Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

369K characters. Original on sec.gov · Markdown

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TABLE OF CONTENTS



	Page
Consolidated Statements of Income	71
Consolidated Statements of Comprehensive Income	72
Consolidated Balance Sheets	73
Consolidated Statements of Cash Flows	74
Consolidated Statements of Shareowners' Equity	75
Notes to Consolidated Financial Statements	76
Report of Management	146
Report of Independent Registered Public Accounting Firm	148
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	149
Quarterly Data (Unaudited)	150

THE COCA-COLA COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME



Year Ended December 31,	2018			2017				2016
(In millions except per share data)
NET OPERATING REVENUES	$	31,856		$	35,410			$	41,863
Cost of goods sold	11,770			13,255				16,465
GROSS PROFIT	20,086			22,155				25,398
Selling, general and administrative expenses	10,307			12,654				15,370
Other operating charges	1,079			1,902				1,371
OPERATING INCOME	8,700			7,599				8,657
Interest income	682			677				642
Interest expense	919			841				733
Equity income (loss) — net	1,008			1,071				835
Other income (loss) — net	(1,121		)	(1,764		)		(1,265		)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	8,350			6,742				8,136
Income taxes from continuing operations	1,623			5,560				1,586
NET INCOME FROM CONTINUING OPERATIONS	6,727			1,182				6,550
Income (loss) from discontinued operations (net of income taxes of $126, $47 and $0, respectively)	(251		)	101				—
CONSOLIDATED NET INCOME	6,476			1,283				6,550
Less: Net income attributable to noncontrolling interests	42			35				23
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY	$	6,434		$	1,248			$	6,527

Basic net income per share from continuing operations1	$	1.58		$	0.28			$	1.51
Basic net income (loss) per share from discontinued operations2	(0.07		)	0.02				—
BASIC NET INCOME PER SHARE	$	1.51		$	0.29		3	$	1.51
Diluted net income per share from continuing operations1	$	1.57		$	0.27			$	1.49
Diluted net income (loss) per share from discontinued operations2	(0.07		)	0.02				—
DILUTED NET INCOME PER SHARE	$	1.50		$	0.29			$	1.49
AVERAGE SHARES OUTSTANDING — BASIC	4,259			4,272				4,317
Effect of dilutive securities	40			52				50
AVERAGE SHARES OUTSTANDING — DILUTED	4,299			4,324				4,367


1	Calculated based on net income from continuing operations less net income from continuing operations attributable to noncontrolling interests.


2	Calculated based on net income (loss) from discontinued operations less net income from discontinued operations attributable to noncontrolling interests.


3	Per share amounts do not add due to rounding.

Refer to Notes to Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



Year Ended December 31,	2018			2017			2016
(In millions)
CONSOLIDATED NET INCOME	$	6,476		$	1,283		$	6,550
Other comprehensive income:
Net foreign currency translation adjustments	(2,035		)	861			(626		)
Net gains (losses) on derivatives	(7		)	(433		)	(382		)
Net unrealized gains (losses) on available-for-sale securities	(34		)	188			17
Net change in pension and other benefit liabilities	29			322			(53		)
TOTAL COMPREHENSIVE INCOME	4,429			2,221			5,506
Less: Comprehensive income attributable to noncontrolling interests	95			73			10
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY	$	4,334		$	2,148		$	5,496

Refer to Notes to Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



December 31,	2018			2017
(In millions except par value)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	8,926		$	6,006
Short-term investments	2,025			9,352
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS	10,951			15,358
Marketable securities	5,013			5,317
Trade accounts receivable, less allowances of $489 and $477, respectively	3,396			3,667
Inventories	2,766			2,655
Prepaid expenses and other assets	1,962			2,000
Assets held for sale	—			219
Assets held for sale — discontinued operations	6,546			7,329
TOTAL CURRENT ASSETS	30,634			36,545
EQUITY METHOD INVESTMENTS	19,407			20,856
OTHER INVESTMENTS	867			1,096
OTHER ASSETS	4,139			4,230
DEFERRED INCOME TAX ASSETS	2,667			330
PROPERTY, PLANT AND EQUIPMENT — net	8,232			8,203
TRADEMARKS WITH INDEFINITE LIVES	6,682			6,729
BOTTLERS' FRANCHISE RIGHTS WITH INDEFINITE LIVES	51			138
GOODWILL	10,263			9,401
OTHER INTANGIBLE ASSETS	274			368
TOTAL ASSETS	$	83,216		$	87,896
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	8,932		$	8,748
Loans and notes payable	13,194			13,205
Current maturities of long-term debt	4,997			3,298
Accrued income taxes	378			410
Liabilities held for sale	—			37
Liabilities held for sale — discontinued operations	1,722			1,496
TOTAL CURRENT LIABILITIES	29,223			27,194
LONG-TERM DEBT	25,364			31,182
OTHER LIABILITIES	7,638			8,021
DEFERRED INCOME TAX LIABILITIES	1,933			2,522
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
Capital surplus	16,520			15,864
Reinvested earnings	63,234			60,430
Accumulated other comprehensive income (loss)	(12,814		)	(10,305		)
Treasury stock, at cost — 2,772 and 2,781 shares, respectively	(51,719		)	(50,677		)
EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY	16,981			17,072
EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS	2,077			1,905
TOTAL EQUITY	19,058			18,977
TOTAL LIABILITIES AND EQUITY	$	83,216		$	87,896

Refer to Notes to Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



Year Ended December 31,	2018			2017			2016
(In millions)
OPERATING ACTIVITIES
Consolidated net income	$	6,476		$	1,283		$	6,550
(Income) loss from discontinued operations	251			(101		)	—
Net income from continuing operations	6,727			1,182			6,550
Depreciation and amortization	1,086			1,260			1,787
Stock-based compensation expense	225			219			258
Deferred income taxes	(450		)	(1,256		)	(856		)
Equity (income) loss — net of dividends	(457		)	(628		)	(449		)
Foreign currency adjustments	(38		)	281			158
Significant (gains) losses on sales of assets — net	189			1,459			1,146
Other operating charges	558			1,218			647
Other items	682			(269		)	(224		)
Net change in operating assets and liabilities	(1,202		)	3,464			(225		)
Net cash provided by operating activities	7,320			6,930			8,792
INVESTING ACTIVITIES
Purchases of investments	(7,789		)	(17,296		)	(16,626		)
Proceeds from disposals of investments	14,977			16,694			17,842
Acquisitions of businesses, equity method investments and nonmarketable securities	(1,040		)	(3,809		)	(838		)
Proceeds from disposals of businesses, equity method investments and nonmarketable securities	1,362			3,821			1,035
Purchases of property, plant and equipment	(1,347		)	(1,675		)	(2,262		)
Proceeds from disposals of property, plant and equipment	245			104			150
Other investing activities	(60		)	(93		)	(305		)
Net cash provided by (used in) investing activities	6,348			(2,254		)	(1,004		)
FINANCING ACTIVITIES
Issuances of debt	27,339			29,857			27,281
Payments of debt	(30,568		)	(28,768		)	(25,615		)
Issuances of stock	1,476			1,595			1,434
Purchases of stock for treasury	(1,912		)	(3,682		)	(3,681		)
Dividends	(6,644		)	(6,320		)	(6,043		)
Other financing activities	(243		)	(91		)	79
Net cash provided by (used in) financing activities	(10,552		)	(7,409		)	(6,545		)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Net cash provided by (used in) operating activities from discontinued operations	307			111			—
Net cash provided by (used in) investing activities from discontinued operations	(421		)	(58		)	—
Net cash provided by (used in) financing activities from discontinued operations	205			(38		)	—
Net cash provided by (used in) discontinued operations	91			15			—
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS	(262		)	241			(5		)
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the year	2,945			(2,477		)	1,238
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year	6,373			8,850			7,612
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of year	9,318			6,373			8,850
Less: Restricted cash and restricted cash equivalents at end of year	392			367			295
Cash and cash equivalents at end of year	$	8,926		$	6,006		$	8,555

Refer to Notes to Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY



Year Ended December 31,	2018			2017			2016
(In millions except per share data)
EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY
NUMBER OF COMMON SHARES OUTSTANDING
Balance at beginning of year	4,259			4,288			4,324
Treasury stock issued to employees related to stock compensation plans	48			53			50
Purchases of stock for treasury	(39		)	(82		)	(86		)
Balance at end of year	4,268			4,259			4,288
COMMON STOCK	$	1,760		$	1,760		$	1,760
CAPITAL SURPLUS
Balance at beginning of year	15,864			14,993			14,016
Stock issued to employees related to stock compensation plans	467			655			589
Tax benefit (charge) from stock compensation plans	—			—			130
Stock-based compensation expense	225			219			258
Other activities	(36		)	(3		)	—
Balance at end of year	16,520			15,864			14,993
REINVESTED EARNINGS
Balance at beginning of year	60,430			65,502			65,018
Adoption of accounting standards1	3,014			—			—
Net income attributable to shareowners of The Coca-Cola Company	6,434			1,248			6,527
Dividends (per share — $1.56, $1.48 and $1.40 in 2018, 2017 and 2016, respectively)	(6,644		)	(6,320		)	(6,043		)
Balance at end of year	63,234			60,430			65,502
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance at beginning of year	(10,305		)	(11,205		)	(10,174		)
Adoption of accounting standards1	(409		)	—			—
Net other comprehensive income (loss)	(2,100		)	900			(1,031		)
Balance at end of year	(12,814		)	(10,305		)	(11,205		)
TREASURY STOCK
Balance at beginning of year	(50,677		)	(47,988		)	(45,066		)
Treasury stock issued to employees related to stock compensation plans	704			909			811
Purchases of stock for treasury	(1,746		)	(3,598		)	(3,733		)
Balance at end of year	(51,719		)	(50,677		)	(47,988		)
TOTAL EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY	$	16,981		$	17,072		$	23,062
EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Balance at beginning of year	$	1,905		$	158		$	210
Net income attributable to noncontrolling interests	42			35			23
Net foreign currency translation adjustments	53			38			(13		)
Dividends paid to noncontrolling interests	(31		)	(15		)	(25		)
Contributions by noncontrolling interests	—			—			1
Business combinations	101			1,805			—
Deconsolidation of certain entities	—			(157		)	(34		)
Other activities	7			41			(4		)
TOTAL EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS	$	2,077		$	1,905		$	158

1 Refer to Note 1, Note 3, Note 4 and Note 15.

Refer to Notes to Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

When used in these notes, 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.

Description of Business

The Coca-Cola Company is the world's largest nonalcoholic beverage company. We own or license and market more than 500 nonalcoholic beverage brands, which we group into the following category clusters: sparkling soft drinks; water, enhanced water and sports drinks; juice, dairy and plant-based beverages; tea and coffee; and energy drinks. We own and market four of the world's top five nonalcoholic sparkling soft drink 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 and territories.

We make our branded beverage products available to consumers throughout the world through our network of independent bottling partners, distributors, wholesalers and retailers as well as Company-owned or -controlled bottling and distribution operations — the world's largest beverage distribution system ("Coca-Cola system"). Beverages bearing trademarks owned by or licensed to us account for more than 1.9 billion of the approximately 61 billion servings of all beverages consumed worldwide every day.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United 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.

Certain prior year amounts in the consolidated financial statements and accompanying notes have been revised to conform to the current year presentation as a result of the adoption of certain accounting standards that became effective January 1, 2018, as applicable. Refer to the "Recently Adopted Accounting Guidance" section within this note below for further details.

Principles of Consolidation

Our Company consolidates all entities that we control by ownership of a majority voting interest. Additionally, 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 (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance and (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 equity investments, profit guarantees or subordinated financial support. Refer to Note 12. Although these financial arrangements resulted in our 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, and other subordinated financial support related to these VIEs totaled $3,916 million and $4,523 million as of December 31, 2018 and 2017, respectively, representing our maximum exposures to loss. The Company's investments, plus any loans and guarantees, related to these VIEs were not individually 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 $49 million and $1 million as of December 31, 2018 and 2017, 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.

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 investee includes considering key factors such as our ownership interest, representation on the board of directors, participation in policy-making decisions, other commercial arrangements and material intercompany transactions.

We eliminate from our financial results all significant intercompany transactions, including the intercompany transactions with consolidated VIEs and the intercompany portion of transactions with equity method investees.

Assets and Liabilities Held for Sale

Our Company classifies long-lived assets or disposal groups to be sold as held for sale in the period in which all of the following criteria are met: (1) management, having the authority to approve the action, commits to a plan to sell the asset or disposal group; (2) the asset 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 or disposal groups; (3) an active program to locate a buyer and other actions required to complete the plan to sell the asset or disposal group have been initiated; (4) the sale of the asset or disposal group is probable, and transfer of the asset 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 or disposal group beyond one year; (5) the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (6) 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 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 or disposal group until the date of sale. We assess the fair value of a long-lived asset 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 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 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. Refer to Note 2.

Discontinued Operations

A disposal group is classified as a discontinued operation when the following criteria are met: (1) the disposal group is a component of an entity; (2) the component of the entity meets the held-for-sale criteria in accordance with our policy described above; and (3) the component of the entity represents a strategic shift in the entity's operating and financial results. Alternatively, if a business meets the criteria for held for sale on the acquisition date, the business is accounted for as a discontinued operation. In October 2017, the Company and Anheuser-Busch InBev ("ABI") completed the transition of ABI's controlling interest in Coca-Cola Beverages Africa Proprietary Limited ("CCBA") to the Company for $3,150 million, resulting in its consolidation. As CCBA met the criteria for held for sale upon consolidation, we have presented the financial position and results of operations of CCBA as discontinued operations in the accompanying consolidated financial statements.

Revenue Recognition

Effective January 1, 2018, we adopted Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606"). Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. Prior to the adoption of ASC 606, we recognized revenue when persuasive evidence of an arrangement existed, delivery of products had occurred, the sales price was fixed or determinable and collectibility was reasonably assured. Refer to Note 3.

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 $4 billion in 2018, 2017 and 2016. As of December 31, 2018 and 2017, advertising and production costs of

$54 million and $95 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 goods from our 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 goods from our manufacturing locations or sales distribution centers to our customers are also included in the line item cost of goods sold in our consolidated statements of income, except for costs incurred to distribute goods sold by our Company-owned bottlers to our customers, which are included in the line item selling, general and administrative expenses. Our customers generally do not pay us separately for shipping and handling costs. Effective January 1, 2018, we adopted ASC 606. Upon adoption, we made a policy election to recognize the cost of shipping and handling activities that are performed after a customer obtains control of the goods as costs to fulfill our promise to provide goods to the customer. As a result of this election, the Company does not evaluate whether shipping and handling activities are services promised to customers. If revenue is recognized for the related goods before the shipping and handling activities occur, the related costs of those shipping and handling activities are accrued. Refer to Note 3 for additional information regarding revenue recognition.

Sales, Use, Value-Added and Excise Taxes

The Company collects taxes imposed directly on its customers related to sales, use, value-added, excise and other similar taxes. The Company then remits such taxes on behalf of its customers to the applicable governmental authorities. Upon adoption of ASC 606, we made a policy election to exclude from net operating revenues the tax amounts imposed on revenue-producing transactions that were collected from our customers to be remitted to governmental authorities. Accordingly, such tax amounts are recorded in the line item trade accounts receivable in our consolidated balance sheet when collection of taxes from the customer has not yet occurred and are recorded in the line item accounts payable and accrued expenses in our consolidated balance sheet until they are remitted to the applicable governmental authorities. Taxes imposed directly on the Company, whether based on receipts from sales, inventory procurement costs or manufacturing activities, are recorded in the line item cost of goods sold in our consolidated statement of income. Refer to Note 3 for additional information regarding revenue recognition.

Net Income Per Share

Basic net income per share is computed by dividing net income attributable to shareowners of The Coca-Cola Company 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 51 million, 47 million and 51 million stock option awards were excluded from the computations of diluted net income per share in 2018, 2017 and 2016, respectively, because the awards would have been antidilutive for the years presented.

The following table presents information related to net income from continuing operations and net income from discontinued operations (in millions):



Year Ended December 31,	2018			2017		2016
CONTINUING OPERATIONS
Net income from continuing operations	$	6,727		$	1,182	$	6,550
Less: Net income (loss) from continuing operations attributable to noncontrolling interests	(7		)	1		23
Net income from continuing operations attributable to shareowners of The Coca-Cola Company	$	6,734		$	1,181	$	6,527
DISCONTINUED OPERATIONS
Net income (loss) from discontinued operations	$	(251	)	$	101	$	—
Less: Net income from discontinued operations attributable to noncontrolling interests	49			34		—
Net income (loss) from discontinued operations attributable to shareowners of The Coca-Cola Company	$	(300	)	$	67	$	—
CONSOLIDATED
Consolidated net income	$	6,476		$	1,283	$	6,550
Less: Net income attributable to noncontrolling interests	42			35		23
Net income attributable to shareowners of The Coca-Cola Company	$	6,434		$	1,248	$	6,527

Cash, Cash Equivalents, Restricted Cash and Restricted 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 or restricted cash equivalents, as applicable. Restricted cash and restricted cash equivalents generally consist of amounts held by our captive insurance companies, which are included in the line item other assets on our consolidated balance sheets, and amounts classified in assets held for sale and assets held for sale — discontinued operations. We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties and procedures to monitor our concentrations of credit risk.

The following table provides a summary of cash, cash equivalents, restricted cash and restricted cash equivalents that constitute the total amounts shown in the consolidated statements of cash flows (in millions):



	December 31, 2018		December 31, 2017		December 31, 2016
Cash and cash equivalents	$	8,926	$	6,006	$	8,555
Cash and cash equivalents included in assets held for sale	—		13		49
Cash and cash equivalents included in assets held for sale — discontinued operations	151		97		—
Cash and cash equivalents included in other assets1	241		257		246
Cash, cash equivalents, restricted cash and restricted cash equivalents	$	9,318	$	6,373	$	8,850

1 Amounts represent cash and cash equivalents in our solvency capital portfolio set aside primarily to cover pension obligations in certain of

our European and Canadian pension plans. Refer to Note 4.

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

Effective January 1, 2018, we adopted Accounting Standards Update ("ASU") 2016-01 Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), which requires us to measure all equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in earnings. For equity securities without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Prior to the adoption of ASU 2016-01, marketable equity securities not accounted for under the equity method were classified as

trading or available-for-sale. Both realized and unrealized gains and losses on equity securities classified as trading securities were recognized in net income. For equity securities classified as available-for-sale, realized gains and losses were included in net income. Unrealized gains and losses on equity securities classified as available-for-sale were recognized in accumulated other comprehensive income (loss) ("AOCI"), net of tax. Equity securities without readily determinable fair values were recorded at cost. 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. Refer to Note 4 for additional information on our policy for investments which include our assessment of impairments.

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,	2018			2017			2016
Balance at beginning of year	$	477		$	466		$	352
Net charges to costs and expenses1	29			32			126
Write-offs	(4		)	(10		)	(10		)
Other2	(13		)	(11		)	(2		)
Balance at end of year	$	489		$	477		$	466


1	The 2016 amount was primarily related to concentrate sales receivables from our bottling partner in Venezuela. See "Hyperinflationary Economies" discussion below for additional information.

2 Other includes foreign currency translation adjustments and the impact of reclassifying certain assets to assets held for sale. Refer to 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 3 and Note 20. 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. Refer to Note 7.

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; other assets; accounts payable and accrued 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 6.

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 or disposal group is classified as held for sale, even if the asset or disposal group continues to generate revenue during the period. Depreciation expense, including the depreciation expense of assets under capital lease, totaled $999 million, $1,131 million and $1,575 million in 2018, 2017 and 2016, respectively. Amortization expense for leasehold improvements totaled $18 million, $19 million and $22 million in 2018, 2017 and 2016, respectively. Refer to Note 8.

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 and an impairment test 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. Refer to Note 17.

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 9.

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 profit and 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 of the asset or asset 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 tests 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, rather than completing the impairment test. 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.

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. 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.

In order to test for goodwill impairment, the Company compares the fair value of the reporting unit to its carrying value,

including goodwill. If the fair value of the reporting unit is lower than its carrying amount, goodwill is written down for the amount by which the carrying amount exceeds the fair value. However, the loss recognized cannot exceed the carrying amount of 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 a hypothetical marketplace participant would use. The Company has the option to perform a qualitative assessment of goodwill in order 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 testing discussed above. Otherwise, the Company does not need to perform any further testing.

Impairment charges related to intangible assets, including goodwill, 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 12.

Stock-Based Compensation

Our Company grants awards under its stock-based compensation plans to certain employees of the Company. These awards include stock options, restricted stock units, restricted stock and performance–based 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 stock option grant is earned by the employee, generally four years.

The fair value of our restricted stock units, restricted stock and certain performance-based 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 period. For most performance-based share units granted from 2014 to 2017 and for performance-based share units granted to executives in 2018, 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 the Company's 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-based 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 threshold specified in the performance-based share award 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 fair 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 threshold specified in the award, we reverse all of the previously recognized compensation expense in the period such a determination is made.

The Company has made a policy election to estimate the number of stock-based compensation awards that are expected to vest to determine the amount of compensation expense recognized in earnings. Forfeiture estimates are trued-up through the vesting date, in order to ensure that total compensation expense is recognized only for those awards that ultimately vest. Refer to Note 13.

Income Taxes

Income tax expense includes U.S., state, local and international income taxes, plus a provision for U.S. taxes on undistributed earnings of foreign subsidiaries and other prescribed foreign entities 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 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 12 and Note 15.

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 16. 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 6.

Hyperinflationary Economies

A hyperinflationary economy is one that has cumulative inflation of 100 percent or more over a three-year period. 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 has been designated as a hyperinflationary economy. During the year ended December 31, 2016, the Venezuelan government devalued its currency and changed its official and most preferential exchange rate, which should be used for purchases of certain essential goods, to 10 bolivars per U.S. dollar from 6.3. The official and most preferential rate is now known as DIPRO and the former official rate has been eliminated. The Venezuelan government replaced the former open market exchange rate with the DICOM rate, which is allowed to float freely and is expected to fluctuate based on supply and demand. As a result, management determined that the DICOM rate was the most appropriate legally available rate to remeasure the net monetary assets of our Venezuelan subsidiary.

We sell concentrate to our bottling partner in Venezuela from outside the country. These sales are denominated in U.S. dollars. During the year ended December 31, 2016, as a result of the continued lack of liquidity and our revised assessment of the U.S. dollar value we expected to realize upon the conversion of Venezuelan bolivars into U.S. dollars by our bottling partner to pay our concentrate sales receivables, we recorded a write-down of $76 million, which was recorded in the line item other operating charges in our consolidated statement of income.

We also have certain U.S. dollar-denominated intangible assets associated with products sold in Venezuela. As a result of weaker sales, the volatility of foreign currency exchange rates resulting from continued instability and the Company's revised expectations regarding the convertibility of the local currency, we recognized an impairment charge of $34 million during the year ended December 31, 2017, which was recorded in the line item other operating charges in our consolidated statement of income. As a result of this impairment charge, the remaining carrying value of all U.S. dollar-denominated intangible assets associated with products sold in Venezuela is zero.

Refer to Note 20 for the impact these items had on our operating segments and Corporate.

Recently Adopted Accounting Guidance

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers, which replaces 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. ASU 2014-09 and its amendments were included primarily in ASC 606. The core principle of ASC 606 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. ASC 606 also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. We adopted ASC 606 effective January 1, 2018, using the modified retrospective method. We recognized a cumulative effect adjustment to decrease the opening balance of reinvested earnings as of January 1, 2018 by $257 million, net of tax. The Company has changed our accounting policies and practices, business processes, systems and controls, as well as designed and implemented specific controls over our evaluation

of the impact of the new guidance on the Company, including the cumulative effect calculation, disclosure requirements and the collection of relevant data for the reporting process. Refer to Note 3.

In January 2016, the FASB issued ASU 2016-01, which addresses certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 was effective for the Company beginning January 1, 2018, and we are now recognizing any changes in the fair value of certain equity investments in net income as prescribed by the new standard rather than in other comprehensive income ("OCI"). We recognized a cumulative effect adjustment to increase the opening balance of reinvested earnings as of January 1, 2018 by $409 million, net of tax. Refer to Note 4 for additional disclosures required by this ASU.

In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The Company adopted ASU 2016-09 on January 1, 2017 by prospectively recognizing excess tax benefits and tax deficiencies in our consolidated statement of income as the awards vested or were settled. Effective January 1, 2017, the Company also prospectively presented excess tax benefits as an operating activity, rather than a financing activity, in our consolidated statement of cash flows. Had these changes been required to be adopted retrospectively, during the year ended December 31, 2016, the Company would have recognized an additional $130 million of excess tax benefits in our consolidated statement of income. Additionally, during the year ended December 31, 2016, the Company would have reduced our financing activities and increased our operating activities by $130 million in our consolidated statement of cash flows. The Company has elected, consistent with past practice, to estimate the number of awards that are expected to vest to determine the amount of stock-based compensation expense recognized in earnings.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 was effective for the Company beginning January 1, 2018 and was adopted using the retrospective transition approach to all periods presented. The impact of the adoption of ASU 2016-15 on our consolidated statement of cash flows was a change in presentation related to our proceeds from the settlement of corporate-owned life insurance policies. We revised our consolidated statement of cash flows to reflect these proceeds in the line item other investing activities, which were previously presented in the line item net change in operating assets and liabilities. During the years ended December 31, 2017 and 2016, the amount of proceeds received from the settlement of corporate-owned life insurance policies was $65 million and $3 million, respectively.

In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory ("ASU 2016-16"), which requires the Company to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 was effective for the Company beginning January 1, 2018 and was adopted using a modified retrospective basis. We recorded a $2.9 billion cumulative effect adjustment to increase the opening balance of reinvested earnings, with the majority of the offset being recorded in the line item deferred income tax assets in our consolidated balance sheet. Refer to Note 15.

In November 2016, the FASB issued ASU 2016-18, Restricted Cash. The amendments in this update address diversity in practice that exists in the classification and presentation of changes in amounts generally described as restricted cash and require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts that an entity defines as restricted cash for purposes of this standard or otherwise does not present in the line item cash and cash equivalents on its balance sheet. ASU 2016-18 was effective for the Company beginning January 1, 2018 and was adopted using the retrospective transition method to all periods presented.

Prior to the adoption of ASU 2016-18, we presented the transfer of cash and cash equivalents into or out of our captive insurance companies in the line items purchases of investments and proceeds from disposals of investments in our consolidated statement of cash flows. We did not present the purchases of investments and proceeds from disposals of investments within our captive insurance companies. Cash flows related to cash and cash equivalents included in our insurance captives are now presented in the line items purchases of investments and proceeds from disposals of investments within the investing activities section of our consolidated statement of cash flows. During the year ended December 31, 2017, the purchases of investments and proceeds from disposals of investments within our captive insurance companies were $777 million and $773 million, respectively. During the year ended December 31, 2016, the purchases of investments and proceeds from disposals of investments within our captive insurance companies were $1,388 million and $1,304 million, respectively.

Prior to the adoption of ASU 2016-18, we treated the change in cash and cash equivalents included in assets held for sale as an adjustment to the line item other investing activities within our consolidated statement of cash flows. With the adoption of this ASU, we no longer make this adjustment and we revised the prior year to remove this adjustment. During the year ended December 31, 2017, the change in cash and cash equivalents included in assets held for sale was $36 million. During the year ended December 31, 2016, the change in cash and cash equivalents included in assets held for sale was $94 million. Refer to

the heading "Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents" above for additional disclosures required by this ASU.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires that the service cost component of the Company's net periodic pension cost and net periodic postretirement benefit cost be included in the same line item as other compensation costs arising from services rendered by employees, with the non-service cost components of net periodic benefit cost and other benefit plan charges and credits being classified outside of a subtotal of income from operations. ASU 2017-07 was effective for the Company beginning January 1, 2018 and was adopted retrospectively for the presentation of the other components of net periodic benefit cost and other benefit plan charges and credits in our consolidated statements of income. As part of our adoption, we elected to use a practical expedient which allows us to use information previously disclosed in our note on pension and other postretirement benefit plans as the estimation basis for applying the retrospective presentation requirements of this ASU. During the years ended December 31, 2017 and December 31, 2016, we reclassified $98 million and $31 million of expense, respectively, related to our non-service cost components of net periodic benefit cost and other benefit plan charges and credits from operating income to other income (loss) — net in our consolidated statements of income. Refer to Note 14 for additional disclosures required by this ASU.

In March 2018, the FASB issued ASU 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The amendments in this update provide guidance on when to record and disclose provisional amounts for certain income tax effects of the Tax Cuts and Jobs Act ("Tax Reform Act"). The amendments also require any provisional amounts or subsequent adjustments to be included in net income from continuing operations. Additionally, this ASU discusses required disclosures that an entity must make with regard to the Tax Reform Act. This ASU is effective immediately as new information is available to adjust provisional amounts that were previously recorded. The Company adopted this standard and subsequently finalized the accounting based on the guidance, interpretations and data available as of December 31, 2018. Refer to Note 15 for additional information on the Tax Reform Act.

Accounting Guidance Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize right-of-use assets, representing their right to use the underlying asset for the lease term, and lease liabilities on the balance sheet for all leases with terms greater than 12 months. The guidance also modifies the classification criteria and the accounting for sales-type and direct financing leases by lessors. Additionally, the guidance requires qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. The Company has substantially completed its preparation for the adoption of this new accounting standard. This included assessing the completeness of our lease arrangements, evaluating practical expedients and accounting policy elections, executing changes to our business process, which include our systems and controls, and implementing software to meet the reporting requirements of this standard.

ASU 2016-02 is effective for the Company beginning January 1, 2019. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The Company expects to elect certain practical expedients, including the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs, and is evaluating the other practical expedients available under the guidance. The Company also plans to elect the optional transition method that will give companies the option to use the effective date as the date of initial application on transition, and as a result, we will not adjust our comparative period financial information or make the new required lease disclosures for periods before the effective date. The Company anticipates the adoption of this new standard will result in an increase of approximately 1 percent of total assets and liabilities on our consolidated balance sheet. This estimate does not include transactions that closed in the first quarter of 2019, such as Costa Limited ("Costa"). While we are substantially complete with the process of quantifying the impacts that will result from applying the new guidance, our assessment will be finalized during the first quarter of 2019. We do not expect the new standard to have a material impact on the Company's consolidated statement of income. As the impact of this standard is noncash in nature, we do not anticipate its adoption having an impact on the Company's consolidated statement of cash flows.

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, which eliminates the requirement to separately measure and report hedge ineffectiveness and requires companies to recognize all elements of hedge accounting that impact earnings in the same line item in the statement of income where the hedged item resides. The amendments include new alternatives for measuring the hedged item for fair value hedges of interest rate risk and ease the requirements for effectiveness testing, hedge documentation and applying the critical terms match method. Finally, the standard introduces new alternatives that permit companies to reduce the risk of material error if the shortcut method is misapplied. ASU 2017-12 is effective for the Company beginning January 1, 2019 and is required to be applied prospectively. The adoption of

this ASU is not expected to have a material impact on our consolidated balance sheet, statement of income or statement of cash flows.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits entities to reclassify the disproportionate income tax effects of the Tax Reform Act on items within accumulated other comprehensive income (loss) ("AOCI") to reinvested earnings. These disproportionate income tax effect items are referred to as "stranded tax effects." Amendments in this update only relate to the reclassification of the income tax effects of the Tax Reform Act. Other accounting guidance that requires the effect of changes in tax laws or rates to be included in net income from continuing operations is not affected by this update. ASU 2018-02 is effective for the Company beginning January 1, 2019 and should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Act is recognized. We have elected to apply this standard in the period of adoption and will recognize a cumulative effect adjustment to the opening balance of reinvested earnings as of January 1, 2019. We expect this cumulative effect adjustment to increase reinvested earnings by approximately $500 million.

NOTE 2: ACQUISITIONS AND DIVESTITURES

Acquisitions

During 2018, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $1,040 million, which included the acquisition of the 51 percent controlling interest in the Philippine bottling operations from Coca-Cola FEMSA, S.A.B. de C.V. ("Coca-Cola FEMSA"), an equity method investee. Refer to the "Philippine Bottling Operations" section within this note below for further details. Additionally, we acquired a minority interest in BA Sports Nutrition, LLC ("BodyArmor"). We account for our minority interest in BodyArmor as an equity method investment based on our equity ownership percentage and our representation on their Management Committee. We obtained an option to acquire the remaining ownership interests in BodyArmor based on an agreed-upon formula, which becomes exercisable in 2021. Upon the expiration of the Company's option, BodyArmor has the option to sell their remaining interests to the Company based on the same agreed‑upon formula. The Company also acquired additional ownership interests in the Company's franchise bottlers in the United Arab Emirates and in Oman, both of which were previously equity method investees of the Company. As a result of the additional interest acquired in the Oman bottler, we obtained a controlling interest, resulting in its consolidation.

During 2017, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $3,809 million, of which $3,150 million related to the transition of ABI's 54.5 percent controlling interest in CCBA to the Company, resulting in its consolidation in October 2017. The financial position and results of operations of CCBA are being accounted for as a discontinued operation. Refer to the "Discontinued Operations" section within this note below for further details. Additionally, in conjunction with the refranchising of Coca-Cola Refreshments' ("CCR") Southwest operating unit ("Southwest Transaction"), we obtained an equity interest in AC Bebidas, S. de R.L. de C.V. ("AC Bebidas"), a subsidiary of Arca Continental, S.A.B. de C.V. ("Arca"), primarily for noncash consideration. Refer to the "North America Refranchising — United States" section within this note below for further details. The remaining activity primarily related to the acquisition of AdeS, a plant-based beverage business, by the Company and several of its bottling partners in Latin America, and the acquisition of the U.S. rights to the Topo Chico premium sparkling water brand from AC Bebidas, an equity method investee.

During 2016, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $838 million, which primarily related to our acquisition of Xiamen Culiangwang Beverage Technology Co., Ltd. ("China Green"), a maker of plant-based protein beverages in China, and a minority investment in CHI Limited ("CHI"), a Nigerian producer of value-added dairy and juice beverages, which is accounted for under the equity method of accounting. Under the terms of the agreement for our investment in CHI, the Company acquired the remaining ownership interest from the existing shareowners in January 2019.

Philippine Bottling Operations

In December 2018, the Company acquired the 51 percent controlling interest in the Philippine bottling operations held by Coca‑Cola FEMSA, an equity method investee, in exchange for $715 million of cash. The acquired business had $345 million of cash on hand upon acquisition. The acquisition was a result of Coca-Cola FEMSA exercising the option to sell its ownership interest to the Company. Coca-Cola FEMSA obtained this option when it originally acquired the controlling interest from the Company in 2013. As a result of this acquisition, we now own 100 percent of the Philippine bottling operations. Upon consolidation, we recognized a net charge of $32 million, which included the remeasurement of our previously held equity interest in the Philippine bottling operations to fair value and the reversal of the related cumulative translation adjustments. The fair value of our previously held equity investment was determined using a discounted cash flow model based on Level 3 inputs. The net charge was recorded in the line item other income (loss) — net in our consolidated statement of income.

Divestitures

During 2018, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $1,362 million, primarily related to proceeds from the refranchising of our Canadian and Latin American bottling operations, as well as the sale of our equity ownership in Corporación Lindley S.A. ("Lindley").

During 2017, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $3,821 million, primarily related to proceeds from the refranchising of certain of our bottling territories in North America and our China bottling operations.

During 2016, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $1,035 million, primarily related to proceeds from the refranchising of certain of our bottling territories in North America.

Latin America Bottling Operations

As of December 31, 2017, certain of the Company's bottling operations in Latin America were classified as held for sale. During 2018, the Company sold its bottling operations in Latin America to Coca-Cola FEMSA, an equity method investee. We received net cash proceeds of $289 million as a result of these sales and recognized a net gain of $47 million, which was included in the line item other income (loss) — net in our consolidated statement of income.

Corporación Lindley S.A.

In September 2018, we sold our equity ownership in Lindley to AC Bebidas, an equity method investee. We received net cash proceeds of $507 million and recognized a net gain of $296 million during the year ended December 31, 2018, which was included in the line item other income (loss) — net in our consolidated statement of income.

North America Refranchising — Canada

In September 2018, the Company completed its North America refranchising with the sale of its Canadian bottling operations. We received initial net cash proceeds of $518 million and recognized a net charge of $385 million during the year ended December 31, 2018, which was included in the line item other income (loss) — net in our consolidated statement of income.

North America Refranchising — United States

In conjunction with implementing a new beverage partnership model in North America, the Company refranchised bottling territories in the United States 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.

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, except for the CBA entered into in conjunction with the Southwest Transaction and for additional territories sold to AC Bebidas as well as the CBA entered into with Liberty Coca-Cola Beverages, the bottlers 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. Liberty Coca-Cola Beverages, the co-owners of which are former management of CCR, will make ongoing quarterly payments based on the gross profit in its refranchised territories upon the earlier of reaching a predefined level of profitability, or the 41st quarter following the closing date.

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, except for the territory included in the Southwest Transaction. As discussed further below, we did not receive cash in the Southwest Transaction for these items.

In 2016, the Company formed a new National Product Supply System ("NPSS") to facilitate optimal operation of the U.S. product supply system. Under the NPSS, the Company and several of its independent producing bottlers administer key

national product supply activities for these bottlers. Additionally, CCR sold production assets to these independent producing bottlers in exchange for cash, excluding production facilities included in the Southwest Transaction.

During the years ended December 31, 2018, December 31, 2017 and December 31, 2016, cash proceeds from these sales totaled $3 million, $2,860 million and $1,017 million, respectively. Included in the cash proceeds for the years ended December 31, 2017 and December 31, 2016 was $336 million and $279 million, respectively, from Coca-Cola Bottling Co. Consolidated now known as Coca-Cola Consolidated, Inc. ("CCCI"), an equity method investee. Also included in the cash

proceeds for the year ended December 31, 2017 was $220 million from AC Bebidas and $39 million from Liberty Coca-Cola Beverages.

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 these territories. We recognized net charges of $91 million, $3,177 million and $2,456 million during the years ended December 31, 2018, December 31, 2017 and December 31, 2016, respectively. Included in these amounts are net charges from transactions with equity method investees or former management of $21 million, $1,104 million and $492 million, during the years ended December 31, 2018, December 31, 2017 and December 31, 2016, respectively. The net charges in 2018 were primarily related to post-closing adjustments as contemplated by the related agreements. The net charges in 2017 and 2016 were primarily related to the derecognition of the intangible assets transferred or reclassified as held for sale and were included in the line item other income (loss) — net in our consolidated statements of income. The net charges in 2017 included $236 million of expense associated with an indemnification liability related to an underfunded multi-employer benefit plan in which employees of certain refranchised territories participate. In total, we expect to recover the value of the intangible assets transferred to the bottlers under the CBAs through the future quarterly payments; however, as the payments for the territory rights are dependent on the bottlers' future gross profit in these territories, they are considered a form of contingent consideration.

There is diversity in practice as it relates to the accounting for contingent consideration by the seller. The seller can account for the future contingent payments received as a gain contingency, recognizing the amounts in the statement of income only after the related contingencies are resolved and the gain is realized, which in this arrangement will be quarterly as the bottlers earn gross profit in the transferred territories. Alternatively, the seller can record a receivable for the contingent consideration at fair value on the date of sale and record any future differences between the payments received and this receivable in the statement of income as they occur. We elected the gain contingency treatment since the quarterly payments will be received throughout the terms of the CBAs, including all subsequent renewals, regardless of the cumulative amount received as compared to the value of the intangible assets transferred.

During the years ended December 31, 2018, December 31, 2017 and December 31, 2016, the Company recorded charges of $34 million, $313 million and $31 million, respectively, primarily related to payments made to certain of our unconsolidated bottling partners in order to convert the bottling agreements for their legacy territories and any previously refranchised territories to a single form of CBA with additional requirements. The additional requirements generally include a binding national governance model, mandatory incidence pricing and additional core performance requirements, among other things. As a result of these conversions, the legacy territories and any previously refranchised territories for each of the related bottling partners will be governed under similar CBAs, which will provide consistency across each such bottler's respective territory, as well as consistency with other U.S. bottlers that have been granted or converted to this form of CBA. The charges related to these payments were included in the line item other income (loss) — net in our consolidated statements of income during the years ended December 31, 2018, December 31, 2017 and December 31, 2016.

On April 1, 2017, the Company refranchised the Southwest operating unit of CCR, which includes Texas and parts of Oklahoma, New Mexico and Arkansas, in the Southwest Transaction. In conjunction with the Southwest Transaction, Arca contributed its existing beverage business to AC Bebidas. CCR contributed its Southwest operating unit, including all of its assets and liabilities, to AC Bebidas in exchange for an approximate 20 percent interest in AC Bebidas. Arca owns the remaining interest in AC Bebidas. CCR also made cash payments of $144 million, net of cash received. As a result of the Southwest Transaction, the Company recognized a gain of $1,037 million due to the difference in the recorded carrying value of the net assets transferred compared to the value of the interest it obtained in AC Bebidas of $2,960 million, which was determined using an income and market approach (a Level 3 measurement). This gain was recorded in the line item other income (loss) — net in our consolidated statement of income. The Company accounts for its interest in AC Bebidas as an equity method investment based on our equity ownership percentage, our representation on AC Bebidas' Board of Directors, material intercompany transactions and other governance rights.

Refer to Note 20 for the impact these items had on our operating segments and Corporate.

Refranchising of China Bottling Operations

In 2017, the Company sold its bottling operations in China to the two existing local franchise bottlers, one of which is an equity method investee, and sold a related cost method investment to one of the franchise bottlers. We received net cash proceeds of $963 million as a result of these sales and recognized a gain of $88 million during the year ended December 31, 2017, which was included in the line item other income (loss) — net in our consolidated statement of income.

Coca-Cola European Partners

In May 2016, the Company merged our German bottling operations with Coca-Cola Enterprises, Inc. ("CCE") and Coca-Cola Iberian Partners, S.A.U., formerly known as Coca-Cola Iberian Partners, S.A. ("CCIP"), to create Coca-Cola European Partners plc ("CCEP"). In exchange for our German bottling operations, we received an 18 percent interest in CCEP. As a result of recording our interest in CCEP at fair value based on its quoted market price (a Level 1 measurement), the deconsolidation of our German bottling operations, and the related reversal of its cumulative translation adjustments, we recognized a gain of $1,400 million. This gain was partially offset by a $77 million charge incurred as a result of reclassifying losses related to our net investment hedges of our German bottling operations from AOCI into earnings as well as transaction costs incurred resulting in a net gain of $1,287 million during the year ended December 31, 2016. Refer to Note 16. With the exception of the transaction costs, the net gain was recorded in the line item other income (loss) — net in our consolidated statement of income. The Company accounts for its interest in CCEP as an equity method investment based on our equity ownership percentage, our representation on CCEP's Board of Directors, material intercompany transactions and other governance rights.

Coca-Cola Beverages Africa Proprietary Limited

In July 2016, the Company, SABMiller plc and Gutsche Family Investments combined the bottling operations of each of the parties' nonalcoholic ready-to-drink beverage businesses in Southern and East Africa to form a new bottler, which is called CCBA. The Company: (1) contributed its South African bottling operations to CCBA, which included certain wholly owned subsidiaries and an equity method investment; (2) paid $150 million in cash; (3) obtained a 12 percent interest in CCBA and a 3 percent interest in CCBA's South African subsidiary; and (4) acquired several trademarks that are generally indefinite-lived.

As a result of recording our interests in CCBA and its South African subsidiary at fair value, the deconsolidation of our South African bottling operations, the derecognition of the equity method investment, and the reversal of related cumulative translation adjustments, we recognized a charge of $21 million. The fair values of the equity investments in CCBA and CCBA's South African subsidiary, along with the acquired trademarks, were determined using income approaches, including discounted cash flow models (a Level 3 measurement), and the Company believes the inputs and assumptions used are consistent with those hypothetical marketplace participants would use. The loss recognized resulted primarily from the reversal of the related cumulative translation adjustments. This loss was recorded in the line item other income (loss) — net in our consolidated statement of income during the year ended December 31, 2016.

Based on the level of equity ownership, the Company's representation on CCBA's Board of Directors (two of its ten members) and other governance rights, the Company accounted for its interests in CCBA and CCBA's South African subsidiary as equity method investments. The Company's interest in CCBA provided it with a call option to acquire the ownership interest of SABMiller plc at fair value upon the occurrence of certain events, including upon a change in control of SABMiller plc.

In October 2016, ABI acquired SABMiller plc, including its 54.5 percent controlling interest in CCBA, and as a result, we exercised our call option. In October 2017, the Company and ABI completed the transition of ABI's controlling interest in CCBA to the Company for $3,150 million. We plan to hold our controlling interest in CCBA temporarily. Accordingly, we have presented the financial position and results of operations of CCBA as discontinued operations in the accompanying consolidated financial statements from its date of acquisition. Refer to the "Discontinued Operations" section within this note below for further discussion.

Keurig Green Mountain, Inc.

In March 2016, a JAB Holding Company-led investor group acquired Keurig Green Mountain, Inc. ("Keurig"). As a result, the Company received proceeds of $2,380 million, which were recorded in the line item proceeds from disposals of investments in our consolidated statement of cash flows, and recorded a gain of $18 million related to the disposal of our shares of Keurig in the line item other income (loss) — net in our consolidated statement of income during the year ended December 31, 2016.

Assets and Liabilities Held for Sale

As of December 31, 2017, the Company had certain bottling operations in North America and Latin America that met the criteria to be classified as held for sale, which requires us to present the related assets and liabilities as separate line items in our consolidated balance sheet. As these bottling territories met the criteria to be classified as held for sale, we were required to record their assets and liabilities at the lower of carrying value or fair value less any costs to sell based on the agreed-upon sale

price and present the related assets and liabilities as separate line items in our consolidated balance sheet. These operations were refranchised in 2018.

The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in our consolidated balance sheet (in millions):



	December 31, 2017
Cash, cash equivalents and short-term investments	$	13
Trade accounts receivable, less allowances	10
Inventories	11
Prepaid expenses and other assets	12
Other assets	7
Property, plant and equipment — net	85
Bottlers' franchise rights with indefinite lives	5
Goodwill	103
Other intangible assets	1
Allowance for reduction of assets held for sale	(28		)
Assets held for sale	$	219		1
Accounts payable and accrued expenses	$	22
Other liabilities	12
Deferred income taxes	3
Liabilities held for sale	$	37		2


1	Consists of total assets relating to North America refranchising of $9 million and Latin America bottling operations of $210 million, which are included in the Bottling Investments operating segment.


2	Consists of total liabilities relating to North America refranchising of $5 million and Latin America bottling operations of $32 million, which are included in the Bottling Investments operating segment.

We determined that the operations included in the table above did not meet the criteria to be classified as discontinued operations under the applicable guidance.

Discontinued Operations

In October 2017, the Company and ABI completed the transition of ABI's controlling interest in CCBA to the Company for $3,150 million. We plan to hold a controlling interest in CCBA temporarily. We anticipate that we will divest a portion of our ownership interest in 2019, which will result in the Company no longer having a controlling interest in CCBA. Accordingly, we have presented the financial position and results of operations of CCBA as discontinued operations in the accompanying consolidated financial statements. As CCBA met the criteria to be classified as held for sale, we were required to record their assets and liabilities at the lower of carrying value or fair value less any costs to sell and present the related assets and liabilities as separate line items in our consolidated balance sheet. During the year ended December 31, 2018, we recorded an impairment charge of $554 million, reflecting management's view of the proceeds that are expected to be received based on revised projections of future operating results and foreign currency exchange rate fluctuations. Refer to Note 17.

Upon consolidation of CCBA, we remeasured our previously held equity interests in CCBA and its South African subsidiary to fair value and recorded a gain on the remeasurement of $150 million. The fair values in our previously held equity investments in CCBA and its South African subsidiary were determined using income approaches, including discounted cash flow models (a Level 3 measurement), and the Company believes the inputs and assumptions used are consistent with those hypothetical marketplace participants would use. We recorded $1,805 million for the noncontrolling interests of CCBA. The fair value of the noncontrolling interests was determined in a manner similar to our previously held equity investments.

The preliminary goodwill recorded at the time of the transaction was $4,262 million, none of which is tax deductible. This goodwill is in part due to the significant synergies that are expected from the consolidation of the bottling system in Southern and East Africa, especially within the country of South Africa. As a result, upon finalization of purchase accounting $411 million of the final goodwill balance of $4,186 million was allocated to other reporting units expected to benefit from this transaction.

During 2018, the Company acquired additional bottling operations in Zambia and Botswana, which have also been included in assets held for sale — discontinued operations and liabilities held for sale — discontinued operations.

The following table presents information related to the major classes of assets and liabilities of CCBA that were classified as held for sale — discontinued operations in our consolidated balance sheets (in millions):



	December 31, 2018			December 31, 2017
Cash, cash equivalents and short-term investments	$	151		$	97
Trade accounts receivable, less allowances	289			299
Inventories	305			299
Prepaid expenses and other assets	97			52
Equity method investments	5			7
Other assets	15			29
Property, plant and equipment — net	1,587			1,436
Goodwill	3,847			4,248
Other intangible assets	796			862
Allowance for reduction of assets held for sale	(546		)	—
Assets held for sale — discontinued operations	$	6,546		$	7,329
Accounts payable and accrued expenses	$	602		$	598
Loans and notes payable	641			404
Current maturities of long-term debt	6			6
Accrued income taxes	32			40
Long-term debt	12			19
Other liabilities	8			10
Deferred income taxes	421			419
Liabilities held for sale — discontinued operations	$	1,722		$	1,496

NOTE 3: REVENUE RECOGNITION

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 soft drinks and other nonalcoholic 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 domestic and international concentrate operations, we typically generate net operating revenues by selling concentrates, syrups and certain finished beverages to authorized bottling 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, 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. In addition, outside the United States, our bottling partners are typically authorized to manufacture fountain syrups, using our concentrate, which they sell to fountain retailers for use in producing beverages for immediate consumption, or to authorized fountain wholesalers who in turn sell and distribute the fountain syrups to fountain retailers. Our concentrate operations are included in our geographic operating segments.

Our finished product operations generate net operating revenues by selling sparkling soft drinks and a variety of other finished nonalcoholic beverages, such as water, enhanced water and sports drinks; juice, dairy and plant-based beverages; tea and coffee; and energy drinks, to retailers or to distributors and wholesalers who distribute them to retailers. These operations consist primarily of Company-owned or -controlled bottling, sales and distribution operations, which are included in our Bottling Investments operating segment. In certain markets, the Company also operates non-bottling finished product operations in which we sell finished beverages to distributors and wholesalers that are generally not one of the Company's bottling partners. These operations are generally included in one of our geographic operating segments. In the United States, we

manufacture fountain syrups and sell them to fountain retailers, 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. These fountain syrup sales are included in our North America operating segment. Generally, finished product operations produce higher net operating revenues but lower gross profit margins compared to concentrate operations.

We adopted ASC 606 effective January 1, 2018, using the modified retrospective method. We have applied this standard to all contracts at the effective date and contracts entered into thereafter. Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. Our performance obligation generally consists of the promise to sell concentrates or finished products to our bottling partners, wholesalers, distributors or retailers. Control of the concentrates or finished products is transferred upon shipment to, or receipt at, our customers' locations, as determined by the specific terms of the contract. Once control is transferred to the customer, we have completed our performance obligation, and revenue is recognized. Our sales terms generally do not allow for a right of return except for matters related to any manufacturing defects on our part. After completion of our performance obligation, we have an unconditional right to consideration as outlined in the contract. Our receivables will generally be collected in less than six months, in accordance with the underlying payment terms. All of our performance obligations under the terms of contracts with our customers have an original duration of one year or less.

Our customers and bottling partners may be entitled to cash discounts, funds for promotional and marketing activities, volume-based incentive programs, support for infrastructure programs and other similar programs. In some markets, in an effort to allow our Company and our bottling partners to grow together through shared value, aligned financial objectives 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 concentrate pricing model. 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 produced from the concentrate are sold, and package mix. The amounts associated with the arrangements described above are defined as variable consideration under ASC 606 and an estimate of which is included in the transaction price as a component of net operating revenues in our consolidated statement of income upon completion of our performance obligations. The total revenue recorded, including any variable consideration, cannot exceed the amount for which it is probable that a significant reversal will not occur when uncertainties related to variability are resolved. As a result, we are recognizing revenue based on our faithful depiction of the consideration that we expect to receive. In making our estimates of variable consideration, we consider past results and make significant assumptions related to: (1) customer sales volumes; (2) customer ending inventories; (3) customer selling price per unit; (4) selling channels; and (5) discount rates, rebates and other pricing allowances, as applicable. In gathering data to estimate our variable consideration, we generally calculate our estimates using a portfolio approach at the country and product line level rather than at the individual contract level. The result of making these estimates will impact the line items trade accounts receivable and accounts payable and accrued expenses in our consolidated balance sheet. The actual amounts ultimately paid and/or received may be different from our estimates. The change in the amount of variable consideration recognized during the year ended December 31, 2018 related to performance obligations satisfied in prior periods was immaterial.

In addition to changes in the timing of when we record variable consideration, ASC 606 provided clarification about the classification of certain costs relating to revenue arrangements with customers. As a result, during the year ended December 31, 2018, we recorded certain amounts in cost of goods sold or selling, general and administrative expenses that were previously classified as reductions in net operating revenues. The Company also re-evaluated the principal versus agent considerations pertaining to certain of its arrangements with third-party manufacturers and co-packers. We recorded certain costs in net operating revenues which were previously recorded in cost of goods sold related to arrangements in which we concluded we did not control the goods before they were delivered to our customers.

Prior to the adoption of ASC 606, we recognized revenue when persuasive evidence of an arrangement existed, delivery of products had occurred, the sales price was fixed or determinable and collectibility was reasonably assured. For our Company, this generally meant that we recognized revenue when title to our products was transferred to our bottling partners, resellers or other customers. Title usually transferred upon shipment to or receipt at our customers' locations, as determined by the specific sales terms of each transaction. Our sales terms did not allow for a right of return except for matters related to any manufacturing defects on our part. Our customers could earn certain incentives which were included in deductions from revenue, a component of net operating revenues in our consolidated statement of income. These incentives included, but were not limited to, cash discounts, funds for promotional and marketing activities, volume-based incentive programs and support for infrastructure programs. In preparing the financial statements, management made estimates related to the contractual terms, customer performance and sales volume to determine the total amounts recorded as deductions from revenue. Management also considered past results in making such estimates. The actual amounts ultimately paid may have been different from our estimates. Such differences were recorded once they were determined and historically were not significant.

The following tables compare the amounts reported in the consolidated statement of income and consolidated balance sheet to the amounts had the previous revenue recognition guidance been in effect (in millions):



	Year Ended December 31, 2018
	As Reported			Balances without Adoption of ASC 606			Increase (Decrease) Due to Adoption
Net operating revenues	$	31,856		$	31,191		$	665		1
Cost of goods sold	11,770			10,930			840			1
Gross profit	20,086			20,261			(175		)
Selling, general and administrative expenses	10,307			10,488			(181		)
Operating income	8,700			8,694			6
Income from continuing operations before income taxes	8,350			8,344			6
Income taxes from continuing operations	1,623			1,626			3
Net income from continuing operations	6,727			6,718			9
Income (loss) from discontinued operations	(251		)	(253		)	2
Consolidated net income	6,476			6,465			11
Net income attributable to shareowners of The Coca-Cola Company	6,434			6,423			11

1 The increase was primarily due to the reclassification of shipping and handling costs.



	December 31, 2018
	As Reported		Balances without Adoption of ASC 606		Increase (Decrease) Due to Adoption
ASSETS
Trade accounts receivable	$	3,396	$	3,302	$	94		1
Prepaid expenses and other assets	1,962		1,970		(8		)
Total current assets	30,634		30,548		86
Deferred income tax assets	2,667		2,649		18
Total assets	83,216		83,112		104
LIABILITIES AND EQUITY
Accounts payable and accrued expenses	$	8,932	$	8,513	$	419		2
Total current liabilities	29,223		28,804		419
Deferred income tax liabilities	1,933		2,002		(69		)
Reinvested earnings	63,234		63,480		(246		)
Total equity	19,058		19,304		(246		)
Total liabilities and equity	83,216		83,112		104

1 The increase was primarily due to incremental estimated variable consideration receivables from third-party customers.

2 The increase was primarily due to incremental estimated variable consideration payables due to third-party customers.

The following table presents net operating revenues disaggregated between the United States and International and further by line of business (in millions):



	United States		International		Total
Year Ended December 31, 2018
Concentrate operations	$	4,571	$	15,886	$	20,457
Finished product operations	6,773		4,626		11,399
Total	$	11,344	$	20,512	$	31,856

Refer to Note 20 for additional revenue disclosures by operating segment and Corporate.

NOTE 4: INVESTMENTS

Equity Securities

Effective January 1, 2018, we adopted ASU 2016-01, which requires us to measure all equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in earnings. We use quoted market prices to determine the fair value of equity securities with readily determinable fair values. For equity securities without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Management assesses each of these investments on an individual basis. We recognized a cumulative effect adjustment of $409 million, net of tax, to increase the opening balance of reinvested earnings with an offset to AOCI as of January 1, 2018 in connection with the adoption of ASU 2016-01.

Prior to the adoption of ASU 2016-01, marketable equity securities not accounted for under the equity method were classified as either trading or available-for-sale. Both realized and unrealized gains and losses on equity securities classified as trading securities were recognized in net income. For equity securities classified as available-for-sale, realized gains and losses were included in net income. Unrealized gains and losses on equity securities classified as available-for-sale were recognized in AOCI, net of tax. Equity securities without readily determinable fair values were recorded at cost.

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. The cost basis is determined by the specific identification method. 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 debt securities as well as realized gains and losses on available-for-sale debt securities are included in net income. Unrealized gains and losses, net of tax, on available-for-sale debt securities are included in our consolidated balance sheet as a component of AOCI, except for the change in fair value attributable to the currency risk being hedged, if applicable, which is included in net income. Refer to Note 6 for additional information related to the Company's fair value hedges of available-for-sale debt securities.

Equity securities with readily determinable fair values that are not accounted for under the equity method and debt securities classified as trading are not assessed for impairment, since they are carried at fair value with the change in fair value included in net income. Similarly, prior to the adoption of ASU 2016-01, equity investments classified as trading were not tested for impairment. Equity method investments, equity securities without readily determinable fair values and debt securities classified as available-for-sale or held-to-maturity are, and prior to the adoption of ASU 2016-01, equity securities classified as available-for-sale and cost method investments were, reviewed 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. 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 emerging and developing 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.

As of December 31, 2018, the carrying values of our equity securities were included in the following line items in our consolidated balance sheet (in millions):



	Fair Value with Changes Recognized in Income		Measurement Alternative — No Readily Determinable Fair Value
Marketable securities	$	278	$	—
Other investments	787		80
Other assets	869		—
Total equity securities	$	1,934	$	80

The calculation of net unrealized gains and losses recognized during the year related to equity securities still held at December 31, 2018 is as follows (in millions):



	Year Ended December 31, 2018
Net gains (losses) recognized during the year related to equity securities	$	(250	)
Less: Net gains (losses) recognized during the year related to equity securities sold during the year	8
Net unrealized gains (losses) recognized during the year related to equity securities still held at the end of the year	$	(258	)

As of December 31, 2017, our equity securities consisted of the following (in millions):



			Gross Unrealized					Estimated
	Cost		Gains		Losses			Fair Value
Trading securities	$	324	$	75	$	(4	)	$	395
Available-for-sale securities	1,276		685		(66		)	1,895
Total equity securities	$	1,600	$	760	$	(70	)	$	2,290

As of December 31, 2017, the fair values of our equity securities were included in the following line items in our consolidated balance sheet (in millions):



	Trading Securities		Available-for-Sale Securities
Marketable securities	$	283	$	52
Other investments	—		953
Other assets	112		890
Total equity securities	$	395	$	1,895

The sale and/or maturity of available-for-sale equity securities resulted in the following realized activity (in millions):



	Year Ended
	December 31, 2017
Gross gains	$	61
Gross losses	(19		)
Proceeds	275

Debt Securities

Our debt securities consisted of the following (in millions):



			Gross Unrealized					Estimated
	Cost		Gains		Losses			Fair Value
December 31, 2018
Trading securities	$	45	$	—	$	(1	)	$	44
Available-for-sale securities	4,901		119		(27		)	4,993
Total debt securities	$	4,946	$	119	$	(28	)	$	5,037
December 31, 2017
Trading securities	$	12	$	—	$	—		$	12
Available-for-sale securities	5,782		157		(27		)	5,912
Total debt securities	$	5,794	$	157	$	(27	)	$	5,924

The fair values of our debt securities were included in the following line items in our consolidated balance sheets (in millions):



	December 31, 2018				December 31, 2017
	Trading Securities		Available-for-Sale Securities		Trading Securities		Available-for-Sale Securities
Cash and cash equivalents	$	—	$	—	$	—	$	667
Marketable securities	44		4,691		12		4,970
Other assets	—		302		—		275
Total debt securities	$	44	$	4,993	$	12	$	5,912

The contractual maturities of these available-for-sale debt securities as of December 31, 2018 were as follows (in millions):



	Cost		Estimated Fair Value
Within 1 year	$	685	$	682
After 1 year through 5 years	3,871		3,948
After 5 years through 10 years	106		122
After 10 years	239		241
Total	$	4,901	$	4,993

The Company expects that actual maturities may differ from the contractual maturities above because borrowers have the right to call or prepay certain obligations.

The sale and/or maturity of available-for-sale debt securities resulted in the following realized activity (in millions):



Year Ended December 31,	2018			2017
Gross gains	$	22		$	7
Gross losses	(27		)	(13		)
Proceeds	13,710			13,930

Captive Insurance Companies

In accordance with local insurance regulations, our captive insurance companies are required to meet and maintain minimum solvency capital requirements. The Company elected to invest a majority of its solvency capital in a portfolio of marketable equity and debt securities. These securities are included in the disclosures above. The Company uses one of its consolidated captive insurance companies to reinsure group annuity insurance contracts that cover the pension obligations of certain of our European and Canadian pension plans. This captive's solvency capital funds included equity and debt securities of $1,056 million as of December 31, 2018 and $1,159 million as of December 31, 2017, which are classified in the line item other assets in our consolidated balance sheets because the assets are not available to satisfy our current obligations.

NOTE 5: INVENTORIES

Inventories consist primarily of raw materials and packaging (which include 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 net realizable value. 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,	2018		2017
Raw materials and packaging	$	1,862	$	1,729
Finished goods	692		693
Other	212		233
Total inventories	$	2,766	$	2,655

NOTE 6: 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." When 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 third-party debt, in hedging relationships.

All derivatives are carried at fair value in our consolidated balance sheets, primarily 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 statements 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 values 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 current market rates. Refer to Note 17. 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
Derivatives Designated as Hedging Instruments	Balance Sheet Location1	December 31, 2018		December 31, 2017
Assets:
Foreign currency contracts	Prepaid expenses and other assets	$	43	$	45
Foreign currency contracts	Other assets	114		79
Interest rate contracts	Other assets	88		52
Total assets		$	245	$	176
Liabilities:
Foreign currency contracts	Accounts payable and accrued expenses	$	19	$	69
Foreign currency contracts	Other liabilities	15		9
Foreign currency contracts	Liabilities held for sale — discontinued operations	—		8
Commodity contracts	Accounts payable and accrued expenses	1		—
Commodity contracts	Liabilities held for sale — discontinued operations	—		4
Interest rate contracts	Accounts payable and accrued expenses	—		30
Interest rate contracts	Other liabilities	40		39
Total liabilities		$	75	$	159


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 17 for the net presentation of the Company's derivative instruments.

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 17 for the net presentation of the Company's derivative instruments.


2	Refer to Note 17 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
Derivatives Not Designated as Hedging Instruments	Balance Sheet Location1	December 31, 2018		December 31, 2017
Assets:
Foreign currency contracts	Prepaid expenses and other assets	$	61	$	20
Foreign currency contracts	Other assets	—		27
Commodity contracts	Prepaid expenses and other assets	2		25
Commodity contracts	Other assets	—		1
Other derivative instruments	Prepaid expenses and other assets	7		8
Total assets		$	70	$	81
Liabilities:
Foreign currency contracts	Accounts payable and accrued expenses	$	99	$	69
Foreign currency contracts	Other liabilities	—		28
Foreign currency contracts	Liabilities held for sale — discontinued operations	2		—
Commodity contracts	Accounts payable and accrued expenses	37		7
Commodity contracts	Other liabilities	8		—
Commodity contracts	Liabilities held for sale — discontinued operations	1		—
Other derivative instruments	Accounts payable and accrued expenses	13		1
Other derivative instruments	Other liabilities	—		1
Total liabilities		$	160	$	106


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 17 for the net presentation of the Company's derivative instruments.


2	Refer to Note 17 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 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 statements 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 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 values of derivatives that have been designated and qualify for the Company's

foreign currency cash flow hedging program were $3,175 million and $4,068 million as of December 31, 2018 and 2017, respectively.

The Company uses cross-currency swaps to hedge the changes in cash flows of certain of its foreign currency denominated debt and other monetary assets or liabilities due to changes in foreign currency exchange rates. For this hedging program, the Company records the change in carrying value of these foreign currency denominated assets and liabilities 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. The total notional values of derivatives that have been designated as cash flow hedges for the Company's foreign currency denominated assets and liabilities were $3,028 million and $1,851 million as of December 31, 2018 and 2017, respectively.

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. These 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 value of derivatives that have been designated and qualify for this program were $9 million and $35 million as of December 31, 2018 and 2017, 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 values of these interest rate swap agreements that was designated and qualified for the Company's interest rate cash flow hedging program was $500 million as of December 31, 2017. During the year ended December 31, 2018, we discontinued the cash flow hedge relationship related to these swaps. We reclassified a loss of $8 million into earnings as a result of the discontinuance. As of December 31, 2018, we did not have any interest rate swaps designated as a cash flow hedge.

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 (in millions):



	Gain (Loss) Recognized in 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)
2018
Foreign currency contracts	$	9		Net operating revenues	$	136		$	1
Foreign currency contracts	15			Cost of goods sold	8			—			2
Foreign currency contracts	—			Interest expense	(9		)	—
Foreign currency contracts	23			Other income (loss) — net	(5		)	(4		)
Foreign currency contracts	—			Income (loss) from discontinued operations	—			(3		)
Interest rate contracts	22			Interest expense	(40		)	(8		)
Commodity contracts	(1		)	Cost of goods sold	—			—
Commodity contracts	—			Income (loss) from discontinued operations	—			(5		)
Total	$	68			$	90		$	(19	)
2017
Foreign currency contracts	$	(226	)	Net operating revenues	$	443		$	1
Foreign currency contracts	(23		)	Cost of goods sold	(2		)	—			2
Foreign currency contracts	—			Interest expense	(9		)	—
Foreign currency contracts	92			Other income (loss) — net	107			3
Foreign currency contracts	(3		)	Income (loss) from discontinued operations	—			—
Interest rate contracts	(22		)	Interest expense	(37		)	2
Commodity contracts	(1		)	Cost of goods sold	(1		)	—
Commodity contracts	(5		)	Income (loss) from discontinued operations	—			—
Total	$	(188	)		$	501		$	6
2016
Foreign currency contracts	$	69		Net operating revenues	$	567		$	(3	)
Foreign currency contracts	8			Cost of goods sold	35			(1		)
Foreign currency contracts	—			Interest expense	(9		)	—
Foreign currency contracts	13			Other income (loss) — net	(3		)	(3		)
Interest rate contracts	(126		)	Interest expense	(17		)	(2		)
Commodity contracts	(1		)	Cost of goods sold	(1		)	—
Total	$	(37	)		$	572		$	(9	)


1	The Company records gains and losses reclassified from AOCI into 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, 2018, the Company estimates that it will reclassify into earnings during the next 12 months net losses of $29 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, 2018, such adjustments had cumulatively increased the carrying value of our long-term debt by $42 million. When 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 earnings over the remaining life of the hedged item, or immediately if the hedged item has matured. The total notional values of derivatives related to our fair value hedges of this type were $8,023 million and $8,121 million as of December 31, 2018 and 2017, respectively.

The Company also 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. As a result, any difference is reflected in earnings as ineffectiveness. The total notional value of derivatives related to fair value hedges of this type was $311 million as of December 31, 2017. As of December 31, 2018, we did not have any fair value hedges of this type.

The following table summarizes the pretax impact that changes in the fair values of derivatives designated as fair value hedges had on earnings (in millions):



Hedging Instruments and Hedged Items	Location of Gain (Loss) Recognized in Income	Gain (Loss) Recognized in Income1
2018
Interest rate contracts	Interest expense	$	34
Fixed-rate debt	Interest expense	(38		)
Net impact to interest expense		$	(4	)
Foreign currency contracts	Other income (loss) — net	$	(6	)
Available-for-sale securities	Other income (loss) — net	6
Net impact to other income (loss) — net		$	—
Net impact of fair value hedging instruments		$	(4	)
2017
Interest rate contracts	Interest expense	$	(69	)
Fixed-rate debt	Interest expense	63
Net impact to interest expense		$	(6	)
Foreign currency contracts	Other income (loss) — net	$	(37	)
Available-for-sale securities	Other income (loss) — net	44
Net impact to other income (loss) — net		$	7
Net impact of fair value hedging instruments		$	1
2016
Interest rate contracts	Interest expense	$	170
Fixed-rate debt	Interest expense	(152		)
Net impact to interest expense		$	18
Foreign currency contracts	Other income (loss) — net	$	69
Available-for-sale securities	Other income (loss) — net	(73		)
Net impact to other income (loss) — net		$	(4	)
Net impact of fair value hedging instruments		$	14

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 a portion of its foreign currency denominated debt, a non-derivative financial instrument, to protect the value of our net investments in a number of foreign operations. 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 adjustment, a component of AOCI, to offset the changes in the values of the net investments being hedged. For non-derivative financial instruments that are designated and qualify as hedges of net investments in foreign operations, the change in the carrying value of the designated portion of the non-derivative financial instrument due to changes in foreign currency exchange rates is recorded in net foreign currency translation adjustment. Any ineffective portions of net investment hedges are reclassified from AOCI into earnings during the period of change.

During the years ended December 31, 2018, 2017 and 2016, the Company designated a portion of its euro-denominated debt as a hedge of a net investment in our European operations.

The following table summarizes the notional values and pretax impact of changes in the fair values of instruments designated as net investment hedges (in millions):



	Notional Amount				Gain (Loss) Recognized in OCI
	as of December 31,				Year Ended December 31,
	2018		2017		2018			2017			2016
Foreign currency contracts	$	—	$	—	$	(14	)	$	(7	)	$	(237	)
Foreign currency denominated debt	12,494		13,147		653			(1,505		)	304
Total	$	12,494	$	13,147	$	639		$	(1,512	)	$	67

The Company did not reclassify any deferred gains or losses related to net investment hedges from AOCI to earnings during the years ended December 31, 2018 and 2017. The Company reclassified net deferred losses of $77 million related to the deconsolidation of our German bottling operations from AOCI into earnings during the year ended December 31, 2016. In addition, the Company did not have any ineffectiveness related to net investment hedges during the years ended December 31, 2018, 2017 and 2016. 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 those 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 fluctuations in foreign currency exchange rates, including those related to certain acquisition and divestiture activities. The changes in fair values 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, cost of goods sold or other income (loss) — net in our consolidated statements of income, as applicable. The total notional values of derivatives related to our foreign currency economic hedges were $10,939 million and $6,827 million as of December 31, 2018 and 2017, 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, or selling, general and administrative expenses in our consolidated statements of income, as applicable. The total notional values of derivatives related to our economic hedges of this type were $373 million and $357 million as of December 31, 2018 and 2017, respectively.

The following table presents the pretax impact that changes in the fair values of derivatives not designated as hedging instruments had on earnings (in millions):



Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income	Gain (Loss) Recognized in Income
	Year Ended December 31,
	2018			2017			2016
Foreign currency contracts	Net operating revenues	$	22		$	(30	)	$	(45	)
Foreign currency contracts	Cost of goods sold	9			(1		)	4
Foreign currency contracts	Other income (loss) — net	(264		)	73			(168		)
Commodity contracts	Net operating revenues	—			16			10
Commodity contracts	Cost of goods sold	(29		)	15			75
Commodity contracts	Selling, general and administrative expenses	—			1			6
Commodity contracts	Income (loss) from discontinued operations	4			—			—
Interest rate contracts	Interest expense	(1		)	—			(39		)
Other derivative instruments	Selling, general and administrative expenses	(18		)	46			16
Other derivative instruments	Other income (loss) — net	(22		)	1			(15		)
Total		$	(299	)	$	121		$	(156	)

NOTE 7: 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 18 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 to the extent of our ownership interest, including the intercompany portion of transactions with equity method investees.

The Company's equity method investments include, but are not limited to, our ownership interests in CCEP, Monster Beverage Corporation ("Monster"), AC Bebidas, Coca-Cola FEMSA, Coca-Cola HBC AG ("Coca-Cola Hellenic"), and Coca-Cola Bottlers Japan Holdings Inc. ("CCBJHI"). As of December 31, 2018, we owned approximately 19 percent, 19 percent, 20 percent, 28 percent, 23 percent and 18 percent, respectively, of these companies' outstanding shares. As of December 31, 2018, our investments in our equity method investees in the aggregate exceeded our proportionate share of the net assets of these equity method investees by $9,071 million. This difference is not amortized.

A summary of financial information for our equity method investees in the aggregate is as follows (in millions):



Year Ended December 31,1	2018		2017		2016
Net operating revenues	$	75,462	$	73,339	$	58,054
Cost of goods sold	44,914		42,867		34,338
Gross profit	$	30,548	$	30,472	$	23,716
Operating income	$	7,511	$	7,577	$	5,652
Consolidated net income	$	4,645	$	4,545	$	2,967
Less: Net income attributable to noncontrolling interests	101		120		78
Net income attributable to common shareowners	$	4,544	$	4,425	$	2,889
Equity income (loss) — net	$	1,008	$	1,071	$	835

1 The financial information represents the results of the equity method investees during the Company's period of ownership.



December 31,	2018		2017
Current assets	$	23,239	$	25,023
Noncurrent assets	66,731		66,578
Total assets	$	89,970	$	91,601
Current liabilities	$	18,097	$	17,890
Noncurrent liabilities	29,143		29,986
Total liabilities	$	47,240	$	47,876
Equity attributable to shareowners of investees	$	41,550	$	41,773
Equity attributable to noncontrolling interests	1,180		1,952
Total equity	$	42,730	$	43,725
Company equity investment	$	19,407	$	20,856

Net sales to equity method investees, the majority of which are located outside the United States, were $14,799 million, $14,144 million and $10,495 million in 2018, 2017 and 2016, respectively. The increase in net sales to equity method investees in 2017 was primarily due to our acquisition of equity method investments in CCEP and AC Bebidas, as well as the integration of Coca-Cola West Co., Ltd. ("CCW") and Coca-Cola East Japan Co., Ltd. ("CCEJ") to establish CCBJHI in 2017. Refer to Note 2. Total payments, primarily marketing, made to equity method investees were $1,131 million, $930 million and $946 million in 2018, 2017 and 2016, respectively. In addition, purchases of beverage products from equity method investees were $533 million, $1,298 million and $1,857 million in 2018, 2017 and 2016, respectively. The decrease in purchases of beverage products in 2018 was primarily due to reduced purchases of Monster products as a result of North America refranchising activities. Refer to Note 2.

If valued at the December 31, 2018 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 $6,209 million. However, the carrying value of our investment in CCBJHI exceeded the fair value of the investment as of December 31, 2018 by $164 million. Based on the length of time and the extent to which the market value has been less than our cost basis and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value, management determined that the decline in fair value was temporary in nature. Therefore, we did not record an impairment charge.

Net Receivables and Dividends from Equity Method Investees

Total net receivables due from equity method investees were $1,563 million and $2,053 million as of December 31, 2018 and 2017, respectively. The total amount of dividends received from equity method investees was $551 million, $443 million and $386 million for the years ended December 31, 2018, 2017 and 2016, respectively. The amount of consolidated reinvested earnings that represents undistributed earnings of investments accounted for under the equity method as of December 31, 2018 was $4,546 million.

NOTE 8: PROPERTY, PLANT AND EQUIPMENT

The following table summarizes our property, plant and equipment (in millions):



December 31,	2018		2017
Land	$	485	$	334
Buildings and improvements	3,838		3,917
Machinery, equipment and vehicle fleet	11,922		12,198
Property, plant and equipment — cost	16,245		16,449
Less accumulated depreciation	8,013		8,246
Property, plant and equipment — net	$	8,232	$	8,203

NOTE 9: INTANGIBLE ASSETS

Indefinite-Lived Intangible Assets

The following table presents the carrying values of indefinite-lived intangible assets included in our consolidated balance sheets (in millions):



December 31,	2018		2017
Trademarks	$	6,682	$	6,729
Bottlers' franchise rights	51		138
Goodwill	10,263		9,401
Other	106		106
Indefinite-lived intangible assets	$	17,102	$	16,374

The following table provides information related to the carrying value of our goodwill by operating segment (in millions):



	Europe, Middle East & Africa			Latin America			North America			Asia Pacific			Bottling Investments			Total
2017
Balance at beginning of year	$	628		$	117		$	8,321		$	128		$	1,435		$	10,629
Effect of foreign currency translation	75			8			—			(1		)	5			87
Acquisitions1	—			25			28			—			3			56
Adjustments related to the finalization of purchase accounting1	—			—			—			18			—			18
Impairment charges	—			—			—			—			(390		)	(390		)
Divestitures, deconsolidations and other1,2	—			—			—			—			(999		)	(999		)
Balance at end of year	$	703		$	150		$	8,349		$	145		$	54		$	9,401
2018
Balance at beginning of year	$	703		$	150		$	8,349		$	145		$	54		$	9,401
Effect of foreign currency translation	(58		)	(9		)	—			(4		)	(2		)	(73		)
Acquisitions1,3	12			—			—			13			488			513
Adjustments related to the finalization of purchase accounting1,4	411			27			(11		)	—			—			427
Divestitures, deconsolidations and other1	—			—			—			—			(5		)	(5		)
Balance at end of year	$	1,068		$	168		$	8,338		$	154		$	535		$	10,263


1	Refer to Note 2 for information related to the Company's acquisitions and divestitures.


2	The 2017 decrease in the Bottling Investments segment was primarily a result of North America bottling operations being refranchised. Refer to Note 2.


3	The increase in 2018 was primarily due to the acquisition of the Philippine bottling operations. Refer to Note 2.


4	The increase in 2018 was primarily due to the allocation of goodwill from CCBA to other reporting units expected to benefit from the acquisition of CCBA. Refer to Note 2.

Definite-Lived Intangible Assets

The following table provides information related to definite-lived intangible assets (in millions):



	December 31, 2018							December 31, 2017
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Gross Carrying Value		Accumulated Amortization			Net Carrying Value
Customer relationships	$	185	$	(151	)	$	34	$	205	$	(143	)	$	62
Bottlers' franchise rights	30		(18		)	12		213		(152		)	61
Trademarks	186		(91		)	95		182		(73		)	109
Other	88		(61		)	27		94		(64		)	30
Total	$	489	$	(321	)	$	168	$	694	$	(432	)	$	262

Total amortization expense for intangible assets subject to amortization was $49 million, $68 million and $139 million in 2018, 2017 and 2016, respectively.

Based on the carrying value of definite-lived intangible assets as of December 31, 2018, we estimate our amortization expense for the next five years will be as follows (in millions):



	Amortization Expense
2019	$	44
2020	34
2021	26
2022	25
2023	25

NOTE 10: ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following (in millions):



December 31,	2018			2017
Accrued marketing	$	1,787		$	2,108
Trade accounts payable	2,498			2,288
Other accrued expenses	3,352		1	3,071
Accrued compensation	894			854
Sales, payroll and other taxes	315			347
Container deposits	86			80
Accounts payable and accrued expenses	$	8,932		$	8,748


1	The increase in other accrued expenses is primarily due to incremental estimated variable consideration due to third-party customers. Refer to Note 1 and Note 3 for additional information on our adoption of ASC 606 that became effective on January 1, 2018.

NOTE 11: 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, 2018 and 2017, we had $13,063 million and $12,931 million, respectively, in outstanding commercial paper borrowings. Our weighted-average interest rates for commercial paper outstanding were approximately 2.6 percent and 1.4 percent per year as of December 31, 2018 and 2017, respectively. In addition, we had $10,483 million in lines of credit and other short-term credit facilities as of December 31, 2018. The Company's total lines of credit included $131 million that was outstanding and primarily related to our international operations.

Included in the credit facilities discussed above, the Company had $7,895 million in lines of credit for general corporate purposes. These backup lines of credit expire at various times from 2019 through 2022. There were no borrowings under these

backup lines of credit during 2018. 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 2018, the Company retired upon maturity $3,276 million total principal amount of notes and debentures. The general terms of the notes and debentures retired are as follows:


•	$26 million total principal amount of debentures due January 29, 2018, at a fixed interest rate of 9.66 percent;


•	$750 million total principal amount of notes due March 14, 2018, at a fixed interest rate of 1.65 percent;


•	$1,250 million total principal amount of notes due April 1, 2018, at a fixed interest rate of 1.15 percent; and


•	$1,250 million total principal amount of notes due November 1, 2018, at a fixed interest rate of 1.65 percent.

The Company also extinguished a portion of the long-term debt that was assumed in connection with our acquisition of Coca‑Cola Enterprises Inc.'s former North America business ("Old CCE"). The extinguished debentures had a total principal amount of $94 million that was due to mature on May 15, 2098, at a fixed interest rate of 7.00 percent. Related to this extinguishment, the Company recorded a net gain of $27 million in the line item interest expense in our consolidated statement of income during the year ended December 31, 2018.

During 2017, the Company issued U.S. dollar- and euro-denominated debt of $1,000 million and €2,500 million, respectively. The carrying value of this debt as of December 31, 2017 was $3,974 million. The general terms of the notes issued are as follows:


•	$500 million total principal amount of notes due May 25, 2022, at a fixed interest rate of 2.20 percent;


•	$500 million total principal amount of notes due May 25, 2027, at a fixed interest rate of 2.90 percent;


•	€1,500 million total principal amount of notes due March 8, 2019, at a variable interest rate equal to the three-month Euro Interbank Offered Rate ("EURIBOR") plus 0.25 percent;


•	€500 million total principal amount of notes due March 9, 2021, at a fixed interest rate of 0.00 percent; and


•	€500 million total principal amount of notes due March 8, 2024, at a fixed interest rate of 0.50 percent.

During 2017, the Company retired upon maturity €2,000 million total principal amount of notes due March 9, 2017, at a variable interest rate equal to the three-month EURIBOR plus 0.15 percent, $206 million total principal amount of notes due August 1, 2017, at a fixed interest rate of 7.125 percent, SFr200 million total principal amount of notes due October 2, 2017, at a fixed interest rate of 0.00 percent, $750 million total principal amount of notes due October 27, 2017, at a fixed interest rate of 0.875 percent, and $225 million total principal amount of notes due November 16, 2017, at a variable interest rate equal to the three-month London Interbank Offered Rate ("LIBOR") plus 0.05 percent. The Company also extinguished a portion of the long-term debt that was assumed in connection with our acquisition of Old CCE. The extinguished notes had a carrying value of $417 million, which included fair value adjustments recorded as part of purchase accounting. The general terms of the notes extinguished were as follows:


•	$95.6 million total principal amount of notes due August 15, 2019, at a fixed interest rate of 4.50 percent;


•	$38.6 million total principal amount of notes due February 1, 2022, at a fixed interest rate of 8.50 percent;


•	$11.7 million total principal amount of notes due September 15, 2022, at a fixed interest rate of 8.00 percent;


•	$36.5 million total principal amount of notes due September 15, 2023, at a fixed interest rate of 6.75 percent;


•	$9.9 million total principal amount of notes due October 1, 2026, at a fixed interest rate of 7.00 percent;


•	$53.8 million total principal amount of notes due November 15, 2026, at a fixed interest rate of 6.95 percent;


•	$41.3 million total principal amount of notes due September 15, 2028, at a fixed interest rate of 6.75 percent;


•	$32.0 million total principal amount of notes due October 15, 2036, at a fixed interest rate of 6.70 percent;


•	$3.4 million total principal amount of notes due March 18, 2037, at a fixed interest rate of 5.71 percent;


•	$24.3 million total principal amount of notes due January 15, 2038, at a fixed interest rate of 6.75 percent; and


•	$4.7 million total principal amount of notes due May 15, 2098, at a fixed interest rate of 7.00 percent.

The Company recorded a net charge of $38 million in the line item interest expense in our consolidated statement of income during the year ended December 31, 2017.

During 2016, the Company issued Australian dollar-, euro- and U.S. dollar-denominated debt of AUD1,000 million, €500 million and $3,725 million, respectively. The general terms of the notes issued are as follows:


•	AUD450 million total principal amount of notes due June 9, 2020, at a fixed interest rate of 2.60 percent;


•	AUD550 million total principal amount of notes due June 11, 2024, at a fixed interest rate of 3.25 percent;


•	€500 million total principal amount of notes due September 2, 2036, at a fixed interest rate of 1.10 percent;


•	$225 million total principal amount of notes due November 16, 2017, at a variable interest rate equal to the three-month LIBOR plus 0.05 percent;


•	$1,000 million total principal amount of notes due May 30, 2019, at a fixed interest rate of 1.375 percent;


•	$1,000 million total principal amount of notes due September 1, 2021, at a fixed interest rate of 1.55 percent;


•	$500 million total principal amount of notes due June 1, 2026, at a fixed interest rate of 2.55 percent; and


•	$1,000 million total principal amount of notes due September 1, 2026, at a fixed interest rate of 2.25 percent.

During 2016, the Company retired upon maturity $1,654 million total principal amount of notes due September 1, 2016 at a fixed interest rate of 1.80 percent, $500 million total principal amount of notes due November 1, 2016 at a fixed interest rate of 0.75 percent and $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.

The Company's long-term debt consisted of the following (in millions except average rate data):



	December 31, 2018				December 31, 2017
	Amount		Average Rate 1		Amount		Average Rate1
U.S. dollar notes due 2019–2093	$	13,619	2.6	%	$	16,854	2.3	%
U.S. dollar debentures due 2020–2098	1,390		5.2		1,559		5.5
U.S. dollar zero coupon notes due 20202	163		8.4		158		8.4
Australian dollar notes due 2020–2024	723		2.2		760		2.1
Euro notes due 2019–2036	12,994		0.6		13,663		0.7
Swiss franc notes due 2022–2028	1,128		3.6		1,148		3.0
Other, due through 20983	282		3.4		325		3.4
Fair value adjustments4	62		N/A		13		N/A
Total5,6	30,361		1.9	%	34,480		1.8	%
Less current portion	4,997				3,298
Long-term debt	$	25,364			$	31,182


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, cross-currency swap agreements and fair value adjustments, if applicable. Refer to Note 6 for a more detailed discussion on interest rate management.


2	Amount is shown net of unamortized discounts of $8 million and $13 million as of December 31, 2018 and 2017, respectively.


3	As of December 31, 2018, the amount shown includes $136 million of debt instruments that are due through 2031.


4	Amount represents changes in fair value due to changes in benchmark interest rates. Refer to Note 6 for additional information about our fair value hedging strategy.


5	As of December 31, 2018 and 2017, the fair value of our long-term debt, including the current portion, was $30,438 million and $35,169 million, respectively.


6	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 Old CCE's former North America business in 2010 of $212 million and $263 million as of December 31, 2018 and 2017, respectively. These fair value adjustments are being amortized over the number of years remaining until the underlying debt matures. As of December 31, 2018, the weighted-average maturity of the assumed debt to which these fair value adjustments relate was approximately 19 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 $871 million, $757 million and $663 million in 2018, 2017 and 2016, respectively.

Maturities of long-term debt for the five years succeeding December 31, 2018 are as follows (in millions):



	Maturities of Long-Term Debt
2019	$	4,997
2020	4,265
2021	2,929
2022	2,414
2023	4,099

NOTE 12: COMMITMENTS AND CONTINGENCIES

Guarantees

As of December 31, 2018, we were contingently liable for guarantees of indebtedness owed by third parties of $600 million, of which $247 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 is individually significant. These amounts represent 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 of 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.

Indemnifications

At the time we acquire or divest an 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. Refer to Note 2.

Tax Audits

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. The number of years subject to tax audits or 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 15.

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 claimed 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. 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.

During the 2007-2009 audit period, the Company followed the same transfer pricing methodology for these licenses that had consistently been followed since the methodology was agreed with the IRS in a 1996 closing agreement that applied back to 1987. The closing agreement provided prospective penalty protection conditioned on the Company's continued adherence to the prescribed methodology absent change in material facts or circumstances and relevant federal tax law. Although the IRS subsequently asserted, without explanation, that material facts and circumstances and relevant federal tax law had changed, it has not asserted penalties. 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. To the extent the matter remains designated, 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 is pursuing, and will continue to pursue, all available administrative and judicial remedies necessary to vigorously defend its position. To that end, the Company filed a petition in the U.S. Tax Court on December 14, 2015, and the IRS filed its answer on February 12, 2016. On October 4, 2017, the IRS filed an amended answer to the Company's petition in which it increased its transfer pricing adjustment by $385 million resulting in an additional tax adjustment of $135 million.

On June 20, 2017, the Company filed a motion for summary judgment on the portion of the IRS' adjustments related to our licensee in Mexico. On December 14, 2017, the U.S. Tax Court issued a decision on the summary judgment motion in favor of the Company. This decision effectively reduced the IRS' potential tax adjustment by approximately $138 million.

The U.S. Tax Court trial was held from March 8, 2018 through May 11, 2018. The Company and the IRS filed and exchanged final post-trial briefs in February 2019. It is not known how much time will elapse thereafter prior to the issuance of the Court's decision. In the interim, or subsequent to the Tax Court's decision, the IRS may propose similar adjustments for years subsequent to the 2007-2009 litigation period. While the Company continues to strongly disagree with the IRS' position, there is no assurance that the U.S. Tax Court will rule in the Company's favor, and it is possible that all or some portion of the adjustment proposed by the IRS Notice ultimately could be sustained. In that event, the Company will be subject to significant additional liabilities for the years at issue and potentially also for subsequent periods, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.

The Company regularly assesses the likelihood of adverse outcomes resulting from tax disputes such as this and other examinations for all open years to determine the adequacy of its tax reserves. Any such adjustments related to years prior to 2018, either in the litigation period or later, may have an impact on the transition tax payable as part of the Tax Cuts and Jobs Act of 2017.

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 using actuarial methods and assumptions of the insurance industry, adjusted for our specific expectations based on our claim history. Our self-insurance reserves totaled $362 million and $480 million as of December 31, 2018 and 2017, respectively.

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, 2018 (in millions):



	Operating Lease Payments
2019	$	144
2020	84
2021	70
2022	60
2023	42
Thereafter	100
Total minimum operating lease payments1	$	500


1	Income associated with sublease arrangements is not significant.

NOTE 13: STOCK-BASED COMPENSATION PLANS

Our Company grants awards under its stock-based compensation plans to certain employees of the Company. Total stock-based compensation expense was $225 million, $219 million and $258 million in 2018, 2017 and 2016, 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 awards under these plans was $47 million, $44 million and $71 million in 2018, 2017 and 2016, respectively. From 2015 to 2017, certain employees who had previously been eligible for long-term equity awards received long-term performance cash awards. Employees who received these performance cash awards did not receive equity awards as part of the long-term incentive program. In 2017, the Company changed the long-term incentive program for certain employees previously eligible for the performance cash award. These employees no longer participate in the long-term incentive program and were issued a final restricted stock unit award that vests ratably over five years.

As of December 31, 2018, we had $271 million of total unrecognized compensation cost related to nonvested stock-based compensation awards granted under our plans. This cost is expected to be recognized over a weighted-average period of 2.5 years as stock‑based compensation expense. This expected cost does not include the impact of any future stock-based compensation awards.

The Coca-Cola Company 2014 Equity Plan ("2014 Equity Plan") was approved by shareowners in April 2014. Under the 2014 Equity Plan, a maximum of 500 million shares of our common stock was approved to be issued, through the grant of 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. As of December 31, 2018, there were 391.9 million shares available to be granted under the 2014 Equity Plan. In addition, there were 2.9 million shares from plans approved by shareowners prior to 2014 available to be granted under stock option and restricted stock award plans.

Stock Option Awards

Stock options have generally been granted with an exercise price equal to the average of the high and low market prices per share for the Company's stock on the date of grant. The fair value of each stock option award is estimated using a Black-Scholes-Merton option-pricing model and is amortized over the vesting period, generally four years. The weighted-average fair value of stock 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:



Year Ended December 31,	2018			2017			2016
Fair value of stock options at grant date	$	4.97		$	3.98		$	4.17
Dividend yield1	3.5		%	3.6		%	3.2		%
Expected volatility2	15.5		%	15.5		%	16.0		%
Risk-free interest rate3	2.8		%	2.2		%	1.5		%
Expected term of the stock options4	6 years			6 years			6 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 stock options represents the period of time that options granted are expected to be outstanding and is derived by analyzing historical exercise behavior.

Generally, stock options granted from 1999 through July 2003 expired 15 years from the date of grant, and stock options granted in December 2003 and thereafter expire 10 years from the date of grant. The shares of common stock to be issued and/or sold upon exercise of stock options 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 its stock-based compensation plans from the Company's treasury shares.

Stock option activity for all plans for the year ended December 31, 2018 was as follows:



	Shares (In millions)		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value (In millions)
Outstanding on January 1, 2018	173		$	35.02
Granted	8		44.49
Exercised	(47	)	31.51
Forfeited/expired	(1	)	41.22
Outstanding on December 31, 20181	133		$	36.74	4.59 years	$	1,407
Expected to vest	132		$	36.69	4.56 years	$	1,402
Exercisable on December 31, 2018	114		$	35.74	4.02 years	$	1,327


1	Includes 0.1 million stock option replacement awards in connection with our acquisition of Old CCE in 2010. These options had a weighted-average exercise price of $17.35 and generally vest over 3 years and expire 10 years from the original date of grant.

The total intrinsic value of the stock options exercised was $721 million, $744 million and $787 million in 2018, 2017 and 2016, respectively. The total shares exercised were 47 million, 53 million and 50 million in 2018, 2017 and 2016, respectively.

Performance-Based Share Unit Awards

Performance-based share unit awards require achievement of certain performance criteria, which are predefined by the Compensation Committee of the Board of Directors at the time of grant. For performance share unit grants from 2015 through 2017, the performance criteria used were economic profit and net operating revenues over a predefined performance period of three years. Economic profit is our net operating profit after tax less the cost of the capital used in our business. 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. These grants include a relative 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 the Company's 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 these performance share units was determined using a Monte Carlo valuation model. The performance share units granted from 2015 through 2017 are subject to a one-year holding period after the performance period before the shares are released.

In 2018, the Company renamed our performance share unit awards to growth share unit awards. For growth share units granted in 2018, performance criteria were equally weighted among net operating revenues, earnings per share and free cash flow over a predefined performance period of three years. Earnings per share for these purposes is diluted net income per share from continuing operations and free cash flow is net cash provided by operating activities less purchases of property, plant and equipment. Net operating revenues, earnings per share and free cash flow 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. Growth share units granted to executives include a relative TSR modifier to determine the number of shares earned at the end of the performance period. The fair value of growth share unit grants that include a TSR modifier is determined using a Monte Carlo valuation model. The fair value of growth share units that do not include the TSR modifier 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 performance period. Growth share units granted in 2018 will be released at the end of the performance period if the predefined performance criteria are achieved.

For all performance-based share unit awards, 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 but above the minimum threshold, a reduced number of shares will be granted. If the certified results fall below the minimum threshold, no shares will be granted. Performance-based share unit awards do not entitle participants to vote or receive dividends.

In the period it becomes probable that the minimum threshold specified in the award will be achieved, we recognize expense for the proportionate share of the total fair value of the performance-based share units related to the vesting period that has already lapsed for the shares expected to vest and be released. The remaining fair value of the shares 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 threshold specified in the award, we reverse all of the previously recognized compensation expense in the period such a determination is made.

Performance share units and growth share units are generally settled in stock, except for certain circumstances such as death or disability, in which case employees or their beneficiaries are provided a cash equivalent payment. As of December 31, 2018, performance share units of 2,756,000 and 2,837,000 were outstanding for the 2016-2018 and 2017-2019 performance periods, respectively, and growth share units of 2,105,000 were outstanding for the 2018-2020 performance period, based on the target award amounts.

The following table summarizes information about performance share units and growth share units based on the target award amounts:



	Performance Share Units and Growth Share Units (In thousands)		Weighted-Average Grant Date Fair Value
Outstanding on January 1, 2018	8,212		$	37.14
Granted	2,183		41.02
Conversions to restricted stock units1	(2,111	)	36.24
Canceled/forfeited	(586	)	37.58
Outstanding on December 31, 20182	7,698		$	38.45


1	Represents the target amount of performance share units converted to restricted stock units for the 2015–2017 performance period. The vesting of restricted stock units is subject to the terms of the performance share unit agreements.


2	The outstanding performance share units and growth share units as of December 31, 2018 at the threshold award and maximum award levels were 2.4 million and 15.3 million, respectively.

The weighted–average grant date fair value of growth share units granted in 2018 was $41.02. The weighted–average grant date fair value of performance share units granted in 2017 and 2016 was $34.75 and $39.70, respectively. The Company did not convert any performance share units into cash equivalent payments in 2018. The Company converted performance share units of 11,052 in 2017 and 52,545 in 2016 to cash equivalent payments of $0.4 million and $1.9 million, respectively, to former employees or their beneficiaries due to certain events such as death or disability.

The following table summarizes information about nonvested performance-based restricted stock units based on the performance share units' certified award level:



	Restricted Stock Units (In thousands)		Weighted- Average Grant Date Fair Value
Nonvested on January 1, 2018	6,748		$	32.35
Conversions from performance share units	2,692		36.24
Vested and released	(6,747	)	32.34
Canceled/forfeited	(102	)	36.18
Nonvested on December 31, 2018	2,591		$	36.24

The total intrinsic value of restricted shares that were vested and released in 2018 was $305 million.

Time-Based Restricted Stock and Restricted Stock Unit Awards

Prior to the release date, time-based restricted stock and restricted stock units granted from the 2014 Equity Plan do not entitle participants to vote or receive dividends and will be forfeited in the event of the recipient's termination of employment, except for reasons such as death or disability. Certain other time-based restricted stock awards entitle participants to vote and receive dividends. The fair value of the restricted stock and restricted stock units expected to vest and be released is expensed on a straight-line basis over the vesting period. As of December 31, 2018, the Company had outstanding nonvested time-based restricted stock, including restricted stock units, of 3,422,323, most of which do not pay dividends or have voting rights.

The following table summarizes information about nonvested time-based restricted stock and restricted stock units:



	Restricted Stock and Restricted Stock Units (In thousands)		Weighted-Average Grant Date Fair Value
Nonvested on January 1, 2018	3,535		$	40.99
Granted	1,457		40.12
Vested and released	(1,015	)	41.80
Forfeited/expired	(555	)	41.32
Nonvested on December 31, 2018	3,422		$	40.31

NOTE 14: 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.

We refer to the funded defined benefit pension plan in the United States that is not associated with collective bargaining agreements as the "primary U.S. plan." As of December 31, 2018, the primary U.S. plan represented 62 percent of both the Company's consolidated projected benefit obligation and pension assets.

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
Year Ended December 31,	2018			2017			2018			2017
Benefit obligation at beginning of year1	$	9,455		$	9,428		$	782		$	962
Service cost	124			197			11			17
Interest cost	294			306			23			29
Foreign currency exchange rate changes	(110		)	150			(5		)	4
Amendments	1			1			(8		)	(21		)
Net actuarial loss (gain)	(469		)	420			(33		)	(28		)
Benefits paid2	(356		)	(341		)	(70		)	(71		)
Business combinations3	60			—			1			—
Divestitures	(11		)	(7		)	—			(66		)
Settlements4	(932		)	(832		)	—			—
Curtailments4	(63		)	(10		)	—			(48		)
Special termination benefits4	7			106			—			—
Other	4			37			7			4
Benefit obligation at end of year1	$	8,004		$	9,455		$	708		$	782
Fair value of plan assets at beginning of year	$	8,843		$	8,371		$	288		$	255
Actual return on plan assets	(271		)	1,139			(5		)	31
Employer contributions	107			181			—			—
Foreign currency exchange rate changes	(128		)	196			—			—
Benefits paid	(285		)	(285		)	(3		)	(3		)
Business combinations3	30			—			—			—
Divestitures	(1		)	—			—			—
Settlements4	(892		)	(794		)	—			—
Other	6			35			9			5
Fair value of plan assets at end of year	$	7,409		$	8,843		$	289		$	288
Net liability recognized	$	(595	)	$	(612	)	$	(419	)	$	(494	)


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 $7,856 million and $9,175 million as of December 31, 2018 and 2017, respectively.


2	Benefits paid to pension plan participants during 2018 and 2017 included $71 million and $56 million, respectively, in payments related to unfunded pension plans that were paid from Company assets. Benefits paid to participants of other benefit plans during 2018 and 2017 included $67 million and $68 million, respectively, that were paid from Company assets.


3	Business combinations primarily related to the acquisition of a controlling interest in the Philippine bottling operations. Refer to Note 2.


4	Settlements, curtailments and special termination benefits were primarily related to productivity, integration and restructuring initiatives and the refranchising of our North America bottling operations. Refer to Note 2 and Note 19.

Pension and other benefit amounts recognized in our consolidated balance sheets are as follows (in millions):



	Pension Benefits						Other Benefits
December 31,	2018			2017			2018			2017
Other assets	$	803		$	921		$	—		$	—
Accounts payable and accrued expenses	(70		)	(72		)	(21		)	(21		)
Other liabilities	(1,328		)	(1,461		)	(398		)	(473		)
Net liability recognized	$	(595	)	$	(612	)	$	(419	)	$	(494	)

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,	2018		2017
Projected benefit obligations	$	6,561	$	7,833
Fair value of plan assets	5,163		6,330

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,	2018		2017
Accumulated benefit obligations	$	6,450	$	7,614
Fair value of plan assets	5,157		6,305

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
December 31,	2018		2017		2018		2017
Cash and cash equivalents	$	310	$	454	$	153	$	237
Equity securities:
U.S.-based companies	1,116		1,427		644		670
International-based companies	659		911		462		554
Fixed-income securities:
Government bonds	192		183		271		191
Corporate bonds and debt securities	745		785		90		42
Mutual, pooled and commingled funds1	238		215		637		766
Hedge funds/limited partnerships	785		939		43		44
Real estate	385		596		6		2
Other	412		518		261		309
Total pension plan assets2	$	4,842	$	6,028	$	2,567	$	2,815


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.

Fair value disclosures related to our pension plan assets are included in Note 17. Fair value disclosures include, but are not limited to, the levels within the fair value hierarchy in 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 plan assets.

Investment Strategy for U.S. Pension Plans

The Company utilizes the services of investment managers to actively manage the 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 plans. 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. Our target allocation is a mix of 42 percent equity investments, 30 percent fixed-income investments and 28 percent alternative investments. 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.

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, 2018, no investment manager was responsible for more than 9 percent of total U.S. pension plan assets.

Our target allocation of 42 percent equity investments is composed of 60 percent global equities, 16 percent emerging market equities and 24 percent 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 5 percent of our total global equities and approximately 3 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 may experience large swings in their market value. 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 equity investments 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 which is typically available from publicly traded equity securities. Alternative 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, 2018, the long-term target allocation for 68 percent of our international subsidiaries' pension plan assets, primarily certain of our European and Canadian plans, is 65 percent equity securities, 10 percent fixed-income securities and 25 percent other investments. The actual allocation for the remaining 32 percent of the Company's international subsidiaries' plan assets consisted of 54 percent mutual, pooled and commingled funds; 7 percent fixed-income securities; 1 percent global equities and 38 percent other investments. The investment strategies for our international subsidiaries' plans 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 plans through a Voluntary Employee Beneficiary Association ("VEBA"), a tax-qualified trust. The VEBA assets 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,	2018		2017
Cash and cash equivalents	$	73	$	78
Equity securities:
U.S.-based companies	93		96
International-based companies	7		8
Fixed-income securities:
Government bonds	2		2
Corporate bonds and debt securities	16		7
Mutual, pooled and commingled funds	82		80
Hedge funds/limited partnerships	8		8
Real estate	4		5
Other	4		4
Total other postretirement benefit plan assets1	$	289	$	288

Fair value disclosures related to our other postretirement benefit plan assets are included in Note 17. Fair value disclosures include, but are not limited to, the levels within the fair value hierarchy in which the fair value measurements in their entirety fall and information about the valuation techniques and inputs used to measure the fair value of our other postretirement benefit plan assets.

Components of Net Periodic Benefit Cost (Income)

Net periodic benefit cost (income) for our pension and other postretirement benefit plans consisted of the following (in millions):



	Pension Benefits									Other Benefits
Year Ended December 31,	2018			2017			2016			2018			2017			2016
Service cost	$	124		$	197		$	239		$	11		$	17		$	22
Interest cost	294			306			319			23			29			31
Expected return on plan assets1	(650		)	(650		)	(653		)	(13		)	(12		)	(11		)
Amortization of prior service credit	(3		)	—			(2		)	(14		)	(18		)	(19		)
Amortization of net actuarial loss2	128			175			183			3			8			7
Net periodic benefit cost (income)	(107		)	28			86			10			24			30
Settlement charges3	240			228			118			—			—			—
Curtailment charges (credits)3	5			4			—			(4		)	(79		)	—
Special termination benefits3	7			106			37			—			—			1
Other	—			1			(3		)	(1		)	—			23
Total cost (income) recognized in consolidated statements of income	$	145		$	367		$	238		$	5		$	(55	)	$	54


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 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 plan participants.


3	Settlements, curtailments and special termination benefits were primarily related to productivity, integration and restructuring initiatives and the refranchising of our North America bottling operations. Refer to Note 2 and Note 19.

All of the amounts in the tables above, other than service cost, were recorded in the line item other income (loss) — net in our consolidated statements of income.

Impact on Accumulated Other Comprehensive Income

The following table sets forth the changes in AOCI for our benefit plans (in millions, pretax):



	Pension Benefits								Other Benefits
Year Ended December 31,	2018				2017				2018				2017
Balance in AOCI at beginning of year	$	(2,493	)		$	(2,932	)		$	(26	)		$	(48	)
Recognized prior service cost (credit)	1			1	4				(18		)	4	(54		)	5
Recognized net actuarial loss (gain)	369			2	403			3	3				(36		)	5
Prior service credit (cost) occurring during the year	(1		)		(1		)		8				21
Net actuarial (loss) gain occurring during the year	(389		)	1	75				15				92			5
Impact of divestitures	4				—				—				—
Foreign currency translation gain (loss)	27				(42		)		3				(1		)
Balance in AOCI at end of year	$	(2,482	)		$	(2,493	)		$	(15	)		$	(26	)


1	Includes $4 million of recognized prior service cost and $63 million of actuarial gains occurring during the year due to the impact of curtailments.


2	Includes $240 million of recognized net actuarial losses due to the impact of settlements.


3	Includes $228 million of recognized net actuarial losses due to the impact of settlements.


4	Includes $4 million of recognized prior service credit due to the impact of curtailments.

5 Includes $36 million of recognized prior service credit, $43 million of recognized net actuarial gains and $45 million of actuarial gains occurring during the year due to the impact of curtailments.

The following table sets forth amounts in AOCI for our benefit plans (in millions, pretax):



	Pension Benefits						Other Benefits
December 31,	2018			2017			2018			2017
Prior service credit (cost)	$	(12	)	$	(10	)	$	29		$	36
Net actuarial loss	(2,470		)	(2,483		)	(44		)	(62		)
Balance in AOCI at end of year	$	(2,482	)	$	(2,493	)	$	(15	)	$	(26	)

Amounts in AOCI expected to be recognized as components of net periodic benefit cost in 2019 are as follows (in millions, pretax):



	Pension Benefits			Other Benefits
Amortization of prior service credit	$	(4	)	$	(2	)
Amortization of net actuarial loss	152			2
Total	$	148		$	—

Assumptions

Certain weighted-average assumptions used in computing the benefit obligations are as follows:



	Pension Benefits				Other Benefits
December 31,	2018		2017		2018		2017
Discount rate	4.00	%	3.50	%	4.25	%	3.50	%
Rate of increase in compensation levels	3.75	%	3.50	%	N/A		N/A

Certain weighted-average assumptions used in computing net periodic benefit cost are as follows:



	Pension Benefits						Other Benefits
Year Ended December 31,	2018		2017		2016		2018		2017		2016
Discount rate	3.50	%	4.00	%	4.25	%	3.50	%	4.00	%	4.25	%
Rate of increase in compensation levels	3.50	%	3.75	%	3.50	%	N/A		N/A		N/A
Expected long-term rate of return on plan assets	8.00	%	8.00	%	8.25	%	4.50	%	4.75	%	4.75	%

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 U.S. and certain non-U.S. plans at December 31, 2018 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 other non-U.S. plans, we base the discount rate on comparable indices within each of the countries. The Company measures the service cost and interest cost components of net periodic benefit cost for pension and other postretirement benefit plans by applying the specific spot rates along the yield curve to the plans' projected cash flows. The rate of compensation increase assumption is determined by the Company based upon annual reviews.

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 2018 net periodic pension cost for the U.S. plans was 8.00 percent. As of December 31, 2018, the 5-year, 10-year and 15-year annualized return on plan assets for the primary U.S. plan was 5.5 percent, 9.2 percent and 6.4 percent, respectively. The annualized return since inception was 10.3 percent.

The assumed health care cost trend rates are as follows:



December 31,	2018		2017
Health care cost trend rate assumed for next year	7.00	%	7.00	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	2023		2022

We review external data and our own historical trends for health care costs to determine the health care cost trend rate assumptions. 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.

Cash Flows

Our estimated future benefit payments for funded and unfunded plans are as follows (in millions):



Year Ended December 31,	2019		2020		2021		2022		2023		2024–2028
Pension benefit payments	$	439	$	448	$	460	$	468	$	480	$	2,517
Other benefit payments1	62		61		59		57		55		250
Total estimated benefit payments	$	501	$	509	$	519	$	525	$	535	$	2,767


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 $3 million for the period 2019–2023 and $2 million for the period 2024–2028.

The Company anticipates making pension contributions in 2019 of $32 million, all of which will be allocated to our international plans. The majority of these contributions are required by funding regulations or law.

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 $39 million, $61 million and $82 million in 2018, 2017 and 2016, respectively. We also sponsor defined contribution plans in certain locations outside the United States. Company costs associated with those plans were $33 million, $35 million and $37 million in 2018, 2017 and 2016, respectively.

Multi-Employer Pension Plans

The Company participates in various multi-employer pension plans. 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 multi-employer pension plans totaled $6 million, $35 million and $41 million in 2018, 2017 and 2016, respectively. The decrease in 2018 was primarily driven by the refranchising of certain bottling territories in the United

States during 2017. The plans we currently participate in have contractual arrangements that extend into 2021. 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. Refer to Note 2 for additional information on North America refranchising.

NOTE 15: INCOME TAXES

Income from continuing operations before income taxes consisted of the following (in millions):



Year Ended December 31,	2018			2017				2016
United States	$	888	1	$	(690	)	1	$	113	1
International	7,462		1	7,432				8,023
Total	$	8,350		$	6,742			$	8,136

1 Includes charges of $476 million, $2,140 million and $2,456 million related to refranchising certain bottling territories in North America in 2018, 2017 and 2016, respectively. Refer to Note 2.

Income taxes from continuing operations consisted of the following (in millions):



	United States				State and Local				International			Total
2018
Current	$	591		1	$	145			$	1,337		$	2,073
Deferred	(386		)	1,3	(81		)	1,3	17		1,3	(450		)
2017
Current	$	5,438		2	$	121			$	1,257		$	6,816
Deferred	(1,783		)	2,3	14				513		2	(1,256		)
2016
Current	$	1,147			$	113			$	1,182		$	2,442
Deferred	(838		)	3	(91		)		73			(856		)

1 Includes the tax impact that resulted from changes to our original provisional estimates of the impact of the Tax Reform Act as permitted by Staff Accounting Bulletin No. 118 ("SAB 118").

2 Includes our reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax resulting from the Tax Reform Act that was signed into law on December 22, 2017. The provisional amount as of December 31, 2017, related to the one-time transition tax on the mandatory deemed repatriation of prescribed foreign earnings was $4.6 billion of tax expense based on cumulative prescribed foreign earnings estimated at that time to be $42 billion. The provisional amount that was primarily related to the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future was a net deferred tax benefit of $1.0 billion.

3 Includes the benefit from charges related to refranchising certain bottling territories in North America. Refer to Note 2.

Income taxes from discontinued operations consisted of $87 million and $55 million of current expense and $38 million of deferred tax expense and $8 million of deferred tax benefit for the years ended December 31, 2018 and 2017, respectively.

We made income tax payments of $2,037 million, $1,904 million and $1,554 million in 2018, 2017 and 2016, respectively.

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. 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 2019 to 2036. We anticipate that we will be able to extend or renew the grants in these locations. Tax incentive grants favorably impacted our income tax expense by $318 million, $221 million and $105 million for the years ended December 31, 2018, 2017 and 2016, 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,	2018			2017			2016
Statutory U.S. federal tax rate	21.0	%		35.0	%		35.0	%
State and local income taxes — net of federal benefit	1.5			1.2			1.2
Earnings in jurisdictions taxed at rates different from the statutory U.S. federal tax rate	1.2		1,2	(9.7	)		(17.5	)	7
Equity income or loss	(2.4	)		(3.4	)		(3.0	)
Tax Reform Act	0.1		3	53.5		4	—
Excess tax benefits on stock-based compensation	(1.2	)		(2.0	)		—
Other — net	(0.8	)		7.9		5,6	3.8		8
Effective tax rate	19.4	%		82.5	%		19.5	%

1 Includes the impact of pretax charges of $591 million (or a 1.5 percent impact on our effective tax rate) related to other-than-temporary impairments of certain of our equity method investees. Refer to Note 17.

2 Includes tax expense of $28 million on net pretax charges of $403 million (or a 1.4 percent impact on our effective tax rate) primarily related to the refranchising of certain foreign bottling operations. Refer to Note 2.

3 Includes net tax expense of $8 million (or a 0.1 percent impact on our effective tax rate) related to the finalization of our accounting related to the Tax Reform Act.

4 Includes net tax expense of $3,610 million primarily related to our reasonable estimate of the one-time transition tax resulting from the Tax Reform Act that was signed into law on December 22, 2017, partially offset by the impact of the lower rate introduced by the Tax Reform Act on our existing deferred tax balances.

5 Includes net tax expense of $1,048 million on a pretax gain of $1,037 million (or a 10.2 percent impact on our effective tax rate) related to the Southwest Transaction, in conjunction with which we obtained an equity interest in AC Bebidas. The Company accounts for its interest in AC Bebidas as an equity method investment and the net tax expense was primarily the result of the deferred tax recorded on the basis difference in this investment. Refer to Note 2.

6 Includes a $156 million net tax benefit related to the impact of manufacturing incentives and permanent book to tax adjustments.

7 Includes tax expense of $97 million related to a pretax gain of $1,323 million (or a 4.5 percent impact on our effective tax rate) related to

the deconsolidation of our German bottling operations. Refer to Note 2.

8 Includes tax expense of $157 million (or a 1.9 percent impact on our effective tax rate) primarily related to amounts required to be

recorded for changes to our uncertain tax positions, including interest and penalties, in certain domestic jurisdictions.

The one-time transition tax is based on our total accumulated post-1986 prescribed foreign earnings and profits ("E&P") of approximately $41 billion. Most of this amount comprises unremitted foreign earnings, upon which no U.S. federal or state income tax had been accrued, because they were considered to have been indefinitely reinvested. At December 31, 2017, following enactment of the Tax Reform Act, we recorded a provisional $4.6 billion tax reflecting our best estimate of the one-time deemed repatriation tax liability as of December 31, 2017, and a $0.6 billion provisional deferred tax liability related to foreign withholding taxes and state income taxes on earnings no longer considered to be indefinitely reinvested.

During 2018, we recorded a net tax expense from the impact of the Tax Reform Act. As permitted by SAB 118, we had recorded provisional adjustments to our reasonable estimate of the impact of the Tax Reform Act during the 2018 measurement period pursuant to our analysis of contemporaneous guidance, interpretations and data, and we have finalized that analysis based on such information available as of December 31, 2018. As such, we recorded an additional $0.3 billion in tax for our one-time transition tax and a tax benefit of $0.3 billion, primarily related to a reduction in deferred taxes on related withholding taxes and state income taxes in 2018. We also remeasured and adjusted certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21.0 percent. This adjustment was not significant. We have not recorded incremental income taxes for any additional outside basis differences of approximately $8.1 billion in our investments in foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any additional outside basis differences in these entities is not practicable.

The Global Intangible Low-Taxed Income ("GILTI") provisions of the Tax Reform Act require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary's tangible assets. An accounting policy election is available to either account for the tax effects of GILTI in the period that is subject to such taxes or to provide deferred taxes for book and tax basis differences that upon reversal may be subject to such taxes. We have elected to account for the tax effects of these provisions in the period that is subject to such tax and the impact is reflected in our full year provision.

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 2007. 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 2004. 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 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 12.

As of December 31, 2018, the gross amount of unrecognized tax benefits was $336 million. If the Company were to prevail on all uncertain tax positions, the net effect would be a benefit of $182 million, exclusive of any benefits related to interest and penalties. The remaining $154 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 amount of unrecognized tax benefits is as follows (in millions):



Year Ended December 31,	2018			2017			2016
Beginning balance of unrecognized tax benefits	$	331		$	302		$	168
Increase related to prior period tax positions	11			18			163			1
Decrease related to prior period tax positions	(2		)	(13		)	—
Increase related to current period tax positions	17			13			17
Decrease related to settlements with taxing authorities	(4		)	—			(40		)	1
Increase (decrease) due to effect of foreign currency exchange rate changes	(17		)	11			(6		)
Ending balance of unrecognized tax benefits	$	336		$	331		$	302

The net increase was primarily related to a change in judgment about one of the Company's tax positions as a result of receiving notification of a preliminary settlement of a Competent Authority matter with a foreign jurisdiction, a portion of which became certain later in the year. This change in position did not have a material impact on the Company's consolidated statement of income during the year ended December 31, 2016, as it was partially offset by refunds to be received from the foreign jurisdiction.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company had $190 million, $177 million and $142 million in interest and penalties related to unrecognized tax benefits accrued as of December 31, 2018, 2017 and 2016, respectively. Of these amounts, $13 million, $35 million and $31 million of expense were recognized through income tax expense in 2018, 2017 and 2016, respectively. 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 statement of income or consolidated balance sheet. 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.

The tax effects of temporary differences and carryforwards that give rise to deferred tax assets and liabilities consisted of the following (in millions):



December 31,	2018				2017
Deferred tax assets:
Property, plant and equipment	$	64			$	99
Trademarks and other intangible assets	2,540			2	98
Equity method investments (including foreign currency translation adjustment)	315				300
Derivative financial instruments	322				387
Other liabilities	791				861
Benefit plans	881				977
Net operating/capital loss carryforwards	318				520
Other	221				163
Gross deferred tax assets	5,452				3,405
Valuation allowances	(399		)		(501		)
Total deferred tax assets1	$	5,053			$	2,904
Deferred tax liabilities:
Property, plant and equipment	$	(724	)		$	(819	)
Trademarks and other intangible assets	(951		)		(978		)
Equity method investments (including foreign currency translation adjustment)	(1,707		)		(1,835		)
Derivative financial instruments	(162		)		(436		)
Other liabilities	(67		)		(50		)
Benefit plans	(255		)		(289		)
Other	(453		)		(688		)
Total deferred tax liabilities	$	(4,319	)		$	(5,095	)
Net deferred tax assets (liabilities)	$	734			$	(2,191	)

1 Noncurrent deferred tax assets of $2,667 million and $330 million were included in the line item Deferred income tax assets in our consolidated balance sheets as of December 31, 2018 and 2017, respectively.

2 The increase was primarily the result of a $2.9 billion cumulative effect adjustment related to our adoption of ASU 2016-16.

In October 2016, the FASB issued ASU 2016-16, which requires the Company to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 was effective for the Company beginning January 1, 2018 and was adopted using a modified retrospective basis. We recorded a $2.9 billion cumulative effect adjustment to increase the opening balance of reinvested earnings with the majority of the offset being recorded as a deferred tax asset. This amount is primarily related to trademarks and other intangible assets and was recorded in the line item deferred income tax assets in our consolidated balance sheet.

As of December 31, 2018, we had net deferred tax assets of $2.0 billion and as of December 31, 2017, we had net deferred tax liabilities of $539 million located in countries outside the United States.

As of December 31, 2018, we had $2,906 million of loss carryforwards available to reduce future taxable income. Loss carryforwards of $372 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,	2018			2017			2016
Balance at beginning of year	$	501		$	530		$	477
Additions	81			184			68
Decrease due to reclassification to assets held for sale	—			—			(9		)
Deductions	(183		)	(213		)	(6		)
Balance at end of year	$	399		$	501		$	530

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. 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 sheet.

In 2018, the Company recognized a net decrease of $102 million in its valuation allowances. This decrease was primarily due to changes to deferred tax assets and related valuation allowances on certain equity investments. In addition, the changes in net operating losses in the normal course of business contributed to the net decrease in valuation allowance. The decreases were partially offset by an increase due to the acquisition of a controlling interest in one of our foreign bottling operations.

In 2017, the Company recognized a net decrease of $29 million in its valuation allowances. This decrease was primarily due to the reversal of a valuation allowance in a foreign jurisdiction related to expenses incurred in the normal course of business that were previously determined to be non-deductible. In addition, the decrease in value of certain deferred tax assets and related valuation allowance due to the reduction in the U.S. corporate tax rate and changes to deferred tax assets and related valuation allowances on certain equity investments contributed to the net decrease in the valuation allowance. The decreases were partially offset by an increase in the valuation allowance due to increases in the deferred tax asset and related valuation allowances on certain equity investments and recognizing a valuation allowance on deferred tax assets related to net operating losses at certain foreign bottling operations after considering recent negative evidence as to the realizability of those deferred tax assets.

In 2016, the Company recognized a net increase of $53 million in its valuation allowances. This increase was primarily due to the increase in non-deductible expenses incurred during the normal course of business operations.

NOTE 16: OTHER COMPREHENSIVE INCOME

AOCI attributable to shareowners of The Coca-Cola Company is separately presented in 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. OCI attributable to noncontrolling interests is allocated to, and included in, our consolidated 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, net of tax (in millions):



December 31,	2018			2017
Foreign currency translation adjustments	$	(11,045	)	$	(8,957	)
Accumulated derivative net gains (losses)	(126		)	(119		)
Unrealized net gains (losses) on available-for-sale securities1	50			493
Adjustments to pension and other benefit liabilities	(1,693		)	(1,722		)
Accumulated other comprehensive income (loss)	$	(12,814	)	$	(10,305	)

1 The change in the balance from December 31, 2017 includes the $409 million reclassification to reinvested earnings upon the adoption of

ASU 2016-01. Refer to Note 1 and Note 4.

The following table summarizes the allocation of total comprehensive income between shareowners of The Coca-Cola Company and noncontrolling interests (in millions):



	Year Ended December 31, 2018
	Shareowners of The Coca-Cola Company			Noncontrolling Interests		Total
Consolidated net income	$	6,434		$	42	$	6,476
Other comprehensive income:
Net foreign currency translation adjustments	(2,088		)	53		(2,035		)
Net gains (losses) on derivatives1	(7		)	—		(7		)
Net change in unrealized gains (losses) on available-for-sale debt securities2	(34		)	—		(34		)
Net change in pension and other benefit liabilities3	29			—		29
Total comprehensive income	$	4,334		$	95	$	4,429


1	Refer to Note 6 for additional information related to the net gains or losses on derivative instruments designated and qualifying as cash flow hedging instruments.


2	Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.


3	Refer to Note 14 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, 2018, 2017 and 2016 is as follows (in millions):



	Before-Tax Amount			Income Tax			After-Tax Amount
2018
Foreign currency translation adjustments:
Translation adjustments arising during the year	$	(1,728	)	$	59		$	(1,669	)
Reclassification adjustments recognized in net income	398			—			398
Gains (losses) on intra-entity transactions that are of a long-term investment nature	(1,296		)	—			(1,296		)
Gains (losses) on net investment hedges arising during the year1	639			(160		)	479
Net foreign currency translation adjustments	$	(1,987	)	$	(101	)	$	(2,088	)
Derivatives:
Gains (losses) arising during the year	59			(16		)	43
Reclassification adjustments recognized in net income	(68		)	18			(50		)
Net gains (losses) on derivatives1	$	(9	)	$	2		$	(7	)
Available-for-sale debt securities:
Unrealized gains (losses) arising during the year	(50		)	11			(39		)
Reclassification adjustments recognized in net income	5			—			5
Net change in unrealized gains (losses) on available-for-sale debt securities2	$	(45	)	$	11		$	(34	)
Pension and other benefit liabilities:
Net pension and other benefit liabilities arising during the year	(299		)	75			(224		)
Reclassification adjustments recognized in net income	341			(88		)	253
Net change in pension and other benefit liabilities3	$	42		$	(13	)	$	29
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola Company	$	(1,999	)	$	(101	)	$	(2,100	)


1	Refer to Note 6 for additional information related to the net gains or losses on derivative instruments designated and qualifying as cash flow hedging instruments.


2	Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.


3	Refer to Note 14 for additional information related to the Company's pension and other postretirement benefit liabilities.



	Before-Tax Amount			Income Tax			After-Tax Amount
2017
Foreign currency translation adjustments:
Translation adjustments arising during the year	$	(1,350	)	$	(242	)	$	(1,592	)
Reclassification adjustments recognized in net income	23			(6		)	17
Gains (losses) on intra-entity transactions that are of a long-term investment nature	3,332			—			3,332
Gains (losses) on net investment hedges arising during the year1	(1,512		)	578			(934		)
Net foreign currency translation adjustments	$	493		$	330		$	823
Derivatives:
Gains (losses) arising during the year	(184		)	65			(119		)
Reclassification adjustments recognized in net income	(506		)	192			(314		)
Net gains (losses) on derivatives1	$	(690	)	$	257		$	(433	)
Available-for-sale securities:
Unrealized gains (losses) arising during the year	405			(136		)	269
Reclassification adjustments recognized in net income	(123		)	42			(81		)
Net change in unrealized gains (losses) on available-for-sale securities2	$	282		$	(94	)	$	188
Pension and other benefit liabilities:
Net pension and other benefit liabilities arising during the year	120			(7		)	113
Reclassification adjustments recognized in net income	325			(116		)	209
Net change in pension and other benefit liabilities3	$	445		$	(123	)	$	322
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola Company	$	530		$	370		$	900


1	Refer to Note 6 for additional information related to the net gains or losses on derivative instruments designated and qualifying as cash flow hedging instruments.


2	Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale securities.


3	Refer to Note 14 for additional information related to the Company's pension and other postretirement benefit liabilities.



	Before-Tax Amount			Income Tax			After-Tax Amount
2016
Foreign currency translation adjustments:
Translation adjustments arising during the year	$	(1,103	)	$	51		$	(1,052	)
Reclassification adjustments recognized in net income	368			(18		)	350
Gains (losses) on net investment hedges arising during the year	67			(25		)	42
Reclassification adjustments for net investment hedges recognized in net income	77			(30		)	47
Net foreign currency translation adjustments	$	(591	)	$	(22	)	$	(613	)
Derivatives:
Gains (losses) arising during the year	(43		)	11			(32		)
Reclassification adjustments recognized in net income	(563		)	213			(350		)
Net gains (losses) on derivatives1	$	(606	)	$	224		$	(382	)
Available-for-sale securities:
Unrealized gains (losses) arising during the year	124			(28		)	96
Reclassification adjustments recognized in net income	(105		)	26			(79		)
Net change in unrealized gains (losses) on available-for-sale securities2	$	19		$	(2	)	$	17
Pension and other benefit liabilities:
Net pension and other benefit liabilities arising during the year	(374		)	99			(275		)
Reclassification adjustments recognized in net income	342			(120		)	222
Net change in pension and other benefit liabilities3	$	(32	)	$	(21	)	$	(53	)
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola Company	$	(1,210	)	$	179		$	(1,031	)


1	Refer to Note 6 for additional information related to the net gains or losses on derivative instruments designated and qualifying as cash flow hedging instruments.


2	Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale securities.


3	Refer to Note 14 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 statement of income where adjustments reclassified from AOCI into income were recorded during the year ended December 31, 2018 (in millions):



Description of AOCI Component	Financial Statement Line Item	Amount Reclassified from AOCI into Income
Foreign currency translation adjustments:
Divestitures, deconsolidations and other1,2	Other income (loss) — net	$	398
	Income from continuing operations before income taxes	$	398
	Income taxes from continuing operations	—
	Consolidated net income	$	398
Derivatives:
Foreign currency contracts	Net operating revenues	$	(137	)
Foreign currency contracts	Cost of goods sold	(8		)
Foreign currency contracts	Other income (loss) — net	9
Divestitures, deconsolidations and other	Other income (loss) — net	3
Foreign currency and interest rate contracts	Interest expense	57
	Income from continuing operations before income taxes	$	(76	)
	Income taxes from continuing operations	20
	Net income from continuing operations	$	(56	)
Foreign currency and commodity contracts	Income from discontinued operations (net of income taxes)	$	6
	Consolidated net income	$	(50	)
Available-for-sale securities:
Sale of securities	Other income (loss) — net	$	5
	Income from continuing operations before income taxes	$	5
	Income taxes from continuing operations	—
	Consolidated net income	$	5
Pension and other benefit liabilities:
Settlement charges3	Other income (loss) — net	$	240
Curtailment charges3	Other income (loss) — net	1
Recognized net actuarial loss	Other income (loss) — net	131
Recognized prior service cost (credit)	Other income (loss) — net	(17		)
Divestitures, deconsolidations and other2	Other income (loss) — net	(14		)
	Income from continuing operations before income taxes	$	341
	Income taxes from continuing operations	(88		)
	Consolidated net income	$	253


1	Primarily related to the reversal of the cumulative translation adjustments resulting from the substantial liquidation of the Company's former Russian juice operations, and the deconsolidation of our Canadian bottling operations.


2	Primarily related to our previously held equity method investment in the Philippine bottling operations and the refranchising of our Latin American bottling operations.


3	The settlement and curtailment charges were primarily related to productivity, restructuring and integration initiatives and the refranchising of our North America bottling operations. Refer to Note 14 and Note 19.

NOTE 17: FAIR VALUE MEASUREMENTS

U.S. GAAP defines 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 U.S. GAAP, 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 with readily determinable fair values, 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 Debt and Equity Securities

The fair values of our investments in debt and equity 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 debt and equity 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 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 values of our derivative instruments.

The following tables summarize those assets and liabilities measured at fair value on a recurring basis (in millions):



	December 31, 2018
	Level 1			Level 2			Level 3		Other		3	Netting Adjustment			4	Fair Value Measurements
Assets:
Equity securities with readily determinable values1	$	1,681		$	186		$	6	$	61		$	—			$	1,934
Debt securities1	—			5,018			19		—			—				5,037
Derivatives2	2			313			—		—			(261		)	5	54			7
Total assets	$	1,683		$	5,517		$	25	$	61		$	(261	)		$	7,025
Liabilities:
Derivatives2	$	(14	)	$	(221	)	$	—	$	—		$	182		6	$	(53	)	7
Total liabilities	$	(14	)	$	(221	)	$	—	$	—		$	182			$	(53	)


1	Refer to Note 4 for additional information related to the composition of our equity securities with readily determinable values and debt securities.


2	Refer to Note 6 for additional information related to the composition of our derivative portfolio.


3	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 4.

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 6.


5	The Company is obligated to return $96 million in cash collateral it has netted against its derivative position.


6	The Company has the right to reclaim $4 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: $54 million in the line item other assets; $3 million in the line item liabilities held for sale — discontinued operations and $50 million in the line item other liabilities. Refer to Note 6 for additional information related to the composition of our derivative portfolio.



	December 31, 2017
	Level 1			Level 2			Level 3			Other		4	Netting Adjustment			5	Fair Value Measurements
Assets:
Trading securities1	$	212		$	127		$	3		$	65		$	—			$	407
Available-for-sale securities1	1,899			5,739			169		3	—			—				7,807
Derivatives2	7			250			—			—			(198		)	6	59			8
Total assets	$	2,118		$	6,116		$	172		$	65		$	(198	)		$	8,273
Liabilities:
Derivatives2	$	(3	)	$	(262	)	$	—		$	—		$	147		7	$	(118	)	8
Total liabilities	$	(3	)	$	(262	)	$	—		$	—		$	147			$	(118	)


1	Refer to Note 4 for additional information related to the composition of our trading securities and available-for-sale securities.


2	Refer to Note 6 for additional information related to the composition of our derivative portfolio.


3	Primarily related to debt securities that mature in 2018.


4	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 4.


6	The Company is obligated to return $55 million in cash collateral it has netted against its derivative position.


7	The Company has the right to reclaim $2 million in cash collateral it has netted against its derivative position.

The Company's derivative financial instruments are recorded at fair value in our consolidated balance sheet as follows: $59 million in the line item other assets; $28 million in the line item accounts payable and accrued expenses; $12 million in the line item liabilities held for sale — discontinued operations and $78 million in the line item other liabilities. Refer to Note 6 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, 2018 and 2017.

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, 2018 and 2017.

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 U.S. GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges, or as a result of observable changes in equity securities using the measurement alternative.

The gains and losses on assets measured at fair value on a nonrecurring basis are summarized in the table below (in millions):



	Gains (Losses)
Year Ended December 31,	2018				2017
Other-than-temporary impairment charges	$	(591	)	1	$	(50	)	5
Assets held for sale — discontinued operations	(554		)	2	—
Other long-lived assets	(312		)	3	(329		)	6
Intangible assets	(138		)	3	(442		)	7
Assets held for sale	—				(1,819		)	8
Investment in formerly unconsolidated subsidiary	(32		)	4	150			9
Valuation of shares in equity method investee	—				25			10
Total	$	(1,627	)		$	(2,465	)

The Company recognized other-than-temporary impairment charges of $334 million related to certain equity method investees in the Middle East. These impairments were primarily driven by revised projections of future operating results largely related to instability in the region, which include recent sanctions imposed locally. The Company also recognized an other-than-temporary impairment charge of $205 million related to an equity method investee in Indonesia. This impairment was primarily driven by revised projections of future operating results reflecting unfavorable macroeconomic conditions and foreign currency exchange rate fluctuations. Additionally, the Company recognized an other-than-temporary impairment charge of $52 million related to one of our equity method investees in Latin America. This impairment was primarily driven by revised projections of future operating results. The fair value of each of these investments was derived using discounted cash flow analyses based on Level 3 inputs.

The Company recorded impairment charges of $554 million related to assets held by CCBA. These charges were incurred primarily as a result of management's view of the proceeds that are expected to be received based on revised projections of future operating results and foreign currency exchange rate fluctuations. The fair value of these assets was derived using discounted cash flow analyses based on Level 3 inputs. We recorded these impairment charges in the line item income (loss) from discontinued operations in our consolidated statements of income.

The Company recognized charges of $312 million related to CCR's property, plant and equipment and $138 million related to CCR's intangible assets. These charges were a result of management's revised estimate of the proceeds that were expected to be received for the remaining bottling territories upon their refranchising. These charges were determined by comparing the fair value of the reporting unit, based on Level 3 inputs, to its carrying value. Refer to Note 18.


4	The Company recognized a loss of $32 million, which included the remeasurement of our previously held equity interest in the Philippine bottling operations to fair value and the reversal of the related cumulative translation adjustments. The fair value of our previously held equity investment was determined using a discounted cash flow model based on Level 3 inputs.


5	The Company recognized an other-than-temporary impairment charge of $50 million related to one of our international equity method investees, primarily driven by foreign currency exchange rate fluctuations. The fair value of this investment was derived using discounted cash flow analyses based on Level 3 inputs.

The Company recognized impairment charges of $310 million related to CCR's property, plant and equipment and $19 million related to CCR's other assets primarily as a result of refranchising activities in North America. The fair value of these assets was derived using management's estimate of the proceeds that were expected to be received for the remaining bottling territories upon their refranchising.

The Company recognized an impairment charge of $375 million related to CCR's goodwill. This impairment charge was determined by comparing the fair value of the reporting unit, based on Level 3 inputs, to its carrying value. The Company also recognized an impairment charge of $33 million related to certain U.S. bottlers' franchise rights. This charge was determined by comparing the fair value of the asset to its current carrying value. Each of these impairment charges was primarily a result of refranchising activities in North America and management's estimates of the proceeds that were expected to be received for the remaining bottling territories upon their refranchising. Additionally, the Company recorded impairment charges of $34 million related to Venezuelan intangible assets due to weaker sales and the volatility of foreign currency exchange rates resulting from continued political instability. The fair value of these assets was derived using discounted cash flow analyses based on Level 3 inputs.


8	The Company is required to record assets and liabilities that are held for sale at the lower of carrying value or fair value less any costs to sell based on the agreed-upon sale price. These losses related to refranchising activities in North America. The charges were calculated based on Level 3 inputs. Refer to Note 2.

9 The Company recognized a gain of $150 million on our previously held equity interests in CCBA and its South African subsidiary, which were accounted for under the equity method of accounting prior to our consolidation of the bottler in October 2017. 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 Company remeasured our equity interests in CCBA and its South African subsidiary based on Level 3 inputs. Refer to Note 2.

10 The Company recognized a gain of $25 million as a result of Coca-Cola FEMSA, an equity method investee, issuing additional shares of its stock at a per share amount greater than the carrying value of the Company's per share investment. Accordingly, the Company is required to treat this type of transaction as if the Company had sold a proportionate share of its investment in Coca-Cola FEMSA. This gain was determined using Level 1 inputs.

Fair Value Measurements for Pension and Other Postretirement Benefit Plan Assets

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 14. 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 for our pension plan assets (in millions):



	December 31, 2018												December 31, 2017
	Level 1		Level 2		Level 3			Other 1			Total		Level 1		Level 2		Level 3			Other 1			Total
Cash and cash equivalents	$	441	$	22	$	—		$	—		$	463	$	626	$	65	$	—		$	—		$	691
Equity securities:
U.S.-based companies	1,728		15		17			—			1,760		2,080		3		14			—			2,097
International-based companies	1,098		23		—			—			1,121		1,465		—		—			—			1,465
Fixed-income securities:
Government bonds	—		463		—			—			463		—		374		—			—			374
Corporate bonds and debt securities	—		819		16			—			835		—		803		24			—			827
Mutual, pooled and commingled funds	46		130		—			699		3	875		239		42		—			700		3	981
Hedge funds/limited partnerships	—		—		—			828		4	828		—		—		—			983		4	983
Real estate	—		—		—			391		5	391		—		—		2			596		5	598
Other	—		—		270		2	403		6	673		—		—		263		2	564		6	827
Total	$	3,313	$	1,472	$	303		$	2,321		$	7,409	$	4,410	$	1,287	$	303		$	2,843		$	8,843


1	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 14.


2	Includes purchased annuity insurance contracts.


3	This class of assets includes actively managed emerging markets equity funds and a collective trust fund for qualified plans, invested primarily in equity securities of companies in developed and emerging markets. There are no liquidity restrictions on these investments.

This class of assets includes hedge funds that can be subject to redemption restrictions, ranging from monthly to tri-annually, with a redemption notice period of up to 120 days and/or initial lock-up periods of up to one year, and private equity funds that are primarily closed-end funds in which the Company's investments are generally not eligible for redemption. Distributions from these private equity funds will be received as the underlying assets are liquidated or distributed.

This class of assets includes funds invested in real estate, including a privately held real estate investment trust, a real estate commingled pension trust fund, infrastructure limited partnerships and commingled investment funds. These funds seek current income and capital appreciation through the investments and can be subject to redemption restrictions, ranging from quarterly to semi-annually, with a redemption notice period of up to 90 days.


6	This class of assets includes segregated portfolios of private investment funds that are invested in a portfolio of insurance-linked securities. These assets can be subject to a semi-annual redemption, with a redemption notice period of 90 days, subject to certain gate restrictions.

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 (in millions):



	Equity Securities			Fixed-Income Securities			Real Estate			Other				Total
2017
Balance at beginning of year	$	14		$	19		$	2		$	211			$	246
Actual return on plan assets held at the reporting date	(3		)	1			—			4				2
Purchases, sales and settlements — net	3			1			—			(9		)		(5		)
Transfers into/(out of) Level 3 — net	—			3			—			31				34
Foreign currency translation adjustments	—			—			—			26				26
Balance at end of year	$	14		$	24		$	2		$	263		1	$	303
2018
Balance at beginning of year	$	14		$	24		$	2		$	263			$	303
Actual return on plan assets held at the reporting date	(2		)	(1		)	—			19				16
Purchases, sales and settlements — net	3			(7		)	(2		)	1				(5		)
Transfers into/(out of) Level 3 — net	2			—			—			—				2
Foreign currency translation adjustments	—			—			—			(13		)		(13		)
Balance at end of year	$	17		$	16		$	—		$	270		1	$	303


1	Includes purchased annuity insurance contracts.

Other Postretirement Benefit Plan Assets

The following table summarizes the levels within the fair value hierarchy for our other postretirement benefit plan assets (in millions):



	December 31, 2018								December 31, 2017
	Level 1		Level 2		Other 1		Total		Level 1		Level 2		Other 1		Total
Cash and cash equivalents	$	73	$	—	$	—	$	73	$	78	$	—	$	—	$	78
Equity securities:
U.S.-based companies	93		—		—		93		96		—		—		96
International-based companies	7		—		—		7		8		—		—		8
Fixed-income securities:
Government bonds	—		2		—		2		—		2		—		2
Corporate bonds and debt securities	—		16		—		16		—		7		—		7
Mutual, pooled and commingled funds	—		—		82		82		—		—		80		80
Hedge funds/limited partnerships	—		—		8		8		—		—		8		8
Real estate	—		—		4		4		—		—		5		5
Other	—		—		4		4		—		—		4		4
Total	$	173	$	18	$	98	$	289	$	182	$	9	$	97	$	288


1	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 14.

Other Fair Value Disclosures

The carrying amounts of cash and cash equivalents; short-term investments; trade accounts receivable; 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. As of December 31, 2018, the carrying amount and fair value of our long-term debt, including the current portion, were $30,361 million and $30,438 million, respectively. As of December 31, 2017, the carrying amount and fair value of our long-term debt, including the current portion, were $34,480 million and $35,169 million, respectively.

NOTE 18: SIGNIFICANT OPERATING AND NONOPERATING ITEMS

Other Operating Charges

In 2018, the Company recorded other operating charges of $1,079 million. These charges primarily consisted of $450 million of CCR asset impairments and $440 million related to the Company's productivity and reinvestment program. In addition, other operating charges included $139 million related to costs incurred to refranchise certain of our North America bottling operations. These costs include, among other items, internal and external costs for individuals directly working on the refranchising efforts, severance, and costs associated with the implementation of information technology systems to facilitate consistent data standards and availability throughout our bottling systems. Other operating charges also included $33 million related to tax litigation expense and $19 million related to noncapitalizable transaction costs associated with pending and closed transactions. Refer to Note 2 for additional information on the refranchising of our bottling operations. Refer to Note 12 for additional information related to the tax litigation. Refer to Note 17 for additional information on the impairment charges. Refer to Note 19 for additional information on the Company's productivity and reinvestment program. Refer to Note 20 for the impact these charges had on our operating segments and Corporate.

In 2017, the Company recorded other operating charges of $1,902 million. These charges primarily consisted of $737 million of CCR asset impairments and $534 million related to the Company's productivity and reinvestment program. In addition, other operating charges included $280 million related to costs incurred to refranchise certain of our bottling operations. Other operating charges also included $225 million related to a cash contribution we made to The Coca-Cola Foundation, $67 million related to tax litigation expense, $34 million related to impairments of Venezuelan intangible assets and $19 million related to noncapitalizable transaction costs associated with pending and closed transactions. Refer to Note 1 for additional information about the Venezuelan intangible assets. Refer to Note 2 for additional information on the refranchising of our bottling operations. Refer to Note 17 for information on how the Company determined the asset impairment charges. Refer to Note 19 for additional information on the Company's productivity and reinvestment program. Refer to Note 20 for the impact these charges had on our operating segments and Corporate.

In 2016, the Company recorded other operating charges of $1,371 million. These charges primarily consisted of $352 million due to the Company's productivity and reinvestment program and $240 million due to the integration of our German bottling operations. In addition, the Company recorded charges of $276 million related to costs incurred to refranchise certain of our bottling operations. The Company also recorded a charge of $200 million related to cash contributions we made to The Coca‑Cola Foundation, a charge of $76 million due to the write-down we recorded related to our receivables from our bottling partner in Venezuela as a result of changes in exchange rates, and charges of $41 million related to noncapitalizable transaction costs associated with pending and closed transactions. In 2016, the Company also recorded impairment charges of $153 million related to certain intangible assets. Refer to Note 1 for additional information on the Venezuelan exchange rates. Refer to Note 2 for additional information on the refranchising of our bottling operations. Refer to Note 17 for additional information on the impairment charges. Refer to Note 19 for additional information on the Company's productivity, integration and restructuring initiatives. Refer to Note 20 for the impact these charges had on our operating segments and Corporate.

Other Nonoperating Items

Interest Expense

During the year ended December 31, 2018, the Company recorded a net gain of $27 million related to the early extinguishment of long-term debt. Refer to Note 11 for additional information.

During the year ended December 31, 2017, the Company recorded a net charge of $38 million related to the early extinguishment of long-term debt. Refer to Note 11 for additional information.

Equity Income (Loss) — Net

The Company recorded net charges of $111 million, $92 million and $61 million in equity income (loss) — net during the years ended December 31, 2018, 2017 and 2016, respectively. These amounts primarily represent the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees. Refer to Note 20 for the impact these charges had on our operating segments and Corporate.

Other Income (Loss) — Net

In 2018, other income (loss) — net was a loss of $1,121 million. The Company recorded other-than-temporary impairment charges of $591 million related to certain of our equity method investees and net charges of $476 million due to the refranchising of certain bottling territories in North America. The Company also recorded a net loss of $278 million related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities, charges of $240 million related to pension settlements, and a net loss of $79 million related to economic hedging activity associated with the purchase of Costa, which we acquired on January 3, 2019. Additionally, we recorded charges of $34 million primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements, a net loss of $33 million primarily related to the reversal of the cumulative translation adjustments resulting from the substantial liquidation of the Company's former Russian juice operations, and a $32 million loss related to acquiring a controlling interest in the Philippine bottling operations. These charges were partially offset by a net gain of $296 million related to the sale of our equity ownership in Lindley and a net gain of $47 million related to the refranchising of our Latin American bottling operations. Refer to Note 1 and Note 4 for additional information on equity and debt securities. Refer to Note 2 for additional information on refranchising activities, North America conversion payments, the sale of our equity ownership in Lindley and our acquisition of the controlling interest in the Philippine bottling operations. Refer to Note 6 for additional information on our hedging activities. Refer to Note 17 for information on how the Company determined the impairment charges. Refer to Note 20 for the impact these items had on our operating segments and Corporate. Refer to Note 22 for additional information on the acquisition of Costa.

In 2017, other income (loss) — net was a loss of $1,764 million. The Company recognized a net charge of $2,140 million due to the refranchising of certain bottling territories in North America and charges of $313 million primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. The Company also recorded net charges of $255 million resulting from settlements, special termination benefits and curtailment credits primarily related to North America refranchising and the Company's productivity and reinvestment program. Additionally, the Company recorded an other-than-temporary impairment charge of $50 million related to one of our international equity method investees, primarily driven by foreign currency exchange rate fluctuations. The Company also incurred a charge of $26 million related to our former German bottling operations. These charges were partially offset by a gain of $445 million related to the integration of CCW and CCEJ to establish CCBJHI. In exchange for our previously existing equity interests in CCW and CCEJ, we received an approximate 17 percent equity interest in CCBJHI. The Company also recognized a gain of $150 million related to the remeasurement of our previously held equity interests in CCBA and its South African subsidiary to fair value upon consolidation of CCBA. Additionally, the Company recognized a gain of $88 million related to the refranchising of our China bottling operations and the sale of a related cost method investment and a gain of $25 million as a result of Coca-Cola FEMSA, an equity method investee, issuing additional shares of its stock during the period at a per share amount greater than the carrying value of the Company's per share investment. Refer to Note 2 for additional information on our North America and China refranchising activities, the conversion payments and our consolidation of CCBA. Refer to Note 20 for the impact these items had on our operating segments and Corporate.

In 2016, other income (loss) — net was a loss of $1,265 million. This loss included losses of $2,456 million due to the refranchising of certain bottling territories in North America and a net charge of $139 million resulting from settlements and special termination benefits primarily related to North America refranchising. The Company also recorded a loss of $21 million due to the deconsolidation of our South African bottling operations and disposal of the related equity method investment in exchange for investments in CCBA and CCBA's South African subsidiary. The Company incurred charges of $31 million related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Additionally, the Company incurred a charge of $72 million as a result of remeasuring its net monetary assets denominated in Egyptian pounds. The Egyptian pound devalued as a result of the central bank allowing its currency, which was previously pegged to the U.S. dollar, to float freely. These charges were partially offset by a gain of $1,323 million due to the deconsolidation of our German bottling operations. Refer to Note 2 for additional information on the deconsolidation of our German bottling operations, the deconsolidation of our South African bottling operations, the North America refranchising and the conversion payments. Refer to Note 20 for the impact these items had on our operating segments and Corporate.

NOTE 19: PRODUCTIVITY, INTEGRATION AND RESTRUCTURING INITIATIVES

Productivity and Reinvestment

In February 2012, the Company announced a productivity and reinvestment program designed to further enable our efforts to strengthen our brands and reinvest our resources to drive long-term profitable growth. This program is 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 the integration of Old CCE.

In February 2014, the Company announced the expansion of our productivity and reinvestment program to drive incremental productivity 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 focuses on four key areas: restructuring the Company's global supply chain; 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.

In April 2017, the Company announced another expansion of our productivity and reinvestment program. This expansion is focused on achieving additional efficiencies in both our supply chain and our marketing expenditures as well as transitioning to a new, more agile operating model to enable growth. Under this operating model, our business units will be supported by an expanded enabling services organization and a corporate center focused on a few strategic initiatives, policy and governance. The expanded enabling services organization will focus on both simplifying and standardizing key transactional processes and providing support to business units through global centers of excellence.

The Company has incurred total pretax expenses of $3,566 million related to our productivity and reinvestment program since it commenced. These expenses were recorded in the line items other operating charges and other income (loss) — net in our consolidated statements of income. Refer to Note 20 for the impact these charges had on our operating segments and Corporate. 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 (in millions):



	Severance Pay and Benefits				Outside Services			Other Direct Costs			Total
2016
Accrued balance at beginning of year	$	144			$	8		$	52		$	204
Costs incurred	95				27			230			352
Payments	(114		)		(30		)	(205		)	(349		)
Noncash and exchange	(2		)		1			(55		)	(56		)
Accrued balance at end of year	$	123			$	6		$	22		$	151
2017
Costs incurred	$	310			$	79		$	261		$	650
Payments	(181		)		(83		)	(267		)	(531		)
Noncash and exchange	(62		)	1	(1		)	(1		)	(64		)
Accrued balance at end of year	$	190			$	1		$	15		$	206
2018
Costs incurred	$	164			$	92		$	252		$	508
Payments	(209		)		(83		)	(211		)	(503		)
Noncash and exchange	(69		)	1	—			(52		)	(121		)
Accrued balance at end of year	$	76			$	10		$	4		$	90


1	Includes pension settlement charges. Refer to Note 14.

Integration Initiatives

Integration of Our German Bottling Operations

In 2008, the Company began an integration initiative related to our German bottling operations acquired in 2007. The Company incurred $240 million of expenses related to this initiative in 2016 and has incurred total pretax expenses of $1,367 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. During the year ended December 31, 2016, the Company deconsolidated our German bottling operations. Therefore, there was no remaining accrual balance as of December 31, 2016. Refer to Note 2 for additional information on the deconsolidation of our German bottling operations.

NOTE 20: OPERATING SEGMENTS

As of December 31, 2018, our organizational structure consisted of the following operating segments: Europe, Middle East and Africa; Latin America; North America; Asia Pacific; and Bottling Investments. Our operating structure also included Corporate, which consists of two components: (1) a center focused on strategic initiatives, policy and governance, and (2) an enabling services organization focused on both simplifying and standardizing key transactional processes and providing support to business units through global centers of excellence.

Segment Products and Services

The business of our Company is nonalcoholic beverages. Our geographic operating segments (Europe, Middle East and Africa; 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. Our Bottling Investments operating segment is composed of our Company-owned or consolidated bottling operations, with the exception of those that are classified as discontinued operations, regardless of the geographic location of the bottler. Our Bottling Investments operating segment also includes 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. Generally, finished product operations produce higher net operating revenues but lower gross profit margins compared to concentrate operations. Refer to Note 3.

The following table sets forth the percentage of total net operating revenues related to concentrate operations and finished product operations:



Year Ended December 31,	2018		2017		2016
Concentrate operations	64	%	51	%	40	%
Finished product operations	36		49		60
Total	100	%	100	%	100	%

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 from continuing operations and certain treasury-related items, such as interest income and expense, on a global basis within Corporate. We evaluate segment performance based on income or loss from continuing operations before income taxes.

Geographic Data

The following table provides information related to our net operating revenues (in millions):



Year Ended December 31,	2018		2017		2016
United States	$	11,344	$	14,727	$	19,899
International	20,512		20,683		21,964
Net operating revenues	$	31,856	$	35,410	$	41,863

The following table provides information related to our property, plant and equipment — net (in millions):



Year Ended December 31,	2018		2017		2016
United States	$	4,154	$	4,163	$	6,784
International	4,078		4,040		3,851
Property, plant and equipment — net	$	8,232	$	8,203	$	10,635

Information about our Company's continuing operations by operating segment and Corporate as of and for the years ended December 31, 2018, 2017 and 2016, is as follows (in millions):



	Europe, Middle East & Africa		Latin America			North America			Asia Pacific			Bottling Investments				Corporate			Eliminations			Consolidated
2018
Net operating revenues:
Third party	$	7,138	$	3,975		$	11,505		$	4,809		$	3,760			$	105		$	—		$	31,292
Intersegment	564		39			263			388			11				—			(701		)	564		4
Total net operating revenues	7,702		4,014			11,768			5,197			3,771				105			(701		)	31,856
Operating income (loss)	3,714		2,321			2,453			2,278			(649		)		(1,417		)	—			8,700
Interest income	—		—			70			—			—				612			—			682
Interest expense	—		—			—			—			—				919			—			919
Depreciation and amortization	85		30			422			58			239				252			—			1,086
Equity income (loss) — net	2		(19		)	(2		)	12			828				187			—			1,008
Income (loss) from continuing operations before income taxes	3,406		2,247			2,494			2,305			(612		)		(1,490		)	—			8,350
Identifiable operating assets1	7,985		1,715			17,913			1,999		2	4,135			2	22,649			—			56,396		5
Investments3	789		784			400			216			14,367				3,718			—			20,274
Capital expenditures	77		90			429			31			316				404			—			1,347
2017
Net operating revenues:
Third party	$	7,332	$	3,956		$	8,796		$	4,767		$	10,379			$	138		$	—		$	35,368
Intersegment	42		73			1,954			409			81				—			(2,517		)	42		4
Total net operating revenues	7,374		4,029			10,750			5,176			10,460				138			(2,517		)	35,410
Operating income (loss)	3,625		2,218			2,591			2,147			(962		)		(2,020		)	—			7,599
Interest income	—		—			44			—			—				633			—			677
Interest expense	—		—			—			—			—				841			—			841
Depreciation and amortization	91		37			411			65			454				202			—			1,260
Equity income (loss) — net	48		(3		)	(3		)	11			878				140			—			1,071
Income (loss) from continuing operations before income taxes	3,706		2,211			2,320			2,179			(2,358		)		(1,316		)	—			6,742
Identifiable operating assets1	5,475		1,896			17,619			2,072		2	4,493			2	27,060			—			58,615		5
Investments3	1,238		891			112			177			15,998				3,536			—			21,952
Capital expenditures	81		55			541			50			662				286			—			1,675
2016
Net operating revenues:
Third party	$	7,014	$	3,746		$	6,587		$	4,788		$	19,601			$	127		$	—		$	41,863
Intersegment	264		73			3,738			506			134				5			(4,720		)	—
Total net operating revenues	7,278		3,819			10,325			5,294			19,735				132			(4,720		)	41,863
Operating income (loss)	3,668		1,953			2,614			2,210			1				(1,789		)	—			8,657
Interest income	—		—			27			—			—				615			—			642
Interest expense	—		—			—			—			—				733			—			733
Depreciation and amortization	93		35			426			80			1,013				140			—			1,787
Equity income (loss) — net	62		18			(17		)	9			648				115			—			835
Income (loss) from continuing operations before income taxes	3,749		1,966			2,592			2,238			(1,955		)		(454		)	—			8,136
Capital expenditures	62		45			438			107			1,329				281			—			2,262


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 India represented 10 percent and 11 percent of consolidated property, plant and equipment — net in 2018 and 2017, respectively.


3	Principally equity method investments and other investments in bottling companies.


4	Intersegment revenues do not eliminate on a consolidated basis in the table above due to intercompany sales to our discontinued operations.


5	Identifiable operating assets excludes $6,546 million and $7,329 million of assets held for sale — discontinued operations as of December 31, 2018 and December 31, 2017, respectively.

During 2018, 2017 and 2016, our operating segments and Corporate were impacted by acquisition and divestiture activities. Refer to Note 2.

In 2018, the results of our operating segments and Corporate were impacted by the following items:

•

Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $4 million for Latin America, $175 million for North America, $31 million for Bottling Investments and $237 million for Corporate, and increased by $3 million for Europe, Middle East and Africa and $4 million for Asia Pacific due to the Company's productivity and reinvestment program, including refinements to prior period accruals. In addition, income (loss) from continuing operations before income taxes was reduced by $64 million for Corporate and $4 million for Latin America due to pension settlements related to the Company's productivity and reinvestment program. Refer to Note 14 and Note 19.


•	Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $450 million for Bottling Investments due to asset impairment charges. Refer to Note 17.


•	Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $139 million for Bottling Investments due to costs incurred to refranchise certain of our bottling operations.


•	Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $33 million for Corporate due to tax litigation expense. Refer to Note 12.


•	Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $19 million for Corporate related to noncapitalizable transaction costs associated with pending and closed transactions.


•	Income (loss) from continuing operations before income taxes was reduced by $476 million for Bottling Investments due to the refranchising of certain bottling territories in North America. Refer to Note 2.


•	Income (loss) from continuing operations before income taxes was reduced by $334 million for Europe, Middle East and Africa, $205 million for Bottling Investments and $52 million for Latin America due to other-than-temporary impairment charges related to certain of our equity method investees. Refer to Note 17.


•	Income (loss) from continuing operations before income taxes was reduced by $278 million for Corporate related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities. Refer to Note 4.


•	Income (loss) from continuing operations before income taxes was reduced by $124 million for Bottling Investments and increased by $13 million for Corporate due to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.


•	Income (loss) from continuing operations before income taxes was reduced by $149 million for Bottling Investments due to pension settlements related to the refranchising of North America bottling operations. Refer to Note 14.


•	Income (loss) from continuing operations before income taxes was reduced by $79 million for Corporate related to economic hedging activity associated with the purchase of Costa, which we acquired on January 3, 2019. Refer to Note 6 and Note 22.


•	Income (loss) from continuing operations before income taxes was reduced by $34 million for North America primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.


•	Income (loss) from continuing operations before income taxes was reduced by $33 million for Bottling Investments primarily due to the reversal of the cumulative translation adjustments resulting from the substantial liquidation of the Company's former Russian juice operations.


•	Income (loss) from continuing operations before income taxes was reduced by $32 million for Corporate related to acquiring a controlling interest in the Philippine bottling operations. Refer to Note 2.


•	Income (loss) from continuing operations before income taxes was increased by $296 million for Corporate related to the sale of our equity ownership in Lindley. Refer to Note 2.


•	Income (loss) from continuing operations before income taxes was increased by $47 million for Corporate related to the refranchising of our Latin American bottling operations. Refer to Note 2.


•	Income (loss) from continuing operations before income taxes was increased by $27 million for Corporate related to a net gain on the extinguishment of long-term debt. Refer to Note 11.

In 2017, the results of our operating segments and Corporate were impacted by the following items:

•

Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $26 million for Europe, Middle East and Africa, $7 million for Latin America, $241 million for North America, $10 million for Asia Pacific, $57 million for Bottling Investments and $193 million for Corporate due to the Company's productivity and reinvestment program. Income (loss) from continuing operations before income taxes was also reduced by $116 million for Corporate due to pension settlements related to the Company's productivity and reinvestment program. Refer to Note 14 and Note 19.


•	Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $737 million for Bottling Investments and $34 million for Corporate due to asset impairment charges. Refer to Note 17.


•	Operating income (loss) was reduced by $280 million and income (loss) from continuing operations before income taxes was reduced by $419 million for Bottling Investments due to costs incurred to refranchise certain of our bottling operations. Refer to Note 2.


•	Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $225 million for Corporate as a result of a cash contribution we made to The Coca-Cola Foundation.


•	Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $67 million for Corporate due to tax litigation expense. Refer to Note 12.


•	Income (loss) from continuing operations before income taxes was reduced by $4 million for Europe, Middle East and Africa, $2 million for North America, $70 million for Bottling Investments and $16 million for Corporate due to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.


•	Income (loss) from continuing operations before income taxes was reduced by $2,140 million for Bottling Investments due to the refranchising of certain bottling territories in North America. Refer to Note 2.


•	Income (loss) from continuing operations before income taxes was increased by $445 million for Corporate due to a gain recognized resulting from the merger of CCW and CCEJ. Refer to Note 18.


•	Income (loss) from continuing operations before income taxes was reduced by $313 million for North America primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.


•	Income (loss) from continuing operations before income taxes was increased by $150 million for Corporate related to the remeasurement of our previously held equity interests in CCBA and its South African subsidiary to fair value. Refer to Note 2.


•	Income (loss) from continuing operations before income taxes was increased by $88 million for Corporate due to a gain recognized upon refranchising our China bottling operations and selling a related cost method investment. Refer to Note 2.


•	Income (loss) from continuing operations before income taxes was reduced by $50 million for Corporate due to an other-than-temporary impairment charge related to one of our international equity method investees. Refer to Note 17.


•	Income (loss) from continuing operations before income taxes was reduced by $38 million for Corporate due to the early extinguishment of long-term debt. Refer to Note 11.


•	Income (loss) from continuing operations before income taxes was reduced by $26 million for Corporate due to a charge related to our former German bottling operations.


•	Income (loss) from continuing operations before income taxes was increased by $25 million for Corporate due to Coca‑Cola FEMSA, an equity method investee, issuing additional shares of its stock during the period at a per share amount greater than the carrying value of the Company's per share investment. Refer to Note 17.

In 2016, the results of our operating segments and Corporate were impacted by the following items:

•

Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $32 million for Europe, Middle East and Africa, $134 million for North America, $1 million for Asia Pacific, $322 million for Bottling Investments and $105 million for Corporate and increased by $2 million for Latin America due to the Company's productivity and reinvestment program, including refinements to prior period accruals. Refer to Note 19.


•	Operating income (loss) was reduced by $276 million and income (loss) from continuing operations before income taxes was reduced by $297 million for Bottling Investments due to costs incurred to refranchise certain of our bottling operations. Refer to Note 2.


•	Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $200 million for Corporate as a result of cash contributions to The Coca-Cola Foundation.


•	Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $153 million for Bottling Investments due to impairment charges recorded on certain of the Company's intangible assets.


•	Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $76 million for Latin America due to the write-down we recorded related to our receivables from our bottling partner in Venezuela due to changes in exchange rates. Refer to Note 1.


•	Operating income (loss) and income (loss) from continuing operations before income taxes were reduced by $9 million for Bottling Investments and $32 million for Corporate related to noncapitalizable transaction costs associated with pending and closed transactions.


•	Income (loss) from continuing operations before income taxes was reduced by $118 million for Bottling Investments due to pension settlement charges primarily as a result of our refranchising activities. Refer to Note 14.


•	Income (loss) from continuing operations before income taxes was reduced by $52 million for Bottling Investments and $9 million for Corporate due to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.


•	Income (loss) from continuing operations before income taxes was reduced by $2,456 million for Bottling Investments primarily due to the refranchising of certain bottling territories in North America. Refer to Note 2.


•	Income (loss) from continuing operations before income taxes was increased by $1,323 million for Corporate as a result of the deconsolidation of our German bottling operations. Refer to Note 2.


•	Income (loss) from continuing operations before income taxes was reduced by $72 million for Corporate as a result of remeasuring our net monetary assets denominated in Egyptian pounds. Refer to Note 18.


•	Income (loss) from continuing operations before income taxes was reduced by $31 million for North America related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.

NOTE 21: 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,	2018			2017			2016
(Increase) decrease in trade accounts receivable	$	66		$	(141	)	$	(28	)
(Increase) decrease in inventories	(171		)	(355		)	(142		)
(Increase) decrease in prepaid expenses and other assets	(221		)	506			279
Increase (decrease) in accounts payable and accrued expenses	(289		)	(445		)	(540		)
Increase (decrease) in accrued income taxes	(12		)	(153		)	750
Increase (decrease) in other liabilities1	(575		)	4,052			(544		)
Net change in operating assets and liabilities	$	(1,202	)	$	3,464		$	(225	)

1 The increase in other liabilities in 2017 was primarily due to the one-time transition tax required by the Tax Reform Act signed into law on

December 22, 2017. Refer to Note 15.

NOTE 22: SUBSEQUENT EVENT

On January 3, 2019, the Company acquired Costa in exchange for $4.9 billion of cash. Costa is a coffee company with retail outlets in over 30 countries, a coffee vending operation, for-home coffee formats and a state-of-the-art roastery. We believe this acquisition will allow us to increase our presence in the hot beverages market platform. We are currently in the process of finalizing the accounting for this transaction and expect to complete our preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed by the end of the first quarter of 2019.

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 Report on Form 10-K. The financial statements were prepared in conformity with accounting principles generally accepted in the United States appropriate in the circumstances and, accordingly, include certain amounts based on our best judgments and estimates. Financial information in this Annual 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 ("Exchange Act"). Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2018. 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, 2018.

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 2019 Proxy Statement.




James R. Quincey		Larry M. Mark
Chief Executive Officer February 21, 2019		Vice President and Controller February 21, 2019


Kathy N. Waller		Mark Randazza
Executive Vice President and Chief Financial Officer February 21, 2019		Vice President, Assistant Controller and Chief Accounting Officer February 21, 2019

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareowners

The Coca-Cola Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Coca-Cola Company and subsidiaries (the Company) as of December 31, 2018 and 2017, 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, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with US generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal controls over financial reporting as of December 31, 2018, 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 21, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company's auditor since 1921.

Atlanta, Georgia

February 21, 2019

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareowners

The Coca-Cola Company

Opinion on Internal Control over Financial Reporting

We have audited The Coca-Cola Company and subsidiaries’ internal control over financial reporting as of December 31, 2018, 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). In our opinion, The Coca-Cola Company and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018 based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, 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, 2018, and the related notes and our report dated February 21, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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.

Definition and Limitations of Internal Control Over Financial Reporting

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.

Atlanta, Georgia

February 21, 2019

Quarterly Data (Unaudited)



	First Quarter		Second Quarter		Third Quarter		Fourth Quarter			Full Year
(In millions except per share data)
2018
Net operating revenues	$	7,626	$	8,927	$	8,245	$	7,058		$	31,856
Gross profit	4,888		5,675		5,186		4,337			20,086
Net income attributable to shareowners of The Coca-Cola Company	1,368		2,316		1,880		870			6,434
Basic net income per share	$	0.32	$	0.54	$	0.44	$	0.20		$	1.51	1
Diluted net income per share	$	0.32	$	0.54	$	0.44	$	0.20		$	1.50
2017
Net operating revenues	$	9,118	$	9,702	$	9,078	$	7,512		$	35,410
Gross profit	5,605		6,043		5,684		4,823			22,155
Net income (loss) attributable to shareowners of The Coca-Cola Company	1,182		1,371		1,447		(2,752		)	1,248
Basic net income (loss) per share	$	0.28	$	0.32	$	0.34	$	(0.65	)	$	0.29
Diluted net income (loss) per share	$	0.27	$	0.32	$	0.33	$	(0.65	)	$	0.29	1

The sum of the quarterly net income (loss) per share amounts does not agree to the full year net income per share amounts. We calculate net income (loss) per share based on the weighted-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.

Our first quarter, second quarter and third quarter reporting periods end on the Friday closest to the last day of the applicable quarterly calendar period. Our fourth quarter and fiscal year end on December 31 regardless of the day of the week on which December 31 falls.

During 2018 and 2017, our quarterly operating results were impacted by acquisition and divestiture activities. Refer to Note 2.

The Company's first quarter 2018 results were impacted by one less day compared to the first quarter of 2017. Furthermore, the Company recorded the following transactions which impacted results:


•	Charges of $390 million related to the impairment of certain assets. Refer to Note 17.


•	Charges of $95 million due to the Company's productivity and reinvestment program. Refer to Note 19.


•	A net loss of $85 million related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities. Refer to Note 4.


•	A net charge of $51 million related to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.


•	Charges of $45 million related to costs incurred to refranchise certain of our North America bottling operations.


•	A net loss of $33 million primarily related to the reversal of the cumulative translation adjustments resulting from the substantial liquidation of the Company's former Russian juice operations.


•	Charges of $19 million primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.

In the second quarter of 2018, the Company recorded the following transactions which impacted results:


•	Charges of $150 million due to the Company's productivity and reinvestment program. Refer to Note 19.


•	Charges of $102 million due to the refranchising of certain bottling territories in North America. Refer to Note 2.


•	Charges of $60 million related to the impairment of certain assets. Refer to Note 17.


•	An other-than-temporary impairment charge of $52 million related to one of our international equity method investees. Refer to Note 17.


•	Charges of $47 million related to pension settlements as a result of North America refranchising. Refer to Note 14.


•	A net gain of $36 million related to the refranchising of our Latin American bottling operations. Refer to Note 2.


•	A net gain of $36 million related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities. Refer to Note 4.


•	Charges of $34 million related to costs incurred to refranchise certain of our North America bottling operations.


•	A net charge of $33 million related to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.


•	Charges of $22 million related to tax litigation expense. Refer to Note 12.

In the third quarter of 2018, the Company recorded the following transactions which impacted results:


•	A net gain of $370 million related to the sale of our equity ownership in Lindley. Refer to Note 2.


•	Charges of $275 million due to the refranchising of certain bottling territories in North America. Refer to Note 2.


•	An other-than-temporary impairment charge of $205 million related to our equity method investee in Indonesia. Refer to Note 17.


•	Charges of $132 million due to the Company's productivity and reinvestment program. Refer to Note 19.


•	A net gain of $64 million related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities. Refer to Note 4.


•	A gain of $41 million related to economic hedging activity associated with the purchase of Costa, which we acquired on January 3, 2019. Refer to Note 6.


•	Charges of $38 million related to costs incurred to refranchise certain of our North America bottling operations.


•	A net gain of $27 million related to the early extinguishment of long-term debt. Refer to Note 11.


•	A net gain of $19 million related to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.


•	Charges of $12 million primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.


•	A gain of $11 million related to the refranchising of our Latin American bottling operations. Refer to Note 2.

The Company's fourth quarter 2018 results were impacted by one additional day compared to the fourth quarter of 2017. Furthermore, the Company recorded the following transactions which impacted results:


•	Other-than-temporary impairment charges of $334 million related to certain of our equity method investees in the Middle East. Refer to Note 17.


•	A net loss of $293 million related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities. Refer to Note 4.


•	Charges of $131 million due to the Company's productivity and reinvestment program. Refer to Note 19.


•	A net loss of $120 million related to economic hedging activity associated with the purchase of Costa, which we acquired on January 3, 2019. Refer to Note 6.


•	Charges of $102 million related to pension settlements as a result of North America refranchising. Refer to Note 14.


•	Charges of $97 million due to the refranchising of certain bottling territories in North America. Refer to Note 2.


•	A loss of $74 million related to the sale of our equity ownership in Lindley. Refer to Note 2.


•	A net charge of $46 million related to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.


•	A net loss of $32 million related to acquiring a controlling interest in the Philippine bottling operations. Refer to Note 2.


•	Charges of $22 million related to costs incurred to refranchise certain of our North America bottling operations.

In the first quarter of 2017, the Company recorded the following transactions which impacted results:


•	Charges of $497 million due to the refranchising of certain bottling territories in North America. Refer to Note 2.


•	Charges of $139 million due to the Company's productivity and reinvestment program. Refer to Note 19.


•	Charges of $106 million primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.


•	Charges of $104 million related to the impairment of certain intangible assets. Refer to Note 17.


•	A net charge of $58 million related to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.


•	Charges of $60 million related to costs incurred to refranchise certain of our bottling operations.

In the second quarter of 2017, the Company recorded the following transactions which impacted results:


•	Charges of $667 million related to the impairment of certain intangible assets. Refer to Note 17.


•	A gain of $445 million related to the integration of CCW and CCEJ to establish CCBJHI. Refer to Note 18.


•	Charges of $214 million due to the refranchising of certain bottling territories in North America. Refer to Note 2.


•	Charges of $109 million primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.


•	Charges of $87 million due to the Company's productivity and reinvestment program. Refer to Note 19.


•	Charges of $44 million related to costs incurred to refranchise certain of our bottling operations.


•	A net charge of $38 million related to the early extinguishment of long-term debt. Refer to Note 11.


•	A net gain of $37 million related to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.


•	A gain of $9 million related to refranchising a substantial portion of our China bottling operations. Refer to Note 2.

In the third quarter of 2017, the Company recorded the following transactions which impacted results:


•	Charges of $762 million due to the refranchising of certain bottling territories in North America. Refer to Note 2.


•	Charges of $213 million related to costs incurred to refranchise certain of our bottling operations.


•	Charges of $129 million due to the Company's productivity and reinvestment program. Refer to Note 19.


•	A gain of $79 million related to the refranchising of our remaining China bottling operations and related cost method investment. Refer to Note 2.


•	Charges of $72 million primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.


•	An other-than-temporary impairment charge of $50 million related to one of our international equity method investees. Refer to Note 17.


•	A net charge of $16 million related to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.

In the fourth quarter of 2017, the Company recorded the following transactions which impacted results:


•	A net provisional tax charge of $3,610 million as a result of the Tax Reform Act that was signed into law on December 22, 2017. Refer to Note 15.


•	Charges of $667 million due to the refranchising of certain bottling territories in North America. Refer to Note 2.


•	Charges of $295 million due to the Company's productivity and reinvestment program. Refer to Note 19.


•	A charge of $225 million as a result of a cash contribution we made to The Coca-Cola Foundation.


•	A gain of $150 million related to the remeasurement of our previously held equity interests in CCBA and its South African subsidiary to fair value. Refer to Note 2.


•	Charges of $105 million related to costs incurred to refranchise certain of our bottling operations.


•	A net charge of $55 million related to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.


•	Charges of $26 million primarily related to payments made to convert the bottling agreements for certain North America bottling partners' territories to a single form of CBA with additional requirements. Refer to Note 2.

Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE