The Coca-Cola Company Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

EQUITY METHOD INVESTMENTS

EQUITY METHOD INVESTMENTS

12 Months Ended

Dec. 31, 2019

EQUITY METHOD INVESTMENTS [Abstract]

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 statement 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 statement of income and our carrying value in those investments. Refer to Note 19 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 Coca-Cola European Partners plc ("CCEP"), 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, 2019, we owned approximately 19 percent, 19 percent, 20 percent, 28 percent, 23 percent and 19 percent, respectively, of these companies' outstanding shares. As of December 31, 2019, our investments in our equity method investees in the aggregate exceeded our proportionate share of the net assets of these equity method investees by $8,679 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	2019		2018		2017
Net operating revenues	$	75,980	$	75,482	$	73,343
Cost of goods sold	44,881		44,933		42,871
Gross profit	$	31,099	$	30,549	$	30,472
Operating income	$	7,748	$	7,511	$	7,577
Consolidated net income	$	4,597	$	4,646	$	4,545
Less: Net income attributable to noncontrolling interests	63		101		120
Net income attributable to common shareowners	$	4,534	$	4,545	$	4,425
Company equity income (loss) — net	$	1,049	$	1,008	$	1,072

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



December 31,	2019		2018
Current assets	$	25,654	$	23,249
Noncurrent assets	68,269		66,733
Total assets	$	93,923	$	89,982
Current liabilities	$	20,271	$	18,100
Noncurrent liabilities	31,321		29,144
Total liabilities	$	51,592	$	47,244
Equity attributable to shareowners of investees	$	41,203	$	41,558
Equity attributable to noncontrolling interests	1,128		1,180
Total equity	$	42,331	$	42,738
Company equity method investments	$	19,025	$	19,412

Net sales to equity method investees, the majority of which are located outside the United States, were $14,832 million, $14,799 million and $14,144 million in 2019, 2018 and 2017, respectively. Total payments, primarily marketing, made to equity method investees were $897 million, $1,131 million and $930 million in 2019, 2018 and 2017, respectively. The decrease in payments made to equity method investees in 2019 was primarily due to changes in bottler funding arrangements. In addition, purchases of beverage products from equity method investees were $426 million, $536 million and $1,299 million in 2019, 2018 and 2017, respectively. The decrease in purchases of beverage products in 2019 and 2018 was primarily due to reduced purchases of Monster products as a result of the North America refranchising activities. Refer to Note 2.

The following table presents the difference between calculated fair values, based on quoted closing prices of publicly traded shares, and our Company's carrying value in investments in publicly traded companies accounted for under the equity method (in millions):



December 31, 2019	Fair Value		Carrying Value		Difference
Monster Beverage Corporation	$	6,490	$	3,781	$	2,709
Coca-Cola European Partners plc	4,475		3,604		871
Coca-Cola FEMSA, S.A.B. de C.V.	3,461		1,758		1,703
Coca-Cola HBC AG	2,801		1,109		1,692
Coca-Cola Amatil Limited	1,674		611		1,063
Coca-Cola Bottlers Japan Holdings Inc.	866		765		101
Coca-Cola Consolidated, Inc.	705		142		563
Coca-Cola İçecek A.Ş.	347		210		137
Embotelladora Andina S.A.	163		109		54
Total	$	20,982	$	12,089	$	8,893

Net Receivables and Dividends from Equity Method Investees

Total net receivables due from equity method investees were $1,707 million and $1,564 million as of December 31, 2019 and 2018, respectively. The total amount of dividends received from equity method investees was $628 million, $551 million and $443 million for the years ended December 31, 2019, 2018 and 2017, respectively. The amount of consolidated reinvested earnings that represents undistributed earnings of investments accounted for under the equity method as of December 31, 2019 was $4,983 million.