Annual report pursuant to Section 13 and 15(d)

OPERATING SEGMENTS

v2.4.1.9
OPERATING SEGMENTS
 12 Months Ended
Dec. 31, 2014
Operations, Reportable Information, by Operating Segment  
OPERATING SEGMENTS
OPERATING SEGMENTS
As of December 31, 2014, our organizational structure consisted of the following operating segments: Eurasia and Africa; Europe; Latin America; North America; Asia Pacific; Bottling Investments; and Corporate.
Segment Products and Services
The business of our Company is nonalcoholic beverages. With the exception of North America, our geographic operating segments (Eurasia and Africa; Europe; Latin America; North America; and Asia Pacific) derive a majority of their revenues from the manufacture and sale of beverage concentrates and syrups and, in some cases, the sale of finished beverages. The North America operating segment derives the majority of its revenues from the sale of finished beverages. Our Bottling Investments operating segment is composed of our Company-owned or consolidated bottling operations outside of North America, regardless of the geographic location of the bottler, and equity income from the majority of our equity method investments. Company-owned or consolidated bottling operations derive the majority of their revenues from the sale of finished beverages. Generally, bottling and finished product operations produce higher net revenues but lower gross profit margins compared to concentrate and syrup operations.
The following table sets forth the percentage of total net operating revenues related to concentrate operations and finished product operations:
Year Ended December 31,
2014

 
2013

 
2012

Concentrate operations1
38
%
 
38
%
 
38
%
Finished product operations2
62


62

 
62

Net operating revenues
100
%
 
100
%
 
100
%

1 
Includes concentrates sold by the Company to authorized bottling partners for the manufacture of fountain syrups. The bottlers then typically sell the fountain syrups to wholesalers or directly to fountain retailers.
2 
Includes fountain syrups manufactured by the Company, including consolidated bottling operations, and sold to fountain retailers or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers.
Method of Determining Segment Income or Loss
Management evaluates the performance of our operating segments separately to individually monitor the different factors affecting financial performance. Our Company manages income taxes and certain treasury-related items, such as interest income and expense, on a global basis within the Corporate operating segment. We evaluate segment performance based on income or loss before income taxes.
Geographic Data
The following table provides information related to our net operating revenues (in millions):
Year Ended December 31,
2014

 
2013

 
2012

United States
$
19,763

 
$
19,820

 
$
19,732

International
26,235

 
27,034

 
28,285

Net operating revenues
$
45,998

 
$
46,854

 
$
48,017

The following table provides information related to our property, plant and equipment — net (in millions):
Year Ended December 31,
2014

 
2013

 
2012

United States
$
8,683

 
$
8,841

 
$
8,509

International
5,950

 
6,126

 
5,967

Property, plant and equipment — net
$
14,633

 
$
14,967

 
$
14,476


Information about our Company's operations by operating segment for the years ended December 31, 2014, 2013 and 2012, is as follows (in millions):
 
Eurasia &
Africa

 
Europe

 
Latin
America

 
North
America

 
Asia Pacific

 
Bottling
Investments

 
Corporate

 
Eliminations

 
Consolidated

2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Third party
$
2,730

 
$
4,844

 
$
4,597

 
$
21,462

 
$
5,257


$
6,972

 
$
136

 
$
—

 
$
45,998

   Intersegment
—

 
692

 
60

 
17

 
489

 
67

 
—

 
(1,325
)
 
—

   Total net revenues
2,730

 
5,536

 
4,657

 
21,479

 
5,746

 
7,039

 
136

 
(1,325
)
 
45,998

Operating income (loss)
1,084

 
2,852

 
2,316

 
2,447

 
2,448

 
9

 
(1,448
)
 
—

 
9,708

Interest income
—

 
—

 
—

 
—

 
—

 
—

 
594

 
—

 
594

Interest expense
—

 
—

 
—

 
—

 
—

 
—

 
483

 
—

 
483

Depreciation and amortization
47

 
75

 
56

 
1,195

 
96

 
315

 
192

 
—

 
1,976

Equity income (loss) — net
35

 
31

 
10

 
(16
)
 
12

 
691

 
6

 
—

 
769

Income (loss) before income taxes
1,125

 
2,892

 
2,319

 
1,633

 
2,464

 
715

 
(1,823
)
 
—

 
9,325

Identifiable operating assets1
1,298

 
3,358

2 
2,426

 
33,066

 
1,793

 
6,975

2 
29,482

 
—

 
78,398

Investments3
1,081

 
90

 
757

 
48

 
157

 
8,781

 
2,711

 
—

 
13,625

Capital expenditures
30

 
54

 
55

 
1,293

 
76

 
628

 
270

 
—

 
2,406

2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Third party
$
2,763

 
$
4,645

 
$
4,748

 
$
21,574

 
$
5,372

 
$
7,598

 
$
154

 
$
—

 
$
46,854

   Intersegment
—

 
689

 
191

 
16

 
497

 
78

 
—

 
(1,471
)
 
—

   Total net revenues
2,763

 
5,334

 
4,939

 
21,590

 
5,869

 
7,676

 
154

 
(1,471
)
 
46,854

Operating income (loss)
1,087

 
2,859

 
2,908

 
2,432

 
2,478

 
115

 
(1,651
)
 
—

 
10,228

Interest income
—

 
—

 
—

 
—

 
—

 
—

 
534

 
—

 
534

Interest expense
—

 
—

 
—

 
—

 
—

 
—

 
463

 
—

 
463

Depreciation and amortization
42

 
86

 
58

 
1,192

 
130

 
335

 
134

 
—

 
1,977

Equity income (loss) — net
22

 
24

 
13

 
2

 
19

 
524

 
(2
)
 
—

 
602

Income (loss) before income taxes
1,109

 
2,923

 
2,920

 
2,434

 
2,494

 
679

 
(1,082
)
 
—

 
11,477

Identifiable operating assets1
1,273

 
3,713

2 
2,918

 
33,964

 
1,922

 
7,011

2 
27,742

 
—

 
78,543

Investments3
1,157

 
106

 
545

 
49

 
143

 
9,424

 
88

 
—

 
11,512

Capital expenditures
40

 
34

 
63

 
1,374

 
117

 
643

 
279

 
—

 
2,550

2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Third party
$
2,697

 
$
4,481

 
$
4,560

 
$
21,665

 
$
5,680

 
$
8,807

 
$
127

 
$
—

 
$
48,017

   Intersegment
—

 
642

 
271

 
15

 
628

 
88

 
—

 
(1,644
)
 
—

   Total net revenues
2,697

 
5,123

 
4,831

 
21,680

 
6,308

 
8,895

 
127

 
(1,644
)
 
48,017

Operating income (loss)
1,078

 
2,960

 
2,879

 
2,597

 
2,516

 
140

 
(1,391
)
 
—

 
10,779

Interest income
—

 
—

 
—

 
—

 
—

 
—

 
471

 
—

 
471

Interest expense
—

 
—

 
—

 
—

 
—

 
—

 
397

 
—

 
397

Depreciation and amortization
33

 
100

 
70

 
1,083

 
119

 
406

 
171

 
—

 
1,982

Equity income (loss) — net
20

 
45

 
4

 
13

 
2

 
732

 
3

 
—

 
819

Income (loss) before income taxes
1,101

 
3,015

 
2,882

 
2,624

 
2,523

 
904

 
(1,240
)
 
—

 
11,809

Identifiable operating assets1
1,299

 
2,976

2 
2,759

 
34,114

 
2,163

 
9,648

2 
22,767

 
—

 
75,726

Investments3
1,155

 
271

 
539

 
39

 
127

 
8,253

 
64

 
—

 
10,448

Capital expenditures
51

 
30

 
88

 
1,447

 
107

 
867

 
190

 
—

 
2,780

1 
Principally cash and cash equivalents, short-term investments, marketable securities, trade accounts receivable, inventories, goodwill, trademarks and other intangible assets and property, plant and equipment — net.
2 
Property, plant and equipment — net in Germany represented 10 percent of consolidated property, plant and equipment — net in 2014, 11 percent in 2013 and 10 percent in 2012.
3 
Principally equity method investments, available-for-sale securities and nonmarketable investments in bottling companies.
In 2014, the results of our operating segments were impacted by the following items:
•
Operating income (loss) and income (loss) before income taxes were reduced by $26 million for Eurasia and Africa, $111 million for Europe, $20 million for Latin America, $281 million for North America, $36 million for Asia Pacific, $211 million for Bottling Investments and $124 million for Corporate due to charges related to the Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 18.
•
Operating income (loss) and income (loss) before income taxes were reduced by $42 million for Bottling Investments as a result of the restructuring and transition of the Company's Russian juice operations to an existing joint venture with an unconsolidated bottling partner. Refer to Note 17.
•
Income (loss) before income taxes was reduced by $2 million for Europe and $16 million for Bottling Investments due to the Company's proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 17.
•
Income (loss) before income taxes was reduced by $799 million for North America due to the refranchising of certain territories. Refer to Note 2 and Note 17.
•
Income (loss) before income taxes was reduced by $275 million for Latin America and $411 million for Corporate due to the remeasurement of the net monetary assets of our local Venezuelan subsidiary into U.S. dollars using the SICAD 2 exchange rate, an impairment of a Venezuelan trademark, and a write-down the Company recorded on the concentrate sales receivables from our bottling partner in Venezuela. Refer to Note 1 and Note 17.
•
Income (loss) before income taxes was increased by $25 million for Bottling Investments due to the elimination of intercompany profits resulting from a write-down we recorded on the concentrate sales receivables from our bottling partner in Venezuela, an equity method investee, partially offset by our proportionate share of their remeasurement loss. Refer to Note 1.
•
Income (loss) before income taxes was reduced by $32 million for Corporate as a result of a Brazilian bottling entity's majority interest owners exercising their option to acquire from us an additional equity interest at an exercise price less than that of our carrying value. Refer to Note 2 and Note 17.
In 2013, the results of our operating segments were impacted by the following items:
•
Operating income (loss) and income (loss) before income taxes were reduced by $2 million for Eurasia and Africa, $57 million for Europe, $282 million for North America, $26 million for Asia Pacific, $194 million for Bottling Investments and $121 million for Corporate due to charges related to the Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 18.
•
Operating income (loss) and income (loss) before income taxes were reduced by $195 million for Corporate due to impairment charges recorded on certain of the Company's intangible assets. Refer to Note 8 and Note 17.
•
Operating income (loss) and income (loss) before income taxes were reduced by $22 million for Asia Pacific due to charges associated with certain of the Company's fixed assets. Refer to Note 17.
•
Income (loss) before income taxes was increased by $615 million for Corporate due to a gain the Company recognized on the deconsolidation of our Brazilian bottling operations as a result of their combination with an independent bottling partner. Refer to Note 2.
•
Income (loss) before income taxes was reduced by $9 million for Bottling Investments and $140 million for Corporate due to the devaluation of the Venezuelan bolivar, including our proportionate share of the charge incurred by an equity method investee that has operations in Venezuela. Refer to Note 1 and Note 17.
•
Income (loss) before income taxes was reduced by a net $114 million for Corporate due to the merger of four of the Company's Japanese bottling partners in which we held equity method investments prior to their merger into CCEJ. Refer to Note 2 and Note 17.
•
Income (loss) before income taxes was increased by $139 million for Corporate due to a gain the Company recognized as a result of Coca-Cola FEMSA issuing additional shares of its own stock during the year at a per share amount greater than the carrying value of the Company's per share investment. Refer to Note 16 and Note 17.
•
Income (loss) before income taxes was reduced by a net $159 million for Bottling Investments due to the Company’s proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 17.
•
Income (loss) before income taxes was reduced by $53 million for Corporate due to charges the Company recognized on the early extinguishment of certain long-term debt, including the hedge accounting adjustments reclassified from accumulated other comprehensive income to earnings. Refer to Note 10.
In 2012, the results of our operating segments were impacted by the following items:
•
Operating income (loss) and income (loss) before income taxes were reduced by $1 million for Europe, $227 million for North America, $3 million for Asia Pacific, $164 million for Bottling Investments and $38 million for Corporate due to charges related to the Company's productivity and reinvestment program as well as other restructuring initiatives. Refer to Note 18.
•
Operating income (loss) and income (loss) before income taxes were reduced by $21 million for North America due to costs associated with the Company detecting residues of carbendazim, a fungicide that is not registered in the United States for use on citrus products, in orange juice imported from Brazil for distribution in the United States. As a result, the Company began purchasing additional supplies of Florida orange juice at a higher cost than Brazilian orange juice. Refer to Note 17.
•
Operating income (loss) and income (loss) before income taxes were reduced by $20 million for North America due to changes in the Company's ready-to-drink tea strategy as a result of our U.S. license agreement with Nestlé that terminated at the end of 2012. Refer to Note 17.
•
Equity income (loss) — net and income (loss) before income taxes were increased by $8 million for Bottling Investments due to the Company’s proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 17.
•
Income (loss) before income taxes was increased by $185 million for Corporate due to the gain the Company recognized as a result of the merger of Andina and Polar. Refer to Note 17.
•
Income (loss) before income taxes was reduced by $108 million for Corporate due to the loss the Company recognized on the pending sale of a majority ownership interest in our Philippine bottling operations to Coca-Cola FEMSA, which was completed in January 2013. As of December 31, 2012, the assets and liabilities associated with our Philippine bottling operations were classified as held for sale in our consolidated balance sheets. Refer to Note 17.
•
Income (loss) before income taxes was increased by $92 million for Corporate due to a gain the Company recognized as a result of Coca-Cola FEMSA issuing additional shares of its own stock during the year at a per share amount greater than the carrying amount of the Company's per share investment. Refer to Note 17.
•
Income (loss) before income taxes was reduced by $82 million for Corporate due to the Company acquiring an ownership interest in Mikuni for which we paid a premium over the publicly traded market price. This premium was expensed on the acquisition date. Refer to Note 17.
•
Income (loss) before income taxes was reduced by $16 million for Corporate due to other-than-temporary declines in the fair values of certain cost method investments. Refer to Note 16 and Note 17.
•
Income (loss) before income taxes was reduced by $1 million for Eurasia and Africa, $4 million for Europe, $2 million for Latin America and $4 million for Asia Pacific due to changes in the structure of BPW, our 50/50 joint venture with Nestlé in the ready-to-drink tea category. Refer to Note 17.