What changed in this filing

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Item 1. Financial Statements

2021-08-10 compared with 2021-05-11 · 188 added, 119 removed, 703 unchanged (30% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

First Quarter

Second Quarter First Half

(in thousands, except per share data) 2021 2020 2021 2020

28 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

First Quarter

Second Quarter First Half

(in thousands) 2021 2020 2021 2020

Net income $ 48,180 $ 42,613 $ 101,543 $ 58,214

Other comprehensive income (loss), net of tax:

Other comprehensive income, net of tax:

Defined benefit plans reclassification including pension costs:

1 unchanged sentence

Prior service credits — 3 1 7

Postretirement benefits reclassification included in benefits costs:

Postretirement benefits reclassification including benefits costs:

Actuarial gains 139 66 279 132

1 unchanged sentence

Foreign currency translation adjustment 28 3 ( 9 ) 2

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

Other comprehensive income, net of tax 1,324 971 2,656 921

Comprehensive income 49,504 43,584 104,199 59,135

5 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

Current Assets:

55 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

First Quarter

(in thousands) 2021 2020

4 unchanged sentences

Amortization of intangible assets and deferred proceeds, net 11,619 11,518

Deferred income taxes 19,980 5,910

Fair value adjustment of acquisition related contingent consideration 56,981 15,260

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

Impairment of property, plant and equipment 3,200 1,350

Loss on sale of property, plant and equipment 2,457 1,416

Deferred income taxes 2,293 21,670

Amortization of debt costs 549 494

2 unchanged sentences

Change in other noncurrent liabilities ( 14,178 ) 9,848

Other ( 37 ) —

Total adjustments 169,842 170,789

14 unchanged sentences

Debt issuance fees ( 147 ) ( 145 )

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

Net cash used in financing activities $ ( 189,622 ) $ ( 88,363 )

Net increase (decrease) in cash during period $ ( 589 ) $ 67,936

19 unchanged sentences

Interest Total

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

Net income — — — 48,180 — — — 48,180 — 48,180

Other comprehensive income, net of tax — — — — 1,324 — — 1,324 — 1,324

Cash dividends paid:

($ 0.25 per share)

— — — ( 1,786 ) — — — ( 1,786 ) — ( 1,786 )

Class B Common Stock

($ 0.25 per share)

— — — ( 558 ) — — — ( 558 ) — ( 558 )

Balance on July 2, 2021 $ 10,204 $ 2,860 $ 135,953 $ 641,136 $ ( 116,397 ) $ ( 60,845 ) $ ( 409 ) $ 612,502 $ — $ 612,502

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

Net income — — — 101,543 — — — 101,543 — 101,543

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

Other comprehensive income, net of tax — — — — 2,656 — — 2,656 — 2,656

Cash dividends paid:

4 unchanged sentences

— — — ( 1,116 ) — — — ( 1,116 ) — ( 1,116 )

Balance on July 2, 2021 $ 10,204 $ 2,860 $ 135,953 $ 641,136 $ ( 116,397 ) $ ( 60,845 ) $ ( 409 ) $ 612,502 $ — $ 612,502

(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

Consolidated,

Interest Total

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

Net income — — — 39,569 — — — 39,569 3,044 42,613

Other comprehensive income, net of tax — — — — 971 — — 971 — 971

Cash dividends paid:

($ 0.25 per share)

— — — ( 1,785 ) — — — ( 1,785 ) — ( 1,785 )

Class B Common Stock

($ 0.25 per share)

— — — ( 557 ) — — — ( 557 ) — ( 557 )

Balance on June 28, 2020 $ 10,204 $ 2,860 $ 128,983 $ 430,706 $ ( 114,081 ) $ ( 60,845 ) $ ( 409 ) $ 397,418 $ 108,147 $ 505,565

Balance on December 29, 2019 $ 10,204 $ 2,860 $ 128,983 $ 381,161 $ ( 115,002 ) $ ( 60,845 ) $ ( 409 ) $ 346,952 $ 104,164 $ 451,116

7 unchanged sentences

— — — ( 1,115 ) — — — ( 1,115 ) — ( 1,115 )

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

Balance on June 28, 2020 $ 10,204 $ 2,860 $ 128,983 $ 430,706 $ ( 114,081 ) $ ( 60,845 ) $ ( 409 ) $ 397,418 $ 108,147 $ 505,565

See accompanying notes to condensed consolidated financial statements.

9 unchanged sentences

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 financial position as of July 2, 2021 and December 31, 2020.

• The results of operations and comprehensive income for the three-month periods ended July 2, 2021 (the “second quarter” of fiscal 2021 (“2021”)) and June 28, 2020 (the “second quarter” of fiscal 2020 (“2020”)) and the six-month periods ended July 2, 2021 (the “first half” of 2021) and June 28, 2020 (the “first half” of 2020).

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

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

22 unchanged sentences

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 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.

As of July 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.

3 unchanged sentences

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:

First Quarter

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

Second Quarter First Half

(in thousands) 2021 2020 2021 2020

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

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

Customer marketing programs 32,694 32,991

Cold drink equipment parts 5,036 6,341

Brand investment programs 4,190 3,262

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

Marketing funding support payments $ 18,351 $ 21,546

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

Payments made by the Company to The Coca-Cola Company (1)

$ 366,808 $ 313,081 $ 716,153 $ 643,382

Payments made by The Coca-Cola Company to the Company 50,325 27,100 80,002 60,628

(1) This excludes payments by the Company to Coca-Cola Refreshments USA, Inc., a wholly owned subsidiary of The Coca‑Cola Company, as discussed in the next section.

More than 80 % of the payments made by the Company to The Coca‑Cola Company were for concentrate, syrup, sweetener and other finished goods products, which were recorded in cost of sales in the condensed consolidated statements of operations and represent the primary components of the soft drink products the Company manufactures and distributes.

Payments made by the Company to The Coca‑Cola Company also included payments for marketing programs associated with large, national customers managed by The Coca‑Cola Company on behalf of the Company, which were recorded as a reduction to net sales in the condensed consolidated statements of operations.

Other payments made by the Company to The Coca‑Cola Company related to cold drink equipment parts, fees associated with the rights to distribute certain brands and other customary items.

Payments made by The Coca‑Cola Company to the Company included annual funding in connection with the Company’s agreement to support certain business initiatives developed by The Coca‑Cola Company and funding associated with the delivery of post-mix products to various customers, both of which were recorded as a reduction to cost of sales in the condensed consolidated statements of operations.

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.

Payments made by The Coca‑Cola Company to the Company also included transportation services and fountain product delivery and equipment repair services performed by the Company on The Coca‑Cola Company equipment, all of which were recorded in net sales in the condensed consolidated statements of operations.

Coca‑Cola Refreshments USA, Inc.

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 Company, The Coca‑Cola Company and CCR 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.

Sub-bottling payments to CCR were $ 19.9 million in the first half of 2021 and $ 20.5 million in the first half 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) April 2, 2021 December 31, 2020

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

Current portion of acquisition related contingent consideration $ 44,658 $ 36,020

4 unchanged sentences

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 $ 22.4 million as of April 2, 2021 and $ 21.9 million as of December 31, 2020.

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

South Atlantic Canners, Inc.

2 unchanged sentences

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 $ 8.2 million as of April 2, 2021 and $ 8.0 million as of December 31, 2020.

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

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

1 unchanged sentence

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 $ 2.3 million in the first quarter of 2021 and $ 2.4 million in the first quarter of 2020.

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 $ 4.5 million in the first half of 2021 and $ 4.7 million in the first half of 2020.

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

2 unchanged sentences

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 $ 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.

The Company had rebates due from CCBSS of $ 7.5 million on July 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 $ 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.

The Company incurred administrative fees to CCBSS of $ 1.4 million in the first half of 2021 and $ 1.6 million in the first half 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 $ 12.0 million as of April 2, 2021 and $ 11.5 million as of December 31, 2020.

The Company’s investment in CONA, which was classified as other assets in the condensed consolidated balance sheets, was $ 12.9 million as of July 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 $ 5.9 million in the first quarter of 2021 and $ 5.8 million in the first quarter of 2020.

The Company incurred CONA service fees of $ 12.4 million in the first half of 2021 and $ 11.6 million in the first half of 2020.

Related Party Leases

3 unchanged sentences

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 principal balance outstanding under this lease was $ 29.5 million on July 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.

3 unchanged sentences

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

The principal balance outstanding under this lease was $ 60.5 million on July 2, 2021 and $ 61.9 million on December 31, 2020.

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

Second Quarter First Half

(in thousands) 2021 2020 2021 2020

7 unchanged sentences

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.

Compensation expense for the Long-Term Performance Equity Plan, which was included in SD&A expenses in the condensed consolidated statements of operations, was $ 5.5 million in the first half of 2021 and $ 4.3 million in the first half of 2020.

Revenue Recognition

5 unchanged sentences

Other sales include sales to other Coca‑Cola bottlers, post-mix products, 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.

The Company’s contracts are derived from customer orders, including customer sales incentives, generated through an order processing and replenishment model.

3 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 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.

Point in time sales accounted for approximately 97 % of the Company’s net sales in both the first half of 2021 and the first half 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:

First Quarter

Second Quarter First Half

(in thousands) 2021 2020 2021 2020

11 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 April 2, 2021 and December 31, 2020.

The Company’s reserve for customer returns was $ 3.5 million as of July 2, 2021 and $ 3.6 million as of 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.

1 unchanged sentence

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

First Quarter

(in thousands) 2021 2020

9 unchanged sentences

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

Second Quarter First Half

(in thousands) 2021 2020 2021 2020

4 unchanged sentences

Consolidated net sales $ 1,433,086 $ 1,227,215 $ 2,702,943 $ 2,400,236

First Quarter

Second Quarter First Half

(in thousands) 2021 2020 2021 2020

11 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:

First Quarter

Second Quarter First Half

(in thousands, except per share data) 2021 2020 2021 2020

25 unchanged sentences

Numerator for diluted net income per Common Stock share $ 48,180 $ 39,569 $ 101,543 $ 54,231

First Quarter

Second Quarter First Half

(in thousands, except per share data) 2021 2020 2021 2020

26 unchanged sentences

Inventories consisted of the following:

(in thousands)

April 2, 2021 December 31, 2020

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

Finished products

8 unchanged sentences

Prepaid expenses and other current assets consisted of the following:

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

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

Repair parts $ 26,863 $ 26,811

Prepaid taxes 7,873 8,428

Prepaid software 5,868 6,650

1 unchanged sentence

Commodity hedges at fair market value 5,715 2,417

Prepaid taxes 525 8,428

Other prepaid expenses and other current assets 31,503 25,067

1 unchanged sentence

Assets Held for Sale

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.

During the second 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.

In addition, the Company integrated 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 July 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.

1 unchanged sentence

Following is a summary of the assets held for sale:

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

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

Land $ 3,909 $ 2,559

4 unchanged sentences

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

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

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

Land $ 80,641 $ 81,981

11 unchanged sentences

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

April 2, 2021 December 31, 2020

July 2, 2021 December 31, 2020

Weighted average remaining lease term:

5 unchanged sentences

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

First Quarter

Second Quarter First Half

(in thousands) 2021 2020 2021 2020

5 unchanged sentences

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 April 2, 2021:

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

(in thousands) Operating Leases Financing Leases

24 unchanged sentences

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

First Quarter

(in thousands) 2021 2020

6 unchanged sentences

Total cash flows from financing activities impact $ 2,368 $ 3,001

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 .

As of July 2, 2021, the Company had five operating lease commitments that had not yet commenced.

These lease commitments have lease terms of approximately three to 10 years and are expected to commence during the third quarter of 2021.

The additional lease liability associated with these lease commitments is expected to be $ 4.6 million.

1 unchanged sentence

Distribution agreements, net, which are amortized on a straight-line basis and have an estimated useful life of 10 to 40 years, consisted of the following:

(in thousands)

April 2, 2021 December 31, 2020

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

Distribution agreements at cost

6 unchanged sentences

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)

April 2, 2021 December 31, 2020

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

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

3 unchanged sentences

Other accrued liabilities consisted of the following:

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

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

Accrued insurance costs $ 50,683 $ 48,318

Accrued marketing costs 40,054 38,539

Current portion of acquisition related contingent consideration 44,658 36,020

Accrued marketing costs 34,901 38,539

Employee and retiree benefit plan accruals 30,897 31,653

3 unchanged sentences

Total other accrued liabilities $ 223,011 $ 205,141

The Company has taken advantage of certain provisions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which allow an employer to defer the deposit and payment of the employer’s portion of social security taxes that would otherwise be due on or after March 27, 2020 and before January 1, 2021.

The Company has taken advantage of certain provisions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which allow 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 law permits an employer to deposit half of these deferred payments by December 31, 2021 and the other half by December 31, 2022.

11 unchanged sentences

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:

First Quarter

Second Quarter First Half

(in thousands) 2021 2020 2021 2020

6 unchanged sentences

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

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

Prepaid expenses and other current assets $ 5,715 $ 2,417

2 unchanged sentences

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) April 2, 2021 December 31, 2020

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

Gross commodity derivative instrument assets $ 6,394 $ 2,473

1 unchanged sentence

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

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

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

Notional amount of outstanding commodity derivative instruments $ 44,464 $ 23,030

17 unchanged sentences

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

18 unchanged sentences

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.

The future expected sub-bottling payments extend through the life of applicable distribution assets acquired from CCR, which is generally 40 years.

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 the 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).

2 unchanged sentences

A summary of the Level 3 activity is as follows:

First Quarter

Second Quarter First Half

(in thousands) 2021 2020 2021 2020

4 unchanged sentences

Ending balance - Level 3 liability $ 473,055 $ 441,113 $ 473,055 $ 441,113

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.

As of July 2, 2021 and June 28, 2020, discount rates of 7.7 % 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 half of 2021 and the first half 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 the acquisition related contingent consideration arrangements for the distribution territories subject to sub-bottling fees is expected to be in the range of $ 31 million to $ 57 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.

The Company’s effective income tax rate was 26.9 % for the first half of 2021 and 26.1 % for the first half of 2020.

The Company’s income tax expense was $ 37.3 million for the first half of 2021 and $ 20.5 million for the first half of 2020.

The increase in income tax expense was primarily attributable to improved financial results during the first half of 2021 compared to the first half of 2020.

The Company had uncertain tax positions, including accrued interest, of $ 2.7 million on July 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.

8 unchanged sentences

The components of net periodic pension cost were as follows:

First Quarter

Second Quarter First Half

(in thousands) 2021 2020 2021 2020

5 unchanged sentences

Net periodic pension cost $ 2,286 $ 2,229 $ 4,572 $ 4,459

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

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

4 unchanged sentences

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

First Quarter

Second Quarter First Half

(in thousands) 2021 2020 2021 2020

5 unchanged sentences

Other liabilities consisted of the following:

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

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

Noncurrent portion of acquisition related contingent consideration $ 428,397 $ 398,674

9 unchanged sentences

Rate Interest

Nonpublic April 2,

Nonpublic July 2,

2021 December 31,

2 unchanged sentences

Senior notes 2/27/2023 3.28 % Semi-annually Nonpublic 125,000 125,000

Revolving credit facility (2)

6/8/2023 Variable Varies Nonpublic — —

2018 Revolving Credit Facility 6/8/2023 Variable Varies Nonpublic 55,000 —

Senior bonds (2)

6 unchanged sentences

Total long-term debt $ 778,236 $ 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.

(1) At the end of fiscal 2020, the Company intended to refinance outstanding principal payments due in the next 12 months under the 2016 Term Loan Facility (as defined below) using the 2018 Revolving Credit Facility (as defined below), which was classified as long-term debt, and the Company was not restricted by any subjective acceleration clause within the agreement for the 2018 Revolving Credit Facility.

As such, the 2016 Term Loan Facility balance was classified as long term as of December 31, 2020.

(2) The senior bonds due in 2025 were issued at 99.975 % of par.

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.

In 2019, the Company entered into a $ 100 million fixed rate swap maturing June 7, 2021 , to hedge a portion of the interest rate risk on the Company’s term loan facility.

This interest rate swap is designated as a cash flow hedging instrument and changes in its fair value are not expected to be material to the condensed consolidated balance sheets.

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.

On June 7, 2021, the Company used a combination of cash on hand and borrowings under its revolving credit facility (the “2018 Revolving Credit Facility”) to repay the remaining balance of the term loan facility (the “2016 Term Loan Facility”) that matured on that date.

Subsequent to the end of the second quarter of 2021, the Company refinanced the 2018 Revolving Credit Facility and entered into a new $ 70 million term loan.

See Note 23 for additional information.

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.

1 unchanged sentence

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 April 2, 2021.

The Company was in compliance with these covenants as of July 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 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 Company purchased 14.3 million cases and 15.1 million cases of finished product from SAC in the first half of 2021 and the first half of 2020, respectively.

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

First Quarter

Second Quarter First Half

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

The amount guaranteed was $ 14.7 million on both July 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 April 2, 2021, and there was no impairment identified in 2020.

No impairment of the Company’s investment in SAC was identified as of July 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 both April 2, 2021 and December 31, 2020.

These letters of credit totaled $ 37.6 million on both July 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 April 2, 2021, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 155.7 million.

As of July 2, 2021, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 149.7 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 first quarter of 2021 and the first quarter of 2020:

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

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

(in thousands) April 2, 2021 Pre-tax Activity Tax Effect July 2, 2021

Net pension activity:

5 unchanged sentences

Interest rate swap (1)

( 244 ) 324 ( 80 ) —

Foreign currency translation adjustment ( 23 ) 36 ( 8 ) 5

1 unchanged sentence

Total AOCI(L) $ ( 117,721 ) $ 1,761 $ ( 437 ) $ ( 116,397 )

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

(1) In 2019, the Company entered into a $ 100 million fixed rate swap to hedge a portion of the interest rate risk on the 2016 Term Loan Facility, both of which matured on June 7, 2021.

This interest rate swap was designated as a cash flow hedging instrument and changes in its fair value were not material to the condensed consolidated balance sheets.

(in thousands) March 29, 2020 Pre-tax Activity Tax Effect June 28, 2020

Net pension activity:

8 unchanged sentences

Total AOCI(L) $ ( 115,052 ) $ 1,288 $ ( 317 ) $ ( 114,081 )

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

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

Net pension activity:

Actuarial loss $ ( 93,847 ) $ 2,435 $ ( 606 ) $ ( 92,018 )

Prior service credits 8 1 — 9

Net postretirement benefits activity:

Actuarial loss ( 4,328 ) 371 ( 92 ) ( 4,049 )

Prior service costs ( 624 ) — — ( 624 )

Interest rate swap ( 556 ) 739 ( 183 ) —

Foreign currency translation adjustment 14 ( 13 ) 4 5

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

Total AOCI(L) $ ( 119,053 ) $ 3,533 $ ( 877 ) $ ( 116,397 )

(in thousands) December 29, 2019 Pre-tax Activity Tax Effect June 28, 2020

Net pension activity:

Actuarial loss $ ( 93,174 ) $ 2,379 $ ( 586 ) $ ( 91,381 )

Prior service costs ( 7 ) 9 ( 2 ) —

Net postretirement benefits activity:

Actuarial loss ( 1,191 ) 175 ( 43 ) ( 1,059 )

Prior service costs ( 624 ) — — ( 624 )

Interest rate swap ( 270 ) ( 1,344 ) 331 ( 1,283 )

Foreign currency translation adjustment ( 16 ) 3 ( 1 ) ( 14 )

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

Total AOCI(L) $ ( 115,002 ) $ 1,222 $ ( 301 ) $ ( 114,081 )

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

First Quarter 2021

Second 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 1,216 185 324 36 1,761

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

Income tax expense 303 46 80 8 437

Total after tax effect $ 913 $ 139 $ 244 $ 28 $ 1,324

First Quarter 2020

Second 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 87 3 4 1,288

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

Income tax expense 294 21 1 1 317

Total after tax effect $ 900 $ 66 $ 2 $ 3 $ 971

First Half 2021

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

Cost of sales $ 704 $ 207 $ — $ — $ 911

Selling, delivery and administrative expenses 1,732 164 739 ( 13 ) 2,622

Subtotal pre-tax 2,436 371 739 ( 13 ) 3,533

Income tax expense 606 92 183 ( 4 ) 877

Total after tax effect $ 1,830 $ 279 $ 556 $ ( 9 ) $ 2,656

First Half 2020

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

Cost of sales $ 694 $ 105 $ — $ — $ 799

Selling, delivery and administrative expenses 1,694 70 ( 1,344 ) 3 423

Subtotal pre-tax 2,388 175 ( 1,344 ) 3 1,222

Income tax expense 588 43 ( 331 ) 1 301

Total after tax effect $ 1,800 $ 132 $ ( 1,013 ) $ 2 $ 921

Supplemental Disclosures of Cash Flow Information

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

First Quarter

(in thousands) 2021 2020

11 unchanged sentences

Change in current assets less current liabilities $ 24,332 $ 20,935

Subsequent Events

On July 9, 2021, the Company entered into an agreement (the “2021 Revolving Credit Facility Agreement”) providing for a five-year unsecured revolving credit facility with an aggregate maximum borrowing capacity of $ 500 million (the “2021 Revolving Credit Facility”), maturing on July 9, 2026.

Subject to obtaining commitments from the lenders and satisfying other conditions specified in the 2021 Revolving Credit Facility Agreement, at the Company’s option, additional incremental revolving commitments of up to $ 250 million may be established under the 2021 Revolving Credit Facility to increase the aggregate revolving commitments under the 2021 Revolving Credit Facility to up to $ 750 million.

The 2021 Revolving Credit Facility replaced the 2018 Revolving Credit Facility, which had a maturity date of June 8, 2023.

Borrowings under the 2021 Revolving Credit Facility bear interest at a base rate or an adjusted LIBOR rate, at the Company’s option, plus an applicable rate, depending on the applicable rating for the Company’s long-term senior unsecured, non-credit-enhanced debt (“Debt Rating”).

In addition, the Company must pay a facility fee on the lenders’ aggregate commitments under the 2021 Revolving Credit Facility ranging from 0.060 % to 0.175 % per annum, depending on the Company’s Debt Rating.

On July 9, 2021, the Company entered into a three-year term loan agreement (the “2021 Term Loan Facility Agreement”) for a senior unsecured term loan facility in the aggregate principal amount of $ 70 million (the “2021 Term Loan Facility”), maturing on July 9, 2024.

Subject to obtaining commitments from the lenders and satisfying other conditions specified in the 2021 Term Loan Facility Agreement, at the Company’s option, additional incremental term loans of up to $ 50 million may be established under the 2021 Term Loan Facility to increase the aggregate principal amount of term loans under the 2021 Term Loan Facility to up to $ 120 million.

Borrowings under the 2021 Term Loan Facility bear interest at a base rate or an adjusted LIBOR rate, at the Company’s option, plus an applicable rate, depending on the Company’s Debt Rating.

The Company used approximately $ 55 million of the proceeds to repay outstanding indebtedness under the 2018 Revolving Credit Facility and used the remaining proceeds for general corporate purposes.

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