What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-11 compared with 2020-11-03 · 196 added, 315 removed, 626 unchanged (45% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Third Quarter First Nine Months

First Quarter

(in thousands, except per share data) 2021 2020

28 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Third Quarter First Nine Months

First Quarter

(in thousands) 2021 2020

Net income $ 53,363 $ 15,601

Other comprehensive income, net of tax:

Other comprehensive income (loss), net of tax:

Defined benefit plans reclassification including pension costs:

Actuarial gains 916 896

Prior service benefits 4 4 11 13

Prior service credits 1 4

Postretirement benefits reclassification included in benefits costs:

Actuarial gains 140 66

Prior service costs — ( 244 ) — ( 731 )

Interest rate swap 312 ( 1,015 )

Foreign currency translation adjustment ( 37 ) ( 1 )

Other comprehensive income, net of tax 1,280 196 2,201 1,367

Other comprehensive income (loss), net of tax 1,332 ( 50 )

Comprehensive income 54,695 15,551

5 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data) September 27, 2020 December 29, 2019

(in thousands, except share data) April 2, 2021 December 31, 2020

Current Assets:

14 unchanged sentences

Distribution agreements, net 847,645 853,753

Customer lists and other identifiable intangible assets, net 13,264 14,643

Customer lists, net 12,345 12,804

Total assets $ 3,284,832 $ 3,222,450

24 unchanged sentences

2,860,356 shares issued

Capital in excess of par value 128,983 128,983

Additional paid-in capital 135,953 135,953

Retained earnings 595,300 544,280

6 unchanged sentences

( 409 ) ( 409 )

Total equity of Coca‑Cola Consolidated, Inc.

448,238 346,952

Noncontrolling interest 111,317 104,164

Total equity 565,342 512,990

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

First Nine Months

First Quarter

(in thousands) 2021 2020

4 unchanged sentences

Amortization of intangible assets and deferred proceeds, net 5,810 5,760

Fair value adjustment of acquisition related contingent consideration 35,068 62,017

Impairment of property, plant and equipment 7,908 4,144

Deferred income taxes 19,980 5,910

Fair value adjustment of acquisition related contingent consideration 10,998 712

Loss on sale of property, plant and equipment 1,098 491

Impairment of property, plant and equipment 500 —

Amortization of debt costs 277 220

Stock compensation expense — 2,045

Change in current assets less current liabilities ( 38,662 ) ( 42,310 )

6 unchanged sentences

Additions to property, plant and equipment $ ( 37,204 ) $ ( 33,093 )

Proceeds from the sale of property, plant and equipment 2,397 1,028

Investment in CONA Services LLC ( 1,770 ) ( 1,713 )

Other distribution agreements ( 1,998 ) —

Investment in CONA Services LLC ( 514 ) ( 893 )

Proceeds from the sale of property, plant and equipment 74 1,658

Net cash used in investing activities $ ( 39,642 ) $ ( 32,328 )

Cash Flows from Financing Activities:

Payments on revolving credit facility $ ( 280,000 ) $ ( 376,339 )

Borrowings under revolving credit facility $ — $ 185,000

Payments on term loan facility and senior notes ( 22,500 ) ( 132,500 )

Proceeds from issuance of senior notes — 100,000

Payments on revolving credit facility — ( 125,000 )

Payments on term loan facility ( 31,250 ) ( 7,500 )

Payments of acquisition related contingent consideration ( 10,046 ) ( 10,452 )

2 unchanged sentences

Debt issuance fees ( 147 ) ( 46 )

Net cash used in financing activities $ ( 111,102 ) $ ( 110,056 )

Net cash provided by (used in) financing activities $ ( 45,233 ) $ 38,173

Net increase (decrease) in cash during period $ ( 2,965 ) $ 38,134

2 unchanged sentences

Significant non-cash investing and financing activities:

Additions to leased property under financing leases $ 61,121 $ —

Right-of-use assets obtained in exchange for operating lease obligations 38,317 39,213

Additions to property, plant and equipment accrued and recorded in accounts payable, trade $ 16,192 $ 12,748

Issuance of Class B Common Stock in connection with stock award — 4,776

Right-of-use assets obtained in exchange for operating lease obligations — 31,691

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands, except share data)

(in thousands, except share data) Common

Stock Class B

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Loss Treasury

Stock - Common

Stock Treasury

Stock - Class B

of Coca ‑ Cola

Consolidated,

Interest Total

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 — — — 14,662 — — — 14,662 939 15,601

Other comprehensive income, net of tax — — — — 1,367 — — 1,367 — 1,367

Other comprehensive loss, net of tax — — — — ( 50 ) — — ( 50 ) — ( 50 )

Cash dividends paid:

4 unchanged sentences

— — — ( 558 ) — — — ( 558 ) — ( 558 )

Issuance of 19,224 shares of Class B Common Stock

— 21 4,755 — — — — 4,776 — 4,776

Reclassification of stranded tax effects — — — 19,720 ( 19,720 ) — — — — —

Balance on September 29, 2019 $ 10,204 $ 2,860 $ 128,983 $ 393,674 $ ( 95,618 ) $ ( 60,845 ) $ ( 409 ) $ 378,849 $ 102,258 $ 481,107

Balance on March 29, 2020 $ 10,204 $ 2,860 $ 128,983 $ 393,479 $ ( 115,052 ) $ ( 60,845 ) $ ( 409 ) $ 359,220 $ 105,103 $ 464,323

Balance on December 31, 2020 $ 10,204 $ 2,860 $ 135,953 $ 544,280 $ ( 119,053 ) $ ( 60,845 ) $ ( 409 ) $ 512,990 $ — $ 512,990

Net income — — — 53,363 — — — 53,363 — 53,363

Other comprehensive loss, net of tax — — — — 2,201 — — 2,201 — 2,201

Other comprehensive income, net of tax — — — — 1,332 — — 1,332 — 1,332

Cash dividends paid:

4 unchanged sentences

— — — ( 558 ) — — — ( 558 ) — ( 558 )

Balance on September 27, 2020 $ 10,204 $ 2,860 $ 128,983 $ 480,246 $ ( 112,801 ) $ ( 60,845 ) $ ( 409 ) $ 448,238 $ 111,317 $ 559,555

Balance on April 2, 2021 $ 10,204 $ 2,860 $ 135,953 $ 595,300 $ ( 117,721 ) $ ( 60,845 ) $ ( 409 ) $ 565,342 $ — $ 565,342

See accompanying notes to condensed consolidated financial statements.

5 unchanged sentences

All significant intercompany accounts and transactions have been eliminated.

The condensed consolidated financial statements reflect all adjustments, including normal, recurring accruals, which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented:

• The financial position as of September 27, 2020 and December 29, 2019.

• The results of operations and comprehensive income for the 13-week periods ended September 27, 2020 (the “third quarter” of fiscal 2020 (“2020”)) and September 29, 2019 (the “third quarter” of fiscal 2019 (“2019”)), and the 39-week periods ended September 27, 2020 (the “first nine months” of 2020) and September 29, 2019 (the “first nine months” of 2019).

• The changes in cash flows and equity for the first nine months of 2020 and the first nine months of 2019.

Each of the Company’s quarters, other than the fourth quarter, ends on the Friday closest to the last day of the corresponding quarterly calendar period.

The Company’s fourth quarter and fiscal year end on December 31 regardless of the day of the week on which December 31 falls.

The condensed consolidated financial statements presented are:

• The financial position as of April 2, 2021 and December 31, 2020.

• The results of operations and comprehensive income for the three-month periods ended April 2, 2021 (the “first quarter” of fiscal 2021 (“2021”)) and March 29, 2020 (the “first quarter” of fiscal 2020 (“2020”)).

• The changes in cash flows and equity for the first quarter of 2021 and the first quarter of 2020.

The condensed consolidated financial statements include the consolidated operations of the Company and its majority-owned subsidiaries.

During 2020, Piedmont Coca-Cola Bottling Partnership (“Piedmont”) was the Company’s only subsidiary that had a significant noncontrolling interest.

On December 9, 2020, an indirect wholly owned subsidiary of the Company purchased the remaining 22.7 % general partnership interest in Piedmont from an indirect wholly owned subsidiary of The Coca‑Cola Company, and Piedmont became an indirect wholly owned subsidiary of the Company.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X.

The accounting policies followed in the presentation of interim financial results are consistent with those followed on an annual basis.

These policies are presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for 2019 filed with the Securities and Exchange Commission.

These policies are presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for 2020 filed with the United States Securities and Exchange Commission.

The preparation of condensed consolidated financial statements, in conformity with 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.

7 unchanged sentences

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Measurement of Credit Losses on Financial Instruments,” which requires measurement and recognition of expected credit losses at the point a loss is probable to occur, rather than expected to occur, which will generally result in earlier recognition of allowances for credit losses.

The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019‑12, “Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in income tax accounting and improves consistent application of and simplifies GAAP for other areas of income tax accounting by clarifying and amending existing guidance.

The new guidance is effective for fiscal years

beginning after December 15, 2020, including interim periods within those fiscal years.

The Company adopted ASU 2019-12 in the first quarter of 2021 and the adoption did not have a material impact on its condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement,” which removes, modifies and adds certain disclosure requirements in Accounting Standards Codification Topic 820, Fair Value Measurement.

This ASU is effective for annual and interim reporting periods beginning after December 15, 2019.

Certain amendments must be applied prospectively while others are to be applied on a retrospective basis to all periods presented.

The Company adopted ASU 2018-13 in the first quarter of 2020.

See Note 15 for additional information.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans,” which is effective for fiscal years ending after December 15, 2020.

Under this guidance, disclosures will be removed for the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, the amount and timing of assets expected to be returned to the employer, certain related party disclosures, and the effects of a one-percentage-point change in the assumed health care cost trend rates.

Additional disclosures will include the weighted average interest crediting rate for plans with promised crediting interest rates and an explanation of the reasons for significant gains and losses related to the benefit obligation for the period.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which will simplify the accounting for income taxes by removing certain exceptions to the general principles in income tax accounting and improve consistent application of and simplify GAAP for other areas of income tax accounting by clarifying and amending existing guidance.

The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company is currently evaluating the impact ASU 2019-12 will have on its condensed consolidated financial statements.

Related Party Transactions

The Coca‑Cola Company

The Company’s business consists primarily of the production, marketing and distribution of nonalcoholic beverages of The Coca‑Cola Company, which is the sole owner of the formulas under which the primary components of its soft drink products, either concentrate or syrup, are manufactured.

Frank Harrison, III, the Chairman of the Board of Directors and Chief Executive Officer of the Company, together with the trustees of certain trusts established for the benefit of certain relatives of the late J.

The Company’s business consists primarily of the distribution, marketing and manufacture of nonalcoholic beverages of The Coca‑Cola Company, which is the sole owner of the formulas under which the primary components of its soft drink products, either concentrate or syrup, are manufactured.

Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, together with the trustees of certain trusts established for the benefit of certain relatives of the late J.

Frank Harrison, Jr., control shares representing approximately 86 % of the total voting power of the Company’s total outstanding Common Stock and Class B Common Stock on a consolidated basis.

As of September 27, 2020, The Coca‑Cola Company owned approximately 27 % of the Company’s total outstanding Common Stock and Class B Common Stock on a consolidated basis, 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 the Company’s Common Stock it currently owns, it has the right to have its designee proposed by the Company for nomination to the Company’s Board of Directors, and J.

As of April 2, 2021, The Coca‑Cola Company owned approximately 27 % of the Company’s total outstanding Common Stock and Class B Common Stock on a consolidated basis, representing approximately 5 % of the total voting power of the Company’s Common Stock and Class B Common Stock voting together.

The number of shares of the Company’s Common Stock currently held by The Coca‑Cola Company gives it the right to have a designee proposed by the Company for nomination to the Company’s Board of Directors in the Company’s annual proxy statement.

Frank Harrison, III and the trustees of the J.

Frank Harrison, Jr.

family trusts described above, have agreed to vote the shares of the Company’s Class B Common Stock which they control in favor of such designee.

family trusts described above, have agreed to vote the shares of the Company’s Class B Common Stock 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.

The following table summarizes the significant transactions between the Company and The Coca‑Cola Company:

Third Quarter First Nine Months

First Quarter

(in thousands) 2021 2020

Payments made by the Company to The Coca‑Cola Company for:

Concentrate, syrup, sweetener and other purchases $ 324,312 $ 306,588 $ 873,827 $ 893,123

Concentrate, syrup, sweetener, finished products, and other purchases $ 307,425 $ 287,707

Customer marketing programs 32,694 32,991

4 unchanged sentences

Fountain delivery and equipment repair fees 8,818 9,090

Facilitating the distribution of certain brands and packages 2,508 1,157

Presence marketing funding support on the Company’s behalf — 1,735

Facilitating the distribution of certain brands and packages to other Coca‑Cola bottlers 1,151 1,602 3,469 3,952

In fiscal 2017 (“2017”), The Coca‑Cola Company agreed to provide the Company a fee 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 certain manufacturing facilities owned by the Company (the “Legacy Facilities Credit”).

The Company immediately recognized

the portion of the Legacy Facilities Credit applicable to a regional manufacturing facility divested in 2017 and the remaining balance of the Legacy Facilities Credit will be amortized as a reduction to cost of sales over a period of 40 years.

The portion of the deferred liability that is expected to be amortized in the next 12 months is classified as current.

Coca‑Cola Refreshments USA, Inc.

The Company, The Coca‑Cola Company and CCR, a wholly owned subsidiary of The Coca‑Cola Company, entered into a comprehensive beverage agreement in 2017 (as amended, the “CBA”).

Pursuant to the CBA, the Company is required to make quarterly 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.

These sub-bottling payments are 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.

Sub-bottling payments to CCR were $ 32.0 million during the first nine months of 2020 and $ 18.8 million during the first nine months of 2019.

The Company, The Coca‑Cola Company and CCR, a wholly owned subsidiary of The Coca‑Cola Company, entered into comprehensive beverage agreements (collectively, the “CBA”).

The CBA requires the Company to make quarterly 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.

These sub-bottling 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.

Sub-bottling payments to CCR were $ 10.0 million in the first quarter of 2021 and $ 10.5 million in the first quarter of 2020.

The following table summarizes the liability recorded by the Company to reflect the estimated fair value of contingent consideration related to future sub‑bottling payments to CCR:

(in thousands) September 27, 2020 December 29, 2019

(in thousands) April 2, 2021 December 31, 2020

Current portion of acquisition related contingent consideration $ 38,014 $ 36,020

1 unchanged sentence

Total acquisition related contingent consideration $ 435,746 $ 434,694

Upon the conversion of the Company’s then-existing bottling agreements in 2017 pursuant to the CBA, the Company received a fee from CCR (the “Territory Conversion Fee”).

The Territory Conversion Fee was recorded as a deferred liability and will be amortized as a reduction to cost of sales over a period of 40 years.

The portion of the deferred liability that is expected to be amortized in the next 12 months is classified as current.

Southeastern Container (“Southeastern”)

1 unchanged sentence

The Company accounts for Southeastern as an equity method investment.

The Company’s investment in Southeastern, which was classified as other assets in the condensed consolidated balance sheets, was $ 22.8 million as of September 27, 2020 and $ 23.2 million as of December 29, 2019.

The Company’s investment in Southeastern, which was classified as other assets in the condensed consolidated balance sheets, was $ 22.4 million as of April 2, 2021 and $ 21.9 million as of December 31, 2020.

South Atlantic Canners, Inc.

The Company is a shareholder of SAC, a manufacturing cooperative in Bishopville, South Carolina.

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 condensed consolidated balance sheets, was $ 8.0 million as of September 27, 2020 and $ 8.2 million as of December 29, 2019.

The Company’s investment in SAC, which was classified as other assets in the condensed consolidated balance sheets, was $ 8.2 million as of April 2, 2021 and $ 8.0 million as of December 31, 2020.

The Company also guarantees a portion of SAC’s debt;

see Note 20 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 classified as a reduction to cost of sales in the condensed consolidated statements of operations, were $ 6.9 million in the first nine months of 2020 and $ 7.0 million in the first nine months of 2019.

Proceeds from management fees received from SAC, which were classified as a reduction to cost of sales in the condensed consolidated statements of operations, were $ 2.3 million in the first quarter of 2021 and $ 2.4 million in the first quarter of 2020.

Coca‑Cola Bottlers’ Sales and Services Company, LLC (“CCBSS”)

Along with 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.

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 $ 13.8 million on September 27, 2020 and $ 10.0 million on December 29, 2019, which were classified as accounts receivable, other in the condensed consolidated balance sheets.

The Company had rebates due from CCBSS of $ 7.6 million on April 2, 2021 and $ 6.3 million on December 31, 2020, which were classified as accounts receivable, other in the condensed consolidated balance sheets.

In addition, the Company pays an administrative fee to CCBSS for its services.

The Company incurred administrative fees to CCBSS of $ 2.1 million in the first nine months of 2020 and $ 1.7 million in the first nine months of 2019, which were classified as selling, delivery and administrative (“SD&A”) expenses in the condensed consolidated statements of operations.

The Company incurred administrative fees to CCBSS of $ 0.6 million in both the first quarter of 2021 and the first quarter of 2020, which were classified as selling, delivery and administrative (“SD&A”) expenses in the condensed consolidated statements of operations.

CONA Services LLC (“CONA”)

1 unchanged sentence

The Company accounts for CONA as an equity method investment.

The Company’s investment in CONA, which was classified as other assets in the condensed consolidated balance sheets, was $ 11.5 million as of September 27, 2020 and $ 10.5 million as of December 29, 2019.

The Company’s investment in CONA, which was classified as other assets in the condensed consolidated balance sheets, was $ 12.0 million as of April 2, 2021 and $ 11.5 million as of December 31, 2020.

Pursuant to an amended and restated master services agreement with CONA, the Company 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 and receive CONA-related services, it is charged service fees by CONA.

The Company incurred CONA service fees of $ 17.4 million in the first nine months of 2020 and $ 17.7 million in the first nine months of 2019.

The Company incurred CONA service fees of $ 5.9 million in the first quarter of 2021 and $ 5.8 million in the first quarter of 2020.

Related Party Leases

The Company leases its headquarters office facility and an adjacent office facility in Charlotte, North Carolina from Beacon Investment Corporation (“Beacon”), of which J.

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 Company’s Board of Directors, is a minority stockholder.

During the first quarter of 2020, the Company entered into a new lease agreement, effective January 1, 2020, with Beacon to continue to lease its corporate facilities.

The new lease expires on December 31, 2029.

The principal balance outstanding under the new operating lease was $ 31.3 million on September 27, 2020 and the principal balance outstanding under the previous financing lease, which was replaced by the new operating lease, was $ 6.8 million on December 29, 2019.

The Company leases the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina from Harrison Limited Partnership One (“HLP”), which is directly and indirectly owned by trusts of which J.

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 $ 30.2 million on April 2, 2021 and $ 30.8 million on December 31, 2020.

The Company leases the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina from Harrison Limited Partnership One, which is directly and indirectly owned by trusts of which J.

Frank Harrison, III and Sue Anne H.

1 unchanged sentence

Everett is a permissible, discretionary beneficiary.

During the third quarter of 2020, the Company entered into an amendment to this lease, effective June 30, 2020, with HLP to extend the term of the original lease agreement by 15 years from December 31, 2020 through December 31, 2035.

The principal balance outstanding under the amended lease was $ 62.6 million on September 27, 2020 and the principal balance outstanding under the lease, prior to being amended, was $ 4.3 million on December 29, 2019.

A summary of rental payments related to these leases is as follows:

Third Quarter First Nine Months

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, 2035.

The principal balance outstanding under this lease was $ 61.2 million on April 2, 2021 and $ 61.9 million on December 31, 2020.

A summary of rental payments for these leases related to the first quarter of 2021 and the first quarter of 2020 is as follows:

First Quarter

(in thousands) 2021 2020

4 unchanged sentences

Frank Harrison, III based on the Company’s performance.

Awards granted 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 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 condensed consolidated statements of operations, was $ 7.2 million in the first nine months of 2020 and $ 10.3 million in the first nine months of 2019.

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 Class B Common Stock, based on the average of the closing prices of shares of 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 on the condensed consolidated statements of operations, was $ 1.9 million in the first quarter of 2021 and $ 1.8 million in the first quarter of 2020.

Revenue Recognition

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, 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” accounts, 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 typically collects payment from customers within 30 days from the date of sale.

The Company’s sales are divided into two main categories:

10 unchanged sentences

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”).

Point in time sales accounted for approximately 97 % of the Company’s net sales in the first nine months of 2020 and approximately 96 % of the Company’s net sales in the first nine months of 2019.

Point in time sales accounted for approximately 96 % of the Company’s net sales in the first quarter of 2021 and approximately 97 % of the Company’s net sales in the first quarter of 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 (“over time”).

5 unchanged sentences

The following table represents a disaggregation of revenue from contracts with customers:

Third Quarter First Nine Months

First Quarter

(in thousands) 2021 2020

7 unchanged sentences

Total net sales $ 1,269,857 $ 1,173,021

The Company participates in various sales programs with The Coca‑Cola Company, other beverage companies and customers to increase the sale of its products.

Programs negotiated with customers include arrangements under which allowances can be earned for attaining agreed-upon sales levels.

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 condensed consolidated statements of operations over the relevant period for 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 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’s ability to meet its financial obligations.

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 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.

The Company’s allowance for doubtful accounts in the condensed consolidated balance sheets includes a reserve for customer returns and an allowance for credit losses.

2 unchanged sentences

Returned product is recognized as a reduction to net sales.

The Company’s reserve for customer returns was $ 3.6 million as of both September 27, 2020 and December 29, 2019.

The Company’s reserve for customer returns was $ 3.6 million as of both April 2, 2021 and December 31, 2020.

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.

Following is a summary of activity for the allowance for credit losses during the first nine months of 2020:

(in thousands) First Nine Months 2020

Balance at beginning of year - allowance for credit losses $ 10,232

A reconciliation of the activity for the allowance for credit losses is as follows:

First Quarter

(in thousands) 2021 2020

Beginning balance - allowance for credit losses $ 18,070 $ 10,232

Additions charged to costs and expenses 1,270 3,167

Write-offs, net of recoveries ( 2,970 )

Balance at end of period - allowance for credit losses $ 21,500

(1) Includes an allowance for credit losses for COVID-19-related collectability risk .

Deductions ( 2,242 ) ( 787 )

Ending balance - allowance for credit losses $ 17,098 $ 12,612

The Company evaluates segment reporting in accordance with the 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”).

3 unchanged sentences

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.”

The Company’s segment results are as follows:

Third Quarter First Nine Months

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.” The Company’s segment results are as follows:

First Quarter

(in thousands) 2021 2020

4 unchanged sentences

Consolidated net sales $ 1,269,857 $ 1,173,021

First Quarter

(in thousands) 2021 2020

Income from operations:

10 unchanged sentences

The following table sets forth the computation of basic net income per share and diluted net income per share under the two-class method:

Third Quarter First Nine Months

First Quarter

(in thousands, except per share data) 2021 2020

20 unchanged sentences

Numerator for basic net income per Class B Common Stock share $ 12,707 $ 3,491

Third Quarter First Nine Months

(in thousands, except per share data) 2020 2019 2020 2019

Numerator for diluted net income per Common Stock share:

3 unchanged sentences

Numerator for diluted net income per Common Stock share $ 53,363 $ 14,662

First Quarter

(in thousands, except per share data) 2021 2020

Numerator for diluted net income per Class B Common Stock share:

18 unchanged sentences

(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 had 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 had net loss, the unvested shares granted pursuant to the Long-Term Performance Equity Plan are excluded from the computation of diluted net loss per share, as the effect would have been anti-dilutive.

(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 shares granted pursuant to the Long-Term Performance Equity Plan are excluded from the computation of diluted net loss per share, as the effect would have been anti-dilutive.

See Note 2 for additional information on the Long-Term Performance Equity Plan .

4 unchanged sentences

(in thousands)

September 27, 2020 December 29, 2019

April 2, 2021 December 31, 2020

Finished products

8 unchanged sentences

Prepaid expenses and other current assets consisted of the following:

(in thousands) September 27, 2020 December 29, 2019

(in thousands) April 2, 2021 December 31, 2020

Repair parts $ 26,955 $ 26,811

2 unchanged sentences

Prepaid marketing 6,023 4,773

Prepayments for sponsorship contracts 2,462 8,696

Commodity hedges at fair market value 3,321 2,417

Other prepaid expenses and other current assets 25,839 25,067

1 unchanged sentence

Assets Held for Sale

The Company is in the process of integrating its Memphis, Tennessee manufacturing plant with its West Memphis, Arkansas operations, which is expected to greatly expand its West Memphis production capabilities and to reduce its overall production costs.

Additionally, the Company is planning to open a new, automated distribution center in Whitestown, Indiana by the spring of 2021, which will allow the Company to consolidate its Anderson, Bloomington, Lafayette, Shelbyville and Speedway, Indiana warehousing and distribution operations into this one new facility.

The increased capacity and automation in Whitestown will allow the Company to optimize its supply chain and to better serve its customers and consumers in Indiana and the surrounding areas.

As of September 27, 2020, certain locations of the Company, which are primarily those included in the Company’s supply chain optimization discussed above, met the accounting guidance criteria to be classified as assets held for sale.

All locations classified as held for sale are included in the Nonalcoholic Beverages segment.

There are not any liabilities held for sale associated with these locations and none meet the accounting guidance criteria to be classified as discontinued operations.

Subsequent to the end of the first quarter of 2021, the Company opened a new, automated distribution center in Whitestown, Indiana, which allowed the Company to consolidate certain nearby warehousing and distribution operations into this one new facility.

The Company believes the increased capacity and automation in Whitestown will allow the Company to optimize its supply chain and to better serve its customers and consumers in Indiana and the surrounding areas.

In addition, the Company is in the process of integrating its Memphis, Tennessee manufacturing plant with its West Memphis, Arkansas operations, which is expected to greatly expand its West Memphis production capabilities and to reduce its overall production costs.

As of April 2, 2021, certain properties owned by the Company, which are primarily those being consolidated in the Company’s supply chain optimization discussed above, met the accounting guidance criteria to be classified as assets held for sale.

All properties classified as held for sale are included in the Nonalcoholic Beverages segment.

There are not any liabilities held for sale associated with these properties and none meet the accounting guidance criteria to be classified as discontinued operations.

Following is a summary of the assets held for sale:

(in thousands) September 27, 2020

(in thousands) April 2, 2021 December 31, 2020

Land $ 2,547 $ 2,559

Buildings and leasehold and land improvements 3,803 3,870

Assets held for sale $ 7,036

An impairment of $ 1.6 million was recorded for these locations as a result of the net book value exceeding the agreed upon purchase price of one of the locations.

This impairment was recorded within cost of sales on the condensed consolidated statements of operations and within impairment of property, plant and equipment on the condensed consolidated statements of cash flows.

Total assets held for sale $ 6,350 $ 6,429

An impairment of $ 1.6 million was recorded in 2020 for these locations as a result of the net book value exceeding the agreed upon purchase price of one of the locations.

Property, Plant and Equipment, Net

The principal categories and estimated useful lives of property, plant and equipment, net were as follows:

(in thousands) September 27, 2020 December 29, 2019 Estimated Useful Lives

(in thousands) April 2, 2021 December 31, 2020 Estimated Useful Lives

Land $ 81,981 $ 81,981

10 unchanged sentences

Property, plant and equipment, net $ 1,021,198 $ 1,022,722

The Company leases 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 leases:

• Determining a lease:

The Company assesses contracts at inception to determine whether an arrangement is or includes a lease, which conveys the Company’s right to control the use of an identified asset for a period of time in exchange for consideration.

Operating lease right-of-use assets and associated liabilities are recognized at the commencement date and initially measured based on the present value of lease payments over the defined lease term.

• Allocating lease and non-lease components:

The Company has elected the practical expedient to not separate lease and non-lease components for certain classes of underlying assets.

The Company has equipment and vehicle lease agreements, which generally have the lease 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 generally accounted for separately where applicable.

• Calculating the discount rate:

The Company calculates the discount rate based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company calculates an incremental borrowing rate using a portfolio approach.

The incremental borrowing rate is calculated using the contractual lease term and the Company’s borrowing rate.

• Recognizing leases:

The Company does not recognize leases with a contractual term of less than 12 months on its condensed consolidated balance sheets.

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 reasonably certain to renew or purchase, those options are included within the lease term and, therefore, included in the measurement of the right-of-use asset and the associated lease liability.

• 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 consideration.

The terms and conditions of the termination options vary by contract.

• Including residual value guarantees, restrictions or covenants:

The Company’s lease agreements do not contain residual value guarantees, restrictions or covenants.

Following is a summary of the weighted average remaining lease term and the weighted average discount rate for the Company’s leases:

September 27, 2020 December 29, 2019

April 2, 2021 December 31, 2020

Weighted average remaining lease term:

4 unchanged sentences

Financing leases 3.2 % 3.2 %

As of September 27, 2020, the Company had one real estate and two vehicle operating lease commitments that had not yet commenced.

These lease commitments are expected to commence during the fourth quarter of 2020 and have lease terms of approximately three years .

The additional lease liability associated with these lease commitments is expected to be $ 2.1 million.

Following is a summary of the Company’s leases within the condensed consolidated statements of operations:

Third Quarter First Nine Months

First Quarter

(in thousands) 2021 2020

Cost of sales impact:

Operating lease costs $ 6,254 $ 6,054

1 unchanged sentence

Depreciation expense from financing leases 1,414 925

Total cost of sales impact $ 5,751 $ 4,523 $ 14,885 $ 12,492

SD&A expenses impact:

Operating lease costs $ 4,846 $ 3,717 $ 14,225 $ 9,639

Short-term and variable leases 271 838 1,612 2,676

Depreciation expense from financing leases 772 1,139 1,914 3,415

Total SD&A expenses impact $ 5,889 $ 5,694 $ 17,751 $ 15,730

Interest expense, net impact:

Interest expense on financing lease obligations 584 266

Total interest expense, net impact $ 613 $ 666 $ 1,120 $ 2,083

Total lease cost $ 12,129 $ 10,735

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 common area maintenance.

Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of September 27, 2020 :

(in thousands) Operating

Leases Financing

Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of April 2, 2021:

(in thousands) Operating Leases Financing Leases

Remainder of 2021 $ 17,926 $ 5,317

7 unchanged sentences

Present value of minimum lease principal payments 134,875 74,665

Current portion of lease liabilities - operating and financing leases 18,812 5,814 24,626

Noncurrent portion of lease liabilities - operating and financing leases $ 121,288 $ 71,183 $ 192,471

Current portion of lease liabilities 19,388 5,909

Noncurrent portion of lease liabilities $ 115,487 $ 68,756

Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of December 31, 2020:

(in thousands) Operating

Leases Financing

(in thousands) Operating Leases Financing Leases

2021 $ 24,056 $ 7,079

7 unchanged sentences

Present value of minimum lease principal payments 139,689 75,844

Current portion of lease liabilities - operating and financing leases 15,024 9,403 24,427

Noncurrent portion of lease liabilities - operating and financing leases $ 97,765 $ 17,403 $ 115,168

Current portion of lease liabilities 19,766 5,860

Noncurrent portion of lease liabilities $ 119,923 $ 69,984

Following is a summary of the Company’s leases within the condensed consolidated statements of cash flows:

First Nine Months

First Quarter

(in thousands) 2021 2020

6 unchanged sentences

Total cash flows from financing activities impact $ 1,447 $ 1,485

As of April 2, 2021, the Company had one equipment and two vehicle operating lease commitments that had not yet commenced.

These lease commitments are expected to commence during the second quarter of 2021.

The equipment lease has a lease term of approximately 10 years and the vehicle leases have lease terms of approximately three years .

The additional lease liability associated with these lease commitments is expected to be $ 4.7 million.

Distribution Agreements, Net

1 unchanged sentence

(in thousands)

September 27, 2020 December 29, 2019

April 2, 2021 December 31, 2020

Distribution agreements at cost

4 unchanged sentences

$ 847,645 $ 853,753

Customer Lists and Other Identifiable Intangible Assets, Net

Customer lists and other identifiable intangible assets, net, which are amortized on a straight-line basis and have an estimated useful life of five to 12 years, consisted of the following:

Customer Lists, Net

Customer lists, net, which are amortized on a straight-line basis and have an estimated useful life of five to 12 years, consisted of the following:

(in thousands)

September 27, 2020 December 29, 2019

Customer lists and other identifiable intangible assets at cost

$ 25,288 $ 25,288

April 2, 2021 December 31, 2020

Customer lists at cost $ 25,288 $ 25,288

Accumulated amortization 12,943 12,484

12,024 10,645

Customer lists and other identifiable intangible assets, net

$ 13,264 $ 14,643

Customer lists, net $ 12,345 $ 12,804

Other Accrued Liabilities

Other accrued liabilities consisted of the following:

(in thousands) September 27, 2020 December 29, 2019

(in thousands) April 2, 2021 December 31, 2020

Accrued insurance costs $ 51,022 $ 48,318

Current portion of acquisition related contingent consideration 41,912 41,087

Accrued marketing costs 40,054 38,539

Current portion of acquisition related contingent consideration 38,014 36,020

Employee and retiree benefit plan accruals 32,531 31,653

1 unchanged sentence

Accrued taxes (other than income taxes) 8,629 6,178

Checks and transfers yet to be presented for payment from zero balance cash accounts 3,140 20,199

Current deferred proceeds from Territory Conversion Fee 2,286 2,286

Commodity derivative instruments at fair market value 1,376 1,174

Federal income taxes — 1,651

All other accrued expenses 30,628 25,727

9 unchanged sentences

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.

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.

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 condensed consolidated statements of cash flows.

The following table summarizes pre-tax changes in the fair values of the Company’s commodity derivative instruments and the classification of such changes in the condensed consolidated statements of operations:

Third Quarter First Nine Months

First Quarter

(in thousands) 2021 2020

5 unchanged sentences

Accordingly, the net amounts of derivative assets are recognized in either prepaid expenses and other current assets or other assets in the condensed consolidated balance sheets and the net amounts of derivative liabilities are recognized in either other accrued liabilities or other liabilities in the condensed consolidated balance sheets.

following table summarizes the fair values of the Company’s commodity derivative instruments and the classification of such instruments in the condensed consolidated balance sheets:

(in thousands) September 27, 2020 December 29, 2019

The following table summarizes the fair values of the Company’s commodity derivative instruments and the classification of such instruments in the condensed consolidated balance sheets:

(in thousands) April 2, 2021 December 31, 2020

Prepaid expenses and other current assets $ 3,321 $ 2,417

Other assets — 56

Total assets $ 3,321 $ 2,473

Other accrued liabilities $ 1,376 $ 1,174

Total liabilities $ 1,376 $ 1,174

The following table summarizes the Company’s gross commodity derivative instrument assets and gross commodity derivative instrument liabilities in the condensed consolidated balance sheets:

(in thousands) September 27, 2020 December 29, 2019

(in thousands) April 2, 2021 December 31, 2020

Gross commodity derivative instrument assets $ 4,383 $ 2,473

1 unchanged sentence

The following table summarizes the Company’s outstanding commodity derivative instruments:

(in thousands) September 27, 2020 December 29, 2019

(in thousands) April 2, 2021 December 31, 2020

Notional amount of outstanding commodity derivative instruments $ 30,888 $ 23,030

5 unchanged sentences

Unobservable inputs that are not corroborated by market data.

The below methods and assumptions were used by the Company in estimating the fair values of its financial instruments.

The following 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

Methods 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 nonqualified 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 values of the securities held within the mutual funds.

2 unchanged sentences

The Company considers nonperformance risk in determining the fair values of commodity derivative instruments.

Nonpublic variable rate debt Level 2 The carrying amounts of the Company’s nonpublic variable rate debt approximate the fair values due to variable interest rates with short reset periods.

Nonpublic fixed rate debt Level 2 The fair values of the Company’s nonpublic 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.

Long-term debt Level 2 The carrying amounts of the Company’s variable rate debt approximate the fair values due to variable interest rates with short reset periods.

The fair values of the Company’s fixed rate debt are based on estimated current market prices.

Acquisition related contingent consideration Level 3 The fair value of the Company’s acquisition related contingent consideration is based on internal forecasts and the weighted average cost of capital (“WACC”) derived from market data.

The following tables summarize the carrying amounts and fair values by level of the Company’s deferred compensation plan, commodity derivative instruments, debt and acquisition related contingent consideration:

September 27, 2020

The following tables summarize the carrying amounts and fair values by level of the Company’s deferred compensation plan assets and liabilities, commodity derivative instruments, long-term debt and acquisition related contingent consideration:

April 2, 2021

(in thousands) Carrying

Fair Value Fair Value

Level 1 Fair Value

Level 2 Fair Value

Deferred compensation plan assets $ 52,595 $ 52,595 $ 52,595 $ — $ —

1 unchanged sentence

Deferred compensation plan liabilities 52,595 52,595 52,595 — —

Commodity derivative instruments 1,376 1,376 — 1,376 —

Nonpublic variable rate debt 239,882 240,000 — 240,000 —

Nonpublic fixed rate debt 374,747 402,500 — 402,500 —

Public debt securities 348,238 390,200 — 390,200 —

Long-term debt 909,304 967,350 — 967,350 —

Acquisition related contingent consideration 435,746 435,746 — — 435,746

7 unchanged sentences

Deferred compensation plan liabilities 51,742 51,742 51,742 — —

Commodity derivative instruments 1,174 1,174 — 1,174 —

Nonpublic variable rate debt 307,250 307,500 — 307,500 —

Nonpublic fixed rate debt 374,723 383,900 — 383,900 —

Public debt securities 347,947 367,300 — 367,300 —

Long-term debt 940,465 1,015,700 — 1,015,700 —

Acquisition related contingent consideration 434,694 434,694 — — 434,694

The acquisition related contingent consideration was 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 to fair value by discounting future expected sub-bottling payments required under the CBA using the Company’s estimated WACC.

Each reporting period, the

Company adjusts its acquisition related contingent consideration liability related to the distribution territories to fair value by discounting future expected sub-bottling payments required under the CBA using the Company’s estimated WACC.

The future expected sub-bottling payments extend through the life of applicable distribution assets acquired from CCR, 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 amounts that will be paid in the future under the CBA, and current 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 income or expense recorded each reporting period.

The acquisition related contingent consideration liability is the Company’s only Level 3 asset or liability.

A summary of the Level 3 activity is as follows:

Third Quarter First Nine Months

First Quarter

(in thousands) 2021 2020

4 unchanged sentences

Ending balance - Level 3 liability $ 435,746 $ 437,094

The increase in the fair value of the acquisition related contingent consideration liability during the first nine months of 2020 was primarily driven by changes in future cash flow projections of the distribution territories subject to sub-bottling fees, partially offset by an increase in the discount rate used to calculate the fair value.

The increase in the fair value of the acquisition related contingent consideration liability during the first nine months of 2019 was primarily driven by a decrease in the discount rate used to calculate the fair value and changes in future cash flow projections of the distribution territories subject to sub-bottling fees.

As of April 2, 2021 and March 29, 2020, discount rates of 7.9 % and 7.4 %, respectively, were utilized in the valuation of the Company’s acquisition related contingent consideration liability.

The increase in the fair value of the acquisition related contingent consideration liability in the first quarter of 2021 and the first quarter of 2020 was primarily driven by higher projections of future cash flows in the distribution territories subject to sub-bottling fees, partially offset by an increase in the discount rate used to calculate fair value.

These fair value adjustments were recorded in other expense, net in the condensed consolidated statements of operations.

The anticipated amount the Company could pay annually under acquisition related contingent consideration arrangements is expected to be in the range of $ 28 million to $ 53 million.

The Company’s effective income tax rate, calculated by dividing income tax expense by income before income taxes, was 25.6 % for the first nine months of 2020 and 28.7 % for the first nine months of 2019.

The decrease in the effective income tax rate was primarily driven by improved financial results.

The Company’s effective income tax rate, calculated by dividing income tax expense by income before income taxes minus net income attributable to noncontrolling interest, was 26.8 % for the first nine months of 2020 and 33.4 % for the first nine months of 2019.

The Company had uncertain tax positions, including accrued interest, of $ 3.4 million on September 27, 2020 and $ 2.5 million on December 29, 2019, all of which would affect the Company’s effective income tax rate if recognized.

The anticipated amount the Company could pay annually under the acquisition related contingent consideration arrangements for the distribution territories subject to sub-bottling fees is expected to be in the range of $ 30 million to $ 54 million.

The Company’s effective income tax rate was 27.3 % for the first quarter of 2021 and 25.6 % for the first quarter of 2020.

The increase in the effective income tax rate was primarily driven by the favorable tax benefit attributable to an income tax credit recorded during the first quarter of 2020, which did not reoccur in the first quarter of 2021.

The Company had uncertain tax positions, including accrued interest, of $ 2.7 million on April 2, 2021 and $ 2.6 million on December 31, 2020, 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 significant impact on the condensed consolidated financial statements.

6 unchanged sentences

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 amounts currently deductible for income tax purposes.

Contributions to the plans are based on actuarially determined amounts and are limited to the amounts currently deductible for income tax purposes.

The components of net periodic pension cost were as follows:

Third Quarter First Nine Months

First Quarter

(in thousands) 2021 2020

5 unchanged sentences

Net periodic pension cost $ 2,286 $ 2,230

The Company contributed $ 16.3 million to the two Company-sponsored pension plans during the first nine months of 2020 and does no t anticipate making additional contributions during the fourth quarter of 2020.

The Company did no t make any contributions to the two Company-sponsored pension plans during the first quarter of 2021.

Contributions to the two Company-sponsored pension plans in 2021 are expected to be in the range of $ 8 million to $ 12 million.

Postretirement Benefits

1 unchanged sentence

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-fund these benefits and has the right to modify or terminate certain of these benefits in the future.

The Company does not prefund these benefits and has the right to modify or terminate certain of these benefits in the future.

The components of net periodic postretirement benefit cost were as follows:

Third Quarter First Nine Months

First Quarter

(in thousands) 2021 2020

2 unchanged sentences

Recognized net actuarial loss 186 88

Amortization of prior service cost — ( 324 ) — ( 970 )

Net periodic postretirement benefit cost $ 1,036 $ 967

1 unchanged sentence

Other liabilities consisted of the following:

(in thousands) September 27, 2020 December 29, 2019

(in thousands) April 2, 2021 December 31, 2020

Noncurrent portion of acquisition related contingent consideration $ 397,732 $ 398,674

Accruals for executive benefit plans 133,539 144,101

Noncurrent deferred proceeds from Territory Conversion Fee 81,162 82,877

Noncurrent deferred proceeds from Legacy Facilities Credit 28,970 29,569

Noncurrent deferred proceeds from related parties 108,590 109,361

Noncurrent portion of deferred payroll taxes under CARES Act 18,706 18,706

1 unchanged sentence

Total other liabilities $ 666,885 $ 679,280

$ 679,361 $ 668,566

Long-Term Debt

3 unchanged sentences

Rate Interest

Paid Public or

Nonpublic September 27,

Nonpublic April 2,

2021 December 31,

4 unchanged sentences

6/8/2023 Variable Varies Nonpublic — —

Senior notes 11/25/2025 3.80 % Semi-annually Public 350,000 350,000

Senior bonds (3)

11/25/2025 3.80 % Semi-annually Public 350,000 350,000

Senior notes 10/10/2026 3.93 % Quarterly Nonpublic 100,000 100,000

Senior notes 3/21/2030 3.96 % Quarterly Nonpublic 150,000 150,000

Unamortized discount on senior notes (3)

Unamortized discount on senior bonds (3)

11/25/2025 ( 44 ) ( 43 )

Debt issuance costs ( 1,902 ) ( 1,992 )

Long-term debt $ 962,867 $ 1,029,920

(1) The Company intends to refinance principal payments due in the next 12 months under the term loan facility, and has the capacity to do so under its revolving credit facility, which is classified as long-term debt.

As such, any amounts due in the next 12 months were classified as noncurrent.

(2) The Company’s revolving credit facility has an aggregate maximum borrowing capacity of $ 500 million, which may be increased at the Company’s option to $ 750 million, subject to obtaining commitments from the lenders and satisfying other conditions specified in the credit agreement.

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.

Total long-term debt $ 909,304 $ 940,465

(1) The Company intends to refinance principal payments due in the next 12 months under the term loan facility, and has the capacity to do so using its revolving credit facility, which is classified as long-term debt, and the Company is not restricted by any subjective acceleration clause within the revolving credit agreement.

As such, any amounts due in the next 12 months were classified as long term.

(2) The Company’s revolving credit facility has an aggregate maximum borrowing capacity of $ 500 million.

(3) The senior notes due in 2025 were issued at 99.975 % of par.

4 unchanged sentences

Changes in the fair value of this interest rate swap were classified as accumulated other comprehensive loss on the condensed consolidated balance sheets and included in the condensed consolidated statements of comprehensive income.

The indenture under which the Company’s public debt was 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 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 September 27, 2020.

The Company was in compliance with these covenants as of April 2, 2021.

These covenants do not currently, and the Company does not anticipate they will, restrict its liquidity or capital resources.

5 unchanged sentences

The Company is also obligated to purchase 17.5 million cases of finished product from SAC on an annual basis through June 2024.

The Company purchased 21.9 million cases and 22.2 million cases of finished product from SAC in the first nine months of 2020 and the first nine months of 2019, respectively.

The Company purchased 7.2 million cases and 7.7 million cases of finished product from SAC in the first quarter of 2021 and the first quarter of 2020, respectively.

The following table summarizes the Company’s purchases from these manufacturing cooperatives:

Third Quarter First Nine Months

First Quarter

(in thousands) 2021 2020

3 unchanged sentences

The Company guarantees a portion of SAC’s debt, which expires at various dates through 2024.

The amount guaranteed was $ 14.7 million on both September 27, 2020 and December 29, 2019.

The amount guaranteed was $ 14.7 million on both April 2, 2021 and December 31, 2020.

In the event 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 the guarantee.

3 unchanged sentences

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 September 27, 2020, and there was no impairment identified in 2019.

No impairment of the Company’s investment in SAC was identified as of April 2, 2021, and there was no impairment identified in 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 September 27, 2020 and $ 35.6 million on December 29, 2019.

These letters of credit totaled $ 37.6 million on both April 2, 2021 and December 31, 2020.

The Company participates in long-term marketing contractual arrangements with certain prestige properties, athletic venues and other locations.

As of September 27, 2020, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 168.1 million.

As of April 2, 2021, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 155.7 million.

The Company is involved in various claims and legal proceedings which have arisen in the ordinary course of its business.

7 unchanged sentences

Accumulated other comprehensive income (loss) (“AOCI(L)”) is comprised of adjustments to the Company’s pension and postretirement medical benefit plans, the interest rate swap on the Company’s term loan facility 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 the third quarter of 2020 and the third quarter of 2019:

(in thousands) June 28, 2020 Pre-tax Activity Tax Effect September 27, 2020

Net pension activity:

Actuarial loss $ ( 91,381 ) $ 1,189 $ ( 293 ) $ ( 90,485 )

Prior service costs — 5 ( 1 ) 4

Net postretirement benefits activity:

Actuarial loss ( 1,059 ) 88 ( 22 ) ( 993 )

Prior service costs ( 624 ) — — ( 624 )

Interest rate swap ( 1,283 ) 402 ( 99 ) ( 980 )

Foreign currency translation adjustment ( 14 ) 15 ( 4 ) ( 3 )

Reclassification of stranded tax effects ( 19,720 ) — — ( 19,720 )

Total AOCI(L) $ ( 114,081 ) $ 1,699 $ ( 419 ) $ ( 112,801 )

(in thousands) June 30, 2019 Pre-tax Activity Tax Effect September 29, 2019

Net pension activity:

Actuarial loss $ ( 71,332 ) $ 901 $ ( 222 ) $ ( 70,653 )

Prior service costs ( 15 ) 5 ( 1 ) ( 11 )

Net postretirement benefits activity:

Actuarial loss ( 4,607 ) 196 ( 48 ) ( 4,459 )

Prior service costs ( 136 ) ( 324 ) 80 ( 380 )

Interest rate swap — ( 496 ) 122 ( 374 )

Foreign currency translation adjustment ( 4 ) ( 23 ) 6 ( 21 )

Reclassification of stranded tax effects ( 19,720 ) — — ( 19,720 )

Total AOCI(L) $ ( 95,814 ) $ 259 $ ( 63 ) $ ( 95,618 )

Following is a summary of AOCI(L) for the first nine months of 2020 and the first nine months of 2019:

(in thousands) December 29, 2019 Pre-tax Activity Tax Effect September 27, 2020

Following is a summary of AOCI(L) for the first quarter of 2021 and the first quarter of 2020:

(in thousands) December 31, 2020 Pre-tax Activity Tax Effect April 2, 2021

Net pension activity:

Actuarial loss $ ( 93,847 ) $ 1,219 $ ( 303 ) $ ( 92,931 )

Prior service costs ( 7 ) 14 ( 3 ) 4

Prior service credits 8 1 — 9

Net postretirement benefits activity:

5 unchanged sentences

Total AOCI(L) $ ( 119,053 ) $ 1,772 $ ( 440 ) $ ( 117,721 )

(in thousands) December 30, 2018 Pre-tax Activity Tax Effect September 29, 2019

(in thousands) December 29, 2019 Pre-tax Activity Tax Effect March 29, 2020

Net pension activity:

9 unchanged sentences

Following is a summary of the impact of AOCI(L) on the condensed consolidated statements of operations:

Third Quarter 2020

(in thousands) Net Pension Activity Net Postretirement Benefits Activity Interest Rate Swap Foreign Currency Translation Adjustment Total

Cost of sales $ 363 $ 55 $ — $ — $ 418

Selling, delivery and administrative expenses 831 33 402 15 1,281

Subtotal pre-tax 1,194 88 402 15 1,699

Income tax expense 294 22 99 4 419

Total after tax effect $ 900 $ 66 $ 303 $ 11 $ 1,280

Third Quarter 2019

(in thousands) Net Pension Activity Net Postretirement Benefits Activity Interest Rate Swap Foreign Currency Translation Adjustment Total

Cost of sales $ 265 $ ( 67 ) $ — $ — $ 198

Selling, delivery and administrative expenses 641 ( 61 ) ( 496 ) ( 23 ) 61

Subtotal pre-tax 906 ( 128 ) ( 496 ) ( 23 ) 259

Income tax expense 223 ( 32 ) ( 122 ) ( 6 ) 63

Total after tax effect $ 683 $ ( 96 ) $ ( 374 ) $ ( 17 ) $ 196

First Nine Months 2020

First Quarter 2021

(in thousands) Net Pension Activity Net Postretirement Benefits Activity Interest Rate Swap Foreign Currency Translation Adjustment Total

2 unchanged sentences

Subtotal pre-tax 1,220 186 415 ( 49 ) 1,772

Income tax expense 882 65 ( 232 ) 5 720

Income tax expense (benefit) 303 46 103 ( 12 ) 440

Total after tax effect $ 917 $ 140 $ 312 $ ( 37 ) $ 1,332

First Nine Months 2019

First Quarter 2020

(in thousands) Net Pension Activity Net Postretirement Benefits Activity Interest Rate Swap Foreign Currency Translation Adjustment Total

2 unchanged sentences

Subtotal pre-tax 1,194 88 ( 1,347 ) ( 1 ) ( 66 )

Income tax expense 669 ( 95 ) ( 122 ) ( 5 ) 447

Income tax expense (benefit) 294 22 ( 332 ) — ( 16 )

Total after tax effect $ 900 $ 66 $ ( 1,015 ) $ ( 1 ) $ ( 50 )

1 unchanged sentence

Changes in current assets and current liabilities affecting cash flows were as follows:

First Nine Months

First Quarter

(in thousands) 2021 2020

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements