KO Coca Cola Company

Notes to Financial Statements

Note 1 – Description of Plan

The following description of the Coca-Cola Refreshments Bargaining Employees’ 401(k) Plan (the “Plan”) provides only general information. Participants should refer to the summary plan description for a more comprehensive description of the Plan’s provisions.

General

The Plan is sponsored by Coca-Cola Refreshments USA, Inc. (the “Company”), which is a wholly owned subsidiary of The Coca-Cola Company (“TCCC”). The Plan was formed effective July 1, 1984 and amended and restated effective January 1, 2002. The Plan is a defined contribution plan covering certain bargaining employees of the Company, and is subject to the provisions of the Employee Retirement Income Security Act of 1974 as amended (“ERISA”).

Administration

The Plan is administered by The Coca-Cola Company Benefits Committee (the “Committee”) which, as Plan Administrator, has substantial control of and discretion over the administration of the Plan. Mercer Trust Company (the “Trustee”) provides trust services and Transamerica Retirement Plan Services provides recordkeeping services for the Plan.

Transfers from Related Plan

During 2016, the Plan received transferred account balances totaling $212,082 for participants whose employment status with the Company changed from non-bargaining to bargaining. These participants elected to transfer their account balances to the Plan from The Coca-Cola Company 401(k) Plan.

Eligibility

Each employee who is eligible for the Plan under the terms of a collective bargaining agreement negotiated between the Company and such bargaining unit shall become a participant on the entry date (the first day of the calendar quarter following date of hire) at which time the participant may elect to begin compensation deferrals, unless otherwise defined in the Plan.

Contributions

The Plan allows a participant to contribute 1% to 15% of compensation, unless otherwise defined in the Plan. The Company matches participant contributions as provided for in the various collective bargaining agreements. Contributions are subject to certain Internal Revenue Code (the “Code”) limitations. All contributions are invested as directed by participants.

Coca-Cola Refreshments

Bargaining Employees’ 401(k) Plan

Notes to Financial Statements

Note 1 – Description of Plan (Continued)

Vesting

Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company’s matching contribution portion of their accounts plus actual earnings thereon is based on years of service.

A participant is 100% vested after three years of credited service, unless otherwise defined in the Plan. All participants become fully vested upon death, total disability or reaching normal retirement age as defined in the Plan.

Participant Accounts

Each participant’s account is credited with the participant’s contributions, employer contributions, if any, rollover contributions, if any, and allocations of Plan investment results; however, each account is also charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account balance.

Notes Receivable from Participants

Participants may borrow from their account balances subject to certain limitations. The following applies to participant loans unless otherwise defined in the Plan:

Coca-Cola Refreshments

Bargaining Employees’ 401(k) Plan

Notes to Financial Statements

Note 1 – Description of Plan (Continued)

Employee Stock Ownership Plan

The portion of the Plan invested in common stock of The Coca-Cola Company is designated as an employee stock ownership plan (“ESOP”) within the meaning of Code Section 4975(e)(7). Participants invested in common stock of The Coca-Cola Company may elect to receive their entire dividend amount as a cash payment made directly to them rather than have the dividend amount reinvested in their Plan account. The total amount of dividends paid directly to participants was $74,669 during 2016.  

Withdrawals and Benefit Payments

Distributions of a participant’s fully vested account balance shall be made during the period following his or her retirement, total disability, death or termination of employment.

Distributions to participants shall be made in a single lump sum or a series of installments over a certain period selected by the participant. The amount of distribution under the Plan shall be equal to the participant’s vested account balance.

If the participant has any loan balance at the time of distribution, the amount of cash available to the participant or beneficiary shall be reduced by the outstanding principal balance of the loan.

Prior to retirement, a withdrawal from the balance of a participant’s pre-tax contribution account would be available for a financial hardship or from a participant’s rollover source within the Plan, unless otherwise defined in the Plan.

North America Refranchising Transactions

In conjunction with implementing a new beverage partnership model in North America, TCCC refranchised territories that were previously managed by the Company to certain of TCCC’s unconsolidated bottling partners. TCCC expects to complete its refranchising in the United States by the end of 2017. The refranchising will significantly decrease the number of active participants in the Plan.

In connection with the Company’s refranchising of certain distribution and manufacturing facilities to independent bottlers, amendments were made to the Plan to fully vest impacted employees who were terminated from the Company as a result of the divestiture of their facility (“Transitioning Employees”). In addition, the Plan’s loan procedures were revised to allow Transitioning Employees who elect to rollover their entire Plan account balances to the applicable bottler’s defined contribution plan to also elect to rollover their outstanding loan balances. Approximately $809,000 of participants loans were rolled out of the Plan and included in distributions to participants for the year ended December 31, 2016.

Coca-Cola Refreshments

Bargaining Employees’ 401(k) Plan

Notes to Financial Statements

Note 1 – Description of Plan (Continued)

Plan Termination

Although the Company has not expressed any intent to do so, the Company has the right under the Plan agreement to discontinue contributions at any time and to terminate the Plan. In the event of Plan termination, all participants become fully vested and shall receive a full distribution of their account balances.

Note 2 – Summary of Significant Accounting Policies

Basis of Accounting

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Valuation of Investments

The Plan’s investments are stated at fair value in accordance with Accounting Standards Codification Topic 820 “Fair Value Measurements and Disclosures” (“ASC 820”). See Note 3 for fair value measurements.

Purchases and sales of securities are recorded on the trade date. Interest income is recorded as earned and dividend income is recorded as of the ex-dividend date.

Notes Receivable from Participants

Participant loans, which are classified as receivables, are stated at the unpaid principal balance plus any accrued but unpaid interest.

Administrative Expenses

Certain administrative expenses are paid by the Plan, as permitted by the Plan document. All other expenses are paid by the Company.

Coca-Cola Refreshments

Bargaining Employees’ 401(k) Plan

Notes to Financial Statements

Note 2 – Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements

In February 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting. The new standard clarifies presentation requirements for a plan’s interest in a master trust and requires more detailed disclosures of the plan’s interest in the master trust. For each master trust in which a plan holds an interest, the amendments in this standard require a plan’s interest in that master trust and any change in that interest to be presented in separate financial statement line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively. The standard is effective for fiscal years beginning after December 15, 2018 (with early adoption permitted) using a retrospective transition approach. The Company is currently evaluating the impact of this standard on the Plan’s financial statements.

Note 3 – The Coca-Cola Company Master Trust for 401(k) Plans

The Plan participates in The Coca-Cola Company Master Trust for 401(k) Plans (the “Master Trust”) with similar retirement plans sponsored by TCCC and certain other subsidiaries of TCCC, whereby investments are held collectively for all plans by the Trustee. Each participating plan’s investment in the Master Trust is equal to the sum of its participant account balances in relation to total Master Trust investments. The Plan’s investments include retirement target date funds, equity and fixed income index funds, actively managed equity and fixed income funds, synthetic guaranteed investment contracts, and common stock of The Coca-Cola Company. The investment structures include mutual funds, collective trust funds, Master Trust investment funds, and direct ownership of common stock of The Coca-Cola Company.

The Plan’s investments in the Master Trust were approximately $92.8 million and $103.7 million at December 31, 2016 and 2015, respectively. The Plan’s interest in the net assets of the Master Trust was approximately 2.1% and 2.3% at December 31, 2016 and 2015, respectively. This was determined by comparing the Plan’s investment in the Master Trust to total net assets in the Master Trust.

The following table summarizes the net assets of the Master Trust as of December 31, 2016 and 2015 (in thousands):

Fair Value Measurements

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also established a fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

The Plan’s valuation methods used to measure fair value of its investments may produce fair values that may not be indicative of a future sale, or reflective of future fair values. The use of different methods to determine the fair value of investments could result in different estimates of fair value at the reporting date.

During 2016 and 2015 there were no Level 2 or 3 investments.

Coca-Cola Refreshments

Bargaining Employees’ 401(k) Plan

Notes to Financial Statements

Note 3 – The Coca-Cola Company Master Trust for 401(k) Plans (Continued)

Synthetic Guaranteed Investment Contracts

The Master Trust has a separate account (the “account”) which invests in wrapper contracts (comprised primarily of synthetic guaranteed investment contracts) and cash equivalents. Contracts within the account are fully benefit-responsive and are therefore reported at contract value on the statements of net assets available for benefits. Contract value represents contributions made under the contracts, plus earnings, less withdrawals and administrative expenses. As of December 31, 2016, the account consisted of approximately $350,550,000 of wrapper contracts and approximately $17,049,000 of cash equivalents.

In a wrapper contract structure, the underlying investments are owned by the account and held in trust for Plan participants. These contracts wrap a diversified portfolio primarily comprised of corporate and government bonds, and collective trust funds. The account purchases wrapper contracts from an insurance company or bank. The wrapper contracts amortize the realized and unrealized gains and losses on the underlying fixed income investments, typically over the duration of the investments, through adjustments to the future interest crediting rate (which is the rate earned by participants in the account for the underlying investments). The issuers of the wrapper contracts provide assurances that the adjustments to the interest crediting rate do not result in a future crediting rate that is less than zero.

Examples of events that would permit a wrapper contract issuer to terminate a wrapper contract upon short notice include the Plan’s loss of its qualified status, uncured material breaches of responsibilities, or material and adverse changes to the provisions of the Plan. If one of these events was to occur, the wrapper contract issuer could terminate the wrapper contract at the market value of the underlying investments.

The Master Trust held the following investments in common stock of The Coca-Cola Company as of December 31, 2016 and 2015 (in thousands):

Note 4 – Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service dated September 2, 2009, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the Internal Revenue Service, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax exempt.

U.S. GAAP require the management of the Plan to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2016, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

Coca-Cola Refreshments

Bargaining Employees’ 401(k) Plan

Notes to Financial Statements

Note 5 – Risks and Uncertainties

The Master Trust invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.

Note 6 – Nonexempt Transactions

During 2016, the Plan Administrator identified certain operational deficiencies regarding one participant’s loan.  Management of the Plan has taken corrective actions to ensure compliance with the Plan’s loan policy and will be filing an application under the Voluntary Correction Program (“VCP”) with the IRS with proposed corrections of these matters.  The Plan Administrator and counsel for the Plan believe that these deficiencies and VCP application will not impact the tax qualification of the Plan and that the Plan continues to maintain tax qualified status under the applicable sections of the IRC.

The following is a reconciliation of investment income from the Master Trust per the financial statements to the Form 5500 for the year ended December 31, 2016:

Supplemental Schedule

Coca-Cola Refreshments

Bargaining Employees’ 401(k) Plan

EIN: 58-0503352 PN: 003

Schedule H, Line 4i - Schedule of Assets (Held at End of Year)

December 31, 2016

* Parties-in-interest

Note: Column (d) cost is not required for participant-directed investments.