The Coca-Cola Company Reports Third Quarter and Year-to-Date 2014 Results

Global volume growth of 1% in the quarter and 2% year to date
Global volume and value share gains in nonalcoholic ready-to-drink beverages

Expands productivity initiatives with $3 billion in annualized savings by 2019

Third Quarter and Year-to-Date 2014 Highlights

• Reported net revenues were even in the quarter and declined 2% year to date. Excluding the impact of structural changes, comparable currency neutral net revenues grew 1% in the quarter and 2% year to date.
• Global unit case volume grew 1% in the quarter and 2% year to date. Coca-Cola International volume grew 1% in the quarter while North America volume declined 1%.
• Global price/mix increased 1% in both the quarter and year to date.
• Reported operating income increased 10% in the quarter and 2% year to date. Excluding the impact of structural changes, comparable currency neutral operating income grew 5% in both the quarter and year to date, while the Company continued to invest for growth in its brands with its global system partners.
• Third quarter reported EPS was $0.48, a decline of 13%, and comparable EPS was $0.53, even with the prior year quarter. Comparable currency neutral EPS increased 6%.
• Year-to-date cash from operations was $8.0 billion.

ATLANTA--(BUSINESS WIRE)-- The Coca-Cola Company today reported third quarter and year-to-date 2014 operating results. Muhtar Kent, Chairman and Chief Executive Officer of The Coca-Cola Company said, “Earlier this year, we announced five strategic priorities to restore momentum and reinvigorate long-term sustainable growth. While we have begun to see early signs of progress, we recognize that we need to increase the scope and pace of change as we continue to face a challenging macroeconomic environment. We are therefore taking actions to strengthen our long-term financial performance, including further aligning our organization and our incentive plans to drive revenue and profit growth, increasing our productivity target to $3 billion in annualized savings by 2019, streamlining and simplifying our organization, and proceeding with plans for refranchising the majority of Company-owned North American bottling territories by the end of 2017. While these actions will take time to implement, we are confident that they will position The Coca-Cola Company to continue delivering sustainable value to our shareowners as we work toward our 2020 Vision.”

PERFORMANCE HIGHLIGHTS

• The Coca-Cola Company reported global volume growth of 1% in the third quarter and 2% year to date and gained volume and value share in nonalcoholic ready-to-drink (NARTD) beverages in the quarter.
• Global sparkling beverage volume was even in the quarter and grew 1% year to date as a challenging macroeconomic environment, adverse weather in certain regions and competitive pressures in certain markets impacted results. However, on a global basis the Company gained volume and value share in core sparkling beverages in the quarter due, in part, to successful execution of the Share a Coke marketing campaign in many markets around the world. Worldwide brand Coca-Cola volume was even in the quarter while Sprite and Fanta both grew 1%.
• The Company reported progress in certain key markets during the quarter despite a challenging macroeconomic environment. In North America, a rational approach to pricing, incremental media investments, high quality marketing programs, and disciplined price/pack strategies emphasizing small packages drove incidence and revenue growth in sparkling beverages. In key emerging markets, including India, Sub-Saharan Africa and the Middle East, our incremental media investments are driving recruitment with solid net revenue and volume growth. This gives us confidence that when we invest in our brands, align on a system plan and focus on execution, we see positive results.
• Worldwide still beverage volume grew 2% in the quarter and 5% year to date, with tea contributing 4% volume growth in the quarter and both water and energy drinks volume growing 7%. Volume growth in these beverage categories was partially offset by a decline in juices and juice drinks, due in part to price increases to cover higher input costs in North America, and a decline in sports drinks. The Company maintained global volume share while gaining global value share in total still beverages in the quarter and gained value share in juices and juice drinks, ready-to-drink tea, energy drinks and packaged water.
• After adjusting for structural changes, the Company delivered comparable currency neutral net revenue growth of 1% in the quarter, capturing global price/mix of 1%. On a year-to-date basis, comparable currency neutral net revenues grew 2% after adjusting for structural changes.
• Excluding the impact of structural changes, comparable currency neutral operating income grew 5% in the quarter and year to date, while the Company increased its media investments by double digits as compared to the prior year.
• The Company generated $8.0 billion in cash from operations year to date enabling it to pay a healthy dividend, reinvest in the business and return $1.9 billion to its shareowners through net share repurchases. The Company is now targeting full-year 2014 net share repurchases of $2.5 billion.

OPERATING REVIEW

* Represents the percent change in net revenues attributable to the increase (decrease) in concentrate sales volume for our geographic operating segments (expressed in equivalent unit cases) after considering the impact of structural changes. For our Bottling Investments operating segment, this represents the percent change in net revenues attributable to the increase (decrease) in unit case volume after considering the impact of structural changes. Our Bottling Investments operating segment data reflects unit case volume growth for consolidated bottlers only and is computed on a reported basis.

OPERATING REVIEW (CONTINUED)

*Represents the percent change in net revenues attributable to the increase (decrease) in concentrate sales volume for our geographic operating segments (expressed in equivalent unit cases) after considering the impact of structural changes. For our Bottling Investments operating segment, this represents the percent change in net revenues attributable to the increase (decrease) in unit case volume after considering the impact of structural changes. Our Bottling Investments operating segment data reflects unit case volume growth for consolidated bottlers only and is computed on a reported basis.

EURASIA AND AFRICA

• Volume grew 5% in the Eurasia and Africa Group in the quarter leading to volume and value share gains in NARTD beverages. With the exception of the Russia, Ukraine and Belarus business unit, where volume declined 3%, the Company experienced solid volume growth across the group in the quarter driven by activation of the Share a Coke campaign, increased media investments, new packaging introductions and targeted investments in cold-drink equipment. Volume grew high single digits in both the Middle East & North Africa and Central, East & West Africa business units. Sparkling beverage volume grew 5% in the quarter, led by brand Coca-Cola, which helped the Company capture sparkling volume share. Still beverage volume grew 6% in the quarter, leading to volume and value share gains.
• Reported operating income grew 15% in the quarter, which included a 9 point headwind from foreign currency. Comparable currency neutral operating income grew 24% reflecting strong net revenue growth, with a good balance of volume and price/mix, and positive operating leverage. Increased brand investments were partially offset by efficient management and timing of operating expenses. Growth in concentrate sales lagged growth in unit case sales due to the timing of shipments in the Middle East & North Africa business unit last year.

EUROPE

• Top-line results in Europe were impacted by a 5% decrease in volume in the quarter as poor weather, competitive pressures and a deteriorating macroeconomic environment negatively impacted sales. Sparkling beverages declined mid single digits while still beverage volume declined low single digits. Volume in the Germany and Iberia business units declined 1% and 2%, respectively, in the quarter, yet Germany gained volume and value share in NARTD beverages due to successful marketing campaigns, price/pack architecture enhancements and solid marketplace execution. The Company continues to innovate and to expand its premium brand portfolio, as demonstrated by the launch of Coca-Cola Life and smartwater in Great Britain during the quarter. The Europe Group maintained value share in still beverages benefiting from gains in juices and juice drinks as well as sports drinks.
• Reported operating income grew 1% in the quarter, which included a 2 point benefit from foreign currency. Comparable currency neutral operating income was even in the quarter, reflecting a 2% decline in currency neutral net revenues offset by positive operating leverage. Currency neutral net revenues were negatively impacted by a decrease in concentrate sales which was partially offset by a 3% increase in price/mix. Both the decrease in concentrate sales and positive price/mix were largely attributable to price increases in certain markets within the Northwest Europe & Nordics and Central & Southern Europe business units. The positive operating leverage was primarily due to the timing of operating and marketing expenses.

LATIN AMERICA

• Latin America top-line results were driven by volume growth of 2% in the quarter as sports drinks, water, tea and dairy contributed to still beverage volume growth of 9% while sparkling beverage volume, including brand Coca-Cola, was even. The Latin Center business unit delivered strong volume growth of 7% in the quarter, while the Mexico and South Latin business units grew 2% and 1%, respectively. Volume declined 1% in Brazil in the quarter. Affordability strategies, including returnable PET and entry level packages, are helping to mitigate the impact of high inflation and declining consumer confidence in key markets and leading to immediate consumption packages outperforming future consumption packages in sparkling beverages in Latin America.
• Reported operating income decreased 9% in the quarter, which included a 6 point headwind from foreign currency. Comparable currency neutral operating income decreased 4% as strong price/mix and growth in concentrate sales were offset by increased marketing investments and the provision enacted in Venezuela earlier this year that imposes a maximum threshold for profit margins. The strong price/mix reflects positive pricing in the Mexico, Brazil and South Latin business units.

NORTH AMERICA

• In North America, a rational approach to pricing, incremental media investments, high quality marketing programs and disciplined price/pack strategies emphasizing small packages drove incidence and revenue growth in sparkling beverages as well as value share gains in NARTD beverages for the 18^th consecutive quarter. Immediate consumption packages outperformed future consumption packages in sparkling beverages, reflecting our emphasis on recruiting new consumers by offering a variety of entry level packages. Sparkling beverage volume declined 1% in the quarter while sparkling price/mix grew a solid 3% due to strong pricing and the performance of our smaller size packages. A successful Share a Coke campaign activation helped the Company gain value share in the competitive sparkling beverage segment, resulting in the ninth consecutive quarter in which the Company gained or maintained sparkling value share. Still beverage volume declined 1%, while the Company gained value share in still beverages, making this the 29^th consecutive quarter that the still beverage portfolio has either gained or maintained value share. Volume growth in tea, energy drinks and water was offset by declines in juices and juice drinks as well as sports drinks.

• Reported net revenues decreased 2% in the quarter, which included a 2 point headwind from structural items related to refranchised territories and changes to our process of buying and selling recyclable materials. Positive price/mix of 1% was offset by a decrease in volume. Reported operating income decreased 5%, which included items impacting comparability, principally net gains/losses related to economic hedges. Comparable currency neutral operating income decreased 1%, primarily driven by increased brand investments and the impact of structural items, partially offset by gross margin expansion.

ASIA PACIFIC

• Asia Pacific volume grew 2% in the quarter, with 3% sparkling beverage growth and even still beverage volume, leading to volume and value share gains in NARTD beverages as the Company continued to focus on its recruitment strategy. Among key markets, India delivered volume and value share gains with double-digit volume growth, while China and Japan also delivered volume and value share gains despite volume declines of 1% and 4%, respectively, in the quarter. Although weather was a benefit in India, it negatively impacted the Company’s performance in China and Japan as both countries experienced an unseasonably cool summer. China delivered brand Coca-Cola volume growth of 4% and benefited from the launch of Schweppes C+ earlier in the year, while Japan grew water and tea volume through innovations including I LOHAS Sparkling and a milder green tea formulation for Ayataka.
• Reported operating income increased 11% in the quarter, which included a 6 point headwind from foreign currency. Additionally, reported net revenue and operating income growth reflect a benefit from items impacting comparability as the Company cycled the deferral of revenue and gross profit associated with the intercompany portion of concentrate sales to Coca-Cola East Japan (CCEJ) following the closing of the merger of four of the Company’s bottling partners to create CCEJ on July 1, 2013. Comparable currency neutral operating income increased 5%, driven by 4% growth in concentrate sales partially offset by 1 point of negative price/mix in the quarter. Growth in concentrate sales was ahead of growth in unit case sales for the quarter, primarily due to the timing of shipments, but are in line on a year-to-date basis.

BOTTLING INVESTMENTS

• Bottling Investments Group (BIG) volume grew 1% in the quarter after adjusting for the impact of the restructuring of Company-owned juice operations in Russia.
• Reported operating income decreased 39% in the quarter while comparable currency neutral operating income decreased 2%.

FINANCIAL REVIEW

Summary of Third Quarter 2014 Financial Performance

• Reported financial performance for the third quarter included the impact of certain structural changes, primarily the refranchising of territories in North America to certain unconsolidated bottling partners, changes in our process of buying and selling recyclable materials in North America, and lower revenues and operating income in the Company's Venezuelan business.  As disclosed last quarter, the Venezuelan government enacted a new provision that imposed a maximum threshold for profit margins.
• Reported net revenues were even. Excluding the impact of structural changes, comparable currency neutral net revenues grew 1%, reflecting 1% concentrate sales growth and 1% positive price/mix. Concentrate sales growth and unit case volume growth were in line during the quarter.
• Reported gross profit increased 1%. Excluding the impact of structural changes, comparable currency neutral gross profit increased 4%, driven by net revenue growth and gross margin expansion due to geographic mix and a slight tailwind from commodity costs.
• Reported operating income grew 10%. Excluding the impact of structural changes, comparable currency neutral operating income increased 5%, which was slightly ahead of gross profit growth. The 1 point of operating expense leverage reflects a double-digit increase in media investments offset by the efficient management of operating expenses and the reversal of certain expenses related to the Company’s long-term incentive plans. Structural changes were a 2 point headwind and foreign currency was a 3 point headwind on operating income during the quarter. Items impacting comparability reduced third quarter 2014 reported operating income by $129 million and reduced third quarter 2013 reported operating income by $376 million.
• Although the currency headwind on operating income was in line with the outlook provided last quarter, foreign currency unfavorably impacted EPS by 6 points due to additional currency headwinds related to remeasurement gains/losses recorded in the line item Other income (loss) - net.
• Reported EPS was $0.48 and comparable EPS was $0.53. Items impacting comparability reduced third quarter 2014 reported EPS by a net $0.05 and increased third quarter 2013 reported EPS by a net $0.01. Comparable currency neutral EPS increased 6% during the quarter.
• The reported effective tax rate for the third quarter was 20.2%, while the underlying effective tax rate on operations for the quarter was 22.5%. The variance between the reported rate and the underlying rate was due to the tax effect of various items impacting comparability, separately disclosed in this document in the Reconciliation of GAAP and Non-GAAP Financial Measures schedule. The underlying effective tax rate does not reflect the impact of significant or unusual items and discrete events, which, if and when they occur, are separately recognized in the appropriate period.

• Year-to-date cash from operations was $8.0 billion, up 3%, primarily due to cycling incremental pension contributions last year and the efficient management of working capital, partially offset by an unfavorable impact from foreign currency exchange rates and the deconsolidation of the Company’s Brazilian bottling operations in July 2013.
• Year-to-date net share repurchases totaled $1.9 billion.

2014 OUTLOOK

• We expect the impact of structural items to be a 1 to 2 point headwind on net revenues and an approximate 2 point headwind on operating income during the fourth quarter of 2014.
• We continue to expect fluctuations in currency exchange rates to have an unfavorable impact on our reported results in 2014. Based on current spot rates, our existing hedge positions, and the cycling of our prior year rates, we expect an approximate 7 point headwind on operating income during the fourth quarter of 2014. We now estimate currency will be a 6 point headwind on our full-year operating income, which is at the high end of the outlook we provided last quarter.
• We continue to expect operating leverage to be flat to slightly positive for the full year.
• We are now targeting full-year 2014 net share repurchases of $2.5 billion.
• Given the above, the Company expects to be below its long-term EPS growth target for 2014.

ITEMS IMPACTING COMPARABILITY

• For details on items impacting comparability in the quarter, see the Reconciliation of GAAP and Non-GAAP Financial Measures schedule.

NOTES

• All references to growth rate percentages and share compare the results of the period to those of the prior year comparable period.
• “Concentrate sales” represents the amount of concentrates, syrups, beverage bases and powders sold by, or used in finished beverages sold by, the Company to its bottling partners or other customers.
• “Sparkling beverages” means NARTD beverages with carbonation, including carbonated energy drinks and waters.
• “Still beverages” means nonalcoholic beverages without carbonation, including noncarbonated waters, flavored waters and enhanced waters, juices and juice drinks, teas, coffees, sports drinks and noncarbonated energy drinks.
• All references to volume and volume percentage changes indicate unit case volume, unless otherwise noted. All volume percentage changes are computed based on average daily sales, unless otherwise noted. “Unit case” means a unit of measurement equal to 24 eight-ounce servings of finished beverage. “Unit case volume” means the number of unit cases (or unit case equivalents) of Company beverages directly or indirectly sold by the Company and its bottling partners to customers.
• First quarter 2014 financial results were impacted by one less selling day, and fourth quarter 2014 financial results will be impacted by one additional selling day. Unit case volume results for the quarters are not impacted by the variance in selling days due to the average daily sales computation referenced above.
• As previously announced, effective Jan. 1, 2014, the Company renamed the Company’s Pacific operating segment the Asia Pacific operating segment.
• The Company reports its financial results in accordance with accounting principles generally accepted in the United States (GAAP). However, management believes that certain non-GAAP financial measures provide users with additional meaningful financial information that should be considered when assessing the Company’s ongoing performance. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company's performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. The Company’s non-GAAP financial information does not represent a comprehensive basis of accounting.

CONFERENCE CALL

We are hosting a conference call with investors and analysts to discuss third quarter and year-to-date 2014 results today, Oct. 21, 2014 at 9:30 a.m. EDT. We invite investors to listen to a live audiocast of the conference call at our website, http://www.coca-colacompany.com in the “Investors” section. Supplemental materials that support the prepared remarks for the conference call will also be available for download. A replay in downloadable MP3 format and a transcript of the call will also be available within 24 hours after the audiocast on the Company’s website. Further, the “Investors” section of the website includes a reconciliation of non-GAAP financial measures, which may be used periodically by management when discussing financial results with investors and analysts, to the Company’s results as reported under GAAP.

During the three months ended September 26, 2014, the results of our operating segments were impacted by the following items:

• Intersegment revenues were $187 million for Europe, $16 million for Latin America, $3 million for North America, $154 million for Asia Pacific and $19 million for Bottling Investments.
• Operating income (loss) and income (loss) before income taxes were reduced by $1 million for Eurasia and Africa, $2 million for Europe, $59 million for North America, $2 million for Asia Pacific, $34 million for Bottling Investments and $20 million for Corporate due to charges related to the Company's productivity and reinvestment program as well as other restructuring initiatives.
• Operating income (loss) and income (loss) before income taxes were reduced by $7 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.
• Operating income (loss) and income (loss) before income taxes were reduced by $1 million for Asia Pacific due to a charge associated with certain of the Company's fixed assets.
• Operating income (loss) and income (loss) before income taxes were reduced by $7 million for Corporate due to a charge related to our indemnification of a previously consolidated entity.
• Income (loss) before income taxes was reduced by $270 million for North America due to the refranchising of certain territories.
• Income (loss) before income taxes was reduced 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.

During the three months ended September 27, 2013, the results of our operating segments were impacted by the following items:

• Intersegment revenues were $188 million for Europe, $22 million for Latin America, $4 million for North America, $128 million for Asia Pacific and $21 million for Bottling Investments.
• Operating income (loss) and income (loss) before income taxes were reduced by $1 million for Europe, $53 million for North America, $2 million for Asia Pacific, $45 million for Bottling Investments and $41 million for Corporate due to charges related to the Company's productivity and reinvestment program as well as other restructuring initiatives. Operating income (loss) and income (loss) before income taxes were increased by $2 million for North America due to the refinement of previously established accruals related to the Company's integration of Coca-Cola Enterprises' ("CCE") former North America business.
• Operating income (loss) and income (loss) before income taxes was reduced by $190 million for Corporate due to impairment charges recorded on certain of the Company's intangible assets.
• Operating income (loss) and income (loss) before income taxes were reduced by $11 million for Asia Pacific due to a charge associated with certain of the Company's fixed assets.
• 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.
• Income (loss) before income taxes was increased by $30 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.
• Income (loss) before income taxes was 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.

During the nine months ended September 26, 2014, the results of our operating segments were impacted by the following items:

• Intersegment revenues were $530 million for Europe, $46 million for Latin America, $13 million for North America, $432 million for Asia Pacific and $53 million for Bottling Investments.
• Operating income (loss) and income (loss) before income taxes were reduced by $1 million for Eurasia and Africa, $2 million for Europe, $192 million for North America, $10 million for Asia Pacific, $142 million for Bottling Investments and $54 million for Corporate due to charges related to the Company's productivity and reinvestment program as well as other restructuring initiatives.
• Operating income (loss) and income (loss) before income taxes were reduced by $32 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.
• Operating income (loss) and income (loss) before income taxes were reduced by $1 million for Asia Pacific due to a charge associated with certain of the Company's fixed assets.

• Operating income (loss) and income (loss) before income taxes were reduced by $7 million for Corporate due to a charge related to our indemnification of a previously consolidated entity.
• Income (loss) before income taxes was reduced by $410 million for North America due to the refranchising of certain territories.
• Income (loss) before income taxes was reduced by $21 million for Bottling Investments and $247 million for Corporate due to the devaluation of the Venezuelan bolivar, including a write-down of receivables related to concentrate sales to our bottling partner in Venezuela as well as our proportionate share of the charge incurred by this bottler, an equity method investee.
• Income (loss) before income taxes was reduced by $20 million for Bottling Investments due to the Company's proportionate share of unusual or infrequent items recorded by certain of our equity method investees.

During the nine months ended September 27, 2013, the results of our operating segments were impacted by the following items:

• Intersegment revenues were $520 million for Europe, $169 million for Latin America, $13 million for North America, $431 million for Asia Pacific and $61 million for Bottling Investments.
• Operating income (loss) and income (loss) before income taxes were reduced by $2 million for Eurasia and Africa, $7 million for Europe, $190 million for North America, $16 million for Asia Pacific, $86 million for Bottling Investments and $97 million for Corporate due to charges related to the Company's productivity and reinvestment program as well as other restructuring initiatives. Operating income (loss) and income (loss) before income taxes were increased by $2 million for North America due to the refinement of previously established accruals related to the Company's integration of CCE's former North America business. Operating income (loss) and income (loss) before income taxes were increased by $1 million for Asia Pacific and $1 million for Corporate due to the refinement of previously established accruals related to the Company's 2008-2011 productivity initiatives.
• Operating income (loss) and income (loss) before income taxes was reduced by $190 million for Corporate due to impairment charges recorded on certain of the Company's intangible assets.
• Operating income (loss) and income (loss) before income taxes were reduced by $11 million for Asia Pacific due to a charge associated with certain of the Company's fixed assets.
• Operating income (loss) and income (loss) before income taxes were reduced by $7 million for Corporate due to transaction costs associated with certain of the Company's bottling partners.
• Operating income (loss) and income (loss) before income taxes were increased by $3 million for North America due to the refinement of previously established accruals related to the loss or damage of certain fixed assets as a result of Hurricane Sandy.
• 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.
• 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 which has operations in Venezuela.
• Income (loss) before income taxes was reduced by a net $114 million for Corporate due to charges related to the merger of four of the Company's Japanese bottling partners in which we held equity method investments prior to their merger.
• 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 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 $25 million for Bottling Investments due to the Company’s proportionate share of unusual or infrequent items recorded by certain of our equity method investees.
• Income (loss) before income taxes was reduced by $23 million for Corporate due to a charge the Company recognized on the early extinguishment of certain long-term debt.

The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP" or referred to herein as "reported"). However, management believes that certain non-GAAP financial measures provide users with additional meaningful financial information that should be considered when assessing our ongoing performance. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company's performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP. Our non-GAAP financial information does not represent a comprehensive basis of accounting.

ITEMS IMPACTING COMPARABILITY

The following information is provided to give qualitative and quantitative information related to items impacting comparability. Items impacting comparability are not defined terms within GAAP. Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies. We determine which items to consider as "items impacting comparability" based on how management views our business; makes financial, operating and planning decisions; and evaluates the Company's ongoing performance. Items such as charges, gains and accounting changes which are viewed by management as impacting only the current period or the comparable period, but not both, or as relating to different and unrelated underlying activities or events across comparable periods, are generally considered "items impacting comparability". In addition, we provide the impact that changes in foreign currency exchange rates had on our financial results ("currency neutral").

Asset Impairments and Restructuring

Asset Impairments

During the three and nine months ended September 27, 2013, the Company recorded charges of $190 million related to certain intangible assets. These charges included $108 million related to the impairment of trademarks recorded in our Bottling Investments and Pacific operating segments. These impairments were primarily due to a strategic decision to phase out certain local-market value brands which resulted in a change in the expected useful life of the intangible assets. The charges were determined by comparing the fair value of the trademarks, derived using discounted cash flow analyses, to the current carrying value. Additionally, the remaining charge of $82 million was related to goodwill recorded in our Bottling Investments operating segment. This charge was primarily the result of management's revised outlook on market conditions and volume performance. The total impairment charges of $190 million were recorded in our Corporate operating segment.

Restructuring

During the three and nine months ended September 26, 2014, the Company recorded charges of $34 million and $142 million, respectively. The Company also recorded charges of $45 million and $86 million during the three and nine months ended September 27, 2013, respectively. These charges were primarily related to the integration of our German bottling and distribution operations.

Productivity and Reinvestment

During the three and nine months ended September 26, 2014, the Company recorded charges of $84 million and $259 million, respectively. The Company also recorded charges of $97 million and $312 million during the three and nine months ended September 27, 2013, respectively. These charges were related to our productivity and reinvestment program. 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 further integration of CCE's former North America business.

In February 2014, the Company announced that we are expanding our productivity and reinvestment program to drive an incremental $1 billion in productivity by 2016 that will primarily be redirected into increased media investments. Our incremental productivity goal consists of two relatively equal components. First, expanded savings through global supply chain optimization, data and information technology system standardization, and resource and cost reallocation. These savings will be reinvested in global brand-building initiatives, with an emphasis on increased media spending. Second, we will be increasing 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.

Equity Investees

During the three and nine months ended September 26, 2014, the Company recorded net charges of $8 million and $20 million, respectively. During the three and nine months ended September 27, 2013, the Company recorded a net gain of $8 million and a net charge of $25 million, respectively. These amounts represent the Company’s proportionate share of unusual or infrequent items recorded by certain of our equity method investees.

Transaction Gains/Losses

During the three and nine months ended September 26, 2014, the Company recorded charges of $270 million and $410 million, respectively, primarily due to the derecognition of intangible assets relating to the refranchising of territories in North America to certain of its unconsolidated bottling partners. These charges include $236 million related to assets classified as held for sale as a result of the Company entering into definitive agreements during the three months ended September 26, 2014, to refranchise additional territories. Under the terms of the new agreements, the bottlers will purchase finished products from the Company for distribution in these newly granted territories. In exchange for the grant of the exclusive rights to distribute, promote, market and sell the Company's products in the assigned territories, the bottlers will make ongoing quarterly payments to the Company based on their future gross profit in these territories.

During the three and nine months ended September 26, 2014, the Company recorded a charge of $7 million associated with our indemnification of a previously consolidated entity. The impact of this charge effectively reduced the initial gain the Company recognized when we sold the entity.

During the three and nine months ended September 27, 2013, the Company recorded a gain of $615 million related to the deconsolidation of our Brazilian bottling operations upon their combination with an independent bottler. Subsequent to this transaction, the Company accounts for our investment in the newly combined Brazilian bottling operations under the equity method of accounting.

In 2012, four of the Company's Japanese bottling partners announced their intent to merge as Coca-Cola East Japan Bottling Company, Ltd. ("CCEJ"), a publicly traded entity, through a share exchange. The merger was completed effective July 1, 2013. The terms of the merger agreement included the issuance of new shares of one of the publicly traded bottlers in exchange for 100 percent of the outstanding shares of the remaining three bottlers according to an agreed upon share exchange ratio. As a result, the Company recorded a gain of $30 million during the three months ended September 27, 2013, based on the value of the shares the Company received on July 1, 2013. This gain partially offset a loss the Company recorded during the second quarter of 2013 for those investments in which the Company's carrying value was higher than the fair value of the shares expected to be received. In total, the Company recorded a net loss of $114 million during the nine months ended September 27, 2013, related to our investment in the entities that merged to form CCEJ.

As a result of the transactions described above in Brazil and Japan, the Company recorded a charge of $60 million during the three and nine months ended September 27, 2013. This charge was due to the deferral of the revenue and corresponding gross profit associated with the intercompany portion of our concentrate sales to CCEJ and the newly combined Brazilian bottling operations until the finished beverage products made from those concentrates are sold to a third party.

In addition to the items above, during the nine months ended September 27, 2013, the Company recorded a gain of $139 million due to Coca-Cola FEMSA, S.A.B. de C.V. ("Coca-Cola FEMSA"), an equity method investee, issuing additional shares of its own stock during the period at a per share amount greater than the carrying value of the Company's per share investment, charges of $7 million due to transaction costs associated with certain of our bottling partners and a benefit of $1 million due to an adjustment to the Company's loss on the sale of a majority interest in our previously consolidated Philippine bottling operations to Coca-Cola FEMSA in January 2013.

Certain Tax Matters

During the three and nine months ended September 26, 2014, the Company recorded a net tax benefit of $29 million and a net tax charge of $2 million, respectively, related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties. During the three and nine months ended September 27, 2013, the Company recorded a net tax benefit of $20 million related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties.

Other Items

Economic (Nondesignated) Hedges

The Company uses derivatives as economic hedges primarily to mitigate the price risk associated with the purchase of materials used in the manufacturing process as well as the purchase of vehicle fuel. Although these derivatives were not designated and/or did not qualify for hedge accounting, they are effective economic hedges. The changes in fair values of these economic hedges are immediately recognized into earnings.

The Company excludes the net impact of mark-to-market adjustments for outstanding hedges and realized gains/losses for settled hedges from our non-GAAP financial information until the period in which the underlying exposure being hedged impacts our condensed consolidated statement of income. We believe this adjustment provides meaningful information related to the impact of our economic hedging activities. During the three months ended September 26, 2014 and September 27, 2013, the net impact of the Company's adjustment related to our economic hedging activities described above resulted in a decrease of $21 million and $25 million, respectively, to our non-GAAP income before income taxes. During the nine months ended September 26, 2014 and September 27, 2013, the net impact of the Company's adjustment related to our economic hedging activities described above resulted in a decrease of $120 million and an increase of $95 million, respectively, to our non-GAAP income before income taxes.

Hyperinflationary Economies

During the nine months ended September 26, 2014, the Company recorded charges of $268 million related to the devaluation of the Venezuelan bolivar, including a write-down of receivables related to concentrate sales to our bottling partner in Venezuela as well as our proportionate share of the charge incurred by this bottler, an equity method investee. During the nine months ended September 27, 2013, the Company recorded charges of $149 million related to the devaluation of the Venezuelan bolivar, including our proportionate share of the charge incurred by our bottling partner in Venezuela, an equity method investee.

Restructuring and Transitioning Russian Juice Operations

During the three and nine months ended September 26, 2014, the Company recorded losses of $5 million and $30 million, respectively, related to restructuring and transitioning its Russian juice operations to an existing joint venture with an unconsolidated bottling partner.

Early Extinguishment of Long-Term Debt

During the nine months ended September 27, 2013, the Company recorded a charge of $23 million due to the early extinguishment of certain long-term debt.

Impact of Natural Disasters

On October 29, 2012, Hurricane Sandy caused widespread flooding and wind damage across the mid-Atlantic region of the United States, primarily in New York and New Jersey. During the nine months ended September 27, 2013, the Company reversed charges of $3 million due to the refinement of previously established accruals related to the loss or damage of certain fixed assets resulting from the hurricane.

Fixed Assets

During the three and nine months ended September 26, 2014, the Company recorded a charge of $1 million associated with certain of the Company's fixed assets.

During the three and nine months ended September 27, 2013, the Company recorded a charge of $11 million associated with certain of the Company's fixed assets.

Currency Neutral

Management evaluates the operating performance of our Company and our international subsidiaries on a currency neutral basis. We determine our currency neutral operating results by dividing or multiplying, as appropriate, our current period actual U.S. dollar operating results by the current period actual exchange rates (that include the impact of current period currency hedging activities), to derive our current period local currency operating results. We then multiply or divide, as appropriate, the derived current period local currency operating results by the foreign currency exchange rates (that also include the impact of the comparable prior period currency hedging activities) used to translate the Company's financial statements in the comparable prior year period to determine what the current period U.S. dollar operating results would have been if the foreign currency exchange rates had not changed from the comparable prior year period.

Structural Changes

Structural changes generally refer to acquisitions or dispositions of bottling, distribution or canning operations and consolidation or deconsolidation of bottling and distribution entities for accounting purposes. In 2014, the Company refranchised territories in North America to certain of its unconsolidated bottling partners; changed our process of buying and selling recyclable materials in North America; was impacted by a new provision enacted by the Venezuelan government which imposes a maximum threshold for profit margins; and restructured and transitioned its Russian juice operations to an existing joint venture with an unconsolidated bottling partner. In 2013, the Company acquired bottling operations in Myanmar and deconsolidated our Philippine and Brazilian bottling operations. Accordingly, these activities have been included as structural items in our analysis of the impact of these changes on certain line items in our condensed consolidated statements of income.