Edgar Filing: COCA COLA CO

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 29, 2019

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-02217

(Exact name of Registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)		58-0628465 (I.R.S. Employer Identification No.)
One Coca-Cola Plaza Atlanta, Georgia (Address of principal executive offices)		30313 (Zip Code)

Registrant's telephone number, including area code: (404) 676-2121

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer ý			Accelerated filer o
Non-accelerated filer o			Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark if the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.



Class of Common Stock		Outstanding as of April 22, 2019
$0.25 Par Value		4,266,115,111 Shares

THE COCA-COLA COMPANY AND SUBSIDIARIES

Table of Contents



		Page
	Forward-Looking Statements	1

	Part I. Financial Information

Item 1.	Financial Statements (Unaudited)	2

	Condensed Consolidated Statements of Income Three Months Ended March 29, 2019 and March 30, 2018	2

	Condensed Consolidated Statements of Comprehensive Income Three Months Ended March 29, 2019 and March 30, 2018	3

	Condensed Consolidated Balance Sheets March 29, 2019 and December 31, 2018	4

	Condensed Consolidated Statements of Cash Flows Three Months Ended March 29, 2019 and March 30, 2018	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57

Item 4.	Controls and Procedures	57

	Part II. Other Information

Item 1.	Legal Proceedings	57

Item 1A.	Risk Factors	58

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59

Item 6.	Exhibits	59
	Signatures	62

FORWARD-LOOKING STATEMENTS

This report contains information that may constitute "forward-looking statements." Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to volume growth, share of sales and earnings per share growth, and statements expressing general views about future operating results — are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part II, "Item 1A. Risk Factors" and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2018, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

Part I. Financial Information

Item 1. Financial Statements (Unaudited)

THE COCA-COLA COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(In millions except per share data)



	Three Months Ended
	March 29, 2019			March 30, 2018
NET OPERATING REVENUES	$	8,020		$	7,626
Cost of goods sold	2,990			2,738
GROSS PROFIT	5,030			4,888
Selling, general and administrative expenses	2,567			2,541
Other operating charges	127			536
OPERATING INCOME	2,336			1,811
Interest income	129			165
Interest expense	232			230
Equity income (loss) — net	133			142
Other income (loss) — net	(234		)	(55		)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	2,132			1,833
Income taxes from continuing operations	486			506
NET INCOME FROM CONTINUING OPERATIONS	1,646			1,327
Income from discontinued operations (net of income taxes of $36 and $40, respectively)	57			73
CONSOLIDATED NET INCOME	1,703			1,400
Less: Net income attributable to noncontrolling interests	25			32
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY	$	1,678		$	1,368

Basic net income per share from continuing operations¹	$	0.39		$	0.31
Basic net income per share from discontinued operations²	0.01			0.01
BASIC NET INCOME PER SHARE³	$	0.39		$	0.32
Diluted net income per share from continuing operations¹	$	0.38		$	0.31
Diluted net income per share from discontinued operations²	0.01			0.01
DILUTED NET INCOME PER SHARE	$	0.39		$	0.32
AVERAGE SHARES OUTSTANDING — BASIC	4,271			4,265
Effect of dilutive securities	35			41
AVERAGE SHARES OUTSTANDING — DILUTED	4,306			4,306


¹	Calculated based on net income from continuing operations less net income from continuing operations attributable to noncontrolling interests.


²	Calculated based on net income from discontinued operations less net income from discontinued operations attributable to noncontrolling interests.


³	Per share amounts may not add due to rounding.

Refer to Notes to Condensed Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(In millions)



	Three Months Ended
	March 29, 2019			March 30, 2018
CONSOLIDATED NET INCOME	$	1,703		$	1,400
Other comprehensive income:
Net foreign currency translation adjustments	926			728
Net gains (losses) on derivatives	8			(16		)
Net unrealized gain (loss) on available-for-sale securities	15			(11		)
Net change in pension and other benefit liabilities	31			34
TOTAL COMPREHENSIVE INCOME	2,683			2,135
Less: Comprehensive income (loss) attributable to noncontrolling interests	(3		)	91
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY	$	2,686		$	2,044

Refer to Notes to Condensed Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In millions except par value)



	March 29, 2019			December 31, 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	5,645		$	8,926
Short-term investments	1,538			2,025
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS	7,183			10,951
Marketable securities	4,765			5,013
Trade accounts receivable, less allowances of $492 and $489, respectively	3,852			3,396
Inventories	3,178			2,766
Prepaid expenses and other assets	2,935			1,962
Assets held for sale — discontinued operations	6,627			6,546
TOTAL CURRENT ASSETS	28,540			30,634
EQUITY METHOD INVESTMENTS	19,283			19,407
OTHER INVESTMENTS	915			867
OTHER ASSETS	5,382			4,139
DEFERRED INCOME TAX ASSETS	2,617			2,667
PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation of $8,032 and $8,013, respectively	8,866			8,232
TRADEMARKS WITH INDEFINITE LIVES	9,351			6,682
BOTTLERS' FRANCHISE RIGHTS WITH INDEFINITE LIVES	111			51
GOODWILL	12,964			10,263
OTHER INTANGIBLE ASSETS	318			274
TOTAL ASSETS	$	88,347		$	83,216
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	10,986		$	8,932
Loans and notes payable	11,570			13,194
Current maturities of long-term debt	3,297			4,997
Accrued income taxes	255			378
Liabilities held for sale — discontinued operations	1,835			1,722
TOTAL CURRENT LIABILITIES	27,943			29,223
LONG-TERM DEBT	29,400			25,364
OTHER LIABILITIES	8,598			7,638
DEFERRED INCOME TAX LIABILITIES	2,602			1,933
THE COCA-COLA COMPANY SHAREOWNERS' EQUITY
Common stock, $0.25 par value; Authorized — 11,200 shares; Issued — 7,040 and 7,040 shares, respectively	1,760			1,760
Capital surplus	16,577			16,520
Reinvested earnings	63,704			63,234
Accumulated other comprehensive income (loss)	(12,325		)	(12,814		)
Treasury stock, at cost — 2,772 and 2,772 shares, respectively	(51,981		)	(51,719		)
EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY	17,735			16,981
EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS	2,069			2,077
TOTAL EQUITY	19,804			19,058
TOTAL LIABILITIES AND EQUITY	$	88,347		$	83,216

Refer to Notes to Condensed Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In millions)



	Three Months Ended
	March 29, 2019			March 30, 2018
OPERATING ACTIVITIES
Consolidated net income	$	1,703		$	1,400
(Income) loss from discontinued operations	(57		)	(73		)
Net income from continuing operations	1,646			1,327
Depreciation and amortization	275			270
Stock-based compensation expense	40			72
Deferred income taxes	110			(199		)
Equity (income) loss — net of dividends	(119		)	(43		)
Foreign currency adjustments	(39		)	(19		)
Significant (gains) losses — net	87			34
Other operating charges	55			510
Other items	122			(27		)
Net change in operating assets and liabilities	(1,478		)	(1,312		)
Net cash provided by operating activities	699			613
INVESTING ACTIVITIES
Purchases of investments	(1,062		)	(2,669		)
Proceeds from disposals of investments	1,994			4,379
Acquisitions of businesses, equity method investments and nonmarketable securities	(5,201		)	(183		)
Proceeds from disposals of businesses, equity method investments and nonmarketable securities	261			3
Purchases of property, plant and equipment	(364		)	(274		)
Proceeds from disposals of property, plant and equipment	26			43
Other investing activities	31			22
Net cash provided by (used in) investing activities	(4,315		)	1,321
FINANCING ACTIVITIES
Issuances of debt	10,119			9,576
Payments of debt	(9,656		)	(8,770		)
Issuances of stock	190			477
Purchases of stock for treasury	(397		)	(927		)
Other financing activities	29			(72		)
Net cash provided by financing activities	285			284
CASH FLOWS FROM DISCONTINUED OPERATIONS
Net cash provided by (used in) operating activities from discontinued operations	89			46
Net cash provided by (used in) investing activities from discontinued operations	(144		)	(24		)
Net cash provided by (used in) financing activities from discontinued operations	136			40
Net cash provided by discontinued operations	81			62
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS	56			95
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period	(3,194		)	2,375
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	9,318			6,373
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	6,124			8,748
Less: Restricted cash and restricted cash equivalents at end of period	479			457
Cash and cash equivalents at end of period	$	5,645		$	8,291

Refer to Notes to Condensed Consolidated Financial Statements.

THE COCA-COLA COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by U.S. GAAP for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K of The Coca-Cola Company for the year ended December 31, 2018.

When used in these notes, the terms "The Coca-Cola Company," "Company," "we," "us" and "our" mean The Coca-Cola Company and all entities included in our condensed consolidated financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 29, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. Sales of our nonalcoholic ready-to-drink beverages are somewhat seasonal, with the second and third calendar quarters accounting for the highest sales volumes. The volume of sales in the beverage business may be affected by weather conditions.

Each of our interim reporting periods, other than the fourth interim reporting period, ends on the Friday closest to the last day of the corresponding quarterly calendar period. The first quarter of 2019 and the first quarter of 2018 ended on March 29, 2019 and March 30, 2018, respectively. Our fourth interim reporting period and our fiscal year end on December 31 regardless of the day of the week on which December 31 falls.

Operating Segments

In January 2019, we established a new operating segment, Global Ventures, which includes the results of Costa Limited ("Costa"), which we acquired in January 2019, and the results of our innocent and doğadan businesses as well as fees earned pursuant to distribution coordination agreements between the Company and Monster Beverage Corporation ("Monster"). Accordingly, all prior period operating segment and Corporate information presented herein has been adjusted to reflect this change in our organizational structure. Refer to Note 17.

As of March 29, 2019, our organizational structure consisted 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 included 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.

Advertising Costs

The Company's accounting policy related to advertising costs for annual reporting purposes is to expense production costs of print, radio, television and other advertisements as of the first date the advertisements take place. All other marketing expenditures are expensed in the annual period in which the expenditure is incurred.

For interim reporting purposes, we allocate our estimated full year marketing expenditures that benefit multiple interim periods to each of our interim reporting periods. We use the proportion of each interim period's actual unit case volume to the estimated full year unit case volume as the basis for the allocation. This methodology results in our marketing expenditures being recognized at a standard rate per unit case. At the end of each interim reporting period, we review our estimated full year unit case volume and our estimated full year marketing expenditures that benefit multiple interim periods in order to evaluate if a change in estimate is necessary. The impact of any changes in these full year estimates is recognized in the interim period in which the change in estimate occurs. Our full year marketing expenditures are not impacted by this interim accounting policy.

Shipping and Handling Costs

Shipping and handling costs related to the movement of goods from our manufacturing locations to our sales distribution centers are included in the line item cost of goods sold in our consolidated statement of income. Shipping and handling costs incurred to move goods from our manufacturing locations or sales distribution centers to our customers are also included in the line item cost of goods sold in our consolidated statement of income, except for costs incurred to distribute goods sold by our Company-owned bottlers to our customers, which are included in the line item selling, general and administrative expenses. Our customers generally do not pay us separately for shipping and handling costs. Effective January 1, 2018, we adopted Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606"). Upon adoption, we made a policy election to recognize the cost of shipping and handling activities that are performed after a customer obtains control of the goods as costs to fulfill our promise to provide goods to the customer. As a result of this election, the Company does not evaluate whether shipping and handling activities are services promised to customers. If revenue is recognized for the related goods before the shipping and handling activities occur, the related costs of those shipping and handling activities are accrued. Refer to Note 3 for additional information regarding revenue recognition.

Sales, Use, Value-Added and Excise Taxes

The Company collects taxes imposed directly on its customers related to sales, use, value-added, excise and other similar taxes. The Company then remits such taxes on behalf of its customers to the applicable governmental authorities. Upon adoption of ASC 606, we made a policy election to exclude from net operating revenues the tax amounts imposed on revenue-producing transactions that were collected from our customers to be remitted to governmental authorities. Accordingly, such tax amounts are recorded in the line item trade accounts receivable in our consolidated balance sheet when collection of taxes from the customer has not yet occurred and are recorded in the line item accounts payable and accrued expenses in our consolidated balance sheet until they are remitted to the applicable governmental authorities. Taxes imposed directly on the Company, whether based on receipts from sales, inventory procurement costs or manufacturing activities, are recorded in the line item cost of goods sold in our consolidated statement of income. Refer to Note 3 for additional information regarding revenue recognition.

Leases

Effective January 1, 2019, we adopted Accounting Standards Codification 842, Leases ("ASC 842"). We determine if an arrangement contains a lease at inception based on whether or not the Company has the right to control the asset during the contract period and other facts and circumstances.

Lessee

We are the lessee in a lease contract when we obtain the right to control the asset. Operating leases are included in the line items other assets, accounts payable and accrued expenses, and other liabilities in our consolidated balance sheet. Operating lease right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on our consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statement of income. We determine the lease term by assuming the exercise of renewal options that are reasonably certain. As most of our leases do not provide an implicit interest rate, we use our local incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. When our contracts contain lease and non-lease components, we account for both components as a single lease component. Refer to Note 8 for further discussion.

Lessor

We have various arrangements for certain fountain equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.

Net Income

The following table presents information related to net income from continuing operations and net income from discontinued operations (in millions):



	Three Months Ended
	March 29, 2019		March 30, 2018
CONTINUING OPERATIONS
Net income from continuing operations	$	1,646	$	1,327
Less: Net income from continuing operations attributable to noncontrolling interests	1		2
Net income from continuing operations attributable to shareowners of The Coca-Cola Company	$	1,645	$	1,325
DISCONTINUED OPERATIONS
Net income from discontinued operations	$	57	$	73
Less: Net income from discontinued operations attributable to noncontrolling interests	24		30
Net income from discontinued operations attributable to shareowners of The Coca-Cola Company	$	33	$	43
CONSOLIDATED
Consolidated net income	$	1,703	$	1,400
Less: Net income attributable to noncontrolling interests	25		32
Net income attributable to shareowners of The Coca-Cola Company	$	1,678	$	1,368

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

We classify time deposits and other investments that are highly liquid and have maturities of three months or less at the date of

purchase as cash equivalents or restricted cash equivalents, as applicable. Restricted cash and restricted cash equivalents

generally consist of amounts held by our captive insurance companies, which are included in the line item other assets on our

consolidated balance sheet, and amounts classified in assets held for sale and assets held for sale — discontinued operations.

We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of

counterparties and procedures to monitor our concentrations of credit risk.

The following table provides a summary of cash, cash equivalents, restricted cash and restricted cash equivalents that constitute the total amounts shown in the condensed consolidated statements of cash flows (in millions):



	March 29, 2019		December 31, 2018
Cash and cash equivalents	$	5,645	$	8,926
Cash and cash equivalents included in assets held for sale — discontinued operations	203		151
Cash and cash equivalents included in other assets¹	276		241
Cash, cash equivalents, restricted cash and restricted cash equivalents	$	6,124	$	9,318
	March 30, 2018		December 31, 2017
Cash and cash equivalents	$	8,291	$	6,006
Cash and cash equivalents included in assets held for sale	7		13
Cash and cash equivalents included in assets held for sale — discontinued operations	169		97
Cash and cash equivalents included in other assets¹	281		257
Cash, cash equivalents, restricted cash and restricted cash equivalents	$	8,748	$	6,373

¹Amounts represent cash and cash equivalents in our solvency capital portfolio set aside primarily to cover pension obligations in certain of

our European and Canadian pension plans. Refer to Note 4.

Recently Adopted Accounting Guidance

ASC 842 requires lessees to recognize operating lease ROU assets, representing their right to use the underlying asset for the lease term, and lease liabilities on the balance sheet for all leases with lease terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. We adopted ASC 842 using the modified retrospective method and utilized the optional transition method under

which we continue to apply the legacy guidance in ASC 840, Leases, including its disclosure requirements, in the comparative period presented. In addition, we elected the package of practical expedients permitted under the transition guidance which permits us to carry forward the historical lease classification, among other things. As a result of the adoption, our operating lease ROU assets and operating lease liabilities were $1,242 million and $1,268 million, respectively, as of March 29, 2019, which include preliminary amounts recorded resulting from the acquisition of Costa in January 2019. The adoption of this standard did not impact our consolidated statement of income or our consolidated statement of cash flows. Refer to Note 8 for further discussion.

In August 2017, the Financial Accounting Standards Board ("FASB") issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, which eliminates the requirement to separately measure and report hedge ineffectiveness and requires companies to recognize all elements of hedge accounting that impact earnings in the same line item in the statement of income where the hedged item resides. The amendments in this update include new alternatives for measuring the hedged item for fair value hedges of interest rate risk and ease the requirements for effectiveness testing, hedge documentation and applying the critical terms match method. We adopted ASU 2017-12 effective January 1, 2019 using the modified retrospective method. We recognized a cumulative effect adjustment to decrease the opening balance of reinvested earnings as of January 1, 2019 by $12 million, net of tax. Refer to Note 6 for additional disclosures required by this ASU.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits entities to reclassify the disproportionate income tax effects of the Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act") on items within accumulated other comprehensive income (loss) ("AOCI") to reinvested earnings. These disproportionate income tax effect items are referred to as "stranded tax effects." The amendments in this update only relate to the reclassification of the income tax effects of the Tax Reform Act. Other accounting guidance that requires the effect of changes in tax laws or rates to be included in net income from continuing operations is not affected by this update. We adopted ASU 2018-02 effective January 1, 2019. We recognized a cumulative effect adjustment to increase the opening balance of reinvested earnings as of January 1, 2019 by $513 million.

NOTE 2: ACQUISITIONS AND DIVESTITURES

Acquisitions

During the three months ended March 29, 2019, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $5,201 million, which included the acquisition of Costa and the remaining equity ownership interest in C.H.I. Limited ("CHI"), a Nigerian producer of value-added dairy and juice beverages and iced tea.

During the three months ended March 30, 2018, our Company's acquisitions of businesses, equity method investments and nonmarketable securities totaled $183 million, which primarily related to the acquisition of additional interests in the Company’s franchise bottlers in the United Arab Emirates and in Oman, both of which were previously equity method investees of the Company. As a result of the additional interest acquired in the Oman bottler, we obtained a controlling interest, resulting in its consolidation.

Costa Limited

In January 2019, the Company acquired Costa in exchange for $4.9 billion of cash, net of cash acquired. Costa is a coffee company with retail outlets in over 30 countries, the Costa Express vending system and a state-of-the-art roastery. We believe this acquisition will allow us to increase our presence in the hot beverage market as Costa has a scalable platform across multiple formats and channels, including opportunities to introduce ready-to-drink products. As of March 29, 2019, $2.4 billion of the purchase price was preliminarily allocated to the Costa trademark and $2.5 billion was preliminarily allocated to goodwill. The goodwill recognized as part of this acquisition is primarily related to synergistic value created from the opportunity for additional expansion as well as our ability to market and distribute Costa in ready-to-drink form throughout our bottling system. It also includes certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce. The goodwill is not tax deductible and has been assigned to the Global Ventures operating segment. The preliminary allocation of the purchase price is subject to refinement when valuations are finalized. As of March 29, 2019, the valuations that have not been finalized primarily relate to intangible assets, operating lease ROU assets and operating lease liabilities and certain fixed assets. The final purchase price allocation will be completed as soon as possible, but no later than the first quarter of 2020.

CHI Limited

In January 2019, the Company acquired the remaining 60 percent interest in CHI in exchange for $260 million of cash, net of cash acquired, under the terms of the agreement for our original investment in CHI. Upon consolidation, we recognized a net charge of $121 million, which included the remeasurement of our previously held equity interest in CHI to fair value and the reversal of the related cumulative translation adjustments. The fair value of our previously held equity investment was determined using a discounted cash flow model based on Level 3 inputs. The net charge was recorded in the line item other income (loss) — net in our condensed consolidated statement of income.

Divestitures

During the three months ended March 29, 2019, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $261 million, which primarily related to the sale of a portion of our equity method investment in Embotelladora Andina S.A. ("Andina"). We recognized a gain of $39 million as a result of the sale, which was recorded in the line item other income (loss) — net in our condensed consolidated statement of income. We continue to account for our remaining interest in Andina as an equity method investment as a result of our representation on Andina's Board of Directors and other governance rights.

During the three months ended March 30, 2018, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $3 million, which related to the proceeds from the refranchising of our U.S. Virgin Islands bottling territories.

North America Refranchising — United States

In conjunction with implementing a new beverage partnership model in North America, in 2018 the Company completed the refranchising of all of our bottling territories in the United States that were previously managed by Coca-Cola Refreshments

("CCR") to certain of our unconsolidated bottling partners. We recognized net charges of $4 million and $2 million during the three months ended March 29, 2019 and March 30, 2018, respectively. These net charges were included in the line item other income (loss) — net in our condensed consolidated statements of income, and were primarily related to post-closing adjustments as contemplated by the related agreements.

During the three months ended March 29, 2019 and March 30, 2018, the Company recorded charges of $4 million and $19 million, respectively, primarily related to payments made to certain of our unconsolidated bottling partners in order to convert the bottling agreements for their legacy territories and any previously refranchised territories to a single form of comprehensive beverage agreement ("CBA") with additional requirements. The additional requirements generally include a binding national governance model, mandatory incidence pricing and additional core performance requirements, among other things. As a result of these conversions, the legacy territories and any previously refranchised territories for each of the related bottling partners will be governed under similar CBAs, which will provide consistency across each such bottler's respective territory, as well as consistency with other U.S. bottlers that have been granted or converted to this form of CBA. The charges related to these payments were included in the line item other income (loss) — net in our condensed consolidated statements of income.

Refer to Note 17 for the impact these items had on our operating segments and Corporate.

Discontinued Operations

We present the financial position and results of operations of Coca-Cola Beverages Africa Proprietary Limited ("CCBA") as discontinued operations in the accompanying condensed consolidated financial statements because CCBA met the criteria to be classified as held for sale upon acquisition. Since CCBA met the criteria to be classified as held for sale, we were required to record their assets and liabilities at the lower of carrying value or fair value less any costs to sell and present the related assets and liabilities as separate line items in our condensed consolidated balance sheets. We anticipate that we will divest a portion of our ownership interest in 2019, which will result in the Company no longer having a controlling interest in CCBA.

The following table presents information related to the major classes of assets and liabilities of CCBA that were classified as held for sale — discontinued operations in our condensed consolidated balance sheets (in millions):



	March 29, 2019				December 31, 2018
Cash, cash equivalents and short-term investments	$	203			$	151
Trade accounts receivable, less allowances	257				289
Inventories	283				305
Prepaid expenses and other assets	103				97
Equity method investments	5				5
Other assets	26			¹	15
Property, plant and equipment — net	1,626				1,587
Goodwill	3,875				3,847
Other intangible assets	790				796
Allowance for reduction of assets held for sale	(541		)		(546		)
Assets held for sale — discontinued operations	$	6,627			$	6,546
Accounts payable and accrued expenses	$	530		²	$	602
Loans and notes payable	784				641
Current maturities of long-term debt	6				6
Accrued income taxes	54				32
Long-term debt	9				12
Other liabilities	13			³	8
Deferred income taxes	439				421
Liabilities held for sale — discontinued operations	$	1,835			$	1,722

¹Includes $10 million of operating lease ROU assets as a result of our adoption of ASC 842.

²Includes $4 million of the current portion of operating lease liabilities as a result of our adoption of ASC 842.

³Includes $6 million of the noncurrent portion of operating lease liabilities as a result of our adoption of ASC 842.

NOTE 3: REVENUE RECOGNITION

Our Company markets, manufactures and sells:


•	beverage concentrates, sometimes referred to as "beverage bases," and syrups, including fountain syrups (we refer to this part of our business as our "concentrate business" or "concentrate operations"); and


•	finished sparkling soft drinks and other nonalcoholic beverages (we refer to this part of our business as our "finished product business" or "finished product operations").

Generally, finished product operations generate higher net operating revenues but lower gross profit margins than concentrate operations.

In our domestic and international concentrate operations, we typically generate net operating revenues by selling concentrates, syrups and certain finished beverages to authorized bottling operations (which we typically refer to as our "bottlers" or our "bottling partners"). Our bottling partners either combine the concentrates with sweeteners (depending on the product), still water and/or sparkling water, or combine the syrups with sparkling water to produce finished beverages. The finished beverages are packaged in authorized containers, such as cans and refillable and nonrefillable glass and plastic bottles, bearing our trademarks or trademarks licensed to us and are then sold to retailers directly or, in some cases, through wholesalers or other bottlers. In addition, outside the United States, our bottling partners are typically authorized to manufacture fountain syrups, using our concentrate, which they sell to fountain retailers for use in producing beverages for immediate consumption, or to authorized fountain wholesalers who in turn sell and distribute the fountain syrups to fountain retailers. Our concentrate operations are included in our geographic operating segments.

Our finished product operations generate net operating revenues by selling sparkling soft drinks and a variety of other finished nonalcoholic beverages, such as water, enhanced water and sports drinks; juice, dairy and plant-based beverages; tea and coffee; and energy drinks, to retailers or to distributors and wholesalers who distribute them to retailers or Company-owned Costa retail outlets. These operations consist primarily of Company-owned or -controlled bottling, sales and distribution operations, which are included in our Bottling Investments operating segment. In certain markets, the Company also operates non-bottling finished product operations in which we sell finished beverages to distributors and wholesalers that are generally not one of the Company's bottling partners. These operations are generally included in one of our geographic operating

segments or our Global Ventures operating segment. In the United States, we manufacture fountain syrups and sell them to fountain retailers, who use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. These fountain syrup sales are included in our North America operating segment. Generally, finished product operations produce higher net operating revenues but lower gross profit margins compared to concentrate operations.

We adopted ASC 606 effective January 1, 2018, using the modified retrospective method. We have applied this standard to all contracts at the effective date and contracts entered into thereafter. Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. Our performance obligation generally consists of the promise to sell concentrates or finished products to our bottling partners, wholesalers, distributors or retailers. Control of the concentrates or finished products is transferred upon shipment to, or receipt at, our customers' locations, as determined by the specific terms of the contract. Once control is transferred to the customer, we have completed our performance obligation, and revenue is recognized. Our sales terms generally do not allow for a right of return except for matters related to any manufacturing defects on our part. After completion of our performance obligation, we have an unconditional right to consideration as outlined in the contract. Our receivables will generally be collected in less than six months, in accordance with the underlying payment terms. All of our performance obligations under the terms of contracts with our customers have an original duration of one year or less.

Our customers and bottling partners may be entitled to cash discounts, funds for promotional and marketing activities, volume-based incentive programs, support for infrastructure programs and other similar programs. In some markets, in an effort to allow our Company and our bottling partners to grow together through shared value, aligned financial objectives and the flexibility necessary to meet consumers' always changing needs and tastes, we work with our bottling partners to develop and implement an incidence-based concentrate pricing model. Under this model, the price we charge bottlers for concentrate they use to prepare and package finished products is impacted by a number of factors, including, but not limited to, the prices charged by the bottlers for such finished products, the channels in which they are sold and package mix. The amounts associated with the arrangements described above are defined as variable consideration under ASC 606 and an estimate of which is included in the transaction price as a component of net operating revenues in our consolidated statement of income upon completion of our performance obligations. The total revenue recorded, including any variable consideration, cannot exceed the amount for which it is probable that a significant reversal will not occur when uncertainties related to variability are resolved. As a result, we are recognizing revenue based on our faithful depiction of the consideration that we expect to receive. In making our estimates of variable consideration, we consider past results and make significant assumptions related to: (1) customer sales volumes; (2) customer ending inventories; (3) customer selling price per unit; (4) selling channels; and (5) discount rates, rebates and other pricing allowances, as applicable. In gathering data to estimate our variable consideration, we generally calculate our estimates using a portfolio approach at the country and product line level rather than at the individual contract level. The result of making these estimates will impact the line items trade accounts receivable and accounts payable and accrued expenses in our consolidated balance sheet. The actual amounts ultimately paid and/or received may be different from our estimates. The change in the amount of variable consideration recognized during the three months ended March 29, 2019 related to performance obligations satisfied in prior periods was immaterial.

The following table presents net operating revenues disaggregated between the United States and International and further by line of business (in millions):



	United States		International		Total
Three Months Ended March 29, 2019
Concentrate operations	$	1,186	$	3,724	$	4,910
Finished product operations	1,460		1,650		3,110
Total	$	2,646	$	5,374	$	8,020
Three Months Ended March 30, 2018
Concentrate operations	$	1,116	$	3,779	$	4,895
Finished product operations	1,472		1,259		2,731
Total	$	2,588	$	5,038	$	7,626

Refer to Note 17 for additional revenue disclosures by operating segment and Corporate.

NOTE 4: INVESTMENTS

We measure all equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in earnings. We use quoted market prices to determine the fair value of equity securities with readily determinable fair values. For equity securities without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes

resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Management assesses each of these investments on an individual basis.

Our investments in debt securities are classified as trading, available-for-sale or held-to-maturity and carried at either amortized cost or fair value. The cost basis is determined by the specific identification method. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on debt securities classified as trading securities are included in net income. For debt securities classified as available-for-sale, realized gains and losses are included in net income. Unrealized gains and losses, net of tax, on available-for-sale debt securities are recognized in AOCI, except for the change in fair value attributable to the currency risk being hedged, if applicable, which is included in net income. Refer to Note 6 for additional information related to the Company's fair value hedges of available-for-sale debt securities.

Equity securities with readily determinable fair values that are not accounted for under the equity method and debt securities classified as trading are not assessed for impairment, since they are carried at fair value with the change in fair value included in net income. Equity method investments, equity securities without readily determinable fair values and debt securities classified as available-for-sale or held-to-maturity are reviewed each reporting period to determine whether a significant event or change in circumstances has occurred that may have an adverse effect on the fair value of each investment. When such events or changes occur, we evaluate the fair value compared to our cost basis in the investment. We also perform this evaluation every reporting period for each investment for which our cost basis has exceeded the fair value. The fair values of most of our Company's investments in publicly traded companies are often readily available based on quoted market prices. For investments in nonpublicly traded companies, management's assessment of fair value is based on valuation methodologies including discounted cash flows, estimates of sales proceeds and appraisals, as appropriate. We consider the assumptions that we believe hypothetical marketplace participants would use in evaluating estimated future cash flows when employing the discounted cash flow or estimates of sales proceeds valuation methodologies. The ability to accurately predict future cash flows, especially in emerging and developing markets, may impact the determination of fair value. In the event the fair value of an investment declines below our cost basis, management is required to determine if the decline in fair value is other than temporary. If management determines the decline is other than temporary, an impairment charge is recorded. Management's assessment as to the nature of a decline in fair value is based on, among other things, 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.

Equity Securities

The carrying values of our equity securities were included in the following line items in our condensed consolidated balance sheets (in millions):



	Fair Value with Changes Recognized in Income		Measurement Alternative — No Readily Determinable Fair Value
March 29, 2019
Marketable securities	$	302	$	—
Other investments	835		80
Other assets	965		—
Total equity securities	$	2,102	$	80
December 31, 2018
Marketable securities	$	278	$	—
Other investments	787		80
Other assets	869		—
Total equity securities	$	1,934	$	80

The calculation of net unrealized gains and losses recognized during the period related to equity securities still held at the end of the period is as follows (in millions):



	Three Months Ended
	March 29, 2019		March 30, 2018
Net gains (losses) recognized during the period related to equity securities	$	147	$	(79	)
Less: Net gains (losses) recognized during the period related to equity securities sold during the period	7		3
Net unrealized gains (losses) recognized during the period related to equity securities still held at the end of the period	$	140	$	(82	)

Debt Securities

Our debt securities consisted of the following (in millions):



			Gross Unrealized					Estimated
	Cost		Gains		Losses			Fair Value
March 29, 2019
Trading securities	$	42	$	—	$	—		$	42
Available-for-sale securities	4,631		128		(14		)	4,745
Total debt securities	$	4,673	$	128	$	(14	)	$	4,787
December 31, 2018
Trading securities	$	45	$	—	$	(1	)	$	44
Available-for-sale securities	4,901		119		(27		)	4,993
Total debt securities	$	4,946	$	119	$	(28	)	$	5,037

The fair values of our debt securities were included in the following line items in our condensed consolidated balance sheets (in millions):



	March 29, 2019				December 31, 2018
	Trading Securities		Available-for-Sale Securities		Trading Securities		Available-for-Sale Securities
Cash and cash equivalents	$	—	$	7	$	—	$	—
Marketable securities	42		4,421		44		4,691
Other assets	—		317		—		302
Total debt securities	$	42	$	4,745	$	44	$	4,993

The contractual maturities of these available-for-sale debt securities as of March 29, 2019 were as follows (in millions):



	Cost		Estimated Fair Value
Within 1 year	$	925	$	921
After 1 year through 5 years	3,383		3,474
After 5 years through 10 years	101		121
After 10 years	222		229
Total	$	4,631	$	4,745

The Company expects that actual maturities may differ from the contractual maturities above because borrowers have the right to call or prepay certain obligations.

The sale and/or maturity of available-for-sale debt securities resulted in the following realized activity (in millions):



	Three Months Ended
	March 29, 2019			March 30, 2018
Gross gains	$	5		$	—
Gross losses	(3		)	(5		)
Proceeds	722			3,087

Captive Insurance Companies

In accordance with local insurance regulations, our captive insurance companies are required to meet and maintain minimum solvency capital requirements. The Company elected to invest a majority of its solvency capital in a portfolio of marketable equity and debt securities. These securities are included in the disclosures above. The Company uses one of its consolidated captive insurance companies to reinsure group annuity insurance contracts that cover the pension obligations of certain of our European and Canadian pension plans. This captive's solvency capital funds included equity and debt securities of $1,158 million as of March 29, 2019 and $1,056 million as of December 31, 2018, which are classified in the line item other assets in our condensed consolidated balance sheets because the assets are not available to satisfy our current obligations.

NOTE 5: INVENTORIES

Inventories consist primarily of raw materials and packaging (which include ingredients and supplies) and finished goods (which include concentrates and syrups in our concentrate operations and finished beverages in our finished product operations). Inventories are valued at the lower of cost or net realizable value. We determine cost on the basis of the average cost or first-in, first-out methods. Inventories consisted of the following (in millions):



	March 29, 2019		December 31, 2018
Raw materials and packaging	$	2,050	$	1,862
Finished goods	852		692
Other	276		212
Total inventories	$	3,178	$	2,766

NOTE 6: HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS

The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company's financial performance and are referred to as "market risks." When deemed appropriate, our Company uses derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risks managed by the Company through the use of derivative and non-derivative financial instruments are foreign currency exchange rate risk, commodity price risk and interest rate risk.

The Company uses various types of derivative instruments including, but not limited to, forward contracts, commodity futures contracts, option contracts, collars and swaps. Forward contracts and commodity futures contracts are agreements to buy or sell a quantity of a currency or commodity at a predetermined future date and at a predetermined rate or price. An option contract is an agreement that conveys the purchaser the right, but not the obligation, to buy or sell a quantity of a currency or commodity at a predetermined rate or price during a period or at a time in the future. A collar is a strategy that uses a combination of options to limit the range of possible positive or negative returns on an underlying asset or liability to a specific range, or to protect expected future cash flows. To do this, an investor simultaneously buys a put option and sells (writes) a call option, or alternatively buys a call option and sells (writes) a put option. A swap agreement is a contract between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices. We do not enter into derivative financial instruments for trading purposes. The Company may also designate certain non-derivative instruments, such as our foreign-denominated third-party debt, in hedging relationships.

All derivative instruments are carried at fair value in our condensed consolidated balance sheet, primarily in the following line items, as applicable: prepaid expenses and other assets; other assets; accounts payable and accrued expenses; and other liabilities. The carrying values of the derivatives reflect the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. These master netting agreements allow the Company to net settle positive and negative positions (assets and liabilities) arising from different transactions with the same counterparty.

The accounting for gains and losses that result from changes in the fair values of derivative instruments depends on whether the derivatives have been designated and qualify as hedging instruments and the type of hedging relationships. Derivatives can be designated as fair value hedges, cash flow hedges or hedges of net investments in foreign operations. The changes in the fair

values of derivatives that have been designated and qualify for fair value hedge accounting are recorded in the same line item in our condensed consolidated statement of income as the changes in the fair values of the hedged items attributable to the risk being hedged. The changes in the fair values of derivatives that have been designated and qualify as cash flow hedges or hedges of net investments in foreign operations are recorded in AOCI and are reclassified into the line item in our condensed consolidated statement of income in which the hedged items are recorded in the same period the hedged items affect earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, fluctuations in the values of the derivative instruments are generally offset by changes in the fair values or cash flows of the underlying exposures being hedged. The changes in the fair values of derivatives that were not designated and/or did not qualify as hedging instruments are immediately recognized into earnings.

For derivatives that will be accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction. In addition, the Company formally assesses, both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair values or cash flows of the related underlying exposures.

The Company determines the fair values of its derivatives based on quoted market prices or pricing models using current market rates. Refer to Note 16. The notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above. The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as interest rates, foreign currency exchange rates, commodity rates or other financial indices. The Company does not view the fair values of its derivatives in isolation but rather in relation to the fair values or cash flows of the underlying hedged transactions or other exposures. Virtually all of our derivatives are straightforward over-the-counter instruments with liquid markets.

On January 1, 2019, we adopted ASU 2017-12. For highly effective cash flow hedges, this ASU requires the entire change in fair value of the hedging instrument included in the assessment of hedge effectiveness to be recorded in other comprehensive income. No components of the Company's hedging instruments were excluded from the assessment of hedge effectiveness. To reflect the adoption of the new hedging standard on our cash flow hedging relationships at January 1, 2019, we recorded a $6 million increase, net of taxes, to the opening balance of reinvested earnings and a corresponding decrease to AOCI. For fair value hedges of interest rate risk, this ASU allows entities to elect to use the benchmark interest rate component of the contractual coupon cash flows to calculate the change in fair value of the hedged item attributable to changes in the benchmark interest rate. As a result of applying the new hedging standard to our fair value hedges on January 1, 2019, we recorded a $24 million increase to our hedged long-term debt balances, with a corresponding decrease to the opening balance of reinvested earnings of $18 million, net of taxes.

The following table presents the fair values of the Company's derivative instruments that were designated and qualified as part of a hedging relationship (in millions):



		Fair Value^1,2
Derivatives Designated as Hedging Instruments	Balance Sheet Location¹	March 29, 2019		December 31, 2018
Assets:
Foreign currency contracts	Prepaid expenses and other assets	$	53	$	43
Foreign currency contracts	Other assets	113		114
Interest rate contracts	Other assets	287		88
Total assets		$	453	$	245
Liabilities:
Foreign currency contracts	Accounts payable and accrued expenses	$	28	$	19
Foreign currency contracts	Other liabilities	30		15
Commodity contracts	Accounts payable and accrued expenses	1		1
Interest rate contracts	Other liabilities	28		40
Total liabilities		$	87	$	75

¹All of the Company's derivative instruments are carried at fair value in our condensed consolidated balance sheets after considering the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. Current disclosure requirements mandate that derivatives must also be disclosed without reflecting the impact of master netting agreements and cash collateral. Refer to Note 16 for the net presentation of the Company's derivative instruments.

²Refer to Note 16 for additional information related to the estimated fair value.

The following table presents the fair values of the Company's derivative instruments that were not designated as hedging instruments (in millions):



		Fair Value^1,2
Derivatives Not Designated as Hedging Instruments	Balance Sheet Location¹	March 29, 2019		December 31, 2018
Assets:
Foreign currency contracts	Prepaid expenses and other assets	$	23	$	61
Foreign currency contracts	Assets held for sale — discontinued operations	2		—
Commodity contracts	Prepaid expenses and other assets	1		2
Commodity contracts	Other assets	4		—
Other derivative instruments	Prepaid expenses and other assets	10		7
Total assets		$	40	$	70
Liabilities:
Foreign currency contracts	Accounts payable and accrued expenses	$	17	$	99
Foreign currency contracts	Other liabilities	2		—
Foreign currency contracts	Liabilities held for sale — discontinued operations	—		2
Commodity contracts	Accounts payable and accrued expenses	20		37
Commodity contracts	Other liabilities	3		8
Commodity contracts	Liabilities held for sale — discontinued operations	—		1
Other derivative instruments	Accounts payable and accrued expenses	—		13
Total liabilities		$	42	$	160

²Refer to Note 16 for additional information related to the estimated fair value.

Credit Risk Associated with Derivatives

We have established strict counterparty credit guidelines and enter into transactions only with financial institutions of investment grade or better. We monitor counterparty exposures regularly and review any downgrade in credit rating immediately. If a downgrade in the credit rating of a counterparty were to occur, we have provisions requiring collateral for substantially all of our transactions. To mitigate presettlement risk, minimum credit standards become more stringent as the duration of the derivative financial instrument increases. In addition, the Company's master netting agreements reduce credit risk by permitting the Company to net settle for transactions with the same counterparty. To minimize the concentration of credit risk, we enter into derivative transactions with a portfolio of financial institutions. Based on these factors, we consider the risk of counterparty default to be minimal.

Cash Flow Hedging Strategy

The Company uses cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in foreign currency exchange rates, commodity prices or interest rates. The changes in the fair values of derivatives designated as cash flow hedges are recorded in AOCI and are reclassified into the line item in our condensed consolidated statement of income in which the hedged items are recorded in the same period the hedged items affect earnings. The changes in fair values of hedges that are determined to be ineffective are immediately reclassified from AOCI into earnings. The maximum length of time for which the Company hedges its exposure to future cash flows is typically three years.

The Company maintains a foreign currency cash flow hedging program to reduce the risk that our eventual U.S. dollar net cash inflows from sales outside the United States and U.S. dollar net cash outflows from procurement activities will be adversely affected by fluctuations in foreign currency exchange rates. We enter into forward contracts and purchase foreign currency options (principally euros and Japanese yen) and collars to hedge certain portions of forecasted cash flows denominated in foreign currencies. When the U.S. dollar strengthens against the foreign currencies, the decline in the present value of future foreign currency cash flows is partially offset by gains in the fair value of the derivative instruments. Conversely, when the U.S. dollar weakens, the increase in the present value of future foreign currency cash flows is partially offset by losses in the fair value of the derivative instruments. The total notional values of derivatives that were designated and qualify for the Company's foreign currency cash flow hedging program were $4,657 million and $3,175 million as of March 29, 2019 and December 31, 2018, respectively.

The Company uses cross-currency swaps to hedge the changes in cash flows of certain of its foreign currency denominated debt and other monetary assets or liabilities due to changes in foreign currency exchange rates. For this hedging program, the Company records the change in carrying value of these foreign currency denominated assets and liabilities due to changes in

exchange rates into earnings each period. The changes in fair value of the cross-currency swap derivatives are recorded in AOCI with an immediate reclassification into earnings for the change in fair value attributable to fluctuations in foreign currency exchange rates. The total notional values of derivatives that have been designated as cash flow hedges for the Company's foreign currency denominated assets and liabilities were $3,028 million as of March 29, 2019 and December 31, 2018.

The Company has entered into commodity futures contracts and other derivative instruments on various commodities to mitigate the price risk associated with forecasted purchases of materials used in our manufacturing process. These derivative instruments have been designated and qualify as part of the Company's commodity cash flow hedging program. The objective of this hedging program is to reduce the variability of cash flows associated with future purchases of certain commodities. The total notional values of derivatives that have been designated and qualify for this program were $8 million and $9 million as of March 29, 2019 and December 31, 2018, respectively.

Our Company monitors our mix of short-term debt and long-term debt regularly. From time to time, we manage our risk to interest rate fluctuations through the use of derivative financial instruments. The Company has entered into interest rate swap agreements and has designated these instruments as part of the Company's interest rate cash flow hedging program. The objective of this hedging program is to mitigate the risk of adverse changes in benchmark interest rates on the Company's future interest payments. During the three months ended March 30, 2018, we discontinued the cash flow hedge relationship related to these swaps. We reclassified a loss of $8 million into earnings as a result of the discontinuance. As of March 29, 2019 and December 31, 2018, we did not have any interest rate swaps designated as a cash flow hedge.

The following table presents the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on other comprehensive income ("OCI"), AOCI and earnings (in millions):



	Gain (Loss) Recognized in OCI			Location of Gain (Loss) Recognized in Income¹	Gain (Loss) Reclassified from AOCI into Income (Effective Portion)²			Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)²
Three Months Ended March 29, 2019
Foreign currency contracts	$	(2	)	Net operating revenues	$	6		$	—
Foreign currency contracts	1			Cost of goods sold	4			—
Foreign currency contracts	—			Interest expense	(2		)	—
Foreign currency contracts	(22		)	Other income (loss) — net	(50		)	—
Interest rate contracts	—			Interest expense	(10		)	—
Total	$	(23	)		$	(52	)	$	—
Three Months Ended March 30, 2018
Foreign currency contracts	$	(57	)	Net operating revenues	$	15		$	—		³
Foreign currency contracts	(4		)	Cost of goods sold	(1		)	—			³
Foreign currency contracts	—			Interest expense	(2		)	—
Foreign currency contracts	105			Other income (loss) — net	67			5
Foreign currency contracts	—			Income from discontinued operations	—			(3		)
Interest rate contracts	22			Interest expense	(10		)	(8		)
Commodity contracts	—			Income from discontinued operations	—			(5		)
Total	$	66			$	69		$	(11	)

¹The Company records gains and losses reclassified from AOCI into income for the effective portion and the ineffective portion, if any, to the same line items in our condensed consolidated statement of income.

²Effective January 1, 2019, ASU 2017-12 eliminated the requirement to separately measure and report hedge ineffectiveness for cash flow hedges. No components of the Company’s hedging instruments were excluded from the assessment of hedge effectiveness.

³Includes a de minimis amount of ineffectiveness in the hedging relationship.

As of March 29, 2019, the Company estimates that it will reclassify into earnings during the next 12 months net losses of $36 million from the pretax amount recorded in AOCI as the anticipated cash flows occur.

Fair Value Hedging Strategy

The Company uses interest rate swap agreements designated as fair value hedges to minimize exposure to changes in the fair value of fixed-rate debt that results from fluctuations in benchmark interest rates. The Company also uses cross-currency interest rate swaps to hedge the changes in the fair value of foreign currency denominated debt relating to changes in foreign currency exchange rates and benchmark interest rates. The changes in fair values of derivatives designated as fair value hedges and the offsetting changes in fair values of the hedged items are recognized in earnings. The ineffective portions of these hedges are immediately recognized in earnings. When a derivative is no longer designated as a fair value hedge for any reason, including termination and maturity, the remaining unamortized difference between the carrying value of the hedged item at that time and the face value of the hedged item is amortized to earnings over the remaining life of the hedged item, or immediately if the hedged item has matured. The total notional values of derivatives related to our fair value hedges of this type were $12,832 million and $8,023 million as of March 29, 2019 and December 31, 2018, respectively.

The Company also uses fair value hedges to minimize exposure to changes in the fair value of certain available-for-sale securities from fluctuations in foreign currency exchange rates. The changes in fair values of derivatives designated as fair value hedges and the offsetting changes in fair values of the hedged items due to changes in foreign currency exchange rates are recognized in earnings. As a result, any difference is reflected in earnings as ineffectiveness. As of March 29, 2019 and December 31, 2018, we did not have any fair value hedges of this type.

The following table summarizes the pretax impact that changes in the fair values of derivatives designated as fair value hedges had on earnings (in millions):



Hedging Instruments and Hedged Items	Location of Gain (Loss) Recognized in Income	Gain (Loss) Recognized in Income
		Three Months Ended
		March 29, 2019			March 30, 2018
Interest rate contracts	Interest expense	$	212		$	(16	)
Fixed-rate debt	Interest expense	(210		)	14
Net impact to interest expense		$	2		$	(2	)
Foreign currency contracts	Other income (loss) — net	$	—		$	(6	)
Available-for-sale securities	Other income (loss) — net	—			6
Net impact to other income (loss) — net		$	—		$	—
Net impact of fair value hedging instruments		$	2		$	(2	)

The following table summarizes the amounts recorded in the condensed consolidated balance sheets related to hedged items in fair value hedging relationships (in millions):



	Carrying Value of the Hedged Item				Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Value of the Hedged Item¹
	March 29, 2019		December 31, 2018		March 29, 2019		December 31, 2018
Long-term debt	$	12,937	$	8,043	$	298	$	62

¹Cumulative amount of fair value hedging adjustments does not include changes due to foreign currency exchange rates.

Hedges of Net Investments in Foreign Operations Strategy

The Company uses forward contracts and a portion of its foreign currency denominated debt, a non-derivative financial instrument, to protect the value of our net investments in a number of foreign operations. For derivative instruments that are designated and qualify as hedges of net investments in foreign operations, the changes in fair values of the derivative instruments are recognized in net foreign currency translation adjustments, a component of AOCI, to offset the changes in the values of the net investments being hedged. For non-derivative financial instruments that are designated and qualify as hedges of net investments in foreign operations, the change in the carrying value of the designated portion of the non-derivative financial instrument due to changes in foreign currency exchange rates is recorded in net foreign currency translation adjustments. Any ineffective net investment hedges are reclassified from AOCI into earnings during the period of change.

The following table summarizes the notional values and pretax impact of changes in the fair values of instruments designated as net investment hedges (in millions):



	Notional Amount				Gain (Loss) Recognized in OCI
	as of				Three Months Ended
	March 29, 2019		December 31, 2018		March 29, 2019		March 30, 2018
Foreign currency contracts	$	100	$	—	$	22	$	—
Foreign currency denominated debt	12,348		12,494		131		(411		)
Total	$	12,448	$	12,494	$	153	$	(411	)

The Company did not reclassify any gains or losses related to net investment hedges from AOCI into earnings during the three months ended March 29, 2019 and March 30, 2018. In addition, the Company did not have any ineffectiveness related to net investment hedges during the three months ended March 29, 2019 and March 30, 2018. The cash inflows and outflows associated with the Company's derivative contracts designated as net investment hedges are classified in the line item other investing activities in our condensed consolidated statement of cash flows.

Economic (Nondesignated) Hedging Strategy

In addition to derivative instruments that are designated and qualify for hedge accounting, the Company also uses certain derivatives as economic hedges of foreign currency, interest rate and commodity exposure. Although these derivatives were not designated and/or did not qualify for hedge accounting, they are effective economic hedges. The changes in the fair value of economic hedges are immediately recognized into earnings.

The Company uses foreign currency economic hedges to offset the earnings impact that fluctuations in foreign currency exchange rates have on certain monetary assets and liabilities denominated in nonfunctional currencies. The changes in fair value of economic hedges used to offset those monetary assets and liabilities are immediately recognized into earnings in the line item other income (loss) — net in our condensed consolidated statement of income. In addition, we use foreign currency economic hedges to minimize the variability in cash flows associated with fluctuations in foreign currency exchange rates, including those related to certain acquisition and divestiture activities. The changes in fair values of economic hedges used to offset the variability in U.S. dollar net cash flows are recognized into earnings in the line items net operating revenues, cost of goods sold or other income (loss) — net in our condensed consolidated statement of income, as applicable. The total notional values of derivatives related to our foreign currency economic hedges were $6,512 million and $10,939 million as of March 29, 2019 and December 31, 2018, respectively.

The Company also uses certain derivatives as economic hedges to mitigate the price risk associated with the purchase of materials used in the manufacturing process and for vehicle fuel. The changes in fair values of these economic hedges are immediately recognized into earnings in the line items net operating revenues, cost of goods sold, or selling, general and administrative expenses in our condensed consolidated statement of income, as applicable. The total notional values of derivatives related to our economic hedges of this type were $450 million and $373 million as of March 29, 2019 and December 31, 2018, respectively.

The following table presents the pretax impact that changes in the fair values of derivatives not designated as hedging instruments had on earnings (in millions):



Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income	Gain (Loss) Recognized in Income
		Three Months Ended
		March 29, 2019			March 30, 2018
Foreign currency contracts	Net operating revenues	$	(11	)	$	(7	)
Foreign currency contracts	Cost of goods sold	(1		)	(1		)
Foreign currency contracts	Other income (loss) — net	21			(43		)
Foreign currency contracts	Income from discontinued operations	—			(6		)
Interest rate contracts	Interest expense	—			(2		)
Commodity contracts	Cost of goods sold	20			13
Commodity contracts	Income from discontinued operations	—			1
Other derivative instruments	Selling, general and administrative expenses	17			(6		)
Other derivative instruments	Other income (loss) — net	34			(1		)
Total		$	80		$	(52	)

NOTE 7: DEBT AND BORROWING ARRANGEMENTS

During the three months ended March 29, 2019, the Company issued euro-denominated debt totaling €3,500 million. The carrying value of this debt as of March 29, 2019 was $3,906 million. The general terms of the notes issued are as follows:


•	€750 million total principal amount of notes due 2021, at a variable interest rate equal to the three-month Euro Interbank Offered Rate ("EURIBOR") plus 0.20 percent;


•	€1,000 million total principal amount of notes due 2022, at a fixed interest rate of 0.125 percent;


•	€1,000 million total principal amount of notes due 2026, at a fixed interest rate of 0.75 percent; and


•	€750 million total principal amount of notes due 2031, at a fixed interest rate of 1.25 percent.

During the three months ended March 29, 2019, the Company retired upon maturity €1,500 million total principal amount of notes due March 8, 2019 at a variable interest rate equal to the three-month EURIBOR plus 0.25 percent.

NOTE 8: LEASES

We have operating leases primarily for real estate, vehicles, and manufacturing and other equipment.

Balance sheet information related to operating leases is as follows (in millions):



	March 29, 2019
Operating lease ROU assets¹	$	1,242
Current portion of operating lease liabilities²	$	251
Noncurrent portion of operating lease liabilities³	1,017
Total operating lease liabilities	$	1,268

¹Operating lease ROU assets are recorded in the line item other assets in our condensed consolidated balance sheet.

²The current portion of operating lease liabilities is recorded in the line item accounts payable and accrued expenses in our condensed

consolidated balance sheet.

³The noncurrent portion of operating lease liabilities is recorded in the line item other liabilities in our condensed consolidated balance sheet.

We had operating lease costs of approximately $73 million for the three months ended March 29, 2019. Cash paid for amounts included in the measurement of operating lease liabilities was $69 million during the three months ended March 29, 2019. Operating lease ROU assets obtained in exchange for operating lease obligations was $51 million during the three months ended March 29, 2019.

Weighted-average information associated with the measurement of our remaining operating lease obligations is as follows:



	March 29, 2019
Weighted-average remaining lease term	7 years
Weighted-average discount rate	3	%

The following table summarizes the maturity of our operating lease liabilities as of March 29, 2019 (in millions):



2019	$	226
2020	255
2021	199
2022	165
2023	125
Thereafter	378
Total operating lease payments	1,348
Less imputed interest	(80		)
Total operating lease liabilities	$	1,268

Our leases have remaining lease terms of 1 year to 20 years, inclusive of renewal or termination options that we are reasonably certain to exercise.

NOTE 9: COMMITMENTS AND CONTINGENCIES

Guarantees

As of March 29, 2019, we were contingently liable for guarantees of indebtedness owed by third parties of $609 million, of which $252 million was related to variable interest entities. Our guarantees are primarily related to third-party customers, bottlers, vendors and container manufacturing operations and have arisen through the normal course of business. These guarantees have various terms, and none of these guarantees is individually significant. These amounts represent the maximum potential future payments that we could be required to make under the guarantees; however, we do not consider it probable that we will be required to satisfy these guarantees.

We believe our exposure to concentrations of credit risk is limited due to the diverse geographic areas covered by our operations.

Legal Contingencies

The Company is involved in various legal proceedings. We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated. Management has also identified certain other legal matters where we believe an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings will not have a material adverse effect on the Company taken as a whole.

Tax Audits

The Company is involved in various tax matters, with respect to some of which the outcome is uncertain. We establish reserves to remove some or all of the tax benefit of any of our tax positions at the time we determine that it becomes uncertain based upon one of the following conditions: (1) the tax position is not "more likely than not" to be sustained; (2) the tax position is "more likely than not" to be sustained, but for a lesser amount; or (3) the tax position is "more likely than not" to be sustained, but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether or not a tax position is uncertain, (1) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information; (2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings and case law and their applicability to the facts and circumstances of the tax position; and (3) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken. A number of years may elapse before a particular uncertain tax position is audited and finally resolved. The number of years subject to tax audits or tax assessments varies depending on the tax jurisdiction. The tax benefit that has been previously reserved because of a failure to meet the "more likely than not" recognition threshold would be recognized in our income tax expense in the first interim period when the uncertainty disappears under any one of the following conditions: (1) the tax position is "more likely than not" to be sustained; (2) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the tax position has expired. Refer to Note 15.

On September 17, 2015, the Company received a Statutory Notice of Deficiency ("Notice") from the Internal Revenue Service ("IRS") for the tax years 2007 through 2009, after a five-year audit. In the Notice, the IRS claimed that the Company's United States taxable income should be increased by an amount that creates a potential additional federal income tax liability of approximately $3.3 billion for the period, plus interest. No penalties were asserted in the Notice. The disputed amounts largely relate to a transfer pricing matter involving the appropriate amount of taxable income the Company should report in the United States in connection with its licensing of intangible property to certain related foreign licensees regarding the manufacturing, distribution, sale, marketing and promotion of products in overseas markets.

During the 2007-2009 audit period, the Company followed the same transfer pricing methodology for these licenses that had consistently been followed since the methodology was agreed with the IRS in a 1996 closing agreement that applied back to 1987. The closing agreement provided prospective penalty protection conditioned on the Company's continued adherence to the prescribed methodology absent change in material facts or circumstances or relevant federal tax law. Although the IRS subsequently asserted, without explanation, that material facts and circumstances and relevant federal tax law had changed, it has not asserted penalties. The Company's compliance with the closing agreement was audited and confirmed by the IRS in five successive audit cycles covering the subsequent 11 years through 2006, with the last audit concluding as recently as 2009.

The Notice represents a repudiation of the methodology previously adopted in the 1996 closing agreement. The IRS designated the matter for litigation on October 15, 2015. To the extent the matter remains designated, the Company will be prevented from pursuing any administrative settlement at IRS Appeals or under the IRS Advance Pricing and Mutual Agreement Program.

The Company firmly believes that the IRS' claims are without merit and is pursuing, and will continue to pursue, all available administrative and judicial remedies necessary to vigorously defend its position. To that end, the Company filed a petition in the U.S. Tax Court on December 14, 2015, and the IRS filed its answer on February 12, 2016. On October 4, 2017, the IRS filed an amended answer to the Company's petition in which it increased its transfer pricing adjustment by $385 million resulting in an additional tax adjustment of $135 million.

On June 20, 2017, the Company filed a motion for summary judgment on the portion of the IRS' adjustments related to our licensee in Mexico. On December 14, 2017, the U.S. Tax Court issued a decision on the summary judgment motion in favor of the Company. This decision effectively reduced the IRS' potential tax adjustment by approximately $138 million.

The U.S. Tax Court trial was held from March 8, 2018 through May 11, 2018. The Company and the IRS filed simultaneous opening and answering post-trial briefs in October 2018 and February 2019, respectively. The Company filed a subsequent brief in March 2019 to which the IRS responded in April 2019. It is not known how much time will elapse thereafter prior to the issuance of the Court's decision. In the interim, or subsequent to the Court's decision, the IRS may propose similar adjustments for years subsequent to the 2007-2009 litigation period. While the Company continues to strongly disagree with the IRS' position, there is no assurance that the Court will rule in the Company's favor, and it is possible that all or some portion of the adjustment proposed by the IRS Notice ultimately could be sustained. In that event, the Company will be subject to

significant additional liabilities for the years at issue and potentially also for subsequent periods, which could have a material adverse impact on the Company's financial position, results of operations and cash flows.

The Company regularly assesses the likelihood of adverse outcomes resulting from tax disputes such as this and other examinations for all open years to determine the adequacy of its tax reserves. Any such adjustments related to years prior to 2018, either in the litigation period or later, may have an impact on the transition tax payable as part of the Tax Reform Act.

Risk Management Programs

The Company has numerous global insurance programs in place to help protect the Company from the risk of loss. In general, we are self-insured for large portions of many different types of claims; however, we do use commercial insurance above our self-insured retentions to reduce the Company's risk of catastrophic loss. Our reserves for the Company's self-insured losses are estimated using actuarial methods and assumptions of the insurance industry, adjusted for our specific expectations based on our claim history. Our self-insurance reserves totaled $339 million and $362 million as of March 29, 2019 and December 31, 2018, respectively.

NOTE 10: OTHER COMPREHENSIVE INCOME

AOCI attributable to shareowners of The Coca-Cola Company is separately presented in our condensed consolidated balance sheets as a component of The Coca-Cola Company's shareowners' equity, which also includes our proportionate share of equity method investees' AOCI. OCI attributable to noncontrolling interests is allocated to, and included in, our condensed consolidated balance sheets as part of the line item equity attributable to noncontrolling interests.

AOCI attributable to shareowners of The Coca-Cola Company consisted of the following, net of tax (in millions):



	March 29, 2019			December 31, 2018
Foreign currency translation adjustments¹	$	(10,300	)	$	(11,045	)
Accumulated derivative net gains (losses)^{1, 2}	(147		)	(126		)
Unrealized net gains (losses) on available-for-sale securities¹	72			50
Adjustments to pension and other benefit liabilities¹	(1,950		)	(1,693		)
Accumulated other comprehensive income (loss)	$	(12,325	)	$	(12,814	)

¹The change in the balance from December 31, 2018 includes a portion of a $513 million reclassification to reinvested earnings from AOCI

upon the adoption of ASU 2018-02. Refer to Note 1.

²The change in the balance from December 31, 2018 includes a $6 million reclassification to reinvested earnings from AOCI upon the

adoption of ASU 2017-12. Refer to Note 1 and Note 6.

The following table summarizes the allocation of total comprehensive income between shareowners of The Coca-Cola Company and noncontrolling interests (in millions):



	Three Months Ended March 29, 2019
	Shareowners of The Coca-Cola Company		Noncontrolling Interests			Total
Consolidated net income	$	1,678	$	25		$	1,703
Other comprehensive income:
Net foreign currency translation adjustments	954		(28		)	926
Net gains (losses) on derivatives¹	8		—			8
Net change in unrealized gains (losses) on available-for-sale debt securities²	15		—			15
Net change in pension and other benefit liabilities³	31		—			31
Total comprehensive income	$	2,686	$	(3	)	$	2,683

¹Refer to Note 6 for additional information related to the net gains or losses on derivative instruments designated and qualifying as cash flow hedging instruments.

²Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.

³Refer to Note 14 for additional information related to the Company's pension and other postretirement benefit liabilities.

The following tables present OCI attributable to shareowners of The Coca-Cola Company, including our proportionate share of equity method investees' OCI (in millions):



Three Months Ended March 29, 2019	Before-Tax Amount			Income Tax			After-Tax Amount
Foreign currency translation adjustments:
Translation adjustments arising during the period	$	997		$	(73	)	$	924
Reclassification adjustments recognized in net income	192			—			192
Gains (losses) on intra-entity transactions that are of a long-term investment nature	(287		)	—			(287		)
Gains (losses) on net investment hedges arising during the period¹	153			(28		)	125
Net foreign currency translation adjustments	$	1,055		$	(101	)	$	954
Derivatives:
Gains (losses) arising during the period	$	(36	)	$	4		$	(32	)
Reclassification adjustments recognized in net income	53			(13		)	40
Net gains (losses) on derivatives¹	$	17		$	(9	)	$	8
Available-for-sale debt securities:
Unrealized gains (losses) arising during the period	$	24		$	(7	)	$	17
Reclassification adjustments recognized in net income	(2		)	—			(2		)
Net change in unrealized gains (losses) on available-for-sale debt securities²	$	22		$	(7	)	$	15
Pension and other benefit liabilities:
Net pension and other benefit liabilities arising during the period	$	(1	)	$	4		$	3
Reclassification adjustments recognized in net income	37			(9		)	28
Net change in pension and other benefit liabilities³	$	36		$	(5	)	$	31
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola Company	$	1,130		$	(122	)	$	1,008


¹	Refer to Note 6 for additional information related to the net gains or losses on derivative instruments designated and qualifying as cash flow hedging instruments.


²	Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.


³	Refer to Note 14 for additional information related to the Company's pension and other postretirement benefit liabilities.



Three Months Ended March 30, 2018	Before-Tax Amount			Income Tax			After-Tax Amount
Foreign currency translation adjustments:
Translation adjustments arising during the period	$	167		$	(68	)	$	99
Reclassification adjustments recognized in net income	56			—			56
Gains (losses) on intra-entity transactions that are of a long-term investment nature	796			—			796
Gains (losses) on net investment hedges arising during the period¹	(411		)	129			(282		)
Net foreign currency translation adjustments	$	608		$	61		$	669
Derivatives:
Gains (losses) arising during the period	$	66		$	(38	)	$	28
Reclassification adjustments recognized in net income	(58		)	14			(44		)
Net gains (losses) on derivatives¹	$	8		$	(24	)	$	(16	)
Available-for-sale debt securities:
Unrealized gains (losses) arising during the period	$	(13	)	$	(2	)	$	(15	)
Reclassification adjustments recognized in net income	5			(1		)	4
Net change in unrealized gains (losses) on available-for-sale debt securities²	$	(8	)	$	(3	)	$	(11	)
Pension and other benefit liabilities:
Net pension and other benefit liabilities arising during the period	$	10		$	(1	)	$	9
Reclassification adjustments recognized in net income	33			(8		)	25
Net change in pension and other benefit liabilities³	$	43		$	(9	)	$	34
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola Company	$	651		$	25		$	676


¹	Refer to Note 6 for additional information related to the net gains or losses on derivative instruments designated and qualifying as cash flow hedging instruments.


²	Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.


³	Refer to Note 14 for additional information related to the Company's pension and other postretirement benefit liabilities.

The following table presents the amounts and line items in our condensed consolidated statement of income where adjustments reclassified from AOCI into income were recorded (in millions):



		Amount Reclassified from AOCI into Income
Description of AOCI Component	Financial Statement Line Item	Three Months Ended March 29, 2019
Foreign currency translation adjustments:
Divestitures, deconsolidations and other¹	Other income (loss) — net	$	192
	Income from continuing operations before income taxes	192
	Consolidated net income	$	192
Derivatives:
Foreign currency contracts	Net operating revenues	$	(6	)
Foreign currency contracts	Cost of goods sold	(4		)
Foreign currency contracts	Other income (loss) — net	50
Divestitures, deconsolidations and other	Other income (loss) — net	1
Foreign currency and interest rate contracts	Interest expense	12
	Net income from continuing operations before income taxes	53
	Income taxes from continuing operations	(13		)
	Consolidated net income	$	40
Available-for-sale debt securities:
Sale of debt securities	Other income (loss) — net	$	(2	)
	Income from continuing operations before income taxes	(2		)
	Income taxes from continuing operations	—
	Consolidated net income	$	(2	)
Pension and other benefit liabilities:
Recognized net actuarial loss	Other income (loss) — net	$	39
Recognized prior service cost (credit)	Other income (loss) — net	(2		)
	Income from continuing operations before income taxes	37
	Income taxes from continuing operations	(9		)
	Consolidated net income	$	28


¹	Primarily related to our previously held equity ownership interest in CHI and the sale of a portion of our equity ownership interest in Andina. Refer to Note 2.

NOTE 11: CHANGES IN EQUITY

The following tables provide a reconciliation of the beginning and ending carrying amounts of total equity, equity attributable to shareowners of The Coca-Cola Company and equity attributable to noncontrolling interests (in millions):



						Shareowners of The Coca-Cola Company
Three Months Ended March 29, 2019	Common Shares Outstanding		Total			Reinvested Earnings			Accumulated Other Comprehensive Income (Loss)			Common Stock		Capital Surplus		Treasury Stock			Non- controlling Interests
December 31, 2018	4,268		$	19,058		$	63,234		$	(12,814	)	$	1,760	$	16,520	$	(51,719	)	$	2,077
Adoption of accounting standards¹	—		(18		)	501			(519		)	—		—		—			—
Comprehensive income (loss)	—		2,683			1,678			1,008			—		—		—			(3		)
Dividends paid/payable to shareowners of The Coca-Cola Company ($0.40 per share)	—		(1,709		)	(1,709		)	—			—		—		—			—
Dividends paid to noncontrolling interests	—		(5		)	—			—			—		—		—			(5		)
Purchases of treasury stock	(9	)	(398		)	—			—			—		—		(398		)	—
Impact related to stock compensation plans	9		193			—			—			—		57		136			—
March 29, 2019	4,268		$	19,804		$	63,704		$	(12,325	)	$	1,760	$	16,577	$	(51,981	)	$	2,069

¹Refer to Note 1 and Note 6.



						Shareowners of The Coca-Cola Company
Three Months Ended March 30, 2018	Common Shares Outstanding		Total			Reinvested Earnings			Accumulated Other Comprehensive Income (Loss)			Common Stock		Capital Surplus		Treasury Stock			Non-controlling Interests
December 31, 2017	4,259		$	18,977		$	60,430		$	(10,305	)	$	1,760	$	15,864	$	(50,677	)	$	1,905
Adoption of accounting standards¹	—		2,605			3,014			(409		)	—		—		—			—
Comprehensive income (loss)	—		2,135			1,368			676			—		—		—			91
Dividends paid/payable to shareowners of The Coca-Cola Company ($0.39 per share)	—		(1,662		)	(1,662		)	—			—		—		—			—
Business combinations	—		13			—			—			—		—		—			13
Purchases of treasury stock	(18	)	(822		)	—			—			—		—		(822		)	—
Impact related to stock compensation plans	18		373			—			—			—		142		231			—
Other activities	—		(2		)	—			—			—		—		—			(2		)
March 30, 2018	4,259		$	21,617		$	63,150		$	(10,038	)	$	1,760	$	16,006	$	(51,268	)	$	2,007

¹Refer to Note 1, Note 3 and Note 4.

NOTE 12: SIGNIFICANT OPERATING AND NONOPERATING ITEMS

Other Operating Charges

During the three months ended March 29, 2019, the Company recorded other operating charges of $127 million. These charges primarily consisted of $68 million related to the Company's productivity and reinvestment program. In addition, other operating charges included $46 million of transaction costs associated with the purchase of Costa, which we acquired in January 2019, and $11 million for costs incurred to refranchise certain of our North America bottling operations. Costs related to refranchising include, among other items, internal and external costs for individuals directly working on the refranchising efforts, severance, and costs associated with the implementation of information technology systems to facilitate consistent data standards and availability throughout our North America bottling system. Other operating charges also included $2 million related to tax litigation expense. Refer to Note 2 for additional information on the acquisition of Costa. Refer to Note 9 for additional information related to the tax litigation. Refer to Note 13 for additional information on the Company's productivity and reinvestment program. Refer to Note 17 for the impact these charges had on our operating segments and Corporate.

During the three months ended March 30, 2018, the Company recorded other operating charges of $536 million. These charges primarily consisted of $390 million of CCR asset impairments and $95 million related to the Company's productivity and reinvestment program. In addition, other operating charges included $45 million related to costs incurred to refranchise certain of our North America bottling operations. Refer to Note 13 for additional information on the Company's productivity and reinvestment program. Refer to Note 16 for information on how the Company determined the asset impairment charges. Refer to Note 17 for the impact these charges had on our operating segments and Corporate.

Other Nonoperating Items

Equity Income (Loss) — Net

During the three months ended March 29, 2019 and March 30, 2018, the Company recorded net charges of $42 million and$51 million, respectively. These amounts represent the Company's proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees. Refer to Note 17 for the impact these items had on our operating segments and Corporate.

Other Income (Loss) — Net

During the three months ended March 29, 2019, the Company recognized an other-than-temporary impairment charge of $286 million related to Coca-Cola Bottlers Japan Holdings Inc. ("CCBJHI"), an equity method investee. The Company also recognized a $121 million loss in conjunction with our acquisition of the remaining equity ownership interest in CHI and a $57 million other-than-temporary impairment charge related to one of our equity method investees in North America. Additionally, the Company recognized net charges of $4 million due to the refranchising of certain bottling territories in North America and charges of $4 million 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. These charges were partially offset by a net gain of $149 million 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, a gain of $39 million related to the sale of a portion of our equity ownership interest in Andina and a gain of $34 million related to economic hedging activities. Refer to Note 2 for additional information on refranchising activities, the North America conversion payments, the acquisition of the remaining equity ownership interest in CHI and the sale of a portion of our equity ownership interest in Andina. Refer to Note 4 for additional information on equity and debt securities. Refer to Note 6 for additional information on economic hedging activities. Refer to Note 16 for information on how the Company determined the impairment charges and the loss recognized in conjunction with our acquisition of the remaining equity ownership interest in CHI. Refer to Note 17 for the impact these items had on our operating segments and Corporate.

During the three months ended March 30, 2018, the Company recorded a net loss of $85 million 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, and a net loss of $33 million primarily related to the reversal of the cumulative translation adjustments resulting from the substantial liquidation of the Company's former Russian juice operations. The Company also recorded $19 million 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 and $2 million due to the refranchising of certain bottling territories in North America. Refer to Note 2 for additional information on the North America conversion payments. Refer to Note 4 for additional information on mark-to-market adjustments of equity and debt securities. Refer to Note 17 for the impact these items had on our operating segments and Corporate.

NOTE 13: PRODUCTIVITY AND REINVESTMENT PROGRAM

In February 2012, the Company announced a productivity and reinvestment program designed to further enable our efforts to strengthen our brands and reinvest our resources to drive long-term profitable growth. 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 the integration of Coca‑Cola Enterprises Inc.'s former North America business ("Old CCE").

In February 2014, the Company announced the expansion of our productivity and reinvestment program to drive incremental productivity that will primarily be redirected into increased media investments. Our incremental productivity goal consists of two relatively equal components. First, we will expand savings through global supply chain optimization, data and information technology systems standardization, and resource and cost reallocation. Second, we will increase 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.

In October 2014, the Company announced that we were further expanding our productivity and reinvestment program and extending it through 2019. The expansion of the productivity initiatives focuses on four key areas: restructuring the Company's global supply chain; implementing zero-based work, an evolution of zero-based budget principles, across the organization; streamlining and simplifying the Company's operating model; and further driving increased discipline and efficiency in direct marketing investments.

In April 2017, the Company announced another expansion of our productivity and reinvestment program. This expansion is focused on achieving additional efficiencies in both our supply chain and our marketing expenditures as well as transitioning to a new, more agile operating model to enable growth. Under this operating model, our business units will be supported by an expanded enabling services organization and a corporate center focused on a few strategic initiatives, policy and governance. The expanded enabling services organization will focus on both simplifying and standardizing key transactional processes and providing support to business units through global centers of excellence.

The Company has incurred total pretax expenses of $3,634 million related to our productivity and reinvestment program since it commenced. These expenses were recorded in the line items other operating charges and other income (loss) — net in our condensed consolidated statements of income. Refer to Note 17 for the impact these charges had on our operating segments and Corporate. Outside services reported in the table below primarily relate to expenses in connection with legal, outplacement and consulting activities. Other direct costs reported in the table below include, among other items, internal and external costs associated with the development, communication, administration and implementation of these initiatives; accelerated depreciation on certain fixed assets; contract termination fees; and relocation costs.

The following table summarizes the balance of accrued expenses related to these productivity and reinvestment initiatives and the changes in the accrued amounts as of and for the three months ended March 29, 2019 (in millions):



	Accrued Balance December 31, 2018		Costs Incurred Three Months Ended March 29, 2019		Payments			Noncash and Exchange			Accrued Balance March 29, 2019
Severance pay and benefits	$	76	$	11	$	(37	)	$	1		$	51
Outside services	10		27		(24		)	—			13
Other direct costs	4		30		(12		)	(12		)	10
Total	$	90	$	68	$	(73	)	$	(11	)	$	74

NOTE 14: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

Net periodic benefit cost (income) for our pension and other postretirement benefit plans consisted of the following (in millions):



	Pension Benefits						Other Benefits
	Three Months Ended
	March 29, 2019			March 30, 2018			March 29, 2019			March 30, 2018
Service cost	$	26		$	32		$	2		$	3
Interest cost	72			73			7			6
Expected return on plan assets¹	(138		)	(168		)	(3		)	(3		)
Amortization of prior service cost (credit)	(1		)	2			(1		)	(4		)
Amortization of net actuarial loss	38			34			1			1
Net periodic benefit cost (income)	$	(3	)	$	(27	)	$	6		$	3

¹The weighted-average expected long-term rates of return on plan assets used in computing 2019 net periodic benefit cost (income) are

7.7 percent for pension benefit plans and 4.6 percent for other benefit plans.

All of the amounts in the table above, other than service cost, were recorded in the line item other income (loss) — net in our condensed consolidated statements of income. During the three months ended March 29, 2019, the Company contributed $6 million to our pension trusts, and we anticipate making additional contributions of approximately $14 million during the remainder of 2019. The Company contributed $27 million to our pension trusts during the three months ended March 30, 2018.

NOTE 15: INCOME TAXES

The Company recorded income taxes from continuing operations of $486 million (22.8 percent effective tax rate) and $506 million (27.6 percent effective tax rate) during the three months ended March 29, 2019 and March 30, 2018, respectively.

The Company's effective tax rate for the three months ended March 29, 2019 and March 30, 2018 varies from the statutory federal income tax rate of 21.0 percent primarily due to the tax impact of significant operating and nonoperating items, along with the tax benefits of having significant operations outside the United States and significant earnings generated in investments accounted for under the equity method of accounting, both of which are generally taxed at rates lower than the U.S. statutory rate.

The Company's effective tax rate for the three months ended March 30, 2018 included $176 million of additional tax expense to adjust our provisional tax estimate recorded as of December 31, 2017, related to the Tax Reform Act signed into law on December 22, 2017.

On September 17, 2015, the Company received a Statutory Notice of Deficiency from the IRS for the tax years 2007 through 2009, after a five-year audit. Refer to Note 9.

NOTE 16: FAIR VALUE MEASUREMENTS

U.S. GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:


•	Level 1 — Quoted prices in active markets for identical assets or liabilities.


•	Level 2 — Observable inputs other than quoted prices included in Level 1. We value assets and liabilities included in this level using dealer and broker quotations, certain pricing models, bid prices, quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.


•	Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Recurring Fair Value Measurements

In accordance with U.S. GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. For our Company, the only assets and liabilities that are adjusted to fair value on a recurring basis are investments in equity

securities with readily determinable fair values, debt securities classified as trading or available-for-sale and derivative financial instruments. Additionally, the Company adjusts the carrying value of certain long-term debt as a result of the Company's fair value hedging strategy.

Investments in Debt and Equity Securities

The fair values of our investments in debt and equity securities using quoted market prices from daily exchange traded markets are based on the closing price as of the balance sheet date and are classified as Level 1. The fair values of our investments in debt and equity securities classified as Level 2 are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. Inputs into these valuation techniques include actual trade data, benchmark yields, broker/dealer quotes and other similar data. These inputs are obtained from quoted market prices, independent pricing vendors or other sources.

Derivative Financial Instruments

The fair values of our futures contracts are primarily determined using quoted contract prices on futures exchange markets. The fair values of these instruments are based on the closing contract price as of the balance sheet date and are classified as Level 1.

The fair values of our derivative instruments other than futures are determined using standard valuation models. The significant inputs used in these models are readily available in public markets, or can be derived from observable market transactions, and therefore have been classified as Level 2. Inputs used in these standard valuation models for derivative instruments other than futures include the applicable exchange rates, forward rates, interest rates, discount rates and commodity prices. The standard valuation model for options also uses implied volatility as an additional input. The discount rates are based on the historical U.S. Deposit or U.S. Treasury rates, and the implied volatility specific to options is based on quoted rates from financial institutions.

Included in the fair values of derivative instruments is an adjustment for nonperformance risk. The adjustment is based on current credit default swap ("CDS") rates applied to each contract, by counterparty. We use our counterparty's CDS rate when we are in an asset position and our own CDS rate when we are in a liability position. The adjustment for nonperformance risk did not have a significant impact on the fair values of our derivative instruments.

The following tables summarize those assets and liabilities measured at fair value on a recurring basis (in millions):



March 29, 2019	Level 1			Level 2			Level 3		Other³		Netting Adjustment			⁴	Fair Value Measurements
Assets:
Equity securities with readily determinable values¹	$	1,831		$	201		$	7	$	63	$	—			$	2,102
Debt securities¹	—			4,768			19		—		—				4,787
Derivatives²	3			490			—		—		(314		)	⁵	179			⁶
Total assets	$	1,834		$	5,459		$	26	$	63	$	(314	)		$	7,068
Liabilities:
Derivatives²	$	(6	)	$	(123	)	$	—	$	—	$	115			$	(14	)	⁶
Total liabilities	$	(6	)	$	(123	)	$	—	$	—	$	115			$	(14	)

¹Refer to Note 4 for additional information related to the composition of our equity securities with readily determinable values and debt securities.

²Refer to Note 6 for additional information related to the composition of our derivative portfolio.

³Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 4.

⁴Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle net positive and negative positions and also cash collateral held or placed with the same counterparties. There are no amounts subject to legally enforceable master netting agreements that management has chosen not to offset or that do not meet the offsetting requirements. Refer to Note 6.


⁵	The Company is obligated to return $205 million in cash collateral it has netted against its derivative position.

⁶

The Company's derivative financial instruments are recorded at fair value in our condensed consolidated balance sheet as follows: $177 million in the line item other assets; $2 million in the line item assets held for sale — discontinued operations; and $14 million in the line item other liabilities. Refer to Note 6 for additional information related to the composition of our derivative portfolio.



December 31, 2018	Level 1		Level 2		Level 3		Other³		Netting Adjustment		⁴	Fair Value Measurements
Assets:
Equity securities with readily determinable values¹	$	1,681	$	186	$	6	$	61	$	—		$	1,934
Debt securities¹	—		5,018		19		—		—			5,037
Derivatives²	2		313		—