Item 3. Quantitative and Qualitative Disclosures About Market Risk
We have no material changes to the disclosures on this matter made in our Annual Report on Form 10-K for the year ended December 31, 2025.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of July 3, 2026.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the quarter ended July 3, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II. Other Information
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, could also materially adversely affect our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information with respect to purchases of common stock of the Company made during the three months ended July 3, 2026 by the Company or any “affiliated purchaser” of the Company as defined in Rule 10b-18(a)(3) under the Exchange Act:
Total Number of Shares Purchased as Part of the Publicly Announced Plan2
Maximum Number of Shares That May Yet Be Purchased Under the Publicly Announced Plan
April 4, 2026 through May 1, 2026
1,093,205
$76.63
1,085,577
60,981,263
May 2, 2026 through May 29, 2026
528,481
79.95
525,800
60,455,463
May 30, 2026 through July 3, 2026
772,808
80.23
770,349
59,685,114
Total
2,394,494
$78.53
2,381,726
1The total number of shares purchased includes: (1) shares purchased, if any, pursuant to the plan described in footnote 2 below and (2) shares surrendered, if any, 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.
2In February 2019, the Company publicly announced that our Board of Directors had authorized a plan (“2019 Plan”) for the Company to purchase up to 150 million shares of our common stock. This column discloses the number of shares purchased, if any, pursuant to the 2019 Plan during the indicated time periods (including shares purchased pursuant to the terms of preset trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act).
Item 5. Other Information
During the fiscal quarter ended July 3, 2026, none of our Directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
Item 6. Exhibits
In reviewing the agreements included as exhibits to this report, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements contain representations, warranties, covenants and conditions by or of each of the parties to the applicable agreement. These representations, warranties, covenants and conditions have been made solely for the benefit of the other parties to the applicable agreement and:
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
were made only as of the date of the applicable agreement, or such other date or dates as may be specified in the agreement, and are subject to more recent developments.
Accordingly, these representations, warranties, covenants and conditions may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this report and the Company’s other public filings, which are available without charge through the Securities and Exchange Commission’s website at http://www.sec.gov.
EXHIBIT INDEX
Exhibit No.
(With regard to applicable cross-references in the list of exhibits below, the Company’s Current, Quarterly and Annual Reports are filed with the Securities and Exchange Commission (“SEC”) under File No. 001-02217; and Coca-Cola Refreshments USA, LLC’s (formerly known as Coca-Cola Refreshments USA, Inc. and Coca-Cola Enterprises Inc.) Current, Quarterly and Annual Reports are filed with the SEC under File No. 001-09300.)
3.2 By-Laws of the Company, as amended and restated through October 19, 2023 — incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on October 20, 2023.
4.1 As permitted by the rules of the SEC, the Company has not filed certain instruments defining the rights of holders of long-term debt of the Company or consolidated subsidiaries under which the total amount of securities authorized does not exceed 10% of the total assets of the Company and its consolidated subsidiaries. The Company agrees to furnish to the SEC, upon request, a copy of any omitted instrument.
4.2 Amended and Restated Indenture, dated as of April 26, 1988, between the Company and Deutsche Bank Trust Company Americas, as successor to Bankers Trust Company, as trustee — incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 25, 2017.
4.3 First Supplemental Indenture, dated as of February 24, 1992, to Amended and Restated Indenture, dated as of April 26, 1988, between the Company and Deutsche Bank Trust Company Americas, as successor to Bankers Trust Company, as trustee — incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report onForm 8-K filed on May 25, 2017.
4.4 Second Supplemental Indenture, dated as of November 1, 2007, to Amended and Restated Indenture, dated as of April 26, 1988, as amended, between the Company and Deutsche Bank Trust Company Americas, as successor to Bankers Trust Company, as trustee — incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on May 25, 2017.
4.5 Form of Note for 1.875% Notes due 2026 — incorporated herein by reference to Exhibit 4.4 to the Company’s Registration Statement on Form 8-A filed on September 19, 2014.
4.6 Form of Note for 1.125% Notes due 2027 — incorporated herein by reference to Exhibit 4.7 to the Company’s Registration Statement on Form 8-A filed on March 6, 2015.
4.7 Form of Note for 1.625% Notes due 2035 — incorporated herein by reference to Exhibit 4.8 to the Company’s Registration Statement on Form 8-A filed on March 6, 2015.
4.8 Form of Note for 1.100% Notes due 2036 — incorporated herein by reference to Exhibit 4.4 to the Company’s Registration Statement on Form 8-A filed on September 2, 2016.
4.9 Form of Note for 2.900% Notes due 2027 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on May 25, 2017.
4.10 Form of Note for 0.750% Notes due 2026 — incorporated herein by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on March 8, 2019.
4.11 Form of Note for 1.250% Notes due 2031 — incorporated herein by reference to Exhibit 4.7 to the Company’s Current Report on Form 8-K filed on March 8, 2019.
4.12 Form of Note for 2.125% Notes due 2029 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on September 9, 2019.
4.13 Form of Note for 3.375% Notes due 2027 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on March 25, 2020.
4.14 Form of Note for 3.450% Notes due 2030 — incorporated herein by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on March 25, 2020.
4.15 Form of Note for 4.125% Notes due 2040 — incorporated herein by reference to Exhibit 4.7 to the Company’s Current Report on Form 8-K filed on March 25, 2020.
4.16 Form of Note for 4.200% Notes due 2050 — incorporated herein by reference to Exhibit 4.8 to the Company’s Current Report on Form 8-K filed on March 25, 2020.
4.17 Form of Note for 1.450% Notes due 2027 — incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on May 4, 2020.
4.18 Form of Note for 1.650% Notes due 2030 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on May 4, 2020.
4.19 Form of Note for 2.500% Notes due 2040 — incorporated herein by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on May 4, 2020.
4.20 Form of Note for 2.600% Notes due 2050 — incorporated herein by reference to Exhibit 4.7 to the Company’s Current Report on Form 8-K filed on May 4, 2020.
4.21 Form of Note for 2.750% Notes due 2060 — incorporated herein by reference to Exhibit 4.8 to the Company’s Current Report on Form 8-K filed on May 4, 2020.
4.22 Form of Note for 0.125% Notes due 2029 — incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on September 18, 2020.
4.23 Form of Note for 0.375% Notes due 2033 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on September 18, 2020.
4.24 Form of Note for 0.800% Notes due 2040 — incorporated herein by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on September 18, 2020.
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4.25 Form of Note for 1.000% Notes due 2028 — incorporated herein by reference to Exhibit 4.7 to the Company’s Current Report on Form 8-K filed on September 18, 2020.
4.26 Form of Note for 1.375% Notes due 2031 — incorporated herein by reference to Exhibit 4.8 to the Company’s Current Report on Form 8-K filed on September 18, 2020.
4.27 Form of Note for 2.500% Notes due 2051 — incorporated herein by reference to Exhibit 4.9 to the Company’s Current Report on Form 8-K filed on September 18, 2020.
4.28 Form of Note for 1.500% Notes due 2028 — incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on March 5, 2021.
4.29 Form of Note for 2.000% Notes due 2031 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on March 5, 2021.
4.30 Form of Note for 0.125% Notes due 2029 — incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on March 9, 2021.
4.31 Form of Note for 0.500% Notes due 2033 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on March 9, 2021.
4.32 Form of Note for 1.000% Notes due 2041 — incorporated herein by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on March 9, 2021.
4.33 Form of Note for 2.250% Notes due 2032 — incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on May 5, 2021.
4.34 Form of Note for 2.875% Notes due 2041 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on May 5, 2021.
4.35 Form of Note for 3.000% Notes due 2051 — incorporated herein by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on May 5, 2021.
4.36 Form of Note for 0.950% Notes due 2036 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on May 6, 2021.
4.37 Form of Note for 0.400% Notes due 2030 — incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on May 17, 2021.
4.38 Form of Note for 5.000% Notes due 2034 — incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on May 13, 2024.
4.39 Form of Note for 5.300% Notes due 2054 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on May 13, 2024.
4.40 Form of Note for 5.400% Notes due 2064 — incorporated herein by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on May 13, 2024.
4.41 Form of Note for 3.125% Notes due 2032 — incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on May 14, 2024.
4.42 Form of Note for 3.500% Notes due 2044 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on May 14, 2024.
4.43 Form of Note for 4.650% Notes due 2034 — incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on August 14, 2024.
4.44 Form of Note for 5.200% Notes due 2055 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on August 14, 2024.
4.45 Form of Note for 3.375% Notes due 2037 — incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on August 15, 2024.
4.46 Form of Note for 3.750% Notes due 2053 — incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on August 15, 2024.
4.47 Indenture, dated as of July 30, 1991, between Coca-Cola Refreshments USA, Inc. and Deutsche Bank Trust Company Americas, as trustee — incorporated herein by reference to Exhibit 4.1 to Coca-Cola Refreshments USA, Inc.’s Current Report on Form 8-K dated July 30, 1991.
4.48 First Supplemental Indenture, dated as of January 29, 1992, to the Indenture, dated as of July 30, 1991, between Coca-Cola Refreshments USA, Inc. and Deutsche Bank Trust Company Americas, as trustee — incorporated herein by reference to Exhibit 4.01 to Coca-Cola Refreshments USA, Inc.’s Current Report on Form 8-K dated January 29, 1992.
4.49 Second Supplemental Indenture, dated as of June 22, 2017, to the Indenture, dated as of July 30, 1991, as amended, among Coca-Cola Refreshments USA, Inc., the Company and Deutsche Bank Trust Company Americas, as trustee — incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on June 23, 2017.
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4.50 Third Supplemental Indenture, dated as of July 5, 2017, to the Indenture, dated as of July 30, 1991, as amended, among Coca-Cola Refreshments USA, Inc., the Company and Deutsche Bank Trust Company Americas, as trustee — incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on July 6, 2017.
10.1 The Coca-Cola Company Severance Pay Plan, as amended and restated effective January 1, 2026.
10.2 Letter, dated April 13, 2026, from the Company to Lisa Chang.
10.3 Letter, dated April 13, 2026, from the Company to Tapaswee Chandele.
10.4 Separation Agreement and Full and Complete Release and Agreement on Trade Secrets and Confidentiality between the Company and Jennifer Mann, dated June 25, 2026, incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 25, 2026.
31.1 Rule 13a-14(a)/15d-14(a) Certification, executed by Henrique Braun, Chief Executive Officer of The Coca-Cola Company.
31.2 Rule 13a-14(a)/15d-14(a) Certification, executed by John Murphy, President and Chief Financial Officer of The Coca-Cola Company.
32.1 Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350), executed by Henrique Braun, Chief Executive Officer of The Coca-Cola Company, and by John Murphy, President and Chief Financial Officer of The Coca-Cola Company.
(101) The following financial information from The Coca-Cola Company’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2026, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Statements of Income for the three and six months ended July 3, 2026 and June 27, 2025; (ii) Consolidated Statements of Comprehensive Income for the three and six months ended July 3, 2026 and June 27, 2025; (iii) Consolidated Balance Sheets as of July 3, 2026 and December 31, 2025; (iv) Consolidated Statements of Cash Flows for the six months ended July 3, 2026 and June 27, 2025; and (v) Notes to Consolidated Financial Statements.
(104) Cover Page Interactive Data File (the cover page XBRL tags are embedded within the iXBRL document and included in Exhibit 101).
Refer to Notes to Consolidated Financial Statements.
THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by U.S. GAAP for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K of The Coca-Cola Company for the year ended December 31, 2025. Certain other amounts in the prior year’s consolidated financial statements and notes have been revised to conform to the current year presentation.
When used in these notes, the terms “The Coca-Cola Company,” “Company,” “we,” “us” and “our” mean The Coca-Cola Company and all entities included in our consolidated financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended July 3, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. Sales of our ready-to-drink beverages are somewhat seasonal, with the second and third calendar quarters typically accounting for the highest sales volumes. The volume of sales in the beverage business may be affected by weather conditions.
Each of our quarterly reporting periods, other than the fourth quarter, ends on the Friday closest to the last day of the corresponding quarterly calendar period. The second quarter of 2026 and the second quarter of 2025 ended on July 3, 2026 and June 27, 2025, respectively. Our fourth quarter and our fiscal year end on December 31 regardless of the day of the week on which December 31 falls.
Advertising Costs
The Company’s accounting policy related to advertising costs for annual reporting purposes is to expense production costs of print, radio, television and other advertisements as of the first date the advertisements take place. All other marketing expenditures are expensed in the annual period in which the expenditure is incurred.
For quarterly reporting purposes, we allocate our estimated full year marketing expenditures that benefit multiple quarters to each of those quarters. We use the proportion of each quarter’s actual unit case volume to the estimated full year unit case volume as the basis for the allocation. This methodology results in our marketing expenditures being recognized at a standard rate per unit case. At the end of each quarter, we review our estimated full year unit case volume and our estimated full year marketing expenditures that benefit multiple quarters in order to evaluate if a change in estimate is necessary. The impact of any change in the full year estimate is recognized in the quarter in which the change in estimate occurs. Our full year marketing expenditures are not impacted by this interim accounting policy.
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
We classify time deposits and other investments that are highly liquid and have maturities of three months or less at the date of purchase as cash equivalents or restricted cash equivalents, as applicable. Restricted cash and restricted cash equivalents generally consist of amounts held by our captive insurance companies, which are included in the line item other noncurrent assets in our consolidated balance sheet, and when applicable, cash and cash equivalents related to assets held for sale are included in the line item assets held for sale in our consolidated balance sheet. We manage our exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties and procedures to monitor our concentrations of credit risk. Refer to Note 2 for additional information on our assets held for sale and Note 4 for additional information on our captive insurance companies.
The following tables provide a summary of cash, cash equivalents, restricted cash and restricted cash equivalents that constitute the total amounts shown in our consolidated statements of cash flows (in millions):
Our Company’s acquisitions of businesses, equity method investments and nonmarketable securities totaled $199 million and $179 million during the six months ended July 3, 2026 and June 27, 2025, respectively. The activity during 2026 included additional investments of $112 million in an equity method investee in Japan. The activity during the six months ended July 3, 2026 and June 27, 2025 included $75 million and $148 million, respectively, of investments in alternative energy limited partnerships. Refer to Note 14 for additional information on these investments.
Divestitures
Proceeds from disposals of businesses, equity method investments and nonmarketable securities totaled $1 million and $973 million during the six months ended July 3, 2026 and June 27, 2025, respectively. In March 2025, the Company sold a portion of our ownership interest in Coca-Cola Europacific Partners plc (“CCEP”), an equity method investee, for which we received cash proceeds of $741 million and recognized a net gain of $331 million. In May 2025, the Company refranchised its bottling operations in certain territories in India that were held for sale as of December 31, 2024, for which we received net cash proceeds of $218 million and recognized a net gain of $102 million. These gains were recorded in the line item other income (loss) — net in our consolidated statement of income.
Assets and Liabilities Held for Sale
In October 2025, the Company entered into a definitive agreement to sell a portion of our interest in our bottling operations in Africa to Coca-Cola HBC AG (“CCHBC”), an equity method investee. Closing is subject to various regulatory approvals and is expected by the end of 2026, upon which we will deconsolidate these bottling operations. We have also agreed to a separate option arrangement for CCHBC to acquire the Company’s remaining 25% ownership interest within a six-year period from closing. As these operations met the criteria to be classified as held for sale, during the year ended December 31, 2025, we were required to record the related assets and liabilities at the lower of carrying value or fair value less any costs to sell based on the estimated proceeds. This resulted in an impairment charge of $1,274 million, primarily due to the negative net foreign currency translation adjustments that will be reclassified to income upon sale. During the three and six months ended July 3, 2026, we recorded a gain to reduce this impairment charge by $66 million and $56 million, respectively, based on management’s revised estimates. These amounts were recorded in the line item other income (loss) — net in our consolidated statements of income.
The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in our consolidated balance sheets (in millions):
The following tables present net operating revenues disaggregated between the United States and International and further by line of business (in millions):
Measurement Alternative — No Readily Determinable Fair Value
July 3, 2026
Marketable securities
$547
—
Other noncurrent assets
2,738
293
The calculation of net unrealized gains and losses recognized during the period related to equity securities still held at the end of the period is as follows (in millions):
1 The estimated fair value as of July 3, 2026 includes $2,056 million of Brazilian government bonds with a cost of $2,119 million and gross unrealized losses of $63 million and, as of December 31, 2025, includes $1,207 million of Brazilian government bonds with a cost of $1,255 million, gross unrealized gains of $1 million and gross unrealized losses of $49 million.
The carrying values of our debt securities were included in the following line items in our consolidated balance sheets (in millions):
The Company expects that actual maturities may differ from the contractual maturities above because borrowers have the right to call or prepay certain obligations.
The sale and/or maturity of available-for-sale debt securities resulted in the following realized activity (in millions):
In accordance with local insurance regulations, our consolidated captive insurance companies are required to meet and maintain minimum solvency capital requirements. The Company elected to invest a majority of its solvency capital in a portfolio of marketable equity and debt securities. These securities are included in the disclosures above. The Company uses one of our consolidated captive insurance companies to reinsure group annuity insurance contracts that cover the obligations of certain of our European and Canadian pension plans. This captive’s solvency capital funds included total equity and debt securities of million and million as of July 3, 2026 and December 31, 2025, respectively, which were classified in the line item other noncurrent assets in our consolidated balance sheets because the assets were not available to satisfy our current obligations.
NOTE 5: INVENTORIES
Inventories consisted of the following (in millions):
NOTE 6: HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS
The following table presents the fair values of the Company’s derivative instruments that were designated and qualified as part of a hedging relationship (in millions):
1All of the Company’s derivative instruments are carried at fair value in our consolidated balance sheets after considering the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. Current disclosure requirements mandate that derivatives must also be disclosed without reflecting the impact of master netting agreements and cash collateral. Refer to Note 15 for the net presentation of the Company’s derivative instruments.
2Refer to Note 15 for additional information related to the estimated fair value.
The following table presents the fair values of the Company’s derivative instruments that were not designated as hedging instruments (in millions):
1All of the Company’s derivative instruments are carried at fair value in our consolidated balance sheets after considering the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. Current disclosure requirements mandate that derivatives must also be disclosed without reflecting the impact of master netting agreements and cash collateral. Refer to Note 15 for the net presentation of the Company’s derivative instruments.
2Refer to Note 15 for additional information related to the estimated fair value.
Credit Risk Associated with Derivatives
We have established strict counterparty credit guidelines and enter into transactions only with financial institutions of investment grade or better. We monitor counterparty exposures regularly and review any downgrade in credit rating immediately. If a downgrade in the credit rating of a counterparty were to occur, we have provisions requiring collateral for substantially all of our transactions. To mitigate pre-settlement risk, minimum credit standards become more stringent as the duration of the derivative financial instrument increases. In addition, the Company’s master netting agreements reduce credit risk by permitting the Company to net settle for transactions with the same counterparty. To minimize the concentration of credit risk, we enter into derivative transactions with a portfolio of financial institutions. Furthermore, for certain derivative financial instruments, the Company has agreements with counterparties that require collateral to be exchanged based on changes in the fair value of the instruments. The Company classifies collateral payments and receipts as investing cash flows when the collateral account is in an asset position and as financing cash flows when the collateral account is in a liability position. As a result of these factors, we consider the risk of counterparty default to be minimal.
Cash Flow Hedging Strategy
The Company uses cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in foreign currency exchange rates, commodity prices or interest rates. The changes in the fair values of derivatives designated as cash flow hedges are recorded in accumulated other comprehensive income (loss) (“AOCI”) and are reclassified into the line item in our consolidated statement of income in which the hedged items are recorded in the same period the hedged items affect earnings. The changes in the fair values of hedges that are determined to be ineffective are immediately reclassified from AOCI into income. The maximum length of time for which the Company hedges its exposure to the variability in future cash flows is typically three years.
The Company maintains a foreign currency cash flow hedging program to reduce the risk that our U.S. dollar net cash inflows from sales outside the United States and U.S. dollar net cash outflows from procurement activities will be adversely affected by fluctuations in foreign currency exchange rates. We enter into forward contracts and purchase foreign currency options and collars (principally euro, British pound and Japanese yen) to hedge certain portions of forecasted cash flows denominated in foreign currencies. When the U.S. dollar strengthens against the foreign currencies, the decline in the present value of future foreign currency cash flows is partially offset by gains in the fair value of the derivative instruments. Conversely, when the U.S. dollar weakens, the increase in the present value of future foreign currency cash flows is partially offset by losses in the fair value of the derivative instruments. The total notional values of derivatives that were designated and qualified for the Company’s foreign currency cash flow hedging program were $10,536 million and $9,760 million as of July 3, 2026 and December 31, 2025, respectively.
The Company uses cross-currency swaps to hedge the changes in cash flows of certain of its foreign currency denominated debt and other monetary assets or liabilities due to fluctuations in foreign currency exchange rates. For this hedging program, the Company recognizes in earnings each period the changes in carrying values of these foreign currency denominated assets and liabilities due to fluctuations in exchange rates. The changes in fair values of the cross-currency swap derivatives are recorded in AOCI with an immediate reclassification into income for the changes in fair values attributable to fluctuations in foreign currency exchange rates. The total notional value of derivatives that were designated as cash flow hedges for the Company’s foreign currency denominated assets and liabilities was $557 million as of both July 3, 2026 and December 31, 2025.
The Company has entered into commodity futures contracts and other derivative instruments on various commodities to mitigate the price risk associated with forecasted purchases of materials used in our manufacturing process. These derivative instruments were designated as part of the Company’s commodity cash flow hedging program. The objective of this hedging program is to reduce the variability of cash flows associated with future purchases of certain commodities. The total notional values of derivatives that were designated and qualified for this program were $89 million and $53 million as of July 3, 2026 and December 31, 2025, respectively.
Our Company monitors our mix of short-term debt and long-term debt regularly. We manage our risk related to interest rate fluctuations through the use of derivative financial instruments. From time to time, the Company has entered into interest rate swap agreements and has designated these instruments as part of the Company’s interest rate cash flow hedging program. The objective of this hedging program is to mitigate the risk of adverse changes in benchmark interest rates on the Company’s future interest payments. The total notional values of derivatives that were designated and qualified for this program were $775 million and $1,786 million as of July 3, 2026 and December 31, 2025, respectively.
The following tables present the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on other comprehensive income (“OCI”), AOCI and income (in millions):
As of July 3, 2026, the Company estimates that it will reclassify into income during the next 12 months net losses of million from the pretax amount recorded in AOCI as the anticipated cash flows occur.
Fair Value Hedging Strategy
The Company uses interest rate swap agreements designated as fair value hedges to minimize exposure to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. The Company also uses cross-currency interest rate swaps to hedge the changes in the fair value of foreign currency denominated debt relating to fluctuations in foreign currency exchange rates and benchmark interest rates. The changes in the fair values of derivatives designated as fair value hedges and the offsetting changes in the fair values of the hedged items are recognized in earnings. As a result, any difference is reflected in earnings as ineffectiveness. When a derivative is no longer designated as a fair value hedge for any reason, including termination and maturity, the remaining unamortized difference between the carrying value of the hedged item at that
time and the face value of the hedged item is amortized to earnings over the remaining life of the hedged item, or immediately if the hedged item has matured or has been extinguished. The total notional values of derivatives that were designated and qualified as fair value hedges of this type were $13,441 million and $13,674 million as of July 3, 2026 and December 31, 2025, respectively.
The following table summarizes the pretax impact that changes in the fair values of derivatives designated as fair value hedges had on income (in millions):
Gain (Loss) Recognized in Income · Three Months EndedJuly 3,2026
Gain (Loss) Recognized in Income · Three Months EndedJune 27,2025
Gain (Loss) Recognized in Income · Six Months EndedJuly 3,2026
Gain (Loss) Recognized in Income · Six Months EndedJune 27,2025
Interest rate contracts
The following table summarizes the amounts recorded in our consolidated balance sheets related to hedged items in fair value hedging relationships (in millions):
Cumulative Amount of Fair Value Hedging Adjustments1 · Included in the Carrying Values of Hedged ItemsJuly 3,2026
Cumulative Amount of Fair Value Hedging Adjustments1 · Included in the Carrying Values of Hedged ItemsDecember 31,2025
Cumulative Amount of Fair Value Hedging Adjustments1 · Remaining for Which Hedge Accounting Has Been Discontinued
1Cumulative amount of fair value hedging adjustments does not include changes due to foreign currency exchange rate fluctuations.
Hedges of Net Investments in Foreign Operations Strategy
The Company uses forward contracts and a portion of its foreign currency denominated debt, a non-derivative financial instrument, to protect the value of our net investments in a number of foreign operations. In 2025, the Company changed its method for assessing the effectiveness of derivative financial instruments designated as net investment hedges to include only the changes in fair value attributable to changes in foreign currency spot rates. The changes in the fair values of the effective portion of the derivative financial instruments are recognized in net foreign currency translation adjustments, a component of AOCI, to offset the changes in the values of the net investments being hedged. The initial value, and subsequent changes in fair value of the excluded component, are amortized into earnings over the life of the hedging instrument. For non-derivative financial instruments that are designated and qualify as hedges of net investments in foreign operations, the changes in the carrying values of the designated portions of the non-derivative financial instruments due to fluctuations in foreign currency exchange rates are recorded in net foreign currency translation adjustments. Any ineffective portions of net investment hedges are reclassified from AOCI into income during the period of change.
The following table summarizes the notional values and pretax impact of changes in the fair values of instruments designated as net investment hedges (in millions):
Gain (Loss) Recognized in OCI · Three Months EndedJuly 3,2026
Gain (Loss) Recognized in OCI · Three Months EndedJune 27,2025
Gain (Loss) Recognized in OCI · Six Months EndedJuly 3,2026
The Company did not reclassify any gains or losses during the three and six months ended July 3, 2026, nor the three and six months ended June 27, 2025. The cash inflows and outflows associated with the Company’s derivative contracts designated as net investment hedges are classified in the line item other investing activities in our consolidated statement of cash flows.
Economic (Non-Designated) Hedging Strategy
In addition to derivative instruments that have been designated and qualify for hedge accounting, the Company also uses certain derivatives as economic hedges of foreign currency, interest rate and commodity exposure. Although these derivatives were not designated and/or did not qualify for hedge accounting, they are effective economic hedges. The changes in the fair values of economic hedges are immediately recognized in earnings.
The Company uses foreign currency economic hedges to offset the earnings impact that fluctuations in foreign currency exchange rates have on certain monetary assets and liabilities denominated in nonfunctional currencies. The changes in the fair values of economic hedges used to offset those monetary assets and liabilities are immediately recognized in earnings in the line item other income (loss) — net in our consolidated statement of income. In addition, we use foreign currency economic hedges to minimize the variability in cash flows associated with fluctuations in foreign currency exchange rates, including those related to certain acquisition and divestiture activities. The changes in the fair values of economic hedges used to offset the variability in U.S. dollar net cash flows are immediately recognized in earnings in the line items net operating revenues, cost of goods sold or other income (loss) — net in our consolidated statement of income, as applicable. The total notional values of derivatives related to our foreign currency economic hedges were $12,482 million and $9,744 million as of July 3, 2026 and December 31, 2025, respectively.
The Company also uses certain derivatives as economic hedges to mitigate the price risk associated with the purchase of materials used in the manufacturing process and vehicle fuel. The changes in the fair values of these economic hedges are immediately recognized in earnings in the line items net operating revenues, cost of goods sold, or selling, general and administrative expenses in our consolidated statement of income, as applicable. The total notional values of derivatives related to our economic hedges of this type were $716 million and $482 million as of July 3, 2026 and December 31, 2025, respectively.
The following tables present the pretax impact that changes in the fair values of derivatives not designated as hedging instruments had on income (in millions):
Gain (Loss)Recognized in Income · Six Months EndedJuly 3,2026
Gain (Loss)Recognized in Income · Six Months EndedJune 27,2025
Foreign currency contracts
Net operating revenues
$(65)
$(182)
Foreign currency contracts
Cost of goods sold
NOTE 7: SUPPLY CHAIN FINANCE PROGRAM
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. The SCF program is available to suppliers of goods and services included in cost of goods sold and selling, general and administrative expenses in our consolidated statement of income. The Company and our suppliers agree on contractual terms for the goods and services we procure, including prices, quantities and payment terms, regardless of whether
the supplier elects to participate in the SCF program. The suppliers sell goods or services, as applicable, to the Company and issue the associated invoices to the Company based on the agreed-upon contractual terms. Then, if they are participating in the SCF program, our suppliers sell their invoices to the financial institutions. Our suppliers’ voluntary participation in the SCF program has no bearing on our payment terms. No guarantees are provided by the Company or any of our subsidiaries under the SCF program. We have no economic interest in a supplier’s decision to participate in the SCF program, and we have no direct financial relationship with the financial institutions, as it relates to the SCF program. Accordingly, amounts due to our suppliers that elected to participate in the SCF program are included in the line item accounts payable and accrued expenses and liabilities held for sale in our consolidated balance sheet, as applicable. All activity related to amounts due to suppliers that elected to participate in the SCF program is reflected within the operating activities section of our consolidated statement of cash flows. As of July 3, 2026 and December 31, 2025, the amount of obligations outstanding that the Company has confirmed as valid to the financial institutions under the SCF program was million and million, respectively. As of July 3, 2026 and December 31, 2025, these amounts included $22 million and $37 million, respectively, of confirmed obligations outstanding related to our bottling operations in Africa that are currently held for sale. Refer to Note 2.
NOTE 8: DEBT AND BORROWING ARRANGEMENTS
Loans and notes payable consist primarily of commercial paper issued in the United States. As of December 31, 2025, we had million in outstanding commercial paper borrowings. We had no outstanding commercial paper borrowings as of July 3, 2026.
NOTE 9: COMMITMENTS AND CONTINGENCIES
Guarantees
As of July 3, 2026, we were contingently liable for guarantees of indebtedness owed by third parties of million, of which $61 million was related to variable interest entities. Our guarantees are primarily related to third-party customers, bottlers and vendors and have arisen through the normal course of business. These guarantees have various terms, and none of these guarantees is individually significant. These amounts represent the maximum potential future payments that we could be required to make under the guarantees. However, management has concluded that the likelihood of any significant amounts being paid by our Company under these guarantees is remote.
Concentrations of Credit Risk
We believe our exposure to concentrations of credit risk is limited due to the diverse geographic areas covered by our operations.
Legal Contingencies
The Company is involved in various legal proceedings. We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated. Management has also identified certain other legal matters where we believe an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made. Management believes that the total liabilities of the Company that may arise as a result of currently pending legal proceedings (excluding tax audit claims) will not have a material adverse effect on the Company taken as a whole.
Tax Audits
The Company is involved in various tax matters, with respect to some of which the outcome is uncertain. These uncertain tax matters may result in the assessment of additional taxes.
On September 17, 2015, the Company received a Statutory Notice of Deficiency (“Notice”) from the United States Internal Revenue Service (“IRS”) seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets.
The Notice concerned the Company’s transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm’s-length pricing of transactions between related parties such as the Company’s U.S. parent and its foreign affiliates.
To resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm’s-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in a closing agreement resolving that dispute (“Closing Agreement”). The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company’s income taxes going forward, the Company would not be assessed
penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years.
The IRS audited and confirmed the Company’s compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006.
The September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so.
The IRS designated the Company’s matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS’ designation of the Company’s matter for litigation, the Company was forced to either accept the IRS’ newly imposed tax assessment and pay the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS’ litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.
The Company consequently initiated litigation by filing a petition in the U.S. Tax Court (“Tax Court”) in December 2015, challenging the tax adjustments enumerated in the Notice.
Prior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS’ potential tax adjustment by $138 million.
The trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.
On November 18, 2020, the Tax Court issued an opinion (“Opinion”) in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. On November 8, 2023, the Tax Court issued a supplemental opinion (together with the original Tax Court opinion, “Opinions”), siding with the IRS in concluding both that 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 3M Co. & Subs. v. Commissioner (February 9, 2023) (“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 Internal Revenue Code (“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.
The Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company’s foreign licensees to increase the Company’s U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its claims on appeal and vigorously defend its positions. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company continues to evaluate the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled Chevron U.S.A., Inc. v. NRDC (“Chevron case”). Since 1984, the Chevron case had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by the Chevron case.
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 those invoices (“IRS Tax Litigation Deposit”) on September 10, 2024, which stopped 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 three and six months ended July 3, 2026, the Company recorded net interest income of $43 million and $98 million, respectively, related to this tax payment. For the three and six months ended June 27, 2025, the Company recorded net interest income of $54 million and $107 million, respectively, related
to this tax payment. These amounts were recorded 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 July 3, 2026 and December 31, 2025. 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 U.S. Court of Appeals for the Eleventh Circuit heard the case on June 25, 2026.
In determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company’s tax positions, that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the methodology asserted by the IRS and affirmed in the Opinions (“Tax Court Methodology”), that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company’s tax. As a result of this analysis, we recorded a tax reserve of million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company’s analysis.
The Company’s conclusion that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal is unchanged as of July 3, 2026. However, based on the required probability analysis and the accrual of interest through the current reporting period, we updated our tax reserve as of July 3, 2026 to million.
While the Company strongly disagrees with the IRS’ positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the 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 $514 million as of July 3, 2026. Additionally, the Company would likely be subject to significant additional liabilities for subsequent years, which could have a material adverse impact on the Company’s financial position, results of operations and cash flows.
The Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions for the 2010 through 2025 tax years, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2025. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate remaining incremental tax and interest liability for the tax years 2010 through 2025 could be approximately billion as of December 31, 2025. Additional income tax and interest on any unpaid 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. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended July 3, 2026 would increase the potential aggregate incremental tax and interest liability by approximately $450 million and $900 million, respectively. We currently project the continued application of the Tax Court Methodology in 2026, assuming similar facts and circumstances as of December 31, 2025 and reflecting changes enacted under the One Big Beautiful Bill Act effective in 2026, would result in an incremental annual tax liability that would increase the Company’s effective tax rate by approximately %.
Risk Management Programs
The Company has numerous global insurance programs in place to help protect the Company from the risk of loss. In general, we are self-insured for large portions of many different types of claims; however, we do use commercial insurance above our self-insured retentions to reduce the Company’s risk of catastrophic loss. Our reserves for the Company’s self-insured losses are estimated using actuarial methods and assumptions of the insurance industry, adjusted for our specific expectations based on our claims history. Our self-insurance reserves totaled million and million as of July 3, 2026 and December 31, 2025, respectively.
NOTE 10: OTHER COMPREHENSIVE INCOME
AOCI attributable to shareowners of The Coca-Cola Company is separately presented in our consolidated balance sheet as a component of shareowners’ equity, which also includes our proportionate share of equity method investees’ AOCI. OCI attributable to noncontrolling interests is allocated to, and included in, our consolidated balance sheet as part of the line item equity attributable to noncontrolling interests.
AOCI attributable to shareowners of The Coca-Cola Company consisted of the following, net of tax (in millions):
Unrealized net gains (losses) on available-for-sale debt securities
(40)
(26)
Adjustments to pension and other postretirement benefit liabilities
The following table summarizes the allocation of total comprehensive income between shareowners of The Coca-Cola Company and noncontrolling interests (in millions):
1Refer to Note 6 for additional information related to the net gains or losses on derivative instruments.
2Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.
The following tables present OCI attributable to shareowners of The Coca-Cola Company, including our proportionate share of equity method investees’ OCI (in millions):
1Refer to Note 6 for additional information related to the net gains or losses on derivative instruments.
2Refer to Note 4 for additional information related to the net unrealized gains or losses on available-for-sale debt securities.
The following table presents the amounts and line items in our consolidated statements of income where adjustments reclassified from AOCI into income were recorded (in millions):
Amount Reclassified from AOCIinto IncomeThree Months Ended July 3, 2026
Amount Reclassified from AOCIinto IncomeSix Months Ended July 3, 2026
Derivatives:
Foreign currency contracts
NOTE 11: CHANGES IN EQUITY
The following tables provide a reconciliation of the beginning and ending carrying amounts of total equity, equity attributable to shareowners of The Coca-Cola Company and equity attributable to noncontrolling interests (in millions):
Shareowners of The Coca-Cola CompanyReinvested Earnings
Shareowners of The Coca-Cola CompanyAccumulated Other Comprehensive Income (Loss)
Shareowners of The Coca-Cola CompanyCommon Stock
Shareowners of The Coca-Cola CompanyCapital Surplus
Shareowners of The Coca-Cola Company
NOTE 12: SIGNIFICANT OPERATING AND NONOPERATING ITEMS
Other Operating Charges
During the three months ended July 3, 2026, the Company recorded other operating charges of million. These charges consisted of $9 million related to an indemnification agreement entered into as a part of the refranchising of certain of our bottling operations, million related to North America modernization initiatives, million related to tax litigation expense and $3 million for the amortization of noncompete agreements related to the BA Sports Nutrition, LLC (“BodyArmor”) acquisition in 2021.
During the six months ended July 3, 2026, the Company recorded other operating charges of million. These charges consisted of $19 million related to an indemnification agreement entered into as a part of the refranchising of certain of our bottling operations, million related to North America modernization initiatives, million related to tax litigation expense and $7 million for the amortization of noncompete agreements related to the BodyArmor acquisition.
During the three months ended June 27, 2025, the Company recorded other operating charges of million. These charges primarily included million related to the impairment of a trademark in Latin America, $28 million related to the Company’s productivity and reinvestment program, $7 million of transaction costs related to the refranchising of our bottling operations in certain territories in India, $4 million for the amortization of noncompete agreements related to the BodyArmor acquisition and million related to tax litigation expense.
During the six months ended June 27, 2025, the Company recorded other operating charges of million. These charges consisted of $47 million related to the remeasurement of our contingent consideration liability to fair value in conjunction with our acquisition of fairlife, LLC (“fairlife”) in 2020, which brought the total liability to $6,173 million and was paid in March 2025. Additionally, other operating charges included $39 million related to the Company’s productivity and reinvestment program, million related to the impairment of a trademark in Latin America, $8 million related to an indemnification agreement entered into as a part of the refranchising of certain of our bottling operations, $7 million for the amortization of noncompete agreements related to the BodyArmor acquisition, $7 million of transaction costs related to the refranchising of our bottling operations in certain territories in India and million related to tax litigation expense.
Refer to Note 2 for additional information on the refranchising of our bottling operations in certain territories in India. Refer to Note 9 for additional information on the tax litigation. Refer to Note 15 for additional information on the impairment charge.
Other Nonoperating Items
Equity Income (Loss) — Net
During the three and six months ended July 3, 2026, the Company recorded a net benefit of million and a net charge of million, respectively. During the three and six months ended June 27, 2025, the Company recorded net charges of million and million, respectively. These amounts represent the Company’s proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees.
Other Income (Loss) — Net
During the three months ended July 3, 2026, the Company recognized a net gain of million related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities. The Company also recorded a reduction in the previously recorded impairment charge of million related to our bottling operations in Africa, which are held for sale. This reduction is based on management’s revised estimates.
During the six months ended July 3, 2026, the Company recognized a net gain of million related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities. The Company also recorded a reduction in the previously recorded impairment charge of million related to our bottling operations in Africa, which are held for sale. This reduction is based on management’s revised estimates.
During the three months ended June 27, 2025, the Company recognized a net gain of 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 $102 million related to the refranchising of our bottling operations in certain territories in India, an other-than-temporary impairment charge of million related to an equity method investee in Latin America and a charge of million related to assets held for sale.
During the six months ended June 27, 2025, the Company recognized a gain of $331 million related to the sale of a portion of our ownership interest in CCEP, a net gain of million related to realized and unrealized gains and losses on equity securities and trading debt securities as well as realized gains and losses on available-for-sale debt securities and a gain of $102 million related to the refranchising of our bottling operations in certain territories in India. The Company also recorded other-than-temporary impairment charges of $40 million related to an equity method investee in Latin America and $25 million related to a joint venture in Latin America, as well as a charge of million related to assets held for sale, and charges of $25 million and $11 million for special termination benefits and a curtailment loss, respectively, related to non-U.S. pension activity.
Refer to Note 2 for additional information on our bottling operations in Africa and our divestiture activities. Refer to Note 4 for additional information on equity and debt securities. Refer to Note 13 for additional information on the non-U.S. pension curtailment and special termination benefits. Refer to Note 15 for additional information on the impairment charges.
NOTE 13: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
Net periodic benefit cost or income for our pension and other postretirement benefit plans consisted of the following (in millions):
Other Postretirement Benefit Plans · Three Months EndedJuly 3,2026
Other Postretirement Benefit Plans · Three Months EndedJune 27,2025
Service cost
$26
1The weighted-average expected long-term rates of return on plan assets used in computing 2026 net periodic benefit cost (income) were 6.25% for pension plans and 6.75% for other postretirement benefit plans.
Other Postretirement Benefit Plans · Six Months EndedJuly 3,2026
Other Postretirement Benefit Plans · Six Months EndedJune 27,2025
Service cost
$52
$51
1The weighted-average expected long-term rates of return on plan assets used in computing 2026 net periodic benefit cost (income) were 6.25% for pension plans and 6.75% for other postretirement benefit plans.
2The curtailment loss and special termination benefits were primarily related to the benefit uplifts provided by the Company to active participants pursuant to the group annuity purchase (“buy-in”) for a non-U.S. defined benefit plan. The Company intends to convert the buy-in to a buy-out in the future, at which time the insurer would assume full responsibility for the plan obligations.
All of the amounts in the tables above, other than service cost, were recorded in the line item other income (loss) — net in our consolidated statements of income. During the six months ended July 3, 2026, the Company contributed million to our pension trusts. We anticipate making additional contributions of approximately million during the remainder of 2026. The Company contributed million to our pension trusts, offset by a $331 million transfer of surplus non-U.S. plan assets from pension trusts to general assets of the Company during the six months ended June 27, 2025.
NOTE 14: INCOME TAXES
The Company recorded income taxes of million (% effective tax rate) and million (% effective tax rate) during the three months ended July 3, 2026 and June 27, 2025, respectively. The Company recorded income taxes of million (% effective tax rate) and million (% effective tax rate) during the six months ended July 3, 2026 and June 27, 2025, respectively.
The Company’s effective tax rates for the three and six months ended July 3, 2026 and June 27, 2025 vary from the statutory U.S. federal tax rate of %, primarily due to the tax impact of significant operating and nonoperating items, as described in Note 12, along with the tax benefits of having significant earnings generated outside of the United States and significant earnings generated in investments accounted for under the equity method, both of which are generally taxed at rates lower than the statutory U.S. federal tax rate.
The Company’s effective tax rates for the three and six months ended July 3, 2026 included $40 million and $319 million, respectively, of net tax benefits related to various discrete tax items, including net interest income of $43 million and $98 million, respectively, related to the IRS Tax Litigation Deposit recorded in the line item income taxes in our consolidated statements of income, in accordance with our accounting policy. The Company’s effective tax rates for the three and six months ended July 3, 2026 also included net tax expense of million and a net tax benefit of million, respectively, primarily related to return to provision adjustments.
The Company’s effective tax rates for the three and six months ended June 27, 2025 included $12 million and $155 million, respectively, of net tax benefits related to various discrete tax items, including net interest income of $54 million and $107 million, respectively, related to the IRS Tax Litigation Deposit recorded in the line item income taxes in our consolidated statements of income, in accordance with our accounting policy. The Company’s effective tax rate for the six months ended June 27, 2025 also included a tax benefit of million related to a change in the Company’s indefinite reinvestment assertion for certain foreign entities.
During the six months ended July 3, 2026, the Company invested $75 million in limited partnerships that receive tax credits and other tax benefits by constructing, owning and operating alternative energy generation facilities. During the three and six months ended July 3, 2026, the Company received tax credits and other income tax benefits of $2 million and $5 million, respectively, and recognized amortization expense of million and million, respectively, related to all of our investments of this nature. The amount of non-income tax-related activity and other returns related to these investments was not material during the three and six months ended July 3, 2026.
During the six months ended June 27, 2025, the Company invested $148 million in limited partnerships that receive tax credits and other tax benefits by constructing, owning and operating alternative energy generation facilities. During the three and six months ended June 27, 2025, the Company received tax credits and other income tax benefits of $146 million and $155 million, respectively, and recognized amortization expense of million and million, respectively, related to all of our investments of this nature. The amount of non-income tax-related activity and other returns related to these investments was not material during the three and six months ended June 27, 2025.
As of July 3, 2026 and December 31, 2025, the carrying values of these investments were million and million, respectively. The Company recorded million and million of unfunded commitments related to these investments in the line item accounts payable and accrued expenses in our consolidated balance sheets as of July 3, 2026 and December 31, 2025, respectively.
We are currently in litigation with the IRS for tax years 2007 through 2009. Refer to Note 9.
NOTE 15: FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The following tables summarize assets and liabilities measured at fair value on a recurring basis (in millions):
1Refer to Note 4 for additional information related to the composition of our equity securities with readily determinable values and debt securities.
2Refer to Note 6 for additional information related to the composition of our derivatives portfolio.
3Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 4.
4Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle net positive and negative positions and also cash collateral held or placed with the same counterparties. There were no amounts subject to legally enforceable master netting agreements that management has chosen not to offset or that do not meet the offsetting requirements. Refer to Note 6.
5The Company is obligated to return million in cash collateral it has netted against its derivative position.
6The Company has the right to reclaim million in cash collateral it has netted against its derivative position.
7The Company’s derivative financial instruments were recorded at fair value in our consolidated balance sheet as follows: $5 million in the line item assets held for sale, $100 million in the line item other noncurrent assets, $4 million in the line item liabilities held for sale and $8 million in the line item other noncurrent liabilities. Refer to Note 6 for additional information related to the composition of our derivatives portfolio.
1Refer to Note 4 for additional information related to the composition of our equity securities with readily determinable values and debt securities.
2Refer to Note 6 for additional information related to the composition of our derivatives portfolio.
3Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 4.
4Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle net positive and negative positions and also cash collateral held or placed with the same counterparties. There were no amounts subject to legally enforceable master netting agreements that management has chosen not to offset or that do not meet the offsetting requirements. Refer to Note 6.
5The Company was obligated to return million in cash collateral it had netted against its derivative position.
6The Company had the right to reclaim million in cash collateral it had netted against its derivative position.
7The Company’s derivative financial instruments were recorded at fair value in our consolidated balance sheet as follows: $3 million in the line item assets held for sale, $35 million in the line item other noncurrent assets, $5 million in the line item liabilities held for sale and $90 million in the line item other noncurrent liabilities. Refer to Note 6 for additional information related to the composition of our derivatives portfolio.
Gross realized and unrealized gains and losses on Level 3 assets and liabilities were not significant for the three and six months ended July 3, 2026. Gross realized and unrealized gains and losses on Level 3 assets and liabilities, excluding the
remeasurement of the fairlife contingent consideration liability, were not significant for the three and six months ended June 27, 2025. Refer to Note 12 for additional information on the fairlife contingent consideration liability.
The Company recognizes transfers between levels within the hierarchy as of the beginning of the reporting period. Gross transfers between levels within the hierarchy were not significant for the three and six months ended July 3, 2026 and June 27, 2025.
Nonrecurring Fair Value Measurements
The gains and losses on assets measured at fair value on a nonrecurring basis are summarized in the following table (in millions):
1During the three and six months ended July 3, 2026, the Company recorded a reduction in the previously recorded impairment charge of million and million, respectively, related to our bottling operations in Africa, which are held for sale, based on Level 3 inputs. These gains were recorded in the line item other income (loss) — net in our consolidated statements of income. Refer to Note 2.
2The Company is required to record assets and liabilities that are held for sale at the lower of carrying value or fair value less any costs to sell based on the agreed-upon sale price. During the three and six months ended June 27, 2025, the Company recorded a charge of million in the line item other income (loss) — net in our consolidated statements of income. This charge was due to the write-down of assets held for sale related to the refranchising of certain bottling operations in Ghana. This charge, which was calculated based on Level 3 inputs, primarily impacted the line item property, plant and equipment in our consolidated balance sheet.
3During the three and six months ended June 27, 2025, the Company recorded an other-than-temporary impairment charge of $40 million related to an equity method investee in Latin America. This impairment charge was derived using Level 3 inputs and was primarily driven by revised projections of future operating results. This charge was recorded in the line item other income (loss) — net in our consolidated statements of income.
4During the three and six months ended June 27, 2025, the Company recorded an asset impairment charge of million related to a trademark in Latin America. This impairment charge was derived using Level 3 inputs and was primarily driven by revised projections of future operating results and changes in macroeconomic conditions. This charge was recorded in the line item other operating charges in our consolidated statements of income. The remaining carrying value of the trademark is $55 million.
5During the six months ended June 27, 2025, the Company recorded an other-than-temporary impairment charge of $25 million related to a joint venture in Latin America. This impairment charge was derived using Level 3 inputs and was due to the joint venture’s restructuring and planned liquidation. This charge was recorded in the line item other income (loss) — net in our consolidated statement of income.
Other Fair Value Disclosures
The carrying values of cash and cash equivalents, short-term investments, trade accounts receivable, accounts payable and accrued expenses, and loans and notes payable approximate their fair values because of the relatively short-term maturities of these financial instruments. The fair value of our long-term debt is estimated using Level 2 inputs based on quoted prices for those instruments. Where quoted prices are not available, the fair value is estimated using discounted cash flows and market-based expectations for interest rates, credit risk and the contractual terms of the debt instruments. As of July 3, 2026, the carrying value and fair value of our long-term debt, including the current portion, were million and million, respectively. As of December 31, 2025, the carrying value and fair value of our long-term debt, including the current portion, were million and million, respectively.
NOTE 16: OPERATING SEGMENTS
Our organizational structure consists of the following operating segments: Europe, Middle East and Africa (“EMEA”), Latin America, North America, Asia Pacific, and Bottling Investments. Information about our Company’s operations by operating segment and Corporate is as follows (in millions):
Effective March 31, 2026, our Company’s chief operating decision maker (“CODM”) is our Chief Executive Officer. Information about total assets by segment is not disclosed because such information is not regularly provided to, or used by, our CODM.
During the three and six months ended July 3, 2026 and June 27, 2025, our operating segments and Corporate were impacted by acquisition and divestiture activities. Refer to Note 2. Additionally, during the three and six months ended July 3, 2026 and June 27, 2025, our operating segments and Corporate were impacted by certain significant operating and nonoperating items. Refer to Note 12.
Selling, general and administrative expenses
Other operating charges
Operating Income
Interest income
Interest expense
Equity income (loss) — net
Other income (loss) — net
Income Before Income Taxes
Income taxes
Consolidated Net Income
Less: Net income (loss) attributable to noncontrolling interests
()
()
Net Income Attributable to Shareowners of The Coca-Cola Company
Basic Net Income Per Share1
Diluted Net Income Per Share1
Average Shares Outstanding — Basic
Effect of dilutive securities
Average Shares Outstanding — Diluted
Other Comprehensive Income:
Net foreign currency translation adjustments
Net gains (losses) on derivatives
()
()
Net change in unrealized gains (losses) on available-for-sale debt securities
()
()
Net change in pension and other postretirement benefit liabilities
Total Comprehensive Income
Less: Comprehensive income (loss) attributable to noncontrolling interests
Total Comprehensive Income Attributable to Shareowners of The Coca-Cola Company
Short-term investments
Total Cash, Cash Equivalents and Short-Term Investments
Marketable securities
Trade accounts receivable, less allowances of and , respectively
Inventories
Prepaid expenses and other current assets
Assets held for sale
Total Current Assets
Equity method investments
Deferred income tax assets
Property, plant and equipment, less accumulated depreciation of and , respectively
Trademarks with indefinite lives
Goodwill
Other noncurrent assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued expenses
Loans and notes payable
Current maturities of long-term debt
Accrued income taxes
Liabilities held for sale
Total Current Liabilities
Long-term debt
Other noncurrent liabilities
Deferred income tax liabilities
The Coca-Cola Company Shareowners’ Equity
Common stock, par value; authorized — shares; issued — shares
Capital surplus
Reinvested earnings
Accumulated other comprehensive income (loss)
()
()
Treasury stock, at cost — and shares, respectively
()
()
Equity Attributable to Shareowners of The Coca-Cola Company
Equity attributable to noncontrolling interests
Total Equity
Total Liabilities and Equity
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation expense
Deferred income taxes
Equity (income) loss — net of dividends
()
()
Foreign currency adjustments
Significant (gains) losses — net
()
()
Other operating charges
Other items
()
Net change in operating assets and liabilities
()
()
Net Cash Provided by (Used in) Operating Activities
()
Investing Activities
Purchases of investments
()
()
Proceeds from disposals of investments
Acquisitions of businesses, equity method investments and nonmarketable securities
(199)
(179)
Proceeds from disposals of businesses, equity method investments and nonmarketable securities
1
973
Purchases of property, plant and equipment
()
()
Proceeds from disposals of property, plant and equipment
Collateral (paid) received associated with hedging activities — net
()
Other investing activities
Net Cash Provided by (Used in) Investing Activities
()
Financing Activities
Issuances of loans, notes payable and long-term debt
Payments of loans, notes payable and long-term debt
()
()
Issuances of stock
Purchases of stock for treasury
()
()
Dividends
()
()
Other financing activities
()
()
Net Cash Provided by (Used in) Financing Activities
()
Effect of Exchange Rate Changes on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
85
332
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the period
()
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents at End of Period
Less: Restricted cash and restricted cash equivalents at end of period
Cash and Cash Equivalents at End of Period
Cash, cash equivalents, restricted cash and restricted cash equivalents
Cash, cash equivalents, restricted cash and restricted cash equivalents
Inventories
Prepaid expenses and other current assets
Equity method investments
Deferred income tax assets
Property, plant and equipment — net
Trademarks with indefinite lives
Goodwill
Other noncurrent assets
Allowance for reduction of assets held for sale
()
()
Assets held for sale
Accounts payable and accrued expenses
Loans and notes payable
Current maturities of long-term debt
Accrued income taxes
Long-term debt
Other noncurrent liabilities
Deferred income tax liabilities
Liabilities held for sale
Total
Three Months Ended June 27, 2025
Concentrate operations
Finished product operations
Total
Total
Six Months Ended June 27, 2025
Concentrate operations
Finished product operations
Total
Total equity securities
December 31, 2025
Marketable securities
$489
—
Other noncurrent assets
2,100
44
Total equity securities
()
Net unrealized gains (losses) recognized during the period related to equity securitiesstill held at the end of the period
Net unrealized gains (losses) recognized during the period related to equity securitiesstill held at the end of the period
$1
—
Available-for-sale securities1
()
Total debt securities
$21
$(81)
December 31, 2025
Trading securities
$1
—
Available-for-sale securities1
()
Total debt securities
$24
$(65)
$50
$1,395
Other noncurrent assets
—
379
—
379
Total debt securities
$49
$2,625
$50
$1,774
After 5 years through 10 years
After 10 years
Total
$3
Gross losses
()
()
()
()
Proceeds
Other
Total inventories
$168
$125
Foreign currency contracts
Other noncurrent assets
41
31
Commodity contracts
Prepaid expenses and other current assets
17
—
Interest rate contracts
Other noncurrent assets
132
142
Total assets
$358
$298
Liabilities:
Foreign currency contracts
Accounts payable and accrued expenses
$100
$205
Foreign currency contracts
Other noncurrent liabilities
22
28
Commodity contracts
Accounts payable and accrued expenses
—
9
Interest rate contracts
Accounts payable and accrued expenses
26
17
Interest rate contracts
Other noncurrent liabilities
692
700
Total liabilities
$840
$959
$139
$115
Foreign currency contracts
Other noncurrent assets
24
18
Commodity contracts
Prepaid expenses and other current assets
34
7
Commodity contracts
Other noncurrent assets
2
—
Commodity contracts
Assets held for sale
4
3
Other derivative instruments
Prepaid expenses and other current assets
8
—
Total assets
$211
$143
Liabilities:
Foreign currency contracts
Accounts payable and accrued expenses
$111
$66
Foreign currency contracts
Other noncurrent liabilities
25
5
Foreign currency contracts
Liabilities held for sale
3
5
Commodity contracts
Accounts payable and accrued expenses
18
10
Commodity contracts
Other noncurrent liabilities
5
1
Commodity contracts
Liabilities held for sale
1
1
Other derivative instruments
Accounts payable and accrued expenses
—
2
Total liabilities
$163
$90
Interest expense
(1)
Foreign currency contracts
6
Other income (loss) — net
(3)
Commodity contracts
58
Cost of goods sold
25
Interest rate contracts
1
Interest expense
(1)
Total
$28
$(40)
Three Months Ended June 27, 2025
Foreign currency contracts
$(501)
Net operating revenues
$(69)
Foreign currency contracts
(11)
Cost of goods sold
1
Foreign currency contracts
—
Interest expense
(1)
Foreign currency contracts
41
Other income (loss) — net
44
Commodity contracts
(13)
Cost of goods sold
(5)
Interest rate contracts
(1)
Interest expense
—
Total
$(485)
$(30)
Interest expense
(2)
Foreign currency contracts
(3)
Other income (loss) — net
(15)
Commodity contracts
46
Cost of goods sold
30
Interest rate contracts
(1)
Interest expense
(2)
Total
$69
$(118)
Six Months Ended June 27, 2025
Foreign currency contracts
$(770)
Net operating revenues
$(28)
Foreign currency contracts
(18)
Cost of goods sold
4
Foreign currency contracts
—
Interest expense
(2)
Foreign currency contracts
37
Other income (loss) — net
68
Commodity contracts
(10)
Cost of goods sold
(2)
Interest rate contracts
(1)
Interest expense
(1)
Total
$(762)
$39
Interest expense
$38
$168
$(11)
$248
Fixed-rate debt
Interest expense
(40)
(170)
17
(246)
Net impact of fair value hedging instruments
$(2)
$(2)
$6
$2
July 3,2026
Cumulative Amount of Fair Value Hedging Adjustments1 · Remaining for Which Hedge Accounting Has Been DiscontinuedDecember 31,2025
Current maturities of long-term debt
$3,166
$1,491
$(20)
$(10)
$9
—
Long-term debt
9,715
11,648
(701)
(705)
72
97
Gain (Loss) Recognized in OCI · Six Months EndedJune 27,2025
Foreign currency contracts
$1,377
$1,067
$(9)
—
$(10)
$(1)
Foreign currency denominated debt
14,602
14,998
102
(1,139)
396
(1,744)
Total
$15,979
$16,065
$93
$(1,139)
$386
$(1,745)
29
58
Foreign currency contracts
Other income (loss) — net
33
67
Commodity contracts
Cost of goods sold
(35)
(10)
Other derivative instruments
Selling, general and administrative expenses
26
11
Total
$27
$15
35
79
Foreign currency contracts
Other income (loss) — net
58
96
Commodity contracts
Cost of goods sold
32
(6)
Other derivative instruments
Selling, general and administrative expenses
26
12
Total
$86
$(1)
(1,145)
(1,188)
Accumulated other comprehensive income (loss)
$(13,626)
$(14,131)
Other comprehensive income:
Net foreign currency translation adjustments
Net gains (losses) on derivatives1
131
—
Net change in unrealized gains (losses) on available-for-sale debt securities2
(14)
()
Net change in pension and other postretirement benefit liabilities
Total comprehensive income (loss)
Gains (losses) on intra-entity transactions that are of a long-term investment nature
(171)
—
(171)
Gains (losses) on net investment hedges arising during the period1
(22)
71
Net foreign currency translation adjustments
$394
$(51)
Derivatives:
Gains (losses) arising during the period
$(3)
Reclassification adjustments recognized in net income
(10)
30
Net gains (losses) on derivatives1
$73
$(13)
$60
Available-for-sale debt securities:
Unrealized gains (losses) arising during the period
$()
$()
Reclassification adjustments recognized in net income
1
Net change in unrealized gains (losses) on available-for-sale debt securities2
$(4)
$1
$(3)
Pension and other postretirement benefit liabilities:
Net pension and other postretirement benefit liabilities arising during the period
$()
$(2)
$()
Reclassification adjustments recognized in net income
22
()
Net change in pension and other postretirement benefit liabilities
$(7)
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola Company
$(70)
Gains (losses) on intra-entity transactions that are of a long-term investment nature
(661)
—
(661)
Gains (losses) on net investment hedges arising during the period1
(93)
293
Net foreign currency translation adjustments
$447
$(102)
Derivatives:
Gains (losses) arising during the period
$(13)
Reclassification adjustments recognized in net income
(29)
89
Net gains (losses) on derivatives1
$173
$(42)
$131
Available-for-sale debt securities:
Unrealized gains (losses) arising during the period
$()
$()
Reclassification adjustments recognized in net income
1
Net change in unrealized gains (losses) on available-for-sale debt securities2
$(19)
$5
$(14)
Pension and other postretirement benefit liabilities:
Net pension and other postretirement benefit liabilities arising during the period
$(3)
Reclassification adjustments recognized in net income
43
()
Net change in pension and other postretirement benefit liabilities
$(13)
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola Company
$(152)
Gains (losses) on intra-entity transactions that are of a long-term investment nature
1,901
—
1,901
Gains (losses) on net investment hedges arising during the period1
()
284
(855)
Net foreign currency translation adjustments
$857
$200
Derivatives:
Gains (losses) arising during the period
$()
$118
$()
Reclassification adjustments recognized in net income
(7)
23
Net gains (losses) on derivatives1
$(455)
$111
$(344)
Available-for-sale debt securities:
Unrealized gains (losses) arising during the period
$()
Net change in unrealized gains (losses) on available-for-sale debt securities2
$16
$(6)
$10
Pension and other postretirement benefit liabilities:
Net pension and other postretirement benefit liabilities arising during the period
$()
$4
$()
Reclassification adjustments recognized in net income
26
()
Net change in pension and other postretirement benefit liabilities
$(3)
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola Company
$302
Reclassification adjustments recognized in net income
()
Gains (losses) on intra-entity transactions that are of a long-term investment nature
2,911
—
2,911
Gains (losses) on net investment hedges arising during the period1
()
435
(1,310)
Net foreign currency translation adjustments
$1,303
$340
Derivatives:
Gains (losses) arising during the period
$()
$187
$()
Reclassification adjustments recognized in net income
()
10
(29)
Net gains (losses) on derivatives1
$(798)
$197
$(601)
Available-for-sale debt securities:
Unrealized gains (losses) arising during the period
$()
Reclassification adjustments recognized in net income
1
Net change in unrealized gains (losses) on available-for-sale debt securities2
$33
$(10)
$23
Pension and other postretirement benefit liabilities:
Net pension and other postretirement benefit liabilities arising during the period
$()
$14
$()
Reclassification adjustments recognized in net income
59
()
Net change in pension and other postretirement benefit liabilities
—
Other comprehensive income (loss) attributable to shareowners of The Coca-Cola Company
$527
Net operating revenues
$63
$134
Foreign currency and commodity contracts
Cost of goods sold
(28)
(35)
Foreign currency and interest rate contracts
Interest expense
2
4
Foreign currency contracts
Other income (loss) — net
3
15
Income before income taxes
Income taxes
(10)
(29)
Consolidated net income
$30
$89
Available-for-sale debt securities:
Sale of debt securities
Other income (loss) — net
$1
$1
Income before income taxes
Income taxes
Consolidated net income
$1
$1
Pension and other postretirement benefit liabilities:
Amortization of net actuarial loss (gain)
Other income (loss) — net
$22
$43
Income before income taxes
22
43
Income taxes
()
()
Consolidated net income
Treasury Stock
Non-controlling Interests
April 3, 2026
4,303
$82,026
$(14,040)
$1,760
$20,634
$(56,747)
Comprehensive income (loss)
—
4,425
414
—
—
—
Dividends paid/payable to shareowners of The Coca-Cola Company ($0.53 per share)
—
()
(2,282)
—
—
—
—
—
Dividends paid to noncontrolling interests
—
()
—
—
—
—
—
()
Purchases of treasury stock
()
()
—
—
—
—
(188)
—
Impact related to stock-based compensation plans
2
—
—
—
107
41
—
July 3, 2026
4,303
$84,169
$(13,626)
$1,760
$20,741
$(56,894)
Treasury Stock
Non-controlling Interests
December 31, 2025
4,302
$80,382
$(14,131)
$1,760
$20,581
$(56,423)
Comprehensive income (loss)
—
8,349
505
—
—
—
Dividends paid/payable to shareowners of The Coca-Cola Company ($1.06 per share)
—
()
(4,562)
—
—
—
—
—
Dividends paid to noncontrolling interests
—
()
—
—
—
—
—
()
Purchases of treasury stock
()
()
—
—
—
—
(549)
—
Impact related to stock-based compensation plans
8
—
—
—
160
78
—
July 3, 2026
4,303
$84,169
$(13,626)
$1,760
$20,741
$(56,894)
Treasury Stock
Non-controlling Interests
March 28, 2025
4,304
$77,189
$(16,482)
$1,760
$19,873
$(56,138)
Comprehensive income (loss)
—
3,810
724
—
—
—
Dividends paid/payable to shareowners of The Coca-Cola Company ($0.51 per share)
—
()
(2,196)
—
—
—
—
—
Dividends paid to noncontrolling interests
—
()
—
—
—
—
—
()
Contributions by noncontrolling interests
—
13
—
—
—
—
—
13
Purchases of treasury stock
()
()
—
—
—
—
(81)
—
Impact related to stock-based compensation plans
1
—
—
—
97
29
—
June 27, 2025
4,304
$78,803
$(15,758)
$1,760
$19,970
$(56,190)
Treasury Stock
Non-controlling Interests
December 31, 2024
4,302
$76,054
$(16,843)
$1,760
$19,801
$(55,916)
Comprehensive income (loss)
—
7,140
1,085
—
—
—
Dividends paid/payable to shareowners of The Coca-Cola Company ($1.02 per share)
—
()
(4,391)
—
—
—
—
—
Dividends paid to noncontrolling interests
—
()
—
—
—
—
—
()
Contributions by noncontrolling interests
—
13
—
—
—
—
—
13
Purchases of treasury stock
()
()
—
—
—
—
(360)
—
Impact related to stock-based compensation plans
7
—
—
—
169
86
—
June 27, 2025
4,304
$78,803
$(15,758)
$1,760
$19,970
$(56,190)
$25
—
$1
Interest cost
75
74
3
2
Expected return on plan assets1
(97)
(104)
(1)
(1)
Amortization of net actuarial loss (gain)
22
26
—
—
Net periodic benefit cost (income)
$26
$21
$2
$2
$1
$2
Interest cost
151
149
5
5
Expected return on plan assets1
(195)
(208)
(2)
(2)
Amortization of prior service cost (credit)
1
—
(1)
(1)
Amortization of net actuarial loss (gain)
43
51
—
—
Curtailment loss (gain)2
—
11
—
—
Special termination benefits2
—
25
—
—
Net periodic benefit cost (income)
$52
$79
$3
$4
Assets:
Equity securities with readily determinable values1
$2,427
$435
$70
$353
$
—
Debt securities1
—
2,674
—
—
—
Derivatives2
17
552
—
—
(464)
5
7
Total assets
$2,444
$3,661
$70
$353
$(464)
Liabilities:
Derivatives2
$
—
$1,003
$
—
$
—
$(991)
6
7
Total liabilities
$
—
$1,003
$
—
$
—
$(991)
Assets:
Equity securities with readily determinable values1
$2,148
$237
$61
$143
$
—
Debt securities1
—
1,824
—
—
—
Derivatives2
—
441
—
—
(403)
5
7
Total assets
$2,148
$2,502
$61
$143
$(403)
Liabilities:
Derivatives2
$9
$1,040
$
—
$
—
$(954)
6
7
Total liabilities
$9
$1,040
$
—
$
—
$(954)
$()
$()
Other-than-temporary impairment charges
(40)
()
Impairment of intangible assets
()
()
Total
$66
$(99)
$56
$(124)
Third party
$1,487
$13,343
$37
—
Intersegment
94
252
—
(252)
Total net operating revenues
1,581
13,595
37
(252)
Cost of goods sold
470
5,279
(62)
(252)
Selling, general and administrative expenses
455
3,382
338
—
Other operating charges
—
6
17
—
Operating income (loss)
$656
$4,928
$(256)
—
Interest income
Interest expense
Equity income (loss) — net
Other income (loss) — net
Income before income taxes
Other segment information:
Capital expenditures
—
$317
$101
—
Depreciation and amortization
12
250
16
—
Three Months Ended June 27, 2025
Net operating revenues:
Third party
$1,464
$12,496
$39
—
Intersegment
108
279
—
(279)
Total net operating revenues
1,572
12,775
39
(279)
Cost of goods sold
476
5,057
(64)
(279)
Selling, general and administrative expenses
449
3,078
392
—
Other operating charges
—
31
40
—
Operating income (loss)
$647
$4,609
$(329)
—
Interest income
Interest expense
Equity income (loss) — net
Other income (loss) — net
Income before income taxes
Other segment information:
Capital expenditures
$4
$327
$115
—
Depreciation and amortization
10
230
49
—
Third party
$2,913
$25,783
$69
—
Intersegment
176
543
—
(543)
Total net operating revenues
3,089
26,326
69
(543)
Cost of goods sold
987
10,282
(154)
(543)
Selling, general and administrative expenses
910
6,476
716
—
Other operating charges
—
10
34
—
Operating income (loss)
$1,192
$9,558
$(527)
—
Interest income
Interest expense
Equity income (loss) — net
Other income (loss) — net
Income before income taxes
Other segment information:
Capital expenditures
$1
$528
$156
—
Depreciation and amortization
23
499
31
—
Six Months Ended June 27, 2025
Net operating revenues:
Third party
$2,789
$23,599
$65
—
Intersegment
204
555
—
(555)
Total net operating revenues
2,993
24,154
65
(555)
Cost of goods sold
866
9,596
(164)
(555)
Selling, general and administrative expenses
856
5,865
839
—
Other operating charges
—
31
113
—
Operating income (loss)
$1,271
$8,662
$(723)
—
Interest income
Interest expense
Equity income (loss) — net
Other income (loss) — net
Income before income taxes
Other segment information:
Capital expenditures
$5
$589
$162
—
Depreciation and amortization
22
450
96
—
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
When used in this report, the terms “The Coca-Cola Company,” “Company,” “we,” “us” and “our” mean The Coca-Cola Company and all entities included in our consolidated financial statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
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 headings “Item 1A. Risk Factors” in Part I and “Our Business — Challenges and Risks” in Part II of our Annual Report on Form 10-K for the year ended December 31, 2025, as well as the heading “Operations Review” below, for additional information related to our present business environment. As a result, management must make numerous assumptions, which involve a significant amount of judgment, when performing impairment tests of equity method investments and indefinite-lived intangible assets in various regions around the world. The performance of impairment tests involves critical accounting estimates. These estimates require significant management judgment and include inherent uncertainties. Factors that management must estimate include, among others, the economic lives of the assets, sales volume, pricing, royalty rates, cost of raw materials, delivery costs, long-term growth rates, discount rates, marketing spending, foreign currency exchange rates, tax rates, capital spending and proceeds from the sale of assets. The variability of these factors depends on a number of conditions, and thus our accounting estimates may change from period to period. These factors are even more difficult to estimate given the highly volatile global financial markets. 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.
During the three months ended December 31, 2025, the operating results related to our BodyArmor sports performance and hydration beverage business, 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 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. As of July 3, 2026, the fair value of this trademark approximates its carrying value. 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.
OPERATIONS REVIEW
Sales of our ready-to-drink beverages are somewhat seasonal, with the second and third calendar quarters typically accounting for the highest sales volumes. The volume of sales in the beverage business may be affected by weather conditions.
While our operations are primarily local, we remain subject to global trade dynamics, which may impact certain components of our cost structure as well as the cost structures of our bottlers and our customers and may affect consumer sentiment across our markets.
As previously disclosed in the Company’s Current Report on Form 8-K filed on July 16, 2026, the Company announced a ransomware event at its fairlife operations in the U.S., which are a part of the North America operating segment. The event involved unauthorized access by a third party to a portion of fairlife’s systems and the taking of certain data, and led to a temporary suspension of production operations. A majority of production operations have resumed, and based on the information currently available and the Company’s investigation to date, the Company believes that the incident has not had, and is not reasonably likely to have, a material impact on the Company’s financial condition or results of operations.
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
(collectively, “Coca-Cola system”) 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 our 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 May 2025, the Company refranchised our bottling operations in certain territories in India. The impact of this refranchising has been included as a structural change in our analysis of net operating revenues on a consolidated basis as well as for the Bottling Investments and Asia Pacific operating segments for the three and six months ended July 3, 2026. 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 for the three and six months ended July 3, 2026.
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 primarily consists 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. 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 for each of our operating segments is as follows:
Percent Change 2026 versus 2025 · Three Months Ended July 3, 2026Unit Cases1,2,3
Percent Change 2026 versus 2025 · Three Months Ended July 3, 2026Concentrate Sales4
Percent Change 2026 versus 2025 · Six Months Ended July 3, 2026Unit Cases1,2,3
Percent Change 2026 versus 2025 · Six Months Ended July 3, 2026Concentrate Sales4
Worldwide
1Bottling Investments operating segment data reflects unit case volume growth for consolidated bottlers only.
2Geographic 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.
3Unit case volume percent change is based on average daily sales. Unit case volume growth based on average daily sales is computed by comparing the average daily sales in each of the corresponding periods. Average daily sales are the unit cases sold during the period divided by the number of days in the period.
4Concentrate 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 and is not based on average daily sales. 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 and is not based on average daily sales. Each of our quarters, other than the fourth quarter, ends on the Friday closest to the last day of the corresponding quarterly calendar period. As a result, the first quarter of 2026 had six additional days when compared to the first quarter of 2025, and the fourth quarter of 2026 will have six fewer days when compared to the fourth quarter of 2025.
5After considering the impact of structural changes, unit case volume for Bottling Investments for the three and six months ended July 3, 2026 increased 8% and 6%, respectively.
6After considering the impact of structural changes, concentrate sales volume for Asia Pacific for both the three and six months ended July 3, 2026 increased 11%.
Unit Case Volume
Although a significant portion of our Company’s net operating revenues is not based directly on unit case volume, we believe unit case volume performance 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.
Three Months Ended July 3, 2026 versus Three Months Ended June 27, 2025
Unit case volume in EMEA increased 4%, which included 4% growth in Trademark Coca-Cola, 7% growth in water, sports, coffee and tea, as well as growth in energy drinks, partially offset by a 9% decline in juice, value-added dairy and plant-based beverages, which was driven by the impact of the sale of our finished product operations in Nigeria. Unit case volume in sparkling flavors was even. The operating segment’s volume performance included an increase in unit case volume of 6% in the Eurasia and Middle East operating unit, 3% in the Europe operating unit and 4% in the Africa operating unit.
Unit case volume in Latin America increased 3%, which included 3% growth in Trademark Coca-Cola, 4% growth in water, sports, coffee and tea, 2% growth in sparkling flavors, as well as growth in energy drinks. Unit case volume in juice, value-added dairy and plant-based beverages was even. The operating segment’s volume performance included 6% growth in Brazil, 20% growth in Colombia and 16% growth in Peru. Unit case volume in Mexico was even.
Unit case volume in North America increased 3%, which included 5% growth in Trademark Coca-Cola, 4% growth in juice, value-added dairy and plant-based beverages, 1% growth in sparkling flavors, as well as growth in energy drinks. Unit case volume in water, sports, coffee and tea was even.
Unit case volume in Asia Pacific increased 8%, which included 8% growth in both sparkling flavors and Trademark Coca-Cola, 9% growth in water, sports, coffee and tea, 8% growth in juice, value-added dairy and plant-based beverages, as well as growth in energy drinks. The operating segment’s volume performance included 13% growth in the India and Southwest Asia operating unit, 8% growth in both the Greater China and Mongolia and the ASEAN and South Pacific operating units, and 2% growth in the Japan and South Korea operating unit.
Unit case volume for Bottling Investments increased 5%, primarily driven by growth in India, partially offset by the impact of refranchising certain territories of our bottling operations in India.
Six Months Ended July 3, 2026 versus Six Months Ended June 27, 2025
Unit case volume in EMEA increased 3%, which included 2% growth in Trademark Coca-Cola, 5% growth in water, sports, coffee and tea, 2% growth in sparkling flavors, as well as growth in energy drinks, partially offset by a 12% decline in juice, value-added dairy and plant-based beverages, which was driven by the impact of the sale of our finished product operations in Nigeria. The operating segment’s volume performance included an increase in unit case volume of 4% in both the Africa and the Eurasia and Middle East operating units and 2% growth in the Europe operating unit.
Unit case volume in Latin America increased 2%, which included 2% growth in Trademark Coca-Cola, 3% growth in water, sports, coffee and tea, 2% growth in sparkling flavors, as well as growth in energy drinks. Unit case volume in juice, value-added dairy and plant-based beverages was even. The operating segment’s volume performance included 4% growth in Brazil, 14% growth in Colombia and 11% growth in Peru, partially offset by declines of 1% in Mexico and 5% in Argentina.
Unit case volume in North America increased 3%, which included 5% growth in Trademark Coca-Cola, 2% growth in both water, sports, coffee and tea and juice, value-added dairy and plant-based beverages, 1% growth in sparkling flavors, as well as growth in energy drinks.
Unit case volume in Asia Pacific increased 7%, which included 7% growth in Trademark Coca-Cola, 6% growth in sparkling flavors, 8% growth in water, sports, coffee and tea, 5% growth in juice, value-added dairy and plant-based beverages, as well as growth in energy drinks. The operating segment’s volume performance included 8% growth in the Greater China and Mongolia operating unit, 9% growth in the India and Southwest Asia operating unit, 5% growth in the ASEAN and South Pacific operating unit and 3% growth in the Japan and South Korea operating unit.
Unit case volume for Bottling Investments increased 3%, primarily driven by growth in India, partially offset by the impact of refranchising certain territories of our bottling operations in India.
Concentrate Sales Volume
During the three months ended July 3, 2026, worldwide concentrate sales volume increased 4% and unit case volume increased 5% compared to the three months ended June 27, 2025. During the six months ended July 3, 2026, worldwide concentrate sales volume increased 6% and unit case volume increased 4% compared to the six months ended June 27, 2025. Concentrate sales volume growth is calculated based on the amount sold during the reporting periods, which is impacted by the number of days. Conversely, unit case volume growth is calculated based on average daily sales, which is not impacted by the number of days in the reporting periods. The first quarter of 2026 had six additional days when compared to the first quarter of 2025, which
contributed to the differences between concentrate sales volume and unit case volume growth rates on a consolidated basis and for the individual operating segments during the six months ended July 3, 2026. Additionally, the differences between concentrate sales volume and unit case volume growth rates for the operating segments were impacted by the timing of concentrate shipments. We generally expect the differences between concentrate sales volume and unit case volume growth rates to be minimal on a full year basis; however, for the full year 2026 we currently expect worldwide concentrate sales volume growth to be slightly behind unit case volume growth.
Net Operating Revenues
Three Months Ended July 3, 2026 versus Three Months Ended June 27, 2025
During the three months ended July 3, 2026, net operating revenues were $13,380 million, compared to $12,535 million during the three months ended June 27, 2025, an increase of $845 million, or 7%.
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 2026 versus 2025Foreign Currency Fluctuations
Percent Change 2026 versus 2025Acquisitions & Divestitures2
Total
Consolidated
4%
Note: Certain rows may not add due to rounding.
1Represents 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 computed by comparing the total sales (rather than the average daily sales) in each of the corresponding periods 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.
2Includes 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 2% 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, partially offset by unfavorable mix;
North America — favorable pricing initiatives;
Asia Pacific — unfavorable mix and affordability initiatives; and
Bottling Investments — favorable mix and favorable pricing initiatives.
Fluctuations in foreign currency exchange rates, including the effects of our hedging activities, favorably impacted our consolidated net operating revenues by 2%. Net operating revenues were favorably impacted by a weaker U.S. dollar compared to certain foreign currencies, including the Mexican peso, Brazilian real, euro and South African rand, which had a favorable impact on our Latin America, EMEA and Bottling Investments operating segments. The favorable impact of a weaker U.S. dollar compared to the currencies listed above was partially offset by the impact of a stronger U.S. dollar compared to certain other foreign currencies, including the Indian rupee, Japanese yen, Turkish lira and Argentine peso, which had an unfavorable impact on our Asia Pacific, EMEA, Latin America and Bottling Investments 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 period-to-period 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.
Six Months Ended July 3, 2026 versus Six Months Ended June 27, 2025
During the six months ended July 3, 2026, net operating revenues were $25,852 million, compared to $23,664 million during the six months ended June 27, 2025, an increase of $2,188 million, or 9%.
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 2026 versus 2025Foreign Currency Fluctuations
Percent Change 2026 versus 2025Acquisitions & Divestitures2
Total
Consolidated
6%
Note: Certain rows may not add due to rounding.
1Represents 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 computed by comparing the total sales (rather than the average daily sales) in each of the corresponding periods 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.
2Includes 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 had a 2% 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;
Latin America — favorable pricing initiatives, including inflationary pricing, partially offset by unfavorable mix;
North America — favorable pricing initiatives, partially offset by unfavorable mix;
Asia Pacific — unfavorable mix and affordability initiatives; and
Bottling Investments — favorable pricing initiatives, offset by unfavorable mix.
Fluctuations in foreign currency exchange rates, including the effects of our hedging activities, favorably impacted our consolidated net operating revenues by 2%. Net operating revenues were favorably impacted by a weaker U.S. dollar compared to certain foreign currencies, including the Mexican peso, Brazilian real, euro and South African rand, which had a favorable impact on our Latin America, EMEA and Bottling Investments operating segments. The favorable impact of a weaker U.S. dollar compared to the currencies listed above was partially offset by the impact of a stronger U.S. dollar compared to certain other foreign currencies, including the Indian rupee, Japanese yen, Argentine peso and Turkish lira, which had an unfavorable impact on our Asia Pacific, Latin America, EMEA and Bottling Investments operating segments. Refer to the heading “Liquidity, Capital Resources and Financial Position — Foreign Exchange” below.
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.
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 62.9% for the three months ended July 3, 2026, compared to 62.4% for the three months ended June 27, 2025. Our gross profit margin increased to 62.9% for the six months ended July 3, 2026, compared to 62.5% for the six months ended June 27, 2025. The increases were primarily due to the favorable impact of pricing initiatives and foreign currency exchange rate fluctuations, as well as the impact of the sale of our finished product operations in Nigeria, partially offset by higher commodity costs.
Selling, General and Administrative Expenses
During the three months ended July 3, 2026, selling, general and administrative expenses were $3,720 million, compared to $3,470 million during the three months ended June 27, 2025, an increase of $250 million, or 7%. During the six months ended July 3, 2026, selling, general and administrative expenses were $7,192 million, compared to $6,704 million during the six months ended June 27, 2025, an increase of $488 million, or 7%. These increases were primarily due to increased marketing spending partly due to timing. Additionally, during the three and six months ended July 3, 2026, foreign currency exchange rate fluctuations increased selling, general and administrative expenses by 1% and 2%, respectively. These increases were partially offset by lower annual incentive expense and the impact of the sale of our finished product operations in Nigeria.
Advertising expenses for the three months ended July 3, 2026 and June 27, 2025 were $1,565 million and $1,328 million, respectively. Advertising expenses for the six months ended July 3, 2026 and June 27, 2025 were $2,942 million and $2,417 million, respectively.
Other Operating Charges
Other operating charges incurred by our operating segments and Corporate were as follows (in millions):
During the three months ended July 3, 2026, the Company recorded other operating charges of $23 million. These charges consisted of $9 million related to an indemnification agreement entered into as a part of the refranchising of certain of our bottling operations, $6 million related to North America modernization initiatives, $5 million related to tax litigation expense and $3 million for the amortization of noncompete agreements related to the BodyArmor acquisition.
During the six months ended July 3, 2026, the Company recorded other operating charges of $44 million. These charges consisted of $19 million related to an indemnification agreement entered into as a part of the refranchising of certain of our bottling operations, $10 million related to North America modernization initiatives, $8 million related to tax litigation expense and $7 million for the amortization of noncompete agreements related to the BodyArmor acquisition.
During the three months ended June 27, 2025, the Company recorded other operating charges of $71 million. These charges primarily included $31 million related to the impairment of a trademark in Latin America, $28 million related to the Company’s productivity and reinvestment program, $7 million of transaction costs related to the refranchising of our bottling operations in certain territories in India, $4 million for the amortization of noncompete agreements related to the BodyArmor acquisition and $2 million related to tax litigation expense.
During the six months ended June 27, 2025, the Company recorded other operating charges of $144 million. These charges consisted of $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 $39 million related to the Company’s productivity and reinvestment program, $31 million related to the impairment of a trademark in Latin America, $8 million related to an indemnification agreement entered into as a part of the refranchising of certain of our bottling operations, $7 million for the amortization of noncompete agreements related to the BodyArmor acquisition, $7 million of transaction costs related to the refranchising of our bottling operations in certain territories in India and $5 million related to tax litigation expense.
Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on the refranchising of our bottling operations in certain territories in India. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information on the tax litigation. Refer to Note 15 of Notes to Consolidated Financial Statements for additional information on the impairment charge.
Operating Income and Operating Margin
Information about our operating income contribution by operating segment and Corporate on a percentage basis is as follows:
Operating margin is a ratio calculated by dividing operating income by net operating revenues. Management believes operating margin provides investors with useful information related to the profitability of our business after considering all of the selling, general and administrative expenses and other operating charges incurred. Management 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 for each of our operating segments and Corporate is as follows:
Three Months Ended July 3, 2026 versus Three Months Ended June 27, 2025
During the three months ended July 3, 2026, operating income was $4,672 million, compared to $4,280 million during the three months ended June 27, 2025, an increase of $392 million, or 9%. The increase was primarily driven by an increase in concentrate sales volume of 4%, favorable price/mix, lower operating expenses, lower other operating charges and a favorable foreign currency exchange rate impact of 5%, partially offset by higher commodity costs and increased marketing spending partly due to timing.
Fluctuations in foreign currency exchange rates, including the effects of our hedging activities, favorably impacted consolidated operating income by 5% due to a weaker U.S. dollar compared to certain foreign currencies, including the Mexican peso, Brazilian real and euro, which had a favorable impact on our Latin America and EMEA operating segments. The favorable impact of a weaker U.S. dollar compared to the currencies listed above was partially offset by the impact of a stronger U.S. dollar compared to certain other foreign currencies, including the Japanese yen, which had an unfavorable impact on our Asia Pacific operating segment. Refer to the heading “Liquidity, Capital Resources and Financial Position — Foreign Exchange” below.
The EMEA operating segment reported operating income of $1,309 million and $1,325 million for the three months ended July 3, 2026 and June 27, 2025, respectively. The decrease in operating income was primarily driven by increased marketing spending and higher operating expenses, partially offset by an increase in concentrate sales volume of 1%, favorable price/mix, lower commodity costs and a favorable foreign currency exchange rate impact of 4%.
Latin America reported operating income of $1,177 million and $957 million for the three months ended July 3, 2026 and June 27, 2025, respectively. The increase in operating income was primarily driven by an increase in concentrate sales volume of 1%, favorable price/mix, lower operating expenses, lower other operating charges, and a favorable foreign currency exchange rate impact of 15%, partially offset by increased marketing spending.
Operating income for North America for the three months ended July 3, 2026 and June 27, 2025 was $1,695 million and $1,621 million, respectively. The increase in operating income was primarily driven by an increase in concentrate sales volume of 3%, favorable price/mix, lower operating expenses and a favorable foreign currency exchange rate impact of 1%, partially offset by higher commodity costs, higher other operating charges and increased marketing spending.
Asia Pacific’s operating income for the three months ended July 3, 2026 and June 27, 2025 was $656 million and $647 million, respectively. The increase in operating income was primarily driven by an increase in concentrate sales volume of 11%, lower commodity costs, lower operating expenses and a favorable foreign currency exchange rate impact of 1%, partially offset by unfavorable price/mix and increased marketing spending.
Bottling Investments’ operating income for the three months ended July 3, 2026 and June 27, 2025 was $91 million and $59 million, respectively. The increase in operating income was primarily driven by an increase in unit case volume of 8%, favorable price/mix and lower commodity costs, partially offset by higher operating expenses, the impact of refranchising certain territories of our bottling operations in India and an unfavorable foreign currency exchange rate impact of 24%.
Corporate’s operating loss for the three months ended July 3, 2026 and June 27, 2025 was $256 million and $329 million, respectively. This decrease is primarily a result of lower annual incentive expense and lower other operating charges.
Six Months Ended July 3, 2026 versus Six Months Ended June 27, 2025
During the six months ended July 3, 2026, operating income was $9,031 million, compared to $7,939 million during the six months ended June 27, 2025, an increase of $1,092 million, or 14%. The increase was primarily driven by an increase in concentrate sales volume of 6%, favorable price/mix, lower operating expenses, lower other operating charges and a favorable foreign currency exchange rate impact of 4%, partially offset by higher commodity costs and increased marketing spending partly due to timing.
Fluctuations in foreign currency exchange rates, including the effects of our hedging activities, favorably impacted consolidated operating income by 4% due to a weaker U.S. dollar compared to certain foreign currencies, including the Mexican peso, Brazilian real and euro, which had a favorable impact on our Latin America and EMEA operating segments. The favorable impact of a weaker U.S. dollar compared to the currencies listed above was partially offset by the impact of a stronger U.S. dollar compared to certain other foreign currencies, including the Argentine peso, Turkish lira, Indian rupee and Japanese yen, which had an unfavorable impact on our Latin America, EMEA, Asia Pacific and Bottling Investments operating segments. Refer to the heading “Liquidity, Capital Resources and Financial Position — Foreign Exchange” below.
The EMEA operating segment reported operating income of $2,568 million and $2,390 million for the six months ended July 3, 2026 and June 27, 2025, respectively. The increase in operating income was primarily driven by an increase in concentrate sales volume of 3%, favorable price/mix, lower commodity costs and a favorable foreign currency exchange rate impact of 5%, partially offset by increased marketing spending and higher operating expenses.
Latin America reported operating income of $2,215 million and $1,861 million for the six months ended July 3, 2026 and June 27, 2025, respectively. The increase in operating income was primarily driven by an increase in concentrate sales volume of 4%, favorable price/mix, lower commodity costs, lower operating expenses, lower other operating charges and a favorable foreign currency exchange rate impact of 10%, partially offset by increased marketing spending partly due to timing.
Operating income for North America for the six months ended July 3, 2026 and June 27, 2025 was $3,301 million and $2,962 million, respectively. The increase in operating income was primarily driven by an increase in concentrate sales volume of 7%, favorable price/mix, lower operating expenses and a favorable foreign currency exchange rate impact of 1%, partially offset by higher commodity costs, higher other operating charges and increased marketing spending partly due to timing.
Asia Pacific’s operating income for the six months ended July 3, 2026 and June 27, 2025 was $1,192 million and $1,271 million, respectively. The decrease in operating income was primarily driven by unfavorable price/mix, higher commodity costs and increased marketing spending partly due to timing, partially offset by an increase in concentrate sales volume of 11%, lower operating expenses, and a favorable foreign currency exchange rate impact of 2%.
Bottling Investments’ operating income for the six months ended July 3, 2026 and June 27, 2025 was $282 million and $178 million, respectively. The increase in operating income was primarily driven by an increase in unit case volume of 10% and lower commodity costs, partially offset by higher operating expenses and the impact of refranchising certain territories of our bottling operations in India.
Corporate’s operating loss for the six months ended July 3, 2026 and June 27, 2025 was $527 million and $723 million, respectively. This decrease is primarily a result of lower annual incentive expense and lower other operating charges.
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 operating income.
Interest Income
During the three months ended July 3, 2026, interest income was $198 million, compared to $188 million during the three months ended June 27, 2025, an increase of $10 million, or 6%. During the six months ended July 3, 2026, interest income was $420 million, compared to $368 million during the six months ended June 27, 2025, an increase of $52 million, or 14%. The increases were primarily driven by higher average investment balances.
Interest Expense
During the three months ended July 3, 2026, interest expense was $369 million, compared to $445 million during the three months ended June 27, 2025, a decrease of $76 million, or 17%. During the six months ended July 3, 2026, interest expense was $744 million, compared to $832 million during the six months ended June 27, 2025, a decrease of $88 million, or 11%. The decreases were primarily due to lower average short-term debt balances.
Equity Income (Loss) — Net
During the three months ended July 3, 2026, equity income was $604 million, compared to equity income of $561 million during the three months ended June 27, 2025, an increase of $43 million, or 8%. During the six months ended July 3, 2026, equity income was $988 million, compared to equity income of $912 million during the six months ended June 27, 2025, an increase of $76 million, or 8%. These increases reflect, among other items, the impact of more favorable operating results reported by certain of our equity method investees in the current year, a favorable foreign currency exchange rate impact and a reduction of net charges resulting from the Company’s proportionate share of significant operating and nonoperating items recorded by certain of our equity method investees. These favorable impacts were partially offset by the impact of the sale of our ownership interests in certain equity method investees in 2025.
Other Income (Loss) — Net
Three Months Ended July 3, 2026 versus Three Months Ended June 27, 2025
During the three months ended July 3, 2026, other income (loss) — net was income of $370 million. The Company recognized a net gain of $320 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, dividend income of $38 million and net foreign currency exchange losses of $37 million. The Company also recorded a $66 million reduction in the previously recorded impairment charge related to our bottling operations in Africa, which are held for sale. This reduction is based on management’s revised estimates. Other income (loss) — net also included $14 million of costs related to our trade accounts receivable factoring program.
During the three months ended June 27, 2025, other income (loss) — net was income of $212 million. The Company recognized a net gain of $163 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 $102 million related to the refranchising of our bottling operations in certain territories in India and dividend income of $36 million. Additionally, the Company recorded an other-than-temporary impairment charge of $40 million related to an equity method investee in Latin America, a charge of $28 million related to assets held for sale, $12 million of costs related to our trade accounts receivable factoring program and net foreign currency exchange losses of $4 million. Other income (loss) — net also included income of $3 million related to the non-service cost components of net periodic benefit cost.
Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on our bottling operations in Africa and our divestiture activities. Refer to Note 4 of Notes to Consolidated Financial Statements for additional information on equity and debt securities. Refer to Note 13 of Notes to Consolidated Financial Statements for additional information on net periodic benefit cost or income. Refer to Note 15 of Notes to Consolidated Financial Statements for additional information on the impairment charges.
Six Months Ended July 3, 2026 versus Six Months Ended June 27, 2025
During the six months ended July 3, 2026, other income (loss) — net was income of $391 million. The Company recognized a net gain of $301 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, dividend income of $71 million and net foreign currency exchange losses of $7 million. The Company also recorded a $56 million reduction in the previously recorded impairment charge related to our bottling operations in Africa, which are held for sale. This reduction is based on management’s revised estimates. Other income (loss) — net also included $27 million of costs related to our trade accounts receivable factoring program.
During the six months ended June 27, 2025, other income (loss) — net was income of $466 million. The Company recognized a gain of $331 million related to the sale of a portion of our ownership interest in CCEP, a net gain of $144 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 $102 million related to the refranchising of our bottling operations in certain territories in India and dividend income of $91 million. Additionally, the Company recorded other-than-temporary impairment charges of $40 million related to an equity method investee in Latin America and $25 million related to a joint venture in Latin America. Other income (loss) — net also included $36 million of costs related to our trade accounts receivable factoring program, a charge of $28 million related to assets held for sale, net foreign currency exchange losses of $20 million and expense of $30 million related to the non-service cost components of net periodic benefit cost, which included charges of $25 million and $11 million for special termination benefits and a curtailment loss, respectively, related to non-U.S. pension activity.
Refer to Note 2 of Notes to Consolidated Financial Statements for additional information on our bottling operations in Africa and our divestiture activities. Refer to Note 4 of Notes to Consolidated Financial Statements for additional information on equity and debt securities. Refer to Note 13 of Notes to Consolidated Financial Statements for additional information on net periodic benefit cost or income. Refer to Note 15 of Notes to Consolidated Financial Statements for additional information on the impairment charges.
Income Taxes
The Company recorded income taxes of $1,037 million (18.9% effective tax rate) and $993 million (20.7% effective tax rate) during the three months ended July 3, 2026 and June 27, 2025, respectively. The Company recorded income taxes of $1,682 million (16.7% effective tax rate) and $1,715 million (19.4% effective tax rate) during the six months ended July 3, 2026 and June 27, 2025, respectively.
The Company’s effective tax rates for the three and six months ended July 3, 2026 and June 27, 2025 vary from the statutory U.S. federal tax rate of 21.0%, primarily due to the tax impact of significant operating and nonoperating items, as described in Note 12 of Notes to Consolidated Financial Statements, along with the tax benefits of having significant earnings generated outside of the United States and significant earnings generated in investments accounted for under the equity method, both of which are generally taxed at rates lower than the statutory U.S. federal tax rate.
The Company’s effective tax rates for the three and six months ended July 3, 2026 included $40 million and $319 million, respectively, of net tax benefits related to various discrete tax items, including net interest income of $43 million and $98 million, respectively, related to the IRS Tax Litigation Deposit recorded in the line item income taxes in our consolidated statements of income, in accordance with our accounting policy. The Company’s effective tax rates for the three and six months ended July 3, 2026 also included net tax expense of $13 million and a net tax benefit of $181 million, respectively, primarily related to return to provision adjustments.
The Company’s effective tax rates for the three and six months ended June 27, 2025 included $12 million and $155 million, respectively, of net tax benefits related to various discrete tax items, including net interest income of $54 million and $107 million, respectively, related to the IRS Tax Litigation Deposit recorded in the line item income taxes in our consolidated statements of income, in accordance with our accounting policy. The Company’s effective tax rate for the six months ended June 27, 2025 also included a tax benefit of $85 million related to a change in the Company’s indefinite reinvestment assertion for certain foreign entities.
We are currently in litigation with the IRS for tax years 2007 through 2009. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information on the tax litigation.
At the end of each quarter, we make our best estimate of the effective tax rate expected to be applicable for the full fiscal year. This estimate reflects, among other items, our best estimate of operating results and foreign currency exchange rates. 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 19.9% 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 Organization for Economic Co-operation and Development’s (“OECD”) Anti-Base Erosion and Profit Shifting project. The OECD is currently coordinating a two-pillared project on behalf of the Group of Twenty (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 Group of Seven (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.
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 $16.4 billion as of July 3, 2026. In addition to these funds, our commercial paper program, and our ability to issue long-term debt, we had $6.6 billion in unused backup lines of credit for general corporate purposes as of July 3, 2026. These backup lines of credit expire at various times through 2031.
Our current payment terms with the majority of our suppliers are 120 days. Certain financial institutions offer a voluntary supply chain finance program which enables our suppliers, at their sole discretion, to sell their receivables from the Company to these financial institutions on a non-recourse basis at a rate that leverages our credit rating and thus may be more beneficial to them. We do not believe there is a risk that our payment terms will be shortened in the near future. Refer to Note 7 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 $7,011 million and $8,400 million of trade accounts receivables under this program during the six months ended July 3, 2026 and June 27, 2025, respectively. The costs of factoring such receivables were $27 million and $36 million for the six months ended July 3, 2026 and June 27, 2025, respectively. The cash received from the financial institutions is reflected within the operating activities section of 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 expect to repurchase shares to offset dilution resulting from employee stock-based compensation.
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 Litigation Deposit on September 10, 2024, which stopped 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 three and six months ended July 3, 2026, the Company recorded net interest income of $43 million and $98 million, respectively, and for the three and six months ended June 27, 2025, the Company recorded net interest income of $54 million and $107 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 July 3, 2026 and December 31, 2025. 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 U.S. Court of Appeals for the Eleventh Circuit heard the case on June 25, 2026. The Company strongly disagrees with the IRS’ positions and the portions of the Opinions affirming such positions and intends to vigorously defend our positions utilizing every available avenue of appeal. While the Company believes that it is more likely than not that we will ultimately prevail in this litigation upon appeal, it is possible that all, or some portion of, the adjustments proposed by the IRS and sustained by the Tax Court could ultimately be upheld. In 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 $514 million as of July 3, 2026. Additionally, the Company would likely be subject to significant additional liabilities for subsequent years, which could have a material adverse 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 unpaid 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. The Company estimates the impact of the continued application of the methodology asserted by the IRS and affirmed in the Opinions for the three and six months ended July 3, 2026 would increase the potential aggregate incremental tax and interest liability by approximately $450 million and $900 million, respectively. Refer to Note 9 of Notes to Consolidated Financial Statements for additional information on the tax litigation.
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 during the six months ended July 3, 2026 was $7,543 million, and net cash used in operating activities during the six months ended June 27, 2025 was $1,391 million. The increase was primarily driven by strong cash operating results, a benefit of the trade accounts receivable factoring program in the current year, lower income tax payments, a favorable impact due to foreign currency exchange rate fluctuations, lower net interest payments and lower annual incentive payments. These items were partially offset by the prior year transfer of surplus non-U.S. plan assets from pension trusts to general assets of the Company and unfavorable hedging activity.
Additionally, the activity in 2025 included $6,069 million of the $6,173 million final milestone payment for fairlife that was made during the six months ended June 27, 2025. Refer to Note 12 of Notes to Consolidated Financial Statements for additional information on our milestone payment for fairlife.
Cash Flows from Investing Activities
Net cash provided by investing activities during the six months ended July 3, 2026 was $1,104 million, and net cash used in investing activities during the six months ended June 27, 2025 was $278 million.
Purchases of Investments and Proceeds from Disposals of Investments
During the six months ended July 3, 2026, purchases of investments were $2,799 million and proceeds from disposals of investments were $4,574 million, resulting in a net cash inflow of $1,775 million. During the six months ended June 27, 2025, purchases of investments were $2,865 million and proceeds from disposals of investments were $2,201 million, resulting in a net cash outflow of $664 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. Refer to Note 4 of Notes to Consolidated Financial Statements for additional information on our investments.
Acquisitions of Businesses, Equity Method Investments and Nonmarketable Securities
During the six months ended July 3, 2026 and June 27, 2025, the Company’s acquisitions of businesses, equity method investments and nonmarketable securities totaled $199 million and $179 million, respectively. The activity during the six months ended July 3, 2026 included additional investments of $112 million in an equity method investee in Japan. The activity during the six months ended July 3, 2026 and June 27, 2025 also included $75 million and $148 million, respectively, of investments in alternative energy limited partnerships. Refer to Note 14 of Notes to Consolidated Financial Statements for additional information on these investments.
Proceeds from Disposals of Businesses, Equity Method Investments and Nonmarketable Securities
During the six months ended July 3, 2026 and June 27, 2025, proceeds from disposals of businesses, equity method investments and nonmarketable securities were $1 million and $973 million, respectively. The activity during the six months ended June 27, 2025 primarily related to the sale of a portion of our ownership interest in CCEP and the refranchising of certain of our bottling operations. Refer to Note 2 of Notes to Consolidated Financial Statements.
Purchases of Property, Plant and Equipment
Purchases of property, plant and equipment during the six months ended July 3, 2026 and June 27, 2025 were $684 million and $751 million, respectively.
Other Investing Activities
During the six months ended July 3, 2026 and June 27, 2025, the total cash inflow was $241 million and $124 million, respectively. The activity during the six months ended July 3, 2026 included the return of an advance payment of $184 million to acquire additional shares in an equity method investee in Japan. The activity during the six months ended June 27, 2025 included $98 million related to the reimbursement of advance payments made to finance the construction of leased assets.
Cash Flows from Financing Activities
Net cash used in financing activities during the six months ended July 3, 2026 was $6,535 million, and net cash provided by financing activities during the six months ended June 27, 2025 was $52 million.
Loans, Notes Payable and Long-Term Debt
The Company made payments of debt of $1,559 million during the six months ended July 3, 2026, which consisted of $1,027 million of payments related to commercial paper and short-term debt with maturities of 90 days or less, $500 million of
payments related to commercial paper and short-term debt with maturities greater than 90 days and payments of long-term debt of $32 million.
During the six months ended June 27, 2025, the Company had issuances of debt of $5,320 million, which consisted of $1,547 million of net issuances of commercial paper and short-term debt with maturities of 90 days or less, $3,205 million of issuances of commercial paper and short-term debt with maturities greater than 90 days and long-term debt issuances of $568 million, net of related discounts and issuance costs.
The Company made payments of debt of $2,630 million during the six months ended June 27, 2025, which consisted of $1,957 million of payments related to commercial paper and short-term debt with maturities greater than 90 days and payments of long-term debt of $673 million.
Issuances of Stock
The issuances of stock during the six months ended July 3, 2026 and June 27, 2025 were related to the exercise of stock options by employees.
Purchases of Stock for Treasury
During the six months ended July 3, 2026, the total cash outflow for treasury stock purchases was $663 million. The Company repurchased 7.3 million shares of common stock under the share repurchase plan authorized by our Board of Directors. These shares were repurchased at an average cost of $75.53 per share, for a total cost of $549 million. In addition to shares repurchased under the share repurchase plan, the Company’s treasury stock activity included 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. The net impact of the Company’s issuances of stock and share repurchases during the six months ended July 3, 2026 resulted in a net cash outflow of $412 million.
During the six months ended June 27, 2025, the total cash outflow for treasury stock purchases was $472 million. The Company repurchased 5.4 million shares of common stock under the share repurchase plan authorized by our Board of Directors. These shares were repurchased at an average cost of $66.27 per share, for a total cost of $360 million. In addition to shares repurchased under the share repurchase plan, the Company’s treasury stock activity included 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. The net impact of the Company’s issuances of stock and share repurchases during the six months ended June 27, 2025 resulted in a net cash outflow of $249 million.
Dividends
During the six months ended July 3, 2026 and June 27, 2025, the Company paid dividends of $4,562 million and $2,283 million, respectively. As a result of the timing of our quarterly reporting periods as well as our dividend payment dates, the Company paid all of the 2026 second quarterly dividend in the second quarter and paid substantially all of the 2025 second quarterly dividend in the third quarter.
Our Board of Directors approved the Company’s regular quarterly dividend of $0.53 per share at its July 2026 meeting. This dividend is payable on October 1, 2026 to shareowners of record as of the close of business on September 15, 2026.
Other Financing Activities
During the six months ended July 3, 2026 and June 27, 2025, the total cash outflow for other financing activities was $11 million and $106 million, respectively. The cash outflow during the six months ended June 27, 2025 included $104 million of the $6,173 million final milestone payment for fairlife.
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. Our hedging activities are designed to mitigate, over time, a portion of the impact of exchange rate fluctuations on our net income. Taking into account the effects of our hedging activities, the impact of fluctuations in foreign currency exchange rates increased our operating income for the three and six months ended July 3, 2026 by 5% and 4%, respectively.
Based on current spot rates and our hedging coverage in place, we expect foreign currency exchange rate fluctuations will have a favorable impact on operating income and cash flows from operating activities through the end of the year.
Item 1. Legal Proceedings
Information regarding reportable legal proceedings is contained in Part I, “Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2025, as updated in Part II, “Item 1. Legal Proceedings” in our Quarterly Report on Form 10-Q for the quarter ended April 3, 2026. The following updates and restates the description of the previously reported U.S. Federal Income Tax Dispute matter and provides updates to a previously reported environmental matter. Management believes that, except as disclosed in “U.S. Federal Income Tax Dispute” below, the total liabilities of the Company that may arise as a result of currently pending legal proceedings will not have a material adverse effect on the Company taken as a whole.
U.S. Federal Income Tax Dispute
On September 17, 2015, the Company received a Notice from the IRS seeking approximately $3.3 billion of additional federal income tax for years 2007 through 2009. In the Notice, the IRS stated its intent to reallocate over $9 billion of income to the U.S. parent company from certain of its foreign affiliates that the U.S. parent company licensed to manufacture, distribute, sell, market and promote its products in certain non-U.S. markets.
The Notice concerned the Company’s transfer pricing between its U.S. parent company and certain of its foreign affiliates. IRS rules governing transfer pricing require arm’s-length pricing of transactions between related parties such as the Company’s U.S. parent and its foreign affiliates.
To resolve the same transfer pricing issue for the tax years 1987 through 1995, the Company and the IRS had agreed in 1996 on an arm’s-length methodology for determining the amount of U.S. taxable income that the U.S. parent company would report as compensation from its foreign licensees. The Company and the IRS memorialized this accord in the Closing Agreement resolving that dispute. The Closing Agreement provided that, absent a change in material facts or circumstances or relevant federal tax law, in calculating the Company’s income taxes going forward, the Company would not be assessed penalties by the IRS for using the agreed-upon tax calculation methodology that the Company and the IRS agreed would be used for the 1987 through 1995 tax years.
5%
4%
4%
6%
EMEA
4
1
3
3
Latin America
3
1
2
4
North America
3
3
3
7
Asia Pacific
8
10
7
10
Bottling Investments
5
N/A
3
N/A
2%
2%
(1)%
7%
EMEA
1
1
2
(3)
2
Latin America
1
3
11
—
16
North America
3
4
—
—
7
Asia Pacific
11
(9)
(1)
—
1
Bottling Investments
8
2
—
(2)
8
2%
2%
(1)%
9%
EMEA
3
3
4
(3)
7
Latin America
4
2
8
—
15
North America
7
3
—
—
10
Asia Pacific
11
(8)
—
—
3
Bottling Investments
10
—
2
(2)
10
—
Six Months Ended · June 27,2025$
Six Months Ended · June 27,2025—
Latin America
—
31
—
31
North America
6
—
10
—
Asia Pacific
—
—
—
—
Bottling Investments
—
—
—
—
Corporate
17
40
34
113
Total
$23
$71
$44
$144
30.1%
Latin America
25.2
22.3
24.5
23.4
North America
36.3
37.9
36.6
37.3
Asia Pacific
14.0
15.1
13.2
16.0
Bottling Investments
2.0
1.4
3.1
2.3
Corporate
(5.5)
(7.7)
(5.8)
(9.1)
Total
100.0%
100.0%
100.0%
100.0%
33.6%
EMEA
42.4
44.1
43.6
43.5
Latin America
64.0
60.3
63.0
60.7
North America
31.4
32.3
32.1
31.6
Asia Pacific
44.1
44.2
40.9
45.6
Bottling Investments
6.1
4.2
9.0
6.2
Corporate
*
*
*
*
The IRS audited and confirmed the Company’s compliance with the agreed-upon Closing Agreement methodology in five successive audit cycles for tax years 1996 through 2006.
The September 17, 2015 Notice from the IRS retroactively rejected the previously agreed-upon methodology for the 2007 through 2009 tax years in favor of an entirely different methodology, without prior notice to the Company. Using the new tax calculation methodology, the IRS reallocated over $9 billion of income to the U.S. parent company from its foreign licensees for tax years 2007 through 2009. Consistent with the Closing Agreement, the IRS did not assert penalties, and it has yet to do so.
The IRS designated the Company’s matter for litigation on October 15, 2015. Litigation designation is an IRS determination that forecloses to a company any and all alternative means for resolution of a tax dispute. As a result of the IRS’ designation of the Company’s matter for litigation, the Company was forced to either accept the IRS’ newly imposed tax assessment and pay
the full amount of the asserted tax or litigate the matter in the federal courts. The matter remains subject to the IRS’ litigation designation, preventing the Company from any attempt to settle or otherwise mutually resolve the matter with the IRS.
The Company consequently initiated litigation by filing a petition in the Tax Court in December 2015, challenging the tax adjustments enumerated in the Notice.
Prior to trial, the IRS increased its transfer pricing adjustment by $385 million, resulting in an additional tax adjustment of $135 million. The Company obtained a summary judgment in its favor on a different matter related to Mexican foreign tax credits, which thereafter effectively reduced the IRS’ potential tax adjustment by $138 million.
The trial was held in the Tax Court from March through May 2018, and final post-trial briefs were filed and exchanged in April 2019.
On November 18, 2020, the Tax Court issued the Opinion in which it predominantly sided with the IRS but agreed with the Company that dividends previously paid by the foreign licensees to the U.S. parent company in reliance upon the Closing Agreement should continue to be allowed to offset royalties, including those that would become payable to the Company in accordance with the Opinion. 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.
The Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company’s foreign licensees to increase the Company’s U.S. tax. Moreover, the Company believes that the retroactive imposition of such tax liability using a calculation methodology different from that previously agreed upon by the IRS and the Company, and audited by the IRS for over a decade, is unconstitutional. The Company intends to assert its claims on appeal and vigorously defend its positions. In addition, for its litigation with the IRS and for purposes of its appeal of the Tax Court decision, the Company continues to evaluate the implications of several significant administrative law cases recently decided by the U.S. Supreme Court, most notably Loper Bright v. Raimondo, which overruled the Chevron case. Since 1984, the Chevron case had required that courts defer to agency interpretations of statutes and agency action. In Ohio v. EPA and Garland v. Cargill, two of the recent decisions, the U.S. Supreme Court demonstrated how courts are to rule on agency interpretations and actions without the deference previously required by the Chevron case.
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 Litigation Deposit on September 10, 2024, which stopped 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 three and six months ended July 3, 2026, the Company recorded net interest income of $43 million and $98 million, respectively, related to this tax payment. For the three and six months ended June 27, 2025, the Company recorded net interest income of $54 million and $107 million, respectively, related to this tax payment. These amounts were recorded 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 July 3, 2026 and December 31, 2025. 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 U.S. Court of Appeals for the Eleventh Circuit heard the case on June 25, 2026.
In determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes. In doing so, we consulted with outside advisors, and we reviewed and considered relevant laws, rules, and regulations, including, but not limited to, the Opinions and relevant caselaw. We also considered our intention to vigorously defend our positions and assert our various well-founded legal claims via every available avenue of appeal. We concluded, based on the technical and legal merits of the Company’s tax positions, that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal. In addition, we considered a number of alternative transfer pricing methodologies, including the Tax Court Methodology, that could be applied by the courts upon final resolution of the litigation. Based on the required probability analysis, we determined the methodologies we believe the federal courts could ultimately order to be used in calculating the Company’s tax. As a result of this analysis, we recorded a tax reserve of $438 million during the year ended December 31, 2020 related to the application of the resulting methodologies as well as the different tax treatment applicable to dividends originally paid to the U.S. parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company’s analysis.
The Company’s conclusion that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal is unchanged as of July 3, 2026. However, based on the required probability analysis and the accrual of interest through the current reporting period, we updated our tax reserve as of July 3, 2026 to $529 million.
While the Company strongly disagrees with the IRS’ positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the 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 $514 million as of July 3, 2026. Additionally, the Company would likely be subject to significant additional liabilities for subsequent years, which could have a material adverse impact on the Company’s financial position, results of operations and cash flows.
The Company calculated the potential impact of applying the Tax Court Methodology to reallocate income from foreign licensees potentially covered within the scope of the Opinions for the 2010 through 2025 tax years, assuming such methodology were to be ultimately upheld by the courts, and the IRS were to decide to apply that methodology to subsequent years, with consent of the federal courts. This impact would include taxes and interest accrued through December 31, 2025. The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act. The Company estimates that the potential aggregate 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 unpaid 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. The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended July 3, 2026 would increase the potential aggregate incremental tax and interest liability by approximately $450 million and $900 million, respectively. We currently project the continued application of the Tax Court Methodology in 2026, assuming similar facts and circumstances as of December 31, 2025 and reflecting changes enacted under the One Big Beautiful Bill Act effective in 2026, would result in an incremental annual tax liability that would increase the Company’s effective tax rate by approximately 3.8%.
Environmental Matter
On June 20, 2024, the Mayor and City Council of Baltimore filed a lawsuit against the Company and several unrelated parties in the Circuit Court for Baltimore City, Maryland (“Baltimore Circuit Court”), concerning the environmental impacts of plastic packaging on the city’s lands and waterways. The complaint asserts claims for (a) violations of various state statutes and local ordinances that prohibit littering or improper dumping of waste on public or private property; (b) unfair, abusive or deceptive trade practices; (c) trespass upon city property; (d) design defects; (e) public nuisance; (f) failure to warn; and (g) negligence. The complaint seeks injunctive relief, compensatory damages and punitive damages but does not specify an amount of damages sought. The Company believes it has strong defenses to the claims. On July 21, 2025, the Baltimore Circuit Court granted in part the Company’s Motion to Dismiss, dismissing with prejudice all claims except the public nuisance claim. On July 23, 2026, the court dismissed the remaining public nuisance claim.
