What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-10 · 143 added, 135 removed, 756 unchanged (27% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Second Quarter First Half

Third Quarter First Nine Months

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

28 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2021 2020 2021 2020

16 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(in thousands, except share data) October 1, 2021 December 31, 2020

Current Assets:

55 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

First Nine Months

(in thousands) 2021 2020

5 unchanged sentences

Fair value adjustment of acquisition related contingent consideration 90,905 35,068

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

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

Deferred payroll taxes under CARES Act ( 18,739 ) 24,648

Deferred income taxes 10,907 5,302

Loss on sale of property, plant and equipment 4,017 3,656

Impairment and abandonment of property, plant and equipment 3,200 7,908

Amortization of debt costs 790 778

2 unchanged sentences

Change in other noncurrent liabilities ( 27,905 ) ( 23,775 )

Other ( 15 ) 1,048

Total adjustments 269,402 263,133

2 unchanged sentences

Additions to property, plant and equipment $ ( 119,620 ) $ ( 110,717 )

Other distribution agreements ( 1,998 ) —

Investment in CONA Services LLC ( 1,724 ) ( 1,582 )

Proceeds from the sale of property, plant and equipment 4,215 2,397

Investment in CONA Services LLC ( 2,194 ) ( 1,770 )

Other distribution agreements ( 1,998 ) —

Net cash used in investing activities $ ( 119,597 ) $ ( 110,090 )

2 unchanged sentences

Payments on revolving credit facility ( 55,000 ) ( 280,000 )

Borrowings under term loan facility 70,000 —

Payments on term loan facility ( 217,500 ) ( 22,500 )

4 unchanged sentences

Net cash used in financing activities $ ( 188,193 ) $ ( 111,102 )

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

Net increase in cash during period $ 132,085 $ 155,209

Cash at beginning of period 54,793 9,614

1 unchanged sentence

Significant non-cash investing and financing activities:

Additions to property, plant and equipment accrued and recorded in accounts payable, trade $ 16,734 $ 11,900

Right-of-use assets obtained in exchange for operating lease obligations $ 21,759 $ 38,317

Additions to property, plant and equipment accrued and recorded in accounts payable, trade 9,612 25,477

Additions to leased property under financing leases — 61,121

See accompanying notes to condensed consolidated financial statements.

13 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

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

Net income — — — 68,930 — — — 68,930 — 68,930

6 unchanged sentences

— — — ( 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 October 1, 2021 $ 10,204 $ 2,860 $ 135,953 $ 707,723 $ ( 115,346 ) $ ( 60,845 ) $ ( 409 ) $ 680,140 $ — $ 680,140

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

7 unchanged sentences

— — — ( 1,674 ) — — — ( 1,674 ) — ( 1,674 )

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

Balance on October 1, 2021 $ 10,204 $ 2,860 $ 135,953 $ 707,723 $ ( 115,346 ) $ ( 60,845 ) $ ( 409 ) $ 680,140 $ — $ 680,140

(in thousands, except share data) Common

10 unchanged sentences

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

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

Net income — — — 51,884 — — — 51,884 3,170 55,054

6 unchanged sentences

— — — ( 559 ) — — — ( 559 ) — ( 559 )

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

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

— — — ( 1,674 ) — — — ( 1,674 ) — ( 1,674 )

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

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 quarters presented.

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.

1 unchanged sentence

The condensed consolidated financial statements presented are:

• 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 financial position as of October 1, 2021 and December 31, 2020.

• The results of operations, comprehensive income and changes in equity for the three-month periods ended October 1, 2021 (the “third quarter” of fiscal 2021 (“2021”)) and September 27, 2020 (the “third quarter” of fiscal 2020 (“2020”)) and the nine-month periods ended October 1, 2021 (the “first nine months” of 2021) and September 27, 2020 (the “first nine months” of 2020).

• The changes in cash flows for the first nine months of 2021 and the first nine months of 2020.

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

13 unchanged sentences

Recently Adopted Accounting Pronouncements

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.

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.

4 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 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.

As of October 1, 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.

4 unchanged sentences

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

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2021 2020 2021 2020

8 unchanged sentences

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.

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’s equipment, all of which were recorded in net sales in the condensed consolidated statements of operations.

Coca‑Cola Refreshments USA, Inc.

1 unchanged sentence

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 $ 19.9 million in the first half of 2021 and $ 20.5 million in the first half of 2020.

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 $ 28.6 million in the first nine months of 2021 and $ 32.0 million in the first nine months 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) July 2, 2021 December 31, 2020

(in thousands) October 1, 2021 December 31, 2020

Current portion of acquisition related contingent consideration $ 47,212 $ 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 July 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 October 1, 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 July 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 October 1, 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 $ 4.5 million in the first half of 2021 and $ 4.7 million in the first half of 2020.

Proceeds from management fees received from SAC, which were recorded as a reduction to cost of sales in the condensed consolidated statements of operations, were $ 6.6 million in the first nine months of 2021 and $ 6.9 million in the first nine months 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 $ 7.5 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.

The Company had rebates due from CCBSS of $ 4.4 million on October 1, 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 $ 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.

The Company incurred administrative fees to CCBSS of $ 2.2 million in the first nine months of 2021 and $ 2.1 million in the first nine months 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 $ 12.9 million as of July 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 $ 13.3 million as of October 1, 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 $ 12.4 million in the first half of 2021 and $ 11.6 million in the first half of 2020.

The Company incurred CONA service fees of $ 18.9 million in the first nine months of 2021 and $ 17.4 million in the first nine months 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 $ 29.5 million on July 2, 2021 and $ 30.8 million on December 31, 2020.

The principal balance outstanding under this lease was $ 28.9 million on October 1, 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 $ 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

The principal balance outstanding under this lease was $ 59.8 million on October 1, 2021 and $ 61.9 million on December 31, 2020.

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

Third Quarter First Nine Months

(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 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.

Compensation expense for the Long-Term Performance Equity Plan, which was included in SD&A expenses in the condensed consolidated statements of operations, was $ 7.6 million in the first nine months of 2021 and $ 7.2 million in the first nine months of 2020.

Revenue Recognition

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 both the first half of 2021 and the first half of 2020.

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

Second Quarter First Half

Third Quarter First Nine Months

(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 $ 3.5 million as of July 2, 2021 and $ 3.6 million as of December 31, 2020.

The Company’s reserve for customer returns was $ 3.0 million as of October 1, 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 Nine Months

(in thousands) 2021 2020

3 unchanged sentences

Ending balance - allowance for credit losses $ 13,610 $ 21,500

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”).

The Company evaluates segment reporting in accordance with FASB Accounting Standards Codification Topic 280, Segment Reporting, each reporting period, including evaluating the reporting package reviewed by the Chief Operating Decision Maker (the “CODM”).

The Company has concluded the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer, as a group, represent the CODM.

3 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:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2021 2020 2021 2020

4 unchanged sentences

Consolidated net sales $ 1,457,432 $ 1,328,484 $ 4,160,375 $ 3,728,720

Second Quarter First Half

(1) The entire net sales elimination represents net sales from the All Other segment to the Nonalcoholic Beverages segment.

Sales between these segments are recognized at either fair market value or cost depending on the nature of the transaction.

Third Quarter First Nine Months

(in thousands) 2021 2020 2021 2020

7 unchanged sentences

Consolidated depreciation and amortization $ 47,458 $ 48,093 $ 135,341 $ 134,489

(1) The entire net sales elimination represents net sales from the All Other segment to the Nonalcoholic Beverages segment.

Sales between these segments are recognized at either fair market value or cost depending on the nature of the transaction.

Net Income Per Share

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

Second Quarter First Half

Third Quarter First Nine Months

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

25 unchanged sentences

Numerator for diluted net income per Common Stock share $ 68,930 $ 51,884 $ 170,473 $ 106,115

Second Quarter First Half

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

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

2 unchanged sentences

Numerator for diluted net income per Class B Common Stock share $ 16,609 $ 12,584 $ 41,124 $ 25,725

Third Quarter First Nine Months

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

Denominator for basic net income per Common Stock and Class B Common Stock share:

21 unchanged sentences

Inventories consisted of the following:

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

(in thousands) October 1, 2021 December 31, 2020

Finished products

8 unchanged sentences

Prepaid expenses and other current assets consisted of the following:

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

(in thousands) October 1, 2021 December 31, 2020

Repair parts $ 27,537 $ 26,811

Commodity hedges at fair market value 8,807 2,417

Prepaid software 6,185 6,650

Prepaid marketing 5,723 4,773

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

Prepaid taxes 4,411 8,428

2 unchanged sentences

Assets Held for Sale

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 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.

As of October 1, 2021, certain properties owned by the Company met the accounting guidance criteria to be classified as assets held for sale.

The properties primarily relate to warehousing and distribution operations that have been consolidated into new facilities.

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) July 2, 2021 December 31, 2020

(in thousands) October 1, 2021 December 31, 2020

Land $ 2,918 $ 2,559

1 unchanged sentence

Total assets held for sale $ 6,932 $ 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) July 2, 2021 December 31, 2020 Estimated Useful Lives

(in thousands) October 1, 2021 December 31, 2020 Estimated Useful Lives

Land $ 80,261 $ 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:

July 2, 2021 December 31, 2020

October 1, 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:

Second Quarter First Half

Third Quarter First Nine Months

(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 July 2, 2021:

Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of October 1, 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 Nine Months

(in thousands) 2021 2020

6 unchanged sentences

Total cash flows from financing activities impact $ 3,567 $ 4,428

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.

As of October 1, 2021, the Company had one operating lease commitment that had not yet commenced.

This lease commitment has a lease term of approximately three years and is expected to commence during the fourth quarter of 2021.

The additional lease liability associated with this lease commitment is expected to be $ 2.0 million.

Distribution Agreements, Net

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) July 2, 2021 December 31, 2020

(in thousands) October 1, 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) July 2, 2021 December 31, 2020

(in thousands) October 1, 2021 December 31, 2020

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

3 unchanged sentences

Other accrued liabilities consisted of the following:

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

(in thousands) October 1, 2021 December 31, 2020

Accrued insurance costs $ 51,401 $ 48,318

2 unchanged sentences

Employee and retiree benefit plan accruals 33,707 31,653

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

Accrued taxes (other than income taxes) 7,662 6,178

Current deferred proceeds from related parties 3,064 3,085

Current portion of deferred payroll taxes under CARES Act — 18,706

All other accrued expenses 36,496 22,642

2 unchanged sentences

The law permits an employer to deposit half of these deferred payments by December 31, 2021 and the other half by December 31, 2022.

The Company intends to repay a portion of the deferred payroll taxes in the next 12 months and has classified this portion as current.

During the third quarter of 2021, the Company repaid the portion of the deferred payroll taxes classified as current as of December 31, 2020.

The Company intends to

repay the remaining portion of the deferred payroll taxes during the fourth quarter of 2022, and, thus, classified the balance as noncurrent as of October 1, 2021.

Derivative Financial Instruments

5 unchanged sentences

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.

Commodity derivative instruments held by the Company are marked to market on a monthly basis and are recognized in earnings consistent with the expense classification of the underlying hedged item.

The Company generally pays a fee for these commodity derivative instruments, which is amortized over the corresponding period of each commodity derivative instrument.

1 unchanged sentence

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:

Second Quarter First Half

Third Quarter First Nine Months

(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) July 2, 2021 December 31, 2020

(in thousands) October 1, 2021 December 31, 2020

Prepaid expenses and other current assets $ 8,807 $ 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) July 2, 2021 December 31, 2020

(in thousands) October 1, 2021 December 31, 2020

Gross commodity derivative instrument assets $ 10,643 $ 2,473

1 unchanged sentence

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

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

(in thousands) October 1, 2021 December 31, 2020

Notional amount of outstanding commodity derivative instruments $ 65,541 $ 23,030

5 unchanged sentences

Unobservable inputs that are not corroborated by market data.

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

The below 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.

9 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:

October 1, 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.

Each reporting period, the Company adjusts its acquisition related contingent consideration liability related to the distribution territories subject to sub-

bottling fees 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.

3 unchanged sentences

A summary of the Level 3 activity is as follows:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2021 2020 2021 2020

4 unchanged sentences

Ending balance - Level 3 liability $ 496,659 $ 448,653 $ 496,659 $ 448,653

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 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.

As of October 1, 2021 and September 27, 2020, discount rates of 7.6 % 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 nine months of 2021 was primarily driven by higher projections of future cash flows in the distribution territories subject to sub-bottling fees.

This fair value adjustment was recorded in other expense, net in the condensed consolidated statement of operations for the first nine months of 2021.

The Company anticipates that the amount it could pay annually under the acquisition related contingent consideration arrangements for the distribution territories subject to sub-bottling fees will be in the range of $ 32 million to $ 59 million.

The Company’s effective income tax rate was 26.8 % for the first nine months of 2021 and 25.6 % for the first nine months of 2020.

The Company’s income tax expense was $ 62.3 million for the first nine months of 2021 and $ 38.9 million for the first nine months of 2020.

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

The Company had uncertain tax positions, including accrued interest, of $ 2.8 million on October 1, 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.

3 unchanged sentences

There are two Company-sponsored pension plans.

The primary Company-sponsored pension plan was frozen as of June 30, 2006 and no benefits accrued to participants after this date.

The primary Company-sponsored pension plan was frozen as of June 30, 2006 and no benefits accrued to participants after that date.

The second Company-sponsored pension plan (the “Bargaining Plan”) is for certain employees under collective bargaining agreements.

2 unchanged sentences

The components of net periodic pension cost were as follows:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2021 2020 2021 2020

5 unchanged sentences

Net periodic pension cost $ 2,285 $ 2,231 $ 6,857 $ 6,690

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.

The Company contributed $ 6.8 million to the two Company-sponsored pension plans during the first nine months of 2021 and does no t anticipate making additional contributions during the fourth quarter of 2021.

Postretirement Benefits

3 unchanged sentences

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

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2021 2020 2021 2020

5 unchanged sentences

Other liabilities consisted of the following:

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

(in thousands) October 1, 2021 December 31, 2020

Noncurrent portion of acquisition related contingent consideration $ 449,447 $ 398,674

9 unchanged sentences

Rate Interest

Nonpublic July 2,

Nonpublic October 1,

2021 December 31,

3 unchanged sentences

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

2021 Term Loan Facility 7/9/2024 Variable Varies Nonpublic 70,000 —

Senior bonds (2)

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

2021 Revolving Credit Facility 7/9/2026 Variable Varies Nonpublic — —

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

4 unchanged sentences

Total long-term debt $ 793,177 $ 940,465

(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.

(1) As of December 31, 2020, the 2016 Term Loan Facility (as defined below) balance was classified as long term as the Company intended to refinance outstanding principal payments due in the next 12 months 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.

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

1 unchanged sentence

The Company monitors counterparty credit ratings on an ongoing basis.

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.

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

On July 9, 2021, the Company entered into a credit 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.

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

The Company currently believes all banks participating in the 2021 Revolving Credit Facility have the ability to and will meet any funding requests from the Company.

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

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

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

The entire amount of the 2021 Term Loan Facility was fully drawn on July 9, 2021.

The Company used approximately $ 55 million of the proceeds of the 2021 Term Loan Facility to repay outstanding indebtedness under the 2018 Revolving Credit Facility and used the remaining proceeds for general corporate purposes.

Subsequent to the end of the third quarter of 2021, the Company notified the lender of its intent to repay the $ 70 million of borrowings outstanding under the 2021 Term Loan Facility during the fourth quarter of 2021.

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 July 2, 2021.

The Company was in compliance with these covenants as of October 1, 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 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 Company purchased 21.0 million cases and 21.9 million cases of finished product from SAC in the first nine months of 2021 and the first nine months of 2020, respectively.

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

Second Quarter First Half

Third Quarter First Nine Months

(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 July 2, 2021 and December 31, 2020.

The amount guaranteed was $ 14.7 million on both October 1, 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 July 2, 2021, and there was no impairment identified in 2020.

No impairment of the Company’s investment in SAC was identified as of October 1, 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 July 2, 2021 and December 31, 2020.

These letters of credit totaled $ 37.6 million on both October 1, 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 July 2, 2021, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 149.7 million.

As of October 1, 2021, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 140.6 million.

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

6 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) (“AOCI(L)”) is comprised of adjustments to the Company’s pension and postretirement medical benefit plans, 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 second quarter of 2021 and the second quarter of 2020:

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

Accumulated other comprehensive income (loss) (“AOCI(L)”) is comprised of adjustments to the Company’s pension and postretirement medical benefit plans and the foreign currency translation for a subsidiary of the Company that performs data analysis and provides consulting services outside the United States.

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

(in thousands) July 2, 2021 Pre-tax Activity Tax Effect October 1, 2021

Net pension activity:

4 unchanged sentences

Prior service costs ( 624 ) — — ( 624 )

Interest rate swap (1)

( 244 ) 324 ( 80 ) —

Foreign currency translation adjustment 5 ( 8 ) 2 ( 1 )

1 unchanged sentence

Total AOCI(L) $ ( 116,397 ) $ 1,398 $ ( 347 ) $ ( 115,346 )

(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

(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 ( 3 ) 4 ( 1 ) —

Prior service credits — 5 ( 1 ) 4

Net postretirement benefits activity:

2 unchanged sentences

Interest rate swap (1)

( 1,283 ) 402 ( 99 ) ( 980 )

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

1 unchanged sentence

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

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

(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.

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

(in thousands) December 31, 2020 Pre-tax Activity Tax Effect October 1, 2021

Net pension activity:

8 unchanged sentences

Total AOCI(L) $ ( 119,053 ) $ 4,931 $ ( 1,224 ) $ ( 115,346 )

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

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

Net pension activity:

Actuarial loss $ ( 93,174 ) $ 3,568 $ ( 879 ) $ ( 90,485 )

Prior service costs ( 7 ) 9 ( 2 ) —

Prior service credits (costs) ( 7 ) 14 ( 3 ) 4

Net postretirement benefits activity:

6 unchanged sentences

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

Second Quarter 2021

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

Third Quarter 2021

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

Cost of sales $ 364 $ 97 $ — $ 461

3 unchanged sentences

Total after tax effect $ 917 $ 140 $ ( 6 ) $ 1,051

Second Quarter 2020

Third Quarter 2020

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

4 unchanged sentences

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

First Half 2021

First Nine Months 2021

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

4 unchanged sentences

Total after tax effect $ 2,747 $ 419 $ 556 $ ( 15 ) $ 3,707

First Half 2020

First Nine Months 2020

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

6 unchanged sentences

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

First Nine Months

(in thousands) 2021 2020

11 unchanged sentences

Change in current assets less current liabilities $ 60,546 $ 57,651

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”).

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