What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-20 compared with 2023-02-21 · 239 added, 305 removed, 670 unchanged (45% of the section changed)

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• Operations Review — an analysis of our consolidated results of operations for 2023 and 2022 and year-to-year comparisons between 2023 and 2022.

An analysis of our consolidated results of operations for 2021 and 2020 and year-to-year comparisons between 2021 and 2020 can be found in MD&A in Part II, Item 7 of the Company’s Form 10-K for the year ended December 31, 2021.

An analysis of our consolidated results of operations for 2022 and 2021 and year-

to-year comparisons between 2022 and 2021 can be found in MD&A in Part II, Item 7 of the Company’s Form 10-K for the year ended December 31, 2022.

• Liquidity, Capital Resources and Financial Position — an analysis of cash flows, contractual obligations, foreign exchange, and the impact of inflation and changing prices.

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and emerging beverages.

We own and market five of the world’s top six nonalcoholic sparkling soft drink brands:

Coca-Cola, Sprite, Fanta, Coca-Cola Zero Sugar and Diet Coke/Coca-Cola Light.

We own and market several of the world’s largest nonalcoholic sparkling soft drink brands, including Coca-Cola, Sprite, Fanta, Coca-Cola Zero Sugar and Diet Coke/Coca-Cola Light.

We make our branded beverage products available to consumers throughout the world through our network of independent bottling partners, distributors, wholesalers and retailers as well as the Company’s consolidated bottling and distribution operations.

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Our success further depends on the ability of our people to execute effectively, every day.

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 operations”);

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

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

Our concentrate operations typically generate net operating revenues by selling concentrates, syrups and certain finished beverages to authorized bottling operations (to which we typically refer as our “bottlers” or our “bottling partners”).

Our Company operates in two lines of business:

concentrate operations and finished product operations.

Our concentrate operations typically generate net operating revenues by selling beverage concentrates, sometimes referred to as “beverage bases,” syrups, including fountain syrups, and certain finished beverages to authorized bottling operations (to which we typically refer as our “bottlers” or our “bottling partners”).

Our bottling partners either combine concentrates with still or sparkling water and sweeteners (depending on the product), or combine syrups with still or 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 concentrates, 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.

In addition, outside the United States, our bottling partners are typically authorized to manufacture fountain syrups, using our concentrates, 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 and our Global Ventures operating segment.

Our finished product operations generate net operating revenues by selling sparkling soft drinks and a variety of other finished beverages to retailers, or to distributors and wholesalers who in turn sell the beverages to retailers.

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

These operations consist primarily of our consolidated bottling and distribution operations, which are included in our Bottling Investments operating segment.

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These sales are included in 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 in turn sell the fountain syrups to fountain retailers.

These fountain syrup sales are included in our North America operating segment.

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We face strong competition from numerous other general and specialty beverage companies.

We, along with other beverage companies, are affected by a number of factors, including, but not limited to, the cost to manufacture and distribute products, consumer spending, economic conditions, availability and quality of water, consumer preferences, inflation, geopolitical conditions, local and national laws and regulations, foreign currency exchange rate fluctuations, fuel prices, weather patterns and the COVID-19 pandemic.

On March 8, 2022, the Company announced the suspension of its business in Russia as a result of the conflict between Russia and Ukraine.

In addition, the conflict has caused a disruption of our business in Ukraine.

The Company will continue to monitor and assess the situation as circumstances evolve.

As a point of reference, in 2021, the Company’s business in Russia and Ukraine contributed 2 percent of the Company’s unit case volume and 1 percent and 2 percent of the Company’s consolidated net operating revenues and operating income, respectively.

Throughout 2022, the effects of the COVID-19 pandemic, including the resurgence of the virus in certain countries and the related actions by governments to attempt to contain the spread of the virus, continued to negatively impact our business.

While uncertainties caused by the COVID-19 pandemic remain, and factors such as the state of the supply chain, labor shortages and the inflationary environment are likely to impact the pace of the economic recovery, we are focused on executing for growth.

We, along with other beverage companies, are affected by a number of factors, including, but not limited to, the cost to manufacture and distribute products, consumer spending, economic conditions, availability and quality of water, consumer preferences, inflation, geopolitical conditions including international conflicts, local and national laws and regulations, foreign currency exchange rate fluctuations, fuel prices, weather patterns and health crises.

Despite the dynamic world in which we are currently operating, we believe we are well positioned to create value for our Company and our stakeholders.

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Our management has identified certain challenges and risks that demand the attention of our Company and the commercial beverage industry.

Of these, five key challenges and risks are discussed below.

Obesity continues to impact communities and countries worldwide.

There is growing concern among consumers, public health professionals and governments about the health problems associated with obesity.

Of these, six key strategic business challenges and risks are discussed below.

Obesity continues to impact individuals, communities and countries worldwide.

There is concern among consumers, public health professionals and governments about the health problems associated with obesity.

This concern represents a significant challenge to our industry.

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The heritage of our Company is to lead, and innovation is critical for leadership.

As such, we are resolute in continuing to innovate and are committed to partnering to find winning solutions in the area of noncaloric sweeteners.

This includes working to reduce sugar and calories in many of our beverages.

As such, we are resolute in continuing to innovate and are committed to partnering with suppliers to invest in research and development of new noncaloric sweeteners and flavors that help us create the best tasting beverages, including options with low or no calories.

We want to be a helpful and credible partner in the fight against obesity.

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As a consequence of these changes, many consumers want more beverage choices, personalization, a focus on sustainability, and transparency related to our products and packaging.

We are committed to meeting changing consumer needs and to generating growth through our evolving portfolio of beverage brands and products (including numerous low- and no-calorie products);

We are committed to meeting changing consumer needs and to generating growth through our evolving portfolio of beverage brands and products (including numerous

low- and no-calorie products);

selectively expanding into other profitable categories of the commercial beverage industry;

innovative and sustainable packaging;

and ingredient education efforts.

investing in innovative and sustainable packaging;

and including easy-to-access information about our beverages on our website.

Evolving Competitive Landscape and Competing in the Digital Marketplace

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We are aware that some consumers have concerns and negative viewpoints regarding certain ingredients used in our products.

We only use ingredients that are authorized for use by regulatory authorities in each of the markets in which we operate.

The Coca-Cola system works every day to produce high-quality, safe and refreshing beverages for consumers around the world.

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Sustainability Matters

As investors and stakeholders increasingly focus on sustainability matters, our Company and companies across all industries are facing challenges and risks related to, among other things, sustainable packaging;

Investors and stakeholders increasingly focus on sustainability matters.

We acknowledge that we have a role to play in developing and implementing solutions that help build resilience across our business.

We report our sustainability progress in the following areas:

circular economy of packaging;

water stewardship;

health and nutrition;

human rights;

and diversity, equity and inclusion.

Where these challenges and risks relate to our business, we acknowledge that we have a role to play in developing and implementing solutions related to these important challenges.

We have established specific sustainability focus areas:

water quality and scarcity;

packaging materials used for our products;

reduction of carbon dioxide and other greenhouse gas emissions;

sustainable sourcing of agricultural commodities;

diversity, equity and inclusion;

and human and workplace rights.

Our ability to achieve our sustainability goals is dependent on many factors, including, but not limited to, our actions along with the actions of various stakeholders, such as our bottling partners, suppliers, governments, nongovernmental organizations, communities, and other third parties, all of which are outside of our control.

sustainable agriculture;

human and workplace rights and diversity, equity and inclusion.

Talent Acquisition and Retention

Competition for existing and prospective personnel has increased, especially in light of changing worker expectations and talent marketplace variability regarding flexible work models.

In addition, the broader labor market is experiencing a shortage of qualified workers, which has further increased competition for qualified employees that we want and may require for our future business needs.

Our people and our culture are critical business priorities, and we strive to be a global employer of choice that attracts and retains high-performing talent with the passion, skills and mindsets to drive us on our purpose to refresh the world and make a difference.

We are committed to building an equitable and inclusive culture that inspires and supports the growth of our employees, serves our communities and shapes a strong and more sustainable business.

See “Item 1A.

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• Principles of Consolidation

• Recoverability of Current and Noncurrent Assets

• Recoverability of Equity Method Investments and Indefinite-Lived Intangible Assets

• Pension Plan Valuations

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We use the equity method to account for investments in companies if our investment provides us with the ability to exercise significant influence over the operating and financial policies of the investee.

Our consolidated net income includes our

Company’s proportionate share of the net income or loss of these companies.

Our judgment regarding the level of influence over each equity method investee includes considering key factors, such as our ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions.

Our consolidated net income includes our Company’s proportionate share of the net income or loss of these companies.

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

Recoverability of Current and Noncurrent Assets

Recoverability of Equity Method Investments and Indefinite-Lived Intangible Assets

Our Company faces many uncertainties and risks related to various economic, political and regulatory environments in the countries and territories in which we operate, particularly in developing and emerging markets.

Refer to the heading “Our Business — Challenges and Risks” above and “Item 1A.

Risk Factors” in Part I of this report.

As a result, management must make numerous assumptions, which involve a significant amount of judgment, when performing recoverability and impairment tests of current and noncurrent assets in various regions around the world.

We perform recoverability and impairment tests of current and noncurrent assets in accordance with U.S.

For certain assets, recoverability and/or impairment tests are required only when conditions exist that indicate the carrying value may not be recoverable.

For other assets, impairment tests are required at least annually, or more frequently if events or circumstances indicate that an asset may be impaired.

The performance of recoverability and impairment tests of current and noncurrent assets involves critical accounting estimates.

These estimates require significant management judgment, include inherent uncertainties and are often interdependent;

therefore, they do not change in isolation.

Factors that management must estimate include, among others, the economic lives of the assets, sales volume, pricing, royalty rates, cost of raw materials, delivery costs, the impact of any supply chain disruptions, inflation, long-term growth rates, cost of capital, marketing spending, foreign currency exchange rates, tax rates, capital spending, proceeds from the sale of assets and customers’ financial condition.

The variability of these factors depends on a number of conditions, and thus our accounting estimates may change from period to period.

These factors are even more difficult to estimate as a result of uncertainties associated with the scope, severity and duration of the global COVID-19 pandemic.

The estimates we use when performing recoverability tests of assets are consistent with those we use in our internal planning.

When performing impairment tests, we estimate the fair values of the assets using management’s best assumptions, which we believe are consistent with those a market participant would use.

The Company has certain intangible and other long-lived assets that are more dependent on cash flows generated in away-from-home channels and/or that generate cash flows in geographic areas which are more heavily impacted by the COVID-19 pandemic, and therefore these assets are more susceptible to impairment.

In addition, intangible and other long-lived assets we acquired in recent transactions are naturally more susceptible to impairment, because they are recorded at fair value based on recent operating plans and macroeconomic conditions at the time of acquisition.

Risk Factors” in Part I of this report as well as the heading “Operations Review” below for additional information related to our present business environment.

As a result, management must make numerous assumptions, which involve a significant amount of judgment, when performing impairment tests of equity method investments and indefinite-lived intangible assets in various regions around the world.

The performance of impairment tests involves critical accounting estimates.

These estimates require significant management judgment and include inherent uncertainties.

Factors that management must estimate include, among others, the economic lives of the assets, sales volume, pricing, royalty rates, cost of raw materials, delivery costs, long-term growth rates, discount rates, marketing spending, foreign currency exchange rates, tax rates, capital spending and proceeds from the sale of assets.

The variability of these factors

depends on a number of conditions, and thus our accounting estimates may change from period to period.

These factors are even more difficult to estimate when global financial markets are highly volatile.

As these factors are often interdependent and may not change in isolation, we do not believe it is practicable or meaningful to present the impact of changing a single factor.

If we had used other assumptions and estimates when impairment tests were performed, impairment charges could have resulted.

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The total future impairment charges we may be required to record could be material.

Refer to Note 2 of Notes to Consolidated Financial Statements for a discussion of recent acquisitions.

Refer to Note 16 of Notes to Consolidated Financial Statements for the discussion of impairment charges.

Refer to the heading “Operations Review” below for additional information related to our present business environment.

As of December 31, 2022, the carrying value of our investment in Coca-Cola Bottlers Japan Holdings Inc.

(“CCBJHI”) exceeded its fair value by $29 million, or 8 percent.

Based on the length of time and the extent to which the fair value has been less than our carrying value and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value, management determined that the decline in fair value was temporary in nature.

Therefore, we did not record an impairment charge related to the investment.

Our equity method investees also perform such recoverability and impairment tests.

If an impairment charge is recorded by one of our equity method investees, the Company records its proportionate share of such charge as a reduction of equity income (loss) — net in our consolidated statement of income.

However, the actual amount we record with respect to our proportionate share of such charge may be impacted by items such as basis differences, deferred taxes and deferred gains.

Investments in Equity and Debt Securities

We measure all equity investments that do not result in consolidation and are not accounted for under the equity method at fair value with the change in fair value included in net income.

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 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 trading debt securities as well as realized gains and losses on available-for-sale debt securities are included in net income.

Unrealized gains and losses, net of tax, on available-for-sale debt securities are included in our consolidated balance sheet as a component of accumulated other comprehensive income (loss), except for the changes in fair values attributable to the currency risk being hedged, if applicable, which are included in net income.

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.

Equity Method Investments

Equity method investments are reviewed for impairment whenever significant events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable.

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.

The fair values of most of our Company’s investments in publicly traded companies are readily available based on quoted market prices.

For investments in nonpublicly traded companies, management’s assessment of fair value is based on various valuation methodologies, including discounted cash flows, estimates of sales proceeds, and appraisals, as appropriate.

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and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Property, Plant and Equipment

Certain events or changes in circumstances may indicate that the recoverability of the carrying amount or remaining useful life of property, plant and equipment should be assessed, including, among others, the manner or length of time in which the Company intends to use the asset, a significant decrease in market value, a significant change in the business climate in a particular market, or a current period operating or cash flow loss combined with historical losses and/or projected future losses.

When such events or changes in circumstances are present and a recoverability test is performed, we estimate the future cash flows expected to result from the use of the asset or asset group and its eventual disposition.

These estimated future cash flows are consistent with those we use in our internal planning.

If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment charge.

The impairment charge recognized is the amount by which the carrying amount exceeds the fair value.

We use a variety of methodologies to determine the fair value of property, plant and equipment, including appraisals and discounted cash flow models.

These appraisals and models include assumptions we believe are consistent with those a market participant would use.

Goodwill, Trademarks and Other Intangible Assets

Intangible assets are classified into three categories:

(1) intangible assets with definite lives subject to amortization;

(2) intangible assets with indefinite lives not subject to amortization;

and (3) goodwill.

For intangible assets with definite lives, recoverability tests must be performed if conditions exist that indicate the carrying value may not be recoverable.

For intangible assets with indefinite lives and goodwill, impairment tests must be performed at least annually, or more frequently if events or circumstances indicate that an asset may be impaired.

The performance of recoverability and impairment tests of intangible assets involves critical accounting estimates.

These estimates require significant management judgment, include inherent uncertainties and are often interdependent;

therefore, they do not change in isolation.

These factors are even more difficult to predict when global financial markets are highly volatile.

The estimates we use when performing recoverability tests of intangible assets are consistent with those we use in our internal planning.

When performing impairment tests, we estimate the fair values of the assets using management’s best assumptions, which we believe are consistent with those a market participant would use.

Refer to Note 17 of Notes to Consolidated Financial Statements for a discussion of impairment charges, if applicable.

Indefinite-Lived Intangible Assets

Impairment tests for indefinite-lived intangible assets must be performed at least annually, or more frequently if events or circumstances indicate that an asset may be impaired.

Our Company performs the annual impairment tests as of the first day of our third fiscal quarter.

We perform impairment tests using various valuation methodologies, including discounted cash flow models and a market approach, to determine the fair value of the indefinite-lived intangible asset or the reporting unit, as applicable.

The ability to accurately predict future cash flows, especially in emerging and developing markets, may impact the determination of fair value.

When performing these impairment tests, we estimate the fair values of the assets using management’s best assumptions, which we believe are consistent with those a market participant would use.

The estimates and assumptions used in these tests are evaluated and updated as appropriate.

The variability of these factors depends on a number

of conditions, including uncertainty about future events, and thus our accounting estimates may change from period to period.

If other assumptions and estimates had been used when these tests were performed, impairment charges could have resulted.

As mentioned above, these factors do not change in isolation and, therefore, we do not believe it is practicable or meaningful to present the impact of changing a single factor.

Furthermore, if management uses different assumptions in future periods or if different conditions exist in future periods, impairment charges could result.

Refer to the heading “Operations Review” below for additional information related to our present business environment.

Intangible assets acquired in recent transactions are naturally more susceptible to impairment, because they are recorded at fair value based on recent operating plans and macroeconomic conditions present at the time of acquisition.

Consequently, if operating results and/or macroeconomic conditions deteriorate shortly after an acquisition, it could result in the impairment of the acquired assets.

A deterioration of macroeconomic conditions may not only negatively impact the estimated operating cash flows used in our cash flow models but may also negatively impact other assumptions used in our analyses, including, but not limited to, the estimated cost of capital and/or discount rates.

Additionally, we are required to ensure that the assumptions used to determine fair value in our analyses are consistent with the assumptions that we believe a market participant would use.

As a result, the cost of capital and/or discount rates used in our analyses may increase or decrease based on market conditions and trends, regardless of whether our Company’s actual cost of capital has changed.

Therefore, if the cost of capital and/or discount rates change, our Company may recognize an impairment of an intangible asset in spite of realizing actual cash flows that are equal to, or greater than, our previously forecasted amounts.

For indefinite-lived intangible assets, other than goodwill, if the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess.

The Company has the option to perform a qualitative assessment of indefinite-lived intangible assets, other than goodwill, rather than completing the impairment test.

The Company must assess whether it is more likely than not that the fair value of the intangible asset is less than its carrying amount.

If the Company concludes that this is the case, it must perform the impairment testing described above.

We perform impairment tests of goodwill at our reporting unit level, which is generally one level below our operating segments.

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However, the impairment charge recognized cannot exceed the carrying amount of goodwill.

We typically use discounted cash flow models to determine the fair value of a reporting unit.

The assumptions used in these models are consistent with those we believe a market participant would use.

The assumptions used in our impairment testing models are consistent with those we believe a market participant would use.

The Company has the option to perform a qualitative assessment of goodwill rather than completing the impairment test.

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Otherwise, the Company does not need to perform any further assessment.

When events or circumstances indicate that the carrying value of definite-lived intangible assets may not be recoverable, management performs a recoverability test of the carrying value by preparing estimates of sales volume and the resulting gross profit and cash flows.

These estimated future cash flows are consistent with those we use in our internal planning.

If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset or asset group, we recognize an impairment charge.

The impairment charge recognized is the amount by which the carrying amount exceeds the fair value.

We use a variety of methodologies to determine the fair value of these assets, including discounted cash flow models.

These models include assumptions we believe are consistent with those a market participant would use.

We test indefinite-lived intangible assets, including trademarks, franchise rights and goodwill, for impairment annually, or more frequently if events or circumstances indicate that an asset may be impaired.

Our Company performs these annual impairment tests as of the first day of our third fiscal quarter.

We use a variety of methodologies in conducting impairment tests of indefinite-lived intangible assets, including, but not limited to, discounted cash flow models.

These models include assumptions we believe are consistent with those a market participant would use.

For indefinite-lived intangible assets, other than goodwill, if the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess.

The Company has the option to perform a qualitative assessment of indefinite-lived intangible assets, other than goodwill, rather than completing the impairment test.

The Company must assess whether it is more likely than not that the fair value of the intangible asset is less than its carrying amount.

If the Company concludes that this is the case, it must perform the impairment testing described above.

Otherwise, the Company does not need to perform any further assessment.

Consequently, if operating results and/or macroeconomic conditions deteriorate shortly after an acquisition, it could result in the impairment of the acquired assets.

If the discount rates change, our Company may recognize an impairment of an intangible asset in spite of realizing actual cash flows that are equal to, or greater than, our previously forecasted amounts.

Refer to Note 2 of Notes to Consolidated Financial Statements for a discussion of recent acquisitions, if applicable.

In November 2021, the Company acquired the remaining 85% ownership interest in, and now owns 100% of BodyArmor, which offers a line of sports performance and hydration beverages.

The Company allocated $4.2 billion of the purchase price to the BodyArmor trademark.

As of December 31, 2023, the fair value of this trademark approximates its carrying value.

If the near-term operating results of this trademark do not achieve our current financial projections, or if the macroeconomic conditions change causing the discount rate to increase without an offsetting increase in the operating results, it is likely that we would be required to recognize an impairment charge.

Management will continue to monitor the fair value of this trademark in future periods.

Pension Plan Valuations

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As a result, the Company periodically revises asset allocations, where appropriate, to seek to improve returns and manage risk.

In 2022, the Company’s net periodic pension income was $124 million.

In 2023, the Company’s total cost related to pension plans was $120 million, which included $38 million of net periodic pension cost and net charges of $82 million, primarily due to settlements and special termination benefits.

In 2024, we expect our net periodic pension cost to be approximately $51 million.

The primary driver of this change is the unfavorable performance of plan assets in 2022, partially offset by the net impact of the increase in the weighted-average discount rate at December 31, 2022 compared to December 31, 2021.

The increase in net periodic pension cost is primarily due to the net impact of the decrease in the weighted-average discount rate at December 31, 2023 compared to December 31, 2022.

As of December 31, 2023, the U.S.

qualified pension plan represented 64 percent and 61 percent of the Company’s consolidated projected benefit obligation and pension plan assets, respectively.

For this plan, we estimate that a 50 basis-point decrease in the discount rate would result in a $13 million increase in our 2023 net periodic pension cost, and we estimate that a 50 basis-point decrease in the expected long-term rate of return on plan assets would result in a $21 million increase in our 2023 net periodic pension cost.

qualified pension plan represented 63% and 56% of the Company’s consolidated projected benefit obligation and pension plan assets, respectively.

For this plan, we estimate that a 50 basis-point decrease in the discount rate would result in an $8 million increase in our 2024 net periodic pension cost, and we estimate that a 50 basis-point decrease in the expected long-term rate of return on plan assets would result in a $19 million increase in our 2024 net periodic pension cost.

Refer to Note 14 of Notes to Consolidated Financial Statements for additional information about our pension plans and related actuarial assumptions.

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Upon transfer of control to the customer, which completes our performance obligation, 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.

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.

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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 most 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 have implemented an incidence-based concentrate pricing model.

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As a result, we are recognizing revenue based on our faithful depiction of the consideration that we expect to receive.

our estimates of variable consideration, we consider past results and make significant assumptions related to:

In making our estimates of variable consideration, we consider past results and make significant assumptions related to:

(1) customer sales volumes;

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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 result of making these estimates will impact the line items trade accounts receivable or accounts payable and accrued expenses in our consolidated balance sheet, as applicable.

The actual amounts ultimately paid and/or received may be different from our estimates.

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and the availability of tax planning strategies.

A valuation allowance is required to be established unless management determines that it is more likely than not that the Company will ultimately realize the tax benefit associated with a deferred tax asset.

A valuation allowance is required

to be established unless management determines that it is more likely than not that the Company will ultimately realize the tax benefit associated with a deferred tax asset.

The Company does not record a U.S.

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We recognize unit case volume for all sales of Company beverage products, regardless of our ownership interest in the bottling partner, if any.

However, the unit case volume reported by our Bottling Investments operating segment is generally impacted by structural changes because it only includes the unit case volume of our consolidated bottling operations.

However, the unit case volume reported by our Bottling Investments operating segment is generally impacted by structural changes because it only includes the

unit case volume of our consolidated bottling operations.

Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on the Company’s acquisitions and divestitures.

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The impact of this acquisition has been included as a structural change in our analysis of net operating revenues on a consolidated basis as well as for the Bottling Investments and Europe, Middle East and Africa operating segments.

Additionally, in November 2022, the Company refranchised our bottling operations in Cambodia.

The impact of this refranchising has been included as a structural change in our analysis of net operating revenues on a consolidated basis as well as for the Bottling Investments and Asia Pacific operating segments.

In November 2021, the Company acquired the remaining ownership interest in BA Sports Nutrition, LLC (“BodyArmor”).

The impact of this acquisition has been included in acquisitions and divestitures in our analysis of net operating revenues on a consolidated basis as well as for the North America operating segment.

Additionally, the Company refranchised our bottling operations in Cambodia and Vietnam in November 2022 and January 2023, respectively, the impact of which has been included as a structural change in our analysis of net operating revenues on a consolidated basis as well as for the Bottling Investments and Asia Pacific operating segments.

In May 2023 and July 2022, the Company acquired certain brands in Asia Pacific.

The impact of acquiring these brands has been included in acquisitions and divestitures in our analysis of net revenues on a consolidated basis as well as for the Asia Pacific operating segment.

Beverage Volume

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Global Ventures 4

Bottling Investments 12 N/A

Bottling Investments (1) 3

1 Bottling Investments operating segment data reflects unit case volume growth for consolidated bottlers only.

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Global Ventures operating segment data also reflects unit case volume growth for Costa retail stores.

3 After considering the impact of structural changes, unit case volume for Bottling Investments grew 6%.

Unit Case Volume

The Coca-Cola system sold 33.3 billion and 32.7 billion unit cases of our products in 2023 and 2022, respectively.

The increase was primarily a result of strength in away-from-home channels and ongoing investments in the marketplace.

Unit case volume in Europe, Middle East and Africa increased 3 percent, which included 4 percent growth in Trademark Coca-Cola, 6 percent growth in water, sports, coffee and tea, and 2 percent growth in sparkling flavors, partially offset by a 13 percent decline in juice, value-added dairy and plant-based beverages.

The operating segment reported growth in unit case volume of 8 percent in the Eurasia and Middle East operating unit and 1 percent in the Europe operating unit.

Unit case volume in the Africa operating unit was even.

The growth in the Europe operating unit included the impact of the suspension of the Company’s business in Russia.

The performance in the Africa operating unit included the impact of transitioning certain territories to new franchise bottling partners.

In Latin America, unit case volume increased 6 percent, which included 5 percent growth in Trademark Coca-Cola, 10 percent growth in water, sports, coffee and tea, 6 percent growth in sparkling flavors and 10 percent growth in juice, value-added dairy and plant-based beverages.

The operating segment’s volume performance included 5 percent growth in Mexico, 9 percent growth in Brazil and 11 percent growth in Argentina.

Unit case volume in North America increased 2 percent, which included 1 percent growth in Trademark Coca-Cola, 3 percent growth in both sparkling flavors and juice, value-added dairy and plant-based beverages, and even performance in water, sports, coffee and tea.

In Asia Pacific, unit case volume increased 6 percent, which included 8 percent growth in sparkling flavors, 6 percent growth in Trademark Coca-Cola, 4 percent growth in water, sports, coffee and tea, and 9 percent growth in juice, value-added dairy and plant-based beverages.

The operating segment reported growth in unit case volume of 36 percent in the India and Southwest Asia operating unit, 6 percent in the ASEAN and South Pacific operating unit, and 2 percent in the Japan and South Korea operating unit, partially offset by a decline of 3 percent in the Greater China and Mongolia operating unit.

Unit case volume for Global Ventures increased 13 percent, driven by 12 percent growth in water, sports, coffee and tea along with growth in energy drinks, partially offset by a decline of 3 percent in juice, value-added dairy and plant-based beverages.

Unit case volume for Bottling Investments increased 12 percent, which primarily reflects growth in India, South Africa and Vietnam.

Unit case volume in Europe, Middle East and Africa decreased 2%, which included a 3% decline in sparkling flavors, a 14% decline in juice, value-added dairy and plant-based beverages, a 1% decline in Trademark Coca-Cola, and a 2% decline in water, sports, coffee and tea.

The operating segment reported declines in unit case volume of 6% in the Europe operating unit and 1% in the Eurasia and Middle East operating unit, partially offset by growth in unit case volume of 3% in the Africa operating unit.

The decline in unit case volume in Europe, Middle East and Africa was primarily due to the suspension of the Company’s business in Russia in March 2022.

In Latin America, unit case volume increased 5%, which included 5% growth in Trademark Coca-Cola, 9% growth in water, sports, coffee and tea, 2% growth in sparkling flavors and 3% growth in juice, value-added dairy and plant-based beverages.

The operating segment’s volume performance included 5% growth in both Mexico and Brazil.

Unit case volume in North America decreased 1%, which included a 5% decline in water, sports, coffee and tea, partially offset by 3% growth in juice, value-added dairy and plant-based beverages and 1% growth in sparkling flavors.

Trademark Coca-Cola performance was even.

In Asia Pacific, unit case volume increased 3%, which included 4% growth in both sparkling flavors and Trademark Coca-Cola, 10% growth in juice, value-added dairy and plant-based beverages, and 1% growth in water, sports, coffee and tea.

The operating segment reported growth in unit case volume of 11% in the India and Southwest Asia operating unit, 2% in the Greater China and Mongolia operating unit, and 1% in both the ASEAN and South Pacific and the Japan and South Korea operating units.

Unit case volume for Global Ventures increased 4%, driven by growth in energy drinks, partially offset by a 1% decline in both water, sports, coffee and tea as well as juice, value-added dairy and plant-based beverages.

Unit case volume for Bottling Investments decreased 1%, which primarily reflects the impact of refranchising our bottling operations in Vietnam and Cambodia, partially offset by growth in India and South Africa.

Concentrate Sales Volume

In 2022, worldwide concentrate sales volume and unit case volume both grew 5 percent compared to 2021.

In 2023, worldwide concentrate sales volume and unit case volume both grew 2% compared to 2022.

The differences between concentrate sales volume and unit case volume growth rates for the operating segments were primarily due to the timing of concentrate shipments and the impact of unit case volume from certain joint ventures in which the Company has an ownership interest, but to which the Company does not sell concentrates, syrups, source waters or powders/minerals.

Net Operating Revenues

Net operating revenues were $43,004 million in 2022, compared to $38,655 million in 2021, an increase of $4,349 million, or 11 percent.

Net operating revenues were $45,754 million in 2023, compared to $43,004 million in 2022, an increase of $2,750 million, or 6%.

The following table illustrates, on a percentage basis, the estimated impact of the factors resulting in the increase (decrease) in net operating revenues on a consolidated basis and for each of our operating segments:

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Management uses this measure in making financial, operating and planning decisions and in evaluating the Company’s performance.

Price, product and geographic m ix had an 11 percent favorable impact on our consolidated net operating revenues.

Price, product and geographic mix had a 10% favorable impact on our consolidated net operating revenues.

Price, product and geographic mix was impacted by a variety of factors and events, including, but not limited to, the following:

• Europe, Middle East and Africa — favorable pricing initiatives, including inflationary pricing in Türkiye, partially offset by unfavorable geographic mix;

• Latin America — favorable pricing initiatives, including inflationary pricing in Argentina, along with favorable channel and package mix;

• North America — favorable pricing initiatives, including a benefit resulting from the timing of price increases in the prior year, and favorable channel, package and product mix;

• Asia Pacific — favorable pricing initiatives along with favorable channel and package mix, partially offset by unfavorable geographic mix;

• Global Ventures — favorable pricing initiatives and favorable channel mix, primarily due to the timing of Costa retail store reopenings in the United Kingdom in the prior year, offset by the unfavorable impact of no longer receiving COVID-related incentives in the current year;

• Europe, Middle East and Africa — favorable pricing initiatives, including inflationary pricing in Türkiye and Zimbabwe, partially offset by unfavorable geographic mix;

• Latin America — favorable pricing initiatives, including inflationary pricing in Argentina, along with favorable channel and product mix, partially offset by increased funding for promotional and marketing support;

• North America — favorable pricing initiatives and favorable channel, package and product mix;

• Asia Pacific — favorable pricing initiatives, partially offset by unfavorable geographic mix and increased funding for promotional and marketing support;

• Global Ventures — favorable pricing initiatives and favorable channel mix, primarily due to the favorable performance of Costa in the United Kingdom, offset by unfavorable product mix and the impact of no longer receiving COVID-related incentives in the current year;

• Bottling Investments — favorable pricing initiatives across most markets, partially offset by unfavorable geographic mix.

The favorable channel and package mix for the year ended December 31, 2022 in all applicable operating segments was primarily a result of strength in away-from-home channels in the current year and the impact of social distancing measures in the prior year.

Fluctuations in foreign currency exchange rates decreased our consolidated net operating revenues by 7 percent.

The favorable pricing initiatives for the year ended December 31, 2023 in all operating segments included carryover pricing increases from the prior year.

Fluctuations in foreign currency exchange rates decreased our consolidated net operating revenues by 4%.

This unfavorable impact was primarily due to a stronger U.S.

dollar compared to certain foreign currencies, including the Japanese yen, Turkish lira, euro, British pound sterling, Philippine peso, South African rand and Argentine peso, which had an unfavorable impact on our Asia Pacific;

dollar compared to certain foreign currencies, including the Argentine peso, Zimbabwean dollar, South African rand, Nigerian naira, Turkish lira, Japanese yen, Indian rupee and Chinese yuan, which had an unfavorable impact on our Latin America;

Europe, Middle East and Africa;

Global Ventures;

Bottling Investments;

and Latin America operating segments.

Asia Pacific;

and Bottling Investments operating segments.

The unfavorable impact of a stronger U.S.

dollar compared to the currencies listed above was partially offset by the impact of a weaker U.S.

dollar compared to certain other foreign currencies, including the Brazilian real and Mexican peso, which had a favorable impact on our Latin America operating segment.

dollar compared to certain other foreign currencies, including the Mexican peso, which had a favorable impact on our Latin America operating segment.

Refer to the heading “Liquidity, Capital Resources and Financial Position — Foreign Exchange” below for additional information about the impact of foreign currency exchange rate fluctuations.

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Management uses this measure in making financial, operating and planning decisions and in evaluating the Company’s performance.

Our gross profit margin decreased to 58.1 percent in 2022 from 60.3 percent in 2021.

This decrease was primarily due to the unfavorable impact of foreign currency exchange rate fluctuations, increased commodity and transportation costs, and the acquisition of BodyArmor, a finished goods business, in November 2021.

The impact of these items was partially offset by favorable pricing initiatives as well as favorable channel and package mix.

We expect commodity and transportation costs to continue to have an unfavorable impact on our gross profit margin in 2023, and we will continue to proactively take actions in an effort to mitigate the impact of these incremental costs.

Our gross profit margin increased to 59.5% in 2023 from 58.1% in 2022.

This increase was primarily due to the impact of favorable pricing initiatives, favorable channel and package mix, and structural changes.

The impact of these items was partially offset by the unfavorable impact of foreign currency exchange rate fluctuations and increased commodity costs.

Selling, General and Administrative Expenses

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Selling, general and administrative expenses $ 13,972 $ 12,880

Selling, general and administrative expenses increased $736 million, or 6 percent, in 2022.

This increase was primarily due to increased marketing spending, higher selling and distribution expenses, and higher annual incentive and stock-based compensation expense.

The increase in selling and distribution expenses was due to the continued recovery from the COVID-19 pandemic.

The increase in stock-based compensation expense was primarily due to our strong financial performance in 2022 and a more favorable outlook of our future financial performance, which resulted in higher payout assumptions as compared to 2021.

In 2022, foreign currency exchange rate fluctuations decreased selling, general and administrative expenses by 6 percent.

Selling, general and administrative expenses increased $1,092 million, or 8%, in 2023.

This increase was primarily due to higher advertising and other operating expenses, partially offset by decreases in selling and distribution expenses and stock-based compensation expense.

The increase in other operating expenses was primarily due to higher other marketing expenses and increased charitable donations, as well as higher annual incentive expense and other employee benefit costs.

The decrease in selling and distribution expenses was primarily a result of the refranchising of our bottling operations in Vietnam and Cambodia.

The decrease in stock-based compensation expense was primarily due to the cumulative expense that was recorded in 2022 resulting from the impact a more favorable financial outlook had on the outstanding nonvested performance share units.

In 2023, foreign currency exchange rate fluctuations decreased selling, general and administrative expenses by 3%.

As of December 31, 2023, we had $267 million of total unrecognized compensation cost related to nonvested stock-based compensation awards granted under our plans, which we expect to recognize over a weighted-average period of 1.7 years as stock-based compensation expense.

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In 2023, the Company recorded other operating charges of $1,951 million.

These charges primarily consisted of $1,000 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with our acquisition of fairlife, LLC ("fairlife") in 2020, $85 million related to the Company’s productivity and reinvestment program and $57 million related to the impairment of a trademark in Asia Pacific.

In addition, other operating charges included $38 million related to the restructuring of our North America operating unit and $38 million related to the BodyArmor acquisition in 2021, 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 2021.

These charges were partially offset by a net gain of $6 million due to revisions of management’s estimates related to the Company’s strategic realignment initiatives.

These charges consisted of $1,702 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with our acquisition of fairlife in 2020, $164 million related to the Company’s productivity and reinvestment program and $35 million related to the discontinuation of certain manufacturing operations in Asia Pacific.

In addition, other operating charges included $27 million related to the restructuring of our North America operating unit, $15 million for the amortization of noncompete agreements related to the BodyArmor acquisition in 2021 and $8 million related to tax litigation expense.

In 2022, the Company recorded other operating charges of $1,215 million.

These charges primarily consisted of $369 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition, $146 million related to the Company’s strategic realignment initiatives, $119 million related to the BodyArmor acquisition, which includes various transition and transaction costs, distributor termination fees, employee retention costs and the amortization of noncompete agreements, and $115 million related to the Company’s productivity and reinvestment program.

addition, other operating charges included an impairment charge of $78 million related to a trademark in Europe, which was driven by a change in the long-term outlook on the licensing arrangement for a certain brand, charges of $15 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 2 of Notes to Consolidated Financial Statements for additional information on the BodyArmor and fairlife acquisitions.

These charges primarily consisted of $1,000 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition, $85 million related to the Company’s productivity and reinvestment program and $57 million related to the impairment of a trademark in Asia Pacific.

In addition, other operating charges included $38 million related to the restructuring of our North America operating unit and $38 million related to the BodyArmor acquisition, 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 2021.

These charges were partially offset by a net gain of $6 million due to revisions of management’s estimates related to the Company’s strategic realignment initiatives.

Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on the BodyArmor acquisition.

Refer to Note 12 of Notes to Consolidated Financial Statements for additional information related to the tax litigation.

Refer to Note 16 of Notes to Consolidated Financial Statements for additional information on the impairment charges.

Refer to Note 18 of Notes to Consolidated Financial Statements for additional information on the Company’s restructuring initiatives.

Refer to Note 17 of Notes to Consolidated Financial Statements for additional information on the fairlife contingent consideration and the impairment charge.

Refer to Note 19 of Notes to Consolidated Financial Statements for additional information on the

Company’s restructuring initiatives.

Refer to Note 20 of Notes to Consolidated Financial Statements for the impact these charges had on our operating segments and Corporate.

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Operating margin is a ratio calculated by dividing operating income by net operating revenues.

Management believes operating margin provides investors with useful information related to the profitability of our business after considering all of the selling, general and administrative expenses and other operating charges incurred.

Management believes operating margin provides investors with useful information related to the profitability of our business after considering selling, general and administrative expenses and other operating charges.

Management uses this measure in making financial, operating and planning decisions and in evaluating the Company’s performance.

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* Calculation is not meaningful.

Operating income was $10,909 million in 2022, compared to $10,308 million in 2021, an increase of $601 million, or 6 percent.

The increase in operating income was primarily driven by concentrate sales volume growth of 5 percent, favorable channel and package mix, and favorable pricing initiatives, partially offset by higher other operating charges;

increased marketing spending;

Operating income was $11,311 million in 2023, compared to $10,909 million in 2022, an increase of $402 million, or 4%.

The increase in operating income was primarily driven by concentrate sales volume growth of 2% and favorable pricing initiatives.

These items were partially offset by higher commodity costs;

higher selling, general and administrative expenses;

higher other operating charges;

and an unfavorable foreign currency exchange rate impact.

The decrease in our operating margin on a consolidated basis was primarily due to the unfavorable impact of foreign currency exchange rate fluctuations, increased commodity and transportation costs, increased marketing spending, and the acquisition of BodyArmor, a finished goods business, in November 2021.

The impact of these items was partially offset by favorable pricing initiatives as well as favorable channel and package mix.

In 2022, fluctuations in foreign currency exchange rates unfavorably impacted consolidated operating income by 9 percent due to a stronger U.S.

dollar compared to certain foreign currencies, including the Japanese yen, Turkish lira, euro, Argentine peso, and British pound sterling, which had an unfavorable impact on our Asia Pacific;

The decrease in our operating margin on a consolidated basis was primarily due to higher commodity costs, increased marketing spending, higher other operating charges and the unfavorable impact of foreign currency exchange rate fluctuations.

The impact of these items was partially offset by favorable pricing initiatives.

In 2023, fluctuations in foreign currency exchange rates unfavorably impacted consolidated operating income by 8% due to a stronger U.S.

dollar compared to certain foreign currencies, including the Argentine peso, Zimbabwean dollar, Turkish lira, euro, South African rand, and Japanese yen, which had an unfavorable impact on our Latin America;

Europe, Middle East and Africa;

Latin America;

and Global Ventures operating segments.

Bottling Investments;

and Asia Pacific operating segments.

The unfavorable impact of a stronger U.S.

dollar compared to the currencies listed above was partially offset by the impact of a weaker U.S.

dollar compared to certain other foreign currencies, including

the Mexican peso and Brazilian real, which had a favorable impact on our Latin America operating segment.

dollar compared to certain other foreign currencies, including the Mexican peso, which had a favorable impact on our Latin America operating segment.

Refer to the heading “Liquidity, Capital Resources and Financial Position — Foreign Exchange” below.

The Company’s Europe, Middle East and Africa operating segment reported operating income of $4,202 million and $3,958 million for the years ended December 31, 2023 and 2022, respectively.

The increase in operating income was primarily driven by a 2 percent increase in concentrate sales volume, favorable pricing initiatives, favorable channel and package mix, and lower other operating charges, partially offset by an unfavorable foreign currency exchange rate impact of 17 percent, higher commodity costs, increased operating expenses and increased marketing spending.

The increase in operating income was primarily driven by favorable pricing initiatives, partially offset by higher commodity costs, increased marketing spending, higher operating expenses and an unfavorable foreign currency exchange rate impact of 14%.

Latin America reported operating income of $3,432 million and $2,870 million for the years ended December 31, 2023 and 2022, respectively.

The increase in operating income was primarily driven by concentrate sales volume growth of 7 percent, favorable pricing initiatives, favorable channel and package mix, and lower other operating charges, partially offset by an unfavorable foreign currency exchange rate impact of 6 percent, higher commodity costs and increased marketing spending.

The increase in operating income was primarily driven by concentrate sales volume growth of 6% and favorable pricing initiatives, partially offset by higher commodity costs, increased marketing spending, higher operating expenses and an unfavorable foreign currency exchange rate impact of 5%.

Operating income for North America for the years ended December 31, 2023 and 2022 was $4,435 million and $3,742 million, respectively.

The increase in operating income was primarily driven by concentrate sales volume growth of 1 percent, favorable pricing initiatives, favorable channel and category mix and lower other operating charges, partially offset by increased marketing spending and increased operating expenses.

The increase in operating income was primarily driven by favorable pricing initiatives, partially offset by a decline in concentrate sales volume of 1%, higher commodity costs, increased marketing spending, higher operating expenses and higher other operating charges.

Asia Pacific’s operating income for the years ended December 31, 2023 and 2022 was $2,040 million and $2,303 million, respectively.

The decrease in operating income was primarily driven by an unfavorable foreign currency exchange rate impact of 8 percent, increased marketing spending, increased operating expenses and higher other operating charges, partially offset by concentrate sales volume growth of 8 percent, favorable pricing initiatives, and favorable channel and package mix.

The decrease in operating income was primarily driven by higher commodity costs, increased marketing spending and an unfavorable foreign currency exchange rate impact of 7%, partially offset by favorable pricing initiatives, lower other operating charges and the impact of acquired brands.

Global Ventures’ operating income for the years ended December 31, 2023 and 2022 was $329 million and $185 million, respectively.

The decrease in operating income was primarily driven by the impact of no longer receiving COVID-related incentives in the current year, higher commodity costs, higher selling and distribution expenses, and an unfavorable foreign currency exchange rate impact of 2 percent, partially offset by concentrate sales volume growth of 13 percent.

The increase in operating income was primarily driven by concentrate sales volume growth of 5%, favorable pricing initiatives, decreased marketing spending and a favorable foreign currency exchange rate impact of 3%, partially offset by higher operating expenses and the impact of no longer receiving COVID-related incentives in the current year.

Bottling Investments’ operating income for the years ended December 31, 2023 and 2022 was $578 million and $487 million, respectively.

The increase in operating income was primarily driven by unit case volume growth of 12 percent and favorable pricing initiatives, partially offset by an unfavorable foreign currency exchange rate impact of 9 percent and higher selling and distribution expenses.

The increase in operating income was primarily driven by unit case volume growth of 6% and favorable pricing initiatives, partially offset by higher commodity costs, higher operating expenses, an unfavorable foreign currency exchange rate impact of 7% and the refranchising of our bottling operations in Vietnam and Cambodia.

Corporate’s operating loss for the years ended December 31, 2023 and 2022 was $3,705 million and $2,636 million, respectively.

Operating loss in 2022 increased primarily as a result of higher other operating charges due to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition and increased marketing spending.

Operating loss in 2023 increased primarily as a result of higher other operating charges due to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition, higher operating expenses and increased marketing spending.

Refer to Note 17 of Notes to Consolidated Financial Statements for additional information on the fairlife contingent consideration.

Interest Income

Interest income was $449 million in 2022, compared to $276 million in 2021, an increase of $173 million, or 62 percent.

This increase was primarily driven by higher returns in certain of our international locations.

Interest income was $907 million in 2023, compared to $449 million in 2022, an increase of $458 million, or 102%.

This increase was primarily driven by higher returns on our Corporate and certain international investments and higher average investment balances.

Interest Expense

Interest expense was $882 million in 2022, compared to $1,597 million in 2021, a decrease of $715 million, or 45 percent.

This decrease was primarily due to charges in 2021 of $650 million associated with the extinguishment of long-term debt and certain hedging activities that occurred during 2021, partially offset by the impact of higher interest rates in 2022.

Interest expense was $1,527 million in 2023, compared to $882 million in 2022, an increase of $645 million, or 73%.

This increase was primarily due to the impact of higher interest rates on short-term borrowings and derivative instruments compared to the prior year.

Refer to Note 11 of Notes to Consolidated Financial Statements.

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Equity income (loss) — net represents our Company’s proportionate share of net income or loss from each of our equity method investees.

In 2022, equity income was $1,472 million, compared to equity income of $1,438 million in 2021, an increase of $34 million, or 2 percent.

The increase was primarily due to more favorable operating results reported by several of our equity method investees in the current year, partially offset by an unfavorable foreign currency exchange rate impact and the sale of all or a portion of our ownership interest in certain equity method investees.

In addition, the Company recorded net charges of $34 million and $13 million during the years ended December 31, 2022 and 2021, respectively, which represent the Company’s proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.

In 2023, equity income was $1,691 million, compared to equity income of $1,472 million in 2022, an increase of $219 million, or 15%.

The increase reflects, among other items, the impact of more favorable operating results reported by some of our equity method investees in the current year and a favorable foreign currency exchange rate impact.

These favorable impacts were partially offset by a $125 million increase in net charges resulting from the Company’s proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.

Other Income (Loss) — Net

Other income (loss) — net includes, among other things, dividend income;

gains and losses related to the disposal of property, plant and equipment;

gains and losses related to acquisitions and divestitures;

non-service cost components of net periodic benefit cost or income for pension and other postretirement benefit plans;

other charges and credits related to pension and other postretirement benefit plans;

realized and unrealized gains and losses on equity securities and trading debt securities;

realized gains and losses on available-for-sale debt securities;

other-than-temporary impairment charges;

and net foreign currency exchange gains and losses.

Foreign currency exchange gains and losses are primarily the result of the remeasurement of monetary assets and liabilities from certain currencies into functional currencies.

The effects of the remeasurement of these assets and liabilities are partially offset by the impact of our economic hedging program for certain exposures on our consolidated balance sheet.

Refer to Note 5 of Notes to Consolidated Financial Statements.

In 2023, other income (loss) — net was income of $570 million.

The Company recorded a net gain of $439 million related to the refranchising of our bottling operations in Vietnam, a net gain of $289 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 dividend income of $208 million.

Other income (loss) — net also included a net gain of $94 million related to the sale of our ownership interests in our equity method investees in Pakistan and Indonesia and net income of $51 million related to the non-service cost components of net periodic benefit cost.

The Company also recorded net foreign currency exchange losses of $312 million, $83 million of costs related to our trade accounts receivable factoring program and $67 million due to pension and other postretirement benefit plan settlement charges.

Additionally, the Company recorded an other-than-temporary

impairment charge of $39 million related to an equity method investee in Latin America and charges of $32 million related to the restructuring of our manufacturing operations in the United States.

In 2022, other income (loss) — net was a loss of $262 million.

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Additionally, other income (loss) — net included net income of $219 million related to the non-service cost components of net periodic benefit income, a net gain of $153 million related to the refranchising of our bottling operations in Cambodia and dividend income of $111 million.

In 2021, other income (loss) — net was income of $2,000 million.

The Company recognized a gain of $834 million in conjunction with the BodyArmor acquisition;

a net gain of $695 million related to the sale of our ownership interest in Coca-Cola Amatil Limited (“CCA”), an equity method investee, to CCEP, also an equity method investee;

and a net gain of $114 million related to the sale of our ownership interest in an equity method investee and the sale of a portion of our ownership interest in another equity method investee.

Additionally, the Company recognized a net gain of $467 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.

Other income (loss) — net also included $277 million related to the non-service cost components of net periodic benefit income, dividend income of $73 million, charges of $266 million related to the restructuring of our manufacturing operations in the United States, pension plan settlement charges of $117 million related to our strategic realignment initiatives and net foreign currency exchange losses of $61 million.

Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on the acquisition of BodyArmor, the sale of our ownership interest in CCA and the refranchising of our bottling operations in Cambodia.

Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on the sale of our ownership interests in Pakistan and Indonesia and the refranchising of our bottling operations in Vietnam and Cambodia.

Refer to Note 4 of Notes to Consolidated Financial Statements for additional information on equity and debt securities.

Refer to Note 14 of Notes to Consolidated Financial Statements for additional information on pension and other postretirement benefit plan activity.

Refer to Note 17 of Notes to Consolidated Financial Statements for additional information on the restructuring of our manufacturing operations in the United States and the impairment charges.

Refer to Note 18 of Notes to Consolidated Financial Statements for additional information on the Company’s strategic realignment initiatives.

Refer to Note 20 of Notes to Consolidated Financial Statements for the impact these items had on our operating segments and Corporate.

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Effective tax rate 17.4 % 18.1 %

1 Includes net tax charges of $375 million (or a 3.0 percent impact on our effective tax rate) related to changes in tax laws in certain foreign jurisdictions, amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions, as well as other discrete items.

2 Includes a tax benefit of $14 million (or a 1.5 percent impact on our effective tax rate) associated with the $834 million gain recorded upon the acquisition of the remaining ownership interest in BodyArmor.

Refer to Note 2 of Notes to Consolidated Financial Statements.

On November 18, 2020, the Tax Court issued the Opinion regarding the Company’s 2015 litigation with the IRS involving transfer pricing tax adjustments in which the court predominantly sided with the IRS.

The Company disagrees with the Opinion and intends to vigorously defend its position.

On November 8, 2023, the Tax Court issued a supplemental opinion, siding with the IRS in concluding both that the blocked-income regulations apply to the Company’s operations and that the Tax Court opinion in 3M Co.

Commissioner (February 9, 2023) controlled as to the validity of those regulations.

The Company strongly disagrees with the Opinions and intends to vigorously defend its position.

Refer to Note 12 of Notes to Consolidated Financial Statements.

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Decrease related to settlements with taxing authorities — (2)

Decrease due to lapse of the applicable statute of limitations (2) —

Effect of foreign currency translation (4) (22)

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If the Company were to prevail on all uncertain tax positions, the reversal of this accrual would be a benefit to the Company’s effective tax rate.

Based on current tax laws, the Company’s effective tax rate in 2023 is expected to be approximately 19.5 percent before considering the potential impact of any significant operating and nonoperating items that may affect our effective tax rate.

Based on current tax laws, the Company’s effective tax rate in 2024 is expected to be approximately 19.2% before considering the potential impact of any significant operating and nonoperating items that may affect our effective tax rate.

This rate does not include the impact of the ongoing tax litigation with the IRS, if the Company were not to prevail.

Many jurisdictions have enacted legislation and adopted policies resulting from the OECD’s Anti-Base Erosion and Profit Shifting project.

The OECD is currently coordinating a two pillared project on behalf of the G20 and other participating countries which would grant additional taxing rights over profits earned by multinational enterprises to the countries in which their products are sold and services rendered.

Pillar One would allow countries to reallocate a portion of profits earned by multinational businesses with an annual global revenue exceeding €20 billion and a profit margin of over 10% to applicable market jurisdictions.

While the OECD issued draft language for the international implementation of Pillar One in October 2023, both the substantive rules and implementation process remain under discussion at the OECD so the timetable for any implementation remains uncertain.

In December 2021, the OECD issued Pillar Two model rules which would establish a global per-country minimum tax of 15%, and the European Union has approved a directive requiring member states to incorporate similar provisions into their respective domestic laws.

The directive requires the rules to initially become effective for fiscal years starting on or after December 31, 2023.

While it is uncertain whether the United States will enact legislation to adopt Pillar Two, numerous countries have enacted legislation, or have indicated their intent to adopt legislation, to implement certain aspects of Pillar Two effective January 1, 2024, with general implementation of the remaining global minimum tax rules by January 1, 2025.

The OECD and implementing countries are expected to continue to make further revisions to their legislation and release additional guidance.

The Company will continue to monitor developments to determine any potential impact in the countries in which we operate.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION

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In addition to these funds, our commercial paper program and our ability to issue long-term debt, we had $4.6 billion in unused backup lines of credit for general corporate purposes as of December 31, 2023.

These backup lines of credit expire at various times from 2023 through 2028.

These backup lines of credit expire at various times through 2028.

Our current payment terms with the majority of our suppliers are 120 days.

Two global financial institutions offer a voluntary supply chain finance program which enables our suppliers, at their sole discretion, to sell their receivables from the Company to these financial institutions on a non-recourse basis at a rate that leverages our credit rating and thus may be more beneficial to them.

We do not believe there is a risk that our payment terms will be shortened in the near future.

Refer to Note 9 of Notes to Consolidated Financial Statements for additional information.

The Company has a trade accounts receivable factoring program in certain countries.

Under this program, we can elect to sell trade accounts receivables to unaffiliated financial institutions at a discount.

In these factoring arrangements, for ease of administration, the Company collects customer payments related to the factored receivables and remits those payments to the financial institutions.

The Company sold $17,704 million and $10,709 million of trade accounts receivables under this program during the years ended December 31, 2023 and 2022, respectively.

The costs of factoring such receivables were $83 million and $27 million for the years ended December 31, 2023 and 2022, respectively.

The cash received from the financial institutions is classified within the operating activities section in our consolidated statement of cash flows.

Our current capital allocation priorities are as follows:

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On November 18, 2020, the Tax Court issued the Opinion in which it predominantly sided with the IRS.

however, a final decision is still pending and the timing of such decision is not currently known.

The Company strongly disagrees with the IRS’ positions and the portions of the Opinion affirming such positions and intends to vigorously defend our positions utilizing every available avenue of appeal.

Commissioner (February 9, 2023) controlled as to the validity of those regulations.

The Company strongly disagrees with the IRS’ positions and the portions of the Opinions affirming such positions and intends to vigorously defend our positions utilizing every available avenue of appeal.

While the Company believes that it is more likely than not that we will ultimately prevail in this litigation upon appeal, it is possible that all, or some portion of, the adjustments proposed by the IRS and sustained by the Tax Court could ultimately be upheld.

In the event that all of the adjustments proposed by the IRS were ultimately upheld for tax years 2007 through 2009 and the IRS, with the consent of the federal courts, were to decide to apply the Tax Court Methodology to the subsequent years up to and including 2022, the Company currently estimates that the potential aggregate incremental tax and interest liability could be approximately $14 billion as of December 31, 2022.

In the event that all of the adjustments proposed by the IRS were to be ultimately upheld for tax years 2007 through 2009 and the IRS, with the consent of the federal courts, were to decide to apply the Tax Court Methodology to the subsequent years up to and including 2023, the Company currently estimates that the potential aggregate incremental tax and interest liability could be approximately $16 billion as of December 31, 2023.

Additional income tax and interest would continue to accrue until the time any such potential liability, or portion thereof, were to be paid.

Once the Tax Court renders a final decision, the Company will have 90 days to file a notice of appeal and pay the portion of the potential aggregate incremental tax and interest liability related to the 2007 through 2009 tax years, which we currently estimate to be approximately $5.2 billion (including interest accrued through December 31, 2022), plus any additional interest accrued through the time of payment.

The Company and the IRS are now in the process of agreeing on the tax impacts of the Opinions.

Subsequent to the completion of this process, the Tax Court will render a 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.

The IRS can then seek to collect, and the Company expects to pay, any additional tax related to the 2007 through 2009 tax years reflected in the Tax Court decision (and interest thereon).

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 $5.8 billion (including interest accrued through December 31, 2023), plus any additional interest accrued through the time of payment.

Some or all of this amount, plus accrued interest, would be refunded if the Company were to prevail on appeal.

Refer to Note 12 of Notes to Consolidated Financial Statements for additional information on the tax litigation.

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Cash Flows from Operating Activities

As part of our continued efforts to improve our working capital efficiency, we have worked with our suppliers over the past several years to revisit terms and conditions, including the extension of payment terms.

Our current payment terms with the majority of our suppliers are 120 days.

Additionally, two global financial institutions offer a voluntary supply chain finance (“SCF”) program which enables our suppliers, at their sole discretion, to sell their receivables from the Company to these financial institutions on a non-recourse basis at a rate that leverages our credit rating and thus may be more beneficial to them.

The SCF program is available to suppliers of goods and services included in cost of goods sold as well as suppliers of goods and services included in selling, general and administrative expenses in our consolidated statement of income.

The Company and our suppliers agree on contractual terms for the goods and services we procure, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the SCF program.

The suppliers sell goods or services, as applicable, to the Company and issue the associated invoices to the Company based on the agreed-upon contractual terms.

Then, if they are participating in the SCF program, our suppliers, at their sole discretion, determine which invoices, if any, they want to sell to the financial institutions.

Our suppliers’ voluntary inclusion of invoices in the SCF program has no bearing on our payment terms.

No guarantees are provided by the Company or any of our subsidiaries under the SCF program.

We have no economic interest in a supplier’s decision to participate in the SCF program, and we have no direct financial relationship with the financial institutions, as it relates to the SCF program.

Accordingly, amounts due to our suppliers that elected to participate in the SCF program are included in the line item accounts payable and accrued expenses in our consolidated balance sheet.

All activity related to amounts due to suppliers that elected to participate in the SCF program is reflected within the operating activities section of our consolidated statement of cash flows.

We have been informed by the financial institutions that as of December 31, 2022 and 2021, suppliers had elected to sell $1,234 million and $882 million, respectively, of our outstanding payment obligations to the financial institutions.

The amounts settled through the SCF program were $4,724 million and $3,237 million during the years ended December 31, 2022 and 2021, respectively.

We do not believe there is a risk that our payment terms will be shortened in the near future.

The Company has a trade accounts receivable factoring program in certain countries.

Under this program, we can elect to sell trade accounts receivables to unaffiliated financial institutions at a discount.

In these factoring arrangements, for ease of administration, the Company collects customer payments related to the factored receivables and remits those payments to the financial institutions.

The Company sold $10,709 million and $6,266 million of trade accounts receivables under this program during the years ended December 31, 2022 and 2021, respectively.

The costs of factoring such receivables were $27 million and $5 million for the years ended December 31, 2022 and 2021, respectively.

The cash received from the financial institutions is classified within the operating activities section in our consolidated statement of cash flows.

Net cash provided by operating activities for the years ended December 31, 2022 and 2021 was $11,018 million and $12,625 million, respectively, a decrease of $1,607 million, or 13 percent.

This decrease was primarily driven by higher marketing payments resulting from 2021 year-end accruals, an unfavorable impact due to foreign currency exchange rate fluctuations, the buildup of inventory to manage potential supply chain disruptions, and higher annual incentive and tax payments in 2022.

These items were partially offset by increased operating income, lower payments related to our strategic realignment initiatives, and increased benefits from the extension of certain vendor payment terms and our trade accounts receivable factoring program.

Net cash provided by operating activities for the years ended December 31, 2023 and 2022 was $11,599 million and $11,018 million, respectively, an increase of $581 million, or 5%.

This increase was primarily driven by strong operating results and lower marketing payments resulting from year-end accruals.

These items were partially offset by an unfavorable impact due to foreign currency exchange rate fluctuations, higher interest and tax payments in the current year, the unfavorable impact from the extension of certain vendor payment terms in the prior year, payments resulting from the buildup of inventory in the prior year to manage potential supply chain disruptions, payments related to our restructuring initiatives and $167 million of the $275 million milestone payment for fairlife.

Refer to Note 17 of Notes to Consolidated Financial Statements for additional information on the milestone payment for fairlife.

Cash Flows from Investing Activities

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Purchases of Investments and Proceeds from Disposals of Investments

In 2022, purchases of investments were $3,751 million and proceeds from disposals of investments were $4,771 million, resulting in a net cash inflow of $1,020 million.

In 2023, purchases of investments were $6,698 million and proceeds from disposals of investments were $4,354 million, resulting in a net cash outflow of $2,344 million.

In 2022, purchases of investments were $3,751 million and proceeds from disposals of investments were $4,771 million, resulting in a net cash inflow of $1,020 million.

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Acquisitions of Businesses, Equity Method Investments and Nonmarketable Securities

In 2022, the Company’s acquisitions of businesses, equity method investments and nonmarketable securities totaled $73 million.

In 2021, the Company’s acquisitions of businesses, equity method investments and nonmarketable securities totaled $4,766 million, which primarily related to the acquisition of the remaining ownership interest in BodyArmor.

Refer to Note 2 of Notes to Consolidated Financial Statements for additional information related to our acquisitions.

In 2023 and 2022, the Company’s acquisitions of businesses, equity method investments and nonmarketable securities totaled $62 million and $73 million, respectively.

Proceeds from Disposals of Businesses, Equity Method Investments and Nonmarketable Securities

In 2022, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $458 million, which primarily related to the refranchising of our bottling operations in Cambodia and the sale of our ownership interest in one of our equity method investments.

In 2021, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $2,180 million, which primarily related to the sale of our ownership interest in CCA, an equity method investee, to CCEP, also an equity method investee.

Refer to Note 2 of Notes to Consolidated Financial Statements for additional information related to our disposals.

In 2023 and 2022, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $430 million and $458 million, respectively.

Refer to Note 2 of Notes to Consolidated Financial Statements for additional information.

Purchases of Property, Plant and Equipment

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Collateral (Paid) Received Associated with Hedging Activities — Net

Collateral paid associated with our hedging activities during the year ended December 31, 2022 was $1,465 million.

Collateral received associated with our hedging activities during the year ended December 31, 2023 was $366 million and collateral paid associated with our hedging activities during the year ended December 31, 2022 was $1,465 million.

Refer to Note 5 of Notes to Consolidated Financial Statements for additional information on our hedging activities.

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Net cash used in financing activities was $8,310 million and $10,250 million in 2023 and 2022, respectively.

Debt Financing

Loans, Notes Payable and Long-Term Debt

Our Company maintains debt levels we consider prudent based on our cash flows, interest coverage ratio and percentage of debt to capital.

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Our debt management policies, in conjunction with our share repurchase program and investment activity, can result in current liabilities exceeding current assets.

Issuances and payments of debt included both short-term and long-term financing activities.

During 2023, the Company had issuances of debt of $6,891 million, which included $6,436 million of issuances of commercial paper and short-term debt with maturities greater than 90 days, $222 million of net issuances of commercial paper and short-term debt with maturities of 90 days or less, and long-term debt issuances of $233 million, net of related discounts and issuance costs.

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However, other LIBOR reference rates, including U.S.

dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, will continue to be published through June 2023.

In preparation for the discontinuation of LIBOR, we have amended, or will amend, our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate.

We do not plan to enter into variable-rate agreements that reference LIBOR in the future.

dollar overnight, 1-month, 3-month, 6-month and 12-month maturities, continued to be published through June 2023.

As a result of the discontinuation of LIBOR, we have amended our LIBOR-referencing agreements to either reference the Secured Overnight Financing Rate or include mechanics for selecting an alternative rate.

Refer to Note 5 of Notes to Consolidated Financial Statements for additional information on our hedging activities.

Issuances of Stock

The issuances of stock in 2023 and 2022 were related to the exercise of stock options by employees.

Share Repurchases

Purchases of Stock for Treasury

In 2012, our Board of Directors authorized a share repurchase plan of up to 500 million shares (“2012 Plan”) of the Company’s common stock.

In May 2022, the Company reached the maximum number of shares that could be repurchased under the 2012 Plan and thereby completed the plan.

In 2019, our Board of Directors authorized a new share repurchase plan of up to 150 million shares of the Company’s common stock.

In 2019, our Board of Directors authorized a new share repurchase plan of up to 150 million shares (“2019 Plan”) of the Company’s common stock.

During 2023, the total cash outflow for treasury stock purchases was $2,289 million.

The Company repurchased 36.9 million shares of common stock under the 2019 Plan authorized by our Board of Directors.

These shares were repurchased at an average price per share of $59.08, for a total cost of $2,177 million.

The net impact of the Company’s issuances of stock and treasury stock purchases during 2023 resulted in a net cash outflow of $1,750 million.

During 2022, the total cash outflow for treasury stock purchases was $1,418 million.

The Company repurchased 21.3 million shares of common stock under the share repurchase plans authorized by our Board of Directors.

These shares were repurchased at an average price per share of $62.67, for a total cost of $1,336 million.

The net impact of the Company’s issuances of stock and treasury stock purchases during 2022 resulted in a net cash outflow of $581 million.

Since the inception of our share repurchase program in 1984, we have repurchased 3.6 billion shares of our common stock at an average price per share of $17.96.

In addition to shares repurchased under the share repurchase plans authorized by our Board of Directors, the Company’s treasury stock activity also includes shares surrendered to the Company to pay the exercise price and/or to satisfy tax withholding obligations in connection with so-called stock swap exercises of employee stock options and/or the vesting of restricted stock issued to employees.

The net impact of the Company’s issuances of stock and share repurchases during 2022 resulted in a net cash outflow of $581 million.

During 2021, the Company did not repurchase shares of our common stock under the share repurchase plans authorized by our Board of Directors.

The Company paid dividends of $7,952 million and $7,616 million during the years ended December 31, 2023 and 2022, respectively.

At its February 2024 meeting, our Board of Directors increased our regular quarterly dividend to $0.485 per share, equivalent to a full year dividend of $1.94 per share in 2024.

This is our 61 st consecutive annual increase.

This is our 62 nd consecutive annual increase.

Our annualized common stock dividend was $1.84 per share and $1.76 per share in 2023 and 2022, respectively.

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During the years ended December 31, 2023 and 2022, the total cash outflow for other financing activities was $465 million and $1,095 million, respectively.

The activities during 2022 included payments totaling $637 million related to the BodyArmor acquisition, which included amounts originally held back for indemnification obligations.

Additionally, other financing activities during 2022 and 2021 included repayments of collateral related to our hedging programs.

The activities during 2023 included $108 million of the $275 million milestone payment for fairlife.

The activities during 2023 and 2022 also included payments totaling $311 million and $637 million, respectively, related to the BodyArmor acquisition, which included amounts originally held back for indemnification obligations.

Additionally, other financing activities during 2022 included repayments of collateral related to our hedging programs of $403 million.

Refer to Note 17 of Notes to Consolidated Financial Statements for additional information on the milestone payment for fairlife.

Contractual Obligations

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We will consider several alternatives for settling this long-term debt, including the use of cash flows from operating activities, issuance of commercial paper or issuance of other long-term debt.

The table above shows expected cash payments to be made by the Company and excludes the noncash portion of debt, including any fair market value adjustments, unamortized discounts and premiums.

The table above shows expected cash payments to be made by the Company and excludes the noncash portion of debt, including any fair value adjustments, unamortized discounts and premiums.

3 We calculated estimated interest payments for our long-term debt based on the applicable rates and payment dates.

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6 We expect to fund these marketing obligations with cash flows from operating activities.

7 Represents obligations related to our acquisitions of fairlife and BodyArmor.

Refer to Note 2 of Notes to Consolidated Financial Statements for additional information.

8 Represents $823 million received in December 2022 in advance of the refranchising of the Company’s bottling operations in Vietnam in January 2023 as well as liabilities and contractual obligations that were classified as held for sale.

7 Primarily represents our contingent consideration liability related to our acquisition of fairlife.

Refer to Note 17 of Notes to Consolidated Financial Statements.

8 Represents liabilities and contractual obligations that were classified as held for sale related to the Company’s bottling operations in the Philippines and Bangladesh and certain bottling operations in India.

Refer to Note 2 of Notes to Consolidated Financial Statements for additional information.

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The expected benefit payments for these unfunded pension plans are not included in the table above.

However, we anticipate benefit payments for these unfunded pension plans will be approximately $65 million annually for 2023 through 2025.

However, we anticipate benefit payments for these unfunded pension plans will be approximately $64 million annually for 2024 and 2025.

Thereafter, the expected annual benefit payments will gradually decline.

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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.

However, management has concluded that the likelihood of any significant amounts being paid by our Company under these guarantees is remote.

As of December 31, 2023, we were not directly liable for the debt of any unconsolidated entity.

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Brazilian real 3 4

British pound sterling (11) 3

British pound 2 (11)

Chinese yuan (7) (3)

Indian rupee (6) (5)

Japanese yen (7) (17)

Mexican peso 14 1

Philippine peso (3) (9)

South African rand (11) (9)

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Our hedging activities are designed to mitigate, over time, a portion of the potentially unfavorable impact of exchange rate fluctuations on our net income.

The total impact of foreign currency exchange rate fluctuations on net operating revenues, including the effect of our hedging activities, was a decrease of 7 percent in 2022 and an increase of 1 percent in 2021.

The total impact of foreign currency

exchange rate fluctuations on income before income taxes, including the effect of our hedging activities, was a decrease of 6 percent in 2022 and an increase of 2 percent in 2021.

The total impact of foreign currency exchange rate fluctuations on net operating revenues, including the effect of our hedging activities, was a decrease of 4% and 7% in 2023 and 2022, respectively.

The total impact of foreign currency exchange rate fluctuations on income before income taxes, including the effect of our hedging activities, was a decrease of 8% and 6% in 2023 and 2022, respectively.

Foreign currency exchange gains and losses are primarily the result of the remeasurement of monetary assets and liabilities from certain currencies into functional currencies.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis