Debt |
|
| 2016 | $ | 2,677 |
|
| 2017 | 3,368 |
|
| 2018 | 3,302 |
|
| 2019 | 2,294 |
|
| 2020 | 3,927 |
|
NOTE 11: 11: COMMITMENTS AND CONTINGENCIES
Guarantees
As of December 31, 20122015, we were contingently liable for guarantees of indebtedness owed by third parties of $671572 million, of which $294263 million was related to VIEs. Refer to Note 1 for additional information related to the Company's maximum exposure to loss due to our involvement with VIEs. Our guarantees are primarily related to third-party customers, bottlers, vendors and container manufacturing operations and have arisen through the normal course of business. These guarantees have various terms, and none of these guarantees werewas individually significant. The amount represents the maximum potential future payments that we could be required to make under the guarantees; however, we do not consider it probable that we will be required to satisfy these guarantees.
We believe our exposure to concentrations of credit risk is limited due to the diverse geographic areas covered by our operations.
Legal Contingencies
The Company is involved in various legal proceedings. We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated. Management has also identified certain other legal matters where we believe an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made. Management believes that the total liabilities to the Company that may arise as a result of currently pending legal proceedings will not have a material adverse effect on the Company taken as a whole.
During the period from 1970 to 1981, our Company owned Aqua-Chem, Inc., now known as Cleaver-Brooks, Inc. ("Aqua-Chem"). During that time, the Company purchased over $400 million of insurance coverage, which also insures Aqua-Chem for some of its prior and future costs for certain product liability and other claims. A division of Aqua-Chem manufactured certain boilers that contained gaskets that Aqua-Chem purchased from outside suppliers. Several years after our Company sold this entity, Aqua-Chem received its first lawsuit relating to asbestos, a component of some of the gaskets. Aqua-Chem was first named as a defendant in asbestos lawsuits in or around 1985 and currently has approximately 40,000 active claims pending against it. In September 2002, Aqua-Chem notified our Company that it believed we were obligated for certain costs and expenses associated with its asbestos litigations. Aqua-Chem demanded that our Company reimburse it for approximately $10 million for out-of-pocket litigation-related expenses. Aqua-Chem also demanded that the Company acknowledge a continuing obligation to Aqua-Chem for any future liabilities and expenses that are excluded from coverage under the applicable insurance or for which there is no insurance. Our Company disputes Aqua-Chem's claims, and we believe we have no obligation to Aqua-Chem for any of its past, present or future liabilities, costs or expenses. Furthermore, we believe we have substantial legal and factual defenses to Aqua-Chem's claims. The parties entered into litigation in Georgia to resolve this dispute, which was stayed by agreement of the parties pending the outcome of litigation filed in Wisconsin by certain insurers of Aqua-Chem. In that case, five plaintiff insurance companies filed a declaratory judgment action against Aqua-Chem, the Company and 16 defendant insurance companies seeking a determination of the parties' rights and liabilities under policies issued by the insurers and reimbursement for amounts paid by plaintiffs in excess of their obligations. During the course of the Wisconsin insurance coverage litigation, Aqua-Chem and the Company reached settlements with several of the insurers, including plaintiffs, who have or will pay funds into an escrow account for payment of costs arising from the asbestos claims against Aqua-Chem. On July 24, 2007, the Wisconsin trial court entered a final declaratory judgment regarding the rights and obligations of the parties under the insurance policies issued by the remaining defendant insurers, which judgment was not appealed. The judgment directs, among other things, that each insurer whose policy is triggered is jointly and severally liable for 100 percent of Aqua-Chem's losses up to policy limits. The court's judgment concluded the Wisconsin insurance coverage litigation. The Georgia litigation remains subject to the stay agreement. The Company and Aqua-Chem continued to negotiate with various insurers that were defendants in the Wisconsin insurance coverage litigation over those insurers' obligations to defend and indemnify Aqua-Chem for the asbestos-related claims. The Company anticipated that a final settlement with three of those insurers (the “Chartis insurers”) would be finalized in May 2011, but such insurers repudiated their settlement commitments and, as a result, Aqua-Chem and the Company filed suit against them in Wisconsin state court to enforce the coverage-in-place settlement or, in the alternative, to obtain a declaratory judgment validating Aqua-Chem and the Company's interpretation of the court's judgment in the Wisconsin insurance coverage litigation. In February 2012, the parties filed and argued a number of cross-motions for summary judgment related to the issues of the enforceability of the settlement agreement and the exhaustion of policies underlying those of the Chartis insurers. The court granted defendants' motions for summary judgment that the 2011 Settlement Agreement and 2010 Term Sheet were not binding contracts, but denied their similar motions related to plaintiffs' claims for promissory and/or equitable estoppel. On or about May 15, 2012, the parties entered into a mutually agreeable settlement/stipulation resolving two major issues: exhaustion of underlying coverage and control of defense; and, on or about January 10, 2013, the parties reached a settlement of the remaining coverage issues and the estoppel claims. The Chartis insurers have filed a notice of appeal with respect to certain issues that were the subject of summary judgment orders earlier in the case. Whatever the outcome of that appeal, these three insurance companies will remain subject to the court's judgment in the Wisconsin insurance coverage litigation.
The Company is unable to estimate at this time the amount or range of reasonably possible loss it may ultimately incur as a result of asbestos-related claims against Aqua-Chem. The Company believes that assuming (a) the defense and indemnity costs for the asbestos-related claims against Aqua-Chem in the future are in the same range as during the past five years, and (b) the various insurers that cover the asbestos-related claims against Aqua-Chem remain solvent, regardless of the outcome of the coverage-in-place settlement litigation but taking into account the issues resolved to date, insurance coverage for substantially all defense and indemnity costs would be available for the next 10 to 15 years.
Indemnifications
At the time we acquire or divest our interest in an entity, we sometimes agree to indemnify the seller or buyer for specific contingent liabilities. Management believes that any liability to the Company that may arise as a result of any such indemnification agreements will not have a material adverse effect on the Company taken as a whole.
Tax Audits
The Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These audits may result in the assessment of additional taxes that are subsequently resolved with authorities or potentially through the courts. Refer to Note 14.
On September 17, 2015, the Company received a Statutory Notice of Deficiency ("Notice") from the Internal Revenue Service ("IRS") for the tax years 2007 through 2009, after a five-year audit. In the Notice, the IRS claims that the Company's United States taxable income should be increased by an amount that creates a potential additional federal income tax liability of approximately $3.3 billion for the period, plus interest. No penalties were asserted in the Notice; however, the IRS has since taken the position that it is not precluded from asserting penalties and notified the Company that it may do so. The disputed amounts largely relate to a transfer pricing matter involving the appropriate amount of taxable income the Company should report in the United States in connection with its licensing of intangible property to certain related foreign licensees regarding the manufacturing, distribution, sale, marketing and promotion of products in overseas markets.
The Company has followed the same transfer pricing methodology for these licenses since the methodology was agreed with the IRS in a 1996 closing agreement that applied back to 1987. The closing agreement provides prospective penalty protection as long as the Company follows the prescribed methodology and material facts and circumstances and relevant Federal tax law have not changed. On February 11, 2016, the IRS notified the Company, without further explanation, that the IRS has determined that material facts and circumstances and relevant Federal tax law have changed and that it may assert penalties. The Company does not agree with this determination. The Company's compliance with the closing agreement was audited and confirmed by the IRS in five successive audit cycles covering the subsequent 11 years through 2006, with the last audit concluding as recently as 2009.
The Notice represents a repudiation of the methodology previously adopted in the 1996 closing agreement. The IRS designated the matter for litigation on October 15, 2015. Therefore, the Company will be prevented from pursuing any administrative settlement at IRS Appeals or under the IRS Advance Pricing and Mutual Agreement Program.
The Company firmly believes that the IRS' claims are without merit and plans to pursue all available administrative and judicial remedies necessary to resolve this matter. To that end, the Company filed a petition in the U.S. Tax Court on December 14, 2015. The Company intends to vigorously defend its position and is confident in its ability to prevail on the merits. The Company regularly assesses the likelihood of adverse outcomes resulting from examinations such as this to determine the adequacy of its tax reserves. The Company believes that the final adjudication of this matter will not have a material impact on its consolidated financial position, results of operations or cash flows and that it has adequate tax reserves for all tax matters. However, the ultimate outcome of disputes of this nature is uncertain, and if the IRS were to prevail on its assertions, the additional tax, interest, and any potential penalties could have a material adverse impact on the Company's financial position, results of operations or cash flows.
Risk Management Programs
The Company has numerous global insurance programs in place to help protect the Company from the risk of loss. In general, we are self-insured for large portions of many different types of claims; however, we do use commercial insurance above our self-insured retentions to reduce the Company's risk of catastrophic loss. Our reserves for the Company's self-insured losses are estimated through actuarial procedures of the insurance industry and by using industry assumptions, adjusted for our specific expectations based on our claim history. The Company's self-insurance reserves totaled $508560 million and $527530 million as of December 31, 20122015 and 20112014, respectively.
Workforce (Unaudited)
We refer to our employees as "associates." As of December 31, 20122015, our Company had approximately 150,900123,200 associates, of which approximately 68,30060,900 associates were located in the United States. Our Company, through its divisions and subsidiaries, is a party to numerous collective bargaining agreements. As of December 31, 20122015, approximately 17,90017,500 associates, excluding seasonal hires, in North America were covered by collective bargaining agreements. These agreements typically have terms of three years to five years years.. We currently expect that we will be able to renegotiate such agreements on satisfactory terms when they expire. The Company believes that its relations with its associates are generally satisfactory.
Operating Leases
The following table summarizes our minimum lease payments under noncancelable operating leases with initial or remaining lease terms in excess of one year as of December 31, 20122015 (in millions):
| | | Years Ending December 31, | Operating Lease Payments |
| |
| 2013 | $ | 233 |
| |
| 2014 | 162 |
| |
| 2015 | 128 |
| |
| Year Ended December 31, | | Operating Lease Payments |
|
| 2016 | 101 |
| $ | 171 |
|
| 2017 | 72 |
| 109 |
|
| 2018 | | 89 |
|
| 2019 | | 68 |
|
| 2020 | | 59 |
|
| Thereafter | 235 |
| 220 |
|
Total minimum operating lease payments1 | $ | 931 |
| $ | 716 |
|
| |
1 | Income associated with sublease arrangements is not significant. |
NOTE 12: STOCKSTOCK-BASED COMPENSATION PLANS
Our Company grants stock options and restricted stock awards under its stock-based compensation plans to certain employees of the Company. Total stock-based compensation expense was $259$236 million,, $354 $209 million and $380$227 million in 2012, 20112015, 2014 and 2010,2013, respectively, and was included as a component of selling, general and administrative expenses in our consolidated statements of income. The total income tax benefit recognized in our consolidated statements of income related to stock-based compensation arrangementsawards under these plans was $72$65 million,, $99 $57 million and $110$62 million in 2012, 20112015, 2014 and 2010,2013, respectively. Beginning in 2015, certain employees who had previously been eligible for long-term equity awards received long-term performance cash awards. Employees who receive these performance cash awards do not receive equity awards as part of the long-term incentive program.
As of December 31, 2012,2015, we had $467$319 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangementsawards granted under our plans. This cost is expected to be recognized over a weighted-average period of 1.8 years as stock-based compensation expense. This expected cost does not include the impact of any future stock-based compensation awards.
On July 27, 2012, the Company's certificate of incorporation was amended to increase the number of authorized shares of common stock from 5.6 billion to 11.2 billion and effect a two-for-one stock split of the common stock. The record date for the stock split was July 27, 2012, and the additional shares were distributed on August 10, 2012. Each shareowner of record on the close of business on the record date received one additional share of common stock for each share held. All share and per share data presented herein reflect the impact of the increase in authorized shares and the stock split, as appropriate.
AsThe Coca-Cola Company 2014 Equity Plan ("2014 Equity Plan") was approved by shareowners in April 2014. Under the 2014 Equity Plan, a resultmaximum of 500 million shares of our acquisitioncommon stock was approved to be issued, through the grant of CCE's former North America business,equity awards, to certain employees. The 2014 Equity Plan allows for grants of stock options, performance share units, restricted stock units, restricted stock and other specified award types including cash awards with performance-based vesting criteria. Beginning in 2015, the Company assumed certain stock-based compensation plans previously sponsored by CCE. Shares2014 Equity Plan was the primary plan in use for equity awards and performance cash awards. There were no grants made from these plans remain available for future grant to current employees who were employees of CCE or its subsidiariesthe 2014 Equity Plan prior to the acquisition or who are hired by the Company or its subsidiaries following the acquisition. The assumed Coca-Cola Enterprises Inc. 2001 Stock Option Plan, Coca-Cola Enterprises Inc. 2004 Stock Award Plan and Coca-Cola Enterprises Inc. 2007 Incentive Award Plan previously sponsored by CCE have approximately 292015. As of December 31, 2015, there were 471.6 million shares available for grant after conversion of CCE commonto be granted under the 2014 Equity Plan. In addition to the 2014 Equity Plan, there were 2.7 million shares available to be granted under stock into our common stock. The Company has notoption plans approved by shareowners in 1999 and 2008 and 0.2 million shares available to be granted any equity awards from the assumed plans.under a restricted stock award plan approved by shareowners in 1989.
Stock Option PlansAwards
The fair valueStock options have generally been granted with an exercise price equal to the Company's stock price on the date of our stock option grants is amortized over the vesting period, generally four years.grant. The fair value of each option award is estimated on the grant date using a Black-Scholes-Merton option-pricing model.model and is amortized over the vesting period, generally four years. The weighted-average fair value of options granted during the past three years and the weighted-average assumptions used in the Black-Scholes-Merton option-pricing model for such grants were as follows:
| | | | 2012 |
| | 2011 |
| | 2010 |
| | | | | | | |
| | | | As Adjusted | 2015 |
| | 2014 |
| | 2013 |
|
| Fair value of options at grant date | $ | 3.80 |
| | $ | 4.64 |
| | $ | 4.70 |
| $ | 4.38 |
| | $ | 3.91 |
| | $ | 3.73 |
|
Dividend yield1 | 2.7 | % | | 2.7 | % | | 2.9 | % | 3.1 | % | | 2.7 | % | | 2.8 | % |
Expected volatility2 | 18.0 | % | | 19.0 | % | | 20.0 | % | 16.0 | % | | 16.0 | % | | 17.0 | % |
Risk-free interest rate3 | 1.0 | % | | 2.3 | % | | 3.0 | % | 1.8 | % | | 1.6 | % | | 0.9 | % |
Expected term of the option4 | 5 years |
| | 5 years |
| | 6 years |
| 6 years |
| | 5 years |
| | 5 years |
|
| |
1 | The dividend yield is the calculated yield on the Company's stock at the time of the grant. |
| |
2 | Expected volatility is based on implied volatilities from traded options on the Company's stock, historical volatility of the Company's stock and other factors. |
| |
3 | The risk-free interest rate for the period matching the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. |
| |
4 | The expected term of the option represents the period of time that options granted are expected to be outstanding and is derived by analyzing historichistorical exercise behavior. |
Generally, stock options granted from 1999 through July 2003 expire 15 years years from the date of grant and stock options granted in December 2003 and thereafter expire 10 years years from the date of grant. The shares of common stock to be issued transferred and/or sold under theupon exercise of stock option plansoptions are made available from either authorized and unissued Company common stock or from the Company's treasury shares. In 2007, the Company began issuing common stock under these plans from the Company's treasury shares. The Company had the following active stock option plans as of December 31, 2012:
The Coca-Cola Company 1999 Stock Option Plan (the "1999 Option Plan") was approved by shareowners in April 1999. Under the 1999 Option Plan, a maximum of 240 million shares of our common stock was approved to be issued or transferred, through the grant of stock options, to certain officers and employees.
The Coca-Cola Company 2002 Stock Option Plan (the "2002 Option Plan") was approved by shareowners in April 2002. An amendment to the 2002 Option Plan which permitted the issuance of stock appreciation rights was approved by shareowners in April 2003. Under the 2002 Option Plan, a maximum of 240 million shares of our common stock was approved to be issued or transferred, through the grant of stock options or stock appreciation rights, to certain officers and employees. No stock appreciation rights have been issued under the 2002 Option Plan as of December 31, 2012.
The Coca-Cola Company 2008 Stock Option Plan (the "2008 Option Plan") was approved by shareowners in April 2008. Under the 2008 Option Plan, a maximum of 280 million shares of our common stock was approved to be issued or transferred to certain officers and employees pursuant to stock options granted under the 2008 Option Plan.
As of December 31, 2012, there were 132 million shares available to be granted under the stock option plans discussed above. Options to purchase common stock under all of these plans have generally been granted at the fair market value of the Company's stock at the date of grant.
Stock option activity for all stock option plans for the year ended December 31, 2012,2015, was as follows:
|
| | | | | | | | | | | | |
| | Shares (In millions) |
| | Weighted-Average Exercise Price |
| | Weighted-Average Remaining Contractual Life | | Aggregate Intrinsic Value (In millions) |
|
| Outstanding on January 1, 2012 — As Adjusted | 323 |
| | $ | 25.62 |
| | | | |
|
| Granted | 53 |
| | 34.40 |
| | | | |
|
| Exercised | (61 | ) | | 24.43 |
| | | | |
|
| Forfeited/expired | (6 | ) | | 30.01 |
| | | | |
|
Outstanding on December 31, 20121 | 309 |
| | $ | 27.27 |
| | 5.82 years | | $ | 2,777 |
|
| Expected to vest at December 31, 2012 | 305 |
| | $ | 27.20 |
| | 5.79 years | | $ | 2,765 |
|
| Exercisable on December 31, 2012 | 194 |
| | $ | 24.92 |
| | 4.41 years | | $ | 2,200 |
|
|
| | | | | | | | | | | | |
| | Shares (In millions) |
| | Weighted-Average Exercise Price |
| | Weighted-Average Remaining Contractual Life | | Aggregate Intrinsic Value (In millions) |
|
| Outstanding on January 1, 2015 | 305 |
| | $ | 31.60 |
| | | | |
|
| Granted | 13 |
| | 41.89 |
| | | | |
|
| Exercised | (44 | ) | | 28.31 |
| | | | |
|
| Forfeited/expired | (8 | ) | | 36.53 |
| | | | |
|
Outstanding on December 31, 20151 | 266 |
| | $ | 32.51 |
| | 5.55 years | | $ | 2,786 |
|
| Expected to vest | 264 |
| | $ | 32.45 |
| | 5.53 years | | $ | 2,775 |
|
| Exercisable on December 31, 2015 | 178 |
| | $ | 29.92 |
| | 4.43 years | | $ | 2,317 |
|
| |
1 | Includes 41.0 million stock option replacement awards in connection with our acquisition of Old CCE's former North America business in 2010. These options had a weighted-average exercise price of $18.3216.26, and generally vest over 3 years and expire 10 years from the original date of grant. |
The total intrinsic value of the options exercised was $780$594 million,, $631 $894 million and $524$815 million in 2012, 20112015, 2014 and 2010,2013, respectively. The total shares exercised were 6144 million,, 65 58 million and 7353 million in 2012, 20112015, 2014 and 2010,2013, respectively.
Restricted Stock Award Plans
Under The Coca-Cola Company 1989 Restricted Stock Award Plan and The Coca-Cola Company 1983 Restricted Stock Award Plan (the "Restricted Stock Award Plans"), 80 million and 48 million shares of restricted common stock, respectively, were originally available to be granted to certain officers and key employees of our Company. As of December 31, 2012, 32 million shares remain available for grant under the Restricted Stock Award Plans. The Company issues restricted stock to employees as a result of performance share unit awards, time-based awards and performance-based awards.
For awards prior to January 1, 2008, under the 1983 Restricted Stock Award Plan, participants are reimbursed by our Company for income taxes imposed on the award, but not for taxes generated by the reimbursement payment. The 1983 Restricted Stock Award Plan has been amended to eliminate this tax reimbursement for awards after January 1, 2008. The shares are subject to certain transfer restrictions and may be forfeited if a participant leaves our Company for reasons other than retirement, disability or death, absent a change in control of our Company.
Performance Share Unit Awards
In 2003, the Company established a program to grant performancePerformance share units under The Coca-Cola Company 1989 Restricted Stock Award Plan to executives. In 2008, the Company expanded the program to award a mixrequire achievement of stock options and performance share units to eligible employees in addition to executives. The number of shares earned is determined at the end of each performance period, generally three years, based on the actualcertain performance criteria, predeterminedwhich are predefined by the Compensation Committee of the Board of Directors at the time of grant. The primary performance criterion used is compound annual growth in economic profit over a predefined performance period, which is generally three years. Economic profit is our net operating profit after tax less the cost of the capital used in our business. Beginning in 2015, the Company added net operating revenues as an additional performance criterion. Economic profit and net operating revenues are adjusted for certain items, which are approved and certified by the Audit Committee of the Board of Directors. The purpose of these adjustments is to ensure a consistent year-to-year comparison of the specific performance criteria. In the event the certified results equal the predefined performance criteria, the Company will grant the number of shares equal to the target award. In the event the certified results exceed the predefined performance criteria, additional shares up to the maximum award will be granted. In the event the certified results fall below the predefined performance criteria, a reduced number of shares will be granted. If the certified results fall below the threshold award performance criteria are met, the award results in a grant of restricted stock or restricted stocklevel, no shares will be granted. The performance share units whichgranted under this program are then generally subject to a holding period in order forof one year before the restricted stock to beshares are released. For performance share units granted before 2008, this holding period is generally two years. For performance share units granted in 2008 and after, this holding period is generally one year. Restrictions on such stock generally lapse at the end of the holding period.
Performance share units generally do not pay dividends or allow voting rights duringrights. For most performance share units granted beginning in 2014, the Company includes a relative TSR modifier to determine the number of shares earned at the end of the performance period. For these awards, granted prior to 2011, participants generally receive dividendsthe number of shares earned based on the certified achievement of the predefined performance criteria will be reduced or dividend equivalents onceincreased if total shareowner return over the performance criteria have been certified andperiod relative to a predefined compensation comparator group of companies falls outside of a defined range. The fair value of performance share units that include the restricted stock or restricted stock units have been issued.TSR modifier is determined using a Monte Carlo valuation model. For the remaining awards granted in 2011 and later, participants generally receive dividends or dividend equivalents oncethat do not include the shares have been released. Accordingly,TSR modifier, the fair value of the performance share units is the quoted market value of the Company stock on the grant date less the present value of the expected dividends not received during the relevant period.
In the period it becomes probable that the minimum performance criteria specified in the plan will be achieved, we recognize expense for the proportionate share of the total fair value of the performance share units related to the vesting period that has already lapsed.lapsed for the shares expected to vest and be released. The remaining costfair value of the grantshares expected to vest and be released is expensed on a straight-line basis over the balance of the vesting period. In the event the Company determines it is no longer probable that we will achieve the minimum performance criteria specified in the plan, we reverse all of the previously recognized compensation expense in the period such a determination is made.
Performance share units under The Coca-Cola Company 1989 Restricted Stock Award Plan require achievement of certain financial measures, primarily compound annual growth in earnings per share or economic profit. These financial measures are adjusted for certain items approved and certified by the Audit Committee of the Board of Directors. The purpose of these adjustments is to ensure a consistent year to year comparison of the specific performance criteria. Economic profit is our net operating profit after tax less the cost of the capital used in our business. In the event the financial results equal the predefined target, the Company will grant the number of restricted shares equal to the target award in the underlying performance share unit agreements. In the event the financial results exceed the predefined target, additional shares up to the maximum award may be granted. In the event the financial results fall below the predefined target, a reduced number of shares may be granted. If the financial results fall below the threshold award performance level, no shares will be granted. Performance share units are generally settled in stock, except for certain circumstances such as death or disability, wherein which case former employees or their beneficiaries are provided a cash equivalent payment. As of December 31, 2012,2015, performance share units of 5,105,000, 5,655,0005,115,000, 5,306,000 and 6,824,0001,775,000 were outstanding for the 2010–2012, 2011–20132013–2015, 2014–2016 and 2012–20142015–2017 performance periods, respectively, based on the target award amounts in the performance share unit agreements.
The following table summarizes information about performance share units based on the target award amounts in the performance share unit agreements:
|
| | | | | | |
| | Share Units (In thousands) |
| | Weighted-Average Grant-Date Fair Value |
|
| Outstanding on January 1, 2012 — As Adjusted | 11,366 |
| | $ | 25.41 |
|
| Granted | 7,034 |
| | 29.95 |
|
| Paid in cash equivalent | (16 | ) | | 27.30 |
|
| Canceled/forfeited | (800 | ) | | 27.71 |
|
Outstanding on December 31, 20121 | 17,584 |
| | $ | 28.01 |
|
|
| | | | | | |
| | Performance Share Units (In thousands) |
| | Weighted-Average Grant Date Fair Value |
|
| Outstanding on January 1, 2015 | 17,426 |
| | $ | 31.59 |
|
Granted1 | 1,857 |
| | 37.99 |
|
| Canceled/forfeited | (7,087 | ) | | 30.32 |
|
Outstanding on December 31, 20152 | 12,196 |
| | $ | 33.30 |
|
| |
1 | Includes 70 percent of the total 2015 award. The remaining 30 percent of the 2015 award contained metrics that cannot be fully defined until 2017; therefore, these awards are not considered granted until all of the metrics are established. |
| |
2 | The outstanding performance share units as of December 31, 2012,2015, at the threshold award and maximum award levels were 8.85.0 million and 26.420.9 million,, respectively. |
The weighted-average grant date fair value of performance share units granted was $29.95$37.99 in 2012, $25.582015, $32.33 in 20112014 and $25.17$32.67 in 2010.2013. The Company did not convert any performance share units into cash equivalent payments in 2015. The Company converted performance share units of 16,2675,403 in 2012, 19,4622014 and 54,999 in 2011 and 27,650 in 20102013 to cash equivalent payments of $0.6$0.2 million, $0.7 and $1.8 million, and $0.7 million, respectively, to former executives who were ineligible for restricted stock grantsemployees or their beneficiaries due to certain events such as death disability or termination.disability.
The following table summarizes information about the conversions of performance share units that were previously converted to restricted stock andor restricted stock units:
|
| | | | | | |
| | Share Units (In thousands) |
| | Weighted-Average Grant-Date Fair Value1 |
|
Nonvested on January 1, 2012 — As Adjusted2 | 4,444 |
| | $ | 26.53 |
|
| Vested and released | (4,302 | ) | | 26.53 |
|
| Canceled/forfeited | (44 | ) | | 26.54 |
|
Nonvested on December 31, 20122 | 98 |
| | $ | 26.54 |
|
|
| | | | | | |
| | Restricted Stock and Restricted Stock Units (In thousands) |
| | Weighted-Average Grant Date Fair Value1 |
|
Nonvested on January 1, 20152 | 130 |
| | $ | 25.17 |
|
| Vested and released | (130 | ) | | 25.17 |
|
| Nonvested on December 31, 2015 | — |
| | $ | — |
|
| |
1 | The weighted-average grant-dategrant date fair value is based on the fair values of the performance share units granted. |
| |
2 | The nonvested sharesrestricted stock and stock units as of January 1, 2012, and December 31, 2012,2015 are presented at the performance share unitsunits' certified award amount. level. |
The total intrinsic value of restricted shares that were vested and released was $1485 million, $72255 million and $5816 million in 20122015, 20112014 and 20102013, respectively. The total restricted share units vested and released in 20122015 were 4,301,732130,017 at the certified award amount.level. In 20112014 and 20102013, the total restricted share units vested and released were 2,084,9126,773,934 and 1,850,466405,963, respectively.
Replacement performance share unit awards issued by the Company in connection with our acquisition of CCE's former North America business are not included in the tables or discussions above and were originally granted under the Coca-Cola Enterprises Inc. 2007 Incentive Award Plan. Refer to Note 2. These awards were converted into equivalent share units of the Company's common stock on the acquisition date and entitle the participant to dividend equivalents (which vest, in some cases, only if the restricted share units vest), but not the right to vote. Accordingly, the fair value of these units was the quoted value
of the Company's stock at the grant date. The number of shares earned is determined at the end of each performance period, generally one to three years, based on the actual performance criteria predetermined at the time of grant. These performance share units require achievement of certain financial measures, primarily compound annual growth in earnings per share, as adjusted for certain items detailed in the plan documents. In the event the financial results exceed the predefined targets, additional shares up to a maximum of 200 percent of target may be granted. In the event the financial results fall below the predefined targets, a reduced number of shares may be granted. If the financial results fall below the minimum award performance level, no shares will be granted.
On the acquisition date, the Company issued 3.3 million replacement performance share unit awards at target with a weighted average grant-date price of $29.56 per share unit for the 2008–2010, 2009 and 2010 performance periods. The 2008–2010 and the 2010 performance period awards were projected to pay out at 200 percent on the acquisition date and were certified as such in February 2011. The 2009 award was already certified at 200 percent prior to the acquisition date. In accordance with accounting principles generally accepted in the United States, the portion of the fair value of the replacement awards related to services provided prior to the business combination was included in the total purchase price. Refer to Note 2. The portion of the fair value associated with future service is recognized as expense over the future service period. However, in the fourth quarter of 2010, the Company modified primarily all of these performance awards to eliminate the remaining holding period after December 31, 2010, which resulted in $74 million of accelerated expense included in the total stock-based compensation expense above. As a result of this modification, the Company released 2.8 million shares at the 200 percent payout for the 2009 performance period award during the fourth quarter of 2010. The intrinsic value of the release of these shares was $91 million. During 2011, the Company released 3.1 million shares at the 200 percent payout with an intrinsic value of $98 million, primarily related to the 2008–2010 and 2010 performance periods. During 2012, the Company released 0.6 million shares at the 200 percent payout with an intrinsic value of $22 million, primarily related to the 2009 performance period. As of December 31, 2012, the Company had 0.1 million outstanding replacement performance share units related to the 2009 performance period. The remaining shares are scheduled for release during the second quarter of 2013.
Time-Based and Performance-Based Restricted Stock and Restricted Stock Unit Awards
The Coca-Cola Company 1989 Restricted Stock Award Plan allows forPrior to the grant ofrelease date, time-based and performance-based restricted stock and restricted stock units. The performance-based restricted awards are released only uponunits granted from the achievement of specific measurable performance criteria. These awards2014 Equity Plan do not pay dividends duringor have voting rights and will be forfeited in the performance period. The majorityevent of the recipient's termination of employment, except for reasons such as death or disability. Certain other time-based restricted stock awards have specific performance targetsentitled participants to vote and receive dividends, while for achievement. If the performance targetstime-based restricted stock units, participants may receive payment of dividend equivalents but are not met, the awards will be canceled. In the period it becomes probable that the performance criteria will be achieved, we recognize expense for the proportionate share of the totalallowed to vote. The fair value of the grant relatedrestricted stock and restricted stock units expected to the vesting period that has already lapsed. The remaining cost of the grantvest and be released is expensed on a straight-line basis over the balance of the vesting period.
For time-based and performance-based restricted stock awards, participants are entitled to vote and receive dividends on the restricted shares. The Company also awards time-based and performance-based restricted stock units for which participants may receive payments of dividend equivalents but are not entitled to vote. As of December 31, 2012,2015, the Company had outstanding nonvested time-based and performance-based restricted stock, awards, including restricted stock units, of 774,000 and 92,000, respectively. Time-based and performance-based restricted awards were941,205, most of which do not significant to our consolidated financial statements.
In 2010, the Company issued time-based restricted stock unit replacement awards in connection with our acquisition of CCE's former North America business. Refer to Note 2. These awards were converted into equivalent shares of the Company's common stock. These restricted share awards entitle the participant to dividend equivalents (which vest, in some cases, only if the restricted share unit vests), but not the right to vote. As of December 31, 2012, the Company had 65,000 outstanding nonvested time-based restricted stock replacement awards, including restricted stock units. These time-based restricted awards were not significant to our consolidated financial statements.pay dividends or have voting rights.
NOTE 13: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
Our Company sponsors and/or contributes to pension and postretirement health care and life insurance benefit plans covering substantially all U.S. employees. We also sponsor nonqualified, unfunded defined benefit pension plans for certain associates. In addition, our Company and its subsidiaries have various pension plans and other forms of postretirement arrangements outside the United States.
Effective January 1, 2012, the Company elected to change our accounting methodology for determining the market-related value of assets for our U.S. qualified defined benefit pension plans. This change in accounting methodology has been applied retrospectively, and we have adjusted all applicable prior period financial information presented herein as required. Refer to Note 1 for further information related to this change and the impact it had on our consolidated financial statements.
As part of the Company's acquisition of CCE's former North America business during the fourth quarter of 2010, we assumed certain liabilities related to pension and other postretirement benefit plans. Refer to Note 2 for additional information related to this acquisition. These liabilities relate to various pension, retiree medical and defined contribution plans (referred to herein as the "assumed plans"). The assumed plans include participation in multi-employer pension plans in the United States. See discussion of multi-employer plans below.
We refer to the funded defined benefit pension plan in the United States that is not associated with collective bargaining organizations as the "primary U.S. plan." As of December 31, 2012,2015, the primary U.S. plan represented 59 percent and 6462 percent of the Company's consolidated projected benefit obligation and pension assets, respectively.
Obligations and Funded Status
The following table sets forth the changes in benefit obligations and the fair value of plan assets for our benefit plans (in millions):
| | | | Pension Benefits | | Other Benefits | Pension Benefits | | Other Benefits |
| | 2012 |
| | 2011 |
| | 2012 |
| | 2011 |
| |
| Year Ended December 31, | | 2015 |
| | 2014 |
| | 2015 |
| | 2014 |
|
Benefit obligation at beginning of year1 | $ | 8,255 |
| | $ | 7,292 |
| | $ | 953 |
| | $ | 889 |
| $ | 10,346 |
| | $ | 8,845 |
| | $ | 1,006 |
| | $ | 946 |
|
| Service cost | 291 |
| | 249 |
| | 34 |
| | 32 |
| 265 |
| | 261 |
| | 27 |
| | 26 |
|
| Interest cost | 388 |
| | 391 |
| | 43 |
| | 45 |
| 379 |
| | 406 |
| | 37 |
| | 43 |
|
| Foreign currency exchange rate changes | (7 | ) | | 30 |
| | 3 |
| | 2 |
| (309 | ) | | (183 | ) | | (14 | ) | | (4 | ) |
| Amendments | (3 | ) | | (57 | ) | | (2 | ) | | (12 | ) | 6 |
| | — |
| | (10 | ) | | (31 | ) |
| Actuarial loss (gain) | 1,259 |
| | 773 |
| | 115 |
| | 45 |
| (479 | ) | | 1,519 |
| | (54 | ) | | 88 |
|
Benefits paid2 | (420 | ) | | (440 | ) | | (53 | ) | | (63 | ) | (353 | ) | | (522 | ) | | (59 | ) | | (62 | ) |
| Settlements | (35 | ) | | (24 | ) | | — |
| | — |
| |
| Curtailments | 6 |
| | — |
| | — |
| | — |
| |
| Business combinations | | 1 |
| | 4 |
| | — |
| | — |
|
Divestitures3 | | (218 | ) | | — |
| | — |
| | — |
|
Settlements4 | | (499 | ) | | (7 | ) | | — |
| | (1 | ) |
| Special termination benefits | 1 |
| | 8 |
| | — |
| | 3 |
| 21 |
| | 5 |
| | 2 |
| | — |
|
Other3 | (42 | ) | | 33 |
| | 11 |
| | 12 |
| |
| Other | | (1 | ) | | 18 |
| | 5 |
| | 1 |
|
Benefit obligation at end of year1 | $ | 9,693 |
| | $ | 8,255 |
| | $ | 1,104 |
| | $ | 953 |
| $ | 9,159 |
| | $ | 10,346 |
| | $ | 940 |
| | $ | 1,006 |
|
| Fair value of plan assets at beginning of year | $ | 6,171 |
| | $ | 5,497 |
| | $ | 185 |
| | $ | 187 |
| $ | 8,902 |
| | $ | 8,746 |
| | $ | 246 |
| | $ | 243 |
|
| Actual return on plan assets | 822 |
| | 73 |
| | 16 |
| | (4 | ) | (44 | ) | | 574 |
| | (3 | ) | | 2 |
|
| Employer contributions | 1,056 |
| | 1,001 |
| | — |
| | — |
| 121 |
| | 214 |
| | — |
| | — |
|
| Foreign currency exchange rate changes | (17 | ) | | (1 | ) | | — |
| | — |
| (322 | ) | | (203 | ) | | — |
| | — |
|
| Benefits paid | (366 | ) | | (374 | ) | | (2 | ) | | (1 | ) | (270 | ) | | (435 | ) | | (3 | ) | | (3 | ) |
| Settlements | (34 | ) | | (27 | ) | | — |
| | — |
| |
Other3 | (48 | ) | | 2 |
| | 3 |
| | 3 |
| |
Divestitures3 | | (206 | ) | | — |
| | — |
| | — |
|
Settlements4 | | (486 | ) | | (1 | ) | | — |
| | — |
|
| Other | | (6 | ) | | 7 |
| | 5 |
| | 4 |
|
| Fair value of plan assets at end of year | $ | 7,584 |
| | $ | 6,171 |
| | $ | 202 |
| | $ | 185 |
| $ | 7,689 |
| | $ | 8,902 |
| | $ | 245 |
| | $ | 246 |
|
| Net liability recognized | $ | (2,109 | ) | | $ | (2,084 | ) | | $ | (902 | ) | | $ | (768 | ) | $ | (1,470 | ) | | $ | (1,444 | ) | | $ | (695 | ) | | $ | (760 | ) |
| |
1 | For pension benefit plans, the benefit obligation is the projected benefit obligation. For other benefit plans, the benefit obligation is the accumulated postretirement benefit obligation. The accumulated benefit obligation for our pension plans was $9,345$8,868 million and $7,958$10,028 million as of December 31, 20122015 and 2011,2014, respectively. |
| |
2 | Benefits paid to pension plan participants during 20122015 and 20112014 included $54$83 million and $66$87 million,, respectively, in payments related to unfunded pension plans that were paid from Company assets. Benefits paid to participants of other benefit plans during 20122015 and 20112014 included $51$56 million and $62$59 million,, respectively, that were paid from Company assets. |
| |
3 | In 2012,Divestitures are primarily relatesrelated to the transfer of assets and liabilities associated with the Company's consolidated PhilippineGerman bottling operations to assets held for sale and liabilities held for sale as of December 31, 2012.2015. Refer to Note 2 for additional information.
|
| |
4 | Settlements are primarily related to the Company's productivity, restructuring and integration initiatives. Refer to Note 18. |
Pension and other benefit amounts recognized in our consolidated balance sheets are as follows (in millions):
| | | | Pension Benefits | | Other Benefits | Pension Benefits | | Other Benefits |
| December 31, | 2012 |
| | 2011 |
| | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
| | 2015 |
| | 2014 |
|
| Noncurrent asset | $ | 395 |
| | $ | 468 |
| | $ | — |
| | $ | — |
| $ | 454 |
| | $ | 479 |
| | $ | — |
| | $ | — |
|
| Current liability | (73 | ) | | (68 | ) | | (21 | ) | | (21 | ) | (72 | ) | | (78 | ) | | (21 | ) | | (20 | ) |
| Long-term liability | (2,431 | ) | | (2,484 | ) | | (881 | ) | | (747 | ) | (1,852 | ) | | (1,845 | ) | | (674 | ) | | (740 | ) |
| Net liability recognized | $ | (2,109 | ) | | $ | (2,084 | ) | | $ | (902 | ) | | $ | (768 | ) | $ | (1,470 | ) | | $ | (1,444 | ) | | $ | (695 | ) | | $ | (760 | ) |
Effective January 1, 2010, the Company's existing primary U.S. plan was transitioned from a traditional final average pay formula to a cash balance formula. In general, employees may receive credits based on age, service, pay and interest under the new method. The pension plan acquired by the Company in connection with our acquisition of CCE's former North America business transitioned to a cash balance formula in 2011.115
Certain of our pension plans have projected benefit obligations in excess of the fair value of plan assets. For these plans, the projected benefit obligations and the fair value of plan assets were as follows (in millions):
| | | December 31, | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
|
| Projected benefit obligation | $ | 9,161 |
| | $ | 7,591 |
| $ | 7,767 |
| | $ | 8,753 |
|
| Fair value of plan assets | 6,659 |
| | 5,048 |
| 5,865 |
| | 6,854 |
|
Certain of our pension plans have accumulated benefit obligations in excess of the fair value of plan assets. For these plans, the accumulated benefit obligations and the fair value of plan assets were as follows (in millions):
| | | December 31, | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
|
| Accumulated benefit obligation | $ | 8,736 |
| | $ | 7,277 |
| $ | 7,537 |
| | $ | 8,501 |
|
| Fair value of plan assets | 6,546 |
| | 4,998 |
| 5,846 |
| | 6,820 |
|
Pension Plan Assets
The following table presents total assets for our U.S. and non-U.S. pension plans (in millions):
| | | | U.S. Plans | | Non-U.S. Plans | U.S. Plans | | Non-U.S. Plans |
| December 31, | 2012 |
| | 2011 |
| | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
| | 2015 |
| | 2014 |
|
| Cash and cash equivalents | $ | 299 |
| | $ | 104 |
| | $ | 87 |
| | $ | 123 |
| $ | 222 |
| | $ | 186 |
| | $ | 54 |
| | $ | 75 |
|
| Equity securities: | | | | | | | | | | | | | | |
| U.S.-based companies | 1,844 |
| | 1,362 |
| | 37 |
| | 33 |
| 1,118 |
| | 1,274 |
| | 445 |
| | 542 |
|
| International-based companies | 324 |
| | 630 |
| | 640 |
| | 323 |
| 398 |
| | 558 |
| | 419 |
| | 505 |
|
| Fixed-income securities: | | | | | | | | | | | | | | |
| Government bonds | 399 |
| | 358 |
| | 163 |
| | 415 |
| 442 |
| | 455 |
| | 295 |
| | 411 |
|
| Corporate bonds and debt securities | 856 |
| | 669 |
| | 126 |
| | 49 |
| 1,037 |
| | 1,379 |
| | 136 |
| | 187 |
|
Mutual, pooled and commingled funds1 | 1,057 |
| | 323 |
| | 453 |
| | 406 |
| 713 |
| | 863 |
| | 410 |
| | 400 |
|
| Hedge funds/limited partnerships | 496 |
| | 458 |
| | 29 |
| | 31 |
| 723 |
| | 756 |
| | 41 |
| | 43 |
|
| Real estate | 248 |
| | 256 |
| | 9 |
| | 14 |
| 462 |
| | 391 |
| | 2 |
| | 17 |
|
| Other | 26 |
| | 114 |
| | 491 |
| | 503 |
| 513 |
| | 481 |
| | 259 |
| | 379 |
|
Total pension plan assets2 | $ | 5,549 |
| | $ | 4,274 |
| | $ | 2,035 |
| | $ | 1,897 |
| $ | 5,628 |
| | $ | 6,343 |
| | $ | 2,061 |
| | $ | 2,559 |
|
| |
1 | Mutual, pooled and commingled funds include investments in equity securities, fixed-income securities and combinations of both. There are a significant number of mutual, pooled and commingled funds from which investors can choose. The selection of the type of fund is dictated by the specific investment objectives and needs of a given plan. These objectives and needs vary greatly between plans. |
| |
2 | Fair value disclosures related to our pension assets are included in Note 16.16. Fair value disclosures include, but are not limited to, the levels within the fair value hierarchy onin which the fair value measurements in their entirety fall; a reconciliation of the beginning and ending balances of Level 3 assets; and information about the valuation techniques and inputs used to measure the fair value of our pension and other postretirement assets. |
Investment Strategy for U.S. Pension Plans
The Company utilizes the services of investment managers to actively manage the pension assets of our U.S. pension plans. We have established asset allocation targets and investment guidelines with each investment manager. Our asset allocation targets promote optimal expected return and volatility characteristics given the long-term time horizon for fulfilling the obligations of the plan. Selection of the targeted asset allocation for U.S. plan assets was based upon a review of the expected return and risk characteristics of each asset class, as well as the correlation of returns among asset classes. During 2012, the Company revised asset allocation targets and restructured the investment manager composition to further diversify investment risk and reduce volatility while maintaining long-term return objectives. Our revised target allocation is a mix of approximately 42 percent equity investments, 30 percent fixed-income investments and 28 percent alternative investments. As of December 31, 2012, the transition to the new asset allocation targets was not complete, but we anticipate this transition being completed during the first quarter of 2013. We believe this target allocation will enable us to achieve the following long-term investment objectives:
| |
| (1) | optimize the long-term return on plan assets at an acceptable level of risk; |
| |
| (2) | maintain a broad diversification across asset classes and among investment managers; and |
| |
| (3) | maintain careful control of the risk level within each asset class; and |
| |
(4) | focus on a long-term return objective.class. |
The guidelines that have been established with each investment manager provide parameters within which the investment managers agree to operate, including criteria that determine eligible and ineligible securities, diversification requirements and credit quality standards, where applicable. Unless exceptions have been approved, investment managers are prohibited from buying or selling commodities, futures or option contracts, as well as from short selling of securities. Additionally, investment managers agree to obtain written approval for deviations from stated investment style or guidelines. As of December 31, 2012,2015, no investment manager was responsible for more than 108 percent of total U.S. plan assets.
Our target allocation of 42 percent equity investments is composed of approximately 60 percent in global equities, 16 percent in emerging market equities and 24 percent in domestic small- and mid-cap equities. Optimal returns through our investments in global equities are achieved through security selection as well as country and sector diversification. Investments in the common stock of our Company accounted for approximately 56 percent of our total global equities allocation and approximately 23 percent of total U.S. plan assets. Our investments in global equities are intended to provide diversified exposure to both U.S. and non-U.S. equity markets. Our investments in both emerging market equities and domestic small- and mid-cap equities are expected tomay experience largerlarge swings in their market value on a periodic basis. Our investments in these asset classes are selected based on capital appreciation potential.
Our target allocation of 30 percent fixed-income investments is composed of 33 percent long-duration bonds and 67 percent with multi-strategy alternative credit managers. Long-duration bonds are intended to provide a stable rate of return through investments in high-quality publicly traded debt securities. Our investments in long-duration bonds are diversified in order to mitigate duration and credit exposure. Multi-strategy alternative credit managers invest in a combination of high-yield bonds, bank loans, structured credit and emerging market debt. These investments are in lower-rated and non-rated debt securities, which generally produce higher returns compared to long-duration bonds and also help to diversify our overall fixed-income portfolio.
In addition to investments in equity securitiesinvestments and fixed-income investments, we have a target allocation of 28 percent in alternative investments. These alternative investments include hedge funds, reinsurance, private equity limited partnerships, leveraged buyout funds, international venture capital partnerships and real estate. The objective of investing in alternative investments is to provide a higher rate of return than that available from publicly traded equity securities. These investments are inherently illiquid and require a long-term perspective in evaluating investment performance.
Investment Strategy for Non-U.S. Pension Plans
As of December 31, 2012,2015, the long-term target allocation for 4571 percent of our international subsidiaries' plan assets, primarily certain of our European and Canadian plans, is 5661 percent equity securitiessecurities; 25 percent fixed-income securities; and 4414 percent fixed-income securities. other investments. The actual allocation for the remaining 5529 percent of the Company's international subsidiaries' plan assets consisted of 3856 percent mutual, pooled and commingled funds; 161 percent equity securities; 153 percent fixed-income securities; and 3140 percent other investments. The investment strategies of our international subsidiaries differ greatly, and in some instances are influenced by local law. None of our pension plans outside the United States is individually significant for separate disclosure.
Other Postretirement Benefit Plan Assets
Plan assets associated with other postretirement benefits primarily represent funding of one of the U.S. postretirement benefit planplans through a U.S. Voluntary Employee Beneficiary Association ("VEBA"), a tax-qualified trust. The VEBA assets remain segregated from the primary U.S. pension master trust and are primarily invested in liquid assets due to the level and timing of expected future benefit payments.
The following table presents total assets for our other postretirement benefit plans (in millions):
| | | December 31, | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
|
| Cash and cash equivalents | $ | 13 |
| | $ | 86 |
| $ | 8 |
| | $ | 10 |
|
| Equity securities: | | | | | | |
| U.S.-based companies | 81 |
| | 70 |
| 116 |
| | 114 |
|
| International-based companies | 4 |
| | 13 |
| 6 |
| | 7 |
|
| Fixed-income securities: | | | | | | |
| Government bonds | 78 |
| | 2 |
| 80 |
| | 79 |
|
| Corporate bonds and debt securities | 5 |
| | 6 |
| 8 |
| | 9 |
|
| Mutual, pooled and commingled funds | 16 |
| | 3 |
| 15 |
| | 16 |
|
| Hedge funds/limited partnerships | 3 |
| | 2 |
| 5 |
| | 5 |
|
| Real estate | 2 |
| | 2 |
| 3 |
| | 3 |
|
| Other | — |
| | 1 |
| 4 |
| | 3 |
|
Total other postretirement benefit plan assets1 | $ | 202 |
| | $ | 185 |
| $ | 245 |
| | $ | 246 |
|
| |
1 | Fair value disclosures related to our other postretirement benefit plan assets are included in Note 16.16. Fair value disclosures include, but are not limited to, the levels within the fair value hierarchy onin which the fair value measurements in their entirety fall; a reconciliation of the beginning and ending balances of Level 3 assets;fall and information about the valuation techniques and inputs used to measure the fair value of our pension and other postretirement benefit plan assets. |
Components of Net Periodic Benefit Cost
Net periodic benefit cost for our pension and other postretirement benefit plans consisted of the following (in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Pension Benefits | | Other Benefits |
| Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| | 2012 |
| | 2011 |
| | 2010 |
|
| | | | As Adjusted | | | | | | |
| Service cost | $ | 291 |
| | $ | 249 |
| | $ | 143 |
| | $ | 34 |
| | $ | 32 |
| | $ | 24 |
|
| Interest cost | 388 |
| | 391 |
| | 260 |
| | 43 |
| | 45 |
| | 30 |
|
| Expected return on plan assets | (573 | ) | | (508 | ) | | (285 | ) | | (8 | ) | | (8 | ) | | (8 | ) |
| Amortization of prior service cost (credit) | (2 | ) | | 5 |
| | 5 |
| | (52 | ) | | (61 | ) | | (61 | ) |
| Amortization of actuarial loss | 137 |
| | 82 |
| | 83 |
| | 6 |
| | 2 |
| | 3 |
|
| Net periodic benefit cost (credit) | $ | 241 |
| | $ | 219 |
| | $ | 206 |
| | $ | 23 |
| | $ | 10 |
| | $ | (12 | ) |
| Settlement charge | 3 |
| | 3 |
| | 6 |
| | — |
| | — |
| | — |
|
| Curtailment charge | 6 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Special termination benefits1 | 1 |
| | 8 |
| | — |
| | — |
| | 3 |
| | 1 |
|
| Total cost (credit) recognized in the statements of income | $ | 251 |
| | $ | 230 |
| | $ | 212 |
| | $ | 23 |
| | $ | 13 |
| | $ | (11 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Pension Benefits | | Other Benefits |
| Year Ended December 31, | 2015 |
| | 2014 |
| | 2013 |
| | 2015 |
| | 2014 |
| | 2013 |
|
| Service cost | $ | 265 |
| | $ | 261 |
| | $ | 280 |
| | $ | 27 |
| | $ | 26 |
| | $ | 36 |
|
| Interest cost | 379 |
| | 406 |
| | 378 |
| | 37 |
| | 43 |
| | 42 |
|
Expected return on plan assets1 | (705 | ) | | (713 | ) | | (659 | ) | | (11 | ) | | (11 | ) | | (9 | ) |
| Amortization of prior service cost (credit) | (2 | ) | | (2 | ) | | (2 | ) | | (19 | ) | | (17 | ) | | (10 | ) |
Amortization of actuarial loss2 | 199 |
| | 73 |
| | 197 |
| | 10 |
| | 2 |
| | 13 |
|
| Net periodic benefit cost | $ | 136 |
| | $ | 25 |
| | $ | 194 |
| | $ | 44 |
| | $ | 43 |
| | $ | 72 |
|
Settlement charge3 | 149 |
| | 4 |
| | 1 |
| | — |
| | — |
| | — |
|
Special termination benefits3 | 20 |
| | 5 |
| | 2 |
| | 2 |
| | — |
| | — |
|
| Total cost recognized in statements of income | $ | 305 |
| | $ | 34 |
| | $ | 197 |
| | $ | 46 |
| | $ | 43 |
| | $ | 72 |
|
| |
1 | The Company has elected to use the actual fair value of plan assets as the market-related value of assets in the determination of the expected return on plan assets. |
| |
2 | Actuarial gains and losses are amortized using a corridor approach. The gain/loss corridor is equal to 10 percent of the greater of the pension benefit obligation and the market-related value of assets. Gains and losses in excess of the corridor are generally amortized over the average future working lifetime of the pension plan participants. |
| |
3 | The settlement charge and special termination benefits were primarily relaterelated to the Company's productivity, restructuring and integration initiatives. Refer to Note 18 for additional information related to our productivity, restructuring and integration initiatives.18. |
The following table sets forth the changes in AOCI for our benefit plans (in millions, pretax):
| | | | Pension Benefits | | Other Benefits | Pension Benefits | | Other Benefits |
| December 31, | 2012 |
| | 2011 |
| | 2012 |
| | 2011 |
| |
| | | | As Adjusted |
| | | | | |
| Beginning balance in AOCI | $ | (2,169 | ) | | $ | (1,101 | ) | | $ | (34 | ) | | $ | 72 |
| |
| Year Ended December 31, | | 2015 |
| | 2014 |
| | 2015 |
| | 2014 |
|
| Balance in AOCI at beginning of year | | $ | (3,069 | ) | | $ | (1,537 | ) | | $ | (67 | ) | | $ | 13 |
|
| Recognized prior service cost (credit) | (2 | ) | | 5 |
| | (52 | ) | | (61 | ) | (2 | ) | | (2 | ) | | (19 | ) | | (17 | ) |
| Recognized net actuarial loss (gain) | 140 |
| | 85 |
| | 6 |
| | 2 |
| 348 |
| | 77 |
| | 10 |
| | 2 |
|
| Prior service credit (cost) arising in current year | 3 |
| | 57 |
| | 2 |
| | 12 |
| (6 | ) | | — |
| | 10 |
| | 31 |
|
| Net actuarial (loss) gain arising in current year | (1,009 | ) | | (1,208 | ) | | (107 | ) | | (57 | ) | (270 | ) | | (1,658 | ) | | 40 |
| | (97 | ) |
| Foreign currency translation gain (loss) | 5 |
| | (7 | ) | | (1 | ) | | (2 | ) | 92 |
| | 51 |
| | — |
| | 1 |
|
| Ending balance in AOCI | $ | (3,032 | ) | | $ | (2,169 | ) | | $ | (186 | ) | | $ | (34 | ) | |
| Balance in AOCI at end of year | | $ | (2,907 | ) | | $ | (3,069 | ) | | $ | (26 | ) | | $ | (67 | ) |
The following table sets forth amounts in AOCI for our benefit plans (in millions, pretax):
| | | | Pension Benefits | | Other Benefits | Pension Benefits | | Other Benefits |
| December 31, | 2012 |
| | 2011 |
| | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
| | 2015 |
| | 2014 |
|
| | | | As Adjusted |
| | | | | |
| Prior service credit (cost) | $ | 16 |
| | $ | 14 |
| | $ | 23 |
| | $ | 73 |
| $ | 3 |
| | $ | 10 |
| | $ | 93 |
| | $ | 100 |
|
| Net actuarial loss | (3,048 | ) | | (2,183 | ) | | (209 | ) | | (107 | ) | (2,910 | ) | | (3,079 | ) | | (119 | ) | | (167 | ) |
| Ending balance in AOCI | $ | (3,032 | ) | | $ | (2,169 | ) | | $ | (186 | ) | | $ | (34 | ) | |
| Balance in AOCI at end of year | | $ | (2,907 | ) | | $ | (3,069 | ) | | $ | (26 | ) | | $ | (67 | ) |
Amounts in AOCI expected to be recognized as components of net periodic pension cost in 20132016 are as follows (in millions, pretax):
| | | | Pension Benefits | | Other Benefits | Pension Benefits | | Other Benefits |
| Amortization of prior service cost (credit) | $ | (3 | ) | | $ | (10 | ) | $ | (2 | ) | | $ | (19 | ) |
| Amortization of actuarial loss | 238 |
| | 11 |
| 181 |
| | 7 |
|
| | $ | 235 |
| | $ | 1 |
| |
| Total | | $ | 179 |
| | $ | (12 | ) |
Assumptions
Certain weighted-average assumptions used in computing the benefit obligations are as follows:
| | | | Pension Benefits | | Other Benefits | Pension Benefits | | Other Benefits |
| December 31, | 2012 |
| | 2011 |
| | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
| | 2015 |
| | 2014 |
|
| Discount rate | 4.00 | % | | 4.75 | % | | 4.00 | % | | 4.75 | % | 4.25 | % | | 3.75 | % | | 4.25 | % | | 3.75 | % |
| Rate of increase in compensation levels | 3.50 | % | | 3.25 | % | | N/A |
| | N/A |
| 3.50 | % | | 3.50 | % | | N/A |
| | N/A |
|
Certain weighted-average assumptions used in computing net periodic benefit cost are as follows:
| | | | Pension Benefits | | Other Benefits | Pension Benefits | | Other Benefits |
| December 31, | 2012 |
| | 2011 |
| | 2010 |
| | 2012 |
| | 2011 |
| | 2010 |
| |
| Year Ended December 31, | | 2015 |
| | 2014 |
| | 2013 |
| | 2015 |
| | 2014 |
| | 2013 |
|
| Discount rate | 4.75 | % | | 5.50 | % | | 5.75 | % | | 4.75 | % | | 5.25 | % | | 5.50 | % | 3.75 | % | | 4.75 | % | | 4.00 | % | | 3.75 | % | | 4.75 | % | | 4.00 | % |
| Rate of increase in compensation levels | 3.25 | % | | 4.00 | % | | 3.75 | % | | N/A |
| | N/A |
| | N/A |
| 3.50 | % | | 3.50 | % | | 3.50 | % | | N/A |
| | N/A |
| | N/A |
|
| Expected long-term rate of return on plan assets | 8.25 | % | | 8.25 | % | | 8.00 | % | | 4.75 | % | | 4.75 | % | | 4.75 | % | 8.25 | % | | 8.25 | % | | 8.25 | % | | 4.75 | % | | 4.75 | % | | 4.75 | % |
The expected long-term rate of return assumption for U.S. pension plan assets is based upon the target asset allocation and is determined using forward-looking assumptions in the context of historical returns and volatilities for each asset class, as well as correlations among asset classes. We evaluate the rate of return assumption on an annual basis. The expected long-term rate of return assumption used in computing 20122015 net periodic pension cost for the U.S. plans was 8.5 percent.percent. As of December 31,
2012, 2015, the 5-year, 10-year and 15-year annualized return on plan assets infor the primary U.S. plan was 8.46.7 percent,, the 15-year annualized return was 6.1 5.4 percent, and the5.7 percent, respectively. The annualized return since inception was 11.0 percent.10.6 percent.
The assumed health care cost trend rates are as follows:
| | | December 31, | 2012 |
| | 2011 |
| 2015 |
| | 2014 |
|
| Health care cost trend rate assumed for next year | 8.00 | % | | 8.00 | % | 7.00 | % | | 7.50 | % |
| Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) | 5.00 | % | | 5.00 | % | 5.00 | % | | 5.00 | % |
| Year that the rate reaches the ultimate trend rate | 2019 |
| | 2018 |
| 2021 |
| | 2020 |
|
The Company's U.S. postretirement benefit plans are primarily defined dollar benefit plans that limit the effects of medical inflation because the plans have established dollar limits for determining our contributions. As a result, the effect of a 1 percentage point change in the assumed health care cost trend rate would not be significant to the Company.
The discount rate assumptions used to account for pension and other postretirement benefit plans reflect the rates at which the benefit obligations could be effectively settled. Rates for each of our U.S. and certain non-U.S. plans at December 31, 2012,2015, were determined using a cash flow matching technique whereby the rates of a yield curve, developed from high-quality debt securities, were applied to the benefit obligations to determine the appropriate discount rate. For ourother non-U.S. plans, we base the discount rate on comparable indices within each of the countries. The rate of compensation increase assumption is determined by the Company based upon annual reviews. We review external data and our own historical trends for health care costs to determine the health care cost trend rate assumptions.
Effective January 1, 2016, for benefit plans using the yield curve approach, the Company changed the method used to calculate the service cost and interest cost components of net periodic benefit costs for pension and other postretirement benefit plans and will measure these costs by applying the specific spot rates along the yield curve to the plans' projected cash flows. The Company believes the new approach provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and the corresponding spot yield curve rates. The change does not affect the measurement of the Company's pension and other postretirement benefit obligations for those plans and is accounted for as a change in accounting estimate, which is applied prospectively.
Cash Flows
Our estimated future benefit payments for funded and unfunded plans are as follows (in millions):
| | | Year Ended December 31, | 2013 |
| | 2014 |
| | 2015 |
| | 2016 |
| | 2017 |
| | 2018-2022 |
| 2016 |
| | 2017 |
| | 2018 |
| | 2019 |
| | 2020 |
| | 2021–2025 |
|
| Pension benefit payments | $ | 452 |
| | $ | 473 |
| | $ | 493 |
| | $ | 510 |
| | $ | 542 |
| | $ | 2,929 |
| $ | 521 |
| | $ | 504 |
| | $ | 533 |
| | $ | 551 |
| | $ | 570 |
| | $ | 3,065 |
|
Other benefit payments1 | 58 |
| | 61 |
| | 64 |
| | 65 |
| | 66 |
| | 352 |
| 61 |
| | 63 |
| | 64 |
| | 65 |
| | 67 |
| | 332 |
|
| Total estimated benefit payments | $ | 510 |
| | $ | 534 |
| | $ | 557 |
| | $ | 575 |
| | $ | 608 |
| | $ | 3,281 |
| $ | 582 |
| | $ | 567 |
| | $ | 597 |
| | $ | 616 |
| | $ | 637 |
| | $ | 3,397 |
|
| |
1 | The expected benefit payments for our other postretirement benefit plans are net of estimated federal subsidies expected to be received under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Federal subsidies are estimated to be approximately $184 million for the period 2013–2017,2016–2020, and $223 million for the period 2018–2022.2021–2025. |
On March 23, 2010, the Patient Protection and Affordable Care Act (HR 3590) (the "Act") was signed into law. As a result of this legislation, entities are no longer eligible to receive a tax deduction for the portion of prescription drug expenses reimbursed under the Medicare Part D subsidy. This change resulted in a reduction of our deferred tax assets and a corresponding charge to income tax expense of $14 million during the first quarter of 2010.
The Company anticipates making pension contributions in 20132016 of approximately $640$512 million,, the majority of which approximately $359 million will be allocated to our primary U.S. plan.plans. The majority of these contributions are discretionary.
Defined Contribution Plans
Our Company sponsors qualified defined contribution plans covering substantially all U.S. employees. Under the largest U.S. defined contribution plan, we match participants' contributions up to a maximum of 3.5 percent of compensation, subject to certain limitations. Company costs related to the U.S. plans were $9394 million, $7892 million and $4497 million in 20122015, 20112014 and 20102013, respectively. We also sponsor defined contribution plans in certain locations outside the United States. Company costs associated with those plans were $2935 million, $3136 million and $3532 million in 20122015, 20112014 and 20102013, respectively.
Multi-Employer Plans
As a result of our acquisition of Old CCE's former North America business during the fourth quarter of 2010, the Company now participates in various multi-employer pension plans in the United States. Multi-employer pension plans are designed to cover employees from multiple employers and are typically established under collective bargaining agreements. These plans allow multiple employers to pool their pension resources and realize efficiencies associated with the daily administration of the plan.
Multi-employer plans are generally governed by a board of trustees composed of management and labor representatives and are funded through employer contributions.
The Company's expense for U.S. multi-employer pension plans totaled $31$40 million, $38 million and $69$37 million in 20122015, 2014 and 2011,2013, respectively. In 2011, the Company's expense for U.S. multi-employer pension plans included charges of $32 million related to the withdrawal from certain of these plans in connection with the Company's integration initiatives in North America. Refer to Note 18 for additional information related to these initiatives. The plans we currently participate in have contractual arrangements that extend into 2017.2020. If, in the future, we choose to withdraw from any of the multi-employer pension plans in which we currently participate, we would need to record the appropriate withdrawal liabilities at that time.
NOTE 14: INCOME TAXES
Income before income taxes consisted of the following (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| | | | As Adjusted | |
United States1 | $ | 3,526 |
| | $ | 3,029 |
| | $ | 7,188 |
| |
| United States | | $ | 1,801 |
| | $ | 1,567 |
| | $ | 2,451 |
|
| International | 8,283 |
| | 8,429 |
| | 7,019 |
| 7,804 |
| | 7,758 |
| | 9,026 |
|
| Total | $ | 11,809 |
| | $ | 11,458 |
| | $ | 14,207 |
| $ | 9,605 |
| | $ | 9,325 |
| | $ | 11,477 |
|
| |
1
| In 2010, the Company's U.S. income before income taxes included a $4,978 million gain due to the remeasurement of our equity investment in CCE to fair value upon our acquisition of CCE's former North America business. Refer to Note 2 for additional information.
|
Income tax expense consisted of the following for the years ended December 31, 2012, 20112015, 2014 and 20102013 (in millions):
| | | | United States |
| | State and Local |
| | International |
| | Total |
| United States |
| | State and Local |
| | International |
| | Total |
|
| 2012 | | | | | | | | |
| 2015 | | | | | | | | |
| Current | $ | 602 |
| | $ | 74 |
| | $ | 1,415 |
| | $ | 2,091 |
| $ | 711 |
| | $ | 69 |
| | $ | 1,386 |
| | $ | 2,166 |
|
| Deferred | 936 |
| | 33 |
| | (337 | ) | | 632 |
| 120 |
| | 45 |
| | (92 | ) | | 73 |
|
| 2011 — As Adjusted | | | | | | | | |
| 2014 | | | | | | | | |
| Current | $ | 286 |
| | $ | 66 |
| | $ | 1,425 |
| | $ | 1,777 |
| $ | 867 |
| | $ | 81 |
| | $ | 1,293 |
| | $ | 2,241 |
|
| Deferred | 898 |
| | 27 |
| | 110 |
| | 1,035 |
| (97 | ) | | (21 | ) | | 78 |
| | (40 | ) |
| 2010 — As Adjusted | | | | | | | | |
| 2013 | | | | | | | | |
| Current | $ | 469 |
| | $ | 85 |
| | $ | 1,212 |
| | $ | 1,766 |
| $ | 713 |
| | $ | 102 |
| | $ | 1,388 |
| | $ | 2,203 |
|
| Deferred | 586 |
| | 2 |
| | 16 |
| | 604 |
| 305 |
| | 38 |
| | 305 |
| | 648 |
|
We made income tax payments of $981$2,357 million,, $1,612 $1,926 million and $1,766$2,162 million in 2012, 20112015, 2014 and 2010,2013, respectively.
A reconciliation of the statutory U.S. federal tax rate and our effective tax rate is as follows:
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| | 2015 |
| | 2014 |
| | 2013 |
| |
| | | | As Adjusted | |
| Statutory U.S. federal tax rate | 35.0 | % | | 35.0 | % | | 35.0 | % | | 35.0 | % | | 35.0 | % | | 35.0 | % | |
| State and local income taxes — net of federal benefit | 1.1 |
| | 0.9 |
| | 0.6 |
| | 1.2 |
| | 1.0 |
| | 1.0 |
| |
| Earnings in jurisdictions taxed at rates different from the statutory U.S. federal rate | (9.5 | ) | 1,2 | (9.5 | ) | 5,6,7 | (5.6 | ) | 15 | (12.7 | ) | 1 | (11.5 | ) | 6,7 | (10.3 | ) | 10,11,12 |
| Reversal of valuation allowances | (2.4 | ) | 3 | — |
| | — |
| | |
| Equity income or loss | (2.0 | ) | | (1.4 | ) | 8 | (1.9 | ) | 16 | (1.7 | ) | 2 | (2.2 | ) | | (1.4 | ) | 13 |
| CCE transaction | — |
| | — |
| | (12.5 | ) | 17,18 | |
| Sale of Norwegian and Swedish bottling operations | — |
| | — |
| 9 | 0.4 |
| 19 | |
| Other operating charges | 0.4 |
| 4 | 0.3 |
| 10 | 0.4 |
| 20 | 1.2 |
| 3,4 | 2.9 |
| 8,9 | 1.2 |
| 14 |
| Other — net | 0.5 |
| | (0.8 | ) | 11,12,13,14 | 0.3 |
| 21,22 | 0.3 |
| 5 | (1.6 | ) | | (0.7 | ) | |
| Effective tax rate | 23.1 | % | | 24.5 | % | | 16.7 | % | | 23.3 | % | | 23.6 | % | | 24.8 | % | |
| |
1 | Includes a pretax charge of $27 million (or a 0.1 percent impact on our effective tax rate) due to the remeasurement of the net monetary assets of our local Venezuelan subsidiary into U.S. dollars using the SIMADI exchange rate. Refer to Note 1 and Note 17. |
| |
2 | Includes a tax benefit of $5 million on a pretax charge of $87 million (or a 0.3 percent impact on our effective tax rate) related to our proportionate share of unusual or infrequent items recorded by our equity method investees. Refer to Note 17. |
| |
3 | Includes a tax benefit of $45 million on a pretax charge of $225 million (or a 0.3 percent impact on our effective tax rate) primarily due to an impairment of a Venezuelan trademark, a write-down of receivables from our bottling partner in Venezuela, a cash contribution to The Coca-Cola Foundation and charges associated with ongoing tax litigation. Refer to Note 1 and Note 17. |
| |
4 | Includes a tax benefit of $259 million on pretax charges of $983 million (or a 0.9 percent impact on our effective tax rate) primarily related to the Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 18. |
| |
5 | Includes tax expense of $133$150 million on pretax income of $77 million (or a 1.3 percent impact on our effective rate) primarily due to the gain related to the Monster Transaction, offset by charges related to the refranchising of certain territories in North America and charges associated with the early extinguishment of long-term debt. Refer to Note 2 and Note 17. |
| |
6 | Includes tax expense of $6 million on a pretax net charge of $372 million (or a 1.5 percent impact on our effective tax rate) due to the remeasurement of the net monetary assets of our local Venezuelan subsidiary into U.S. dollars using the SICAD 2 exchange rate. Refer to Note 1. |
| |
1.17
| Includes tax expense of $18 million (or a 0.2 percent impact on our effective tax rate) related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions. |
| |
28
| Includes a tax expense of $57$55 million on a pretax net gainscharge of $76$352 million (or a 0.31.9 percent impact on our effective tax rate) relatedprimarily due to an impairment of a Venezuelan trademark, a write-down on receivables from our bottling partner in Venezuela, a charge associated with certain of the following: a gain recognizedCompany's fixed assets, and as a result of the merger of Embotelladora Andina S.A. ("Andina")restructuring and Embotelladoras Coca-Cola Polar S.A. ("Polar"); a gain recognized as a result of 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; the loss recognized on the pending sale of a majority ownership interest in our consolidated Philippine bottling operations to Coca-Cola FEMSA; and the expense recorded for the premium the Company paid over the publicly traded market price to acquire an ownership interest in Mikuni. Refer to Note 17.
| |
3
| Relates to a net tax benefit of $283 million associated with the reversal of valuation allowances in certaintransition of the Company's foreign jurisdictions.
Russian juice operations to an existing joint venture with an unconsolidated bottling partner. Refer to Note 1 and Note 17. |
| |
49
| Includes a tax benefit of $95$191 million on pretax charges of $416$809 million (or a 0.41 percent impact on our effective tax rate) primarily related to the Company's productivity and reinvestment program as well as other restructuring initiatives; the refinement of previously established accruals related to the Company's 2008–2011 productivity initiatives; and the refinement of previously established accruals related to the Company's integration of CCE's former North America business.initiatives. Refer to Note 18. |
| |
5
| Includes a tax benefit of $6 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions.
|
| |
6
| Includes a zero percent effective tax rate on pretax charges of $17 million due to the impairment of available-for-sale securities. Refer to Note 3 and Note 17.
|
| |
7
| Includes a tax expense of $299 million on pretax net gains of $641 million (or a 0.7 percent impact on our effective tax rate) related to the net gain recognized as a result of the merger of Embotelladoras Arca, S.A.B. de C.V. ("Arca") and Grupo Continental S.A.B. ("Contal"); the gain recognized on the sale of our investment in Embonor; and gains the Company recognized as a result of Coca-Cola FEMSA, an equity method investee, issuing additional shares of its own stock at per share amounts greater than the carrying value of the Company's per share investment. These gains were partially offset by charges associated with certain of the Company's equity method investments in Japan. Refer to Note 17.
|
| |
8
| Includes a tax benefit of $7 million on pretax net charges of $53 million (or a 0.1 percent impact on our effective tax rate) related to our proportionate share of asset impairments and restructuring charges recorded by certain of our equity method investees. Refer to Note 17.
|
| |
9
| Includes a tax benefit of $2 million on pretax charges of $5 million related to the finalization of working capital adjustments on the sale of our Norwegian and Swedish bottling operations. Refer to Note 2 and Note 17.
18. |
| |
10 | Includes a tax benefit of $224$26 million on pretax charges of $732 million (or a 0.3 percent impact on our effective tax rate) primarily related to the Company's productivity, integration and restructuring initiatives; transaction costs incurred in connection with the merger of Arca and Contal; costs associated with the earthquake and tsunami that devastated northern and eastern Japan; and costs associated with the flooding in Thailand. Refer to Note 17. |
| |
11
| Includes a tax benefit of $8 million on pretax charges of $19 million related to the amortization of favorable supply contracts acquired in connection with our acquisition of CCE's former North America business.
|
| |
12
| Includes a tax benefit of $3 million on pretax net charges of $9 million related to the repurchase and/or exchange of certain long-term debt assumed in connection with our acquisition of CCE's former North America business as well as the early extinguishment of certain other long-term debt. Refer to Note 10.
|
| |
13
| Includes a tax benefit of $14 million on pretax charges of $41 million related to the impairment of an investment in an entity accounted for under the equity method of accounting. Refer to Note 17.
|
| |
14
| Includes a tax benefit of $2 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in certain domestic jurisdictions.
|
| |
15
| Includes a tax expense of $265 million (or a 1.9 percent impact on our effective tax rate) primarily related to deferred tax expense on certain current year undistributed foreign earnings that are not considered indefinitely reinvested and amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties.
|
| |
16
| Includes a tax benefit of $9 million on pretax net charges of $66 million (or a 0.1 percent impact on our effective tax rate) related to charges recorded by our equity method investees. Refer to Note 17.
|
| |
17
| Includes a tax benefit of $34 million on a pretax gain of $4,978 million (or a reduction of 12.5 percent on our effective tax rate) related to the remeasurement of our equity investment in CCE to fair value upon our acquisition of CCE's former North America business. The tax benefit reflects the impact of reversing deferred tax liabilities associated with our equity investment in CCE prior to the acquisition. Refer to Note 2.
|
| |
18
| Includes a tax benefit of $99 million on pretax charges of $265 million related to the write-off of preexisting relationships with CCE. Refer to Note 2.
|
| |
19
| Includes a tax expense of $261 million on a pretax gain of $597 million (or a 0.4 percent impact on our effective tax rate) related to the sale of our Norwegian and Swedish bottling operations. Refer to Note 2.
|
| |
20
| Includes a tax benefit of $223 million on pretax charges of $819 million (or a 0.4 percent impact on our effective tax rate) primarily related to the Company's productivity, integration and restructuring initiatives, transaction costs and charitable contributions. Refer to Note 17.
|
| |
21
| Includes a tax benefit of $114 million on pretax charges of $493 million (or a 0.5 percent impact on our effective tax rate) related to the repurchase of certain long-term debt and costs associated with the settlement of treasury rate locks issued in connection with the debt tender offer; the loss related to the remeasurement of our Venezuelan subsidiary's net assets; other-than-temporary impairment charges; and a donation of preferred shares in one of our equity method investees. Refer to Note 17.
|
| |
22
| Includes a tax expense of $31 million (or a 0.2 percent impact on our effective tax rate) related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions.
|
| |
11 | Includes tax expense of $279 million on pretax net gains of $501 million (or a 0.9 percent impact on our effective tax rate) related to the deconsolidation of our Brazilian bottling operations upon their combination with an independent bottler and a loss due to the merger of four of the Company's Japanese bottling partners. Refer to Note 2 and Note 17. |
| |
12 | Includes tax expense of $3 million (or a 0.5 percent impact on our effective tax rate) related to a charge of $149 million due to the devaluation of the Venezuelan bolivar. Refer to Note 19. |
| |
13 | Includes a tax benefit of $8 million on a pretax charge of $159 million (or a 0.4 percent impact on our effective tax rate) related to our proportionate share of unusual or infrequent items recorded by our equity method investees. Refer to Note 17. |
| |
14 | Includes a tax benefit of $175 million on pretax charges of $877 million (or a 1.2 percent impact on our effective tax rate) primarily related to impairment charges recorded on certain of the Company's intangible assets and charges related to the Company's productivity and reinvestment program as well as other tax matters in certain domestic jurisdictions.restructuring initiatives. Refer to Note 17 and Note 18. |
Our effective tax rate reflects the tax benefits of having significant operations outside the United States, which are generally taxed at rates lower than the U.S. statutory rate of 3535.0 percent. As a result of employment actions and capital investments made by the Company, certain tax jurisdictions provide income tax incentive grants, including Brazil, Costa Rica, Singapore and Swaziland. The terms of these grants expire from 20152016 to 20202023. We expect each ofanticipate that we will be able to extend or renew the grants in these grants to be renewed indefinitely.locations. Tax incentive grants favorably impacted our income tax expense by $168223 million, $193265 million and $145279 million for the years ended December 31, 20122015, 20112014 and 20102013, respectively. In addition, our effective tax rate reflects the benefits of having significant earnings generated in investments accounted for under the equity method of accounting, which are generally taxed at rates lower than the U.S. statutory rate.
In 2010, the Company recorded a $4,978 million pretax remeasurement gain associated with the acquisition of CCE's former North America business. This remeasurement gain was not recognized for tax purposes and therefore no tax expense was recorded on this gain. Also, as a result of this acquisition, the Company was required to reverse $34 million of deferred tax liabilities which were associated with our equity investment in CCE prior to the acquisition. In addition, the Company recognized a $265 million charge related to the settlement of preexisting relationships with CCE, and we recorded a tax benefit of 37 percent related to this charge.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. U.S. tax authorities have completed their federal income tax examinations for all years prior to 20052007. With respect to state and local jurisdictions and countries outside the United States, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax audits for years before 20022006. For U.S. federal and state tax purposes, the net operating losses and tax credit carryovers acquired in connection with our acquisition of Old CCE's former North America business that were generated between the years of 1990 through 2010 are subject to adjustments until the year in which they are actually utilized is no longer subject to examination.
Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, including interest and penalties, have been provided for any adjustments that are expected to result from those years.
On September 17, 2015, the Company received a Notice from the IRS for the tax years 2007 through 2009, after a five-year audit. Refer to Note 11.
As of December 31, 2012,2015, the gross amount of unrecognized tax benefits was $302 million.$168 million. If the Company were to prevail on all uncertain tax positions, the net effect would be a benefit to the Company's effective tax rate of $187$148 million,, exclusive of any benefits related to interest and penalties. The remaining $115$20 million,, which was recorded as a deferred tax asset, primarily represents tax benefits that would be received in different tax jurisdictions in the event the Company did not prevail on all uncertain tax positions.
A reconciliation of the changes in the gross balanceamount of unrecognized tax benefit amountsbenefits is as follows (in millions):
|
| | | | | | | | | | | |
| Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
|
| Beginning balance of unrecognized tax benefits | $ | 320 |
| | $ | 387 |
| | $ | 354 |
|
| Increases related to prior period tax positions | 69 |
| | 9 |
| | 26 |
|
| Decreases related to prior period tax positions | (15 | ) | | (19 | ) | | (10 | ) |
| Increases related to current period tax positions | 23 |
| | 6 |
| | 33 |
|
| Decreases related to current period tax positions | — |
| | (1 | ) | | — |
|
| Decreases related to settlements with taxing authorities | (45 | ) | | (5 | ) | | — |
|
| Reductions as a result of a lapse of the applicable statute of limitations | (36 | ) | | (46 | ) | | (1 | ) |
| Increase related to acquisition of CCE's former North America business | — |
| | — |
| | 6 |
|
| Increases (decreases) from effects of foreign currency exchange rates | (14 | ) | | (11 | ) | | (21 | ) |
| Ending balance of unrecognized tax benefits | $ | 302 |
| | $ | 320 |
| | $ | 387 |
|
|
| | | | | | | | | | | |
| Year Ended December 31, | 2015 |
| | 2014 |
| | 2013 |
|
| Beginning balance of unrecognized tax benefits | $ | 211 |
| | $ | 230 |
| | $ | 302 |
|
| Increase related to prior period tax positions | 4 |
| | 13 |
| | 1 |
|
| Decrease related to prior period tax positions | (9 | ) | | (2 | ) | | (7 | ) |
| Increase related to current period tax positions | 5 |
| | 11 |
| | 8 |
|
| Decrease related to settlements with taxing authorities | (5 | ) | | (5 | ) | | (4 | ) |
| Decrease due to lapse of the applicable statute of limitations | (23 | ) | | (32 | ) | | (59 | ) |
| Increase (decrease) due to effect of foreign currency exchange rate changes | (15 | ) | | (4 | ) | | (11 | ) |
| Ending balance of unrecognized tax benefits | $ | 168 |
| | $ | 211 |
| | $ | 230 |
|
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company had $113$111 million,, $110 $113 million and $112$105 million in interest and penalties related to unrecognized tax benefits accrued as of December 31, 20122015, , 20112014 and 20102013, respectively. Of these amounts, $33$8 million of expense $2and $8 million of benefit and $17 million of expense were recognized through income tax expense in 2012, 20112014 and 20102013, respectively. For the year ended December 31, 2015, an insignificant amount of interest and penalties were recognized through income tax expense. If the Company were to prevail on all uncertain tax positions, the reversal of this accrual would also be a benefit to the Company's effective tax rate.
It is expected that the amount of unrecognized tax benefits will change in the next 12 months; however, we do not expect the change to have a significant impact on our consolidated statements of income or consolidated balance sheets. These changes may be the result of settlements of ongoing audits, statute of limitations expiring or final settlements in transfer pricing matters that are the subject of litigation. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.
As of December 31, 2012,2015, undistributed earnings of the Company's foreign subsidiaries amounted to $26.9 billion.$31.9 billion. Those earnings are considered to be indefinitely reinvested and, accordingly, no U.S. federal and state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicalpracticable because of the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce a portion of the U.S. tax liability.
The tax effects of temporary differences and carryforwards that give rise to deferred tax assets and liabilities consist of the following (in millions):
| | | December 31, | 2012 |
| | 2011 |
| | 2015 |
| | 2014 |
|
| Deferred tax assets: | | | | | | | |
| Property, plant and equipment | $ | 89 |
| | $ | 224 |
| | $ | 192 |
| | $ | 96 |
|
| Trademarks and other intangible assets | 77 |
| | 68 |
| | 68 |
| | 68 |
|
| Equity method investments (including foreign currency translation adjustment) | 209 |
| | 278 |
| | 694 |
| | 462 |
|
| Derivative financial instruments | 116 |
| | 43 |
| | 161 |
| | 134 |
|
| Other liabilities | 1,178 |
| | 1,257 |
| | 1,056 |
| | 1,082 |
|
| Benefit plans | 1,808 |
| | 2,022 |
| | 1,541 |
| | 1,673 |
|
| Net operating/capital loss carryforwards | 782 |
| | 818 |
| | 413 |
| | 729 |
|
| Other | 320 |
| | 418 |
| | 175 |
| | 196 |
|
| Gross deferred tax assets | $ | 4,579 |
| | $ | 5,128 |
| | $ | 4,300 |
| | $ | 4,440 |
|
| Valuation allowances | (487 | ) | | (859 | ) | | (477 | ) | | (649 | ) |
Total deferred tax assets1,2 | $ | 4,092 |
| | $ | 4,269 |
| | $ | 3,823 |
| | $ | 3,791 |
|
| Deferred tax liabilities: | | | | | | | |
| Property, plant and equipment | $ | (2,204 | ) | | $ | (2,039 | ) | | $ | (1,887 | ) | | $ | (2,342 | ) |
| Trademarks and other intangible assets | (4,133 | ) | | (4,201 | ) | | (3,422 | ) | | (4,020 | ) |
| Equity method investments (including foreign currency translation adjustment) | (712 | ) | | (816 | ) | | (1,441 | ) | | (1,038 | ) |
| Derivative financial instruments | (140 | ) | | (129 | ) | | (687 | ) | | (457 | ) |
| Other liabilities | (144 | ) | | (129 | ) | | (216 | ) | | (110 | ) |
| Benefit plans | (495 | ) | | (445 | ) | | (367 | ) | | (487 | ) |
| Other | (929 | ) | | (753 | ) | | (726 | ) | | (944 | ) |
Total deferred tax liabilities3 | $ | (8,757 | ) | | $ | (8,512 | ) | | $ | (8,746 | ) | | $ | (9,398 | ) |
| Net deferred tax liabilities | $ | (4,665 | ) | | $ | (4,243 | ) | | $ | (4,923 | ) | | $ | (5,607 | ) |
| |
1 | Noncurrent deferred tax assets of $403$360 million and $243$319 million were included in the line item other assets in our consolidated balance sheets as of December 31, 20122015 and 2011,2014, respectively. |
| |
2 | Current deferred tax assets of $244$151 million and $227$160 million were included in the line item prepaid expenses and other assets in our consolidated balance sheets as of December 31, 20122015 and 2011,2014, respectively. |
| |
3 | Current deferred tax liabilities of $331$743 million and $19$450 million were included in the line item accounts payable and accrued expenses in our consolidated balance sheets as of December 31, 20122015 and 2011,2014, respectively. |
As of December 31, 20122015 and 2011,2014, we had $70$62 million of net deferred tax assets and $491$643 million of net deferred tax liabilities, respectively, located in countries outside the United States.
As of December 31, 2012,2015, we had $6,494$4,419 million of loss carryforwards available to reduce future taxable income. Loss carryforwards of $279$356 million must be utilized within the next five years, and the remainder can be utilized over a period greater than five years.
An analysis of our deferred tax asset valuation allowances is as follows (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| Balance at beginning of year | $ | 859 |
| | $ | 950 |
| | $ | 681 |
| $ | 649 |
| | $ | 586 |
| | $ | 487 |
|
| Increase due to our acquisition of CCE's former North America business | — |
| | — |
| | 291 |
| |
| Additions | 126 |
| | 138 |
| | 115 |
| 42 |
| | 104 |
| | 169 |
|
| Decrease due to transfer to assets held for sale | (146 | ) | | — |
| | — |
| (163 | ) | | — |
| | — |
|
| Deductions | (352 | ) | | (229 | ) | | (137 | ) | (51 | ) | | (41 | ) | | (70 | ) |
| Balance at end of year | $ | 487 |
| | $ | 859 |
| | $ | 950 |
| $ | 477 |
| | $ | 649 |
| | $ | 586 |
|
The Company's deferred tax asset valuation allowances are primarily the result of uncertainties regarding the future realization of recorded tax benefits on tax loss carryforwards from operations in various jurisdictions. These valuation allowances were primarily related to deferred tax assets generated from net operating losses. Current evidence does not suggest we will realize sufficient taxable income of the appropriate character within the carryforward period to allow us to realize these deferred tax benefits. If we were to identify and implement tax planning strategies to recover these deferred tax assets or generate sufficient income of the appropriate character in these jurisdictions in the future, it could lead to the reversal of these valuation allowances and a reduction of income tax expense. The Company believes that it will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets in our consolidated balance sheets.
In 2012,2015, the Company recognized a net decrease of $372$172 million in its valuation allowances. As a result of our German bottling operations meeting the criteria to be classified as held for sale, the Company was required to present the related assets and liabilities as separate line items in our consolidated balance sheets. In addition, the changes in net operating losses during the normal course of business and changes in deferred tax assets and related valuation allowances on certain equity investments also contributed to a decrease in the valuation allowances. These decreases were partially offset by an increase in the valuation allowances primarily due to the impact of currency devaluations in Venezuela on certain receivables.
In 2014, the Company recognized a net increase of $63 million in its valuation allowances. This decreaseincrease was primarily relateddue to the reversalincrease in net operating losses during the normal course of business operations and due to the remeasurement of the net monetary assets of our local Venezuelan subsidiary into U.S. dollars using the SICAD 2 exchange rate. The Company recognized a reduction in the valuation allowances primarily due to changes in several foreign jurisdictions. As a result of considering recent significant positive evidence, including, among other items, a consistent pattern of earnings in the past three years, as well as business plans showing continued profitability, it was determined that a valuation allowance was no longer required for certain deferred tax assets primarily recordedand related valuation allowances on certain equity investments and decreases in net operating losses in foreign jurisdictions. This decrease was also partially due to a transferduring the normal course of a valuation allowance into assets held for sale as required by accounting principles generally accepted in the United States upon execution of the share purchase agreement for the sale of a majority interest in our consolidated Philippine bottlingbusiness operations. Refer to Note 1 for additional information on the Company's accounting policy related to assets and liabilities held for sale. Refer to Note 2 for additional information on the Company's Philippine bottling operations.
In addition,2013, the Company recognized ana net increase of $99 million in its valuation allowancesallowances. This increase was primarily due to the addition of a deferred tax asset and related valuation allowance on certain investments accounted for under the equity method of accountinginvestments and increases in net operating losses during the normal course of business operations.
In 2011, the Company recognized a net decrease of $91 million in its valuation allowances. This decrease was primarily related to the utilization of net operating losses during the normal course of business operations; the reversal of a deferred tax asset and related valuation allowance on certain expiring attributes; and the reversal of a deferred tax asset and related valuation allowance on certain equity investments. In addition, the Company recognized an increase in the valuation allowances primarily due to the carryforward of expenses disallowed in the current year and increases in net operating losses during the normal course of business operations.
In 2010, the Company recognized a net increase of $269 million in its valuation allowances. This increase was primarily related to valuation allowances on various tax loss carryforwards acquired in conjunction with our acquisition of CCE's former North America business. The Company also recognized an increase in the valuation allowances due to the carryforward of expenses disallowed in the current year and changes to deferred tax assets and a related valuation allowance on certain equity method investments. In addition, the Company recognized a reduction in the valuation allowances primarily due to the reversal of a deferred tax asset and related valuation allowance on certain expiring attributes; the reversal of a deferred tax asset and related valuation allowance related to the deconsolidation of certain entities; and the impact of foreign currency fluctuations.equity method investments.
NOTE 15: OTHER COMPREHENSIVE INCOME
AOCI attributable to shareowners of The Coca-Cola Company is separately presented on our consolidated balance sheets as a component of The Coca-Cola Company's shareowners' equity, which also includes our proportionate share of equity method investees' AOCI. Other comprehensive income (loss) ("OCI") attributable to noncontrolling interests is allocated to, and included in, our balance sheets as part of the line item equity attributable to noncontrolling interests.
AOCI attributable to shareowners of The Coca-Cola Company consisted of the following (in millions): |
| | | | | | | |
| December 31, | 2015 |
| | 2014 |
|
| Foreign currency translation adjustment | $ | (9,167 | ) | | $ | (5,226 | ) |
| Accumulated derivative net gains (losses) | 696 |
| | 554 |
|
| Unrealized net gains (losses) on available-for-sale securities | 288 |
| | 972 |
|
| Adjustments to pension and other benefit liabilities | (1,991 | ) | | (2,077 | ) |
| Accumulated other comprehensive income (loss) | $ | (10,174 | ) | | $ | (5,777 | ) |
The following table summarizes the allocation of total comprehensive income between shareowners of The Coca-Cola Company and noncontrolling interests (in millions):
|
| | | | | | | |
| December 31, | 2012 |
| | 2011 |
|
| | | | As Adjusted |
|
| Foreign currency translation adjustment | $ | (1,665 | ) | | $ | (1,445 | ) |
| Accumulated derivative net gains (losses) | 46 |
| | (53 | ) |
| Unrealized net gains (losses) on available-for-sale securities | 338 |
| | 160 |
|
| Adjustments to pension and other benefit liabilities | (2,104 | ) | | (1,436 | ) |
| Accumulated other comprehensive income (loss) | $ | (3,385 | ) | | $ | (2,774 | ) |
|
| | | | | | | | | |
| | Year Ended December 31, 2015 |
| | Shareowners of The Coca-Cola Company |
| Noncontrolling Interests |
| Total |
|
| Consolidated net income | $ | 7,351 |
| $ | 15 |
| $ | 7,366 |
|
| Other comprehensive income: | | | |
| Net foreign currency translation adjustment | (3,941 | ) | (18 | ) | (3,959 | ) |
Net gain (loss) on derivatives1 | 142 |
| — |
| 142 |
|
Net unrealized gain (loss) on available-for-sale securities2 | (684 | ) | — |
| (684 | ) |
Net change in pension and other benefit liabilities3 | 86 |
| — |
| 86 |
|
| Total comprehensive income | $ | 2,954 |
| $ | (3 | ) | $ | 2,951 |
|
| |
1 | Refer to Note 5 for additional information related to the net gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments. |
| |
2 | Refer to Note 3 for information related to the net unrealized gain or loss on available-for-sale securities. |
| |
3 | Refer to Note 13 for additional information related to the Company's pension and other postretirement benefit liabilities. |
OCI attributable to shareowners of The Coca-Cola Company, including our proportionate share of equity method investees' OCI, for the years ended December 31, 2012, 20112015, 2014 and 2010,2013, is as follows (in millions):
| | | | Before-Tax Amount |
| | Income Tax |
| | After-Tax Amount |
| Before-Tax Amount |
| | Income Tax |
| | After-Tax Amount |
|
| 2012 | | | | | | |
| 2015 | | | | | | |
| Foreign currency translation adjustments: | | | | | | |
| Translation adjustment arising during the year | | $ | (4,626 | ) | | $ | 243 |
| | $ | (4,383 | ) |
| Reclassification adjustments recognized in net income | | 63 |
| | (14 | ) | | 49 |
|
| Unrealized gains (losses) on net investment hedges arising during the year | | 637 |
| | (244 | ) | | 393 |
|
| Net foreign currency translation adjustment | $ | (219 | ) | | $ | (1 | ) | | $ | (220 | ) | (3,926 | ) | | (15 | ) | | (3,941 | ) |
| Derivatives: | | | | | | | | | | |
| Unrealized gains (losses) arising during the year | 77 |
| | (29 | ) | | 48 |
| 853 |
| | (314 | ) | | 539 |
|
| Reclassification adjustments recognized in net income | 82 |
| | (31 | ) | | 51 |
| (638 | ) | | 241 |
| | (397 | ) |
Net gain (loss) on derivatives1 | 159 |
| | (60 | ) | | 99 |
| 215 |
| | (73 | ) | | 142 |
|
| Available-for-sale securities: | | | | | | | | | | |
| Unrealized gains (losses) arising during the year | 248 |
| | (64 | ) | | 184 |
| (973 | ) | | 328 |
| | (645 | ) |
| Reclassification adjustments recognized in net income | (6 | ) | | — |
| | (6 | ) | (61 | ) | | 22 |
| | (39 | ) |
Net change in unrealized gain (loss) on available-for-sale securities2 | 242 |
| | (64 | ) | | 178 |
| (1,034 | ) | | 350 |
| | (684 | ) |
| Pension and other benefit liabilities: | | | | | | | | | | |
| Net pension and other benefits arising during the year | (1,132 | ) | | 405 |
| | (727 | ) | (169 | ) | | 43 |
| | (126 | ) |
| Reclassification adjustments recognized in net income | 92 |
| | (33 | ) | | 59 |
| 337 |
| | (125 | ) | | 212 |
|
Net change in pension and other benefit liabilities3 | (1,040 | ) | | 372 |
| | (668 | ) | 168 |
| | (82 | ) | | 86 |
|
| Other comprehensive income (loss) attributable to The Coca-Cola Company | $ | (858 | ) | | $ | 247 |
| | $ | (611 | ) | $ | (4,577 | ) | | $ | 180 |
| | $ | (4,397 | ) |
| |
1 | Refer to Note 5 for additional information related to the net gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments. |
| |
2 | Includes reclassification adjustments related to divestitures of certain available-for-sale securities. Refer to Note 3 for additional information related to these divestitures. |
| |
3 | Refer to Note 13 for additional information related to the Company's pension and other postretirement benefit liabilities. |
| | | | Before-Tax Amount |
| | Income Tax |
| | After-Tax Amount |
| Before-Tax Amount |
| | Income Tax |
| | After-Tax Amount |
|
| 2011 — As Adjusted | | | | | | |
| 2014 | | | | | | |
| Foreign currency translation adjustments: | | | | | | |
| Translation adjustment arising during the year | | $ | (2,560 | ) | | $ | 183 |
| | $ | (2,377 | ) |
| Net foreign currency translation adjustment | $ | (639 | ) | | $ | (1 | ) | | $ | (640 | ) | (2,560 | ) | | 183 |
| | (2,377 | ) |
| Derivatives: | | | | | | | | | | |
| Unrealized gains (losses) arising during the year | (3 | ) | | (1 | ) | | (4 | ) | 620 |
| | (231 | ) | | 389 |
|
| Reclassification adjustments recognized in net income | 243 |
| | (94 | ) | | 149 |
| (50 | ) | | 18 |
| | (32 | ) |
Net gain (loss) on derivatives1 | 240 |
| | (95 | ) | | 145 |
| 570 |
| | (213 | ) | | 357 |
|
| Available-for-sale securities: | | | | | | | | | | |
| Unrealized gains (losses) arising during the year | (4 | ) | | (8 | ) | | (12 | ) | 1,139 |
| | (412 | ) | | 727 |
|
| Reclassification adjustments recognized in net income | 10 |
| | (5 | ) | | 5 |
| (17 | ) | | 4 |
| | (13 | ) |
Net change in unrealized gain (loss) on available-for-sale securities2 | 6 |
| | (13 | ) | | (7 | ) | 1,122 |
| | (408 | ) | | 714 |
|
| Pension and other benefit liabilities: | | | | | | | | | | |
| Net pension and other benefits arising during the year | (1,206 | ) | | 423 |
| | (783 | ) | (1,666 | ) | | 588 |
| | (1,078 | ) |
| Reclassification adjustments recognized in net income | 31 |
| | (11 | ) | | 20 |
| 60 |
| | (21 | ) | | 39 |
|
Net change in pension and other benefit liabilities3 | (1,175 | ) | | 412 |
| | (763 | ) | (1,606 | ) | | 567 |
| | (1,039 | ) |
| Other comprehensive income (loss) attributable to The Coca-Cola Company | $ | (1,568 | ) | | $ | 303 |
| | $ | (1,265 | ) | $ | (2,474 | ) | | $ | 129 |
| | $ | (2,345 | ) |
| |
1 | Refer to Note 5 for additional information related to the net gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments. |
| |
2 | Includes reclassification adjustments related to divestitures of certain available-for-sale securities. Refer to Note 3 for additional information related to these divestitures. |
| |
3 | Refer to Note 13 for additional information related to the Company's pension and other postretirement benefit liabilities. |
| | | | Before-Tax Amount |
| | Income Tax |
| | After-Tax Amount |
| Before-Tax Amount |
| | Income Tax |
| | After-Tax Amount |
|
| 2010 — As Adjusted | | | | | | |
| 2013 | | | | | | |
| Foreign currency translation adjustments: | | | | | | |
| Translation adjustment arising during the year | | $ | (1,046 | ) | | $ | 56 |
| | $ | (990 | ) |
| Reclassification adjustments recognized in net income | | (194 | ) | | — |
| | (194 | ) |
| Net foreign currency translation adjustment | $ | (966 | ) | | $ | 31 |
| | $ | (935 | ) | (1,240 | ) | | 56 |
| | (1,184 | ) |
| Derivatives: | | | | | | | | | | |
| Unrealized gains (losses) arising during the year | (239 | ) | | 108 |
| | (131 | ) | 425 |
| | (173 | ) | | 252 |
|
| Reclassification adjustments recognized in net income | 17 |
| | (6 | ) | | 11 |
| (167 | ) | | 66 |
| | (101 | ) |
Net gain (loss) on derivatives1 | (222 | ) | | 102 |
| | (120 | ) | 258 |
| | (107 | ) | | 151 |
|
| Available-for-sale securities: | | | | | | | | | | |
| Unrealized gains (losses) arising during the year | 115 |
| | (25 | ) | | 90 |
| (134 | ) | | 42 |
| | (92 | ) |
| Reclassification adjustments recognized in net income | 18 |
| | (6 | ) | | 12 |
| 12 |
| | — |
| | 12 |
|
Net change in unrealized gain (loss) on available-for-sale securities2 | 133 |
| | (31 | ) | | 102 |
| (122 | ) | | 42 |
| | (80 | ) |
| Pension and other benefit liabilities: | | | | | | | | | | |
| Net pension and other benefits arising during the year | 397 |
| | (139 | ) | | 258 |
| 1,490 |
| | (550 | ) | | 940 |
|
| Reclassification adjustments recognized in net income | 35 |
| | (11 | ) | | 24 |
| 198 |
| | (72 | ) | | 126 |
|
Net change in pension and other benefit liabilities3 | 432 |
| | (150 | ) | | 282 |
| 1,688 |
| | (622 | ) | | 1,066 |
|
| Other comprehensive income (loss) attributable to The Coca-Cola Company | $ | (623 | ) | | $ | (48 | ) | | $ | (671 | ) | $ | 584 |
| | $ | (631 | ) | | $ | (47 | ) |
| |
1 | Refer to Note 5 for additional information related to the net gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments. |
| |
2 | Includes reclassification adjustments related to divestitures of certain available-for-sale securities. Refer to Note 3 for additional information related to these divestitures. |
| |
3 | Refer to Note 13 for additional information related to the Company's pension and other postretirement benefit liabilities. |
The following table presents the amounts and line items in our consolidated statements of income where adjustments reclassified from AOCI into income were recorded during the year ended December 31, 2015 (in millions):
|
| | | | |
| Description of AOCI Component | Financial Statement Line Item | Amount Reclassified from AOCI into Income |
|
| Foreign currency translation adjustments: | | |
| Divestitures, deconsolidations and other | Other income (loss) — net | $ | 63 |
|
| | Income before income taxes | $ | 63 |
|
| | Income taxes | (14 | ) |
| | Consolidated net income | $ | 49 |
|
| Derivatives: | | |
| Foreign currency contracts | Net operating revenues | $ | (630 | ) |
| Foreign currency and commodity contracts | Cost of goods sold | (59 | ) |
| Foreign currency contracts | Other income (loss) — net | 40 |
|
| Foreign currency and interest rate contracts | Interest expense | 11 |
|
| | Income before income taxes | $ | (638 | ) |
| | Income taxes | 241 |
|
| | Consolidated net income | $ | (397 | ) |
| Available-for-sale securities: | | |
| Sale of securities | Other income (loss) — net | $ | (61 | ) |
| | Income before income taxes | $ | (61 | ) |
| | Income taxes | 22 |
|
| | Consolidated net income | $ | (39 | ) |
| Pension and other benefit liabilities: | | |
| Recognized net actuarial loss (gain) | * | $ | 358 |
|
| Recognized prior service cost (credit) | * | (21 | ) |
| | Income before income taxes | $ | 337 |
|
| | Income taxes | (125 | ) |
| | Consolidated net income | $ | 212 |
|
| |
| * | This component of AOCI is included in the Company's computation of net periodic benefit cost and is not reclassified out of AOCI into a single line item in our consolidated statements of income in its entirety. Refer to Note 13 for additional information. |
NOTE 16: FAIR VALUE MEASUREMENTS
Accounting principles generally accepted in the United States define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1. We value assets and liabilities included in this level using dealer and broker quotations, certain pricing models, bid prices, quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
Recurring Fair Value Measurements
In accordance with accounting principles generally accepted in the United States, certain assets and liabilities are required to be recorded at fair value on a recurring basis. For our Company, the only assets and liabilities that are adjusted to fair value on a recurring basis are investments in equity and debt securities classified as trading or available-for-sale and derivative financial instruments. Additionally, the Company adjusts the carrying value of certain long-term debt as a result of the Company's fair value hedging strategy.
Investments in Trading and Available-for-Sale Securities
The fair values of our investments in trading and available-for-sale securities using quoted market prices from daily exchange traded markets are based on the closing price as of the balance sheet date and are classified as Level 1. The fair values of our investments in trading and available-for-sale securities classified as Level 2 are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. Inputs into these valuation techniques include actual trade data, benchmark yields, broker/dealer quotes and other similar data. These inputs are obtained from quoted market prices, independent pricing vendors or other sources.
Derivative Financial Instruments
The fair values of our futures contracts are primarily determined using quoted contract prices on futures exchange markets. The fair values of these instruments are based on the closing contract price as of the balance sheet date and are classified as Level 1.
The fair values of our derivative instruments other than futures are determined using standard valuation models. The significant inputs used in these models are readily available in public markets, or can be derived from observable market transactions, and therefore have been classified as Level 2. Inputs used in these standard valuation models for derivative instruments other than futures include the applicable exchange rates, forward rates, interest rates, discount rates and discount rates.commodity prices. The standard valuation model for options also uses implied volatility as an additional input. The discount rates are based on the historical U.S. Deposit or U.S. Treasury rates, and the implied volatility specific to options is based on quoted rates from financial institutions.
Included in the fair value of derivative instruments is an adjustment for nonperformance risk. The adjustment is based on current credit default swap ("CDS") rates applied to each contract, by counterparty. We use our counterparty's CDS rate when we are in an asset position and our own CDS rate when we are in a liability position. The adjustment for nonperformance risk did not have a significant impact on the estimated fair value of our derivative instruments.
The following tables summarize those assets and liabilities measured at fair value on a recurring basis (in millions):
| | | | December 31, 2012 | December 31, 2015 | |
| | Level 1 |
| | Level 2 |
| | Level 3 |
| | Netting Adjustment1 |
| | Fair Value Measurements |
| Level 1 |
| | Level 2 |
| | Level 3 |
| | Netting Adjustment1 |
| | Fair Value Measurements |
| |
| Assets: | | | | | | | | | | | | | | | | | | | |
| Trading securities | $ | 146 |
| | $ | 116 |
| | $ | 4 |
| | $ | — |
| | $ | 266 |
| |
| Available-for-sale securities | 1,390 |
| | 3,068 |
| | 135 |
| 2 | — |
| | 4,593 |
| |
Derivatives3 | 47 |
| | 583 |
| | — |
| | (116 | ) | | 514 |
| |
Trading securities2 | | $ | 183 |
| | $ | 135 |
| | $ | 4 |
| | $ | — |
| | $ | 322 |
| |
Available-for-sale securities2 | | 3,913 |
| | 4,574 |
| | 119 |
| 3 | — |
| | 8,606 |
| |
Derivatives4 | | 2 |
| | 1,268 |
| | — |
| | (638 | ) | 5 | 632 |
| 7 |
| Total assets | $ | 1,583 |
| | $ | 3,767 |
| | $ | 139 |
| | $ | (116 | ) | | $ | 5,373 |
| $ | 4,098 |
| | $ | 5,977 |
| | $ | 123 |
| | $ | (638 | ) | | $ | 9,560 |
| |
| Liabilities: | | | | | | | | | | | | | | | | | | | |
Derivatives3 | $ | 35 |
| | $ | 98 |
| | $ | — |
| | $ | (121 | ) | | $ | 12 |
| |
Derivatives4 | | $ | 24 |
| | $ | 635 |
| | $ | — |
| | $ | (488 | ) | 6 | $ | 171 |
| 7 |
| Total liabilities | $ | 35 |
| | $ | 98 |
| | $ | — |
| | $ | (121 | ) | | $ | 12 |
| $ | 24 |
| | $ | 635 |
| | $ | — |
| | $ | (488 | ) | | $ | 171 |
| |
| |
1 | Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle net positive and negative positions and also cash collateral held or placed with the same counterparties. There are no amounts subject to legally enforceable master netting agreements that management has chosen not to offset or that do not meet the offsetting requirements. Refer to Note 5. 5. |
| |
2 | Refer to Note 3 for additional information related to the composition of our trading securities and available-for-sale securities. |
| |
3 | Primarily related to long-term debt securities that mature in 2018. |
| |
34
| Refer to Note 5 for additional information related to the composition of our derivative portfolio. |
| |
5 | The Company is obligated to return $184 million in cash collateral it has netted against its derivative position. |
| |
6 | The Company has the right to reclaim $17 million in cash collateral it has netted against its derivative position. |
| |
7 | The Company's derivative financial instruments are recorded at fair value in our consolidated balance sheet as follows: $79 million in the line item prepaid expenses and other assets; $553 million in the line item other assets; and $171 million in the line item other liabilities. Refer to Note 5 for additional information related to the composition of our derivative portfolio. |
| | | | December 31, 2011 | December 31, 2014 | |
| | Level 1 |
| | Level 2 |
| | Level 3 |
| | Netting Adjustment1 |
| | Fair Value Measurements |
| Level 1 |
| | Level 2 |
| | Level 3 |
| | Netting Adjustment1 |
| | Fair Value Measurements |
| |
| Assets: | | | | | | | | | | | | | | | | | | | |
| Trading securities | $ | 166 |
| | $ | 41 |
| | $ | 4 |
| | $ | — |
| | $ | 211 |
| |
| Available-for-sale securities | 1,071 |
| | 214 |
| | 116 |
| 2 | — |
| | 1,401 |
| |
Derivatives3 | 39 |
| | 467 |
| | — |
| | (117 | ) | | 389 |
| |
Trading securities2 | | $ | 228 |
| | $ | 177 |
| | $ | 4 |
| | $ | — |
| | $ | 409 |
| |
Available-for-sale securities2 | | 4,116 |
| | 3,627 |
| | 136 |
| 3 | — |
| | 7,879 |
| |
Derivatives4 | | 9 |
| | 1,721 |
| | — |
| | (437 | ) | | 1,293 |
| 5 |
| Total assets | $ | 1,276 |
| | $ | 722 |
| | $ | 120 |
| | $ | (117 | ) | | $ | 2,001 |
| $ | 4,353 |
| | $ | 5,525 |
| | $ | 140 |
| | $ | (437 | ) | | $ | 9,581 |
| |
| Liabilities: | | | | | | | | | | | | | | | | | | | |
Derivatives3 | $ | 5 |
| | $ | 201 |
| | $ | — |
| | $ | (121 | ) | | $ | 85 |
| |
Derivatives4 | | $ | 2 |
| | $ | 558 |
| | $ | — |
| | $ | (437 | ) | | $ | 123 |
| 5 |
| Total liabilities | $ | 5 |
| | $ | 201 |
| | $ | — |
| | $ | (121 | ) | | $ | 85 |
| $ | 2 |
| | $ | 558 |
| | $ | — |
| | $ | (437 | ) | | $ | 123 |
| |
| |
1 | Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle net positive and negative positions and also cash collateral held or placed with the same counterparties. There are no amounts subject to legally enforceable master netting agreements that management has chosen not to offset or that do not meet the offsetting requirements. Refer to Note 5. 5. |
| |
2 | Refer to Note 3 for additional information related to the composition of our trading securities and available-for-sale securities. |
| |
3 | Primarily related to long-term debt securities that mature in 2018. |
| |
34
| Refer to Note 5 for additional information related to the composition of our derivative portfolio. |
| |
5 | The Company's derivative financial instruments are recorded at fair value in our consolidated balance sheet as follows: $567 million in the line item prepaid expenses and other assets; $726 million in the line item other assets; $14 million in the line item accounts payable and accrued expenses; and $109 million in the line item other liabilities. Refer to Note 5 for additional information related to the composition of our derivative portfolio. |
Gross realized and unrealized gains and losses on Level 3 assets and liabilities were not significant for the years ended December 31, 20122015 and 2011.2014.
The Company recognizes transfers between levels within the hierarchy as of the beginning of the reporting period. Gross transfers between levels within the hierarchy were not significant for the years ended December 31, 20122015 and 2011.2014.
Nonrecurring Fair Value Measurements
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a nonrecurring basis as required by accounting principles generally accepted in the United States. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. Assets
The gains or losses on assets measured at fair value on a nonrecurring basis forare summarized in the years ended December 31, 2012 and 2011, are summarizedtable below (in millions):
|
| | | | | | | | |
| | Gains (Losses) | |
| December 31, | 2012 |
| | 2011 |
| |
| Exchange of investment in equity securities | $ | 185 |
| 1 | $ | 418 |
| 5 |
| Assets held for sale | (108 | ) | 2 | — |
| |
| Valuation of shares in equity method investee | 10 |
| 3 | 122 |
| 6 |
| Cost method investments | (16 | ) | 4 | — |
| |
| Equity method investments | — |
| | (41 | ) | 7 |
| Available-for-sale securities | — |
| | (17 | ) | 8 |
| Inventories | — |
| | (11 | ) | 9 |
| Cold-drink equipment | — |
| | (1 | ) | 9 |
| Total | $ | 71 |
| | $ | 470 |
| |
|
| | | | | | | | |
| | Gains (Losses) | |
| December 31, | 2015 |
| | 2014 |
| |
Assets held for sale1 | $ | (980 | ) | | $ | (494 | ) | |
| Intangible assets | (473 | ) | 2 | (18 | ) | 2 |
| Investment in formerly unconsolidated subsidiary | (19 | ) | 3 | — |
| |
| Valuation of shares in equity method investee | (6 | ) | 4 | (32 | ) | 4 |
| Total | $ | (1,478 | ) | | $ | (544 | ) | |
| |
1 | As a resultThe Company is required to record assets and liabilities that are held for sale at the lower of the merger of Andina and Polar, the Company recognized a gain of $185 millioncarrying value or fair value less any costs to sell based on the exchange of shares we previously ownedagreed-upon sale price. These charges primarily related to refranchising activities in Polar for shares in Andina. This gain primarily represents the difference between the carrying value of the Polar shares we relinquished and the fair value of the Andina shares we received as a result of the transaction.North America. The gain wascharges were calculated based on Level 13 inputs. Refer to Note 17.
2. |
| |
2 | The Company recognized losses of $473 million and Coca-Cola FEMSA executed a share purchase agreement for$18 million during the saleyears ended December 31, 2015 and 2014, respectively, due to impairment charges on certain intangible assets. The charges incurred during 2015 included $418 million of a majority ownership interestimpairment charges primarily due to the discontinuation of the energy products in our consolidated Philippine bottling operations. Asthe glacéau portfolio as a result of this agreement, the CompanyMonster Transaction and a $55 million impairment charge on a Venezuelan trademark. The charges were determined by comparing the fair value of the assets to the current carrying value. The fair value of the assets was required to classify our Philippine bottling operations as held for sale in our consolidated balance sheet as of December 31, 2012. We also recognized a loss of $108 million during the year ended December 31, 2012, based on the agreed upon sale price and related transaction costs. The loss was calculatedderived using discounted cash flow analyses based on Level 3 inputs. Refer to Note 17. 1, Note 2 and Note 17. |
| |
3 | The Company recognized a gainloss of $92$19 million as a result of 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 we sold a proportionate share of on our previously held investment in Coca-Cola FEMSA. This gain was partially offset by a loss of $82 million the Company recognized due to the Company acquiring an ownership interest in MikuniSouth African bottler, which had been accounted for which we paid a premium over the publicly traded market price. This premium was expensed on the acquisition date. Subsequent to this transaction, the Company accounts for our investment in Mikuni under the equity method of accounting.accounting prior to our acquisition of the bottler in February 2015. U.S. GAAP requires the acquirer to remeasure its previously held noncontrolling equity interest in the acquired entity to fair value as of the acquisition date and recognize any gains or losses in earnings. The gain and loss described above were determined usingCompany remeasured our equity interest in the South African bottler based on Level 13 inputs. Refer to Note 17. 2. |
| |
4 | TheIn 2014, the Company recognized impairment chargesan estimated loss of $16$32 million dueas a result of the owners of the majority interest in a Brazilian bottling entity exercising their option to other-than-temporary declinesacquire from us a 10 percent interest in the fair valuesentity's outstanding shares. The exercise price was lower than our carrying value. The transaction closed in January 2015, and the Company recorded an additional loss of certain cost method investments.$6 million during the year ended December 31, 2015, calculated based on the final option price. These chargeslosses were determined using Level 3 inputs. Refer to Note 17.2 and Note 17.
|
| |
5
| As a result of the merger of Arca and Contal, the Company recognized a gain of $418 million on the exchange of the shares we previously owned in Contal for shares in the newly formed entity Arca Contal. The gain represents the difference between the carrying value of the Contal shares we relinquished and the fair value of the Arca Contal shares we received as a result of the transaction. The gain and initial carrying value of our investment were calculated based on Level 1 inputs. Refer to Note 17.
|
| |
6
| The Company recognized a net gain of $122 million, primarily as a result of Coca-Cola FEMSA, an equity method investee, issuing additional shares of its own stock at per share amounts 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 we sold a proportionate share of our investment in Coca-Cola FEMSA. The gains the Company recognized as a result of the previous transactions were partially offset by charges associated with certain of the Company's equity method investments in Japan. The gains and charges were determined using Level 1 inputs. Refer to Note 17.
|
| |
7
| The Company recognized impairment charges of $41 million related to an investment in an entity accounted for under the equity method of accounting. Subsequent to the recognition of these impairment charges, the Company's remaining financial exposure related to this entity is not significant. This charge was determined using Level 3 inputs. Refer to Note 17.
|
| |
8
| The Company recognized impairment charges of $17 million due to the other-than-temporary decline in the fair values of certain available-for-sale securities. These charges were determined using Level 1 inputs. Refer to Note 17.
|
| |
9
| These assets primarily consisted of Company-owned inventory as well as cold-drink equipment that were damaged or lost as a result of the natural disasters in Japan on March 11, 2011. We recorded impairment charges of $11 million and $1 million related to Company-owned inventory and cold-drink equipment, respectively. These charges were determined using Level 3 inputs based on the carrying value of the inventory and cold-drink equipment prior to the disasters. Refer to Note 17.
|
Fair Value Measurements for Pension and Other Postretirement Benefit Plans
The fair value hierarchy discussed above is not only applicable to assets and liabilities that are included in our consolidated balance sheets but is also applied to certain other assets that indirectly impact our consolidated financial statements. For example, our Company sponsors and/or contributes to a number of pension and other postretirement benefit plans. Assets contributed by the Company become the property of the individual plans. Even though the Company no longer has control over these assets, we are indirectly impacted by subsequent fair value adjustments to these assets. The actual return on these assets impacts the Company's future net periodic benefit cost, as well as amounts recognized in our consolidated balance sheets. Refer to Note 13.13. The Company uses the fair value hierarchy to measure the fair value of assets held by our various pension and other postretirement benefit plans.
Pension Plan Assets
The following table summarizes the levels within the fair value hierarchy used to determine the fair value offor our pension plan assets for our U.S. and non-U.S. pension plans as of December 31, 20122015 and 20112014 (in millions):
| | | | December 31, 2012 | | December 31, 2011 | December 31, 2015 | | December 31, 2014 |
| | Level 1 |
| | Level 2 |
| | Level 3 |
| | Total |
| | Level 1 |
| | Level 2 |
| | Level 3 |
| | Total |
| Level 1 |
| | Level 2 |
| | Level 3 |
| | Total |
| | Level 1 |
| | Level 2 |
| | Level 3 |
| | Total |
|
| Cash and cash equivalents | $ | 187 |
| | $ | 199 |
| | $ | — |
| | $ | 386 |
| | $ | 152 |
| | $ | 75 |
| | $ | — |
| | $ | 227 |
| $ | 128 |
| | $ | 148 |
| | $ | — |
| | $ | 276 |
| | $ | 161 |
| | $ | 100 |
| | $ | — |
| | $ | 261 |
|
| Equity securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S.-based companies | 1,847 |
| | 20 |
| | 14 |
| | 1,881 |
| | 1,366 |
| | 15 |
| | 14 |
| | 1,395 |
| 1,562 |
| | — |
| | 1 |
| | 1,563 |
| | 1,793 |
| | 6 |
| | 17 |
| | 1,816 |
|
| International-based companies | 910 |
| | 54 |
| | — |
| | 964 |
| | 865 |
| | 82 |
| | 6 |
| | 953 |
| 802 |
| | 5 |
| | 10 |
| | 817 |
| | 1,050 |
| | 13 |
| | — |
| | 1,063 |
|
| Fixed-income securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Government bonds | — |
| | 562 |
| | — |
| | 562 |
| | — |
| | 773 |
| | — |
| | 773 |
| — |
| | 736 |
| | 1 |
| | 737 |
| | — |
| | 863 |
| | 3 |
| | 866 |
|
| Corporate bonds and debt securities | — |
| | 982 |
| | — |
| | 982 |
| | — |
| | 718 |
| | — |
| | 718 |
| — |
| | 1,171 |
| | 2 |
| | 1,173 |
| | — |
| | 1,533 |
| | 33 |
| | 1,566 |
|
| Mutual, pooled and commingled funds | 504 |
| | 1,006 |
| | — |
| | 1,510 |
| | 167 |
| | 557 |
| | 5 |
| | 729 |
| 77 |
| | 1,046 |
| | — |
| | 1,123 |
| | 98 |
| | 1,134 |
| | 31 |
| | 1,263 |
|
| Hedge funds/limited partnerships | — |
| | 125 |
| | 400 |
| | 525 |
| | — |
| | 140 |
| | 349 |
| | 489 |
| — |
| | 205 |
| | 559 |
| | 764 |
| | — |
| | 215 |
| | 584 |
| | 799 |
|
| Real estate | — |
| | — |
| | 257 |
| | 257 |
| | — |
| | — |
| | 270 |
| | 270 |
| — |
| | — |
| | 464 |
| | 464 |
| | — |
| | 16 |
| | 392 |
| | 408 |
|
| Other | — |
| | 7 |
| | 510 |
| 1 | 517 |
| | — |
| | 99 |
| | 518 |
| 1 | 617 |
| — |
| | 15 |
| | 757 |
| 1 | 772 |
| | — |
| | 14 |
| | 846 |
| 1 | 860 |
|
| Total | $ | 3,448 |
| | $ | 2,955 |
| | $ | 1,181 |
| | $ | 7,584 |
| | $ | 2,550 |
| | $ | 2,459 |
| | $ | 1,162 |
| | $ | 6,171 |
| $ | 2,569 |
| | $ | 3,326 |
| | $ | 1,794 |
| | $ | 7,689 |
| | $ | 3,102 |
| | $ | 3,894 |
| | $ | 1,906 |
| | $ | 8,902 |
|
| |
1 | Includes $510 million and $514 million of purchased annuity contracts as of December 31, 2012and 2011, respectively. insurance-linked securities. |
The following table provides a reconciliation of the beginning and ending balance of Level 3 assets for our U.S. and non-U.S. pension plans for the years ended December 31, 20122015 and 20112014 (in millions):
| | | | Hedge Funds/Limited Partnerships |
| | Real Estate |
| | Equity Securities |
| | Mutual, Pooled and Commingled Funds |
| | Other |
| | Total |
| Fixed-Income Securities |
| | Hedge Funds/Limited Partnerships |
| | Real Estate |
| | Equity Securities |
| | Mutual, Pooled and Commingled Funds |
| | Other |
| | Total |
|
| 2011 | | | | | | | | | | | | |
| 2014 | | | | | | | | | | | | | | |
| Balance at beginning of year | $ | 317 |
| | $ | 242 |
| | $ | 15 |
| | $ | 20 |
| | $ | 303 |
| | $ | 897 |
| $ | 89 |
| | $ | 353 |
| | $ | 251 |
| | $ | 15 |
| | $ | — |
| | $ | 584 |
| | $ | 1,292 |
|
| Actual return on plan assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Related to assets still held at the reporting date | 9 |
| | 35 |
| | 4 |
| | (5 | ) | | 61 |
| | 104 |
| 17 |
| | (17 | ) | | 29 |
| | 1 |
| | — |
| | 50 |
| | 80 |
|
| Related to assets sold during the year | (3 | ) | | (5 | ) | | — |
| | 6 |
| | — |
| | (2 | ) | (2 | ) | | 42 |
| | 7 |
| | — |
| | — |
| | — |
| | 47 |
|
| Purchases, sales and settlements — net | 26 |
| | (2 | ) | | (1 | ) | | (16 | ) | | 146 |
| | 153 |
| (41 | ) | | 198 |
| | 106 |
| | 1 |
| | 31 |
| | 241 |
| | 536 |
|
| Transfers in or out of Level 3 — net | 1 |
| | — |
| | 2 |
| | — |
| | 2 |
| | 5 |
| (27 | ) | | 9 |
| | — |
| | — |
| | — |
| | — |
| | (18 | ) |
| Foreign currency translation | (1 | ) | | — |
| | — |
| | — |
| | 6 |
| | 5 |
| — |
| | (1 | ) | | (1 | ) | | — |
| | — |
| | (29 | ) | | (31 | ) |
| Balance at end of year | $ | 349 |
| | $ | 270 |
| | $ | 20 |
| | $ | 5 |
| | $ | 518 |
| 1 | $ | 1,162 |
| $ | 36 |
| | $ | 584 |
| | $ | 392 |
| | $ | 17 |
| | $ | 31 |
| | $ | 846 |
| 1 | $ | 1,906 |
|
| 2012 | | | | | | | | | | | | |
| 2015 | | | | | | | | | | | | | | |
| Balance at beginning of year | $ | 349 |
| | $ | 270 |
| | $ | 20 |
| | $ | 5 |
| | $ | 518 |
| | $ | 1,162 |
| $ | 36 |
| | $ | 584 |
| | $ | 392 |
| | $ | 17 |
| | $ | 31 |
| | $ | 846 |
| | $ | 1,906 |
|
| Actual return on plan assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Related to assets still held at the reporting date | (8 | ) | | 13 |
| | — |
| | — |
| | 1 |
| | 6 |
| 1 |
| | (14 | ) | | 32 |
| | (6 | ) | | — |
| | 42 |
| | 55 |
|
| Related to assets sold during the year | 24 |
| | 3 |
| | — |
| | — |
| | — |
| | 27 |
| (4 | ) | | 45 |
| | 6 |
| | — |
| | — |
| | — |
| | 47 |
|
| Purchases, sales and settlements — net | 35 |
| | (27 | ) | | — |
| | (5 | ) | | (2 | ) | | 1 |
| (6 | ) | | (74 | ) | | 32 |
| | — |
| | (2 | ) | | (76 | ) | 2 | (126 | ) |
| Transfers in or out of Level 3 — net | — |
| | (2 | ) | | (6 | ) | | — |
| | (4 | ) | | (12 | ) | (24 | ) | | 21 |
| | 2 |
| | — |
| | (29 | ) | | (3 | ) | | (33 | ) |
| Foreign currency translation | — |
| | — |
| | — |
| | — |
| | (3 | ) | | (3 | ) | — |
| | (3 | ) | | — |
| | — |
| | — |
| | (52 | ) | | (55 | ) |
| Balance at end of year | $ | 400 |
| | $ | 257 |
| | $ | 14 |
| | $ | — |
| | $ | 510 |
| 1 | $ | 1,181 |
| $ | 3 |
| | $ | 559 |
| | $ | 464 |
| | $ | 11 |
| | $ | — |
| | $ | 757 |
| 1 | $ | 1,794 |
|
| |
1 | Includes $510 million and $514 million of purchased annuity contracts and insurance-linked securities. |
| |
2 | Includes the transfer of assets associated with the Company's consolidated German bottling operations to assets held for sale and liabilities held for sale as of December 31, 2012 and 2011, respectively.2015. Refer to Note 2 for additional information. |
Other Postretirement Benefit Plan Assets
The following table summarizes the levels within the fair value hierarchy used to determine the fair value offor our other postretirement benefit plan assets as of December 31, 20122015 and 20112014 (in millions):
| | | | December 31, 2012 | | December 31, 2011 | December 31, 2015 | | December 31, 2014 |
| | Level 1 |
| | Level 2 |
| | Level 3 1 |
| | Total |
| | Level 1 |
| | Level 2 |
| | Level 3 1 |
| | Total |
| Level 1 |
| | Level 2 |
| | Level 3 1 |
| | Total |
| | Level 1 |
| | Level 2 |
| | Level 3 1 |
| | Total |
|
| Cash and cash equivalents | $ | 1 |
| | $ | 12 |
| | $ | — |
| | $ | 13 |
| | $ | — |
| | $ | 86 |
| | $ | — |
| | $ | 86 |
| $ | 1 |
| | $ | 7 |
| | $ | — |
| | $ | 8 |
| | $ | 9 |
| | $ | 1 |
| | $ | — |
| | $ | 10 |
|
| Equity securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S.-based companies | 81 |
| | — |
| | — |
| | 81 |
| | 70 |
| | — |
| | — |
| | 70 |
| 116 |
| | — |
| | — |
| | 116 |
| | 114 |
| | — |
| | — |
| | 114 |
|
| International-based companies | 4 |
| | — |
| | — |
| | 4 |
| | 13 |
| | — |
| | — |
| | 13 |
| 6 |
| | — |
| | — |
| | 6 |
| | 7 |
| | — |
| | — |
| | 7 |
|
| Fixed-income securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Government bonds | 75 |
| | 3 |
| | — |
| | 78 |
| | — |
| | 2 |
| | — |
| | 2 |
| 77 |
| | 3 |
| | — |
| | 80 |
| | 76 |
| | 3 |
| | — |
| | 79 |
|
| Corporate bonds and debt securities | — |
| | 5 |
| | — |
| | 5 |
| | — |
| | 6 |
| | — |
| | 6 |
| — |
| | 8 |
| | — |
| | 8 |
| | — |
| | 9 |
| | — |
| | 9 |
|
| Mutual, pooled and commingled funds | 11 |
| | 5 |
| | — |
| | 16 |
| | — |
| | 3 |
| | — |
| | 3 |
| 10 |
| | 5 |
| | — |
| | 15 |
| | 10 |
| | 6 |
| | — |
| | 16 |
|
| Hedge funds/limited partnerships | — |
| | 1 |
| | 2 |
| | 3 |
| | — |
| | — |
| | 2 |
| | 2 |
| — |
| | 1 |
| | 4 |
| | 5 |
| | — |
| | 1 |
| | 4 |
| | 5 |
|
| Real estate | — |
| | — |
| | 2 |
| | 2 |
| | — |
| | — |
| | 2 |
| | 2 |
| — |
| | — |
| | 3 |
| | 3 |
| | — |
| | — |
| | 3 |
| | 3 |
|
| Other | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
| — |
| | — |
| | 4 |
| | 4 |
| | — |
| | — |
| | 3 |
| | 3 |
|
| Total | $ | 172 |
| | $ | 26 |
| | $ | 4 |
| | $ | 202 |
| | $ | 83 |
| | $ | 98 |
| | $ | 4 |
| | $ | 185 |
| $ | 210 |
| | $ | 24 |
| | $ | 11 |
| | $ | 245 |
| | $ | 216 |
| | $ | 20 |
| | $ | 10 |
| | $ | 246 |
|
| |
1 | Level 3 assets are not a significant portion of other postretirement benefit plan assets. |
Other Fair Value Disclosures
The carrying amounts of cash and cash equivalents; short-term investments; receivables; accounts payable and accrued expenses; and loans and notes payable approximate their fair values because of the relatively short-term maturities of these financial instruments.
The fair value of our long-term debt is estimated using Level 2 inputs based on quoted prices for those instruments. Where quoted prices are not available, fair value is estimated using discounted cash flows and market-based expectations for interest rates, credit risk and the contractual terms of the debt instruments. As of December 31, 2012,2015, the carrying amount and fair value of our long-term debt, including the current portion, were $16,313$31,084 million and $17,157$31,308 million,, respectively. As of December 31, 2011,2014, the carrying amount and fair value of our long-term debt, including the current portion, were $15,697$22,615 million and $16,360$23,411 million,, respectively.
NOTE 17: 17: SIGNIFICANT OPERATING AND NONOPERATING ITEMS
Other Operating ItemsCharges
In December 2011,2015, 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 other operating charges of $131,657 million during the year ended December 31, 2012.. These charges wereprimarily consisted of $691 million due to the Company's productivity and reinvestment program and $292 million due to the integration of our German bottling operations. In addition, the Company recorded inimpairment charges of $418 million primarily due to the line item cost of goods sold in our consolidated statement of income.
On March 11, 2011, a major earthquake struck off the coast of Japan, resulting in a tsunami that devastated the northern and eastern regionsdiscontinuation 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 has helped 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 year ended December 31, 2011, including $23 million in deductions from revenue, $11 million in cost of goods sold and $50 million in other operating charges. The charges of $23 million 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 beverageenergy 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 charges of $11 million recorded in cost of goods sold were primarily related to Company-owned inventory that was destroyed or lost. The charges of $50 million recorded in other operating charges were primarily related to the donation discussed above and included an impairment charge of $1 million related to certain Company-owned fixed assets. These fixed assets primarily consisted of Company-owned vending equipment and coolers that were damaged or lostglacéau portfolio as a result of the Monster Transaction and incurred a charge of $100 million due to a cash contribution we made to The Coca-Cola Foundation. The Company also incurred a charge of $111 million due to the write-down of receivables from our bottling partner in Venezuela and an impairment of a Venezuelan trademark primarily due to changes in exchange rates as a result of the establishment of the new open market exchange system. Refer to Note 18 for additional information on the Company's productivity, integration and restructuring initiatives. Refer to Note 2 for additional information on the Monster Transaction. Refer to Note 1 for additional information on the Venezuelan currency change. Refer to Note 19 for the impact these events.charges had on our operating segments.
In 2014, the Company incurred other operating charges of $1,183 million. These charges primarily consisted of $601 million due to the Company's productivity and reinvestment program and $208 million due to the integration of our German bottling operations. In addition, the Company incurred a charge of $314 million due to a write-down we recorded related to receivables from our bottling partner in Venezuela and an impairment of a Venezuelan trademark primarily due to changes in exchange rates. The write-down was recorded as a result of limited government-approved exchange rate conversion mechanisms. The Company also recorded a loss of $36 million as a result of the restructuring and transition of the Company's Russian juice operations to an existing joint venture with an unconsolidated bottling partner. Refer to Note 1618 for additional information on our productivity and reinvestment program as well as the fair value disclosures relatedCompany's other productivity, integration and restructuring initiatives. Refer to Note 1 for additional information on the inventory and fixed asset charges described above.Venezuelan currency change. Refer to Note 19 for the impact these charges had on our operating segments.
Other Operating Charges
In 2012,2013, the Company incurred other operating charges of $447895 million, which primarily consisted of $270$494 million associated with the Company's productivity and reinvestment program; $163$195 million related due to the impairment of certain intangible assets described below; $188 million due to the Company's other restructuring and integration initiatives; $20and $22 million due to changes incharges associated with certain of 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 $8 million due to costs associated with the Company detecting carbendazim in orange juice imported from Brazil for distribution in the United States as described above. These charges were partially offset by reversals of $10 million associated with the refinement of previously established accruals related to the Company's 2008–2011 productivity initiatives as well as reversals of $6 million associated with the refinement of previously established accruals related to the Company's integration of CCE's former North America business.fixed assets. Refer to Note 18 for additional information on our productivity and reinvestment program as well as the Company's other productivity, integration and restructuring initiatives. Refer to Note 19 for the impact these charges had on our operating segments.
In 2011,During the year ended December 31, 2013, the Company incurred other operatingrecorded charges of $732$195 million, which primarily consisted of $633 related to certain intangible assets. These charges included $113 million associated with the Company's productivity, integration and restructuring initiatives; $50 million related to the eventsimpairment of trademarks recorded in Japan described above; $35 million of costs associated with the merger of Arcaour Bottling Investments and Contal; and $10 million associated with the floodsAsia Pacific operating segments. These impairments were primarily due to a strategic decision to phase out certain local-market value brands, which resulted in Thailand that impacted the Company's supply chain operationsa change in the region.expected useful life of the intangible assets. The charges were determined by comparing the fair value of the trademarks, derived using discounted cash flow analyses, to the current carrying value. Additionally, the remaining charge of $82 million was related to goodwill recorded in our Bottling Investments operating segment. This charge was primarily the result of management's revised outlook on market conditions and volume performance.
Other Nonoperating Items
Interest Expense
During the year ended December 31, 2015, the Company recorded charges of $320 million due to the early extinguishment of certain long-term debt. These charges included the difference between the reacquisition price and the net carrying amount of the debt extinguished, including the impact of the related fair value hedging relationship. Refer to Note 1810 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 19 for the impact these chargesthis charge had on our operating segments.
In 2010, the Company incurred other operating charges of $819 million, which consisted of $478 million related to the Company's productivity, integration and restructuring initiatives; $250 million related to charitable contributions; $81 million due to transaction costs incurred in connection with our acquisition of CCE's former North America business and the sale of our Norwegian and Swedish bottling operations to New CCE; and $10 million of charges related to bottling activities in Eurasia. Refer to Note 18 for additional information on our productivity, integration and restructuring initiatives. The charitable contributions were primarily attributable to a cash donation to The Coca-Cola Foundation. Refer to Note 2 for additional information related to the transaction costs. Refer to Note 19 for the impact these charges had on our operating segments.
Other Nonoperating Items
Equity Income (Loss) — Net
The Company recorded a net gain of $8 million and net charges of $87 million, $5318 million and $66159 million in equity income (loss) — net during the years ended December 31, 20122015, 20112014 and 20102013, respectively. These amounts primarily represent the Company's proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 19 for the impact these charges had on our operating segments.
Other Income (Loss) — Net
In 2012,2015, the Company also recorded a net gain of $1,403 million as a result of the Monster Transaction and charges of $1,006 million due to the refranchising of certain territories in North America. In addition, the Company recognized a foreign currency exchange gain of $300 million associated with our foreign-denominated debt partially offset by a charge of $11$27 million due to the remeasurement of the net monetary assets of our Venezuelan subsidiary using the SIMADI exchange rate. Refer to Note 2 for additional information related to changesthe Monster Transaction and North America refranchising. Refer to Note 1 for additional information related to the charge due to the remeasurement 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.
Venezuela. Refer to Note 19 for the impact these items had on our operating segments.
Other Income (Loss) — NetIn 2014, the Company recorded charges of $799 million due to the refranchising of certain territories in North America. The Company also incurred a charge of $372 million due to the remeasurement of the net monetary assets of our Venezuelan subsidiary using the SICAD 2 exchange rate. Refer to Note 2 for more information related to the North America refranchising, Note 1 for more information related to the charge due to the remeasurement in Venezuela and Note 19 for the impact these charges had on our operating segments.
In 2012,2013, the Company recognizedrecorded a gain of $185$615 million due to the deconsolidation of our Brazilian bottling operations as a result of the merger of Andina and Polar,their combination with Andina being the acquiring company. Prioran independent bottling partner. Subsequent to this transaction, the Company held anaccounts for our investment in Andina that we accounted for as an available-for-sale security as well as an investment in Polar that we accounted forthe newly combined Brazilian bottling operations under the equity method of accounting. The mergerowners of the two companies wasmajority interest received the option to acquire from us up to 24 percent of the new entity's outstanding shares at any time for a noncash transaction that resulted in Polar shareholders exchanging their existing Polar shares for newly issued sharesperiod of Andina at a specified exchange rate. As a result,six years beginning December 31, 2013. In December 2014, the Company now holds an investment in Andinareceived notification that we account for as an equity method investment. This gain impacted the Corporate operating segment. Refer to Note 19. Refer to Note 16 for additional information on the measurementowners of the gain.
On December 13, 2012, the Company and Coca-Cola FEMSA executedmajority interest had exercised their option to acquire from us a share purchase agreement for the sale of a majority ownership10 percent interest in our consolidated Philippine bottling operations. Asthe entity's outstanding shares. During the year ended December 31, 2014, we recorded an estimated loss of $32 million as a result of this agreement,the exercise price being lower than our carrying value. The transaction closed in January 2015, and the Company was required to classify our Philippine bottling operations as held for sale in our consolidated balance sheet as of December 31, 2012. We also recognized arecorded an additional loss of $108$6 million during the year ended December 31, 2012,2015, based on the agreed-upon sale price and related transaction costs. This loss impacted the Corporate operating segment.final option price. Refer to Note 2 for additional information on this transaction. Refer to Note 19. for the impact these items had on our operating segments.
Effective July 1, 2013, four of the Company's Japanese bottling partners merged as Coca-Cola East Japan Bottling Company, Ltd. ("CCEJ"), a publicly traded entity, through a share exchange. The terms of the agreement included 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. As a result, the Company recorded a net charge of $114 million for those investments in which the Company's carrying value was greater than the fair value of the shares received. Refer to Note 19 for the impact this loss had on our operating segments.
In 2013, the Company recorded a charge of $140 million due to the Venezuelan government announcing a currency devaluation. As a result of this devaluation, the Company remeasured the net monetary assets related to its operations in Venezuela. Refer to Note 19 for the impact this charge had on our operating segments. The Company also recognized a gain of $92$139 million as a result of 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 investment. Accordingly, the Company is required to treat this type of transaction as if we sold a proportionate share of our investment in Coca-Cola FEMSA. This gain impacted the Corporate operating segment. Refer to Note 19. Refer to Note 16 for additional information on the measurement of the gain.
During the year ended December 31, 2012, the Company recorded a charge of $82 million due to the acquisition of an ownership interest in Mikuni for which we paid a premium over the publicly traded market price. Although the Company paid this premium to obtain specific rights that have an economic and strategic value to the Company, they do not qualify as an asset and were recorded as expense on the acquisition date. This charge impacted the Corporate operating segment. Refer to Note 19. The Company accounts for our investment in Mikuni under the equity method of accounting.
The Company also recognized charges of $16 million during the year ended December 31, 2012, due to other-than-temporary declines in the fair values of certain cost method investments. These charges impacted the Corporate operating segment. Refer to Note 19.
In 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 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 noncash transaction that resulted in Contal shareholders exchanging their existing Contal shares for new shares in Arca Contal at a specified exchange rate. Refer to Note 16 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. This net gain impacted the Corporate operating segment. Refer to Note 19.
The Company also recognized a net gain of $122 million during 2011, primarily as a result of Coca-Cola FEMSA issuing additional shares of its own stock at per share amounts 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 wethe Company sold a proportionate share of ourits investment in Coca-Cola FEMSA. The gains the Company recognized as a result of the previous transactions were partially offset by charges associated with certain of the Company's equity method investments in Japan. In addition, the Company recognized a gain of $102 million during 2011 related to the sale of our investment in Embonor. Refer to Note 216 for additional information. Refer toinformation on the measurement of the gain and Note 19 for the impact these items had on our operating segments.
During 2011, the Company recorded charges of $41 million due to the impairment of an investment in an entity accounted for under the equity method of accounting and $17 million due to other-than-temporary declines in the fair value of certain of the Company's available-for-sale securities. Refer to Note 16 for additional fair value information related to these impairments. The
Company also recorded a charge of $5 million related to the finalization of working capital adjustments associated with the sale of our Norwegian and Swedish Bottling operations to New CCE during the fourth quarter of 2010. This charge reduced the amount of our previously reportedthis gain on the sale of these bottling operations. Refer to Note 19 for the impact these charges had on our operating segments.
In 2010, the Company recognized gains of $4,978 million related to the remeasurement of our equity investment in CCE to fair value; $597 million due to the sale of all our ownership interests in our Norwegian and Swedish bottling operations to New CCE; and $23 million as a result of the sale of 50 percent of our investment in Leão Junior, which was a wholly owned subsidiary of the Company prior to this transaction. Refer to Note 2 for additional information related to our acquisition of CCE's former North America business and the sale of all our ownership interests in our Norwegian and Swedish bottling operations to New CCE. The gain on the Leão Junior 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. The gains related to these transactions impacted our Corporate operating segment. Refer to Note 19.
During 2010, in addition to the transaction gains, the Company recorded charges of $265 million related to preexisting relationships with CCE and $103 million due to the remeasurement of our Venezuelan subsidiary's net assets. The charges related to preexisting relationships with CCE were primarily due to the write-off of our investment in infrastructure programs with CCE. Refer to Note 6 for additional information related to our preexisting relationships with CCE. The remeasurement loss related to our Venezuelan subsidiary's net assets was due to the Venezuelan government announcing a currency devaluation and Venezuela becoming a hyperinflationary economy subsequent to December 31, 2009. As a result, our local subsidiary was required to use the U.S. dollar as its functional currency, and the remeasurement gains and losses were recorded in other income (loss) — net. This charge impacted the Corporate operating segment. Refer to Note 19.
Also during 2010, the Company recorded charges of $48 million related to other-than-temporary impairments of available-for-sale securities and an equity method investment and a donation of preferred shares in one of our equity method investees. Refer to Note 19 for the impact these charges had on our operating segments.
NOTE 18: 18: PRODUCTIVITY, INTEGRATION AND RESTRUCTURING INITIATIVES
Productivity and Reinvestment
In February 2012, the Company announced a four-year productivity and reinvestment program which willdesigned to further enable our efforts to strengthen our brands and reinvest our resources to drive long-term profitable growth. This program will beis 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 furtherthe integration of Old CCE's former North America business.American bottling operations.
In February 2014, the Company announced the expansion of our productivity and reinvestment program to drive incremental productivity by 2016 that will primarily be redirected into increased media investments. Our incremental productivity goal consists of two relatively equal components. First, we will expand savings through global supply chain optimization, data and information technology systems standardization, and resource and cost reallocation. Second, we will increase the effectiveness of our marketing investments by transforming our marketing and commercial model to redeploy resources into more consumer-facing marketing investments to accelerate growth.
In October 2014, the Company announced that we were further expanding our productivity and reinvestment program and extending it through 2019. The expansion of the productivity initiatives will focus on four key areas: restructuring the Company's global supply chain, including manufacturing in North America; implementing zero-based work, an evolution of zero-based budget principles, across the organization; streamlining and simplifying the Company's operating model; and further driving increased discipline and efficiency in direct marketing investments.
The Company has incurred total pretax expenses of $270$2,056 million related to this program during the year endedDecember 31, 2012.since it commenced. These expenses were recorded in the line item other operating charges in our consolidated statement of income. Refer to Note 19 for the impact these charges had on our operating segments. Outside services reported in the table below primarily relate to expenses in connection with legal, outplacement and consulting activities. Other direct costs reported in the table 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 since the commencement of the plan (in millions):
|
| | | | | | | | | | | | | | | |
| | Severance Pay and Benefits |
| | Outside Services |
| | Other Direct Costs |
| | Total |
|
| 2012 | | | | | | | |
| Costs incurred | $ | 21 |
| | $ | 61 |
| | $ | 188 |
| | $ | 270 |
|
| Payments | (8 | ) | | (55 | ) | | (167 | ) | | (230 | ) |
| Noncash and exchange | (1 | ) | | — |
| | (13 | ) | | (14 | ) |
| Accrued balance as of December 31 | $ | 12 |
| | $ | 6 |
| | $ | 8 |
| | $ | 26 |
|
Productivity Initiatives
During 2008, the Company announced a transformation effort centered on productivity initiatives to provide additional flexibility to invest for growth. 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. |
| | | | | | | | | | | | | | | |
| | Severance Pay and Benefits |
| | Outside Services |
| | Other Direct Costs |
| | Total |
|
| 2013 | | | | | | | |
| Accrued balance as of January 1 | $ | 12 |
| | $ | 6 |
| | $ | 8 |
| | $ | 26 |
|
| Costs incurred | 188 |
| | 59 |
| | 247 |
| | 494 |
|
| Payments | (113 | ) | | (59 | ) | | (209 | ) | | (381 | ) |
| Noncash and exchange | 1 |
| | — |
| | (28 | ) | | (27 | ) |
| Accrued balance as of December 31 | $ | 88 |
| | $ | 6 |
| | $ | 18 |
| | $ | 112 |
|
| 2014 | | | | | | | |
| Costs incurred | $ | 277 |
| | $ | 77 |
| | $ | 247 |
| | $ | 601 |
|
| Payments | (103 | ) | | (79 | ) | | (220 | ) | | (402 | ) |
| Noncash and exchange | (2 | ) | | — |
| | (24 | ) | | (26 | ) |
| Accrued balance as of December 31 | $ | 260 |
| | $ | 4 |
| | $ | 21 |
| | $ | 285 |
|
| 2015 | | | | | | | |
| Costs incurred | $ | 269 |
| | $ | 56 |
| | $ | 366 |
| | $ | 691 |
|
| Payments | (200 | ) | | (47 | ) | | (265 | ) | | (512 | ) |
| Noncash and exchange | (185 | ) | 1 | (5 | ) | | (70 | ) | | (260 | ) |
| Accrued balance as of December 31 | $ | 144 |
| | $ | 8 |
| | $ | 52 |
| | $ | 204 |
|
In 2011, we completed this program. The Company has incurred total pretax expenses of $498 million1 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 in our consolidated statements of income.Includes pension settlement charges. Refer to Note 1913. for the impact these charges had on our operating segments. Outside services reported in the table below primarily relate to expenses in connection with legal, outplacement and consulting activities. Other direct costs reported in the table 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 (in millions):
|
| | | | | | | | | | | | | | | |
| | Severance Pay and Benefits |
| | Outside Services |
| | Other Direct Costs |
| | Total |
|
| 2010 | | | | | | | |
| Accrued balance as of January 1 | $ | 18 |
| | $ | 9 |
| | $ | 4 |
| | $ | 31 |
|
| 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 |
|
| 2012 | | | | | | | |
| Costs incurred | $ | (8 | ) | | $ | — |
| | $ | (2 | ) | | $ | (10 | ) |
| Payments | (29 | ) | | (2 | ) | | (3 | ) | | (34 | ) |
| Noncash and exchange | (2 | ) | | — |
| | (3 | ) | | (5 | ) |
| Accrued balance as of December 31 | $ | 9 |
| | $ | 1 |
| | $ | 1 |
| | $ | 11 |
|
Integration Initiatives
Integration of CCE's former North America Business
In 2010, we acquired CCE's former North America 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 America 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.
In 2011, we completed this program. The Company has incurred total pretax expenses of $487 million related to this initiative since the plan commenced in the fourth quarter of 2010. These expenses were recorded in the line item other operating charges in our consolidated statements of income. Refer to Note 19 for the impact these charges had on our operating segments. Outside services reported in the table below primarily relate to expenses in connection with legal, outplacement and consulting activities. Other direct costs reported in the table 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.
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 Services |
| | 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 |
|
| 2012 | | | | | | | |
| Costs incurred | $ | (6 | ) | | $ | — |
| | $ | — |
| | $ | (6 | ) |
| Payments | (41 | ) | | (13 | ) | | (26 | ) | | (80 | ) |
| Noncash and exchange | — |
| | 2 |
| | (4 | ) | | (2 | ) |
| Accrued balance as of December 31 | $ | 1 |
| | $ | — |
| | $ | 2 |
| | $ | 3 |
|
Integration of Our German Bottling and Distribution Operations
In 2008, the Company began an integration initiative related to the 18our German bottling and distribution operations acquired in 2007. The Company incurred $148$292 million,, $67 $208 million and $94$187 million of expenses related to this initiative in 2012, 20112015, 2014 and 2010,2013, respectively, and has incurred total pretax expenses of $440$1,127 million related to this initiative since it commenced. These expenses were recorded in the line item other operating charges in our consolidated statements of income 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 $96$122 million and $30$101 million accrued related to these integration costs as of December 31, 20122015 and 2011,2014, 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, 2012,2015, the Company had not finalized any additional plans.
Restructuring Initiatives
The Company incurred charges of $15 million, $52 million and $59 million related to other restructuring initiatives during 2012, 2011 and 2010, 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 in our consolidated statements of income. Refer to Note 19 for the impact these charges had on our operating segments.
NOTE 19: OPERATING SEGMENTS
As of December 31, 2012,2015, our organizational structure consisted of the following operating segments: Eurasia and Africa; Europe; Latin America; North America; Asia Pacific; Bottling Investments; and Corporate.
Segment Products and Services
The business of our Company is nonalcoholic beverages. OurWith the exception of North America, our geographic operating segments (Eurasia and Africa; Europe; Latin America; North America; and Asia Pacific) derive a majority of their revenues from the manufacture and sale of beverage concentrates and syrups and, in some cases, the sale of finished beverages. The North America operating segment derives the majority of its revenues from the sale of finished beverages. Our Bottling Investments operating segment is comprisedcomposed of our Company-owned or consolidated bottling operations outside of North America, regardless of the geographic location of the bottler, except for bottling operations managed by CCR, which are included in our North America operating segment, and equity income from the majority of our equity method investments. Company-owned or consolidated bottling operations derive the majority of their revenues from the sale of finished beverages. Subsequent to our acquisition of CCE's former North America business on October 2, 2010, our North America operating segment began to derive the majority of its net operating revenues from the sale of finished beverages. Refer to Note 2. Generally, bottling and finished product operations produce higher net operating revenues but lower gross profit margins compared to concentrate and syrup operations.
The following table sets forth the percentage of total net operating revenues related to concentrate operations and finished product operations:
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
Concentrate operations1 | 38 | % | | 39 | % | | 51 | % | 37 | % | | 38 | % | | 38 | % |
Finished product operations2,3 | 62 |
|
| 61 |
| | 49 |
| |
| Net operating revenues | 100 | % | | 100 | % | | 100 | % | |
Finished product operations2 | | 63 |
|
| 62 |
| | 62 |
|
| Total | | 100 | % | | 100 | % | | 100 | % |
| |
1 | Includes concentrates sold by the Company to authorized bottling partners for the manufacture of fountain syrups. The bottlers then typically sell the fountain syrups to wholesalers or directly to fountain retailers. |
| |
2 | Includes fountain syrups manufactured by the Company, including consolidated bottling operations, and sold to fountain retailers or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. |
| |
3
| Includes net operating revenues related to our acquisition of CCE's former North America business for the full year in 2012 and 2011. In 2010, the percentage includes net operating revenues from the date of the CCE acquisition on October 2, 2010. |
Method of Determining Segment Income or Loss
Management evaluates the performance of our operating segments separately to individually monitor the different factors affecting financial performance. Our Company manages income taxes and certain treasury-related items, such as interest income and expense, on a global basis within the Corporate operating segment. We evaluate segment performance based on income or loss before income taxes.
Geographic Data
The following table provides information related to our net operating revenues (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| United States | $ | 19,732 |
| | $ | 18,699 |
| | $ | 10,629 |
| $ | 20,360 |
| | $ | 19,763 |
| | $ | 19,820 |
|
| International | 28,285 |
| | 27,843 |
| | 24,490 |
| 23,934 |
| | 26,235 |
| | 27,034 |
|
| Net operating revenues | $ | 48,017 |
| | $ | 46,542 |
| | $ | 35,119 |
| $ | 44,294 |
| | $ | 45,998 |
| | $ | 46,854 |
|
The following table provides information related to our property, plant and equipment — net (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| United States | $ | 8,509 |
| | $ | 8,043 |
| | $ | 8,251 |
| $ | 8,266 |
| | $ | 8,683 |
| | $ | 8,841 |
|
| International | 5,967 |
| | 6,896 |
| | 6,476 |
| 4,305 |
| | 5,950 |
| | 6,126 |
|
| Property, plant and equipment — net | $ | 14,476 |
| | $ | 14,939 |
| | $ | 14,727 |
| $ | 12,571 |
| | $ | 14,633 |
| | $ | 14,967 |
|
Information about our Company's operations by operating segment as of and for the years ended December 31, 2012, 20112015, 2014 and 2010,2013, is as follows (in millions):
| | | | Eurasia & Africa |
| | Europe |
| | Latin America |
| | North America |
| | Pacific |
| | Bottling Investments |
| | Corporate |
| | Eliminations |
| | Consolidated |
| Eurasia & Africa |
| | Europe |
| | Latin America |
| | North America |
| | Asia Pacific |
| | Bottling Investments |
| | Corporate |
| | Eliminations |
| | Consolidated |
|
| 2012 | | | | | | | | | | | | | | | | | | |
| 2015 | | | | | | | | | | | | | | | | | | |
| Net operating revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Third party | $ | 2,818 |
| | $ | 4,481 |
| | $ | 4,560 |
| | $ | 21,665 |
| | $ | 5,559 |
|
| $ | 8,807 |
| | $ | 127 |
| | $ | — |
| | $ | 48,017 |
| $ | 2,423 |
| | $ | 4,543 |
| | $ | 3,999 |
| | $ | 21,784 |
| | $ | 4,707 |
|
| $ | 6,682 |
| | $ | 156 |
| | $ | — |
| | $ | 44,294 |
|
| Intersegment | 152 |
| | 642 |
| | 271 |
| | 15 |
| | 476 |
| | 88 |
| | — |
| | (1,644 | ) | | — |
| 36 |
| | 585 |
| | 75 |
| | 18 |
| | 545 |
| | 49 |
| | 10 |
| | (1,318 | ) | | — |
|
| Total net revenues | 2,970 |
| | 5,123 |
| | 4,831 |
| | 21,680 |
| | 6,035 |
| | 8,895 |
| | 127 |
| | (1,644 | ) | | 48,017 |
| 2,459 |
| | 5,128 |
| | 4,074 |
| | 21,802 |
| | 5,252 |
| | 6,731 |
| | 166 |
| | (1,318 | ) | | 44,294 |
|
| Operating income (loss) | 1,169 |
| | 2,960 |
| | 2,879 |
| | 2,597 |
| | 2,425 |
| | 140 |
| | (1,391 | ) | | — |
| | 10,779 |
| 987 |
| | 2,888 |
| | 2,169 |
| | 2,490 |
| | 2,189 |
| | — |
| | (1,995 | ) | | — |
| | 8,728 |
|
| Interest income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 471 |
| | — |
| | 471 |
| — |
| | — |
| | — |
| | 9 |
| | — |
| | — |
| | 604 |
| | — |
| | 613 |
|
| Interest expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 397 |
| | — |
| | 397 |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 856 |
| | — |
| | 856 |
|
| Depreciation and amortization | 45 |
| | 100 |
| | 70 |
| | 1,083 |
| | 107 |
| | 406 |
| | 171 |
| | — |
| | 1,982 |
| 44 |
| | 59 |
| | 41 |
| | 1,217 |
| | 85 |
| | 367 |
| | 157 |
| | — |
| | 1,970 |
|
| Equity income (loss) — net | 20 |
| | 45 |
| | 4 |
| | 13 |
| | 2 |
| | 732 |
| | 3 |
| | — |
| | 819 |
| 14 |
| | 25 |
| | (7 | ) | | (17 | ) | | 9 |
| | 425 |
| | 40 |
| | — |
| | 489 |
|
| Income (loss) before income taxes | 1,192 |
| | 3,015 |
| | 2,882 |
| | 2,624 |
| | 2,432 |
| | 904 |
| | (1,240 | ) | | — |
| | 11,809 |
| 1,004 |
| | 2,919 |
| | 2,164 |
| | 1,475 |
| | 2,207 |
| | 454 |
| | (618 | ) | | — |
| | 9,605 |
|
Identifiable operating assets1 | 1,415 |
| | 2,976 |
| 2 | 2,759 |
| | 34,114 |
| | 2,047 |
| | 9,648 |
| 2 | 22,767 |
| | — |
| | 75,726 |
| 1,148 |
| | 3,008 |
| 2 | 1,627 |
| | 32,042 |
| | 1,639 |
| | 7,042 |
| 2 | 27,799 |
| | — |
| | 74,305 |
|
Investments3 | 1,155 |
| | 271 |
| | 539 |
| | 39 |
| | 127 |
| | 8,253 |
| | 64 |
| | — |
| | 10,448 |
| 1,061 |
| | 77 |
| | 657 |
| | 118 |
| | 158 |
| | 8,073 |
| | 5,644 |
| | — |
| | 15,788 |
|
| Capital expenditures | 88 |
| | 30 |
| | 88 |
| | 1,447 |
| | 70 |
| | 867 |
| | 190 |
| | — |
| | 2,780 |
| 19 |
| | 35 |
| | 70 |
| | 1,341 |
| | 81 |
| | 735 |
| | 272 |
| | — |
| | 2,553 |
|
| 2011 — As Adjusted | | | | | | | | | | | | | | | | | | |
| 2014 | | | | | | | | | | | | | | | | | | |
| Net operating revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Third party | $ | 2,689 |
| | $ | 4,777 |
| | $ | 4,403 |
| | $ | 20,559 |
| | $ | 5,454 |
| | $ | 8,501 |
| | $ | 159 |
| | $ | — |
| | $ | 46,542 |
| $ | 2,730 |
| | $ | 4,844 |
| | $ | 4,597 |
| | $ | 21,462 |
| | $ | 5,257 |
| | $ | 6,972 |
| | $ | 136 |
| | $ | — |
| | $ | 45,998 |
|
| Intersegment | 152 |
| | 697 |
| | 287 |
| | 12 |
| | 384 |
| | 90 |
| | — |
| | (1,622 | ) | | — |
| — |
| | 692 |
| | 60 |
| | 17 |
| | 489 |
| | 67 |
| | — |
| | (1,325 | ) | | — |
|
| Total net revenues | 2,841 |
| | 5,474 |
| | 4,690 |
| | 20,571 |
| | 5,838 |
| | 8,591 |
| | 159 |
| | (1,622 | ) | | 46,542 |
| 2,730 |
| | 5,536 |
| | 4,657 |
| | 21,479 |
| | 5,746 |
| | 7,039 |
| | 136 |
| | (1,325 | ) | | 45,998 |
|
| Operating income (loss) | 1,091 |
| | 3,090 |
| | 2,815 |
| | 2,319 |
| | 2,151 |
| | 224 |
| | (1,517 | ) | | — |
| | 10,173 |
| 1,084 |
| | 2,852 |
| | 2,316 |
| | 2,447 |
| | 2,448 |
| | 9 |
| | (1,448 | ) | | — |
| | 9,708 |
|
| Interest income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 483 |
| | — |
| | 483 |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 594 |
| | — |
| | 594 |
|
| Interest expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 417 |
| | — |
| | 417 |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 483 |
| | — |
| | 483 |
|
| Depreciation and amortization | 39 |
| | 109 |
| | 63 |
| | 1,065 |
| | 106 |
| | 403 |
| | 169 |
| | — |
| | 1,954 |
| 47 |
| | 75 |
| | 56 |
| | 1,195 |
| | 96 |
| | 315 |
| | 192 |
| | — |
| | 1,976 |
|
| Equity income (loss) — net | (3 | ) | | 33 |
| | 20 |
| | 6 |
| | 1 |
| | 646 |
| | (13 | ) | | — |
| | 690 |
| 35 |
| | 31 |
| | 10 |
| | (16 | ) | | 12 |
| | 691 |
| | 6 |
| | — |
| | 769 |
|
| Income (loss) before income taxes | 1,089 |
| | 3,134 |
| | 2,832 |
| | 2,327 |
| | 2,154 |
| | 897 |
| | (975 | ) | | — |
| | 11,458 |
| 1,125 |
| | 2,892 |
| | 2,319 |
| | 1,633 |
| | 2,464 |
| | 715 |
| | (1,823 | ) | | — |
| | 9,325 |
|
Identifiable operating assets1 | 1,245 |
| | 3,204 |
| 2 | 2,446 |
| | 33,422 |
| | 2,085 |
| | 8,905 |
| 2 | 20,293 |
| | — |
| | 71,600 |
| 1,298 |
| | 3,358 |
| 2 | 2,426 |
| | 33,066 |
| | 1,793 |
| | 6,975 |
| 2 | 29,482 |
| | — |
| | 78,398 |
|
Investments3 | 284 |
| | 243 |
| | 475 |
| | 26 |
| | 133 |
| | 7,140 |
| | 73 |
| | — |
| | 8,374 |
| 1,081 |
| | 90 |
| | 757 |
| | 48 |
| | 157 |
| | 8,781 |
| | 2,711 |
| | — |
| | 13,625 |
|
| Capital expenditures | 86 |
| | 38 |
| | 105 |
| | 1,364 |
| | 92 |
| | 1,039 |
| | 196 |
| | — |
| | 2,920 |
| 30 |
| | 54 |
| | 55 |
| | 1,293 |
| | 76 |
| | 628 |
| | 270 |
| | — |
| | 2,406 |
|
| 2010 — As Adjusted | | | | | | | | | | | | | | | | | | |
| 2013 | | | | | | | | | | | | | | | | | | |
| Net operating revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Third party | $ | 2,426 |
| | $ | 4,424 |
| | $ | 3,880 |
| | $ | 11,140 |
| | $ | 4,941 |
| | $ | 8,216 |
| | $ | 92 |
| | $ | — |
| | $ | 35,119 |
| $ | 2,763 |
| | $ | 4,645 |
| | $ | 4,748 |
| | $ | 21,574 |
| | $ | 5,372 |
| | $ | 7,598 |
| | $ | 154 |
| | $ | — |
| | $ | 46,854 |
|
| Intersegment | 130 |
| | 825 |
| | 241 |
| | 65 |
| | 330 |
| | 97 |
| | — |
| | (1,688 | ) | | — |
| — |
| | 689 |
| | 191 |
| | 16 |
| | 497 |
| | 78 |
| | — |
| | (1,471 | ) | | — |
|
| Total net revenues | 2,556 |
| | 5,249 |
| | 4,121 |
| | 11,205 |
| | 5,271 |
| | 8,313 |
| | 92 |
| | (1,688 | ) | | 35,119 |
| 2,763 |
| | 5,334 |
| | 4,939 |
| | 21,590 |
| | 5,869 |
| | 7,676 |
| | 154 |
| | (1,471 | ) | | 46,854 |
|
| Operating income (loss) | 980 |
| | 2,976 |
| | 2,405 |
| | 1,520 |
| | 2,048 |
| | 227 |
| | (1,743 | ) | | — |
| | 8,413 |
| 1,087 |
| | 2,859 |
| | 2,908 |
| | 2,432 |
| | 2,478 |
| | 115 |
| | (1,651 | ) | | — |
| | 10,228 |
|
| Interest income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 317 |
| | — |
| | 317 |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 534 |
| | — |
| | 534 |
|
| Interest expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 733 |
| | — |
| | 733 |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 463 |
| | — |
| | 463 |
|
| Depreciation and amortization | 31 |
| | 106 |
| | 54 |
| | 575 |
| | 101 |
| | 430 |
| | 146 |
| | — |
| | 1,443 |
| 42 |
| | 86 |
| | 58 |
| | 1,192 |
| | 130 |
| | 335 |
| | 134 |
| | — |
| | 1,977 |
|
| Equity income (loss) — net | 18 |
| | 33 |
| | 24 |
| | (4 | ) | | 1 |
| | 971 |
| | (18 | ) | | — |
| | 1,025 |
| 22 |
| | 24 |
| | 13 |
| | 2 |
| | 19 |
| | 524 |
| | (2 | ) | | — |
| | 602 |
|
| Income (loss) before income taxes | 1,000 |
| | 3,020 |
| | 2,426 |
| | 1,523 |
| | 2,049 |
| | 1,205 |
| | 2,984 |
| | — |
| | 14,207 |
| 1,109 |
| | 2,923 |
| | 2,920 |
| | 2,434 |
| | 2,494 |
| | 679 |
| | (1,082 | ) | | — |
| | 11,477 |
|
Identifiable operating assets1 | 1,278 |
| | 2,724 |
| 2 | 2,298 |
| | 32,793 |
| | 1,827 |
| | 8,398 |
| 2 | 16,018 |
| | — |
| | 65,336 |
| 1,273 |
| | 3,713 |
| 2 | 2,918 |
| | 33,964 |
| | 1,922 |
| | 7,011 |
| 2 | 27,742 |
| | — |
| | 78,543 |
|
Investments3 | 291 |
| | 243 |
| | 379 |
| | 57 |
| | 123 |
| | 6,426 |
| | 66 |
| | — |
| | 7,585 |
| 1,157 |
| | 106 |
| | 545 |
| | 49 |
| | 143 |
| | 9,424 |
| | 88 |
| | — |
| | 11,512 |
|
| Capital expenditures | 59 |
| | 33 |
| | 94 |
| | 711 |
| | 101 |
| | 942 |
| | 275 |
| | — |
| | 2,215 |
| 40 |
| | 34 |
| | 63 |
| | 1,374 |
| | 117 |
| | 643 |
| | 279 |
| | — |
| | 2,550 |
|
| |
1 | Principally cash and cash equivalents, short-term investments, marketable securities, trade accounts receivable, inventories, goodwill, trademarks and other intangible assets, and property, plant and equipment — net. |
| |
2 | Property, plant and equipment — net in Germany represented approximately 10 percent of consolidated property, plant and equipment — net in 2012, 2015, 10 percent in 20112014 and 1011 percent in 2010. 2013. The 2015 amount includes property, plant and equipment — net classified as held for sale. |
| |
3 | Principally equity method investments available-for-sale securities and nonmarketableother investments in bottling companies. |
In 2012,2015, the results of our operating segments were impacted by the following items:
Operating income (loss) and income (loss) before income taxes were reduced by $1$16 million for Europe, $227Eurasia and Africa, $7 million for Latin America, $384 million for North America, $3$2 million for Asia Pacific, $164$353 million for Bottling Investments and $38$246 million for Corporate due to the Company's productivity and reinvestment program as well as other restructuring initiatives. Operating income (loss) and income (loss) before income taxes were increased by $25 million for Europe due to the refinement of previously established accruals related to the Company's productivity and reinvestment program. Refer to Note 18.
Operating income (loss) and income (loss) before income taxes were reduced by $418 million for Corporate primarily due to an impairment charge primarily related to the discontinuation of the energy products in the glacéau portfolio as a result of the Monster Transaction. Refer to Note 2 and Note 17.
Operating income (loss) and income (loss) before income taxes were reduced by $100 million for Corporate as a result of a cash contribution to The Coca-Cola Foundation. Refer to Note 17.
Income (loss) before income taxes was increased by $1,403 million for Corporate as a result of the Monster Transaction. Refer to Note 2 and Note 17.
Income (loss) before income taxes was reduced by $1,006 million for North America due to the refranchising of certain territories in North America. Refer to Note 2 and Note 17.
Income (loss) before income taxes was reduced by $320 million for Corporate due to charges the Company recognized on the early extinguishment of certain long-term debt. Refer to Note 10 and Note 17.
Income (loss) before income taxes was reduced by $33 million for Latin America and $105 million for Corporate due to the remeasurement of the net monetary assets of our local Venezuelan subsidiary into U.S. dollars using the SIMADI exchange rate, an impairment of a Venezuelan trademark, and a write-down the Company recorded on receivables from our bottling partner in Venezuela. Refer to Note 1 and Note 17.
Income (loss) before income taxes was reduced by $19 million for Corporate as a result of the remeasurement of our previously held equity interest in a South African bottler to fair value upon our acquisition of the bottling operations. Refer to Note 2.
Income (loss) before income taxes was reduced by $6 million for Corporate as a result of a Brazilian bottling entity's majority interest owners exercising their option to acquire from us an additional equity interest at an exercise price less than that of our carrying value. Refer to Note 2 and Note 17.
Income (loss) before income taxes was increased by $3 million for Eurasia and Africa and reduced by $7 million for Europe and $83 million for Bottling Investments due to the Company's proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 17.
In 2014, the results of our operating segments were impacted by the following items:
Operating income (loss) and income (loss) before income taxes were reduced by $26 million for Eurasia and Africa, $111 million for Europe, $20 million for Latin America, $281 million for North America, $36 million for Asia Pacific, $211 million for Bottling Investments and $124 million for Corporate due to charges related to the Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 18.
18.Operating income (loss) and income (loss) before income taxes were increased by $4 million for Europe, $1 million for Pacific and $5 million for Corporate due to the refinement of previously established accruals related to the Company's 2008–2011 productivity initiatives. Refer to Note 18.
Operating income (loss) and income (loss) before income taxes were increased by $6 million for North America due to the refinement of previously established accruals related to the Company's integration of CCE's former North America business. Refer to Note 18.
Operating income (loss) and income (loss) before income taxes were reduced by $21$42 million for Bottling Investments as a result of the restructuring and transition of the Company's Russian juice operations to an existing joint venture with an unconsolidated bottling partner. Refer to Note 17.
Income (loss) before income taxes was reduced by $2 million for Europe and $16 million for Bottling Investments due to the Company's proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 17.
Income (loss) before income taxes was reduced by $799 million for North America due to costs associated withthe refranchising of certain territories. Refer to Note 2 and Note 17.
Income (loss) before income taxes was reduced by $275 million for Latin America and $411 million for Corporate due to the remeasurement of the net monetary assets of our local Venezuelan subsidiary into U.S. dollars using the SICAD 2 exchange rate, an impairment of a Venezuelan trademark, and a write-down the Company detecting residuesrecorded on the concentrate sales receivables from our bottling partner in Venezuela. Refer to Note 1 and Note 17.
Income (loss) before income taxes was increased by $25 million for Bottling Investments due to the elimination of carbendazim,intercompany profits resulting from a fungicide that is not registeredwrite-down we recorded on the concentrate sales receivables from our bottling partner in the United StatesVenezuela, an equity method investee, partially offset by our proportionate share of their remeasurement loss. Refer to Note 1.
Income (loss) before income taxes was reduced by $32 million for use on citrus products, in orange juice imported from Brazil for distribution in the United States. AsCorporate as a result the Company began purchasingof a Brazilian bottling entity's majority interest owners exercising their option to acquire from us an additional suppliesequity interest at an exercise price less than that of Florida orange juice at a higher cost than Brazilian orange juice.our carrying value. Refer to Note 17.
2 and Note 17.In 2013, the results of our operating segments were impacted by the following items:
Operating income (loss) and income (loss) before income taxes were reduced by $20$2 million for Eurasia and Africa, $57 million for Europe, $282 million for North America, $26 million for Asia Pacific, $194 million for Bottling Investments and $121 million for Corporate due to changes incharges related to the Company's ready-to-drink tea strategyproductivity and reinvestment program as a result of our current U.S. license agreement with Nestlé terminating at the end of 2012.well as other restructuring initiatives. Refer to Note 17.
18.EquityOperating income (loss) — net and income (loss) before income taxes were reduced by $195 million for Corporate due to impairment charges recorded on certain of the Company's intangible assets. Refer to Note 17.
Operating income (loss) and income (loss) before income taxes were reduced by $22 million for Asia Pacific due to charges associated with certain of the Company's fixed assets. Refer to Note 17.
Income (loss) before income taxes was increased by $8$615 million for Corporate due to a gain the Company recognized on the deconsolidation of our Brazilian bottling operations as a result of their combination with an independent bottling partner. Refer to Note 17.
Income (loss) before income taxes was reduced by $9 million for Bottling Investments and $140 million for Corporate due to the devaluation of the Venezuelan bolivar, including our proportionate share of the charge incurred by an equity method investee that has operations in Venezuela. Refer to Note 1 and Note 17.
Income (loss) before income taxes was reduced by a net $114 million for Corporate due to the merger of four of the Company's Japanese bottling partners in which we held equity method investments prior to their merger into CCEJ. Refer to Note 17.
Income (loss) before income taxes was increased by $139 million for Corporate due to a gain the Company recognized as a result of Coca-Cola FEMSA issuing additional shares of its own stock during the year at a per share amount greater than the carrying value of the Company's per share investment. Refer to Note 17.
Income (loss) before income taxes was reduced by a net $159 million for Bottling Investments due to the Company’s proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 17.
17.Income (loss) before income taxes was increased by $185 million for Corporate due to the gain the Company recognized as a result of the merger of Andina and Polar. Refer to Note 16 and Note 17.
Income (loss) before income taxes was reduced by $108$53 million for Corporate due to the losscharges the Company recognized on the pending sale of a majority ownership interest in our Philippine bottling operations to Coca-Cola FEMSA which closed in January 2013. As of December 31, 2012, the assets and liabilities associated with our Philippine bottling operations were classified as held for sale in our consolidated balance sheets. Refer to Note 16 and Note 17.
Income (loss) before income taxes was increased by $92 million for Corporate due to a gain the Company recognized as a result of Coca-Cola FEMSA issuing additional shares of its own stock during the period at a per share amount greater than the carrying amount of the Company's per share investment. Refer to Note 16 and Note 17.
Income (loss) before income taxes was reduced by $82 million for Corporate due to the Company acquiring an ownership interest in Mikuni for which we paid a premium over the publicly traded market price. This premium was expensed on the acquisition date. Subsequent to this transaction, the Company accounts for our investment in Mikuni under the equity method of accounting. Refer to Note 16 and Note 17.
Income (loss) before income taxes was reduced by $16 million for Corporate due to other-than-temporary declines in the fair values of certain cost method investments. Refer to Note 16 and Note 17.
Income (loss) before income taxes was reduced by $1 million for Eurasia and Africa, $4 million for Europe, $2 million for Latin America and $4 million for Pacific due to changes in the structure of BPW, our 50/50 joint venture with Nestlé in the ready-to-drink tea category. Refer to Note 17.
In 2011, the results of our operating segments were impacted by the following items:
Operating income (loss) and income (loss) before income taxes were reduced by $12 million for Eurasia and Africa, $25 million for Europe, $4 million for Latin America, $374 million for North America, $4 million for Pacific, $89 million for Bottling Investments and $164 million for Corporate, primarily due to the Company's ongoing productivity, integration and restructuring initiatives as well as costs associated with the merger of Arca and Contal. Refer to Note 18 for additional information on our productivity, integration and restructuring initiatives. Refer to Note 17 for additional information related to the merger of Arca and Contal.
Operating income (loss) and income (loss) before income taxes were reduced by $82 million for Pacific and $2 million for North America due to charges associated with the earthquake and tsunami that devastated northern and eastern Japan on March 11, 2011. Refer to Note 17.
Operating income (loss) and income (loss) before income taxes were reduced by $10 million for Corporate due to charges associated with the floods in Thailand that impacted the Company's supply chain operations in the region. Refer to Note 17.
Equity income (loss) — net and income (loss) before income taxes were reduced by $53 million for Bottling Investments, primarily attributable to the Company's proportionate share of asset impairments and restructuring charges recorded by certain of our equity method investees. Refer to Note 17.
Income (loss) before income taxes was increased by a net $417 million for Corporate, primarily due to the gain the Company recognized as a result of the merger of Arca and Contal. Refer to Note 17.
Income (loss) before income taxes was increased by a net $122 million for Corporate, primarily due to gains the Company recognized as a result of Coca-Cola FEMSA issuing additional shares of its own stock during the year at per share amounts greater than the carrying value of the Company's per share investment. These gains were partially offset by charges associated with certain of the Company's equity method investments in Japan. Refer to Note 17.
Income (loss) before income taxes was increased by $102 million for Corporate, primarily due to the gain on the sale of our investment in Embonor, a bottling partner with operations primarily in Chile. Prior to this transaction, the Company accounted for our investment in Embonor under the equity method of accounting. Refer to Note 17.
Income (loss) before income taxes was reduced by $41 million for Corporate due to the impairment of an investment in an entity accounted for under the equity method of accounting. Refer to Note 16 and Note 17.
Income (loss) before income taxes was reduced by $17 million for Corporate due to other-than-temporary impairments of certain available-for-sale securities. Refer to Note 16 and Note 17.
Income (loss) before income taxes was reduced by $9 million for Corporate due to the net charge we recognized on the repurchase and/or exchangeearly extinguishment of certain long-term debt, assumed in connection with our acquisition of CCE's former North America business as well asincluding the early extinguishment of certainhedge accounting adjustments reclassified from accumulated other long-term debt.comprehensive income to earnings. Refer to Note 10.
Income (loss) before income taxes was reduced by $5 million for Corporate due to the finalization of working capital adjustments related to the sale of our Norwegian and Swedish bottling operations to New CCE. Refer to Note 2 and Note 17.
In 2010, the results of our operating segments were impacted by the following items:
Operating income (loss) and income (loss) before income taxes were reduced by $7 million for Eurasia and Africa, $50 million for Europe, $133 million for North America, $22 million for Pacific, $122 million for Bottling Investments and $485 million for Corporate, primarily due to the Company's ongoing productivity, integration and restructuring initiatives; charitable donations; transaction costs incurred in connection with our acquisition of CCE's former North America business and the sale of our Norwegian and Swedish bottling operations to New CCE; and other charges related to bottling activities in Eurasia. Refer to Note 17.
Operating income (loss) and income (loss) before income taxes were reduced by $74 million for North America due to the acceleration of expense associated with certain share-based replacement awards issued in connection with our acquisition of CCE's former North America business. Refer to Note 12.
Equity income (loss) — net and income (loss) before income taxes were reduced by $66 million for Bottling Investments. This net charge was primarily attributable to the Company's proportionate share of unusual tax charges, asset impairments, restructuring charges and transaction costs recorded by equity method investees, which 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. Refer to Note 17.
Income (loss) before income taxes was reduced by $23 million for Bottling Investments and $25 million for Corporate due to other-than-temporary impairments and a donation of preferred shares in one of our equity method investees. Refer to Note 17.
Income (loss) before income taxes was increased by $4,978 million for Corporate due to the remeasurement of our equity investment in CCE to fair value upon the close of the transaction. Refer to Note 2.
Income (loss) before income taxes was increased by $597 million for Corporate due to the gain on the sale of our Norwegian and Swedish bottling operations to New CCE. Refer to Note 2.
Income (loss) before income taxes was reduced by $342 million for Corporate related to the premiums paid to repurchase the long-term debt and the costs associated with the settlement of treasury rate locks issued in connection with the debt tender offer. Refer to Note 10.
Income (loss) before income taxes was reduced by $265 million for Corporate due to charges related to preexisting relationships with CCE. These charges primarily related to the write-off of our investment in infrastructure programs with CCE. Refer to Note 2.
Income (loss) before income taxes was reduced by $103 million for Corporate due to the remeasurement of our Venezuelan subsidiary's net assets. Refer to Note 1.
Income (loss) before income taxes was increased by $23 million for Corporate due to the gain on the sale of 50 percent of our investment in Leão Junior. Refer to Note 17.
10.NOTE 20: NET CHANGE IN OPERATING ASSETS AND LIABILITIES
Net cash provided by (used in) operating activities attributable to the net change in operating assets and liabilities is composed of the following (in millions):
| | | Year Ended December 31, | 2012 |
| | 2011 |
| | 2010 |
| 2015 |
| | 2014 |
| | 2013 |
|
| (Increase) decrease in trade accounts receivable | $ | (33 | ) | | $ | (562 | ) | | $ | (41 | ) | $ | (212 | ) | | $ | (253 | ) | | $ | 28 |
|
| (Increase) decrease in inventories | (286 | ) | | (447 | ) | | 182 |
| (250 | ) | | 35 |
| | (105 | ) |
| (Increase) decrease in prepaid expenses and other assets | (29 | ) | | (350 | ) | | (148 | ) | 123 |
| | 194 |
| | (163 | ) |
| Increase (decrease) in accounts payable and accrued expenses | (556 | ) | | 63 |
| | 656 |
| 1,004 |
| | (250 | ) | | (158 | ) |
| Increase (decrease) in accrued taxes | 770 |
| | (132 | ) | | (266 | ) | (306 | ) | | 151 |
| | 22 |
|
| Increase (decrease) in other liabilities | (946 | ) | | (465 | ) | | (13 | ) | (516 | ) | | (316 | ) | | (556 | ) |
| Net change in operating assets and liabilities | $ | (1,080 | ) | | $ | (1,893 | ) | | $ | 370 |
| $ | (157 | ) | | $ | (439 | ) | | $ | (932 | ) |
NOTE 21: SUBSEQUENT EVENT
In February 2016, additional territories in North America met the criteria to be classified as held for sale. Therefore, we are required to record the related assets and liabilities at the lower of carrying value or fair value less any costs to sell based on the estimated sale price, which will result in a noncash loss of $296 million in 2016. This loss is primarily related to the write-down of intangible assets due to the accounting treatment for the contingent consideration that will be received in exchange for the grant of the exclusive territory rights. The Company expects these territories to be refranchised at various times throughout 2016. Refer to Note 2 for additional information about North America refranchising.
The following table presents information related to the major classes of assets and liabilities related to these additional territories, which were included in the North America operating segment (in millions):
|
| | | |
| | |
| Inventories | $ | 4 |
|
| Prepaid expenses and other assets | 1 |
|
| Property, plant and equipment — net | 62 |
|
| Bottlers' franchise rights with indefinite lives | 273 |
|
| Goodwill | 10 |
|
| Other intangible assets | 13 |
|
| Allowance for reduction of assets held for sale | (296 | ) |
| Total assets | $ | 67 |
|
| Accounts payable and accrued expenses | $ | 1 |
|
| Other liabilities | 1 |
|
| Deferred income taxes | 19 |
|
| Total liabilities | $ | 21 |
|
REPORT OF MANAGEMENT
Management's Responsibility for the Financial Statements
Management of the Company is responsible for the preparation and integrity of the consolidated financial statements appearing in our annual reportAnnual Report on Form 10-K. The financial statements were prepared in conformity with generally accepted accounting principles appropriate in the circumstances and, accordingly, include certain amounts based on our best judgments and estimates. Financial information in this annual reportAnnual Report on Form 10-K is consistent with that in the financial statements.
Management of the Company is responsible for establishing and maintaining a system of internal controls and procedures to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements. Our internal control system is supported by a program of internal audits and appropriate reviews by management, written policies and guidelines, careful selection and training of qualified personnel, and a written Code of Business Conduct adopted by our Company's Board of Directors, applicable to all officers and employees of our Company and subsidiaries. In addition, our Company's Board of Directors adopted a written Code of Business Conduct for Non-Employee Directors which reflects the same principles and values as our Code of Business Conduct for officers and employees but focuses on matters of relevance to non-employee Directors.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management's Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended ("Exchange Act"). Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2012.2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) ("COSO") in Internal Control — Integrated Framework. Based on this assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2012.2015.
The Company's independent auditors, Ernst & Young LLP, a registered public accounting firm, are appointed by the Audit Committee of the Company's Board of Directors, subject to ratification by our Company's shareowners. Ernst & Young LLP has audited and reported on the consolidated financial statements of The Coca-Cola Company and subsidiaries and the Company's internal control over financial reporting. The reports of the independent auditors are contained in this annual report.
Audit Committee's Responsibility
The Audit Committee of our Company's Board of Directors, composed solely of Directors who are independent in accordance with the requirements of the New York Stock Exchange listing standards, the Exchange Act, and the Company's Corporate Governance Guidelines, meets with the independent auditors, management and internal auditors periodically to discuss internal controls and auditing and financial reporting matters. The Audit Committee reviews with the independent auditors the scope and results of the audit effort. The Audit Committee also meets periodically with the independent auditors and the chief internal auditor without management present to ensure that the independent auditors and the chief internal auditor have free access to the Audit Committee. Our Audit Committee's Report can be found in the Company's 20132016 Proxy Statement.
|
| | |
| | |
| Muhtar Kent | | Kathy N. Waller |
Chairman of the Board of Directors and Chief Executive Officer and President February 27, 201325, 2016 | | Vice President and Controller
February 27, 2013
|
| | |
| | |
Gary P. Fayard
Executive Vice President and Chief Financial Officer February 27, 201325, 2016 |
| | |
| | |
| James R. Quincey | | Larry M. Mark |
President and Chief Operating Officer
February 25, 2016 | | Vice President and Controller February 25, 2016 |
| | |
| | |
| | Mark Randazza |
| | Vice President and Assistant Controller
February 25, 2016 |
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareowners
The Coca-Cola Company
We have audited the accompanying consolidated balance sheets of The Coca-Cola Company and subsidiaries as of December 31, 20122015 and 20112014, and the related consolidated statements of income, comprehensive income, shareowners' equity, and cash flows for each of the three years in the period ended December 31, 20122015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Coca-Cola Company and subsidiaries at December 31, 20122015 and 20112014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 20122015, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, The Coca-Cola Company has elected to change its method of calculating the market-related value of plan assets related to certain of its pension plans in 2012.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), The Coca-Cola Company and subsidiaries' internal control over financial reporting as of December 31, 20122015, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 27, 201325, 2016 expressed an unqualified opinion thereon.
Atlanta, Georgia
February 27, 201325, 2016
Report of Independent Registered Public Accounting Firm
on Internal Control Over Financial Reporting
Board of Directors and Shareowners
The Coca-Cola Company
We have audited The Coca-Cola Company and subsidiaries' internal control over financial reporting as of December 31, 20122015, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). The Coca-Cola Company and subsidiaries' management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, The Coca-Cola Company and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 20122015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The Coca-Cola Company and subsidiaries as of December 31, 20122015 and 20112014, and the related consolidated statements of income, comprehensive income, shareowners' equity, and cash flows for each of the three years in the period ended December 31, 20122015, and our report dated February 27, 201325, 2016 expressed an unqualified opinion thereon.
Atlanta, Georgia
February 27, 201325, 2016
Quarterly Data (Unaudited)
| | | | First Quarter |
| | Second Quarter |
| | Third Quarter |
| | Fourth Quarter |
| | Full Year |
| | First Quarter |
| | Second Quarter |
| | Third Quarter |
| | Fourth Quarter |
| | Full Year |
| |
| (In millions except per share data) | | | | | | | | | | | | | | | | | | | | |
| 2012 | | | | | | | | | | | |
| 2015 | | | | | | | | | | | |
| Net operating revenues | $ | 11,137 |
| | $ | 13,085 |
| | $ | 12,340 |
| | $ | 11,455 |
| | $ | 48,017 |
| | $ | 10,711 |
| | $ | 12,156 |
| | $ | 11,427 |
| | $ | 10,000 |
| | $ | 44,294 |
| |
| Gross profit | 6,789 |
| | 7,861 |
| | 7,487 |
| | 6,827 |
| | 28,964 |
| | 6,608 |
| | 7,408 |
| | 6,850 |
| | 5,946 |
| | 26,812 |
| |
Net income attributable to shareowners of The Coca-Cola Company | 2,054 |
| | 2,788 |
| | 2,311 |
| | 1,866 |
| | 9,019 |
| | 1,557 |
| | 3,108 |
| | 1,449 |
| | 1,237 |
| | 7,351 |
| |
| Basic net income per share | $ | 0.45 |
| | $ | 0.62 |
| | $ | 0.51 |
| | $ | 0.42 |
| | $ | 2.00 |
| | $ | 0.36 |
| | $ | 0.71 |
| | $ | 0.33 |
| | $ | 0.29 |
| | $ | 1.69 |
| |
| Diluted net income per share | $ | 0.45 |
| | $ | 0.61 |
| | $ | 0.50 |
| | $ | 0.41 |
| | $ | 1.97 |
| | $ | 0.35 |
| | $ | 0.71 |
| | $ | 0.33 |
| | $ | 0.28 |
| | $ | 1.67 |
| |
2011 — As Adjusted2,3 | | | | | | | | | | | |
| 2014 | | | | | | | | | | | |
| Net operating revenues | $ | 10,517 |
| | $ | 12,737 |
| | $ | 12,248 |
| | $ | 11,040 |
| | $ | 46,542 |
| | $ | 10,576 |
| | $ | 12,574 |
| | $ | 11,976 |
| | $ | 10,872 |
| | $ | 45,998 |
| |
| Gross profit | 6,569 |
| | 7,748 |
| | 7,373 |
| | 6,637 |
| | 28,327 |
| | 6,493 |
| | 7,755 |
| | 7,346 |
| | 6,515 |
| | 28,109 |
| |
Net income attributable to shareowners of The Coca-Cola Company | 1,903 |
| | 2,800 |
| | 2,224 |
| | 1,657 |
| | 8,584 |
| | 1,619 |
| | 2,595 |
| | 2,114 |
| | 770 |
| | 7,098 |
| |
| Basic net income per share | $ | 0.42 |
| | $ | 0.61 |
| | $ | 0.49 |
| | $ | 0.37 |
| | $ | 1.88 |
| 1 | $ | 0.37 |
| | $ | 0.59 |
| | $ | 0.48 |
| | $ | 0.18 |
| | $ | 1.62 |
| |
| Diluted net income per share | $ | 0.41 |
| | $ | 0.60 |
| | $ | 0.48 |
| | $ | 0.36 |
| | $ | 1.85 |
| | $ | 0.36 |
| | $ | 0.58 |
| | $ | 0.48 |
| | $ | 0.17 |
| | $ | 1.60 |
| 1 |
| |
1 | The sum of the quarterly net income per share amounts dodoes not agree to the full year net income per share amounts. We calculate net income per share based on the weighted averageweighted-average number of outstanding shares during the reporting period. The average number of shares fluctuates throughout the year and can therefore produce a full year result that does not agree to the sum of the individual quarters. |
| |
2
| Effective January 1, 2012, the Company elected to change our accounting methodology for determining the market-related value of assets for our U.S. qualified defined benefit pension plans. The Company's change in accounting methodology has been applied retrospectively, and we have adjusted all prior period financial information presented herein as required. |
| |
3
| On July 27, 2012, the Company's certificate of incorporation was amended to increase the number of authorized shares of common stock from 5.6 billion to 11.2 billion and effect a two-for-one stock split of the common stock. The record date for the stock split was July 27, 2012, and the additional shares were distributed on August 10, 2012. Each shareowner of record on the close of business on the record date received one additional share of common stock for each share held. All share and per share data presented herein reflect the impact of the increase in authorized shares and the stock split, as appropriate.
|
Our first quarter, second quarter and third quarter reporting period endsperiods end on the Friday closest to the last day of the applicable quarterly calendar period. Our fourth quarter and fiscal year endsend on December 31 regardless of the day of the week on which December 31 falls.
The Company's first quarter 20122015 results were impacted by one lesssix additional shipping daydays compared to the first quarter of 2011.2014. Furthermore, the Company recorded the following transactions which impacted results:
Charge of $320 million due to the early extinguishment of debt. Refer to Note 10 and Note 17.
Charges of $61$135 million for North America, $15due to the remeasurement of the net monetary assets of our local Venezuelan subsidiary into U.S. dollars using the SIMADI exchange rate, an impairment of a Venezuelan trademark and a write-down the Company recorded on receivables from our bottling partner in Venezuela. Refer to Note 1 and Note 17.
Charges of $125 million for Bottling Investments and $3 million for Corporate due to the Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 17 and Note 18.
18.BenefitCharges of $1$73 million for Europe due to the refinement of previously established accruals related to the Company's 2008–2011 productivity initiatives. Refer to Note 17 and Note 18.
Charge of $20 million for North America due to changes in the Company's ready-to-drink tea strategy as a result of our current U.S. license agreement with Nestlé terminating at the end of 2012. Refer to Note 17.
Charge of $6 million for North America due to costs associated with the Company detecting residues of carbendazim, a fungicide that is not registered in the United States for use on citrus products, in orange juice imported from Brazil for distribution in the United States. As a result, the Company began purchasing additional supplies of Florida orange juice at a higher cost than Brazilian orange juice. Refer to Note 17.
Charge of $3 million for Corporate due to changes in the structure of BPW, our 50/50 joint venture with Nestlé in the ready-to-drink tea category. Refer to Note 17.
Net benefit of $44 million for Bottling Investments due to the Company's proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 17.17.
Net tax benefitCharge of $8$21 million associated withdue to the reversalrefranchising of a valuation allowancecertain territories in one of the Company's foreign jurisdictions, partially offset by amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties.North America. Refer to Note 14.
2 and Note 17.In the second quarter of 2012,2015, the Company recorded the following transactions which impacted results:
Benefit of $1,402 million as a result of the Monster Transaction. Refer to Note 2 and Note 17.
Charge of $380 million due to an impairment primarily related to the discontinuation of the energy products in the glacéau portfolio as a result of the Monster Transaction. Refer to Note 2 and Note 17.
Charges of $48$186 million for North America, $16 million for Bottling Investments and $5 million for Corporate due to the Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 17 and Note 18.
18.Benefit of $2 million for Europe due to the refinement of previously established accruals related to the Company's 2008–2011 productivity initiatives. Refer to Note 17 and Note 18.
Charge of $6$100 million for North America due to costs associated with the Company detecting residues of carbendazim in orange juice imported from Brazil for distribution in the United States. Refer to Note 17.
Benefit of $92 million for Corporate due to a gain the Company recognized as a result of a cash contribution to The Coca-Cola FEMSA, an equity method investee, issuing additional shares of its own stock during the period at a per share amount greater than the carrying amount of the Company's per share investment.Foundation. Refer to Note 17.
17.ChargesCharge of $3$12 million for Eurasia and Africa, $6 million for Europe, $2 million for Latin America, $3 million for Pacific and a benefit of $3 million for Corporate due to changes in the structure of BPW. Refer to Note 17.
Net charge of $1 million for Bottling Investments due to the Company's proportionate sharerefranchising of unusual or infrequent items recorded by certain of our equity method investees.territories in North America. Refer to Note 17.2 and Note 17.
Net tax benefit of $25 million associated with the reversal of a valuation allowance in one of the Company's foreign jurisdictions as well as amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties. Refer to Note 14.
In the third quarter of 2012,2015, the Company recorded the following transactions which impacted results:
ChargesCharge of $48$794 million for North America, $1 million for Pacific, $14 million for Bottling Investments and $10 million for Corporate due to charges related to the Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 17 and Note 18.
Benefit of $1 million for Pacific and $5 million for Corporate due to the refinementrefranchising of previously established accruals related to the Company's 2008–2011 productivity initiatives.certain territories in North America. Refer to Note 172 and Note 18.
17.Benefit of $5 million for North America due to the refinement of previously established accruals related to the Company's integration of CCE's former North America business. Refer to Note 17 and Note 18.
Charge of $9 million for North America due to costs associated with the Company detecting residues of carbendazim in orange juice imported from Brazil for distribution in the United States. Refer to Note 17.
Charges of $1$216 million for Latin America, $1 million for North America, $2 million for Pacific and benefits of $1 million for Eurasia and Africa and $3 million for Europe due to changes in the structure of BPW. Refer to Note 17.
Net charge of $10 million for Bottling Investments due to the Company's proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 17.
Net charge of $7 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties. Refer to Note 14.
The Company's fourth quarter 2012 results were impacted by two additional shipping days compared to the fourth quarter of 2011. Furthermore, the Company recorded the following transactions which impacted results:
Charges of $1 million for Europe, $70 million for North America, $2 million for Pacific, $119 million for Bottling Investments and $20 million for Corporate due to the Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 17 and Note 18.
18.BenefitCharge of $1$38 million for Europe due to the refinement of previously established accruals related to an impairment on a trademark in the Company's 2008–2011 productivity initiatives. Refer to Note 17 and Note 18.
Benefit of $1 million for North America due to the refinement of previously established accruals related to the Company's integration of CCE's former North America business. Refer to Note 17 and Note 18.
Benefit of $185 million for Corporate due to the gain the Company recognizedglacéau portfolio, primarily as a result of foreign currency exchange rate fluctuations that impacted the mergerfair value of Andina and Polar.the asset. Refer to Note 162 and Note 17.
17.Charge of $108$3 million for Corporate duerelated to an impairment charge on a Venezuelan trademark. Refer to Note 1.
The Company's fourth quarter 2015 results were impacted by six fewer shipping days compared to the loss the Company recognized on the pending sale of a majority ownership interest in our Philippine bottling operations to Coca-Cola FEMSA. This transaction was completed in January 2013. As of December 31, 2012, the assets and liabilities associated with our Philippine bottling operations were classified as held for sale in our consolidated balance sheets. Refer to Note 17.
Charge of $82 million for Corporate due to the Company acquiring an ownership interest in Mikuni for which we paid a premium over the publicly traded market price. This premium was expensed on the acquisition date. The Company accounts for our investment in Mikuni under the equity method of accounting. Refer to Note 17.
Net charge of $25 million for Bottling Investments due to the Company’s proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 17.
Charge of $16 million for Corporate due to other-than-temporary declines in the fair values of certain cost method investments. Refer to Note 16 and Note 17.
Benefits of $1 million for Eurasia and Africa, $1 million for Latin America, $1 million for North America, $1 million for Pacific and a charge of $1 million for Europe due to changes in the structure of BPW. Refer to Note 17.
Net tax benefit of $124 million associated with the reversal of a valuation allowance in one of the Company's foreign jurisdictions as well as amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties. Refer to Note 14.
In the firstfourth quarter of 2011,2014. Furthermore, the Company recorded the following transactions which impacted results:
Charges of $1$456 million for Eurasia and Africa, $1 million for Europe, $111 million for North America, $1 million for Pacific, $21 million for Bottling Investments and $27 million for Corporate due to the Company's ongoing productivity integration and reinvestment program as well as other restructuring initiatives. Refer to Note 17 and Note 18.
18.GainCharge of $102$179 million for Corporate due to the salerefranchising of our investmentcertain territories in Embonor, a bottling partner with operations primarily in Chile. Prior to this transaction, the Company accounted for our investment in Embonor under the equity method of accounting.North America. Refer to Note 17.
2 and Note 17.ChargeBenefit of $79$1 million for Pacific associated withas a result of the earthquakeMonster Transaction. Refer to Note 2 and tsunami that devastated northern and eastern Japan on March 11, 2011. This charge was primarily relatedNote 17.
The Company's first quarter 2014 results were impacted by one less shipping day compared to the Company's charitable donations in support of relief and rebuilding efforts in Japan and funds provided to certain bottling partners in the affected regions. Refer to Note 17.
Charge of $19 million for North America due to the amortization of favorable supply contracts acquired in connection with our acquisition of CCE's former North America business. Refer to Note 17.
Charge of $4 million for Corporate related to premiums paid to repurchase certain long-term debt assumed in connection with our acquisition of CCE's former North America business. Refer to Note 10.
Charge of $4 million for Bottling Investments, primarily attributable to the Company's proportionate share of restructuring charges recorded by an equity method investee. Refer to Note 17.
A net tax charge of $3 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties. Refer to Note 14.
In the secondfirst quarter of 2011,2013. Furthermore, the Company recorded the following transactions which impacted results:
Charges of $8$247 million for Eurasiadue to the devaluation of the Venezuelan bolivar, including our proportionate share of the charge incurred by an equity method investee that has operations in Venezuela. Refer to Note 1 and Africa, $2Note 17.
Charges of $128 million for Europe, $1 million for Latin America, $66 million for North America, $23 million for Bottling Investments and $47 million for Corporate, primarily due to the Company's ongoing productivity integration and restructuring initiativesreinvestment program as well as costs associated with the merger of Arca and Contal.other restructuring initiatives. Refer to Note 17 and Note 18.
A net gain of $417 million for Corporate, primarily due to the merger of Arca and Contal. Refer to Note 16 and Note 17.
Charge of $38 million for Corporate due to the impairment of an investment in an entity accounted for under the equity method of accounting. Refer to Note 16 and Note 17.
Charge of $4 million for Pacific due to the earthquake and tsunami that devastated northern and eastern Japan on March 11, 2011. Refer to Note 17.
A net gain of $1 million for Corporate related to the repurchase of certain long-term debt we assumed in connection with our acquisition of CCE's former North America business. Refer to Note 10.
A net tax charge of $16 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties. Refer to Note 14.
18.In the thirdsecond quarter of 2011,2014, the Company recorded the following transactions which impacted results:
Charges of $2$155 million for Europe, $2 million for Latin America, $52 million for North America, $2 million for Pacific, $14 million for Bottling Investments and $26 million for Corporate, due to the Company's ongoing productivity integration and restructuring initiativesreinvestment program as well as costs associated with the merger of Arca and Contal.other restructuring initiatives. Refer to Note 17 and Note 18.
18.Charge of $36$140 million for Bottling Investments, primarily attributable to the Company's proportionate share of asset impairments and restructuring charges recorded by certain of our equity method investees. Refer to Note 17.
A net charge of $5 million for Corporate due to the repurchase and/or exchangerefranchising of certain long-term debt assumedterritories in connection with our acquisition of CCE's former North America business.America. Refer to Note 10.
2 and Note 17.Charge of $5$21 million for Corporateas a result of a write-down of receivables related to sales of concentrate to our bottling partner in Venezuela due to the finalization of working capital adjustments related to the sale of all our ownership interests in our Norwegian and Swedish bottling operations to New CCE.limited government-approved exchange rate conversion mechanisms. Refer to Note 17.
Charge of $3 million for Corporate due to the impairment of an investment in an entity accounted for under the equity method of accounting. Refer to 1 and Note 16 and Note 17.
A net charge of $1 million associated with the earthquake and tsunami that devastated northern and eastern Japan on March 11, 2011. This net charge included a charge of $2 million for North America and a benefit of $1 million for Pacific. Refer to Note 17.
A net tax benefit of $4 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties. Refer to Note 14.
17.In the fourththird quarter of 2011,2014, the Company recorded the following transactions which impacted results:
Charge of $270 million due to the refranchising of certain territories in North America. Refer to Note 2 and Note 17.
Charges of $3$118 million for Eurasia and Africa, $20 million for Europe, $1 million for Latin America, $145 million for North America, $1 million for Pacific, $31 million for Bottling Investments and $64 million for Corporate, primarily due to the Company's ongoing productivity integration and reinvestment program as well as other restructuring initiatives. Refer to Note 17 and Note 18.
18.A net gainThe Company's fourth quarter 2014 results were impacted by one additional shipping day compared to the fourth quarter of $1222013. Furthermore, the Company recorded the following transactions which impacted results:
Charges of $408 million for Corporate, primarily due to gainsthe Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 17 and Note 18.
Charge of $389 million due to the refranchising of certain territories in North America. Refer to Note 2 and Note 17.
Charge of $275 million due to the write-down of concentrate sales receivables from our bottling partner in Venezuela. Refer to Note 1 and Note 17.
Charge of $164 million due to the remeasurement of the net monetary assets of our local Venezuelan subsidiary into U.S. dollars using the SICAD 2 exchange rate, and for the impairment of a Venezuelan trademark. Refer to Note 1 and Note 17.
Benefit of $46 million due to the elimination of intercompany profits resulting from a write-down the Company recognizedrecorded on the concentrate sales receivables from our bottling partner in Venezuela, an equity method investee. Refer to Note 1 and Note 17.
Charge of $32 million as a result of Coca-Cola FEMSA,a Brazilian bottling entity's majority interest owners exercising their option to acquire from us an additional equity method investee, issuing additional sharesinterest at an exercise price less than that of its own stock during the period at per share amounts greater than theour carrying value of the Company's per share investment. These gains were partially offset by charges associated with certain of the Company's equity method investments in Japan.value. Refer to Note 17.
Charge of $17 million for Corporate due to other-than-temporary impairments of certain available-for-sale securities. Refer to Note 16 and Note 17.
Charge of $13 million for Bottling Investments, primarily attributable to the Company's proportionate share of asset impairments and restructuring charges recorded by certain of our equity method investees. Refer to Note 17.
Charge of $10 million for Corporate due to the floods in Thailand that impacted the Company's supply chain operations in the region. Refer to Note 17.
Charge of $1 million for Corporate due to the early extinguishment of certain long-term debt. This debt existed prior to the Company's acquisition of CCE's former North America business. Refer to Note 10.
A net tax benefit of $22 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties. Refer to Note 14.
17.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company's "disclosure controls and procedures" (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange("Exchange Act")) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of December 31, 20122015.
Report of Management on Internal Control Over Financial Reporting and Attestation Report of Independent Registered Public Accounting Firm
The report of management on our internal control over financial reporting as of December 31, 20122015 and the attestation report of our independent registered public accounting firm on our internal control over financial reporting are set forth in Part II, "Item 8. Financial Statements and Supplementary Data" in this report.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company's internal control over financial reporting during the quarter ended December 31, 20122015 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information regarding Director Nominations under the subheading "Item 1-Election of Directors" under the principal headings "ELECTION OF DIRECTORS" and "SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE,heading "Governance," the information regarding the Codes of Business Conduct under the subheading "Additional Governance Features" under the principal heading "Governance," the information under the subheading "Codes of Business Conduct""Section 16(a) Beneficial Ownership Reporting Compliance" under the principal heading "CORPORATE GOVERNANCE,""Share Ownership" and the information regarding the Audit Committee under the subheading “Board Meetings"Board and Committees”Committee Governance" under the principal heading "CORPORATE GOVERNANCE,""Governance" in the Company's 20132016 Proxy Statement is incorporated herein by reference. See Item X in Part I of this report for information regarding executive officers of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The information under the subheading "Director Compensation" under the principal headings "DIRECTOR COMPENSATION,heading "Governance" and the information under the subheadings "Compensation Discussion and Analysis," "COMPENSATION DISCUSSION AND ANALYSIS,"Report of the Compensation Committee," "REPORT OF THE COMPENSATION COMMITTEE,"Compensation Committee Interlocks and Insider Participation," "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION""Compensation Tables," "Payments on Termination or Change in Control" and "EXECUTIVE COMPENSATION""Summary of Plans" under the principal heading "Compensation" in the Company's 20132016 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information under the subheading "Equity Compensation Plan Information" under the principal headings "EQUITY COMPENSATION PLAN INFORMATION"heading "Compensation" and "OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY"the information under the subheading "Ownership of Equity Securities of the Company" under the principal heading "Share Ownership" in the Company's 20132016 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information under the subheading "Independence"Director Independence and Related Person Transactions" under the principal heading "CORPORATE GOVERNANCE"
"Governance" in the Company's 20132016 Proxy Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information under the subheadings "Auditregarding Audit Fees, Audit-Related Fees, Tax Fees, All Other Fees and All Other Fees" and "AuditAudit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors under the subheading "Item 3 – Ratification of the Appointment of Ernst & Young LLP as Independent Auditors" belowunder the principal heading "RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS""Audit Matters" in the Company's 20132016 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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| (a) | The following documents are filed as part of this report: |
1.Financial Statements:
Consolidated Statements of Income — Years ended December 31, 20122015, 20112014 and 20102013.
Consolidated Statements of Comprehensive Income — Years ended December 31, 20122015, 20112014 and 20102013.
Consolidated Balance Sheets — December 31, 20122015 and 20112014.
Consolidated Statements of Cash Flows — Years ended December 31, 20122015, 20112014 and 20102013.
Consolidated Statements of Shareowners' Equity — Years ended December 31, 20122015, 20112014 and 20102013.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm.
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting.
2.Financial Statement Schedules:
The schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission ("SEC") are not required under the related instructions or are inapplicable and, therefore, have been omitted.
3.Exhibits
In reviewing the agreements included as exhibits to this report, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements contain representations, warranties, covenants and conditions by or of each of the parties to the applicable agreement. These representations, warranties, covenants and conditions have been made solely for the benefit of the other parties to the applicable agreement and:
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this report and the Company's other public filings, which are available without charge through the SEC's website at http://www.sec.gov.
Exhibit No.
(With regard to applicable cross-references in the list of exhibits below, the Company's Current, Quarterly and Annual Reports are filed with the Securities and Exchange Commission (the "SEC"("SEC") under File No. 001-02217; and Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Current, Quarterly and Annual Reports are filed with the SEC under File No. 01-09300).
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2.1.1 | | Business Separation and Merger Agreement, dated as of February 25, 2010, by and among Coca-Cola Enterprises Inc., International CCE, Inc., The Coca-Cola Company and Cobalt Subsidiary LLC. |
| | Exhibit I | Tax Sharing Agreement |
| | Exhibit II | Employee Matters Agreement |
| | Exhibit III | Form of Corporate Name Letter |
| | Exhibit IV | Form of Transition Services Agreement |
| | Exhibit V-1 | Bottler's Agreement Jurisdictions |
| | Exhibit V-2 | Form of Bottler's Agreement |
| | — incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on March 3, 2010. In accordance with Item 601(b)(2) of Regulation S-K, certain schedules have not been filed. The Company hereby agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request. |
2.1.2 | | Amendment No. 1, dated as of September 6, 2010, to the Business Separation and Merger Agreement, dated as of February 25, 2010, by and among Coca-Cola Enterprises Inc., International CCE Inc., the Company and Cobalt Subsidiary LLC — incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on September 7, 2010. |
2.2 | | Tax Sharing Agreement, dated as of February 25, 2010, by and among The Coca-Cola Company, Coca-Cola Enterprises Inc. and International CCE, Inc. (included as Exhibit I to the Business Separation and Merger Agreement) — incorporated herein by reference to Exhibit 2.2 of the Company's Current Report on Form 8-K filed on March 3, 2010. |
2.3 | | Employee Matters Agreement, dated as of February 25, 2010, by and among The Coca-Cola Company, Coca-Cola Enterprises Inc. and International CCE, Inc. (included as Exhibit II to the Business Separation and Merger Agreement) — incorporated herein by reference to Exhibit 2.3 to the Company's Current Report on Form 8-K filed on March 3, 2010. |
2.4 | | Letter Agreement, dated as of February 25, 2010, by and between the Company and Coca-Cola Enterprises Inc. — incorporated herein by reference to Exhibit 2.4 to the Company's Current Report on Form 8-K filed on March 3, 2010. |
2.5 | | Share Purchase Agreement, dated as of March 20, 2010, by and among The Coca-Cola Company, Bottling Holdings (Luxembourg) s.a.r.l., Coca-Cola Enterprises Inc. and International CCE, Inc. |
| | Exhibit I | Form of Corporate Name Letter |
| | Exhibit II | Form of Bottler's Agreement |
| | — incorporated herein by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K filed on March 22, 2010. In accordance with Item 601(b)(2) of Regulation S-K, certain schedules have not been filed. The Company hereby agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request. |
| 3.1 | | Certificate of Incorporation of the Company, including Amendment of Certificate of Incorporation, dated July 27, 2012 — incorporated herein by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 2012. |
| 3.2 | | By-Laws of the Company, as amended and restated through April 17, 2008September 2, 2015 — incorporated herein by reference to Exhibit 3.23.1 of the Company's QuarterlyCurrent Report on Form 10-Q for the quarter ended June 27, 2008.8-K filed on September 3, 2015. |
| 4.1 | | As permitted by the rules of the SEC, the Company has not filed certain instruments defining the rights of holders of long-term debt of the Company or consolidated subsidiaries under which the total amount of securities authorized does not exceed 10 percent of the total assets of the Company and its consolidated subsidiaries. The Company agrees to furnish to the SEC, upon request, a copy of any omitted instrument. |
| 4.2 | | Amended and Restated Indenture, dated as of April 26, 1988, between the Company and Deutsche Bank Trust Company Americas, as successor to Bankers Trust Company, as trustee — incorporated herein by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-3 (Registration No. 33-50743) filed on October 25, 1993. |
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| 4.3 | | First Supplemental Indenture, dated as of February 24, 1992, to Amended and Restated Indenture, dated as of April 26, 1988, between the Company and Deutsche Bank Trust Company Americas, as successor to Bankers Trust Company, as trustee — incorporated herein by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 33-50743) filed on October 25, 1993. |
| 4.4 | | Second Supplemental Indenture, dated as of November 1, 2007, to Amended and Restated Indenture, dated as of April 26, 1988, as amended, between the Company and Deutsche Bank Trust Company Americas, as successor to Bankers Trust Company, as trustee — incorporated herein by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on March 5, 2009. |
| 4.5 | | Form of Note for 5.350% Notes due November 15, 2017 — incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on October 31, 2007. |
| 4.6 | | Form of Note for 3.625% Notes due March 15, 2014 — incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on March 5, 2009. |
4.7 | | Form of Note for 4.875% Notes due March 15, 2019 — incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed on March 5, 2009. |
4.8 | | [RESERVED] |
4.9 | | Form of Note for 0.750% Notes due November 15, 2013 — incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed November 18, 2010. |
4.10 | | Form of Note for 1.500% Notes due November 15, 2015 — incorporated herein by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K filed November 18, 2010. |
4.10.14.7 | | Form of Note for 3.150% Notes due November 15, 2020 — incorporated herein by reference to Exhibit 4.7 to the Company's Current Report on Form 8-K filed on November 18, 2010. |
4.114.8 | | Form of Exchange and Registration Rights Agreement among the Company, the representatives of the initial purchasers of the Notes and the other parties named therein — incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on August 8, 2011. |
4.124.9 | | Form of Note for 1.80% Notes due September 1, 2016 — incorporated herein by reference to Exhibit 4.13 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011. |
4.134.10 | | Form of Note for 3.30% Notes due September 1, 2021 — incorporated herein by reference to Exhibit 4.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011. |
4.14 | | Form of Note for Floating Rates Notes due March 14, 2014 — incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed March 14, 2012.*
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4.15 | | Form of Note for 0.750% Notes due March 13, 2015 — incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed March 14, 2012.*
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4.164.11 | | Form of Note for 1.650% Notes due March 14, 2018 — incorporated herein by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K filed on March 14, 2012.* |
10.1.14.12 | | Supplemental Disability PlanForm of the Company, as amended and restated effective January 1, 2003Note for 1.150% Notes due 2018 — incorporated herein by reference to Exhibit 10.24.5 to the Company's AnnualCurrent Report on Form 10-K for the year ended December 31, 2002.*8-K filed on March 5, 2013. |
10.1.24.13 | | TerminationForm of Note for 2.500% Notes due 2023 — incorporated herein by reference to Exhibit 4.6 to the Company's Supplemental Disability Plan, effective December 31, 2012.*Current Report on Form 8-K filed on March 5, 2013. |
10.24.14 | | Form of Note for Floating Rate Notes due 2016 — incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on November 1, 2013. |
| 4.15 | | Form of Note for 0.750% Notes due 2016 — incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed on November 1, 2013. |
| 4.16 | | Form of Note for 1.650% Notes due 2018 — incorporated herein by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K filed on November 1, 2013. |
| 4.17 | | Form of Note for 2.450% Notes due 2020 — incorporated herein by reference to Exhibit 4.7 to the Company's Current Report on Form 8-K filed on November 1, 2013. |
| 4.18 | | Form of Note for 3.200% Notes due 2023 — incorporated herein by reference to Exhibit 4.8 to the Company's Current Report on Form 8-K filed on November 1, 2013. |
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| 4.19 | | Form of Note for Floating Rate Notes due 2015 — incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on March 7, 2014. |
| 4.20 | | Form of Note for 1.875% Notes due 2026 — incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-A filed on September 19, 2014. |
| 4.21 | | Form of Note for 1.125% Notes due 2022 — incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-A filed on September 19, 2014. |
| 4.22 | | Form of Note for Floating Rate Notes due 2017 — incorporated herein by reference to Exhibit 4.4 to the Company's Registration Statement on Form 8-A filed on March 6, 2015. |
| 4.23 | | Form of Note for Floating Rate Notes due 2019 — incorporated herein by reference to Exhibit 4.5 to the Company's Registration Statement on Form 8-A filed on March 6, 2015. |
| 4.24 | | Form of Note for 0.75% Notes due 2023 — incorporated herein by reference to Exhibit 4.6 to the Company's Registration Statement on Form 8-A filed on March 6, 2015. |
| 4.25 | | Form of Note for 1.125% Notes due 2027 — incorporated herein by reference to Exhibit 4.7 to the Company's Registration Statement on Form 8-A filed on March 6, 2015. |
| 4.26 | | Form of Note for 1.625% Notes due 2035 — incorporated herein by reference to Exhibit 4.8 to the Company's Registration Statement on Form 8-A filed on March 6, 2015. |
| 4.27 | | Form of Note for 0.875% Notes due 2017 — incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on October 27, 2015. |
| 4.28 | | Form of Note for 1.875% Notes due 2020 — incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed on October 27, 2015. |
| 4.29 | | Form of Note for 2.875% Notes due 2025 — incorporated herein by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K filed on October 27, 2015. |
| 10.1 | | Performance Incentive Plan of the Company, as amended and restated as of February 16, 2011 — incorporated herein by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on February 17, 2011.* |
10.3.110.2 | | The Coca-Cola Company 1999 Stock Option Plan, of the Company, as amended and restated through February 16, 201120, 2013 (the "1999 Stock Option Plan") — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 17, 2011.20, 2013.*
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10.3.210.2.1 | | Form of Stock Option Agreement in connection with the 1999 Stock Option Plan of the Company — incorporated herein by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 14, 2007.* |
10.3.310.2.2 | | Form of Stock Option Agreement in connection with the 1999 Stock Option Plan, of the Company, as adopted December 12, 2007 — incorporated herein by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed on February 21, 2008.* |
10.3.410.2.3 | | Form of Stock Option Agreement in connection with the 1999 Stock Option Plan, of the Company, as adopted February 18, 2009 — incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on February 18, 2009.* |
10.4.110.3 | | The Coca-Cola Company 2002 Stock Option Plan, of the Company, amended and restated through February 18, 2009 (the "2002 Stock Option Plan") — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 18, 2009.* |
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10.4.210.3.1 | | Form of Stock Option Agreement in connection with the 2002 Stock Option Plan, as amended — incorporated herein by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed on December 8, 2004.* |
10.4.310.3.2 | | Form of Stock Option Agreement in connection with the 2002 Stock Option Plan, as adopted December 12, 2007 — incorporated herein by reference to Exhibit 10.9 to the Company's Current Report on Form 8-K filed on February 21, 2008.* |
10.4.410.3.3 | | Form of Stock Option Agreement in connection with the 2002 Stock Option Plan, as adopted February 18, 2009 — incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on February 18, 2009.* |
10.5.110.4 | | The Coca-Cola Company 2008 Stock Option Plan, of the Company, as amended and restated, effective February 16, 201120, 2013 (the "2008 Stock Option Plan") — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 17, 2011.20, 2013.*
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10.5.210.4.1 | | Form of Stock Option Agreement for grants under the Company's 2008 Stock Option Plan — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 16, 2008.* |
10.5.310.4.2 | | Form of Stock Option Agreement for grants under the Company's 2008 Stock Option Plan, as adopted February 18, 2009 — incorporated herein by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on February 18, 2009.* |
10.6 |
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| 10.4.3 | | Form of Stock Option Agreement for grants under the 2008 Stock Option Plan, as adopted February 19, 2014— incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on February 19, 2014.* |
| 10.5 | | The Coca-Cola Company 1983 Restricted Stock Award Plan, of the Company, as amended and restated through February 16, 2011 (the "1983 Restricted Stock Award Plan") — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 17, 2011.* |
10.7.110.6 | | The Coca-Cola Company 1989 Restricted Stock Award Plan, of the Company, as amended and restated through February 16, 201119, 2014 (the "1989 Restricted Stock Award Plan") — incorporated herein by reference to Exhibit 10.410.3 to the Company's Current Report on Form 8-K filed on February 17, 2011.*
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10.7.2 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan of the Company, as adopted December 12, 2007 — incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed February 21, 2008.19, 2014.* |
10.7.3 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) for France in connection with the 1989 Restricted Stock Award Plan of the Company, as adopted December 12, 2007 — incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed February 21, 2008.* |
10.7.410.6.1 | | Form of Restricted Stock Agreement in connection with The Coca-Cola Companythe 1989 Restricted Stock Award Plan, as adopted February 17, 2010 — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 18, 2010.* |
10.7.510.6.2 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with The Coca-Cola Companythe 1989 Restricted Stock Award Plan, as adopted February 17, 2010 — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 18, 2010.* |
10.7.610.6.3 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) for France in connection with The Coca-Cola Companythe 1989 Restricted Stock Award Plan, as adopted February 17, 2010 — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 18, 2010.* |
10.7.710.6.4 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan, of the Company, as adopted February 16, 2011 — incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on February 17, 2011.* |
10.7.810.6.5 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) for France in connection with the 1989 Restricted Stock Award Plan, of the Company, as adopted February 16, 2011 — incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on February 17, 2011.* |
10.7.910.6.6 | | Form of Restricted Stock Unit Agreement in connection with The Coca-Cola Companythe 1989 Restricted Stock Award Plan, as adopted February 15, 2012 -— incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 15, 2012.* |
10.7.1010.6.7 | | Form of Restricted Stock Unit Agreement in connection with The Coca-Cola Companythe 1989 Restricted Stock Award Plan, as adopted February 15, 2012 — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 15, 2012.* |
10.7.1110.6.8 | | Form of Restricted Stock Unit Agreement in connection with The Coca-Cola Companythe 1989 Restricted Stock Award Plan, as adopted February 15, 2012 — incorporated herein by reference to Exhibit 10.110.3 to the Company's Current Report on Form 8-K filed on February 15, 2012.* |
10.7.1210.6.9 | | Form of Restricted Stock Unit Agreement in connection with The Coca-Cola Companythe 1989 Restricted Stock Award Plan, as adopted February 15, 2012 — incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on February 15, 2012.* |
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10.7.1310.6.10 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with The Coca-Cola Companythe 1989 Restricted Stock Award Plan, as adopted February 15, 2012 — incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on February 15, 2012.* |
10.7.1410.6.11 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) for France in connection with The Coca-Cola Companythe 1989 Restricted Stock Award Plan, as adopted February 15, 2012 — incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on February 15, 2012.*
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10.8.110.6.12 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan, as adopted February 20, 2013 — incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on February 20, 2013.* |
| 10.6.13 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan, as adopted February 20, 2013 — incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on February 20, 2013.* |
| 10.6.14 | | Form of Restricted Stock Unit Agreement in connection with the 1989 Restricted Stock Award Plan, as adopted February 20, 2013 — incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on February 20, 2013.* |
| 10.6.15 | | Form of Restricted Stock Unit Agreement in connection with the 1989 Restricted Stock Award Plan, as adopted February 20, 2013 — incorporated herein by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on February 20, 2013.* |
| 10.6.16 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan, as adopted February 19, 2014 — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 19, 2014.* |
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| 10.6.17 | | Form of Restricted Stock Unit Agreement in connection with the 1989 Restricted Stock Award Plan, as adopted February 19, 2014 — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 19, 2014.* |
| 10.7 | | The Coca-Cola Company 2014 Equity Plan (the "2014 Equity Plan") — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 23, 2014.* |
| 10.7.1 | | Form of Performance Share Agreement for grants under the 2014 Equity Plan, as adopted February 18, 2015 — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 18, 2015.* |
| 10.7.2 | | Form of Performance Share Agreement alternate for grants under the 2014 Equity Plan, as adopted February 18, 2015 — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 18, 2015.* |
| 10.7.3 | | Form of Stock Option Agreement for grants under the 2014 Equity Plan, as adopted February 18, 2015 — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 18, 2015.* |
| 10.7.4 | | Form of Restricted Stock Unit Agreement for grants under the 2014 Equity Plan, as adopted February 18, 2015 — incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on February 18, 2015.* |
| 10.8 | | The Coca-Cola Company Compensation Deferral & Investment Program of the Company, as amended (the "Compensation Deferral & Investment Program"), including Amendment Number Four, dated November 28, 1995 — incorporated herein by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.* |
10.8.210.8.1 | | Amendment Number Five to the Compensation Deferral & Investment Program, of the Company, effective as of January 1, 1998 — incorporated herein by reference to Exhibit 10.8.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997.* |
10.8.310.8.2 | | Amendment Number Six to the Compensation Deferral & Investment Program, of the Company, dated as of January 12, 2004, effective January 1, 2004 — incorporated herein by reference to Exhibit 10.9.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2003.* |
| 10.9 | | [RESERVED] |
10.10.1 | | The Coca-Cola Company Supplemental Pension Plan, Amended and Restated Effectiveeffective January 1, 2010 (the "Supplemental Pension Plan") — incorporated herein by reference to Exhibit 10.10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009.* |
10.10.210.9.1 | | Amendment One to The Coca-Cola Companythe Supplemental Pension Plan, effective December 31, 2012, dated December 6, 2012 — incorporated herein by reference to Exhibit 10.10.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
10.1110.9.2 | | Amendment Two to the Supplemental Pension Plan, effective April 1, 2013, dated March 19, 2013 — incorporated herein by reference to Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 29, 2013.* |
| 10.10 | | The Coca-Cola Company Supplemental 401(k) Plan (f/k/a the Supplemental Thrift Plan of the Company), Amended and Restated Effective January 1, 2012, dated December 14, 2011 — incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
10.12.110.11 | | The Coca-Cola Company Supplemental Cash Balance Plan, effective January 1, 2012 (the "Supplemental Cash Balance Plan") — incorporated herein by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.*
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10.12.210.11.1 | | Amendment One to The Coca-Cola Companythe Supplemental Cash Balance Plan, dated December 6, 2012 — incorporated herein by reference to Exhibit 10.12.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
10.1310.11.2 | | Amendment Two to the Supplemental Cash Balance Plan, dated June 15, 2015 — incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 3, 2015.* |
| 10.12 | | The Coca-Cola Company Directors' Plan, amended and restated on December 13, 2012, effective January 1, 2013.* |
10.14 | | Long-Term Performance Incentive Plan of the Company, as amended and restated effective December 13, 20062013 — incorporated herein by reference to Exhibit 10.1410.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.2012.* |
10.15 | | Executive Incentive Plan of the Company, adopted as of February 14, 2001 — incorporated herein by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000.* |
10.1610.13 | | Deferred Compensation Plan of the Company, as amended and restated December 8, 2010 — incorporated herein by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
10.1710.14 | | The Coca-Cola Export Corporation Employee Share Plan, effective as of March 13, 2002 — incorporated herein by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002.* |
10.18 | | Employees' Savings and Share Ownership Plan of Coca-Cola Ltd., effective as of January 1, 1990 — incorporated herein by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002.* |
10.19 | | Share Purchase Plan — Denmark, effective as of 1991 — incorporated herein by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002.* | |
10.20.110.15 | | The Coca-Cola Company Benefits Plan for Members of the Board of Directors, as amended and restated through April 14, 2004 (the "Benefits Plan for Members of the Board of Directors") — incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.* |
10.20.210.15.1 | | Amendment Number One to the Company's Benefits Plan for Members of the Board of Directors, dated December 16, 2005 — incorporated herein by reference to Exhibit 10.31.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2005.* |
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10.21.1 | | Employment Agreement, dated as of February 20, 2003, between the Company and José Octavio Reyes — incorporated herein by reference to Exhibit 10.43 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004.* |
10.21.2 | | Letter, dated September 13, 2012, between Servicios Integrados de Administración y Alta Gerencia, S de R.L. de C.V. and José Octavio Reyes — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
10.21.3 | | Modification of Conditions, Termination Agreement and Release, dated September 13, 2012, between Servicios Integrados de Administración y Alta Gerencia, S de R.L. de C.V. and José Octavio Reyes — incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on September 14, 2012.*
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10.2210.16 | | The Coca-Cola Company Severance Pay Plan, As Amended and Restated, Effective January 1, 2012, dated December 14, 2011 — incorporated herein by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
10.2310.17 | | Order Instituting Cease and DesistCease-and-Desist Proceedings, Making Findings and Imposing a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934 — incorporated herein by reference to Exhibit 99.299.3 to the Company's Current Report on Form 8-K filed on April 18, 2005. |
10.2410.18 | | Offer of Settlement of The Coca-Cola Company — incorporated herein by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed on April 18, 2005. |
10.25 | | Employment Agreement, effective as of May 1, 2005, between Refreshment Services S.A.S. and Dominique Reiniche, dated September 7, 2006 — incorporated herein by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed on September 12, 2006.* |
10.26 | | Refreshment Services S.A.S. Defined Benefit Plan, dated September 25, 2006 — incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 29, 2006.* |
10.2710.19 | | Share Purchase Agreement among Coca-Cola South Asia Holdings, Inc. and San Miguel Corporation, San Miguel Beverages (L) Pte Limited and San Miguel Holdings Limited in connection with the Company's purchase of Coca-Cola Bottlers Philippines, Inc., dated December 23, 2006 — incorporated herein by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed on December 29, 2006. |
10.2810.20 | | Cooperation Agreement between Coca-Cola South Asia Holdings, Inc. and San Miguel Corporation in connection with the Company's purchase of Coca-Cola Bottlers Philippines, Inc., dated December 23, 2006 — incorporated herein by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed on December 29, 2006. |
10.29.110.21 | | Offer Letter, dated July 20, 2007, from the Company to Joseph V. Tripodi, including Agreement on Confidentiality, Non-Competition and Non-Solicitation, dated July 20, 2007 — incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 2007.* |
10.29.210.21.1 | | Agreement between the Company and Joseph V. Tripodi, dated December 15, 2008 — incorporated herein by reference to Exhibit 10.47.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008.* |
10.3010.21.2 | | Separation Agreement and Full and Complete Release and Agreement on Competition, Trade Secrets and Confidentiality between The Coca-Cola Company and Joseph V. Tripodi, dated December 5, 2014.* |
| 10.22 | | Letter, dated July 17, 2008, to Muhtar Kent — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 21, 2008.* |
10.31 | | Separation Agreement between the Company and Robert Leechman, dated February 24, 2009, including form of Full and Complete Release and Agreement on Competition, Trade Secrets and Confidentiality — incorporated herein by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 3, 2009.* |
10.32 | | Separation Agreement between the Company and Cynthia McCague, dated June 22, 2009 (effective as of July 22, 2009), including form of Full and Complete Release and Agreement on Competition, Trade Secrets and Confidentiality and summary of anticipated consulting agreement — incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended October 2, 2009.* |
10.3310.23 | | Letter of Understanding between the Company and Ceree Eberly, dated October 26, 2009, including Agreement on Confidentiality, Non-Competition and Non-Solicitation, dated November 1, 2009 — incorporated herein by reference to Exhibit 10.47 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009.* |
10.34.110.24 | | The Coca-Cola Export Corporation Overseas Retirement Plan, as amended and restated, effective October 1, 2007 — incorporated herein by reference to Exhibit 10.55 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008.* |
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10.34.210.24.1 | | Amendment Number One to The Coca-Cola Export Corporation Overseas Retirement Plan, as Amended and Restated, Effective October 1, 2007, dated September 29, 2011 — incorporated herein by reference to Exhibit 10.34.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
10.34.310.24.2 | | Amendment Number Two to The Coca-Cola Export Corporation Overseas Retirement Plan, as Amended and Restated, Effective October 1, 2007, dated November 14, 2011 — incorporated herein by reference to Exhibit 10.34.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
10.34.410.24.3 | | Amendment Number Three to The Coca-Cola Export Corporation Overseas Retirement Plan, as Amended and Restated, Effective October 1, 2007, dated September 27, 2012 — incorporated herein by reference to Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q filed on September 28, 2012.*
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10.35.110.25 | | The Coca-Cola Export Corporation International Thrift Plan, as amendedAmended and restated, effectiveRestated, Effective January 1, 2011 — incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 1, 2011.* |
10.35.210.25.1 | | Amendment Number One to The Coca-Cola Export Corporation International Thrift Plan, as Amended and Restated, Effective January 1, 2011, dated September 20, 2011 — incorporated herein by reference to Exhibit 10.35.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
10.35.3 |
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| 10.25.2 | | Amendment Number Two to The Coca-Cola Export Corporation International Thrift Plan, as Amended and Restated, Effective January 1, 2011, dated September 27, 2012 — incorporated herein by reference to Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q filed on September 28, 2012.* |
10.3610.26 | | The Coca-Cola Export Corporation Mobile Employees Retirement Plan, effective January 1, 2012.* |
| 10.27 | | Letter Agreement, dated as of June 7, 2010, between The Coca-Cola Company and Dr Pepper Seven-Up, Inc. — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 7, 2010. |
10.37 | | [RESERVED] |
10.38 | | Coca-Cola Enterprises Inc. Stock Deferral Plan — incorporated herein by reference to Exhibit 99.1 to the Company's Registration Statement on Form S-3 (Registration No. 333-169724) filed on October 1, 2010.* |
10.39 | | Coca-Cola Enterprises Inc. 1997 Stock Option Plan — incorporated herein by reference to Exhibit 99.1 to the Company's Registration Statement on Form S-8 (Registration No. 333-169722) filed on October 1, 2010.* |
10.40 | | Coca-Cola Enterprises Inc. 1999 Stock Option Plan — incorporated herein by reference to Exhibit 99.2 to the Company's Registration Statement on Form S-8 (Registration No. 333-169722) filed on October 1, 2010.* |
10.41 | | Coca-Cola Enterprises Inc. 2001 Restricted Stock Award Plan — incorporated herein by reference to Exhibit 99.3 to the Company's Registration Statement on Form S-8 (Registration No. 333-169722) filed on October 1, 2010.* |
10.4210.28 | | Coca-Cola Enterprises Inc. 2001 Stock Option Plan — incorporated herein by reference to Exhibit 99.4 to the Company's Registration Statement on Form S-8 (Registration No. 333-169722) filed on October 1, 2010.* |
10.4310.29 | | Coca-Cola Enterprises Inc. 2004 Stock Award Plan — incorporated herein by reference to Exhibit 99.5 to the Company's Registration Statement on Form S-8 (Registration No. 333-169722) filed on October 1, 2010.* |
10.44.110.30 | | Coca-Cola Enterprises Inc. 2007 Incentive Award Plan — incorporated herein by reference to Exhibit 99.6 to the Company's Registration Statement on Form S-8 (Registration No. 333-169722) filed on October 1, 2010.* |
10.44.210.30.1 | | Form of 2007 Stock Option Agreement (Senior Officers) under the Coca-Cola Enterprises Inc. 2007 Incentive Award Plan — incorporated herein by reference to Exhibit 10.32 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2007.* |
10.44.310.30.2 | | Form of Stock Option Agreement (Chief Executive Officer and Senior Officers) under the Coca-Cola Enterprises Inc. 2007 Incentive Award Plan for Awards after October 29, 2008 — incorporated herein by reference to Exhibit 10.16.4 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2008.* |
10.44.410.30.3 | | Form of 2007 Restricted Stock Unit Agreement (Senior Officers) under the Coca-Cola Enterprises Inc. 2007 Incentive Award Plan — incorporated herein by reference to Exhibit 10.16.7 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2008.* |
10.44.510.30.4 | | Form of 2007 Performance Share Unit Agreement (Senior Officers) under the Coca-Cola Enterprises Inc. 2007 Incentive Award Plan — incorporated herein by reference to Exhibit 10.16.10 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2008.* |
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10.44.610.30.5 | | Form of Performance Share Unit Agreement (Chief Executive Officer and Senior Officers) under the Coca-Cola Enterprises Inc. 2007 Incentive Award Plan for Awards after October 29, 2008 — incorporated herein by reference to Exhibit 10.16.12 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2008.* |
10.45.110.31 | | Coca-Cola Refreshments USA, Inc. Supplemental Matched Employee Savings and Investment Plan (Amended and Restated Effective January 1, 2010) — incorporated herein by reference to Exhibit 10.2 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2009.* |
10.45.210.31.1 | | First Amendment to the Coca-Cola Refreshments USA, Inc. Supplemental Matched Employee Savings and Investment Plan (Amended and Restated Effective January 1, 2010), dated September 24, 2010 — incorporated herein by reference to Exhibit 10.45.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
10.45.310.31.2 | | Second Amendment to the Coca-Cola Refreshments USA, Inc. Supplemental Matched Employee Savings and Investment Plan (Amended and Restated Effective January 1, 2010), dated November 3, 2010 — incorporated herein by reference to Exhibit 10.45.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
10.45.410.31.3 | | Third Amendment to the Coca-Cola Refreshments USA, Inc. Supplemental Matched Employee Savings and Investment Plan, Effective January 1, 2010, dated February 15, 2011 — incorporated herein by reference to Exhibit 10.45.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
10.45.510.31.4 | | Fourth Amendment to the Coca-Cola Refreshments USA, Inc. Supplemental Matched Employee Savings and Investment Plan, effective December 31, 2011, dated December 14, 2011 — incorporated herein by reference to Exhibit 10.45.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
10.46.110.32 | | Coca-Cola Refreshments Executive Pension Plan, dated December 13, 2010 (Amended and Restated, Effective January 1, 2011) — incorporated herein by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
10.46.210.32.1 | | Amendment Number One to the Coca-Cola Refreshments Executive Pension Plan (Amended and Restated, Effective January 1, 2011), dated as of July 14, 2011—2011 — incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011.* |
10.46.3 |
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| 10.32.2 | | Amendment Number Two to the Coca-Cola Refreshments Executive Pension Plan, effective December 31, 2011, dated December 14, 2011 — incorporated herein by reference to Exhibit 10.46.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
10.47 | | Summary Plan Description for Coca-Cola Refreshments USA, Inc. Executive Long-Term Disability Plan — incorporated by reference to Exhibit 10.18 of Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2006.* |
10.48.1 | | Coca-Cola Refreshments USA, Inc. Executive Severance Plan (Amended and Restated Effective December 31, 2008) — incorporated herein by reference to Exhibit 10.5.4 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2008.* |
10.48.2 | | Form Agreement in connection with the Coca-Cola Refreshments USA, Inc. Executive Severance Plan (Amended and Restated Effective September 25, 2008) — incorporated herein by reference to Exhibit 10.5.5 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2008.*
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10.48.3 | | First Amendment to the Coca-Cola Refreshments USA, Inc. Executive Severance Plan (Amended and Restated Effective December 31, 2008), dated as of November 3, 2010 — incorporated herein by reference to Exhibit 10.48.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
10.48.4 | | Amendment Number Two to the Coca-Cola Refreshments USA, Inc. Executive Severance Plan (Amended and Restated Effective December 31, 2008), dated as of July 14, 2011 — incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011.* |
10.48.5 | | Amendment Number Three to the Coca-Cola Refreshments Executive Severance Plan, dated September 24, 2012 - incorporated herein by reference to Exhibit 10.12 to the Company's Quarterly Report on Form 10-Q filed on September 28, 2012.* |
10.4910.33 | | Amendment to certain Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Employee Benefit Plans and Equity Plans, effective December 6, 2010 — incorporated herein by reference to Exhibit 10.49 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
10.50.1 | | Offer Letter, dated October 21, 2010, from the Company to Steven A. Cahillane, including Agreement on Confidentiality, Non-Competition and Non-Solicitation, dated November 10, 2010 — incorporated herein by reference to Exhibit 10.50 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
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10.50.2 | | Letter, dated September 11, 2012, from the Company to Steven A. Cahillane — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
10.51 | | Offer Letter, dated January 5, 2011, from the Company to Guy Wollaert, including Agreement on Confidentiality, Non-Competition and Non-Solicitation, dated June 23, 2008 — incorporated herein by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 1, 2011.* |
10.5210.34 | | Letter, dated September 11, 2012, from the Company to Ahmet Bozer — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
10.5310.34.1 | | Separation Agreement and Full and Complete Release and Agreement on Competition, Trade Secrets and Confidentiality between The Coca-Cola Company and Ahmet Bozer, dated August 12, 2015 — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on August 13, 2015.* |
| 10.35 | | Letter, dated September 11, 2012, from the Company to Brian Smith — incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
10.5410.36 | | Letter, dated September 11, 2012, from the Company to J. Alexander Douglas, Jr. — incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
10.55 | | Letter, dated September 11, 2012, from the Company to Brian Kelley - incorporated herein by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
10.5610.37 | | Letter, dated September 11, 2012, from the Company to Nathan Kalumbu — incorporated herein by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
10.57.1 | | Letter, dated September 11, 2012, from the Company to James Quincey — incorporated herein by reference to Exhibit 10.9 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
10.57.2 | | Service Agreement between Beverage Services Limited and James Robert Quincey, dated November 14, 2012.* |
10.58 | | Letter, dated December 12, 2012, from the Company to Glen Walter, including Agreement on Confidentiality, Non-Competition and Non-Solicitation, dated December 14, 2012.* |
10.59.110.38 | | Coca-Cola Refreshments Supplemental Pension Plan (Amended and Restated Effective January 1, 2011), dated December 13, 2010 — incorporated herein by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 2012.* |
10.59.210.38.1 | | Amendment Number One to the Coca-Cola Refreshments Supplemental Pension Plan, dated December 14, 2011 — incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 2012.* |
10.59.310.38.2 | | Amendment Two to the Coca-Cola Refreshments Supplemental Pension Plan, dated December 6, 2012 — incorporated herein by reference to Exhibit 10.59.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
10.60.110.38.3 | | Amendment Three to the Coca-Cola Refreshments Supplemental Pension Plan, adopted March 19, 2013 — incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 29, 2013.* |
| 10.38.4 | | Amendment Four to the Coca-Cola Refreshments Supplemental Pension Plan, dated June 15, 2015 — incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 3, 2015.* |
| 10.39 | | Coca-Cola Refreshments Severance Pay Plan for Exempt Employees, effective as of January 1, 2012 — incorporated herein by reference to Exhibit 10.60.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
10.60.210.39.1 | | Amendment One to the Coca-Cola Refreshments Severance Pay Plan for Exempt Employees, effective January 1, 2012, dated May 24, 2012 — incorporated herein by reference to Exhibit 10.60.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
10.60.310.39.2 | | Amendment Two to the Coca-Cola Refreshments Severance Pay Plan for Exempt Employees, dated December 6, 2012 — incorporated herein by reference to Exhibit 10.60.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
| 10.39.3 | | Amendment Three to the Coca-Cola Refreshments Severance Pay Plan for Exempt Employees, adopted March 19, 2013 — incorporated herein by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 29, 2013.* |
| 10.40 | | Letter, dated December 16, 2013, from the Company to Irial Finan — incorporated herein by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended December 31, 2013.* |
| 10.40.1 | | Letter, dated April 29, 2015, from the Company to Irial Finan — incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on July 29, 2015.* |
| 10.41 | | Letter, dated April 24, 2014, from the Company to Kathy N. Waller — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 25, 2014.* |
| 10.42 | | Letter, dated October 15, 2014, from the Company to Atul Singh — incorporated herein by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014.* |
| 10.43 | | Letter, dated December 16, 2014, from the Company to Marcos de Quinto — incorporated herein by reference to Exhibit 10.47 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014.* |
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| 10.44 | | Letter, dated February 12, 2015, from the Company to Ed Hays — incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q filed on April 30, 2015.* |
| 10.45 | | Letter, dated April 29, 2015, from the Company to Julie Hamilton — incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on July 29, 2015.* |
| 10.46 | | Letter, dated August 12, 2015, from the Company to James Quincey — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 13, 2015.* |
| 10.47 | | Separation Agreement and Full and Complete Release and Agreement on Competition, Trade Secrets and Confidentiality between The Coca-Cola Company and Alex Cummings, dated December 23, 2015.* |
| 10.48 | | Letter, dated October 14, 2015, from the Company to Bernhard Goepelt.* |
| 12.1 | | Computation of Ratios of Earnings to Fixed Charges for the years ended December 31, 2015, 2014, 2013, 2012 2011, 2010, 2009 and 2008. |
18.1 | | Preferability Letter from Independent Registered Public Accounting Firm — incorporated herein by reference to Exhibit 18.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 2012.2011. |
| 21.1 | | List of subsidiaries of the Company as of December 31, 2012.2015. |
| 23.1 | | Consent of Independent Registered Public Accounting Firm. |
| 24.1 | | Powers of Attorney of Officers and Directors signing this report. |
| 31.1 | | Rule 13a-14(a)/15d-14(a) Certification, executed by Muhtar Kent, Chairman of the Board of Directors and Chief Executive Officer and President of The Coca-Cola Company. |
| 31.2 | | Rule 13a-14(a)/15d-14(a) Certification, executed by Gary P. Fayard,Kathy N. Waller, Executive Vice President and Chief Financial Officer of The Coca-Cola Company. |
| 32.1 | | Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), executed by Muhtar Kent, Chairman of the Board of Directors and Chief Executive Officer and President of The Coca-Cola Company and by Gary P. Fayard,Kathy N. Waller, Executive Vice President and Chief Financial Officer of The Coca-Cola Company. |
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| 101 | | The following financial information from The Coca-Cola Company's Annual Report on Form 10-K for the year ended December 31, 2012,2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income for the years ended December 31, 2012, 20112015, 2014 and 2010,2013, (ii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 20112015, 2014 and 2010,2013, (iii) Consolidated Balance Sheets as of December 31, 20122015 and 2011,2014, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2012, 20112015, 2014 and 2010,2013, (v) Consolidated Statements of Shareowners' Equity for the years ended December 31, 2012, 20112015, 2014 and 20102013 and (vi) the Notes to Consolidated Financial Statements.
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* | Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 15(b) of this report.Form 10-K. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| | | | | |
| | THE COCA-COLA COMPANY | |
| | (Registrant) | |
| | By: | | /s/ MUHTAR KENT | |
| | | | Muhtar Kent Chairman of the Board of Directors and Chief Executive Officer and President | |
| | | | Date: | February 27, 201325, 2016 | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
| | |
| /s/ MUHTAR KENT | | */s/ KATHY N. WALLER |
Muhtar Kent Chairman of the Board of Directors, Chief Executive Officer President and a Director
(Principal Executive Officer) | | Richard M. Daley
Director
|
| | |
February 27, 2013 | | February 27, 2013 |
| | |
/s/ GARY P. FAYARD | | * |
Gary P. FayardKathy N. Waller
Executive Vice President and Chief Financial Officer
(Principal Financial Officer) | | Barry Diller
Director
|
| | | |
February 27, 201325, 2016 | | February 27, 201325, 2016 |
| | | |
/s/ KATHY N. WALLERLARRY M. MARK | | */s/ MARK RANDAZZA |
Kathy N. WallerLarry M. Mark
Vice President and Controller (As Principal Accounting Officer) | | Evan G. Greenberg
Director
Mark Randazza
Vice President and Assistant Controller
(On behalf of the Registrant) |
| | | |
February 27, 201325, 2016 | | February 27, 201325, 2016 |
| | | |
| * | | * |
Herbert A. Allen Director | | Alexis M. Herman
Howard G. Buffett
Director |
| | | |
February 27, 201325, 2016 | | February 27, 201325, 2016 |
| | | |
| * | | * |
Ronald W. Allen Director | | Donald R. KeoughRichard M. Daley
Director |
| | | |
February 27, 201325, 2016 | | February 27, 201325, 2016 |
| | | |
| * | | * |
Howard G. BuffettMarc Bolland
Director | | Robert A. Kotick
Barry Diller Director |
| | | |
February 27, 201325, 2016 | | February 27, 201325, 2016 |
| | |
| * | | * |
Ana Botín Director | | Helene D. Gayle Director |
| | |
| February 25, 2016 | | February 25, 2016 |
|
| | |
| * | | * |
Maria Elena LagomasinoEvan G. Greenberg
Director | | Peter V. UeberrothMaria Elena Lagomasino
Director |
| | | |
February 27, 201325, 2016 | | February 27, 201325, 2016 |
| | |
| * | | * |
Alexis M. Herman
Director | | Sam Nunn Director |
| | |
| February 25, 2016 | | February 25, 2016 |
| | | |
| * | | * |
Donald F. McHenryRobert A. Kotick
Director | | Jacob WallenbergDavid B. Weinberg
Director |
| | | |
February 27, 201325, 2016 | | February 27, 201325, 2016 |
| | | |
* | | * |
Sam Nunn
Director
| | James B. Williams
Director
|
| | |
February 27, 2013 | | February 27, 2013 |
| | |
* | | |
James D. Robinson III
Director
| | |
| | |
February 27, 2013 | | |
|
| | |
| *By: | | /s/ GLORIA K. BOWDEN |
| | | Gloria K. Bowden Attorney-in-fact |
| | | |
| | | February 27, 201325, 2016 |
EXHIBIT INDEX
Exhibit No.
(With regard to applicable cross-references in the list of exhibits below, the Company's Current, Quarterly and Annual Reports are filed with the Securities and Exchange Commission ("SEC") under File No. 001-02217; and Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Current, Quarterly and Annual Reports are filed with the SEC under File No. 01-09300).
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| 3.1 | | Certificate of Incorporation of the Company, including Amendment of Certificate of Incorporation, dated July 27, 2012 — incorporated herein by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 2012. |
| 3.2 | | By-Laws of the Company, as amended and restated through September 2, 2015 — incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed on September 3, 2015. |
| 4.1 | | As permitted by the rules of the SEC, the Company has not filed certain instruments defining the rights of holders of long-term debt of the Company or consolidated subsidiaries under which the total amount of securities authorized does not exceed 10 percent of the total assets of the Company and its consolidated subsidiaries. The Company agrees to furnish to the SEC, upon request, a copy of any omitted instrument. |
| 4.2 | | Amended and Restated Indenture, dated as of April 26, 1988, between the Company and Deutsche Bank Trust Company Americas, as successor to Bankers Trust Company, as trustee — incorporated herein by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-3 (Registration No. 33-50743) filed on October 25, 1993. |
| 4.3 | | First Supplemental Indenture, dated as of February 24, 1992, to Amended and Restated Indenture, dated as of April 26, 1988, between the Company and Deutsche Bank Trust Company Americas, as successor to Bankers Trust Company, as trustee — incorporated herein by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 33-50743) filed on October 25, 1993. |
| 4.4 | | Second Supplemental Indenture, dated as of November 1, 2007, to Amended and Restated Indenture, dated as of April 26, 1988, as amended, between the Company and Deutsche Bank Trust Company Americas, as successor to Bankers Trust Company, as trustee — incorporated herein by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on March 5, 2009. |
| 4.5 | | Form of Note for 5.350% Notes due November 15, 2017 — incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on October 31, 2007. |
| 4.6 | | Form of Note for 4.875% Notes due March 15, 2019 — incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed on March 5, 2009. |
| 4.7 | | Form of Note for 3.150% Notes due November 15, 2020 — incorporated herein by reference to Exhibit 4.7 to the Company's Current Report on Form 8-K filed on November 18, 2010. |
| 4.8 | | Form of Exchange and Registration Rights Agreement among the Company, the representatives of the initial purchasers of the Notes and the other parties named therein — incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on August 8, 2011. |
| 4.9 | | Form of Note for 1.80% Notes due September 1, 2016 — incorporated herein by reference to Exhibit 4.13 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011. |
| 4.10 | | Form of Note for 3.30% Notes due September 1, 2021 — incorporated herein by reference to Exhibit 4.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011. |
| 4.11 | | Form of Note for 1.650% Notes due March 14, 2018 — incorporated herein by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K filed on March 14, 2012. |
| 4.12 | | Form of Note for 1.150% Notes due 2018 — incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed on March 5, 2013. |
| 4.13 | | Form of Note for 2.500% Notes due 2023 — incorporated herein by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K filed on March 5, 2013. |
| 4.14 | | Form of Note for Floating Rate Notes due 2016 — incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on November 1, 2013. |
| 4.15 | | Form of Note for 0.750% Notes due 2016 — incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed on November 1, 2013. |
| 4.16 | | Form of Note for 1.650% Notes due 2018 — incorporated herein by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K filed on November 1, 2013. |
| 4.17 | | Form of Note for 2.450% Notes due 2020 — incorporated herein by reference to Exhibit 4.7 to the Company's Current Report on Form 8-K filed on November 1, 2013. |
| 4.18 | | Form of Note for 3.200% Notes due 2023 — incorporated herein by reference to Exhibit 4.8 to the Company's Current Report on Form 8-K filed on November 1, 2013. |
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| 4.19 | | Form of Note for Floating Rate Notes due 2015 — incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on March 7, 2014. |
| 4.20 | | Form of Note for 1.875% Notes due 2026 — incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-A filed on September 19, 2014. |
| 4.21 | | Form of Note for 1.125% Notes due 2022 — incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-A filed on September 19, 2014. |
| 4.22 | | Form of Note for Floating Rate Notes due 2017 — incorporated herein by reference to Exhibit 4.4 to the Company's Registration Statement on Form 8-A filed on March 6, 2015. |
| 4.23 | | Form of Note for Floating Rate Notes due 2019 — incorporated herein by reference to Exhibit 4.5 to the Company's Registration Statement on Form 8-A filed on March 6, 2015. |
| 4.24 | | Form of Note for 0.75% Notes due 2023 — incorporated herein by reference to Exhibit 4.6 to the Company's Registration Statement on Form 8-A filed on March 6, 2015. |
| 4.25 | | Form of Note for 1.125% Notes due 2027 — incorporated herein by reference to Exhibit 4.7 to the Company's Registration Statement on Form 8-A filed on March 6, 2015. |
| 4.26 | | Form of Note for 1.625% Notes due 2035 — incorporated herein by reference to Exhibit 4.8 to the Company's Registration Statement on Form 8-A filed on March 6, 2015. |
| 4.27 | | Form of Note for 0.875% Notes due 2017 — incorporated herein by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on October 27, 2015. |
| 4.28 | | Form of Note for 1.875% Notes due 2020 — incorporated herein by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed on October 27, 2015. |
| 4.29 | | Form of Note for 2.875% Notes due 2025 — incorporated herein by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K filed on October 27, 2015. |
| 10.1 | | Performance Incentive Plan of the Company, as amended and restated as of February 16, 2011 — incorporated herein by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on February 17, 2011.* |
| 10.2 | | The Coca-Cola Company 1999 Stock Option Plan, as amended and restated through February 20, 2013 (the "1999 Stock Option Plan") — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 20, 2013.* |
| 10.2.1 | | Form of Stock Option Agreement in connection with the 1999 Stock Option Plan — incorporated herein by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 14, 2007.* |
| 10.2.2 | | Form of Stock Option Agreement in connection with the 1999 Stock Option Plan, as adopted December 12, 2007 — incorporated herein by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed on February 21, 2008.* |
| 10.2.3 | | Form of Stock Option Agreement in connection with the 1999 Stock Option Plan, as adopted February 18, 2009 — incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on February 18, 2009.* |
| 10.3 | | The Coca-Cola Company 2002 Stock Option Plan, amended and restated through February 18, 2009 (the "2002 Stock Option Plan") — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 18, 2009.* |
| 10.3.1 | | Form of Stock Option Agreement in connection with the 2002 Stock Option Plan, as amended — incorporated herein by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed on December 8, 2004.* |
| 10.3.2 | | Form of Stock Option Agreement in connection with the 2002 Stock Option Plan, as adopted December 12, 2007 — incorporated herein by reference to Exhibit 10.9 to the Company's Current Report on Form 8-K filed on February 21, 2008.* |
| 10.3.3 | | Form of Stock Option Agreement in connection with the 2002 Stock Option Plan, as adopted February 18, 2009 — incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on February 18, 2009.* |
| 10.4 | | The Coca-Cola Company 2008 Stock Option Plan, as amended and restated, effective February 20, 2013 (the "2008 Stock Option Plan") — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 20, 2013.* |
| 10.4.1 | | Form of Stock Option Agreement for grants under the 2008 Stock Option Plan — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 16, 2008.* |
| 10.4.2 | | Form of Stock Option Agreement for grants under the 2008 Stock Option Plan, as adopted February 18, 2009 — incorporated herein by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on February 18, 2009.* |
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| | | |
| 10.4.3 | | Form of Stock Option Agreement for grants under the 2008 Stock Option Plan, as adopted February 19, 2014— incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on February 19, 2014.* |
| 10.5 | | The Coca-Cola Company 1983 Restricted Stock Award Plan, as amended and restated through February 16, 2011 (the "1983 Restricted Stock Award Plan") — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 17, 2011.* |
| 10.6 | | The Coca-Cola Company 1989 Restricted Stock Award Plan, as amended and restated through February 19, 2014 (the "1989 Restricted Stock Award Plan") — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 19, 2014.* |
| 10.6.1 | | Form of Restricted Stock Agreement in connection with the 1989 Restricted Stock Award Plan, as adopted February 17, 2010 — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 18, 2010.* |
| 10.6.2 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan, as adopted February 17, 2010 — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 18, 2010.* |
| 10.6.3 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) for France in connection with the 1989 Restricted Stock Award Plan, as adopted February 17, 2010 — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 18, 2010.* |
| 10.6.4 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan, as adopted February 16, 2011 — incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on February 17, 2011.* |
| 10.6.5 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) for France in connection with the 1989 Restricted Stock Award Plan, as adopted February 16, 2011 — incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on February 17, 2011.* |
| 10.6.6 | | Form of Restricted Stock Unit Agreement in connection with the 1989 Restricted Stock Award Plan, as adopted February 15, 2012 — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 15, 2012.* |
| 10.6.7 | | Form of Restricted Stock Unit Agreement in connection with the 1989 Restricted Stock Award Plan, as adopted February 15, 2012 — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 15, 2012.* |
| 10.6.8 | | Form of Restricted Stock Unit Agreement in connection with the 1989 Restricted Stock Award Plan, as adopted February 15, 2012 — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 15, 2012.* |
| 10.6.9 | | Form of Restricted Stock Unit Agreement in connection with the 1989 Restricted Stock Award Plan, as adopted February 15, 2012 — incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on February 15, 2012.* |
| 10.6.10 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan, as adopted February 15, 2012 — incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on February 15, 2012.* |
| 10.6.11 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) for France in connection with the 1989 Restricted Stock Award Plan, as adopted February 15, 2012 — incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on February 15, 2012.* |
| 10.6.12 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan, as adopted February 20, 2013 — incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on February 20, 2013.* |
| 10.6.13 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan, as adopted February 20, 2013 — incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on February 20, 2013.* |
| 10.6.14 | | Form of Restricted Stock Unit Agreement in connection with the 1989 Restricted Stock Award Plan, as adopted February 20, 2013 — incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on February 20, 2013.* |
| 10.6.15 | | Form of Restricted Stock Unit Agreement in connection with the 1989 Restricted Stock Award Plan, as adopted February 20, 2013 — incorporated herein by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on February 20, 2013.* |
| 10.6.16 | | Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan, as adopted February 19, 2014 — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 19, 2014.* |
| 10.6.17 | | Form of Restricted Stock Unit Agreement in connection with the 1989 Restricted Stock Award Plan, as adopted February 19, 2014 — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 19, 2014.* |
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| 10.7 | | The Coca-Cola Company 2014 Equity Plan (the "2014 Equity Plan") — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 23, 2014.* |
| 10.7.1 | | Form of Performance Share Agreement for grants under the 2014 Equity Plan, as adopted February 18, 2015 — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 18, 2015.* |
| 10.7.2 | | Form of Performance Share Agreement alternate for grants under the 2014 Equity Plan, as adopted February 18, 2015 — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 18, 2015.* |
| 10.7.3 | | Form of Stock Option Agreement for grants under the 2014 Equity Plan, as adopted February 18, 2015 — incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 18, 2015.* |
| 10.7.4 | | Form of Restricted Stock Unit Agreement for grants under the 2014 Equity Plan, as adopted February 18, 2015 — incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on February 18, 2015.* |
| 10.8 | | The Coca-Cola Company Compensation Deferral & Investment Program of the Company, as amended (the "Compensation Deferral & Investment Program"), including Amendment Number Four, dated November 28, 1995 — incorporated herein by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.* |
| 10.8.1 | | Amendment Number Five to the Compensation Deferral & Investment Program, effective as of January 1, 1998 — incorporated herein by reference to Exhibit 10.8.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997.* |
| 10.8.2 | | Amendment Number Six to the Compensation Deferral & Investment Program, dated as of January 12, 2004, effective January 1, 2004 — incorporated herein by reference to Exhibit 10.9.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2003.* |
| 10.9 | | The Coca-Cola Company Supplemental Pension Plan, Amended and Restated effective January 1, 2010 (the "Supplemental Pension Plan") — incorporated herein by reference to Exhibit 10.10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009.* |
| 10.9.1 | | Amendment One to the Supplemental Pension Plan, effective December 31, 2012, dated December 6, 2012 — incorporated herein by reference to Exhibit 10.10.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
| 10.9.2 | | Amendment Two to the Supplemental Pension Plan, effective April 1, 2013, dated March 19, 2013 — incorporated herein by reference to Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 29, 2013.* |
| 10.10 | | The Coca-Cola Company Supplemental 401(k) Plan (f/k/a the Supplemental Thrift Plan of the Company), Amended and Restated Effective January 1, 2012, dated December 14, 2011 — incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
| 10.11 | | The Coca-Cola Company Supplemental Cash Balance Plan, effective January 1, 2012 (the "Supplemental Cash Balance Plan") — incorporated herein by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
| 10.11.1 | | Amendment One to the Supplemental Cash Balance Plan, dated December 6, 2012 — incorporated herein by reference to Exhibit 10.12.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
| 10.11.2 | | Amendment Two to the Supplemental Cash Balance Plan, dated June 15, 2015 — incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 3, 2015.* |
| 10.12 | | The Coca-Cola Company Directors' Plan, amended and restated on December 13, 2012, effective January 1, 2013 — incorporated herein by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
| 10.13 | | Deferred Compensation Plan of the Company, as amended and restated December 8, 2010 — incorporated herein by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
| 10.14 | | The Coca-Cola Export Corporation Employee Share Plan, effective as of March 13, 2002 — incorporated herein by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002.* |
| 10.15 | | The Coca-Cola Company Benefits Plan for Members of the Board of Directors, as amended and restated through April 14, 2004 (the "Benefits Plan for Members of the Board of Directors") — incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.* |
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| 10.15.1 | | Amendment Number One to the Benefits Plan for Members of the Board of Directors, dated December 16, 2005 — incorporated herein by reference to Exhibit 10.31.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2005.* |
| 10.16 | | The Coca-Cola Company Severance Pay Plan, As Amended and Restated, Effective January 1, 2012, dated December 14, 2011 — incorporated herein by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
| 10.17 | | Order Instituting Cease-and-Desist Proceedings, Making Findings and Imposing a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934 — incorporated herein by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K filed on April 18, 2005. |
| 10.18 | | Offer of Settlement of The Coca-Cola Company — incorporated herein by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed on April 18, 2005. |
| 10.19 | | Share Purchase Agreement among Coca-Cola South Asia Holdings, Inc. and San Miguel Corporation, San Miguel Beverages (L) Pte Limited and San Miguel Holdings Limited in connection with the Company's purchase of Coca-Cola Bottlers Philippines, Inc., dated December 23, 2006 — incorporated herein by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed on December 29, 2006. |
| 10.20 | | Cooperation Agreement between Coca-Cola South Asia Holdings, Inc. and San Miguel Corporation in connection with the Company's purchase of Coca-Cola Bottlers Philippines, Inc., dated December 23, 2006 — incorporated herein by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed on December 29, 2006. |
| 10.21 | | Offer Letter, dated July 20, 2007, from the Company to Joseph V. Tripodi, including Agreement on Confidentiality, Non-Competition and Non-Solicitation, dated July 20, 2007 — incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 28, 2007.* |
| 10.21.1 | | Agreement between the Company and Joseph V. Tripodi, dated December 15, 2008 — incorporated herein by reference to Exhibit 10.47.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008.* |
| 10.21.2 | | Separation Agreement and Full and Complete Release and Agreement on Competition, Trade Secrets and Confidentiality between The Coca-Cola Company and Joseph V. Tripodi, dated December 5, 2014.* |
| 10.22 | | Letter, dated July 17, 2008, to Muhtar Kent — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 21, 2008.* |
| 10.23 | | Letter of Understanding between the Company and Ceree Eberly, dated October 26, 2009, including Agreement on Confidentiality, Non-Competition and Non-Solicitation, dated November 1, 2009 — incorporated herein by reference to Exhibit 10.47 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009.* |
| 10.24 | | The Coca-Cola Export Corporation Overseas Retirement Plan, as amended and restated, effective October 1, 2007 — incorporated herein by reference to Exhibit 10.55 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008.* |
| 10.24.1 | | Amendment Number One to The Coca-Cola Export Corporation Overseas Retirement Plan, as Amended and Restated, Effective October 1, 2007, dated September 29, 2011 — incorporated herein by reference to Exhibit 10.34.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
| 10.24.2 | | Amendment Number Two to The Coca-Cola Export Corporation Overseas Retirement Plan, as Amended and Restated, Effective October 1, 2007, dated November 14, 2011 — incorporated herein by reference to Exhibit 10.34.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
| 10.24.3 | | Amendment Number Three to The Coca-Cola Export Corporation Overseas Retirement Plan, as Amended and Restated, Effective October 1, 2007, dated September 27, 2012 — incorporated herein by reference to Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q filed on September 28, 2012.* |
| 10.25 | | The Coca-Cola Export Corporation International Thrift Plan, as Amended and Restated, Effective January 1, 2011 — incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 1, 2011.* |
| 10.25.1 | | Amendment Number One to The Coca-Cola Export Corporation International Thrift Plan, as Amended and Restated, Effective January 1, 2011, dated September 20, 2011 — incorporated herein by reference to Exhibit 10.35.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
| 10.25.2 | | Amendment Number Two to The Coca-Cola Export Corporation International Thrift Plan, as Amended and Restated, Effective January 1, 2011, dated September 27, 2012 — incorporated herein by reference to Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q filed on September 28, 2012.* |
| 10.26 | | The Coca-Cola Export Corporation Mobile Employees Retirement Plan, effective January 1, 2012.* |
| 10.27 | | Letter Agreement, dated as of June 7, 2010, between The Coca-Cola Company and Dr Pepper Seven-Up, Inc. — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 7, 2010. |
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| 10.28 | | Coca-Cola Enterprises Inc. 2001 Stock Option Plan — incorporated herein by reference to Exhibit 99.4 to the Company's Registration Statement on Form S-8 (Registration No. 333-169722) filed on October 1, 2010.* |
| 10.29 | | Coca-Cola Enterprises Inc. 2004 Stock Award Plan — incorporated herein by reference to Exhibit 99.5 to the Company's Registration Statement on Form S-8 (Registration No. 333-169722) filed on October 1, 2010.* |
| 10.30 | | Coca-Cola Enterprises Inc. 2007 Incentive Award Plan — incorporated herein by reference to Exhibit 99.6 to the Company's Registration Statement on Form S-8 (Registration No. 333-169722) filed on October 1, 2010.* |
| 10.30.1 | | Form of 2007 Stock Option Agreement (Senior Officers) under the Coca-Cola Enterprises Inc. 2007 Incentive Award Plan — incorporated herein by reference to Exhibit 10.32 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2007.* |
| 10.30.2 | | Form of Stock Option Agreement (Chief Executive Officer and Senior Officers) under the Coca-Cola Enterprises Inc. 2007 Incentive Award Plan for Awards after October 29, 2008 — incorporated herein by reference to Exhibit 10.16.4 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2008.* |
| 10.30.3 | | Form of 2007 Restricted Stock Unit Agreement (Senior Officers) under the Coca-Cola Enterprises Inc. 2007 Incentive Award Plan — incorporated herein by reference to Exhibit 10.16.7 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2008.* |
| 10.30.4 | | Form of 2007 Performance Share Unit Agreement (Senior Officers) under the Coca-Cola Enterprises Inc. 2007 Incentive Award Plan — incorporated herein by reference to Exhibit 10.16.10 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2008.* |
| 10.30.5 | | Form of Performance Share Unit Agreement (Chief Executive Officer and Senior Officers) under the Coca-Cola Enterprises Inc. 2007 Incentive Award Plan for Awards after October 29, 2008 — incorporated herein by reference to Exhibit 10.16.12 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2008.* |
| 10.31 | | Coca-Cola Refreshments USA, Inc. Supplemental Matched Employee Savings and Investment Plan (Amended and Restated Effective January 1, 2010) — incorporated herein by reference to Exhibit 10.2 to Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Annual Report on Form 10-K for the year ended December 31, 2009.* |
| 10.31.1 | | First Amendment to the Coca-Cola Refreshments USA, Inc. Supplemental Matched Employee Savings and Investment Plan (Amended and Restated Effective January 1, 2010), dated September 24, 2010 — incorporated herein by reference to Exhibit 10.45.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
| 10.31.2 | | Second Amendment to the Coca-Cola Refreshments USA, Inc. Supplemental Matched Employee Savings and Investment Plan (Amended and Restated Effective January 1, 2010), dated November 3, 2010 — incorporated herein by reference to Exhibit 10.45.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
| 10.31.3 | | Third Amendment to the Coca-Cola Refreshments USA, Inc. Supplemental Matched Employee Savings and Investment Plan, Effective January 1, 2010, dated February 15, 2011 — incorporated herein by reference to Exhibit 10.45.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
| 10.31.4 | | Fourth Amendment to the Coca-Cola Refreshments USA, Inc. Supplemental Matched Employee Savings and Investment Plan, effective December 31, 2011, dated December 14, 2011 — incorporated herein by reference to Exhibit 10.45.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
| 10.32 | | Coca-Cola Refreshments Executive Pension Plan, dated December 13, 2010 (Amended and Restated, Effective January 1, 2011) — incorporated herein by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
| 10.32.1 | | Amendment Number One to the Coca-Cola Refreshments Executive Pension Plan (Amended and Restated, Effective January 1, 2011), dated as of July 14, 2011 — incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011.* |
| 10.32.2 | | Amendment Number Two to the Coca-Cola Refreshments Executive Pension Plan, effective December 31, 2011, dated December 14, 2011 — incorporated herein by reference to Exhibit 10.46.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.* |
| 10.33 | | Amendment to certain Coca-Cola Refreshments USA, Inc.'s (formerly known as Coca-Cola Enterprises Inc.) Employee Benefit Plans and Equity Plans, effective December 6, 2010 — incorporated herein by reference to Exhibit 10.49 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010.* |
| 10.34 | | Letter, dated September 11, 2012, from the Company to Ahmet Bozer — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
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| 10.34.1 | | Separation Agreement and Full and Complete Release and Agreement on Competition, Trade Secrets and Confidentiality between The Coca-Cola Company and Ahmet Bozer, dated August 12, 2015 — incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on August 13, 2015.* |
| 10.35 | | Letter, dated September 11, 2012, from the Company to Brian Smith — incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
| 10.36 | | Letter, dated September 11, 2012, from the Company to J. Alexander Douglas, Jr. — incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
| 10.37 | | Letter, dated September 11, 2012, from the Company to Nathan Kalumbu — incorporated herein by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed on September 14, 2012.* |
| 10.38 | | Coca-Cola Refreshments Supplemental Pension Plan (Amended and Restated Effective January 1, 2011), dated December 13, 2010 — incorporated herein by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 2012.* |
| 10.38.1 | | Amendment Number One to the Coca-Cola Refreshments Supplemental Pension Plan, dated December 14, 2011 — incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 2012.* |
| 10.38.2 | | Amendment Two to the Coca-Cola Refreshments Supplemental Pension Plan, dated December 6, 2012 — incorporated herein by reference to Exhibit 10.59.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
| 10.38.3 | | Amendment Three to the Coca-Cola Refreshments Supplemental Pension Plan, adopted March 19, 2013 — incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 29, 2013.* |
| 10.38.4 | | Amendment Four to the Coca-Cola Refreshments Supplemental Pension Plan, dated June 15, 2015 — incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 3, 2015.* |
| 10.39 | | Coca-Cola Refreshments Severance Pay Plan for Exempt Employees, effective as of January 1, 2012 — incorporated herein by reference to Exhibit 10.60.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
| 10.39.1 | | Amendment One to the Coca-Cola Refreshments Severance Pay Plan for Exempt Employees, effective January 1, 2012, dated May 24, 2012 — incorporated herein by reference to Exhibit 10.60.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
| 10.39.2 | | Amendment Two to the Coca-Cola Refreshments Severance Pay Plan for Exempt Employees, dated December 6, 2012 — incorporated herein by reference to Exhibit 10.60.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.* |
| 10.39.3 | | Amendment Three to the Coca-Cola Refreshments Severance Pay Plan for Exempt Employees, adopted March 19, 2013 — incorporated herein by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 29, 2013.* |
| 10.40 | | Letter, dated December 16, 2013, from the Company to Irial Finan — incorporated herein by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended December 31, 2013.* |
| 10.40.1 | | Letter, dated April 29, 2015, from the Company to Irial Finan — incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on July 29, 2015.* |
| 10.41 | | Letter, dated April 24, 2014, from the Company to Kathy N. Waller — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 25, 2014.* |
| 10.42 | | Letter, dated October 15, 2014, from the Company to Atul Singh — incorporated herein by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014.* |
| 10.43 | | Letter, dated December 16, 2014, from the Company to Marcos de Quinto — incorporated herein by reference to Exhibit 10.47 to the Company's Annual Report on Form 10-K for the year ended December 31, 2014.* |
| 10.44 | | Letter, dated February 12, 2015, from the Company to Ed Hays — incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q filed on April 30, 2015.* |
| 10.45 | | Letter, dated April 29, 2015, from the Company to Julie Hamilton — incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on July 29, 2015.* |
| 10.46 | | Letter, dated August 12, 2015, from the Company to James Quincey — incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 13, 2015.* |
| 10.47 | | Separation Agreement and Full and Complete Release and Agreement on Competition, Trade Secrets and Confidentiality between The Coca-Cola Company and Alex Cummings, dated December 23, 2015.* |
| 10.48 | | Letter, dated October 14, 2015, from the Company to Bernhard Goepelt.* |
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| 12.1 | | Computation of Ratios of Earnings to Fixed Charges for the years ended December 31, 2015, 2014, 2013, 2012 and 2011. |
| 21.1 | | List of subsidiaries of the Company as of December 31, 2015. |
| 23.1 | | Consent of Independent Registered Public Accounting Firm. |
| 24.1 | | Powers of Attorney of Officers and Directors signing this report. |
| 31.1 | | Rule 13a-14(a)/15d-14(a) Certification, executed by Muhtar Kent, Chairman of the Board of Directors and Chief Executive Officer of The Coca-Cola Company. |
| 31.2 | | Rule 13a-14(a)/15d-14(a) Certification, executed by Kathy N. Waller, Executive Vice President and Chief Financial Officer of The Coca-Cola Company. |
| 32.1 | | Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), executed by Muhtar Kent, Chairman of the Board of Directors and Chief Executive Officer of The Coca-Cola Company and by Kathy N. Waller, Executive Vice President and Chief Financial Officer of The Coca-Cola Company. |
| 101 | | The following financial information from The Coca-Cola Company's Annual Report on Form 10-K for the year ended December 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income for the years ended December 31, 2015, 2014 and 2013, (ii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013, (iii) Consolidated Balance Sheets as of December 31, 2015 and 2014, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013, (v) Consolidated Statements of Shareowners' Equity for the years ended December 31, 2015, 2014 and 2013 and (vi) the Notes to Consolidated Financial Statements.
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* | Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 15(b) of Form 10-K. |
