UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒

FORM 10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

2022

or

☐

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from to

Commission file numberFile Number: 0-9286

coke-20221231_g1.jpg
COCA-COLA BOTTLING CO. CONSOLIDATED,

INC.

(Exact name of registrant as specified in its charter)

Delaware

56-0950585

Delaware56-0950585
(State or other jurisdiction of


incorporation or organization)

(I.R.S. Employer


Identification No.)

4100 Coca-Cola Plaza
Charlotte, NC

28211
(Address of principal executive offices)(Zip Code)

4100 Coca-Cola Plaza, Charlotte, North Carolina 28211

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (704) 557-4400

(980) 392-8298

Securities Registered Pursuantregistered pursuant to Section 12(b) of the Act:

Title of Each Class

each class

Trading Symbol(s)

Name of Each Exchangeeach exchange on Which Registered

which registered

Common Stock, par value $1.00 Par Value

per share

COKE

The NASDAQNasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:  None

Securities Registered Pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒     No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

(Do not check if a smaller reporting company)

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  ☐    No  ☒

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

Class
Market Value as of June 30, 2017

July 1, 2022

Common Stock, par value $l.00 Par Value

per share

$1,066,187,233

3,385,395,472

Class B Common Stock, par value $l.00 Par Value

per share

*

*No market exists for the Class B Common Stock, which is neither registered under Section 12 of the Act nor subject to Section 15(d) of the Act. The Class B Common Stock is convertible into Common Stock on a share-for-share basis at any time at the option of the holder.

Indicate the number of shares outstanding of each of the registrant'sregistrant’s classes of common stock, as of the latest practicable date.

 Class

Class
Outstanding as of February 16, 2018

January 27, 2023

Common Stock, par value $1.00 Par Value

per share

7,141,447

8,368,993

Class B Common Stock, par value $1.00 Par Value

per share

2,192,722

1,004,696

Documents Incorporated by Reference

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statementproxy statement to be filed pursuant to Section 14 ofwith the ActUnited States Securities and Exchange Commission in connection with respect to the registrant’s 20182023 Annual Meeting of Stockholders are incorporated by reference in Part III Items 10-14.

Table of Contents

this report to the extent described herein.

Page



COCA‑COLA CONSOLIDATED, INC.
ANNUAL REPORT ON FORM 10‑K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022

TABLE OF CONTENTS


Part I

Page

Item 1.

BusinessPART I

4

1

15

8

22

16

22

17

24

18

24

18

25

19

PartPART II

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

27

21

Selected Financial Data21

29

30

22

60

36

61

37

119

78

119

78

119

78

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

78

Part III

PART III

120

79

120

79

120

79

120

79

120

79

PartPART IV

121

80

128

85

130

87



i

PART I

Item 1.

Business


Item 1.Business.

Introduction


Coca‑Cola Bottling Co. Consolidated, Inc., a Delaware corporation (together with its majority-owned subsidiaries, “Coca‑Cola Consolidated,” the “Company,” “CCBCC,” “we,” “our”“us” or “us”“our”), distributes, markets and manufactures nonalcoholic beverages in territories spanning 14 states and the District of Columbia. The Company was incorporated in 1980 and, together with its predecessors, has been in the nonalcoholic beverage manufacturing and distribution business since 1902. We are the largest independent Coca‑Cola bottler in the United States. Approximately 93%86% of our total bottle/can sales volume to retail customers consists of products of The Coca‑Cola Company, which include some of the most recognized and popular beverage brands in the world. We also distribute products for several other beverage brandscompanies, including Keurig Dr Pepper SundropInc. (“Dr Pepper”) and Monster Energy.Energy Company (“Monster Energy”). Our purposePurpose is to honor God in all we do, to serve others, to pursue excellence and to grow profitably. Our stock is traded on the NASDAQ Global Select Market under the symbol “COKE.”


Ownership


As of December 31, 2017, The Coca‑Cola2022, J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, owned approximately 35%controlled 1,004,394 shares of the Company’s total outstandingClass B Common Stock, representingwhich represented approximately 5%71% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock voting together.on a consolidated basis. As long asof December 31, 2022, The Coca‑Cola Company holdsowned shares of the Company’s Common Stock representing approximately 9% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. The number of shares of the Company’s Common Stock it currently owns,held by The Coca‑Cola Company gives it has the right to have a designee proposed by the Company for nomination to the Company’s Board of Directors.Directors in the Company’s annual proxy statement. J. Frank Harrison, III the Chairman of the Board of Directors and Chief Executive Officer of the Company, and trustees of certain trusts established for the benefit of certain relatives of the late J. Frank Harrison, Jr. have agreed to vote the shares of the Company’s Class B Common Stock which they control, representing approximately 86% of the total voting power of the Company’s Common Stock and Class B Common Stock voting together,that they control in favor of such designee. The Coca‑Cola Company does not own any shares of the Company’s Class B Common Stock.


Beverage Products


We offer a range of nonalcoholic beverage products and flavors, including both sparkling and still beverages, designed to meet the demands of our consumers, including both sparkling and still beverages.consumers. Sparkling beverages are carbonated beverages and the Company’s principal sparkling beverage is Coca‑Cola. Still beverages include energy products and noncarbonated beverages such as bottled water, ready to drink tea, ready to drink coffee, enhanced water, juices and sports drinks.


Our sales are divided into two main categories: (i) bottle/can sales and (ii) other sales. Bottle/can sales include products packaged primarily in plastic bottles and aluminum cans. Other sales include sales to other Coca‑Cola bottlers, post-mix sales, transportation revenue and “post-mix” products.equipment maintenance revenue. Post-mix products are dispensed through equipment that mixes fountain syrups with carbonated or still water, enabling fountain retailers to sell finished products to consumers in cups or glasses.

Bottle/can sales represented approximately 84%, 84% and 82% of total net sales for fiscal 2017 (“2017”), fiscal 2016 (“2016”) and fiscal 2015 (“2015”), respectively. The sparkling beverage category represented approximately 63%, 66% and 70% of total bottle/can sales during 2017, 2016 and 2015, respectively.



The following table sets forth some of our principal products, including products of The Coca‑Cola Company and products licensed to us by other beverage companies.

companies:

Sparkling BeveragesStill Beverages
The Coca-Cola Company Products

Beverage Products Licensed

Products:

Sparkling Beverages

Still Beverages

by Other Beverage Companies

Barqs Root Beer

Fanta Zero

Fresca

Core Power(1)

AHA

Peace Tea

Diet Dr Pepper

Cherry Coke

Coca-Cola

Fresca

Mello Yello

Dasani

POWERade

BODYARMOR products

Dr Pepper

POWERade

Cherry CokeCoca-Cola Zero

Mello Yello

Dasani Flavors

POWERade Zero

Full Throttle

Coca-Cola

Mello Yello Zero

Dunkin’ Donuts Iced Coffee(1)

Tum-E Yummies

Core Power

Monster Energy products

POWERade Zero

Coca-Cola Life

Minute Maid Sparkling

FUZE

Yup Milk(1)

Dasani

NOS®

Tum-E Yummies

Coca-Cola Vanilla

Pibb Xtra

glacéau smartwater

ZICO

fairlife products

Sundrop

Coca-Cola Zero Sugar

Seagrams Ginger Ale

glacéau smartwater
Diet CokeSpriteglacéau vitaminwater

Dasani Sparkling

Fanta

Sprite

Zero Sugar

Gold Peak Tea

Diet Barqs Root Beer

Fanta Zero

Sprite Zero

Hi-C

Diet Coke

Surge

Honest Tea

Diet Coke Splenda®

TAB

Minute Maid Adult Refreshments

Fanta Flavors

Minute Maid Juices To Go

Products Licensed to Us by Other Beverage Companies:
Diet Dr PepperSundropDunkin’ Donuts productsNOS®
Diet SundropFull ThrottleReign products
Dr PepperMonster Energy products

(1) Indicates brands for which The Coca‑Cola Company has a license, joint venture or strategic partnership.

System Transformation

We recently concluded a series of transactions with The Coca‑Cola Company and Coca‑Cola Refreshments USA, Inc. (“CCR”), a wholly-owned subsidiary of The Coca‑Cola Company, which were initiated in April 2013 as part of The Coca‑Cola Company’s multi-year refranchising of its North American bottling territories (the “System Transformation”). Through several asset purchase and asset exchange transactions with The Coca‑Cola Company, CCR and Coca‑Cola Bottling Company United, Inc. (“United”), an independent bottler that is unrelated to the Company, we significantly expanded our distribution and manufacturing operations through the acquisition and exchange of distribution territories and regional manufacturing facilities.

Following the completion of the System Transformation, we are party to several key agreements that (i) provide us with rights to distribute, market and manufacture beverage products and (ii) coordinate our role in the North American Coca‑Cola system. The following sections summarize certain of these key agreements.


1

Beverage Distribution and Manufacturing Agreements


We have rights to distribute, promote, market and sell certain nonalcoholic beverages of The Coca‑Cola Company pursuant to a comprehensive beverage agreementagreements (collectively, the “CBA”) with The Coca‑Cola Company and CCR. We also have rights to manufacture, produce and package certain beverages bearing trademarksCoca‑Cola Refreshments USA, Inc. (“CCR”), a wholly owned subsidiary of The Coca‑Cola Company pursuantCompany. The CBA relates to a regionalmulti-year series of transactions, which were completed in October 2017, through which the Company acquired and exchanged distribution territories and manufacturing agreement withplants. The Coca‑Cola Company. These agreements, which areCBA requires the principal agreements we have with The Coca‑Cola Company and its affiliates following completionto make quarterly acquisition related sub-bottling payments to CCR on a continuing basis in exchange for the grant of the System Transformation, are described below under the headings “Distribution Agreement with The Coca‑Cola Company and CCR” and “Manufacturing Agreement with The Coca‑Cola Company.”

In addition to our agreements with The Coca‑Cola Company and CCR, we also have rights to distribute certain beverage brands owned by other beverage companies, including Dr Pepper and Monster Energy, pursuant to agreements with such other beverage companies. These agreements are described below under the heading “Distribution Agreements with Other Beverage Companies.”

Distribution Agreement with The Coca‑Cola Company and CCR

We have exclusive rights to distribute, promote, market and sell certain beverages and beverage productsthe authorized brands of The Coca‑Cola Company and related products in certain territories pursuantof the Company’s distribution territories. In addition to a comprehensive beverage agreement with The Coca‑Cola Companycustomary termination and CCR entered into on March 31, 2017 (as amended, the “CBA”), in exchange for which we are required to make quarterly sub-bottling payments to CCR. The amount of these payments is based on gross profit derived from our sales of beverages and beverage products of The Coca‑Cola Company as well as certain cross-licensed beverage brands not owned or licensed by The Coca‑Cola Company. These sub-bottling payments to CCR are for the territories we acquired in the System Transformation, and are not applicable to those territories we served prior to the System Transformation or to those territories we acquired in an exchange transaction. Since March 31, 2017, we entered into a series of amendments todefault rights, the CBA with The Coca‑Cola Company and CCR to add or remove, as applicable, all territories we acquired or exchanged after that date in the System Transformation.


As of December 31, 2017, the estimated fair value of the contingent consideration related to future sub-bottling payments was $381.3 million. Each quarter, we adjust the liability to fair value to reflect the estimated fair value of the contingent consideration related to future sub-bottling payments. See Note 15 to the consolidated financial statements for additional information.

The CBA contains provisions that apply in the event of a potential sale of our company or our aggregate businesses related to the distribution, promotion, marketing and sale of beverages and beverage products of The Coca‑Cola Company. Pursuant to the CBA, we may only sell our distribution business to either The Coca‑Cola Company or third-party buyers approved by The Coca‑Cola Company. We may obtain a list of approved third-party buyers from The Coca‑Cola Company on an annual basis or can seek The Coca‑Cola Company’s approval of a potential buyer upon receipt of a third-party offer to purchase our distribution business. If we wish to sell our distribution business to The Coca‑Cola Company and are unable to agree with The Coca‑Cola Company on the terms of a binding purchase and sale agreement, including the purchase price for our distribution business, the CBA provides that we may either withdraw from negotiations or initiate a third-party valuation process to determine the purchase price and, upon this determination, opt to continue with our potential sale to The Coca‑Cola Company. If we elect to continue with our potential sale, The Coca‑Cola Company will then have the option to (i) purchase our distribution business at the purchase price determined by the third-party valuation process and pursuant to the sale terms set forth in the CBA (including, to the extent not otherwise agreed to by us and The Coca‑Cola Company, default non-price terms and conditions of the acquisition agreement), or (ii) elect not to purchase our distribution business, in which case the CBA will be automatically amended to, among other things, permitrequires us to sell our distribution business to any third party without obtaining The Coca‑Cola Company’s prior approval.

The CBA further provides:

the right of The Coca‑Cola Company to terminate the CBA in the event of an uncured default by us, in which case The Coca‑Cola Company (or its designee) is required to acquire our distribution business;

the requirement that we maintain an annual equivalent case volume per capita change rate that is not less than one standard deviation below the median of the rates for all U.S. Coca‑Cola bottlers for the same period; and

the requirement that we make minimum, ongoing capital expenditures in our distribution business atand to meet certain minimum volume requirements, gives The Coca‑Cola Company certain approval and other rights in connection with a specified level.

The CBAsale of the Company or of the distribution business of the Company and prohibits us from producing, manufacturing, preparing, packaging, distributing, selling, dealing in or otherwise using or handling any beverages, beverage components or other beverage products (i) other than the beverages and beverage products of The Coca‑Cola Company and certain expressly permitted cross-licensed brands and (ii) unless otherwise consented to by The Coca‑Cola Company. The CBA has a term of ten years and is renewable by us indefinitely for successive additional terms of ten years, unless earlier terminated as provided therein.

As part ofwithout the System Transformation, on March 31, 2017, each of our then-existing bottling agreements for The Coca‑Cola Company beverage brands was automatically amended, restated and converted into the CBA (the “Bottling Agreement Conversion”), pursuant to a territory conversion agreement we entered into with The Coca‑Cola Company and CCR on September 23, 2015 (as amended, the “Territory Conversion Agreement”). The Bottling Agreement Conversion included, subject to certain limited exceptions, all of our then-existing comprehensive beverage agreements, master bottle contracts, allied bottle contracts and other bottling agreements with The Coca‑Cola Company or CCR that authorized us to produce and/or distribute beverages and beverage productsconsent of The Coca‑Cola Company in all territories where we (or one of our affiliates) had rights to market, promote, distribute and sell beverage products owned or licensed by The Coca‑ColaCoca-Cola Company.

In connection with the Bottling Agreement Conversion, each then-existing bottling agreement for The Coca‑Cola Company beverage brands between The Coca‑Cola Company and certain of our subsidiaries, including Piedmont Coca‑Cola Bottling Partnership, a partnership formed by us and The Coca‑Cola Company (“Piedmont”), was


We also amended, restated and converted into a comprehensive beverage agreement with The Coca‑Cola Company, pursuant to which the subsidiary was granted certain exclusive rights to distribute, promote, market and sell certain beverages and beverage products of The Coca‑Cola Company in certain territories. These comprehensive beverage agreements are substantially similar to the CBA and, as with the treatment of the territories served by the Company prior to the System Transformation under the CBA, do not require our subsidiaries to make quarterly sub-bottling payments to CCR.

Manufacturing Agreement with The Coca‑Cola Company

We have rights to manufacture, produce and package certain beverages and beverage productsbearing trademarks of The Coca‑Cola Company at our manufacturing facilitiesplants pursuant to a regional manufacturing agreement with The Coca‑Cola Company entered into on March 31, 2017 (as amended, the “RMA”). TheseWe may distribute these beverages may be distributed by us for our own account in accordance with the CBA or may be sold by ussell them to certain other U.S. Coca‑Cola bottlers andor to the Coca‑Cola North America division of The Coca‑Cola Company (“CCNA”) in accordance with the RMA. PursuantFor prices determined pursuant to the RMA, The Coca‑Cola Company unilaterally establishes from time to time the prices, or certain elements of the formulas used to determine the prices, that the Company charges for these sales to CCNA orcertain other U.S. Coca‑Cola bottlers are unilaterally established by CCNA from


time to time. Since March 31, 2017, we entered into a series of amendments to the RMA with The Coca‑Cola Company to add or remove, as applicable, all regional manufacturing facilities we acquired or exchanged after that date in the System Transformation.

Under the RMA, our aggregate business primarily related to the manufacture of certain beverages and beverage products of The Coca‑Cola Company and permitted third-party beverage products are subject to the same agreed upon sale process provisions in the CBA, including the obligation to obtain The Coca‑Cola Company’s prior approval of a potential purchaser of our manufacturing business and provisions for the sale of such business to The Coca‑Cola Company. The RMA requires that we makecontains provisions similar to those contained in the CBA restricting the sale of the Company or the manufacturing business of the Company, requiring minimum, ongoing capital expenditures in our manufacturing business, at a specified level. The Coca‑Cola Company has the right to terminate the RMA in the event of an uncured default by us under the CBA or in the event of an uncured breach of our material obligations under the RMA or the NPSG Governance Agreement (as defined below).

The RMA prohibitsprohibiting us from manufacturing any beverages, beverage components or other beverage products (i) other than the beverages and beverage products of The Coca‑Cola Company and certain expressly permitted cross‑licensedcross-licensed brands and (ii) unless otherwise consented to bywithout the consent of The Coca‑Cola Company. Subject to The Coca‑Cola Company’s termination rights, the RMA has a term that continuesCompany and allowing for the durationtermination of the term of the CBA.

As part of the System Transformation and concurrent with the Bottling Agreement Conversion, on March 31, 2017, each ofRMA.


In addition to our then-existing manufacturing agreements with The Coca‑Cola Company were amended, restated and converted intoCCR, we also have rights to manufacture and/or distribute certain beverage brands owned by other beverage companies, including Dr Pepper and Monster Energy, pursuant to agreements with such other beverage companies. Our distribution agreements with Dr Pepper permit us to distribute Dr Pepper beverage brands, as well as certain post-mix products of Dr Pepper. Certain of our agreements with Dr Pepper also authorize us to manufacture certain Dr Pepper beverage brands. Our distribution agreements with Monster Energy grant us the RMA.

rights to distribute certain products offered, packaged and/or marketed by Monster Energy. Similar to the CBA, these beverage agreements contain restrictions on the use of trademarks and approved bottles, cans and labels and the sale of imitations or substitutes, as well as provisions for their termination for cause or upon the occurrence of other events defined in these agreements. Sales of beverages under these agreements with other beverage companies represented approximately 14%, 17% and 16% of our total bottle/can sales volume to retail customers in 2022, 2021 and 2020, respectively.


Finished Goods Supply Arrangements


We have finished goods supply arrangements with other U.S. Coca‑Cola bottlers to sell and buy and sell finished products produced undergoods bearing trademarks owned by The Coca‑Cola Company and produced by us in accordance with the RMA pursuantor produced by a selling U.S. Coca‑Cola bottler in accordance with a similar regional manufacturing authorization held by such bottler. Pursuant to whichthe RMA, The Coca‑Cola Company unilaterally establishes from time to time the prices, or certain elements of the formulas used to determine the prices, for such finished products are unilaterally established by CCNA from time to time.goods. In most instances, the Company’s ability to negotiate the prices at which it purchasessells finished goods bearing trademarks owned by The Coca‑Cola Company from,to, and the prices at which it sellspurchases such finished goods to,from, other U.S. Coca‑Cola bottlers is limited pursuant to these pricing provisions, which could have an adverse impact on the Company’s profitability.

Distribution Agreements with Other Beverage Companies

In addition to our distribution and manufacturing agreements with The Coca‑Cola Company, we also have distribution agreements with other beverage companies, including Dr Pepper Snapple Group, Inc. (“Dr Pepper Snapple”) and Monster Energy Corporation (“Monster Energy”).

Our distribution agreements with Dr Pepper Snapple permit us to distribute Dr Pepper and/or Sundrop beverage brands, as well as certain post-mix products of Dr Pepper Snapple, and our distribution agreement with Monster Energy grants us the rights to distribute energy drink products offered, packaged and/or marketed by Monster Energy under the primary brand name “Monster.”

Under our distribution agreements with other beverage companies, the price for syrup or concentrate is set by the beverage company from time to time. Similar to the CBA, these beverage agreements contain restrictions on the use of trademarks, approved bottles, cans and labels and sale of imitations or substitutes, as well as termination for cause provisions. The territories covered by beverage agreements with other beverage companies are not always aligned with the territories covered by the CBA, but are generally within those territory boundaries.

Sales of beverages under these agreements with other beverage companies represented approximately 7%, 10% and 13% of our bottle/can sales volume to retail customers for each of 2017, 2016 and 2015, respectively.


Other Agreements relatedRelated to the Coca‑Cola System

As part of the System Transformation process, we entered into


We have other agreements with The Coca‑Cola Company, CCR and other Coca‑Cola bottlers regarding product supply, information technology services and other aspects of the North American Coca‑Cola system, as described below. Many of these agreements involve new system governance structures providing for greater participation and involvement by bottlers whichthat require increased demands onthe Company’s management to closely collaborate and more collaboration and alignment by thealign with other participating bottlers in order to successfully implement Coca‑Cola system plans and strategies. We believe these system governance initiatives will benefit the Company and the Coca‑Cola system, but the failure of these mechanisms to function efficiently could impair our ability to realize their intended benefits.



Incidence-Based Pricing Agreement with The Coca‑Cola Company


The Company has an incidence-based pricing agreement with The Coca‑Cola Company, which establishes the prices charged by The Coca‑Cola Company to the Company for (i) concentrates of sparkling and certain still beverages produced by the Company and
2

(ii) certain purchased still beverages. Under the incidence-based pricing agreement, with The Coca‑Cola Company, the prices charged by The Coca‑Cola Company are impacted by a number of factors, including the incidence rate in effect, our pricing and sales of finished products, the channels in which the finished products are sold, the package mix and, package mix.in the case of products sold by The Coca‑Cola Company to us in finished form, the cost of goods for certain elements used in such products. The Coca‑Cola Company has no rights under the incidence-based pricing agreement to establish the resaleprices, or the elements of the formulas used to determine the prices, at which we sell its products, but does have rightsthe right to establish certain pricing under other agreements, including the RMA.


National Product Supply Governance Agreement


We are a member of a national product supply group (the “NPSG”), which is comprised of The Coca‑Cola Company, the Company and certain other Coca‑Cola bottlers who are regional producing bottlers (“RPBs”) in The Coca‑Cola Company’s national product supply system (collectively with the Company, the “NPSG Members”), pursuant to a national product supply governance agreement executed in October 2015 with The Coca‑Cola Company and certain other RPBs (theCoca‑Cola bottlers (as amended, the “NPSG Governance Agreement”). The stated objectives of the NPSG include, among others, (i) Coca‑Cola system strategic infrastructure investment and divestment planning; (ii) network optimization of all plant to distribution center sourcing; and (iii) new product/product or packaging infrastructure planning.


Under the NPSG Governance Agreement, the NPSG membersMembers established certain governance mechanisms, including a governing board (the “NPSG Board”) comprised of a representativerepresentatives of (i) the Company, (ii) The Coca‑Cola Company and (iii) each other RPB. As of December 31, 2017, thecertain NPSG Board consisted of The Coca‑Cola Company, the Company and seven other RPBs.Members. The NPSG Board makes and/or oversees and directs certain key decisions regarding the NPSG, including decisions regarding the management and staffing of the NPSG and the funding for its ongoing operations. Pursuant to the decisions of the NPSG Board made from time to time and subjectNPSG. Subject to the terms and conditions of the NPSG Governance Agreement, each RPBNPSG Member is required to make investments in its respective manufacturing assets and implement Coca‑Cola system strategic investment opportunities consistentcomply with certain key decisions made by the NPSG Governance Agreement.Board, which include decisions regarding strategic infrastructure investment and divestment planning, optimal national product supply sourcing and new product or packaging infrastructure planning. We are also obligated to pay a certain portion of the costs of operating the NPSG.


CONA Services LLC

We


Along with certain other Coca‑Cola bottlers, we are a member of CONA Services LLC (“CONA”), an entity formed with The Coca‑Cola Company and certain other Coca‑Cola bottlers pursuant to a limited liability company agreement executed in January 2016 (as amended, the “CONA LLC Agreement”) to provide business process and information technology services to its members.

Under the CONA LLC Agreement, the business and affairs of CONA are managed by a board of directors comprised of representatives of its members (the “CONA Board”). All directors are entitled to one vote, regardless of the percentage interest in CONA held by each member. We currently have the right to designate one of the members of the CONA Board and have a percentage interest in CONA of approximately 20%. Most matters to be decided by the CONA Board require approval by a majority of a quorum of the directors, provided that the approval of 80% of the directors is required to, among other things, require members to make additional capital contributions, approve CONA’s annual operating and capital budgets, and approve capital expenditures in excess of certain agreed upon amounts.

Each CONA member is required to make capital contributions to CONA if and when approved by the CONA Board. No CONA member may transfer its membership interest (or any portion thereof) except to a purchaser of the member’s bottling business (or any portion thereof) and as permitted under the member’s comprehensive beverage agreement with The Coca‑Cola Company.

The CONA LLC Agreement further provides that, if CCR grants any major North American Coca‑Cola bottler other than a CONA member rights to (i) manufacture, produce and package or (ii) market, promote, distribute and sell Coca‑Cola products, CCR will require the bottler to become a CONA member, to implement the CONA System in the bottler’s operations and to enter into a master services agreement with CONA.

We also are party to an amended and restated master services agreement with CONA, (the “CONA MSA”), pursuant to which CONA agreed to make available, and we became authorized to use, the Coke One North America system (the “CONA System”), a uniform information technology system developed to promote operational efficiency and uniformity among North American Coca‑Cola bottlers. As part of making the CONA System available to us, CONA provides us with certain business process and information technology services, including the planning, development, management and operation of the CONA System in connection with our direct store delivery and manufacture of products (collectively, the “CONA Services”). We are also authorized under the CONA MSA to use the CONA System in connection with our distribution, promotion, marketing, sale and manufacture of beverages we are authorized to distribute or manufacture under the CBA, the RMA or any other agreement with The Coca‑Cola Company, subject to the


provisions of the CONA LLC Agreement and any licenses or other agreements relating to products or services provided by third parties and used in connection with the CONA System.

products. In exchange for our rights to use the CONA System and receive the CONA Services under the CONA MSA,CONA-related services, we are charged service fees by CONA, based on the number of physical cases of beverageswhich we distributed or manufactured during the applicable period in the portion of our territories where the CONA Services have then been implemented. Upon the earlier of (i) all members of CONA beginning to use the CONA System in all territories in which they distribute and manufacture Coca‑Cola products (excluding certain territories of CCR that are expected to be sold to bottlers that are neither members of CONA nor users of the CONA System), or (ii) December 31, 2018, the service fees will be changed to be an amount per physical case of beverages distributed or manufactured in any portion of our territories equal to the aggregate costs incurred by CONA to maintain and operate the CONA System and provide the CONA Services divided by the total number of cases distributed or manufactured by all of the members of CONA, subject to certain exceptions and provided that the aggregate costs related to CONA’s manufacturing functionality will be borne solely amongst the CONA members who have rights to manufacture beverages of The Coca‑Cola Company. We are obligated to pay the service fees under the CONA MSA even if we are not using the CONA System for all or any portion of our distribution and manufacturing operations.


Amended and Restated Ancillary Business Letter

As part of the System Transformation,


On March 31, 2017, we entered into an amended and restated ancillary business letter with The Coca‑Cola Company on March 31, 2017 (the “Ancillary Business Letter”), pursuant to which we were granted advance waivers to acquire or develop certain lines of business involving the preparation, distribution, sale, dealing in or otherwise using or handling of certain beverage products that would otherwise be prohibited under the CBA or any similar agreement.

CBA.


Under the Ancillary Business Letter, subject to certain limited exceptions, we are prohibited from acquiring or developing any line of business inside or outside of our territories governed by the CBA or any similar agreement prior to January 1, 2020 without the consent of The Coca‑Cola Company, which consent may not be unreasonably withheld. After January 1, 2020, The Coca‑Cola Companywithheld, would be required for us to consent (which consent may not be unreasonably withheld) to our acquisitionacquire or development ofdevelop (i) any grocery, quick service restaurant, or convenience and petroleum store business engaged in the sale of beverages, beverage components and other beverage products not otherwise authorized or permitted by the CBA or (ii) any other line of business for which beverage activities otherwise prohibited under the CBA represent more than a certain threshold of net sales (subject to certain limited exceptions).

Distribution Territories and Regional Manufacturing Facilities

We are the largest independent Coca‑Cola bottler in the United States, distributing, marketing and manufacturing beverage products in territories spanning 14 states and the District of Columbia. In addition to the distribution territories and manufacturing facilities we continue to serve and operate in our historic operational footprint, which includes markets in North Carolina, South Carolina, central Tennessee, western Virginia and West Virginia, we now service and operate the following additional territories and manufacturing facilities acquired from CCR and United in the System Transformation:



Distribution Territories Acquired in System Transformation

Acquired

From

Acquisition

Date

Johnson City and Morristown, Tennessee

CCR

May 23, 2014

Knoxville, Tennessee

CCR

October 24, 2014

Cleveland and Cookeville, Tennessee

CCR

January 30, 2015

Louisville, Kentucky and Evansville, Indiana

CCR

February 27, 2015

Paducah and Pikeville, Kentucky

CCR

May 1, 2015

Lexington, Kentucky

CCR

May 1, 2015

Norfolk, Fredericksburg and Staunton, Virginia and Elizabeth City, North Carolina

CCR

October 30, 2015

Annapolis, Maryland Make-Ready Center

CCR

October 30, 2015

Easton and Salisbury, Maryland and Richmond and Yorktown, Virginia

CCR

January 29, 2016

Alexandria, Virginia and Capitol Heights and La Plata, Maryland

CCR

April 1, 2016

Baltimore, Hagerstown and Cumberland, Maryland

CCR

April 29, 2016

Cincinnati, Dayton, Lima and Portsmouth, Ohio and Louisa, Kentucky

CCR

October 28, 2016

Anderson, Fort Wayne, Lafayette, South Bend and Terre Haute, Indiana

CCR

January 27, 2017

Indianapolis and Bloomington, Indiana and Columbus and Mansfield, Ohio

CCR

March 31, 2017

Akron, Elyria, Toledo, Willoughby and Youngstown, Ohio

CCR

April 28, 2017

Memphis, Tennessee

CCR

October 2, 2017

Little Rock and West Memphis, Arkansas

CCR

October 2, 2017

Bluffton and Spartanburg, South Carolina(1)

United

October 2, 2017

3

(1) A portion of the Bluffton, South Carolina territory was acquired by Piedmont.

Regional Manufacturing Facilities Acquired in System Transformation

Acquired

From

Acquisition

Date

Sandston, Virginia

CCR

January 29, 2016

Silver Spring and Baltimore, Maryland

CCR

April 29, 2016

Cincinnati, Ohio

CCR

October 28, 2016

Indianapolis and Portland, Indiana

CCR

March 31, 2017

Twinsburg, Ohio

CCR

April 28, 2017

Memphis, Tennessee and West Memphis, Arkansas

CCR

October 2, 2017

As part of the System Transformation, the Company also divested certain of its distribution territories and one regional manufacturing facility in asset exchange transactions with CCR and United, summarized as follows:

Distribution Territories and Regional Manufacturing Facilities Exchanged in System Transformation

Acquired

By

Exchange

Date

Jackson, Tennessee

CCR

May 1, 2015

Leroy, Mobile and Robertsdale, Alabama, Panama City, Florida, Bainbridge, Columbus and Sylvester, Georgia, Ocean Springs, Mississippi and Mobile Alabama Regional Manufacturing Facility (the "Deep South") and Somerset, Kentucky

CCR

October 2, 2017

Florence, Alabama and Laurel, Mississippi

United

October 2, 2017

Northeastern Georgia(1)

United

October 2, 2017


(1) Territory exchanged by Piedmont.


Markets Served and Production and Distribution Facilities


As of December 31, 2017,2022, we served approximately 65.060 million consumers within our territories, which comprised 9five principal markets. Certain information regarding each of these markets follows:

Market

 

Description

 

Approximate

Population

 

Production Facilities

 

Number of

Distribution

Facilities

Arkansas / Northwestern Mississippi

 

A significant portion of central and southern Arkansas and a portion of western Tennessee, including Little Rock and West Memphis, Arkansas, Memphis, Tennessee and a portion of northwestern Mississippi and surrounding areas.

 

3.5 million

 

West Memphis, AR

Memphis, TN

 

3

Indiana / Southeastern Illinois

 

A significant portion of Indiana and a portion of southeastern Illinois, including Anderson, Bloomington, Evansville, Fort Wayne, Indianapolis, Lafayette, South Bend and Terre Haute, Indiana and surrounding areas.

 

5.6 million

 

Indianapolis, IN

Portland, IN

 

8

Kentucky / West Virginia

 

A significant portion of northeastern Kentucky, the majority of West Virginia, a portion of southeastern Indiana, a majority of southern Ohio and a portion of southwestern Pennsylvania, including Lexington, Louisville and Pikeville, Kentucky, Clarksburg, Elkins, Parkersburg, Craigsville and Charleston, West Virginia and Cincinnati and Portsmouth, Ohio and surrounding areas.

 

7.4 million

 

Cincinnati, OH

 

12

Maryland / Delaware / District of Columbia / South-Central Pennsylvania

 

The entire state of Maryland, a majority of the state of Delaware, the District of Columbia, and a portion of south-central Pennsylvania, including Easton, Salisbury, Capitol Heights, La Plata, Baltimore, Hagerstown and Cumberland, Maryland and surrounding areas.

 

13.3 million

 

Baltimore, MD

Silver Spring, MD

 

7

North Carolina

 

The majority of North Carolina and a portion of southern Virginia, including Boone, Hickory, Mount Airy, Asheville, Charlotte, Greensboro, Fayetteville, Raleigh, Greenville, New Bern and Wilmington, North Carolina and surrounding areas.

 

9.0 million

 

Charlotte, NC

 

11

Ohio

 

The majority of Ohio, including Akron, Columbus, Dayton, Elyria, Lima, Mansfield, Toledo, Willoughby and Youngstown and surrounding areas.

 

7.0 million

 

Twinsburg, OH

 

11

South Carolina

 

The majority of South Carolina and a portion of eastern Tennessee, including Beaufort, Conway, Marion, Bluffton, Charleston, Columbia, Greenville, Myrtle Beach and Spartanburg, South Carolina and surrounding areas and surrounding areas.

 

5.0 million

 

None

 

9

Tennessee

 

A significant portion of central and eastern Tennessee and a portion of western Kentucky, including Nashville, Johnson City, Morristown, Knoxville, Cleveland and Cookeville, Tennessee and Paducah, Kentucky and surrounding areas.

 

4.2 million

 

Nashville, TN

 

7

Virginia

 

The majority of Virginia and a portion of southern West Virginia, including Roanoke, Norfolk, Staunton, Alexandria, Richmond, Yorktown and Fredericksburg, Virginia and Beckley, West Virginia and surrounding areas.

 

10.0 million

 

Roanoke, VA

Sandston, VA

 

12

Total

 

 

 

65.0 million

 

12

 

80



MarketDescriptionManufacturing
Plants		Number of
Distribution
Centers
CarolinasThe majority of North Carolina and South Carolina and portions of southern Virginia, including Boone, Hickory, Mount Airy, Charlotte, Raleigh, Winston-Salem, Greensboro, Fayetteville, Greenville and New Bern, North Carolina, Conway, Marion, Charleston, Columbia, Greenville and Ridgeland, South Carolina and surrounding areas.Charlotte, NC17
CentralA significant portion of northeastern Kentucky, the majority of West Virginia and portions of southern Ohio, southeastern Indiana and southwestern Pennsylvania, including Lexington, Louisville and Pikeville, Kentucky, Beckley, Bluefield, Clarksburg, Elkins, Parkersburg, Craigsville and Charleston, West Virginia, Cincinnati and Portsmouth, Ohio and surrounding areas.Cincinnati, OH12
Mid-AtlanticThe entire state of Maryland, the majority of Virginia and Delaware, the District of Columbia and a portion of south-central Pennsylvania, including Easton, Salisbury, Capitol Heights, Baltimore, Hagerstown and Cumberland, Maryland, Norfolk, Staunton, Alexandria, Roanoke, Richmond, Yorktown and Fredericksburg, Virginia and surrounding areas.Baltimore, MD
Silver Spring, MD
Roanoke, VA
Sandston, VA		11
Mid-SouthA significant portion of central and southern Arkansas and Tennessee and portions of western Kentucky and northwestern Mississippi, including Little Rock and West Memphis, Arkansas, Cleveland, Cookeville, Johnson City, Knoxville, Memphis and Morristown, Tennessee, Paducah, Kentucky and surrounding areas.West Memphis, AR
Nashville, TN		10
Mid-WestA significant portion of Indiana and Ohio and a portion of southeastern Illinois, including Anderson, Whitestown, Evansville, Fort Wayne, Indianapolis and South Bend, Indiana, Akron, Columbus, Dayton, Elyria, Lima, Mansfield, Toledo, Willoughby and Youngstown, Ohio and surrounding areas.Indianapolis, IN
Twinsburg, OH		10
Total 1060


The Company is also a shareholder inof South Atlantic Canners, Inc. (“SAC”), a manufacturing cooperative managed by the Company. The Company is obligated to purchase 17.5 million cases of finished product from SAC on an annual basis through June 2024. SAC is located in Bishopville, South Carolina, and the Company utilizes a portion of the production capacity from the Bishopville production facility.

manufacturing plant.


Raw Materials


In addition to concentrates purchased from The Coca‑Cola Company and other beverage companies for use in our beverage manufacturing, we also purchase sweetener, carbon dioxide, plastic bottles, cans, closures and other packaging materials, as well as equipment for the distribution, marketing and production of nonalcoholic beverages.


We purchase all of ourthe plastic bottles used in our manufacturing plants from Southeastern Container and Western Container, two manufacturing cooperatives we co-own with several other Coca‑Cola bottlers, and all of our aluminum cans from two domestic suppliers.


Along with all other U.S. Coca-ColaCoca‑Cola bottlers in the United States and Canada, we are a member of Coca-Cola Bottlers’ Sales and& Services Company LLC (“CCBSS”), which was formed in 2003 to facilitate variousprovide certain procurement functions and the distribution of beverage products of The Coca‑Cola Companyother services with the intentintention of enhancing the efficiency and competitiveness of the Coca‑Cola bottling system in the United States.system. CCBSS negotiates the procurement for the majority of our raw materials, excluding concentrate.

concentrate, and we receive a rebate from CCBSS for the purchase of these raw materials.


We are exposed to price risk on commodities such as aluminum, corn and PET resin (a petroleum- or plant-based product), and fuel, which affects the cost of raw materials used in the production of our finished products. We both produce and procure these finished products. Examples of the raw materials affected includeare aluminum cans and plastic bottles used for packaging and high fructose corn syrup used as a product ingredient. Further, we are exposed to commodity price risk on crude oil, which impacts our cost of fuel used in the movement and delivery of our products. We participate in commodity hedging and risk mitigation programs, including programs administered both by CCBSS and by the Company.programs we administer. In addition, other than as discussed above, there are no limits on the prices The Coca‑Cola Company and other beverage companies can charge for concentrate.

4


Customers and Marketing


The Company’s products are sold and distributed in the United States through various channels, which include selling directly to customers, including direct sales to retailgrocery stores, mass merchandise stores, club stores, convenience stores and other outletsdrug stores, selling to on-premise locations, where products are typically consumed immediately, such as food markets, institutional accountsrestaurants, schools, amusement parks and recreational facilities, and selling through other channels such as vending machine outlets. During 2017, approximately 65% of the Company’s bottle/can sales volume to retail customers was sold for future consumption, while the remaining bottle/can sales volume to retail customers was sold for immediate consumption. All of the Company’s beverage sales during 2017 were to customers in the United States.


The following table summarizes the percentage of ourthe Company’s total bottle/can sales volume to ourits largest customers, as well as the percentage of ourthe Company’s total net sales that such volume represents:

 

 

Fiscal Year

 

 

 

2017

 

 

2016

 

 

2015

 

Approximate percent of the Company's total bottle/can sales volume

 

 

 

 

 

 

 

 

 

 

 

 

Wal-Mart Stores, Inc.

 

 

19

%

 

 

20

%

 

 

22

%

The Kroger Company

 

 

10

%

 

 

6

%

 

 

6

%

Food Lion, LLC

 

 

6

%

 

 

8

%

 

 

7

%

Total approximate percent of the Company's total bottle/can sales volume

 

 

35

%

 

 

34

%

 

 

35

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Approximate percent of the Company's total net sales

 

 

 

 

 

 

 

 

 

 

 

 

Wal-Mart Stores, Inc.

 

 

13

%

 

 

14

%

 

 

15

%

The Kroger Company

 

 

7

%

 

 

5

%

 

 

5

%

Food Lion, LLC

 

 

4

%

 

 

5

%

 

 

5

%

Total approximate percent of the Company's total net sales

 

 

24

%

 

 

24

%

 

 

25

%


 Fiscal Year
 20222021
Approximate percent of the Company’s total bottle/can sales volume:
Wal-Mart Stores, Inc.20 %20 %
The Kroger Company12 %13 %
Total approximate percent of the Company’s total bottle/can sales volume32 %33 %
Approximate percent of the Company’s total net sales:
Wal-Mart Stores, Inc.16 %14 %
The Kroger Company10 %9 %
Total approximate percent of the Company’s total net sales26 %23 %

The loss of Wal-Mart Stores, Inc., or The Kroger Company or Food Lion, LLC as a customer could have a material adverse effect on the operating and financial results of the Company.

No other customer represented greater than 10% of the Company’s total net sales or would impose a material adverse effect on the operating or financial results of the Company should they cease to be a customer of the Company.


New brand and product introductions, packaging changes and sales promotions are the primary sales and marketing practices in the nonalcoholic beverage industry and have required, and are expected to continue to require, substantial expenditures. Recent product introductions in our business include new flavor varieties within certain brands such as Sprite Cherry, POWERade Citrus Passionfruit, Monster Ultra Violet, Monster Juice Mango Loco, Peace Tea Georgia Peach, Peace Tea Razzleberry,Coca‑Cola Creations, Dr Pepper & Cream Soda, fairlife milk products and Minute Maid 5% Berry Punch, Dunkin’ Donuts

Aguas Frescas.


Mocha Iced Coffee, Dunkin’ Donuts French Vanilla Iced Coffee and Coke Zero Sugar. Recent packaging introductions include the 13.7-ounce bottle for Dunkin’ Donuts Iced Coffees, 0.5-liter energy drink cans and eight-packs of 16-ounce energy drinks.

We sell our products primarily in non-refillablesingle-use, recyclable bottles and cans, in varying package configurations from market to market. For example, there may be as many as 28up to 26 different packages for Diet Coke within a single geographic area. Bottle/Total bottle/can sales volume to retail customers during 20172022 was approximately 62%51% bottles and 38%49% cans.


We rely extensively on advertising in various media outlets, primarily online, television and radio, for the marketing of our products. The Coca‑Cola Company, Monster Energy and Dr Pepper Snapple (collectively, the “Beverage Companies”)and Monster Energy make substantial expenditures on advertising programs in our territories from which we benefit. Although the Beverage CompaniesThe Coca‑Cola Company and other beverage companies have provided us with marketing funding support in the past, our beverage agreements generally do not obligate the Beverages Companies to do so.

such funding.


We also expend substantial funds on our own behalf for extensive local sales promotions of our products. Historically, these expenses have been partially offset by marketing funding support provided to us by the Beverage CompaniesThe Coca‑Cola Company and other beverage companies in support of a variety of marketing programs, such as point-of-sale displays and merchandising programs. We consider the funds we expend for marketing and merchandising programs necessary to maintain or increase revenue.


In addition to our marketing and merchandising programs, we believe a sustained and planned charitable giving program to support the communities we serve is an essential component to the success of our brand and, by extension, our net sales. In 2017,2022, the Company made cash donations of approximately $5.8$37 million to various charities and donor-advised funds in light of the Company’s financial performance, expanded distribution territory footprint and future business prospects. The Company intends to continue its charitable contributions in future years, subject to the Company’s financial performance and other business factors.


Seasonality


Business seasonality results primarily from higher unit sales of the Company’s products in the second and third quarters of the fiscal year.year, as sales of our products are typically correlated with warmer weather. We believe that we and other manufacturers from whom we purchase finished goodsproducts have adequate production capacity to meet sales demand for sparkling and still beverages during these peak periods. See “Item 2. Properties” for information relating to utilization of our production facilities.manufacturing plants. Sales volume can also be impacted by weather conditions. Fixed costs, such as depreciation expense, are not significantly impacted by business seasonality.


5

Competition


The nonalcoholic beverage marketindustry is highly competitive for both sparkling and stillstill beverages. Our competitors include bottlers and distributors of nationally and regionally advertised and marketed products, as well as bottlers and distributors of private label beverages. Our principal competitors include local bottlers of Pepsi-ColaPepsiCo, Inc. products and, in some regions, local bottlers of Dr Pepper Royal Crown and/or 7‑Up products.


The principal methods of competition in the nonalcoholic beverage industry are new brand and product introductions, point-of-sale merchandising, new product introductions, new vending and dispensing equipment, packaging changes, pricing, pricesales promotions, product quality, retail space management, customer service, frequency of distribution and advertising. We believe we are competitive in our territories with respect to these methods of competition.


Government Regulation


Our businesses arebusiness is subject to various laws and regulations administered by federal, state and local governmentalgovernment agencies of the United States, including laws and regulations governing the production, storage, distribution, sale, display, advertising, marketing, packaging, labeling, content, quality and safety of our products, our occupational health and safety practices and the transportation and use of many of our products.


We are required to comply with a variety of U.S. laws and regulations, including, but not limited to: the Federal Food, Drug and Cosmetic Act and various state laws governing food safety; the Food Safety Modernization Act; the Occupational Safety and Health Act; the Clean Air Act; the Clean Water Act; the Resource Conservation and Recovery Act; the Comprehensive Environmental Response, Compensation and Liability Act; the Federal Motor Carrier Safety Act; the Lanham Act; various federal and state laws and regulations governing competition and trade practices; various federal and state laws and regulations governing our employment practices, including those related to equal employment opportunity, such as the Equal Employment Opportunity Act and the National Labor Relations Act; and laws regulatingand regulations restricting the sale of certain of our products in schools.



As a manufacturer, distributor and seller of beverage products of the Beverage CompaniesThe Coca‑Cola Company and other beverage companies in exclusive territories, we are subject to antitrust laws of general applicability. However, pursuant to the United States Soft Drink Interbrand Competition Act, soft drink bottlers, such as us, are permitted to have exclusive rights to manufacture, distribute and sell a soft drink productproducts in a defined geographic territory if that soft drink product is in substantial and effective competition with other products of the same general class in the market. We believe such competition exists in each of the exclusive geographic territories in the United States in which we operate.


In response to the growing health, nutrition and obesitywellness concerns offor today’s youth, a number of states and local governments have regulations restricting the sale of soft drinks and other foods in schools, particularly elementary, middle and high schools. Many of these restrictions have existed for several years in connection with subsidized meal programs in schools. Additionally, legislation has been proposed by certain state and local governments to limit or restrict the sale of energy drinks to minors and/or persons below a specified age and/or to restrict the venues in which energy drinks can be sold. Restrictive legislation, if widely enacted, could have an adverse impact on our products, imagesales and reputation.


Most beverage products sold by the Company are classified as food or food products and are therefore eligible for purchase using supplemental nutrition assistance program (“SNAP”) benefits by consumers purchasing them for home consumption. Energy drinks with a nutrition facts label are also classified as food and are eligible for purchase for home consumption using SNAP benefits, whereas energy drinks classified as a supplement by the United States Food and Drug Administration (the “FDA”) are not. Regulators may restrict the use of benefit programs, including SNAP, to purchase certain beverages and foods.

currently classified as food or food products.


Certain jurisdictions in which our products are sold have imposed, or are considering imposing, taxes, labeling requirements or other limitations on, or regulations pertaining to, the sale of certain of our products, ingredients or substances contained in, or attributes of, our products or commodities used in the manufacture of our products, including certain of our products that contain added sugars or sodium, exceed a specified caloric content,count or include specified ingredients such as caffeine.


Legislation has been proposed in Congress and by certain state and local governments which would prohibit the sale of soft drink products in non-refillable bottles and cans or require a mandatory deposit as a means of encouraging the return of such containers, each in an attempt to reduce solid waste and litter. Similarly, we are aware of proposed legislation that would impose fees or taxes on various types of containers that are used in our business, as well as proposed legislation around new recycling regulations and the reduction of single-use plastics. We are not currently not impacted by this typethe policies in these types of proposed legislation, but it is possible that similar or more restrictive legal requirements may be proposed or enacted within our distribution territories in the future.


6

We are also subject to federal, state and local environmental laws, including laws related to water consumption and treatment, wastewater discharge and air emissions. Our facilities must comply with the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act and other federal, state and statelocal laws regarding handling, storage, release and disposal of wastes generated on-site and sent to third-party owned and operated off-site licensed facilities.

Environmental Remediation


We do not currently have any material capital expenditure commitments for environmental compliance or environmental remediation for any of our properties. We do not believe compliance with enacted or adopted federal, state and local provisions pertaining to the discharge of materials into the environment or otherwise relating to the protection of the environment will have a material adverse impact on our consolidated financial statements or our competitive position.

Employees


Human Capital Resources

At Coca-Cola Consolidated, our teammates are the heart of our business and the key to our success. As of December 31, 2017,2022, we hademployed approximately 16,50017,000 employees which we refer to as “teammates,” of which approximately 14,50015,000 were full-time and approximately 2,000 were part-time. Approximately 14%13% of our labor forceworkforce is covered by collective bargaining agreements. While the number of collective bargaining agreements.

that will expire in any given year varies, we have been successful in the past in negotiating renewals to expiring agreements without any material disruption to our operations, and management considers teammate relations to be good.


Purpose and Culture

We believe a strong and clear purpose is the foundation to a strong culture and critical to the long-term success of the business. At Coca‑Cola Consolidated, we strive to fulfill our Purpose – To honor God in all we do, to serve others, to pursue excellence and to grow profitably. As a waypoint to help guide us along this journey is our Operating Destination – One Coca‑Cola Consolidated Team, consistently generating strong cash flow, while empowering the next generation of diverse servant leaders. At the core of our culture is a focus on service. We want teammates to recognize and embrace a passion for serving each other along with our consumers, our customers and our communities. Through our Coke Cares program, we provide opportunities for our teammates to be involved in stewardship, charitable and community activities as a way to serve our communities.

We recognize the personal challenges and difficulties facing our teammates each day, and how it may be difficult for them to discuss their struggles with other teammates. Through our corporate chaplaincy program and our employee assistance program, we provide resources for our teammates to engage with a third party in a personal and confidential manner to discuss their personal challenges. These programs are administered by third parties and are valuable resources to help enhance emotional wellness, reduce stress and increase productivity.

Talent Acquisition, Development and Retention

The success and growth of our business depend in a large part on our ability to execute on our talent strategy which is to be a purpose driven organization that attracts, engages and grows a highly talented, diverse workforce of servant leaders enabling our growth and performance. To meet our talent objectives, we utilize key strategies and processes related to recruitment, onboarding and learning development. Through our Total Rewards Program, we strive to offer competitive compensation, benefits and services to our full-time teammates, including incentive plans, recognition plans, defined contribution plans, healthcare benefits, tax-advantaged spending accounts, corporate chaplaincy and employee assistance programs and other programs. Management monitors market compensation and benefits to be able to attract, retain and promote teammates and reduce turnover and its associated costs.

In recent years, the Company has faced periods of high teammate turnover, periodic labor shortages and wage inflation in our front-line workforce due to tight conditions in the labor market. The Company responded to these challenges by making certain investments in our teammates to reward them for their contributions in achieving strong operating results and to remain competitive in the current labor environment.

We are a learning organization committed to the goal of continuous improvement and the development of our teams and teammates. To empower our teammates to unlock their potential, we offer a wide range of learning experiences and resources. Our teammate onboarding experiences involve online learning, job-specific training and on-the-job development to learn about our Company, our products and our industry. Job-specific training includes activity-based classes that focus on how teammates can safely and efficiently sell, merchandise and display our products. After onboarding, our teammates may participate in numerous learning experiences offered by the Company to help them develop and improve their skills and capabilities to advance in their careers, including at one of our two dedicated experiential learning centers where teammates can develop and grow their skills through a hands-on experience. We provide a leadership program designed to challenge and grow our future servant leaders through a series of learning experiences, including on-the-job training, mentorship, peer coaching and formal leadership courses. This program focuses on developing
7

leadership skills, building cohesive teams and strengthening business acumen to prepare teammates for a leadership position at Coca‑Cola Consolidated.

An important part of attracting and retaining top talent is teammate satisfaction, and we conduct an annual engagement survey administered and analyzed by an independent third party to assess teammate satisfaction and engagement and the effectiveness of our teammate development and compensation programs. In 2022, 79% of our teammates participated in the survey. This survey provides valuable insight to our leaders about how our teammates experience the Company and how we can better serve them and improve job performance, satisfaction and retention. Our executive officers review the survey results and develop and implement specific action plans to address key areas of opportunity. Additionally, leaders across our Company discuss the results with local managers to develop additional action plans to best address teammate feedback in different market units and functional areas.

Health and Safety

One of our top priorities is protecting the health and safety of our teammates. We are committed to operating in a safe, secure and responsible manner for the benefit of our consumers, customers, teammates and communities. We sponsor a number of programs and initiatives designed to reduce the frequency and severity of workplace injuries, incidents, risks and hazards, including safety committees, Company policies and procedures, coaching and training, and awareness through leadership engagement and messaging.

Diversity and Inclusion

We strive to cultivate diversity in our workforce and believe teammates with diverse backgrounds, experiences and viewpoints bring value to our organization. We have a diversity task force comprised of diverse teammates from across the organization and led by our President and Chief Operating Officer with a focus on cultivating diversity at Coca‑Cola Consolidated. This task force developed a diversity framework focused on four pillars – communication, accountability, empowerment and partnerships. The task force and discussion groups led by our senior executive leadership team strive to enhance Company-wide engagement on diversity and inclusion, provide opportunities for teammates to discuss diversity and inclusion, develop initiatives to support our diversity framework and monitor progress across these initiatives.

Exchange Act Reports

We


Our website is www.cokeconsolidated.com and we make available free of charge through the investor relations portion of our websitewww.cokeconsolidated.com, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,10‑Q, Current Reports on Form 8-K, proxy statement8‑K, and allany amendments to these reports.reports, as well as proxy statements and other information. These reportsdocuments are available on our website as soon as reasonably practicable after such materialsdocuments are electronically filed with, or furnished to, the United States Securities and Exchange Commission (the “SEC”). The information provided on our website or linked to or from our website is not incorporated by reference into, and does not constitute a part of, this report or any other documents we file with, or furnish to, the SEC.

We use our website to distribute information, including as a means of disclosing material, nonpublic information and is not incorporated herein by reference.

for complying with our disclosure obligations under Regulation FD. We routinely post and make accessible financial and other information regarding the Company on our website. Accordingly, investors should monitor the investor relations portion of our website, in addition to our press releases, SEC filings and other public communications.


The SEC also maintains a website, www.sec.gov, whichthat contains reports, proxy and information statements, and other information filedregarding issuers that file electronically with the SEC. Any materials that we file with the SEC may also be read and copied at the SEC’s Public Reference Room, 100 F Street, N.E., Room 1580, Washington, DC 20549. Information on the operations of the Public Reference Room is available by calling the SEC at 1-800-SEC-0330.


Item 1A.

Risk Factors


Item 1A.Risk Factors.

In addition to other information in this Form 10-K,report, the following risk factors should be considered carefully in evaluating the Company’s business. The Company’s business, financial condition or results of operations could be materially and adversely affected by any of these risks.


Risks Related to Our Business

The inabilityCompany’s business and results of operations may be adversely affected by increased costs, disruption of supply or unavailability or shortages of raw materials, fuel and other supplies.

Raw material costs, including the costs for plastic bottles, aluminum cans, PET resin, carbon dioxide and high fructose corn syrup, are subject to significant price volatility, which may be worsened by periods of increased demand, supply constraints or high inflation. International or domestic geopolitical or other events, including armed conflict or the imposition of tariffs and/or quotas by the U.S. government on any of these raw materials, could adversely impact the supply and cost of these raw materials to the Company. In
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recent years, the COVID-19 pandemic resulted in certain raw materials not being available at commercially favorable terms or at all, and future pandemics or other events causing widespread supply chain disruption may also have such an effect. In addition, there are no limits on the prices The Coca‑Cola Company and other beverage companies can charge for concentrate. If the Company cannot offset higher raw material costs with higher selling prices, effective commodity price hedging, increased sales volume or reductions in other costs, the Company’s results of operations and profitability could be adversely affected.

Limited suppliers for certain of the CompanyCompany’s raw materials could have an adverse effect on the Company’s ability to successfully integratenegotiate the operationslowest costs and, employees acquiredin light of the Company’s relatively low in-plant raw material inventory levels, has the potential for causing interruptions in the System Transformation into existing operationsCompany’s supply of raw materials and in its manufacture of finished goods. For example, during 2022, the Company experienced intermittent shortages of carbon dioxide supply that caused work stoppages at certain of its manufacturing facilities. These work stoppages were offset by increased production at other facilities, but similar stoppages in the future could adversely affect the Company’s business, culture or results of operations.

Duringoperations and profitability.


The Company uses significant amounts of fuel for its delivery fleet and other vehicles used in the fourth quarterdistribution of 2017,its products. International or domestic geopolitical or other events could impact the supply and cost of fuel and the timely delivery of the Company’s products to its customers. Although the Company completed its System Transformation transactions, throughstrives to reduce fuel consumption and uses commodity hedges to manage the Company’s fuel costs, there can be no assurance the Company will succeed in limiting the impact of fuel price increases or price volatility on the Company’s business or future cost increases, which it acquired additional distribution territoriescould reduce the profitability of the Company’s operations.

The Company uses a combination of internal and manufacturing facilities from CCRexternal freight shipping and United. Through these acquisitionstransportation services to transport and deliver products. The Company’s freight cost and the additional resources needed to supporttimely delivery of its products may be adversely impacted by a number of factors which could reduce the profitability of the Company’s growth,operations, including driver shortages, reduced availability of independent contractor drivers, higher fuel costs, weather conditions, traffic congestion, increased government regulation and other matters.

The Company purchases all of the plastic bottles used in its manufacturing plants from Southeastern Container and Western Container, two manufacturing cooperatives the Company has grownco-owns with several other Coca‑Cola bottlers, and all of its aluminum cans from 6,700 employees serving 20.6 million customerstwo domestic suppliers. The inability of these suppliers to meet the Company’s requirements for containers could result in fiscal 2013the Company not being able to 16,500 employees serving 65 million customers in 2017.

Althoughfulfill customer orders and production demand until alternative sources of supply are located. The Company attempts to mitigate these risks by working closely with key suppliers and by purchasing business interruption insurance where appropriate. Failure of the System Transformation acquisitions are now complete,plastic bottle or aluminum can suppliers to meet the Company’s purchase requirements could negatively impact inventory levels, customer confidence and results of operations, including sales levels and profitability.


The Company continues to face riskmake significant reinvestments in its abilitybusiness in order to continueevolve its operating model and to integrateaccommodate future growth and portfolio expansion, including supply chain optimization. The increased costs associated with these reinvestments, the Company’s culture, information technology systems, production,potential for disruption in manufacturing and distribution sales and administrative support activities, internal controls over financial reporting, environmental compliance and health and safety compliance, procedures and policies across all its territories.

The completed System Transformation acquisitions involve certain other financial and business risks. Thethe risk the Company may not realize a satisfactory return including economic benefit and productivity levels, on the Company’s investments. In addition, the Company’s assumptions for potential growth, synergies or cost savings at the time of the distribution territory and manufacturing facilities acquisitions may prove to be incorrect. The occurrence of these eventsits investments could adversely affect the Company’s business, financial condition or results of operations.


The reliance on purchased finished products from external sources could have an adverse impact on the Company’s profitability.

The Company does not, and does not plan to, manufacture all of the products it distributes and, therefore, remains reliant on purchased finished products from external sources to meet customer demand. As a result, the Company is subject to incremental risk, including, but not limited to, product quality and availability, price variability and production capacity shortfalls for externally purchased finished products, which could have an impact on the Company’s profitability and customer relationships. Particularly, the Company is subject to the risk of unavailability of still products that it acquires from other manufacturers, leading to an inability to meet consumer demand for these products. In most instances, the Company’s ability to negotiate the prices at which it purchases finished products from other U.S. Coca‑Cola bottlers is limited pursuant to The Coca‑Cola Company’s right to unilaterally establish the prices, or certain elements of the formulas used to determine the prices, for such finished products under the RMA, which could have an adverse impact on the Company’s profitability.

Changes in public and consumer perception and preferences, or government regulationsincluding concerns related to nonalcoholic beverages, including concerns or regulations related to obesity, public health,product safety and sustainability, artificial ingredients, brand reputation and product safety,obesity, could reduce demand for the Company’s products and reduce profitability.


Concerns about perceived negative safety and quality consequences of certain ingredients in the Company’s products, such as non-nutritive sweeteners or ingredients in energy drinks, may erode consumers’ confidence in the safety and quality of the Company’s products, whether or not justified. The Company’s business is also impacted by changes in consumer concerns or perceptions surrounding the product manufacturing processes and packaging materials, including single-use and other plastic packaging, and the environmental and sustainability impact of such manufacturing processes and packaging materials. Any of these factors may reduce consumers’ willingness to purchase the Company’s products and any inability on the part of the Company to anticipate or react to such
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changes could result in reduced demand for the Company’s products or erode the Company’s competitive and financial position and could adversely affect the Company’s business, reputation, financial condition or results of operations.

The Company’s success depends on its ability to maintain consumer confidence in the safety and quality of all of its products. The Company has rigorous product safety and quality standards. However, if beverage products taken to market are or become contaminated or adulterated, the Company may be required to conduct costly product recalls and may become subject to product liability claims and negative publicity, which could cause its business and reputation to suffer.

The Company’s success also depends in large part on its ability and the ability of The Coca‑Cola Company and other beverage companies it works with to maintain the brand image of existing products, build up brand image for new products and brand extensions and maintain its corporate reputation and social license to operate. Engagements by the Company’s executives in social and public policy debates may occasionally be the subject of criticism from advocacy groups that have differing points of view and could result in adverse media and consumer reaction, including product boycotts. Similarly, the Company’s sponsorship relationships and charitable giving program could subject the Company to negative publicity as a result of actual or perceived views of organizations the Company sponsors or supports financially. Likewise, negative postings or comments on social media or networking websites about the Company, The Coca‑Cola Company or one of the products the Company carries, even if inaccurate or malicious, could generate adverse publicity that could damage the reputation of the Company’s brands or the Company.

The Company’s business depends substantially on consumer tastes, preferences and preferencesshopping habits that change in often unpredictable ways. As a result of certain health and wellness trends, including concern over the public health consequences associated with obesity, consumer preferences over the past several years have shifted from sugar-sweetened sparkling beverages to diet sparkling beverages, tea, sports drinks, enhanced water and bottled water. As the Company distributes, markets and manufactures beverage brands owned by others, the success of the Company’s business depends in large measure on working with the Beverage Companies. The Company is reliant upon the ability of The Coca‑Cola Company and other Beverage Companiesbeverage companies to develop and introduce product innovations to meet the changing preferences of the broad consumer market, and failure to satisfy these consumer preferences could adversely affect the profitabilityCompany’s profitability.

The Company’s business and results of operations may be adversely affected by the inability to attract and retain front-line employees in a tight labor market.

In recent years, the U.S. economy has experienced a challenging labor market as the supply of available workers frequently fell short of the Company’s business.

Healthnumber of workers necessary to fill all available jobs. As a result, the Company experienced difficulty in attracting and wellness trends overretaining front-line workers and faced periods of high turnover. Tight labor markets and a lack of available workers has led, and may lead in the past several years have resultedfuture, to increased labor costs in the form of higher salaries, increased overtime and other compensation adjustments to remain competitive in a shiftchallenging labor market. If the Company cannot retain adequate front-line employees to produce and deliver its products, its business operations may be adversely affected and higher labor costs have had, and may have in consumer preferences from sugar sweetened sparklingthe future, an adverse effect on our results of operations.


Changes in government regulations related to nonalcoholic beverages, including regulations related to diet sparkling beverages, tea, sports drinks, enhanced water and bottled water. Consumers,obesity, public health, officials, public health advocatesartificial ingredients and government officialsproduct safety and sustainability, could reduce demand for the Company’s products and reduce profitability.

The Company’s business and properties are becoming increasingly concerned aboutsubject to various federal, state and local laws and regulations, including those governing the public health consequences associatedproduction, packaging, quality, labeling and distribution of beverage products. Compliance with obesity, particularly among young people. or changes in existing laws or regulations could require material expenses and negatively affect our financial results through lower sales or higher costs.

The production and marketing of beverages are subject to the rules and regulations of the FDA and other federal, state and local health agencies, and extensive changes in these rules and regulations could increase the Company’s costs or adversely impact its sales. The Company cannot predict whether any such rules or regulations will be enacted or, if enacted, the impact that such rules or regulations could have on its business.


In addition, regulatory actions, activitiesresponse to growing health, nutrition and wellness concerns for today’s youth, a number of states and local governments have regulations restricting the sale of soft drinks and other foods in schools, particularly elementary, middle and high schools. Many of these restrictions have existed for several years in connection with subsidized meal programs in schools. Additionally, legislation has been proposed by nongovernmental organizationscertain state and public debatelocal governments to limit or restrict the sale of energy drinks to minors and/or persons below a specified age and/or to restrict the venues in which energy drinks can be sold. Restrictive legislation, if widely enacted, could have an adverse impact on the Company’s products, sales and concernsreputation.

Legislation has been proposed in Congress and by certain state and local governments which would prohibit the sale of soft drink products in non-refillable bottles and cans or require a mandatory deposit as a means of encouraging the return of such containers, each in an attempt to reduce solid waste and litter. Similarly, the Company is aware of proposed legislation that would impose fees or
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taxes on various types of containers used in its business, as well as proposed legislation around new recycling regulations and the reduction of single-use plastics. The Company is not currently impacted by the policies in these types of proposed legislation, but it is possible that similar or more restrictive legal requirements may be proposed or enacted within its distribution territories in the future.

Concerns about perceived negative safety and quality consequences of certain ingredients in the Company’s products, such as non-nutritive sweeteners may erode consumers’ confidenceor ingredients in the safety and quality of the Company’s products, whether or not justified. These actionsenergy drinks, could result in additional governmental regulations concerning the production, marketing, labeling or availability of the Company’s products or the ingredients in such products, possible new taxes or negative publicity resulting from actual or threatened legal actions against the Company or other companies in the same industry, any of which could damage the reputation of the Company or reduce demand for the Company’s products, which could adversely affect the Company’s profitability.


The FDA occasionally proposes major changes to the nutrition labels required on all packaged foods and beverages, including those for most of the Company’s successproducts, which could require the Company and its competitors to revise nutrition labels to include updated serving sizes, information about total calories in a beverage product container and information about any added sugars or nutrients. Any pervasive nutrition label changes could increase the Company’s costs and could inhibit sales of one or more of the Company’s major products.

Most beverage products sold by the Company are classified as food or food products and are therefore eligible for purchase using SNAP benefits by consumers purchasing them for home consumption. Energy drinks with a nutrition facts label are also depends on its abilityclassified as food and are eligible for purchase for home consumption using SNAP benefits, whereas energy drinks classified as a supplement by the FDA are not. Regulators may restrict the use of benefit programs, including SNAP, to maintain consumer confidence in the safetypurchase certain beverages and quality of all itsfoods currently classified as food or food products.

The Company has rigorous product safety and quality standards. However, if beverage products taken to market are or become contaminated or adulterated, the Company may be required to conduct costly product recalls and may become subject to product liability claims and negative publicity, which could cause its business and reputation to suffer.


The Company’s business and results of operations may be adversely affected by increased costs, disruption of supply or shortages of raw materials, fuel and other supplies.

Raw material costs, including the costs for plastic bottles, aluminum cans, resin and high fructose corn syrup, have historically been subject to significant price volatility and may continue to be in the future. International or domestic geopolitical or other events, including the imposition of any tariffs and/or quotas by the U.S. governmentrelies on any of these raw materials, could adversely impact the supply and cost of these raw materials to us. In addition, there is no limit on the prices The Coca‑Cola Company and other Beverage Companies can charge for concentrate. If the Company cannot offset higher raw material costs with higher selling prices, effective commodity price hedging, increased sales volume or reductions in other costs, the Company’s profitability could be adversely affected.

In recent years, there has been consolidation among suppliers of certain of the Company’s raw materials, which could have an adverse effect on the Company’s abilitybeverage companies to negotiate the lowest costs and, in light of the Company’s relatively low in-plant raw material inventory levels, has the potential for causing interruptions in the Company’s supply of raw materials and in its manufacture of finished goods.

The Company purchases all of its plastic bottles from Southeastern Container and Western Container, two manufacturing cooperatives the Company co-owns with several other Coca‑Cola bottlers, and all of its aluminum cans from two domestic suppliers. The inability of these plastic bottle or aluminum can suppliers to meet the Company’s requirements for containers could resultinvest in the Company not being ablethrough marketing funding and to fulfill customer orderspromote their own company brand identity through external advertising, marketing spending and production demand until alternative sourcesproduct innovation. Decreases from historic levels of supply are located. The Company attempts to mitigate these risks by working closely with key suppliers and by purchasing business interruption insurance where appropriate. Failure of the aluminum can or plastic bottle suppliers to meet the Company’s purchase requirementsinvestment could negatively impact inventory levels, customer confidencethe Company’s business, financial condition and results of operations including sales levelsor profitability.


The Coca‑Cola Company and profitability.

other beverage companies have historically provided financial support to the Company through marketing funding. While the Company does not believe there will be significant changes to the amount of marketing funding support provided by The Coca‑Cola Company uses a combination of internal and external freight shipping and transportation services to transport and deliver products.  The Company’s freight cost and the timely delivery of our products may be adversely impacted by a number of factors which could reduce the profitability ofother beverage companies, the Company’s operations, including driver shortages, reduced availability of independent contractor drivers, higher fuel costs, weather conditions, traffic congestion, increased government regulationbeverage agreements generally do not obligate such funding and other matters.

In addition, the Company uses significant amounts of fuel for its delivery fleet and other vehicles used in the distribution of its products. International or domestic geopolitical or other events could impact the supply and cost of fuel and could impact the timely delivery of the Company’s products to its customers. Although the Company strives to reduce fuel consumption and uses commodity hedges to manage the Company’s fuel costs, there can be no assurance the historic levels will continue. Decreases in the level of marketing funding provided, material changes in the marketing funding programs’ performance requirements or the Company’s inability to meet the performance requirements for marketing funding could adversely affect the Company’s business, financial condition and results of operations or profitability.


In addition, The Coca‑Cola Company and other beverage companies have their own external advertising campaigns, marketing spending and product innovation programs, which directly impact the Company’s operations. Decreases in advertising, marketing and product innovation spending by The Coca‑Cola Company and other beverage companies, or advertising campaigns that are negatively perceived by the public, could adversely impact the sales volume growth and profitability of the Company. While the Company does not believe there will succeedbe significant changes in limiting the level of external advertising and marketing spending by The Coca‑Cola Company and other beverage companies, there can be no assurance the historic levels will continue or that advertising campaigns will be positively perceived by the public. The Company’s volume growth is also dependent on product innovation by The Coca‑Cola Company and other beverage companies, and their ability to develop and introduce products that meet consumer preferences.

The Company is a participant in several Coca‑Cola system governance entities, and decisions made by these governance entities may be different than decisions that would have been made by the Company individually. Any failure of these governance entities to function efficiently or on the best behalf of the Company and any failure or delay of the Company to receive anticipated benefits from these governance entities could adversely affect the Company’s business, financial condition and results of operations.

The Company is a member of CONA and party to an amended and restated master services agreement with CONA, pursuant to which the Company is an authorized user of the CONA System, a uniform information technology system developed to promote operational efficiency and uniformity among North American Coca‑Cola bottlers. The Company relies on CONA to make necessary upgrades to and resolve ongoing or disaster-related technology issues with the CONA System, and it is limited in its authority and ability to timely resolve errors or to make changes to the CONA software. Any service interruptions of the CONA System could result in increased costs or adversely impact the Company’s results of fueloperations. In addition, because other Coca‑Cola bottlers are also users of the CONA System and would likely experience similar service interruptions, the Company may not be able to have another bottler process orders on its behalf during any such interruption.

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The Company is also a member of the NPSG, which is comprised of The Coca‑Cola Company, the Company and certain other Coca‑Cola bottlers who are regional producing bottlers in The Coca‑Cola Company’s national product supply system. Subject to the terms and conditions of the NPSG Agreement, the Company is required to comply with certain key decisions made by the NPSG Board, which include decisions regarding strategic infrastructure investment and divestment planning, optimal national product supply sourcing and new product or packaging infrastructure planning. Although the Company has a representative on the NPSG Board, the Company cannot exercise sole decision-making authority relating to the decisions of the NPSG Board, and the interests of other members of the NPSG Board may diverge from those of the Company. Any such divergence could have a material adverse effect on the operating and financial results of the Company.

Provisions in the CBA and the RMA with The Coca‑Cola Company could delay or prevent a change in control of the Company or a sale of the Company’s Coca‑Cola distribution or manufacturing businesses.

Provisions in the CBA and the RMA require the Company to obtain The Coca‑Cola Company’s prior approval of a potential buyer of the Company’s Coca‑Cola distribution or manufacturing businesses, which could delay or prevent a change in control of the Company or the Company’s ability to sell such businesses. The Company can obtain a list of pre-approved third-party buyers from The Coca‑Cola Company annually. In addition, the Company can seek buyer-specific approval from The Coca‑Cola Company upon receipt of a third-party offer to purchase the Company or its Coca‑Cola distribution or manufacturing businesses. If a change in control or sale of one of our businesses is delayed or prevented by the provisions in the CBA and the RMA, the market price volatilityof our Common Stock could be negatively affected.

The concentration of the Company’s capital stock ownership with our Chairman and Chief Executive Officer limits other stockholders’ ability to influence corporate matters.

As of December 31, 2022, J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, controlled 1,004,394 shares of the Company’s Class B Common Stock, which represented approximately 71% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. Mr. Harrison also has the right to acquire 292,386 shares of Class B Common Stock from the Company in exchange for an equivalent number of shares of Common Stock. In the event of such an exchange, Mr. Harrison would control 1,296,780 shares of the Company’s Class B Common Stock, which would represent approximately 76% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. Furthermore, Mr. Harrison and another member of the Harrison family serve on the Company’s businessBoard of Directors.

As a result, Mr. Harrison has the ability to exert substantial influence or future cost increases,actual control over the Company’s management and affairs and over substantially all matters requiring action by the Company’s stockholders, including the election of directors and significant corporate transactions, such as a merger or other sale of the Company or its assets. This concentration of ownership may have the effect of delaying or preventing a change in control otherwise favored by the Company’s other stockholders and could depress the stock price or limit other stockholders’ ability to influence corporate matters, which could reduceresult in the profitabilityCompany making decisions that stockholders outside the Harrison family may not view as beneficial.

The Company’s inability to meet requirements under its beverage agreements could result in the loss of distribution and manufacturing rights.

Under the CBA and the RMA, which authorize the Company to distribute and/or manufacture products of The Coca‑Cola Company, and pursuant to the Company’s distribution agreements with other beverage companies, the Company must satisfy various requirements, such as making minimum capital expenditures or maintaining certain performance rates. Failure to satisfy these requirements could result in the loss of distribution and manufacturing rights for the respective products under one or more of these beverage agreements. The occurrence of other events defined in these agreements could also result in the termination of one or more beverage agreements.

The RMA also requires the Company to provide and sell covered beverages to other U.S. Coca‑Cola bottlers at prices established pursuant to the RMA. As the timing and quantity of such requests by other U.S. Coca‑Cola bottlers can be unpredictable, any failure by the Company to adequately plan for such demand could also constrain the Company’s supply chain network.

Changes in the inputs used to calculate the Company’s acquisition related contingent consideration liability could have a material adverse impact on the Company’s financial condition and results of operations.

The Company’s acquisition related contingent consideration liability, which totaled $541.5 million as of December 31, 2022, consists of the Company’s operations.

estimated amounts due to The Coca‑Cola Company as acquisition related sub-bottling payments under the CBA with The Coca‑Cola Company and CCR over the useful life of the related distribution rights. Changes in business conditions or other events could materially change both the future cash flow projections and the discount rate used in the calculation of the fair value of

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contingent consideration under the CBA. These changes could result in material changes to the fair value of the acquisition related contingent consideration and could materially impact the amount of non-cash expense (or income) recorded each reporting period.

General Risk Factors

Technology failures or cyberattacks on the Company’s technology systems or the Company’s effective response to technology failures or cyberattacks on its customers’, suppliers’ or other third parties’ technology systems could disrupt the Company’s operations and negatively impact the Company’s reputation, business, financial condition or results of operations.


The Company increasingly relies on information technology systems to process, transmit and store electronic information. Like most companies, the Company’s information technology systems are vulnerable to interruption due to a variety of events beyond the Company’s control, including, but not limited to, power outages, computer and telecommunications failures, computer viruses, other malicious computer programs and cyberattacks, denial-of-service attacks, security breaches, catastrophic events such as fires, tornadoes, earthquakes and hurricanes, usage errors by employees and other security issues. In addition, third-party providers of data hosting or cloud services, as well as other vendors, customers and suppliers, are vulnerable to cybersecurity incidents involving data the Company shares with them. While incidents at our third-party service providers have not materially impacted our business operations, one or more of these incidents could significantly impact the Company in the future.

The Company depends heavily upon the efficient operation of technological resources and a failure in these technology systems or controls could negatively impact the Company’s operations, business, financial condition or results of operations. In addition, the Company continuously upgrades and updates current technology or installs new technology. In order to address risks to its technology systems, the Company continues to monitor networks and systems, upgrade security policies and train its employees, and it requires third-party service providers and business partners, customers, suppliers and other third parties to do the same. The inability to implement upgrades, updates or installations in a timely manner, to train employees effectively in the use of new or updated technology, or to obtain the anticipated benefits of the Company’s technology could adversely impact the Company’s business, financial condition, results of operations or profitability.

The Company increasingly relies on information technology systems to process, transmit and store electronic information. For example, the Company’s production and distribution facilities, inventory management and driver handheld devices all utilize information technology to maximize efficiencies and minimize costs. Furthermore, a significant portion of the communication between personnel, customers and suppliers depends on information technology.

Like most companies, the Company’s information technology systems may be vulnerable to interruption due to a variety of events beyond the Company’s control, including, but not limited to, power outages, computer and telecommunications failures, computer viruses, other malicious computer programs and cyberattacks, denial-of-service attacks, security breaches, catastrophic events such as fires, tornadoes, earthquakes and hurricanes, usage errors by employees and other security issues.


The Company has technology security initiatives and disaster recovery plans in place to mitigate its risk to these vulnerabilities,vulnerabilities; however, these measures may not be adequate or implemented properly to ensure that the Company’s operations are not disrupted. If the Company’s technology systems, or those of its third-party service providers or business partners, are damaged, breached or cease to function properly, itthe Company may incur significant costsfinancial and other resources to mitigate, upgrade, repair or replace them, and the Company may suffer interruptions in its business operations, resulting in lost revenues and potential delays in reporting its financial results.



Further, misuse, leakage or falsification of the Company’s information could result in violations of data privacy laws and regulations and damage the reputation and credibility of the Company. The Company may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to the Company, current or former employees, bottling partners, other customers, suppliers or consumers, and may become subject to legal action and increased regulatory oversight. The Company could also be required to spend significant financial and other resources to remedy the damage caused by a security breach or to repair or replace networks and information technology systems, including liability for stolen information, increased cybersecurity protection costs, litigation expense and increased insurance premiums.

Any failure or delay of the Company to transition to, and receive anticipated benefits from, the CONA System or the decisions made by the CONA Board could negatively impact the Company’s results of operations.

The Company is a member of CONA and party to the CONA MSA, pursuant to which the Company is an authorized user of the CONA System, a uniform information technology system developed to promote operational efficiency and uniformity among all North American Coca‑Cola bottlers. The Company is continuing the process of transitioning its legacy technology system platform to the CONA System for its manufacturing facilities, distribution facilities and corporate headquarters. The Company anticipates completing the transition of all locations to the CONA System by the end of fiscal 2018.

Although the Company believes it has taken the necessary steps to mitigate risk associated with a phased cut-over to the CONA System, including a comprehensive review of internal controls, extensive employee training, and additional verifications and testing to ensure data integrity, any service interruptions or delays in the Company’s transition to the CONA System could result in increased costs or adversely impact the Company’s results of operations. In addition, because other Coca‑Cola bottlers are also transitioning to the CONA System and would likely experience similar service interruptions or delays, the Company may not be able to have another bottler process orders on its behalf during any such event.

The Company currently has the right to designate one of the members of the CONA Board and has a percentage interest in CONA of approximately 20% but cannot unilaterally control the actions of CONA or the CONA Board. The Company faces the risk that a software solution beneficial to the Company is not approved by the CONA Board, requiring the Company to invest additional time and financial resources in developing a solution outside the CONA System to meet its requirements, or that the CONA Board makes decisions regarding CONA or the CONA System which may be different than decisions the Company would have made on its own behalf. Further, the Company remains obligated to pay service fees under the CONA MSA even if it is not using the CONA System for all or any portion of its distribution and manufacturing operations.

There is additional risk involved with the CONA System as the Company relies on CONA to make necessary upgrades and resolve ongoing or disaster-related technology issues with the CONA System and is limited in its authority and ability to timely resolve errors or make changes to the CONA software.

Miscalculation of the Company’s need for infrastructure investment could impact the Company’s financial results.

Significant changes from the Company’s expected returns on cold drink equipment, fleet, technology and supply chain infrastructure investments could adversely affect the Company’s consolidated financial results. Projected requirements for infrastructure investments may differ from actual levels if the Company does not achieve the sales volume growth it anticipates. The Company’s infrastructure investments are generally long-term in nature; therefore, it is possible the investments made today may not generate the returns expected by the Company as a result of future changes in the marketplace. In addition, the Company faces risk in determining the level of infrastructure investment needed in territories and facilities recently acquired in the System Transformation. Any failure of the Company to adequately forecast these infrastructure investment requirements could reduce the profitability of the Company’s operations.

Significant additional labeling or warning requirements may increase costs and inhibit sales of affected products.

The FDA occasionally proposes major changes to the nutrition labels required on all packaged foods and beverages, including those for most of the Company’s products. Any pervasive nutrition label changes could increase the Company’s costs and could inhibit sales of one or more of the Company’s major products.

Certain nutrition label changes announced by the FDA in 2016, which were originally to become effective in July 2018, have been delayed until 2020 or later. These proposed changes will require the Company and its competitors to revise nutrition labels to include updated serving sizes, information about total calories in a beverage product container and information about any added sugars or nutrients.



The Company’s financial condition can be impacted by the stability of the general economy.


Unfavorable changes in general economic conditions or in the geographic markets in which the Company does business may have the temporary effect of reducing the demand for certain of the Company’s products. For example, economic forces may cause consumers to shift away from purchasing higher-margin products and packages sold through immediate consumption and other highly profitable channels. Periods of sustained high inflation may have adverse impacts on demand for the Company’s products and on the Company’s ability to sustain margins due to higher input costs. In addition, efforts by the government to curb inflation may cause a general economic slowdown. Adverse economic conditions could also increase the likelihood of customer delinquencies and bankruptcies, which would increase the risk of uncollectibilityuncollectability of certain accounts. Each of these factors could adversely affect the Company’s overall business, financial condition and operating results.

results of operations.


The Company’s capital structure, including its cash positions and debt borrowing capacity with banks or other financial institutions and financial markets, exposes it to the risk of default by or failure of counterparty financial institutions. The risk of counterparty default or failure may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of the Company’s counterparties were to become insolvent or file forenter bankruptcy, the Company’s ability to recover losses incurred as a result of default or to retrieve assets that are deposited or held in accounts with such counterparty may be limited by the counterparty’s liquidity or the applicable laws governing the insolvency or bankruptcy proceedings andproceedings. Consequently, the Company’s access to capital may be
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diminished. Any such event of default or failure could negatively impact the Company’s business, financial condition and results of operations and financial condition.

operations.


Changes in the Company’s top customer relationships and marketing strategies could impact sales volume and revenues.

net sales.


The Company faces concentration risks related to a few customers comprising a large portion of the Company’s annual sales volume and net revenue.sales. The Company’s business, financial condition and results of operations could be adversely affected if revenuenet sales from one or more of these significant customers is materially reduced or if the cost of complying with the customers’ demands is significant. Additionally, if receivables from one or more of these significant customers become uncollectible, the Company’s financial condition and results of operations may be adversely impacted.


The Company’s largest customers, Wal-Mart Stores, Inc., and The Kroger Company, and Food Lion, LLC, accounted for approximately 35%32% of the Company’s 20172022 total bottle/can sales volume to retail customers and approximately 24%26% of the Company’s 20172022 total net sales. These customers typically make purchase decisions based on a combination of price, product quality, consumer demand and customer service performance and generally do not enter into long-term contracts. The Company faces risks related to maintaining the volume demanded on a short-term basis from these customers, which can also divert resources away from other customers. The loss of Wal-MartWal‑Mart Stores, Inc., or The Kroger Company or Food Lion, LLC as a customer could have a material adverse effect on the operatingbusiness, financial condition and financial results of operations of the Company.


Further, the Company’s revenue isnet sales are affected by promotion of the Company’s products by significant customers, such as in-store displays created by customers or the promotion of the Company’s products in customers’ periodic advertising. If the Company’s significant customers change the manner in which they market or promote the Company’s products, or if the marketing efforts by significant customers become ineffective, the Company’s sales volume and revenuenet sales could be adversely impacted.


The Company may not be able to respond successfully to changes in the marketplace.


The Company operates in the highly competitive nonalcoholic beverage industry and faces strong competition from other general and specialty beverage companies. The Company’s response to continued and increased customer and competitor consolidations and marketplace competition may result in lower than expected net pricing of the Company’s products. The Company’s ability to gain or maintain the Company’s share of sales or gross margins may be limited by the actions of the Company’s competitors, which may have advantages in setting prices due to lower raw material costs.


Competitive pressures in the markets in which the Company operates may cause channel and product mix to shift away from more profitable channels and packages. If the Company is unable to maintain or increase volume in higher-margin products and in packages sold through higher-margin channels, such as immediate consumption, pricing and gross margins could be adversely affected. Any related efforts by the Company to improve pricing and/or gross margin may result in lower than expected sales volume.


In addition, the Company’s sales of finished goods to CCNAThe Coca‑Cola Company and other U.S. Coca‑Cola bottlers are governed by the RMA, pursuant to which the prices, or certain elements of the formulas used to determine the prices, for such finished goods are unilaterally established by CCNAThe Coca‑Cola Company from time to time,time. This limits the Company’s ability to adjust pricing in response to changes in the marketplace, which could have an adverse impact on the Company’s profitability.

The reliance on purchased finished goods from external sources could have an adverse impact on the Company’s profitability.

The Company does not, and does not plan to, manufacture all products it distributes and, therefore, remains reliant on purchased finished goods from external sources to meet customer demand. As a result, the Company is subject to incremental risk including, but


not limited to, product quality and availability, price variability and production capacity shortfalls for externally purchased finished goods, which could have an impact on the Company’s profitability and customer relationships. In most instances, the Company’s ability to negotiate the prices at which it purchases finished goods from other U.S. Coca‑Cola bottlers is limited pursuant to CCNA’s right to unilaterally establish the prices, or certain elements of the formulas used to determine the prices, for such finished goods under the RMA, which could have an adverse impact on the Company’s profitability.

The decisions made by the NPSG regarding product sourcing, product and packaging infrastructure and strategic investment and divestment may be different than decisions that would have been made by the Company individually. Any failure of the NPSG to function efficiently could adversely affect our business, financial condition and results of operations.

The Company is a member of the NPSG, which consists of The Coca‑Cola Company, the Company and other RPBs in The Coca‑Cola Company’s national product supply system, each of which has a representative on the NPSG Board. Pursuant to the NPSG Governance Agreement, the Company has agreed to abide by decisions made by the NPSG Board, which include decisions regarding strategic investment and divestment, optimal national product supply sourcing and new product or packaging infrastructure planning. Although the Company has a representative on the NPSG Board, the Company cannot exercise sole decision-making authority relating to the decisions of the NPSG Board, and the interests of other members of the NPSG Board may diverge from those of the Company. For example, the NPSG Board may require the Company to make investments in its manufacturing assets, subject to certain limitations and consistent with the NPSG Governance Agreement, which the Company would not have chosen to make on its own.

Decreases from historic levels of marketing funding provided to the Company from The Coca‑Cola Company and other Beverage Companies could reduce the Company’s profitability.

The Coca‑Cola Company and other Beverage Companies have historically provided financial support to the Company through marketing funding. In 2017, the Company received $120.1 million in marketing funding. While the Company does not believe there will be significant changes to the amount of marketing funding support by the Beverage Companies, there can be no assurance the historic levels will continue. Decreases in the level of marketing funding provided, material changes in the marketing funding programs’ performance requirements or the Company’s inability to meet the performance requirements for marketing funding could adversely affect the Company’s profitability.

Changes in The Coca‑Cola Company’s and other Beverage Companies’ levels of external advertising, marketing spending and product innovation could reduce the Company’s sales volume.

The Coca‑Cola Company and other Beverage Companies have their own external advertising campaigns, marketing spending and product innovation programs, which directly impact the Company’s operations. Decreases in marketing, advertising and product innovation spending by the Beverage Companies, or advertising campaigns that are negatively perceived by the public, could adversely impact the sales volume growth and profitability of the Company. While the Company does not believe there will be significant changes in the level of external advertising and marketing spending by the Beverage Companies, there can be no assurance historic levels will continue in the future. The Company’s volume growth is also dependent on product innovation by the Beverage Companies, especially The Coca‑Cola Company, and their ability to develop and introduce products that meet consumer preferences.

The Company’s inability to meet requirements under its beverage agreements could result in the loss of distribution and manufacture rights.

Approximately 93% of the Company’s bottle/can sales volume to retail customers in 2017 consisted of products of The Coca‑Cola Company, which is the sole supplier of these products or the concentrates and syrups required to manufacture these products. Under the CBA and the RMA, which authorize the Company to distribute and/or manufacture products of The Coca‑Cola Company, and pursuant to the Company’s distribution agreements with other Beverage Companies, the Company must satisfy various requirements, such as making minimum capital expenditures or maintaining certain performance rates. Failure to satisfy these requirements could result in the loss of distribution and manufacture rights for the respective products under one or more of these beverage agreements. The occurrence of other events defined in these agreements could also result in the termination of one or more beverage agreements.

The RMA also requires the Company to provide and sell covered beverages to other U.S. Coca‑Cola bottlers at prices established pursuant to the RMA. As the timing and quantity of such requests by other U.S. Coca‑Cola bottlers can be unpredictable, any failure by the Company to adequately plan for such demand could also constrain the Company’s supply chain network.



Changes in the Company’s level of debt, borrowing costs and credit ratings could impact access to capital and credit markets, restrict the Company’s operating flexibility and limit the Company’s ability to obtain additional financing to fund future needs.


As of December 31, 2017,2022, the Company had $1.13 billion$598.8 million of debt and capital lease obligations.outstanding. The Company’s level of debt requires a substantial portion of future cash flows from operations to be dedicated to the payment of principal and interest, which reduces funds available for other purposes. The Company’s debt level can negatively impact its operations by:

by limiting the Company’s ability to, and/or increasing its cost to, access credit markets for working capital, capital expenditures and other general corporate purposes;

increasing the Company’s vulnerability to economic downturns and adverse industry conditions by limiting the Company’s ability to react to changing economic and business conditions; and

exposing the Company to increased risk that the Company will not be able to refinance the principal amount of debt as it becomes due or that a significant decrease in cash flows from operations could make it difficult for the Company to meet its debt service requirements and to comply with financial covenants in its debt agreements.


The Company’s acquisition related contingent consideration, revolving credit facility, term loan facility and pension and postretirement medical benefits are subject to changes in interest rates. If interest rates increase in the future, the Company’s borrowing costs could increase, which could result in a reduction ofnegatively impact the Company’s overall profitabilityfinancial condition and results of operations and limit the Company’s ability to spend in other areas.areas of the business. Further, a decline in the interest rates used to discount the Company’s pension and postretirement medical liabilities could increase the cost of these benefits and increase the totalamount of the liabilities.

14


In assessing the Company’s credit strength, credit rating agencies consider the Company’s capital structure, financial policies, consolidated balance sheet and other financial information, and may also consider financial information of other bottling and beverage companies. The Company’s credit ratings could be significantly impacted by the Company’s operating performance, changes in the methodologies used by rating agencies to assess the Company’s credit ratings, and by changes in The Coca‑Cola Company’s credit ratings.ratings and the rating agencies’ perception of the impact of credit market conditions on the Company’s current or future financial performance. Lower credit ratings could significantly increase the Company’s interestborrowing costs or adversely affect the Company’s ability to obtain additional financing at acceptable interest rates or to refinance existing debt.


Failure to attract, train and retain qualified employees while controlling labor costs, as well asand other labor issues including a failure to renegotiate collective bargaining agreements, could have an adverse effect on the Company’s reputation, business, financial condition and results of operations or profitability.


The Company’s future growth and performance dependsdepend on its ability to attract, hire, train, develop, motivate and retain a highly skilled, diverse and properly credentialed workforce. The Company’s ability to meet its labor needs while controlling labor costs is subject to many external factors, including competition for and availability of qualified personnel in a given market, unemployment levels within those markets, prevailing wage rates, minimum wage laws, health and other insurance costs and changes in employment and labor laws or other workplace regulations. The Company’s labor costs could be impacted by new or revised labor laws, rules or regulations or healthcare laws that are adopted or implemented. Any unplanned turnover or unsuccessful implementation of the Company’s succession plans could deplete the Company’s institutional knowledge base and erode its competitive advantage or result in increased costs due to increased competition for employees, higher employee turnover or increased employee benefit costs. Any of the foregoing could adversely affect the Company’s reputation, business, financial condition or results of operations.


The Company uses various insurance structures to manage costs related to workers’ compensation, auto liability, medical and other insurable risks. These structures consist of retentions, deductibles, limits and a diverse group of insurers that serve to strategically finance, transfer and mitigate the financial impact of losses. The Company uses commercial insurance as a risk reduction strategylosses to minimize catastrophic losses from claims.the Company. Losses are accrued using assumptions and procedures followed in the insurance industry, then adjusted for company-specific history and expectations. Although the Company has actively sought to control increases in these costs, there can be no assurance the Company will succeed in limiting future cost increases, which could reduce the profitability of the Company’s operations.


In addition, the Company’s profitability is substantially affected by the cost of pension retirement benefits, postretirement medical benefits and current employees’ medical benefits. Macro-economic factors beyond the Company’s control, including increases in health carehealthcare costs, declines in investment returns on pension assets and changes in discount rates used to calculate pension and related liabilities, could result in significant increases in these costs for the Company. Although the Company has actively sought to control increases in these costs, there can be no assurance the Company will succeed in limiting future cost increases, which could reduce the profitability of the Company’s operations.


Failure to maintain productive relationships with our employees covered by collective bargaining agreements, including failing to renegotiate collective bargaining agreements, could have an adverse effect on the Company’s business, financial condition and results of operations.

Approximately 14%13% of the Company’s employees are covered by collective bargaining agreements. Any inability byof the Company to renegotiate subsequent agreements with labor unions on satisfactory terms and conditions could result in work interruptions or stoppages, which could have a material adverse impact on the Company’s profitability. In addition, the terms and conditions of existing or renegotiated agreements could increase costs or otherwise affect the Company’s ability to fully implement operational changes to improve overall efficiency.



Changes

Certain employees of the Company whose employment is covered under collective bargaining agreements participate in a multiemployer pension plan, the Employers-Teamsters Local Union Nos. 175 and 505 Pension Fund (the “Teamsters Plan”). Participating in the inputsTeamsters Plan involves certain risks in addition to the risks associated with single employer pension plans, as contributed assets are pooled and may be used to calculateprovide benefits to employees of other participating employers. If a participating employer stops contributing to the Company’s acquisition related contingent considerationTeamsters Plan, the unfunded obligations of the Teamsters Plan may be borne by the remaining participating employers. If the Company chooses to stop participating in the Teamsters Plan, the Company could be required to pay the Teamsters Plan a withdrawal liability could have a material adverse impactbased on the Company’s financial results.

The Company’s acquisition related contingent consideration liability, which was $381.3 million as of December 31, 2017, consistsunderfunded status of the estimated amounts due to The Coca‑Cola Company under the CBA over the remaining useful life of the related distribution rights. Changes in business conditions or other events could materially change both the projection of future cash flows and the discount rate used in the calculation of the fair value of contingent consideration under the CBA. These changes could materially impact the fair value of the related contingent consideration and could materially impact the amount of noncash expense (or income) recorded each reporting period.

Teamsters Plan.


Changes in tax laws, disagreements with tax authorities or additional tax liabilities could have a material adverse impact on the Company’s financial results.

condition and results of operations.


The Company is subject to income taxes within the United States. The Company’s annual income tax rate is based upon the Company’s income, federal tax laws and various state and local tax laws within the jurisdictions in which the Company operates.
15

Changes in federal, state or local income tax rates and changes in federal, state and/or local tax laws could have a material adverse impact on the Company’s financial results.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law and significantly reformed the Internal Revenue Code of 1986, as amended. Shortly after the Tax Act was enacted, the Securities and Exchange Commission issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) to address the application of GAAP and direct taxpayers to consider the impact of the Act as “provisional” when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for the change in tax law. In accordance with SAB 118, the Company has recognized the provisional tax impacts, outlined above, related to the re-measurement of its net deferred tax liability. The ultimate impact may differ from the provisional amounts, possibly materially, due to, among other things, the significant complexity of the Tax Act, anticipated additional regulatory guidance or related interpretations that may be issued by the Internal Revenue Service (the “IRS”), changes in accounting standards, legislative actions, future actions by states within the U.S. and changes in estimate, analysis, interpretations and assumptions the Company has made.


Excise or other taxes imposed on the sale of certain of the Company’s products by the federal government and certain state and local governments, particularly if theany taxes were incorporated into shelf prices and passed along to consumers, could cause consumers to shift away from purchasing products of the Company, which could materially affecthave a material adverse impact on the Company’s business and financial results.


In addition, an assessment of additional taxes resulting from audits of the Company’s tax filings could have an adverse impact on the Company’s profitability, cash flows and financial condition.


Litigation or legal proceedings could expose the Company to significant liabilities and damage the Company’s reputation.


The Company is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business, including, but not limited to, litigation claims and legal proceedings arising out of its advertising and marketing practices, product claims and labels, intellectual property and commercial disputes, and environmental and employment matters.matters. With respect to all such lawsuits, claims and proceedings, the Company records reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. Although the Company does not believe a material amount of loss in excess of recorded amounts is reasonably possible as a result of these claims, the Company faces risk of an adverse effect on its results of operations, financial position or cash flows, depending on the outcome of the legal proceedings.


Natural disasters, changing weather patterns and unfavorable weather could negatively impact the Company’s business, financial condition and future results of operations or profitability.


Natural disasters or unfavorable weather conditions in the geographic regions in which the Company or its suppliers operate could have an adverse impact on the Company’s revenue and profitability. For instance, unusually cold or rainy weather during the summer months may have a temporary effect on the demand for the Company’s products and contribute to lower sales, which could adversely affect the Company’s profitability for such periods. Prolonged drought conditions could lead to restrictions on water use, which could adversely affect the Company’s cost and ability to manufacture and distribute products. Hurricanes or similar storms may have a negative sourcing impact or cause shifts in product mix to lower-margin products and packages.

Changing


Climate change may have a long-term adverse impact on our business and results of operations.

There is concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere could cause significant changes in weather patterns along withand an increase in the increased frequency or duration of extreme weather and climate events,events. These changes could adversely impact some of the Company’s facilities, or the availability and cost of key raw materials used by the Company in production.production or the demand for the Company’s products. Public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation and raw material costs, and may require the Company to make additional investments in facilities and equipment. In addition, federal, state or local governmental authorities may propose legislative and regulatory initiatives proposed by the U.S. Environmental Protection Agencyin response to concerns over climate change which could directly or indirectly adversely affect the


Company’s production, distribution and packaging, andbusiness, require additional investments or increase the cost of raw materials, fuel, ingredients and water, whichwater. As a result, the effects of climate change could adverselyhave a long-term adverse impact the Company’s profitability.

Provisions in the CBA and the RMA with The Coca‑Cola Company could delay or prevent a change in control of the Company and a sale of the Company’s Coca‑Cola distribution or manufacturing businesses.

Provisions in the CBA and the RMA require the Company to obtain The Coca‑Cola Company’s prior approval of a potential buyer of the Company’s Coca‑Cola distribution or manufacturing businesses, which could delay or prevent a change in control of the Company or the Company’s ability to sell such businesses. The Company can obtain a list of approved third-party buyers from The Coca‑Cola Company annually. In addition, the Company can seek buyer-specific approval from The Coca‑Cola Company upon receipt of a third party offer to purchase the Company or its Coca‑Cola related businesses.

The concentration of the Company’s capital stock ownership with the Harrison family limits other stockholders’ ability to influence corporate matters.

Members of the Harrison family, including the Company’s Chairman and Chief Executive Officer, J. Frank Harrison, III, beneficially own shares of Common Stock and Class B Common Stock representing approximately 86% of the total voting power of the Company’s outstanding capital stock. In addition, three members of the Harrison family, including Mr. Harrison, serve on the Company’s Boardbusiness and results of Directors.

As a result, members of the Harrison family have the ability to exert substantial influence or actual control over the Company’s management and affairs and over substantially all matters requiring action by the Company’s stockholders. This concentration of ownership may have the effect of delaying or preventing a change in control otherwise favored by the Company’s other stockholders and could depress the stock price or limit other stockholders’ ability to influence corporate matters, which could result in the Company making decisions that stockholders outside the Harrison family may not view as beneficial.

operations.

Item 1B.

Unresolved Staff Comments


Item 1B.Unresolved Staff Comments.

None.

Item 2.

Properties












16

Item 2.Properties.

As of February 16, 2018,January 27, 2023, the principal properties of the Company includeincluded its corporate headquarters, 12 production facilitiessubsidiary headquarters, 60 distribution centers and 78 distribution centers.10 manufacturing plants. The Company owns 10 production facilities, 6447 distribution centers and one additional storage warehouse,9 manufacturing plants, and leases its corporate headquarters, subsidiary headquarters, two production facilities, 1413 distribution centers and eight additional storage warehouses. one manufacturing plant.

During 2022, CCBCC Operations, LLC, a wholly owned subsidiary of the Company, purchased the Snyder Production Center, which consists of a distribution center/manufacturing plant combination in Charlotte, North Carolina. In connection with this transaction, the lease for the Snyder Production Center was terminated.

Following is a summary of the Company’s production facilitiesmanufacturing plants and certain other properties:

Facility TypeLocationSquare
Feet		Leased /
Owned		Lease
Expiration
Distribution Center/Manufacturing Plant Combination(1)
Charlotte, NC650,000 Owned—
Distribution CenterWhitestown, IN415,000 Owned—
Manufacturing PlantIndianapolis, IN400,000 Owned—
WarehouseCharlotte, NC380,000 Leased2028
Manufacturing PlantCincinnati, OH368,000 Owned—
WarehouseChester, VA353,000 Leased2028
Distribution Center/Manufacturing Plant CombinationSandston, VA319,000 Owned—
Manufacturing PlantRoanoke, VA310,000 Owned—
Distribution CenterErlanger, KY301,000 Leased2034
Distribution CenterLouisville, KY300,000 Leased2030
Manufacturing PlantTwinsburg, OH287,000 Owned—
WarehouseHanover, MD278,000 Leased2027
Distribution CenterHanover, MD276,000 Leased2034
Distribution CenterMemphis, TN266,000 Leased2025
Distribution CenterClayton, NC233,000 Leased2026
Manufacturing PlantNashville, TN220,000 Leased2024
Distribution CenterLa Vergne, TN220,000 Leased2026
Corporate Headquarters(2)(3)
Charlotte, NC172,000 Leased2029
Manufacturing PlantBaltimore, MD155,000 Owned—
Manufacturing PlantWest Memphis, AR116,000 Owned—
Manufacturing PlantSilver Spring, MD104,000 Owned—

(1)Includes a 535,000-square foot manufacturing plant and an adjacent 115,000-square foot distribution center.
(2)Includes two adjacent buildings totaling approximately 172,000 square feet.
(3)The lease for this facility is with a related party.

The Company believes all of its distribution facilities.

Owned Facilities

Facility Type

Location

Square Feet

Distribution Facility

Alexandria, VA

157,000

Distribution Facility

Columbus, OH

124,000

Distribution Facility

Dayton, OH

114,000

Distribution Facility

Knoxville, TN

153,000

Distribution Facility

Lexington, KY

171,000

Distribution Facility

Norfolk, VA

158,000

Production Facility

Baltimore, MD

158,000

Production Facility

Memphis, TN

271,000

Production Facility

Portland, IN

119,000

Production Facility

Roanoke, VA

316,000

Production Facility

Silver Spring, MD

104,000

Production Facility

Twinsburg, OH

287,000

Production Facility

West Memphis, AR

126,000

Production/ Distribution Combination Facility

Cincinnati, OH

368,000

Production/ Distribution Combination Facility

Indianapolis, IN

380,000

Production/ Distribution Combination Facility

Sandston, VA

319,000


Leased Facilities

Facility Type

 

Location

 

Square

Feet

 

 

Lease

Expiration

 

 

2017 Rent

(in millions)

 

Corporate headquarters(1)(3)

 

Charlotte, NC

 

 

175,000

 

 

 

2021

 

 

$

4.4

 

Customer Center

 

Charlotte, NC

 

 

71,000

 

 

 

2030

 

 

 

0.3

 

Distribution Facility

 

Baltimore, MD

 

 

290,000

 

 

 

2025

 

 

 

2.0

 

Distribution Facility

 

Charleston, SC

 

 

50,000

 

 

 

2027

 

 

 

0.3

 

Distribution Facility

 

Clayton, NC

 

 

233,000

 

 

 

2026

 

 

 

1.1

 

Distribution Facility

 

Cleveland, TN

 

 

75,000

 

 

 

2030

 

 

 

0.2

 

Distribution Facility

 

Greenville, SC

 

 

57,000

 

 

 

2018

 

 

 

0.8

 

Distribution Facility

 

La Vergne, TN

 

 

220,000

 

 

 

2026

 

 

 

0.8

 

Distribution Facility

 

Louisville, KY

 

 

300,000

 

 

 

2029

 

 

 

1.4

 

Production/ Distribution Combination Facility(2)(3)

 

Charlotte, NC

 

 

647,000

 

 

 

2020

 

 

 

4.1

 

Production/ Distribution Combination Facility

 

Nashville, TN

 

 

330,000

 

 

 

2024

 

 

 

0.5

 

Subsidiary headquarters

 

Charlotte, NC

 

 

57,000

 

 

 

2022

 

 

 

0.5

 

Warehouse

 

Bishopville, SC

 

 

100,000

 

 

 

2026

 

 

 

0.3

 

Warehouse

 

Charlotte, NC

 

 

367,000

 

 

 

2022

 

 

 

1.0

 

Warehouse

 

Roanoke, VA

 

 

111,000

 

 

 

2025

 

 

 

0.8

 

(1)

Includes two adjacent buildings totaling 175,000 square feet.

(2)

Includes a 542,000 square foot production center and adjacent 105,000 square foot distribution center.

(3)

The leases for these facilities are with a related party.

facilities are in good condition and are adequate for the Company’s operations as presently conducted. The Company currently has sufficient production capacity to meet its current operational requirements. The approximateestimated utilization percentage utilization of the Company's production facilities,Company’s manufacturing plants, which fluctuates with the seasonality of the business, as of December 31, 2017,2022, is indicated below:

Location

Utilization(1)

Portland, Indiana

90

%

Roanoke, Virginia

78

%

Nashville, Tennessee

76

%

Charlotte, North Carolina

74

%

Silver Spring, Maryland

70

%

Cincinnati, Ohio

67

%

Sandston, Virginia

59

%

Baltimore, Maryland

51

%

Twinsburg, Ohio

48

%

Memphis, Tennessee

48

%

Indianapolis, Indiana

46

%

West Memphis, Arkansas

43

%


Location
Utilization(1)
Location
Utilization(1)
Roanoke, VA96 %Indianapolis, IN77 %
Charlotte, NC89 %Cincinnati, OH75 %
Nashville, TN89 %Silver Spring, MD70 %
Baltimore, MD83 %Sandston, VA68 %
West Memphis, AR82 %Twinsburg, OH59 %

(1)Estimated 2018 production divided by capacity, based on expected operations of 6six days per week and 20 hours per day.


In addition to the production facilities noted above, the Company utilizes a portion of the production capacity atfrom the 261,000-square foot manufacturing plant owned by SAC, a manufacturing cooperative located in Bishopville, South Carolina, that owns a 261,000 square foot production facility.

Carolina.


17

The Company’s products are generally transported to sales distribution facilitiescenters for storage pending sale. TheThere were no changes to the number of sales distribution facilitiescenters by market area as of February 16, 2018, was as follows:

Location

Number of

Facilities

Arkansas / Northwestern Mississippi

3

Indiana / Southeastern Illinois

8

Kentucky / West Virginia

12

Maryland / Delaware / District of Columbia / South-Central Pennsylvania

7

North Carolina

11

Ohio

11

South Carolina

8

Tennessee

7

Virginia

11

Total number of sales distribution facilities

78

The Company believes its facilities are all in good conditionbetween December 31, 2022 and are adequate for the Company’s operations as presently conducted.

January 27, 2023.


As of January 28, 2018,27, 2023, the Company owned and operated approximately 4,3004,200 vehicles in the sale and distribution of the Company’s beverage products, of which approximately 2,8002,700 were route delivery trucks. In addition, the Company owned approximately 500,000429,000 beverage dispensing and vending machines for the sale of the Company’sbeverage products in the Company’s bottling territories as of January 28, 2018.

27, 2023.

Item 3.

Legal Proceedings


Item 3.Legal Proceedings.

The Company is involved in various claims and legal proceedings which have arisen in the ordinary course of its business. Although it is difficult to predict the ultimate outcome of these claims and legal proceedings, management believes that the ultimate disposition of these matters will not have a material adverse effect on the financial condition, cash flows or results of operations or cash flows of the Company. No material amount of loss in excess of recorded amounts is believed to be reasonably possible as a result of these claims and legal proceedings.

Item 4.

Mine Safety Disclosures


Item 4.Mine Safety Disclosures.

Not applicable.


18


Information About Our Executive OfficersOfficers

The following is a description of the Registrant

The following information is provided with respect to eachnames and ages of the executive officers of the Company, asindicating all positions and offices with the Company held by each such person and each person’s principal occupation or employment during the past five years. Each executive officer of February 16, 2018.

the Company is elected by the Board of Directors and holds office from the date of election until thereafter removed by the Board.

Name

NamePosition and Office

Age

J. Frank Harrison, III

Chairman of the Board of Directors and Chief Executive Officer

63

68

Henry W. Flint

David M. Katz

President and Chief Operating Officer

63

54

William J. Billiard

F. Scott Anthony

SeniorExecutive Vice President and Chief AccountingFinancial Officer

51

59

Matthew J. Blickley

Senior Vice President, Financial Planning and Chief Accounting Officer41
Robert G. Chambless

Executive Vice President, Franchise Beverage Operations

52

57

Donell W. Etheridge

Executive Vice President, Product Supply Operations54
Morgan H. Everett

Vice President

Chair of the Board of Directors

36

41

E. Beauregarde Fisher III

Executive Vice President, General Counsel and Secretary

49

54

James E. Harris

Christine A. Motherwell

Executive Vice President, Business Transformation and Business Services

55

Umesh M. Kasbekar

Vice Chairman of the Board of Directors

60

David M. Katz

Executive Vice President and Chief Financial Officer

49

Kimberly A. Kuo

Senior Vice President, Public Affairs, Communications and Communities

47

James L. Matte

Senior Vice President, Human Resources

44
Jeffrey L. Turney

58

Senior Vice President, Strategy & Business Transformation		55


Mr. J. Frank Harrison, IIIwas appointedelected Chairman of the Board of Directors of the Company in December 1996.1996 and Chief Executive Officer of the Company in May 1994. Mr. Harrison III served as Vice Chairman of the Board of Directors of the Company from November 1987 throughto December 1996 and was appointed as the Company's Chief Executive Officer in May 1994.1996. He was first employed by the Company in 1977 and has also served as a Division Sales Manager and as a Vice President.


Mr. Henry W. Flint David M. Katzwas appointedelected President and Chief Operating Officer in August 2012. He has served as a Director of the Company since April 2007. Previously, he was Vice Chairman of the Board of Directors, a position he held from April 2007 to August 2012.in December 2018. Prior to that, he wasserved in various positions within the Company, including Executive Vice President and AssistantChief Financial Officer from January 2018 to December 2018, Executive Vice President, Product Supply and Culture & Stewardship from April 2017 to January 2018, Executive Vice President, Human Resources from April 2016 to April 2017 and Senior Vice President from January 2013 to March 2016. He held the position of Senior Vice President, Midwest Region for CCR, a wholly owned subsidiary of The Coca‑Cola Company, from November 2010 to December 2012. Prior to the Chairmanformation of CCR, Mr. Katz was Vice President, Sales Operations for the East Business Unit of Coca‑Cola Enterprises Inc. (“CCE”) from January 2010 to December 2010. From 2008 to 2010, he served as Chief Procurement Officer and as President and Chief Executive Officer of Coca‑Cola Bottlers’ Sales & Services Company LLC. He began his Coca‑Cola career in 1993 with CCE as a Logistics Consultant.

Mr. F. Scott Anthony was elected Executive Vice President and Chief Financial Officer of the Company a position to which he was appointed in July 2004.December 2018. Prior to that, he served as Senior Vice President, Treasurer of the Company from November 2018 to December 2018. Before joining the Company, Mr. Anthony served as Executive Vice President, Chief Financial Officer of Ventura Foods, LLC, a privately held food solutions company, from April 2011 to September 2018. Previously, Mr. Anthony spent 21 years with CCE in a variety of roles, including Vice President, Chief Financial Officer of CCE’s North America division, Vice President, Investor Relations & Planning, and Director, Acquisitions & Investor Relations.

Mr. Matthew J. Blickley was a Managing Partner at the law firm of Kennedy Covington Lobdell & Hickman, L.L.P., with which he was associated from 1980 to 2004.

Mr. William J. Billiard was appointedelected Senior Vice President, Financial Planning and Chief Accounting Officer of the Company in February 2006 and Senior Vice President in April 2017. In additionJuly 2020, effective August 2020. Prior to these roles,that, he has also served as Vice President, Financial Planning and Analysis of the Company from April 2018 to August 2020, as Senior Director, Financial Planning and Analysis of the Company from April 2016 to March 2018 and as Corporate Controller from February 2006 to November 2010, Vice President, Operations Financeof the Company from November 20102014 to June 2013 and Vice President, Corporate Controller from June 2013 to November 2014.March 2016. Before joining the Company, Mr. Blickley was with Family Dollar Stores, Inc., an operator of general merchandise retail discount stores, from January 2011 to November 2014, where he served in various senior financial roles, including Chief Financial Officer, Treasurer, Corporate Controller andDivisional Vice President, of Finance for companiesFinancial Planning & Analysis and Director, Financial Reporting. Mr. Blickley is a certified public accountant and began his career with PricewaterhouseCoopers LLP in the Charlotte, North Carolina and Atlanta, Georgia areas and was an accountant2004 where he advanced from Audit Associate to Audit Manager during his more than six years with Deloitte.

that firm.


Mr. Robert G. Chamblesswas appointedelected Executive Vice President, Franchise Beverage Operations of the Company in January 2018. Prior to this,that, he served in various positions within the Company, including Executive Vice President, Franchise Strategy and Operations from April 2016 to January 2018, Senior Vice President, Sales, Field Operations and Marketing from August 2010 to March 2016, Senior Vice President, Sales from June 2008 to July 2010, Vice President -– Franchise Sales from 2003 to 2008, Region Sales Manager for the Company’s Southern Division from 2000 to 2003 and Sales Manager in the Company’s Columbia, South Carolina branch from 1997 to 2000. He hasalso served the Company in several other positions prior to 1997 and was first employed by the Company in 1986.


19

Mr. Donell W. Etheridge was elected Executive Vice President, Product Supply Operations of the Company in March 2021. Prior to that, he served in various positions within the Company, including Senior Vice President, Product Supply Operations from September 2016 to February 2021, Vice President, Product Supply Operations from December 2013 to September 2016, Senior Director, Manufacturing from August 2011 to November 2013, Director, Operations from April 2009 to July 2011 and Plant Manager from January 2003 to March 2009. He also served the Company in several other positions prior to 2003 and was first employed by the Company in 1990.

Ms. Morgan H. Everettwas appointedelected Vice PresidentChair of the Board of Directors of the Company in January 2016.May 2020. Prior to that, she was Senior Vice President of the Company from April 2019 to May 2020, Vice President of the Company from January 2016 to March 2019, and Community Relations Director of the Company a position she held from January 2009 to December 2015. Since December 2018, Ms. Everett has served as Chairman of Red Classic Services, LLC and Data Ventures, Inc., two of the Company’s operating subsidiaries. She has been an employee of the Company since October 2004.


Mr. E. Beauregarde Fisher IIIwas appointedelected Executive Vice President, General Counsel of the Company in February 2017 and Secretary of the Company in May 2017. Before joining the Company, he was a partner with the law firm of Moore & Van Allen PLLC where he served on the firm’s management committee and chaired its business law practice group. He was associated with the firm from 1998 to 2017 and concentrated his practice on mergers and acquisitions, corporate governance and general corporate matters. From 2011 to 2017, he served as the Company’s outside corporate counsel.

Mr. James E. Harris


Ms. Christine A. Motherwellwas appointed Executiveelected Senior Vice President, Business Transformation and Business ServicesHuman Resources of the Company in September 2021, effective January 2018 after serving as Executive2022. Prior to that, she served in various positions within the Company, including Vice President, Human Resources Business TransformationPartner from October 2019 to December 2021, Vice President, Home Market Sales from April 2016 to September 2019, Vice President, Walmart/Club from April 2015 to March 2016 and Senior Director, Customer Development – Walmart from February 2013 to March 2015. Before joining the Company, Ms. Motherwell was National Account Executive, Publix of The Coca-Cola Company, the world’s largest nonalcoholic beverage company, from December 2011 to February 2013. Prior to that, Ms. Motherwell was with CCR, a wholly owned subsidiary of The Coca‑Cola Company, where she served as Director, Sales from January 20182011 to December 2011 and as Sales Center Manager from October 2009 to December 2010.

Mr. Jeffrey L. Turney was elected Senior Vice President, Shared Services and Chief Financial Officer from January 2008 to March 2016. He served as a DirectorStrategy & Business Transformation of the Company from August 2003 until January 2008 and was a member of the Audit Committee and the Finance Committee. He served as Executive Vice President and Chief Financial Officer of MedCath Corporation, an operator of cardiovascular hospitals, from December 1999 to January 2008. From 1998 to 1999, he was Chief Financial Officer of Fresh Foods, Inc., a manufacturer of fully cooked food products. From 1987 to 1998,


he served in several different officer positions with The Shelton Companies, Inc., a private investment firm. He also served two years with Ernst & Young LLP as a senior accountant.

Mr. Umesh M. Kasbekar was appointed Vice Chairman of the Board of Directors in January 2016. Previously2019. Prior to that, he served as the Secretary of the Company from August 2012 to May 2017 and as Senior Vice President, Planning and& Administration of the Company from June 2005January 2018 to December 2015. Prior to that, he was2018 and as Vice President, Planning a position he was appointed to in& Administration of the Company from December 1988.

Mr. David M. Katz was appointed Executive Vice President and Chief Financial Officer in January 2018. Previously, he served as Executive Vice President, Product Supply and Culture & Stewardship from April 2016 to January 2018, Executive Vice President, Human Resources from April 2016 to April 2017 and Senior Vice President from January 2013 to March 2016. He held the position of Senior Vice President, Midwest Region for CCR from November 20102015 to December 2012. Prior to the formation of CCR, he was Vice President, Sales Operations for Coca‑Cola Enterprises Inc.’s (“CCE”) East Business Unit. From 2008 to 2010, he served as President and Chief Executive Officer of Coca‑Cola Bottlers’ Sales and Services Company, LLC. He began his Coca‑Cola career in 1993 with CCE as a Logistics Consultant.

Ms. Kimberly A. Kuo was appointed Senior Vice President, Public Affairs, Communications and Communities in January 2016. Before joining the Company, she operated her own communications and marketing consulting firm, Sterling Strategies, from January 2014 to December 2015. Prior to that, she served as Chief Marketing Officer at Baker and Taylor, a book and entertainment distributor from February 2009 to July 2013. Prior to her experience at Baker and Taylor, she served in various communications and government affairs roles on Capitol Hill, in political campaigns, trade associations, and corporations.

Mr. James L. Matte was appointed Senior Vice President, Human Resources in April 2017 after joining the Company as Vice President of Human Resources in September 2015.2017. Before joining the Company, Mr. Matte served as a labor and employee relations consultant to several private equity groupsTurney was Vice President, Strategy & Business Development of The Coca‑Cola Company, the world’s largest nonalcoholic beverage company, from January 20142011 to AugustDecember 2015. Prior to that, he was employed by Coca-Cola EnterprisesMr. Turney joined The Coca‑Cola Company in May 2002, serving in various other strategic planning, commercial operations, customer sales and finance positions with the Coca‑Cola North America and in Europe, holding a varietydivision of human resources leadership positions related to human resource strategy, talent management, employee and labor relations, organizational development and employment practices from August 2004 to December 2013.The Coca‑Cola Company. Prior to his career at Coca-Cola Enterprises,time in the Coca‑Cola system, Mr. Turney served consumer products and retail industry clients with Arthur Andersen Consulting from 1999 to 2002. From 1989 to 1999, he held various management and leadership roles in the positionsconsumer products and supermarket retail industry. Mr. Turney has notified the Company that he will retire in the second fiscal quarter of Attorney2023.


20

PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Partner at McGuireWoods, LLP.

Securities.


PART II

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company has two classes of common stock outstanding, Common Stock and Class B Common Stock. The Common Stock is traded on the NASDAQThe Nasdaq Global Select Market under the symbol COKE. The table below sets forth for the periods indicated the high and low reported sales prices per share of Common Stock. There is no established public trading market for the Class B Common Stock. Shares of Class B Common Stock are convertible on a share-for-share basis into shares of Common Stock.

 

 

2017

 

 

2016

 

 

 

High

 

 

Low

 

 

High

 

 

Low

 

First quarter

 

$

207.40

 

 

$

162.31

 

 

$

184.20

 

 

$

150.26

 

Second quarter

 

 

240.45

 

 

 

195.95

 

 

 

167.94

 

 

 

119.80

 

Third quarter

 

 

249.54

 

 

 

200.10

 

 

 

161.44

 

 

 

138.81

 

Fourth quarter

 

 

230.00

 

 

 

182.26

 

 

 

182.26

 

 

 

125.00

 

A quarterly dividend rate of $0.25 per share on both Common Stock and Class B Common Stock was maintained throughout 2017 and 2016. Pursuant toat any time at the Company's certificate of incorporation, no cash dividend or dividend of property or stock other than stockoption of the Company, as specifically described inholder.


The Company’s Board of Directors determines the certificate of incorporation, may be declared and paid on the Class B Common Stock unless an equal or greater dividend is declared and paid on the Common Stock. Shares of Common Stock and Class B Common Stock have participated equally in dividends since 1994.

The amount and frequency of future dividends will be determineddeclared and paid by the Company's Board of DirectorsCompany in light of the earnings and financial condition of the Company at such time, and notime. No assurance can be given that dividends will be declared or paid in the future.


As of February 16, 2018,January 27, 2023, the number of stockholders of record of the Common Stock and the Class B Common Stock was 2,7011,008 and 10,6, respectively.

On March 7, 2017, the Compensation Committee determined that 40,000 shares of restricted Class B Common Stock, $1.00 par value, should be issued (pursuant to a Performance Unit Award Agreement approved in 2008) to J. Frank Harrison, III, in connection with his services in 2016 as Chairman of the Board of Directors and Chief Executive Officer of the Company. As permitted under the terms of the Performance Unit Award Agreement, 18,980 of such shares were settled in cash to satisfy tax withholding obligations in connection with the vesting of the performance units. The shares issued to Mr. Harrison were issued without registration under the Securities Act of 1933, as amended, in reliance on Section 4(a)(2) therein.


Stock Performance Graph


Presented below is a line graph comparing the yearly percentage change in the cumulative total return on the Company’s Common Stock to the cumulative total return of the Standard & Poor’s 500 Index and a peer group for the period commencing December 30, 201231, 2017 and ending December 31, 2017.2022. The peer group is comprised of Keurig Dr Pepper Snapple,Inc., National Beverage Corp., The Coca‑Cola Company, Primo Water Corporation (f/k/a Cott CorporationCorporation) and PepsiCo, Inc.


The graph assumes $100 was invested in the Company’s Common Stock, the Standard & Poor’s 500 Index and each of the companies within the peer group on December 30, 201231, 2017, and that all dividends were reinvested on a quarterly basis. Returns for the companies included in the peer group have been weighted on the basis of the total market capitalization for each company.


*

$100 invested on 12/30/12 in stock or 12/31/12 in index, including reinvestment of dividends. Index calculated on month-end basis.


Item 6.

Selected Financial Data


The following table sets forth certain selected financial data concerning

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*
Among Coca-Cola Consolidated, Inc., the Company for the five fiscal years ended December 31, 2017. The data is derived from audited consolidated financial statementsS&P 500 Index and a Peer Group
coke-20221231_g2.jpg
*Assumes $100 invested on 12/31/2017 in stock or index, including reinvestment of the Company. See dividends.
Index calculated on a month-end basis.

Item 6.[Reserved]

21

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations and the accompanying notes to consolidated financial statements for additional information.

 

 

Fiscal Year

 

(in thousands, except per share data and number of facilities)

 

2017(1)

 

 

2016(1)

 

 

2015(1)(2)

 

 

2014(1)

 

 

2013

 

Net sales

 

$

4,323,668

 

 

$

3,156,428

 

 

$

2,306,458

 

 

$

1,746,369

 

 

$

1,641,331

 

Cost of sales

 

 

2,782,721

 

 

 

1,940,706

 

 

 

1,405,426

 

 

 

1,041,130

 

 

 

982,691

 

Gross profit

 

 

1,540,947

 

 

 

1,215,722

 

 

 

901,032

 

 

 

705,239

 

 

 

658,640

 

Selling, delivery and administrative expenses

 

 

1,444,768

 

 

 

1,087,863

 

 

 

802,888

 

 

 

619,272

 

 

 

584,993

 

Income from operations

 

 

96,179

 

 

 

127,859

 

 

 

98,144

 

 

 

85,967

 

 

 

73,647

 

Interest expense, net

 

 

41,869

 

 

 

36,325

 

 

 

28,915

 

 

 

29,272

 

 

 

29,403

 

Other income (expense), net

 

 

(4,197

)

 

 

1,870

 

 

 

(3,576

)

 

 

(1,077

)

 

 

-

 

Gain (loss) on exchange transactions

 

 

12,893

 

 

 

(692

)

 

 

8,807

 

 

 

-

 

 

 

-

 

Gain on sale of business

 

 

-

 

 

 

-

 

 

 

22,651

 

 

 

-

 

 

 

-

 

Bargain purchase gain, net of tax of $1,265

 

 

-

 

 

 

-

 

 

 

2,011

 

 

 

-

 

 

 

-

 

Income before taxes

 

 

63,006

 

 

 

92,712

 

 

 

99,122

 

 

 

55,618

 

 

 

44,244

 

Income tax expense (benefit)

 

 

(39,841

)

 

 

36,049

 

 

 

34,078

 

 

 

19,536

 

 

 

12,142

 

Net income

 

 

102,847

 

 

 

56,663

 

 

 

65,044

 

 

 

36,082

 

 

 

32,102

 

Less: Net income attributable to noncontrolling interest

 

 

6,312

 

 

 

6,517

 

 

 

6,042

 

 

 

4,728

 

 

 

4,427

 

Net income attributable to Coca-Cola Bottling Co. Consolidated

 

$

96,535

 

 

$

50,146

 

 

$

59,002

 

 

$

31,354

 

 

$

27,675

 

Basic net income per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

$

10.35

 

 

$

5.39

 

 

$

6.35

 

 

$

3.38

 

 

$

2.99

 

Class B Common Stock

 

$

10.35

 

 

$

5.39

 

 

$

6.35

 

 

$

3.38

 

 

$

2.99

 

Diluted net income per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

$

10.30

 

 

$

5.36

 

 

$

6.33

 

 

$

3.37

 

 

$

2.98

 

Class B Common Stock

 

$

10.29

 

 

$

5.35

 

 

$

6.31

 

 

$

3.35

 

 

$

2.97

 

Cash dividends per share - Common Stock

 

$

1.00

 

 

$

1.00

 

 

$

1.00

 

 

$

1.00

 

 

$

1.00

 

Cash dividends per share - Class B Common Stock

 

$

1.00

 

 

$

1.00

 

 

$

1.00

 

 

$

1.00

 

 

$

1.00

 

Net cash provided by operating activities

 

$

307,816

 

 

$

161,995

 

 

$

108,290

 

 

$

91,903

 

 

$

96,374

 

Net cash used in investing activities

 

 

458,895

 

 

 

452,026

 

 

 

217,343

 

 

 

124,251

 

 

 

55,296

 

Net cash provided by (used in) financing activities

 

 

146,131

 

 

 

256,383

 

 

 

155,456

 

 

 

29,682

 

 

 

(39,716

)

Total assets

 

 

3,072,960

 

 

 

2,449,484

 

 

 

1,846,565

 

 

 

1,430,641

 

 

 

1,272,361

 

Working capital

 

 

155,086

 

 

 

135,904

 

 

 

108,366

 

 

 

58,177

 

 

 

28,919

 

Acquisition related contingent consideration

 

 

381,291

 

 

 

253,437

 

 

 

136,570

 

 

 

46,850

 

 

 

-

 

Current portion of obligations under capital leases

 

 

8,221

 

 

 

7,527

 

 

 

7,063

 

 

 

6,446

 

 

 

5,939

 

Obligations under capital leases

 

 

35,248

 

 

 

41,194

 

 

 

48,721

 

 

 

52,604

 

 

 

59,050

 

Current portion of debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,000

 

Long-term debt

 

 

1,088,018

 

 

 

907,254

 

 

 

619,628

 

 

 

442,324

 

 

 

374,771

 

Total equity of Coca-Cola Bottling Co. Consolidated

 

 

366,702

 

 

 

277,131

 

 

 

243,056

 

 

 

183,609

 

 

 

191,320

 

Equivalent unit case volume (percentage change)(3):

 

 

31.6

%

 

 

36.4

%

 

 

28.9

%

 

 

6.1

%

 

 

0.3

%

Sparkling beverages

 

 

27.8

%

 

 

32.5

%

 

 

24.1

%

 

 

3.6

%

 

 

-2.0

%

Still beverages

 

 

40.8

%

 

 

47.3

%

 

 

44.4

%

 

 

15.0

%

 

 

11.1

%

Number of production facilities

 

 

12

 

 

 

8

 

 

 

4

 

 

 

4

 

 

 

4

 

Number of sales distribution facilities

 

 

80

 

 

 

66

 

 

 

53

 

 

 

44

 

 

 

41

 

(1)

For additional information on acquisitions and divestitures in 2017, 2016, 2015 and 2014, see Management’s Discussion and Analysis on Financial Condition and Results of Operations and the accompanying notes to the consolidated financial statements.

Operations.

(2)

All years presented are 52-week fiscal years except 2015 which was a 53-week year. The estimated net sales, gross margin and selling, delivery and administrative expenses for the additional week in 2015 of approximately $39 million, $14 million and $10 million, respectively, are included in the reported results for 2015.


(3)

Equivalent unit case volume is defined as twenty-four 8-ounce servings or 192-ounces.


Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“M,D&A”)is intended to help the reader understand our financial condition and results of Coca‑Cola Bottling Co. Consolidated (the “Company”)operations and is provided as an addition to, and should be read in conjunction with, theour consolidated financial statements of the Company and the accompanying notes to the consolidated financial statements.

The Company’s fiscal year generally ends on the Sunday closest to December 31 of each year. 


The fiscal years presented are:

The 52-week periodare the periods ended December 31, 20172022 (“2017”)

The 52-week period ended January 1, 2017 (“2016”); and

The 53-week period ended January 3, 2016 (“2015”).

The estimated net sales, gross profit and selling, delivery and administrative (“S,D&A”) expenses for the additional selling week in 2015 were approximately $39 million, $14 million and $10 million, respectively, and were included in reported results in 2015.

The consolidated financial statements include the consolidated operations of the Company and its majority-owned subsidiaries including Piedmont Coca-Cola Bottling Partnership (“Piedmont”). Piedmont is the Company’s only subsidiary that has a significant noncontrolling interest. Piedmont distributes and markets nonalcoholic beverages in portions of North Carolina and South Carolina. The Company provides a portion of these nonalcoholic beverage products to Piedmont at cost and receives a fee for managing the operations of Piedmont pursuant to a management agreement. Noncontrolling interest consists of The Coca‑Cola Company’s interest in Piedmont, which was 22.7% for all periods presented.

System Transformation Transactions

As part of The Coca‑Cola Company’s plans to refranchise its North American bottling territories, the Company recently concluded a series of transactions from April 2013 to October 2017 with The Coca‑Cola Company, Coca‑Cola Refreshments USA, Inc. (“CCR”), a wholly-owned subsidiary of The Coca‑Cola Company, and Coca‑Cola Bottling Company United, Inc. (“United”), an independent bottler that is unrelated to the Company, to significantly expand the Company’s distribution and manufacturing operations (the “System Transformation”). The System Transformation included the acquisition and exchange of rights to serve distribution territories (the “Expansion Territories”2022”) and related distribution assets, as well asDecember 31, 2021 (“2021”). Information concerning the acquisition and exchange of regional manufacturing facilities (the “Expansion Facilities”fiscal year ended December 31, 2020 (“2020”) and related manufacturing assets. A summarya comparison of the System Transformation transactions (the “System Transformation Transactions”) completed by the Company prior to 2017 is included2021 and 2020 may be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K10‑K for 2016. During 2017,2021, filed with the SEC on February 22, 2022.


The Company closedmanages its business on the following System Transformation Transactions:

System Transformation Transactions Completedbasis of three operating segments. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated net sales and income from operations. The additional two operating segments do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, and, therefore, have been combined into “All Other.”


Executive Summary

Net sales increased 11% to $6.20 billion in 2022, with CCRphysical case volume flat when compared to the prior year. The increase in 2017

Anderson, Fort Wayne, Lafayette, South Bendnet sales was driven primarily by price increases taken across our portfolio during the year while volume continued to outperform the price elasticities we have historically experienced with higher pricing. Sparkling and Terre Haute, Indiana Expansion Territories Acquisitions (the “January 2017 Transaction”)

On January 27, 2017,Still net sales increased 16.6% and 8.5%, respectively, compared to 2021. Sparkling volume grew 0.6% in 2022, driven by strong consumer demand for our multi-serve can and small bottle PET packages, while Still volume decreased 1.3% in 2022. Brands within the Company acquired distribution rightsSparkling category benefited from solid demand in our on-premise sales channels, including restaurants, universities, sports venues, amusement parks and related assetsother immediate consumption outlets.


Gross profit in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in Anderson, Fort Wayne, Lafayette, South Bend and Terre Haute, Indiana pursuant2022 increased $323.8 million, or 17%, while gross margin increased 160 basis points to a distribution asset purchase agreement entered into by the Company and CCR on September 1, 2016 (the “September 2016 Distribution APA”)36.7%. The Company completedimprovement in gross profit resulted from higher prices for our products, stable volume and prices for certain commodities moderating from historically high levels. Compared to 2021, gross margin also benefited from the January 2017 Transactionincreased mix of Sparkling beverages, which generally carry higher gross margins than Still packages.

Selling, delivery and administrative (“SD&A”) expenses in 2022 increased $121.9 million, or 8%. SD&A expenses as a percentage of net sales in 2022 decreased 80 basis points to 26.4% as compared to 2021. The increase in SD&A expenses related primarily to an increase in labor costs. Over the last year, we have made certain investments in our teammates to reward performance for their contributions in achieving strong operating results and to remain competitive in the current labor environment. In addition, we experienced broad inflationary increases across a cash purchase pricenumber of $32.1SD&A categories.

Income from operations in 2022 increased $201.9 million which includes all post-closing adjustments. The cash purchase priceto $641.0 million. Net income increased $0.5$240.6 million in fiscal year 2022 to $430.2 million as a result of post-closing adjustments made during 2017.

Acquisition of Bloomingtoncompared to fiscal year 2021. Net income in 2022 and Indianapolis, Indiana and Columbus and Mansfield, Ohio Expansion Territories and Indianapolis and Portland, Indiana Expansion Facilities (the “March 2017 Transactions”)

On March 31, 2017, the Company acquired (i) distribution rights and related assets in Expansion Territories previously served2021 was adversely impacted by CCR through CCR’s facilities and equipment located in Indianapolis and Bloomington, Indiana and Columbus and Mansfield, Ohio pursuant to the September 2016 Distribution APA and (ii) two Expansion Facilities located in Indianapolis and Portland, Indiana and related manufacturing assets pursuant to a manufacturing asset purchase agreement entered into by the Company and CCR on September 1, 2016 (the “September 2016 Manufacturing APA”). The Company completed the March 2017 Transactions for a cash purchase price of $104.6 million, which includes all post-closing adjustments. The cash purchase price decreased $4.1 million as a result of post-closing adjustments made during 2017.


Acquisition of Akron, Elyria, Toledo, Willoughby and Youngstown, Ohio Expansion Territories and Twinsburg, Ohio Expansion Facility (the “April 2017 Transactions”)

On April 28, 2017, the Company acquired (i) distribution rights and related assets in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in Akron, Elyria, Toledo, Willoughby and Youngstown, Ohio pursuant to a distribution asset purchase agreement entered into by the Company and CCR on April 13, 2017 (the “April 2017 Distribution APA”) and (ii) an Expansion Facility located in Twinsburg, Ohio and related manufacturing assets pursuant to a manufacturing asset purchase agreement entered into by the Company and CCR on April 13, 2017 (the “April 2017 Manufacturing APA”). The Company completed the April 2017 Transactions for a cash purchase price of $87.9 million. During the fourth quarter of 2017, the cash purchase price for the April 2017 Transactions decreased by $4.7 million as a result of net working capital and other fair value adjustments which remains due from The Coca‑Cola Company. Theto our acquisition related contingent consideration liability, driven by changes in future cash purchase price for the April 2017 Transactions remains subject to post-closing adjustment in accordance with the April 2017 Distribution APAflow projections and the April 2017 Manufacturing APA.

Acquisition of Arkansas Expansion Territories and Memphis, Tennessee and West Memphis, Arkansas Expansion Facilities in exchange for the Company’s Deep South and Somerset Distribution Territories and Mobile, Alabama Manufacturing Facility (the “CCR Exchange Transaction”)

On October 2, 2017, the Company (i) acquired from CCR distribution rights and related assets in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in central and southern Arkansas and two Expansion Facilities located in Memphis, Tennessee and West Memphis, Arkansas and related manufacturing assets (collectively, the “CCR Exchange Business”) in exchange for which the Company (ii) transferreddiscount rate used to CCR distribution rights and related assets in territories previously served by the Company through its facilities and equipment located in portions of southern Alabama, southeastern Mississippi, southwestern Georgia and northwestern Florida and in and around Somerset, Kentucky and a regional manufacturing facility located in Mobile, Alabama and related manufacturing assets (collectively, the “Deep South and Somerset Exchange Business”), pursuant to an asset exchange agreement entered into by the Company, certain of its wholly-owned subsidiaries and CCR on September 29, 2017 (the “CCR AEA”).

During 2017, the Company paid CCR $15.9 million toward the closing of the CCR Exchange Transaction, representing an estimate of the difference between the value of the CCR Exchange Business acquired by the Company and the value of the Deep South and Somerset Exchange Business acquired by CCR. During the fourth quarter of 2017, the Company recorded certain adjustments to this settlement amount as a result of changes in estimated net working capital and other fair value adjustments, which are included in accounts payable to The Coca‑Cola Company. The final closing price for the CCR Exchange Transaction remains subject to final resolution pursuant to the CCR AEA. The payment for the CCR Exchange Transaction reflected the application of $4.8 million of the Expansion Facilities Discount (as described below).

Acquisition of Memphis, Tennessee Expansion Territories

On October 2, 2017, the Company acquired distribution rights and related assets in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in and around Memphis, Tennessee, including portions of northwestern Mississippi and eastern Arkansas, pursuant to an asset purchase agreement entered by the Company and CCR on September 29, 2017 (the “September 2017 APA”). The Company completed this acquisition for a cash purchase price of $39.6 million, which remains subject to post-closing adjustment in accordance with the September 2017 APA.

System Transformation Transactions Completed with United in 2017

Acquisition of Spartanburg and Bluffton, South Carolina Expansion Territories in exchange for the Company’s Florence and Laurel Territories and Piedmont’s Northeastern Georgia Territories (“United Exchange Transaction”)

On October 2, 2017, the Company and Piedmont completed exchange transactions in which (i) the Company acquired from Coca‑Cola Bottling Company United, Inc. (“United”), an independent bottler that is unrelated to the Company, distribution rights and related assets in Expansion Territories previously served by United through United’s facilities and equipment located in and around Spartanburg, South Carolina and a portion of United’s territory located in and around Bluffton, South Carolina and Piedmont acquired from United similar rights, assets and liabilities, and working capital in the remainder of United’s Bluffton, South Carolina territory (collectively, the “United Distribution Business”), in exchange for which (ii) the Company transferred to United distribution rights and related assets in territories previously served by the Company through its facilities and equipment located in parts of northwestern Alabama, south-central Tennessee and southeastern Mississippi previously served by the Company’s distribution centers located in Florence, Alabama and Laurel, Mississippi (collectively, the “Florence and Laurel Distribution Business”) and Piedmont transferred to United similar rights, assets and liabilities, and working capital of Piedmont’s in territory located in parts of northeastern Georgia (the “Northeastern Georgia Distribution Business”), pursuant to an asset exchange agreement between the Company, certain of its wholly-


owned subsidiaries and United dated September 29, 2017 (the “United AEA”) and an asset exchange agreement between Piedmont and United dated September 29, 2017 (the “Piedmont – United AEA”).

At closing, the Company and Piedmont paid United $3.4 million toward the closing of the United Exchange Transaction, representing an estimate of (i) the difference between the value of the portion of the United Distribution Business acquired by the Company and the value of the Florence and Laurel Distribution Business acquired by United, plus (ii) the difference between the value of the portion of the United Distribution Business acquired by Piedmont and the value of the Northeastern Georgia Distribution Business acquired by United, which such amounts remain subject to final resolution pursuant to the United AEA and the Piedmont – United AEA, respectively.

Expansion Facilities Discount and Legacy Facilities Credit Letter Agreement

In connection with the Company’s acquisitions of the Expansion Facilities and the impact on transaction value from certain adjustments made by The Coca‑Cola Company under the RMA (as discussed above in Item 1) to the authorized pricing on sales of certain beverages produced by the Company under trademarks of The Coca‑Cola Company at the Expansion Facilities and sold to The Coca‑Cola Company and certain U.S. Coca‑Cola bottlers, the Company and The Coca‑Cola Company also entered into a letter agreement on March 31, 2017 (as amended, the “Manufacturing Facilities Letter Agreement”), pursuant to which The Coca‑Cola Company agreed to provide the Company with an aggregate valuation adjustment discount of $33.1 million (the “Expansion Facilities Discount”) on the purchase prices for the Expansion Facilities.

The parties agreed to apply $22.9 million of the total Expansion Facilities Discount upon the Company’s acquisition of Expansion Facilities in March 2017 and agreed to apply an additional $5.4 million of the total Expansion Facilities Discount upon the Company’s acquisition of an Expansion Facility in April 2017. The parties agreed to apply the remaining $4.8 million of the total Expansion Facilities Discount upon the Company’s acquisition of two additional Expansion Facilities as part of the CCR Exchange Transaction, after which time no amounts remain outstanding under the Manufacturing Facilities Letter Agreement.

The Manufacturing Facilities Letter Agreement also establishes a mechanism to compensate the Company with a payment or credit for the net economic impact to the manufacturing facilities the Company served prior to the System Transformation (the “Legacy Facilities”) of the changes made by The Coca‑Cola Company to the authorized pricing under the RMA on sales of certain Coca‑Cola products produced by the Company at the Legacy Facilities and sold to The Coca‑Cola Company and certain U.S. Coca‑Cola bottlers versus the Company’s historical returns for products produced at the Legacy Facilities prior to the conversion on March 31, 2017 of the Company’s then-existing manufacturing agreements with The Coca‑Cola Company to the RMA (the “Legacy Facilities Credit”).

The Company and The Coca‑Cola Company agreed that the amount of the Legacy Facilities Credit to be paid to the Company by The Coca‑Cola Company was $43.0 million, pursuant to a letter agreement between the Company and The Coca‑Cola Company dated December 26, 2017. The Coca‑Cola Company paid the Legacy Facilities Credit, in the amount of $43.0 million, to the Company in December 2017.

The Company recognized $12.4 million of the Legacy Facilities Credit during 2017, representing the portion of the credit applicable to the Mobile, Alabama facility which the Company transferred to CCR as part of the CCR Exchange Transaction. The $12.4 million portion of the Legacy Facilities Credit related to the Mobile, Alabama facility was recorded to gain (loss) on exchange transactions in the Company’s consolidated financial statements. The remaining $30.6 million of the Legacy Facilities Credit was recorded as a deferred liability and will be amortized as a reduction to cost of sales over a period of 40 years.

Gain on Exchange Transactions

Upon closing the CCR Exchange Transaction and the United Exchange Transaction,compute the fair value of net assets acquired exceeded the carrying valueliability. Income tax expense for 2022 was $144.9 million, compared to $65.6 million in 2021. The increase in income tax expense was the result of net assets exchanged, which resultedhigher pre-tax income.


Cash flows provided by operations in 2022 were $554.5 million, compared to $521.8 million in 2021. Cash flows from operations were impacted by our strong operating performance and the timing of certain working capital payments and receipts during the current year. During 2022, we invested $298.6 million in capital expenditures as we continue to optimize our supply chain and invest for future growth. The Company reduced outstanding indebtedness by $125.0 million during the year.

Areas of Emphasis

Key priorities for the Company include commercial execution, revenue management, supply chain optimization and cash flow generation.

Commercial Execution: Our success is dependent on our ability to execute our commercial strategy within our customers’ stores. Our ability to obtain shelf space within stores and remain in-stock across our portfolio of brands and packages in a gainprofitable manner will have a significant impact on our results. We are focused on execution at every step in our supply chain, including raw material and finished product procurement, manufacturing conversion, transportation, warehousing and distribution, to ensure in-store execution can occur. We continue to invest in tools and technology to enable our teammates to operate more effectively and efficiently with our customers and drive long-term value in our business.

22

Revenue Management: Our revenue management strategy focuses on pricing our brands and packages optimally within product categories and channels, creating effective working relationships with our customers and making disciplined fact-based decisions. Pricing decisions are made considering a variety of $0.5 million recordedfactors, including brand strength, competitive environment, input costs, the roles certain brands play in our product portfolio and other market conditions.

Supply Chain Optimization: We are continually focused on optimizing our supply chain, which includes identifying nearby warehousing and distribution operations that can be consolidated into new facilities to gain (loss) on exchange transactionsincrease capacity, expand production capabilities, reduce overall production costs and add automation to allow the Company to better serve its customers and consumers. The Company undertook significant capital expenditures to optimize our supply chain and to invest for future growth during 2022, and expects to continue to make significant investments during 2023.

Cash Flow Generation: We have several initiatives in place to optimize cash flow, improve profitability and prudently manage capital expenditures. We believe strengthening our balance sheet gives us the flexibility to make optimal capital allocation decisions for long-term value creation.

Results of Operations

The Company’s results of operations for 2022 and 2021 are highlighted in the Company’s consolidated financial statements. This amount remains subjecttable below and discussed in the following paragraphs.

 Fiscal Year 
(in thousands)20222021Change
Net sales$6,200,957 $5,562,714 $638,243 
Cost of sales3,923,003 3,608,527 314,476 
Gross profit2,277,954 1,954,187 323,767 
Selling, delivery and administrative expenses1,636,907 1,515,016 121,891 
Income from operations641,047 439,171 201,876 
Interest expense, net24,792 33,449 (8,657)
Other expense, net41,168 150,573 (109,405)
Income before taxes575,087 255,149 319,938 
Income tax expense144,929 65,569 79,360 
Net income430,158 189,580 240,578 
Other comprehensive income, net of tax15,626 18,590 (2,964)
Comprehensive income$445,784 $208,170 $237,614 

Net Sales

Net sales increased $638.2 million, or 11.5%, to final resolution pursuant$6.20 billion in 2022, as compared to $5.56 billion in 2021. The largest driver of the CCR AEA,increase in net sales was higher average bottle/can sales price per unit charged to retail customers, which led to approximately $610 million in additional net sales. Throughout 2022, the United AEA and the Piedmont – United AEA.

The $0.5 million gain on the CCR Exchange Transaction and the United Exchange Transaction,Company executed price increases across our portfolio, which, combined with the $12.4 million portion of the Legacy Facilities Credit relatedsteady overall volume, led to the Mobile, Alabama facility, resultedsignificant growth in a total gain on exchange transactions of $12.9 million in 2017.


As of December 31, 2017, the System Transformation Transactions completed and their respective net cash purchase prices were as follows:

Expansion Territories and Expansion Facilities Acquired

 

Acquisition / Exchange Date

 

Net Cash

Purchase Price

(In Millions)

Johnson City and Morristown, Tennessee

 

May 23, 2014

 

$

12.2

 

 

Knoxville, Tennessee

 

October 24, 2014

 

 

30.9

 

 

Cleveland and Cookeville, Tennessee

 

January 30, 2015

 

 

13.2

 

 

Louisville, Kentucky and Evansville, Indiana

 

February 27, 2015

 

 

18.0

 

 

Paducah and Pikeville, Kentucky

 

May 1, 2015

 

 

7.0

 

 

Lexington, Kentucky (in exchange for Jackson, Tennessee)

 

May 1, 2015

 

 

15.3

 

 

Norfolk, Fredericksburg and Staunton, Virginia and Elizabeth City, North Carolina

 

October 30, 2015

 

 

26.7

 

 

Annapolis, Maryland Make-Ready Center

 

October 30, 2015

 

 

5.4

 

 

Easton and Salisbury, Maryland, Richmond and Yorktown, Virginia and Sandston, Virginia Regional Manufacturing Facility

 

January 29, 2016

 

 

75.9

 

(1)

Alexandria, Virginia and Capitol Heights and La Plata, Maryland

 

April 1, 2016

 

 

34.8

 

(1)

Baltimore, Hagerstown and Cumberland, Maryland and Silver Spring and Baltimore, Maryland Regional Manufacturing Facilities

 

April 29, 2016

 

 

68.5

 

(1)

Cincinnati, Dayton, Lima and Portsmouth, Ohio and Louisa, Kentucky and Cincinnati, Ohio Regional Manufacturing Facility

 

October 28, 2016

 

 

99.7

 

 

Anderson, Fort Wayne, Lafayette, South Bend and Terre Haute, Indiana

 

January 27, 2017

 

 

32.1

 

 

Indianapolis and Bloomington, Indiana and Columbus and Mansfield, Ohio and Indianapolis and Portland, Indiana Regional Manufacturing Facilities

 

March 31, 2017

 

 

104.6

 

 

Akron, Elyria, Toledo, Willoughby and Youngstown, Ohio and Twinsburg, Ohio Regional Manufacturing Facility

 

April 28, 2017

 

 

87.9

 

(2)

Little Rock and West Memphis, Arkansas and Memphis, Tennessee and West Memphis, Arkansas Regional Manufacturing Facilities (in exchange for the Deep South and Somerset Exchange Business)

 

October 2, 2017

 

 

15.9

 

(2)

Memphis, Tennessee

 

October 2, 2017

 

 

39.6

 

(2)

Bluffton and Spartanburg, South Carolina (in exchange for the Company’s Florence and Laurel Distribution Business and Piedmont’s Northeastern Georgia Distribution Business)

 

October 2, 2017

 

 

3.4

 

(2)

(1) Cash purchase price amounts include final post-closing adjustments that were made beyond one year from the applicable transaction closing date and were therefore adjusted through the consolidated statement of operations and not reflected in the acquisitions’ opening balance sheets.

(2) Cash purchase price amounts are subject to a final post-closing adjustment and, as a result, may either increase or decrease.

The financial results of the Expansion Territories and the Expansion Facilities have been included in the Company’s consolidated financial statements from their respective acquisition or exchange dates. These Expansion Territories and Expansion Facilities contributed the following amounts to the Company’s consolidated statement of operations:

 

 

Fiscal Year

 

(in thousands)

 

2017(1)

 

 

2016(2)

 

Net sales

 

$

1,751,897

 

 

$

1,061,769

 

Income from operations

 

 

29,684

 

 

 

24,280

 

(1)

Includes the results of the Expansion Territories and the Expansion Facilities acquired in the System Transformation during 2017 and 2016.

(2)

Includes the results of the Expansion Territories and the Expansion Facilities acquired in the System Transformation during 2016 and 2015.


Net Sales by Product Category

The Company’s net sales in the last three fiscal yearsof both Sparkling and Still beverages.


Net sales by product category were as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Bottle/can sales:

 

 

 

 

 

 

 

 

 

 

 

 

Sparkling beverages (carbonated)

 

$

2,285,621

 

 

$

1,764,558

 

 

$

1,323,712

 

Still beverages (noncarbonated, including energy products)

 

 

1,325,969

 

 

 

892,125

 

 

 

577,872

 

Total bottle/can sales

 

 

3,611,590

 

 

 

2,656,683

 

 

 

1,901,584

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other sales:

 

 

 

 

 

 

 

 

 

 

 

 

Sales to other Coca-Cola bottlers

 

 

383,065

 

 

 

238,182

 

 

 

178,777

 

Post-mix and other

 

 

329,013

 

 

 

261,563

 

 

 

226,097

 

Total other sales

 

 

712,078

 

 

 

499,745

 

 

 

404,874

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

4,323,668

 

 

$

3,156,428

 

 

$

2,306,458

 


Areas of Emphasis

Key priorities for the Company include integration of the Expansion Territories and the Expansion Facilities, revenue management, product innovation and beverage portfolio expansion, distribution cost management and productivity.

Revenue Management:  Revenue management requires a strategy that reflects consideration for pricing of brands and packages within product categories and channels, highly effective working relationships with customers and disciplined fact-based decision-making. Revenue management has been and continues to be a key driver which has a significant impact on the Company’s results of operations.

Product Innovation and Beverage Portfolio Expansion:  Innovation of both new brands and packages has been and is expected to continue to be important to the Company’s overall revenue. Recent product introductions from the Company and The Coca‑Cola Company include new flavor varieties within certain brands such as Sprite Cherry, POWERade Citrus Passionfruit, Monster Ultra Violet, Monster Juice Mango Loco, Peace Tea Georgia Peach, Peace Tea Razzleberry, Minute Maid 5% Berry Punch, Dunkin’ Donuts Mocha Iced Coffee, Dunkin’ Donuts French Vanilla Iced Coffee and Coke Zero Sugar. Recent packaging introductions include the 13.7-ounce bottle for Dunkin’ Donuts Iced Coffees, 0.5-liter energy drink cans and eight-packs of 16-ounce energy drinks.

Distribution Cost Management:  Distribution costs represent the costs of transporting finished goods from Company locations to customer outlets. Total distribution costs, including warehouse costs, were $550.9 million in 2017, $395.4 million in 2016 and $277.9 million in 2015. Management of these costs will continue to be a key area of emphasis for the Company.

The Company has three primary delivery systems: (i) bulk delivery for large supermarkets, mass merchandisers and club stores, (ii) advanced sale delivery for convenience stores, drug stores, small supermarkets and on-premises accounts and (iii) full service delivery for its full service vending customers.

Productivity:  A key driver in the Company’s S,D&A expense management relates to ongoing improvements in labor productivity and asset productivity.

Items Impacting Operations and Financial Condition

The comparison of operating results for 2015 to the operating results for 2017 and 2016 are affected by the impact of one additional selling week in 2015 due to the Company’s fiscal year ending on the Sunday closest to December 31. The estimated net sales, gross profit and S,D&A expenses for the additional selling week in 2015 of approximately $39 million, $14 million and $10 million, respectively, are included in reported results in 2015.


Fiscal Year
(in thousands)20222021% Change
Bottle/can sales:
Sparkling beverages$3,521,273 $3,020,887 16.6 %
Still beverages2,020,100 1,861,162 8.5 %
Total bottle/can sales5,541,373 4,882,049 13.5 %
Other sales:
Sales to other Coca‑Cola bottlers349,837 347,185 0.8 %
Post-mix sales and other309,747 333,480 (7.1)%
Total other sales659,584 680,665 (3.1)%
Total net sales$6,200,957 $5,562,714 11.5 %

The following items also affect the comparability of the financial results presented below:

2017


$1.75 billion in net sales and $29.7 million of income from operations related to Expansion Territories and Expansion Facilities acquired in 2017 and 2016;

23

$66.6 million estimated benefit to income taxes as a result of the Tax Cuts and Jobs Act (“Tax Act”), which reduced the federal corporate tax rate from 35% to 21% and changed deductibility of certain expenses;

$49.5 million of expenses related to acquiring and transitioning Expansion Territories and Expansion Facilities;

$12.4 million in income for the recognized portion of Legacy Facilities Credit related to the facility in Mobile, Alabama, which was transferred to CCR as part of the CCR Exchange Transaction;

$7.9 million of net amortization expense associated with the conversion of the Company's franchise rights to distribution rights for the distribution territories the Company served prior to the System Transformation (the “Legacy Territories”);

$7.0 million recorded in other expense for net working capital and other fair value adjustments related to System Transformation Transactions that were made beyond one year from the transaction closing date; and

$6.0 million recorded in other income as a result of an increase in the Company’s investment in Southeastern Container following CCR’s redistribution of a portion of its investment in Southeastern Container in December 2017.

2016

$1.06 billion in net sales and $24.3 million of income from operations related to Expansion Territories and Expansion Facilities acquired in 2016 and 2015;

$68.9 million in net sales and $11.5 million of income from operations related to distribution territories and the production facility divested by the Company in 2017 as part of the CCR Exchange Transaction and the United Exchange Transaction;

$32.3 million of expenses related to acquiring and transitioning Expansion Territories and Expansion Facilities;

$7.5 million gross profit on sales to other Coca‑Cola bottlers made prior to the adoption of a standardized pricing methodology in 2017;

$4.7 million pretax favorable mark-to-market adjustments related to our commodity hedging program; and

$4.0 million of additional expense related to increased charitable contributions.

2015

$278.7 million in net sales and $3.4 million of income from operations related to Expansion Territories and Expansion Facilities acquired in 2015;

$22.7 million gain on the sale of BYB Brands, Inc. (“BYB”);

$20.0 million of expenses related to acquiring and transitioning Expansion Territories;

$8.8 million gain on the exchange of certain Expansion Territories and related assets and liabilities; and

$3.6 million recorded in other expense as a result of an unfavorable fair value adjustment to the Company’s contingent consideration liability related to the Expansion Territories.


Results of Operations

2017 Compared to 2016

A summary of the Company’s financial results for 2017 and 2016:

 

 

Fiscal Year

 

 

 

 

 

 

 

 

 

(in thousands)

 

2017

 

 

2016

 

 

Change

 

 

% Change

 

Net sales

 

$

4,323,668

 

 

$

3,156,428

 

 

$

1,167,240

 

 

37.0%

 

Cost of sales

 

 

2,782,721

 

 

 

1,940,706

 

 

 

842,015

 

 

 

43.4

 

Gross profit

 

 

1,540,947

 

 

 

1,215,722

 

 

 

325,225

 

 

 

26.8

 

S,D&A expenses

 

 

1,444,768

 

 

 

1,087,863

 

 

 

356,905

 

 

 

32.8

 

Income from operations

 

 

96,179

 

 

 

127,859

 

 

 

(31,680

)

 

 

(24.8

)

Interest expense, net

 

 

41,869

 

 

 

36,325

 

 

 

5,544

 

 

 

15.3

 

Other income (expense), net

 

 

(4,197

)

 

 

1,870

 

 

 

(6,067

)

 

 

(324.4

)

Gain (loss) on exchange transactions

 

 

12,893

 

 

 

(692

)

 

 

13,585

 

 

 

(1,963.2

)

Income before taxes

 

 

63,006

 

 

 

92,712

 

 

 

(29,706

)

 

 

(32.0

)

Income tax expense (benefit)

 

 

(39,841

)

 

 

36,049

 

 

 

(75,890

)

 

 

(210.5

)

Net income

 

 

102,847

 

 

 

56,663

 

 

 

46,184

 

 

 

81.5

 

Less:  Net income attributable to noncontrolling interest

 

 

6,312

 

 

 

6,517

 

 

 

(205

)

 

 

(3.1

)

Net income attributable to Coca-Cola Bottling Co. Consolidated

 

$

96,535

 

 

$

50,146

 

 

$

46,389

 

 

92.5%

 

Net Sales

Net sales increased $1.16 billion, or 37.0%, to $4.32 billion in 2017, as compared to $3.16 billion in 2016. The increase in net sales was principally attributable to the following (in millions):

2017

 

 

Attributable to:

$

1,091.2

 

 

Net sales increase related to the Expansion Territories and Expansion Facilities acquired in the System Transformation during 2017 and 2016, net of divestiture of the Deep South and Somerset Exchange Business and the Florence and Laurel Distribution Business

 

32.8

 

 

1.6% increase in bottle/can sales volume to retail customers in the Legacy Territories and the Expansion Territories acquired in the System Transformation during 2015 and 2014

 

28.9

 

 

1.4% increase in bottle/can sales price per unit to retail customers in the Legacy Territories and the Expansion Territories acquired in the System Transformation during 2015 and 2014

 

14.3

 

 

Other

$

1,167.2

 

 

Total increase in net sales

The Company’s bottle/can sales to retail customers accounted for approximately 84% of the Company’s total net sales in both 2017 and 2016. Bottle/can net pricing is based on the invoice price charged to customers reduced by promotional allowances. Bottle/can net pricing per unit is impacted by the price charged per package, the volume generated in each package and the channels in which those packages are sold.

Product category sales volume in 2017 and 2016 as a percentage of total bottle/can sales volumephysical cases and the percentage change by product category were as follows:

 

 

Bottle/Can Sales Volume

 

 

Bottle/Can Sales

 

Product Category

 

2017

 

 

2016

 

 

Volume Increase

 

Sparkling beverages

 

 

69.3

%

 

 

71.2

%

 

 

27.8

%

Still beverages (including energy products)

 

 

30.7

%

 

 

28.8

%

 

 

40.8

%

Total bottle/can sales volume

 

 

100.0

%

 

 

100.0

%

 

 

31.6

%


Bottle/can sales volume

Fiscal Year
(in thousands)20222021% Change
Bottle/can sales volume:
Sparkling beverages255,514254,0280.6 %
Still beverages110,601112,008(1.3)%
Total bottle/can sales volume366,115366,036— %

As the Company introduces new products, it reassesses the category assigned to retail customers, excludingits products at the Expansion Territories and Expansion Facilities acquired in the System Transformation during 2017 and 2016, increased 1.6% in 2017, which represented a 0.2% increase in sparkling beverages and a 4.9% increase in still beverages as comparedSKU level, therefore categorization could differ from previously presented results to 2016.


The Company’s productsconform with current period categorization. Any differences are sold and distributed through various channels, which include selling directly to retail stores and other outlets such as food markets, institutional accounts and vending machine outlets. During 2017, approximately 65% of the Company’s bottle/can sales volume to retail customers was sold for future consumption, while the remaining bottle/can sales volume to retail customers was sold for immediate consumption. All the Company’s beverage sales were to customers in the United States. The Company recorded delivery fees to retail customers in net sales of $5.7 million in 2017 and $6.0 million in 2016. These fees are used to offset a portion of the Company’s delivery and handling costs.

not material.


The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers, as well as the percentage of the Company’s total net sales that such volume represents:

 

 

Fiscal Year

 

 

 

2017

 

 

2016

 

Approximate percent of the Company's total bottle/can sales volume

 

 

 

 

 

 

 

 

Wal-Mart Stores, Inc.

 

 

19

%

 

 

20

%

The Kroger Company

 

 

10

%

 

 

6

%

Food Lion, LLC

 

 

6

%

 

 

8

%

Total approximate percent of the Company's total bottle/can sales volume

 

 

35

%

 

 

34

%

 

 

 

 

 

 

 

 

 

Approximate percent of the Company's total net sales

 

 

 

 

 

 

 

 

Wal-Mart Stores, Inc.

 

 

13

%

 

 

14

%

The Kroger Company

 

 

7

%

 

 

5

%

Food Lion, LLC

 

 

4

%

 

 

5

%

Total approximate percent of the Company's total net sales

 

 

24

%

 

 

24

%


 Fiscal Year
20222021
Approximate percent of the Company’s total bottle/can sales volume:
Wal-Mart Stores, Inc.20 %20 %
The Kroger Company12 %13 %
Total approximate percent of the Company’s total bottle/can sales volume32 %33 %
Approximate percent of the Company’s total net sales:
Wal-Mart Stores, Inc.16 %14 %
The Kroger Company10 %9 %
Total approximate percent of the Company’s total net sales26 %23 %

Cost of Sales

Cost of sales includes the following: raw material costs, manufacturing labor, manufacturing overhead including depreciation expense, manufacturing warehousing costs, shipping and handling costs related to the movement of finished goods from manufacturing locations to sales distribution centers and the purchase of finished goods.


Inputs representing a substantial portion of the Company’s total cost of sales include: (i) sweeteners,purchases of finished products, (ii) packaging materials,raw material costs, including aluminum cans, plastic bottles, carbon dioxide and aluminum cans,sweetener, (iii) concentrate costs and (iii)(iv) manufacturing costs, including labor, overhead and warehouse costs. In addition, cost of sales includes shipping, handling and fuel costs related to the movement of finished products purchased from other vendors.

manufacturing plants to distribution centers, amortization expense of distribution rights, distribution fees of certain products and marketing credits from brand companies. Raw material costs represent approximately 20% of total cost of sales on an annual basis.


Cost of sales increased $842.0$314.5 million, or 43.4%8.7%, to $2.78$3.92 billion in 2017,2022, as compared to $1.94$3.61 billion in 2016.2021. The increase in cost of sales was principally attributabledriven by approximately $365 million in increased input costs, including aluminum, PET resin and transportation costs, largely due to the following (in millions):

impacts of continued inflation, as well as the shift in product mix to meet consumer preferences.

2017

 

 

Attributable to:

$

765.8

 

 

Cost of sales increase related to the Expansion Territories and Expansion Facilities acquired in the System Transformation during 2017 and 2016

 

46.4

 

 

Increase in purchases of finished goods and an increase in raw material costs and manufacturing costs

 

19.0

 

 

1.6% increase in bottle/can sales volume to retail customers in the Legacy Territories and the Expansion Territories acquired in the System Transformation during 2015 and 2014

 

10.8

 

 

Other

$

842.0

 

 

Total increase in cost of sales


The Company relies extensively on advertising and sales promotionpromotions in the marketing of its products. The Coca‑Cola Company and other beverage companies that supply concentrates, syrups and finished products to the Company make substantial marketing and advertising expenditures, including national advertising programs, to develop their brand identities and to promote sales in the Company’s territories. Certain of thethese marketing expenditures by The Coca‑Cola Company and other beverage companiesadvertising expenditures are made pursuant to annual arrangements. The Company also benefits from national advertising programs conducted by The Coca‑Cola Company and other beverage companies. Total marketing funding support from The Coca‑Cola Company and other beverage companies, which includes both direct payments to the Company and payments to customers for marketing programs, was $120.1$147.3 million in 2017,2022, as compared to $99.4$133.1 million in 2016.

The Company’s cost of sales may not be comparable to other peer companies, as some peer companies include all costs related to their distribution network in cost of sales. The Company includes a portion of these costs in S,D&A expenses, as described below.

2021.


S,D&A

Selling, Delivery and Administrative Expenses

S,D


SD&A expenses include the following: sales management labor costs, distribution costs resulting from salestransporting finished products from distribution centers to customer locations, sales distribution center warehouse costs,overhead including depreciation expense, related to sales centers,distribution center warehousing costs, delivery vehicles and cold drink equipment, point-of-sale expenses, advertising expenses, cold drink equipment repair costs, amortization of intangiblesintangible assets and administrative support labor and operating costs.

S,D


SD&A expenses increased by $356.9$121.9 million, or 32.8%8.0%, to $1.44$1.64 billion in 2017,2022, as compared to $1.09$1.52 billion in 2016. S,D2021. SD&A expenses as a percentage of net sales decreased to 33.4%26.4% in 20172022 from 34.5%27.2% in 2016. The2021. Of the increase in S,DSD&A expenses, approximately $75 million was driven by an increase in payroll expense due to certain investments in our teammates to reward them for their
24

contributions in achieving strong operating results and to remain competitive in the current labor environment. In addition, approximately $15 million of the increase in SD&A expenses was principally attributabledriven by an increase in commitments to various charities and donor-advised funds in light of the following (in millions):

Company’s financial performance. The remaining increase in SD&A expenses was primarily driven by broad inflationary increases across a number of SD&A categories as compared to 2021.

2017

 

 

Attributable to:

$

177.4

 

 

Increase in employee salaries including bonus and incentives due to additional personnel acquired in the System Transformation and normal salary increases

 

32.6

 

 

Increase in employee benefit costs primarily due to additional medical expense and increased 401(k) employer matching contributions for employees acquired in the System Transformation

 

24.0

 

 

Increase in depreciation and amortization of property, plant and equipment primarily due to depreciation for fleet and vending equipment acquired in the System Transformation

 

23.2

 

 

Increase in expenses related to the System Transformation, primarily professional fees related to due diligence

 

15.0

 

 

Increase in marketing expense primarily due to increased spending for promotional items and media and cold drink sponsorships

 

14.3

 

 

Increase in employer payroll taxes primarily due to payroll acquired in the System Transformation

 

9.1

 

 

Increase in vending and fountain parts expense acquired in the System Transformation

 

6.8

 

 

Increase in fuel costs related to the movement of finished goods from  distribution centers to customer locations primarily in Expansion Territories acquired in the System Transformation

 

6.8

 

 

Increase in property, vehicle and other taxes acquired in the System Transformation

 

6.5

 

 

Increase in software expenses primarily due to increased maintenance expense

 

5.8

 

 

Increase in property and casualty insurance expense primarily due to an increase in insurance premiums and insurance claims for Expansion Territories and Expansion Facilities acquired in the System Transformation

 

5.0

 

 

Increase in facilities non-rent expenses related to Expansion Facilities acquired in the System Transformation

 

4.5

 

 

Increase in rental expense due primarily to additional equipment and facilities rent expense acquired in the System Transformation

 

14.5

 

 

Other individually immaterial expense increases primarily related to the System Transformation

 

11.4

 

 

Other individually immaterial increases

$

356.9

 

 

Total increase in S,D&A expenses


Shipping and handling costs related to the movement of finished goods from manufacturing locations to sales distribution centers are included in cost of sales. Shipping and handling costs related to the movement of finished goods from sales distribution centers to customer locations, including warehouse costs, are included in S,DSD&A expenses and totaled $550.9were $756.9 million in 20172022 and $395.4$674.3 million in 2016.

2021.


Interest Expense, Net


Interest expense, net increased $5.6decreased $8.7 million, or 15.3%25.9%, to $41.9$24.8 million in 2017,2022, as compared to $36.3$33.4 million in 2016.2021. The increasedecrease was primarily a result of additional borrowingslower average debt balances, as well as an increase in interest income due to fund the System Transformation during 2017.

higher cash equivalent balances and increased yields.


Other Income (Expense),Expense, Net


Other expense, included $7.0net decreased $109.4 million forto $41.2 million in 2022, as compared to $150.6 million in 2021. The decrease in other expense, net working capital and other fair value adjustments related to System Transformation Transactions that were made beyond one year from the transaction closing date. As these adjustments were made beyond one year from the acquisition date, the Company recorded the adjustments through its consolidated statements of operations.

Other income included $6.0was driven by $114.0 million related to an increasethe change in the Company’s investment in Southeastern Container following CCR’s redistribution of a portion of its investment in Southeastern Container in December 2017.

Other income (expense), net also included a noncash charge of $3.2 million in 2017 and noncash income of $1.9 million in 2016, each as a result of fair value adjustments of the Company’s contingent consideration liability related to the Expansion Territories. The fair value adjustment to the acquisition related contingent consideration liability during 2017 was primarily driven by final settlement of


previously closed transactions and aliability. The decrease in the risk-free interest rate,other expense, net was partially offset by an increase of $4.6 million in the non-service cost component of net periodic benefit cost.


During 2023, the Company anticipates a benefit resulting from the Tax Act. The fair value adjustmentssignificant non-cash charge related to the acquisition related contingent consideration liability during 2016 was primarily driven by a changetermination of the primary Company-sponsored pension plan (the “Primary Plan”), which will be recorded in other expense, net in the projected future operating resultsconsolidated statement of operations. The charge will relate primarily to a reclassification of actuarial losses from accumulated other comprehensive loss. As of December 31, 2022, the Expansion Territories whichgross actuarial losses included in accumulated other comprehensive loss associated with the Primary Plan were subjectapproximately $117 million. See Note 16 to sub-bottling fees and changes in the risk-free interest rate.

consolidated financial statements for additional information related to the Company’s pension plans.


Each reporting period, the Company adjusts its acquisition related contingent consideration liability related to the Expansion Territoriesdistribution territories subject to acquisition related sub-bottling payments to fair value. The fair value is determined by discounting future expected acquisition related sub-bottling payments required under the CBA, (as discussed abovewhich extend through the life of the related distribution assets acquired in Item 1)each distribution territory, using the Company’s estimated weighted average cost of capital (“WACC”), which is impacted by many factors, including long-term interest rates; projectedrates and future operating results; and post-closing settlement of cash purchase prices for the Expansion Territories. These future expected sub-bottling payments extend through theflow projections. The life of the relatedthese distribution asset acquired in the System Transformation, whichassets is generally 40 years. The Company is required to pay the current portion of the acquisition related sub-bottling feepayments on a quarterly basis.

Gain (Loss) on Exchange Transactions

At closing,


The change in the fair value of net assets acquiredthe acquisition related contingent consideration liability in the CCR Exchange Transaction and the United Exchange Transaction exceeded the carrying value of net assets exchanged, which resulted in a gain of $0.5 million recorded to gain (loss) on exchange transactions in the Company’s consolidated financial statements. This amount remains subject to final resolution pursuant to the CCR AEA, the United AEA and the Piedmont – United AEA.

In December 2017, the Company also recognized a gain of $12.4 million, representing the portion of the aggregate $43.0 million Legacy Facilities Credit applicable to the Mobile, Alabama facility, which the Company transferred to CCR as part of the CCR Exchange Transaction. The Legacy Facilities Credit was provided to the Company by The Coca‑Cola Company in December 2017 to compensate for the net economic impact of changes made by The Coca‑Cola Company to the authorized pricing on sales of covered beverages produced at the Company’s Legacy Facilities prior to implementation of new pricing mechanisms included in the RMA.

Income Tax Expense (Benefit)

The Company had a $39.8 million income tax benefit in 2017,2022 as compared to income tax expense of $36.0 million in 2016. The Company’s effective tax rate, calculated by dividing income tax expense (benefit) by income before income taxes, was (63.2)% for 2017 and 38.9% for 2016. The Company’s effective tax rate, calculated by dividing income tax expense (benefit) by income before income taxes minus net income attributable to noncontrolling interest, was (70.3)% for 2017 and 41.8% for 2016.

The Tax Act had a substantial impact on the Company’s income tax benefit for 2017. The Company expects to incur additional benefits from the Tax Act in 2018, primarily due to the expensing of certain capital expenditures along with the lower corporate tax rate; however, the limitations placed on the deductibility of meals, entertainment expenses, certain executive compensation and the repeal of the domestic production activities deduction will partially offset some of the Company’s benefits from the Tax Act. See Note 18 to the consolidated financial statements for further detail.

Shortly after the Tax Act was enacted, the Securities and Exchange Commission issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) to address the application of GAAP and direct taxpayers to consider the impact of the Act as “provisional” when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for the change in tax law. In accordance with SAB 118, the Company has recognized the provisional tax impacts, outlined above, related to the re-measurement of its net deferred tax liability. The ultimate impact may differ from the provisional amounts, possibly materially, due to, among other things, the significant complexity of the Tax Act, anticipated additional regulatory guidance or related interpretations that may be issued by the Internal Revenue Service (the “IRS”), changes in accounting standards, legislative actions, future actions by states within the U.S. and changes in estimate, analysis, interpretations and assumptions the Company has made.

Noncontrolling Interest

The Company recorded net income attributable to noncontrolling interest of $6.3 million in 2017 and $6.5 million in 2016 related to the portion of Piedmont owned by The Coca‑Cola Company.

Other Comprehensive Income (Loss), Net of Tax

Other comprehensive loss, net of tax, was $1.3 million in 2017 and $10.5 million in 2016. The increase2021 was primarily a result of a $6.2 million adjustment on postretirement benefits related to the divestiture of the Deep South and Somerset Exchange Business and


the Florence and Laurel Distribution Business, as well as nominal actuarial losses on the Company’s pension and postretirement benefit plans as compared to 2016.

2016 Compared to 2015

A summary of the Company’s financial results for 2016 and 2015 follows:

 

 

Fiscal Year

 

 

 

 

 

 

 

 

 

(in thousands)

 

2016

 

 

2015

 

 

Change

 

 

% Change

 

Net sales

 

$

3,156,428

 

 

$

2,306,458

 

 

$

849,970

 

 

36.9%

 

Cost of sales

 

 

1,940,706

 

 

 

1,405,426

 

 

 

535,280

 

 

 

38.1

 

Gross profit

 

 

1,215,722

 

 

 

901,032

 

 

 

314,690

 

 

 

34.9

 

S,D&A expenses

 

 

1,087,863

 

 

 

802,888

 

 

 

284,975

 

 

 

35.5

 

Income from operations

 

 

127,859

 

 

 

98,144

 

 

 

29,715

 

 

 

30.3

 

Interest expense, net

 

 

36,325

 

 

 

28,915

 

 

 

7,410

 

 

 

25.6

 

Other income (expense), net

 

 

1,870

 

 

 

(3,576

)

 

 

5,446

 

 

 

(152.3

)

Gain (loss) on exchange transactions

 

 

(692

)

 

 

8,807

 

 

 

(9,499

)

 

 

(107.9

)

Gain on sale of business

 

 

-

 

 

 

22,651

 

 

 

(22,651

)

 

 

(100.0

)

Bargain purchase gain, net of tax of $1,265

 

 

-

 

 

 

2,011

 

 

 

(2,011

)

 

 

(100.0

)

Income before taxes

 

 

92,712

 

 

 

99,122

 

 

 

(6,410

)

 

 

(6.5

)

Income tax expense

 

 

36,049

 

 

 

34,078

 

 

 

1,971

 

 

 

5.8

 

Net income

 

 

56,663

 

 

 

65,044

 

 

 

(8,381

)

 

 

(12.9

)

Less:  Net income attributable to noncontrolling interest

 

 

6,517

 

 

 

6,042

 

 

 

475

 

 

 

7.9

 

Net income attributable to Coca-Cola Bottling Co. Consolidated

 

$

50,146

 

 

$

59,002

 

 

$

(8,856

)

 

(15.0)%

 

Net Sales

Net sales increased $850.0 million, or 36.9%, to $3.16 billion in 2016, as compared to $2.31 billion in 2015. Thedriven by an increase in net sales was principally attributablethe discount rate used to the following (in millions):

2016

 

 

Attributable to:

$

773.6

 

 

Net sales increase related to the Expansion Territories acquired in the System Transformation in 2016, partially offset by the 2015 comparable sales of Legacy Territories exchanged for Expansion Territories in 2015

 

54.4

 

 

3.3% increase in bottle/can sales volume to retail customers in the Legacy Territories, primarily due to an increase in still beverages

 

22.6

 

 

Increase in external transportation revenue

 

(21.8

)

 

Decrease in sales of the Company's own brand products, primarily due to the sale of BYB in the third quarter of 2015

 

15.3

 

 

0.9% increase in bottle/can sales price per unit to retail customers in the Company's Legacy Territories, primarily due to an increase in energy beverage volume, including Monster products, which have a higher sales price per unit, and an increase in all beverage categories sales price per unit except the water beverage category

 

5.9

 

 

Other

$

850.0

 

 

Total increase in net sales

The Company’s bottle/can sales to retail customers accounted for approximately 84% of the Company’s total net sales in 2016, as compared to approximately 82% in 2015. Product category sales volume in 2016 and 2015 as a percentage of total bottle/can sales volume and the percentage change by product category were as follows:

 

 

Bottle/Can Sales Volume

 

 

Bottle/Can Sales

 

Product Category

 

2016

 

 

2015

 

 

Volume Increase

 

Sparkling beverages

 

 

71.2

%

 

 

73.4

%

 

 

32.5

%

Still beverages (including energy products)

 

 

28.8

%

 

 

26.6

%

 

 

47.3

%

Total bottle/can sales volume

 

 

100.0

%

 

 

100.0

%

 

 

36.4

%

Bottle/can sales volume to retail customers, excluding Expansion Territories, increased 3.3% in 2016, as compared to 2015, which represented a 0.8% increase in sparkling beverages and a 10.3% increase in still beverages. The increase in still beverages was


primarily due to increases in energy beverages, which was primarily due to the Company expanding the territories in which it distributes Monster products.

During 2016, approximately 66% of the Company’s bottle/can sales volume to retail customers was sold for future consumption, while the remaining bottle/can sales volume to retail customers was sold for immediate consumption. All the Company’s beverage sales were to customers in the United States. The Company recorded delivery fees to retail customers in net sales of $6.0 million in 2016 and $6.3 million in 2015.

The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers,calculate fair value, as well as the percentage of the Company’s total net sales that such volume represents:

 

 

Fiscal Year

 

 

 

2016

 

 

2015

 

Approximate percent of the Company's total bottle/can sales volume

 

 

 

 

 

 

 

 

Wal-Mart Stores, Inc.

 

 

20

%

 

 

22

%

The Kroger Company

 

 

6

%

 

 

6

%

Food Lion, LLC

 

 

8

%

 

 

7

%

Total approximate percent of the Company's total bottle/can sales volume

 

 

34

%

 

 

35

%

 

 

 

 

 

 

 

 

 

Approximate percent of the Company's total net sales

 

 

 

 

 

 

 

 

Wal-Mart Stores, Inc.

 

 

14

%

 

 

15

%

The Kroger Company

 

 

5

%

 

 

5

%

Food Lion, LLC

 

 

5

%

 

 

5

%

Total approximate percent of the Company's total net sales

 

 

24

%

 

 

25

%

Cost of Sales

Cost of sales increased $535.3 million, or 38.1%, to $1.94 billion in 2016, as compared to $1.41 billion in 2015. The increase in cost of sales was principally attributable to the following (in millions):

2016

 

 

Attributable to:

$

493.9

 

 

Net sales increase related to the Expansion Territories acquired in the System Transformation in 2016, partially offset by the 2015 comparable sales of Legacy Territories exchanged for Expansion Territories in 2015

 

30.7

 

 

3.3% increase in bottle/can sales volume to retail customers in the Legacy Territories, primarily due to an increase in still beverages

 

19.3

 

 

Increase in raw material costs and increased purchases of finished products

 

18.0

 

 

Increase in external transportation cost of sales

 

(13.2

)

 

Increase in marketing funding support received for the Legacy Territories, primarily from The Coca-Cola Company

 

(11.6

)

 

Decrease in cost of sales of the Company’s own brand products, primarily due to the sale of BYB in the third quarter of 2015

 

(5.3

)

 

Increase in cost due to the Company's commodity hedging program

 

3.5

 

 

Other

$

535.3

 

 

Total increase in cost of sales

Total marketing funding support from The Coca‑Cola Company and other beverage companies was $99.4 million in 2016, as compared to $72.2 million in 2015.


S,D&A Expenses

S,D&A expenses increased by $285.0 million, or 35.5%, to $1.09 billion in 2016, as compared to $802.9 million in 2015. S,D&A expenses as a percentage of sales decreased to 34.5% in 2016 from 34.8% in 2015. The increase in S,D&A expenses was principally attributable to the following (in millions):

2016

 

 

Attributable to:

$

141.1

 

 

Increase in employee salaries including bonus and incentives due to additional personnel added in the System Transformation and normal salary increases

 

23.9

 

 

Increase in depreciation and amortization of property, plant and equipment primarily due to depreciation for fleet and vending equipment acquired in the System Transformation

 

18.1

 

 

Increase in employee benefit costs primarily due to additional medical expense and increased 401(k) employer matching contributions for employees acquired in the System Transformation

 

12.3

 

 

Increase in expenses related to the System Transformation, primarily professional fees related to due diligence

 

11.7

 

 

Increase in marketing expense primarily due to increased spending for promotional items and media and cold drink sponsorships

 

11.0

 

 

Increase in employer payroll taxes primarily due to payroll acquired in the System Transformation

 

7.2

 

 

Increase in property and casualty insurance expense primarily due to an increase in insurance premiums and insurance claims for Expansion Territories and Expansion Facilities acquired in the System Transformation

 

6.6

 

 

Increase in vending and fountain parts expense acquired in the System Transformation

 

6.1

 

 

Increase in software expenses primarily due to investment in technology for the System Transformation

 

5.7

 

 

Increase in property, vehicle and other taxes acquired in the System Transformation

 

4.6

 

 

Increase in rental expense due primarily to additional equipment and facilities rent expense acquired in the System Transformation

 

4.2

 

 

Increase in facilities non-rent expenses related to Expansion Facilities acquired in the System Transformation

 

4.0

 

 

Increase in charitable contributions made during the first quarter of 2016

 

19.9

 

 

Other individually immaterial expense increases primarily related to the System Transformation

 

8.6

 

 

Other individually immaterial increases

$

285.0

 

 

Total increase in S,D&A expenses

Shipping and handling costs related to the movement of finished goods from sales distribution centers to customer locations, including warehouse costs, totaled $395.4 million in 2016 and $277.9 million in 2015.

Interest Expense, Net

Interest expense, net, increased $7.4 million, or 25.6%, to $36.3 million in 2016, as compared to $28.9 million in 2015. The increase was primarily a result of additional borrowings to finance System Transformation Transactions.

Other Income (Expense), Net

Other income (expense), net, included noncash income of $1.9 million in 2016 and a noncash expense of $3.6 million in 2015 as a result of fair value adjustments of the Company’s contingent consideration liability related to the Expansion Territories. The adjustment was primarily a result of a change in the risk-free interest rates.

Gain (Loss) on Exchange Transaction

During 2015, the Company and CCR completed a like-kind exchange transaction where CCR agreed to exchange certain assetsprojections of CCR relating to the marketing, promotion, distribution and sale of Coca-Cola and other beverage productsfuture cash flows in the territory served by CCR’s facilities and equipment located in Lexington, Kentucky in exchange for certain assets of the Company relatingdistribution territories subject to the marketing, promotion, distribution and sale of Coca-Cola and other beverage products in the territory served by the Company’s facilities and equipment located in Jackson, Tennessee. The fair value in 2015 of the Lexington net assets acquired totaled $36.8 million and the Company paid cash of approximately $10.5 million. The carrying value of the Jackson, Tennessee net assets was $17.5 million, resulting in a net gain of $8.8 million. The balances of net assets acquired and cash paid were subsequently adjusted in 2016 as a result of final post-closing adjustments.

acquisition related sub-bottling payments.


Gain on Sale of Business

During 2015, the Company sold BYB, then a wholly-owned subsidiary of the Company, to The Coca‑Cola Company. The Company received cash proceeds of $26.4 million. The net assets of BYB at closing totaled $3.7 million, which resulted in a gain of $22.7 million in 2015.

Bargain Purchase Gain, Net of Tax

In addition to the Expansion Territories acquired in the System Transformation, the Company also acquired a “make-ready center” in Annapolis, Maryland from CCR for approximately $5.3 million in 2015. The cash paid was subsequently adjusted in 2016 as a result of final post-closing adjustments. The fair value of the net assets acquired totaled $7.3 million, which resulted in a bargain purchase gain of approximately $2.0 million, net of tax of approximately $1.3 million, recorded in 2015.

Income Tax Expense


The Company’s effective income tax rate, calculated by dividing income tax expense by income before income taxes, was 38.9%25.2% for 20162022 and 34.4%25.7% for 2015. 2021. The Company’s income tax expense increased $79.4 million, or 121.0%, to $144.9 million in 2022, as compared to $65.6 million in 2021. The increase in the effective tax rate was driven primarily by a decrease to the favorable manufacturing deduction, as a percentage of pre-tax income, less of a decrease to the valuation allowance in 2016 as compared to 2015, and an increase in non-deductible travel expense. The Company’s effective tax rate, calculated by dividing income tax expense bywas primarily attributable to higher income before income taxes minus net income attributableduring 2022 compared to noncontrolling interest, was 41.8% for 2016 and 36.6% for 2015.

Noncontrolling Interest

The Company recorded net income attributable to noncontrolling interest of $6.5 million in 2016 and $6.0 million in 2015 related to the portion of Piedmont owned by The Coca‑Cola Company.

2021.


Other Comprehensive Income, Net of Tax

Other


The Company had other comprehensive income, net of tax was $10.5of $15.6 million in 20162022 and $7.5$18.6 million in 2015.2021. The increasedecline was primarily a result of changes in actuarial lossesgains on the Company’s pension and postretirement benefit plans in 2022 as compared to 2021. As noted in the discussion of other expense, net above, the Company anticipates a significant non-cash charge during 2023 related to the termination of the Primary Plan, which will also impact other comprehensive income, net of tax. See Note 16 to the consolidated financial statements for additional information related to the Company’s pension plans.


Segment Operating Results


The Company evaluates segment reporting in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”)Codification Topic 280, Segment Reporting, each reporting period, including evaluating the reporting package reviewed by the Chief OperationOperating Decision Maker (“CODM”(the “CODM”). The Company has concluded the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer, as a group, represent the CODM.

Asset information is not provided to the CODM.

25


The Company believes fourthree operating segments exist. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated revenues,net sales and income from operations and assets.operations. The additional threetwo operating segments do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, and, therefore, have been combined into “All Other.”


The Company’s segment results are as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

4,243,007

 

 

$

3,060,937

 

 

$

2,245,836

 

All Other

 

 

301,801

 

 

 

234,732

 

 

 

160,191

 

Eliminations(1)

 

 

(221,140

)

 

 

(139,241

)

 

 

(99,569

)

Consolidated net sales

 

$

4,323,668

 

 

$

3,156,428

 

 

$

2,306,458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations:

 

 

 

 

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

84,775

 

 

$

123,230

 

 

$

92,921

 

All Other

 

 

11,404

 

 

 

4,629

 

 

 

5,223

 

Consolidated income from operations

 

$

96,179

 

 

$

127,859

 

 

$

98,144

 



(1)

The entire net sales elimination for each period presented represents net sales from the All Other segment to the Nonalcoholic Beverages segment. Sales between these segments are recognized at either fair market value or cost depending on the nature of the transaction.

 Fiscal Year
(in thousands)20222021
Net sales:
Nonalcoholic Beverages$6,081,357 $5,432,669 
All Other399,359 366,855 
Eliminations(1)
(279,759)(236,810)
Consolidated net sales$6,200,957 $5,562,714 
Income from operations:
Nonalcoholic Beverages$639,136 $456,713 
All Other1,911 (17,542)
Consolidated income from operations$641,047 $439,171 

Comparable


(1)The entire net sales elimination represents net sales from the All Other segment to the Nonalcoholic Beverages segment. Sales between these segments are recognized at either fair market value or cost depending on the nature of the transaction.

Adjusted Results

(Non-GAAP)


The Company reports its financial results in accordance with U.S.accounting principles generally accepted accounting principlesin the United States (“GAAP”). However, management believes that certain non-GAAP financial measures provide users of the financial statements with additional, meaningful financial information that should be considered when assessing the Company’s ongoing performance. Further, given the signing of the Tax Act in December 2017 and the transformation of the Company’s business through System Transformation Transactions with The Coca‑Cola Company, the Company believes these non-GAAP financial measures allow users to better appreciate the impact of these transactions on the Company’s performance. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP. The Company’s non-GAAP financial information does not represent a comprehensive basis of accounting.


The following tables reconcile reported GAAP results (GAAP) to comparableadjusted results (non-GAAP) for 2017 and 2016:

:

 

 

2017

 

(in thousands, except per share data)

 

Net

sales

 

 

Income from

operations

 

 

Income

before taxes

 

 

Net

income

 

 

Basic net

income per share

 

Reported results (GAAP)

 

$

4,323,668

 

 

$

96,179

 

 

$

63,006

 

 

$

96,535

 

 

$

10.35

 

Acquisitions results of operations

A

 

(1,751,897

)

 

 

(29,684

)

 

 

(29,684

)

 

 

(16,215

)

 

 

(1.74

)

System Transformation Transactions settlements

B

 

-

 

 

 

-

 

 

 

6,996

 

 

 

3,566

 

 

 

0.38

 

System Transformation Transactions expenses

C

 

-

 

 

 

49,545

 

 

 

49,545

 

 

 

25,256

 

 

 

2.70

 

Gain on exchange transactions

D

 

-

 

 

 

-

 

 

 

(529

)

 

 

(228

)

 

 

(0.02

)

Portion of Legacy Facilities Credit related to Mobile, Alabama facility

E

 

-

 

 

 

-

 

 

 

(12,364

)

 

 

(5,329

)

 

 

(0.57

)

Gain on acquisition of Southeastern Container preferred shares in CCR redistribution

F

 

-

 

 

 

-

 

 

 

(6,012

)

 

 

(2,591

)

 

 

(0.28

)

Fair value adjustment of acquisition related contingent consideration

G

 

-

 

 

 

-

 

 

 

3,226

 

 

 

1,644

 

 

 

0.18

 

Amortization of converted distribution rights

H

 

-

 

 

 

7,850

 

 

 

7,850

 

 

 

4,002

 

 

 

0.43

 

Fair value adjustments for commodity hedges

I

 

-

 

 

 

(3,130

)

 

 

(3,130

)

 

 

(1,710

)

 

 

(0.18

)

Tax Act estimated impact

J

 

-

 

 

 

-

 

 

 

-

 

 

 

(66,595

)

 

 

(7.14

)

Total reconciling items

 

 

(1,751,897

)

 

 

24,581

 

 

 

15,898

 

 

 

(58,199

)

 

 

(6.24

)

Comparable results (non-GAAP)

 

$

2,571,771

 

 

$

120,760

 

 

$

78,904

 

 

$

38,336

 

 

$

4.11

 


 

 

2016

 

(in thousands, except per share data)

 

Net

sales

 

 

Income from

operations

 

 

Income

before taxes

 

 

Net

income

 

 

Basic net

income per share

 

Reported results (GAAP)

 

$

3,156,428

 

 

$

127,859

 

 

$

92,712

 

 

$

56,663

 

 

$

5.39

 

Acquisitions results of operations

A

 

(592,330

)

 

 

(22,373

)

 

 

(22,373

)

 

 

(13,760

)

 

 

(1.48

)

Divestitures results of operations

A

 

(68,929

)

 

 

(11,538

)

 

 

(11,538

)

 

 

(7,096

)

 

 

(0.76

)

System Transformation Transactions expenses

C

 

-

 

 

 

32,274

 

 

 

32,274

 

 

 

19,849

 

 

 

2.14

 

Loss on exchange transactions

K

 

-

 

 

 

-

 

 

 

692

 

 

 

426

 

 

 

0.05

 

Fair value adjustment of acquisition related contingent consideration

G

 

-

 

 

 

-

 

 

 

(1,910

)

 

 

(1,175

)

 

 

(0.14

)

Fair value adjustments for commodity hedges

I

 

-

 

 

 

(4,728

)

 

 

(4,728

)

 

 

(2,909

)

 

 

(0.32

)

Impact of changes in product supply governance

L

 

-

 

 

 

(7,523

)

 

 

(7,523

)

 

 

(4,627

)

 

 

(0.50

)

Special charitable contribution

M

 

-

 

 

 

4,000

 

 

 

4,000

 

 

 

2,460

 

 

 

0.26

 

Total reconciling items

 

 

(661,259

)

 

 

(9,888

)

 

 

(11,106

)

 

 

(6,832

)

 

 

(0.75

)

Comparable results (non-GAAP)

 

$

2,495,169

 

 

$

117,971

 

 

$

81,606

 

 

$

49,831

 

 

$

4.64

 

Fiscal Year 2022
(in thousands, except per share data)Gross
profit		SD&A
expenses		Income from
operations		Income before
taxes		Net
income		Basic net income
per share
Reported results (GAAP)$2,277,954 $1,636,907 $641,047 $575,087 $430,158 $45.88 
Fair value adjustment of acquisition related contingent consideration(1)
— — — 32,301 24,306 2.59 
Fair value adjustments for commodity derivative instruments(2)
3,333 427 2,906 2,906 2,187 0.23 
Supply chain optimization(3)
533 (73)606 606 456 0.05 
Total reconciling items3,866 354 3,512 35,813 26,949 2.87 
Adjusted results (non-GAAP)$2,281,820 $1,637,261 $644,559 $610,900 $457,107 $48.75 


Adjusted percentage change versus 202116.5 %8.0 %45.7 %

26

Fiscal Year 2021
(in thousands, except per share data)Gross
profit		SD&A
expenses		Income from
operations		Income before
taxes		Net
income		Basic net income
per share
Reported results (GAAP)$1,954,187 $1,515,016 $439,171 $255,149 $189,580 $20.23 
Fair value adjustment of acquisition related contingent consideration(1)
— — — 146,308 109,731 11.70 
Fair value adjustments for commodity derivative instruments(2)
(3,469)1,772 (5,241)(5,241)(3,931)(0.42)
Supply chain optimization(3)
7,542 (947)8,489 8,489 6,367 0.68 
Total reconciling items4,073 825 3,248 149,556 112,167 11.96 
Adjusted results (non-GAAP)$1,958,260 $1,515,841 $442,419 $404,705 $301,747 $32.19 

Following is an explanation of non-GAAP adjustments:

A.

Adjustment reflects the financial performance of the Expansion Territories and the Expansion Facilities acquired from CCR in the System Transformation in 2017 and 2016 from their respective acquisition or exchange dates and the fourth quarter of 2016 financial performance of the Expansion Territories and the Expansion Facility divested in the CCR Exchange Transaction and the United Exchange Transaction in October 2017.


B.

Adjustment includes a charge within other expense for net working capital and other fair value adjustments related to the Company’s acquisition of Expansion Territories as part of the System Transformation that were made beyond one year from the acquisition date.

(1)This non-cash, fair value adjustment of acquisition related contingent consideration fluctuates based on factors such as long-term interest rates and future cash flow projections of the distribution territories subject to acquisition related sub-bottling payments.

C.

Adjustment reflects expenses related to the System Transformation, which primarily include professional fees and expenses related to due diligence, and information technologies system conversions.


D.

Gain recorded upon closing of the CCR Exchange Transaction and the United Exchange Transaction for the excess fair value of net assets acquired over the carrying value of net assets acquired.

(2)The Company enters into commodity derivative instruments from time to time to hedge some or all of its projected purchases of aluminum, PET resin, diesel fuel and unleaded gasoline in order to mitigate commodity price risk. The Company accounts for its commodity derivative instruments on a mark-to-market basis.

E.

Recognized portion of Legacy Facilities Credit related to a facility in Mobile, Alabama, which was transferred to CCR as part of the CCR Exchange Transaction.


F.

In December 2017, CCR redistributed a portion of its investment in Southeastern Container, which resulted in a $6.0 million increase in the Company’s investment in Southeastern Container.

(3)Adjustment reflects expenses within the Nonalcoholic Beverages segment as the Company continues to optimize efficiency opportunities across its business.

G.

This non-cash, fair value adjustment of acquisition related contingent consideration fluctuates based on factors such as long-term interest rates, projected future results, and final settlements of acquired territory values.


H.

The Company and The Coca‑Cola Company entered into a comprehensive beverage agreement on March 31, 2017 (as amended, the "CBA"). Concurrent with entering into the CBA, the Company converted its franchise rights for the Legacy Territories to distribution rights, to be amortized over an estimated useful life of 40 years. Adjustment reflects the net amortization expense associated with the conversion of the Company's franchise rights.

I.

The Company enters into derivative instruments from time to time to hedge some or all of its projected purchases of aluminum, PET resin, diesel fuel and unleaded gasoline in order to mitigate commodity risk. The Company accounts for commodity hedges on a mark-to-market basis.

J.

The Tax Act, which reduced the federal corporate tax rate from 35% to 21% and changed the deductibility of certain expenses, had an estimated impact of $66.6 million in 2017, primarily as a result of the Company revaluing its net deferred tax liabilities. The recorded impact of the Tax Act is estimated and any final amount may differ, possibly materially, due to changes in estimates, interpretation and assumptions, changes in IRS interpretations, issuance of new guidance, legislative actions, changes in accounting standards or related interpretations in response to the Tax Act and future actions by states within the U.S.

K.

Adjustment reflects a post-closing adjustment completed in the second quarter of 2016 relating to an asset exchange transaction the Company completed in 2015 for its Lexington, Kentucky territory.

L.

Adjustment reflects the gross profit on sales to other Coca‑Cola bottlers prior to the adoption of the Regional Manufacturing Agreement (as amended, the “RMA”) on March 31, 2017. Under the terms of the RMA, The Coca‑Cola Company implemented a standardized pricing methodology, which reduced the gross profit on the Company’s net sales to other Coca‑Cola bottlers. To compensate the Company for its reduction of gross profit under the RMA, The Coca‑Cola Company agreed to provide the Company an aggregate valuation adjustment through a payment or credit.

M.

A special charitable contribution was made during the first quarter of 2016.

Financial Condition


Total assets increased $623.5$264.0 million to $3.07$3.71 billion on December 31, 2017,2022, as compared to $2.45$3.45 billion on January 1, 2017. The increase in total assets is primarily attributable to the System Transformation, contributing to a net increase in total assets of $446.7 million from January 1, 2017.


December 31, 2021. Net working capital, defined as current assets less current liabilities, was $155.1$340.6 million on December 31, 2017,2022, which was an increase of $19.2$98.8 million from January 1, 2017.

December 31, 2021.


Significant changes in net working capital on December 31, 20172022 from January 1, 2017December 31, 2021 were as follows:


•An increase in cash and cash equivalents of $55.3 million primarily as a result of our strong operating performance.

•An increase in accounts receivable, trade of $124.4$59.8 million, driven primarily as a resultby increased net sales and the timing of accounts receivable from the System Transformation Transactions which closed during 2017 (the “2017 System Transformation Transactions”).

cash receipts.

•An increase in inventories of $40.1$44.7 million, driven primarily as a result of inventories from the 2017 System Transformation Transactions.

by higher inventory levels and increased input costs due to inflation.

An increase in prepaid and other current assets of $36.8 million primarily as a result of an increase in the current portion of income taxes and an increase in repair parts as a result of purchases from the 2017 System Transformation Transactions.

•An increase in accounts payable, trade of $80.2$32.4 million primarily as a result of purchases from the 2017 System Transformation Transactions.

An increase in accounts payabledue to The Coca‑Cola Company of $35.9 million primarily as a result of activity from the 2017 System Transformation Transactions and the timing of cash payments.

An increase•A decrease in other accrued liabilities of $51.6$28.5 million primarily due to the payment of the remaining deferred payroll taxes under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) during 2022, as well as a resultreduction in the current portion of the timing of payments and increased marketing, acquisition related contingent consideration liability and insurance as a result of purchases from the 2017 System Transformation Transactions.

liability.

Liquidity and Capital Resources

Capital Resources


The Company’s sources of capital include cash flows from operations, available credit facilities and the issuance of debt and equity securities. As of December 31, 2022, the Company had $197.6 million in cash and cash equivalents. The Company has obtained the majority of its long-term debt other than capital leases, from public markets, private placements and bank facilities. Management believes the Company has sufficient sources of capital available to refinance its maturing debt, finance its business plan, meet its working capital requirements and maintain an appropriate level of capital spending for at least the next 12 months from the issuance of thesethe consolidated financial statements.

27

The Company’s long-term debt as of December 31, 2022 and December 31, 2021 was as follows:

(in thousands)Maturity DateDecember 31, 2022December 31, 2021
Senior notes(1)
2/27/2023$— $125,000 
Senior bonds and unamortized discount on senior bonds(2)
11/25/2025349,974 349,966 
Revolving Credit Facility(3)
7/9/2026— — 
Senior notes10/10/2026100,000 100,000 
Senior notes3/21/2030150,000 150,000 
Debt issuance costs (1,157)(1,523)
Total long-term debt $598,817 $723,443 

(1)On September 13, 2022, the Company used cash on hand to repay the $125 million of senior notes with a stated maturity date of February 27, 2023. There was no penalty for the early repayment of the senior notes.
(2)The senior bonds due in 2025 were issued at 99.975% of par.
(3)The Company’s revolving credit facility has an aggregate maximum borrowing capacity of $500 million. The Company currently believes all banks participating in the revolving credit facility have the ability to and will meet any funding requests from the Company.

The indenture under which the Company’s senior bonds were issued does not include financial covenants but does limit the incurrence of certain liens and encumbrances as well as indebtedness by the Company’s subsidiaries in excess of certain amounts. The agreements under which the Company’s nonpublic debt was issued include two financial covenants: a consolidated cash flow/fixed charges ratio and a consolidated funded indebtedness/cash flow ratio, each as defined in the respective agreement. The Company was in compliance with these covenants as of December 31, 2022. These covenants have not restricted, and are not expected to restrict, the Company’s liquidity or capital resources.

All outstanding long-term debt has been issued by the Company and none has been issued by any of its subsidiaries. There are no guarantees of the Company’s long-term debt.

The Company’s credit ratings are reviewed periodically by certain nationally recognized rating agencies. Changes in the Company’s operating results or financial position can result in changes in the Company’s credit ratings. During 2022, Standard & Poor’s upgraded the Company’s credit rating from BBB with a positive outlook to BBB+ with a stable outlook. Lower credit ratings could result in higher borrowing costs for the Company or reduced access to capital markets, which could have a material adverse impact on the Company’s operating results or financial position.

As of December 31, 2022, the Company’s credit ratings and outlook for its long-term debt were as follows:

Credit RatingRating Outlook
Moody’sBaa1Stable
Standard & Poor’sBBB+Stable

The Company’s Board of Directors has declared, and the Company has paid, dividends on the Common Stock and the Class B Common Stock and each class of common stock has participated equally in all dividends each quarter for more than 25 years. The amount and frequency of future dividends will be determined by the Company’s Board of Directors in light of the earnings and financial condition of the Company at such time, and no assurance can be given that dividends will be declared or paid in the future.


On February 27, 2017,December 7, 2022, the Company sold $125 million aggregate principal amountannounced that its Board of senior unsecured notes due 2023Directors had declared an increase in the regular quarterly cash dividend from $0.25 per share to PGIM, Inc. (“Prudential”) and certain of its affiliates pursuant to$0.50 per share on the Note Purchase and Private Shelf Agreement dated June 10, 2016 between the Company, PrudentialCommon Stock and the other parties thereto (the “Private Shelf Facility”). These notes bear interest at 3.28%, payable semi-annually in arrears on February 27 and August 27 of each year, and will mature on February 27, 2023 unless earlier redeemed by the Company. The Company used the proceeds toward repayment of outstanding indebtedness under the Revolving Credit Facility (as defined below) and for other general corporate purposes. The Company may request that Prudential consider the purchase of additional senior unsecured notesClass B Common Stock of the Company, underwhich represented an increase of 100%, beginning with the Private Shelf Facility in an aggregate principal amountdividend payment on February 10, 2023 to stockholders of up to $175 million.

In October 2014,record as of the close of business on January 27, 2023. The Company’s Board of Directors also declared a special cash dividend of $3.00 per share on the Common Stock and the Class B Common Stock of the Company, entered into a five-year unsecured revolving credit facility (the “Revolving Credit Facility”), and in April 2015, the Company exercised an accordion feature which established a $450 million aggregate maximum borrowing capacityalso payable on the Revolving Credit Facility. The $450 million borrowing capacity includes upFebruary 10, 2023 to $50 million available for the issuancestockholders of letters of credit. Borrowings under the Revolving Credit Facility bear interest at a floating base rate or a floating Eurodollar rate plus an applicable margin, at the Company’s option, dependent on the Company’s credit ratings at the time of borrowing. At the Company’s current credit ratings, the Company must pay an annual facility fee of 0.15%record as of the lenders’ aggregate commitments under the Revolving Credit Facility. The Revolving Credit Facility has a scheduled maturity dateclose of October 16, 2019.

The Company currently believes all banks participating in the Revolving Credit Facility have the ability to and will meet any funding requests from the Company. The Company had outstanding borrowings on the Revolving Credit Facility of $207.0 million on December 31, 2017 and $152.0 millionbusiness on January 1, 2017.

In June 2016, the Company entered into a five-year term loan agreement for a senior unsecured term loan facility (the “Term Loan Facility”) in the aggregate principal amount of $300 million, maturing June 7, 2021.27, 2023. The Company may request additional term loans under the agreement, provided the Company’s aggregate borrowings under the Term Loan Facility do not exceed $500total dividends paid on February 10, 2023 were $32.8 million. Borrowings under the Term Loan Facility bear interest at a floating base rate or a floating Eurodollar rate plus an applicable margin, at the Company’s option, dependent on the Company’s credit ratings. The Company used $210 million of the proceeds from the Term Loan Facility to repay outstanding indebtedness under the Revolving Credit Facility. The Company then used the remaining proceeds, as well as borrowings under the Revolving Credit Facility, to repay the $164.8 million of Senior Notes that matured on June 15, 2016.



Under the Company’s Term Loan Facility, $15 million will become due in fiscal 2018. The Company intends to repay this amount through use of its Revolving Credit Facility, which is classified as long-term debt. As such, the $15 million has been classified as non-current as of December 31, 2017.

The Revolving Credit Facility, the Term Loan Facility and the Private Shelf Facility include two financial covenants: a consolidated cash flow/fixed charges ratio and a consolidated funded indebtedness/cash flow ratio, each as defined in the respective agreements. The Company was in compliance with these covenants as of December 31, 2017. These covenants do not currently, and the Company does not anticipate they will, restrict its liquidity or capital resources.

The indentures under which the Company’s public debt was issued do not include financial covenants but do limit the incurrence of certain liens and encumbrances as well as indebtedness by the Company’s subsidiaries in excess of certain amounts.

All outstanding long-term debt has been issued by the Company and none has been issued by any of its subsidiaries. There are no guarantees of the Company’s debt.

The Company’s credit ratings are reviewed periodically by the respective rating agencies. Changes in the Company’s operating results or financial position could result in changes in the Company’s credit ratings. Lower credit ratings could result in higher borrowing costs for the Company or reduced access to capital markets, which could have a material impact on the Company’s financial position or results of operations. There were no changes in these credit ratings during 2017 from the prior year and the credit ratings are currently stable. As of December 31, 2017, the Company’s credit ratings were as follows:

Long-Term Debt

Standard & Poor’s

BBB

Moody’s

Baa2

28

Net debt and capital lease obligations as of December 31, 2017 and January 1, 2017 were as follows:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Debt

 

$

1,088,018

 

 

$

907,254

 

Capital lease obligations

 

 

43,469

 

 

 

48,721

 

Total debt and capital lease obligations

 

 

1,131,487

 

 

 

955,975

 

Less: Cash and cash equivalents

 

 

16,902

 

 

 

21,850

 

Total net debt and capital lease obligations (1)

 

$

1,114,585

 

 

$

934,125

 


(1)

The non-GAAP measure “Total net debt and capital lease obligations” is used to provide investors with additional information which management believes is helpful in the evaluation of the Company’s capital structure and financial leverage. This non-GAAP financial information is not presented elsewhere in this Report and may not be comparable to the similarly titled measures used by other companies. Additionally, this information should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

The Company is subject to interest rate risk on its floating rate debt, including the Revolving Credit Facility and the Term Loan Facility. Assuming no changes in the Company’s financial structure, if market interest rates average 1% more over the next twelve months than the interest rates as of December 31, 2017, interest expense for the next twelve months would increase by approximately $5.1 million. Refer to Item 7A for additional information.


The Company’s only Level 3 asset or liability is the acquisition related contingent consideration liability incurred as a result of the System Transformation Transactions.liability. There were no transfers from Level 1 or Level 2.2 in any period presented. Fair value adjustments were noncash,non-cash and, therefore, did not impact the Company’s liquidity or capital resources. The followingFollowing is a summary of the Level 3 activity:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Opening balance - Level 3 liability

 

$

253,437

 

 

$

136,570

 

Increase due to System Transformation Transactions acquisitions(1)

 

 

128,880

 

 

 

133,857

 

Measurement period adjustment(2)

 

 

14,826

 

 

 

-

 

Payment of acquisition related contingent consideration

 

 

(16,738

)

 

 

(13,550

)

Reclassification to current payables

 

 

(2,340

)

 

 

(1,530

)

(Favorable)/unfavorable fair value adjustment

 

 

3,226

 

 

 

(1,910

)

Ending balance - Level 3 liability

 

$

381,291

 

 

$

253,437

 


(1) Increase due to System Transformation Transactions acquisitions includes an increase in the acquisition related contingent consideration of $62.5 million in 2017 from the opening balance sheets for the Expansion Territories and Expansion Facilities acquired in the System Transformation during 2017, as disclosed in the financial statements in the Company’s filed periodic reports. These adjustments are for post-closing adjustments made in accordance with the terms and conditions of the applicable asset purchase agreement or asset exchange agreement for each System Transformation Transaction.

(2) Measurement period adjustments relate to post-closing adjustments made in accordance with the terms and conditions of the applicable asset purchase agreement or asset exchange agreement for each System Transformation Transaction.


Fiscal Year
(in thousands)20222021
Beginning balance - Level 3 liability$542,105 $434,694 
Payments of acquisition related contingent consideration(36,515)(39,097)
Reclassification to current payables3,600 200 
Increase in fair value32,301 146,308 
Ending balance - Level 3 liability$541,491 $542,105 


Cash Sources and Uses

The primary sources of cash for the Company in 2017 were debt financings, operating activities and certain one-time payments received from The Coca‑Cola Company, including a $91.5 million Territory Conversion Fee (as defined below) and the $43.0 million Legacy Facilities Credit. The primary uses of cash in 2017 were acquisitions of Expansion Territories and Expansion Facilities and additions to property, plant and equipment. The primary sources of cash for the Company in 2016 were debt financings and operating activities. The primary uses of cash in 2016 were acquisitions of Expansion Territories and Expansion Facilities, debt repayments and additions to property, plant and equipment.


A summary of cash-based activity is as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Cash Sources:

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings under Revolving Credit Facility

 

$

448,000

 

 

$

410,000

 

 

$

334,000

 

Borrowings under Term Loan Facility

 

 

-

 

 

 

300,000

 

 

 

-

 

Adjusted cash provided by operating activities(1)

 

 

235,202

 

 

 

165,979

 

 

 

150,572

 

Proceeds from issuance of Senior Notes

 

 

125,000

 

 

 

-

 

 

 

349,913

 

Bottling conversion agreement fee(2)

 

 

91,450

 

 

 

-

 

 

 

-

 

Proceeds from Legacy Facilities Credit(3)

 

 

30,647

 

 

 

-

 

 

 

-

 

Proceeds from sale of business

 

 

-

 

 

 

-

 

 

 

26,360

 

Portion of Legacy Facilities Credit related to Mobile, Alabama facility(3)

 

 

12,364

 

 

 

-

 

 

 

-

 

Proceeds from cold drink equipment

 

 

8,400

 

 

 

-

 

 

 

-

 

Refund of income tax payments

 

 

-

 

 

 

7,111

 

 

 

-

 

Proceeds from the sale of property, plant and equipment

 

 

608

 

 

 

1,072

 

 

 

1,891

 

Other

 

 

78

 

 

 

25

 

 

 

-

 

Total cash sources

 

$

951,749

 

 

$

884,187

 

 

$

862,736

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Uses:

 

 

 

 

 

 

 

 

 

 

 

 

Payments on Revolving Credit Facility

 

$

393,000

 

 

$

258,000

 

 

$

405,000

 

Acquisition of Expansion Territories and Expansion Facilities, net of cash acquired

 

 

265,060

 

 

 

272,637

 

 

 

71,209

 

Additions to property, plant and equipment (exclusive of acquisitions)

 

 

176,601

 

 

 

172,586

 

 

 

163,887

 

Payments on Senior Notes

 

 

-

 

 

 

164,757

 

 

 

100,000

 

Income tax payments

 

 

30,965

 

 

 

-

 

 

 

31,782

 

Net cash paid for exchange transactions

 

 

19,393

 

 

 

-

 

 

 

10,498

 

Payment of acquisition related contingent consideration

 

 

16,738

 

 

 

13,550

 

 

 

4,039

 

Glacéau distribution agreement consideration

 

 

15,598

 

 

 

-

 

 

 

-

 

Pension plans contributions

 

 

11,600

 

 

 

11,120

 

 

 

10,500

 

Cash dividends paid

 

 

9,328

 

 

 

9,307

 

 

 

9,287

 

Principal payments on capital lease obligations

 

 

7,485

 

 

 

7,063

 

 

 

6,555

 

System Transformation Transactions settlements

 

 

6,996

 

 

 

-

 

 

 

-

 

Investment in CONA Services LLC

 

 

3,615

 

 

 

7,875

 

 

 

-

 

Other

 

 

318

 

 

 

940

 

 

 

3,576

 

Total cash uses

 

$

956,697

 

 

$

917,835

 

 

$

816,333

 

Increase (decrease) in cash

 

$

(4,948

)

 

$

(33,648

)

 

$

46,403

 

(1)

Adjusted cash provided by operating activities excludes amounts received with regard to the bottling agreement conversion fee, income tax payments, proceeds from the Legacy Facilities Credit, pension plan contributions and System Transformation Transactions settlements. This line item is a non-GAAP measure and is used to provide investors with additional information which management believes is helpful in the evaluation of the Company’s cash sources and uses. This non-GAAP financial information is not presented elsewhere in this Report and may not be comparable to the similarly titled measures used by other companies. Additionally, this information should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

(2)

This one-time fee of $91.5 million (the “Territory Conversion Fee”) was paid to the Company upon the conversion of the Company’s then-existing bottling agreements to the CBA in March 2017 pursuant to a territory conversion agreement entered into by the Company, The Coca‑Cola Company and CCR in September 2015 (as amended, the “Territory Conversion Agreement”). The Territory Conversion Fee was equivalent to 0.5 times the EBITDA the Company and its subsidiaries generated during the twelve-month period ended January 1, 2017 from sales in the territories it served prior to the System Transformation of certain



Fiscal Year
(in thousands)20222021
Cash Sources:
Net cash provided by operating activities(1)
$554,506 $521,755 
Proceeds from the sale of property, plant and equipment7,369 5,274 
Borrowings under term loan facility— 70,000 
Borrowings under revolving credit facility— 55,000 
Total cash sources$561,875 $652,029 
Cash Uses:
Additions to property, plant and equipment$298,611 $155,693 
Payments on term loan facility and senior notes125,000 287,500 
Payments of acquisition related contingent consideration36,515 39,097 
Acquisition of distribution rights30,649 8,993 
Cash dividends paid9,374 9,374 
Payments on financing lease obligations2,988 4,778 
Payments on revolving credit facility— 55,000 
Other3,404 4,073 
Total cash uses$506,541 $564,508 
Net increase in cash$55,334 $87,521 

beverages owned by or licensed to The Coca‑Cola Company or Monster Energy on which the Company and its subsidiaries pay, and The Coca‑Cola Company receives, a facilitation fee.


(3)

The Company received an aggregate $43.0 million Legacy Facilities Credit from The Coca‑Cola Company in December 2017 pursuant to the Manufacturing Facilities Letter Agreement. The Company recognized $12.4 million of the Legacy Facilities Credit during 2017, representing the portion of the credit applicable to the Mobile, Alabama facility which the Company transferred to CCR as part of the CCR Exchange Transaction. The remaining $30.6 million of the Legacy Facilities Credit was recorded as a deferred liability and will be amortized as a reduction to cost of sales over a period of 40 years.

Based on current projections, which include a number(1)Net cash provided by operating activities in 2022 included net income tax payments of assumptions such as$141.0 million, payment of deferred payroll taxes under the Company’s pre-tax earnings, the Company anticipates its cash payments for income taxes will be between $5CARES Act of $18.7 million and $15pension plan contributions of $26.0 million. Net cash provided by operating activities in 2021 included net income tax payments of $71.0 million, in fiscal 2018.

payment of deferred payroll taxes under the CARES Act of $18.7 million and pension plan contributions of $6.8 million.


Cash Flows From Operating Activities


During 2017,2022, cash provided by operating activities was $307.8$554.5 million, which was an increase of $145.8$32.8 million, as compared to 2016. 2021. The cash flows from operations were primarily the result of our strong operating performance, which the Company expects to sustain during the next 12 months. Cash flows from operations were also impacted by the timing of certain working capital payments and receipts. As a result of the Company’s strong cash flows from operations, the Company was able to invest in property, plant and equipment and to reduce our debt obligations, as further discussed in the following sections.

Cash Flows From Investing Activities

During 2016,2022, cash provided by operatingused in investing activities was $162.0$325.0 million, which was an increase of $53.7$163.0 million, as compared to 2015. The increase in 2017 was primarily driven by a $91.5 million, one-time Territory Conversion Fee paid to the Company by CCR pursuant to the Territory Conversion Agreement and $30.6 million of the total $43.0 million, one-time Legacy Facilities Credit paid to the Company by The Coca‑Cola Company pursuant to the Manufacturing Facilities Letter Agreement. The increase in both periods was also driven by cash generated from Expansion Territories.

Cash Flows From Investing Activities

During 2017, cash used in investing activities was $458.9 million, which was an increase of $6.9 million as compared to 2016.2021. The increase was driven primarily by $284.5 million in net cash used to finance the System Transformation Transactions and a $15.6 million payment to The Coca‑Cola Company in order to acquire rights to market, promote, distribute and sell glacéau products in certain geographic territories and for The Coca‑Cola Company to terminate a distribution arrangement with the prior distributor in these territories.

Additionsresult of additions to property, plant and equipment, which were $298.6 million during 20172022 and $155.7 million during 2021. CCBCC Operations, LLC, a wholly owned subsidiary of the Company, purchased the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina on March 17, 2022 for a purchase price of $60.0 million, which was

29

included in additions to property, plant and equipment. There were $176.6$44.8 million and $35.8 million of which $22.3 million wereadditions to property, plant and equipment accrued in accounts payable, trade. These additions were funded with cash flows from operationstrade as of December 31, 2022 and available credit facilities and exclude $230.3 millionDecember 31, 2021, respectively.

The increase in property, plant and equipment acquired inreflects the 2017 System Transformation TransactionsCompany’s focus on optimizing our supply chain and $8.4 million in proceeds from cold drink equipment. In addition, the Company recognized $12.4 million of the total $43.0 million, one-time Legacy Facilities Credit, pursuant to the Manufacturing Facilities Letter Agreement,investing for a facility in Mobile, Alabama, which the Company transferred to CCR as part of the CCR Exchange Transaction.

During 2016, cash used in investing activities was $452.0 million, which was an increase of $234.7 million, as compared to 2015. The increase was driven primarily by $272.6 million in cash used to acquire Expansion Territories and Expansion Facilities.

Additions to property, plant and equipment during 2016 were $172.6 million, of which $15.7 million were accrued in accounts payable, trade. The 2016 additions exclude $227.1 million in property, plant and equipment acquired in the System Transformation Transactions completed in 2016.

future growth. The Company expectsanticipates additions to property, plant and equipment in 20182023 to be in the range of $200$250 million to $230$300 million.


The increase in cash used in investing activities as compared to 2021 was also driven by the acquisition of additional distribution rights. On January 1, 2022, the Company acquired $30.1 million of additional BODYARMOR distribution rights.

Cash Flows From Financing Activities


During 2017,2022, cash provided byused in financing activities was $146.1$174.2 million, which was a decrease of $110.3$98.1 million, as compared to 2016.2021. The decrease was primarily driven by a net reduction in borrowings as the Company completed its multi-year System Transformation.

During 2016, cash provided by financing activities was $256.4 million, which was an increase of $100.9 million compared to 2015. The increase was driven primarily a result of providing funding forhigher net repayments of debt during 2021 as compared to 2022. The Company continues to prioritize the acquisitionsreduction of Expansion Territoriesdebt obligations and associated capital expenditures. During 2016, the Company entered into a term loan agreement for a senior unsecured term loan facility in the aggregate principal amountstrengthening of $300 million and had net borrowings on revolving credit facilities of $152.0 million. These increases in debt were partially offsetour balance sheet, as indicated by the early repayment of $164.8$125 million of Senior Notes due 2016. In addition,senior notes during 2016 the2022.


The Company had cash payments of $13.6 million for acquisition related contingent consideration.

consideration of $36.5 million during 2022 and $39.1 million during 2021. The Company anticipates that the amount the Companyit could pay annually under the acquisition related contingent consideration arrangements for the System Transformation Transactions is expecteddistribution territories subject to acquisition related sub-bottling payments will be in the range of $23$42 million to $47$74 million.



Off-Balance Sheet Arrangements

Material Contractual Obligations

The Company ishad a membernumber of contractual obligations and has equity ownership in, South Atlantic Canners, Inc., (“SAC”), a manufacturing cooperative comprised of Coca‑Cola bottlers, and has guaranteed $23.9 million of SAC’s debtcommercial obligations as of December 31, 2017. 2022 that are material to an assessment of the Company’s short- and long-term cash requirements.

The Company does not anticipate SAC will fail to fulfill its commitments relatedhas outstanding long-term debt of $600.0 million, none of which is contractually due in 2023. The remaining interest payments on the Company’s debt obligations are $96.6 million determined in reference to the debt.contractual terms of such debt, of which $23.2 million is due in 2023. All of the Company’s long-term debt instruments have fixed interest rates, and thus are not impacted by fluctuations in interest rates, with the exception of the Company’s revolving credit facility, which did not have any outstanding borrowings as of December 31, 2022.

The Company’s acquisition related contingent consideration liability relates to acquisition related sub-bottling payments required in certain distribution territories under the CBA and totaled $541.5 million as of December 31, 2022. The future expected acquisition related sub-bottling payments extend through the life of the related distribution assets acquired in each distribution territory, which is generally 40 years. The Company further believesexpects to pay $40.1 million of the acquisition related contingent consideration liability in 2023, which is classified as other accrued liabilities in the consolidated balance sheets.

The Company is obligated to purchase 17.5 million cases of finished product from SAC has sufficient assets, including production equipment, facilities and working capital, and the ability to adjust selling priceson an annual basis through June 2024. Based on information available as of its products to adequately mitigate the risk of material loss from the Company’s guarantee.

In the event SAC fails to fulfill its commitments under the related debt,December 31, 2022, the Company wouldestimates this purchase obligation to be responsible for payment$214.5 million, of which an estimated $143.0 million of purchases is expected to the lenders up to the leveloccur in 2023.


The Company has $168.6 million in total minimum operating lease obligations including interest, of the guarantee. which $31.7 million are due in 2023. The Company has $11.0 million in total minimum financing lease obligations including interest, of which $2.8 million are due in 2023.

As of December 31, 2017,2022, the Company’s maximum exposure under the guarantee, if SAC borrowed upCompany estimated obligations for its executive benefit plans to its aggregate borrowing capacity, would have been $31.3be $167.7 million, including the Company’s equity interests. See Note 17 to the consolidated financial statements for additional information.

Aggregate Contractual Obligations

The following table summarizes the Company’s contractual obligations and commercial commitments as of December 31, 2017:

 

 

Contractual Obligation Payments Due During

 

(in thousands)

 

Total

 

 

Fiscal 2018

 

 

Fiscal 2019

 

 

Fiscal 2020

 

 

Fiscal 2021

 

 

Fiscal 2022

 

 

Thereafter

 

Total debt, net of interest

 

$

1,092,000

 

 

$

15,000

 

 

$

347,000

 

 

$

37,500

 

 

$

217,500

 

 

$

-

 

 

$

475,000

 

Estimated interest on debt obligations (1)

 

 

170,124

 

 

 

38,365

 

 

 

30,942

 

 

 

23,926

 

 

 

20,016

 

 

 

17,400

 

 

 

39,475

 

Capital lease obligations, net of interest

 

 

43,469

 

 

 

8,221

 

 

 

8,617

 

 

 

9,364

 

 

 

5,431

 

 

 

2,129

 

 

 

9,707

 

Estimated interest capital lease obligations (1)

 

 

8,058

 

 

 

2,485

 

 

 

1,817

 

 

 

1,249

 

 

 

787

 

 

 

568

 

 

 

1,152

 

SAC purchase obligation (2)

 

 

607,360

 

 

 

93,440

 

 

 

93,440

 

 

 

93,440

 

 

 

93,440

 

 

 

93,440

 

 

 

140,160

 

Acquisition related contingent consideration

 

 

381,291

 

 

 

23,367

 

 

 

23,809

 

 

 

24,219

 

 

 

24,696

 

 

 

25,179

 

 

 

260,021

 

Other long-term liabilities (3)

 

 

278,861

 

 

 

20,900

 

 

 

15,249

 

 

 

13,380

 

 

 

11,257

 

 

 

10,741

 

 

 

207,334

 

Long-term contractual arrangements (4)

 

 

132,774

 

 

 

29,699

 

 

 

24,922

 

 

 

21,434

 

 

 

16,278

 

 

 

11,307

 

 

 

29,134

 

Operating leases

 

 

91,212

 

 

 

12,497

 

 

 

11,872

 

 

 

11,380

 

 

 

10,879

 

 

 

9,867

 

 

 

34,717

 

Postretirement obligations (5)

 

 

76,665

 

 

 

3,678

 

 

 

3,834

 

 

 

4,063

 

 

 

4,253

 

 

 

4,603

 

 

 

56,234

 

Purchase orders (6)

 

 

71,007

 

 

 

71,007

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total contractual obligations

 

$

2,952,821

 

 

$

318,659

 

 

$

561,502

 

 

$

239,955

 

 

$

404,537

 

 

$

175,234

 

 

$

1,252,934

 

(1)

Includes interest payments based on contractual terms.

(2)

Represents an estimate of the Company’s obligation to purchase 17.5 million cases of finished product on an annual basis through June 2024 from SAC.

(3)

Includes obligations under executive benefit plans, the liability to exit from a multi-employer pension plan and other long-term liabilities.

(4)

Includes contractual arrangements with certain prestige properties, athletic venues and other locations, and other long-term marketing commitments.

(5)

Includes the liability for postretirement benefit obligations only. The unfunded portion of the Company’s pension plan is excluded as the timing and/or amount of any cash payment is uncertain.

(6)

Purchase orders include commitments in which a written purchase order has been issued to a vendor, but the goods have not been received or the services performed.

The Company had uncertain tax positions, including accrued interest, of $2.4 million on December 31, 2017, all of which would affect the Company’s effective tax rate if recognized. While it$30.0 million is expected the amount of uncertain tax positions may changeto be paid in the next 12 months, the Company does not expect such change would have a significant impact on the consolidated financial statements. See Note 18 to the consolidated financial statements for additional information.

2023.


The Company is a shareholder of Southeastern Container (“Southeastern”), a plastic bottle manufacturing cooperative from which the Company is obligated to purchase at least 80% of its requirements of plastic bottles for certain designated territories. This obligation is not included in the Company’s table of contractual obligations and commercial commitments as there arehas no minimum purchase requirements.requirements; however, purchases from Southeastern were $154.0 million during 2022 and are expected to remain material in future foreseeable periods. See Note 1719 to the consolidated financial statements for additional information related to Southeastern.


The Company has standby lettersparticipates in long-term marketing contractual arrangements with certain prestige properties, athletic venues and other locations. As of credit, primarilyDecember 31, 2022, the future payments related to its property and casualty insurance programs. These lettersthese contractual arrangements, which expire at various dates through 2033, amounted to $128.8 million, of credit totaled $35.6which $28.1 million on December 31, 2017. See Note 17 to the consolidated financial statements for additional information related to commercial commitments, guarantees, legal and tax matters.


The Company contributed $10.0 million to the Primary Plan (as defined below) and $1.6 million to the Bargaining Plan (as defined below) during 2017. Based on information currently available, the Company estimates it will be required to make cash contributions in the range of $10 million to $20 million to these two plans in 2018.

Postretirement medical care payments areis expected to be approximately $3.7 millionpaid in 2018. See Note 212023.


30

On December 7, 2022, the Board of Directors of the Company declared a regular quarterly cash dividend of $0.50 per share, as well as a special cash dividend of $3.00 per share, on the Common Stock and the Class B Common Stock of the Company. Both dividends are payable on February 10, 2023 to stockholders of record as of the consolidated financial statements for additional information related to pension and postretirement obligations.

close of business on January 27, 2023. As of December 31, 2022, dividends declared but not yet paid were $32.8 million.


Hedging Activities


The Company uses commodity derivative financial instruments to manage its exposure to movementsfluctuations in certain commodity prices. Fees paid by the Company for commodity derivative instruments are amortized over the corresponding period of the instrument. The Company accounts for its commodity hedgesderivative instruments on a mark-to-market basis with any expense or income being reflected as an adjustment to cost of sales or S,DSD&A expenses.

expenses, consistent with the expense classification of the underlying hedged item.


The Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk. The Company has master agreements with the counterparties to its commodity derivative financial agreementsinstruments that provide for net settlement of derivative transactions. The net impact of the commodity hedgesderivative instruments on the consolidated statements of operations was as follows:

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Cost of sales - increase/(decrease)

 

$

(4,453

)

 

$

(1,285

)

 

$

3,468

 

S,D&A expenses - increase/(decrease)

 

 

(1,325

)

 

 

(489

)

 

 

1,408

 

Net impact

 

$

(5,778

)

 

$

(1,774

)

 

$

4,876

 


 Fiscal Year
(in thousands)20222021
Increase (decrease) in cost of sales$3,335 $(12,647)
Decrease in SD&A expenses(16,390)(4,183)
Net impact$(13,055)$(16,830)

COVID-19 Impact

The Company continues to diligently monitor and manage through the impact of the ongoing COVID-19 pandemic on all aspects of its business, including the impact on its teammates, communities and customers.

The Company continues to implement its COVID-19 Response Program as dictated by current conditions, including numerous actions to protect and promote the health and safety of its consumers, customers, suppliers, teammates and communities. Such actions include following prescribed Company and other accepted health and safety standards and protocols, including those adopted by the Centers for Disease Control and Prevention (the “CDC”) and local health authorities. Risk mitigation and safety activities continue; examples include adhering to sanitation protocols and promoting hygiene practices recommended by the CDC; offering supplemental sick time for non-exempt teammates; providing access to personal protective equipment and educational resources; and modifying our health and welfare plans for COVID-19-related events.

At this time and based on current trends, we do not expect the COVID-19 pandemic to materially impact our liquidity position or access to capital in 2023. We also have not experienced, and do not expect, any material impairments or adjustments to the fair values of our assets or the collectability of our receivables as a result of the COVID-19 pandemic.

Discussion of Critical Accounting Policies, Estimates and New Accounting Pronouncements

Critical Accounting Policies and Estimates


In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of its results of operations and financial position in the preparation of its consolidated financial statements in conformity with GAAP. Actual results could differ significantly from those estimates under different assumptions and conditions. The Company believes the following discussion addresses the Company’s most critical accounting policies,estimates, which are those the Company believes to be the most important to the portrayal of the Company’sits financial condition and results of operations and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain matters.

uncertain.


Any changes in critical accounting policies and estimates are discussed with the Audit Committee of the Company’s Board of Directors of the Company during the quarter in which a change is contemplated and prior to making such change.

Allowance


Revenue Recognition

The Company’s sales are divided into two main categories: (i) bottle/can sales and (ii) other sales. Bottle/can sales include products packaged primarily in plastic bottles and aluminum cans. Bottle/can net pricing is based on the invoice price charged to customers reduced by any promotional allowances. Bottle/can net pricing per unit is impacted by the price charged per package, the sales volume generated for Doubtful Accounts

each package and the channels in which those packages are sold. Other sales include sales to other Coca‑Cola bottlers, post-mix sales, transportation revenue and equipment maintenance revenue.

31


The Company’s contracts are derived from customer orders, including customer sales incentives, generated through an order processing and replenishment model. Generally, the Company’s service contracts and contracts related to the delivery of specifically identifiable products have a single performance obligation. Revenues do not include sales or other taxes collected from customers. The Company has defined its performance obligations for its contracts as either at a point in time or over time. Bottle/can sales, sales to other Coca‑Cola bottlers and post-mix sales are recognized when control transfers to a customer, which is generally upon delivery and is considered a single point in time (“point in time”).

Other sales, which include revenue for service fees related to the repair of cold drink equipment and delivery fees for freight hauling and brokerage services, are recognized over time (“over time”). Revenues related to cold drink equipment repair are recognized as the respective services are completed using a cost-to-cost input method. Repair services are generally completed in less than one day but can extend up to one month. Revenues related to freight hauling and brokerage services are recognized as the delivery occurs using a miles driven output method. Generally, delivery occurs and freight charges are recognized in the same day. Over time sales orders open at the end of a financial period are not material to the consolidated financial statements.

The Company sells its products and extends credit, generally without requiring collateral, based on an ongoing evaluation of the customer’s business prospects and financial condition. The Company evaluates the collectability of its trade accounts receivable based on a number of factors. Whenfactors, including the Company becomes aware ofCompany’s historic collections pattern and changes to a specific customer’s inabilityability to meet its financial obligationsobligations. The Company typically collects payment from customers within 30 days from the date of sale.

The Company has established an allowance for doubtful accounts to adjust the Company, a specific reserve for bad debts is estimated and recorded to reduce the recognized receivable to the estimated amount the Company believes will ultimately be collected. The Company’s allowance for doubtful accounts in the consolidated balance sheets includes a reserve for customer returns and an allowance for credit losses. The Company experiences customer returns primarily as a result of damaged or out-of-date product. At any given time, the Company estimates less than 1% of bottle/can sales and post-mix sales could be at risk for return by customers. Returned product is recognized as a reduction to net sales.

The Company estimates an allowance for credit losses, based on historic days’ sales outstanding trends, aged customer balances, previously written-off balances and expected recoveries up to balances previously written off, in order to present the net amount expected to be collected. Accounts receivable balances are written off when determined uncollectible and are recognized as a reduction to the allowance for credit losses.

Valuation of Long-Lived Assets, Goodwill and Other Intangibles

Management performs recoverability and impairment tests of long-lived assets, goodwill and other intangibles in accordance with GAAP, during which management makes numerous assumptions which involve a significant amount of judgment. When performing impairment tests, management estimates the fair values of the assets using its best assumptions, which management believes would be consistent with what a hypothetical marketplace participant would use. Estimates and assumptions used in these tests are evaluated and updated as appropriate. For certain assets, recoverability and/or impairment tests are required only when conditions exist that indicate the carrying value may not be recoverable. For other assets, impairment tests are required at least annually, or more frequently if events or circumstances indicate that an asset may be impaired.

The Company evaluates the recoverability of the carrying amount of its property, plant and equipment and other intangibles when events or circumstances indicate the carrying amount of an asset or asset group may not be recoverable. These evaluations are performed at a level where independent cash flows may be attributed to either an asset or an asset group. If the Company determines the carrying amount of an asset or asset group is not recoverable based upon the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair values of the long-lived assets. During 2022 and 2021, the Company performed periodic reviews of property, plant and equipment and other intangibles and determined no material impairment existed.

All business combinations are accounted for using the acquisition method. All of the Company’s goodwill resides within one reporting unit within the Nonalcoholic Beverages reportable segment and, therefore, the Company has determined it has one reporting unit for the purpose of assessing goodwill for potential impairment. The Company performs its annual goodwill impairment test as of the first day of the fourth quarter each year, and more frequently if facts and circumstances indicate such assets may be impaired, including significant declines in actual or future projected cash flows and significant deterioration of market conditions.

The Company uses its overall market capitalization as part of its estimate of fair value of the reporting unit and in assessing the reasonableness of the Company’s internal estimates of fair value. The Company’s goodwill impairment assessment includes a qualitative assessment to determine whether it is more likely than not that the fair value of the goodwill is below its carrying value, each year, and more often if there are significant changes in business conditions that could result in impairment. When a quantitative analysis is considered necessary for the annual impairment analysis of goodwill, the Company develops an estimated fair value for the
32

reporting unit considering three different approaches: 1) market value, using the Company’s stock price plus outstanding debt; 2) discounted cash flow analysis; and 3) multiple of earnings before interest, taxes, depreciation and amortization based upon relevant industry data.

The estimated fair value of the reporting unit is then compared to its carrying amount, including goodwill. If the estimated fair value exceeds the carrying amount, goodwill is not considered impaired. If the carrying amount, including goodwill, exceeds its estimated fair value, any excess of the carrying value of goodwill of the reporting unit over its fair value is recorded as an impairment. The Company performed its annual impairment test of goodwill as of the first day of the fourth quarter during both 2022 and 2021 and determined there was no impairment of the carrying values of these assets. The Company has determined there has not been an interim impairment trigger since the first day of the fourth quarter of 2022 annual test date.

Acquisition Related Contingent Consideration Liability

The acquisition related contingent consideration liability consists of the estimated amounts due to The Coca‑Cola Company under the CBA with The Coca‑Cola Company and CCR over the useful life of the related distribution rights. Pursuant to the CBA, the Company is required to make quarterly acquisition related sub-bottling payments to CCR on a continuing basis in exchange for the grant of exclusive rights to distribute, promote, market and sell the authorized brands of The Coca‑Cola Company and related products in certain distribution territories the Company acquired from CCR. This acquisition related contingent consideration is valued using a probability weighted discounted cash flow model based on internal forecasts and the WACC derived from market data, which are considered Level 3 inputs.

Each reporting period, the Company adjusts its acquisition related contingent consideration liability related to the distribution territories subject to acquisition related sub-bottling payments to fair value by discounting future expected acquisition related sub-bottling payments required under the CBA using the Company’s estimated WACC. These future expected acquisition related sub-bottling payments extend through the life of the related distribution assets acquired in each distribution territory, which is generally 40 years. As a result, the fair value of the acquisition related contingent consideration liability is impacted by the Company’s WACC, management’s estimate of the acquisition related sub-bottling payments that will be made in the future under the CBA and current acquisition related sub-bottling payments (all Level 3 inputs). Changes in any of these Level 3 inputs, particularly the underlying risk-free interest rate used to estimate the Company’s WACC, could result in material changes to the fair value of the acquisition related contingent consideration liability and could materially impact the amount of non-cash expense (or income) recorded each reporting period. The Company estimates a 10 basis point change in the underlying risk-free interest rate used to estimate the Company’s WACC would result in a change of approximately $5 million to the Company’s acquisition related contingent consideration liability.

Income Tax Estimates

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating losses and tax credit carryforwards, as well as the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance will be provided against deferred tax assets if the Company determines it is more likely than not such assets will not ultimately be realized.

The Company does not recognize a tax benefit unless it concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in the Company’s judgment, is greater than 50% likely to be realized. The Company records interest and penalties related to uncertain tax positions in income tax expense.

Pension and Postretirement Benefit Obligations

There are two Company-sponsored pension plans. The Primary Plan was frozen as of June 30, 2006 and no benefits accrued to participants after that date. The second Company-sponsored pension plan (the “Bargaining Plan”) is for certain employees under collective bargaining agreements. Benefits under the Bargaining Plan are determined in accordance with negotiated formulas for the respective participants. Contributions to the plans are based on actuarially determined amounts and are limited to the amounts currently deductible for income tax purposes. The Company also sponsors a postretirement healthcare plan for employees meeting specified qualifying criteria.

Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the plans. These factors include assumptions about the discount rate, expected return on plan assets, employee turnover and age at retirement, as determined by the Company, within certain guidelines. In addition, the Company uses subjective factors such as
33

mortality rates to estimate the projected benefit obligation. The actuarial assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of net periodic pension cost recorded by the Company in future periods. See Note 16 to the consolidated financial statements for additional information.

The discount rate used in determining the actuarial present value of the projected benefit obligation for the Primary Plan and the Bargaining Plan was 5.33% and 5.34%, respectively, in 2022 and 2.97% and 3.31%, respectively, in 2021. The discount rate assumption is generally the estimate which can have the most significant impact on net periodic pension cost and the projected benefit obligation for these pension plans. Given the anticipated termination of the Primary Plan, the Company determined an appropriate discount rate for the Primary Plan in 2022 based on lump sum segment interest rates, expected lump sum election rates and estimated annuity purchase rates. The Company determines an appropriate discount rate annually for the Bargaining Plan based on the Aon AA Above Median yield curve as of the measurement date and reviews the discount rate assumption at the end of each year. See Note 16 to the consolidated financial statements for additional information.

Pension costs were $13.1 million in 2022 and $9.3 million in 2021.

A 0.25% increase or decrease in the discount rate assumption would have impacted the projected benefit obligation and the net periodic pension cost for the Primary Plan as indicated below. The portion of the liability expected to be paid as a lump sum during 2023 in connection with the anticipated termination of the Primary Plan does not vary based on changes in discount rates, as the interest rate basis upon which the lump sums will be calculated is known and will not change.

(in thousands)0.25% Increase0.25% Decrease
Increase (decrease) in:
Projected benefit obligation for Primary Plan at December 31, 2022$(3,575)$3,722 
Net periodic pension cost for Primary Plan in 202279 (95)

A 0.25% increase or decrease in the discount rate assumption would have impacted the projected benefit obligation and the net periodic pension cost for the Bargaining Plan as follows:

(in thousands)0.25% Increase0.25% Decrease
Increase (decrease) in:
Projected benefit obligation for Bargaining Plan at December 31, 2022$(1,695)$1,814 
Net periodic pension cost for Bargaining Plan in 2022(605)651 

The weighted average expected long-term rate of return of plan assets used in computing net periodic pension cost for the Primary Plan was 3.00% in 2022 and 4.75% in 2021. The weighted average expected long-term rate of return of plan assets used in computing net periodic pension cost for the Bargaining Plan was 5.50% in 2022 and 5.75% in 2021. These rates reflect an estimate of long-term future returns for the pension plan assets. This estimate is primarily a function of the asset classes (equities versus fixed income) in which the pension plan assets are invested and the analysis of past performance of these asset classes over a long period of time. This analysis includes expected long-term inflation and the risk premiums associated with equity and fixed income investments. The analysis also includes planned changes to asset allocations related to the expected termination of the Primary Plan. See Note 16 to the consolidated financial statements for the details by asset type of the Company’s pension plan assets and the weighted average expected long-term rate of return of each asset type. The actual return on pension plan assets for the Primary Plan was a loss of 21.1% in 2022 and a gain of 5.0% in 2021. The actual return on pension plan assets for the Bargaining Plan was a loss of 24.6% in 2022 and a gain of 10.5% in 2021.

The Company sponsors a postretirement healthcare plan for employees meeting specified qualifying criteria. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the net periodic postretirement benefit cost and postretirement benefit obligation for this plan. These factors include assumptions about the discount rate and the expected growth rate for the cost of healthcare benefits. In addition, the Company uses subjective factors such as withdrawal and mortality rates to estimate the projected liability under this plan. The actuarial assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. The Company does not prefund its postretirement benefits and has the right to modify or terminate certain of these benefits in the future.

The discount rate assumption, the annual healthcare cost trend and the ultimate trend rate for healthcare costs are key estimates which can have a significant impact on the net periodic postretirement benefit cost and postretirement benefit obligation in future periods. The Company annually determines the healthcare cost trend based on recent actual medical trend experience and projected experience for subsequent years.
34


The discount rate assumptions used to determine the postretirement benefit obligation are based on the annual yield on long-term corporate bonds as of the plan’s measurement date. The discount rate used in determining the postretirement benefit obligation was 5.19% in 2022 and 2.98% in 2021. The discount rate was derived using the Aon AA Above Median yield curve. Projected benefit payouts for the plan were matched to the Aon AA Above Median yield curve and an equivalent flat rate was derived.

A 0.25% increase or decrease in the discount rate assumption would have impacted the postretirement benefit obligation and the net periodic postretirement benefit cost for the Company’s postretirement healthcare plan as follows:

(in thousands)0.25% Increase0.25% Decrease
Increase (decrease) in:
Postretirement benefit obligation at December 31, 2022$(1,317)$1,378 
Net periodic postretirement benefit cost in 2022(154)161 

Cautionary Note Regarding Forward-Looking Statements

Certain statements made in this report, or in other public filings, press releases, or other written or oral communications made by the Company, which are not historical facts, are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties which we expect will or may occur in the future and may impact our business, financial condition and results of operations. The words “anticipate,” “believe,” “expect,” “intend,” “project,” “may,” “will,” “should,” “could” and similar expressions are intended to identify those forward-looking statements. These forward-looking statements reflect the Company’s best judgment based on current information, and, although we base these statements on circumstances that we believe to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information. As such, the forward-looking statements are not guarantees of future performance, and actual results may vary materially from the projected results and expectations discussed in this report. Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: increased costs (including due to inflation), disruption of supply or unavailability or shortages of raw materials, fuel and other supplies; the reliance on purchased finished products from external sources; changes in public and consumer perception and preferences, including concerns related to product safety and sustainability, artificial ingredients, brand reputation and obesity; the inability to attract and retain front-line employees in a tight labor market; changes in government regulations related to nonalcoholic beverages, including regulations related to obesity, public health, artificial ingredients and product safety and sustainability; decreases from historic levels of marketing funding support provided to us by The Coca‑Cola Company and other beverage companies; material changes in the performance requirements for marketing funding support or our inability to meet such requirements; decreases from historic levels of advertising, marketing and product innovation spending by The Coca‑Cola Company and other beverage companies, or advertising campaigns that are negatively perceived by the public; any failure of the several Coca‑Cola system governance entities of which we are a participant to function efficiently or on our best behalf and any failure or delay of ours to receive anticipated benefits from these governance entities; provisions in our beverage distribution and manufacturing agreements with The Coca‑Cola Company that could delay or prevent a change in control of us or a sale of our Coca‑Cola distribution or manufacturing businesses; the concentration of our capital stock ownership; our inability to meet requirements under our beverage distribution and manufacturing agreements; changes in the inputs used to calculate our acquisition related contingent consideration liability; technology failures or cyberattacks on our technology systems or our effective response to technology failures or cyberattacks on our customers’, suppliers’ or other third parties’ technology systems; unfavorable changes in the general economy; changes in our top customer relationships and marketing strategies; lower than expected net pricing of our products resulting from continued and increased customer and competitor consolidations and marketplace competition; the effect of changes in our level of debt, borrowing costs and credit ratings on our access to capital and credit markets, operating flexibility and ability to obtain additional financing to fund future needs; the failure to attract, train and retain qualified employees while controlling labor costs, and other labor issues; the failure to maintain productive relationships with our employees covered by collective bargaining agreements, including failing to renegotiate collective bargaining agreements; changes in accounting standards; our use of estimates and assumptions; changes in tax laws, disagreements with tax authorities or additional tax liabilities; changes in legal contingencies; natural disasters, changing weather patterns and unfavorable weather; climate change or legislative or regulatory responses to such change; and the risks discussed in “Item 1A. Risk Factors” of this report and elsewhere herein.

Caution should be taken not to place undue reliance on the forward-looking statements included in this report. The Company assumes no obligation to update any forward-looking statements, except as may be required by law. In evaluating forward-looking statements, these risks and uncertainties should be considered, together with the other risks described from time to time in the Company’s reports and other filings with the SEC.

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Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

The Company is subject to interest rate risk on its revolving credit facility and did not have any outstanding borrowings on its revolving credit facility as of December 31, 2022. As such, assuming no changes in the Company’s capital structure, if market interest rates average 1% more over the next 12 months than the interest rates as of December 31, 2022, there would be no change to interest expense for the next 12 months.

The Company’s acquisition related contingent consideration liability, which is adjusted to fair value each reporting period, is also impacted by changes in interest rates. The risk-free interest rate used to estimate the Company’s WACC is a component of the discount rate used to calculate the present value of expected future acquisition related sub-bottling payments due under the CBA. As a result, any changes in the underlying risk-free interest rate could result in material changes to the fair value of the acquisition related contingent consideration liability and could materially impact the amount of non-cash expense (or income) recorded each reporting period. The Company estimates a 10 basis point change in the underlying risk-free interest rate used to estimate the Company’s WACC would result in a change of approximately $5 million to the Company’s acquisition related contingent consideration liability.

The Company is exposed to certain market risks and commodity price risk that arise in the ordinary course of business. The Company may enter into commodity derivative instruments to manage or reduce market risk. The Company does not use commodity derivative instruments for trading or speculative purposes.

The Company is also subject to commodity price risk arising from price movements for certain commodities included as part of its raw materials. The Company manages this commodity price risk in some cases by entering into contracts with adjustable prices to hedge commodity purchases. The Company periodically uses commodity derivative instruments in the management of this risk. The Company estimates a 10% increase in the market prices of commodities included as part of its raw materials over the current market prices would cumulatively increase costs during the next 12 months by approximately $74 million assuming no change in volume.

Fees paid by the Company for agreements to hedge commodity purchases are amortized over the corresponding period of the agreement. The Company accounts for its commodity derivative instruments on a mark-to-market basis with any expense or income being reflected as an adjustment to cost of sales or SD&A expenses, consistent with the expense classification of the underlying hedged item.

The annual rate of inflation in the United States, as measured by year-over-year changes in the Consumer Price Index (the “CPI”), was 6.5% in 2022, 7.0% in 2021 and 1.4% in 2020. Inflation in the prices of those commodities important to the Company’s business is reflected in changes in the CPI, but commodity prices are volatile and in recent years have moved at a faster rate of change than the CPI.

The principal effect of inflation in both commodity and consumer prices on the Company’s operating results is to increase costs, both of goods sold and SD&A expenses. Although the Company can offset these cost increases by increasing selling prices for its products, consumers may not have the buying power to cover these increased costs and may reduce their volume of purchases of those products. In that event, selling price increases may not be sufficient to offset completely the Company’s cost increases.

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Item 8.Financial Statements and Supplementary Data.

COCA‑COLA CONSOLIDATED, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal Year
(in thousands, except per share data)202220212020
Net sales$6,200,957 $5,562,714 $5,007,357 
Cost of sales3,923,003 3,608,527 3,238,448 
Gross profit2,277,954 1,954,187 1,768,909 
Selling, delivery and administrative expenses1,636,907 1,515,016 1,455,531 
Income from operations641,047 439,171 313,378 
Interest expense, net24,792 33,449 36,735 
Other expense, net41,168 150,573 35,603 
Income before taxes575,087 255,149 241,040 
Income tax expense144,929 65,569 58,943 
Net income430,158 189,580 182,097 
Less: Net income attributable to noncontrolling interest— — 9,604 
Net income attributable to Coca‑Cola Consolidated, Inc.$430,158 $189,580 $172,493 
Basic net income per share based on net income attributable to Coca‑Cola Consolidated, Inc.:   
Common Stock$45.88 $20.23 $18.40 
Weighted average number of Common Stock shares outstanding8,117 7,141 7,141 
Class B Common Stock$45.93 $20.23 $18.40 
Weighted average number of Class B Common Stock shares outstanding1,257 2,232 2,232 
Diluted net income per share based on net income attributable to Coca‑Cola Consolidated, Inc.:
Common Stock$45.74 $20.17 $18.30 
Weighted average number of Common Stock shares outstanding – assuming dilution9,405 9,400 9,427 
Class B Common Stock$45.76 $20.16 $18.28 
Weighted average number of Class B Common Stock shares outstanding – assuming dilution1,288 2,259 2,286 




















See accompanying notes to consolidated financial statements.
37

COCA‑COLA CONSOLIDATED, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 Fiscal Year
(in thousands)202220212020
Net income$430,158 $189,580 $182,097 
Other comprehensive income (loss), net of tax:   
Defined benefit plans reclassification including pension costs:   
Actuarial gain (loss)7,742 14,965 (673)
Prior service credits (costs)(116)3 15 
Postretirement benefits reclassification including benefit costs:
Actuarial gain (loss)7,991 3,089 (3,137)
Interest rate swap— 556 (286)
Foreign currency translation adjustment9 (23)30 
Other comprehensive income (loss), net of tax15,626 18,590 (4,051)
Comprehensive income445,784 208,170 178,046 
Less: Comprehensive income attributable to noncontrolling interest— — 9,604 
Comprehensive income attributable to Coca‑Cola Consolidated, Inc.$445,784 $208,170 $168,442 




































See accompanying notes to consolidated financial statements.
38

COCA‑COLA CONSOLIDATED, INC.
CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)December 31, 2022December 31, 2021
ASSETS  
Current Assets:  
Cash and cash equivalents$197,648 $142,314 
Accounts receivable, trade532,047 472,270 
Allowance for doubtful accounts(16,119)(17,336)
Accounts receivable from The Coca-Cola Company35,786 57,737 
Accounts receivable, other54,631 33,878 
Inventories347,545 302,851 
Prepaid expenses and other current assets94,263 78,068 
Assets held for sale— 6,880 
Total current assets1,245,801 1,076,662 
Property, plant and equipment, net1,183,730 1,030,688 
Right-of-use assets - operating leases140,588 139,877 
Leased property under financing leases, net6,431 64,211 
Other assets115,892 120,486 
Goodwill165,903 165,903 
Distribution agreements, net842,035 836,777 
Customer lists, net9,165 10,966 
Total assets$3,709,545 $3,445,570 
LIABILITIES AND EQUITY  
Current Liabilities:  
Current portion of obligations under operating leases$27,635 $22,048 
Current portion of obligations under financing leases2,303 6,060 
Accounts payable, trade351,729 319,318 
Accounts payable to The Coca-Cola Company162,783 145,671 
Other accrued liabilities198,300 226,769 
Accrued compensation126,921 110,894 
Accrued interest payable2,677 4,096 
Dividends payable32,808 — 
Total current liabilities905,156 834,856 
Deferred income taxes150,222 136,432 
Pension and postretirement benefit obligations60,323 93,391 
Other liabilities753,357 758,610 
Noncurrent portion of obligations under operating leases118,763 122,046 
Noncurrent portion of obligations under financing leases7,519 65,006 
Long-term debt598,817 723,443 
Total liabilities2,594,157 2,733,784 
Commitments and Contingencies
Equity:  
Convertible Preferred Stock, $100.00 par value:  authorized - 50,000 shares; issued - none— — 
Nonconvertible Preferred Stock, $100.00 par value:  authorized - 50,000 shares; issued - none— — 
Preferred Stock, $0.01 par value:  authorized - 20,000,000 shares; issued - none— — 
Common Stock, $1.00 par value:  authorized - 30,000,000 shares; issued - 11,431,367 and 10,203,821 shares, respectively11,431 10,204 
Class B Common Stock, $1.00 par value:  authorized - 10,000,000 shares; issued - 1,632,810 and 2,860,356 shares, respectively1,633 2,860 
Class C Common Stock, $1.00 par value:  authorized - 20,000,000 shares; issued - none— — 
Additional paid in capital135,953 135,953 
Retained earnings1,112,462 724,486 
Accumulated other comprehensive loss(84,837)(100,463)
Treasury stock, at cost:  Common Stock - 3,062,374 shares(60,845)(60,845)
Treasury stock, at cost:  Class B Common Stock - 628,114 shares(409)(409)
Total equity1,115,388 711,786 
Total liabilities and equity$3,709,545 $3,445,570 
See accompanying notes to consolidated financial statements.
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COCA-COLA CONSOLIDATED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

 Fiscal Year
(in thousands)202220212020
Cash Flows from Operating Activities:
Net income$430,158 $189,580 $182,097 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense from property, plant and equipment and financing leases147,962 157,320 155,936 
Amortization of intangible assets and deferred proceeds, net23,628 23,245 23,081 
Fair value adjustment of acquisition related contingent consideration32,301 146,308 31,210 
Deferred payroll taxes under CARES Act(18,739)(18,739)37,412 
Deferred income taxes8,977 (9,183)8,737 
Loss on sale of property, plant and equipment5,642 5,921 5,187 
Amortization of debt costs1,012 1,256 1,050 
Impairment and abandonment of property, plant and equipment�� 3,200 8,030 
Change in current assets less current liabilities(74,784)30,595 36,901 
Change in other noncurrent assets31,779 16,003 21,820 
Change in other noncurrent liabilities(33,430)(23,728)(18,065)
Other— (23)1,065 
Total adjustments124,348 332,175 312,364 
Net cash provided by operating activities$554,506 $521,755 $494,461 
Cash Flows from Investing Activities:   
Additions to property, plant and equipment$(298,611)$(155,693)$(202,034)
Acquisition of distribution rights(30,649)(8,993)— 
Proceeds from the sale of property, plant and equipment7,369 5,274 3,385 
Investment in CONA Services LLC(3,094)(2,531)(1,770)
Net cash used in investing activities$(324,985)$(161,943)$(200,419)
Cash Flows from Financing Activities:
Payments on term loan facility and senior notes$(125,000)$(287,500)$(45,000)
Payments of acquisition related contingent consideration(36,515)(39,097)(43,400)
Cash dividends paid(9,374)(9,374)(9,374)
Payments on financing lease obligations(2,988)(4,778)(5,861)
Debt issuance fees(310)(1,542)(228)
Borrowings under term loan facility— 70,000 — 
Payments on revolving credit facility— (55,000)(280,000)
Borrowings under revolving credit facility— 55,000 235,000 
Purchase of noncontrolling interest in Piedmont Coca-Cola Bottling Partnership— — (100,000)
Net cash used in financing activities$(174,187)$(272,291)$(248,863)
Net increase in cash$55,334 $87,521 $45,179 
Cash at beginning of year142,314 54,793 9,614 
Cash at end of year$197,648 $142,314 $54,793 











See accompanying notes to consolidated financial statements.
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COCA-COLA CONSOLIDATED, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)Common
Stock		Class B
Common
Stock		Additional Paid in CapitalRetained
Earnings		Accumulated
Other
Comprehensive
Loss		Treasury
Stock -
Common
Stock		Treasury
Stock -
Class B
Common
Stock		Total
Equity
of Coca-Cola
Consolidated,
Inc.		Non-
controlling
Interest		Total
Equity
Balance on December 29, 2019$10,204 $2,860 $128,983 $381,161 $(115,002)$(60,845)$(409)$346,952 $104,164 $451,116 
Net income— — — 172,493 — — — 172,493 9,604 182,097 
Other comprehensive loss, net of tax— — — — (4,051)— — (4,051)— (4,051)
Dividends declared:
Common Stock ($1.00 per share)— — — (7,141)— — — (7,141)— (7,141)
Class B Common Stock
($1.00 per share)
— — — (2,233)— — — (2,233)— (2,233)
Purchase of noncontrolling interest in Piedmont Coca-Cola Bottling Partnership— — 6,970 — — — — 6,970 (113,768)(106,798)
Balance on December 31, 2020$10,204 $2,860 $135,953 $544,280 $(119,053)$(60,845)$(409)$512,990 $— $512,990 
Net income— — — 189,580 — — — 189,580 — 189,580 
Other comprehensive income, net of tax— — — — 18,590 — — 18,590 — 18,590 
Dividends declared:
Common Stock ($1.00 per share)— — — (7,141)— — — (7,141)— (7,141)
Class B Common Stock
($1.00 per share)
— — — (2,233)— — — (2,233)— (2,233)
Balance on December 31, 2021$10,204 $2,860 $135,953 $724,486 $(100,463)$(60,845)$(409)$711,786 $— $711,786 
Net income— — — 430,158 — — — 430,158 — 430,158 
Other comprehensive income, net of tax— — — — 15,626 — — 15,626 — 15,626 
Dividends declared:
Common Stock ($4.50 per share)— — — (37,354)— — — (37,354)— (37,354)
Class B Common Stock
($4.50 per share)
— — — (4,828)— — — (4,828)— (4,828)
Conversion of 1,227,546 shares of Class B Common Stock1,227 (1,227)— — — — — — — — 
Balance on December 31, 2022$11,431 $1,633 $135,953 $1,112,462 $(84,837)$(60,845)$(409)$1,115,388 $— $1,115,388 















See accompanying notes to consolidated financial statements.
41

COCA-COLA CONSOLIDATED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Description of Business and Summary of Critical Accounting Policies

Description of Business

Coca‑Cola Consolidated, Inc. (the “Company”) distributes, markets and manufactures nonalcoholic beverages, primarily products of The Coca‑Cola Company, and is the largest Coca‑Cola bottler in the United States. Approximately 86% of the Company’s total bottle/can sales volume to retail customers consists of products of The Coca‑Cola Company, which include some of the most recognized and popular beverage brands in the world. The Company also distributes products for several other beverage companies, including Keurig Dr Pepper Inc. and Monster Energy Company.

The Company offers a range of nonalcoholic beverage products and flavors, including both sparkling and still beverages, designed to meet the demands of its consumers. Sparkling beverages are carbonated beverages and the Company’s principal sparkling beverage is Coca‑Cola. Still beverages include energy products and noncarbonated beverages such as bottled water, ready to drink tea, ready to drink coffee, enhanced water, juices and sports drinks.

The Company’s products are sold and distributed in the United States through various channels, which include selling directly to customers, including grocery stores, mass merchandise stores, club stores, convenience stores and drug stores, selling to on-premise locations, where products are typically consumed immediately, such as restaurants, schools, amusement parks and recreational facilities, and selling through other channels such as vending machine outlets.

The Company manages its business on the basis of three operating segments. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated net sales and income from operations. The additional two operating segments do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, and, therefore, have been combined into “All Other.”

Principles of Consolidation

The consolidated financial statements include the accounts and the consolidated operations of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements, in conformity with accounting principles generally accepted in the United States (“GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks and cash equivalents, which are highly liquid debt instruments with maturities of less than 90 days. The Company maintains cash deposits with major banks, which, from time to time, may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and believes the risk of any loss is minimal.

Accounts Receivable, Trade

The Company sells its products and extends credit, generally without requiring collateral, based on an ongoing evaluation of the customer’s business prospects and financial condition. The Company evaluates the collectability of its trade accounts receivable based on a number of factors, including the Company’s historic collections pattern and changes to a specific customer identificationcustomer’s ability to meet its financial obligations. The Company typically collects payment from customers within 30 days from the date of potential bad debts,sale.

Allowance for Doubtful Accounts

The Company has established an allowance for doubtful accounts to adjust the recorded receivable to the estimated amount the Company believes will ultimately be collected. The Company’s allowance for doubtful accounts in the consolidated balance sheets includes a reserve for customer returns and an allowance for credit losses. The Company experiences customer returns primarily as a result of damaged or out-of-date product. At any given time, the Company estimates less than 1% of bottle/can sales and post-mix sales could be at risk for return by customers. Returned product is recordedrecognized as a reduction to net sales.
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The Company estimates an allowance for credit losses, based on historic days’ sales outstanding trends, aged customer balances, previously written-off balances and expected recoveries up to balances previously written off, in order to present the Company’s recent past loss historynet amount expected to be collected. Accounts receivable balances are written off when determined uncollectible and an overall assessmentare recognized as a reduction to the allowance for credit losses.

Inventories

Inventories are stated at the lower of past due trade accounts receivable outstanding.

cost or net realizable value. Cost is determined on the first-in, first-out method for finished products and manufacturing materials and on the average cost method for plastic shells, plastic pallets and other inventories.


Property, Plant and Equipment


Property, plant and equipment are recorded at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements on operating leases are depreciated over the shorter of the estimated useful lives or the term of the lease, including renewal options the Company determines are reasonably assured. Additions and major replacements or betterments are added to the assets at cost. Maintenance and repair costs and minor replacements are charged to expense when incurred. When assets are replaced or otherwise disposed, the cost and accumulated depreciation are removed from the accounts and the gains or losses, if any, are reflected in the statementconsolidated statements of operations. Gains or losses on the disposal of manufacturing equipment and manufacturing facilitiesplants are included in cost of sales. Gains or losses on the disposal of all other property, plant and equipment are included in S,D&Aselling, delivery and administrative (“SD&A”) expenses.



The Company evaluates the recoverability of the carrying amount of its property, plant and equipment when events or circumstances indicate the carrying amount of an asset or asset group may not be recoverable. These evaluations are performed at a level where independent cash flows may be attributed to either an asset or an asset group. If the Company determines the carrying amount of an asset or asset group is not recoverable based upon the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair valuevalues of the long-lived assets.

During 2017, 2016 and 2015, the Company performed periodic reviews of property, plant and equipment and determined no material impairment existed.

Impairment Testing of Goodwill

GAAP requires testing of goodwill for impairment at least annually.


Leases

The Company conductsleases office and warehouse space, machinery and other equipment under noncancelable operating lease agreements and also leases certain warehouse space under financing lease agreements. The Company uses the following policies and assumptions to evaluate its annual impairment test, which includesleases:

•Determining a qualitative assessmentlease: The Company assesses contracts at inception to determine whether itan arrangement is more likely than not the fair value of goodwill is below its carrying value, as of the first day of the fourth quarter of each fiscal year, and more often if there are significant changes in business conditions that could result in impairment.

In all periods presented, the Company completed its qualitative assessment and determinedor includes a quantitative assessment was not necessary.

The Company has determined it has one reporting unit, within the Nonalcoholic Beverages reportable segment, for the purpose of assessing goodwill for potential impairment. The Company uses its overall market capitalization as part of its estimate of fair value of the reporting unit and in assessing the reasonableness oflease, which conveys the Company’s internal estimatesright to control the use of fair value.

When a quantitative analysis is considered necessaryan identified asset for the annual impairment analysis of goodwill, the Company develops an estimated fair value for the reporting unit considering three different approaches:

market value, using the Company’s stock price plus outstanding debt;

discounted cash flow analysis; and

multiple of earnings before interest, taxes, depreciation and amortization based upon relevant industry data.

The estimated fair value of the reporting unit is then compared to its carrying amount, including goodwill. If the estimated fair value exceeds the carrying amount, goodwill is not considered impaired, and the second step of the impairment test is not necessary. If the carrying amount, including goodwill, exceeds its estimated fair value, the second step of the impairment test is performed to measure the amount of the impairment, if any. In the second step, a comparison is made between the book value of goodwill and the implied fair value of goodwill. Implied fair value of goodwill is determined by comparing the fair value of the reporting unit to the book value of its net identifiable assets, excluding goodwill. To estimate the implied fair value of goodwill for a reporting unit, the Company assigns the fair value of the assets and liabilities associated with the reporting unit as if the reporting unit had been acquired in a business combination. Any excess of the carrying value of goodwill of the reporting unit over its implied fair value is recorded as an impairment.

To the extent actual and projected cash flows decline in the future, or if market conditions deteriorate significantly, the Company may be required to perform an interim impairment analysis that could result in an impairment of goodwill. The Company has determined there has not been an interim impairment trigger since the first day of the fourth quarter of 2017 annual test date.

Income Tax Estimates

The Company records a valuation allowance to reduce the carrying value of its deferred tax assets if, based on the weight of available evidence, it is determined that it is more likely than not that such assets will not ultimately be realized. The Company considers future taxable income and prudent and feasible tax planning strategies in assessing the need for a valuation allowance. However, in the event the Company determines it will not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the valuation allowance is charged to income in the period in which such a determination is made. A reduction in the valuation allowance and corresponding adjustment to income may be required if the likelihood of realizing existing deferred tax assets increases to a more likely than not level. The Company evaluates the realizability of deferred tax assets annually and when significant changes occur in the Company’s business that could impact the realizability assessment.

In addition to a valuation allowance related to loss carryforwards and certain deferred compensation, the Company records liabilities for uncertain tax positions related to certain state and federal income tax positions. These liabilities reflect the Company’s best estimate of the ultimate income tax liability based on currently known facts and information. Material changes in facts or information,


as well as the expiration of the statute of limitations and/or settlements with individual tax jurisdictions, may result in material adjustments to these estimates in the future.

Acquisition Related Contingent Consideration Liability

The Company’s acquisition related contingent consideration liability is subject to risk resulting from changes in the Company’s probability weighted discounted cash flow model, which is based on internal forecasts and changes in the Company’s weighted average cost of capital derived from market data.

At each reporting period, the Company evaluates future cash flows associated with its acquired territories as well as the associated discount rate used to calculate the fair value of its contingent consideration. These cash flows represent the Company’s best estimate of the future projections of the relevant territories over the same period as the related intangible asset, which is typically 40 years. The discount rate represents the Company’s weighted average cost of capital at the reporting date for which the fair value calculation is being performed. Changes in business conditions or other events could materially change both the projections of future cash flows and the discount rate used in the calculation of the fair value of contingent consideration. These changes could materially impact the fair value of the related contingent consideration. Changes in the fair value of the acquisition related contingent consideration are included in other income (expense), net on the consolidated statements of operations. The Company will adjust the fair value of the acquisition related contingent consideration over a period of time consistent with the life of the related distribution rights asset subsequent to acquisition.

Revenue Recognition

Revenuesin exchange for consideration. Operating lease right-of-use assets and associated liabilities are recognized when finished products are delivered to customersat the commencement date and both titleinitially measured based on the present value of lease payments over the defined lease term.

•Allocating lease and the risks and benefits of ownership are transferred, price is fixed and determinable, collection is reasonably assured and, in the case of full service vending, when cash is collected from the vending machines. An appropriate provision is made for uncollectible accounts.

The Company receives service fees from The Coca‑Cola Company related to the delivery of fountain syrup products to The Coca‑Cola Company’s fountain customers. In addition, the Company receives service fees from The Coca‑Cola Company related to the repair of fountain equipment owned by The Coca‑Cola Company. The fees received from The Coca‑Cola Company for the delivery of fountain syrup products to their customers and the repair of their fountain equipment are recognized as revenue when the respective services are completed. Service revenue represents approximately one percent of net sales.

The Company performs freight hauling and brokerage for third parties, in addition to delivering its own products. The freight charges are recognized as revenues when the delivery is complete. Freight revenue from third parties represents approximately two percent of net sales.

Revenues do not include sales or other taxes collected from customers.

Risk Management Programs

The Company uses various insurance structures to manage its workers’ compensation, auto liability, medical and other insurable risks. These structures consist of retentions, deductibles, limits and a diverse group of insurers that serve to strategically transfer and mitigate the financial impact of losses. The Company uses commercial insurance for claims as a risk reduction strategy to minimize catastrophic losses. Losses are accrued using assumptions and procedures followed in the insurance industry, adjusted for company-specific history and expectations.non-lease components: The Company has standby letters of credit, primarily relatedelected the practical expedient to its propertynot separate lease and casualty insurance programs. On December 31, 2017, these letters of credit totaled $35.6 million.

Pension and Postretirement Benefit Obligations

There are two Company-sponsored pension plans. The primary Company-sponsored pension plan (the “Primary Plan”) was frozen as of June 30, 2006 and no benefits accrued to participants after this date. The second Company-sponsored pension plan (the “Bargaining Plan”) isnon-lease components for certain employees under collective bargaining agreements. Benefits underclasses of underlying assets. The Company has equipment and vehicle lease agreements, which generally have the Bargaining Planlease and associated non-lease components accounted for as a single lease component. The Company has real estate lease agreements with lease and non-lease components, which are determined in accordance with negotiated formulasaccounted for separately where applicable.

•Calculating the respective participants. Contributions to the plans are based on actuarial determined amounts and are limited to the amounts currently deductible for income tax purposes.

Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the plans. These factors include assumptions aboutdiscount rate: The Company calculates the discount rate expected return on plan assets, employee turnover and age at retirement, as determined by the Company, within certain guidelines. In addition, the Company uses subjective factors such as mortality rates to estimate the projected benefit obligation. The actuarial assumptions used by the Company may differ materially


from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of net periodic pension cost recorded by the Company in future periods.

The discount rate used in determining the actuarial present value of the projected benefit obligation for the Primary Plan and the Bargaining Plan was 3.80% and 3.90%, respectively, in 2017 and 4.44% and 4.49%, respectively, in 2016. The discount rate assumption is generally the estimate which can have the most significant impact on net periodic pension cost and the projected benefit obligation for these pension plans. The Company determines an appropriate discount rate annually based on the annual yield on long-term corporate bonds as of the measurement date and reviews the discount rate assumption at the end of each year.

Pension costs were $4.3 million, $1.9 million and $1.7 million in 2017, 2016 and 2015, respectively.

A 0.25% increase or decreaseimplicit in the discountlease, or if the implicit rate assumption would have impactedis not readily determinable from the projected benefit obligation and net periodic pension cost oflease, then the Company-sponsored pension plans as follows:

(in thousands)

 

0.25% Increase

 

 

0.25% Decrease

 

Increase (decrease) in:

 

 

 

 

 

 

 

 

Projected benefit obligation at December 31, 2017

 

$

(10,767

)

 

$

11,408

 

Net periodic pension cost in 2017

 

 

(241

)

 

 

246

 

Company calculates an incremental borrowing rate using a portfolio approach. The weighted average expected long-termincremental borrowing rate of return of plan assets was 6.0% in 2017, 6.5% for 2016 and 6.5% in 2015. This rate reflects an estimate of long-term future returns foris calculated using the pension plan assets. This estimate is primarily a function of the asset classes (equities versus fixed income) in which the pension plan assets are investedcontractual lease term and the analysis of past performance of these asset classes over a long period of time. This analysis includes expected long-term inflation and the risk premiums associated with equity and fixed income investments. See Note 21 to the consolidated financial statements for the details by asset type of the Company’s pension plan assets and the weighted average expected long-term rate of return of each asset type. The actual return on pension plan assets were gains of 14.5% in 2017, 7.2% in 2016 and 0.7% in 2015.

The Company sponsors a postretirement health care plan for employees meeting specified qualifying criteria. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the net periodic postretirement benefit cost and postretirement benefit obligation for this plan. These factors include assumptions about the discount rate and the expected growth rate for the cost of health care benefits. In addition, the Company uses subjective factors such as withdrawal and mortality rates to estimate the projected liability under this plan. The actuarial assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants.borrowing rate.

•Recognizing leases: The Company does not pre-fund its postretirement benefits and has the right to modify or terminate certainrecognize leases with a contractual term of these benefits in the future.

The discount rate assumption, the annual health care cost trend and the ultimate trend rate for health care costs are key estimates which can have a significant impactless than 12 months on the net periodic postretirement benefit cost and postretirement obligation in future periods. The Company annually determines the health care cost trend based on recent actual medical trend experience and projected experience for subsequent years.

The discount rate assumptions used to determine the pension and postretirement benefit obligations are based on the annual yield on long-term corporate bonds as of each plan’s measurement date. The discount rate used in determining the postretirement benefit obligation was 3.72% in 2017, 4.36% in 2016 and 4.53% in 2015. The discount rate was derived using the Aon/Hewitt AA above median yield curve. Projected benefit payouts for each plan were matched to the Aon/Hewitt AA above median yield curve and an equivalent flat rate was derived.

A 0.25% increase or decrease in the discount rate assumption would have impacted the postretirement benefit obligation and service cost and interest cost of the Company’s postretirement benefit plan as follows:

(in thousands)

 

0.25% Increase

 

 

0.25% Decrease

 

Increase (decrease) in:

 

 

 

 

 

 

 

 

Postretirement benefit obligation at December 31, 2017

 

$

(2,176

)

 

$

2,289

 

Service cost and interest cost in 2017

 

 

(207

)

 

 

217

 


A 1% increase or decrease in the annual health care cost trend would have impacted the postretirement benefit obligation and service cost and interest cost of the Company’s postretirement benefit plan as follows:

(in thousands)

 

1% Increase

 

 

1% Decrease

 

Increase (decrease) in:

 

 

 

 

 

 

 

 

Postretirement benefit obligation at December 31, 2017

 

$

9,389

 

 

$

(8,323

)

Service cost and interest cost in 2017

 

 

668

 

 

 

(593

)

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for employee share-based transactions including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new guidance is effective for annual and interim periods beginning after December 15, 2016. The Company adopted this guidance in the first quarter of 2017 and there was no impact to the Company’s consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory.” The new guidance requires an entity to measure most inventory “at lower of cost and net realizable value” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The new guidance is effective for annual and interim periods beginning after December 15, 2016. The Company adopted this guidance in the first quarter of 2017 and there was no material impact to the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In February 2018, the FASB issued ASU 2018‑02 “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (“Tax Act”). The new guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years and can be early adopted. The Company is still evaluating the impacts of this standard should it choose to make this reclassification.

In March 2017, the FASB issued ASU 2017‑07 “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which requires that the service cost component of the Company’s net periodic pension cost and net periodic postretirement benefit cost be included in the same line item as other compensation costs arising from services rendered by employees, with the non-service cost components of net periodic benefit cost being classified outside of a subtotal of income from operations. Of the components of net periodic benefit cost, only the service cost component will be eligible for asset capitalization. The new guidance is effective for annual periods beginning after December 31, 2017, including interim periods within those annual periods. The Company will adopt the new accounting standards on January 1, 2018 using the practical expedient which allows entities to use information previously disclosed in their pension and other postretirement benefit plans note as the estimation basis to apply the retrospective presentation requirements in ASU 2017-07.

For 2017 and 2016, the Company expects to reclassify $5.4 million and $3.3 million, respectively, related to its non-service cost components of net periodic benefit cost and other benefit plan charges from income from operations to other income (expense), net in the consolidated financial statements. The Company will record the service cost component of net periodic benefit cost in selling, delivery and administrative expenses in the consolidated financial statements. In 2018, the Company expects to record service cost of $7.7 million and $2.7 million related to its non-service cost components of net periodic benefit cost and other benefit plan charges, respectively.

In January 2017, the FASB issued ASU 2017-04 “Simplifying the Test for Goodwill Impairment,” which simplifies how an entity is required to test goodwill for impairment by eliminating step 2 from the goodwill impairment test, which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. Under the new guidance, entities should instead perform annual or interim goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the excess of the carrying amount over the fair value of the respective reporting unit. The new guidance is effective for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and can be early adopted. The Company does not anticipate the adoption of this guidance will have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01 “Clarifying the Definition of a Business,” which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The new guidance is effective for annual periods beginning after December 15, 2017, including


interim periods within those periods. The impact to the Company’s consolidated financial statements will depend on the facts and circumstances of any specific future transactions.

In February 2016, the FASB issued ASU 2016-02 “Leases,” which requires lessees to recognize a right-to-use asset and a lease liability for virtually all leases (other than leases meeting the definition of a short-term lease). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods beginning the following fiscal year. The Company is in the process of evaluating the impact of the new guidance on the Company’s consolidated financial statements and anticipates this impact will be material to its consolidated balance sheets. Additionally,Lease expense for these short-term leases is expensed on a straight-line basis over the lease term.

•Including rent increases or escalation clauses: Certain leases contain scheduled rent increases or escalation clauses, which can be based on the Consumer Price Index or other rates. The Company assesses each contract individually and applies the appropriate variable payments based on the terms of the agreement.
•Including renewal options and/or purchase options: Certain leases include renewal options to extend the lease term and/or purchase options to purchase the leased asset. The Company assesses these options using a threshold of reasonably certain, which is a high threshold and, therefore, the majority of the Company’s leases do not include renewal periods or purchase options for the measurement of the right-of-use asset and the associated lease liability. For leases the Company is evaluatingreasonably certain to renew or purchase, those options are included within the impactslease term and, therefore, included in the measurement of the standard beyond accounting, including system, data and process changes required to comply with the standard.

In January 2016, the FASB issued ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities,” which revises the classification and measurement of investments in equity securitiesright-of-use asset and the presentation of certain fair value changesassociated lease liability.

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•Including options to terminate: Certain leases include the option to terminate the lease prior to its scheduled expiration. This allows a contractually bound party to terminate its obligation under the lease contract, typically in return for an agreed-upon financial liabilities measured at fair value.consideration. The new guidance is effective for annualterms and interim periods beginning after December 31, 2017. The Company will adopt the new accounting standards on January 1, 2018 and does not anticipate the adoption of this guidance will have a material impact on its consolidated financial statements.

Over the past several years, the FASB has issued several accounting standards for revenue recognition:

ASU 2014‑09 “Revenue from Contracts with Customers” was issued in May 2014, which was originally going to be effective for annual and interim periods beginning after December 15, 2016.

ASU 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferralconditions of the Effective Date” was issued in August 2015, which deferred the effective date to annual and interim periods beginning after December 15, 2017.

termination options vary by contract.

ASU 2016-08 “Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net)” was issued in March 2016, which amended certain aspects of ASU 2014‑09.

ASU 2016-11 “Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting” was issued in May 2016, which amended certain aspects of ASU 2014‑09.

ASU 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” was issued in May 2016, which amended certain aspects of ASU 2014‑09.

ASU 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” was issued in December 2016, which clarified the new revenue standard and corrected unintended application of the guidance.

The Company will adopt the new accounting standards on January 1, 2018 using a modified retrospective approach. The Company is in the process of finalizing its assessment of the impact of the new guidance on the Company’s consolidated financial statements. The approach the Company took during the assessment process was identifying and performing detailed walkthroughs of key revenue streams, including high level contract review, then performing detailed contract reviews for all revenue streams in order to evaluate revenue recognition requirements and prepare an implementation work plan. Based on the Company’s current assessment, it does not expect this guidance to have a material impact on the Company’s consolidated financial statements. As the Company completes its overall assessment, the Company will identify and implement changes to its accounting policies and internal controls to support the new revenue recognition and disclosure requirements.



Cautionary Information Regarding Forward-Looking Statements

Certain statements contained in this Report,•Including residual value guarantees, restrictions or in other public filings, press releases, or other written or oral communications made by Coca‑Cola Bottling Co. Consolidated or its representatives, which are not historical facts, are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address, among other things, Company plans, activities or events which the Company expects will or may occur in the future and may include express or implied projections of revenue or expenditures; statements of plans and objectives for future operations, growth or initiatives; statements of future economic performance, including, but not limited to, the state of the economy, capital investment and financing plans, net sales, cost of sales, S,D&A expenses, gross profit, income tax rates, earnings per diluted share, dividends, pension plan contributions, estimated acquisition related contingent consideration payments; or statements regarding the outcome or impact of certain new accounting pronouncements and pending or threatened litigation.

the Company’s beliefs and estimates regarding the impact of the adoption of certain new accounting pronouncements, including its belief that the adoption of ASU 2016-02 issued by the FASB in February 2016 will have a material impact on its consolidated balance sheets;

the Company’s expectation that certain amounts of goodwill will, or will not, be deductible for tax purposes;

the Company’s belief that SAC, whose debt the Company guarantees, has sufficient assets and the ability to adjust selling prices of its products to adequately mitigate the risk of material loss from the Company’s guarantee and that the cooperative will perform its obligations under its debt commitments;

the Company’s belief that it has, and that other manufacturers from whom the Company purchases finished goods have, adequate production capacity to meet sales demand for sparkling and still beverages during peak periods;

the Company’s belief that the ultimate disposition of various claims and legal proceedings which have arisen in the ordinary course of its business will not have a material adverse effect on its financial condition, cash flows or results of operations and that no material amount of loss in excess of recorded amounts is reasonably possible as a result of these claims and legal proceedings;

the Company’s belief that it is competitive in its territories with respect to the principal methods of competition in the nonalcoholic beverage industry and that sufficient competition exists in each of the exclusive geographic territories in which it operates to permit exclusive manufacturing, distribution and sales rights under the United States Soft Drink Interbrand Competition Act;

the Company’s belief that its facilities are all in good condition and are adequate for the Company’s operations as presently conducted;

the Company’s belief that certain non-GAAP financial measures provide users with additional meaningful financial information that should be considered when assessing the Company’s ongoing performance, including information which the Company believes is helpful in the evaluation of its cash sources and uses, capital structure and financial leverage;

the Company’s belief that it has sufficient sources of capital available to refinance its maturing debt, finance its business plan, meet its working capital requirements and maintain an appropriate level of capital spending for at least the next 12 months;

the Company’s belief that a sustained and planned charitable giving program to support communities is an essential component of the success of its brand and, by extension, its sales, and the Company’s intention to continue its charitable contributions in future years, subject to its financial performance and other business factors;

the Company’s belief that all of the banks participating in the Revolving Credit Facility have the ability to and will meet any funding requests from the Company;

the Company’s intention to repay the $15 million that will become due under the Term Loan Facility in fiscal 2018 through use of its Revolving Credit Facility;

the Company’s estimate of the useful lives of certain acquired intangible assets and property, plant and equipment;

the Company’s estimate that a 10% increase in the market price of certain commodities included as part of its raw materials over the current market prices would cumulatively increase costs during the next 12 months by approximately $47.6 million, assuming no change in volume;

the Company’s expectation that the amount of uncertain tax positions may change over the next 12 months but that such changes will not have a significant impact on the consolidated financial statements;

the Company’s estimate of the impact of the Tax Act and its belief that any final amount may differ, possibly materially, due to changes in estimates, interpretations and assumptions, changes in IRS interpretations, issuance of new guidance, legislative actions, changes in accounting standards or related interpretation in response to the Tax Act and future actions by states within the U.S.;

the Company’s belief that certain system governance initiatives will benefit the Company and the Coca‑Cola system, but that the failure of such mechanisms to function efficiently could impair the Company’s ability to realize the intended benefits of such initiatives;

the Company’s belief that it has taken the necessary steps to mitigate risk associated with a phased cut-over to the CONA System;


•

the Company’s expectation that certain territories of CCR will be sold to bottlers that are neither members of CONA nor users of the CONA System and that the transition of all its locations to the CONA System will be completed by the end of fiscal 2018;

the Company’s belief that innovation of both new brands and packages will continue to be important to the Company’s overall revenue;

the Company’s estimates of certain inputs used in its calculations, including estimated rates of return, estimates of bad debts and amounts that will ultimately be collected, and estimates of inputs used in the calculation and adjustment of the fair value of its acquisition related contingent consideration liability related to the Expansion Territories, such as the amounts that will be paid by the Company in the future under the CBA and the Company’s WACC;

the Company’s belief that, assuming no impairment of distribution agreements, net, amortization expense in future years based upon recorded amounts as of December 31, 2017 will be $23.6 million for each year 2018 through 2022;

the Company’s belief that, assuming no impairment of customer lists and other identifiable intangible assets, net, amortization expense in future years based upon recorded amounts as of December 31, 2017 will be $1.8 million for each year 2018 through 2022;

the Company’s belief that the range of undiscounted amounts it could pay annually under the acquisition related contingent consideration arrangements for the System Transformation Transactions is expected to be between $23 million and $47 million;

the Company’s belief that the range of its income tax payments is expected to be between $5 million and $15 million in 2018;

the Company’s belief that it expects to record service cost of $7.7 million and $2.7 million related to its non-service cost components of net periodic benefit cost and other benefit plan charges, respectively, in 2018;

the Company’s belief that the covenants in the Revolving Credit Facility, the Term Loan Facility and the Private Shelf Facility will not restrict its liquidity or capital resources;

the Company’s belief that, based upon its periodic assessments of the financial condition of the institutions with which it maintains cash deposits, its risk of loss from the use of such major banks is minimal;

the Company’s belief that other parties to certain of its contractual arrangements will perform their obligations;

the Company’s belief that cash contributions to the two Company-sponsored pension plans is expected to be in the range of $10 million to $20 million in 2018;

the Company’s expectation that postretirement medical care payments will be approximately $3.7 million in 2018;

the Company’s expectation that it will not withdraw from its participation in the Employers-Teamsters Local Union Nos. 175 and 505 Pension Fund;

the Company’s belief that additions to property, plant and equipment are expected to be in the range of $200 million to $230 million in 2018;

the Company’s belief that it has adequately provided for any assessments likely to result from audits by tax authorities in the jurisdictions in which the Company conducts business;

the Company’s expectations regarding potential changes in the levels of marketing funding support, external advertising and marketing spending from The Coca‑Cola Company and other beverage companies;

the Company’s expectation that new product introductions, packaging changes and sales promotions will continue to require substantial expenditures;

the Company’s belief that compliance with environmental laws will not have a material adverse effect on its consolidated financial statements or competitive position;

the Company’s belief that the majority of its deferred tax assets will be realized;

the Company’s belief that key priorities include territory and manufacturing integration, revenue management, product innovation and beverage portfolio expansion, distribution cost management and productivity; and

the Company’s hypothetical calculation that, if market interest rates average 1% more over the next twelve months than the interest rates as of December 31, 2017, interest expense for the next twelve months would increase by approximately $5.1 million, assuming no changes in the Company’s financial structure.

These forward-looking statements may be identified by the use of the words “believe,” “plan,” “estimate,” “expect,” “anticipate,” “probably,” “should,” “project,” “intend,” “continue,” and other similar terms and expressions. Various risks, uncertainties and other factors may cause the Company’s actual results to differ materially from those expressed or implied in any forward-looking statements. Factors, uncertainties and risks that may result in actual results differing from such forward-looking information include, but are not limited to, those listed in Part I, “Item 1A. Risk Factors” of this Form 10‑K, as well as other factors discussed throughout this Report, including, without limitation, the factors described under “Critical Accounting Policies and Estimates” in Part I, Item 7 of this Form 10‑K, or in other filings or statements made by the Company. All of the forward-looking statements in this Report and other documents or statements are qualified by these and other factors, risks and uncertainties.

Caution should be taken not to place undue reliance on the forward-looking statements included in this Report. The Company assumes no obligation to update any forward-looking statements, even if experience or future changes make it clear that projected results


expressed or implied in such statements will not be realized, except as may be required by law. In evaluating forward-looking statements, these risks and uncertainties should be considered, together with the other risks described from time to time in the Company’s other reports and documents filed with the SEC.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to certain market risks that arise in the ordinary course of business. The Company may enter into derivative financial instrument transactions to manage or reduce market risk. The Company does not enter into derivative financial instrument transactions for trading or speculative purposes. A discussion of the Company’s primary market risk exposure and interest rate risk is presented below.

Debt and Derivative Financial Instruments

The Company is subject to interest rate risk on its floating rate debt, including the Revolving Credit Facility and the Term Loan Facility. Assuming no changes in the Company’s financial structure, if market interest rates average 1% more over the next twelve months than the interest rates as of December 31, 2017, interest expense for the next twelve months would increase by approximately $5.1 million. This amount was determined by calculating the effect of the hypothetical interest rate on the Company’s variable rate debt. This calculated, hypothetical increase in interest expense for the following twelve months may be different from the actual increase in interest expense from a 1% increase in interest rates due to varying interest rate reset dates on the Company’s floating debt.

covenants:The Company’s acquisition related contingent consideration, which is adjusted to fair value at each reporting period, is also impacted by changes in interest rates. The risk-free interest rate used to estimate the Company’s WACC is a component of the discount rate used to calculate the present value of future cash flows due under the CBA. As a result, any changes in the underlying risk-free interest rates will impact the fair value of the acquisition related contingent consideration and could materially impact the amount of noncash expense (or income) recorded each reporting period.

Raw Material and Commodity Prices

The Company is also subject to commodity price risk arising from price movements for certain commodities included as part of its raw materials. The Company manages this commodity price risk in some cases by entering into contracts with adjustable prices to hedge commodity purchases. The Company periodically uses derivative commodity instruments in the management of this risk. The Company estimates a 10% increase in the market prices of commodities included as part of its raw materials over the current market prices would cumulatively increase costs during the next 12 months by approximately $47.6 million assuming no change in volume.

Fees paid by the Company forlease agreements to hedge commodity purchases are amortized over the corresponding period of the instruments. The Company accounts for commodity hedges on a mark-to-market basis with any expense or income being reflected as an adjustment to cost of sales or S,D&A expenses.

Effect of Changing Prices

The annual rate of inflation in the United States, as measured by year-over-year changes in the consumer price index, was 2.1% in 2017, 2.1% in 2016 and 0.7% in 2015. Inflation in the prices of those commodities important to the Company’s business is reflected in changes in the consumer price index, but commodity prices are volatile and in recent years have moved at a faster rate of change than the consumer price index.

The principal effect of inflation in both commodity and consumer prices on the Company’s operating results is to increase costs, both of goods sold and S,D&A. Although the Company can offset these cost increases by increasing selling prices for its products, consumers may not have the buying power to cover these increased costs and may reduce their volume of purchases of those products. In that event, selling price increases may not be sufficient to offset completely the Company’s cost increases.


Item 8.

Financial Statements and Supplementary Data

COCA-COLA BOTTLING CO. CONSOLIDATED

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

Fiscal Year

 

(in thousands, except per share data)

 

2017

 

 

2016

 

 

2015

 

Net sales

 

$

4,323,668

 

 

$

3,156,428

 

 

$

2,306,458

 

Cost of sales

 

 

2,782,721

 

 

 

1,940,706

 

 

 

1,405,426

 

Gross profit

 

 

1,540,947

 

 

 

1,215,722

 

 

 

901,032

 

Selling, delivery and administrative expenses

 

 

1,444,768

 

 

 

1,087,863

 

 

 

802,888

 

Income from operations

 

 

96,179

 

 

 

127,859

 

 

 

98,144

 

Interest expense, net

 

 

41,869

 

 

 

36,325

 

 

 

28,915

 

Other income (expense), net

 

 

(4,197

)

 

 

1,870

 

 

 

(3,576

)

Gain (loss) on exchange transactions

 

 

12,893

 

 

 

(692

)

 

 

8,807

 

Gain on sale of business

 

 

-

 

 

 

-

 

 

 

22,651

 

Bargain purchase gain, net of tax of $1,265

 

 

-

 

 

 

-

 

 

 

2,011

 

Income before taxes

 

 

63,006

 

 

 

92,712

 

 

 

99,122

 

Income tax expense (benefit)

 

 

(39,841

)

 

 

36,049

 

 

 

34,078

 

Net income

 

 

102,847

 

 

 

56,663

 

 

 

65,044

 

Less: Net income attributable to noncontrolling interest

 

 

6,312

 

 

 

6,517

 

 

 

6,042

 

Net income attributable to Coca-Cola Bottling Co. Consolidated

 

$

96,535

 

 

$

50,146

 

 

$

59,002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

$

10.35

 

 

$

5.39

 

 

$

6.35

 

Weighted average number of Common Stock shares outstanding

 

 

7,141

 

 

 

7,141

 

 

 

7,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class B Common Stock

 

$

10.35

 

 

$

5.39

 

 

$

6.35

 

Weighted average number of Class B Common Stock shares outstanding

 

 

2,188

 

 

 

2,168

 

 

 

2,147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

$

10.30

 

 

$

5.36

 

 

$

6.33

 

Weighted average number of Common Stock shares outstanding – assuming dilution

 

 

9,369

 

 

 

9,349

 

 

 

9,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class B Common Stock

 

$

10.29

 

 

$

5.35

 

 

$

6.31

 

Weighted average number of Class B Common Stock shares outstanding – assuming dilution

 

 

2,228

 

 

 

2,208

 

 

 

2,187

 

See accompanying notes to consolidated financial statements.


COCA-COLA BOTTLING CO. CONSOLIDATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Net income

 

$

102,847

 

 

$

56,663

 

 

$

65,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Defined benefit plans reclassification including pension costs:

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial gain (loss)

 

 

(6,225

)

 

 

(4,150

)

 

 

6,624

 

Prior service costs

 

 

18

 

 

 

17

 

 

 

21

 

Postretirement benefits reclassification including benefit costs:

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial gain (loss)

 

 

592

 

 

 

(4,286

)

 

 

2,934

 

Prior service costs

 

 

(1,935

)

 

 

(2,065

)

 

 

(2,068

)

Adjustment due to the divestiture of the Deep South and Somerset Exchange Business and the Florence and Laurel Distribution Business

 

 

6,220

 

 

 

-

 

 

 

-

 

Foreign currency translation adjustment

 

 

25

 

 

 

(6

)

 

 

(4

)

Other comprehensive income (loss), net of tax

 

 

(1,305

)

 

 

(10,490

)

 

 

7,507

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

101,542

 

 

 

46,173

 

 

 

72,551

 

Less: Comprehensive income attributable to noncontrolling interest

 

 

6,312

 

 

 

6,517

 

 

 

6,042

 

Comprehensive income attributable to Coca-Cola Bottling Co. Consolidated

 

$

95,230

 

 

$

39,656

 

 

$

66,509

 

See accompanying notes to consolidated financial statements.


COCA-COLA BOTTLING CO. CONSOLIDATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

December 31, 2017

 

 

January 1, 2017

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,902

 

 

$

21,850

 

Accounts receivable, trade

 

 

396,022

 

 

 

271,661

 

Allowance for doubtful accounts

 

 

(7,606

)

 

 

(4,448

)

Accounts receivable from The Coca-Cola Company

 

 

65,996

 

 

 

67,591

 

Accounts receivable, other

 

 

38,960

 

 

 

29,770

 

Inventories

 

 

183,618

 

 

 

143,553

 

Prepaid expenses and other current assets

 

 

100,646

 

 

 

63,834

 

Total current assets

 

 

794,538

 

 

 

593,811

 

Property, plant and equipment, net

 

 

1,031,388

 

 

 

812,989

 

Leased property under capital leases, net

 

 

29,837

 

 

 

33,552

 

Other assets

 

 

116,209

 

 

 

86,091

 

Franchise rights

 

 

-

 

 

 

533,040

 

Goodwill

 

 

169,316

 

 

 

144,586

 

Distribution agreements, net

 

 

913,352

 

 

 

234,988

 

Customer lists and other identifiable intangible assets, net

 

 

18,320

 

 

 

10,427

 

Total assets

 

$

3,072,960

 

 

$

2,449,484

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of obligations under capital leases

 

$

8,221

 

 

$

7,527

 

Accounts payable, trade

 

 

197,049

 

 

 

116,821

 

Accounts payable to The Coca-Cola Company

 

 

171,042

 

 

 

135,155

 

Other accrued liabilities

 

 

185,530

 

 

 

133,885

 

Accrued compensation

 

 

72,484

 

 

 

60,880

 

Accrued interest payable

 

 

5,126

 

 

 

3,639

 

Total current liabilities

 

 

639,452

 

 

 

457,907

 

Deferred income taxes

 

 

112,364

 

 

 

174,854

 

Pension and postretirement benefit obligations

 

 

118,392

 

 

 

126,679

 

Other liabilities

 

 

620,579

 

 

 

378,572

 

Obligations under capital leases

 

 

35,248

 

 

 

41,194

 

Long-term debt

 

 

1,088,018

 

 

 

907,254

 

Total liabilities

 

 

2,614,053

 

 

 

2,086,460

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Convertible Preferred Stock, $100.00 par value:  authorized - 50,000 shares; issued - none

 

 

 

 

 

 

 

 

Nonconvertible Preferred Stock, $100.00 par value:  authorized - 50,000 shares; issued - none

 

 

 

 

 

 

 

 

Preferred Stock, $.01 par value:  authorized - 20,000,000 shares; issued - none

 

 

 

 

 

 

 

 

Common Stock, $1.00 par value:  authorized - 30,000,000 shares; issued - 10,203,821 shares

 

 

10,204

 

 

 

10,204

 

Class B Common Stock, $1.00 par value:  authorized - 10,000,000 shares; issued-2,820,836 and 2,799,816 shares, respectively

 

 

2,819

 

 

 

2,798

 

Class C Common Stock, $1.00 par value:  authorized - 20,000,000 shares; issued - none

 

 

 

 

 

 

 

 

Capital in excess of par value

 

 

120,417

 

 

 

116,769

 

Retained earnings

 

 

388,718

 

 

 

301,511

 

Accumulated other comprehensive loss

 

 

(94,202

)

 

 

(92,897

)

Treasury stock, at cost:  Common Stock - 3,062,374 shares

 

 

(60,845

)

 

 

(60,845

)

Treasury stock, at cost:  Class B Common Stock - 628,114 shares

 

 

(409

)

 

 

(409

)

Total equity of Coca-Cola Bottling Co. Consolidated

 

 

366,702

 

 

 

277,131

 

Noncontrolling interest

 

 

92,205

 

 

 

85,893

 

Total equity

 

 

458,907

 

 

 

363,024

 

Total liabilities and equity

 

$

3,072,960

 

 

$

2,449,484

 

See accompanying notes to consolidated financial statements.


COCA-COLA BOTTLING CO. CONSOLIDATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

102,847

 

 

$

56,663

 

 

$

65,044

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

 

150,422

 

 

 

111,613

 

 

 

78,096

 

Amortization of intangible assets and deferred proceeds, net

 

 

18,419

 

 

 

5,010

 

 

 

2,800

 

Deferred income taxes

 

 

(58,111

)

 

 

42,942

 

 

 

10,408

 

Loss on sale of property, plant and equipment

 

 

4,492

 

 

 

2,892

 

 

 

1,268

 

Impairment of property, plant and equipment

 

 

-

 

 

 

382

 

 

 

148

 

(Gain) loss on exchange transactions

 

 

(12,893

)

 

 

692

 

 

 

(8,807

)

Gain on sale of business

 

 

-

 

 

 

-

 

 

 

(22,651

)

Bargain purchase gain, net of tax of $1,265

 

 

-

 

 

 

-

 

 

 

(2,011

)

Proceeds from bottling agreements conversion

 

 

91,450

 

 

 

-

 

 

 

-

 

Proceeds from Legacy Facilities Credit

 

 

30,647

 

 

 

-

 

 

 

-

 

Amortization of debt costs

 

 

1,082

 

 

 

1,855

 

 

 

2,011

 

Stock compensation expense

 

 

7,922

 

 

 

7,154

 

 

 

7,300

 

Fair value adjustment of acquisition related contingent consideration

 

 

3,226

 

 

 

(1,910

)

 

 

3,576

 

System Transformation Transactions settlements

 

 

(6,996

)

 

 

-

 

 

 

-

 

Gain on acquisition of Southeastern Container preferred shares in CCR redistribution

 

 

(6,012

)

 

 

-

 

 

 

-

 

Change in current assets less current liabilities (exclusive of acquisitions)

 

 

259

 

 

 

(39,909

)

 

 

(18,262

)

Change in other noncurrent assets (exclusive of acquisitions)

 

 

(17,916

)

 

 

(14,564

)

 

 

(4,292

)

Change in other noncurrent liabilities (exclusive of acquisitions)

 

 

(1,100

)

 

 

(10,850

)

 

 

(6,214

)

Other

 

 

78

 

 

 

25

 

 

 

(124

)

Total adjustments

 

 

204,969

 

 

 

105,332

 

 

 

43,246

 

Net cash provided by operating activities

 

$

307,816

 

 

$

161,995

 

 

$

108,290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of Expansion Territories, net of cash acquired and settlements

 

$

(265,060

)

 

$

(272,637

)

 

$

(71,209

)

Additions to property, plant and equipment (exclusive of acquisitions)

 

 

(176,601

)

 

 

(172,586

)

 

 

(163,887

)

Net cash paid for exchange transactions

 

 

(19,393

)

 

 

-

 

 

 

(10,498

)

Glacéau distribution agreement consideration

 

 

(15,598

)

 

 

-

 

 

 

-

 

Portion of Legacy Facilities Credit related to Mobile, Alabama facility

 

 

12,364

 

 

 

-

 

 

 

-

 

Proceeds from cold drink equipment

 

 

8,400

 

 

 

-

 

 

 

-

 

Investment in CONA Services LLC

 

 

(3,615

)

 

 

(7,875

)

 

 

-

 

Proceeds from the sale of property, plant and equipment

 

 

608

 

 

 

1,072

 

 

 

1,891

 

Proceeds from the sale of BYB Brands, Inc.

 

 

-

 

 

 

-

 

 

 

26,360

 

Net cash used in investing activities

 

$

(458,895

)

 

$

(452,026

)

 

$

(217,343

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of Senior Notes

 

$

125,000

 

 

$

-

 

 

$

349,913

 

Borrowings under Term Loan Facility

 

 

-

 

 

 

300,000

 

 

 

-

 

Borrowing under Revolving Credit Facility

 

 

448,000

 

 

 

410,000

 

 

 

334,000

 

Payments on Revolving Credit Facility

 

 

(393,000

)

 

 

(258,000

)

 

 

(405,000

)

Payments on Senior Notes

 

 

-

 

 

 

(164,757

)

 

 

(100,000

)

Cash dividends paid

 

 

(9,328

)

 

 

(9,307

)

 

 

(9,287

)

Payment of acquisition related contingent consideration

 

 

(16,738

)

 

 

(13,550

)

 

 

(4,039

)

Principal payments on capital lease obligations

 

 

(7,485

)

 

 

(7,063

)

 

 

(6,555

)

Other

 

 

(318

)

 

 

(940

)

 

 

(3,576

)

Net cash provided by financing activities

 

$

146,131

 

 

$

256,383

 

 

$

155,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

$

(4,948

)

 

$

(33,648

)

 

$

46,403

 

Cash at beginning of year

 

 

21,850

 

 

 

55,498

 

 

 

9,095

 

Cash at end of year

 

$

16,902

 

 

$

21,850

 

 

$

55,498

 

See accompanying notes to consolidated financial statements.


COCA-COLA BOTTLING CO. CONSOLIDATED

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

 

Common Stock

 

 

Class B Common Stock

 

 

Capital in Excess of Par Value

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Loss

 

 

Treasury Stock - Common Stock

 

 

Treasury Stock - Class B Common Stock

 

 

Total

Equity

of Coca-Cola Bottling Co. Consolidated

 

 

Noncontrolling

Interest

 

 

Total

Equity

 

Balance on December 28, 2014

 

$

10,204

 

 

$

2,756

 

 

$

110,860

 

 

$

210,957

 

 

$

(89,914

)

 

$

(60,845

)

 

$

(409

)

 

$

183,609

 

 

$

73,334

 

 

$

256,943

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

59,002

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

59,002

 

 

 

6,042

 

 

 

65,044

 

Other comprehensive income (loss), net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,507

 

 

 

-

 

 

 

-

 

 

 

7,507

 

 

 

-

 

 

 

7,507

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common ($1.00 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,141

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,141

)

 

 

-

 

 

 

(7,141

)

Class B Common ($1.00 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,146

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,146

)

 

 

-

 

 

 

(2,146

)

Issuance of 20,920 shares of Class B Common Stock

 

 

-

 

 

 

21

 

 

 

2,204

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,225

 

 

 

-

 

 

 

2,225

 

Balance on January 3, 2016

 

$

10,204

 

 

$

2,777

 

 

$

113,064

 

 

$

260,672

 

 

$

(82,407

)

 

$

(60,845

)

 

$

(409

)

 

$

243,056

 

 

$

79,376

 

 

$

322,432

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

50,146

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

50,146

 

 

 

6,517

 

 

 

56,663

 

Other comprehensive income (loss), net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,490

)

 

 

-

 

 

 

-

 

 

 

(10,490

)

 

 

-

 

 

 

(10,490

)

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common ($1.00 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,141

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,141

)

 

 

-

 

 

 

(7,141

)

Class B Common ($1.00 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,166

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,166

)

 

 

-

 

 

 

(2,166

)

Issuance of 20,920 shares of Class B Common Stock

 

 

-

 

 

 

21

 

 

 

3,705

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,726

 

 

 

-

 

 

 

3,726

 

Balance on January 1, 2017

 

$

10,204

 

 

$

2,798

 

 

$

116,769

 

 

$

301,511

 

 

$

(92,897

)

 

$

(60,845

)

 

$

(409

)

 

$

277,131

 

 

$

85,893

 

 

$

363,024

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

96,535

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

96,535

 

 

 

6,312

 

 

 

102,847

 

Other comprehensive income (loss), net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,305

)

 

 

-

 

 

 

-

 

 

 

(1,305

)

 

 

-

 

 

 

(1,305

)

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common ($1.00 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,141

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,141

)

 

 

-

 

 

 

(7,141

)

Class B Common ($1.00 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,187

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,187

)

 

 

-

 

 

 

(2,187

)

Issuance of 21,020 shares of Class B Common Stock

 

 

-

 

 

 

21

 

 

 

3,648

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,669

 

 

 

-

 

 

 

3,669

 

Balance on December 31, 2017

 

$

10,204

 

 

$

2,819

 

 

$

120,417

 

 

$

388,718

 

 

$

(94,202

)

 

$

(60,845

)

 

$

(409

)

 

$

366,702

 

 

$

92,205

 

 

$

458,907

 

See accompanying notes to consolidated financial statements.

65

COCA-COLA BOTTLING CO. CONSOLIDATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.

Description of Business and Summary of Significant Accounting Policies

Description of Business

Coca‑Cola Bottling Co. Consolidated (the “Company”) produces, markets and distributes nonalcoholic beverages, primarily products of The Coca‑Cola Company, and is the largest independent Coca‑Cola bottler in the United States. Approximately 93% of the Company’s total bottle/can sales volume to retail customers consists of products of The Coca‑Cola Company, which include some of the most recognized and popular beverage brands in the world. The Company also distributes products for several other beverage brands including Dr Pepper and Monster Energy. The Company manages its business on the basis of four operating segments, Nonalcoholic Beverages and three additional operating segments that do not meet the quantitative thresholds for separate reporting, either individuallycontain residual value guarantees, restrictions or in the aggregate, and therefore have been combined into “All Other.”

Piedmont Coca-Cola Bottling Partnership (“Piedmont”) is the Company’s only subsidiary that has a significant third-party noncontrolling interest. Piedmont distributes and markets nonalcoholic beverages in portions of North Carolina and South Carolina. The Company provides a portion of these nonalcoholic beverage products to Piedmont at cost and receives a fee for managing the operations of Piedmont pursuant to a management agreement. Refer to Note 2 for additional information.

As part of The Coca‑Cola Company’s plans to refranchise its North American bottling territories, the Company recently concluded a series of transactions from April 2013 to October 2017 with The Coca‑Cola Company, Coca‑Cola Refreshments USA, Inc. (“CCR”), a wholly-owned subsidiary of The Coca‑Cola Company, and Coca‑Cola Bottling Company United, Inc. (“United”), an independent bottler that is unrelated to the Company, to significantly expand the Company’s distribution and manufacturing operations through the acquisition and exchange of rights to serve distribution territories (the “Expansion Territories”) and related distribution assets, as well as the acquisition and exchange of regional manufacturing facilities (the “Expansion Facilities”) and related manufacturing assets. Refer to Note 3 for additional information.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fiscal Year

The Company’s fiscal year generally ends on the Sunday closest to December 31 of each year. The fiscal years presented are:

The 52-week period ended December 31, 2017 (“2017”)

covenants.

The 52-week period ended January 1, 2017 (“2016”); and


The 53-week period ended January 3, 2016 (“2015”).

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks and cash equivalents, which are highly liquid debt instruments with maturities of less than 90 days. The Company maintains cash deposits with major banks, which, from time to time, may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and believes the risk of any loss is minimal.

Accounts Receivable, Trade

The Company sells its products to mass merchandise retailers, supermarkets retailers, convenience stores and other customers and extends credit, generally without requiring collateral, based on an ongoing evaluation of the customer’s business prospects and financial condition. The Company’s trade accounts receivable are typically collected within 30 days from the date of sale.


Allowance for Doubtful Accounts

The Company evaluates the collectibility of its trade accounts receivable based on a number of factors, including the specific industry in which a particular customer operates. When the Company becomes aware of a customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded to reduce the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, an allowance for doubtful accounts is recorded based on the Company’s recent past loss history and an overall assessment of past due trade accounts receivable outstanding.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first-in, first-out method for finished products and manufacturing materials and on the average cost method for plastic shells, plastic pallets and other inventories.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements on operating leases are depreciated over the shorter of the estimated useful lives or the term of the lease, including renewal options the Company determines are reasonably assured. Additions and major replacements or betterments are added to the assets at cost. Maintenance and repair costs and minor replacements are charged to expense when incurred. When assets are replaced or otherwise disposed, the cost and accumulated depreciation are removed from the accounts and the gains or losses, if any, are reflected in the statement of operations. Gains or losses on the disposal of manufacturing equipment and manufacturing facilities are included in cost of sales. Gains or losses on the disposal of all other property, plant and equipment are included in selling, delivery and administrative (“S,D&A”) expenses.

The Company evaluates the recoverability of the carrying amount of its property, plant and equipment when events or circumstances indicate the carrying amount of an asset or asset group may not be recoverable. These evaluations are performed at a level where independent cash flows may be attributed to either an asset or an asset group. If the Company determines the carrying amount of an asset or asset group is not recoverable based upon the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair value of the long-lived assets.

Leased Property Under Capital Leases

Leased property under capital leases is depreciated using the straight-line method over the lease term.

Internal Use Software


The Company capitalizes costs incurred in the development or acquisition of internal use software. The Company expenses costs incurred in the preliminary project planning stage. Costs, such as maintenance and training, are also expensed as incurred. Capitalized costs are amortized over their estimated useful lives using the straight-line method. Amortization expense for internal use software, which is included in depreciation expense, for internal-use software was $11.9$3.0 million in 2017, $10.92022, $5.4 million in 20162021 and $9.3$6.7 million in 2015.

2020.


Goodwill


All business combinations are accounted for using the acquisition method. Goodwill is tested for impairment annually, or more frequently if facts and circumstances indicate such assets may be impaired. The Company performs its annual goodwill impairment test, which includes a qualitative assessment to determine whether it is more likely than not that the fair value of the goodwill is below its carrying value, as of the first day of the fourth quarter each year, and more often if there are significant changes in business conditions that could result in impairment.

The Company has determined it has


All of the Company’s goodwill resides within one reporting unit within the Nonalcoholic Beverages reportable segment and, therefore, the Company has determined it has one reporting unit for the purpose of assessing goodwill for potential impairment. The Company uses its overall market capitalization as part of its estimate of fair value of the reporting unit and in assessing the reasonableness of the Company’s internal estimates of fair value.



When a quantitative analysis is considered necessary for the annual impairment analysis of goodwill, the Company develops an estimated fair value for the reporting unit considering three different approaches:


•market value, using the Company’s stock price plus outstanding debt;

•discounted cash flow analysis; and

•multiple of earnings before interest, taxes, depreciation and amortization based upon relevant industry data.


The estimated fair value of the reporting unit is then compared to its carrying amount, including goodwill. If the estimated fair value exceeds the carrying amount, goodwill is not considered impaired, and the second step of the impairment test is not necessary.impaired. If the carrying amount, including goodwill, exceeds its estimated fair value, the second step of the impairment test is performed to measure the amount of the impairment, if any. In the second step, a comparison is made between the book value of goodwill and the implied fair value of goodwill. Implied fair value of goodwill is determined by comparing the fair value of the reporting unit to the book value of its net identifiable assets, excluding goodwill. To estimate the implied fair value of goodwill for a reporting unit, the Company assigns the fair value of the assets and liabilities associated with the reporting unit as if the reporting unit had been acquired in a business combination. Anyany excess of the carrying value of goodwill of the reporting unit over its implied fair value is recorded as an impairment.


To the extent the actual and projected cash flows decline in the future or if market conditions or market capitalization significantly deteriorate, the Company may be required to perform an interim impairment analysis that could result in an impairment of goodwill.


During 2022, 2021 and 2020, the Company performed its annual impairment test of goodwill and determined there was no impairment of the carrying value of these assets.

Distribution Agreements and Customer Lists and Other Identifiable Intangible Assets


The Company’s definite-lived intangible assets primarily consist of distribution rightsagreements and customer relationships,lists, which have estimated useful lives of 20 to 40 years and 12five to 2012 years, respectively. These assets are amortized on a straight-line basis over their estimated useful lives.In the first quarter of 2017, the Company converted its franchise rights to distribution rights with an estimated useful life of 40 years.


Acquisition Related Contingent Consideration Liability


The acquisition related contingent consideration liability consists of the estimated amounts due to The Coca‑Cola Company under the Company’s comprehensive beverage agreementagreements (collectively, the “CBA”) with The Coca‑Cola Company and CCR (the “CBA”Coca‑Cola Refreshments USA, Inc. (“CCR”), a wholly owned subsidiary of The Coca‑Cola Company, over the remaining useful life of the related distribution rights intangible assets. Underrights. The CBA relates to a multi-year series of transactions, which were completed in October 2017, through which the Company acquired and exchanged distribution territories and manufacturing plants (the “System Transformation”). Pursuant to the CBA, the Company makesis required to make quarterly acquisition related sub-bottling payments to CCR on a continuing basis in exchange for the grant of exclusive rights to distribute, promote, market and sell certain beveragesthe authorized brands of The Coca‑Cola Company and beveragerelated products in certain distribution territories the Expansion Territories.Company acquired from CCR. This acquisition related contingent consideration is valued
44

using a probability weighted discounted cash flow model based on internal forecasts and the WACCweighted average cost of capital (“WACC”) derived from market data, which are considered Level 3 inputs.


Each reporting period, the Company adjusts its acquisition related contingent consideration liability related to the Expansion Territoriesdistribution territories subject to acquisition related sub-bottling payments to fair value by discounting future expected acquisition related sub-bottling payments required under the CBA using the Company’s estimated WACC. These future expected acquisition related sub-bottling payments extend through the life of the related distribution assets acquired in each Expansion Territory,distribution territory, which is generally 40 years. As a result, the fair value of the acquisition related contingent consideration liability is impacted by the Company’s WACC, management’s estimate of the amountsacquisition related sub-bottling payments that will be paidmade in the future under the CBA and current acquisition related sub-bottling payments (all Level 3 inputs). Changes in any of these Level 3 inputs, particularly the underlying risk-free interest rate used to estimate the Company’s WACC, could result in material changes to the fair value of the acquisition related contingent consideration liability and could materially impact the amount of noncashnon-cash expense (or income) recorded each reporting period.


Pension and Postretirement Benefit Plans


There are two Company-sponsored pension plans. The primary Company-sponsored pension plan (the “Primary Plan”) was frozen as of June 30, 2006 and no benefits accrued to participants after thisthat date. The second Company-sponsored pension plan (the “Bargaining Plan”) is for certain employees under collective bargaining agreements. Benefits under the Bargaining Plan are determined in accordance with negotiated formulas for the respective participants. Contributions to the plans are based on actuarialactuarially determined amounts and are limited to the amounts currently deductible for income tax purposes.

Costs The Company also sponsors a postretirement healthcare plan for employees meeting specified qualifying criteria.


The expense and liability amounts recorded for the benefit plans reflect estimates related to interest rates, investment returns, employee turnover and age at retirement, mortality rates and healthcare costs. Given the anticipated termination of the Primary Plan, the Company determined an appropriate discount rate for the Primary Plan in 2022 based on lump sum segment interest rates, expected lump sum election rates and estimated annuity purchase rates. See Note 16 for additional discussion of the anticipated termination of the Primary Plan. The Company determines an appropriate discount rate annually for the Bargaining Plan and the postretirement healthcare plan based on the Aon AA Above Median yield curve as of the measurement date and reviews the discount rate assumption at the end of each year. The service cost components of the net periodic benefit cost of the plans are charged to current operations, and include severalthe non-service cost components of the net periodic pensionbenefit cost based on actuarial assumptions regarding future expectations of the plans.plans are classified as other expense, net. In addition, certain other union employees are covered by plans provided by their respective union organizations and the Company expenses amounts as paid in accordance with union agreements. The Company recognizes the cost of postretirement benefits, which consist primarily of medical benefits, during employees’ periods of active service.



Amounts recorded for benefit plans reflect estimates related to interest rates, investment returns, employee turnover and health care costs. The discount rate assumptions used to determine the pension and postretirement benefit obligations are based on yield rates available on double-A bonds as of each plan’s measurement date.

Income Taxes


Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating losses and tax credit carryforwards, as well as the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.


A valuation allowance will be provided against deferred tax assets if the Company determines it is more likely than not such assets will not ultimately be realized.


The Company does not recognize a tax benefit unless it concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in the Company’s judgment, is greater than 50 percent50% likely to be realized. The Company records interest and penalties related to uncertain tax positions in income tax expense.


Revenue Recognition

Revenues


The Company’s sales are recognized whendivided into two main categories: (i) bottle/can sales and (ii) other sales. Bottle/can sales include products packaged primarily in plastic bottles and aluminum cans. Bottle/can net pricing is based on the invoice price charged to customers reduced by any promotional allowances. Bottle/can net pricing per unit is impacted by the price charged per package, the sales volume generated for each package and the channels in which those packages are sold. Other sales include sales to other Coca‑Cola bottlers, post-mix sales, transportation revenue and equipment maintenance revenue. Post-mix products are dispensed through equipment that mixes fountain syrups with carbonated or still water, enabling fountain retailers to sell finished products to consumers in cups or glasses.

45

The Company’s contracts are deliveredderived from customer orders, including customer sales incentives, generated through an order processing and replenishment model. Generally, the Company’s service contracts and contracts related to customers and both the title and the risks and benefits of ownership are transferred, price is fixed and determinable, collection is reasonably assured and, in the event of full service vending, when cash is collected from the vending machines. Appropriate provisions are made for uncollectible accounts.

The Company receives service fees from The Coca‑Cola Company for the delivery of fountain syrupspecifically identifiable products to The Coca‑Cola Company’s fountain customers and for the repair of fountain equipment owned by The Coca‑Cola Company. These service fees are recognized as revenue when the respective services are completed. Service revenue represents approximately one percent of net sales, and is presented within the Nonalcoholic Beverages segment.

In addition to delivering its own products, the Company performs freight hauling and brokerage for third parties. The freight charges are recognized as revenue when the delivery is complete. Freight revenue from third parties represents approximately two percent of net sales, and is presented within the All Other segment.

have a single performance obligation. Revenues do not include sales or other taxes collected from customers.

The Company has defined its performance obligations for its contracts as either at a point in time or over time. Bottle/can sales, sales to other Coca‑Cola bottlers and post-mix sales are recognized when control transfers to a customer, which is generally upon delivery and is considered a single point in time (“point in time”).


Other sales, which include revenue for service fees related to the repair of cold drink equipment and delivery fees for freight hauling and brokerage services, are recognized over time (“over time”). Revenues related to cold drink equipment repair are recognized as the respective services are completed using a cost-to-cost input method. Repair services are generally completed in less than one day but can extend up to one month. Revenues related to freight hauling and brokerage services are recognized as the delivery occurs using a miles driven output method. Generally, delivery occurs and freight charges are recognized in the same day. Over time sales orders open at the end of a financial period are not material to the consolidated financial statements.

Marketing Programs and Sales Incentives


The Company participates in various marketing and sales programs with The Coca‑Cola Company, other beverage companies and customers to increase the sale of its products. In addition, coupon programs are deployed on a territory-specific basis. The cost of these various marketing programs and sales incentives with The Coca‑Cola Company and other beverage companies, included as deductions to net sales, totaled $137.3 million in 2017, $117.0 million in 2016 and $71.4 million in 2015. Programs negotiated with customers include arrangements under which allowances can be earned for attaining agreed-upon sales levelslevels. The cost of these various sales incentives is not considered a separate performance obligation and is included as a deduction to net sales.

Allowance payments made to customers can be conditional on the achievement of volume targets and/or marketing commitments. Payments made in advance are recorded as prepayments and amortized in the consolidated statements of operations over the relevant period for participating in specific marketing programs.

which the customer commitment is made. In the event there is no separate identifiable benefit or the fair value of such benefit cannot be established, the amortization of the prepayment is included as a deduction to net sales.


The nature of the Company’s contracts gives rise to several types of variable consideration, including prospective and retrospective rebates. The Company accounts for its prospective and retrospective rebates using the expected value method, which estimates the net price to the customer based on the customer’s expected annual sales volume projections.

Marketing Funding Support


The Company receives marketing funding support payments in cash from The Coca‑Cola Company and other beverage companies. Payments to the Company for marketing programs to promote bottle/can sales volume and fountain syrup sales volume are recognized as a reduction ofto cost of sales, primarily on a per unit basis, as the product is sold. Payments for periodic programs are recognized in the period during which they are earned.


Cash consideration received by a customer from a vendor is presumed to be a reduction of the price of the vendor’s products or services. As such, the cash received is accounted for as a reduction ofto cost of sales unless it is a specific reimbursement of costs or payments for services. Payments the Company receives from The Coca‑Cola Company and other beverage companies for marketing funding support are classified as reductions ofa reduction to cost of sales.



Commodity Derivative Financial Instruments


The Company is subject to the risk of increased costs arising from adverse changes in certain commodity prices. In the normal course of business, the Company manages these risksthis risk through a variety of strategies, including the use of commodity derivative instruments. The Company does not use commodity derivative instruments for trading or speculative purposes. All derivative instruments are recorded at fair value as either assets or liabilities in the Company’s consolidated balance sheets. These commodity derivative instruments are not designated as hedging instruments under GAAP and are used as “economic hedges” to manage certain commodity price risk. DerivativeThe Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk. While the Company would be exposed to credit loss in the event of nonperformance by these counterparties, the Company does not anticipate nonperformance by these counterparties.

Commodity derivative instruments held by the Company are marked to market on a monthly basis and recognized in earnings consistent with the expense classification of the underlying hedged item. Settlements of derivative agreements are included in cash flows from operating activities on the Company’s consolidated statements of cash flows.

The Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk. The Company generally pays a fee for these commodity derivative instruments, which is amortized over the corresponding period of theeach commodity derivative instrument. The Company accounts for itsSettlements of commodity hedges on a mark-to-market basis with any expense or income reflected as an adjustment of related costs whichderivative instruments are included in cash flows from operating activities in the consolidated statements of cash flows.


All commodity derivative instruments are recorded at fair value as either costassets or liabilities in the consolidated balance sheets. The Company has master agreements with the counterparties to its commodity derivative instruments that provide for net settlement of salesderivative transactions. Accordingly, the net amounts of derivative assets are recognized in either prepaid expenses and other current
46

assets or S,D&A expenses.

other assets in the consolidated balance sheets and the net amounts of derivative liabilities are recognized in either other accrued liabilities or other liabilities in the consolidated balance sheets.


Risk Management Programs


The Company uses various insurance structures to manage itscosts related to workers’ compensation, auto liability, medical and other insurable risks. These structures consist of retentions, deductibles, limits and a diverse group of insurers that serve to strategically finance, transfer and mitigate the financial impact of losses. The Company uses commercial insurance for claims as a risk reduction strategylosses to minimize catastrophic losses.the Company. Losses are accrued using assumptions and procedures followed in the insurance industry, then adjusted for company-specific history and expectations.


Cost of Sales

Cost of sales includes the following: raw material costs, manufacturing labor, manufacturing overhead including depreciation expense, manufacturing warehousing costs, shipping and handling costs related to the movement of finished goods from manufacturing locations to sales distribution centers and the purchase of finished goods.


Inputs representing a substantial portion of the Company’s total cost of sales include: (i) sweeteners,purchases of finished products, (ii) packaging materials,raw material costs, including aluminum cans, plastic bottles, carbon dioxide and aluminum cans,sweetener, (iii) concentrate costs and (iii) finished products purchased from other vendors. The Company’s(iv) manufacturing costs, including labor, overhead and warehouse costs. In addition, cost of sales may not be comparable to other peer companies, as some peer companies include allincludes shipping, handling and fuel costs related to theirthe movement of finished products from manufacturing plants to distribution network in costcenters, amortization expense of sales. The Company includes a portiondistribution rights, distribution fees of these costs in S,D&A expenses, as described below.

certain products and marketing credits from brand companies.


Selling, Delivery and Administrative Expenses

S,D


SD&A expenses include the following: sales management labor costs, distribution costs resulting from salestransporting finished products from distribution centers to customer locations, sales distribution center warehouse costs,overhead including depreciation expense, related to sales centers,distribution center warehousing costs, delivery vehicles and cold drink equipment, point-of-sale expenses, advertising expenses, cold drink equipment repair costs, amortization of intangiblesintangible assets and administrative support labor and operating costs.


Shipping and Handling Costs


Shipping and handling costs related to the movement of finished goodsproducts from manufacturing locationsplants to sales distribution centers are included in cost of sales. Shipping and handling costs related to the movement of finished goodsproducts from sales distribution centers to customer locations, including warehousedistribution center warehousing costs, are included in S,DSD&A expenses and totaled $550.9$756.9 million in 2017, $395.42022, $674.3 million in 20162021 and $277.9$622.1 million in 2015.

Delivery fees charged2020.


Stock Compensation

The Company has a long-term performance equity plan (the “Long-Term Performance Equity Plan”) under which awards are earned and granted to Mr. Harrison based on the Company’s attainment during a performance period of performance measures specified by the Company to retail customers are used to offset a portionCompensation Committee of the Company’s delivery and handling costs. The fees are recorded in net sales and are presented within the Nonalcoholic Beverages segment. Delivery fees were $5.7 million in 2017, $6.0 million in 2016 and $6.3 million in 2015.

Stock Compensation with Contingent Vesting

In April 2008, the stockholders of the Company approved a Performance Unit Award Agreement for J. Frank Harrison, III, the Company’s Chairman of the Board of Directors and Chief Executive Officer, consisting of 400,000 performance units (“Units”). Each Unit representsDirectors. Mr. Harrison may elect to have awards earned under the right to receive one shareLong‑Term Performance Equity Plan settled in cash and/or shares of the Company’s Class B Common Stock. See Note 2 for additional information on the Long‑Term Performance Equity Plan.


Common Stock subject to certain terms and conditions. Class B Common Stock

The Units are subject to vesting in annual increments over a ten-year period starting in fiscal year 2009.Company has two classes of common stock outstanding, Common Stock and Class B Common Stock. The number of Units that vest each


year will be equal the product of 40,000 multiplied by the overall goal achievement factor, not to exceed 100%,Common Stock is traded on The Nasdaq Global Select Market under the Company’s Annual Bonus Plan.

symbol COKE. There is no established public trading market for the Class B Common Stock. Shares of Class B Common Stock are convertible on a share-for-share basis into shares of Common Stock at any time at the option of the holder.


Each annual 40,000 unit tranche has an independent performance requirement thatshare of Common Stock is not established untilentitled to one vote per share and each share of Class B Common Stock is entitled to 20 votes per share at all meetings of the Company’s Annual Bonus Plan targets are approved duringstockholders. Except as otherwise required by law, holders of the first quarter of each year byCommon Stock and the Compensation CommitteeClass B Common Stock vote together as a single class on all matters submitted to the Company’s stockholders, including the election of the Board of Directors. As a result, each 40,000 unit tranche is considered to have its own service inception date, grant-date and requisite service period. The Performance Unit Award Agreement does not entitle Mr. Harrison, to participate in dividends orthe holders of the Class B Common Stock control approximately 71% of the total voting rights until each installment has vested and related shares are issued. Mr. Harrison may satisfy tax withholding requirements in whole or in part by requiringpower of the stockholders of the Company to settleand control the election of the Board of Directors. In the event of liquidation, there is no preference between the two classes of common stock.

Dividends

No cash dividend or dividend of property or stock other than stock of the Company, as specifically described in cash such a numberthe Company’s Restated Certificate of units otherwise payable inIncorporation, as amended (the “Restated Certificate of Incorporation”), may be declared and paid on the Class B Common Stock unless an equal or greater dividend is declared and paid on the Common Stock. Under the Restated Certificate of Incorporation, the Board of Directors may declare dividends on the Common Stock without declaring equal or any dividends on the
47

Class B Common Stock. Notwithstanding this provision, the Class B Common Stock has voting and conversion rights that allow the Class B Common Stock to meetparticipate equally on a per share basis with the maximum statutory tax withholding requirements. Common Stock.

The Board of Directors has declared, and the Company recognizes compensation expense over the requisite service period (one fiscal year) basedhas paid, dividends on the Company’sCommon Stock and the Class B Common Stock and each class of common stock price athas participated equally in all dividends declared by the endBoard of each accounting period, unlessDirectors and paid by the achievementCompany since 1994. During 2022, dividends of $4.50 per share were declared and dividends of $1.00 per share were paid on both the Common Stock and the Class B Common Stock. The remaining $3.50 per share of dividends declared but not yet paid as of December 31, 2022 were paid on February 10, 2023 to stockholders of record of the performance requirement forCommon Stock and the fiscalClass B Common Stock as of the close of business on January 27, 2023. During 2021 and 2020, dividends of $1.00 per share were declared and paid on both the Common Stock and the Class B Common Stock. Total cash dividends paid were $9.4 million per year is considered unlikely.

See Note 20 to the consolidated financial statements for additional information on Mr. Harrison’s stock compensation program.

in 2022, 2021 and 2020.


Net Income Per Share


The Company applies the two-class method for calculating and presenting net income per share. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared or accumulated and participation rights in undistributed earnings. Under this method:

(a)

Income from continuing operations (“net income”) is reduced by the amount of dividends declared in the current period for each class of stock and by the contractual amount of dividends that must be paid for the current period.

(b)

The remaining earnings (“undistributed earnings”) are allocated to Common Stock and Class B Common Stock to the extent each security may share in earnings as if all the earnings for the period had been distributed. The total earnings allocated to each security is determined by adding together the amount allocated for dividends and the amount allocated for a participation feature.


(c)

The total earnings allocated to each security is then divided by the number of outstanding shares of the security to which the earnings are allocated to determine the earnings per share for the security.

(i)Income from continuing operations (“net income”) is reduced by the amount of dividends declared in the current period for each class of stock and by the contractual amount of dividends that must be paid for the current period.

(d)

Basic and diluted earnings per share (“EPS”) data are presented for each class of common stock.

(ii)The remaining earnings (“undistributed earnings”) are allocated to the Common Stock and the Class B Common Stock to the extent each security may share in earnings as if all the earnings for the period had been distributed. The total earnings allocated to each security is determined by adding together the amount allocated for dividends and the amount allocated for a participation feature.

(iii)The total earnings allocated to each security is then divided by the number of outstanding shares of the security to which the earnings are allocated to determine the earnings per share for the security.
(iv)Basic and diluted net income per share data are presented for each class of common stock.

In applying the two-class method, the Company determined undistributed earnings should be allocated equally on a per share basis between the Common Stock and the Class B Common Stock due to the aggregate participation rights of the Class B Common Stock (i.e., the voting and conversion rights) and the Company’s history of paying dividends equally on a per share basis on the Common Stock and Class B Common Stock.

Under the Company’s certificate of incorporation, the Board of Directors may declare dividends on Common Stock without declaring equal or any dividends on the Class B Common Stock. Notwithstanding this provision, Class B Common Stock has voting and conversion rights that allow the Class B Common Stock to participate equally on a per share basis with the Common Stock.

The Class B Common Stock is entitled to 20 votes per share and the Common Stock is entitled to one vote per share with respect to each matter to be voted upon by the stockholders of the Company. Except as otherwise required by law, the holders of the Class B Common Stock and Common Stock vote together as a single class on all matters submitted to the Company’s stockholders, including the election of the Board of Directors. As a result, the holders of the Class B Common Stock control approximately 86% of the total voting power of the stockholders of the Company and control the election of the Board of Directors. The Board of Directors has declared and the Company has paid dividends on the Class B Common Stock and Common Stock and each class of common stock has participated equally in all dividends declared by the Board of Directors and paid by the Company since 1994.


The Class B Common Stock conversion rights allow the Class B Common Stock to participate in dividends equally with the Common Stock. The Class B Common Stock is convertible into Common Stock on a one-for-one per share basis at any time at the option of the holder. Accordingly, the holders of the Class B Common Stock can participate equally in any dividends declared on the Common Stock by exercising their conversion rights.


Basic EPSnet income per share excludes potential common shares that were dilutive and is computed by dividing net income available for common stockholders by the weighted average number of Common and Class B Common shares outstanding. Diluted EPSnet income per share for Common Stock and Class B Common Stock gives effect to all securities representing potential common shares that were dilutive and outstanding during the period. The Company does not have anti-dilutive shares.



Recently AdoptedIssued Accounting Pronouncements


In March 2016,September 2022, the Financial Accounting Standards Board (“FASB”(the “FASB”) issued Accounting Standards Update (“ASU”) 2016-09 “Improvements to Employee Share-Based Payment Accounting,2022-04, “Liabilities-Supplier Finance Programs,” which simplifies several aspectsrequires additional quantitative and qualitative disclosures related to a Company’s supplier finance programs to enhance the transparency of the accounting for employee share-based transactions including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new guidance is effective for annual and interim periods beginning after December 15, 2016. The Company adopted this guidance in the first quarter of 2017 and there was no impact to the Company’s consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory.” The new guidance requires an entity to measure most inventory “at lower of cost and net realizable value” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The new guidance is effective for annual and interim periods beginning after December 15, 2016. The Company adopted this guidance in the first quarter of 2017 and there was no material impact to the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In February 2018, the FASB issued ASU 2018‑02 “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (“Tax Act”).these programs. The new guidance is effective for fiscal years beginning after December 15, 2018, and2022, including interim periods within those fiscal years, and can be early adopted. The Company is still evaluating the impacts of this standard should it choose to make this reclassification.

In March 2017, the FASB issued ASU 2017‑07 “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which requires that the service cost component of the Company’s net periodic pension cost and net periodic postretirement benefit cost be included in the same line item as other compensation costs arising from services rendered by employees, with the non-service cost components of net periodic benefit cost being classified outside of a subtotal of income from operations. Of the components of net periodic benefit cost, only the service cost component will be eligible for asset capitalization. The new guidance is effective for annual periods beginning after December 31, 2017, including interim periods within those annual periods. The Company will adopt the new accounting standards on January 1, 2018 using the practical expedient which allows entities to use information previously disclosed in their pension and other postretirement benefit plans note as the estimation basis to apply the retrospective presentation requirements in ASU 2017-07.

For 2017 and 2016, the Company expects to reclassify $5.4 million and $3.3 million, respectively, related to its non-service cost components of net periodic benefit cost and other benefit plan charges from income from operations to other income (expense), net in the consolidated financial statements. The Company will record the service cost component of net periodic benefit cost in selling, delivery and administrative expenses in the consolidated financial statements. In 2018, the Company expects to record service cost of $7.7 million and $2.7 million related to its non-service cost components of net periodic benefit cost and other benefit plan charges, respectively.

In January 2017, the FASB issued ASU 2017-04 “Simplifying the Test for Goodwill Impairment,” which simplifies how an entity is required to test goodwill for impairment by eliminating step 2 from the goodwill impairment test, which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. Under the new guidance, entities should instead perform annual or interim goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment chargeexcept for the excess of the carrying amount over the fair value of the respective reporting unit. The new guidance is effective for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and can be early adopted. The Company does not anticipate the adoption of this guidance will have a material impactamendment on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01 “Clarifying the Definition of a Business,” rollforward information, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The new guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The impact to the Company’s consolidated financial statements will depend on the facts and circumstances of any specific future transactions.

In February 2016, the FASB issued ASU 2016-02 “Leases,” which requires lessees to recognize a right-to-use asset and a lease liability for virtually all leases (other than leases meeting the definition of a short-term lease). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods beginning the following fiscal year.2023. The Company is in the process of evaluatingevaluated the impact of the new guidanceASU 2022-04 will have on the Company’sits consolidated financial statements and anticipates this impact will be


material to its consolidated balance sheets. Additionally, the Company is evaluating the impacts of the standard beyond accounting, including system, data and process changes required to comply with the standard.

In January 2016, the FASB issued ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities,” which revises the classification and measurement of investments in equity securities and the presentation of certain fair value changes in financial liabilities measured at fair value. The new guidance is effective for annual and interim periods beginning after December 31, 2017. The Company will adopt the new accounting standards on January 1, 2018 and does not anticipate the adoption of this guidance will haveexpect a material impact on its consolidated financial statements.

Over the past several years, the FASB has issued several accounting standards for revenue recognition:

ASU 2014‑09 “Revenue from Contracts with Customers” was issuedupon adoption in May 2014, which was originally going to be effective for annual and interim periods beginning after December 15, 2016.

2023.

ASU 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral

2.Related Party Transactions

The Coca‑Cola Company

The Company’s business consists primarily of the Effective Date” was issued in August 2015, which deferred the effective date to annualdistribution, marketing and interim periods beginning after December 15, 2017.

ASU 2016-08 “Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net)” was issued in March 2016, which amended certain aspectsmanufacture of ASU 2014‑09.

ASU 2016-11 “Rescissionnonalcoholic beverages of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting” was issued in May 2016, which amended certain aspects of ASU 2014‑09.

ASU 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” was issued in May 2016, which amended certain aspects of ASU 2014‑09.

ASU 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” was issued in December 2016, which clarified the new revenue standard and corrected unintended application of the guidance.

The Company will adopt the new accounting standards on January 1, 2018 using a modified retrospective approach. The Company is in the process of finalizing its assessment of the impact of the new guidance on the Company’s consolidated financial statements. The approach the Company took during the assessment process was identifying and performing detailed walkthroughs of key revenue streams, including high level contract review, then performing detailed contract reviews for all revenue streams in order to evaluate revenue recognition requirements and prepare an implementation work plan. Based on the Company’s current assessment, it does not expect this guidance to have a material impact on the Company’s consolidated financial statements. As the Company completes its overall assessment, the Company will identify and implement changes to its accounting policies and internal controls to support the new revenue recognition and disclosure requirements.

2.

Piedmont Coca-Cola Bottling Partnership

The Company and The Coca‑Cola Company, formed Piedmontwhich is the sole owner of the formulas under which the primary components of its soft drink products, either concentrate or syrup, are manufactured.


48

On March 17, 2022, the Company entered into a stockholder conversion agreement (the “Stockholder Conversion Agreement”) with the JFH Family Limited Partnership—SW1, the Anne Lupton Carter Trust f/b/o Sue Anne H. Wells, the JFH Family Limited Partnership—DH1 and the Anne Lupton Carter Trust f/b/o Deborah S. Harrison (collectively, the “Converting Stockholders”), pursuant to which the Company and the Converting Stockholders agreed upon the process for converting an aggregate of 1,227,546 shares of the Company’s Class B Common Stock owned by the Converting Stockholders on a one share for one share basis into shares of the Company’s Common Stock, effective as of March 17, 2022 (the “Converted Shares”). In the Stockholder Conversion Agreement, the Company agreed to cause the Converted Shares to be registered for resale pursuant to the Company’s existing automatic shelf registration statement and the Converting Stockholders agreed to certain restrictions on their resale of the Converted Shares, including a trade volume limitation that prohibits the sale of more than 175,000 of the Converted Shares in 1993the aggregate during any three-consecutive month period. On June 21, 2022, the Company filed a prospectus supplement with the SEC pursuant to distribute and market nonalcoholic beverages primarily in portions of North Carolina and South Carolina. the Company’s existing automatic shelf registration statement, registering the Converted Shares for resale by the Converting Stockholders. The Company provides a portionwill not receive any proceeds from any resale of the nonalcoholic beverage products that Piedmont distributesConverted Shares by the Converting Stockholders.

As of December 31, 2022, J. Frank Harrison, III, Chairman of the Board of Directors and markets to Piedmont at cost and receives a fee for managing Piedmont’s operations pursuant to a management agreement. All transactions with Piedmont, includingChief Executive Officer of the financing arrangements described below, are intercompany transactions and are eliminated inCompany, controlled 1,004,394 shares of the Company’s Class B Common Stock, which represented approximately 71% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated financial statements.

Noncontrolling interest representsbasis.


As of December 31, 2022, The Coca‑Cola Company owned shares of the portionCompany’s Common Stock representing approximately 9% of Piedmont ownedthe total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. The number of shares of the Company’s Common Stock currently held by The Coca‑Cola Company which was 22.7% in all periods reported. Noncontrolling interest income of $6.3 million in 2017, $6.5 million in 2016 and $6.0 million in 2015 is included in net income ongives it the right to have a designee proposed by the Company for nomination to the Company’s consolidated statementsBoard of operations. In addition, the amount of consolidated net income attributable to both the Company and noncontrolling interest are shown onDirectors in the Company’s consolidated statementsannual proxy statement. J. Frank Harrison, III and the trustees of operations. Noncontrolling interest is included incertain trusts established for the equity sectionbenefit of certain relatives of the late J. Frank Harrison, Jr. have agreed to vote the shares of the Company’s consolidated balance sheetsCommon Stock and totaled $92.2 million on December 31, 2017 and $85.9 million on January 1, 2017.

The Company has agreed to provide financing to Piedmont up to $100.0 million under an agreementClass B Common Stock that expires on December 31, 2019 with automatic one-year renewal periods unless either the Company or Piedmont provides 10 days’ prior written noticethey control in favor of cancellation to the other party before any such one-year renewal period begins. Piedmont pays the Company interest on its borrowings at the Company’s average monthly cost of borrowing, taking into account all indebtedness of the Company and its consolidated subsidiaries, as determined as of the last business day of each calendar month plus 0.5%. There were no amounts outstanding under this agreement at December 31, 2017.

Piedmont has agreed to provide financing to the Company up to $200.0 million under an agreement that expires December 31, 2022 with automatic one-year renewal periods unless a demand for payment of any amount borrowed by the Company is made by Piedmont prior to any such termination date. Borrowings under the revolving loan agreement bear interest on a monthly basis at a rate that is the


average rate for the month on A1/P1-rated commercial paper with a 30-day maturity, which was 1.47% at December 31, 2017. There was $111.8 million outstanding under this agreement as of December 31, 2017.

3.

Acquisitions and Divestitures

As part of The Coca‑Cola Company’s plans to refranchise its North American bottling territories, the Company recently concluded a series of transactions from April 2013 to October 2017 withdesignee. The Coca‑Cola Company CCR and United to significantly expanddoes not own any shares of the Company’s distribution and manufacturing operations (the “System Transformation”). Class B Common Stock.


The System Transformation included acquisition and exchange of rights to serve Expansion Territories and related distribution assets, as well asfollowing table summarizes the acquisition and exchange of Expansion Facilities and related manufacturing assets. A summary of the System Transformationsignificant cash transactions (the “System Transformation Transactions”) completed by the Company prior to 2017 is included in the Company’s Annual Report on Form 10‑K for 2016. During 2017, the Company closed the following System Transformation Transactions:

System Transformation Transactions Completed in 2017

System Transformation Transactions completed with CCR in 2017

Anderson, Fort Wayne, Lafayette, South Bend and Terre Haute, Indiana Expansion Territories Acquisitions (“January 2017 Transaction”)

On January 27, 2017, the Company acquired distribution rights and related assets in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in Anderson, Fort Wayne, Lafayette, South Bend and Terre Haute, Indiana, pursuant to a distribution asset purchase agreement entered into by the Company and CCR on September 1, 2016 (the “September 2016 Distribution APA”). The Company completed the January 2017 Transaction for a cash purchase price of $32.1 million, which includes all post-closing adjustments. The cash purchase price increased $0.5 million as a result of post-closing adjustments made during 2017.

Acquisition of Bloomington and Indianapolis, Indiana and Columbus and Mansfield, Ohio Expansion Territories and Indianapolis and Portland, Indiana Expansion Facilities (“March 2017 Transactions”)

On March 31, 2017, the Company acquired (i) distribution rights and related assets in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in Indianapolis and Bloomington, Indiana and Columbus and Mansfield, Ohio pursuant to the September 2016 Distribution APA and (ii) two Expansion Facilities located in Indianapolis and Portland, Indiana and related manufacturing assets pursuant to a manufacturing asset purchase agreement entered into by the Company and CCR on September 1, 2016 (the “September 2016 Manufacturing APA”). The Company completed the March 2017 Transactions for a cash purchase price of $104.6 million, which includes all post-closing adjustments. The cash purchase price decreased $4.1 million as a result of post-closing adjustments made during 2017.

Acquisition of Akron, Elyria, Toledo, Willoughby and Youngstown, Ohio Expansion Territories and Twinsburg, Ohio Expansion Facility (“April 2017 Transactions”)

On April 28, 2017, the Company acquired (i) distribution rights and related assets in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in Akron, Elyria, Toledo, Willoughby and Youngstown, Ohio pursuant to a distribution asset purchase agreement entered into by the Company and CCR on April 13, 2017 (the “April 2017 Distribution APA”) and (ii) an Expansion Facility located in Twinsburg, Ohio and related manufacturing assets pursuant to a manufacturing asset purchase agreement entered into by the Company and CCR on April 13, 2017 (the “April 2017 Manufacturing APA”). The Company completed the April 2017 Transactions for a cash purchase price of $87.9 million. During the fourth quarter of 2017, the cash purchase price for the April 2017 Transactions decreased by $4.7 million as a result of net working capital and other fair value adjustments, which remains due from The Coca‑Cola Company. The cash purchase price for the April 2017 Transactions remains subject to post-closing adjustment in accordance with the April 2017 Distribution APA and the April 2017 Manufacturing APA.

Acquisition of Arkansas Expansion Territories and Memphis, Tennessee and West Memphis, Arkansas Expansion Facilities in exchange for the Company’s Deep South and Somerset Distribution Territories and Mobile, Alabama Manufacturing Facility (the “CCR Exchange Transaction”)

On October 2, 2017, the Company (i) acquired from CCR distribution rights and related assets in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in central and southern Arkansas and two Expansion Facilities located in Memphis, Tennessee and West Memphis, Arkansas and related manufacturing assets (collectively, the “CCR Exchange Business”) in exchange for which the Company (ii) transferred to CCR distribution rights and related assets in territories previously served by the Company through its facilities and equipment located in portions of southern Alabama, southeastern Mississippi, southwestern


Georgia and northwestern Florida and in and around Somerset, Kentucky and a regional manufacturing facility located in Mobile, Alabama and related manufacturing assets (collectively, the “Deep South and Somerset Exchange Business”), pursuant to an asset exchange agreement entered into by the Company, certain of its wholly-owned subsidiaries and CCR on September 29, 2017 (the “CCR AEA”).

During 2017, the Company paid CCR $15.9 million toward the closing of the CCR Exchange Transaction, representing an estimate of the difference between the value of the CCR Exchange Business acquired by the Company and the value of the Deep South and Somerset Exchange Business acquired by CCR. During the fourth quarter of 2017, the Company recorded certain adjustments to this settlement amount as a result of changes in estimated net working capital and other fair value adjustments, which are included in accounts payable to The Coca‑Cola Company. The final closing price for the CCR Exchange Transaction remains subject to final resolution pursuant to the CCR AEA. The payment for the CCR Exchange Transaction reflected the application of $4.8 million of the Expansion Facilities Discount (as described below).

Acquisition of Memphis, Tennessee Expansion Territories (“Memphis Transaction”)

On October 2, 2017, the Company acquired distribution rights and related assets in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in and around Memphis, Tennessee, including portions of northwestern Mississippi and eastern Arkansas, pursuant to an asset purchase agreement entered by the Company and CCR on September 29, 2017 (the “September 2017 APA”). The Company completed this acquisition for a cash purchase price of $39.6 million, which remains subject to post-closing adjustment in accordance with the September 2017 APA.

System Transformation Transactions completed with United in 2017

Acquisition of Spartanburg and Bluffton, South Carolina Expansion Territories in exchange for the Company’s Florence and Laurel Territories and Piedmont’s Northeastern Georgia Territories (“United Exchange Transaction”)

On October 2, 2017, the Company and Piedmont completed exchange transactions in which (i) the Company acquired from United distribution rights and related assets in Expansion Territories previously served by United through United’s facilities and equipment located in and around Spartanburg, South Carolina and a portion of United’s territory located in and around Bluffton, South Carolina and Piedmont acquired from United similar rights, assets and liabilities, and working capital in the remainder of United’s Bluffton, South Carolina territory (collectively, the “United Distribution Business”), in exchange for which (ii) the Company transferred to United distribution rights and related assets in territories previously served by the Company through its facilities and equipment located in parts of northwestern Alabama, south-central Tennessee and southeastern Mississippi previously served by the Company’s distribution centers located in Florence, Alabama and Laurel, Mississippi (collectively, the “Florence and Laurel Distribution Business”) and Piedmont transferred to United similar rights, assets and liabilities, and working capital of Piedmont’s in territory located in parts of northeastern Georgia (the “Northeastern Georgia Distribution Business”), pursuant to an asset exchange agreement between the Company, certain of its wholly-owned subsidiaries and United dated September 29, 2017 (the “United AEA”) and an asset exchange agreement between Piedmont and United dated September 29, 2017 (the “Piedmont – United AEA”).

At closing, the Company and Piedmont paid United $3.4 million toward the closing of the United Exchange Transaction, representing an estimate of (i) the difference between the value of the portion of the United Distribution Business acquired by the Company and the value of the Florence and Laurel Distribution Business acquired by United, plus (ii) the difference between the value of the portion of the United Distribution Business acquired by Piedmont and the value of the Northeastern Georgia Distribution Business acquired by United, which such amounts remain subject to final resolution pursuant to the United AEA and the Piedmont – United AEA, respectively.

Expansion Facilities Discount and Legacy Facilities Credit Letter Agreement

In connection with the Company’s acquisitions of the Expansion Facilities and the impact on transaction value from certain adjustments made by The Coca‑Cola Company pursuant to a regional manufacturing agreement with The Coca‑Cola Company entered into on March 31, 2017 (as amended, the “RMA”) to the authorized pricing on sales of certain beverages produced by the Company under trademarks of The Coca‑Cola Company at the Expansion Facilities and sold to The Coca‑Cola Company and certain U.S. Coca‑Cola bottlers, the Company and The Coca‑Cola Company:


 Fiscal Year
(in thousands)202220212020
Payments made by the Company to The Coca-Cola Company(1)
$1,867,727 $1,558,784 $1,444,492 
Payments made by The Coca-Cola Company to the Company256,333 207,073 128,749 

(1)This excludes acquisition related sub-bottling payments made by the Company also entered intoto Coca-Cola Refreshments USA, Inc., a letter agreement on March 31, 2017 (as amended, the “Manufacturing Facilities Letter Agreement”), pursuant to whichwholly owned subsidiary of The Coca‑Cola Company, agreed to providebut includes the purchase price of certain additional BODYARMOR distribution rights, each as discussed below.

On January 1, 2022, the Company entered into an agreement to acquire $30.1 million of additional BODYARMOR distribution rights with an aggregate valuation adjustment discountestimated useful life of $33.1 million (the “Expansion Facilities Discount”) on the purchase prices for the Expansion Facilities.

The parties agreed to apply $22.9 million40 years.


More than 80% of the total Expansion Facilities Discount uponpayments made by the Company’s acquisitionCompany to The Coca‑Cola Company were for concentrate, syrup, sweetener and other finished goods products, which were recorded in cost of Expansion Facilitiessales in March 2017the consolidated statements of operations and agreed to apply an additional $5.4 millionrepresent the primary components of the total Expansion Facilities Discount uponsoft drink products the Company’s


acquisition of an Expansion Facility in April 2017.Company manufactures and distributes. Payments made by the Company to The parties agreed to apply the remaining $4.8 millionCoca‑Cola Company also included payments for marketing programs associated with large, national customers managed by The Coca‑Cola Company on behalf of the total Expansion Facilities Discount uponCompany, which were recorded as a reduction to net sales in the Company’s acquisitionconsolidated statements of two additional Expansion Facilities as part of the CCR Exchange Transaction, after which time no amounts remain outstanding under the Manufacturing Facilities Letter Agreement.

The Manufacturing Facilities Letter Agreement also establishes a mechanism to compensateoperations. Other payments made by the Company to The Coca‑Cola Company related to cold drink equipment parts, fees associated with a payment or credit for the net economic impactrights to the manufacturing facilities the Company served prior to the System Transformation (the “Legacy Facilities”) of the changesdistribute certain brands and other customary items.


Payments made by The Coca‑Cola Company to the authorized pricing underCompany included annual funding in connection with the RMA on sales ofCompany’s agreement to support certain Coca‑Cola products producedbusiness initiatives developed by the Company at the Legacy Facilities and sold to The Coca‑Cola Company and certain U.S. Coca‑Cola bottlers versusfunding associated with the Company’s historical returns fordelivery of post-mix products produced at the Legacy Facilities prior to the conversion on March 31, 2017various customers, both of the Company’s then-existing manufacturing agreements with The Coca‑Cola Company to the RMA (the “Legacy Facilities Credit”).

The Company and The Coca‑Cola Company agreed that the amount of the Legacy Facilities Credit to be paid to the Company by The Coca‑Cola Company was $43.0 million, pursuant to a letter agreement between the Company and The Coca‑Cola Company dated December 26, 2017. The Coca‑Cola Company paid the Legacy Facilities Credit, in the amount of $43.0 million, to the Company in December 2017.

The Company recognized $12.4 million of the Legacy Facilities Credit during 2017, representing the portion of the credit applicable to the Mobile, Alabama facility which the Company transferred to CCR as part of the CCR Exchange Transaction. The $12.4 million portion of the Legacy Facilities Credit related to the Mobile, Alabama facility waswere recorded to gain (loss) on exchange transactions in the Company’s consolidated financial statements. The remaining $30.6 million of the Legacy Facilities Credit was recorded as a deferred liability and will be amortized as a reduction to cost of sales over a period of 40 years.

Gain on Exchange Transactions

Upon closing the CCR Exchange Transaction and the United Exchange Transaction, the fair value of net assets acquired exceeded the carrying value of net assets exchanged, which resulted in a gain of $0.5 million recorded to gain (loss) on exchange transactions in the Company’s consolidated financial statements. This amount remains subject to final resolution pursuantstatements of operations. Payments made by The Coca‑Cola Company to the CCR AEA, the United AEACompany also included transportation services and the Piedmont – United AEA.

The $0.5 million gain on the CCR Exchange Transactionfountain product delivery and the United Exchange Transaction, combined with the $12.4 million portion of the Legacy Facilities Credit related to the Mobile, Alabama facility, resulted in a total gain on exchange transactions of $12.9 million in 2017.

The fair value of acquired assets and assumed liabilities in the 2017 System Transformation Transactions as of the acquisition dates is summarized as follows:

(in thousands)

 

January 2017

Transaction

 

 

March 2017

Transactions

 

 

April 2017

Transactions

 

 

October 2017

Transactions Acquisitions

 

 

Total 2017

Transactions

 

Cash

 

$

107

 

 

$

211

 

 

$

103

 

 

$

191

 

 

$

612

 

Inventories

 

 

5,953

 

 

 

20,952

 

 

 

14,554

 

 

 

14,850

 

 

 

56,309

 

Prepaid expenses and other current assets

 

 

1,155

 

 

 

5,117

 

 

 

4,068

 

 

 

4,754

 

 

 

15,094

 

Accounts receivable from The Coca-Cola Company

 

 

1,042

 

 

 

1,807

 

 

 

2,552

 

 

 

2,391

 

 

 

7,792

 

Property, plant and equipment

 

 

25,708

 

 

 

81,638

 

 

 

52,263

 

 

 

70,645

 

 

 

230,254

 

Other assets (including deferred taxes)

 

 

1,158

 

 

 

3,227

 

 

 

4,369

 

 

 

889

 

 

 

9,643

 

Goodwill

 

 

1,544

 

 

 

2,527

 

 

 

17,804

 

 

 

13,992

 

 

 

35,867

 

Distribution agreements

 

 

22,000

 

 

 

46,750

 

 

 

19,500

 

 

 

124,750

 

 

 

213,000

 

Customer lists

 

 

1,500

 

 

 

1,750

 

 

 

1,000

 

 

 

4,950

 

 

 

9,200

 

Total acquired assets

 

$

60,167

 

 

$

163,979

 

 

$

116,213

 

 

$

237,412

 

 

$

577,771

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities (acquisition related contingent consideration)

 

$

1,350

 

 

$

2,958

 

 

$

1,546

 

 

$

1,458

 

 

$

7,312

 

Other current liabilities

 

 

324

 

 

 

3,760

 

 

 

2,860

 

 

 

6,492

 

 

 

13,436

 

Other liabilities (acquisition related contingent consideration)

 

 

26,377

 

 

 

49,739

 

 

 

26,604

 

 

 

18,848

 

 

 

121,568

 

Other liabilities

 

 

43

 

 

 

2,953

 

 

 

2,005

 

 

 

95

 

 

 

5,096

 

Total assumed liabilities

 

$

28,094

 

 

$

59,410

 

 

$

33,015

 

 

$

26,893

 

 

$

147,412

 


As part of the “October 2017 Transactions Acquisitions,” which include the Expansion Territories and the Expansion Facilities acquired in the CCR Exchange Transaction (the “CCR Exchange Transaction Acquisitions”), the Memphis Transaction and the United Exchange Transaction (the “United Exchange Transaction Acquisitions”), the Company’s acquired assets and assumed liabilities as of the acquisition dates are summarized as follows:

(in thousands)

 

CCR Exchange Transaction Acquisitions

 

 

Memphis Transaction

 

 

United Exchange Transaction Acquisitions

 

 

October 2017

Transactions Acquisitions

 

Cash

 

$

91

 

 

$

100

 

 

$

-

 

 

$

191

 

Inventories

 

 

10,667

 

 

 

3,354

 

 

 

829

 

 

 

14,850

 

Prepaid expenses and other current assets

 

 

3,218

 

 

 

1,222

 

 

 

314

 

 

 

4,754

 

Accounts receivable from The Coca-Cola Company

 

 

1,092

 

 

 

1,089

 

 

 

210

 

 

 

2,391

 

Property, plant and equipment

 

 

47,066

 

 

 

20,795

 

 

 

2,784

 

 

 

70,645

 

Other assets (including deferred taxes)

 

 

624

 

 

 

265

 

 

 

-

 

 

 

889

 

Goodwill

 

 

6,378

 

 

 

4,917

 

 

 

2,697

 

 

 

13,992

 

Distribution agreements

 

 

80,500

 

 

 

30,300

 

 

 

13,950

 

 

 

124,750

 

Customer lists

 

 

3,200

 

 

 

1,200

 

 

 

550

 

 

 

4,950

 

Total acquired assets

 

$

152,836

 

 

$

63,242

 

 

$

21,334

 

 

$

237,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities (acquisition related contingent consideration)

 

$

-

 

 

$

1,458

 

 

$

-

 

 

$

1,458

 

Other current liabilities

 

 

2,760

 

 

 

3,241

 

 

 

491

 

 

 

6,492

 

Other liabilities (acquisition related contingent consideration)

 

 

-

 

 

 

18,848

 

 

 

-

 

 

 

18,848

 

Other liabilities

 

 

1

 

 

 

94

 

 

 

-

 

 

 

95

 

Total assumed liabilities

 

$

2,761

 

 

$

23,641

 

 

$

491

 

 

$

26,893

 

The goodwill for the 2017 System Transformation Transactions is included in the Nonalcoholic Beverages segment and is primarily attributed to operational synergies and the workforce acquired. Goodwill of $11.6 million, $6.4 million, $6.6 million and $2.7 million is expected to be deductible for tax purposes for the April 2017 Transactions, the CCR Exchange Transaction Acquisitions, the Memphis Transaction and the United Exchange Transaction Acquisitions, respectively. No goodwill is expected to be deductible for tax purposes for the January 2017 Transaction or the March 2017 Transactions.

Identifiable intangible assets acquiredequipment repair services performed by the Company on The Coca‑Cola Company’s equipment, all of which were recorded in net sales in the 2017 System Transformation Transactions consist of distribution agreements and customer lists, which have an estimated useful life of 40 years and 12 years, respectively.

The Company has preliminarily allocated the purchase prices of the April 2017 Transactions, the CCR Exchange Transaction, the Memphis Transaction and the United Exchange Transaction to the individual acquired assets and assumed liabilities. The valuations are subject to adjustment as additional information is obtained. Any adjustments made beyond one year from each transaction’s acquisition date are recorded through the Company’s consolidated statements of operations.



Coca‑Cola Refreshments USA, Inc.

The carrying valueCBA requires the Company to make quarterly acquisition related sub-bottling payments to CCR on a continuing basis in exchange for the grant of assetsexclusive rights to distribute, promote, market and liabilitiessell the authorized brands of The Coca‑Cola Company and related products in the Deep South and Somerset Exchange Business divested in the CCR Exchange Transaction and the Florence and Laurel Distribution Business divested in the United Exchange Transaction (together, the “October 2017 Divestitures”) are summarized as follows:

(in thousands)

 

October 2017

Divestitures

 

Cash

 

$

303

 

Inventories

 

 

13,717

 

Prepaid expenses and other current assets

 

 

1,199

 

Property, plant and equipment

 

 

44,380

 

Other assets (including deferred taxes)

 

 

604

 

Goodwill

 

 

13,073

 

Distribution agreements

 

 

65,043

 

Total divested assets

 

$

138,319

 

 

 

 

 

 

Other current liabilities

 

$

5,683

 

Pension and postretirement benefit obligations

 

 

16,855

 

Total divested liabilities

 

$

22,538

 

The October 2017 Divestitures were recorded in the Company’s Nonalcoholic Beverages segment prior to divestiture.

System Transformation Transactions Completed in 2016

During 2016,certain distribution territories the Company acquired from CCR. These acquisition related sub-bottling

49

payments are based on gross profit derived from the Company’s sales of certain beverages and beverage products that are sold under the same trademarks that identify a covered beverage, a beverage product or certain cross-licensed brands applicable to the System Transformation.

Acquisition related sub-bottling payments to CCR distribution rightswere $36.5 million in 2022, $39.1 million in 2021 and $43.4 million in 2020. The following table summarizes the liability recorded by the Company to reflect the estimated fair value of contingent consideration related to future expected acquisition related sub‑bottling payments to CCR:

(in thousands)December 31, 2022December 31, 2021
Current portion of acquisition related contingent consideration$40,060 $51,518 
Noncurrent portion of acquisition related contingent consideration501,431 490,587 
Total acquisition related contingent consideration$541,491 $542,105 

Southeastern Container (“Southeastern”)

The Company is a shareholder of Southeastern, a plastic bottle manufacturing cooperative. The Company accounts for Southeastern as an equity method investment. The Company’s investment in Southeastern, which was classified as other assets in the consolidated balance sheets, was $21.2 million as of December 31, 2022 and $21.7 million as of December 31, 2021.

South Atlantic Canners, Inc. (“SAC”)

The Company is a shareholder of SAC, a manufacturing cooperative located in Bishopville, South Carolina. All of SAC’s shareholders are Coca‑Cola bottlers and each has equal voting rights. The Company accounts for SAC as an equity method investment. The Company’s investment in SAC, which was classified as other assets in the following Expansion Territories: Easton, Salisbury, Capitol Heights, La Plata, Baltimore, Hagerstownconsolidated balance sheets, was $8.2 million as of both December 31, 2022 and Cumberland, Maryland; Richmond, Yorktown and Alexandria, Virginia; Cincinnati, Dayton, Lima and Portsmouth, Ohio; and Louisa, Kentucky.December 31, 2021. The Company also acquired Expansion Facilitiesguarantees a portion of SAC’s debt; see Note 19 for additional information.

The Company receives a fee for managing the day-to-day operations of SAC pursuant to a management agreement. Proceeds from management fees received from SAC, which were recorded as a reduction to cost of sales in the consolidated statements of operations, were $8.9 million in 2022, $8.7 million in 2021 and related manufacturing$9.0 million in 2020.

Coca‑Cola Bottlers’ Sales & Services Company LLC (“CCBSS”)

Along with all other Coca‑Cola bottlers in the United States and Canada, the Company is a member of CCBSS, a company formed to provide certain procurement and other services with the intention of enhancing the efficiency and competitiveness of the Coca‑Cola bottling system. The Company accounts for CCBSS as an equity method investment and its investment in CCBSS is not material.

CCBSS negotiates the procurement for the majority of the Company’s raw materials, excluding concentrate, and the Company receives a rebate from CCBSS for the purchase of these raw materials. The Company had rebates due from CCBSS of $25.7 million on December 31, 2022 and $7.9 million on December 31, 2021, which were classified as accounts receivable, other in the consolidated balance sheets. Changes in rebates receivable relate to volatility in raw material prices and the timing of cash receipts of rebates.

In addition, the Company pays an administrative fee to CCBSS for its services. The Company incurred administrative fees to CCBSS of $2.4 million in 2022, $2.9 million in 2021 and $2.5 million in 2020, which were classified as SD&A expenses in the consolidated statements of operations.

CONA Services LLC (“CONA”)

Along with certain other Coca‑Cola bottlers, the Company is a member of CONA, an entity formed to provide business process and information technology services to its members. The Company accounts for CONA as an equity method investment. The Company’s investment in CONA, which was classified as other assets in Sandston, Virginia; Silver Springthe consolidated balance sheets, was $16.9 million as of December 31, 2022 and Baltimore, Maryland;$13.7 million as of December 31, 2021.

Pursuant to an amended and Cincinnati, Ohio during 2016. Collectively, these arerestated master services agreement with CONA, the “2016Company is authorized to use the Coke One North America system (the “CONA System”), a uniform information technology system developed to promote operational efficiency and uniformity among North American Coca‑Cola bottlers. In exchange for the Company’s rights to use the CONA System Transformation Transactions.” Detailsand receive CONA-related services, it is charged service fees by CONA. The Company incurred service fees to CONA of $25.7 million in 2022, $24.1 million in 2021 and $22.0 million in 2020.

50

Related Party Leases

The Company leases its headquarters office facility and an adjacent office facility in Charlotte, North Carolina from Beacon Investment Corporation, of which J. Frank Harrison, III is the majority stockholder and Morgan H. Everett, Vice Chair of the 2016 System Transformation TransactionsCompany’s Board of Directors, is a minority stockholder. The annual base rent the Company is obligated to pay under this lease is subject to an adjustment for an inflation factor and the lease expires on December 31, 2029. The principal balance outstanding under this lease was $25.5 million on December 31, 2022 and $28.2 million on December 31, 2021.

The Company previously leased the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina (together, the “Snyder Production Center”) from Harrison Limited Partnership One (“HLP”), which is directly and indirectly owned by trusts of which J. Frank Harrison, III and Sue Anne H. Wells, a former director of the Company, are included below.

Eastontrustees and Salisbury, Marylandbeneficiaries and Richmond and Yorktown, Virginia Expansion Territories Acquisitions and Sandston, Virginia Expansion Facility Acquisitionof which Morgan H. Everett is a permissible, discretionary beneficiary. On March 17, 2022, CCBCC Operations, LLC (“January 2016 Transactions”Operations”)

An asset purchase agreement, a wholly owned subsidiary of the Company, entered into bya definitive purchase and sale agreement with HLP, pursuant to which Operations purchased the Company and CCRSnyder Production Center from HLP on such date for a purchase price of $60.0 million. This lease, which was scheduled to expire on December 31, 2035, was terminated in September 2015 (the “September 2015 APA”) contemplated, in part,connection with the Company’s acquisition of distribution rights and related assets in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in Easton and Salisbury, Maryland and Richmond and Yorktown, Virginia. In addition, an asset purchase agreement entered into by the Company and CCR in October 2015 (the “October 2015 APA”) contemplated, in part, the Company’s acquisition of an Expansion Facility and related manufacturing assets in Sandston, Virginia. The closing of the January 2016 Transactions occurredSnyder Production Center by Operations. There was no principal balance outstanding under this lease on January 29, 2016. December 31, 2022 and there was a principal balance outstanding under this lease of $59.1 million on December 31, 2021.


A summary of rental payments for these leases related to 2022, 2021 and 2020 is as follows:

Fiscal Year
(in thousands)202220212020
Company headquarters$3,854 $3,778 $3,304 
Snyder Production Center927 4,451 4,451 

Long-Term Performance Equity Plan

The cash purchase price for the January 2016 Transactions was $75.9 million, which includes all post-closing adjustments. Of the total cash purchase price, $10.2 million was settled beyond one year from the transaction closing date and was recorded as other expenseLong-Term Performance Equity Plan compensates J. Frank Harrison, III based on the Company’s performance. Awards granted to Mr. Harrison under the Long-Term Performance Equity Plan are earned based on the Company’s attainment during a performance period of certain performance measures, each as specified by the Compensation Committee of the Company’s Board of Directors. These awards may be settled in cash and/or shares of the Company’s Class B Common Stock, based on the average of the closing prices of shares of the Company’s Common Stock during the last 20 trading days of the performance period. Compensation expense for the Long-Term Performance Equity Plan, which was included in SD&A expenses in the consolidated statements of operations.

Alexandria, Virginiaoperations, was $10.1 million in 2022, $9.8 million in 2021 and Capitol Heights$9.2 million in 2020.


3.Revenue Recognition

The Company’s sales are divided into two main categories: (i) bottle/can sales and La Plata, Maryland Territories Acquisitions (“April 1, 2016 Transaction”)

(ii) other sales. Bottle/can sales include products packaged primarily in plastic bottles and aluminum cans. Bottle/can net pricing is based on the invoice price charged to customers reduced by any promotional allowances. Bottle/can net pricing per unit is impacted by the price charged per package, the sales volume generated for each package and the channels in which those packages are sold. Other sales include sales to other Coca‑Cola bottlers, post-mix sales, transportation revenue and equipment maintenance revenue.


The September 2015 APA also contemplatedCompany’s contracts are derived from customer orders, including customer sales incentives, generated through an order processing and replenishment model. Generally, the Company’s acquisitionservice contracts and contracts related to the delivery of distribution rightsspecifically identifiable products have a single performance obligation. Revenues do not include sales or other taxes collected from customers. The Company has defined its performance obligations for its contracts as either at a point in time or over time. Bottle/can sales, sales to other Coca‑Cola bottlers and related assetspost-mix sales are recognized when control transfers to a customer, which is generally upon delivery and is considered a single point in Expansion Territories previously served by CCR through CCR’s facilities and equipment locatedtime. Point in Alexandria, Virginia and Capitol Heights and La Plata, Maryland. The closingtime sales accounted for approximately 97% of the April 1, 2016 Transaction occurred on April 1, 2016. Company’s net sales in each of 2022, 2021 and 2020.

Other sales, which include revenue for service fees related to the repair of cold drink equipment and delivery fees for freight hauling and brokerage services, are recognized over time. Revenues related to cold drink equipment repair are recognized as the respective services are completed using a cost-to-cost input method. Repair services are generally completed in less than one day but can extend up to one month. Revenues related to freight hauling and brokerage services are recognized as the delivery occurs using a miles driven output method. Generally, delivery occurs and freight charges are recognized in the same day. Over time sales orders open at the end of a financial period are not material to the consolidated financial statements.

51

The cash purchase pricefollowing table represents a disaggregation of revenue from contracts with customers:

 Fiscal Year
(in thousands)202220212020
Point in time net sales:
Nonalcoholic Beverages - point in time$6,034,914 $5,389,444 $4,842,934 
Total point in time net sales$6,034,914 $5,389,444 $4,842,934 
Over time net sales:
Nonalcoholic Beverages - over time$46,443 $43,225 $36,236 
All Other - over time119,600 130,045 128,187 
Total over time net sales$166,043 $173,270 $164,423 
Total net sales$6,200,957 $5,562,714 $5,007,357 

The Company’s allowance for doubtful accounts in the April 1, 2016 Transaction was $34.8 million, whichconsolidated balance sheets includes all post-closing adjustments. Of the total cash purchase price, $0.8 million was settled beyond one year from the transaction closing datea reserve for customer returns and was recorded as other income on the Company’s consolidated statements of operations.

Baltimore, Hagerstown and Cumberland, Maryland Expansion Territories Acquisitions and Silver Spring and Baltimore, Maryland Expansion Facilities Acquisitions (“April 29, 2016 Transactions”)

On April 29, 2016, thean allowance for credit losses. The Company completed the remaining transactions contemplated by (i) the September 2015 APA, by acquiring distribution rights and related assets in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in Baltimore, Hagerstown and Cumberland, Maryland, and (ii) the October 2015 APA, by acquiring Expansion Facilities and related manufacturing assets in Silver Spring and Baltimore, Maryland. The cash purchase price for the April 29, 2016 Transactions


was $68.5 million, which includes all post-closing adjustments. Of the total cash purchase price, $0.5 million was settled beyond one year from the transaction closing date and was recorded as other income on the Company’s consolidated statements of operations.

Cincinnati, Dayton, Lima and Portsmouth, Ohio and Louisa, Kentucky Expansion Territories Acquisitions and Cincinnati, Ohio Expansion Facility Acquisition (“October 2016 Transactions”)

On October 28, 2016, the Company completed the initial transactions contemplated by (i) the September 2016 Distribution APA, by acquiring distribution rights and related assets in Expansion Territories previously served by CCR through CCR’s facilities and equipment located in Cincinnati, Dayton, Lima and Portsmouth, Ohio and Louisa, Kentucky, and (ii) the September 2016 Manufacturing APA, by acquiring an Expansion Facility and related manufacturing assets located in Cincinnati, Ohio. The closing of the October 2016 Transactions occurred for a cash purchase price of $99.7 million, which includes all post-closing adjustments. The cash purchase price increased $1.5 millionexperiences customer returns primarily as a result of post-closing adjustments made during 2017.

damaged or out-of-date product. At any given time, the Company estimates less than 1% of bottle/can sales and post-mix sales could be at risk for return by customers. Returned product is recognized as a reduction to net sales. The fair value of acquired assets and assumed liabilities of the 2016 System Transformation TransactionsCompany’s reserve for customer returns was $3.0 million as of the acquisition dates is summarized as follows:

(in thousands)

 

January 2016

Transactions

 

 

April 1, 2016

Transaction

 

 

April 29, 2016

Transactions

 

 

October 2016

Transactions

 

 

Total 2016

Transactions

 

Cash

 

$

179

 

 

$

219

 

 

$

161

 

 

$

150

 

 

$

709

 

Inventories

 

 

10,159

 

 

 

3,748

 

 

 

13,850

 

 

 

18,513

 

 

 

46,270

 

Prepaid expenses and other current assets

 

 

2,775

 

 

 

1,945

 

 

 

3,774

 

 

 

4,228

 

 

 

12,722

 

Accounts receivable from The Coca-Cola Company

 

 

1,121

 

 

 

1,162

 

 

 

1,126

 

 

 

1,327

 

 

 

4,736

 

Property, plant and equipment

 

 

46,149

 

 

 

54,135

 

 

 

57,738

 

 

 

67,943

 

 

 

225,965

 

Other assets (including deferred taxes)

 

 

2,351

 

 

 

1,541

 

 

 

5,514

 

 

 

682

 

 

 

10,088

 

Goodwill

 

 

9,396

 

 

 

1,962

 

 

 

8,368

 

 

 

8,473

 

 

 

28,199

 

Distribution agreements

 

 

750

 

 

-

 

 

 

22,000

 

 

 

79,900

 

 

 

102,650

 

Customer lists

 

 

550

 

 

-

 

 

 

1,450

 

 

 

2,750

 

 

 

4,750

 

Total acquired assets

 

$

73,430

 

 

$

64,712

 

 

$

113,981

 

 

$

183,966

 

 

$

436,089

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities (acquisition related contingent consideration)

 

$

361

 

 

$

742

 

 

$

1,307

 

 

$

3,973

 

 

$

6,383

 

Other current liabilities

 

 

591

 

 

 

4,231

 

 

 

5,482

 

 

 

8,513

 

 

 

18,817

 

Accounts payable to The Coca-Cola Company

 

 

650

 

 

-

 

 

-

 

 

-

 

 

 

650

 

Other liabilities (acquisition related contingent consideration)

 

 

6,144

 

 

 

23,924

 

 

 

35,561

 

 

 

71,237

 

 

 

136,866

 

Other liabilities

 

-

 

 

 

266

 

 

 

2,635

 

 

 

573

 

 

 

3,474

 

Total assumed liabilities

 

$

7,746

 

 

$

29,163

 

 

$

44,985

 

 

$

84,296

 

 

$

166,190

 

The goodwill for the 2016 System Transformation Transactions is all included in the Nonalcoholic Beverages segmentboth December 31, 2022 and is primarily attributed to operational synergies and the workforce acquired. Goodwill of $14.9 million and $15.8 million is expected to be deductible for tax purposes for the January 2016 Transactions and October 2016 Transactions, respectively. No goodwill is expected to be deductible for the April 1, 2016 Transaction or the April 29, 2016 Transactions.

System Transformation Transactions Completed in 2015

During 2015, the Company acquired from CCR distribution rights and related assets for the following Expansion Territories: Cleveland and Cookeville, Tennessee; Louisville, Kentucky and Evansville, Indiana; Paducah and Pikeville, Kentucky; Norfolk, Fredericksburg and Staunton, Virginia; and Elizabeth City, North Carolina and acquired a make-ready center in Annapolis, Maryland (the “2015 Expansion Territories”). In 2015, the Company also acquired from CCR distribution rights and related assets for distribution territory in Lexington, Kentucky in exchange for distribution territory previously served by the Company in Jackson, Tennessee (the “2015 Asset Exchange”). The aggregate cash purchase price for the 2015 Expansion Territories and the 2015 Asset Exchange was $85.6 million, which includes all post-closing adjustments.

December 31, 2021.


The Company recognized a gain of $8.1 million as a result of the 2015 Asset Exchange, which was recordedestimates an allowance for credit losses, based on historic days’ sales outstanding trends, aged customer balances, previously written-off balances and expected recoveries up to gain (loss) on exchange transactions balances previously written off, in the consolidated financial statements. In addition, the Company recognized a bargain purchase gain of


$2.0 million after applying a deferred tax liability of $1.3 million as a result of the acquisition of the make-ready center in Annapolis, Maryland, which was recorded to bargain purchase gain, net of tax in the consolidated financial statements.

System Transformation Transactions Completed in 2014

During 2014, the Company acquired from CCR distribution rights and related assets for the following Expansion Territories:  Johnson City, Knoxville and Morristown, Tennessee (the “2014 Expansion Territories”). The aggregate cash purchase price for the 2014 Expansion Territories was $43.1 million, which includes all post-closing adjustments.

System Transformation Transactions Financial Results

The financial results of the 2017 System Transformation Transactions, the 2016 System Transformation Transactions, the 2015 Expansion Territories and the 2015 Asset Exchange have been included in the Company’s consolidated financial statements from their respective acquisition dates. These System Transformation Transactions contributed the following amounts to the Company’s consolidated statement of operations:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Net sales from 2015 Expansion Territories & 2015 Asset Exchange

 

$

484,485

 

 

$

469,440

 

 

$

278,691

 

Net sales from 2016 System Transformation Transactions

 

 

1,011,638

 

 

 

592,329

 

 

 

-

 

Net sales from 2017 System Transformation Transactions

 

 

740,259

 

 

 

-

 

 

 

-

 

Total System Transformation Transactions impact to net sales

 

$

2,236,382

 

 

$

1,061,769

 

 

$

278,691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations from 2015 Expansion Territories & 2015 Asset Exchange

 

$

1,540

 

 

$

1,907

 

 

$

3,364

 

Income from operations from 2016 System Transformation Transactions

 

 

18,930

 

 

 

22,373

 

 

 

-

 

Income from operations from 2017 System Transformation Transactions

 

 

10,754

 

 

 

-

 

 

 

-

 

Total System Transformation Transactions impact to income from operations

 

$

31,224

 

 

$

24,280

 

 

$

3,364

 

The Company incurred transaction related expenses for these System Transformation Transactions of $6.8 million in 2017, $6.1 million in 2016 and $5.8 million in 2015. These expenses are included within selling, delivery and administrative expenses on the consolidated statements of operations.

2017 System Transformation Transactions and 2016 System Transformation Transactions Pro Forma Financial Information

The purpose of the pro forma disclosures isorder to present the net salesamount expected to be collected. Accounts receivable balances are written off when determined uncollectible and are recognized as a reduction to the allowance for credit losses. Following is a summary of activity for the allowance for credit losses during 2022, 2021 and 2020:


Fiscal Year
(in thousands)202220212020
Beginning balance - allowance for credit losses$14,336 $18,070 $10,232 
Additions charged to expenses and as a reduction to net sales4,326 4,638 14,265 
Deductions(5,543)(8,372)(6,427)
Ending balance - allowance for credit losses$13,119 $14,336 $18,070 

4.Segments

The Company evaluates segment reporting in accordance with FASB Accounting Standards Codification Topic 280, Segment Reporting, each reporting period, including evaluating the reporting package reviewed by the Chief Operating Decision Maker (the “CODM”). The Company has concluded the Chief Executive Officer, the Chief Operating Officer and the income from operationsChief Financial Officer, as a group, represent the CODM. Asset information is not provided to the CODM.

The Company believes three operating segments exist. Nonalcoholic Beverages represents the vast majority of the combined entity as though the 2017 System Transformation Transactions and the 2016 System Transformation Transactions had occurred as of the beginning of 2016. The pro forma combinedCompany’s consolidated net sales and income from operationsoperations. The additional two operating segments do not necessarily reflect whatmeet the quantitative thresholds for separate reporting, either individually or in the aggregate, and, therefore, have been combined into “All Other.”

The Company’s segment results are as follows:

 Fiscal Year
(in thousands)202220212020
Net sales:
Nonalcoholic Beverages$6,081,357 $5,432,669 $4,879,170 
All Other399,359 366,855 332,728 
Eliminations(1)
(279,759)(236,810)(204,541)
Consolidated net sales$6,200,957 $5,562,714 $5,007,357 

(1)The entire net sales elimination represents net sales from the All Other segment to the Nonalcoholic Beverages segment. Sales between these segments are recognized at either fair market value or cost depending on the nature of the transaction.
52


 Fiscal Year
(in thousands)202220212020
Income from operations:
Nonalcoholic Beverages$639,136 $456,713 $324,716 
All Other1,911 (17,542)(11,338)
Consolidated income from operations$641,047 $439,171 $313,378 
Depreciation and amortization:
Nonalcoholic Beverages$159,845 $168,206 $167,355 
All Other11,745 12,359 11,662 
Consolidated depreciation and amortization$171,590 $180,565 $179,017 

5.Net Income Per Share

The following table sets forth the computation of basic net income per share and diluted net income per share under the two-class method. See Note 1 for additional information related to net income per share.

 Fiscal Year
(in thousands, except per share data)202220212020
Numerator for basic and diluted net income per Common Stock and Class B Common Stock share:
Net income attributable to Coca-Cola Consolidated, Inc.$430,158 $189,580 $172,493 
Less dividends:
Common Stock8,062 7,141 7,141 
Class B Common Stock1,312 2,233 2,233 
Total undistributed earnings$420,784 $180,206 $163,119 
Common Stock undistributed earnings – basic$364,359 $137,293 $124,275 
Class B Common Stock undistributed earnings – basic56,425 42,913 38,844 
Total undistributed earnings – basic$420,784 $180,206 $163,119 
Common Stock undistributed earnings – diluted$363,158 $136,899 $123,563 
Class B Common Stock undistributed earnings – diluted57,626 43,307 39,556 
Total undistributed earnings – diluted$420,784 $180,206 $163,119 
Numerator for basic net income per Common Stock share:
Dividends on Common Stock$8,062 $7,141 $7,141 
Common Stock undistributed earnings – basic364,359 137,293 124,275 
Numerator for basic net income per Common Stock share$372,421 $144,434 $131,416 
Numerator for basic net income per Class B Common Stock share:
Dividends on Class B Common Stock$1,312 $2,233 $2,233 
Class B Common Stock undistributed earnings – basic56,425 42,913 38,844 
Numerator for basic net income per Class B Common Stock share$57,737 $45,146 $41,077 
Numerator for diluted net income per Common Stock share:
Dividends on Common Stock$8,062 $7,141 $7,141 
Dividends on Class B Common Stock assumed converted to Common Stock1,312 2,233 2,233 
Common Stock undistributed earnings – diluted420,784 180,206 163,119 
Numerator for diluted net income per Common Stock share$430,158 $189,580 $172,493 
Numerator for diluted net income per Class B Common Stock share:
Dividends on Class B Common Stock$1,312 $2,233 $2,233 
Class B Common Stock undistributed earnings – diluted57,626 43,307 39,556 
Numerator for diluted net income per Class B Common Stock share$58,938 $45,540 $41,789 
53


 Fiscal Year
(in thousands, except per share data)202220212020
Denominator for basic net income per Common Stock and Class B Common Stock share:
Common Stock weighted average shares outstanding – basic8,117 7,141 7,141 
Class B Common Stock weighted average shares outstanding – basic1,257 2,232 2,232 
Denominator for diluted net income per Common Stock and Class B Common Stock share:
Common Stock weighted average shares outstanding – diluted (assumes conversion of Class B Common Stock to Common Stock)9,405 9,400 9,427 
Class B Common Stock weighted average shares outstanding – diluted1,288 2,259 2,286 
Basic net income per share:
Common Stock$45.88 $20.23 $18.40 
Class B Common Stock$45.93 $20.23 $18.40 
Diluted net income per share:
Common Stock$45.74 $20.17 $18.30 
Class B Common Stock$45.76 $20.16 $18.28 

NOTES TO TABLE

(1)For purposes of the diluted net income per share computation for Common Stock, all shares of Class B Common Stock are assumed to be converted; therefore, 100% of undistributed earnings is allocated to Common Stock.
(2)For purposes of the diluted net income per share computation for Class B Common Stock, weighted average shares of Class B Common Stock are assumed to be outstanding for the entire period and not converted.
(3)For periods presented during which the Company has net income, the denominator for diluted net income per share for Common Stock and Class B Common Stock includes the dilutive effect of shares relative to the Long-Term Performance Equity Plan. For periods presented during which the Company has net loss, the unvested performance units granted pursuant to the Long-Term Performance Equity Plan are excluded from operationsthe computation of diluted net loss per share, as the effect would have been hadanti-dilutive. See Note 2 for additional information on the acquisitions occurred at the beginning of 2016. Long-Term Performance Equity Plan.
(4)The pro forma financial information alsoLong-Term Performance Equity Plan awards may not be usefulsettled in predicting the future financial resultscash and/or shares of the combined company. The actual results may differ significantlyCompany’s Class B Common Stock. Once an election has been made to settle an award in cash, the dilutive effect of shares relative to such award is prospectively removed from the pro forma amounts reflected herein due to a varietydenominator in the computation of factors.

diluted net income per share.

(5)The following tables representCompany did not have anti-dilutive shares for any periods presented.
(6)1,227,546 shares of the Company’s unaudited pro forma net sales and unaudited pro forma income from operationsClass B Common Stock were converted on a one share for the 2017 System Transformation Transactions and the 2016 System Transformation Transactions.

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Net sales as reported

 

$

4,323,668

 

 

$

3,156,428

 

Pro forma adjustments (unaudited)

 

 

196,224

 

 

 

1,153,358

 

Net sales pro forma (unaudited)

 

$

4,519,892

 

 

$

4,309,786

 

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Income from operations as reported

 

$

96,179

 

 

$

127,859

 

Pro forma adjustments (unaudited)

 

 

5,391

 

 

 

76,906

 

Income from operations pro forma (unaudited)

 

$

101,570

 

 

$

204,765

 


The net sales pro forma and the income from operations pro forma reflect adjustments for (i) the inclusionone share basis into shares of historic results of operations for the Expansion Territories and the Expansion Facilities acquired in the System Transformation Transactions for the period prior to the Company’s acquisitionCommon Stock, effective as of the applicable territories or facility, for each year presented, (ii) the elimination of historic results of operations for the October 2017 Divestitures for the period prior to the Company’s divestiture of the associated Expansion Territories and Expansion Facility and (iii) the elimination of net sales made in the normal course of business between the Company and the selling entity (CCR or United) involved in the applicable System Transformation Transactions. In addition, the income from operations pro forma reflects adjustments for the elimination of cost of sales associated with intercompany sales and an adjustmentMarch 17, 2022. See Note 2 for additional depreciation expense and amortization expense for property, plant and equipment and intangible assets, respectively, as a result ofinformation on the change in fair value of the assets’ useful lives upon acquisition.

Sale of BYB Brands, Inc.

On August 24, 2015, the Company sold BYB Brands, Inc. (“BYB”), a wholly-owned subsidiary of the Company to The Coca‑Cola Company. Pursuant to the stock purchase agreement dated July 22, 2015, the Company sold all issued and outstanding shares of capital stock of BYB for a cash purchase price of $26.4 million. As a result of the sale, the Company recognized a gain of $22.7 million in 2015, which was recorded to gain on sale of business in the consolidated financial statements. BYB contributed the following amounts to the Company’s consolidated statement of operations:

Stockholder Conversion Agreement.

(in thousands)

 

2015

 

Net sales

 

$

23,875

 

Income from operations

 

 

1,809

 


4.

Inventories

6.Inventories

Inventories consisted of the following:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Finished products

 

$

116,354

 

 

$

90,259

 

Manufacturing materials

 

 

33,073

 

 

 

23,196

 

Plastic shells, plastic pallets and other inventories

 

 

34,191

 

 

 

30,098

 

Total inventories

 

$

183,618

 

 

$

143,553

 


The growth in the inventories balance at December 31, 2017, as compared to January 1, 2017, is primarily a result of inventory acquired through the completion of the 2017 System Transformation Transactions.

5.

(in thousands)December 31, 2022December 31, 2021
Finished products$211,089 $181,751 
Manufacturing materials89,300 81,183 
Plastic shells, plastic pallets and other inventories47,156 39,917 
Total inventories$347,545 $302,851 

54

7.Prepaid Expenses and Other Current Assets


Prepaid expenses and other current assets consisted of the following:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Current portion of income taxes

 

$

35,930

 

 

$

21,227

 

Repair parts

 

 

30,530

 

 

 

20,338

 

Prepayments for sponsorships

 

 

6,358

 

 

 

1,879

 

Prepaid software

 

 

5,855

 

 

 

5,331

 

Commodity hedges at fair market value

 

 

4,420

 

 

 

1,289

 

Other prepaid expenses and other current assets

 

 

17,553

 

 

 

13,770

 

Total prepaid expenses and other current assets

 

$

100,646

 

 

$

63,834

 


6.

Property, Plant and Equipment


(in thousands)December 31, 2022December 31, 2021
Repair parts$35,088 $26,643 
Prepaid taxes7,829 4,079 
Prepaid software7,398 7,038 
Commodity hedges at fair market value4,808 7,714 
Prepaid marketing4,303 4,380 
Other prepaid expenses and other current assets34,837 28,214 
Total prepaid expenses and other current assets$94,263 $78,068 

8.Property, Plant and Equipment, Net

The principal categories and estimated useful lives of property, plant and equipment, net were as follows:

 

 

 

 

 

 

 

 

 

 

Estimated

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

 

Useful Lives

Land

 

$

78,825

 

 

$

68,541

 

 

 

Buildings

 

 

211,308

 

 

 

201,247

 

 

8-50 years

Machinery and equipment

 

 

315,117

 

 

 

229,119

 

 

5-20 years

Transportation equipment

 

 

351,479

 

 

 

316,929

 

 

4-20 years

Furniture and fixtures

 

 

89,559

 

 

 

78,219

 

 

3-10 years

Cold drink dispensing equipment

 

 

488,208

 

 

 

484,771

 

 

5-17 years

Leasehold and land improvements

 

 

125,348

 

 

 

112,393

 

 

5-20 years

Software for internal use

 

 

113,490

 

 

 

105,405

 

 

3-10 years

Construction in progress

 

 

25,490

 

 

 

14,818

 

 

 

Total property, plant and equipment, at cost

 

 

1,798,824

 

 

 

1,611,442

 

 

 

Less:  Accumulated depreciation and amortization

 

 

767,436

 

 

 

798,453

 

 

 

Property, plant and equipment, net

 

$

1,031,388

 

 

$

812,989

 

 

 


Depreciation expense, which includes amortization expense for leased property under capital leases, was $150.4 million in 2017, $111.6 million in 2016

(in thousands)December 31, 2022December 31, 2021Estimated Useful Lives
Land$88,185 $80,261  
Buildings352,114 265,070 8-50 years
Machinery and equipment462,640 443,592 5-20 years
Transportation equipment515,752 466,238 3-20 years
Furniture and fixtures102,099 95,062 3-10 years
Cold drink dispensing equipment438,879 436,954 3-17 years
Leasehold and land improvements177,940 178,809 5-20 years
Software for internal use48,581 47,982 3-10 years
Construction in progress103,803 23,496  
Total property, plant and equipment, at cost2,289,993 2,037,464  
Less:  Accumulated depreciation and amortization1,106,263 1,006,776  
Property, plant and equipment, net$1,183,730 $1,030,688  

During 2022, 2021 and $78.1 million in 2015.  

During 2017, 2016 and 2015,2020, the Company performed periodic reviews of property, plant and equipment and determined no material impairment existed.

7.

Leased Property Under Capital Leases


Leased property under capital

9.Leases

Following is a summary of the weighted average remaining lease term and the weighted average discount rate for the Company’s leases:

December 31, 2022December 31, 2021
Weighted average remaining lease term:
Operating leases7.2 years8.3 years
Financing leases4.3 years12.5 years
Weighted average discount rate:
Operating leases3.6 %3.6 %
Financing leases5.2 %3.1 %

On March 17, 2022, the Company terminated its financing lease for the Snyder Production Center, which was scheduled to expire on December 31, 2035. See Note 2 for additional information on the lease termination.

55

Following is a summary of the Company’s leases which consistedwithin the consolidated statements of operations:

Fiscal Year
(in thousands)202220212020
Operating lease costs$30,484 $26,385 $24,823 
Short-term and variable leases15,065 17,245 15,305 
Depreciation expense from financing leases2,315 5,656 4,678 
Interest expense on financing lease obligations884 2,301 1,728 
Total lease cost$48,748 $51,587 $46,534 

The future minimum lease payments related to the Company’s leases include renewal options the Company has determined to be reasonably certain and exclude payments to landlords for real estate taxes and have an estimated useful lifecommon area maintenance. Following is a summary of 3 to 20 years, werefuture minimum lease payments for all noncancelable operating leases and financing leases as following:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Leased property under capital leases

 

$

95,870

 

 

$

94,125

 

Less:  Accumulated amortization

 

 

66,033

 

 

 

60,573

 

Leased property under capital leases, net

 

$

29,837

 

 

$

33,552

 

As of December 31, 2017 $15.1 million2022:


(in thousands)Operating LeasesFinancing Leases
2023$31,697 $2,750 
202427,663 2,808 
202521,628 2,869 
202619,036 1,233 
202717,227 338 
Thereafter51,372 966 
Total minimum lease payments including interest$168,623 $10,964 
Less:  Amounts representing interest22,225 1,142 
Present value of minimum lease principal payments146,398 9,822 
Less:  Current portion of lease liabilities - operating and financing leases27,635 2,303 
Noncurrent portion of lease liabilities - operating and financing leases$118,763 $7,519 

Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of December 31, 2021:

(in thousands)Operating LeasesFinancing Leases
2022$26,026 $7,145 
202324,893 7,201 
202420,639 7,396 
202516,740 7,593 
202615,575 6,100 
Thereafter65,695 49,728 
Total minimum lease payments including interest$169,568 $85,163 
Less:  Amounts representing interest25,474 14,097 
Present value of minimum lease principal payments144,094 71,066 
Less:  Current portion of lease liabilities - operating and financing leases22,048 6,060 
Noncurrent portion of lease liabilities - operating and financing leases$122,046 $65,006 

Following is a summary of the leased property under capitalCompany’s leases was from related party transactions as discussed in Note 22 towithin the consolidated financial statements.

8.

Franchise Rights

A reconciliationstatements of the activity for franchise rights for 2017 and 2016 is as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Beginning balance - franchise rights

 

$

533,040

 

 

$

527,540

 

Conversion from franchise rights to distribution rights

 

 

(533,040

)

 

 

-

 

2015 Asset Exchange

 

 

-

 

 

 

5,500

 

Ending balance - franchise rights

 

$

-

 

 

$

533,040

 

In connection with the closing of the March 2017 Transactions, the Company, The Coca-Cola Company and CCR entered into a comprehensive beverage agreement (as amended, the “CBA”) on March 31, 2017, and concurrently converted the Company’s franchise rights within the territories in which the Company distributed Coca‑Cola products prior to beginning the System Transformation (the “Legacy Territories”) to distribution agreements, net on the consolidated financial statements. Prior to this conversion, the Company’s franchise rights resided entirely within the Nonalcoholic Beverage segment.

During the second quarter of 2016, the Company recorded $5.5 million in franchise rights for the 2015 Asset Exchange.


cash flows:

9.

Goodwill


A reconciliation of the activity for goodwill for 2017 and 2016 is as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Beginning balance - goodwill

 

$

144,586

 

 

$

117,954

 

System Transformation Transactions acquisitions(1)

 

 

35,867

 

 

 

26,272

 

October 2017 Divestitures

 

 

(13,073

)

 

 

-

 

2015 Asset Exchange

 

 

-

 

 

 

(682

)

Measurement period adjustments(2)

 

 

1,936

 

 

 

1,042

 

Ending balance - goodwill

 

$

169,316

 

 

$

144,586

 

Fiscal Year
(in thousands)202220212020
Cash flows from operating activities impact:
Operating leases$28,891 $27,642 $24,718 
Interest payments on financing lease obligations884 2,301 1,728 
Total cash flows from operating activities impact$29,775 $29,943 $26,446 
Cash flows from financing activities impact:
Principal payments on financing lease obligations$2,988 $4,778 $5,861 
Total cash flows from financing activities impact$2,988 $4,778 $5,861 

(1)  System Transformation Transactions acquisitions includes an increase in goodwill of $7.4 million in 2017 and a decrease in goodwill of $5.8 million in 2016 from the opening balance sheets for the Expansion Territories and Expansion Facilities acquired in the System Transformation during 2017 and 2016, respectively, as disclosed in the financial statements in the Company’s filed periodic reports. These adjustments are for post-closing adjustments made in accordance with the terms and conditions of the applicable asset purchase agreement or asset exchange agreement for each System Transformation Transaction.

(2)  Measurement period adjustments relate to post-closing adjustments made in accordance with the terms and conditions of the applicable asset purchase agreement or asset exchange agreement for each System Transformation Transaction.

The Company’s goodwill resides entirely within the Nonalcoholic Beverage segment.


56

The Company performed its annual impairment test of goodwill as of the first day of the fourth quarter of 2017, 2016 and 2015 and determined there was no impairment of the carrying value of these assets.

did not enter into any material operating lease commitments subsequent to year-end.

10.

Distribution Agreements, Net


10.Distribution Agreements, Net

Distribution agreements, net, which are amortized on a straight linestraight-line basis and have an estimated useful life of 20 to 40 years, consisted of the following:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Distribution agreements at cost

 

$

939,527

 

 

$

242,486

 

Less: Accumulated amortization

 

 

26,175

 

 

 

7,498

 

Distribution agreements, net

 

$

913,352

 

 

$

234,988

 


A reconciliation

(in thousands)December 31, 2022December 31, 2021
Distribution agreements at cost$990,191 $960,042 
Less: Accumulated amortization148,156 123,265 
Distribution agreements, net$842,035 $836,777 

Following is a summary of the activity for distribution agreements, net for 2017during 2022 and 2016 is as follows:

2021:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Beginning balance - distribution agreements, net

 

$

234,988

 

 

$

129,786

 

Conversion to distribution rights from franchise rights

 

 

533,040

 

 

 

-

 

System Transformation Transactions acquisitions(1)

 

 

213,000

 

 

 

86,650

 

October 2017 Divestitures

 

 

(65,043

)

 

 

-

 

Measurement period adjustment(2)

 

 

16,000

 

 

 

-

 

Glacéau Distribution Agreement

 

 

-

 

 

 

21,032

 

Other distribution agreements

 

 

44

 

 

 

1,695

 

Additional accumulated amortization

 

 

(18,677

)

 

 

(4,175

)

Ending balance - distribution agreements, net

 

$

913,352

 

 

$

234,988

 


(1)  System Transformation Transactions acquisitions includes an increase of $51.5 million in 2017 from the opening balance sheets for the Expansion Territories and Expansion Facilities acquired in the System Transformation during 2017, as disclosed in the financial statements in the Company’s filed periodic reports. These adjustments are for post-closing adjustments made in accordance with the terms and conditions of the applicable asset purchase agreement or asset exchange agreement for each System Transformation Transaction. The adjustments to amortization expense associated with these measurement period adjustments were not material to the consolidated financial statements.


 Fiscal Year
(in thousands)20222021
Beginning balance - distribution agreements, net$836,777 $853,753 
Other distribution agreements30,149 7,509 
Additional accumulated amortization(24,891)(24,485)
Ending balance - distribution agreements, net$842,035 $836,777 

(2)  Measurement period adjustment relates to post-closing adjustments made in accordance with the terms and conditions of the September 2016 Distribution APA and the September 2016 Manufacturing APA for the October 2016 Transactions. The adjustments to amortization expense associated with this measurement period adjustment were not material to the consolidated financial statements.

Concurrent with its entrance into the CBA in the first quarter of 2017, the Company converted its franchise rights for the Legacy Territories to distribution rights, with an estimated useful life of 40 years.


Assuming no impairment of distribution agreements, net, amortization expense in future years based upon recorded amounts as of December 31, 20172022 will be $23.6approximately $25 million for each fiscal year 20182023 through 2022.

2027.

11.

Customer Lists and Other Identifiable Intangible Assets, Net


11.Customer Lists, Net

Customer lists, and other identifiable intangible assets, net, which are amortized on a straight linestraight-line basis and have an estimated useful life of 12five to 2012 years, consisted of the following:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Customer lists and other identifiable intangible assets at cost

 

$

25,288

 

 

$

15,938

 

Less: Accumulated amortization

 

 

6,968

 

 

 

5,511

 

Customer lists and other identifiable intangible assets, net

 

$

18,320

 

 

$

10,427

 


A reconciliation of the activity for customer lists and other identifiable intangible assets, net for 2017 and 2016 is as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Beginning balance - customer lists and other identifiable intangible assets, net

 

$

10,427

 

 

$

6,662

 

System Transformation Transactions acquisitions(1)

 

 

9,200

 

 

 

4,600

 

Measurement period adjustment(2)

 

 

150

 

 

 

-

 

Additional accumulated amortization

 

 

(1,457

)

 

 

(835

)

Ending balance - customer lists and other identifiable intangible assets, net

 

$

18,320

 

 

$

10,427

 

(in thousands)December 31, 2022December 31, 2021
Customer lists at cost$25,288 $25,288 
Less: Accumulated amortization16,123 14,322 
Customer lists, net$9,165 $10,966 

(1) System Transformation Transactions acquisitions includes an increase of $0.5 million in 2017 from the opening balance sheets for the Expansion Territories and Expansion Facilities acquired in the System Transformation during 2017, as disclosed in the financial statements in the Company’s filed periodic reports. These adjustments are for post-closing adjustments made in accordance with the applicable asset purchase agreement or asset exchange agreement for each System Transformation Transaction. The adjustments to amortization expense associated with these measurement period adjustments were not material to the consolidated financial statements.

(2) Measurement period adjustment relates to post-closing adjustments made in accordance with the terms and conditions of the September 2016 Distribution APA and the September 2016 Manufacturing APA for the October 2016 Transactions. The adjustments to amortization expense associated with this measurement period adjustment were not material to the consolidated financial statements.


Assuming no impairment of customer lists, and other identifiable intangible assets, net, amortization expense in future years based upon recorded amounts as of December 31, 20172022 will be $1.8approximately $2 million for each fiscal year 20182023 through 2022.


2027.

12.

Other Accrued Liabilities


12.Other Accrued Liabilities

Other accrued liabilities consisted of the following:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Checks and transfers yet to be presented for payment from zero balance cash accounts

 

$

37,262

 

 

$

19,326

 

Accrued insurance costs

 

 

35,433

 

 

 

28,248

 

Accrued marketing costs

 

 

33,376

 

 

 

24,714

 

Employee and retiree benefit plan accruals

 

 

27,024

 

 

 

23,858

 

Current portion of acquisition related contingent consideration

 

 

23,339

 

 

 

15,782

 

Accrued taxes (other than income taxes)

 

 

6,391

 

 

 

2,836

 

Current deferred proceeds from bottling agreements conversion

 

 

2,286

 

 

 

-

 

All other accrued expenses

 

 

20,419

 

 

 

19,121

 

Total other accrued liabilities

 

$

185,530

 

 

$

133,885

 


See Note 22 to the consolidated financial statements for additional information on the proceeds from the bottling agreements conversion.

13.

Debt

(in thousands)December 31, 2022December 31, 2021
Accrued insurance costs$54,180 $51,645 
Current portion of acquisition related contingent consideration40,060 51,518 
Accrued marketing costs33,375 32,249 
Employee and retiree benefit plan accruals31,711 32,007 
Accrued taxes (other than income taxes)7,127 6,638 
Current portion of deferred payroll taxes under CARES Act— 18,739 
All other accrued expenses31,847 33,973 
Total other accrued liabilities$198,300 $226,769 

Following is a summary


The Company took advantage of certain provisions of the Company’s debt:

(in thousands)

 

Maturity

 

Interest

Rate

 

 

Interest

Paid

 

Public /

Non-public

 

December 31,

2017

 

 

January 1, 2017

 

Revolving credit facility

 

2019

 

Variable

 

 

Varies

 

Non-public

 

$

207,000

 

 

$

152,000

 

Term Loan

 

2021

 

Variable

 

 

Varies

 

Non-public

 

 

300,000

 

 

 

300,000

 

Senior Notes

 

2023

 

3.28%

 

 

Semi-annually

 

Non-public

 

 

125,000

 

 

 

-

 

Senior Notes

 

2019

 

7.00%

 

 

Semi-annually

 

Public

 

 

110,000

 

 

 

110,000

 

Senior Notes

 

2025

 

3.80%

 

 

Semi-annually

 

Public

 

 

350,000

 

 

 

350,000

 

Unamortized discount on Senior Notes(1)

 

2019

 

 

 

 

 

 

 

 

 

 

(332

)

 

 

(570

)

Unamortized discount on Senior Notes(1)

 

2025

 

 

 

 

 

 

 

 

 

 

(70

)

 

 

(78

)

Debt issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

(3,580

)

 

 

(4,098

)

Total debt

 

 

 

 

 

 

 

 

 

 

 

 

1,088,018

 

 

 

907,254

 

Less:  Current portion of debt

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

Long-term debt

 

 

 

 

 

 

 

 

 

 

 

$

1,088,018

 

 

$

907,254

 

(1)

The Senior Notes due 2019 were issued at 98.238% of par and the Senior Notes due 2025 were issued at 99.975% of par.

Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which allowed an employer to defer the deposit and payment of the employer’s portion of social security taxes that would otherwise have been due on or after March 27, 2020 and before January 1, 2021. The principal maturitieslaw permits an employer to deposit half of debt outstanding onthese deferred payments by December 31, 2017 were as follows:

(in thousands)

 

Debt Maturities

 

2018

 

$

15,000

 

2019

 

 

347,000

 

2020

 

 

37,500

 

2021

 

 

217,500

 

2022

 

 

-

 

Thereafter

 

 

475,000

 

Total debt

 

$

1,092,000

 

Under the Company’s Term Loan Facility (as defined below), $15 million will become due in fiscal 2018. The Company intends to repay this amount through use of its Revolving Credit Facility (as defined below), which is classified as long-term debt. As such, the $15 million has been classified as non-current as of December 31, 2017.

The Company had capital lease obligations of $43.5 million on December 31, 2017 and $48.7 million on January 1, 2017. The Company mitigates its financing risk by using multiple financial institutions and only entering into credit arrangements with institutions with investment grade credit ratings. The Company monitors counterparty credit ratings on an ongoing basis.


On February 27, 2017, the Company sold $125 million aggregate principal amount of senior unsecured notes due 2023 to PGIM, Inc. (“Prudential”) and certain of its affiliates pursuant to the Note Purchase and Private Shelf Agreement dated June 10, 2016 between the Company, Prudential2021 and the other parties thereto (the “Private Shelf Facility”). These notes bear interest at 3.28%, payable semi-annually in arrears on February 27 and August 27 of each year, and will mature on February 27, 2023 unless earlier redeemedhalf by the Company.December 31, 2022. The Company may request that Prudential consider the purchase of additional senior unsecured notesrepaid a portion of the Company underdeferred payroll taxes during 2021 and repaid the Private Shelf Facility in an aggregate principal amount of up to $175 million.

In October 2014, the Company entered into a five-year unsecured revolving credit facility (the “Revolving Credit Facility”), and in April 2015, the Company exercised an accordion feature which established a $450 million aggregate maximum borrowing capacity on the Revolving Credit Facility. The $450 million borrowing capacity includes up to $50 million available for the issuance of letters of credit. Borrowings under the Revolving Credit Facility bear interest at a floating base rate or a floating Eurodollar rate plus an applicable margin, at the Company’s option, dependent on the Company’s credit ratings at the time of borrowing. At the Company’s current credit ratings, the Company must pay an annual facility fee of 0.15%remaining portion of the lenders’ aggregate commitments under the Revolving Credit Facility. The Revolving Credit Facility has a scheduled maturity date of October 16, 2019.

In June 2016, the Company entered into a five-year term loan agreement for a senior unsecured term loan facility (the “Term Loan Facility”) in the aggregate principal amount of $300 million, maturing June 7, 2021. The Company may request additional term loans under the agreement, provided the Company’s aggregate borrowings under the Term Loan Facility do not exceed $500 million. Borrowings under the Term Loan Facility bear interest at a floating base rate or a floating Eurodollar rate plus an applicable margin, at the Company’s option, dependent on the Company’s credit ratings.

The Revolving Credit Facility, the Term Loan Facility and the Private Shelf Facility include two financial covenants: a consolidated cash flow/fixed charges ratio and a consolidated funded indebtedness/cash flow ratio, each as defined in the respective agreements. The Company was in compliance with these covenants as of December 31, 2017. These covenants do not currently, and the Company does not anticipate they will, restrict its liquidity or capital resources.

The indentures under which the Company’s public debt was issued do not include financial covenants but do limit the incurrence of certain liens and encumbrances as well as indebtedness by the Company’s subsidiaries in excess of certain amounts.

All outstanding long-term debt has been issued by the Company and none has been issued by any of its subsidiaries. There are no guarantees of the Company’s debt.

deferred payroll taxes during 2022.

14.

Derivative Financial Instruments


57

13.Commodity Derivative Instruments

The Company is subject to the risk of increased costs arising from adverse changes in certain commodity prices. In the normal course of business, the Company manages these risksthis risk through a variety of strategies, including the use of commodity derivative instruments. The Company does not use commodity derivative instruments for trading or speculative purposes. All derivative instruments are recorded at fair value as either assets or liabilities in the Company’s consolidated balance sheets. These commodity derivative instruments are not designated as hedging instruments under GAAP and are used as “economic hedges” to manage certain commodity price risk. Derivative instruments held are marked to market on a monthly basis and recognized in earnings consistent with the expense classification of the underlying hedged item. Settlements of derivative agreements are included in cash flows from operating activities on the Company’s consolidated statements of cash flows.

The Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk. While the Company would be exposed to credit loss in the event of nonperformance by these counterparties, the Company does not anticipate nonperformance by these parties.

counterparties.


Commodity derivative instruments held by the Company are marked to market on a monthly basis and are recognized in earnings consistent with the expense classification of the underlying hedged item. The Company generally pays a fee for these commodity derivative instruments, which is amortized over the corresponding period of each commodity derivative instrument. Settlements of commodity derivative instruments are included in cash flows from operating activities in the consolidated statements of cash flows. The following table summarizes pre-tax changes in the fair valuevalues of the Company’s commodity derivative financial instruments and the classification of such changes in the consolidated statements of operations.

operations:

 

 

 

 

Fiscal Year

 

(in thousands)

 

Classification of Gain (Loss)

 

2017

 

 

2016

 

 

2015

 

Commodity hedges

 

Cost of sales

 

$

2,815

 

 

$

2,896

 

 

$

(2,354

)

Commodity hedges

 

Selling, delivery and administrative expenses

 

 

315

 

 

 

1,832

 

 

 

(1,085

)

Total gain (loss)

 

 

 

$

3,130

 

 

$

4,728

 

 

$

(3,439

)



 Fiscal Year
(in thousands)202220212020
Cost of sales$(3,333)$3,469 $1,996 
Selling, delivery and administrative expenses427 1,772 791 
Total gain (loss)$(2,906)$5,241 $2,787 

The following table summarizes the


All commodity derivative instruments are recorded at fair values and classificationvalue as either assets or liabilities in the consolidated balance sheets of derivative instruments held by the Company:

(in thousands)

 

Balance Sheet Classification

 

December 31, 2017

 

 

January 1, 2017

 

Assets:

 

 

 

 

 

 

 

 

 

 

Commodity hedges at fair market value

 

Prepaid expenses and other current assets

 

$

4,420

 

 

$

1,289

 

Total assets

 

 

 

$

4,420

 

 

$

1,289

 

sheets. The Company has master agreements with the counterparties to its commodity derivative financial agreementsinstruments that provide for net settlement of derivative transactions. Accordingly, the net amounts of derivative assets are recognized in either prepaid expenses and other current assets or other assets in the Company’s consolidated balance sheets and the net amounts of derivative liabilities are recognized in either other accrued liabilities or other liabilities in the consolidated balance sheets. The following table summarizes the fair values of the Company’s commodity derivative instruments and the classification of such instruments in the consolidated balance sheets:


(in thousands)December 31, 2022December 31, 2021
Prepaid expenses and other current assets$4,808 $7,714 
Total assets$4,808 $7,714 

The following table summarizes the Company’s gross commodity derivative instrument assets and gross commodity derivative instrument liabilities in the consolidated balance sheets:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Gross derivative assets

 

$

4,481

 

 

$

1,297

 

Gross derivative liabilities

 

 

61

 

 

 

8

 


(in thousands)December 31, 2022December 31, 2021
Gross commodity derivative instrument assets$4,808 $9,200 
Gross commodity derivative instrument liabilities— 1,486 

The following table summarizes the Company’s outstanding commodity derivative agreements:

instruments:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Notional amount of outstanding commodity derivative agreements

 

$

59,564

 

 

$

13,146

 

Latest maturity date of outstanding commodity derivative agreements

 

December 2018

 

 

December 2017

 


Subsequent to December 31, 2017, the Company entered into additional agreements to hedge certain commodity costs for 2018. The notional amount

(in thousands)December 31, 2022December 31, 2021
Notional amount of outstanding commodity derivative instruments$61,128 $74,558 
Latest maturity date of outstanding commodity derivative instrumentsDecember 2023December 2022

14.Fair Values of these agreements was $91.7 million. Concurrently, the Company terminated certain hedge agreements for commodity costs for 2018. The notional amount of the terminated agreements was $22.6 million.

Financial Instruments

15.

Fair Values of Financial Instruments


GAAP requires assets and liabilities carried at fair value to be classified and disclosed in one of the following categories:


•Level 1:  Quoted market prices in active markets for identical assets or liabilities.

•Level 2:  Observable market basedmarket-based inputs or unobservable inputs that are corroborated by market data.

•Level 3:  Unobservable inputs that are not corroborated by market data.


58



The followingbelow methods and assumptions were used by the Company in estimating the fair values of its financial instruments. There were no transfers of assets or liabilities between levels in any period presented.


Financial Instrument

Fair Value

Level

Method and Assumptions

Financial Instrument

Fair Value
Level		Methods and Assumptions
Deferred compensation plan assets and liabilities

Level 1

The fair value of the Company’s non-qualifiednonqualified deferred compensation plan for certain executives and other highly compensated employees is based on the fair values of associated assets and liabilities, which are held in mutual funds and are based on the quoted market valuevalues of the securities held within the mutual funds.

Commodity hedging agreements

Pension plan assets

Level 1

The fair values of the Company’s Level 1 pension plan assets, which are equity securities and fixed income investment vehicles, are valued using the quoted market prices of those securities which are actively traded on national exchanges.
Pension plan assetsLevel 2

The fair values of the Company’s Level 2 pension plan assets, which are investments that are pooled with other investments in a commingled fund, are valued using the net asset value produced by the fund manager. The assets within the commingled funds have a readily determinable fair market value.

Commodity derivative instrumentsLevel 2The fair values of the Company’s commodity hedging agreementsderivative instruments are based on current settlement values at each balance sheet date. The fair values of the commodity hedging agreements at each balance sheet date, which represent the estimated amounts the Company would have received or paid upon termination of these agreements.instruments. The Company’s credit risk related to the commodity derivative financial instruments is managed by requiring high standards for its counterparties and periodic settlements. The Company considers nonperformance risk in determining the fair valuevalues of commodity derivative financial instruments.

Non-public variable rateLong-term debt

Level 2

The carrying amounts of the Company’s non-public variable rate debt approximate theirthe fair values due to variable interest rates with short reset periods.

Non-public fixed rate debt

Level 2

The fair values of the Company’s non-public fixed rate debt are based on estimated current market prices.

Public debt securities

Level 2

The fair values of the Company’s public debt securities are based on estimated current market prices.

Acquisition related contingent consideration

Level 3

The fair valuesvalue of the Company’s acquisition related contingent consideration areis based on internal forecasts and the weighted average cost of capital (“WACC”)WACC derived from market data.


The following tables summarize by assets and liabilities, the carrying amounts and the fair values by level of the Company’s deferred compensation plan assets and liabilities, pension plan assets, commodity hedging agreements,derivative instruments, long-term debt and acquisition related contingent consideration:

 

 

December 31, 2017

 

 

 

Carrying

 

 

Total

 

 

Fair Value

 

 

Fair Value

 

 

Fair Value

 

(in thousands)

 

Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan assets

 

$

33,166

 

 

$

33,166

 

 

$

33,166

 

 

$

-

 

 

$

-

 

Commodity hedging agreements

 

 

4,420

 

 

 

4,420

 

 

 

-

 

 

 

4,420

 

 

 

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan liabilities

 

 

33,166

 

 

 

33,166

 

 

 

33,166

 

 

 

-

 

 

 

-

 

Non-public variable rate debt

 

 

506,398

 

 

 

507,000

 

 

 

-

 

 

 

507,000

 

 

 

-

 

Non-public fixed rate debt

 

 

124,829

 

 

 

126,400

 

 

 

-

 

 

 

126,400

 

 

 

-

 

Public debt securities

 

 

456,791

 

 

 

475,100

 

 

 

-

 

 

 

475,100

 

 

 

-

 

Acquisition related contingent consideration

 

 

381,291

 

 

 

381,291

 

 

 

-

 

 

 

-

 

 

 

381,291

 


 

January 1, 2017

 

 

Carrying

 

 

Total

 

 

Fair Value

 

 

Fair Value

 

 

Fair Value

 

 December 31, 2022

(in thousands)

 

Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

(in thousands)Carrying
Amount		Total
Fair Value		Fair Value
Level 1		Fair Value
Level 2		Fair Value
Level 3

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:     

Deferred compensation plan assets

 

$

24,903

 

 

$

24,903

 

 

$

24,903

 

 

$

-

 

 

$

-

 

Deferred compensation plan assets$51,257 $51,257 $51,257 $— $— 

Commodity hedging agreements

 

 

1,289

 

 

 

1,289

 

 

 

-

 

 

 

1,289

 

 

 

-

 

Pension plan assetsPension plan assets261,942 261,942 242,639 19,303 — 
Commodity derivative instrumentsCommodity derivative instruments4,808 4,808 — 4,808 — 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

Deferred compensation plan liabilities

 

 

24,903

 

 

 

24,903

 

 

 

24,903

 

 

 

-

 

 

 

-

 

Deferred compensation plan liabilities51,257 51,257 51,257 — — 

Non-public variable rate debt

 

 

451,222

 

 

 

452,000

 

 

 

-

 

 

 

452,000

 

 

 

-

 

Public debt securities

 

 

456,032

 

 

 

475,800

 

 

 

-

 

 

 

475,800

 

 

 

-

 

Long-term debtLong-term debt598,817 575,900 — 575,900 — 

Acquisition related contingent consideration

 

 

253,437

 

 

 

253,437

 

 

 

-

 

 

 

-

 

 

 

253,437

 

Acquisition related contingent consideration541,491 541,491 — — 541,491 

Under the CBA, the Company will make a quarterly sub-bottling payment to CCR on a continuing basis for the grant of exclusive rights to distribute, promote, market and sell specified covered beverages and beverage products in the Expansion Territories. This


 December 31, 2021
(in thousands)Carrying
Amount		Total
Fair Value		Fair Value
Level 1		Fair Value
Level 2		Fair Value
Level 3
Assets:     
Deferred compensation plan assets$60,461 $60,461 $60,461 $— $— 
Pension plan assets328,250 328,250 313,893 14,357 — 
Commodity derivative instruments7,714 7,714 — 7,714 — 
Liabilities:
Deferred compensation plan liabilities60,461 60,461 60,461 — — 
Long-term debt723,443 772,600 — 772,600 — 
Acquisition related contingent consideration542,105 542,105 — — 542,105 

The acquisition related contingent consideration iswas valued using a probability weighted discounted cash flow model based on internal forecasts and the WACC derived from market data, which are considered Level 3 inputs. Each reporting period, the Company adjusts


its acquisition related contingent consideration liability related to the Expansion Territoriesdistribution territories subject to acquisition related sub-

59

bottling payments to fair value by discounting future expected acquisition related sub-bottling payments required under the CBA using the Company’s estimated WACC. These

The future expected acquisition related sub-bottling payments extend through the life of the related distribution assets acquired in each Expansion Territory,distribution territory, which is generally 40 years. As a result, the fair value of the acquisition related contingent consideration liability is impacted by the Company’s WACC, management’s estimate of the amountsacquisition related sub-bottling payments that will be paidmade in the future under the CBA, and current acquisition related sub-bottling payments (all Level 3 inputs). Changes in any of these Level 3 inputs, particularly the underlying risk-free interest rate used to estimate the Company’s WACC, could result in material changes to the fair value of the acquisition related contingent consideration liability and could materially impact the amount of noncashnon-cash expense (or income) recorded each reporting period.


The acquisition related contingent consideration liability is the Company’s only Level 3 asset or liability. A reconciliationsummary of the Level 3 activity is as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Opening balance - Level 3 liability

 

$

253,437

 

 

$

136,570

 

Increase due to System Transformation Transactions acquisitions(1)

 

 

128,880

 

 

 

133,857

 

Measurement period adjustment(2)

 

 

14,826

 

 

 

-

 

Payment of acquisition related contingent consideration

 

 

(16,738

)

 

 

(13,550

)

Reclassification to current payables

 

 

(2,340

)

 

 

(1,530

)

(Favorable)/unfavorable fair value adjustment

 

 

3,226

 

 

 

(1,910

)

Ending balance - Level 3 liability

 

$

381,291

 

 

$

253,437

 


(1) Increase due to System Transformation Transactions acquisitions includes an increase

 Fiscal Year
(in thousands)20222021
Beginning balance - Level 3 liability$542,105 $434,694 
Payments of acquisition related contingent consideration(36,515)(39,097)
Reclassification to current payables3,600 200 
Increase in fair value32,301 146,308 
Ending balance - Level 3 liability$541,491 $542,105 

As of December 31, 2022 and December 31, 2021, discount rates of 9.1% and 7.5%, respectively, were utilized in the valuation of the Company’s acquisition related contingent consideration of $62.5 million in 2017 from the opening balance sheets for the Expansion Territories and Expansion Facilities acquiredliability. The increase in the System Transformation during 2017, as disclosed in the financial statements in the Company’s filed periodic reports. These adjustments are for post-closing adjustments made in accordance with the terms and conditions of the applicable asset purchase agreement or asset exchange agreement for each System Transformation Transaction.

(2) Measurement period adjustments relate to post-closing adjustments made in accordance with the terms and conditions of the applicable asset purchase agreement or asset exchange agreement for each System Transformation Transaction.

The fair value adjustment toof the acquisition related contingent consideration liability during 2017in 2022 was primarily driven by final settlementhigher projections of previously closed System Transformation Transactions and a decreasefuture cash flows in the risk-free interest rate,distribution territories subject to acquisition related sub-bottling payments, partially offset by a benefit resulting froman increase in the Tax Act. Thediscount rate used to calculate fair value. This fair value adjustments to the acquisition related contingent consideration liability during 2016 were primarily driven by a change in the projected future operating results of the Expansion Territories subject to sub-bottling fees and changes in the risk-free interest rate. These adjustments wereadjustment was recorded in other income (expense),expense, net onin the Company’s consolidated statementsstatement of operations.

operations for 2022.


The Company anticipates that the amount the Companyit could pay annually under the acquisition related contingent consideration arrangements for the System Transformation Transactions is expecteddistribution territories subject to acquisition related sub-bottling payments will be in the range of $23$42 million to $47$74 million.

16.

Other Liabilities

Other liabilities consisted of the following:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Non-current portion of acquisition related contingent consideration

 

$

357,952

 

 

$

237,655

 

Accruals for executive benefit plans

 

 

125,791

 

 

 

123,078

 

Non-current deferred proceeds from bottling agreements conversion

 

 

87,449

 

 

 

-

 

Non-current deferred proceeds from Legacy Facilities Credit

 

 

29,881

 

 

 

-

 

Other

 

 

19,506

 

 

 

17,839

 

Total other liabilities

 

$

620,579

 

 

$

378,572

 

See Note 15 and Note 21 to the consolidated financial statements for additional information on acquisition related contingent consideration and benefit plans, respectively. See Note 22 to the consolidated financial statements for additional information on the proceeds from the bottling agreements conversion and the Legacy Facilities Discount.


17.

Commitments and Contingencies

Leases

The Company leases office and warehouse space, machinery and other equipment under noncancellable operating lease agreements which expire at various dates through 2033. These leases generally contain scheduled rent increases or escalation clauses, renewal options, or in some cases, purchase options. The Company also leases certain warehouse space and other equipment under capital lease agreements which expire at various dates through 2030. These leases contain scheduled rent increases or escalation clauses. Amortization of assets recorded under capital leases is included in depreciation expense.

Rental expense incurred for noncancellable operating leases was $18.7 million in 2017, $13.6 million in 2016 and $8.9 million in 2015. See Note 7 and Note 13 to the consolidated financial statements for additional information on leased property under capital leases.

The following is a summary of future minimum lease payments, including renewal options the Company has determined to be reasonably assured, for all noncancellable operating leases and capital leases as of December 31, 2017:

(in thousands)

 

Capital Leases

 

 

Operating Leases

 

 

Total

 

2018

 

$

10,706

 

 

$

12,497

 

 

$

23,203

 

2019

 

 

10,434

 

 

 

11,872

 

 

 

22,306

 

2020

 

 

10,613

 

 

 

11,380

 

 

 

21,993

 

2021

 

 

6,218

 

 

 

10,879

 

 

 

17,097

 

2022

 

 

2,697

 

 

 

9,867

 

 

 

12,564

 

Thereafter

 

 

10,859

 

 

 

34,717

 

 

 

45,576

 

Total minimum lease payments including interest

 

$

51,527

 

 

$

91,212

 

 

$

142,739

 

Less:  Amounts representing interest

 

 

8,058

 

 

 

 

 

 

 

 

 

Present value of minimum lease principal payments

 

 

43,469

 

 

 

 

 

 

 

 

 

Less:  Current portion of principal payment obligations under capital leases

 

 

8,221

 

 

 

 

 

 

 

 

 

Long-term portion of principal payment obligations under capital leases

 

$

35,248

 

 

 

 

 

 

 

 

 

Manufacturing Cooperatives

The Company is a shareholder of South Atlantic Canners, Inc. (“SAC”), a manufacturing cooperative in Bishopville, South Carolina, managed by the Company. All eight shareholders of SAC are Coca‑Cola bottlers and each has equal voting rights. The Company accounts for SAC as an equity method investment.

The Company receives a fee for managing the day-to-day operations of SAC pursuant to a management agreement. Proceeds from management fees received from SAC were $9.1 million in 2017, $9.0 million in 2016 and $8.5 million in 2015.

The Company is obligated to purchase 17.5 million cases of finished product from SAC on an annual basis through June 2024. The Company purchased 29.9 million cases, 29.9 million cases and 28.3 million cases of finished product from SAC in 2017, 2016 and 2015, respectively.

The Company is also a shareholder of Southeastern Container (“Southeastern”), a plastic bottle manufacturing cooperative from which the Company is obligated to purchase at least 80% of its requirements of plastic bottles for certain designated territories. The Company accounts for Southeastern as an equity method investment.

The following table summarizes the Company’s purchases from these manufacturing cooperatives:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Purchases from SAC

 

$

148,511

 

 

$

149,878

 

 

$

144,511

 

Purchases from Southeastern

 

 

108,528

 

 

 

80,123

 

 

 

63,257

 

Total purchases from manufacturing cooperatives

 

$

257,039

 

 

$

230,001

 

 

$

207,768

 


The Company guarantees a portion of SAC’s debt, which expires at various dates through 2021. The amounts guaranteed were $23.9 million as of December 31, 2017 and $23.3 million as of January 1, 2017. Effective November 17, 2017, the Company’s guarantees for a portion of Southeastern’s debt were eliminated.

The Company does not anticipate SAC will fail to fulfill its commitment related to the debt. The Company further believes SAC has sufficient assets, including production equipment, facilities and working capital, and the ability to adjust selling prices of its products to adequately mitigate the risk of material loss from the Company’s guarantee.

In the event SAC fails to fulfill its commitments under the related debt, the Company would be responsible for payments to the lenders up to the level of the guarantee. The following table summarizes the Company’s maximum exposure under this guarantee if SAC had borrowed up to its aggregate borrowing capacity:

(in thousands)

 

December 31, 2017

 

Maximum guaranteed debt

 

$

23,938

 

Equity investments(1)

 

 

7,325

 

Maximum total exposure, including equity investments

 

$

31,263

 

(1)

Recorded in other assets on the Company’s consolidated balance sheets using the equity method.

The Company holds no assets as collateral against the SAC guarantee, the fair value of which is immaterial to the Company’s consolidated financial statements. The Company monitors its investments in SAC and would be required to write down its investment if an impairment was identified and the Company determined it to be other than temporary. No impairment of the Company’s investments in SAC has been identified as of December 31, 2017, and there was no impairment in 2016 or 2015.

Other Commitments and Contingencies

The Company has standby letters of credit, primarily related to its property and casualty insurance programs. These letters of credit totaled $35.6 million on December 31, 2017 and $29.7 million on January 1, 2017.

The Company participates in long-term marketing contractual arrangements with certain prestige properties, athletic venues and other locations. As of December 31, 2017, the future payments related to these contractual arrangements, which expire at various dates through 2030, amounted to $132.8 million.

The Company is involved in various claims and legal proceedings which have arisen in the ordinary course of its business. Although it is difficult to predict the ultimate outcome of these claims and legal proceedings, management believes that the ultimate disposition of these matters will not have a material adverse effect on the financial condition, cash flows or results of operations of the Company. No material amount of loss in excess of recorded amounts is believed to be reasonably possible as a result of these claims and legal proceedings.

The Company is subject to audits by tax authorities in jurisdictions where it conducts business. These audits may result in assessments that are subsequently resolved with the authorities or potentially through the courts. Management believes the Company has adequately provided for any assessments likely to result from these audits; however, final assessments, if any, could be different than the amounts recorded in the consolidated financial statements.



18.

Income Taxes

15.Income Taxes

The current income tax provision represents the estimated amount of income taxes paid or payable for the year, as well as changes in estimates from prior years. The deferred income tax provision represents the change in deferred tax liabilities and assets. The following table presents the significant components of the provision for income taxes:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

12,978

 

 

$

(6,920

)

 

$

20,107

 

State

 

 

5,292

 

 

 

27

 

 

 

3,563

 

Total current provision (benefit)

 

$

18,270

 

 

$

(6,893

)

 

$

23,670

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(54,232

)

 

$

39,644

 

 

$

10,638

 

State

 

 

(3,879

)

 

 

3,298

 

 

 

(230

)

Total deferred provision (benefit)

 

$

(58,111

)

 

$

42,942

 

 

$

10,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

$

(39,841

)

 

$

36,049

 

 

$

34,078

 


 Fiscal Year
(in thousands)202220212020
Current:
Federal$109,899 $59,308 $38,665 
State26,053 15,444 11,541 
Total current provision$135,952 $74,752 $50,206 
Deferred:   
Federal$7,478 $(4,966)$8,052 
State1,499 (4,217)685 
Total deferred provision (benefit)$8,977 $(9,183)$8,737 
Income tax expense$144,929 $65,569 $58,943 

60

The Company’s effective income tax rate, as calculated by dividing income tax expense (benefit) by income before income taxes, was (63.2)%25.2% for 2017, 38.9%2022, 25.7% for 20162021 and 34.4%24.5% for 2015.2020. The following table provides a reconciliation of income tax expense (benefit) at the statutory federal rate to actual income tax expense (benefit).

expense:

 

 

Fiscal Year

 

 

 

2017

 

 

2016

 

 

2015

 

(in thousands)

 

Income

tax expense

 

 

% pre-tax

income

 

 

Income

tax expense

 

 

% pre-tax

income

 

 

Income

tax expense

 

 

% pre-tax

income

 

Statutory expense

 

$

22,052

 

 

 

35.0

%

 

$

32,449

 

 

 

35.0

%

 

$

34,692

 

 

 

35.0

%

Adjustment for federal tax legislation

 

 

(69,014

)

 

 

(109.5

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Meals and entertainment

 

 

2,771

 

 

 

4.4

 

 

 

1,879

 

 

 

2.0

 

 

 

1,666

 

 

 

1.7

 

Valuation allowance change

 

 

2,718

 

 

 

4.3

 

 

 

(689

)

 

 

(0.7

)

 

 

(1,332

)

 

 

(1.3

)

State income taxes, net of federal benefit

 

 

2,029

 

 

 

3.2

 

 

 

3,243

 

 

 

3.5

 

 

 

3,496

 

 

 

3.5

 

Noncontrolling interest – Piedmont

 

 

(1,692

)

 

 

(2.7

)

 

 

(2,406

)

 

 

(2.6

)

 

 

(2,261

)

 

 

(2.3

)

Adjustment for uncertain tax positions

 

 

(521

)

 

 

(0.8

)

 

 

(43

)

 

 

-

 

 

 

51

 

 

 

0.1

 

Adjustment for state tax legislation

 

 

-

 

 

 

-

 

 

 

(625

)

 

 

(0.7

)

 

 

(1,145

)

 

 

(1.2

)

Manufacturing deduction benefit

 

 

-

 

 

 

-

 

 

 

(56

)

 

 

(0.1

)

 

 

(1,330

)

 

 

(1.3

)

Bargain purchase gain

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(704

)

 

 

(0.7

)

Other, net

 

 

1,816

 

 

 

2.9

 

 

 

2,297

 

 

 

2.5

 

 

 

945

 

 

 

0.9

 

Income tax expense (benefit)

 

$

(39,841

)

 

(63.2)%

 

 

$

36,049

 

 

 

38.9

%

 

$

34,078

 

 

 

34.4

%


 Fiscal Year
 202220212020
(in thousands)Income
tax expense		% pre-tax
income		Income
tax expense		% pre-tax
income		Income
tax expense		% pre-tax
income
Statutory expense$120,768 21.0 %$53,581 21.0 %$50,618 21.0 %
State income taxes, net of federal benefit21,572 3.8 9,522 3.7 9,258 3.8 
Nondeductible compensation4,005 0.7 3,545 1.4 3,007 1.3 
Meals, entertainment and travel expense1,694 0.3 2,028 0.8 1,476 0.6 
Adjustment for uncertain tax positions(1,351)(0.2)(984)(0.4)114 — 
Valuation allowance change(932)(0.2)(902)(0.4)(1,900)(0.8)
Noncontrolling interest – Piedmont— — — — (2,447)(1.0)
Other, net(827)(0.2)(1,221)(0.4)(1,183)(0.4)
Income tax expense$144,929 25.2 %$65,569 25.7 %$58,943 24.5 %

The Company’s effective income tax rate, as calculated by dividing income tax expense (benefit) by income before income taxes minus net income attributable to noncontrolling interest, was (70.3)%25.5% for 2017, 41.8% for 2016 and 36.6% for 2015.

On December 22, 2017, the Tax Act was signed into law and significantly reformed the Internal Revenue Code of 1986, as amended. The Tax Act will significantly impact the Company by reducing the federal corporate tax rate from 35% to 21%, effective January 1, 2018, and by allowing expensing of certain capital expenditures. However, the Tax Act limits the deductibility of meals, entertainment expenses and certain executive compensation, imposes limitations on the deductibility of interest expense and eliminates the domestic production activities deduction.

As of December 31, 2017, the Company completed its estimate for the tax effects of the enactment of the Tax Act, and as a result, the Company revalued and reduced its net deferred tax liability to the newly enacted corporate tax rate of 21%.2020. The Company recognized an estimated benefit of $69.0 million, primarily as a result of revaluing itshad no net deferred tax liability. This benefit was partially offset by a $2.4 million increaseincome attributable to the valuation allowance as a result of the deductibility of certain deferred compensation based on the current interpretation of the Tax Act. The net benefit of $66.6 million was recorded to income tax expense (benefit) in the 2017 consolidated financial statements.


Shortly after the Tax Act was enacted, the Securities and Exchange Commission issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) to address the application of GAAP and direct taxpayers to consider the impact of the Act as “provisional” when a registrant does not have the necessary information available, preparednoncontrolling interest during 2022 or analyzed (including computations) in reasonable detail to complete the accounting for the change in tax law. In accordance with SAB 118, the Company has recognized the provisional tax impacts, outlined above, related to the re-measurement of its net deferred tax liability. The ultimate impact may differ from the provisional amounts, possibly materially, due to, among other things, the significant complexity of the Tax Act, anticipated additional regulatory guidance or related interpretations that may be issued by the Internal Revenue Service (the “IRS”), changes in accounting standards, legislative actions, future actions by states within the U.S. and changes in estimate, analysis, interpretations and assumptions the Company has made.

The amounts recorded to gain (loss) on exchange transactions, gain on sale of business and bargain purchase gain, net of tax on the consolidated statements of operations did not have a significant impact on the effective income tax rate for any periods presented.

2021.


The Company records liabilities for uncertain tax positions related to certain income tax positions. These liabilities reflect the Company’s best estimate of the ultimate income tax liability based on currently known facts and information. Material changes in facts or information, as well as the expiration of statutestatutes of limitations and/or settlements with individual tax jurisdictions, may result in material adjustments to these estimates in the future.


The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense (benefit).expense. During 2017, 20162022, 2021 and 2015,2020, the interest and penalties related to uncertain tax positions recognized in income tax expense (benefit) were not material. In addition, the amount of interest and penalties accrued at December 31, 20172022 and January 1, 2017December 31, 2021 were not material.


The Company had uncertain tax positions, including accrued interest, of $2.4$0.3 million on December 31, 20172022 and $2.9$1.7 million on January 1, 2017,December 31, 2021, all of which would affect the Company’s effective income tax rate if recognized. While it is expected the amount of uncertain tax positions may change in the next 12 months, the Company does not expect such change would have a significantmaterial impact on the consolidated financial statements.

The Company reduced its liability for uncertain tax positions in 2017, 2016 and 2015, primarily as a result of the expiration of applicable statutes of limitation. These reductions resulted in corresponding decreases to income tax expense (benefit).


A reconciliation of uncertain tax positions, excluding accrued interest, is as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Gross uncertain tax positions at the beginning of the year

 

$

2,679

 

 

$

2,633

 

 

$

2,620

 

Increase as a result of tax positions taken in the current period

 

 

966

 

 

 

687

 

 

 

547

 

Reduction as a result of the expiration of the applicable statute of limitations

 

 

(1,359

)

 

 

(641

)

 

 

(534

)

Gross uncertain tax positions at the end of the year

 

$

2,286

 

 

$

2,679

 

 

$

2,633

 



 Fiscal Year
(in thousands)202220212020
Beginning balance - gross uncertain tax positions$1,254 $2,161 $2,283 
Increase as a result of tax positions taken in the current year105 59 61 
Increase as a result of tax positions taken in a prior year— — 504 
Reduction as a result of the expiration of the applicable statute of limitations(1,074)(966)(687)
Ending balance - gross uncertain tax positions$285 $1,254 $2,161 


61

Deferred income taxes are recorded based upon temporary differences between the financial statement and tax bases of assets and liabilities and available net operating loss and tax credit carryforwards. Temporary differences and carryforwards that comprised deferred income tax assets and liabilities were as follows:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Acquisition related contingent consideration

 

$

94,055

 

 

$

97,573

 

Deferred compensation

 

 

27,097

 

 

 

44,185

 

Deferred revenue

 

 

18,704

 

 

 

-

 

Postretirement benefits

 

 

16,443

 

 

 

32,656

 

Accrued liabilities

 

 

15,523

 

 

 

21,666

 

Pension (nonunion)

 

 

8,303

 

 

 

17,381

 

Transactional costs

 

 

5,733

 

 

 

7,155

 

Capital lease agreements

 

 

3,377

 

 

 

5,817

 

Charitable contribution carryover

 

 

3,770

 

 

 

4,409

 

Pension (union)

 

 

1,922

 

 

 

3,162

 

Net operating loss carryforwards

 

 

1,923

 

 

 

2,148

 

Other

 

 

1,669

 

 

 

111

 

Deferred income tax assets

 

$

198,519

 

 

$

236,263

 

Less: Valuation allowance for deferred tax assets

 

 

4,337

 

 

 

1,618

 

Net deferred income tax asset

 

$

194,182

 

 

$

234,645

 

 

 

 

 

 

 

 

 

 

Intangible assets

 

$

(154,425

)

 

$

(204,661

)

Depreciation

 

 

(105,685

)

 

 

(134,872

)

Investment in Piedmont

 

 

(25,895

)

 

 

(45,128

)

Inventory

 

 

(9,781

)

 

 

(13,814

)

Prepaid expenses

 

 

(8,399

)

 

 

(6,300

)

Patronage dividend

 

 

(2,361

)

 

 

(4,724

)

Deferred income tax liabilities

 

$

(306,546

)

 

$

(409,499

)

 

 

 

 

 

 

 

 

 

Net deferred income tax liability

 

$

(112,364

)

 

$

(174,854

)


(in thousands)December 31, 2022December 31, 2021
Acquisition related contingent consideration$132,535 $133,114 
Operating lease liabilities35,832 35,382 
Accrued liabilities30,064 26,253 
Deferred revenue27,976 26,852 
Deferred compensation23,102 24,018 
Postretirement benefits11,511 13,969 
Transactional costs3,532 3,976 
Pension808 4,617 
Financing lease agreements614 1,820 
Net operating loss carryforwards532 1,418 
Other3,875 3,830 
Deferred income tax assets$270,381 $275,249 
Less: Valuation allowance for deferred tax assets3,428 4,372 
Net deferred income tax asset$266,953 $270,877 
Depreciation$(182,174)$(173,124)
Intangible assets(173,560)(177,214)
Right-of-use assets - operating leases(34,410)(34,347)
Inventory(14,603)(13,481)
Prepaid expenses(9,193)(6,774)
Patronage dividend(3,235)(2,369)
Deferred income tax liabilities$(417,175)$(407,309)
Net deferred income tax liability$(150,222)$(136,432)

The Company’s deferred income tax assets and liabilities are subject to adjustment in future periods based on the Company’s ongoing evaluations of such deferred assets and liabilities and new information available to the Company.


Valuation allowances are recognized on deferred tax assets if the Company believes it is more likely than not that some or all of the deferred tax assets will not be realized. The Company believes the majority of the deferred tax assets will be realized due to the reversal of certain significant temporary differences and anticipated future taxable income from operations.


The valuation allowance of $4.3$3.4 million on December 31, 20172022 and $1.6$4.4 million on January 1, 2017December 31, 2021 was established primarily for certain loss carryforwards and deferred compensation. The increase in the valuation allowance as of December 31, 2017, was a result of the Company’s assessment of its ability to use certain loss carryforwards and the deductibility of certain deferred compensation as a result of the current interpretation of the Tax Act. The reduction in the valuation allowance as of January 1, 2017, was a result of the Company’s assessment of its ability to use certain loss carryforwards.


As of December 31, 2017,2022, the Company had $38.8no federal net operating losses and $12.0 million of state net operating losses available to reduce future income taxes, which would expire in varying amounts through 2036. The Company utilized all of its federal net operating losses during 2017.

2042.


Prior tax years beginning in year 20022019 remain open to examination by the IRS,Internal Revenue Service, and various tax years beginning in year 19981999 remain open to examination by certain state tax jurisdictions due to loss carryforwards.

19.

Accumulated Other Comprehensive Income (Loss)


Accumulated other comprehensive income (loss) (“AOCI(L)”) is comprised of adjustments relative

16.Benefit Plans

Executive Benefit Plans

In addition to the Company’s pension and postretirement medical benefit plans and foreign currency translation adjustments required for a subsidiary ofDirector Deferral Plan, the Company that performs data analysis and provides consulting services outside the United States.


A summary of AOCI(L) for 2017, 2016 and 2015 is as follows:

 

 

 

 

 

 

Gains (Losses) During the Period

 

 

Reclassification to Income

 

 

 

 

 

 

 

January 1,

 

 

Pre-tax

 

 

Tax

 

 

Pre-tax

 

 

Tax

 

 

December 31,

 

(in thousands)

 

2017

 

 

Activity

 

 

Effect

 

 

Activity

 

 

Effect

 

 

2017

 

Net pension activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

$

(72,393

)

 

$

(11,219

)

 

$

2,768

 

 

$

3,402

 

 

$

(1,176

)

 

$

(78,618

)

Prior service costs

 

 

(61

)

 

 

-

 

 

 

-

 

 

 

28

 

 

 

(10

)

 

 

(43

)

Net postretirement benefits activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(24,111

)

 

 

(1,796

)

 

 

443

 

 

 

2,942

 

 

 

(997

)

 

 

(23,519

)

Prior service costs

 

 

3,679

 

 

 

-

 

 

 

-

 

 

 

(2,982

)

 

 

1,047

 

 

 

1,744

 

Recognized loss due to divestiture of the Deep South and Somerset Exchange Business and the Florence and Laurel Distribution Business

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,257

 

 

 

(2,037

)

 

 

6,220

 

Foreign currency translation adjustment

 

 

(11

)

 

 

-

 

 

 

-

 

 

 

40

 

 

 

(15

)

 

 

14

 

Total AOCI(L)

 

$

(92,897

)

 

$

(13,015

)

 

$

3,211

 

 

$

11,687

 

 

$

(3,188

)

 

$

(94,202

)

 

 

 

 

 

 

Gains (Losses) During the Period

 

 

Reclassification to Income

 

 

 

 

 

 

 

January 3,

 

 

Pre-tax

 

 

Tax

 

 

Pre-tax

 

 

Tax

 

 

January 1,

 

(in thousands)

 

2016

 

 

Activity

 

 

Effect

 

 

Activity

 

 

Effect

 

 

2017

 

Net pension activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

$

(68,243

)

 

$

(9,777

)

 

$

3,764

 

 

$

3,031

 

 

$

(1,168

)

 

$

(72,393

)

Prior service costs

 

 

(78

)

 

 

-

 

 

 

-

 

 

 

28

 

 

 

(11

)

 

 

(61

)

Net postretirement benefits activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(19,825

)

 

 

(9,152

)

 

 

3,523

 

 

 

2,186

 

 

 

(843

)

 

 

(24,111

)

Prior service costs

 

 

5,744

 

 

 

-

 

 

 

-

 

 

 

(3,360

)

 

 

1,295

 

 

 

3,679

 

Foreign currency translation adjustment

 

 

(5

)

 

 

-

 

 

 

-

 

 

 

(11

)

 

 

5

 

 

 

(11

)

Total AOCI(L)

 

$

(82,407

)

 

$

(18,929

)

 

$

7,287

 

 

$

1,874

 

 

$

(722

)

 

$

(92,897

)

 

 

 

 

 

 

Gains (Losses) During the Period

 

 

Reclassification to Income

 

 

 

 

 

 

 

December 28,

 

 

Pre-tax

 

 

Tax

 

 

Pre-tax

 

 

Tax

 

 

January 3,

 

(in thousands)

 

2014

 

 

Activity

 

 

Effect

 

 

Activity

 

 

Effect

 

 

2016

 

Net pension activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

$

(74,867

)

 

$

7,513

 

 

$

(2,877

)

 

$

3,230

 

 

$

(1,242

)

 

$

(68,243

)

Prior service costs

 

 

(99

)

 

-

 

 

-

 

 

 

35

 

 

 

(14

)

 

 

(78

)

Net postretirement benefits activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(22,759

)

 

 

1,599

 

 

 

(613

)

 

 

3,164

 

 

 

(1,216

)

 

 

(19,825

)

Prior service costs

 

 

7,812

 

 

-

 

 

-

 

 

 

(3,360

)

 

 

1,292

 

 

 

5,744

 

Foreign currency translation adjustment

 

 

(1

)

 

-

 

 

-

 

 

 

(8

)

 

 

4

 

 

 

(5

)

Total AOCI(L)

 

$

(89,914

)

 

$

9,112

 

 

$

(3,490

)

 

$

3,061

 

 

$

(1,176

)

 

$

(82,407

)


A summary of the impact on the income statement line items is as follows:

 

 

Fiscal 2017

 

(in thousands)

 

Net Pension

Activity

 

 

Net Postretirement

Benefits Activity

 

 

Foreign Currency

Translation Adjustment

 

 

Total

 

Cost of sales

 

$

377

 

 

$

(9

)

 

$

-

 

 

$

368

 

S,D&A expenses

 

 

3,053

 

 

 

(31

)

 

 

40

 

 

 

3,062

 

Subtotal pre-tax

 

 

3,430

 

 

 

(40

)

 

 

40

 

 

 

3,430

 

Income tax expense

 

 

1,186

 

 

 

(50

)

 

 

15

 

 

 

1,151

 

Total after tax effect

 

$

2,244

 

 

$

10

 

 

$

25

 

 

$

2,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2016

 

(in thousands)

 

Net Pension

Activity

 

 

Net Postretirement

Benefits Activity

 

 

Foreign Currency

Translation Adjustment

 

 

Total

 

Cost of sales

 

$

331

 

 

$

(174

)

 

$

-

 

 

$

157

 

S,D&A expenses

 

 

2,728

 

 

 

(1,000

)

 

 

(11

)

 

 

1,717

 

Subtotal pre-tax

 

 

3,059

 

 

 

(1,174

)

 

 

(11

)

 

 

1,874

 

Income tax expense

 

 

1,179

 

 

 

(452

)

 

 

(5

)

 

 

722

 

Total after tax effect

 

$

1,880

 

 

$

(722

)

 

$

(6

)

 

$

1,152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2015

 

(in thousands)

 

Net Pension

Activity

 

 

Net Postretirement

Benefits Activity

 

 

Foreign Currency

Translation Adjustment

 

 

Total

 

Cost of sales

 

$

359

 

 

$

(27

)

 

$

-

 

 

$

332

 

S,D&A expenses

 

 

2,906

 

 

 

(169

)

 

 

(8

)

 

 

2,729

 

Subtotal pre-tax

 

 

3,265

 

 

 

(196

)

 

 

(8

)

 

 

3,061

 

Income tax expense

 

 

1,256

 

 

 

(76

)

 

 

(4

)

 

 

1,176

 

Total after tax effect

 

$

2,009

 

 

$

(120

)

 

$

(4

)

 

$

1,885

 

20.

Capital Transactions

During the first quarter of each year, the Compensation Committee of the Company’s Board of Directors determines whether any shares of the Company’s Class B Common Stock should be issued to J. Frank Harrison, III, in connection with his services for the prior year as Chairman of the Board of Directors and Chief Executive Officer of the Company, pursuant to a performance unit award agreement approved in 2008 (the “Performance Unit Award Agreement”). As permitted under the terms of the Performance Unit Award Agreement, a number of shares were settled in cash in 2017, 2016 and 2015 to satisfy tax withholding obligations in connection with the vesting of the performance units. The remaining number of shares increased the total shares of Class B Common Stock outstanding. A summary of the awards issued in 2017, 2016 and 2015 is as follows:

 

 

Fiscal Year

 

 

 

2017

 

 

2016

 

 

2015

 

Date of approval for award

 

March 7, 2017

 

 

March 8, 2016

 

 

March 3, 2015

 

Fiscal year of service covered by award

 

2016

 

 

2015

 

 

2014

 

Shares settled in cash

 

 

18,980

 

 

 

19,080

 

 

 

19,080

 

Increase in Class B Common Stock shares outstanding

 

 

21,020

 

 

 

20,920

 

 

 

20,920

 

Total Class B Common Stock awarded

 

 

40,000

 

 

 

40,000

 

 

 

40,000

 

The Company has two classes of common stock outstanding, Common Stock and Class B Common Stock. The Common Stock is traded on the NASDAQ Global Select Marketsm under the symbol COKE. There is no established public trading market for the Class B Common Stock. Shares of the Class B Common Stock are convertible on a share-for-share basis into shares of Common Stock at any time at the option of the holders of Class B Common Stock.

No cash dividend or dividend of property or stock other than stock of the Company, as specifically described in the Company’s certificate of incorporation, may be declared and paid on the Class B Common Stock unless an equal or greater dividend is declared and paid on the Common Stock. During 2017, 2016 and 2015, dividends of $1.00 per share were declared and paid on both Common Stock and Class B Common Stock. Total cash dividends paid were $9.3 million per year in 2017, 2016 and 2015.


Each share of Common Stock is entitled to one vote per share and each share of Class B Common Stock is entitled to 20 votes per share at all meetings of shareholders. Except as otherwise required by law, holders of the Common Stock and Class B Common Stock vote together as a single class on all matters brought before the Company’s stockholders. In the event of liquidation, there is no preference between the two classes of common stock.

Compensation expense for the Performance Unit Award Agreement, recognized on the share price of the last trading day prior to the end of the fiscal year, was as follows:

 

 

Fiscal Year

 

(in thousands, except per share data)

 

2017

 

 

2016

 

 

2015

 

Total compensation expense

 

$

7,922

 

 

$

7,154

 

 

$

7,300

 

Share price for compensation expense

 

$

215.26

 

 

$

178.85

 

 

$

182.51

 

Share price date for compensation expense

 

December 29, 2017

 

 

December 30, 2016

 

 

December 31, 2015

 

21.

Benefit Plans

Executive Benefit Plans

The Company has four executive benefit plans: the Supplemental Savings Incentive Plan, (“Supplemental Savings Plan”), the Long-Term Retention Plan, (“LTRP”), the Officer Retention Plan (“Retention Plan”) and the Long-Term Performance Plan. The Company also has a Long-Term Performance Equity Plan, (“Performance Plan”).

as discussed in Note 2.


Pursuant to the Supplemental Savings Incentive Plan, as amended and restated effective November 1, 2011, and as further amended thereafter, eligible participants may elect to defer a portion of their annual salary and bonus. Participants are immediately vested in all deferred contributions they make and become fully vested in Company contributions upon completion of five years of service with the Company, termination of employment due to death or retirement or a change in control. Participant deferrals and Company
62

contributions made in years prior to 2006 are invested in either a fixed benefit option or certain investment funds specifieddetermined by the Company.participant. Beginning in 2010, the Company may elect at its discretion to match up to 50% of the first 6% of salary, excluding bonuses, deferred by the participant. During 2017, 20162022, 2021 and 2015,2020, the Company matched up to 50% of the first 6% of salary, excluding bonus,bonuses, deferred by the participant. The Company may also make discretionary contributions to participants’ accounts.

Under the Director Deferral Plan, as amended and restated effective January 1, 2014, non-employee directors may defer payment of all or a portion of their annual retainer and meeting fees. There is no Company matching contribution under the Director Deferral Plan. The liability under this planthese two deferral plans was as follows:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Current liabilities

 

$

8,205

 

 

$

7,339

 

Noncurrent liabilities

 

 

74,958

 

 

 

70,709

 

Total liability - Supplemental Savings Plan

 

$

83,163

 

 

$

78,048

 


(in thousands)December 31, 2022December 31, 2021
Current liabilities$8,147 $10,111 
Noncurrent liabilities74,976 84,664 
Total liability - Supplemental Savings Incentive Plan and Director Deferral Plan$83,123 $94,775 

Under the LTRP,Long-Term Retention Plan, effective March 5, 2014, and as amended thereafter, the Company accrues a defined amount each year for an eligible participant based upon an award schedule. Amounts awarded may earn an investment return based on certain investment funds specified by the Company. Benefits under the LTRPLong-Term Retention Plan are 50% vested until age 50. After51. Beginning at age 50,51, the vesting percentage increases by 5% each year until the benefits are fully vested at age 60. Participants receive payments from the plan upon retirement or, in certain instances, upon termination of employment. Payments are made in the form of monthly installments over a period of ten, fifteen10, 15 or twenty20 years. The liability under this plan was as follows:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Current liabilities

 

$

3

 

 

$

2

 

Noncurrent liabilities

 

 

2,563

 

 

 

1,256

 

Total liability - LTRP

 

$

2,566

 

 

$

1,258

 



(in thousands)December 31, 2022December 31, 2021
Current liabilities$173 $178 
Noncurrent liabilities7,249 6,815 
Total liability - Long-Term Retention Plan$7,422 $6,993 


Under the Officer Retention Plan, as amended and restated effective January 1, 2007, eligibleand as further amended thereafter, eligible participants may elect to receive an annuity payable in equal monthly installments over a 10, 1510-, 15- or 20-year period commencing at retirement or, in certain instances, upon termination of employment. The benefits under the Officer Retention Plan increase with each year of participation as set forth in an agreement between the participant and the Company. Benefits under the Officer Retention Plan are 50% vested until age 50. After51. Beginning at age 50,51, the vesting percentage increases by an additional 5% each year until the benefits are fully vested at age 60. The liability under this plan was as follows:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Current liabilities

 

$

2,949

 

 

$

3,359

 

Noncurrent liabilities

 

 

42,694

 

 

 

44,480

 

Total liability - Retention Plan

 

$

45,643

 

 

$

47,839

 


(in thousands)December 31, 2022December 31, 2021
Current liabilities$3,730 $4,036 
Noncurrent liabilities35,959 37,008 
Total liability - Officer Retention Plan$39,689 $41,044 

Under the Long-Term Performance Plan, adopted as ofamended and restated effective January 1, 2007,2018, and as further amended thereafter, the Compensation Committee of the Company’s Board of Directors establishes dollar amounts to which a participant shall be entitled upon attainment of the applicable performance measures. Bonus awards under the Long-Term Performance Plan are made based on the relative achievement of performance measures in terms of the Company-sponsored objectives or objectives related to the performance of the individual participantsparticipant or of the subsidiary, division, department, region or function in which the participant is employed. The liability under this plan was as follows:

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Current liabilities

 

$

5,561

 

 

$

5,282

 

Noncurrent liabilities

 

 

4,527

 

 

 

5,651

 

Total liability - Performance Plan

 

$

10,088

 

 

$

10,933

 


(in thousands)December 31, 2022December 31, 2021
Current liabilities$7,738 $8,247 
Noncurrent liabilities9,673 7,675 
Total liability - Long-Term Performance Plan$17,411 $15,922 

Pension Plans


There are two Company-sponsored pension plans. The primary Company-sponsored pension plan (the “Primary Plan”)Primary Plan was frozen as of June 30, 2006 and no benefits accrued to participants after thisthat date. The second Company-sponsored pension plan (the “Bargaining Plan”)Bargaining Plan is for certain employees under collective bargaining agreements. Benefits under the Bargaining Plan are determined in accordance with negotiated formulas for the respective participants. Contributions to the plans are based on actuarially determined amounts and are limited to the amounts currently deductible for income tax purposes.

Each year, the The Company

63

updates its mortality assumptions used in the calculation of its pension liability each year using The Society of Actuaries’ latest mortality tables. In 2017, 2016tables and 2015,mortality projection scales.

During 2022, the mortality table reflectedCompany began the process of terminating the Primary Plan. During 2023, the Company expects to offer a lower increase in longevity.

lump sum benefit payout option to certain plan participants prior to completing the purchase of group annuity contracts that will transfer the pension benefit obligation to an insurance company. The assumptions used to estimate the fair value during the annual measurement reflect the incremental cost to terminate the Primary Plan.


The following tables set forth pertinent information for the two Company-sponsored pension plans:


 Fiscal Year
(in thousands)20222021
Beginning balance - projected benefit obligation$359,475 $368,245 
Service cost6,586 7,529 
Interest cost10,642 9,846 
Plan amendments154 — 
Actuarial gain(93,626)(12,735)
Benefits paid(13,088)(13,410)
Ending balance - projected benefit obligation$270,143 $359,475 

Changes in Projected Benefit Obligation

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Projected benefit obligation at beginning of year

 

$

273,148

 

 

$

261,469

 

Service cost

 

 

2,553

 

 

 

461

 

Interest cost

 

 

11,938

 

 

 

12,182

 

Actuarial loss

 

 

27,388

 

 

 

8,268

 

Benefits paid

 

 

(11,109

)

 

 

(9,232

)

Projected benefit obligation at end of year

 

$

303,918

 

 

$

273,148

 


The discount rate for the Primary Plan and the Bargaining Plan decreased to 3.80% and 3.90%, respectively, in 2017 from 4.44% and 4.49%, respectively, in 2016, which was the primary driver of the actuarial loss in 2017. The discount rate decreased to 4.44% and 4.49% for the Primary Plan and the Bargaining Plan, respectively, in 2016, from 4.72% for both Company-sponsored pension plans in 2015, which was the primary driver in the actuarial loss in 2016. The actuarial gain and losses, net of tax, were recorded in other comprehensive loss.

The projected benefit obligationsobligation and the accumulated benefit obligationsobligation for both the Company’sCompany-sponsored pension plans were in excess of plan assets atas of December 31, 20172022 and January 1, 2017.December 31, 2021. The accumulated benefit obligation was $303.9$270.1 million on December 31, 20172022 and $273.1$359.5 million on January 1, 2017.

December 31, 2021.


The increase in the discount rates for both the Primary Plan and the Bargaining Plan, as compared to the previous years, was the primary driver of the actuarial gains in both 2022 and 2021. The actuarial gains, net of tax, were recorded in accumulated other comprehensive loss in the consolidated balance sheets.

Change in Plan Assets

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Fair value of plan assets at beginning of year

 

$

228,256

 

 

$

214,055

 

Actual return on plan assets

 

 

29,766

 

 

 

12,313

 

Employer contributions

 

 

11,600

 

 

 

11,120

 

Benefits paid

 

 

(11,109

)

 

 

(9,232

)

Fair value of plan assets at end of year

 

$

258,513

 

 

$

228,256

 


 Fiscal Year
(in thousands)20222021
Beginning balance - plan assets at fair value$328,250 $319,699 
Actual return on plan assets(76,683)16,427 
Employer contributions26,000 6,800 
Benefits and expenses paid(15,625)(14,676)
Ending balance - plan assets at fair value$261,942 $328,250 

Funded Status

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Projected benefit obligation

 

$

(303,918

)

 

$

(273,148

)

Plan assets at fair value

 

 

258,513

 

 

 

228,256

 

Net funded status

 

$

(45,405

)

 

$

(44,892

)


(in thousands)December 31, 2022December 31, 2021
Projected benefit obligation$(270,143)$(359,475)
Plan assets at fair value261,942 328,250 
Net funded status$(8,201)$(31,225)

Amounts Recognized in the Consolidated Balance Sheets

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Current liabilities

 

$

-

 

 

$

-

 

Noncurrent liabilities

 

 

(45,405

)

 

 

(44,892

)

Total liability - pension plans

 

$

(45,405

)

 

$

(44,892

)


(in thousands)December 31, 2022December 31, 2021
Current liabilities$— $— 
Noncurrent liabilities(8,201)(31,225)
Total liability - pension plans$(8,201)$(31,225)

64

Net Periodic Pension Cost (Benefit)

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Service cost

 

$

2,553

 

 

$

461

 

 

$

116

 

Interest cost

 

 

11,938

 

 

 

12,182

 

 

 

11,875

 

Expected return on plan assets

 

 

(13,597

)

 

 

(13,822

)

 

 

(13,541

)

Recognized net actuarial loss

 

 

3,402

 

 

 

3,031

 

 

 

3,230

 

Amortization of prior service cost

 

 

28

 

 

 

28

 

 

 

35

 

Net periodic pension cost (benefit)

 

$

4,324

 

 

$

1,880

 

 

$

1,715

 


 Fiscal Year
(in thousands)202220212020
Service cost$6,586 $7,529 $6,331 
Interest cost10,642 9,846 10,957 
Expected return on plan assets(8,143)(13,000)(13,617)
Recognized net actuarial loss3,990 4,954 4,619 
Amortization of prior service costs— 3 19 
Net periodic pension cost$13,075 $9,332 $8,309 

Significant Assumptions

 

 

Fiscal Year

 

 

 

2017

 

 

2016

 

 

2015

 

Projected benefit obligation at the measurement date:

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate - Primary Plan

 

 

3.80

%

 

 

4.44

%

 

 

4.72

%

Discount rate - Bargaining Plan

 

 

3.90

%

 

 

4.49

%

 

 

4.72

%

Weighted average rate of compensation increase

 

N/A

 

 

N/A

 

 

N/A

 

Net periodic pension cost for the fiscal year:

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate - Primary Plan and Bargaining Plan

 

 

4.44

%

 

 

4.72

%

 

 

4.32

%

Weighted average expected long-term rate of return on plan assets

 

 

6.00

%

 

 

6.50

%

 

 

6.50

%

Weighted average rate of compensation increase

 

N/A

 

 

N/A

 

 

N/A

 



 Fiscal Year
 202220212020
Projected benefit obligation at the measurement date:
Discount rate - Primary Plan5.33 %2.97 %2.66 %
Discount rate - Bargaining Plan5.34 %3.31 %3.12 %
Weighted average rate of compensation increaseN/AN/AN/A
Net periodic pension cost for the fiscal year:
Discount rate - Primary Plan2.97 %2.66 %3.36 %
Discount rate - Bargaining Plan3.31 %3.12 %3.61 %
Weighted average expected long-term rate of return of plan assets - Primary Plan(1)
3.00 %4.75 %5.50 %
Weighted average expected long-term rate of return of plan assets - Bargaining Plan(1)
5.50 %5.75 %6.25 %
Weighted average rate of compensation increaseN/AN/AN/A

Cash Flows

(in thousands)

 

Anticipated Future Pension Benefit

Payments for the Fiscal Years

 

2018

 

$

10,726

 

2019

 

 

11,350

 

2020

 

 

12,063

 

2021

 

 

12,815

 

2022

 

 

13,523

 

2023 – 2027

 

 

78,179

 


Contributions to the two Company-sponsored pension plans are expected to be in the range of $10 million to $20 million in 2018.

Plan Assets

(1)The Company’s pension plans target asset allocation for 2018, actual asset allocation at December 31, 2017 and January 1, 2017, and the expected weighted average expected long-term rate of return byassumption for the pension plan assets, which was used to compute net periodic pension cost, is based upon target asset category were as follows:

allocation and is determined using forward-looking performance and duration assumptions set at the beginning of each fiscal year.

 

 

Target

 

 

Percentage of Plan

 

 

Weighted Average Expected

 

 

 

Allocation

 

 

Assets at Fiscal Year-End

 

 

Long-Term Rate of Return

 

 

 

2018

 

 

2017

 

 

2016

 

 

2017

 

U.S. large capitalization equity securities

 

 

40

%

 

 

41

%

 

 

41

%

 

 

3.0

%

U.S. small/mid-capitalization equity securities

 

 

5

%

 

 

5

%

 

 

5

%

 

 

0.5

%

International equity securities

 

 

15

%

 

 

15

%

 

 

15

%

 

 

1.2

%

Debt securities

 

 

40

%

 

 

39

%

 

 

39

%

 

 

1.3

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

6.0

%


Cash Flows

(in thousands)Anticipated Future Pension Benefit
Payments for the Fiscal Years
2023$237,899 
20241,053 
20251,241 
20261,470 
20271,689 
2028 - 203211,892 

The anticipated future pension benefit payments for 2023 include the payments associated with the termination of the Primary Plan, which will be made from the related plan assets. The remaining anticipated future pension benefit payments for 2023, and all anticipated future pension benefit payments beyond 2023, relate to the Bargaining Plan.

The Company expects to make cash contributions of approximately $5 million to $10 million to the Primary Plan during 2023 to fund the termination of the Primary Plan. The Company also expects to make cash contributions of approximately $5 million to $10 million to the Bargaining Plan during 2023 to fund the ongoing projected benefit obligation of the Bargaining Plan.

Plan Assets

All assets in the Company’s pension plans are invested in institutional investment funds managed by professional investment advisors which hold U.S. equities, international equities and debt securities. The objective of the Company’s investment philosophy is to earn the plans’ targeted rate of return over longer periods without assuming excess investment risk. The general guidelines for plan investments include 30% - 45% in large capitalization equity securities, 0% - 20% in U.S. small and mid-capitalization equity securities, 0% - 10% in international equity securities and 10% - 50% in debt securities. The Company currently has 61% of its plan investments in equity securities and 39% in debt securities.

U.S. large capitalization equity securities include domestic based companies that are generally included in common market indices such as the S&P 500™ and the Russell 1000™. U.S. small and mid-capitalization equity securities include small domestic equities as represented by the Russell 2000™ index. International equity securities include companies from developed markets outside the United States. Debt securities as of December 31, 2017 are comprised of investments in two institutional bond funds with a weighted average duration of approximately three years.

A weighted average expected long-term rate of return of plan assets of 6.0% in 2017 and 6.5% in 2016 was used to determine net periodic pension cost. The rate reflects an estimate of long-term future returnsassumption for the pension plan assets, which will be used to compute 2023 net periodic pension cost, is based upon target asset allocation and is determined using forward-looking performance and duration assumptions in the context of expenses.historical returns and volatilities for each asset class. The estimate is primarily a functionCompany evaluates the rate of return assumption on an annual basis. The Company’s

65

actual asset allocation at December 31, 2022 and December 31, 2021 and target asset allocation for 2023 by asset category for the Primary Plan were as follows:

Percentage of Plan
Assets at Fiscal Year-End		Target Asset
Allocation
 202220212023
U.S. debt securities84 %87 %64 %
U.S. equity securities— %— %— %
International debt securities10 %10 %— %
International equity securities— %— %— %
Cash and cash equivalents6 %3 %36 %
Total100 %100 %100 %

The Company’s actual asset classes, equities versus fixed income, in whichallocation at December 31, 2022 and December 31, 2021 and target asset allocation for 2023 by asset category for the pension planBargaining Plan were as follows:

Percentage of Plan
Assets at Fiscal Year-End		Target Asset
Allocation
202220212023
U.S. debt securities56 %46 %41 %
U.S. equity securities32 %40 %46 %
International debt securities2 %2 %— %
International equity securities10 %11 %12 %
Cash and cash equivalents— %1 %1 %
Total100 %100 %100 %

The expected long-term rate of return on assets are investedfor the Primary Plan and the analysisBargaining Plan as of past performanceDecember 31, 2022 were 5.00% and 7.00%, respectively.

Debt securities as of these asset classes overDecember 31, 2022 were comprised primarily of investments in government and corporate bonds with a long periodweighted average maturity of time. The analysis includes expected long-term inflationapproximately 12 years for the Primary Plan and approximately 19 years for the Bargaining Plan. U.S. equity securities in the Bargaining Plan as of December 31, 2022 included: (i) large-capitalization domestic equity funds as represented by the S&P 500 index, (ii) mid-capitalization domestic equity funds as represented by the Russell Mid Cap Growth and Value indexes, (iii) small-capitalization domestic equity funds as represented by the Russell Small Cap Growth and Value indexes and (iv) alternative investment funds as represented by the HFRX Global index and the risk premiums associated withMSCI US REIT index. International equity investmentssecurities in the Bargaining Plan as of December 31, 2022 included companies from both developed and fixed income investments.

emerging markets outside the United States. Cash and cash equivalents have a weighted average duration of less than one year.


The following table summarizes the Company’s common/collective trust fund pension plan assets. The underlying investments held in common/collective trust funds are actively managed equity securities and fixed income investment vehicles that are valued at the net asset value per share multiplied by the number of shares held as of the measurement date.

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Common/collective trust funds - equity securities

 

$

157,290

 

 

$

139,735

 

Common/collective trust funds - fixed income

 

 

100,500

 

 

 

87,814

 

Total common/collective trust funds

 

$

257,790

 

 

$

227,549

 

In addition, the Company had other level 1 pension plan assets, related to its equity securities of $0.7 million in both 2017which are classified as Level 1 and 2016. The level 1 assets had quoted market prices in active markets for identical assets availableLevel 2 for fair value measurement.


The Company does not have any unobservable inputs (Level 3)Level 3 pension plan assets.

See Note 14 for additional information.


(in thousands)December 31, 2022December 31, 2021
Pension plan assets - fixed income$232,578 $300,670 
Pension plan assets - equity securities16,194 18,867 
Pension plan assets - cash and cash equivalents13,170 8,713 
Total pension plan assets$261,942 $328,250 

401(k) Savings Plan


The Company provides a 401(k) Savings Plan for substantially all of its employees who are not part of collective bargaining agreements and for certain employees under collective bargaining agreements. The Company’s matching contribution for employees who are not part of collective bargaining agreements is discretionary, with the option to match contributions for eligible participants up to 5% based on the Company’s financial results. For all years presented, the Company matched the maximum 5% of participants’ contributions. The Company’s matching contributionscontribution for employees who are part of collective bargaining agreements areis determined in accordance with negotiated formulas for the respective employees. The total expense for the Company’s matching contributions to the 401(k) Savings Plan was $18.4$26.8 million in 2017, $14.92022, $24.8 million in 20162021 and $10.7$22.7 million in 2015.

2020.


66

Postretirement Benefits


The Company provides postretirement benefits for a portion of its current employees.employees meeting specified qualifying criteria. The Company recognizes the cost of postretirement benefits, which consist principally of medical benefits, during employees’ periods of active service. The Company does not pre-fundprefund these benefits and has the right to modify or terminate certain of these benefits in the future.


The following tables set forth pertinent information for the Company’s postretirement benefit plan:


Reconciliation of Activity

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Benefit obligation at beginning of year

 

$

85,255

 

 

$

70,361

 

Service cost

 

 

2,232

 

 

 

1,567

 

Interest cost

 

 

3,636

 

 

 

3,094

 

Acquisition of benefits

 

 

3,291

 

 

 

3,458

 

Plan participants’ contributions

 

 

752

 

 

 

662

 

Actuarial (gain)/loss

 

 

1,796

 

 

 

9,152

 

Benefits paid

 

 

(2,994

)

 

 

(3,135

)

Medicare Part D subsidy reimbursement

 

 

37

 

 

 

96

 

Divestiture of benefits related to the Deep South and Somerset Exchange Business and the Florence and Laurel Distribution Business

 

 

(17,340

)

 

 

-

 

Benefit obligation at end of year

 

$

76,665

 

 

$

85,255

 


 Fiscal Year
(in thousands)20222021
Benefit obligation at beginning of year$65,156 $67,665 
Service cost1,458 1,516 
Interest cost1,923 1,772 
Plan participants’ contributions657 930 
Actuarial gain(10,138)(3,414)
Benefits paid(3,757)(3,313)
Benefit obligation at end of year$55,299 $65,156 

The increase in the discount rate for the postretirement benefit plan, as compared to the previous years, was the primary driver of the actuarial gain in both 2022 and 2021. The actuarial gain, net of tax, was recorded in accumulated other comprehensive loss in the consolidated balance sheets.

Reconciliation of Plan Assets Fair Value

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

Fair value of plan assets at beginning of year

 

$

-

 

 

$

-

 

Employer contributions

 

 

2,205

 

 

 

2,377

 

Plan participants’ contributions

 

 

752

 

 

 

662

 

Benefits paid

 

 

(2,994

)

 

 

(3,135

)

Medicare Part D subsidy reimbursement

 

 

37

 

 

 

96

 

Fair value of plan assets at end of year

 

$

-

 

 

$

-

 


 Fiscal Year
(in thousands)20222021
Fair value of plan assets at beginning of year$— $— 
Employer contributions3,100 2,383 
Plan participants’ contributions657 930 
Benefits paid(3,757)(3,313)
Fair value of plan assets at end of year$— $— 

Funded Status

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Current liabilities

 

$

3,678

 

 

$

3,468

 

Noncurrent liabilities

 

 

72,987

 

 

 

81,787

 

Total liability - postretirement benefits

 

$

76,665

 

 

$

85,255

 



(in thousands)December 31, 2022December 31, 2021
Current liabilities$(3,177)$(2,990)
Noncurrent liabilities(52,122)(62,166)
Total liability - postretirement benefits$(55,299)$(65,156)


Net Periodic Postretirement Benefit Cost

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Service cost

 

$

2,232

 

 

$

1,567

 

 

$

1,118

 

Interest cost

 

 

3,636

 

 

 

3,094

 

 

 

2,878

 

Recognized net actuarial loss

 

 

2,942

 

 

 

2,186

 

 

 

3,164

 

Amortization of prior service cost

 

 

(2,982

)

 

 

(3,360

)

 

 

(3,360

)

Net periodic postretirement benefit cost

 

$

5,828

 

 

$

3,487

 

 

$

3,800

 


 Fiscal Year
(in thousands)202220212020
Service cost$1,458 $1,516 $1,454 
Interest cost1,923 1,772 2,031 
Recognized net actuarial loss444 682 383 
Net periodic postretirement benefit cost$3,825 $3,970 $3,868 

67

Significant Assumptions

 

 

Fiscal Year

 

 

 

2017

 

 

2016

 

 

2015

 

Benefit obligation discount rate at measurement date

 

 

3.72

%

 

 

4.36

%

 

 

4.53

%

Net periodic postretirement benefit cost discount rate for fiscal year

 

 

4.36

%

 

 

4.53

%

 

 

4.13

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Postretirement benefit expense - Pre-Medicare:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average health care cost trend rate

 

 

6.94

%

 

 

6.20

%

 

 

7.50

%

Trend rate graded down to ultimate rate

 

 

4.50

%

 

 

4.50

%

 

 

5.00

%

Ultimate rate year

 

2025

 

 

2024

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Postretirement benefit expense - Post-Medicare:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average health care cost trend rate

 

 

8.07

%

 

 

7.50

%

 

 

7.00

%

Trend rate graded down to ultimate rate

 

 

4.50

%

 

 

4.50

%

 

 

5.00

%

Ultimate rate year

 

2025

 

 

2024

 

 

2021

 


A 1% increase or decrease in the annual health care cost trend would have impacted the postretirement benefit obligation and service cost and interest cost of the Company’s postretirement benefit plan as follows:

(in thousands)

 

1% Increase

 

 

1% Decrease

 

Postretirement benefit obligation at December 31, 2017

 

$

9,389

 

 

$

(8,323

)

Service cost and interest cost in 2017

 

 

668

 

 

 

(593

)

 Fiscal Year
 202220212020
Benefit obligation at the measurement date:
Weighted average healthcare cost trend rate - Pre-Medicare6.58 %6.04 %6.26 %
Weighted average healthcare cost trend rate - Post-Medicare6.89 %6.29 %6.54 %
Benefit obligation discount rate5.19 %2.98 %2.70 %
Net periodic postretirement benefit cost discount rate for fiscal year2.98 %2.70 %3.32 %
Postretirement benefit expense - Pre-Medicare:
Weighted average healthcare cost trend rate6.04 %6.26 %6.53 %
Trend rate graded down to ultimate rate4.50 %4.50 %4.50 %
Ultimate rate year202920292028
Postretirement benefit expense - Post-Medicare:
Weighted average healthcare cost trend rate6.29 %6.54 %6.73 %
Trend rate graded down to ultimate rate4.50 %4.50 %4.50 %
Ultimate rate year202920292028


Cash Flows

(in thousands)

 

Anticipated Future Postretirement Benefit

Payments Reflecting Expected Future Service

 

2018

 

$

3,678

 

2019

 

 

3,834

 

2020

 

 

4,063

 

2021

 

 

4,253

 

2022

 

 

4,603

 

2023 – 2027

 

 

25,204

 


Anticipated future postretirement benefit payments are shown net of Medicare Part D subsidy reimbursements, which are not material.


(in thousands)Anticipated Future Postretirement Benefit
Payments Reflecting Expected Future Service
2023$3,177 
20243,489 
20253,655 
20264,012 
20274,364 
2028 - 203222,825 


A reconciliation of the gross amounts in accumulated other comprehensive loss not yet recognized as components of net periodic benefit cost is as follows:

(in thousands)

 

January 1,

2017

 

 

Actuarial

Gain (Loss)

 

 

Reclassification Adjustments

 

 

December 31,

2017

 

Pension Plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial (loss)

 

$

(119,644

)

 

$

(11,219

)

 

$

3,402

 

 

$

(127,461

)

Prior service (cost) credit

 

 

(101

)

 

 

-

 

 

 

28

 

 

 

(73

)

Postretirement Medical:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial (loss)

 

 

(40,502

)

 

 

(1,796

)

 

 

2,942

 

 

 

(39,356

)

Prior service (cost) credit

 

 

6,122

 

 

 

-

 

 

 

(2,982

)

 

 

3,140

 

Recognized loss due to the divestiture of the Deep South and Somerset Exchange Business and the Florence and Laurel Distribution Business

 

 

-

 

 

 

-

 

 

 

8,257

 

 

 

8,257

 

Total within accumulated other comprehensive loss

 

$

(154,125

)

 

$

(13,015

)

 

$

11,647

 

 

$

(155,493

)


The amounts in accumulated other comprehensive loss expected to be recognized as components of net periodic cost during 2018 are as follows:

(in thousands)

 

Pension

Plans

 

 

Postretirement Medical

 

 

Total

 

(in thousands)December 31,
2021		Actuarial Gain (Loss)Reclassification
Adjustments		December 31,
2022
Pension Plans:Pension Plans:

Actuarial loss

 

$

3,681

 

 

$

1,238

 

 

$

4,919

 

Actuarial loss$(127,813)$6,263 $3,990 $(117,560)

Prior service cost (credit)

 

 

25

 

 

 

(1,734

)

 

 

(1,709

)

Total expected to be recognized during 2018

 

$

3,706

 

 

$

(496

)

 

$

3,210

 

Prior service costsPrior service costs(4)(154)— (158)
Postretirement Medical:Postretirement Medical:
Actuarial gain (loss)Actuarial gain (loss)(9,812)10,138 444 770 
Total within accumulated other comprehensive lossTotal within accumulated other comprehensive loss$(137,629)$16,247 $4,434 $(116,948)

Multi-Employer


Multiemployer Pension Plans


Certain employees of the Company whose employment is covered under collective bargaining agreements participate in a multi-employermultiemployer pension plan, the Employers-Teamsters Local Union Nos. 175 and 505 Pension Fund (the “Teamsters Plan”). The Company makes monthly contributions to the Teamsters Plan on behalf of such employees. CertainThe collective bargaining agreements covering the Teamsters Plan expired on April 29, 2017. These agreements were renewed and will now expire in April 2020.at various times through 2025. The remainder ofCompany expects these agreements will expire on July 26, 2018.

The risks of participatingbe re-negotiated.


Participating in the Teamsters Plan are different from single-employerinvolves certain risks in addition to the risks associated with single employer pension plans, as contributed assets are pooled and may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the Teamsters Plan, the unfunded obligations of the Teamsters Plan may be borne by the remaining participating employers. If the Company chooses to stop participating in the Teamsters Plan, the Company could be required to pay the Teamsters Plan a withdrawal liability based on the underfunded status of the Teamsters Plan. The Company does not anticipate withdrawing from the Teamsters Plan.


68

In 2015, the Company increased its contribution rates to the Teamsters Plan, with additional increases occurring annually, as part of a rehabilitation plan, which was incorporated into the renewal of collective bargaining agreements with the unions effective April 28, 2014 and adopted by the Company as a rehabilitation plan effective January 1, 2015. This is a result of the Teamsters Plan being certified by its actuary as being in “critical” status for the plan year beginning January 1, 2013.


The Company’s participation in the Teamsters Plan is outlined in the table below. A red zone represents less than 80% funding and requires a financial improvement plan (“FIP”) or rehabilitation plan (“RP”).

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Pension Protection Act Zone Status

 

Red

 

 

Red

 

 

Red

 

FIP or RP pending or implemented

 

Yes

 

 

Yes

 

 

Yes

 

Surcharge imposed

 

Yes

 

 

Yes

 

 

Yes

 

Contribution

 

$

800

 

 

$

728

 

 

$

692

 


 Fiscal Year
(in thousands)202220212020
Pension Protection Act Zone StatusRedRedRed
FIP or RP pending or implementedYesYesYes
Surcharge imposedYesYesYes
Contribution$959 $933 $924 

According to the Teamsters Plan’s FormsForm 5500 for both the plan years ended December 31, 2021 and December 31, 2020, the Company was not listed as providing more than 5% of the total contributions for the plan years ending December 31, 2016 or December 31, 2015.contributions. At the date these consolidated financial statements were issued, Formsa Form 5500 werewas not available for the plan year endingended December 31, 2017.

2022.


The Company has a liability recorded for exitingwithdrawing from a multi-employermultiemployer pension plan in 2008 and is required to make payments of approximately $1 million to this multi-employermultiemployer pension plan each year through 2028. As of December 31, 20172022, the Company has $7.7had $4.6 million remaining on this liability.

22.

Related Party Transactions


The Coca‑Cola Company

The Company’s business consists primarily

17.Other Liabilities

Other liabilities consisted of the production, marketing and distribution of nonalcoholic beverages of The Coca‑Cola Company, which is the sole owner of the secret formulas under which the primary components of its soft drink products, either concentrate or syrup, are manufactured.

As of December 31, 2017, The Coca‑Cola Company owned approximately 35% of the Company’s total outstanding Common Stock, representing approximately 5% of the total voting power of the Company’s Common Stock and Class B Common Stock voting together. As long as The Coca‑Cola Company holds the number of shares of Common Stock it currently owns, it has the right to have a designee proposed by the Company for nomination to the Company’s Board of Directors. J. Frank Harrison, III, the Chairman of the Board of Directors and Chief Executive Officer of the Company, and trustees of certain trusts established for the benefit of certain relatives of J. Frank Harrison, Jr. have agreed to vote the shares of the Company’s Class B Common Stock which they control, representing approximately 86% of the total voting power of the Company’s Common Stock and Class B Common Stock voting together, in favor of such designee. The Coca‑Cola Company does not own any shares of the Company’s Class B Common Stock.

The following table and the subsequent descriptions summarize the significant transactions between the Company and The Coca‑Cola Company:

following:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Payments made by the Company to The Coca-Cola Company for:

 

 

 

 

 

 

 

 

 

 

 

 

Concentrate, syrup, sweetener and other purchases

 

$

1,085,898

 

 

$

669,783

 

 

$

482,673

 

Customer marketing programs

 

 

139,542

 

 

 

116,537

 

 

 

70,754

 

Cold drink equipment parts

 

 

25,381

 

 

 

21,558

 

 

 

16,260

 

Glacéau distribution agreement consideration

 

 

15,598

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments made by The Coca-Cola Company to the Company for:

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of bottling agreements

 

$

91,450

 

 

$

-

 

 

$

-

 

Marketing funding support payments

 

 

83,177

 

 

 

73,513

 

 

 

56,284

 

Fountain delivery and equipment repair fees

 

 

35,335

 

 

 

27,624

 

 

 

17,400

 

Legacy Facilities Credit (excluding portion related to Mobile, Alabama facility)

 

 

30,647

 

 

 

-

 

 

 

-

 

Portion of Legacy Facilities Credit related to Mobile, Alabama facility

 

 

12,364

 

 

 

-

 

 

 

-

 

Facilitating the distribution of certain brands and packages to other Coca-Cola bottlers

 

 

10,474

 

 

 

7,193

 

 

 

4,670

 

Cold drink equipment

 

 

8,400

 

 

 

-

 

 

 

-

 

Presence marketing funding support on the Company’s behalf

 

 

4,843

 

 

 

2,064

 

 

 

2,415

 


Coca‑Cola Refreshments USA, Inc.

The Company has a production arrangement with CCR to buy and sell finished products at cost.

(in thousands)December 31, 2022December 31, 2021
Noncurrent portion of acquisition related contingent consideration$501,431 $490,587 
Accruals for executive benefit plans137,771 147,135 
Noncurrent deferred proceeds from related parties103,240 106,304 
Other10,915 14,584 
Total other liabilities$753,357 $758,610 

In addition, the Company transports product for CCR to the Company’s and other Coca-Cola bottlers’ locations. The following table summarizes purchases and sales under these arrangements between the Company and CCR:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Purchases from CCR

 

$

114,891

 

 

$

269,575

 

 

$

229,954

 

Gross sales to CCR

 

 

76,718

 

 

 

72,568

 

 

 

30,500

 

Sales to CCR for transporting CCR's product

 

 

2,036

 

 

 

21,940

 

 

 

16,523

 

Prior to the sale of BYB to The Coca‑Cola Company, CCR distributed one of the Company’s brands, Tum-E Yummies. During the third quarter of 2015, the Company sold BYB, the subsidiary that owned and distributed Tum-E Yummies to


The Coca‑Cola Company and recorded a gain of $22.7 million on the sale. The Company continues to distribute Tum-E Yummies following the sale. Total sales to CCR for Tum-E Yummies were $14.8 million in 2015.

As discussed in Note 3 to the consolidated financial statements, the Company and CCR recently concluded a series of System Transformation Transactions involving several asset purchase and asset exchange transactions for the acquisition and exchange of the following Expansion Territories and Expansion Facilities:

Expansion Territories

Definitive

Agreement Date

Acquisition /

Exchange Date

Johnson City and Morristown, Tennessee

May 7, 2014

May 23, 2014

Knoxville, Tennessee

August 28, 2014

October 24, 2014

Cleveland and Cookeville, Tennessee

December 5, 2014

January 30, 2015

Louisville, Kentucky and Evansville, Indiana

December 17, 2014

February 27, 2015

Paducah and Pikeville, Kentucky

February 13, 2015

May 1, 2015

Lexington, Kentucky for Jackson, Tennessee Exchange

October 17, 2014

May 1, 2015

Norfolk, Fredericksburg and Staunton, Virginia and Elizabeth City, North Carolina

September 23, 2015

October 30, 2015

Easton and Salisbury, Maryland and Richmond and Yorktown, Virginia

September 23, 2015

January 29, 2016

Alexandria, Virginia and Capitol Heights and La Plata, Maryland

September 23, 2015

April 1, 2016

Baltimore, Hagerstown and Cumberland, Maryland

September 23, 2015

April 29, 2016

Cincinnati, Dayton, Lima and Portsmouth, Ohio and Louisa, Kentucky

September 1, 2016

1

October 28, 2016

Anderson, Fort Wayne, Lafayette, South Bend and Terre Haute, Indiana

September 1, 2016

January 27, 2017

Indianapolis and Bloomington, Indiana and Columbus and Mansfield, Ohio

September 1, 2016

March 31, 2017

Akron, Elyria, Toledo, Willoughby and Youngstown, Ohio

April 13, 2017

April 28, 2017

Memphis, Tennessee

September 29, 2017

October 2, 2017

Little Rock and West Memphis, Arkansas for Leroy, Mobile and Robertsdale, Alabama, Panama City, Florida, Bainbridge, Columbus and Sylvester, Georgia, Ocean Springs, Mississippi and Somerset, Kentucky (as part of the CCR Exchange Transaction)

September 29, 2017

October 2, 2017

Expansion Facilities

Definitive

Agreement Date

Acquisition /

Exchange Date

Annapolis, Maryland Make-Ready Center

October 30, 2015

October 30, 2015

Sandston, Virginia

October 30, 2015

January 29, 2016

Silver Spring and Baltimore, Maryland

October 30, 2015

April 29, 2016

Cincinnati, Ohio

September 1, 2016

October 28, 2016

Indianapolis and Portland, Indiana

September 1, 2016

March 31, 2017

Twinsburg, Ohio

April 13, 2017

April 28, 2017

Memphis, Tennessee and West Memphis, Arkansas for Mobile, Alabama (as part of the CCR Exchange Transaction)

September 29, 2017

October 2, 2017

(1)

As amended by Amendment No. 1, dated January 27, 2017.

As part of the transactions for the Expansion Territories, the Company entered into the CBA, as described above in Note 8. Under the CBA, the Company makes a quarterly sub-bottling payment to CCR on a continuing basis for the grant of exclusive rights to distribute, promote, market and sell the authorized brands of The Coca‑Cola Company and related products in the Expansion Territories. The quarterly sub-bottling payment is based on gross profit derived from sales of certain beverages and beverage products that are sold under the same trademarks that identify a covered beverage, beverage product or certain cross-licensed brands. The liability recorded by the Company to reflect the estimated fair value of contingent consideration related to future sub-bottling payments was $381.3 million on December 31, 2017 and $253.4 million on January 1, 2017. Sub-bottling payments to CCR were $16.7 million in 2017, $13.5 million in 2016 and $4.0 million in 2015.

Glacéau Distribution Termination Agreement

On January 1, 2017, the Company obtained the rights to market, promote, distribute and sell glacéau vitaminwater, glacéau smartwater and glacéau vitaminwater zero drops in certain geographic territories including the District of Columbia and portions of Delaware, Maryland and Virginia, pursuant to an agreement entered into by the Company, The Coca‑Cola Company and CCR in June 2016. Pursuant to the agreement, the Company made a payment of $15.6 million during the first quarter of 2017 to


The Coca‑Cola Company, which represented a portion of the total payment made by The Coca‑Cola Company to terminate a distribution arrangement with a prior distributor in this territory.

Bottling Agreements Conversion

Pursuant to a territory conversion agreement entered into by the Company, The Coca‑Cola Company and CCR in September 2015 (as amended), upon the conversion of the Company’s then-existing bottling agreements to the CBA on March 31, 2017, the Company received a one-time fee from CCR, which, after final adjustments made during the second quarter of 2017, totaled $91.5 million. This one-time fee was recorded as a deferred liability and will be amortized as a reduction to cost of sales over a period of 40 years. As of December 31, 2017, $2.3 million of this fee was recorded in other accrued liabilities, $87.4 million of this fee was recorded to other liabilities and $1.8 million was amortized during 2017 on the consolidated financial statements.

Legacy Facilities Credit

In December 2017, The Coca‑Cola Company agreed to provide the Company the Legacy Facilities Credit, a one-time fee of $43.0 million to compensate the Company for the net economic impact of changes made by The Coca‑Cola Company to the authorized pricing on sales of covered beverages produced at the Company’s Legacy Facilities prior to implementation of new pricing mechanisms included in the RMA. The Company immediately recognized $12.4 million of this fee, representing the portion applicable to a facility in Mobile, Alabama whichcertain manufacturing plants owned by the Company transferred to CCR as part of the CCR Exchange Transaction. The remaining $30.6 million of the Legacy(the “Legacy Facilities Credit, ofCredit”), which $0.7 million was classified as current, was recorded as a deferred liability and will be amortized as a reduction to cost of sales over a period of 40 years.

Investment


Also in Southeastern Container

In December 2017, CCR redistributed a portionupon the conversion of its investment in Southeastern Container. As a result of this redistribution,the Company’s then-existing bottling agreements pursuant to the CBA, the Company increased its investment in Southeastern Container by $6.0 million,received a fee from CCR (the “Territory Conversion Fee”), which was recorded as other income ina deferred liability and will be amortized as a reduction to cost of sales over a period of 40 years. Together, the consolidated financial statements.

Coca‑Cola Bottlers’ SalesLegacy Facilities Credit and Services Company, LLC (“CCBSS”)

Along with all other Coca‑Cola bottlers in the United States, including CCR, the CompanyTerritory Conversion Fee are “deferred proceeds from related parties.”


69

18.Long-Term Debt

Following is a member of CCBSS, a company formed in 2003 for the purpose of facilitating various procurement functions and distributing certain specified beverage products of The Coca‑Cola Company with the intention of enhancing the efficiency and competitiveness of the Coca‑Cola bottling system in the United States.

CCBSS negotiates the procurement for the majoritysummary of the Company’s raw materials, excluding concentrate, andlong-term debt:


(in thousands)Maturity
Date		Interest
Rate		Interest
Paid		Public /
Nonpublic		December 31,
2022		December 31,
2021
Senior notes(1)
2/27/20233.28%Semi-annuallyNonpublic$— $125,000 
Senior bonds(2)
11/25/20253.80%Semi-annuallyPublic350,000 350,000 
Revolving Credit Facility7/9/2026VariableVariesNonpublic— — 
Senior notes10/10/20263.93%QuarterlyNonpublic100,000 100,000 
Senior notes3/21/20303.96%QuarterlyNonpublic150,000 150,000 
Unamortized discount on senior bonds(2)
11/25/2025(26)(34)
Debt issuance costs(1,157)(1,523)
Total long-term debt$598,817 $723,443 

(1)On September 13, 2022, the Company receivesused cash on hand to repay the $125 million of senior notes with a rebate from CCBSSstated maturity date of February 27, 2023. There was no penalty for the purchaseearly repayment of these raw materials. the senior notes.
(2)The Company had rebatessenior bonds due from CCBSSin 2025 were issued at 99.975% of $11.2 millionpar.

The principal maturities of debt outstanding on December 31, 20172022 were as follows:

(in thousands)Debt Maturities
2023$— 
2024— 
2025350,000 
2026100,000 
2027— 
Thereafter150,000 
Long-term debt$600,000 

The Company mitigates its financing risk by using multiple financial institutions and $7.4 milliononly entering into credit arrangements with institutions with investment grade credit ratings. The Company monitors counterparty credit ratings on January 1, 2017.

In addition,an ongoing basis.


The indenture under which the Company’s senior bonds were issued does not include financial covenants but does limit the incurrence of certain liens and encumbrances as well as indebtedness by the Company’s subsidiaries in excess of certain amounts. The agreements under which the Company’s nonpublic debt was issued include two financial covenants: a consolidated cash flow/fixed charges ratio and a consolidated funded indebtedness/cash flow ratio, each as defined in the respective agreement. The Company was in compliance with these covenants as of December 31, 2022. These covenants have not restricted, and are not expected to restrict, the Company’s liquidity or capital resources.

All outstanding long-term debt has been issued by the Company pays an administrative fee to CCBSS forand none has been issued by any of its services. The Company incurred administrative fees to CCBSSsubsidiaries. There are no guarantees of $2.3 million in 2017, $1.3 million in 2016the Company’s long-term debt.

19.Commitments and $0.7 million in 2015, which were classified as accounts receivable, other in the consolidated financial statements.

National Product Supply Group

Contingencies


Manufacturing Cooperatives

The Company is a memberobligated to purchase at least 80% of a national product supply group (the “NPSG”), comprisedits requirements of The Coca‑Cola Company and other Coca‑Cola bottlers who are regional producing bottlers (“RPBs”) in The Coca‑Cola Company’s national product supply system, pursuant to a national product supply governance agreement executed in October 2015 with The Coca‑Cola Company and other RPBs (the “NPSG Governance Agreement”). The stated objectives of the NPSG include, among others, (i) Coca‑Cola system strategic infrastructure investment and divestment planning; (ii) network optimization of all plant to distribution center sourcing; and (iii) new product/packaging infrastructure planning.

Under the NPSG Governance Agreement, the NPSG members establishedplastic bottles for certain governance mechanisms, including a governing board (the “NPSG Board”) comprised of a representative of (i) the Company, (ii) The Coca‑Cola Company and (iii) each other RPB. As of December 31, 2017, the NPSG Board consisted of The Coca‑Cola Company, the Company and seven other RPBs. The NPSG Board makes and/or oversees and directs certain key decisions regarding the NPSG, including decisions regarding the management and staffing of the NPSG and the funding for its ongoing operations. Pursuant to the decisions of the NPSG Board madedesignated territories from time to time and subject to the terms and conditions of the NPSG Governance Agreement, each RPB is required to make investments in its respective manufacturing assets and implement Coca‑Cola system strategic investment opportunities consistent with the NPSG


Governance Agreement.Southeastern. The Company is also obligated to paypurchase 17.5 million cases of finished product from SAC on an annual basis through June 2024. The Company purchased 26.9 million cases, 28.0 million cases and 28.3 million cases of finished product from SAC in 2022, 2021 and 2020, respectively.


70

The following table summarizes the Company’s purchases from these manufacturing cooperatives:

 Fiscal Year
(in thousands)202220212020
Purchases from Southeastern$153,967 $125,142 $125,659 
Purchases from SAC193,261 169,399 155,858 
Total purchases from manufacturing cooperatives$347,228 $294,541 $281,517 

The Company guarantees a certain portion of SAC’s debt, which expires in 2024. The amount guaranteed was $9.5 million on both December 31, 2022 and December 31, 2021. In the costsevent SAC fails to fulfill its commitments under the related debt, the Company would be responsible for payment to the lenders up to the level of operating the NPSG.guarantee. The Company incurred NPSG operating costsdoes not anticipate SAC will fail to fulfill its commitments related to the debt. The Company further believes SAC has sufficient assets, including production equipment, facilities and working capital, and the ability to adjust the selling prices of $1.1its products to adequately mitigate the risk of material loss from the Company’s guarantee.

The Company holds no assets as collateral against the SAC guarantee, the fair value of which is immaterial to the consolidated financial statements. The Company monitors its investment in SAC and would be required to write down its investment if an impairment, other than a temporary impairment, was identified. No impairment of the Company’s investment in SAC was identified as of December 31, 2022, and there was no impairment identified in 2022, 2021 or 2020.

Other Commitments and Contingencies

The Company has standby letters of credit, primarily related to its property and casualty insurance programs. These letters of credit totaled $37.6 million on both December 31, 2022 and December 31, 2021.

The Company participates in 2017long-term marketing contractual arrangements with certain prestige properties, athletic venues and $0.4 millionother locations. As of December 31, 2022, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $128.8 million.

The Company is involved in 2016,various claims and legal proceedings which were classifiedhave arisen in the ordinary course of its business. Although it is difficult to predict the ultimate outcome of these claims and legal proceedings, management believes the ultimate disposition of these matters will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company. No material amount of loss in excess of recorded amounts is believed to be reasonably possible as S,D&A expensea result of these claims and legal proceedings.

The Company is subject to audits by tax authorities in jurisdictions where it conducts business. These audits may result in assessments that are subsequently resolved with the authorities or potentially through the courts. Management believes the Company has adequately provided for any assessments likely to result from these audits; however, final assessments, if any, could be different than the amounts recorded in the consolidated financial statements.

CONA Services LLC

The Company is a member of CONA Services LLC (“CONA”), an entity formed with The Coca‑Cola Companystatements.


20.Risks and certain other Coca‑Cola bottlers pursuant to a limited liability company agreement executed in January 2016 (as amended, the “CONA LLC Agreement”) to provide business process and information technology services to its members.

Under the CONA LLC Agreement, the business and affairs of CONA are managed by a board of directors comprised of representatives of its members (the “CONA Board”). All directors are entitled to one vote, regardless of the percentage interest in CONA held by each member. The Company currently has the right to designate one of the members of the CONA Board and has a percentage interest in CONA of approximately 20%. Most matters to be decided by the CONA Board require approval by a majority of a quorum of the directors, provided that the approval of 80% of the directors is required to, among other things, require members to make additional capital contributions, approve CONA’s annual operating and capital budgets, and approve capital expenditures in excess of certain agreed upon amounts. Each CONA member is required to make capital contributions to CONA if and when approved by the CONA Board. The Company made capital contributions to CONA of $3.6 million in 2017 and $7.9 million in 2016, which were classified as other assets in the consolidated financial statements. No CONA member may transfer its membership interest (or any portion thereof) except to a purchaser of the member’s bottling business (or any portion thereof) and as permitted under the member’s comprehensive beverage agreement with The Coca‑Cola Company.

The CONA LLC Agreement further provides that, if CCR grants any major North American Coca‑Cola bottler other than a CONA member rights to (i) manufacture, produce and package or (ii) market, promote, distribute and sell Coca‑Cola products, CCR will require the bottler to become a CONA member, to implement the CONA System in the bottler’s operations and to enter into a master services agreement with CONA.

The Company is also party to an amended and restated master services agreement with CONA (the “CONA MSA”), pursuant to which CONA agreed to make available, and the Company became authorized to use, the Coke One North America system (the “CONA System”), a uniform information technology system developed to promote operational efficiency and uniformity among North American Coca‑Cola bottlers. As part of making the CONA System available, CONA provides the Company with certain business process and information technology services, including the planning, development, management and operation of the CONA System in connection with our direct store delivery and manufacture of products (collectively, the “CONA Services”). The Company is also authorized under the CONA MSA to use the CONA System in connection with its distribution, promotion, marketing, sale and manufacture of beverages it is authorized to distribute or manufacture under the CBA, the RMA or any other agreement with The Coca‑Cola Company, subject to the provisions of the CONA LLC Agreement and any licenses or other agreements relating to products or services provided by third parties and used in connection with the CONA System.

In exchange for the Company’s rights to use the CONA System and receive the CONA Services under the CONA MSA, it is charged service fees by CONA based on the number of physical cases of beverages the Company distributed or manufactured during the applicable period in the portion of its territories where the CONA Services have then been implemented. Upon the earlier of (i) all members of CONA beginning to use the CONA System in all territories in which they distribute and manufacture Coca‑Cola products (excluding certain territories of CCR that are expected to be sold to bottlers that are neither members of CONA nor users of the CONA System), or (ii) December 31, 2018, the service fees will be changed to be an amount per physical case of beverages distributed or manufactured in any portion of the Company’s territories equal to the aggregate costs incurred by CONA to maintain and operate the CONA System and provide the CONA Services divided by the total number of cases distributed or manufactured by all of the members of CONA, subject to certain exceptions and provided that the aggregate costs related to CONA’s manufacturing functionality will be borne solely amongst the CONA members who have rights to manufacture beverages of The Coca‑Cola Company. The Company is obligated to pay the service fees under the CONA MSA even if it is not using the CONA System for all or any portion of its distribution and manufacturing operations. The Company incurred CONA Services Fees of $12.6 million in 2017 and $7.5 million in 2016.

Snyder Production Center (“SPC”)

The Company leases the SPC and an adjacent sales facility, which are located in Charlotte, North Carolina, from Harrison Limited Partnership One (“HLP”). HLP is directly and indirectly owned by trusts of which J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, Sue Anne H. Wells, a director of the Company, and Deborah H. Everhart, a former director of the Company, are trustees and beneficiaries. Morgan H. Everett, Vice President and a director of the Company, is a permissible, discretionary beneficiary of the trusts that directly or indirectly own HLP. The SPC lease expires on December 31, 2020.


The principal balance outstanding under this capital lease was $11.6 million on December 31, 2017 and $14.7 million on January 1, 2017. The annual base rent the Company is obligated to pay under the lease is subject to an adjustment for an inflation factor. Rental payments related to this lease were $4.1 million in 2017, $4.0 million in 2016 and $3.8 million in 2015.

Company Headquarters

The Company leases its headquarters office facility and an adjacent office facility from Beacon Investment Corporation (“Beacon”). The lease expires on December 31, 2021. J. Frank Harrison, III is Beacon’s majority shareholder and Morgan H. Everett is a minority shareholder. The principal balance outstanding under this capital lease was $12.8 million on December 31, 2017 and $15.5 million on January 1, 2017. The annual base rent the Company is obligated to pay under the lease is subject to adjustment for increases in the Consumer Price Index. The minimum rentals and contingent rental payments related to this lease were as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Minimum rentals

 

$

3,509

 

 

$

3,526

 

 

$

3,540

 

Contingent rentals

 

 

877

 

 

 

767

 

 

 

682

 

Total rental payments

 

$

4,386

 

 

$

4,293

 

 

$

4,222

 

The contingent rentals in 2017, 2016 and 2015 are a result of changes in the Consumer Price Index. Increases or decreases in lease payments that result from changes in the Consumer Price Index were recorded as adjustments to interest expense.

23.

Net Income Per Share

The following table sets forth the computation of basic net income per share and diluted net income per share under the two-class method. See Note 1 to the consolidated financial statements for additional information related to net income per share.

 

 

Fiscal Year

 

(in thousands, except per share data)

 

2017

 

 

2016

 

 

2015

 

Numerator for basic and diluted net income per Common Stock and Class B Common Stock share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Coca-Cola Bottling Co. Consolidated

 

$

96,535

 

 

$

50,146

 

 

$

59,002

 

Less dividends:

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

7,141

 

 

 

7,141

 

 

 

7,141

 

Class B Common Stock

 

 

2,187

 

 

 

2,166

 

 

 

2,146

 

Total undistributed earnings

 

$

87,207

 

 

$

40,839

 

 

$

49,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock undistributed earnings – basic

 

$

66,754

 

 

$

31,328

 

 

$

38,223

 

Class B Common Stock undistributed earnings – basic

 

 

20,453

 

 

 

9,511

 

 

 

11,492

 

Total undistributed earnings

 

$

87,207

 

 

$

40,839

 

 

$

49,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock undistributed earnings – diluted

 

$

66,469

 

 

$

31,194

 

 

$

38,059

 

Class B Common Stock undistributed earnings – diluted

 

 

20,738

 

 

 

9,645

 

 

 

11,656

 

Total undistributed earnings – diluted

 

$

87,207

 

 

$

40,839

 

 

$

49,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator for basic net income per Common Stock share:

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on Common Stock

 

$

7,141

 

 

$

7,141

 

 

$

7,141

 

Common Stock undistributed earnings – basic

 

 

66,754

 

 

 

31,328

 

 

 

38,223

 

Numerator for basic net income per Common Stock share

 

$

73,895

 

 

$

38,469

 

 

$

45,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator for basic net income per Class B Common Stock share:

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on Class B Common Stock

 

$

2,187

 

 

$

2,166

 

 

$

2,146

 

Class B Common Stock undistributed earnings – basic

 

 

20,453

 

 

 

9,511

 

 

 

11,492

 

Numerator for basic net income per Class B Common Stock share

 

$

22,640

 

 

$

11,677

 

 

$

13,638

 

Uncertainties


 

 

Fiscal Year

 

(in thousands, except per share data)

 

2017

 

 

2016

 

 

2015

 

Numerator for diluted net income per Common Stock share:

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on Common Stock

 

$

7,141

 

 

$

7,141

 

 

$

7,141

 

Dividends on Class B Common Stock assumed converted to Common Stock

 

 

2,187

 

 

 

2,166

 

 

 

2,146

 

Common Stock undistributed earnings – diluted

 

 

87,207

 

 

 

40,839

 

 

 

49,715

 

Numerator for diluted net income per Common Stock share

 

$

96,535

 

 

$

50,146

 

 

$

59,002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator for diluted net income per Class B Common Stock share:

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on Class B Common Stock

 

$

2,187

 

 

$

2,166

 

 

$

2,146

 

Class B Common Stock undistributed earnings – diluted

 

 

20,738

 

 

 

9,645

 

 

 

11,656

 

Numerator for diluted net income per Class B Common Stock share

 

$

22,925

 

 

$

11,811

 

 

$

13,802

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic net income per Common Stock and Class B Common Stock share:

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock weighted average shares outstanding – basic

 

 

7,141

 

 

 

7,141

 

 

 

7,141

 

Class B Common Stock weighted average shares outstanding – basic

 

 

2,188

 

 

 

2,168

 

 

 

2,147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for diluted net income per Common Stock and Class B Common Stock share:

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock weighted average shares outstanding – diluted (assumes conversion of Class B Common Stock to Common Stock)

 

 

9,369

 

 

 

9,349

 

 

 

9,328

 

Class B Common Stock weighted average shares outstanding – diluted

 

 

2,228

 

 

 

2,208

 

 

 

2,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

$

10.35

 

 

$

5.39

 

 

$

6.35

 

Class B Common Stock

 

$

10.35

 

 

$

5.39

 

 

$

6.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

$

10.30

 

 

$

5.36

 

 

$

6.33

 

Class B Common Stock

 

$

10.29

 

 

$

5.35

 

 

$

6.31

 

NOTES TO TABLE

(1)

For purposes of the diluted net income per share computation for Common Stock, all shares of Class B Common Stock are assumed to be converted; therefore, 100% of undistributed earnings is allocated to Common Stock.

(2)

For purposes of the diluted net income per share computation for Class B Common Stock, weighted average shares of Class B Common Stock are assumed to be outstanding for the entire period and not converted.

(3)

Denominator for diluted net income per share for Common Stock and Class B Common Stock includes the dilutive effect of shares relative to the Performance Unit Award Agreement.

(4)

The Company does not have anti-dilutive shares.

24.

Risks and Uncertainties

Approximately 93%86% of the Company’s total bottle/can sales volume to retail customers consists of products of The Coca‑Cola Company, which is the sole supplier of these products or of the concentrates or syrups required to manufacture these products. The remaining bottle/can sales volume to retail customers consists of products of other beverage companies or those owned by the Company.companies. The Company has beverage agreements with The Coca‑Cola Company and other beverage companies under which it has various requirements. Failure to meet the requirements of these beverage agreements could result in the loss of distribution rights for the respective products.


The Company’s products are sold and distributed through various channels, which include selling directlyCompany faces concentration risks related to retail stores and other outlets such as food markets, institutional accounts and vending machine outlets. During 2017, approximately 65%a few customers comprising a large portion of the Company’s bottle/canannual sales volume to retail customers was sold for future consumption, while the remaining bottle/can sales volume to retail customers was sold for immediate consumption.


and net sales. The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers,

71

as well as the percentage of the Company’s total net sales, which are included in the Nonalcoholic Beverages operating segment, that such volume represents. No other customer represented greater than 10% of the Company’s total net sales for any years presented.

 

 

Fiscal Year

 

 

 

2017

 

 

2016

 

 

2015

 

Approximate percent of the Company's total bottle/can sales volume

 

 

 

 

 

 

 

 

 

 

 

 

Wal-Mart Stores, Inc.

 

 

19

%

 

 

20

%

 

 

22

%

The Kroger Company

 

 

10

%

 

 

6

%

 

 

6

%

Food Lion, LLC

 

 

6

%

 

 

8

%

 

 

7

%

Total approximate percent of the Company's total bottle/can sales volume

 

 

35

%

 

 

34

%

 

 

35

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Approximate percent of the Company's total net sales

 

 

 

 

 

 

 

 

 

 

 

 

Wal-Mart Stores, Inc.

 

 

13

%

 

 

14

%

 

 

15

%

The Kroger Company

 

 

7

%

 

 

5

%

 

 

5

%

Food Lion, LLC

 

 

4

%

 

 

5

%

 

 

5

%

Total approximate percent of the Company's total net sales

 

 

24

%

 

 

24

%

 

 

25

%


The NPSG Governance Agreement was executed in October 2015 by The Coca‑Cola Company, the Company and other RPBs. The Coca‑Cola Company and each member RPB has a representative on the NPSG Board. As of December 31, 2017, the NPSG Board consisted of The Coca‑Cola‑Company, the Company and seven other RPBs. Pursuant to the NPSG Governance Agreement, the Company has agreed to abide by decisions made by the NPSG Board, which include decisions regarding strategic investment and divestment, optimal national product supply sourcing and new product or packaging infrastructure planning. Even though the Company has a representative on the NPSG Board, the Company will not exercise sole decision-making authority relating to the decisions of the NPSG Board, and the interests of other members of the NPSG Board may diverge from those of the Company.

 Fiscal Year
 202220212020
Approximate percent of the Company’s total bottle/can sales volume
Wal-Mart Stores, Inc.20 %20 %19 %
The Kroger Company12 %13 %13 %
Total approximate percent of the Company’s total bottle/can sales volume32 %33 %32 %
Approximate percent of the Company’s total net sales
Wal-Mart Stores, Inc.16 %14 %14 %
The Kroger Company10 %9 %10 %
Total approximate percent of the Company’s total net sales26 %23 %24 %

The Company purchases all of the plastic bottles used in its manufacturing plants from Southeastern and Western Container, two manufacturing cooperatives the Company co-owns with several other Coca‑Cola bottlers, and all of its aluminum cans from two domestic suppliers and all of its plastic bottles from two manufacturing cooperatives.suppliers. See Note 172 and Note 22 of the consolidated financial statements19 for additional information.


The Company is exposed to price risk on commodities such as aluminum, corn and PET resin (a petroleum- or plant-based product), which affects the cost of raw materials used in the production of its finished products. The Company both produces and procures these finished products. Examples of the raw materials affected are aluminum cans and plastic bottles used for packaging and high fructose corn syrup used as a product ingredient. Further, the Company is exposed to commodity price risk on crude oil, which impacts the Company’s cost of fuel used in the movement and delivery of the Company’s products. The Company participates in commodity hedging and risk mitigation programs, including programs administered both by CCBSS and by the Company. In addition, there is no limit on the price The Coca‑Cola Company and other beverage companies can charge for concentrate.

programs we administer.


Certain liabilities of the Company, including floating rate debt, retirement benefit obligations and the Company’s pension liability, are subject to risk of changes in both long-term and short-term interest rates.


The Company’s contingent consideration liability resulting from the acquisition of the Expansion Territoriescertain distribution territories is subject to risk as a result of changes in the Company’s probability weighted discounted cash flow model, which is based on internal forecasts, and changes in the Company’s WACC, which is derived from market data.


Approximately 14%13% of the Company’s labor forceworkforce is covered by collective bargaining agreements. The Company’s collective bargaining agreements, which generally have 3-three- to 5-yearfive-year terms, expire at various dates through 2022. 2027. Terms and conditions of the new labor union agreements could increase the Company’s exposure to work interruptions or stoppages,stoppages.

21.Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) (“AOCI(L)”) is comprised of adjustments to the Company’s pension and postretirement medical benefit plans and the foreign currency translation for a subsidiary of the Company that performs data analysis and provides consulting services outside the United States.

Following is a summary of AOCI(L) for 2022, 2021 and 2020:

 Gains (Losses) During the PeriodReclassification to Income
(in thousands)December 31,
2021		Pre-tax
Activity		Tax
Effect		Pre-tax
Activity		Tax
Effect		December 31,
2022
Net pension activity:      
Actuarial loss$(78,882)$6,263 $(1,533)$3,990 $(978)$(71,140)
Prior service credits (costs)11 (154)38 — — (105)
Net postretirement benefits activity:
Actuarial gain (loss)(1,239)10,138 (2,481)444 (110)6,752 
Prior service costs(624)— — — — (624)
Foreign currency translation adjustment(9)— — 11 (2)— 
Reclassification of stranded tax effects(19,720)— — — — (19,720)
Total AOCI(L)$(100,463)$16,247 $(3,976)$4,445 $(1,090)$(84,837)
72


Gains (Losses) During the PeriodReclassification to Income
(in thousands)December 31,
2020		Pre-tax
Activity		Tax
Effect		Pre-tax
Activity		Tax
Effect		December 31,
2021
Net pension activity:
Actuarial loss$(93,847)$14,897 $(3,658)$4,954 $(1,228)$(78,882)
Prior service credits8 — — 3 — 11 
Net postretirement benefits activity:
Actuarial loss(4,328)3,414 (838)682 (169)(1,239)
Prior service costs(624)— — — — (624)
Interest rate swap(1)
(556)— — 739 (183)— 
Foreign currency translation adjustment14 — — (32)9 (9)
Reclassification of stranded tax effects(19,720)— — — — (19,720)
Total AOCI(L)$(119,053)$18,311 $(4,496)$6,346 $(1,571)$(100,463)

(1)In 2019, the Company entered into a $100 million fixed rate swap to hedge a portion of the interest rate risk on its previous term loan facility, both of which matured on June 7, 2021. This interest rate swap was designated as an increased percentagea cash flow hedging instrument and changes in its fair value were not material to the consolidated balance sheets.

Gains (Losses) During the PeriodReclassification to Income
(in thousands)December 29,
2019		Pre-tax
Activity		Tax
Effect		Pre-tax
Activity		Tax
Effect		December 31,
2020
Net pension activity:
Actuarial loss$(93,174)$(5,521)$1,369 $4,619 $(1,140)$(93,847)
Prior service credits (costs)(7)— — 19 (4)8 
Net postretirement benefits activity:
Actuarial loss(1,191)(4,555)1,129 383 (94)(4,328)
Prior service costs(624)— — — — (624)
Interest rate swap(270)— — (378)92 (556)
Foreign currency translation adjustment(16)— — 41 (11)14 
Reclassification of stranded tax effects(19,720)— — — — (19,720)
Total AOCI(L)$(115,002)$(10,076)$2,498 $4,684 $(1,157)$(119,053)

Following is a summary of its workforce is covered by collective bargaining agreements.


the impact of AOCI(L) on the consolidated statements of operations:

25.

Supplemental Disclosures of Cash Flow Information


Fiscal Year 2022
(in thousands)Net Pension
Activity		Net Postretirement
Benefits Activity		Foreign Currency
Translation Adjustment		Total
Cost of sales$1,364 $276 $— $1,640 
Selling, delivery and administrative expenses2,626 168 11 2,805 
Subtotal pre-tax3,990 444 11 4,445 
Income tax expense978 110 2 1,090 
Total after tax effect$3,012 $334 $9 $3,355 

Fiscal Year 2021
(in thousands)Net Pension
Activity		Net Postretirement
Benefits Activity		Interest Rate
Swap		Foreign Currency
Translation Adjustment		Total
Cost of sales$1,341 $496 $— $— $1,837 
Selling, delivery and administrative expenses3,616 186 739 (32)4,509 
Subtotal pre-tax4,957 682 739 (32)6,346 
Income tax expense1,228 169 183 (9)1,571 
Total after tax effect$3,729 $513 $556 $(23)$4,775 

73

Fiscal Year 2020
(in thousands)Net Pension
Activity		Net Postretirement
Benefits Activity		Interest Rate
Swap		Foreign Currency
Translation Adjustment		Total
Cost of sales$1,393 $146 $— $— $1,539 
Selling, delivery and administrative expenses3,245 237 (378)41 3,145 
Subtotal pre-tax4,638 383 (378)41 4,684 
Income tax expense1,144 94 (92)11 1,157 
Total after tax effect$3,494 $289 $(286)$30 $3,527 

22.Supplemental Disclosures of Cash Flow Information

Changes in current assets and current liabilities affecting cash were as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Accounts receivable, trade, net

 

$

(121,203

)

 

$

(83,204

)

 

$

(62,542

)

Accounts receivable from The Coca-Cola Company

 

 

3,272

 

 

 

(31,231

)

 

 

(5,258

)

Accounts receivable, other

 

 

(9,190

)

 

 

(5,723

)

 

 

(9,543

)

Inventories

 

 

2,527

 

 

 

(8,301

)

 

 

(13,849

)

Prepaid expenses and other current assets

 

 

(22,870

)

 

 

2,277

 

 

 

(6,264

)

Accounts payable, trade

 

 

73,603

 

 

 

32,186

 

 

 

21,728

 

Accounts payable to The Coca-Cola Company

 

 

33,757

 

 

 

39,842

 

 

 

26,769

 

Other accrued liabilities

 

 

31,525

 

 

 

6,474

 

 

 

24,784

 

Accrued compensation

 

 

7,351

 

 

 

7,613

 

 

 

6,087

 

Accrued interest payable

 

 

1,487

 

 

 

158

 

 

 

(174

)

Change in current assets less current liabilities (exclusive of acquisitions)

 

$

259

 

 

$

(39,909

)

 

$

(18,262

)


 Fiscal Year
(in thousands)202220212020
Accounts receivable, trade$(59,777)$(46,825)$8,107 
Allowance for doubtful accounts(1,217)(4,284)7,838 
Accounts receivable from The Coca-Cola Company21,951 (8,534)13,208 
Accounts receivable, other(20,753)3,206 6,010 
Inventories(44,694)(77,094)169 
Prepaid expenses and other current assets(16,201)(3,922)(4,685)
Accounts payable, trade23,417 84,959 31,378 
Accounts payable to The Coca-Cola Company17,112 38,490 (1,518)
Other accrued liabilities(9,230)21,161 (22,399)
Accrued compensation16,027 23,286 (205)
Accrued interest payable(1,419)152 (1,002)
Change in current assets less current liabilities$(74,784)$30,595 $36,901 

The Company had the following net cash payments (refunds) during the period for interest and income taxes:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Interest

 

$

39,609

 

 

$

34,764

 

 

$

27,391

 

Income taxes

 

 

30,965

 

 

 

(7,111

)

 

 

31,782

 


 Fiscal Year
(in thousands)202220212020
Income taxes$140,988 $70,988 $55,755 
Interest28,086 29,142 34,257 

The Company had the following significant noncashnon-cash investing and financing activities:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Estimated fair value related to the divestiture of the Deep South and Somerset Exchange Business and the Florence and Laurel Distribution Business

 

$

151,434

 

 

$

-

 

 

$

-

 

Additions to property, plant and equipment accrued and recorded in accounts payable, trade

 

 

22,329

 

 

 

15,704

 

 

 

14,006

 

Gain on acquisition of Southeastern Container preferred shares in CCR redistribution

 

 

6,012

 

 

 

-

 

 

 

-

 

Accounts receivable from The Coca-Cola Company for adjustments to the cash purchase price for the April 2017 Transactions

 

 

4,707

 

 

 

-

 

 

 

-

 

Issuance of Class B Common Stock in connection with stock award

 

 

3,669

 

 

 

3,726

 

 

 

2,225

 

Capital lease obligations incurred

 

 

2,233

 

 

 

-

 

 

 

3,361

 

26.

Segments

The Company evaluates segment reporting in accordance with FASB ASC 280, Segment Reporting, each reporting period, including evaluating the reporting package reviewed by the Chief Operation Decision Maker (��CODM”). The Company has concluded the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, as a group, represent the CODM.

The Company believes four operating segments exist. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated revenues, income from operations and assets. The additional three operating segments do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, and therefore have been combined into “All Other.”


The Company’s segment results are as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

4,243,007

 

 

$

3,060,937

 

 

$

2,245,836

 

All Other

 

 

301,801

 

 

 

234,732

 

 

 

160,191

 

Eliminations(1)

 

 

(221,140

)

 

 

(139,241

)

 

 

(99,569

)

Consolidated net sales

 

$

4,323,668

 

 

$

3,156,428

 

 

$

2,306,458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations:

 

 

 

 

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

84,775

 

 

$

123,230

 

 

$

92,921

 

All Other

 

 

11,404

 

 

 

4,629

 

 

 

5,223

 

Consolidated income from operations

 

$

96,179

 

 

$

127,859

 

 

$

98,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization:

 

 

 

 

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

160,524

 

 

$

109,716

 

 

$

76,127

 

All Other

 

 

8,317

 

 

 

6,907

 

 

 

4,769

 

Consolidated depreciation and amortization

 

$

168,841

 

 

$

116,623

 

 

$

80,896

 

(in thousands)

 

December 31, 2017

 

 

January 1, 2017

 

Total Assets:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

2,958,521

 

 

$

2,349,284

 

All Other

 

 

119,894

 

 

 

105,785

 

Eliminations(1)

 

 

(5,455

)

 

 

(5,585

)

Consolidated total assets

 

$

3,072,960

 

 

$

2,449,484

 

(1)

The entire net sales elimination for each period presented represents net sales from All Other to the Nonalcoholic Beverages segment. Sales between these segments are recognized at either fair market value or cost depending on the nature of the transaction. Asset eliminations relate to eliminations of intercompany receivables and payables between Nonalcoholic Beverages and All Other.

Net sales by product category were as follows:

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Bottle/can sales:

 

 

 

 

 

 

 

 

 

 

 

 

Sparkling beverages (carbonated)

 

$

2,285,621

 

 

$

1,764,558

 

 

$

1,323,712

 

Still beverages (noncarbonated, including energy products)

 

 

1,325,969

 

 

 

892,125

 

 

 

577,872

 

Total bottle/can sales

 

 

3,611,590

 

 

 

2,656,683

 

 

 

1,901,584

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other sales:

 

 

 

 

 

 

 

 

 

 

 

 

Sales to other Coca-Cola bottlers

 

 

383,065

 

 

 

238,182

 

 

 

178,777

 

Post-mix and other

 

 

329,013

 

 

 

261,563

 

 

 

226,097

 

Total other sales

 

 

712,078

 

 

 

499,745

 

 

 

404,874

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

4,323,668

 

 

$

3,156,428

 

 

$

2,306,458

 


27.

Quarterly Financial Data (Unaudited)

The unaudited quarterly financial data for the fiscal years ended December 31, 2017 and January 1, 2017 is included in the tables shown below. Excluding the impact of System Transformation Transactions completed during the fiscal year, sales volume has historically been the highest in the second and third quarter of each fiscal year. Additional meaningful financial information is included in the table following each presented period.

 

 

Quarter Ended

 

(in thousands, except per share data)

 

April 2,

2017

 

 

July 2,

2017

 

 

October 1,

2017

 

 

December 31,

2017

 

Net sales

 

$

865,702

 

 

$

1,169,291

 

 

$

1,162,526

 

 

$

1,126,149

 

Gross profit

 

 

332,021

 

 

 

415,178

 

 

 

410,324

 

 

 

383,424

 

Net income (loss) attributable to Coca-Cola Bottling Co. Consolidated

 

 

(5,051

)

 

 

6,348

 

 

 

17,316

 

 

 

77,922

 

Basic net income (loss) per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

$

(0.54

)

 

$

0.68

 

 

$

1.86

 

 

$

8.35

 

Class B Common Stock

 

$

(0.54

)

 

$

0.68

 

 

$

1.86

 

 

$

8.35

 

Diluted net income (loss) per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

$

(0.54

)

 

$

0.68

 

 

$

1.85

 

 

$

8.31

 

Class B Common Stock

 

$

(0.54

)

 

$

0.67

 

 

$

1.84

 

 

$

8.32

 



 Fiscal Year
(in thousands)202220212020
Additions (reductions) to leased property under financing leases$(55,465)$— $61,121 
Additions to property, plant and equipment accrued and recorded in accounts payable, trade44,775 35,809 17,025 
Dividends declared but not yet paid32,808 — — 
Right-of-use assets obtained in exchange for operating lease obligations25,130 26,907 42,698 

Additional Information:

 

Quarter Ended

 

(in thousands, except per share data)

 

April 2,

2017

 

 

July 2,

2017

 

 

October 1,

2017

 

 

December 31,

2017

 

System Transformation Transactions acquisitions impact:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales impact

 

$

264,906

 

 

$

472,649

 

 

$

478,272

 

 

$

536,070

 

Pre-tax income (loss) impact

 

 

4,450

 

 

 

15,320

 

 

 

10,329

 

 

 

(415

)

Net income (loss) impact

 

 

2,746

 

 

 

9,452

 

 

 

6,373

 

 

 

(179

)

Per basic common share impact

 

$

0.29

 

 

$

1.02

 

 

$

0.68

 

 

$

(0.02

)

System Transformation Transactions settlement impact:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax total (income) expense

 

$

-

 

 

$

9,442

 

 

$

-

 

 

$

(2,446

)

(Income) expense net of tax

 

 

-

 

 

 

5,826

 

 

 

-

 

 

 

(1,054

)

(Income) expense per basic common share

 

$

-

 

 

$

0.61

 

 

$

-

 

 

$

(0.11

)

Expenses related to System Transformation Transactions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax total expense

 

$

7,652

 

 

$

11,574

 

 

$

13,148

 

 

$

17,171

 

Expense net of tax

 

 

4,721

 

 

 

7,141

 

 

 

8,112

 

 

 

7,401

 

Expense per basic common share

 

$

0.50

 

 

$

0.77

 

 

$

0.86

 

 

$

0.79

 

Gain on exchange of franchise territories:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax income impact

 

$

-

 

 

$

-

 

 

$

-

 

 

$

529

 

Net income impact

 

 

-

 

 

 

-

 

 

 

-

 

 

 

228

 

Per basic common share impact

 

$

-

 

 

$

-

 

 

$

-

 

 

$

0.02

 

Portion of Legacy Facilities Credit related to Mobile, Alabama facility impact:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax income impact

 

$

-

 

 

$

-

 

 

$

-

 

 

$

12,364

 

Net income impact

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,329

 

Per basic common share impact

 

$

-

 

 

$

-

 

 

$

-

 

 

$

0.57

 

Acquisition of Southeastern Container preferred shares from CCR impact:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax income impact

 

$

-

 

 

$

-

 

 

$

-

 

 

$

6,012

 

Net income impact

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,591

 

Per basic common share impact

 

$

-

 

 

$

-

 

 

$

-

 

 

$

0.28

 

Fair value income/(expense) for acquisition related contingent consideration:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax total income/(expense)

 

$

(12,246

)

 

$

(16,119

)

 

$

5,225

 

 

$

19,914

 

Income/(expense) net of tax

 

 

(7,556

)

 

 

(9,945

)

 

 

3,224

 

 

 

8,583

 

Income/(expense) per basic common share

 

$

(0.81

)

 

$

(1.07

)

 

$

0.35

 

 

$

0.92

 

Amortization of converted distribution rights:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax total expense

 

$

-

 

 

$

2,760

 

 

$

2,760

 

 

$

2,330

 

Expense net of tax

 

 

-

 

 

 

1,703

 

 

 

1,703

 

 

 

1,004

 

Expense per basic common share

 

$

-

 

 

$

0.18

 

 

$

0.18

 

 

$

0.11

 

Mark-to-market income/(expense) related to commodity hedging program:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax total income/(expense)

 

$

327

 

 

$

(1,187

)

 

$

3,401

 

 

$

589

 

Income/(expense) net of tax

 

 

202

 

 

 

(732

)

 

 

2,098

 

 

 

254

 

Income/(expense) per basic common share

 

$

0.02

 

 

$

(0.08

)

 

$

0.22

 

 

$

0.03

 

Tax Act impact:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income net of tax

 

$

-

 

 

$

-

 

 

$

-

 

 

$

66,595

 

Income per basic common share

 

$

-

 

 

$

-

 

 

$

-

 

 

$

7.14

 



74

 

 

Quarter Ended

 

(in thousands, except per share data)

 

April 3,

2016

 

 

July 3,

2016

 

 

October 2,

2016

 

 

January 1,

2017

 

Net sales

 

$

625,456

 

 

$

840,384

 

 

$

849,028

 

 

$

841,560

 

Gross profit

 

 

243,898

 

 

 

319,707

 

 

 

327,190

 

 

 

324,927

 

Net income (loss) attributable to Coca-Cola Bottling Co. Consolidated

 

 

(10,041

)

 

 

15,652

 

 

 

23,142

 

 

 

21,393

 

Basic net income (loss) per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

$

(1.08

)

 

$

1.68

 

 

$

2.48

 

 

$

2.31

 

Class B Common Stock

 

$

(1.08

)

 

$

1.68

 

 

$

2.48

 

 

$

2.31

 

Diluted net income (loss) per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

$

(1.08

)

 

$

1.67

 

 

$

2.47

 

 

$

2.30

 

Class B Common Stock

 

$

(1.08

)

 

$

1.67

 

 

$

2.47

 

 

$

2.29

 

Additional Information:

 

Quarter Ended

 

(in thousands, except per share data)

 

April 3,

2016

 

 

July 3,

2016

 

 

October 2,

2016

 

 

January 1,

2017

 

System Transformation Transactions acquisitions impact:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales impact

 

$

35,311

 

 

$

162,819

 

 

$

174,420

 

 

$

219,780

 

Pre-tax income impact

 

 

1,206

 

 

 

13,502

 

 

 

2,512

 

 

 

5,153

 

Net income impact

 

 

742

 

 

 

8,304

 

 

 

1,545

 

 

 

3,169

 

Per basic common share impact

 

$

0.08

 

 

$

0.89

 

 

$

0.17

 

 

$

0.34

 

System Transformation Transactions divestitures impact:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales impact

 

$

-

 

 

$

-

 

 

$

-

 

 

$

68,929

 

Pre-tax income impact

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11,538

 

Net income impact

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,096

 

Per basic common share impact

 

$

-

 

 

$

-

 

 

$

-

 

 

$

0.76

 

Expenses related to System Transformation Transactions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax total expense

 

$

6,423

 

 

$

7,005

 

 

$

9,780

 

 

$

9,066

 

Expense net of tax

 

 

3,950

 

 

 

4,308

 

 

 

6,015

 

 

 

5,576

 

Expense per basic common share

 

$

0.43

 

 

$

0.46

 

 

$

0.66

 

 

$

0.59

 

Reduction of gain related to exchange of franchise territories:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax total adjustment

 

$

-

 

 

$

692

 

 

$

-

 

 

$

-

 

Adjustment net of tax

 

 

-

 

 

 

426

 

 

 

-

 

 

 

-

 

Adjustment per basic common share

 

$

-

 

 

$

0.05

 

 

$

-

 

 

$

-

 

Fair value income/(expense) for acquisition related contingent consideration:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax total income/(expense)

 

$

(17,151

)

 

$

(16,274

)

 

$

7,365

 

 

$

27,970

 

Income/(expense) net of tax

 

 

(10,548

)

 

 

(10,009

)

 

 

4,530

 

 

 

17,202

 

Income/(expense) per basic common share

 

$

(1.14

)

 

$

(1.06

)

 

$

0.49

 

 

$

1.85

 

Mark-to-market income/(expense) related to commodity hedging program:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax total income/(expense)

 

$

1,040

 

 

$

2,770

 

 

$

388

 

 

$

530

 

Income/(expense) net of tax

 

 

640

 

 

 

1,704

 

 

 

239

 

 

 

326

 

Income/(expense) per basic common share

 

$

0.07

 

 

$

0.18

 

 

$

0.03

 

 

$

0.04

 

Impact of changes in product supply governance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax total income

 

$

2,213

 

 

$

1,105

 

 

$

1,614

 

 

$

2,591

 

Income net of tax

 

 

1,361

 

 

 

680

 

 

 

993

 

 

 

1,593

 

Income per basic common share

 

$

0.15

 

 

$

0.07

 

 

$

0.11

 

 

$

0.17

 

Expense related to special charitable contribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax total expense

 

$

4,000

 

 

$

-

 

 

$

-

 

 

$

-

 

Expense net of tax

 

 

2,460

 

 

 

-

 

 

 

-

 

 

 

-

 

Expense per basic common share

 

$

0.26

 

 

$

-

 

 

$

-

 

 

$

-

 



Management’s Report on Internal Control over Financial Reporting


Management of Coca-Cola Bottling Co. Consolidated, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act.Act of 1934, as amended. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s chief executive and chief financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external purposes in accordance with the U.S.accounting principles generally accepted accounting principles.in the United States. The Company’s internal control over financial reporting includes policies and procedures that:

(i)

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company;

(ii)

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and


(iii)

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

(i)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company;

(ii)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and
(iii)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


As of December 31, 2017,2022, management assessed the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management determined that the Company’s internal control over financial reporting as of December 31, 20172022 was effective.


The effectiveness of the Company’s internal control over financial reporting as of December 31, 2017,2022, has been audited by PricewaterhouseCoopers LLP (PCAOB ID 238), an independent registered public accounting firm, which is included in Item 8 of this report.




February 28, 2018

22, 2023

75


Report of Independent RegisteredRegistered Public Accounting Firm


To the Board of Directors and Stockholders of Coca-Cola Bottling Co.Coca‑Cola Consolidated,

Inc.


Opinions on the Financial Statements and Internal Control over Financial Reporting


We have audited the accompanying consolidated balance sheets of Coca‑Cola Bottling Co. Consolidated, Inc. and its subsidiaries (the “Company”) as of December 31, 20172022 and January 1, 2017,2021, and the related consolidated statements of operations, of comprehensive income, cash flows, andof changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2017,2022, including the related notes and financial statement schedule listedof valuation and qualifying accounts and reserves for each of the three years in the indexperiod ended December 31, 2022 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company'sCompany’s internal control over financial reporting as of December 31. 2017,31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).


In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172022 and January 1, 2017,2021, and the results of theirits operations and theirits cash flows for each of the three years in the period ended December 31, 20172022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.


Basis for Opinions


The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal ControlsControl over Financial Reporting.Reporting appearing under Item 8. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.


Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.



Definition and Limitations of Internal Control over Financial Reporting


A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


76

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Acquisition Related Contingent Consideration Liability

As described in Notes 1, 2, and 14 to the consolidated financial statements, the fair value of the acquisition related contingent consideration liability was $541.5 million as of December 31, 2022, which consists of the estimated amounts due to The Coca‑Cola Company under the Company’s comprehensive beverage agreements (collectively, the “CBA”) with The Coca‑Cola Company and Coca‑Cola Refreshments USA, Inc. (“CCR”), a wholly owned subsidiary of The Coca‑Cola Company, over the useful life of the related distribution rights. The CBA relates to a multi-year series of transactions, which were completed in October 2017, through which the Company acquired and exchanged distribution territories and manufacturing plants. Pursuant to the CBA, the Company is required to make quarterly acquisition related sub-bottling payments to CCR on a continuing basis in exchange for the grant of exclusive rights to distribute, promote, market and sell the authorized brands of The Coca‑Cola Company and related products in certain distribution territories the Company acquired from CCR. Each reporting period, the Company adjusts its acquisition related contingent consideration liability related to the distribution territories subject to acquisition related sub-bottling payments to fair value by using a probability weighted discounted cash flow model and discounting future expected acquisition related sub-bottling payments required under the CBA using the Company’s estimated weighted average cost of capital (“WACC”). These future expected acquisition related sub-bottling payments extend through the life of the related distribution assets acquired in each distribution territory, which is generally forty years. As a result, the fair value of the acquisition related contingent consideration liability is impacted by the Company’s WACC, management’s estimate of the acquisition related sub-bottling payments that will be made in the future under the CBA, and current acquisition related sub-bottling payments.

The principal considerations for our determination that performing procedures relating to the acquisition related contingent consideration liability is a critical audit matter are (i) the significant judgment by management when estimating the fair value of the acquisition related contingent consideration liability, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the WACC and current and future acquisition related sub-bottling payments under the CBA, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of the acquisition related contingent consideration liability. These procedures also included, among others, testing management’s process for determining the fair value of the acquisition related contingent consideration liability; evaluating the appropriateness of the discounted cash flow model; testing the completeness and accuracy of the underlying data used in the model; and evaluating the reasonableness of the significant assumptions related to the WACC and current and future acquisition related sub-bottling payments under the CBA. Evaluating management’s assumptions related to the WACC and current and future acquisition related sub-bottling payments involved evaluating whether the assumptions used were reasonable considering (i) the current and past performance of the distribution territories acquired from CCR, (ii) relevant industry forecasts and macroeconomic conditions, (iii) management’s historical forecasting accuracy, and (iv) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the discounted cash flow model and evaluating the reasonableness of the WACC.



/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Charlotte, North Carolina

February 28, 2018

22, 2023


We have served as the Company’s auditor since at least 1972. We have not determinedbeen able to determine the specific year we began serving as auditor of the Company.



77

The financial statement schedule required by Regulation S-X is set forth in response to Item 15 below.

The supplementary data required by


Item 302 of Regulation S-K is set forth9.Changes in Note 27 to the consolidated financial statements.

and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure


Not applicable.

Item 9A.

Controls and Procedures

None.


Item 9A.Controls and Procedures.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) pursuant to Rule 13a-15(b) of the Exchange Act. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2017.

2022.


Management’s report on internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002 and the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, on the consolidated financial statements, and its opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 20172022 are included in Item 8 of this report.


There has been no change in the Company’s internal control over financial reporting during the quarter ended December 31, 20172022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.

Other Information


Item 9B.Other Information.

None.

Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.



78

PART III

Item 10.

Directors, Executive Officers and Corporate Governance


Item 10.Directors, Executive Officers and Corporate Governance.

For information with respect to the executive officers of the Company, see “Executive Officers of the Registrant”“Information About Our Executive Officers” included as a separate item at the end of Part I of this Report.report, which is incorporated herein by reference. For information with respect to the Directorsdirectors of the Company, see “Proposal 1: Election of Directors” in the Proxy Statementdefinitive proxy statement for the Company’s 20182023 Annual Meeting of Stockholders (the “2018“2023 Proxy Statement”), which is incorporated herein by reference. For information with respect to compliance with Section 16(a) of the Exchange Act, see the “Section 16(a) Beneficial Ownership Reporting Compliance” section of the 2018 Proxy Statement, which is incorporated herein by reference. For information with respect to the Audit Committee of the Board of Directors, see the “Corporate Governance – Board Committees” section of the 20182023 Proxy Statement, which is incorporated herein by reference.


The Company has adopted a Code of Ethics for Senior Financial Officers (the “Code of Ethics”), which is intended to qualify as a “code of ethics” within the meaning of Item 406 of Regulation S-K of the Exchange Act (the “Code of Ethics”).Act. The Code of Ethics applies to the Company’s principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. The Code of Ethics is available on the Company’s website at www.cokeconsolidated.com.

The Company intendswill disclose information pertaining to disclose any substantive amendmentsamendment to, or waiverswaiver from, the provisions of the Code of Ethics that apply to the Company’s principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions and that relate to any element of the Code of Ethics enumerated in the SEC rules and regulations by posting this information on its website.

the Company’s website, www.cokeconsolidated.com. The information on the Company’s website or linked to or from the Company’s website is not incorporated by reference into, and does not constitute a part of, this report or any other documents the Company files with, or furnishes to, the SEC.

Item 11.

Executive Compensation


Item 11.Executive Compensation.

For information with respect to executive and director compensation, see the “Compensation Discussion and Analysis,” “Executive Compensation Tables,” “Consideration of Risk Related to Compensation Programs,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report” and “Director Compensation” sections of the 20182023 Proxy Statement, which are incorporated herein by reference.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

For information with respect to security ownership of certain beneficial owners and management, see the “Principal Stockholders” and “Security Ownership of Directors and Executive Officers” sections of the 20182023 Proxy Statement, which are incorporated herein by reference. For information with respect to securities authorized for issuance under the Company’s equity compensation plans, see the “Equity Compensation Plan Information” section of the 20182023 Proxy Statement, which is incorporated herein by reference.

Item 13.

Certain Relationships and Related Transactions, and Director Independence


Item 13.Certain Relationships and Related Transactions, and Director Independence.

For information with respect to certain relationships and related transactions, see the “Corporate Governance – Policy for Review of Related Person Transactions” and “Corporate Governance – Policy for Review of Related Person Transactions” sections of the 20182023 Proxy Statement, which are incorporated herein by reference. For information with respect to director independence, see the “Corporate Governance – Director Independence” section of the 20182023 Proxy Statement, which is incorporated herein by reference.

Item 14.

Principal Accountant Fees and Services


Item 14.Principal Accountant Fees and Services.

For information with respect to principal accountant fees and services, see “Proposal 2: Ratification of the Appointment of Independent Registered Public Accounting Firm” ofin the 20182023 Proxy Statement, which is incorporated herein by reference.



79

PART IV


Item 15.Exhibits and Financial Statement Schedules.

(a)List of documents filed as part of this report.

1.Financial Statements

Item 15.

Exhibits and Financial Statement Schedules

(a)

List of documents filed as part of this report.

1.

Financial Statements

Consolidated Statements of Operations

61

37

62

38

63

39

64

40

65

41

66

42

116

75

117

76


2.Financial Statement Schedule

The Financial Statement Schedule included under Item 15 hereof, as required for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, consisted of the following:

2.

Financial Statement Schedule

Our Financial Statement Schedule included under Item 15 hereof, as required for the years ended December 31, 2017, January 1, 2017 and January 3, 2016, consisted of the following:

Schedule II - Valuation and Qualifying Accounts and Reserves

129

86


All other financial statements and schedules not listed have been omitted because the required information is included in the consolidated financial statements or the notes thereto, or is not applicable or required.

3.

Listing of Exhibits


3.Listing of Exhibits

The agreements included in the following exhibits to this report are included to provide 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. Some of the agreements contain representations and warranties by each of the parties to the applicable agreements. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreements 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 and warranties may not describe the actual state of affairs as of the date they were made or at any other time.


80


EXHIBIT INDEX

Exhibits incorporated by reference:


Number

Description

Incorporation Reference

2.1+

Exhibit
No.

Asset Exchange Agreement for Lexington, Kentucky Territory Expansion, dated October 17, 2014,Description

Incorporated by and between Coca-Cola Refreshments USA, Inc., the Company and certain of the Company’s wholly-owned subsidiaries identified on the signature pages thereto.

Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 20, 2014 (File No. 0‑9286).

Reference or
Filed/Furnished Herewith

2.2+

3.1

Asset Purchase Agreement for Paducah and Pikeville Kentucky Territory Expansion, dated February 13, 2015, by and between Coca-Cola Refreshments USA, Inc. and the Company.

Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 18, 2015 (File No. 0‑9286).

2.3+

Asset Purchase Agreement for Next Phase Territory Expansion, dated September 23, 2015, by and between the Company and Coca-Cola Refreshments USA, Inc.

Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on September 28, 2015 (File No. 0‑9286).

2.4+

Asset Purchase Agreement for Manufacturing Facility Acquisitions, dated October 30, 2015, by and between the Company and Coca-Cola Refreshments USA, Inc.

Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 2, 2015 (File No. 0‑9286).

2.5+

Stock Purchase Agreement, dated July 22, 2015, by and among the Company, BYB Brands, Inc. and TheCoca-Cola Company.

Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 23, 2015 (File No. 0‑9286).

2.6+

Asset Purchase Agreement for Distribution Territory Expansion, dated September 1, 2016, by and between the Company and Coca-Cola Refreshments USA, Inc.

Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on September 6, 2016 (File No. 0‑9286).

2.7+

Asset Purchase Agreement for Manufacturing Facility Acquisitions, dated September 1, 2016, by and between the Company and Coca-Cola Refreshments USA, Inc.

Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on September 6, 2016 (File No. 0‑9286).

2.8+

Amendment No. 1 to Asset Purchase Agreement, dated January 27, 2017, by and between the Company and Coca-Cola Refreshments USA, Inc.

Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on January 27, 2017 (File No. 0‑9286).

2.9+

Distribution Asset Purchase Agreement, dated April 13, 2017, by and between the Company and Coca‑Cola Refreshments USA, Inc.

Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on April 17, 2017 (File No. 0‑9286).

2.10+

Manufacturing Asset Purchase Agreement, dated April 13, 2017, by and between the Company and Coca‑Cola Refreshments USA, Inc.

Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on April 17, 2017 (File No. 0‑9286).

2.11+

Asset Exchange Agreement, dated September 29, 2017, by and between the Company and Coca‑Cola Refreshments USA, Inc.

Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 4, 2017 (File No. 0‑9286).

2.12+

Asset Purchase Agreement, dated September 29, 2017, by and between the Company and Coca‑Cola Refreshments USA, Inc.

Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on October 4, 2017 (File No. 0‑9286).

2.13+

Asset Exchange Agreement, dated September 29, 2017, by and between the Company and Coca‑Cola Bottling Company United, Inc.

Exhibit 2.3 to the Company’s Current Report on Form 8-K filed on October 4, 2017 (File No. 0‑9286).

3.1

Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 2, 2017 (File No. 0‑9286).

3.2

Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 15, 2017January 2, 2019 (File No. 0-9286).

3.3Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on January 2, 2019 (File No. 0-9286).
4.1Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2019 (File No. 0‑9286).

4.1

4.2

Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 19, 2019 (File No. 0‑9286).
4.3

Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2002 (File No. 0‑9286).

4.2

4.4

Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 25, 2015 (File No. 0‑9286).


Number

Description

Incorporation Reference

4.3

4.5

Officers’ Certificate pursuant to Sections 102 and 301 of the Indenture, dated as of July 20, 1994, as supplemented and restated by the Supplemental Indenture, dated as of March 3, 1995, between the Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, relating to the establishment of the Company’s $110,000,000 aggregate principal amount of 7.00% Senior Notes due 2019.

Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 4, 2010 (File No. 0‑9286).

4.4

Resolutions adopted by Executive Committee and the Pricing Committee of the Board of Directors of the Company related to the establishment of the Company’s $110,000,000 aggregate principal amount of 7.00% Senior Notes due 2019.

Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 4, 2010 (File No. 0‑9286).

4.5

Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 7, 2009 (File No. 0‑9286).

4.6

Form of the Company’s 3.80%3.800% Senior Notes due 2025 (included in Exhibit 4.24.4 above).

Exhibit 4.14.2 to the Company’s Current Report on Form 8-K filed on November 25, 2015 (File No. 0‑9286).

4.7

4.6

Exhibit 4.14.4 to the Company’s Current ReportRegistration Statement on Form 8-KS-3 filed on September 19, 2017December 15, 2020 (File No. 0‑9286)333-251358).

4.8

10.1

Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on September 19, 2017 (File No. 0‑9286).

4.9

The registrant, by signing this report, agrees to furnish the Securities and Exchange Commission, upon its request, a copy of any instrument which defines the rights of holders of long-term debt of the registrant and its consolidated subsidiaries which authorizes a total amount of securities not in excess of 10 percent of the total assets of the registrant and its subsidiaries on a consolidated basis.

10.1

Amended and Restated Credit Agreement, dated October 16, 2014,July 9, 2021, by and among the Company, the lenders named therein, JP Morgan Chase Bank, N.A., as issuing lender and administrative agent, Citibank, N.A. and Wells Fargo Bank, National Association, as co-syndication agents, and Branch Banking and Trust Company, as documentation agent.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 22, 2014 (File No. 0-9286).

10.2

Joinder and Commitment Increase Agreement, dated April 27, 2015, by and among the Company, the lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 29, 2015 (File No. 0-9286).

10.3

Amended and Restated Guaranty Agreement, effective as of July 15, 1993, made by the Company and each of the other guarantor parties thereto in favor of Trust Company Bank and Teachers Insurance and Annuity Association of America.

Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2002 (File No. 0‑9286).

10.4

Amended and Restated Guaranty Agreement, dated as of May 18, 2000, made by the Company in favor of Wachovia Bank, N.A.

Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2001 (File No. 0‑9286).

10.5

Guaranty Agreement, dated as of December 1, 2001, made by the Company in favor of Wachovia, Bank, N.A.

Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2001 (File No. 0‑9286).

10.6

Amended and Restated Stock Rights and Restrictions Agreement, dated February 19, 2009, by and among the Company, The Coca-Cola Company, Carolina Coca-Cola Bottling Investments, Inc. and J. Frank Harrison, III.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 19, 2009 (File No. 0‑9286).

10.7

Termination of Irrevocable Proxy and Voting Agreement, dated February 19, 2009, by and between The Coca-Cola Company and J. Frank Harrison, III.

Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 19, 2009 (File No. 0‑9286).


Number

Description

Incorporation Reference

10.8

Form of Master Bottle Contract (“Cola Beverage Agreement”), made and entered into, effective January 27, 1989, between The Coca-Cola Company and the Company, together with Form of Home Market Amendment to Master Bottle Contract, effective as of October 29, 1999.

Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 3, 2010 (File No. 0‑9286).

10.9

Form of Allied Bottle Contract (“Allied Beverage Agreement”), made and entered into, effective January 11, 1990, between The Coca-Cola Company and the Company (as successor to Coca-Cola Bottling Company of Anderson, S.C.).

Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 3, 2010 (File No. 0‑9286).

10.10

Letter Agreement, dated January 27, 1989, between The Coca-Cola Company and the Company, modifying the Cola Beverage Agreements and Allied Beverage Agreements.

Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 3, 2010 (File No. 0‑9286).

10.11

Form of Marketing and Distribution Agreement (“Still Beverage Agreement”), made and entered into effective October 1, 2000, between The Coca-Cola Company and the Company (as successor to Metrolina Bottling Company), with respect to Dasani.

Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 3, 2010 (File No. 0‑9286).

10.12

Form of Letter Agreement, dated December 10, 2001, between The Coca-Cola Company and the Company, together with Letter Agreement, dated December 14, 1994, modifying the Still Beverage Agreements.

Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 3, 2010 (File No. 0‑9286).

10.13**

Letter Agreement, dated as of March 10, 2008, by and between the Company and The Coca-Cola Company.

Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2008 (File No. 0‑9286).

10.14

Lease, dated as of January 1, 1999, by and between the Company and Ragland Corporation.

Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (File No. 0‑9286).

10.15

First Amendment to Lease and First Amendment to Memorandum of Lease, dated as of August 30, 2002, between the Company and Ragland Corporation.

Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2002 (File No. 0‑9286).

10.16

Lease Agreement, dated as of March 23, 2009, between the Company and Harrison Limited Partnership One.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 26, 2009 (File No. 0‑9286).

10.17

Lease Agreement, dated as of December 18, 2006, between CCBCC Operations, LLC, a wholly-owned subsidiary of the Company, and Beacon Investment Corporation.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 21, 2006 (File No. 0‑9286).

10.18

Limited Liability Company Operating Agreement of Coca-Cola Bottlers’ Sales & Services Company LLC, made as of January 1, 2003, by and between Coca-Cola Bottlers’ Sales & Services Company LLC and Consolidated Beverage Co., a wholly-owned subsidiary of the Company.

Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2002 (File No. 0‑9286).

10.19

Partnership Agreement of Piedmont Coca-Cola Bottling Partnership (formerly known as Carolina Coca-Cola Bottling Partnership), dated as of July 2, 1993, by and among Carolina Coca-Cola Bottling Investments, Inc., Coca-Cola Ventures, Inc., Coca-Cola Bottling Co. Affiliated, Inc., Fayetteville Coca-Cola Bottling Company and Palmetto Bottling Company.

Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2002 (File No. 0‑9286).

10.20

Master Amendment to Partnership Agreement, Management Agreement and Definition and Adjustment Agreement, dated as of January 2, 2002, by and among Piedmont Coca-Cola Bottling Partnership, CCBC of Wilmington, Inc., The Coca-Cola Company, Piedmont Partnership Holding Company, Coca-Cola Ventures, Inc. and the Company.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 14, 2002 (File No. 0‑9286).

10.21

Fourth Amendment to Partnership Agreement, dated as of March 28, 2003, by and among Piedmont Coca-Cola Bottling Partnership, Piedmont Partnership Holding Company and Coca-Cola Ventures, Inc.

Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2003 (File No. 0‑9286).

10.22

Management Agreement, dated as of July 2, 1993, by and among the Company, Piedmont Coca-Cola Bottling Partnership (formerly known as Carolina Coca-Cola Bottling Partnership), CCBC of Wilmington, Inc., Carolina Coca-Cola Bottling Investments, Inc., Coca-Cola Ventures, Inc. and Palmetto Bottling Company.

Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2002 (File No. 0‑9286).


Number

Description

Incorporation Reference

10.23

First Amendment to Management Agreement (relating to the Management Agreement designated as Exhibit 10.22 of this Exhibit Index) effective as of January 1, 2001.

Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (File No. 0‑9286).

10.24

Management Agreement, dated as of March 12, 2014, by and among CCBCC Operations, LLC, a wholly-owned subsidiary of the Company, and South Atlantic Canners, Inc.

Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2014 (File No. 0‑9286).

10.25

Agreement, dated as of March 1, 1994, between the Company and South Atlantic Canners, Inc.

Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2002 (File No. 0‑9286).

10.26*

Coca-Cola Bottling Co. Consolidated Amended and Restated Annual Bonus Plan, effective January 1, 2017.

Appendix A to the Company’s Proxy Statement for the 2017 Annual Meeting of Stockholders (File No. 0‑9286).

10.27*

Coca-Cola Bottling Co. Consolidated Amended and Restated Long-Term Performance Plan, effective January 1, 2017.

Appendix B to the Company’s Proxy Statement for the 2017 Annual Meeting of Stockholders (File No. 0‑9286).

10.28*

Form of Long-Term Performance Plan Bonus Award Agreement.

Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 4, 2010 (File No. 0‑9286).

10.29*

Performance Unit Award Agreement, dated February 27, 2008.

Appendix A to the Company’s Proxy Statement for the 2008 Annual Meeting of Stockholders (File No. 0‑9286).

10.30*

Coca-Cola Bottling Co. Consolidated Supplemental Savings Incentive Plan, as amended and restated effective November 1, 2011.

Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2012 (File No. 0‑9286).

10.31*

Coca-Cola Bottling Co. Consolidated Director Deferral Plan, effective January 1, 2005.

Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2006 (File No. 0‑9286).

10.32*

Coca-Cola Bottling Co. Consolidated Officer Retention Plan, as amended and restated effective January 1, 2007.

Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2007 (File No. 0‑9286).

10.33*

Amendment No. 1 to Coca-Cola Bottling Co. Consolidated Officer Retention Plan, as amended and restated effective January 1, 2009.

Exhibit 10.32 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2008 (File No. 0‑9286).

10.34*

Life Insurance Benefit Agreement, effective as of December 28, 2003, by and between the Company and Jan M. Harrison, Trustee under the J. Frank Harrison, III 2003 Irrevocable Trust, John R. Morgan, Trustee under the Harrison Family 2003 Irrevocable Trust, and J. Frank Harrison, III.

Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2003 (File No. 0‑9286).

10.35*

Form of Amended and Restated Split-Dollar and Deferred Compensation Replacement Benefit Agreement, effective as of November 1, 2005, between the Company and eligible employees of the Company.

Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2006 (File No. 0‑9286).

10.36*

Form of Split-Dollar and Deferred Compensation Replacement Benefit Agreement Election Form and Agreement Amendment, effective as of June 20, 2005, between the Company and certain executive officers of the Company.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 24, 2005 (File No. 0‑9286).

10.37

Coca-Cola Bottling Co. Consolidated Long Term Retention Plan, adopted effective as of March 5, 2014.

Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2014 (File No. 0‑9286).

10.38**

Comprehensive Beverage Agreement for the Johnson City/Morristown territory, dated as of May 23, 2014, by and among the Company, The Coca-Cola Company and Coca-Cola Refreshments, USA, Inc.

Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2014 (File No. 0‑9286).

10.39**

Amendment to the Comprehensive Beverage Agreement for the Johnson City/Morristown territory, dated as of June 1, 2015, by and between the Company, The Coca-Cola Company and Coca-Cola Refreshments, USA, Inc.

Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 28, 2015 (File No. 0‑9286).


Number

Description

Incorporation Reference

10.40**

Finished Goods Supply Agreement for the Johnson City/Morristown territory, dated as of May 23, 2014, by and among the Company, The Coca-Cola Company and Coca-Cola Refreshments, USA, Inc.

Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2014 (File No. 0‑9286).

10.41

Amended and Restated Ancillary Business Letter, dated October 30, 2015, by and between the Company and The Coca-Cola Company.

Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 2, 2015 (File No. 0‑9286).

10.42

Distribution Agreement, dated March 26, 2015, between CCBCC Operations, LLC, a wholly-owned subsidiary of the Company, and Monster Energy Company.

Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 29, 2015 (File No. 0‑9286).

10.43**

Territory Conversion Agreement, dated September 23, 2015, by and between the Company, The Coca-Cola Company and Coca-Cola Refreshments USA, Inc.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 28, 2015 (File No. 0‑9286).

10.44

First Amendment to the Territory Conversion Agreement, dated February 8, 2016, by and between the Company, The Coca-Cola Company and Coca-Cola Refreshments USA, Inc.

Exhibit 10.47 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2016 (File No. 0-9286).

10.45

Expanding Participating Bottler Revenue Incidence Agreement, dated September 23, 2015, by and between the Company and The Coca-Cola Company.

Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 28, 2015 (File No. 0‑9286).

10.46**

National Product Supply Governance Agreement, dated October 30, 2015, by and between the Company, The Coca-Cola Company, Coca-Cola Bottling Company United, Inc., Coca-Cola Refreshments USA, Inc. and Swire Pacific Holdings Inc. d/b/a Swire Coca-Cola USA.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 2, 2015 (File No. 0‑9286).

10.47

2016 Incidence Pricing Letter Agreement, dated April 6, 2016, between the Company and The Coca-Cola Company, by and through its Coca-Cola North America division.

Exhibit 10.1 to the Company's to the Company’s Current Report on Form 8-K filed on April 8, 2016 (File No. 0‑9286).

10.48**

Initial Regional Manufacturing Agreement, dated January 29, 2016, between the Company and The Coca-Cola Company.

Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2016 (File No. 0‑9286).

10.49**

Initial Regional Manufacturing Agreement, dated April 29, 2016, between the Company and The Coca-Cola Company.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 5, 2016 (File No. 0‑9286).

10.50**

CCNA Exchange Letter Agreement, dated April 29, 2016, between the Company and The Coca-Cola Company, by and through its Coca-Cola North America division.

Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 5, 2016 (File No. 0‑9286).

10.51

Term Loan Agreement, dated June 7, 2016, by and among the Company, the lenders named therein, JPMorgan Chase Bank, N.A., as administrative agent, swingline lender and PNC Bank, National Association and Branch Banking and Trust Company as co-syndication agents.

Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2016 (File No. 0‑9286).

10.52**

CONA Services LLC Limited Liability Company Agreement, dated January 27, 2016, by and among the Company, The Coca-Cola Company, Coca-Cola Refreshments USA, Inc.issuing lender, and the other bottlers named therein.lenders party thereto.

Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended July 3, 2016 (File No. 0‑9286).

10.53**

Amendment No. 1 to the CONA Services LLC Limited Liability Company Agreement, dated as of April 6, 2016 and effective as of April 2, 2016, by and among the Company, TheCoca-ColaCompany, Coca-Cola Refreshments USA, Inc. and the other bottlers name therein.

Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended July 3, 2016 (File No. 0‑9286).

10.54**

Master Services Agreement, dated as of April 6, 2016 and effective as of April 2, 2016, between the Company and CONA Services LLC.

Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended July 3, 2016 (File No. 0‑9286).

10.55

Glacéau Agreement, dated June 29, 2016, by and between The Coca-Cola Company, Coca-Cola Refreshments USA, Inc. and Coca-Cola Bottling Co. Consolidated.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 5, 201613, 2021 (File No. 0‑9286)0-9286).

10.56

10.2

Filed herewith.
10.3Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 13, 2021 (File No. 0-9286).
10.4

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 20, 2017 (File No. 0‑9286).

10.57

10.5

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 25, 2018 (File No. 0‑9286).
10.6Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 14, 2018 (File No. 0‑9286).
10.7Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 25, 2018 (File No. 0‑9286).
10.8Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 5, 2019 (File No. 0‑9286).
10.9

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 5, 2019 (File No. 0‑9286).

81

Exhibit
No.		DescriptionIncorporated by Reference or
Filed/Furnished Herewith
10.10**Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 2, 2015 (File No. 0‑9286).
10.11**Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2018 (File No. 0‑9286).
10.12**Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended July 3, 2016 (File No. 0‑9286).
10.13**Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended July 3, 2016 (File No. 0‑9286).
10.14**Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended OctoberApril 2, 20162017 (File No. 0‑9286).


Number

Description

Incorporation Reference

10.58

10.15

Exhibit 10.210.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2016September 27, 2020 (File No. 0‑9286).

10.59

10.16**

Exhibit 10.110.71 to the Company’s CurrentAnnual Report on Form 8-K filed on January 20,10-K for the fiscal year ended December 31, 2017 (File No. 0‑9286).

10.60

10.17

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 4, 2017 (File No. 0‑9286).

10.61

10.18

Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 4, 2017 (File No. 0‑9286).

10.62*10.19**

Exhibit 10.4 to the Company’s Quarterly Report on Form 10-K for the quarter ended April 2, 2017 (File No. 0‑9286).

10.63**

Comprehensive Beverage Agreement, dated March 31, 2017, by and between the Company, The Coca‑Coca‑Cola Company and Coca‑Coca‑Cola Refreshments USA, Inc.

Exhibit 10.5 to the Company’s Quarterly Report on Form 10-K10-Q for the quarter ended April 2, 2017 (File No. 0‑9286).

10.64*10.20**

Exhibit 10.6 to the Company’s Quarterly Report on Form 10-K10-Q for the quarter ended April 2, 2017 (File No. 0‑9286).

10.65*10.21**

Exhibit 10.7 to the Company’s Quarterly Report on Form 10-K for the quarter ended April 2, 2017 (File No. 0‑9286).

10.66**

Expansion Facilities Discount and Legacy Facilities Credit Letter Agreement, dated March 31, 2017, by and between the Company and The Coca‑Cola Company.

Exhibit 10.8 to the Company’s Quarterly Report on Form 10-K for the quarter ended April 2, 2017 (File No. 0‑9286).

10.67**

First Amendment to Comprehensive Beverage Agreement, dated April 28, 2017, by and between the Company, The Coca‑Coca‑Cola Company and Coca‑Coca‑Cola Refreshments USA, Inc.

Exhibit 10.1 to the Company’s Quarterly Report on Form 10-K10-Q for the quarter ended July 2, 2017 (File No. 0‑9286).

10.68

10.22**

Exhibit 10.72 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (File No. 0‑9286).
10.23**Exhibit 10.74 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (File No. 0‑9286).
10.24**Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2018 (File No. 0‑9286).
10.25**Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (File No. 0‑9286).
10.26***Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2019 (File No. 0‑9286).
82

Exhibit
No.		DescriptionIncorporated by Reference or
Filed/Furnished Herewith
10.27Exhibit 10.30 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (File No. 0‑9286).
10.28**Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2017 (File No. 0‑9286).
10.29

Exhibit 10.2 to the Company’s Quarterly Report on Form 10-K10-Q for the quarter ended July 2, 2017 (File No. 0‑9286).

10.69**

10.30

Exhibit 10.3 to the Company’s Quarterly Report on Form 10-K for the quarter ended July 2, 2017 (File No. 0‑9286).

10.70*

Separation Agreement and Release, dated February 14, 2018, by and between the Company and Clifford M. Deal, III.

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 20, 2018 (File No. 0‑9286).


Exhibits filed herewith:

Number

Description

4.10

Specimen of Common Stock Certificate.

10.71**

Amended and Restated Master Services Agreement, dated as of October 2, 2017, between the Company and CONA Services LLC.

10.72**

Amendment to Comprehensive Beverage Agreements, dated October 2, 2017, by and between the Company, Piedmont Coca‑Cola Bottling Partnership, The Coca‑Cola Company and Coca‑Cola Refreshments USA, Inc.

10.73

Second Amendment to Regional Manufacturing Agreement, dated October 2, 2017, by and between the Company and The Coca‑Coca‑Cola Company.

Exhibit 10.73 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (File No. 0‑9286).

10.74**

10.31

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 19, 2009 (File No. 0‑9286).
10.32Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 26, 2009 (File No. 0‑9286).
10.33Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 7, 2020 (File No. 0‑9286).

12

10.34

Exhibit 10.1 to Fixed Charges.

the Company’s Current Report on Form 8-K filed on March 23, 2022 (File No. 0-9286).

21

10.35

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 3, 2020 (File No. 0‑9286).
10.36+Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2019 (File No. 0‑9286).
10.37Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 23, 2022 (File No. 0-9286).
10.38*Exhibit 10.41 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2019 (File No. 0‑9286).
10.39*Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2021 (File No. 0-9286).
10.40*Exhibit 10.42 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2019 (File No. 0‑9286).
10.41*Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 4, 2010 (File No. 0‑9286).
10.42*Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2012 (File No. 0‑9286).
10.43*Exhibit 10.56 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2018 (File No. 0‑9286).
83

Exhibit
No.		DescriptionIncorporated by Reference or
Filed/Furnished Herewith
10.44*Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2021 (File No. 0-9286).
10.45*Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2022 (File No. 0‑9286).
10.46*Exhibit 10.47 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (File No. 0‑9286).
10.47*Exhibit 10.58 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2018 (File No. 0‑9286).
10.48*Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2007 (File No. 0‑9286).
10.49*Exhibit 10.32 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2008 (File No. 0‑9286).
10.50*Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2014 (File No. 0‑9286).
10.51*Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2022 (File No. 0‑9286).
10.52*Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on March 26, 2018 (File No. 0‑9286).
10.53*Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2019 (File No. 0‑9286).
10.54*Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2019 (File No. 0‑9286).
10.55*Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2006 (File No. 0‑9286).
10.56*Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 6, 2020 (File No. 0‑9286).
10.57*Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2022 (File No. 0‑9286).
21Filed herewith.

23

Filed herewith.

31.1

Filed herewith.

31.2

Filed herewith.

32

Furnished herewith.

101

101.INS

Financial statement fromInline XBRL Instance Document – the Annual Report on Form 10-K of Coca-Cola Bottling Co. Consolidated forinstance document does not appear in the fiscal year ended December 31, 2017, filed on February 28, 2018, formatted inInteractive Data File because its XBRL (Extensible Business Reporting Language):  (i)tags are embedded within the Consolidated Statements of Operations; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements of Changes in Stockholders’ Equity; and (vi) the Notes to Consolidated Financial Statements.

Inline XBRL document.		Filed herewith.

84

*

Exhibit
No.		DescriptionIncorporated by Reference or
Filed/Furnished Herewith
101.SCHInline XBRL Taxonomy Extension Schema Document.Filed herewith.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.Filed herewith.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.Filed herewith.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.Filed herewith.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.Filed herewith.
104Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.Filed herewith.

*Indicates a management contract or compensatory plan or arrangement.

**

Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

SEC.

+

***

Certain confidential portions of this exhibit have been redacted in accordance with Item 601(b)(10) of Regulation S‑K.

+Certain schedules and similar supporting attachments to this agreement have been omitted, and the Company agrees to furnish supplemental copies of any such schedules and similar supporting attachments to the Securities and Exchange CommissionSEC upon request.

(b)

Exhibits.


(b)Exhibits.

See Item 15(a)(3) above.

(c)

Financial Statement Schedules.


(c)Financial Statement Schedules.

See Item 15(a)(2) above.

Item 16.

Form 10-K Summary


Item 16.Form 10-K Summary.

None.



Schedule

85

Schedule II

COCA-COLA BOTTLING CO. CONSOLIDATED,

INC.

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

Allowance for Doubtful Accounts

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Balance at beginning of year

 

$

4,448

 

 

$

2,117

 

 

$

1,330

 

Additions charged to costs and expenses

 

 

4,464

 

 

 

2,534

 

 

 

1,234

 

Deductions

 

 

1,306

 

 

 

203

 

 

 

447

 

Balance at end of year

 

$

7,606

 

 

$

4,448

 

 

$

2,117

 

 Fiscal Year
(in thousands)202220212020
Beginning balance - allowance for doubtful accounts$17,336 $21,620 $13,782 
Additions charged to expenses and as a reduction to net sales4,326 4,088 14,265 
Deductions(5,543)(8,372)(6,427)
Ending balance - allowance for doubtful accounts$16,119 $17,336 $21,620 
Deferred Income Tax Valuation Allowance

 

 

Fiscal Year

 

(in thousands)

 

2017

 

 

2016

 

 

2015

 

Balance at beginning of year

 

$

1,618

 

 

$

2,307

 

 

$

3,640

 

Adjustment for federal tax legislation(1)

 

 

2,419

 

 

 

-

 

 

 

-

 

Additions charged to costs and expenses

 

 

877

 

 

 

-

 

 

 

28

 

Deductions credited to expense

 

 

577

 

 

 

689

 

 

 

1,361

 

Balance at end of year

 

$

4,337

 

 

$

1,618

 

 

$

2,307

 

(1) The recorded impact of the Tax Act is estimated and any final amount may differ, possibly materially, due to changes in estimates, interpretations and assumptions, changes in IRS interpretations, issuance of new guidance, legislative actions, changes in accounting standards or related interpretation in response to the Tax Act and future actions by states within the U.S.


 Fiscal Year
(in thousands)202220212020
Beginning balance - valuation allowance for deferred tax assets$4,372 $5,325 $7,190 
Additions charged to costs and expenses— — 163 
Deductions credited to expense(944)(953)(2,028)
Ending balance - valuation allowance for deferred tax assets$3,428 $4,372 $5,325 

SIGNATURES

86

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


COCA-COLA BOTTLING CO. CONSOLIDATED

(REGISTRANT)

COCA-COLA CONSOLIDATED, INC.
(REGISTRANT)

Date: February 28, 2018

22, 2023

By:

/s/ J. Frank Harrison, III

J. Frank Harrison, III

Chairman of the Board of Directors

and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature

Title

Date

Signature

Title

Date

By:

By:/s/ J. Frank Harrison, III

Chairman of the Board of Directors

and

February 28, 2018

22, 2023

J. Frank Harrison, III

Chief Executive Officer and Director

(Principal Executive Officer)

By:

/s/ David M. Katz

F. Scott Anthony

Executive Vice President and Chief Financial Officer

February 28, 2018

22, 2023

David M. Katz

F. Scott Anthony

(Principal Financial Officer)

By:

/s/ WilliamMatthew J. Billiard

Blickley

Senior Vice President, Financial Planning and

February 22, 2023
Matthew J. BlickleyChief Accounting Officer

February 28, 2018

William J. Billiard

(Principal Accounting Officer)

By:

/s/ Sharon A. Decker

Director

February 28, 2018

22, 2023

Sharon A. Decker

By:

/s/ Morgan H. Everett

Vice President and Director

Chair of the Board of Directors

February 28, 2018

22, 2023

Morgan H. Everett

By:

/s/ Henry W. Flint

President, Chief Operating Officer

February 28, 2018

Henry W. Flint

and Director

By:

/s/ James R. Helvey, III

Director

February 28, 2018

22, 2023

James R. Helvey, III

By:

/s/ William H. Jones

Director

February 28, 2018

22, 2023

William H. Jones

By:

/s/ Umesh M. Kasbekar

Vice Chairman of the Board of Directors

February 28, 2018

22, 2023

Umesh M. Kasbekar

and Director

By:

/s/ David M. Katz

DirectorFebruary 22, 2023
David M. Katz
By:/s/ Jennifer K. Mann

Director

February 28, 2018

22, 2023

Jennifer K. Mann

By:

/s/ James H. Morgan

Director

February 28, 2018

22, 2023

James H. Morgan

By:

/s/ John W. Murrey, III

Director

February 28, 2018

John W. Murrey, III

By:

/s/ Sue Anne H. Wells

Director

February 28, 2018

Sue Anne H. Wells

By:

/s/ Dennis A. Wicker

Lead Independent Director

February 28, 2018

22, 2023

Dennis A. Wicker

By:

/s/ Richard T. Williams

Director

February 28, 2018

22, 2023

Richard T. Williams

130

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