What changed in this filing

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Item 1. Financial Statements

2022-11-01 compared with 2022-08-02 · 131 added, 122 removed, 741 unchanged (25% 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) 2022 2021 2022 2021

25 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2022 2021 2022 2021

13 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data) July 1, 2022 December 31, 2021

(in thousands, except share data) September 30, 2022 December 31, 2021

Current Assets:

25 unchanged sentences

Accrued interest payable 5,892 4,096

Current portion of debt 125,000 —

Total current liabilities 876,695 834,856

28 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

First Nine Months

(in thousands) 2022 2021

4 unchanged sentences

Amortization of intangible assets and deferred proceeds, net 17,722 17,431

Deferred income taxes 11,189 2,293

Fair value adjustment of acquisition related contingent consideration 21,132 90,905

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

Deferred income taxes 10,749 10,907

Loss on sale of property, plant and equipment 2,855 4,017

13 unchanged sentences

Cash Flows from Financing Activities:

Payments on term loan facility and senior notes $ ( 125,000 ) $ ( 217,500 )

Payments of acquisition related contingent consideration ( 28,421 ) ( 28,640 )

2 unchanged sentences

Debt issuance fees ( 219 ) ( 1,456 )

Payments on term loan facility — ( 217,500 )

Borrowings under term loan facility — 70,000

Payments on revolving credit facility — ( 55,000 )

Borrowings under revolving credit facility — 55,000

Net cash used in financing activities $ ( 163,111 ) $ ( 188,193 )

Net increase (decrease) in cash during period $ 46,489 $ ( 589 )

Net increase in cash during period $ 20,930 $ 132,085

Cash at beginning of period 142,314 54,793

16 unchanged sentences

Stock Treasury Stock - Class B Common Stock Total

Balance on April 1, 2022 $ 11,431 $ 1,633 $ 135,953 $ 815,532 $ ( 99,648 ) $ ( 60,845 ) $ ( 409 ) $ 803,647

Balance on July 1, 2022 $ 11,431 $ 1,633 $ 135,953 $ 912,751 $ ( 98,834 ) $ ( 60,845 ) $ ( 409 ) $ 901,680

Net income — — — 118,761 — — — 118,761

5 unchanged sentences

— — — ( 251 ) — — — ( 251 )

Balance on July 1, 2022 $ 11,431 $ 1,633 $ 135,953 $ 912,751 $ ( 98,834 ) $ ( 60,845 ) $ ( 409 ) $ 901,680

Balance on September 30, 2022 $ 11,431 $ 1,633 $ 135,953 $ 1,029,169 $ ( 98,019 ) $ ( 60,845 ) $ ( 409 ) $ 1,018,913

Balance on December 31, 2021 $ 10,204 $ 2,860 $ 135,953 $ 724,486 $ ( 100,463 ) $ ( 60,845 ) $ ( 409 ) $ 711,786

8 unchanged sentences

1,227 ( 1,227 ) — — — — — —

Balance on July 1, 2022 $ 11,431 $ 1,633 $ 135,953 $ 912,751 $ ( 98,834 ) $ ( 60,845 ) $ ( 409 ) $ 901,680

Balance on September 30, 2022 $ 11,431 $ 1,633 $ 135,953 $ 1,029,169 $ ( 98,019 ) $ ( 60,845 ) $ ( 409 ) $ 1,018,913

(in thousands, except share data) Common

7 unchanged sentences

Stock Treasury Stock - Class B Common Stock Total

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

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

Net income — — — 68,930 — — — 68,930

5 unchanged sentences

— — — ( 558 ) — — — ( 558 )

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

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

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

6 unchanged sentences

— — — ( 1,674 ) — — — ( 1,674 )

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

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

See accompanying notes to condensed consolidated financial statements.

9 unchanged sentences

The condensed consolidated financial statements presented are:

• The financial position as of July 1, 2022 and December 31, 2021.

• The results of operations, comprehensive income and changes in stockholders’ equity for the three-month periods ended July 1, 2022 (the “second quarter” of fiscal 2022 (“2022”)) and July 2, 2021 (the “second quarter” of fiscal 2021 (“2021”)) and the six-month periods ended July 1, 2022 (the “first half” of 2022) and July 2, 2021 (the “first half” of 2021).

• The changes in cash flows for the first half of 2022 and the first half of 2021.

• The financial position as of September 30, 2022 and December 31, 2021.

• The results of operations, comprehensive income and changes in stockholders’ equity for the three-month periods ended September 30, 2022 (the “third quarter” of fiscal 2022 (“2022”)) and October 1, 2021 (the “third quarter” of fiscal 2021 (“2021”)) and the nine-month periods ended September 30, 2022 (the “first nine months” of 2022) and October 1, 2021 (the “first nine months” of 2021).

• The changes in cash flows for the first nine months of 2022 and the first nine months of 2021.

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

14 unchanged sentences

Wells, the JFH Family Limited Partnership—DH1 and the Anne Lupton Carter Trust f/b/o Deborah S.

Harrison (collectively, the “Converting Stockholders”), pursuant to which the Company and the Converting Stockholders agreed upon the process for converting an aggregate of

1,227,546 shares of the Company’s Class B Common Stock owned by the Converting Stockholders on a one share for one share basis into shares of the Company’s Common Stock, effective as of March 17, 2022 (the “Converted Shares”).

Harrison (collectively, the “Converting Stockholders”),

pursuant to which the Company and the Converting Stockholders agreed upon the process for converting an aggregate of 1,227,546 shares of the Company’s Class B Common Stock owned by the Converting Stockholders on a one share for one share basis into shares of the Company’s Common Stock, effective as of March 17, 2022 (the “Converted Shares”).

In the Stockholder Conversion Agreement, the Company agreed to cause the Converted Shares to be registered for resale pursuant to the Company’s existing automatic shelf registration statement and the Converting Stockholders agreed to certain restrictions on their resale of the Converted Shares, including a trade volume limitation that prohibits the sale of more than 175,000 of the Converted Shares in the aggregate during any three -consecutive month period.

3 unchanged sentences

In addition, other members of the Harrison family control shares of the Company’s Common Stock representing approximately 4 % of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis.

As of July 1, 2022, The Coca‑Cola Company owned shares of the Company’s Common Stock representing approximately 9 % of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis.

As of September 30, 2022, The Coca‑Cola Company owned shares of the Company’s Common Stock representing approximately 9 % of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis.

The number of shares of the Company’s Common Stock 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 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) 2022 2021 2022 2021

11 unchanged sentences

Coca‑Cola Refreshments USA, Inc.

The Company, The Coca‑Cola Company and CCR entered into comprehensive beverage agreements (collectively, the “CBA”), related to a multi-year series of transactions, which were completed in October 2017, through which the Company acquired and

exchanged distribution territories and manufacturing plants (the “System Transformation”).

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 applicable to the System Transformation (“acquisition related sub-bottling payments”).

Acquisition related sub-bottling payments to CCR were $ 18.7 million in the first half of 2022 and $ 19.9 million in the first half of 2021.

Acquisition related sub-bottling payments to CCR were $ 28.4 million in the first nine months of 2022 and $ 28.6 million in the first nine months of 2021.

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

(in thousands) July 1, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Current portion of acquisition related contingent consideration $ 33,186 $ 51,518

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 $ 21.8 million as of July 1, 2022 and $ 21.7 million as of December 31, 2021.

The Company’s investment in Southeastern, which was classified as other assets in the condensed consolidated balance sheets, was $ 21.8 million as of September 30, 2022 and $ 21.7 million as of December 31, 2021.

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 both July 1, 2022 and December 31, 2021.

The Company’s investment in SAC, which was classified as other assets in the condensed consolidated balance sheets, was $ 8.2 million as of both September 30, 2022 and December 31, 2021.

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 recorded as a reduction to cost of sales in the condensed consolidated statements of operations, were $ 4.4 million in the first half of 2022 and $ 4.5 million in the first half of 2021.

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 $ 6.7 million in the first nine months of 2022 and $ 6.6 million in the first nine months of 2021.

Coca‑Cola Bottlers’ Sales & 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 $ 16.7 million on July 1, 2022 and $ 7.9 million on December 31, 2021, which were classified as accounts receivable, other in the condensed consolidated balance sheets.

Changes in rebates receivable relate to volatility in raw material prices.

The Company had rebates due from CCBSS of $ 40.5 million on September 30, 2022 and $ 7.9 million on December 31, 2021, which were classified as accounts receivable, other in the condensed consolidated balance sheets.

Changes in rebates receivable relate to volatility in raw material prices and the timing of cash receipts of rebates.

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

The Company incurred administrative fees to CCBSS of $ 1.1 million in the first half of 2022 and $ 1.4 million in the first half of 2021, 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 $ 1.9 million in the first nine months of 2022 and $ 2.2 million in the first nine months of 2021, 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 $ 15.4 million as of July 1, 2022 and $ 13.7 million as of December 31, 2021.

The Company’s investment in CONA, which was classified as other assets in the condensed consolidated balance sheets, was $ 16.3 million as of September 30, 2022 and $ 13.7 million as of December 31, 2021.

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 $ 13.0 million in the first half of 2022 and $ 12.4 million in the first half of 2021.

The Company incurred service fees to CONA of $ 19.9 million in the first nine months of 2022 and $ 18.9 million in the first nine months of 2021.

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 $ 26.9 million on July 1, 2022 and $ 28.2 million on December 31, 2021.

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

The principal balance outstanding under this lease was $ 26.2 million on September 30, 2022 and $ 28.2 million on December 31, 2021.

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

Frank Harrison, III and Sue Anne H.

3 unchanged sentences

This lease, which was scheduled to expire on December 31, 2035, was terminated in connection with the purchase of the Snyder Production Center by Operations.

There was no principal balance outstanding under this lease on July 1, 2022 and there was a principal balance outstanding of $ 59.1 million on December 31, 2021.

A summary of rental payments for these leases related to the second quarter and the first half of 2022 and 2021 is as follows:

Second Quarter First Half

There was no principal balance outstanding under this lease on September 30, 2022 and there was a principal balance outstanding of $ 59.1 million on December 31, 2021.

A summary of rental payments for these leases related to the third quarter and the first nine months of 2022 and 2021 is as follows:

Third Quarter First Nine Months

(in thousands) 2022 2021 2022 2021

7 unchanged sentences

These awards may be settled in cash and/or shares of the Company’s Class B Common Stock, based on the average of the closing prices of shares of the Company’s Common Stock during the last 20 trading days of the performance period.

Compensation expense for the Long-Term Performance Equity Plan, which was included in SD&A expenses in the condensed consolidated statements of operations, was $ 3.6 million in both the second quarter of 2022 and the second quarter of 2021 and $ 5.6 million and $ 5.5 million in the first half of 2022 and the first half of 2021, respectively.

Compensation expense for the Long-Term Performance Equity Plan, which was included in SD&A expenses in the condensed consolidated statements of operations, was $ 2.3 million and $ 2.1 million in the third quarter of 2022 and the third quarter of 2021, respectively, and $ 7.9 million and $ 7.6 million in the first nine months of 2022 and the first nine months of 2021, respectively.

Revenue Recognition

4 unchanged sentences

Bottle/can net pricing per unit is impacted by the price charged per package, the sales volume generated for each package and the channels in which those packages are sold.

Other sales include sales to other Coca‑Cola bottlers, post-mix products, transportation revenue and equipment maintenance revenue.

Other sales include sales to other Coca‑Cola bottlers, post-mix sales, transportation revenue and equipment maintenance revenue.

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 97 % of the Company’s net sales in both the first half of 2022 and the first half of 2021.

Point in time sales accounted for approximately 97 % of the Company’s net sales in both the first nine months of 2022 and the first nine months of 2021.

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) 2022 2021 2022 2021

11 unchanged sentences

Returned product is recognized as a reduction to net sales.

The Company’s reserve for customer returns was $ 3.0 million as of both July 1, 2022 and December 31, 2021.

The Company’s reserve for customer returns was $ 3.0 million as of both September 30, 2022 and December 31, 2021.

The Company estimates an allowance for credit losses, based on historic days’ sales outstanding trends, aged customer balances, previously written-off balances and expected recoveries up to balances previously written off, in order to present the net amount expected to be collected.

Accounts receivable balances are written off when determined uncollectible and are recognized as a reduction to the allowance for credit losses.

Following is a summary of activity for the allowance for credit losses during the first half of 2022 and the first half of 2021:

Following is a summary of activity for the allowance for credit losses during the first nine months of 2022 and the first nine months of 2021:

First Nine Months

(in thousands) 2022 2021

10 unchanged sentences

The Company’s segment results are as follows:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2022 2021 2022 2021

16 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:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands, except per share data) 2022 2021 2022 2021

15 unchanged sentences

Numerator for basic net income per Common Stock share $ 106,029 $ 52,516 $ 267,034 $ 129,878

Third Quarter First Nine Months

(in thousands, except per share data) 2022 2021 2022 2021

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

2 unchanged sentences

Numerator for basic net income per Class B Common Stock share $ 12,732 $ 16,414 $ 44,679 $ 40,595

Second Quarter First Half

(in thousands, except per share data) 2022 2021 2022 2021

Numerator for diluted net income per Common Stock share:

32 unchanged sentences

Inventories consisted of the following:

(in thousands) July 1, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Finished products $ 204,046 $ 181,751

4 unchanged sentences

Prepaid expenses and other current assets consisted of the following:

(in thousands) July 1, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Repair parts $ 35,162 $ 26,643

Commodity hedges at fair market value 10,036 7,714

Prepaid software 6,579 7,038

1 unchanged sentence

Prepaid taxes 5,455 4,079

Commodity hedges at fair market value 5,005 7,714

Other prepaid expenses and other current assets 34,242 28,214

1 unchanged sentence

Assets Held for Sale

As of July 1, 2022, certain properties owned by the Company met the accounting guidance criteria to be classified as assets held for sale.

As of September 30, 2022, 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.

2 unchanged sentences

Following is a summary of the assets held for sale:

(in thousands) July 1, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Land $ 1,691 $ 2,906

3 unchanged sentences

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

(in thousands) July 1, 2022 December 31, 2021 Estimated Useful Lives

(in thousands) September 30, 2022 December 31, 2021 Estimated Useful Lives

Land $ 87,037 $ 80,261

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 1, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Weighted average remaining lease term:

7 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) 2022 2021 2022 2021

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 1, 2022:

Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of September 30, 2022:

(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) 2022 2021

6 unchanged sentences

Total cash flows from financing activities impact $ 2,441 $ 3,567

Subsequent to quarter-end, the Company entered into an operating lease commitment with a lease term of five years .

This lease commitment is expected to commence during the third quarter of 2022.

The additional lease liability associated with this lease commitment is expected to be approximately $ 9.8 million.

Subsequent to quarter-end, the Company entered into three operating lease commitments with lease terms of three years .

These lease commitments are expected to commence during the fourth quarter of 2022.

The additional lease liability associated with these lease commitments is expected to be approximately $ 3.8 million.

Distribution Agreements, Net

Distribution agreements, net, which are amortized on a straight-line basis and have an estimated useful life of 20 to 40 years, consisted of the following:

(in thousands) July 1, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Distribution agreements at cost $ 990,191 $ 960,042

1 unchanged sentence

Distribution agreements, net $ 848,257 $ 836,777

Following is a summary of activity for distribution agreements, net during the first half of 2022 and the first half of 2021:

Following is a summary of activity for distribution agreements, net during the first nine months of 2022 and the first nine months of 2021:

First Nine Months

(in thousands) 2022 2021

5 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 1, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

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

3 unchanged sentences

Other accrued liabilities consisted of the following:

(in thousands) July 1, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Accrued insurance costs $ 53,074 $ 51,645

Current portion of acquisition related contingent consideration 40,321 51,518

Accrued marketing costs 36,838 32,249

Employee and retiree benefit plan accruals 33,306 32,007

Current portion of deferred payroll taxes under CARES Act 18,739 18,739

Current portion of acquisition related contingent consideration 33,186 51,518

Accrued taxes (other than income taxes) 6,684 6,638

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

Current portion of deferred payroll taxes under CARES Act — 18,739

All other accrued expenses 41,098 30,909

Total other accrued liabilities $ 207,250 $ 226,769

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

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

The 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 repaid a portion of the deferred payroll taxes during 2021 and intends to repay the remaining portion of the deferred payroll taxes during 2022.

The Company repaid a portion of the deferred payroll taxes during 2021 and repaid the remaining portion of the deferred payroll taxes during the third quarter of 2022.

Commodity Derivative Instruments

The Company is subject to the risk of increased costs arising from adverse changes in certain commodity prices.

In the normal course of business, the Company manages these risks through a variety of strategies, including the use of commodity derivative instruments.

In the normal course of business, the Company manages this risk through a variety of strategies, including the use of commodity derivative instruments.

The Company does not use commodity derivative instruments for trading or speculative purposes.

6 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:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

The Company has master agreements with the counterparties to its commodity derivative instruments that provide for net settlement of derivative transactions.

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

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

(in thousands) July 1, 2022 December 31, 2021

Accordingly, the net amounts of derivative assets are recognized in either prepaid

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

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) September 30, 2022 December 31, 2021

Prepaid expenses and other current assets $ 5,005 $ 7,714

Other assets 777 —

Total assets $ 5,782 $ 7,714

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 1, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Gross commodity derivative instrument assets $ 6,631 $ 9,200

1 unchanged sentence

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

(in thousands) July 1, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Notional amount of outstanding commodity derivative instruments $ 66,545 $ 74,558

13 unchanged sentences

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

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

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

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

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

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

The following tables summarize the carrying amounts and the 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:

September 30, 2022

(in thousands) Carrying

6 unchanged sentences

Commodity derivative instruments 625 625 — 625 —

Debt 723,633 718,400 — 718,400 —

Long-term debt 598,778 568,500 — 568,500 —

Acquisition related contingent consideration 536,916 536,916 — — 536,916

7 unchanged sentences

Deferred compensation plan liabilities 60,461 60,461 60,461 — —

Debt 723,443 772,600 — 772,600 —

Long-term debt 723,443 772,600 — 772,600 —

Acquisition related contingent consideration 542,105 542,105 — — 542,105

6 unchanged sentences

A summary of the Level 3 activity is as follows:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2022 2021 2022 2021

2 unchanged sentences

Reclassification to current payables 1,800 ( 1,600 ) 2,100 ( 300 )

Increase (decrease) in fair value 4,021 45,983 ( 1,436 ) 56,981

Increase in fair value 22,568 33,924 21,132 90,905

Ending balance - Level 3 liability $ 536,916 $ 496,659 $ 536,916 $ 496,659

As of July 1, 2022 and July 2, 2021, discount rates of 8.9 % and 7.7 %, respectively, were utilized in the valuation of the Company’s acquisition related contingent consideration liability.

The decrease in the fair value of the acquisition related contingent consideration liability in the first half of 2022 was primarily driven by an increase in the discount rate used to calculate fair value, partially offset by higher projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments.

This fair value adjustment was recorded in other expense, net in the condensed consolidated statement of operations for the first half of 2022.

As of September 30, 2022 and October 1, 2021, discount rates of 9.3 % and 7.6 %, 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 2022 was driven by higher projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments, partially offset by an increase in the discount rate used to calculate fair value.

This fair value adjustment was recorded in other expense, net in the condensed consolidated statement of operations for the first nine months of 2022.

The Company anticipates that the amount it could pay annually under the acquisition related contingent consideration arrangements for the distribution territories subject to acquisition related sub-bottling payments will be in the range of $ 35 million to $ 75 million.

The Company’s effective income tax rate was 25.9 % for the first half of 2022 and 26.9 % for the first half of 2021.

The Company’s income tax expense was $ 67.6 million for the first half of 2022 and $ 37.3 million for the first half of 2021.

The increase in income tax expense was primarily attributable to higher income before taxes during the first half of 2022 compared to the first half of 2021.

The Company had uncertain tax positions, including accrued interest, of $ 1.7 million on both July 1, 2022 and December 31, 2021, all of which would affect the Company’s effective income tax rate if recognized.

The Company’s effective income tax rate was 25.7 % for the first nine months of 2022 and 26.8 % for the first nine months of 2021.

The Company’s income tax expense was $ 107.9 million for the first nine months of 2022 and $ 62.3 million for the first nine months of 2021.

The increase in income tax expense was primarily attributable to higher income before taxes during the first nine months of 2022 compared to the first nine months of 2021.

The Company had uncertain tax positions, including accrued interest, of $ 1.8 million on September 30, 2022 and $ 1.7 million on December 31, 2021, all of which would affect the Company’s effective income tax rate if recognized.

While it is expected the amount of uncertain tax positions may change in the next 12 months, the Company does not expect such change would have a material impact on the condensed consolidated financial statements.

8 unchanged sentences

The components of net periodic pension cost were as follows:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2022 2021 2022 2021

5 unchanged sentences

Net periodic pension cost $ 3,472 $ 2,285 $ 10,417 $ 6,857

The Company did not make any contributions to the two Company-sponsored pension plans during the first half of 2022.

Contributions to the two Company-sponsored pension plans in 2022 are expected to be in the range of $ 20 million to $ 30 million.

During the first half of 2022, the Company began the process of terminating the Primary Plan.

The Company expects to offer a lump sum benefit payout option to certain plan participants prior to completing the purchase of group annuity contracts that will transfer the pension benefit obligation to an insurance company.

The Company contributed $ 26.0 million to the two Company-sponsored pension plans during the first nine months of 2022 and does no t anticipate making additional contributions during the fourth quarter of 2022.

During the first nine months of 2022, the Company began the process of terminating the Primary Plan.

During 2023, the Company expects to offer a lump sum benefit payout option to certain plan participants prior to completing the purchase of group annuity contracts that will transfer the pension benefit obligation to an insurance company.

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) 2022 2021 2022 2021

5 unchanged sentences

Other liabilities consisted of the following:

(in thousands) July 1, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Noncurrent portion of acquisition related contingent consideration $ 503,730 $ 490,587

3 unchanged sentences

Total other liabilities $ 750,814 $ 758,610

Following is a summary of the Company’s debt:

Long-Term Debt

Following is a summary of the Company’s long-term debt:

(in thousands) Maturity

1 unchanged sentence

Rate Interest

Nonpublic July 1,

Nonpublic September 30,

2022 December 31,

8 unchanged sentences

Debt issuance costs ( 1,194 ) ( 1,523 )

Total debt 723,633 723,443

Current portion of debt 125,000 —

Total long-term debt $ 598,778 $ 723,443

2 unchanged sentences

The Company monitors counterparty credit ratings on an ongoing basis.

On September 13, 2022, the Company used cash on hand to repay the $ 125 million of senior notes with a stated maturity date of February 27, 2023.

There was no penalty for the early repayment of the senior notes.

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 1, 2022.

The Company was in compliance with these covenants as of September 30, 2022.

These covenants have not restricted, and are not expected to restrict, the Company’s liquidity or capital resources.

All outstanding debt has been issued by the Company and none has been issued by any of its subsidiaries.

There are no guarantees of the Company’s debt.

All outstanding long‑term debt has been issued by the Company and none has been issued by any of its subsidiaries.

There are no guarantees of the Company’s long‑term debt.

Commitments and Contingencies

2 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 13.4 million cases and 14.3 million cases of finished product from SAC in the first half of 2022 and the first half of 2021, respectively.

The Company purchased 20.1 million cases and 21.0 million cases of finished product from SAC in the first nine months of 2022 and the first nine months of 2021, respectively.

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

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2022 2021 2022 2021

3 unchanged sentences

The Company guarantees a portion of SAC’s debt, which expires in 2024.

The amount guaranteed was $ 9.5 million on both July 1, 2022 and December 31, 2021.

The amount guaranteed was $ 9.5 million on both September 30, 2022 and December 31, 2021.

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 1, 2022, and there was no impairment identified in 2021.

No impairment of the Company’s investment in SAC was identified as of September 30, 2022, and there was no impairment identified in 2021.

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 1, 2022 and December 31, 2021.

These letters of credit totaled $ 37.6 million on both September 30, 2022 and December 31, 2021.

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

As of July 1, 2022, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 139.2 million.

As of September 30, 2022, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 132.7 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 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 2022 and the second quarter of 2021:

(in thousands) April 1, 2022 Pre-tax Activity Tax Effect July 1, 2022

Following is a summary of AOCI(L) for the third quarter of 2022 and the third quarter of 2021:

(in thousands) July 1, 2022 Pre-tax Activity Tax Effect September 30, 2022

Net pension activity:

7 unchanged sentences

Total AOCI(L) $ ( 98,834 ) $ 1,081 $ ( 266 ) $ ( 98,019 )

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

(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 its previous 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 half of 2022 and the first half of 2021:

(in thousands) December 31, 2021 Pre-tax Activity Tax Effect July 1, 2022

Following is a summary of AOCI(L) for the first nine months of 2022 and the first nine months of 2021:

(in thousands) December 31, 2021 Pre-tax Activity Tax Effect September 30, 2022

Net pension activity:

7 unchanged sentences

Total AOCI(L) $ ( 100,463 ) $ 3,241 $ ( 797 ) $ ( 98,019 )

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

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

Net pension activity:

5 unchanged sentences

Interest rate swap (1)

( 556 ) 739 ( 183 ) —

Foreign currency translation adjustment 14 ( 21 ) 6 ( 1 )

1 unchanged sentence

Total AOCI(L) $ ( 119,053 ) $ 4,931 $ ( 1,224 ) $ ( 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 its previous 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 the impact of AOCI(L) on the condensed consolidated statements of operations:

Second Quarter 2022

Third Quarter 2022

(in thousands) Net Pension Activity Net Postretirement Benefits Activity Total

4 unchanged sentences

Total after tax effect $ 746 $ 69 $ 815

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

First Half 2022

First Nine Months 2022

(in thousands) Net Pension Activity Net Postretirement Benefits Activity Total

4 unchanged sentences

Total after tax effect $ 2,237 $ 207 $ 2,444

First Half 2021

First Nine Months 2021

(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 were as follows:

First Nine Months

(in thousands) 2022 2021

12 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements