What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-20 compared with 2023-02-21 · 314 added, 331 removed, 2154 unchanged (23% of the section changed)

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Accounts Payable and Accrued Expenses

Supply Chain Finance Program

Debt and Borrowing Arrangements

Commitments and Contingencies

Stock- B ased Compensation Plans

Stock-Based Compensation Plans

Pension and Other Postretirement Benefit Plans

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Consolidated net income $ 10,703 $ 9,571 $ 9,804

Adjustments to reconcile consolidated net income to net cash provided by operating activities:

Depreciation and amortization 1,128 1,260 1,452

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Financing Activities

Issuances of debt 3,972 13,094 26,934

Payments of debt ( 4,930 ) ( 12,866 ) ( 28,796 )

Issuances of loans, notes payable and long-term debt 6,891 3,972 13,094

Payments of loans, notes payable and long-term debt ( 5,034 ) ( 4,930 ) ( 12,866 )

Issuances of stock 539 837 702

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Stock-based compensation expense 233 332 299

Acquisition of interests held by noncontrolling owners ( 20 ) — —

Other activities ( 3 ) 1 —

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Purchases of stock for treasury

( 2,189 ) ( 1,336 ) —

Balance at end of year ( 54,535 ) ( 52,601 ) ( 51,641 )

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Dividends paid to noncontrolling interests ( 25 ) ( 51 ) ( 43 )

Acquisition of interests held by noncontrolling owners ( 2 ) — —

Contributions by noncontrolling interests — — 20

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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.

Finished beverage products bearing our trademarks, sold in the United States since 1886, are now sold in more than 200 countries and territories.

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Generally, this occurs when an entity holds an interest in another business enterprise that was achieved through arrangements that do not involve voting interests, which results in a disproportionate relationship between such entity’s voting interests in, and its exposure to the economic risks and potential rewards of, the other business enterprise.

This disproportionate relationship results in what is known as a variable interest, and the entity in which we have the variable interest is referred to as a “VIE.” An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the VIE.

This disproportionate relationship results in what is known as a variable interest, and the entity in which another entity holds a variable interest is referred to as a “VIE.” An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the VIE.

The primary beneficiary has both (1) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

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The assets and liabilities of VIEs for which we are the primary beneficiary were not significant to the Company’s consolidated financial statements.

Creditors of our VIEs do not have recourse against the general credit of the Company, regardless of whether they are accounted for as consolidated entities.

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

Creditors of our VIEs do not have recourse against the general credit of the Company, regardless of whether the VIEs are accounted for as consolidated entities.

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.

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Refer to Note 4.

2 Amounts as of December 31, 2022 and 2021 include cash and cash equivalents related to assets held for sale, which are included in the line item prepaid expenses and other current assets in our consolidated balance sheets.

2 Amounts include cash and cash equivalents related to assets held for sale, which are included in the line item prepaid expenses and other current assets in our consolidated balance sheets.

Refer to Note 2.

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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, which include assumptions we believe are consistent with those a market participant would use.

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.

We believe our assumptions 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.

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These geographic regions are our reporting units.

Our Global Ventures operating segment includes the results of our Costa Limited (“Costa”), innocent and doğadan businesses, as well as fees earned pursuant to distribution coordination agreements between the Company and Monster Beverage Corporation (“Monster”), each of which is its own reporting unit.

Investments operating segment includes all of our consolidated bottling operations, regardless of geographic location.

between the Company and Monster Beverage Corporation (“Monster”), each of which is its own reporting unit.

The Bottling Investments operating segment includes all of our consolidated bottling operations, regardless of geographic location.

Generally, each consolidated bottling operation within our Bottling Investments operating segment is its own reporting unit.

Goodwill is assigned to the reporting unit or units that benefit from the synergies arising from each business combination.

In order to test for goodwill impairment, the Company compares the fair value of the reporting unit to its carrying value,

including goodwill.

In order to test for goodwill impairment, the Company compares the fair value of the reporting unit to its carrying value, including goodwill.

If the fair value of the reporting unit is less than its carrying amount, goodwill is written down for the amount by which the carrying amount exceeds the fair value.

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 Company has the option to perform a qualitative assessment of goodwill in order to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

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The fair value of restricted stock, restricted stock units and certain performance share units is the closing market price per share of the Company’s stock on the grant date less the present value of the expected dividends not received during the vesting period.

The Company included a relative total shareowner return (“TSR”) modifier for most performance share unit awards granted from 2014 through 2017 as well as for performance share unit awards granted to executives from 2018 through 2022.

For these awards, the number of performance share units earned based on the certified achievement of the predefined performance criteria will be reduced or increased if the Company’s total shareowner return over the performance period relative to a predefined compensation comparator group of companies falls outside of a predefined range.

The Company included a relative total shareowner return (“TSR”) modifier for performance share unit awards granted to executives from 2018 through 2022 as well as for performance share unit awards granted to all participants in 2023.

For these awards, the number of performance share units earned based on the certified achievement of the predefined performance criteria will be reduced or increased if the Company’s total shareowner return over the performance period relative to a predefined group of companies falls outside of a predefined range.

The fair value of performance share units that include a TSR modifier is determined using a Monte Carlo valuation model.

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The Company has made a policy election to estimate the number of stock-based compensation awards that will ultimately vest to determine the amount of compensation expense recognized each reporting period.

Forfeiture estimates are trued-up at the end of the vesting period in order to ensure that compensation expense is recognized only for those awards that ultimately vest.

Forfeiture estimates are trued-up at the end of each quarter in order to ensure that compensation expense is recognized only for those awards that ultimately vest.

Refer to Note 13.

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Refer to Note 5.

Recently Issued Accounting Guidance

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

The expanded annual disclosures are effective for our year ending December 31, 2024, and the expanded interim disclosures are effective in 2025 and will be applied retrospectively to all prior periods presented.

The Company is currently evaluating the impact that ASU 2023-07 will have on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires, among other things, additional disclosures primarily related to the income tax rate reconciliation and income taxes paid.

The expanded annual disclosures are effective for our year ending December 31, 2025.

The Company is currently evaluating the impact that ASU 2023-09 will have on our consolidated financial statements and whether we will apply the standard prospectively or retrospectively.

ACQUISITIONS AND DIVESTITURES

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

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

During 2021, our 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 BA Sports Nutrition, LLC (“BodyArmor”).

During 2020, our Company’s acquisitions of businesses, equity method investments and nonmarketable securities totaled $ 1,052 million, which primarily related to the acquisition of the remaining ownership interest in fairlife, LLC (“fairlife”).

BA Sports Nutrition, LLC

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

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 in the United States.

We acquired the remaining ownership interest in exchange for approximately $ 5,600 million of cash, of which $ 4,745 million was paid at close, net of cash acquired.

The purchase price reflected the contractual discount included in the purchase option we obtained with our initial investment in 2018.

The remaining $ 860 million of the purchase price was held back related to indemnification obligations, of which $ 540 million was included in the line item accounts payable and accrued expenses and $ 320 million was included in the line item other noncurrent liabilities in our consolidated balance sheet as of December 31, 2021.

As of December 31, 2022, $ 549 million of the $ 860 million had been paid and $ 311 million remained in the line item accounts payable and accrued expenses in our consolidated balance sheet.

Upon consolidation, we recognized a gain of $ 834 million resulting from the remeasurement of our previously held equity interest in BodyArmor to fair value.

The remaining $ 860 million of the purchase price was held back related to indemnification obligations, of which $ 549 million had been paid as of December 31, 2022 and $ 311 million was paid in 2023.

Upon consolidation, we recognized a gain of $ 834 million resulting from the remeasurement of our previously held equity interest in BodyArmor to fair value, which

was recorded in the line item other income (loss) — net in our consolidated statement of income.

The fair value of our previously held equity interest was determined using a discounted cash flow model based on Level 3 inputs, as defined in Note 17.

The gain was recorded in the line item other income (loss) — net in our consolidated statement of income.

Upon finalization of purchase accounting, $ 4.2 billion of the purchase price was allocated to the BodyArmor trademark and $ 2.2 billion was allocated to goodwill, of which $ 1.2 billion is tax deductible.

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Of the total amount allocated to goodwill, $ 1.9 billion has been assigned to the North America operating segment and $ 0.3 billion has been assigned to our other geographic operating segments.

fairlife, LLC

In January 2020, the Company acquired the remaining 57.5 percent ownership interest in, and now owns 100 percent of, fairlife.

fairlife offers a broad portfolio of products in the value-added dairy category across North America.

Upon consolidation, we recognized a gain of $ 902 million resulting from the remeasurement of our previously held equity interest in fairlife to fair value.

The fair value of our previously held equity interest was determined using a discounted cash flow model based on Level 3 inputs, as defined in Note 16.

The gain was recorded in the line item other income (loss) — net in our consolidated statement of income.

We acquired the remaining ownership interest in exchange for $ 979 million of cash, net of cash acquired, and effectively settled our $ 306 million note receivable from fairlife at the recorded amount.

Under the terms of the agreement, we are subject to making future milestone payments which are contingent on fairlife achieving certain financial targets through 2024 and, if achieved, are payable in 2021, 2023 and 2025.

These milestone payments are based on agreed-upon formulas related to fairlife’s operating results, the resulting values of which are not subject to a ceiling.

Under the applicable accounting guidance, we recorded a $ 270 million liability representing our best estimate of the fair value of this contingent consideration as of the acquisition date.

The fair value of this contingent consideration was determined using a Monte Carlo valuation model based on Level 3 inputs, including management’s latest estimates of future operating results.

We are required to remeasure this liability to fair value quarterly, with any changes in the fair value recorded in income until the final milestone payment is made.

Upon finalization of purchase accounting, $ 1.3 billion of the purchase price was allocated to the fairlife trademark and $ 0.8 billion was allocated to goodwill.

The goodwill recognized as part of this acquisition is primarily related to synergistic value created from the opportunity for additional expansion.

It also includes certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce.

The goodwill is not tax deductible and has been assigned to the North America operating segment.

During the years ended December 31, 2022, 2021 and 2020, we recorded charges of $ 1,000 million, $ 369 million and $ 51 million, respectively.

These charges related to the remeasurement of the contingent consideration liability to fair value and were recorded in the line item other operating charges in our consolidated statements of income.

During the year ended December 31, 2021, we made the first milestone payment of $ 100 million based on fairlife meeting its financial targets in 2020.

During 2023, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $ 430 million, which primarily related to sales of our ownership interests in our equity method investees in Indonesia and Pakistan, for which we received cash proceeds of $ 402 million and a note receivable of $ 200 million.

We recognized a net gain of $ 94 million as a result of these transactions.

During 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.

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We received cash proceeds of $ 293 million and recognized a net gain of $ 114 million as a result of these sales.

During 2020, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $ 189 million, which primarily related to the sale of our ownership interest in Piedmont Coca-Cola Bottling Partnership to Coca-Cola Consolidated, Inc., an equity method investee.

We received cash proceeds of $ 100 million and recognized a net loss of $ 2 million as a result of this sale.

Also included were 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.

We received cash proceeds of $ 62 million and recognized a net gain of $ 35 million as a result of these sales.

All of the gains and losses discussed above were recorded in the line item other income (loss) — net in our consolidated statements of income.

Assets and Liabilities Held for Sale

As of December 31, 2021, the Company’s bottling operations in Vietnam and Cambodia met the criteria to be classified as held for sale.

As a result, we were required to record their assets and liabilities at the lower of carrying value or fair value less any costs to sell.

As the fair value less any costs to sell exceeded the carrying value, the related assets and liabilities were recorded at their carrying value.

As of December 31, 2023, the Company’s bottling operations in the Philippines and Bangladesh and certain bottling operations in India met the criteria to be classified as held for sale and are expected to be refranchised during the first quarter of 2024.

As of December 31, 2022, the Company’s bottling operations in Vietnam met the criteria to be classified as held for sale.

As a result, we were required to record the related assets and liabilities at the lower of carrying value or fair value less any costs to sell.

As the fair values less any costs to sell exceeded the carrying values, the related assets and liabilities were recorded at their carrying values.

These assets and liabilities were included in the Bottling Investments operating segment.

The Company refranchised its bottling operations in Cambodia in November 2022.

In December 2022, the Company received cash proceeds of $ 823 million in advance of refranchising its bottling operations in Vietnam.

This advance was included in the

line item accounts payable and accrued expenses in our consolidated balance sheet as of December 31, 2022, and was included in the line item other investing activities in our consolidated statement of cash flows for the year ended December 31, 2022.

The Company refranchised its bottling operations in Vietnam in January 2023.

This advance was included in the line item accounts payable and accrued expenses in our consolidated balance sheet as of December 31, 2022, and was included in the line item other investing activities in our consolidated statement of cash flows for the year ended December 31, 2022.

The Company refranchised its bottling operations in Vietnam in January 2023 and recognized a net gain of $ 439 million as a result of the sale, which was recorded in the line item other income (loss) — net in our consolidated statement of income for the year ended December 31, 2023.

The following table presents information related to the major classes of assets and liabilities that were classified as held for sale and were included in the line items prepaid expenses and other current assets and accounts payable and accrued expenses, respectively, in our consolidated balance sheets (in millions):

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Cash, cash equivalents and short-term investments $ 37 $ 229

Marketable securities

Trade accounts receivable, less allowances 95 12

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Prepaid expenses and other current assets 60 43

Equity method investments

Other noncurrent assets 51 29

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Goodwill 231 34

Other intangible assets

Assets held for sale $ 2,094 $ 602

Accounts payable and accrued expenses $ 464 $ 154

Loans and notes payable

Accrued income taxes 24 3

Long-term debt 2 —

Other noncurrent liabilities 108 3

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NET OPERATING REVENUES

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.

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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 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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For derivatives that will be accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction.

In addition, the Company formally assesses, both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair values or cash flows of the related underlying exposures.

In addition, the Company formally assesses, both at inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair values or cash flows of the related underlying exposures.

The Company determines the fair values of its derivatives based on quoted market prices or pricing models using current market rates.

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Fair Value 1,2

Derivatives Designated as Hedging Instruments Balance Sheet Location 1

Derivatives Designated as Hedging Instruments Financial Statement Line Item Impacted 1

2023 December 31,

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Foreign currency contracts Other noncurrent assets 13 13

Interest rate contracts Prepaid expenses and other current assets — 1

Interest rate contracts Other noncurrent assets 50 —

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Commodity contracts Accounts payable and accrued expenses 3 2

Interest rate contracts Accounts payable and accrued expenses 5 —

Interest rate contracts Other noncurrent liabilities 1,113 1,676

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Fair Value 1,2

Derivatives Not Designated as Hedging Instruments Balance Sheet Location 1

Derivatives Not Designated as Hedging Instruments Financial Statement Line Item Impacted 1

2023 December 31,

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Commodity contracts Prepaid expenses and other current assets 5 34

Commodity contracts Other noncurrent assets — 3

Other derivative instruments Prepaid expenses and other current assets 4 —

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dollar net cash outflows from procurement activities will be adversely affected by fluctuations in foreign currency exchange rates.

We enter into forward contracts and purchase foreign currency options and collars (principally euro, British pound sterling and Japanese yen) to hedge certain portions of forecasted cash flows denominated in foreign currencies.

We enter into forward contracts and purchase foreign currency options and collars (principally euro, British pound and Japanese yen) to hedge certain portions of forecasted cash flows denominated in foreign currencies.

When the U.S.

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The changes in fair values of the cross-currency swap derivatives are recorded in AOCI with an immediate reclassification into earnings for the changes in fair values attributable to fluctuations in foreign currency exchange rates.

The total notional values of derivatives that were designated as cash flow hedges for the Company’s foreign currency denominated assets and liabilities were $ 958 million and $ 1,994 million as of December 31, 2022 and 2021, respectively.

The total notional value of derivatives that were designated as cash flow hedges for the Company’s foreign currency denominated assets and liabilities was $ 958 million as of both December 31, 2023 and 2022.

The Company has entered into commodity futures contracts and other derivative instruments on various commodities to mitigate the price risk associated with forecasted purchases of materials used in our manufacturing process.

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Our Company monitors our mix of short-term debt and long-term debt regularly.

From time to time, we manage our risk to interest rate fluctuations through the use of derivative financial instruments.

The Company has entered into interest rate swap agreements and has designated these instruments as part of the Company’s interest rate cash flow hedging program.

We manage our risk to interest rate fluctuations through the use of derivative financial instruments.

From time to time, the Company has entered into interest rate swap agreements and has designated these instruments as part of the Company’s interest rate cash flow hedging program.

The objective of this hedging program is to mitigate the risk of adverse changes in benchmark interest rates on the Company’s future interest payments.

There were no interest rate swap agreements that were designated and qualified for the Company’s interest rate cash flow hedging program as of December 31, 2022 and 2021.

The total notional value of derivatives that were designated and qualified for the Company’s interest rate cash flow hedging program was $ 750 million as of December 31, 2023.

There were no derivatives that were designated and qualified for the Company’s interest rate cash flow hedging program as of December 31, 2022.

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

in OCI Location of Gain (Loss) Recognized in Income Gain (Loss)

in OCI Financial Statement Line Item Impacted Gain (Loss)

Reclassified from

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Foreign currency contracts ( 91 ) Other income (loss) — net ( 79 )

Interest rate contracts 110 Interest expense ( 90 )

Commodity contracts ( 4 ) Cost of goods sold ( 2 )

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Total $ 162 $ ( 116 )

As of December 31, 2022, the Company estimates that it will reclassify into earnings during the next 12 months net gains of $ 56 million from the pretax amount recorded in AOCI as the anticipated cash flows occur.

As of December 31, 2023, the Company estimates that it will reclassify into earnings during the next 12 months net losses of $ 72 million from the pretax amount recorded in AOCI as the anticipated cash flows occur.

Fair Value Hedging Strategy

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The Company also uses cross-currency interest rate swaps to hedge the changes in the fair value of foreign currency denominated debt relating to fluctuations in foreign currency exchange rates and benchmark interest rates.

The changes in fair values of derivatives designated as fair value hedges and the offsetting changes in fair values of the hedged items are recognized in earnings.

The changes in the fair values of derivatives designated as fair value hedges and the offsetting changes in the fair values of the hedged items are recognized in earnings.

As a result, any difference is reflected in earnings as ineffectiveness.

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

Hedging Instruments and Hedged Items Location of Gain (Loss) Recognized in Income Gain (Loss)

Hedging Instruments and Hedged Items Financial Statement Line Item Impacted Gain (Loss)

Recognized in Income

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Fixed-rate debt Interest expense 66

Net impact to interest expense $ 1

Foreign currency contracts Other income (loss) — net $ ( 4 )

Available-for-sale securities Other income (loss) — net 5

Net impact to other income (loss) — net $ 1

Net impact of fair value hedging instruments $ ( 1 )

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

In June 2023, the Company amended the terms of its interest rate swap agreements to implement a forward-looking interest rate based on the Secured Overnight Financing Rate (“SOFR”) in place of the London Interbank Offered Rate (“LIBOR”).

Since the interest rate swap agreements were affected by reference rate reform, the Company applied the expedients and exceptions provided to preserve the past presentation of its derivatives without de-designating the existing hedging relationships.

All amendments to interest rate swap agreements were executed with the existing counterparties and did not change the notional amounts, maturity dates or other critical terms of the hedging relationships.

Hedges of Net Investments in Foreign Operations Strategy

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Total $ 12,587 $ 12,061 $ ( 382 ) $ 741 $ 918

The Company reclassified a loss of $ 4 million related to net investment hedges from AOCI into earnings during the year ended December 31, 2021.

The Company did not reclassify any gains or losses related to net investment hedges from AOCI into earnings during the years ended December 31, 2023 and 2022.

The Company reclassified a loss of $ 4 million related to net investment hedges from AOCI into earnings during the year ended December 31, 2021.

In addition, the Company did not have any ineffectiveness related to net investment hedges during the years ended December 31, 2023, 2022 and 2021.

1 unchanged sentence

Economic (Non-Designated) Hedging Strategy

In addition to derivative instruments that were designated and qualified for hedge accounting, the Company also uses certain derivatives as economic hedges of foreign currency, interest rate and commodity exposure.

In addition to derivative instruments that have been designated and qualify for hedge accounting, the Company also uses certain derivatives as economic hedges of foreign currency, interest rate and commodity exposure.

Although these derivatives were not designated and/or did not qualify for hedge accounting, they are effective economic hedges.

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The Company uses interest rate contracts as economic hedges to minimize exposure to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates.

The total notional value of derivatives related to our economic hedges of this type was $ 200 million as of December 31, 2021.

There were no interest rate contracts used as economic hedges as of December 31, 2022.

There were no interest rate contracts used as economic hedges as of December 31, 2023 and 2022.

The Company also uses certain derivatives as economic hedges to mitigate the price risk associated with the purchase of materials used in the manufacturing process and vehicle fuel.

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

Derivatives Not Designated as Hedging Instruments Location of Gain (Loss) Recognized in Income Gain (Loss) Recognized in Income

Derivatives Not Designated as Hedging Instruments Financial Statement Line Item Impacted Gain (Loss) Recognized in Income

Year Ended December 31,

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and Coca-Cola Bottlers Japan Holdings Inc.

As of December 31, 2022, we owned 19 percent, 20 percent, 20 percent, 28 percent, 21 percent and 19 percent, respectively, of these companies’ outstanding shares.

As of December 31, 2023, we owned 19 %, 20 %, 20 %, 28 %, 21 % and 18 %, respectively, of these companies’ outstanding shares.

As of December 31, 2023, our investments in our equity method investees in the aggregate exceeded our proportionate share of the net assets of these equity method investees by $ 8,634 million.

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Total payments, primarily related to marketing, made to equity method investees were $ 294 million, $ 396 million and $ 516 million in 2023, 2022 and 2021, respectively.

The increase in net sales to equity method investees in 2022 was primarily due to the continued recovery from the COVID-19 pandemic.

The increase in net sales to equity method investees in 2023 was primarily due to volume growth and favorable pricing initiatives.

In addition, purchases of beverage products from equity method investees were $ 579 million, $ 505 million and $ 496 million in 2023, 2022 and 2021, respectively.

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Coca-Cola Bottlers Japan Holdings Inc.

369 398 ( 29 )

Coca-Cola İçecek A.Ş.

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Total $ 29,317 $ 13,197 $ 16,120

1 The carrying value of our investment in CCBJHI exceeded its fair value as of December 31, 2022 by $ 29 million.

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.

Net Receivables and Dividends from Equity Method Investees

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Acquisitions — — — — — 4 4

55 44 1,886 227 45 — 2,257

Impairments — — — — — ( 7 ) ( 7 )

Purchase accounting adjustments — — 12 2 9 — 23

Divestitures, deconsolidations

— — ( 13 ) — ( 7 ) ( 37 ) ( 57 )

and other — — — — ( 5 ) — ( 5 )

Balance at end of year $ 1,197 $ 203 $ 10,677 $ 412 $ 2,708 $ 3,585 $ 18,782

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Effect of foreign currency translation ( 44 ) 6 — ( 11 ) 120 ( 264 ) ( 193 )

Acquisitions — — — — — 4 4

Purchase accounting adjustments — — 12 2 9 — 23

Divestitures, deconsolidations

and other — — — — ( 5 ) — ( 5 )

— — — — — ( 231 ) ( 231 )

Balance at end of year $ 1,153 $ 209 $ 10,677 $ 401 $ 2,828 $ 3,090 $ 18,358

1 For information related to the Company’s acquisitions, refer to Note 2.

2 The decrease in the Bottling Investments operating segment was a result of the Company’s bottling operations in Vietnam and Cambodia being classified as held for sale.

1 The decrease in the Bottling Investments segment was a result of the Company’s bottling operations in the Philippines being classified as held for sale.

Refer to Note 2.

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Accrued compensation 1,394 1,087

Variable consideration payable 934 1,118

Other accrued expenses 1,2

Accounts payable and accrued expenses $ 15,485 $ 15,749

1 Includes cash proceeds of $ 823 million received in advance of refranchising our bottling operations in Vietnam in January 2023.

Refer to Note 2 for additional information.

1 Includes liabilities held for sale of $ 719 million and $ 160 million as of December 31, 2023 and 2022, respectively.

Refer to Note 2.

2 Includes cash proceeds of $ 823 million as of December 31, 2022 received in advance of refranchising our bottling operations in Vietnam in January 2023.

Refer to Note 2.

SUPPLY CHAIN FINANCE PROGRAM

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

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 and 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.

As of December 31, 2023 and 2022, the amount of obligations outstanding that the Company has confirmed as valid to the financial institutions under the SCF program was $ 1,421 million and $ 1,351 million, respectively.

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

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3 The noncurrent portion of operating lease liabilities is included in the line item other noncurrent liabilities in our consolidated balance sheets.

We had operating lease costs of $ 397 million and $ 342 million for the years ended December 31, 2022 and 2021, respectively.

We had operating lease costs of $ 397 million for both the years ended December 31, 2023 and 2022.

During 2023 and 2022, cash paid for amounts included in the measurement of operating lease liabilities was $ 389 million and $ 400 million, respectively.

Operating lease ROU assets obtained in exchange for operating lease obligations were $ 328 million and $ 337 million for the years ended December 31, 2023 and 2022, respectively.

Information associated with the measurement of our operating lease obligations as of December 31, 2022 is as follows:

Information associated with the measurement of our operating lease liabilities as of December 31, 2023 is as follows:

Weighted-average remaining lease term 8 years

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DEBT AND BORROWING ARRANGEMENTS

Short-Term Borrowings

Loans and Notes Payable

Loans and notes payable consist primarily of commercial paper issued in the United States.

As of December 31, 2023 and 2022, we had $ 4,209 million and $ 2,146 million, respectively, in outstanding commercial paper borrowings.

Our weighted-average interest rates for commercial paper outstanding were 4.2 percent and 0.1 percent as of December 31, 2022 and 2021, respectively.

Our weighted-average interest rates for commercial paper outstanding were 5.3 % and 4.2 % as of December 31, 2023 and 2022, respectively.

As of December 31, 2023 and 2022, the Company also had $ 348 million and $ 227 million, respectively, in lines of credit, short-term credit facilities and other short-term borrowings that were related to our international operations.

In addition, we had $ 6,159 million in unused lines of credit and other short-term credit facilities as of December 31, 2023, of which $ 4,550 million was in corporate backup lines of credit for general purposes.

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

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

There were no borrowings under these corporate backup lines of credit during 2023.

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Long-Term Debt

During 2022, the Company retired upon maturity fixed interest rate Swiss franc notes and U.S.

dollar debentures of SFr 550 million and $ 410 million, respectively, with interest rates ranging from 0.260 percent to 8.500 percent.

During 2022, our bottling operations in Africa refinanced a portion of its short-term borrowings and issued new long-term debt.

This resulted in borrowings of $ 1,368 million at a weighted-average interest rate of 5.210 percent as of December 31, 2022.

During 2021, the Company issued fixed interest rate U.S.

dollar notes and euro notes of $ 5,950 million and € 3,150 million, respectively, with maturity dates ranging from 2028 to 2051 and interest rates ranging from 0.125 percent to 3.000 percent.

The carrying value of these notes as of December 31, 2021 was $ 9,410 million.

During 2021, the Company retired upon maturity variable interest rate euro notes of € 371 million with an interest rate equal to the three-month Euro Interbank Offered Rate (“EURIBOR”) plus 0.200 percent.

During 2021, the Company also extinguished prior to maturity fixed interest rate U.S.

dollar notes and euro notes of $ 6,500 million and € 2,430 million, respectively, with maturity dates ranging from 2023 to 2026 and interest rates ranging from 0.750 percent to 3.200 percent.

These extinguishments resulted in associated charges of $ 559 million recorded in the line item interest expense in our consolidated statement of income.

These charges included the difference between the reacquisition price and the net carrying value of the notes extinguished, including the impact of the related fair value hedging relationships.

We also incurred charges of $ 91 million as a result of the reclassification of related cash flow hedging balances from AOCI into income.

During 2020, the Company issued fixed interest rate U.S.

dollar notes and euro notes of $ 15,600 million and € 2,600 million, respectively, with maturity dates ranging from 2025 to 2060 and interest rates ranging from 0.125 percent to 4.200 percent.

The carrying value of these notes as of December 31, 2020 was $ 17,616 million.

During 2020, the Company retired upon maturity fixed interest rate Australian dollar notes and U.S.

dollar notes of AUD 450 million and $ 3,750 million, respectively, with interest rates ranging from 1.875 percent to 3.150 percent.

Additionally, the Company retired upon maturity U.S.

dollar zero coupon notes of $ 171 million.

During 2020, the Company also extinguished prior to maturity fixed interest rate U.S.

dollar notes and euro notes of $ 3,815 million and € 2,300 million, respectively, with maturity dates ranging from 2021 to 2050 and interest rates ranging from 0.000 percent to 4.200 percent.

Additionally, the Company extinguished prior to maturity variable interest rate euro notes of € 379 million with a maturity date in 2021 and an interest rate equal to the three-month EURIBOR plus 0.200 percent.

These extinguishments resulted in associated charges of $ 459 million recorded in the line item interest expense in our consolidated statement of income.

These charges included the difference between the reacquisition price and the net carrying value of the notes extinguished, including the impact of the related fair value hedging relationships.

We also incurred charges of $ 25 million as a result of the reclassification of related cash flow hedging balances from AOCI into income.

The Company’s long-term debt consisted of the following (in millions except average rate data):

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Long-term debt $ 35,547 $ 36,377

1 Rates represent the weighted-average effective interest rate on the balances outstanding as of year end, as adjusted for the effects of interest rate swap agreements, cross-currency swap agreements and fair value adjustments, if applicable.

1 Rates represent the weighted-average effective interest rate on the balances outstanding as of year end, as adjusted for the effective amount of interest rate swap agreements and cross-currency swap agreements, if applicable.

Refer to Note 5 for a more detailed discussion on interest rate management.

2 As of December 31, 2022, the amount shown includes $ 1,789 million of debt instruments and finance leases that are due through 2046.

3 As of December 31, 2022 and 2021, the amounts shown include $ 1,368 million and $ 407 million, respectively, which relate to our bottling operations in Africa.

2 As of December 31, 2023 and 2022, the amounts include $ 1,211 million and $ 1,368 million, respectively, of debt instruments related to our bottling operations in Africa due through 2026.

3 Amounts represent the changes in fair values due to changes in benchmark interest rates.

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Total interest paid was $ 1,415 million, $ 848 million and $ 738 million in 2023, 2022 and 2021, respectively.

During 2021, the Company extinguished prior to maturity fixed interest rate U.S.

dollar notes and euro notes of $ 6,500 million and € 2,430 million, respectively, with maturity dates ranging from 2023 to 2026 and interest rates ranging from 0.750 % to 3.200 %.

These extinguishments resulted in associated charges of $ 559 million recorded in the line item interest expense in our consolidated statement of income.

These charges included the difference between the reacquisition price and the net carrying value of the notes extinguished, including the impact of the related fair value hedging relationships.

We also incurred charges of $ 91 million as a result of the reclassification of related cash flow hedging balances from AOCI into income.

The following table summarizes the maturities of long-term debt for the five years succeeding December 31, 2023 (in millions):

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Refer to Note 15.

On September 17, 2015, the Company received a Statutory Notice of Deficiency (“Notice”) from the U.S.

Internal Revenue Service (“IRS”) seeking approximately $ 3.3 billion of additional federal income tax for years 2007 through 2009.

On September 17, 2015, the Company received a Statutory Notice of Deficiency (“Notice”) from the United States Internal Revenue Service (“IRS”) seeking approximately $ 3.3 billion of additional federal income tax for years 2007 through 2009.

In the Notice, the IRS stated its intent to reallocate over $ 9 billion of income to the U.S.

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parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion.

The Tax Court reserved ruling on the effect of Brazilian legal restrictions on the payment of royalties by the Company’s licensee in Brazil until after the Tax Court issues its opinion in the separate case of 3M Co.

Commissioner, T.C.

5816-13 (filed March 11, 2013).

The Tax Court issued its opinion in 3M Co.’s case (“3M Co.

opinion”) on February 9, 2023.

Once the Tax Court completes its analysis of the application of the 3M Co.

opinion to the Company’s case, the Company expects the Tax Court to render another opinion, and ultimately a final decision, in the Company’s case.

On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, “Opinions”), 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 believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company’s foreign licensees to increase the Company’s U.S.

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In determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes .

In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinion and relevant caselaw.

In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw.

We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal.

We concluded, based on the technical and legal merits of the Company’s tax positions, that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal.

In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinion (“Tax Court Methodology”), that could be applied by the courts upon final resolution of the litigation.

In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (“Tax Court Methodology”), that could be applied by the courts upon final resolution of the litigation.

Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company’s tax.

As a result of this analysis, we recorded a tax reserve of $ 438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S.

parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinion and the Company’s analysis.

parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company’s analysis.

The Company’s conclusion that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal is unchanged as of December 31, 2023.

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As a result of the application of the required probability analysis to these updated calculations and the accrual of interest through the current reporting period, we updated our tax reserve as of December 31, 2023 to $ 439 million.

While the Company strongly disagrees with the IRS’ positions and the portions of the Opinion affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld.

While the Company strongly disagrees with the IRS’ positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS and sustained by the Tax Court could ultimately be upheld.

In that event, the Company would likely be subject to significant additional liabilities for tax years 2007 through 2009, and potentially also for subsequent years, which could have a material adverse impact on the Company’s financial position, results of operations and cash flows.

The Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinion, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts.

impact would include taxes and interest accrued through December 31, 2022 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2022.

The Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts.

This impact would include taxes and interest accrued through December 31, 2023 for the 2007 through 2009 litigated tax years and for subsequent tax years from 2010 through 2023.

The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act (“Tax Reform Act”).

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

We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2022, would result in an incremental annual tax liability that would increase the Company’s effective tax rate by approximately 3.5 percent.

The Company does not know when the Tax Court will issue its opinion regarding the effect of Brazilian legal restrictions on the payment of royalties by the Company’s licensee in Brazil for the 2007 through 2009 tax years.

After the Tax Court issues its opinion on the Company’s Brazilian licensee, the Company and the IRS will be provided time to agree on the tax impact, if any, of both opinions, after which the Tax Court would render a final decision in the case.

We currently project the continued application of the Tax Court Methodology in future years, assuming similar facts and circumstances as of December 31, 2023, would result in an incremental annual tax liability that would increase the Company’s effective tax rate by approximately 3.5 %.

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 and pay the tax liability and interest related to the 2007 through 2009 tax years.

The Company currently estimates that the payment to be made at that time related to the 2007 through 2009 tax years, which is included in the above estimate of the potential aggregate incremental tax and interest liability, would be approximately $ 5.2 billion (including interest accrued through December 31, 2022), plus any additional interest accrued through the time of payment.

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

Court of Appeals for the Eleventh Circuit.

The IRS will 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.

Risk Management Programs

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In addition, there were 3 million shares available for stock option and restricted stock award grants under plans approved by shareowners prior to 2014.

From 2015 to 2017, certain employees who had previously been eligible for long-term equity awards received long-term performance-based cash awards.

Employees who received these performance-based cash awards did not receive equity awards as part of the long-term incentive program.

In 2017, the Company changed the long-term incentive program for employees previously eligible for the performance-based cash award.

These employees no longer participate in the long-term incentive program and were granted a final restricted stock unit award that vests ratably over five years .

Total stock-based compensation expense was $ 251 million, $ 361 million and $ 337 million in 2023, 2022 and 2021, respectively.

In 2022, for certain employees who accepted voluntary separation from the Company as a result of the restructuring of our North America operating unit, the Company provided cash payments designed to offset the loss of certain equity awards and serve as a cash supplement to employees upon the exercise of certain stock options.

In 2020, for certain employees who accepted voluntary separation from the Company as a result of our strategic realignment initiatives, the Company modified their outstanding equity awards so that the employees retained all or some of their awards, whereas otherwise the awards would have been forfeited.

The incremental stock-based compensation expense in 2022 arising from the cash payments was $ 5 million, and the incremental stock-based compensation expense in 2020 arising from the modification of awards was $ 15 million.

These amounts were recorded in the line item other operating charges in our consolidated statements of income.

In 2022, for certain employees who accepted voluntary separation from the Company as a result of the restructuring of our North America operating unit, the Company provided cash payments designed to offset the loss of certain equity awards and serve as a cash supplement to the employees upon the exercise of certain stock options.

The stock-based compensation expense in 2022 arising from the estimated cash payments was $ 5 million and was recorded in the line item other operating charges, and the remaining stock-based compensation expense of $ 356 million was recorded in the line item selling, general and administrative expenses in our consolidated statement of income.

In 2023, the Company recorded stock-based compensation expense of $ 254 million in the line item selling, general and administrative expenses in our consolidated statement of income.

This was partially offset by $ 3 million related to the revision of management’s estimates arising from the settlement of the estimated cash payments recognized in 2022, which was recorded in the line item other operating charges in our consolidated statement of income.

Refer to Note 19 for additional information on the Company’s restructuring and strategic realignment initiatives.

The remainder of stock-based compensation expense in 2022 and 2020 of $ 356 million and $ 126 million, respectively, and all stock-based compensation expense in 2021 were recorded in the line item selling, general and administrative expenses in our consolidated statements of income.

All stock-based compensation expense in 2021 was recorded in the line item selling, general and administrative expenses in our consolidated statement of income.

The total income tax benefit recognized in our consolidated statements of income related to total stock-based compensation expense was $ 40 million, $ 55 million and $ 60 million in 2023, 2022 and 2021, respectively.

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Performance share unit awards require achievement of certain performance criteria, which are predefined by the Talent and Compensation Committee of our Board of Directors at the time of grant.

For performance share unit awards granted from 2015 through 2017, the performance criteria were economic profit and net operating revenues over a predefined performance period of three years.

Economic profit is our net operating profit after tax less the cost of the capital used in our business.

Economic profit and net operating revenues were adjusted for certain items, which were approved by the Audit Committee of our Board of Directors.

The purpose of these adjustments was to ensure a consistent year-to-year comparison of the specific performance criteria.

Most of these awards included a relative TSR modifier to determine the final number of performance share units earned.

For these awards, the number of performance share units earned based on the certified achievement of the predefined

performance criteria was reduced or increased if the Company’s total shareowner return over the performance period relative to a predefined compensation comparator group of companies fell outside of a predefined range.

The fair value of these performance share units was determined using a Monte Carlo valuation model.

The performance share unit awards granted from 2015 through 2017 were subject to a one-year holding period after the performance period before the shares were released.

For performance share unit awards granted from 2018 through 2022, the performance criteria were equally weighted among net operating revenues, earnings per share and free cash flow over a predefined performance period of three years.

For performance share unit awards granted to executives in 2022, the performance criteria were weighted 30 percent for net operating revenues, 30 percent for earnings per share, 30 percent for free cash flow and 10 percent for environmental sustainability.

For performance share unit awards granted to executives in 2022, and for performance share unit awards granted to all participants in 2023, the performance criteria were weighted 30% for net operating revenues, 30% for earnings per share, 30% for free cash flow and 10% for environmental sustainability.

For purposes of these performance criteria, earnings per share is diluted net income per share;

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The purpose of these adjustments is to ensure a consistent year-to-year comparison of the specific performance criteria.

Performance share unit awards granted to executives include a relative TSR modifier to determine the final number of performance share units earned.

The fair value of performance share units that include a TSR modifier is determined using a Monte Carlo valuation model.

Performance share unit awards granted to executives in 2018 through 2022 and performance share unit awards granted to all participants in 2023 include a relative TSR modifier to determine the final number of performance share units earned.

The fair value of performance share units that include a TSR

modifier is determined using a Monte Carlo valuation model.

For these awards, the number of performance share units earned based on the certified achievement of the predefined performance criteria will be reduced or increased if the Company’s total shareowner return over the performance period relative to a predefined group of companies falls outside of a predefined range.

The fair value of performance share units that do not include a TSR modifier is the closing market price per share of the Company’s stock on the grant date less the present value of the expected dividends not received during the performance period.

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2,854 $ 58.48

1 Represents the target level of performance share units vested as of December 31, 2022 for the 2020-2022 and 2021-2022 performance periods.

1 Represents the target level of performance share units vested as of December 31, 2023 for the 2021-2023 performance period.

Upon certification in February 2024 of the financial results for the performance periods, the final number of shares earned will be determined and released.

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The following table summarizes information about vested performance share units based on the certified award level:

2019-2021 Award

2020-2022 Annual Award 2021-2022

Emerging Stronger Award

Performance Share Units

(In thousands) Weighted-

Fair Value Performance Share Units

(In thousands) Weighted-

Certified 3,029 $ 57.00 1,099 $ 48.36

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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.

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

Obligations and Funded Status

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Amendments — 9 1 —

Net actuarial gain 2

Net actuarial loss (gain) 2

375 ( 1,891 ) 14 ( 175 )

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Settlements ( 287 ) 3

( 26 ) ( 187 ) 4

Curtailments — ( 1 ) — —

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Settlements ( 260 ) 3

( 26 ) ( 187 ) 4

Other — 27 — —

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The accumulated benefit obligation for our pension plans was $ 6,463 million and $ 6,307 million as of December 31, 2023 and 2022, respectively.

2 An increase in the weighted-average discount rate assumption was the primary driver of net actuarial gain during 2022 and 2021.

qualified pension plan, an increase in the discount rate resulted in an actuarial gain of $ 1,231 million during 2022, and an increase in the discount rate resulted in an actuarial gain of $ 197 million during 2021.

Additional drivers of net actuarial gain included other assumption updates and plan experience.

3 Settlements were primarily related to our strategic realignment initiatives.

Refer to Note 18.

2 A change in the weighted-average discount rate assumption was the primary driver of net actuarial loss (gain) during 2023 and 2022.

qualified pension plan, a decrease in the discount rate resulted in an actuarial loss of $ 129 million during 2023, and an increase in the discount rate resulted in an actuarial gain of $ 1,231 million during 2022.

Additional drivers of net actuarial loss (gain) included other assumption updates and plan experience.

3 Settlements primarily related to the U.S.

qualified pension plan, which was amended in 2023 to provide lump sum payment options to all former employees.

qualified pension plan made $ 259 million of lump sum payments in 2023, causing a plan settlement, which resulted in recognition of a $ 76 million settlement charge related to the acceleration of existing unrecognized losses.

4 In 2023, the Company settled its U.S.

post-65 other postretirement benefit obligations such that retiree reimbursement accounts will be funded by an insurance company beginning January 1, 2025 for the lifetime of certain retirees and their eligible dependents.

The transaction resulted in no change to underlying benefits or plan administration, but only to the future financing of the benefits.

Pursuant to the settlement, the Company transferred $ 187 million of plan assets and liabilities to an insurer and recognized a $ 14 million net settlement credit related to the acceleration of existing unrecognized gains.

Pension and other postretirement benefit plan amounts recognized in our consolidated balance sheets were as follows (in millions):

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pension plan assets is based upon a review of the expected return and risk characteristics of each asset class, as well as the correlation of returns among asset classes.

Our target allocation is a mix of 18 percent equity securities, 47 percent fixed-income securities and 35 percent alternative investments.

Our target allocation is a mix of 18 % equity securities, 47 % fixed-income securities and 35 % alternative investments.

We believe this target allocation will enable us to achieve the following long-term investment objectives:

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Investment managers agree to obtain written approval for deviations from stated investment style or guidelines.

As of December 31, 2022, no investment manager was responsible for more than 24 percent of total U.S.

As of December 31, 2023, no investment manager was responsible for more than 28 % of total U.S.

pension plan assets.

Our target allocation of 18 percent equity securities is composed of 81 percent global equities, 11 percent emerging market equities and 8 percent domestic small-cap and mid-cap equities.

Our target allocation of 18 % equity securities is composed of 81 % global equities, 11 % emerging market equities and 8 % domestic small-cap and mid-cap equities.

Optimal returns through our investments in global equities are achieved through security selection as well as country and sector diversification.

As of December 31, 2022, investments in our common stock accounted for 9 percent of total global equities and 5 percent of total U.S.

As of December 31, 2023, investments in our common stock accounted for 9 % of total global equities and 5 % of total U.S.

pension plan assets.

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Our investments in these asset classes are selected based on capital appreciation potential.

Our target allocation of 47 percent fixed-income securities is composed of 62 percent long-duration bonds and 38 percent with multi-strategy alternative credit managers.

Our target allocation of 47 % fixed-income securities is composed of 62 % long-duration bonds and 38 % with multi-strategy alternative credit managers.

Long-duration bonds are intended to provide a stable rate of return through investments in high-quality publicly traded debt securities.

Our investments in long-duration bonds are diversified in order to

mitigate duration and credit exposure.

Our investments in long-duration bonds are diversified in order to mitigate duration and

credit exposure.

Multi-strategy alternative credit managers invest in a combination of high-yield bonds, bank loans, structured credit and emerging market debt.

These investments are in lower-rated and non-rated debt securities, which generally produce higher returns compared to long-duration bonds and also help diversify our overall fixed-income portfolio.

Our target allocation for alternative investments is 35 percent.

Our target allocation for alternative investments is 35 %.

These alternative investments include hedge funds, reinsurance, private equity limited partnerships, leveraged buyout funds, international venture capital partnerships and real estate.

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Pension Plans

The long-term target allocation for 66 percent of our international subsidiaries’ pension plan assets, primarily certain of our European and Canadian plans, is 66 percent equity securities, 16 percent fixed-income securities and 18 percent other investments.

The actual allocation for the remaining 34 percent of the Company’s international subsidiaries’ pension plan assets consisted of 39 percent mutual, pooled and commingled funds;

23 percent fixed-income securities;

2 percent equity securities;

and 36 percent other investments as of December 31, 2022.

The long-term target allocation for 66 % of our international subsidiaries’ pension plan assets, primarily certain of our European and Canadian plans, is 60 % equity securities, 29 % fixed-income securities and 11 % other investments.

The actual allocation for the remaining 34 % of the Company’s international subsidiaries’ pension plan assets consisted of 40 % mutual, pooled and commingled funds;

23 % fixed-income securities;

2 % equity securities;

and 35 % other investments as of December 31, 2023.

The investment strategies for our international subsidiaries’ pension plans vary greatly, and in some instances are influenced by local law.

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( 475 ) ( 558 ) ( 606 ) ( 14 ) ( 16 ) ( 17 )

Amortization of prior service cost (credit) — — 3 ( 3 ) ( 2 ) ( 3 )

Amortization of prior service cost

(credit) 1 — — ( 3 ) ( 3 ) ( 2 )

Amortization of net actuarial loss

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Settlement charges (credits) 81 3

Curtailment charges (credits) ( 1 ) ( 1 ) 1 — ( 1 ) 6

Curtailment credits — ( 1 ) ( 1 ) — — ( 1 )

Special termination benefits 1 1 3 — — —

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2 Actuarial gains and losses are amortized using a corridor approach.

The gain/loss corridor is equal to 10 percent of the greater of the benefit obligation and the market-related value of assets.

The gain/loss corridor is equal to 10 % of the greater of the benefit obligation and the market-related value of assets.

Gains and losses in excess of the corridor are generally amortized over the average future working lifetime of the plan participants.

3 Settlements primarily related to the U.S.

qualified pension plan, which was amended in 2023 to provide lump sum payment options to all former employees.

4 Settlement charges were primarily related to our strategic realignment initiatives.

Refer to Note 19.

5 In 2023, the Company settled its U.S.

The transaction resulted in no change to underlying benefits or plan administration, but only to the future financing of the benefits.

All of the amounts in the table above, other than service cost, were recorded in the line item other income (loss) — net in our consolidated statements of income.

5 unchanged sentences

Recognized prior service cost (credit) 1 —

Recognized net actuarial loss 107 261 1

Prior service credit (cost) occurring during the year ( 9 ) — — 13

Net actuarial gain occurring during the year 232 623 104 27

Recognized net actuarial loss (gain) 177 107 ( 19 ) —

Prior service cost occurring during the year — ( 9 ) ( 1 ) —

Net actuarial gain (loss) occurring during the year ( 313 ) 232 ( 12 ) 104

Net foreign currency translation adjustments ( 16 ) 40 1 ( 2 )

Balance in AOCI at end of year $ ( 1,906 ) $ ( 1,755 ) $ 61 $ 95

1 Includes $ 117 million of recognized net actuarial loss due to the impact of settlements, which were primarily related to our strategic realignment initiatives.

Refer to Note 18.

The following table sets forth the pretax amounts in AOCI for our pension and other postretirement benefit plans (in millions):

27 unchanged sentences

qualified pension plan is based on the yield on six-month U.S.

Treasury bills on the last day of September of the previous plan year, plus 150 basis points, with a minimum interest crediting rate of 3.80 percent for all active employees and certain former employees.

Treasury bills on the last day of September of the previous plan year, plus 150 basis points, with a minimum interest crediting rate of 3.80 % for all active employees and certain former employees.

The Company assumes that the ultimate interest crediting rate is 140 basis points lower than the plan’s year-end discount rate and that the current interest crediting rate will converge with the ultimate interest crediting rate after a period of 10 years.

3 unchanged sentences

The expected long-term rate of return assumption used in computing 2023 net periodic benefit income for the U.S.

pension plans was 6.75 percent.

pension plans was 6.75 %.

As of December 31, 2023, the 5-year, 10-year and 15-year annualized return for the U.S.

pension plan assets was 4.8 percent, 6.8 percent and 5.2 percent, respectively.

The annualized return since inception was 10.0 percent.

pension plan assets was 6.7 %, 6.1 % and 8.3 %, respectively.

The annualized return since inception was 9.9 %.

The weighted-average assumptions for health care cost trend rates were as follows:

8 unchanged sentences

The expected benefit payments for our pension and other postretirement benefit plans for the 10 years succeeding December 31, 2023 are as follows (in millions):

Year Ended December 31, 2023 2024 2025 2026 2027 2028-2032

2024 2025 2026 2027 2028 2029-2033

Benefit payments for pension plans $ 654 $ 615 $ 611 $ 614 $ 489 $ 2,421

7 unchanged sentences

Under the largest U.S.

defined contribution plan, we match participants’ contributions up to a maximum of 3.0 percent to 3.5 percent of compensation, subject to an IRS limit on compensation.

defined contribution plan, we match participants’ contributions up to a maximum of 3.0 % to 3.5 % of compensation, subject to an IRS limit on compensation.

The Company’s expense for the U.S.

1 unchanged sentence

We also sponsor defined contribution plans in certain locations outside the United States.

The Company’s expense for these plans totaled $ 79 million in both 2022 and 2021 and $ 63 million in 2020.

The Company’s expense for these plans totaled $ 82 million in 2023 and $ 79 million in both 2022 and 2021.

Multi-Employer Retirement Plans

2 unchanged sentences

Multi-employer retirement plans are generally governed by a board of trustees composed of representatives of both management and labor and are generally funded through employer contributions.

The Company’s expense for multi-employer retirement plans totaled $ 1 million in both 2022 and 2021 and $ 2 million in 2020.

The Company’s expense for multi-employer retirement plans totaled $ 1 million in 2023, 2022 and 2021.

The plans we currently participate in have contractual arrangements that extend into 2026.

14 unchanged sentences

1 Includes net tax expense of $ 195 million related to changes in tax laws in certain foreign jurisdictions.

We made income tax payments of $ 2,403 million, $ 2,168 million and $ 1,268 million in 2022, 2021 and 2020, respectively.

We made income tax payments of $ 2,580 million, $ 2,403 million and $ 2,168 million in 2023, 2022 and 2021, respectively, which included $ 723 million, $ 385 million, and $ 385 million, respectively, of the one-time transition tax required by the Tax Reform Act.

Our effective tax rate reflects the tax benefits of having significant operations outside the United States, which are generally taxed at rates lower than the statutory U.S.

16 unchanged sentences

Other — net ( 2.0 ) 1

( 0.3 ) ( 0.8 ) 3

Effective tax rate 17.4 % 18.1 % 21.1 %

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.

3 Includes net tax charges of $ 110 million (or a 1.1 percent impact on our effective tax rate) related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions, as well as other agreed-upon audit issues.

4 Includes net tax expense of $ 431 million (or a 4.4 percent impact on our effective tax rate) primarily related to changes in judgment on specific tax positions due to the Opinion and amounts required to be recorded for changes to other uncertain tax positions, including interest and penalties.

Also includes a tax benefit of $ 107 million (or a 1.1 percent impact on our effective tax rate) related to changes in our assessment of certain valuation allowances and a net tax benefit of $ 135 million (or a 1.4 percent impact on our effective tax rate) related to domestic return to provision adjustments and other tax items.

5 Includes a tax benefit of $ 40 million (or a 2.4 percent impact on our effective tax rate) associated with the $ 902 million gain recorded upon the acquisition of the remaining ownership interest in fairlife.

1 Includes net tax benefit of $ 118 million (or a 0.9 % impact on our effective tax rate) related to domestic provision to return adjustments, as well as for various discrete tax items.

Also includes a tax benefit of $ 88 million (or a 0.7 % impact on our effective tax rate) associated with the change in the Company’s indefinite reinvestment assertion for our Philippines and Bangladesh bottling operations.

2 Includes net tax charges of $ 375 million (or a 3.0 % 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.

3 Includes a tax benefit of $ 14 million (or a 1.5 % 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.

As of December 31, 2022, we have not recorded incremental income taxes for additional outside basis differences of $ 6.8 billion in our investments in foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign operations.

As of December 31, 2023, we have not recorded incremental income taxes for additional outside basis differences of $ 8.5 billion in our investments in foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign

Determining the amount of unrecognized deferred tax liability related to any additional outside basis differences in these entities is not practicable.

12 unchanged sentences

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.

9 unchanged sentences

Decrease related to settlements with taxing authorities — ( 2 ) ( 4 )

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

Effect of foreign currency translation ( 4 ) ( 22 ) ( 1 )

Balance of unrecognized tax benefits at end of year $ 929 $ 926 $ 906

1 The increase was primarily related to a change in judgment on certain tax positions due to the Opinion.

Refer to Note 11.

The Company recognizes interest and penalties related to unrecognized tax benefits in the line item income taxes in our consolidated statement of income.

43 unchanged sentences

The Company believes that it will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets in our consolidated balance sheet.

In 2023, the Company recognized a net decrease of $ 28 million in its valuation allowances, primarily due to net decreases in the deferred tax assets and related valuation allowances on a certain equity method investment, certain excess foreign tax credit carryforwards and the changes in net operating losses in the normal course of business.

In 2022, the Company recognized a net increase of $ 23 million in its valuation allowances.

The increase was primarily due to significant negative evidence on the utilization of excess foreign tax credits generated in the current year.

The increase was also due to net increases in the deferred tax assets and related valuation allowances on certain equity investments and the changes in net operating losses in the normal course of business.

The increase was also due to net increases in the deferred tax assets and related valuation allowances on certain equity method investments and the changes in net operating losses in the normal course of business.

In 2021, the Company recognized a net decrease of $ 5 million in its valuation allowances.

The decrease was primarily due to net decreases in the deferred tax assets and related valuation allowances on certain equity investments and the changes in net operating losses in the normal course of business.

In 2020, the Company recognized a net increase of $ 103 million in its valuation allowances.

The increase was primarily due to net increases in the deferred tax assets and related valuation allowances on certain equity investments.

The increase was also due to the increase of valuation allowances after considering significant negative evidence on the utilization of certain net operating losses and excess foreign tax credits.

The decrease was primarily due to net decreases in the deferred tax assets and related valuation allowances on certain equity method investments and the changes in net operating losses in the normal course of business.

OTHER COMPREHENSIVE INCOME

17 unchanged sentences

Net gains (losses) on derivatives 1

( 178 ) — ( 178 )

Net change in unrealized gains (losses) on available-for-sale debt

Net change in pension and other postretirement benefit liabilities 3

( 109 ) — ( 109 )

Total comprehensive income $ 11,334 $ ( 158 ) $ 11,176

14 unchanged sentences

Net gains (losses) on derivatives 1

$ ( 204 ) $ 26 $ ( 178 )

Available-for-sale debt securities:

16 unchanged sentences

741 ( 185 ) 556

Reclassification adjustments for net investment hedges recognized in net income 4 — 4

Net foreign currency translation adjustments $ ( 603 ) $ ( 411 ) $ ( 1,014 )

2 unchanged sentences

Net gains (losses) on derivatives 1

$ 284 $ ( 70 ) $ 214

Available-for-sale debt securities:

17 unchanged sentences

918 ( 230 ) 688

Reclassification adjustments for net investment hedges recognized in net income 4 — 4

Net foreign currency translation adjustments $ ( 356 ) $ ( 211 ) $ ( 567 )

18 unchanged sentences

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

The following table presents the amounts and line items in our consolidated statement of income where adjustments reclassified from AOCI into income were recorded during the year ended December 31, 2022 (in millions):

Description of AOCI Component Financial Statement Line Item Amount Reclassified from AOCI into Income

The following table presents the reclassifications from AOCI into income recorded during the year ended December 31, 2023 (in millions):

Description of AOCI Component Financial Statement Line Item Impacted Amount Reclassified from AOCI

Foreign currency translation adjustments:

5 unchanged sentences

Foreign currency contracts Net operating revenues $ 3

Foreign currency and commodity contracts Cost of goods sold ( 26 )

Foreign currency contracts Other income (loss) — net ( 17 )

9 unchanged sentences

Pension and other postretirement benefit liabilities:

Divestitures, deconsolidations and other 2

Other income (loss) — net $ 1

Settlement charges (credits) Other income (loss) — net 67

Curtailment charges (credits) Other income (loss) — net ( 1 )

Recognized net actuarial loss Other income (loss) — net 109

Recognized net actuarial loss (gain) Other income (loss) — net 91

Recognized prior service cost (credit) Other income (loss) — net ( 2 )

2 unchanged sentences

Consolidated net income $ 125

1 Related to the refranchising of our bottling operations in Vietnam and the sale of our ownership interest in our equity method investees in Pakistan and Indonesia.

Refer to Note 2.

2 Related to the sale of our ownership interest in our equity method investee in Pakistan.

Refer to Note 2.

FAIR VALUE MEASUREMENTS

53 unchanged sentences

Refer to Note 5.

5 Refer to Note 2 for additional information related to the contingent consideration liability resulting from the fairlife acquisition.

6 The Company is not obligated to return any cash collateral it has netted against its derivative position.

5 Represents the fair value of the remaining milestone payment related to our acquisition of fairlife, LLC (“fairlife”) in 2020, which is contingent on fairlife achieving certain financial targets through 2024 and, if achieved, is payable in 2025.

This milestone payment is based

on agreed-upon formulas related to fairlife’s operating results, the resulting value of which is not subject to a ceiling.

The fair value was determined using a Monte Carlo valuation model.

We are required to remeasure this liability to fair value quarterly, with any changes in the fair value recorded in income until the final milestone payment is made.

The Company made a milestone payment of $ 275 million during 2023.

6 The Company is obligated to return $ 4 million in cash collateral it has netted against its derivative position.

7 The Company has the right to reclaim $ 1,039 million in cash collateral it has netted against its derivative position.

22 unchanged sentences

Refer to Note 5.

5 Refer to Note 2 for additional information related to the contingent consideration liability resulting from the fairlife acquisition.

6 The Company was obligated to return $ 331 million in cash collateral it had netted against its derivative position.

7 The Company did not have the right to reclaim any cash collateral it had netted against its derivative position.

5 Represents the fair value of future milestone payments related to our acquisition of fairlife, which are contingent on fairlife achieving certain financial targets through 2024 and, if achieved, are payable in 2023 and 2025.

These milestone payments are based on agreed-upon formulas related to fairlife’s operating results, the resulting values of which are not subject to a ceiling.

The fair value was determined using a Monte Carlo valuation model.

We are required to remeasure this liability to fair value quarterly, with any changes in the fair value recorded in income until the final milestone payment is made.

6 The Company was not obligated to return any cash collateral it had netted against its derivative position.

7 The Company had the right to reclaim $ 1,447 million in cash collateral it had netted against its derivative position.

8 The Company’s derivative financial instruments were recorded at fair value in our consolidated balance sheet as follows:

10 unchanged sentences

Year Ended December 31, 2023 2022

Assets held for sale $ — $ ( 266 ) 4

Impairment of property, plant and equipment $ ( 46 ) 1

Other-than-temporary impairment charges ( 39 ) 2

2 unchanged sentences

Total $ ( 85 ) $ ( 177 )

1 The Company recorded an asset impairment charge of $ 25 million during the year ended December 31, 2023 related to the discontinuation of certain manufacturing operations in Asia Pacific.

Additionally, the Company recorded an asset impairment charge of $ 21 million during the year ended December 31, 2023 related to the restructuring of our manufacturing operations in the United States.

These charges, which were calculated based on Level 3 inputs, were primarily driven by management’s best estimate of the potential proceeds from the disposal of the related assets.

2 The Company recorded an other-than-temporary impairment charge of $ 39 million during the year ended December 31, 2023 related to an equity method investee in Latin America.

This impairment charge was derived using Level 3 inputs and was primarily driven by revised projections of future operating results.

3 The Company recorded an other-than-temporary impairment charge of $ 96 million during the year ended December 31, 2022 related to an equity method investee in Russia.

6 unchanged sentences

This net loss was determined using Level 2 inputs and primarily resulted from the recognition of cumulative translation losses.

4 The Company is required to record assets and liabilities that are held for sale at the lower of carrying value or fair value less any costs to sell based on the agreed-upon sale price.

The Company recorded charges of $ 266 million in the line item other income (loss) — net in our consolidated statement of income related to the restructuring of our manufacturing operations in the United States.

These charges, which were calculated based on Level 3 inputs, primarily impacted the line item property, plant and equipment in our consolidated balance sheet.

5 The Company recorded 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.

The fair value of this trademark was derived using discounted cash flow analyses based on Level 3 inputs.

Fair Value Measurements for Pension and Other Postretirement Benefit Plan Assets

49 unchanged sentences

Purchases, sales and settlements — net ( 1 ) 4 — 3

Transfers into Level 3 — net — ( 6 ) — ( 6 )

Transfers into (out of) Level 3 — net 13 ( 4 ) — 9

Other — — 27 27

Net foreign currency translation adjustments — — ( 15 ) ( 15 )

3 unchanged sentences

Purchases, sales and settlements — net — ( 1 ) 7 6

Transfers into Level 3 — net 13 ( 4 ) — 9

Other — — 27 27

Transfers into (out of) Level 3 — net 4 — — 4

Net foreign currency translation adjustments — — 8 8

30 unchanged sentences

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

These charges consisted of $ 1,702 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition, $ 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 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 $ 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 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.

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.

2 unchanged sentences

In addition, other operating charges included an impairment charge of $ 78 million related to a trademark in Europe, 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.

In 2020, the Company recorded other operating charges of $ 853 million.

These charges primarily consisted of $ 413 million related to the Company’s strategic realignment initiatives and $ 99 million related to the Company’s productivity and reinvestment program.

In addition, other operating charges included impairment charges of $ 160 million related to the Odwalla trademark and net charges of $ 33 million related to discontinuing the Odwalla juice business.

Other operating charges also included an impairment charge of $ 55 million related to a trademark in North America.

In addition, other operating charges included $ 51 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition and net charges of $ 16 million related to the restructuring of our manufacturing operations in the United States.

Refer to Note 2 for additional information on the acquisitions of BodyArmor and fairlife.

Refer to Note 2 for additional information on the acquisition of BodyArmor.

Refer to Note 12 for additional information related to the tax litigation.

Refer to Note 16 for additional information on the impairment charges.

Refer to Note 17 for additional information on fairlife and the impairment charges.

Refer to Note 19 for additional information on the Company’s restructuring initiatives.

2 unchanged sentences

Interest Expense

During the years ended December 31, 2021 and 2020, the Company recorded charges of $ 650 million and $ 484 million, respectively, related to the extinguishment of long-term debt.

These charges impacted Corporate.

During the year ended December 31, 2021, the Company recorded a charge of $ 650 million related to the extinguishment of long-term debt, which impacted Corporate.

Refer to Note 11.

4 unchanged sentences

Other Income (Loss) — Net

During 2023, the Company recognized 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 a net gain of $ 94 million related to the sale of our ownership interests in our equity method investees in Pakistan and Indonesia.

Additionally, the Company recorded charges of $ 67 million due to pension and other postretirement benefit plan settlement charges, 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.

During 2022, the Company recorded a net gain of $ 153 million related to the refranchising of our bottling operations in Cambodia.

5 unchanged sentences

The Company also recorded charges of $ 266 million related to the restructuring of our manufacturing operations in the United States and pension plan settlement charges of $ 117 million related to our strategic realignment initiatives.

During 2020, the Company recognized a gain of $ 902 million in conjunction with the fairlife acquisition, a net gain of $ 148 million related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities, and a net gain of $ 35 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 .

These gains were partially offset by an other-than-temporary impairment charge of $ 252 million related to CCBJHI, an equity method investee, an other-than-temporary impairment charge of $ 38 million related to one of our equity method investees in Latin America, an impairment charge of $ 26 million associated with an investment in an equity security without a readily determinable fair value and a net loss of $ 55 million related to economic hedging activities.

The Company also recorded net charges of $ 25 million related to the restructuring of our manufacturing operations in the United States and pension and other postretirement benefit plan settlement and curtailment charges of $ 14 million related to our strategic realignment initiatives.

Refer to Note 2 for additional information on the acquisitions of BodyArmor and fairlife as well as the sale of our ownership interest in CCA and the refranchising of our bottling operations in Cambodia.

Refer to Note 2 for additional information on the acquisition of BodyArmor, the sales of our ownership interests in equity method investees, as well as the refranchising of our bottling operations in Vietnam and Cambodia.

Refer to Note 4 for additional information on equity and debt securities.

Refer to Note 5 for additional information on our economic hedging activities.

Refer to Note 16 for additional information on the impairment charges, one of our equity method investees issuing additional shares of its stock, and the charges related to the restructuring of our manufacturing operations in the United States.

Refer to Note 14 for additional information on pension and other postretirement benefit plan activity.

Refer to Note 17 for additional information on the impairment charges and one of our equity method investees issuing additional shares of its stock.

Refer to Note 19 for additional information on the Company’s strategic realignment initiatives.

19 unchanged sentences

Direct Costs Total

Accrued balance at beginning of year $ 181 $ 1 $ 3 $ 185

Costs incurred 224 37 2 263

1 unchanged sentence

Noncash and exchange ( 120 ) 1

( 2 ) — ( 122 )

Accrued balance at end of year $ 20 $ 1 $ 2 $ 23

3 unchanged sentences

Noncash and exchange 1 — — 1

( 2 ) — ( 122 )

Accrued balance at end of year $ 2 $ 1 $ — $ 3

Accrued balance at beginning of year $ 2 $ 1 $ — $ 3

Costs incurred ( 4 ) — ( 2 ) ( 6 )

Payments ( 2 ) — — ( 2 )

1 unchanged sentence

Accrued balance at end of year $ — $ — $ — $ —

1 Includes stock-based compensation modifications and other postretirement benefit plan curtailment charges.

Refer to Note 12 and Note 13.

1 Includes pension settlement charges.

3 unchanged sentences

The evolved operating structure will bring together all bottler-related components (franchise leadership, commercial leadership, digital, governance and technical innovation) and will help streamline how we work.

The Company incurred total pretax expenses of $ 38 million related to this restructuring program during the year ended December 31, 2022.

These expenses were recorded in the line item other operating charges in our consolidated statement of income.

The Company has incurred total pretax expenses of $ 65 million related to this restructuring program since it commenced.

These expenses were recorded in the line item other operating charges in our consolidated statements of income.

Refer to Note 20 for the impact these charges had on our operating segments and Corporate.

This restructuring program was substantially complete as of December 31, 2023.

The following table summarizes the balance of accrued expenses related to these North America operating unit restructuring initiatives (in millions):

Severance Pay

and Benefits Outside Services Other

Direct Costs Total

Costs incurred $ 38 $ — $ — $ 38

Payments ( 1 ) — — ( 1 )

Accrued balance at end of year $ 37 $ — $ — $ 37

Accrued balance at beginning of year $ 37 $ — $ — $ 37

Costs incurred 22 1 4 27

Payments ( 58 ) ( 1 ) ( 4 ) ( 63 )

Accrued balance at end of year $ 1 $ — $ — $ 1

Productivity and Reinvestment Program

1 unchanged sentence

This program was expanded multiple times, with the last expansion occurring in April 2017.

While we expect most of the remaining initiatives included in this program, which are primarily designed to further simplify and standardize our organization, to be completed by the end of 2023, certain initiatives may extend into 2024.

The remaining initiatives included in this program, which are primarily designed to further simplify and standardize our organization, will be completed in 2024.

The Company has incurred total pretax expenses of $ 4,293 million related to our productivity and reinvestment program since it commenced.

44 unchanged sentences

Our Bottling Investments operating segment also includes equity income from the majority of our equity method investees.

Our consolidated bottling operations derive the majority of their revenues from the manufacture and sale of finished beverages.

Our consolidated bottling operations derive the

majority of their revenues from the manufacture and sale of finished beverages.

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

73 unchanged sentences

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

2 Property, plant and equipment — net in the Philippines represented 10 percent of consolidated property, plant and equipment — net as of December 31, 2022 and 2021.

2 Property, plant and equipment — net in India represented 12 % of consolidated property, plant and equipment — net as of December 31, 2023.

3 Property, plant and equipment — net in the Philippines represented 10 % of consolidated property, plant and equipment — net as of December 31, 2022.

As of December 31, 2023, the Company’s bottling operations in the Philippines met the criteria to be classified as held for sale.

Refer to Note 2.

During 2023, 2022 and 2021, our operating segments and Corporate were impacted by acquisition and divestiture activities.

1 unchanged sentence

In 2023, the results of our operating segments and Corporate were impacted by the following items:

• Operating income (loss) and income (loss) before income taxes were reduced by $ 1,702 million for Corporate due to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition.

Refer to Note 17.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 165 million for Corporate due to the Company’s productivity and reinvestment program.

Operating income (loss) and income (loss) before income taxes were increased by $ 1 million for North America due to the refinement of previously established accruals related to the Company’s productivity and reinvestment program.

Refer to Note 19.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 35 million for Asia Pacific due to the discontinuation of certain manufacturing operations.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 27 million for North America due to the restructuring of our North America operating unit.

Refer to Note 19.

• Operating income (loss) and income (loss) before income taxes for North America were reduced by $ 18 million and $ 50 million, respectively, due to the restructuring of our manufacturing operations in the United States.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 15 million for Corporate related to our acquisition of BodyArmor.

Refer to Note 18.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 8 million for Corporate related to tax litigation expense.

Refer to Note 12.

• Income (loss) before income taxes was increased by $ 439 million for Corporate due to the refranchising of our bottling operations in Vietnam.

Refer to Note 2.

• Income (loss) before income taxes was increased by $ 289 million for Corporate due to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities.

Refer to Note 4.

• Income (loss) before income taxes was increased by $ 94 million for Corporate related to the sale of our ownership interests in our equity method investees in Indonesia and Pakistan.

Refer to Note 2.

• Income (loss) before income taxes was reduced by $ 146 million for Asia Pacific, $ 7 million for Bottling Investments, $ 5 million for Latin America and $ 1 million for Corporate due to the Company’s proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.

• Income (loss) before income taxes was reduced by $ 67 million for Corporate due to pension and other postretirement benefit plan settlement charges.

Refer to Note 14.

• Income (loss) before income taxes was reduced by $ 39 million for Latin America due to an other-than-temporary impairment charge related to an equity method investee .

Refer to Note 17.

In 2022, the results of our operating segments and Corporate were impacted by the following items:

• Operating income (loss) and income (loss) before income taxes were increased by $ 7 million for Europe, Middle East and Africa and were reduced by $ 1 million for Corporate due to revisions of management’s estimates related to the Company’s strategic realignment initiatives.

4 unchanged sentences

Refer to Note 19.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 59 million for Corporate and were increased by $ 21 million for North America related to our acquisition of BodyArmor in 2021.

Refer to Note 18.

15 unchanged sentences

• Operating income (loss) and income (loss) before income taxes were reduced by $ 369 million for Corporate related to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition.

Refer to Note 2.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 115 million for Corporate due to the Company’s productivity and reinvestment program.

3 unchanged sentences

• Operating income (loss) and income (loss) before income taxes were reduced by $ 78 million for Europe, Middle East and Africa related to the impairment of a trademark.

Refer to Note 16.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 63 million and $ 61 million, respectively, for Europe, Middle East and Africa;

5 unchanged sentences

• Operating income (loss) and income (loss) before income taxes were reduced by $ 52 million and $ 316 million, respectively, for North America, and income (loss) before income taxes was reduced by $ 2 million for Corporate related to the restructuring of our manufacturing operations in the United States.

Refer to Note 16.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 15 million for Corporate related to tax litigation expense.

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• Income (loss) before income taxes was reduced by $ 45 million for Bottling Investments and was increased by $ 32 million for Corporate due to the Company’s proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.

In 2020, the results of our operating segments and Corporate were impacted by the following items:

• Operating income (loss) and income (loss) before income taxes for North America were reduced by $ 160 million related to the impairment of the Odwalla trademark and $ 33 million related to the cost of discontinuing the Odwalla juice business.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 145 million and $ 153 million, respectively, for Corporate;

$ 31 million and $ 30 million, respectively, for Asia Pacific;

$ 21 million and $ 26 million, respectively, for Bottling Investments;

and $ 19 million and $ 21 million, respectively, for Latin America due to the Company’s strategic realignment initiatives.

Additionally, operating income (loss) and income (loss) before income taxes were reduced by $ 115 million for North America;

$ 78 million for Europe, Middle East and Africa;

and $ 4 million for Global Ventures due to the Company’s strategic realignment initiatives.

Refer to Note 18.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 104 million for Corporate due to the Company’s productivity and reinvestment program.

Operating income (loss) and income (loss) before income taxes were increased by $ 5 million for Europe, Middle East and Africa due to the refinement of previously established accruals related to the Company’s productivity and reinvestment program.

Refer to Note 18.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 59 million and $ 84 million, respectively, for North America related to the restructuring of our manufacturing operations in the United States.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 55 million for North America related to the impairment of a trademark.

• Operating income (loss) and income (loss) before income taxes were reduced by $ 51 million for Corporate related to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition.

Refer to Note 2.

• Income (loss) before income taxes was increased by $ 902 million for Corporate in conjunction with our fairlife acquisition, which resulted from the remeasurement of our previously held equity interest in fairlife to fair value.

Refer to Note 2.

• Income (loss) before income taxes was increased by $ 148 million for Corporate related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities.

Refer to Note 4.

• Income (loss) before income taxes was increased by $ 35 million for Corporate 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.

Refer to Note 2.

• Income (loss) before income taxes was reduced by $ 484 million for Corporate related to charges associated with the extinguishment of long-term debt.

Refer to Note 10.

• Income (loss) before income taxes was reduced by $ 252 million for Bottling Investments and $ 38 million for Latin America due to other-than-temporary impairment charges related to certain of our equity method investees.

• Income (loss) before income taxes was reduced by $ 145 million for Bottling Investments, $ 70 million for Latin America and $ 1 million for North America due to the Company’s proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.

• Income (loss) before income taxes was reduced by $ 26 million for Corporate due to an impairment charge associated with an investment in an equity security without a readily determinable fair value.

NET CHANGE IN OPERATING ASSETS AND LIABILITIES

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(Increase) decrease in trade accounts receivable $ ( 2 ) $ ( 69 ) $ ( 225 )

$ ( 69 ) $ ( 225 ) $ 882

(Increase) decrease in inventories 1

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Increase (decrease) in other noncurrent liabilities ( 187 ) ( 200 ) ( 351 )

( 200 ) ( 351 ) 507

Net change in operating assets and liabilities $ ( 846 ) $ ( 605 ) $ 1,325

1 The increase in trade accounts receivable in 2021 was primarily due to improved business performance.

The decrease in trade accounts receivable in 2020 was primarily due to the impact of the COVID-19 pandemic and the start of our trade accounts receivable factoring program.

Refer to Note 1 for additional information on our factoring program.

1 The increase in inventories in 2022 was primarily due to improved business performance, higher costs and the buildup of inventory to manage potential supply chain disruptions.

2 The increase in accounts payable and accrued expenses in 2021 was primarily due to an increase in trade accounts payable, higher marketing accruals, BodyArmor acquisition-related accruals and higher annual incentive accruals.

The decrease in accounts payable and accrued expenses in 2020 was primarily due to the impact of the COVID-19 pandemic and lower annual incentive accruals.

Refer to Note 2 for additional information regarding the BodyArmor acquisition.

4 The increase in other noncurrent liabilities in 2020 was primarily due to the increase in income tax reserves related to the litigation with the IRS.

Refer to Note 11.

REPORT OF MANAGEMENT

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Our Audit Committee’s Report can be found in the Company’s 2024 Proxy Statement.

Quincey John Murphy

James Quincey John Murphy

Chairman of the Board of Directors and Chief Executive Officer

February 21, 2023 President and Chief Financial Officer

February 20, 2024

Kathy Loveless Mark Randazza

Vice President and Controller

February 21, 2023 Vice President, Assistant Controller and Chief Accounting Officer

President and Chief Financial Officer

February 20, 2024

Erin May Mark Randazza

Senior Vice President and Controller

February 20, 2024

Senior Vice President, Assistant Controller and Chief Accounting Officer

February 20, 2024

Report of Independent Registered Public Accounting Firm

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Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

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As of December 31, 2023, the gross amount of unrecognized tax benefits was $929 million.

As described in Note 11, on September 17, 2015 the Company received a Statutory Notice of Deficiency from the Internal Revenue Service for the tax years 2007 through 2009 in the amount of $3.3 billion for the period.

As described in Note 12, on September 17, 2015 the Company received a Statutory Notice of Deficiency from the Internal Revenue Service (“IRS”) for the tax years 2007 through 2009 in the amount of $3.3 billion for the period.

On November 18, 2020, the U.S.

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parent company and certain of its foreign affiliates for tax years 2007 through 2009.

On November 8, 2023, the U.S.

Tax Court issued a supplemental opinion, siding with the IRS.

While the Company continues to disagree with the IRS positions and the portions of the opinion affirming such positions, it is possible that some portion or all of the adjustment proposed by the IRS could ultimately be upheld.

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We involved professionals with specialized skill and knowledge to assist in our evaluation of the tax technical merits of the Company’s assessment, including the assessment of whether the tax positions are more likely than not to be sustained, the amount of the potential benefits to be realized, and the application of relevant tax law.

We also assessed the Company’s disclosure of uncertain tax positions included in Note 11 and Note 14.

We also assessed the Company’s disclosures of uncertain tax positions included in Note 12 and Note 15.

Valuation of trademarks with indefinite lives and goodwill

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Specifically, the fair value estimates were sensitive to significant assumptions about future market and economic conditions.

Significant assumptions used in the Company’s fair value estimates included sales volume, pricing, royalty rates, long-term growth rates, and cost of capital, as applicable.

Significant assumptions used in the Company’s fair value estimates included sales volume, pricing, royalty rates, long-term growth rates, and discount rates, as applicable.

How We Addressed the Matter in Our Audit

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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 8. Financial Statements and Supplementary Data