Operating Segment

9 Months Ended

Sep. 30, 2011

Operating Segment

Operating Segment

OPERATING SEGMENT

We operate in one industry and have one operating segment. This segment derives its revenues from marketing, producing, and distributing nonalcoholic beverages. No single customer accounted for more than 10 percent of our revenues during the first nine months of 2011 or 2010.

Our segment operating income includes the segment’s revenue less substantially all the segment’s cost of production, distribution, and administration. We evaluate the segment’s performance based on several factors, of which net operating revenues and operating income are the primary financial measures.

Prior to the Merger, our Corporate segment included an allocation of certain corporate expenses related to services provided to us by Legacy CCE. These expenses included the cost of executive oversight, information technology, legal, treasury, risk management, human resources, accounting and reporting, investor relations, public relations, internal audit, and certain global restructuring projects. The cost of these services was allocated to us based on specific identification when possible or, when the expenses were determined to be global in nature, based on the percentage of our relative sales volume to total Legacy CCE sales volume for the applicable periods. We believe these allocations are a reasonable representation of the cost incurred for the services provided. However, these allocations are not necessarily indicative of the actual expenses that we would have incurred had we been operating as an independent company prior to the Merger.

Additionally, mark-to-market gains/losses related to our non-designated commodity hedges are recognized in the earnings of our Corporate segment until such time as the underlying hedged transaction affects the earnings of our Europe operating segment. In the period the underlying hedged transaction occurs, the accumulated mark-to-market gains/losses related to the hedged transaction are reclassified from the earnings of our Corporate segment into the earnings of our Europe operating segment. This treatment allows our Europe operating segment to reflect the true economic effects of the underlying hedged transaction in the period the hedged transaction occurs without experiencing the mark-to-market volatility associated with these non-designated commodity hedges. For additional information about our non-designated hedges, refer to Note 5.

Segment Remeasurement

Beginning in the first quarter of 2011, certain information technology-related expenses incurred in Europe that were previously reported in our Corporate segment are now reported in our Europe operating segment. These expenses totaled $12 million and $36 million during the third quarter and first nine months of 2011, respectively, and totaled $9 million and $30 million during the third quarter and first nine months of 2010, respectively. To provide comparability, we have recast our third quarter and first nine months of 2010 segment reporting to reflect the movement of these expenses. The segment measurement change did not impact our consolidated operating income for any period. The following table summarizes our segment operating income (expense) for the periods presented as adjusted for the segment measurement change (in millions):

	Previously Reported			Amount     Recast			As     Adjusted
Third Quarter 2010:
Europe	$	312		$	(9	)	$	303
Corporate	(68		)	9			(59		)
Consolidated	$	244		$	—		$	244
First Nine Months 2010:
Europe	$	839		$	(30	)	$	809
Corporate	(163		)	30			(133		)
Consolidated	$	676		$	—		$	676

The following table summarizes selected segment financial information for the periods presented (in millions):

	Europe		Corporate			Consolidated
Third Quarter 2011:
Net operating revenues	$	2,140	$	—		$	2,140
Operating income	364		(34		)	330
Third Quarter 2010:
Net operating revenues	$	1,681	$	—		$	1,681
Operating income	303		(59		)	244
First Nine Months 2011:
Net operating revenues(A)	$	6,391	$	—		$	6,391
Operating income(B)	972		(119		)	853
Capital asset investments	245		7			252
First Nine Months 2010:
Net operating revenues(A)	$	4,920	$	—		$	4,920
Operating income(B)	809		(133		)	676
Capital asset investments(C)	185		—			185

___________________________

^(A)  The following table summarizes the contribution of total net operating revenues by country as a percentage of total net operating revenues for the periods presented:

	First Nine Months
	2011		2010
Net operating revenues
Great Britain	33	%	39	%
France	29		32
Belgium	16		19
The Netherlands	9		10
Norway	7		n/a
Sweden	6		n/a
Total	100	%	100	%

^(B)  Our Corporate segment operating income includes net mark-to-market losses on our non-designated commodity hedges totaling $2 million for the first nine months of 2011, and net mark-to-market losses on our non-designated commodity hedges totaling $7 million for the first nine months of 2010. As of September 30, 2011, the amount of net mark-to-market gains included in our Corporate segment on non-designated commodity hedges was not significant. These amounts will be reclassified into the earnings of our Europe operating segment when the underlying hedged transactions occur. For additional information about our non-designated hedges, refer to Note 5.

^(C)  Prior to the Merger, our capital asset investments only included those related to Legacy CCE’s Europe operating segment.