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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
 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
ko-20220930_g1.jpg
COCA COLA CO
(Exact name of Registrant as specified in its charter)
Delaware   58-0628465
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
One Coca-Cola Plaza
Atlanta Georgia 30313
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (404) 676-2121
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.25 Par Value KO New York Stock Exchange
0.500% Notes Due 2024 KO24 New York Stock Exchange
1.875% Notes Due 2026 KO26 New York Stock Exchange
0.750% Notes Due 2026 KO26C New York Stock Exchange
1.125% Notes Due 2027 KO27 New York Stock Exchange
0.125% Notes Due 2029 KO29A New York Stock Exchange
0.125% Notes Due 2029 KO29B New York Stock Exchange
0.400% Notes Due 2030 KO30B New York Stock Exchange
1.250% Notes Due 2031 KO31 New York Stock Exchange
0.375% Notes Due 2033 KO33 New York Stock Exchange
0.500% Notes Due 2033 KO33A New York Stock Exchange
1.625% Notes Due 2035 KO35 New York Stock Exchange
1.100% Notes Due 2036 KO36 New York Stock Exchange
0.950% Notes Due 2036 KO36A New York Stock Exchange
0.800% Notes Due 2040 KO40B New York Stock Exchange
1.000% Notes Due 2041 KO41 New York Stock Exchange
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     No 



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     No 
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 Accelerated filer 
Non-accelerated filer Smaller reporting company
Emerging growth company
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.
Indicate by check mark if the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 
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    Shares Outstanding as of October 24, 2022
$0.25 Par Value   4,324,513,264




THE COCA-COLA COMPANY AND SUBSIDIARIES
Table of Contents
    Page
1
 
2
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3
4
5
6
 



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 our Company’s actual results to differ materially from historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, the possibility that the assumptions used to calculate our estimated aggregate incremental tax and interest liability related to the potential unfavorable outcome of the ongoing tax dispute with the U.S. Internal Revenue Service could significantly change; 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, 2021 and in our Quarterly Report on Form 10-Q for the quarter ended April 1, 2022; and those described from time to time in our future reports filed with the Securities and Exchange Commission.
1


Part I. Financial Information
Item 1. Financial Statements
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions except per share data)
Three Months Ended Nine Months Ended
September 30,
2022
October 1,
2021
September 30,
2022
October 1,
2021
Net Operating Revenues $ 11,063  $ 10,042  $ 32,879  $ 29,191 
Cost of goods sold 4,566  3,977  13,487  11,269 
Gross Profit 6,497  6,065  19,392  17,922 
Selling, general and administrative expenses 3,279  3,122  9,449  8,808 
Other operating charges 130  45  1,109  478 
Operating Income 3,088  2,898  8,834  8,636 
Interest income 128  68  306  205 
Interest expense 198  210  578  1,432 
Equity income (loss) — net 479  455  1,133  1,136 
Other income (loss) — net (53) (127) (509) 920 
Income Before Income Taxes 3,444  3,084  9,186  9,465 
Income taxes 622  609  1,671  2,111 
Consolidated Net Income 2,822  2,475  7,515  7,354 
Less: Net income (loss) attributable to noncontrolling interests (3) 4  (3)
Net Income Attributable to Shareowners of The Coca-Cola Company $ 2,825  $ 2,471  $ 7,511  $ 7,357 
Basic Net Income Per Share1
$ 0.65  $ 0.57  $ 1.74  $ 1.71 
Diluted Net Income Per Share1
$ 0.65  $ 0.57  $ 1.73  $ 1.70 
Average Shares Outstanding — Basic 4,325  4,318  4,329  4,313 
Effect of dilutive securities 21  26  23  24 
Average Shares Outstanding — Diluted 4,346  4,344  4,352  4,337 
1 Calculated based on net income attributable to shareowners of The Coca-Cola Company.
Refer to Notes to Consolidated Financial Statements.


2


THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Three Months Ended Nine Months Ended
September 30,
2022
October 1,
2021
September 30,
2022
October 1,
2021
Consolidated Net Income $ 2,822  $ 2,475  $ 7,515  $ 7,354 
Other Comprehensive Income:    
Net foreign currency translation adjustments (1,364) (991) (2,265) (131)
Net gains (losses) on derivatives 93  28  250  184 
 Net change in unrealized gains (losses) on available-for-sale debt securities 18  (22) (12) (83)
Net change in pension and other postretirement benefit liabilities 34  (32) 284  368 
Total Comprehensive Income 1,603  1,458  5,772  7,692 
Less: Comprehensive income (loss) attributable to noncontrolling interests
(154) (62) (200) (16)
Total Comprehensive Income Attributable to Shareowners
of The Coca-Cola Company
$ 1,757  $ 1,520  $ 5,972  $ 7,708 
Refer to Notes to Consolidated Financial Statements.



3


THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions except par value)
September 30,
2022
December 31,
2021
ASSETS
Current Assets  
Cash and cash equivalents $ 10,127  $ 9,684 
Short-term investments 1,120  1,242 
Total Cash, Cash Equivalents and Short-Term Investments 11,247  10,926 
Marketable securities 1,973  1,699 
Trade accounts receivable, less allowances of $517 and $516, respectively
3,994  3,512 
Inventories 3,708  3,414 
Prepaid expenses and other current assets 3,217  2,994 
Total Current Assets 24,139  22,545 
Equity method investments 17,723  17,598 
Other investments 582  818 
Other noncurrent assets 6,130  6,731 
Deferred income tax assets 1,708  2,129 
Property, plant and equipment, less accumulated depreciation of $8,992 and $8,942, respectively
9,243  9,920 
Trademarks with indefinite lives 13,968  14,465 
Goodwill 18,329  19,363 
Other intangible assets 649  785 
Total Assets $ 92,471  $ 94,354 
LIABILITIES AND EQUITY
Current Liabilities    
Accounts payable and accrued expenses $ 16,103  $ 14,619 
Loans and notes payable 3,396  3,307 
Current maturities of long-term debt 729  1,338 
Accrued income taxes 1,211  686 
Total Current Liabilities 21,439  19,950 
Long-term debt 35,462  38,116 
Other noncurrent liabilities 8,010  8,607 
Deferred income tax liabilities 3,124  2,821 
The Coca-Cola Company Shareowners’ Equity    
Common stock, $0.25 par value; authorized — 11,200 shares; issued — 7,040 shares
1,760  1,760 
Capital surplus 18,687  18,116 
Reinvested earnings 70,893  69,094 
Accumulated other comprehensive income (loss) (15,869) (14,330)
Treasury stock, at cost — 2,716 and 2,715 shares, respectively
(52,666) (51,641)
Equity Attributable to Shareowners of The Coca-Cola Company 22,805  22,999 
Equity attributable to noncontrolling interests 1,631  1,861 
Total Equity 24,436  24,860 
Total Liabilities and Equity $ 92,471  $ 94,354 
Refer to Notes to Consolidated Financial Statements.
4


THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
  Nine Months Ended
  September 30,
2022
October 1,
2021
Operating Activities    
Consolidated net income $ 7,515  $ 7,354 
Depreciation and amortization 953  1,111 
Stock-based compensation expense 273  236 
Deferred income taxes (135) 726 
Equity (income) loss — net of dividends (767) (621)
Foreign currency adjustments 176  (5)
Significant (gains) losses — net 25  (498)
Other operating charges 1,070  243 
Other items 217  517 
Net change in operating assets and liabilities (1,259) 168 
Net Cash Provided by Operating Activities 8,068  9,231 
Investing Activities    
Purchases of investments (3,169) (4,732)
Proceeds from disposals of investments 3,049  5,294 
Acquisitions of businesses, equity method investments and nonmarketable securities (40) (11)
Proceeds from disposals of businesses, equity method investments and nonmarketable securities 229  1,950 
Purchases of property, plant and equipment (776) (728)
Proceeds from disposals of property, plant and equipment 46  65 
Collateral (paid) received associated with hedging activities — net (1,449) — 
Other investing activities (79) 81 
Net Cash Provided by (Used in) Investing Activities (2,189) 1,919 
Financing Activities  
Issuances of debt 4,351  11,848 
Payments of debt (3,761) (13,037)
Issuances of stock 707  493 
Purchases of stock for treasury (1,412) (104)
Dividends (3,910) (5,437)
Other financing activities (1,053) (354)
Net Cash Provided by (Used in) Financing Activities (5,078) (6,591)
Effect of Exchange Rate Changes on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
(392) (56)
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 409  4,503 
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 10,025  7,110 
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents at End of Period 10,434  11,613 
Less: Restricted cash and restricted cash equivalents at end of period 307  312 
Cash and Cash Equivalents at End of Period $ 10,127  $ 11,301 
Refer to Notes to Consolidated Financial Statements.
5



THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited 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, 2021.
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 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 and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. Sales of our ready-to-drink beverages are somewhat seasonal, with the second and third calendar quarters typically accounting for the highest sales volumes. The volume of sales in the beverage business may be affected by weather conditions.
Each of our quarterly reporting periods, other than the fourth quarter, ends on the Friday closest to the last day of the corresponding quarterly calendar period. The third quarter of 2022 and the third quarter of 2021 ended on September 30, 2022 and October 1, 2021, respectively. Our fourth quarter and our fiscal year end on December 31 regardless of the day of the week on which December 31 falls.
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 quarterly reporting purposes, we allocate our estimated full year marketing expenditures that benefit multiple quarters to each of those quarters. We use the proportion of each quarter’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 quarter, we review our estimated full year unit case volume and our estimated full year marketing expenditures that benefit multiple quarters in order to evaluate if a change in estimate is necessary. The impact of any change in the full year estimate is recognized in the quarter in which the change in estimate occurs. Our full year marketing expenditures are not impacted by this interim accounting policy.
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 noncurrent assets on our consolidated balance sheet. 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 tables provide a summary of cash, cash equivalents, restricted cash and restricted cash equivalents that constitute the total amounts shown in our consolidated statements of cash flows (in millions):
September 30,
2022
December 31,
2021
Cash and cash equivalents $ 10,127  $ 9,684 
Restricted cash and restricted cash equivalents1,2
307  341 
Cash, cash equivalents, restricted cash and restricted cash equivalents $ 10,434  $ 10,025 
1Amounts include cash and cash equivalents in our solvency capital portfolio, which are included in the line item other noncurrent assets in our consolidated balance sheets. Refer to Note 4.
2Amounts include cash and cash equivalents related to assets held for sale, which are included in the line item prepaid expenses and other current assets in our consolidated balance sheets. Refer to Note 2.
6


October 1,
2021
December 31,
2020
Cash and cash equivalents $ 11,301  $ 6,795 
Restricted cash and restricted cash equivalents1
312  315 
Cash, cash equivalents, restricted cash and restricted cash equivalents $ 11,613  $ 7,110 
1Amounts represent cash and cash equivalents in our solvency capital portfolio, which are included in the line item other noncurrent assets in our consolidated balance sheets. Refer to Note 4.
NOTE 2: ACQUISITIONS AND DIVESTITURES
Acquisitions
Our Company’s acquisitions of businesses, equity method investments and nonmarketable securities totaled $40 million and $11 million during the nine months ended September 30, 2022 and October 1, 2021, respectively.
Divestitures
Proceeds from disposals of businesses, equity method investments and nonmarketable securities during the nine months ended September 30, 2022 and October 1, 2021 totaled $229 million and $1,950 million, respectively. In 2022, we sold our ownership interest in one of our equity method investments and received cash proceeds of $123 million, resulting in a gain of $13 million. In 2021, we sold our ownership interest in Coca-Cola Amatil Limited (“CCA”), an equity method investee, to Coca-Cola Europacific Partners plc, also an equity method investee. We received cash proceeds of $1,738 million and recognized a gain of $695 million as a result of the sale and the related reversal of cumulative translation adjustments. In 2021, we also sold a portion of our ownership interest in one of our equity method investments and received cash proceeds of $134 million, resulting in a gain of $63 million. All of the gains were recorded in the line item other income (loss) — net in our consolidated statements of income.
Assets and Liabilities Held for Sale
The Company had certain bottling operations in Asia Pacific that met the criteria to be classified as held for sale. As a result, we were required to record their assets and liabilities at the lower of carrying value or fair value less any costs to sell. As the fair value less any costs to sell exceeded the carrying value, the related assets and liabilities were recorded at their carrying value. These assets and liabilities were included in the Bottling Investments operating segment. The Company expects these bottling operations to be refranchised during the fourth quarter of 2022, subject to regulatory approval.
The following table presents information related to the major classes of assets and liabilities that were classified as held for sale and were included in the line items prepaid expenses and other current assets and accounts payable and accrued expenses, respectively, in our consolidated balance sheets (in millions):
September 30,
2022
December 31, 2021
Cash, cash equivalents and short-term investments $ 222  $ 228 
Trade accounts receivable, less allowances 17  21 
Inventories 63  55 
Prepaid expenses and other current assets 46  36 
Other noncurrent assets 34 
Deferred income tax assets 7 
Property, plant and equipment — net 289  282 
Goodwill 35  37 
  Assets held for sale $ 713  $ 674 
Accounts payable and accrued expenses $ 165  $ 139 
Accrued income taxes 6 
Other noncurrent liabilities 9 
Deferred income tax liabilities 5 
  Liabilities held for sale $ 185  $ 157 
7


NOTE 3: NET OPERATING REVENUES
The following tables present 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 September 30, 2022
Concentrate operations $ 2,235  $ 4,339  $ 6,574 
Finished product operations 1,909  2,580  4,489 
Total $ 4,144  $ 6,919  $ 11,063 
Three Months Ended October 1, 2021
Concentrate operations $ 1,749  $ 4,122  $ 5,871 
Finished product operations 1,669  2,502  4,171 
Total $ 3,418  $ 6,624  $ 10,042 
United States International Total
Nine Months Ended September 30, 2022
Concentrate operations $ 5,768  $ 12,895  $ 18,663 
Finished product operations 5,856  8,360  14,216 
Total $ 11,624  $ 21,255  $ 32,879 
Nine Months Ended October 1, 2021
Concentrate operations $ 4,899  $ 11,948  $ 16,847 
Finished product operations 4,744  7,600  12,344 
Total $ 9,643  $ 19,548  $ 29,191 
Refer to Note 16 for disclosures of net operating revenues by operating segment and Corporate.
NOTE 4: INVESTMENTS
Equity Securities
The carrying values of our equity securities were included in the following line items in our consolidated balance sheets (in millions):
Fair Value with Changes Recognized in Income Measurement Alternative — No Readily Determinable Fair Value
September 30, 2022
Marketable securities $ 296  $  
Other investments 542  40 
Other noncurrent assets 1,174   
Total equity securities $ 2,012  $ 40 
December 31, 2021
Marketable securities $ 376  $ — 
Other investments 771  47 
Other noncurrent assets 1,576  — 
Total equity securities $ 2,723  $ 47 
8


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
September 30,
2022
October 1,
2021
Net gains (losses) recognized during the period related to equity securities $ (38) $
Less: Net gains (losses) recognized during the period related to equity securities sold
during the period
(95)
Net unrealized gains (losses) recognized during the period related to equity securities
still held at the end of the period
$ 57  $ (1)
Nine Months Ended
September 30,
2022
October 1,
2021
Net gains (losses) recognized during the period related to equity securities $ (399) $ 361 
Less: Net gains (losses) recognized during the period related to equity securities sold
during the period
(350) 33 
Net unrealized gains (losses) recognized during the period related to equity securities
still held at the end of the period
$ (49) $ 328 
Debt Securities
Our debt securities consisted of the following (in millions):
Gross Unrealized Estimated
Fair Value
Cost Gains Losses
September 30, 2022
Trading securities
$ 43  $   $ (4) $ 39 
Available-for-sale securities
1,960  22  (131) 1,851 
Total debt securities
$ 2,003  $ 22  $ (135) $ 1,890 
December 31, 2021
Trading securities
$ 39  $ $ —  $ 40 
Available-for-sale securities
1,648  33  (132) 1,549 
Total debt securities
$ 1,687  $ 34  $ (132) $ 1,589 
The carrying values of our debt securities were included in the following line items in our consolidated balance sheets (in millions):
September 30, 2022 December 31, 2021
Trading Securities Available-for-Sale Securities Trading Securities Available-for-Sale Securities
Marketable securities
$ 39  $ 1,638  $ 40  $ 1,283 
Other noncurrent assets
  213  —  266 
Total debt securities $ 39  $ 1,851  $ 40  $ 1,549 
The contractual maturities of these available-for-sale debt securities as of September 30, 2022 were as follows (in millions):
Cost Estimated
Fair Value
Within 1 year $ 352  $ 342 
After 1 year through 5 years 1,409  1,317 
After 5 years through 10 years 35  47 
After 10 years 164  145 
Total $ 1,960  $ 1,851 
The Company expects that actual maturities may differ from the contractual maturities above because borrowers have the right to call or prepay certain obligations.
9


The sale and/or maturity of available-for-sale debt securities resulted in the following realized activity (in millions):
Three Months Ended Nine Months Ended
September 30,
2022
October 1,
2021
September 30,
2022
October 1,
2021
Gross gains $ 2  $ $ 5  $
Gross losses (43) —  (51) (8)
Proceeds 135  91  479  1,058 
Captive Insurance Companies
In accordance with local insurance regulations, our consolidated 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 our consolidated captive insurance companies to reinsure group annuity insurance contracts that cover the obligations of certain of our European and Canadian pension plans. This captive’s solvency capital funds included total equity and debt securities of $1,249 million and $1,670 million as of September 30, 2022 and December 31, 2021, respectively, which were classified in the line item other noncurrent assets in our consolidated balance sheets because the assets are not available to satisfy our current obligations.
NOTE 5: INVENTORIES
Inventories consisted of the following (in millions):
September 30,
2022
December 31,
2021
Raw materials and packaging $ 2,123  $ 2,133 
Finished goods 1,246  982 
Other 339  299 
Total inventories $ 3,708  $ 3,414 
NOTE 6: HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS
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 Value1,2
Derivatives Designated as Hedging Instruments
Balance Sheet Location1
September 30,
2022
December 31,
2021
Assets:      
Foreign currency contracts Prepaid expenses and other current assets $ 391  $ 151 
Foreign currency contracts Other noncurrent assets 83  27 
Interest rate contracts Prepaid expenses and other current assets  
Interest rate contracts Other noncurrent assets   282 
Total assets   $ 474  $ 461 
Liabilities:      
Foreign currency contracts Accounts payable and accrued expenses $ 52  $ 15 
Foreign currency contracts Other noncurrent liabilities 151  17 
Interest rate contracts Other noncurrent liabilities 1,604  14 
Total liabilities   $ 1,807  $ 46 
1All of the Company’s derivative instruments are carried at fair value in our 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 15 for the net presentation of the Company’s derivative instruments.
2Refer to Note 15 for additional information related to the estimated fair value.
10


The following table presents the fair values of the Company’s derivative instruments that were not designated as hedging instruments (in millions):
 
Fair Value1,2
Derivatives Not Designated as Hedging Instruments
Balance Sheet Location1
September 30,
2022
December 31, 2021
Assets:      
Foreign currency contracts Prepaid expenses and other current assets $ 105  $ 53 
Foreign currency contracts Other noncurrent assets 10  — 
Commodity contracts Prepaid expenses and other current assets 131  131 
Commodity contracts Other noncurrent assets  
Other derivative instruments Prepaid expenses and other current assets  
Total assets   $ 246  $ 196 
Liabilities:      
Foreign currency contracts Accounts payable and accrued expenses $ 22  $ 34 
Foreign currency contracts Other noncurrent liabilities 3 
Commodity contracts Accounts payable and accrued expenses 40 
Commodity contracts Other noncurrent liabilities 6 
Other derivative instruments Accounts payable and accrued expenses 19  — 
Total liabilities   $ 90  $ 50 
1All of the Company’s derivative instruments are carried at fair value in our 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 15 for the net presentation of the Company’s derivative instruments.
2Refer to Note 15 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. Furthermore, for certain derivative financial instruments, the Company has agreements with counterparties that require collateral to be exchanged based on changes in the fair value of the instruments. As a result of 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 accumulated other comprehensive income (loss) (“AOCI”) and are reclassified into the line item in our consolidated statement of income in which the hedged items are recorded in the same period the hedged items affect earnings. The changes in the 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 the variability in future cash flows is typically three years.
The Company maintains a foreign currency cash flow hedging program to reduce the risk that our 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 and collars (principally euro, British pound sterling and Japanese yen) 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 qualified for the Company’s foreign currency cash flow hedging program were $5,963 million and $7,399 million as of September 30, 2022 and December 31, 2021, respectively.
11


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 fluctuations in foreign currency exchange rates. For this hedging program, the Company recognizes in earnings each period the changes in carrying values of these foreign currency denominated assets and liabilities due to fluctuations in exchange rates. The changes in fair values of the cross-currency swap derivatives are recorded in AOCI with an immediate reclassification into earnings for the changes in fair values attributable to fluctuations in foreign currency exchange rates. The total notional values of derivatives that were designated as cash flow hedges for the Company’s foreign currency denominated assets and liabilities were $1,524 million and $1,994 million as of September 30, 2022 and December 31, 2021, respectively.
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 were designated 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 were designated and qualified for this program were $45 million and $10 million as of September 30, 2022 and December 31, 2021, respectively.
Our Company monitors our mix of short-term debt and long-term debt regularly. We manage our risk to interest rate fluctuations through the use of derivative financial instruments. From time to time, the Company enters into interest rate swap agreements and designates 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. As of September 30, 2022 and December 31, 2021, we did not have any interest rate swaps designated as a cash flow hedge.
The following tables present 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 Income Gain (Loss) Reclassified from AOCI into Income
Three Months Ended September 30, 2022
Foreign currency contracts $ 197  Net operating revenues $ 88 
Foreign currency contracts 12  Cost of goods sold 10 
Foreign currency contracts   Interest expense (1)
Foreign currency contracts (56) Other income (loss) — net (71)
Total $ 153  $ 26 
Three Months Ended October 1, 2021
Foreign currency contracts $ 15  Net operating revenues $ (21)
Foreign currency contracts Cost of goods sold (6)
Foreign currency contracts —  Interest expense (1)
Foreign currency contracts (43) Other income (loss) — net (35)
Total
$ (22)   $ (63)
12


Gain (Loss)
Recognized
in OCI
Location of Gain (Loss) Recognized in Income Gain (Loss) Reclassified from AOCI into Income
Nine Months Ended September 30, 2022
Foreign currency contracts $ 475  Net operating revenues $ 148 
Foreign currency contracts 34  Cost of goods sold 13 
Foreign currency contracts   Interest expense (3)
Foreign currency contracts (175) Other income (loss) — net (171)
Total $ 334  $ (13)
Nine Months Ended October 1, 2021
Foreign currency contracts $ (1) Net operating revenues $ (71)
Foreign currency contracts (5) Cost of goods sold (9)
Foreign currency contracts —  Interest expense (12)
Foreign currency contracts 15  Other income (loss) — net 49 
Interest rate contracts 110  Interest expense (90)
Total
$ 119    $ (133)
As of September 30, 2022, the Company estimates that it will reclassify into earnings during the next 12 months net gains of $324 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 result 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 fluctuations in foreign currency exchange rates and benchmark interest rates. The changes in the fair values of derivatives designated as fair value hedges and the offsetting changes in the fair values of the hedged items are recognized in earnings. As a result, any difference is reflected in earnings as ineffectiveness. 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 or has been extinguished. The total notional values of derivatives that were designated and qualified as fair value hedges of this type were $12,701 million and $12,113 million as of September 30, 2022 and December 31, 2021, respectively.
The following tables summarize 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
September 30,
2022
October 1,
2021
Interest rate contracts Interest expense $ (688) $ (56)
Fixed-rate debt Interest expense 705  55 
Net impact of fair value hedging instruments $ 17  $ (1)
Hedging Instruments and Hedged Items Location of Gain (Loss) Recognized in Income Gain (Loss)
Recognized in Income
Nine Months Ended
September 30,
2022
October 1,
2021
Interest rate contracts Interest expense $ (1,873) $ (236)
Fixed-rate debt Interest expense 1,871  237 
Net impact of fair value hedging instruments $ (2) $
13


The following table summarizes the amounts recorded in our consolidated balance sheets related to hedged items in fair value hedging relationships (in millions):
Cumulative Amount of Fair Value Hedging Adjustments1
Carrying Values of
Hedged Items
Included in the Carrying Values of Hedged Items Remaining for Which Hedge Accounting Has Been Discontinued
Balance Sheet Location of Hedged Items September 30,
2022
December 31,
2021
September 30,
2022
December 31,
2021
September 30,
2022
December 31,
2021
Current maturities of long-term debt $   $ 200  $   $ $   $ — 
Long-term debt 11,243  12,353  (1,568) 255  203  228 
1Cumulative amount of fair value hedging adjustments does not include changes due to foreign currency exchange rate fluctuations.
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 financial instruments that are designated and qualify as hedges of net investments in foreign operations, the changes in the fair values of the derivative financial 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 changes in the carrying values of the designated portions of the non-derivative financial instruments due to fluctuations in foreign currency exchange rates are recorded in net foreign currency translation adjustments. Any ineffective portions of 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 Values Gain (Loss) Recognized in OCI
as of Three Months Ended Nine Months Ended
  September 30,
2022
December 31,
2021
September 30,
2022
October 1,
2021
September 30,
2022
October 1,
2021
Foreign currency contracts $ 37  $ 40  $ (1) $ $ (2) $ (1)
Foreign currency denominated debt 11,043  12,812  709  304  1,768  673 
Total $ 11,080  $ 12,852  $ 708  $ 310  $ 1,766  $ 672 
The Company did not reclassify any gains or losses related to net investment hedges from AOCI into earnings during the three and nine months ended September 30, 2022. During the nine months ended October 1, 2021, the Company reclassified a loss of $4 million related to net investment hedges from AOCI into earnings. In addition, the Company did not have any ineffectiveness related to net investment hedges during the three and nine months ended September 30, 2022 and October 1, 2021. 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 consolidated statement of cash flows.
Economic (Non-Designated) 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 values of economic hedges are immediately recognized in 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 the fair values of economic hedges used to offset those monetary assets and liabilities are immediately recognized in earnings in the line item other income (loss) — net in our 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 the fair values of economic hedges used to offset the variability in U.S. dollar net cash flows are immediately recognized in earnings in the line items net operating revenues, cost of goods sold or other income (loss) — net in our consolidated statement of income, as applicable. The total notional values of derivatives related to our foreign currency economic hedges were $4,681 million and $4,258 million as of September 30, 2022 and December 31, 2021, respectively.
14


The Company uses interest rate contracts as economic hedges to minimize exposure to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. The total notional value of derivatives related to our economic hedges of this type was $200 million as of December 31, 2021. As of September 30, 2022, we did not have any interest rate contracts used as economic hedges.
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 vehicle fuel. The changes in the fair values of these economic hedges are immediately recognized in earnings in the line items net operating revenues, cost of goods sold, or selling, general and administrative expenses in our consolidated statement of income, as applicable. The total notional values of derivatives related to our economic hedges of this type were $501 million and $908 million as of September 30, 2022 and December 31, 2021, respectively.
The following tables present 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
September 30,
2022
October 1,
2021
Foreign currency contracts Net operating revenues $ 16  $
Foreign currency contracts Cost of goods sold 21  (10)
Foreign currency contracts Other income (loss) — net 41  (43)
Commodity contracts Cost of goods sold (10) (32)
Other derivative instruments Selling, general and administrative expenses (17) (2)
Total   $ 51  $ (85)
Derivatives Not Designated as Hedging Instruments Location of Gain (Loss) Recognized in Income Gain (Loss)
Recognized in Income
Nine Months Ended
September 30,
2022
October 1,
2021
Foreign currency contracts Net operating revenues $ 23  $
Foreign currency contracts Cost of goods sold 44  (17)
Foreign currency contracts Other income (loss) — net 79  (39)
Interest rate contracts Interest expense   (187)
Commodity contracts Cost of goods sold (5) 178 
Other derivative instruments Selling, general and administrative expenses (38) 18 
Other derivative instruments Other income (loss) — net   (3)
Total   $ 103  $ (48)
NOTE 7: DEBT AND BORROWING ARRANGEMENTS
During the nine months ended September 30, 2022, the Company retired upon maturity fixed interest rate U.S. dollar-denominated debentures of $288 million due February 1, 2022 with an interest rate of 8.500 percent and $122 million due September 15, 2022 with an interest rate of 8.000 percent.
NOTE 8: COMMITMENTS AND CONTINGENCIES
Guarantees
As of September 30, 2022, we were contingently liable for guarantees of indebtedness owed by third parties of $918 million, of which $76 million was related to variable interest entities. Our guarantees are primarily related to third-party customers, bottlers and vendors 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, management has concluded that the likelihood of any significant amounts being paid by our Company under these guarantees is not probable.
We believe our exposure to concentrations of credit risk is limited due to the diverse geographic areas covered by our operations.
15


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 (excluding tax audit claims) 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 caselaw 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 income tax expense in the quarter in which 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 14.
On September 17, 2015, the Company received a Statutory Notice of Deficiency (“Notice”) from the U.S. Internal Revenue Service (“IRS”) seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets.
The Notice concerned the Company’s transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm’s-length pricing of transactions between related parties such as the Company’s U.S. parent and its foreign affiliates.
To resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm’s-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (“Closing Agreement”). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company’s income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years.
The IRS audited and confirmed the Company’s compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006.
The September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so.
The IRS designated the Company’s matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS’ designation of the Company’s matter for litigation, the Company was forced to either accept the IRS’ newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS’ litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.
The Company consequently initiated litigation by filing a petition in the U.S. Tax Court (“Tax Court”) in December 2015, challenging the tax adjustments enumerated in the Notice.
16


Prior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS’ potential tax adjustment by approximately $138 million.
The trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.
On November 18, 2020, the Tax Court issued an opinion (“Opinion”) in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. The Tax Court reserved ruling on the effect of Brazilian legal restrictions on the payment of royalties by the Company’s licensee in Brazil until after the Tax Court issues its opinion in the separate case of 3M Co. & Subs. v. Commissioner, T.C. Docket No. 5816-13 (filed March 11, 2013). Once the Tax Court issues its opinion in 3M Co. & Subs. v. Commissioner, the Company expects the Tax Court thereafter to render another opinion, and ultimately a final decision, in the Company’s case.
The Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company’s foreign licensees to increase the Company’s U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its claims on appeal and vigorously defend its position.
In determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinion and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company’s tax positions, that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinion (“Tax Court Methodology”), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company’s tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinion and the Company’s analysis.
The Company’s conclusion that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal is unchanged as of September 30, 2022. However, we updated our calculation of the methodologies we believe the federal courts could ultimately order to be used in calculating the Company’s tax. As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of September 30, 2022 to $419 million.
While the Company strongly disagrees with the IRS’ positions and the portions of the Opinion affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company’s financial position, results of operations and cash flows.
The Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinion, assuming such methodology were to be ultimately upheld by the courts and the IRS were to decide to apply that methodology to subsequent years with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2021 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2021. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate incremental tax and interest liability could be approximately $13 billion as of December 31, 2021. Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and nine months ended September 30, 2022 would increase the potential aggregate incremental tax and interest liability by approximately $250 million and $750 million, respectively. Additionally, we currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2021, would result in an incremental annual tax liability that would increase the Company’s effective tax rate by approximately 3.5 percent.
17


The Company does not know when the Tax Court will issue its opinion regarding the effect of Brazilian legal restrictions on the payment of royalties by the Company’s licensee in Brazil for the 2007 through 2009 tax years. After the Tax Court issues its opinion on the Company’s Brazilian licensee, the Company and the IRS will be provided time to agree on the tax impact, if any, of both opinions, after which the Tax Court would render a final decision in the case. The Company will have 90 days thereafter to file a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit and pay the tax liability and interest related to the 2007 through 2009 tax years. The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $5.1 billion (including interest accrued through September 30, 2022), plus any additional interest accrued through the time of payment. Some or all of this amount would be refunded if the Company were to prevail on appeal.
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 claims history. Our self-insurance reserves totaled $218 million and $229 million as of September 30, 2022 and December 31, 2021, respectively.
NOTE 9: OTHER COMPREHENSIVE INCOME
AOCI attributable to shareowners of The Coca-Cola Company is separately presented in our consolidated balance sheet 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 consolidated balance sheet 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):
September 30,
2022
December 31,
2021
Net foreign currency translation adjustments $ (14,656) $ (12,595)
Accumulated net gains (losses) on derivatives 270  20 
Unrealized net gains (losses) on available-for-sale debt securities (74) (62)
Adjustments to pension and other postretirement benefit liabilities (1,409) (1,693)
Accumulated other comprehensive income (loss) $ (15,869) $ (14,330)
The following table summarizes the allocation of total comprehensive income between shareowners of The Coca-Cola Company and noncontrolling interests (in millions):
Nine Months Ended September 30, 2022
Shareowners of
The Coca-Cola Company
Noncontrolling
Interests
Total
Consolidated net income $ 7,511  $ $ 7,515 
Other comprehensive income:
Net foreign currency translation adjustments (2,061) (204) (2,265)
Net gains (losses) on derivatives1
250  —  250 
Net change in unrealized gains (losses) on available-for-sale debt securities2
(12) —  (12)
Net change in pension and other postretirement benefit liabilities 284  —  284 
Total comprehensive income (loss) $ 5,972  $ (200) $ 5,772 
1Refer to Note 6 for additional information related to the net gains or losses on derivative instruments.
2Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.
18


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 September 30, 2022 Before-Tax Amount Income Tax After-Tax Amount
Foreign currency translation adjustments:
Translation adjustments arising during the period $ (401) $ (3) $ (404)
Gains (losses) on intra-entity transactions that are of a long-term investment nature (1,340) —  (1,340)
Gains (losses) on net investment hedges arising during the period1
708  (177) 531 
Net foreign currency translation adjustments $ (1,033) $ (180) $ (1,213)
Derivatives:
Gains (losses) arising during the period $ 150  $ (38) $ 112 
Reclassification adjustments recognized in net income (26) (19)
Net gains (losses) on derivatives1
$ 124  $ (31) $ 93 
Available-for-sale debt securities:
Unrealized gains (losses) arising during the period $ (12) $ (1) $ (13)
Reclassification adjustments recognized in net income 41  (10) 31 
Net change in unrealized gains (losses) on available-for-sale debt securities2
$ 29  $ (11) $ 18 
Pension and other postretirement benefit liabilities:
Net pension and other postretirement benefit liabilities arising during the period $ 21  $ (7) $ 14 
Reclassification adjustments recognized in net income 26  (6) 20 
Net change in pension and other postretirement benefit liabilities $ 47  $ (13) $ 34 
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola
   Company
$ (833) $ (235) $ (1,068)
1Refer to Note 6 for additional information related to the net gains or losses on derivative instruments.
2Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.
Nine Months Ended September 30, 2022 Before-Tax Amount Income Tax After-Tax Amount
Foreign currency translation adjustments:
Translation adjustments arising during the period $ (27) $ (216) $ (243)
Reclassification adjustments recognized in net income 200  —  200 
Gains (losses) on intra-entity transactions that are of a long-term investment nature (3,343) —  (3,343)
Gains (losses) on net investment hedges arising during the period1
1,766  (441) 1,325 
Net foreign currency translation adjustments $ (1,404) $ (657) $ (2,061)
Derivatives:
Gains (losses) arising during the period $ 330  $ (90) $ 240 
Reclassification adjustments recognized in net income 13  (3) 10 
Net gains (losses) on derivatives1
$ 343  $ (93) $ 250 
Available-for-sale debt securities:
Unrealized gains (losses) arising during the period $ (56) $ $ (47)
Reclassification adjustments recognized in net income 46  (11) 35 
Net change in unrealized gains (losses) on available-for-sale debt securities2
$ (10) $ (2) $ (12)
Pension and other postretirement benefit liabilities:
Net pension and other postretirement benefit liabilities arising during the period $ 287  $ (65) $ 222 
Reclassification adjustments recognized in net income 82  (20) 62 
Net change in pension and other postretirement benefit liabilities $ 369  $ (85) $ 284 
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola
   Company
$ (702) $ (837) $ (1,539)
1Refer to Note 6 for additional information related to the net gains or losses on derivative instruments.
2Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.
19


Three Months Ended October 1, 2021 Before-Tax Amount Income Tax After-Tax Amount
Foreign currency translation adjustments:
Translation adjustments arising during the period $ (636) $ 39  $ (597)
Reclassification adjustments recognized in net income 13  —  13 
Gains (losses) on intra-entity transactions that are of a long-term investment nature (575) —  (575)
Gains (losses) on net investment hedges arising during the period1
310  (77) 233 
Net foreign currency translation adjustments $ (888) $ (38) $ (926)
Derivatives:
Gains (losses) arising during the period $ (26) $ $ (19)
Reclassification adjustments recognized in net income 63  (16) 47 
Net gains (losses) on derivatives1
$ 37  $ (9) $ 28 
Available-for-sale debt securities:
Unrealized gains (losses) arising during the period $ (28) $ $ (20)
Reclassification adjustments recognized in net income (2) —  (2)
Net change in unrealized gains (losses) on available-for-sale debt securities2
$ (30) $ $ (22)
Pension and other postretirement benefit liabilities:
Net pension and other postretirement benefit liabilities arising during the period $ (102) $ 29  $ (73)
Reclassification adjustments recognized in net income 56  (14) 42 
Net change in pension and other postretirement benefit liabilities $ (46) $ 15  $ (31)
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola
   Company
$ (927) $ (24) $ (951)
1Refer to Note 6 for additional information related to the net gains or losses on derivative instruments.
2Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.
Nine Months Ended October 1, 2021 Before-Tax Amount Income Tax After-Tax Amount
Foreign currency translation adjustments:
Translation adjustments arising during the period $ 505  $ (8) $ 497 
Reclassification adjustments recognized in net income 193  —  193 
Gains (losses) on intra-entity transactions that are of a long-term investment nature (1,317) —  (1,317)
Gains (losses) on net investment hedges arising during the period1
672  (168) 504 
Reclassification adjustments for net investment hedges recognized in net income1
— 
Net foreign currency translation adjustments $ 57  $ (176) $ (119)
Derivatives:
Gains (losses) arising during the period $ 108  $ (30) $ 78 
Reclassification adjustments recognized in net income 139  (33) 106 
Net gains (losses) on derivatives1
$ 247  $ (63) $ 184 
Available-for-sale debt securities:
Unrealized gains (losses) arising during the period $ (131) $ 45  $ (86)
Reclassification adjustments recognized in net income (1)
Net change in unrealized gains (losses) on available-for-sale debt securities2
$ (127) $ 44  $ (83)
Pension and other postretirement benefit liabilities:
Net pension and other postretirement benefit liabilities arising during the period $ 251  $ (46) $ 205 
Reclassification adjustments recognized in net income 218  (54) 164 
Net change in pension and other postretirement benefit liabilities $ 469  $ (100) $ 369 
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola
   Company
$ 646  $ (295) $ 351 
1Refer to Note 6 for additional information related to the net gains or losses on derivative instruments.
2Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.
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The following table presents the amounts and line items in our consolidated statements 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 September 30, 2022 Nine Months Ended September 30, 2022
Foreign currency translation adjustments:
Divestitures, deconsolidations and other1
Other income (loss) — net $ —  $ 200 
Income before income taxes —  200 
Income taxes —  — 
Consolidated net income $ —  $ 200 
Derivatives:
Foreign currency contracts Net operating revenues $ (88) $ (148)
Foreign currency contracts Cost of goods sold (10) (13)
Foreign currency contracts Interest expense
Foreign currency contracts Other income (loss) — net 71  171 
Income before income taxes (26) 13 
Income taxes (3)
Consolidated net income $ (19) $ 10 
Available-for-sale debt securities:
Sale of debt securities Other income (loss) — net $ 41  $ 46 
Income before income taxes 41  46 
Income taxes (10) (11)
Consolidated net income $ 31  $ 35 
Pension and other postretirement benefit liabilities:
Recognized net actuarial loss Other income (loss) — net $ 26  $ 84 
Recognized prior service cost (credit) Other income (loss) — net —  (2)
Income before income taxes 26  82 
Income taxes (6) (20)
Consolidated net income $ 20  $ 62 
1Related to the sale of our ownership interest in one of our equity method investments and the issuance of additional shares of stock by one of our equity method investees. Refer to Note 2 and Note 15, respectively.
21


NOTE 10: 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 September 30, 2022 Common Shares Outstanding Total Reinvested Earnings Accumulated Other Comprehensive Income (Loss) Common Stock Capital Surplus Treasury Stock Non-controlling Interests
July 1, 2022 4,326  $ 24,803  $ 69,970  $ (14,801) $ 1,760  $ 18,581  $ (52,505) $ 1,798 
Comprehensive income (loss) —  1,603  2,825  (1,068) —  —  —  (154)
Dividends paid/payable to
  shareowners of The Coca-Cola
  Company ($0.44 per share)
—  (1,902) (1,902) —  —  —  —  — 
Dividends paid to noncontrolling
  interests
—  (13) —  —  —  —  —  (13)
Purchases of treasury stock (3) (188) —  —  —  —  (188) — 
Impact related to stock-based
  compensation plans
133  —  —  —  106  27  — 
September 30, 2022 4,324  $ 24,436  $ 70,893  $ (15,869) $ 1,760  $ 18,687  $ (52,666) $ 1,631 
 
Shareowners of The Coca-Cola Company  
 
Nine Months Ended September 30, 2022 Common Shares Outstanding Total Reinvested Earnings Accumulated Other Comprehensive Income (Loss) Common Stock Capital Surplus Treasury Stock Non-controlling Interests
December 31, 2021 4,325  $ 24,860  $ 69,094  $ (14,330) $ 1,760  $ 18,116  $ (51,641) $ 1,861 
Comprehensive income (loss) —  5,772  7,511  (1,539) —  —  —  (200)
Dividends paid/payable to
  shareowners of The Coca-Cola
  Company ($1.32 per share)
—  (5,712) (5,712) —  —  —  —  — 
Dividends paid to noncontrolling
  interests
—  (29) —  —  —  —  —  (29)
Purchases of treasury stock (21) (1,336) —  —  —  —  (1,336) — 
Impact related to stock-based
  compensation plans
20  881  —  —  —  570  311  — 
Other activities —  —  —  —  —  —  (1)
September 30, 2022 4,324  $ 24,436  $ 70,893  $ (15,869) $ 1,760  $ 18,687  $ (52,666) $ 1,631 
22


 
Shareowners of The Coca-Cola Company  
 
Three Months Ended October 1, 2021 Common Shares Outstanding Total Reinvested Earnings Accumulated Other Comprehensive Income (Loss) Common Stock Capital Surplus Treasury Stock Non-controlling Interests
July 2, 2021 4,315  $ 24,255  $ 67,838  $ (13,299) $ 1,760  $ 17,781  $ (51,831) $ 2,006 
Comprehensive income (loss) —  1,458  2,471  (951) —  —  —  (62)
Dividends paid/payable to
   shareowners of The Coca-Cola
   Company ($0.42 per share)
—  (1,815) (1,815) —  —  —  —  — 
Dividends paid to noncontrolling
   interests
—  (10) —  —  —  —  —  (10)
Contributions by noncontrolling
   interests
—  20  —  —  —  —  —  20 
Impact related to stock-based
   compensation plans
225  —  —  —  148  77  — 
October 1, 2021 4,319  $ 24,133  $ 68,494  $ (14,250) $ 1,760  $ 17,929  $ (51,754) $ 1,954 
 
Shareowners of The Coca-Cola Company  
 
Nine Months Ended October 1, 2021 Common Shares Outstanding Total Reinvested Earnings Accumulated Other Comprehensive Income (Loss) Common Stock Capital Surplus Treasury Stock Non-controlling Interests
December 31, 2020 4,302  $ 21,284  $ 66,555  $ (14,601) $ 1,760  $ 17,601  $ (52,016) $ 1,985 
Adoption of accounting standards1
—  19  19  —  —  —  —  — 
Comprehensive income (loss) —  7,692  7,357  351  —  —  —  (16)
Dividends paid/payable to
   shareowners of The Coca-Cola
   Company ($1.26 per share)
—  (5,437) (5,437) —  —  —  —  — 
Dividends paid to noncontrolling
   interests
—  (35) —  —  —  —  —  (35)
Contributions by noncontrolling
   interests
—  20  —  —  —  —  —  20 
Impact related to stock-based
   compensation plans
17  590  —  —  —  328  262  — 
October 1, 2021 4,319  $ 24,133  $ 68,494  $ (14,250) $ 1,760  $ 17,929  $ (51,754) $ 1,954 
1Represents the adoption of Accounting Standards Update 2019-12, Simplifying the Accounting for Income Taxes, effective January 1, 2021.
NOTE 11: SIGNIFICANT OPERATING AND NONOPERATING ITEMS
Other Operating Charges
During the three months ended September 30, 2022, the Company recorded other operating charges of $130 million. These charges primarily consisted of $57 million related to the impairment of a trademark in Asia Pacific, $32 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with our acquisition of fairlife, LLC (“fairlife”) in 2020, $27 million related to the Company’s productivity and reinvestment program, and $15 million related to the acquisition of BA Sports Nutrition, LLC (“BodyArmor”) in the prior year, which included various transition and transaction costs, employee retention costs and the amortization of noncompete agreements.
During the nine months ended September 30, 2022, the Company recorded other operating charges of $1,109 million. These charges primarily consisted of $971 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition, $57 million related to the impairment of a trademark in Asia Pacific and $56 million related to the Company’s productivity and reinvestment program. In addition, other operating charges included $23 million related to the BodyArmor acquisition in the prior year, which included various transition and transaction costs, employee retention costs and the amortization of noncompete agreements, net of the reimbursement of distributor termination fees recorded in the prior year.
During the three months ended October 1, 2021, the Company recorded other operating charges of $45 million. These charges included $31 million related to the Company’s productivity and reinvestment program, $12 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition, $4 million
23


related to the Company’s strategic realignment initiatives and $1 million related to tax litigation. Other operating charges also included a net gain of $3 million related to the restructuring of our manufacturing operations in the United States.
During the nine months ended October 1, 2021, the Company recorded other operating charges of $478 million. These charges primarily consisted of $263 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition, $126 million related to the Company’s strategic realignment initiatives and $71 million related to the Company’s productivity and reinvestment program. In addition, other operating charges included $14 million related to tax litigation and a net charge of $4 million related to the restructuring of our manufacturing operations in the United States.
Refer to Note 8 for additional information related to the tax litigation. Refer to Note 12 for additional information on the Company’s productivity and reinvestment program. Refer to Note 15 for additional information on the impairment charge and the fairlife acquisition. Refer to Note 16 for the impact these charges had on our operating segments and Corporate.
Other Nonoperating Items
Interest Expense
During the nine months ended October 1, 2021, the Company recorded charges of $650 million related to the extinguishment of long-term debt.
Equity Income (Loss) — Net
During the three and nine months ended September 30, 2022, the Company recorded net charges of $14 million and $44 million, respectively. During the three and nine months ended October 1, 2021, the Company recorded a net gain of $18 million and a net charge of $5 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 16 for the impact these items had on our operating segments and Corporate.
Other Income (Loss) — Net
During the three months ended September 30, 2022, the Company recorded a net loss of $78 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.
During the nine months ended September 30, 2022, the Company recorded a net loss of $449 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 recorded an other-than-temporary impairment charge of $96 million related to an equity method investee in Russia. The Company also recorded a net loss of $24 million as a result of one of our equity method investees issuing additional shares of its stock.
During the three months ended October 1, 2021, the Company recorded charges of $266 million related to the restructuring of our manufacturing operations in the United States. Additionally, the Company recognized a gain of $63 million related to the sale of a portion of our ownership interest in one of our equity method investments. The Company also recorded pension settlement charges of $21 million related to our strategic realignment initiatives.
During the nine months ended October 1, 2021, the Company recognized a net gain of $695 million related to the sale of our ownership interest in CCA, an equity method investee, and a gain of $63 million related to the sale of a portion of our ownership interest in one of our equity method investments. Additionally, the Company recognized a net gain of $341 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. The Company also recorded charges of $266 million related to the restructuring of our manufacturing operations in the United States and pension settlement charges of $104 million related to our strategic realignment initiatives.
Refer to Note 2 for additional information on the sale of our ownership interest in CCA. Refer to Note 4 for additional information on equity and debt securities. Refer to Note 15 for additional information on the impairment charge, one of our equity method investees issuing additional shares of its stock, and the charges related to the restructuring of our manufacturing operations in the United States. Refer to Note 16 for the impact these items had on our operating segments and Corporate.
NOTE 12: RESTRUCTURING
In February 2012, the Company announced a productivity and reinvestment program designed to strengthen our brands and reinvest our resources to drive long-term profitable growth. The program was expanded multiple times, with the last expansion occurring in April 2017. While we expect most of the remaining initiatives included in this program, which are primarily designed to further simplify and standardize our organization, to be completed by the end of 2023, certain initiatives may extend into 2024.
24


During the three and nine months ended September 30, 2022, the Company incurred expenses of $27 million and $56 million, respectively, and during the three and nine months ended October 1, 2021 incurred expenses of $31 million and $71 million, respectively, related to our productivity and reinvestment program. These expenses primarily included internal and external costs associated with the implementation of the program’s initiatives and were recorded in the line item other operating charges in our consolidated statements of income. Refer to Note 16 for the impact these expenses had on our operating segments and Corporate. The Company has incurred total pretax expenses of $4,100 million related to this program since it commenced.
NOTE 13: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
Net periodic benefit cost or income for our pension and other postretirement benefit plans consisted of the following (in millions):
Pension Plans Other Postretirement
Benefit Plans
Three Months Ended
September 30,
2022
October 1,
2021
September 30,
2022
October 1,
2021
Service cost $ 25  $ 25  $ 2  $
Interest cost 65  46  4 
Expected return on plan assets1
(132) (152) (4) (4)
Amortization of prior service credit   —    (1)
Amortization of net actuarial loss 26  34    — 
Net periodic benefit cost (income) (16) (47) 2 
Settlement charges2
  21  —  — 
Total cost (income)