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

Annual report pursuant to Section 13 and 15(d)

OPERATING SEGMENTS

OPERATING SEGMENTS

12 Months Ended

Dec. 31, 2019

Operations, Reportable Information, by Operating Segment

Our organizational structure consists of the following operating segments: Europe, Middle East and Africa; Latin America; North America; Asia Pacific; Global Ventures and Bottling Investments. Our operating structure also includes 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 Global Ventures operating segment includes the results of our Costa, innocent and doğadan businesses as well as fees earned pursuant to distribution coordination agreements between the Company and Monster. Our Bottling Investments operating segment is composed of our Company-owned or consolidated bottling 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,	2019		2018		2017
Concentrate operations	55	%	58	%	50	%
Finished product operations	45		42		50
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 and certain treasury-related items, such as interest income and expense, on a global basis within Corporate. We evaluate segment performance based primarily on net operating revenues and operating income (loss).

Geographic Data

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



Year Ended December 31,	2019		2018		2017
United States	$	11,715	$	11,344	$	14,727
International	25,551		22,956		21,485
Net operating revenues	$	37,266	$	34,300	$	36,212

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



Year Ended December 31,	2019		2018		2017
United States	$	4,062	$	4,154	$	4,163
International	6,776		5,444		5,475
Property, plant and equipment — net	$	10,838	$	9,598	$	9,638

Information about our Company's operations by operating segment and Corporate as of and for the years ended December 31, 2019, 2018 and 2017 is as follows (in millions):



	Europe, Middle East & Africa			Latin America			North America			Asia Pacific		Global Ventures			Bottling Investments				Corporate			Eliminations			Consolidated
2019
Net operating revenues:
Third party	$	6,434		$	4,118		$	11,906		$	4,723	$	2,560		$	7,431			$	94		$	—		$	37,266
Intersegment	624			—			9			604		2			9				—			(1,248		)	—
Total net operating revenues	7,058			4,118			11,915			5,327		2,562			7,440				94			(1,248		)	37,266
Operating income (loss)	3,551			2,375			2,594			2,282		334			358				(1,408		)	—			10,086
Interest income	—			—			65			—		12			—				486			—			563
Interest expense	—			—			—			—		—			—				946			—			946
Depreciation and amortization	86			35			439			31		117			446				211			—			1,365
Equity income (loss) — net	35			(32		)	(6		)	11		(3		)	836				208			—			1,049
Income (loss) before income taxes	3,361			2,288			2,592			2,310		343			716				(824		)	—			10,786
Identifiable operating assets	8,143		¹	1,801			17,687			2,060		7,265			11,170			¹	18,376			—			66,502
Investments²	543			716			358			224		14			14,093				3,931			—			19,879
Capital expenditures	108			140			392			47		209			836				322			—			2,054
2018
Net operating revenues:
Third party	$	6,535		$	3,971		$	11,370		$	4,797	$	767		$	6,768			$	92		$	—		$	34,300
Intersegment	564			39			260			388		3			19				—			(1,273		)	—
Total net operating revenues	7,099			4,010			11,630			5,185		770			6,787				92			(1,273		)	34,300
Operating income (loss)	3,693			2,318			2,318			2,271		152			(197		)		(1,403		)	—			9,152
Interest income	—			—			57			—		13			—				619			—			689
Interest expense	—			—			—			—		—			—				950			—			950
Depreciation and amortization	77			30			422			58		8			239				252			—			1,086
Equity income (loss) — net	2			(19		)	(2		)	12		—			828				187			—			1,008
Income (loss) before income taxes	3,386			2,243			2,345			2,298		165			(159		)		(2,053		)	—			8,225
Identifiable operating assets	7,414		¹	1,715			17,519			1,996		968			10,525			¹	22,800			—			62,937
Investments²	789			784			400			216		—			14,372				3,718			—			20,279
Capital expenditures	66			90			429			31		11			517				404			—			1,548
2017
Net operating revenues:
Third party	$	6,780		$	3,953		$	8,678		$	4,753	$	712		$	11,223			$	113		$	—		$	36,212
Intersegment	42			73			1,951			409		3			83				—			(2,561		)	—
Total net operating revenues	6,822			4,026			10,629			5,162		715			11,306				113			(2,561		)	36,212
Operating income (loss)	3,585			2,215			2,472			2,136		159			(806		)		(2,006		)	—			7,755
Interest income	—			—			36			—		9			—				634			—			679
Interest expense	—			—			—			—		—			—				853			—			853
Depreciation and amortization	86			37			411			65		5			454				202			—			1,260
Equity income (loss) — net	49			(3		)	(3		)	11		—			878				140			—			1,072
Income (loss) before income taxes	3,666			2,209			2,192			2,168		167			(2,202		)		(1,310		)	—			6,890
Capital expenditures	77			55			541			50		4			737				286			—			1,750

¹Property, plant and equipment — net in South Africa represented 16 percent and 14 percent of consolidated property, plant and equipment — net in 2019 and 2018, respectively.

²Principally equity method investments and other investments in bottling companies.

During 2019, 2018 and 2017, our operating segments and Corporate were impacted by acquisition and divestiture activities. Refer to Note 2.

In 2019, the results of our operating segments and Corporate were impacted by the following items:


•	Operating income (loss) and income (loss) before income taxes were reduced by $2 million for Europe, Middle East and Africa, $1 million for Latin America, $62 million for North America, $5 million for Bottling Investments and $194 million for Corporate due to the Company's productivity and reinvestment program. Refer to Note 20.


•	Operating income (loss) and income (loss) before income taxes were reduced by $95 million for Bottling Investments due to costs incurred to refranchise certain of our North America bottling operations.


•	Operating income (loss) and income (loss) before income taxes were reduced by $46 million for Corporate related to transaction costs associated with the purchase of Costa, which we acquired in January 2019. Refer to Note 2.


•	Operating income (loss) and income (loss) before income taxes were reduced by $42 million for Asia Pacific due to an impairment charge related to a trademark. Refer to Note 18.


•	Income (loss) before income taxes was increased by $739 million for Corporate as a result of the sale of a retail and office building in New York City.


•	Income (loss) before income taxes was increased by $250 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) before income taxes was increased by $73 million for Bottling Investments due to the refranchising of certain bottling operations in India. Refer to Note 2.


•	Income (loss) before income taxes was increased by $39 million for Corporate related to the sale of a portion of our equity ownership interest in Andina. Refer to Note 2.


•	Income (loss) before income taxes was reduced by $406 million for Bottling Investments, $255 million for Europe, Middle East and Africa, $57 million for North America and $49 million for Latin America due to other-than-temporary impairment charges related to certain of our equity method investees. Refer to Note 18.


•	Income (loss) before income taxes was reduced by $160 million for Corporate as a result of CCBA asset adjustments. Refer to Note 2.


•	Income (loss) before income taxes was reduced by $118 million for Corporate resulting from a net loss in conjunction with our acquisition of the remaining equity ownership interest in CHI. Refer to Note 2.


•	Income (loss) before income taxes was reduced by $105 million for Bottling Investments due to the refranchising of certain bottling territories in North America. Refer to Note 2.


•	Income (loss) before income taxes was reduced by $98 million for Bottling Investments and $2 million for Corporate due to the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.

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

•

Operating income (loss) and income (loss) 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) 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 15 and Note 20.


•	Operating income (loss) and income (loss) before income taxes were reduced by $450 million for Bottling Investments due to asset impairment charges. Refer to Note 18.


•	Operating income (loss) and income (loss) 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) before income taxes were reduced by $33 million for Corporate due to tax litigation expense. Refer to Note 13.


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


•	Income (loss) 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) 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) 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 12.


•	Income (loss) before income taxes was reduced by $554 million for Corporate as a result of an impairment charge related to assets held by CCBA. Refer to Note 18.


•	Income (loss) 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) 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 18.


•	Income (loss) 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) 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) before income taxes was reduced by $149 million for Bottling Investments due to pension settlements related to the refranchising of certain of our North America bottling operations. Refer to Note 15.


•	Income (loss) before income taxes was reduced by $79 million for Corporate related to economic hedging activity associated with the purchase of Costa, which we acquired in January 2019.


•	Income (loss) 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) 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) 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.

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

•

Operating income (loss) and income (loss) 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) 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 15 and Note 20.


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


•	Operating income (loss) was reduced by $280 million and income (loss) 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) 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) before income taxes were reduced by $67 million for Corporate due to tax litigation expense. Refer to Note 13.


•	Income (loss) 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 19.


•	Income (loss) 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) 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) 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.


•	Income (loss) 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) 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) 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.


•	Income (loss) before income taxes was reduced by $38 million for Corporate due to the early extinguishment of long-term debt. Refer to Note 12.


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

•

Income (loss) 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.