ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand The Coca-Cola Company, our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes thereto contained in “Item 8. Financial Statements and Supplementary Data” of this report. MD&A includes the following sections:
• Our Business — a general description of our business and its challenges and risks.
• Critical Accounting Policies and Estimates — a discussion of accounting policies that require critical judgments and estimates.
• Operations Review — an analysis of our consolidated results of operations for 2025 and 2024 and year-to-year comparisons between 2025 and 2024. An analysis of our consolidated results of operations for 2024 and 2023 and year-to-year comparisons between 2024 and 2023 can be found in Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 26, 2025.
• Liquidity, Capital Resources and Financial Position — an analysis of cash flows, contractual obligations, foreign exchange, and the impact of inflation and changing prices.
OUR BUSINESS
General
The Coca-Cola Company is a total beverage company, and beverage products bearing our trademarks, sold in the United States since 1886, are now sold in more than 200 countries and territories. We own or license and market numerous beverage brands, which we group into the following categories: Trademark Coca-Cola; sparkling flavors; water, sports, coffee and tea; juice, value-added dairy and plant-based beverages; and emerging beverages. We own and market several of the world’s largest nonalcoholic sparkling soft drink brands, including Coca-Cola, Sprite, Coca-Cola Zero Sugar, Fanta and Diet Coke/Coca-Cola Light.
We make our branded beverage products available to consumers throughout the world through our network of independent bottling partners, distributors, wholesalers and retailers as well as the Company’s consolidated bottling and distribution operations. Beverages bearing trademarks owned by or licensed to us account for 2.2 billion of the estimated 65 billion servings of all beverages consumed worldwide every day.
We believe our success depends on our ability to connect with consumers by providing them with a wide variety of beverage options to meet their desires, needs and lifestyles. Our success further depends on the ability of our people to execute effectively, every day.
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 combine concentrates with still or sparkling water and sweeteners (depending on the product), or combine syrups with still or sparkling water, to produce finished beverages. The finished beverages are packaged in authorized containers, such as cans and refillable and nonrefillable glass and plastic bottles, bearing our trademarks or trademarks licensed to us and are then sold to retailers directly or, in some cases, through wholesalers or other bottlers. In addition, outside the United States, our bottling partners are typically authorized to manufacture fountain syrups, using our concentrates, which they sell to fountain retailers for use in producing beverages for immediate consumption, or to authorized fountain wholesalers who in turn sell and distribute the fountain syrups to fountain retailers. Our concentrate operations are included in our geographic operating segments.
Our finished product operations generate net operating revenues by selling sparkling soft drinks and a variety of other finished 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. In certain markets, the Company also operates non-bottling finished product operations in which we sell finished beverages to distributors and wholesalers that are generally not one of the Company’s bottling partners. These operations are generally included in our geographic operating segments. Additionally, we sell directly to consumers through retail stores operated by Costa. These sales are included in our EMEA operating segment, regardless of the physical location of the retail stores. 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 and distribute the fountain syrups to fountain retailers. These fountain syrup sales are included in our North America operating segment.
The following table sets forth the percentage of total net operating revenues attributable to concentrate operations and finished product operations:
Year Ended December 31,
Concentrate operations
Finished product operations
Total
The following table sets forth the percentage of total worldwide unit case volume attributable to concentrate operations and finished product operations:
Year Ended December 31,
Concentrate operations
Finished product operations
Total
We operate in the highly competitive commercial beverage industry. We face strong competition from numerous other general and specialty beverage companies. We, along with other beverage companies, are affected by a number of factors, including, but not limited to, the cost to manufacture and distribute products, consumer spending, economic conditions, availability and quality of water, consumer preferences, inflation, geopolitical conditions (including international conflicts), local and national laws and regulations, foreign currency exchange rate fluctuations, fuel prices, weather patterns and health crises.
Despite the dynamic world in which we are currently operating, we believe we are well positioned to create value for our Company and our stakeholders. In an effort to support our future growth, we are continuing to invest in our portfolio of brands, our strategic capabilities and our people. We are focused on the following growth pillars: shaping a portfolio of loved brands; transforming our marketing and innovation agenda; optimizing the Coca-Cola ecosystem; building talent and capabilities; and enhancing our license to win.
Challenges and Risks
Being a global enterprise provides unique opportunities for our Company. Challenges and risks accompany those opportunities. Our management has identified certain challenges and risks that demand the attention of our Company and the commercial beverage industry. Of these, six key strategic business challenges and risks are discussed below.
Obesity and Health-Related Concerns
There is ongoing concern among consumers, public health professionals and governments about the health problems associated with obesity and other chronic diseases, which may present a challenge to our industry. We understand that obesity is a complex public health challenge, and we are committed to being a part of the solution.
We recognize the uniqueness of consumers’ lifestyles and dietary choices. Therefore, we continue to do the following:
• offer an expanded portfolio of beverage choices, including reduced-, low- and no-calorie beverage options;
• provide transparent nutrition information, featuring calories on the front of most of our packages;
• provide our beverages in a range of packaging sizes, including small sizes to enable portion control; and
• market responsibly, including no advertising targeted to children under 13.
We remain committed to innovation and to partnering with suppliers to invest in research and development of new noncaloric sweeteners and flavors that help us create great tasting beverages, including options with low or no calories.
Evolving Consumer Product Preferences
We are impacted by shifting consumer demographics and needs, on-the-go lifestyles and consumers who are empowered with more information than ever. As a result, many consumers want more beverage choices, personalization, a focus on sustainability, and transparency related to our products and packaging. We are committed to meeting changing consumer needs and to generating growth through our evolving portfolio of beverage brands and products (including numerous low- and no-calorie products); selectively expanding into other profitable categories of the commercial beverage industry; investing in innovative and more sustainable packaging; and providing easy-to-access information about our beverages on our website.
Evolving Competitive Landscape and Competing in the Digital Marketplace
Our Company faces strong competition from well-established global companies as well as numerous regional and local companies. The rapidly evolving digital landscape and growth of e-commerce in many markets has led to dramatic shifts in consumer shopping habits and patterns. The increasing use of data analytics, automation and artificial intelligence across digital platforms is further reshaping how consumers discover, evaluate and engage with brands. Consumers are rapidly embracing shopping via mobile device applications, e-commerce retailers and e-commerce websites or platforms, which presents new challenges to maintain the competitiveness and relevancy of our brands. As a result, we must continuously strengthen our capabilities in marketing and innovation to compete in a digital environment and maintain brand loyalty and market share. In addition, we are increasing our investments in e-commerce to support retail and meal delivery services, offering more package sizes that are fit-for-purpose for online sales and shifting more consumer and trade promotions to digital.
Product Safety and Quality
We strive to meet the highest standards in both product safety and product quality. We are aware that some consumers have concerns regarding certain ingredients used in our products. We only use ingredients that are authorized for use by regulatory authorities in each of the markets in which we operate. We have rigorous product and ingredient standards designed to help ensure safety and quality in each of our products, and we drive innovation that provides new beverage options to satisfy consumers’ evolving needs and preferences. We stay current with new regulations, industry best practices and marketplace conditions, and we engage with standard-setting and industry organizations.
We, our contract manufacturers and bottling partners are expected to manufacture and distribute our products according to strict policies, requirements and specifications set forth in an integrated quality management program. Our quality management program is designed to identify and mitigate risks and drive improvement. In our quality laboratories, we measure the quality attributes of ingredients, and we perform due diligence to help ensure that product and ingredient safety and quality standards are maintained. We regularly assess the relevance of our requirements and standards and continually work to improve and refine them across our entire supply chain.
Sustainability Matters
Investors and stakeholders increasingly focus on sustainability matters. We acknowledge that we have a role to play in developing and implementing solutions that help build resilience across our business. Our ability to achieve our sustainability goals and aspirations is dependent on many factors, including, but not limited to, our actions along with the actions of various stakeholders, such as our bottling partners, suppliers, governments, nongovernmental organizations, communities, and other third parties, some of which are outside of our control.
Talent Acquisition and Retention
Competition for existing and prospective talent has increased, especially considering changing worker expectations and talent marketplace variability. In addition, the broader labor market is experiencing a shortage of qualified talent, which has further increased competition for specialized talent that we want and may require for our future business needs.
Our people and our culture are critical business priorities, and we strive to be a global employer of choice that attracts and retains high-performing talent with the passion, skills and mindsets to drive us on our purpose to refresh the world and make a difference. We are committed to building an inclusive culture that inspires and supports the growth of our employees, serves our communities and shapes a strong and more sustainable business.
See “Item 1A. Risk Factors” in Part I of this report for additional information about risks and uncertainties facing our Company.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), which require management to make estimates, judgments and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We believe our most critical accounting policies and estimates relate to the following:
• Principles of Consolidation
• Recoverability of Equity Method Investments and Indefinite-Lived Intangible Assets
• Pension Plan Valuations
• Revenue Recognition
• Income Taxes
Management has discussed the development, selection and disclosure of critical accounting policies and estimates with the Audit Committee of our Company’s Board of Directors. While our estimates and assumptions are based on our knowledge of current events and on actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. For a discussion of the Company’s significant accounting policies, refer to Note 1 of Notes to Consolidated Financial Statements.
Principles of Consolidation
Our Company consolidates all entities that we control by ownership of a majority voting interest. Additionally, there are situations in which consolidation is required even though the usual condition of consolidation (i.e., ownership of a majority voting interest) does not apply. 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 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.
Our Company holds interests in certain VIEs, primarily bottling operations, for which we were not determined to be the primary beneficiary. Our variable interests in these VIEs primarily relate to equity investments, profit guarantees or subordinated financial support. Refer to Note 12 of Notes to Consolidated Financial Statements. Although these financial arrangements resulted in our holding variable interests in these entities, they did not empower us to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance. 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. Our judgment regarding the level of influence over each equity method investee includes considering key factors, such as our ownership interest, representation on the board of directors, participation in policy-making decisions, other commercial arrangements and material intercompany transactions.
We eliminate from our financial results all significant intercompany transactions, including the intercompany transactions with consolidated VIEs and the intercompany portion of transactions with equity method investees.
Recoverability of Equity Method Investments and Indefinite-Lived Intangible Assets
Our Company faces many uncertainties and risks related to various economic, political and regulatory environments in the countries and territories in which we operate, particularly in developing and emerging markets. Refer to the heading “Our Business — Challenges and Risks” above and “Item 1A. Risk Factors” in Part I of this report as well as the heading “Operations Review” below for additional information related to our present business environment. As a result, management must make numerous assumptions, which involve a significant amount of judgment, when performing impairment tests of equity method investments and indefinite-lived intangible assets in various regions around the world. The performance of impairment tests involves critical accounting estimates. These estimates require significant management judgment and include inherent uncertainties. Factors that management must estimate include, among others, the economic lives of the assets, revenues, royalty rates, cost of raw materials, delivery costs, long-term growth rates, discount rates, marketing spending, foreign currency exchange rates, tax rates, capital spending and proceeds from the sale of assets. The variability of these factors depends on a number of conditions, and thus our accounting estimates may change from period to period. These factors are even more difficult to estimate when global financial markets are highly . As these factors are often interdependent and may not change in isolation, we do not believe it is practicable or meaningful to present the impact of changing a single factor. If we had used other assumptions and estimates when tests were performed, charges could have resulted. Furthermore, if management uses different assumptions in future periods, or if different conditions exist in future periods, charges could result. The total future charges we may be required to record could be material.
Equity Method Investments
Equity method investments are reviewed for impairment whenever significant events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. When such events or changes occur, we evaluate the fair value compared to our cost basis in the investment. 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. We consider the assumptions that we believe a market participant would use in
evaluating estimated future cash flows when employing the discounted cash flow or estimates of sales proceeds valuation methodologies. The ability to accurately predict future cash flows, especially in emerging and developing markets, may impact the determination of fair value. In the event the fair value of an investment declines below our cost basis, management is required to determine if the decline in fair value is other than temporary. If management determines the decline is other than temporary, an impairment charge is recorded. Management’s assessment as to the nature of a decline in fair value is based on, among other things, the length of time and the extent to which the market value has been less than our cost basis; the financial condition and near-term prospects of the issuer; and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value. Refer to Note 17 of Notes to Consolidated Financial Statements for a discussion of impairment charges, if applicable.
Indefinite-Lived Intangible Assets
Impairment tests for indefinite-lived intangible assets must be performed at least annually, or more frequently if events or circumstances indicate that an asset may be impaired. Our Company performs the annual impairment tests as of the first day of our third fiscal quarter. We perform impairment tests using various valuation methodologies, including discounted cash flow models and a market approach, to determine the fair value of the indefinite-lived intangible asset or the reporting unit, as applicable. The ability to accurately predict future cash flows, especially in emerging and developing markets, may impact the determination of fair value. When performing these impairment tests, we estimate the fair values of the assets using management’s best assumptions, which we believe are consistent with those a market participant would use. The estimates and assumptions used in these tests are evaluated and updated as appropriate.
For indefinite-lived intangible assets, other than goodwill, if the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess. The Company has the option to perform a qualitative assessment of indefinite-lived intangible assets, other than goodwill, rather than completing the impairment test. The Company must assess whether it is more likely than not that the fair value of the intangible asset is less than its carrying amount. If the Company concludes that this is the case, it must perform the impairment testing described above.
We perform impairment tests of goodwill at our reporting unit level, which is generally one level below our operating segments. Our operating segments are primarily based on geographic responsibility, which is consistent with the way management runs our business. Our geographic operating segments are generally subdivided into smaller geographic regions, which are reporting units. 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. 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 reporting unit’s fair value. However, the impairment charge recognized cannot exceed the carrying amount of goodwill. The assumptions used in our impairment testing models are consistent with those we believe a market participant would use. The Company has the option to perform a qualitative assessment of goodwill rather than completing the impairment test. The Company must assess whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the Company concludes that this is the case, it must perform the impairment testing discussed above. Otherwise, the Company does not need to perform any further assessment.
Intangible assets acquired in recent transactions are naturally more susceptible to impairment, because they are recorded at fair value based on recent operating plans and macroeconomic conditions present at the time of acquisition. Consequently, if operating results and/or macroeconomic conditions deteriorate shortly after an acquisition, it could result in the impairment of the acquired assets. A deterioration of macroeconomic conditions may not only negatively impact the estimated operating cash flows used in our cash flow models but may also negatively impact other assumptions used in our analyses, including, but not limited to, the discount rates. If the discount rates change, our Company may recognize an impairment of an intangible asset in spite of realizing actual cash flows that are equal to, or greater than, our previously forecasted amounts. Refer to Note 2 of Notes to Consolidated Financial Statements for a discussion of recent acquisitions, if applicable.
In November 2021, the Company acquired the remaining 85% ownership interest in, and now owns 100% of BA Sports Nutrition, LLC (“BodyArmor”), which offers a line of sports performance and hydration beverages. During the three months ended March 29, 2024, the Company recorded an impairment charge of $760 million due to revised projections of future operating results as well as higher discount rates resulting from changes in macroeconomic conditions since the acquisition date. During the three months ended December 31, 2025, the operating results related to the trademark, combined with lower expectations of future performance compared to the original forecasts, triggered the need to update the Company’s impairment analysis, including a reassessment of the business projections for the trademark. Based on this assessment, the Company concluded that the fair value of the trademark was less than its carrying value and recorded an additional impairment charge of
$960 million. The decrease in fair value was primarily driven by the revised projections of future operating results, including a slowing of the projected long-term growth rate for the category, an intensifying competitive environment, and more focused innovation and international rollout plans. The remaining carrying value of the trademark is $2,440 million. If the near-term operating results of this trademark do not achieve our revised financial projections, or if the macroeconomic conditions change, causing the discount rate to increase without an offsetting increase in the operating results, it is likely that we would be required to recognize an additional impairment charge. Management will continue to monitor the fair value of this trademark in future periods.
Pension Plan Valuations
Our Company sponsors a qualified pension plan covering substantially all U.S. employees as well as unfunded nonqualified pension plans for certain employees in the United States. In addition, our Company and its subsidiaries have various pension plans outside the United States.
Management is required to make certain critical estimates related to the actuarial assumptions used to determine our pension obligations and our net periodic pension cost or income. We believe the two most critical assumptions are the discount rate and the expected long-term rate of return on plan assets. Our actuarial assumptions are reviewed annually, or more frequently to the extent that a settlement or curtailment occurs. Changes in these assumptions could have a material impact on the measurement of our pension obligations and our net periodic pension cost or income.
The discount rate assumption used to account for pension plans reflects the rate at which the benefit obligations could be effectively settled. The discount rate for U.S. and certain non-U.S. plans is determined using a matching technique whereby the rates of a yield curve, developed from high-quality debt securities, are applied to projected benefit cash flows to determine the appropriate effective discount rate. For other non-U.S. plans, we base the discount rate assumption on comparable indices within each of the respective countries. The Company measures the service cost and interest cost components of net periodic pension cost or income by applying the specific spot rates along the yield curve to the plans’ projected cash flows.
The expected long-term rate of return on plan assets is based upon the long-term outlook of our investment strategy as well as our historical returns and volatilities for each asset class. We also review current levels of interest rates and inflation to assess the reasonableness of our expected long-term rate of return on plan assets. Our investment objective for our pension assets is to ensure all funded pension plans have sufficient assets to meet their benefit obligations when they become due. As a result, the Company periodically revises asset allocations, where appropriate, to seek to improve returns and manage risk.
In 2025, the Company’s total net periodic pension cost was $121 million. In 2026, we expect our net periodic pension cost to be approximately $87 million. The decrease in net periodic pension cost is primarily due to special termination benefits and curtailment charges in 2025.
As of December 31, 2025, the U.S. qualified pension plan represented 63% and 60% of the Company’s consolidated projected benefit obligation and pension plan assets, respectively. For this plan, we estimate that a 50 basis-point decrease in the discount rate would result in a $9 million increase in our 2026 net periodic pension cost, and we estimate that a 50 basis-point decrease in the expected long-term rate of return on plan assets would result in a $19 million increase in our 2026 net periodic pension cost.
Refer to Note 14 of Notes to Consolidated Financial Statements for additional information about our pension plans and related actuarial assumptions.
Revenue Recognition
Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. Our performance obligation generally consists of the promise to sell concentrates, syrups or finished products to our bottling partners, wholesalers, distributors or retailers. Control of the concentrates, syrups or finished products is transferred upon shipment to, or receipt at, our customers’ locations, as determined by the specific terms of the contract. Upon transfer of control to the customer, which completes our performance obligation, revenue is recognized. Our sales terms generally do not allow for a right of return except for matters related to any manufacturing defects on our part. After completion of our performance obligation, we have an unconditional right to consideration as outlined in the contract. Our receivables will generally be collected in less than six months, in accordance with the underlying payment terms. All of our performance obligations under the terms of contracts with our customers have an original duration of one year or less.
In most markets, in an effort to allow our Company and our bottling partners to grow together through shared value, aligned financial objectives and the flexibility necessary to meet consumers’ always changing needs and tastes, we have implemented an incidence-based concentrate pricing model. Under this model, the concentrate price we charge is impacted by a number of factors, including, but not limited to, bottler pricing, the channels in which the finished products produced from the concentrates are sold, and package mix. The amounts associated with the arrangements described above represent variable consideration, an
estimate of which is included in the transaction price as a component of net operating revenues in our consolidated statement of income upon completion of our performance obligations. The total revenue recorded, including any variable consideration, cannot exceed the amount for which it is probable that a significant reversal will not occur when uncertainties related to variability are resolved. As a result, we are recognizing revenue based on our best estimate of the consideration that we expect to receive. In making our estimates of variable consideration, we consider past results and make assumptions related to: (1) customer sales volumes; (2) customer ending inventories; (3) customer selling price per unit; (4) selling channels; and (5) discount rates, rebates and other pricing allowances, as applicable. In gathering data to estimate our variable consideration, we generally calculate our estimates using a portfolio approach at the country and product line level rather than at the individual contract level. The result of making these estimates will impact the line items trade accounts receivable or accounts payable and accrued expenses in our consolidated balance sheet, as applicable. The actual amounts ultimately paid and/or received may be different from our estimates.
Income Taxes
Our annual effective tax rate is based on our income and the tax laws in the various jurisdictions in which we operate. Significant judgment is required in determining our annual income tax expense and in evaluating our tax positions. We establish reserves to remove some or all of the tax benefit of any of our tax positions at the time we determine that the position becomes uncertain based upon one of the following conditions: (1) the tax position is not “more likely than not” to be sustained; (2) the tax position is “more likely than not” to be sustained, but for a lesser amount; or (3) the tax position is “more likely than not” to be sustained, but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether or not a tax position is uncertain, (1) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information; (2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings and caselaw and their applicability to the facts and circumstances of the tax position; and (3) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken. We adjust these reserves, including any impact on the related interest and penalties, in light of changing facts and circumstances, such as the of a tax audit. Refer to the heading “Operations Review — Income Taxes” below and Note 15 of Notes to Consolidated Financial Statements.
A number of years may elapse before a particular uncertain tax position is audited and finally resolved. The number of years subject to tax audits or tax assessments varies depending on the tax jurisdiction. The tax benefit that has been previously reserved because of a failure to meet the “more likely than not” recognition threshold would be recognized in income tax expense in the first interim period when the uncertainty disappears under any one of the following conditions: (1) the tax position is “more likely than not” to be sustained; (2) the tax position, amount and/or timing is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the tax position has expired. Settlement of any particular issue would usually require the use of cash. Refer to Note 12 of Notes to Consolidated Financial Statements.
Tax laws require certain items to be included in the tax return at different times than when these items are reflected in the consolidated financial statements. As a result, the annual effective tax rate reflected in our consolidated financial statements is different from that reported in our tax return (our cash tax rate). Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences reverse over time, such as depreciation expense. Deferred tax assets and liabilities are determined based on temporary differences between the book basis and tax basis of assets and liabilities. The tax rates used to determine deferred tax assets or liabilities are the enacted tax rates in effect for the year and for the manner in which the differences are expected to reverse. Based on the evaluation of all available information, the Company recognizes future tax benefits, such as net operating loss carryforwards, to the extent that realizing these benefits is considered more likely than not.
We evaluate our ability to realize the tax benefits associated with deferred tax assets by analyzing our forecasted taxable income using both historical and projected future operating results; the reversal of existing taxable temporary differences; taxable income in prior carryback years (if permitted); and the availability of tax planning strategies. A valuation allowance is required to be established unless management determines that it is more likely than not that the Company will ultimately realize the tax benefit associated with a deferred tax asset.
The Company does not record a U.S. deferred tax liability for the excess of the book basis over the tax basis of its investments in foreign subsidiaries to the extent that the basis difference meets the indefinite reversal criteria. These criteria are met if the foreign subsidiary has invested, or will invest, the undistributed earnings indefinitely. The decision as to the amount of undistributed earnings that the Company intends to maintain in non-U.S. subsidiaries takes into account various items, including, but not limited to, forecasts and budgets of financial needs of cash for working capital, liquidity plans, capital improvement programs, merger and acquisition plans, and planned loans to other non-U.S. subsidiaries. The Company also evaluates its expected cash requirements in the United States. Other factors that can influence that determination are local restrictions on remittances (for example, in some countries a central bank application and approval are required in order for the
Company’s local country subsidiary to pay a dividend), economic stability and asset risk. Refer to Note 15 of Notes to Consolidated Financial Statements.
OPERATIONS REVIEW
Our organizational structure consists of the following operating segments: EMEA; Latin America; North America; Asia Pacific; and Bottling Investments. Our operating structure also includes Corporate, which consists of a center and a platform services organization. For additional information regarding our operating segments and Corporate, refer to Note 20 of Notes to Consolidated Financial Statements.
Structural Changes, Acquired Brands and Newly Licensed Brands
In order to continually improve upon the Company’s operating performance, from time to time we engage in buying and selling ownership interests in bottling partners and other manufacturing operations. In addition, we periodically acquire brands and their related operations or enter into license agreements for certain brands to supplement our beverage offerings. These items impact our operating results and certain key metrics used by management in assessing the Company’s performance.
Unit case volume growth is a key metric used by management to evaluate the Company’s performance because it measures demand for our products at the consumer level. The Company’s unit case volume represents the number of unit cases (or unit case equivalents) of Company beverage products directly or indirectly sold by the Company and its bottling partners to customers or consumers and, therefore, reflects unit case volume for both consolidated and unconsolidated bottlers. Refer to the heading “Beverage Volume” below.
Concentrate sales volume represents the amount of concentrates, syrups, source waters and powders/minerals (in all instances expressed in unit case equivalents) sold by, or used in finished products sold by, the Company to its bottling partners or other customers. For Costa non-ready-to-drink beverage products, concentrate sales volume represents the amount of beverages, primarily measured in number of transactions (in all instances expressed in unit case equivalents), sold by the Company to customers or consumers. Refer to the heading “Beverage Volume” below.
When we analyze our net operating revenues, we generally consider the following factors: (1) volume growth (concentrate sales volume or unit case volume, as applicable); (2) changes in price/mix; (3) foreign currency exchange rate fluctuations; and (4) acquisitions and divestitures (including structural changes as defined below), as applicable. Refer to the heading “Net Operating Revenues” below. The Company sells concentrates and syrups to both consolidated and unconsolidated bottling partners. The ownership structure of our bottling partners impacts the timing of recognizing concentrate revenue and concentrate sales volume. When we sell concentrates or syrups to our consolidated bottling partners, we do not recognize the concentrate revenue or concentrate sales volume until the bottling partner has sold finished products manufactured from the concentrates or syrups to a third party. When we sell concentrates or syrups to our unconsolidated bottling partners, we recognize the concentrate revenue and concentrate sales volume when the concentrates or syrups are sold to the bottling partner. The subsequent sale of the finished products manufactured from the concentrates or syrups to a third party does not impact the timing of recognizing the concentrate revenue or concentrate sales volume. When we account for an unconsolidated bottling partner as an equity method investment, we eliminate the intercompany profit related to concentrate sales to the extent of our ownership interest, until the equity method investee has sold finished products manufactured from the concentrates or syrups to a third party. We typically report unit case volume when finished products manufactured from the concentrates or syrups are sold to a third party, regardless of our ownership interest in the bottling partner, if any.
We generally refer to acquisitions and divestitures of bottling operations as “structural changes,” which are a component of acquisitions and divestitures. Typically, structural changes do not impact the Company’s unit case volume on a consolidated basis or at the geographic operating segment level. We recognize unit case volume for all sales of Company beverage products, regardless of our ownership interest in the bottling partner, if any. However, the unit case volume reported by our Bottling Investments operating segment is generally impacted by structural changes because it only includes the unit case volume of our consolidated bottling operations. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on the Company’s acquisitions and divestitures.
“Acquired brands” refers to brands acquired during the past 12 months. Typically, the Company has not reported unit case volume or recognized concentrate sales volume related to acquired brands in periods prior to the closing of a transaction. Therefore, the unit case volume and concentrate sales volume related to an acquired brand are incremental to prior year volume. We generally do not consider the acquisition of a brand to be a structural change.
“Licensed brands” refers to brands not owned by the Company but for which we hold certain rights, generally including, but not limited to, distribution rights, and from which we derive an economic benefit when the related products are sold. Typically, the Company has not reported unit case volume or recognized concentrate sales volume related to a licensed brand in periods prior to the beginning of the term of a license agreement. Therefore, in the year that a license agreement is entered into, the unit case
volume and concentrate sales volume related to a licensed brand are incremental to prior year volume. We generally do not consider the licensing of a brand to be a structural change.
In January, February and December 2024, as well as May 2025, the Company refranchised our bottling operations in certain territories in India, and in February 2024, the Company refranchised our bottling operations in Bangladesh and the Philippines. The impact of each of these refranchisings has been included as a structural change in our analysis of net operating revenues on a consolidated basis as well as for the Bottling Investments and Asia Pacific operating segments. Additionally, in October 2025, the Company sold our finished product operations in Nigeria. The impact of this sale has been included as a divestiture in our analysis of net operating revenues on a consolidated basis as well as for the EMEA operating segment.
Beverage Volume
We measure the volume of Company beverage products sold in two ways: (1) unit cases of finished products and (2) concentrate sales. As used in this report, “unit case” means a unit of measurement equal to 192 U.S. fluid ounces of finished beverage (24 eight-ounce servings), with the exception of unit case equivalents for Costa non-ready-to-drink beverage products, which are primarily measured in number of transactions; and “unit case volume” means the number of unit cases (or unit case equivalents) of Company beverage products directly or indirectly sold by the Company and its bottling partners to customers or consumers. Unit case volume consists primarily of beverage products bearing Company trademarks. Also included in unit case volume are certain brands licensed to, or distributed by, our Company, and brands owned by Coca-Cola system bottlers for which our Company provides marketing support and from the sale of which we derive an economic benefit. In addition, unit case volume includes sales by certain joint ventures in which the Company has an ownership interest. Although a significant portion of our Company’s net operating revenues is not based directly on unit case volume, we believe unit case volume is one of the indicators of the underlying strength of the Coca-Cola system because it measures demand for our products at the consumer level. The unit case volume numbers used in this report are derived based on estimates received by the Company from its bottling partners and distributors. Concentrate sales volume represents the amount of concentrates, syrups, source waters and powders/minerals (in all instances expressed in unit case equivalents) sold by, or used in finished beverages sold by, the Company to its bottling partners or other customers. For Costa non-ready-to-drink beverage products, concentrate sales volume represents the amount of beverages, primarily measured in number of transactions (in all instances expressed in unit case equivalents), sold by the Company to customers or consumers. Unit case volume and concentrate sales volume growth rates are not necessarily equal during any given period. Factors such as seasonality, bottlers’ inventory practices, supply point changes, timing of price increases, new product introductions and changes in product mix can create differences between unit case volume and concentrate sales volume growth rates. In addition to these items, the impact of unit case volume from certain joint ventures in which the Company has an ownership interest, but to which the Company does not sell concentrates, syrups, source waters or powders/minerals, may give rise to differences between unit case volume and concentrate sales volume growth rates.
Information about our volume growth worldwide and by operating segment is as follows:
Percent Change 2025 versus 2024
Unit Cases
Concentrate Sales
Worldwide
EMEA
Latin America
North America
Asia Pacific
Bottling Investments
1 Bottling Investments operating segment data reflects unit case volume growth for consolidated bottlers only.
2 Geographic operating segment data reflects unit case volume growth for all bottlers, both consolidated and unconsolidated, and distributors in the applicable geographic areas. Unit case volume growth for Costa retail stores is reflected in the EMEA operating segment data.
3 After considering the impact of structural changes, unit case volume for Bottling Investments was even.
4 After considering the impact of divestitures, concentrate sales volume for EMEA grew 4%.
5 After considering the impact of structural changes, concentrate sales volume for Asia Pacific grew 1%.
Unit Case Volume
The Coca-Cola system sold 33.8 billion and 33.7 billion unit cases of our products in 2025 and 2024, respectively.
Unit case volume in EMEA increased 3%, which included 2% growth in Trademark Coca-Cola, 3% growth in sparkling flavors, 2% growth in water, sports, coffee and tea as well as growth in energy drinks, partially offset by a 4% decline in juice, value-added dairy and plant-based beverages. The operating segment reported growth in unit case volume of 7% in the Eurasia and Middle East operating unit, growth of 3% in the Africa operating unit and growth in energy drinks, partially offset by a decline of 1% in the Europe operating unit.
In Latin America, unit case volume was even, which included 1% growth in both water, sports, coffee and tea, and juice, value-added dairy and plant-based beverages as well as growth in energy drinks, offset by a 1% decline in Trademark Coca-Cola and a 2% decline in sparkling flavors. The operating segment’s volume performance included 2% growth in Brazil and 6% growth in Argentina, offset by a decline of 4% in Mexico.
Unit case volume in North America decreased 1%, which included a 1% decline in Trademark Coca-Cola, a 2% decline in juice, value-added dairy and plant-based beverages and a 1% decline in sparkling flavors, partially offset by growth in energy drinks. Unit case volume in water, sports, coffee and tea was even.
In Asia Pacific, unit case volume was even, which included 3% growth in water, sports, coffee and tea, 1% growth in Trademark Coca-Cola and growth in energy drinks, offset by a 3% decline in sparkling flavors and a 6% decline in juice, value-added dairy and plant-based beverages. The operating segment reported growth in unit case volume of 1% in the Greater China and Mongolia operating unit and growth in energy drinks, offset by a decline of 3% in the ASEAN and South Pacific operating unit. Unit case volume in both the India and Southwest Asia and the Japan and South Korea operating units was even.
Unit case volume for Bottling Investments decreased 8%, which primarily reflects the impact of refranchising our bottling operations in the Philippines, Bangladesh and certain territories in India.
Concentrate Sales Volume
In 2025, worldwide concentrate sales volume grew 1% and unit case volume was even compared to 2024. The difference between concentrate sales volume and unit case volume growth rates for our Latin America operating segment was primarily due to the timing of concentrate shipments.
Net Operating Revenues
Net operating revenues were $47,941 million in 2025, compared to $47,061 million in 2024, an increase of $880 million, or 2%.
The following table illustrates, on a percentage basis, the estimated impact of the factors resulting in the increase (decrease) in net operating revenues on a consolidated basis and for each of our operating segments:
Percent Change 2025 versus 2024
Volume 1
Price/Mix
Foreign Currency Exchange Rate Fluctuations
Acquisitions & Divestitures 2
Total
Consolidated
EMEA
Latin America
North America
Asia Pacific
Bottling Investments
Note: Certain rows may not add due to rounding.
1 Represents the percent change in net operating revenues attributable to the increase (decrease) in concentrate sales volume for our geographic operating segments (expressed in unit case equivalents) after considering the impact of acquisitions and divestitures, if any. For our Bottling Investments operating segment, this represents the percent change in net operating revenues attributable to the increase (decrease) in unit case volume after considering the impact of structural changes, if any. Our Bottling Investments operating segment data reflects unit case volume growth for consolidated bottlers only after considering the impact of structural changes, if any. Refer to the heading “Beverage Volume” above.
2 Includes structural changes, if any. Refer to the heading “Structural Changes, Acquired Brands and Newly Licensed Brands” above.
Refer to the heading “Beverage Volume” above for additional information related to changes in our unit case and concentrate sales volumes.
“Price/mix” refers to the change in net operating revenues caused by factors such as pricing actions taken by the Company and, where applicable, our bottling partners; the mix of categories, products and packages sold; and the mix of channels and geographic territories where the sales occurred. Management believes that providing investors with price/mix enhances their understanding about the combined impact that these items had on the Company’s net operating revenues. The impact of price/mix is calculated by subtracting the change in net operating revenues resulting from volume increases or decreases, fluctuations in foreign currency exchange rates, and acquisitions and divestitures from the total change in net operating revenues. Management uses this measure in making financial, operating and planning decisions and in evaluating the Company’s performance.
Price/mix had a 4% favorable impact on our consolidated net operating revenues. Price/mix was impacted by a variety of factors and events, including, but not limited to, the following:
• EMEA — favorable pricing initiatives, including inflationary pricing, partially offset by unfavorable mix;
• Latin America — favorable pricing initiatives, including inflationary pricing in Argentina, and favorable mix;
• North America — favorable pricing initiatives and favorable mix;
• Asia Pacific — favorable mix and favorable pricing initiatives;
• Bottling Investments — favorable pricing initiatives, partially offset by unfavorable mix.
The favorable pricing initiatives for the year ended December 31, 2025 in all operating segments included both new and carryover pricing increases from the prior year.
Fluctuations in foreign currency exchange rates, including the effects of our hedging activities, unfavorably impacted our consolidated net operating revenues by 2%. This unfavorable impact was primarily due to a stronger U.S. dollar compared to certain foreign currencies, including the Mexican peso, Argentine peso, Ethiopian Birr and Turkish lira, which had an unfavorable impact on our Latin America, Bottling Investments and EMEA operating segments. The unfavorable impact of a stronger U.S. dollar compared to the currencies listed above was partially offset by the impact of a weaker U.S. dollar compared to certain other foreign currencies, including the euro, British pound, South African rand and Japanese yen, which had a favorable impact on our EMEA, Bottling Investments and Asia Pacific operating segments. Refer to the heading “Liquidity, Capital Resources and Financial Position — Foreign Exchange” below.
“Acquisitions and divestitures” generally refers to acquisitions and divestitures of brands or businesses, some of which the Company considers to be structural changes. The impact of acquisitions and divestitures is the difference between the change in net operating revenues and the change in what our net operating revenues would have been if we removed the net operating revenues associated with an acquisition or a divestiture from either the current year or the prior year, as applicable. Management believes that quantifying the impact that acquisitions and divestitures had on the Company’s net operating revenues provides investors with useful information to enhance their understanding of the Company’s net operating revenue performance by improving their ability to compare our year-to-year results. Management considers the impact of acquisitions and divestitures when evaluating the Company’s performance. Refer to the heading “Structural Changes, Acquired Brands and Newly Licensed Brands” above for additional information related to acquisitions and divestitures.
Net operating revenue growth rates are impacted by sales volume; price/mix; foreign currency exchange rate fluctuations; and acquisitions and divestitures. The size and timing of acquisitions and divestitures are not consistent from period to period. Based on current spot rates and our hedging coverage in place, we expect foreign currency exchange rate fluctuations will have a favorable impact on our full year 2026 net operating revenues.
Information about our net operating revenues by operating segment and Corporate as a percentage of Company net operating revenues is as follows:
Year Ended December 31,
EMEA
Latin America
North America
Asia Pacific
Bottling Investments
Corporate
Total
The percentage contribution of each operating segment fluctuates over time due to net operating revenues in some operating segments growing at a faster rate compared to other operating segments. In addition, foreign currency exchange rate fluctuations impact the percentage contribution of each operating segment. For additional information about the impact of foreign currency exchange rate fluctuations, refer to the heading “Liquidity, Capital Resources and Financial Position — Foreign Exchange” below.
Gross Profit Margin
Gross profit margin is a ratio calculated by dividing gross profit by net operating revenues. Management believes gross profit margin provides investors with useful information related to the profitability of our business prior to considering all of the selling, general and administrative expenses and other operating charges incurred. Management uses this measure in making financial, operating and planning decisions and in evaluating the Company’s performance.
Our gross profit margin increased to 61.6% in 2025 from 61.1% in 2024. This increase was primarily due to the impact of favorable pricing initiatives and the impact of the prior year refranchising of our bottling operations in the Philippines, Bangladesh and certain territories in India, partially offset by the unfavorable impact of foreign currency exchange rate fluctuations and higher commodity costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $14,521 million in 2025, compared to $14,582 million in 2024, a decrease of $61 million. This decrease was primarily due to lower contributions to The Coca-Cola Foundation and lower annual incentive expense, partially offset by higher severance costs in 2025 associated with ongoing initiatives to optimize our organization, higher advertising expenses and an asset impairment charge related to certain prototypes in the prior year. Advertising expenses for 2025 and 2024 were $5.4 billion and $5.1 billion, respectively. Refer to Note 17 of Notes to Consolidated Financial Statements for more information on the impairment charge.
Other Operating Charges
Other operating charges incurred by operating segment and Corporate were as follows (in millions):
Year Ended December 31,
EMEA
Latin America
North America
Asia Pacific
Bottling Investments
Corporate
Total
In 2025, the Company recorded other operating charges of $1,261 million. These charges consisted of $960 million related to the impairment of our BodyArmor trademark, $97 million related to the Company’s productivity and reinvestment program, and $47 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with our acquisition of fairlife in 2020, which brought the total liability to $6,173 million and was paid in March 2025. Additionally, other operating charges included $44 million related to the impairment of a trademark in Latin America, $41 million related to the impairment of a trademark and property, plant and equipment in Asia Pacific and $35 million related to an indemnification
agreement entered into as a part of the refranchising of certain of our bottling operations. In addition, other operating charges included $15 million for the amortization of noncompete agreements related to the BodyArmor acquisition in 2021, $12 million of transaction costs related to our divestiture activities and $10 million related to tax litigation expense.
In 2024, the Company recorded other operating charges of $4,163 million. These charges consisted of $3,109 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition, $760 million related to the impairment of our BodyArmor trademark, $133 million related to the Company’s productivity and reinvestment program and $126 million related to the impairment of a trademark in Latin America. In addition, other operating charges included $15 million for the amortization of noncompete agreements related to the BodyArmor acquisition, $13 million related to an indemnification agreement entered into as a part of the refranchising of certain of our bottling operations and $9 million of transaction costs related to our divestiture activities. These charges were partially offset by a net benefit of $2 million related to a revision of management’s estimates for tax litigation expense.
Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on our divestiture activities. Refer to Note 12 of Notes to Consolidated Financial Statements for additional information related to the tax litigation. Refer to Note 17 of Notes to Consolidated Financial Statements for additional information on the fairlife contingent consideration and the impairment charges. Refer to Note 18 of Notes to Consolidated Financial Statements for the impact these charges had on our operating segments and Corporate. Refer to Note 19 of Notes to Consolidated Financial Statements for additional information on the Company’s restructuring initiatives.
Operating Income and Operating Margin
Information about our operating income contribution by operating segment and Corporate on a percentage basis is as follows:
Year Ended December 31,
EMEA
Latin America
North America
Asia Pacific
Bottling Investments
Corporate
Total
Operating margin is a ratio calculated by dividing operating income by net operating revenues. Management believes operating margin provides investors with useful information related to the profitability of our business after considering selling, general and administrative expenses and other operating charges. Management uses this measure in making financial, operating and planning decisions and in evaluating the Company’s performance.
Information about our operating margin on a consolidated basis and by operating segment and Corporate is as follows:
Year Ended December 31,
Consolidated
EMEA
Latin America
North America
Asia Pacific
Bottling Investments
Corporate
* Calculation is not meaningful.
Operating income was $13,762 million in 2025, compared to $9,992 million in 2024, an increase of $3,770 million, or 38%. The increases in operating income and operating margin were primarily driven by lower other operating charges, due to the prior year remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition, concentrate sales volume growth of 1% and favorable pricing initiatives. These items were partially offset by higher commodity costs and an unfavorable foreign currency exchange rate impact.
In 2025, fluctuations in foreign currency exchange rates, including the effects of our hedging activities, unfavorably impacted consolidated operating income by 12% due to a stronger U.S. dollar compared to certain foreign currencies, including the Mexican peso, Argentine peso, Brazilian real and Turkish lira, which had an unfavorable impact on our Latin America and EMEA operating segments. The unfavorable impact of a stronger U.S. dollar compared to the currencies listed above was partially offset by the impact of a weaker U.S. dollar compared to certain other foreign currencies, including the euro and British pound, which had a favorable impact on our EMEA operating segment. Refer to the heading “Liquidity, Capital Resources and Financial Position — Foreign Exchange” below.
The Company’s EMEA operating segment reported operating income of $4,298 million and $4,255 million for the years ended December 31, 2025 and 2024, respectively. The increase in operating income was primarily driven by an increase in concentrate sales volume of 4% and favorable pricing initiatives, partially offset by higher commodity costs, increased marketing spending, higher operating expenses, an unfavorable foreign currency exchange rate impact of 5% and the impact of divestiture activity.
Latin America reported operating income of $3,742 million and $3,792 million for the years ended December 31, 2025 and 2024, respectively. The decrease in operating income was primarily driven by a decrease in concentrate sales volume of 1%, increased marketing spending and an unfavorable foreign currency exchange rate impact of 21%, partially offset by favorable pricing initiatives, lower commodity costs and lower other operating charges.
Operating income for North America for the years ended December 31, 2025 and 2024 was $5,070 million and $4,556 million, respectively. The increase in operating income was primarily driven by favorable pricing initiatives, partially offset by a decrease in concentrate sales volume of 1%, higher commodity costs, increased marketing spending, higher other operating charges and an unfavorable foreign currency exchange rate impact of 1%.
Asia Pacific’s operating income for the years ended December 31, 2025 and 2024 was $2,042 million and $2,156 million, respectively. The decrease in operating income was primarily driven by higher commodity costs, higher other operating charges, an unfavorable foreign currency exchange rate impact of 8% and the impact of structural changes, partially offset by concentrate sales volume growth of 1% and favorable pricing initiatives and mix.
Bottling Investments’ operating income for the years ended December 31, 2025 and 2024 was $426 million and $496 million, respectively. The decrease in operating income was primarily driven by the impact of refranchising our bottling operations in the Philippines, Bangladesh and certain territories in India, higher commodity costs and an unfavorable foreign currency exchange rate impact of 2%, partially offset by favorable pricing initiatives and lower operating expenses.
Corporate’s operating loss for the years ended December 31, 2025 and 2024 was $1,816 million and $5,263 million, respectively. Operating loss in 2025 decreased primarily as a result of lower other operating charges due to the prior year remeasurement of our contingent consideration liability to fair value in conjunction with the fairlife acquisition, lower commodity costs, lower marketing expenses and lower contributions to The Coca-Cola Foundation. Refer to Note 18 of Notes to Consolidated Financial Statements for additional information on the fairlife contingent consideration.
Interest Income
Interest income was $786 million in 2025, compared to $988 million in 2024, a decrease of $202 million, or 20%. This decrease was primarily driven by lower average investment balances on our Corporate and certain international investments.
Interest Expense
Interest expense was $1,654 million in 2025, compared to $1,656 million in 2024, a decrease of $2 million. This decrease was primarily due to the impact of lower average short-term debt balances compared to the prior year. Refer to Note 11 of Notes to Consolidated Financial Statements.
Equity Income (Loss) — Net
Equity income (loss) — net represents our Company’s proportionate share of net income or loss from each of our equity method investees. In 2025, equity income was $2,031 million, compared to equity income of $1,770 million in 2024, an increase of $261 million, or 15%. The increase reflects, among other items, the impact of more favorable operating results reported by certain of our equity method investees in 2025, partially offset by the impact of the sale of our ownership interests in certain equity method investees and an unfavorable foreign currency exchange rate impact. In addition, the Company recorded net charges of $21 million and $92 million during the years ended December 31, 2025 and 2024, respectively, which represent the Company’s proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.
Other Income (Loss) — Net
In 2025, other income (loss) — net was income of $1,073 million. The Company recognized a gain of $1,952 million related to the sale of our ownership interest in Coca-Cola Consolidated, Inc. (“Coke Consolidated”), an equity method investee, a net gain of $409 million related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities, a gain of $331 million related to the sale of a portion of our ownership interest in CCEP, dividend income of $159 million, a gain of $102 million related to the refranchising of our bottling operations in certain territories in India and a gain of $31 million related to the substantial liquidation of a joint venture in China. The Company also recorded a charge of $1,274 million related to our bottling operations in Africa that became held for sale, a charge of $393 million related to the sale of our finished product operations in Nigeria, and other-than-temporary charges of $40 million related to an equity method investee in Latin America and $25 million related to a joint venture in Latin America. Additionally, the Company recorded a charge of $36 million related to the refranchising of certain bottling operations in Ghana, and expense of $22 million related to the non-service cost components of net periodic cost, which included charges of $27 million and $11 million for special benefits and a , respectively, related to non-U.S. pension activity. Other income () — net also included net foreign currency exchange of $48 million and $60 million of costs related to our trade accounts receivable factoring program.
In 2024, other income (loss) — net was income of $1,992 million. The Company recorded a gain of $595 million related to the refranchising of our bottling operations in the Philippines and recognized a gain of $506 million related to the sale of our ownership interest in an equity method investee in Thailand. The Company also recognized a gain of $338 million related to the sale of a portion of our ownership interest in Coke Consolidated, a gain of $303 million related to the refranchising of our bottling operations in certain territories in India, and a net gain of $290 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. Additionally, the Company recognized dividend income of $205 million and net income of $76 million related to the non-service cost components of net periodic benefit cost, of which $21 million was due to pension and other postretirement plan settlement . Other income () — net also included net foreign currency exchange of $180 million, $114 million of costs related to our trade accounts receivable factoring program and an other-than-temporary charge of $34 million related to an equity method investee in Latin America.
Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on our divestitures. Refer to Note 4 of Notes to Consolidated Financial Statements for additional information on equity and debt securities. Refer to Note 14 of Notes to Consolidated Financial Statements for additional information on pension and other postretirement benefit plan activity. Refer to Note 17 of Notes to Consolidated Financial Statements for additional information on the impairment charges and the bottling operations in Ghana.
Income Taxes
The Company recorded income taxes of $2,861 million (17.9% effective tax rate) and $2,437 million (18.6% effective tax rate) for the years ended December 31, 2025 and 2024, respectively.
Our effective tax rate reflects the tax impact of having significant operations outside the United States, which are generally taxed at rates different than the statutory U.S. federal tax rate. As a result of employment actions and capital investments made by the Company, certain tax jurisdictions provide income tax incentive grants, including Brazil, Costa Rica, Singapore and Eswatini. The terms of these grants expire from 2031 to 2045. We anticipate that we will be able to extend or renew the grants in these locations. The decision of whether we decide to pursue the renewal of these grants and the impact of the grants going forward is dependent on various factors. Tax incentive grants favorably impacted our income tax expense by $383 million and $346 million for the years ended December 31, 2025 and 2024, respectively. In addition, our effective tax rate reflects the benefits of having significant earnings generated in investments accounted for under the equity method. Also included in our effective tax rate is the tax impact associated with several countries enacting global minimum tax regulations.
We are currently in litigation with the IRS for tax years 2007 through 2009. Refer to Note 12 of Notes to Consolidated Financial Statements for additional information on the tax litigation.
As of December 31, 2025, the gross amount of unrecognized tax benefits was $857 million. If the Company were to prevail on all uncertain tax positions, the net effect would be a benefit of $581 million, exclusive of any benefits related to interest and penalties. The remaining $276 million primarily represents tax benefits that would be received in different tax jurisdictions in the event the Company did not prevail on all uncertain tax positions. Refer to Note 15 of Notes to Consolidated Financial Statements for additional information.
Based on current tax laws, including the impact of several countries enacting global minimum tax regulations, the Company’s effective tax rate in 2026 is expected to be approximately 20.9%, before considering the potential impact of any significant operating and nonoperating items that may affect our effective tax rate. This rate does not include the impact of the ongoing tax litigation with the IRS, if the Company were not to prevail.
Many jurisdictions have enacted legislation and adopted policies resulting from the OECD’s Anti-Base Erosion and Profit Shifting project. The OECD is currently coordinating a two-pillared project on behalf of the G20 and other participating countries which would grant additional taxing rights over profits earned by multinational enterprises to the countries in which their products are sold and services rendered. Pillar One would allow countries to reallocate a portion of profits earned by multinational businesses with an annual global revenue exceeding €20 billion and a profit margin of over 10% to applicable market jurisdictions. While the OECD issued draft language for the international implementation of Pillar One in October 2023, both the substantive rules and implementation process remain under discussion at the OECD, so the timetable for any implementation remains uncertain.
In December 2021, the OECD issued Pillar Two model rules, which would establish a global per-country minimum tax of 15%, and the European Union has approved a directive requiring member states to incorporate similar provisions into their respective domestic laws. The directive requires, with certain limited exceptions, the rules to initially become effective for fiscal years starting on or after December 31, 2023. Numerous countries have enacted legislation that implemented certain aspects of Pillar Two effective January 1, 2024, or adopted legislation that became effective in 2025, while additional jurisdictions may enact similar legislation in the future. In June 2025, the G7 released a statement announcing an understanding of a potential side-by-side system approach to the Pillar Two framework that would exclude U.S.-parented groups from certain Pillar Two provisions in recognition of existing U.S. minimum tax rules. In January 2026, the OECD issued further administrative guidance introducing a side‑by‑side framework under Pillar Two, largely exempting U.S.-headquartered companies from the application of Pillar Two. The OECD and implementing countries are expected to continue to make further revisions to their legislation and release additional guidance intended to adopt this side-by-side framework into law in each of the member countries. The Company will continue to monitor developments to determine any potential impact in the countries in which we operate.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States. The Company continues to evaluate the future impact of these tax law changes on its financial statements. The OBBBA did not materially impact the Company’s effective tax rate for 2025, and we do not expect it to have a material impact in 2026.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
We believe our ability to generate cash flows from operating activities is one of the fundamental strengths of our business. Refer to the heading “Cash Flows from Operating Activities” below. The Company does not typically raise capital through the issuance of stock. Instead, we use debt financing to lower our overall cost of capital and increase our return on shareowners’ equity. Refer to the heading “Cash Flows from Financing Activities” below. We have a history of borrowing funds both domestically and internationally at reasonable interest rates, and we expect to be able to continue to borrow funds at reasonable rates over the long term. Our debt financing also includes the use of a commercial paper program. We currently have the ability to borrow funds in this market at levels that are consistent with our debt financing strategy, and we expect to continue to be able to do so in the future. The Company regularly reviews its optimal mix of short-term and long-term debt.
The Company’s cash, cash equivalents, short-term investments and marketable securities totaled $15.8 billion as of December 31, 2025. In addition to these funds, our commercial paper program, and our ability to issue long-term debt, we had $6.2 billion in unused backup lines of credit for general corporate purposes as of December 31, 2025. These backup lines of credit expire at various times through 2030.
Our current payment terms with the majority of our suppliers are 120 days. Certain 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. We do not believe there is a risk that our payment terms will be shortened in the near future. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information.
The Company has a trade accounts receivable factoring program in certain countries. Under this program, we can elect to sell trade accounts receivables to unaffiliated financial institutions at a discount. In these factoring arrangements, for ease of administration, the Company collects customer payments related to the factored receivables and remits those payments to the financial institutions. The Company sold $14,710 million and $21,873 million of trade accounts receivables under this program during the years ended December 31, 2025 and 2024, respectively. The costs of factoring such receivables were $60 million and $114 million for the years ended December 31, 2025 and 2024, respectively. The cash received from the financial institutions is classified within the operating activities section in our consolidated statement of cash flows.
Our current capital allocation priorities are as follows: investing wisely to support our business operations, continuing to grow our dividend payment, enhancing our beverage portfolio and capabilities through consumer-centric acquisitions, and using excess cash to repurchase shares over time. We currently expect 2026 capital expenditures to be approximately $2.2 billion. During 2026, we also expect to repurchase shares to offset dilution resulting from employee stock-based compensation plans.
We are currently in litigation with the IRS for tax years 2007 through 2009. On November 18, 2020, the Tax Court issued the Opinion in which it predominantly sided with the IRS. On November 8, 2023, the Tax Court issued a supplemental opinion, siding with the IRS in concluding both that certain U.S. tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company’s licensee in Brazil apply to the Company’s operations and that the Tax Court opinion in the 3M case controlled as to the validity of those regulations. On October 1, 2025, the U.S. Court of Appeals for the Eighth Circuit issued an opinion reversing the judgment of the Tax Court in the 3M case. In its decision, the court concluded that the blocked-income regulation was inconsistent with IRC Section 482 and that the IRS therefore could not reallocate income from 3M’s subsidiary in Brazil to 3M in contravention of Brazilian restrictions on the payment of royalties. Further, the U.S. Court of Appeals for the Eighth Circuit specifically rejected the IRS’ argument that the ability of 3M’s subsidiary in Brazil to pay dividends, rather than royalties, meant that royalty income should not be treated as blocked. Both of these conclusions are highly supportive of the Company’s position in its case and reinforce its prior conclusions. On August 2, 2024, the Tax Court entered a decision reflecting additional federal income tax of $2.7 billion for the 2007 through 2009 tax years. With applicable interest, the total liability for the 2007 through 2009 tax years resulting from the Tax Court’s decision is $6.0 billion, for which the IRS issued the Company invoices on September 3, 2024. The Company paid the IRS Tax Deposit on September 10, 2024, which interest from accruing on the additional tax due for the 2007 through 2009 tax years. That amount, plus interest earned, would be refunded in full or in part if the Company’s tax positions are ultimately sustained on appeal. For the years ended December 31, 2025 and 2024, the Company recorded net interest income of $217 million and $77 million, respectively, related to this tax payment in the line item income taxes in our consolidated statements of income, in accordance with our accounting policy. The payment of the IRS invoices and the related accrued interest were recorded in the line item other noncurrent assets in our consolidated balance sheets as of December 31, 2025 and December 31, 2024. On October 22, 2024, the Company appealed the Tax Court’s decision to the U.S. Court of Appeals for the Eleventh Circuit. The Company filed its principal appellate brief with the U.S. Court of Appeals for the Eleventh Circuit on March 12, 2025. The IRS filed its appellate brief on July 7, 2025. The Company filed its reply brief on August 27, 2025. The Company strongly with the IRS’ positions and the portions of the Opinions affirming such positions and intends to vigorously our positions utilizing every available avenue of appeal. While the Company believes that it is more likely than not that we will ultimately prevail in this upon appeal, it is possible that all, or some portion of, the adjustments proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In that event, the Company would not receive a refund of the applicable portion or all of the $6.0 billion it paid in response to the IRS invoices issued in September 2024 and the related accrued interest receivable of $385 million as of December 31, 2025. Additionally, the Company would likely be subject to significant additional liabilities for subsequent years, which could have a material impact on the Company’s financial position, results of operations and cash flows. The Company estimates that the potential aggregate remaining incremental tax and interest liability for the tax years 2010 through 2025 could be approximately $14 billion as of December 31, 2025. Additional income tax and interest on any potential liabilities for the 2010 through 2025 tax years would continue to accrue until the time any such potential liability, or portion thereof, were to be paid. Refer to Note 12 of Notes to Consolidated Financial Statements for additional information on the tax .
While we believe it is more likely than not that we will prevail in the tax litigation discussed above, we are confident that, between our ability to generate cash flows from operating activities and our ability to borrow funds at reasonable interest rates, we can manage the range of possible outcomes in the final resolution of the matter.
Based on all of the aforementioned factors, the Company believes its current liquidity position is strong and will continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for the foreseeable future.
Cash Flows from Operating Activities
Net cash provided by operating activities for the years ended December 31, 2025 and 2024 was $7,408 million and $6,805 million, respectively, an increase of $603 million, or 9%. This increase was primarily driven by strong cash operating results, lower tax payments, the timing of changes in working capital and lower contributions to The Coca-Cola Foundation compared to the prior year. These items were partially offset by the prior year benefit of the trade accounts receivable factoring program and higher transfers of surplus non-U.S. plan assets from pension trusts to general assets of the Company in the prior year. The increase was also partially offset by unfavorable hedging activity, higher marketing payments, tax deposits related to Israel and Vietnam, and higher net interest payments.
Additionally, the activity in 2025 included $6.1 billion of the $6.2 billion final milestone payment for fairlife. The activity in 2024 included the $6.0 billion IRS Tax Litigation Deposit.
Refer to Note 12 of Notes to Consolidated Financial Statements for additional information on the tax payment to the IRS. Refer to Note 14 of Notes to Consolidated Financial Statements for additional information on the pension transfer. Refer to Note 18 of Notes to Consolidated Financial Statements for additional information on our milestone payment for fairlife.
Cash Flows from Investing Activities
Net cash used in investing activities was $67 million in 2025 and net cash provided by investing activities was $2,524 million in 2024.
Purchases of Investments and Proceeds from Disposals of Investments
In 2025, purchases of investments were $6,160 million and proceeds from disposals of investments were $4,665 million, resulting in a net cash outflow of $1,495 million. In 2024, purchases of investments were $5,640 million and proceeds from disposals of investments were $6,589 million, resulting in a net cash inflow of $949 million. This activity primarily represents the purchases of, and proceeds from the disposals of, investments in marketable securities and short-term investments that were made as part of the Company’s overall cash management strategy. Also included in this activity are purchases of, and proceeds from the disposals of, investments held by our captive insurance companies.
Acquisitions of Businesses, Equity Method Investments and Nonmarketable Securities
In 2025 and 2024, the Company’s acquisitions of businesses, equity method investments and nonmarketable securities totaled $461 million and $315 million, respectively. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information.
Proceeds from Disposals of Businesses, Equity Method Investments and Nonmarketable Securities
In 2025 and 2024, proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $3,567 million and $3,485 million, respectively. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information.
Purchases of Property, Plant and Equipment
Purchases of property, plant and equipment during the years ended December 31, 2025 and 2024 were $2,112 million and $2,064 million, respectively.
Total capital expenditures for property, plant and equipment and the percentage of such totals by operating segment and Corporate were as follows (in millions):
Year Ended December 31,
Capital expenditures
EMEA
Latin America
North America
Asia Pacific
Bottling Investments
Corporate
Collateral (Paid) Received Associated with Hedging Activities — Net
Collateral received associated with our hedging activities during the years ended December 31, 2025 and 2024 was $330 million and $235 million, respectively. Refer to Note 5 of Notes to Consolidated Financial Statements for additional information on our hedging activities.
Other Investing Activities
During the years ended December 31, 2025 and 2024, the total cash inflow from other investing activities was $91 million and $194 million, respectively. The activity during 2025 included $139 million related to the reimbursement of advance payments made to finance the construction of leased assets and $74 million related to interest and dividends received from our captive insurance companies’ solvency capital funds, partially offset by an advance payment of $184 million to acquire additional shares in an equity method investee. The activity during 2024 included the receipt of a $100 million installment payment on the note receivable related to the sale of our ownership interest in an equity method investee in Pakistan in 2023 and the collection of $69 million of deferred proceeds related to the refranchising of our bottling operations in Vietnam. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on these transactions.
Cash Flows from Financing Activities
Net cash used in financing activities was $8,140 million and $6,910 million in 2025 and 2024, respectively.
Loans, Notes Payable and Long-Term Debt
Our Company maintains debt levels we consider prudent based on our cash flows, interest coverage ratio and percentage of debt to capital. We use debt financing to lower our overall cost of capital, which increases our return on shareowners’ equity. This exposes us to adverse changes in interest rates. Our interest expense may also be affected by our credit ratings.
As of December 31, 2025, our long-term debt was rated “A+” by Standard & Poor’s and “A1” by Moody’s. Our commercial paper program was rated “A-1” by Standard & Poor’s and “P-1” by Moody’s. In assessing our credit strength, both rating agencies consider our capital structure (including the amount and maturity dates of our debt) and financial policies as well as the consolidated balance sheet and other financial information of the Company. In addition, certain rating agencies also consider the financial information of certain bottlers, including CCEP, Coke Consolidated, Coca-Cola FEMSA and CCHBC. While the Company has no legal obligation for the debt of these bottlers, the rating agencies believe the strategic importance of the bottlers to the Company’s business model provides the Company with an incentive to keep these bottlers viable. It is our expectation that these rating agencies will continue using this methodology. If our credit ratings were to be downgraded as a result of changes in our capital structure, our major bottlers’ financial performance, changes in the credit rating agencies’ methodology in assessing our credit strength, or for any other reason, our cost of borrowing could increase. Additionally, if the credit ratings of certain bottlers in which we have equity method investments were to , the Company’s equity income could be reduced as a result of the potential increase in interest expense for those bottlers.
We monitor our financial ratios and, as indicated above, the rating agencies consider these ratios in assessing our credit ratings. Each rating agency employs a different aggregation methodology and has different thresholds for the various financial ratios. These thresholds are not necessarily permanent, nor are they always fully disclosed to our Company.
Our global presence and strong capital position give us access to key financial markets around the world, enabling us to borrow funds at a low effective cost. This posture, coupled with active management of our mix of short-term and long-term debt as well as our mix of fixed-rate and variable-rate debt, results in a lower overall cost of borrowing. Our debt management policies, in conjunction with our share repurchase program and investment activity, can result in current liabilities exceeding current assets.
During 2025, the Company had issuances of debt of $4,980 million, which consisted of $865 million of net payments of commercial paper and short-term debt with maturities of 90 days or less, $3,442 million of issuances of commercial paper and short-term debt with maturities greater than 90 days and long-term debt issuances of $673 million, net of related discounts and issuance costs.
During 2025, the Company made payments of debt of $4,967 million, which consisted of $4,132 million of payments related to commercial paper and short-term debt with maturities greater than 90 days, and payments of long-term debt of $835 million. Refer to Note 11 of Notes to Consolidated Financial Statements.
During 2024, the Company had issuances of debt of $12,061 million, which consisted of $3,309 million of issuances of commercial paper and short-term debt with maturities greater than 90 days and long-term debt issuances of $8,752 million, net of related discounts and issuance costs.
During 2024, the Company made payments of debt of $9,533 million, which consisted of $1,269 million of net payments of commercial paper and short-term debt with maturities of 90 days or less, $5,276 million of payments related to commercial
paper and short-term debt with maturities greater than 90 days and payments of long-term debt of $2,988 million. During 2024, the Company extinguished $485 million of long-term debt prior to maturity. Refer to Note 11 of Notes to Consolidated Financial Statements.
Issuances of Stock
The issuances of stock in 2025 and 2024 were related to the exercise of stock options by employees.
Purchases of Stock for Treasury
In 2019, our Board of Directors authorized the 2019 Plan, a share repurchase plan of up to 150 million shares of the Company’s common stock.
During 2025, the total cash outflow for treasury stock purchases was $746 million. The Company repurchased 9.4 million shares of common stock under the 2019 Plan. These shares were repurchased at an average price per share of $67.42, for a total cost of $634 million. The net impact of the Company’s issuances of stock and treasury stock purchases during 2025 resulted in a net cash outflow of $433 million.
During 2024, the total cash outflow for treasury stock purchases was $1,795 million. The Company repurchased 26.5 million shares of common stock under the 2019 Plan. These shares were repurchased at an average price per share of $63.91, for a total cost of $1,694 million. The net impact of the Company’s issuances of stock and treasury stock purchases during 2024 resulted in a net cash outflow of $1,048 million.
Since the inception of our share repurchase program in 1984, we have repurchased 3.6 billion shares of our common stock at an average price per share of $18.43. In addition to shares repurchased under the share repurchase plans authorized by our Board of Directors, the Company’s treasury stock activity also includes shares surrendered to the Company to pay the exercise price and/or to satisfy tax withholding obligations in connection with stock swap exercises of employee stock options and/or the vesting of restricted stock issued to employees.
Dividends
The Company paid dividends of $8,779 million and $8,359 million during the years ended December 31, 2025 and 2024, respectively.
At its February 2026 meeting, our Board of Directors increased our regular quarterly dividend to $0.53 per share, equivalent to a full year dividend of $2.12 per share in 2026. This is our 64 th consecutive annual increase. Our annualized common stock dividend was $2.04 per share and $1.94 per share in 2025 and 2024, respectively.
Proceeds from Sale of a Noncontrolling Interest
During 2025, the Company received proceeds of $1,338 million from the sale of a noncontrolling interest. Refer to Note 1 of Notes to Consolidated Financial Statements for additional information.
Other Financing Activities
During the years ended December 31, 2025 and 2024, the total cash outflow for other financing activities was $279 million and $31 million, respectively. The activities during 2025 included $157 million of withholding taxes and other direct costs related to the sale of a noncontrolling interest. Refer to Note 1 of Notes to Consolidated Financial Statements for additional information. Additionally, the cash outflow during 2025 included $104 million of the $6.2 billion final milestone payment for fairlife.
Contractual Obligations
As of December 31, 2025, the Company’s contractual obligations, including payments due by period, were as follows (in millions):
Payments Due by Period
Total
2031 and
Thereafter
Loans and notes payable: 1
Commercial paper borrowings
Lines of credit and other short-term borrowings
Current maturities of long-term debt 2
Long-term debt, net of current maturities 2
Estimated interest payments 3
Accrued income taxes 4
Purchase obligations 5
Marketing obligations 6
Lease obligations
Held-for-sale and related obligations 7
Total contractual obligations
1 Refer to Note 11 of Notes to Consolidated Financial Statements for additional information regarding loans and notes payable. Upon payment of outstanding commercial paper, we typically issue new commercial paper. Lines of credit and other short-term borrowings are expected to fluctuate depending upon current liquidity needs, especially at international subsidiaries.
2 Refer to Note 11 of Notes to Consolidated Financial Statements for additional information regarding long-term debt. We will consider several alternatives for settling this long-term debt, including the use of cash flows from operating activities, issuance of commercial paper or issuance of other long-term debt. The table above shows expected cash payments to be made by the Company and excludes the noncash portion of debt, including any fair value adjustments, unamortized discounts and premiums.
3 We calculated estimated interest payments for our long-term debt based on the applicable rates and payment dates. For our variable-rate debt, we have assumed the December 31, 2025 rate for all periods presented. We expect to fund such interest payments with cash flows from operating activities and/or short-term borrowings.
4 Refer to Note 15 of Notes to Consolidated Financial Statements for additional information regarding income taxes. Liabilities of $1,570 million for unrecognized tax benefits, plus accrued interest and penalties, are not included in the total above. Currently, the settlement period for the unrecognized tax benefits cannot be determined. In addition, any payments related to unrecognized tax benefits may be partially or fully offset by reductions in payments in other jurisdictions.
5 Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms. These agreements include long-term contractual obligations, open purchase orders, accounts payable and certain accrued liabilities. We expect to fund these purchase obligations with cash flows from operating activities.
6 We expect to fund these marketing obligations with cash flows from operating activities.
7 Represents liabilities and contractual obligations that were classified as held for sale related to our bottling operations in Africa. Refer to Note 2 of Notes to Consolidated Financial Statements for additional information.
The total accrued liability for pension and other postretirement benefit plans recognized as of December 31, 2025 was $863 million. Refer to Note 14 of Notes to Consolidated Financial Statements. This amount is impacted by, among other items, net periodic benefit cost or income, plan funding levels, plan amendments, changes in plan demographics and assumptions, and the investment return on plan assets. Because the accrued liability does not represent expected liquidity needs, we did not include this amount in the table above.
We expect to make all contributions to our pension trusts with cash flows from operating activities. Our pension plans are generally funded in accordance with local laws and tax regulations. The Company expects to contribute approximately $27 million in 2026 to our pension trusts, all of which will be allocated to our international plans. Refer to Note 14 of Notes to Consolidated Financial Statements. We did not include our estimated contributions to our pension trusts in the table above.
As of December 31, 2025, the projected benefit obligation of the U.S. qualified pension plan was $3,907 million, and the fair value of the plan assets was $3,896 million. The projected benefit obligation of all pension plans other than the U.S. qualified pension plan was $2,321 million, and the fair value of the plans’ assets was $2,627 million. The Company sponsors various unfunded pension plans outside the United States as well as unfunded nonqualified pension plans covering certain U.S. employees. These U.S. nonqualified pension plans provide benefits that are not permitted to be funded through a qualified plan because of limits imposed by the Internal Revenue Code of 1986. The expected benefit payments for these unfunded pension
plans are not included in the table above. However, we anticipate benefit payments for these unfunded pension plans will be approximately $66 million for 2026. Thereafter, the expected annual benefit payments will gradually decline. Refer to Note 14 of Notes to Consolidated Financial Statements.
In general, we are self-insured for large portions of many different types of claims; however, we do use commercial insurance above our self-insured retentions to reduce the Company’s risk of catastrophic loss. Our reserves for the Company’s self-insured losses are estimated using actuarial methods and assumptions of the insurance industry, adjusted for our specific expectations based on our claims history. As of December 31, 2025, our self-insurance reserves totaled $155 million. Refer to Note 12 of Notes to Consolidated Financial Statements. We did not include estimated payments related to our self-insurance reserves in the table above.
Deferred income tax liabilities as of December 31, 2025 were $2,406 million. Refer to Note 15 of Notes to Consolidated Financial Statements. This amount is not included in the table above because we believe that presentation would not be meaningful. Deferred income tax liabilities are calculated based on temporary differences between the tax bases of assets and liabilities and their respective book bases, which will result in taxable amounts in future years when the underlying assets or liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future years. As a result, scheduling deferred income tax liabilities as payments due by period could be misleading, because this scheduling would not relate to liquidity needs.
As of December 31, 2025, we were contingently liable for guarantees of indebtedness owed by third parties of $786 million, of which $61 million was related to VIEs. Our guarantees are primarily related to third-party customers, bottlers and vendors and arose through the normal course of business. These guarantees have various terms, and none of these guarantees is individually significant. These amounts represent the maximum potential future payments that we could be required to make under the guarantees. However, management has concluded that the likelihood of any significant amounts being paid by our Company under these guarantees is remote. As of December 31, 2025, we were not directly liable for the debt of any unconsolidated entity.
Foreign Exchange
Our international operations are subject to certain opportunities and risks, including currency fluctuations and governmental actions. We closely monitor our operations in each country and seek to adopt appropriate strategies that are responsive to changing economic and political environments as well as to fluctuations in currencies. Due to the geographic diversity of our operations, weakness in some currencies may be offset by strength in other currencies over time.
In 2025 and 2024, our operating income was impacted by the weighted-average fluctuations in exchange rates for foreign currencies in which the Company conducted operations (all operating currencies) and for certain individual currencies. These currencies strengthened (weakened) against the U.S. dollar as follows:
Year Ended December 31,
All operating currencies
Australian dollar
Brazilian real
British pound
Chinese yuan
Euro
Indian rupee
Japanese yen
Mexican peso
Philippine peso
South African rand
The percentages in the table above do not include the effects of our hedging activities and, therefore, do not reflect the actual impact of fluctuations in foreign currency exchange rates on our operating results. Our hedging activities are designed to mitigate, over time, a portion of the impact of exchange rate fluctuations on our net income.
The total impact of foreign currency exchange rate fluctuations on net operating revenues, including the effect of our hedging activities, was a decrease of 2% and 5% in 2025 and 2024, respectively. The total impact of foreign currency exchange rate fluctuations on operating income, including the effect of our hedging activities, was a decrease of 12% and 11% in 2025 and 2024, respectively.
Foreign currency exchange gains and losses are primarily the result of the remeasurement of monetary assets and liabilities from certain currencies into functional currencies. The effects of the remeasurement of these assets and liabilities are partially offset by the impact of our economic hedging program for certain exposures on our consolidated balance sheet. Refer to Note 5 of Notes to Consolidated Financial Statements. Foreign currency exchange gains and losses are recorded in the line item other income (loss) — net in our consolidated statement of income. Refer to the heading “Operations Review — Other Income (Loss) — Net” above. The Company recorded net foreign currency exchange losses of $48 million and $180 million during the years ended December 31, 2025 and 2024, respectively.
Impact of Inflation and Changing Prices
Inflation affects the way we operate in many markets around the world. In general, we believe that, over time, we will be able to increase prices to counteract the majority of the inflationary effects of increasing costs and to generate sufficient cash flows to maintain our productive capability.
