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, 2016

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 statements of income and our carrying value in that investment. Conversely, when we record our proportionate share of a net loss, it decreases equity income (loss) — net in our consolidated statements of income and our carrying value in that investment. The Company's proportionate share of the net income or loss of our equity method investees includes significant operating and nonoperating items recorded by our equity method investees. These items can have a significant impact on the amount of equity income (loss) — net in our consolidated statements of income and our carrying value in those investments. Refer to Note 17 for additional information related to significant operating and nonoperating items recorded by our equity method investees. The carrying values of our equity method investments are also impacted by our proportionate share of items impacting the equity investee's AOCI.

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

The Company's equity method investments include our ownership interests in Coca-Cola FEMSA, Coca-Cola Hellenic, Coca-Cola Amatil Limited, CCEP and Monster. As of December 31, 2016, we owned approximately 28 percent, 23 percent, 29 percent, 18 percent and 18 percent, respectively, of these companies' outstanding shares. As of December 31, 2016, our investment in our equity method investees in the aggregate exceeded our proportionate share of the net assets of these equity method investees by $6,792 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	2016		2015		2014
Net operating revenues	$	58,054	$	47,498	$	52,627
Cost of goods sold	34,338		28,749		31,810
Gross profit	$	23,716	$	18,749	$	20,817
Operating income	$	5,652	$	4,483	$	4,489
Consolidated net income	$	2,967	$	2,299	$	2,440
Less: Net income attributable to noncontrolling interests	78		65		74
Net income attributable to common shareowners	$	2,889	$	2,234	$	2,366
Equity income (loss) — net	$	835	$	489	$	769

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



December 31,	2016		2015
Current assets	$	19,586	$	17,524
Noncurrent assets	58,529		36,498
Total assets	$	78,115	$	54,022
Current liabilities	$	16,125	$	11,820
Noncurrent liabilities	25,610		14,467
Total liabilities	$	41,735	$	26,287
Equity attributable to shareowners of investees	$	35,204	$	26,854
Equity attributable to noncontrolling interests	1,176		881
Total equity	$	36,380	$	27,735
Company equity investment	$	16,260	$	12,318

Net sales to equity method investees, the majority of which are located outside the United States, were $10,495 million, $8,984 million and $10,063 million in 2016, 2015 and 2014, respectively. Total payments, primarily marketing, made to equity method investees were $946 million, $1,380 million and $1,605 million in 2016, 2015 and 2014, respectively. In addition, purchases of beverage products from equity method investees were $1,857 million, $1,131 million and $381 million in 2016, 2015 and 2014, respectively. The increase in purchases of beverage products in 2016 and 2015 is primarily due to purchases from Monster. Refer to Note 2.

If valued at the December 31, 2016 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 $6,179 million. However, the carrying value of our investment in CCEP exceeded the fair value of the investment as of December 31, 2016 by $462 million. Based on 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, 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 $1,696 million and $1,399 million as of December 31, 2016 and 2015, respectively. The total amount of dividends received from equity method investees was $386 million, $367 million and $398 million for the years ended December 31, 2016, 2015 and 2014, respectively. The amount of consolidated reinvested earnings that represents undistributed earnings of investments accounted for under the equity method as of December 31, 2016 was $3,839 million.