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Item 7. Management’s Discussion and Analysis

2023-02-22 compared with 2022-02-22 · 218 added, 233 removed, 298 unchanged (60% of the section changed)

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company should be read in conjunction with the consolidated financial statements of the Company and the accompanying notes to the consolidated financial statements.

Beginning in 2020, the Company’s fiscal year ends on December 31 of the applicable calendar year.

Previously, the Company’s fiscal year generally ended on the Sunday closest to December 31 of each year.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand our financial condition and results of operations and is provided as an addition to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to the consolidated financial statements.

The fiscal years presented are the periods ended December 31, 2022 (“2022”) and December 31, 2021 (“2021”).

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10‑K for 2021, filed with the SEC on February 22, 2022.

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

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

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

The Company manages its business on the basis of three operating segments.

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Executive Summary

Physical case volume increased 2.0% during 2021.

On a comparable selling day basis, as defined in the “Comparable and Adjusted Non-GAAP Results” section below, physical case volume increased 3.0%, which included Sparkling and Still category volume growth of 1.3% and 7.1%, respectively.

Still volume growth was driven primarily by BODYARMOR, smartwater and Monster, and also benefited from the re-openings of certain small stores and accounts where our products are consumed on-premise.

Sparkling volume growth related to continued strong demand for multi-serve can packages sold in larger retail stores.

Net sales increased 11.1% to $5.56 billion in 2021.

The increase in net sales was driven by the strong volume growth referenced above and by pricing actions taken during 2021.

Price increases were taken to offset inflation on our major cost inputs, including aluminum, PET resin and transportation costs.

Gross profit in 2021 increased $185.3 million, or 10.5%, while gross margin decreased 20 basis points to 35.1%.

The improvement in gross profit was primarily due to the continued strong demand for our products and the pricing actions taken during 2021 to offset cost increases.

The decline in gross margin was driven primarily by the increased mix of Still beverages, which generally carry lower gross margins than Sparkling packages.

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

The increase in net sales was driven primarily by price increases taken across our portfolio during the year while volume continued to outperform the price elasticities we have historically experienced with higher pricing.

Sparkling and Still net sales increased 16.6% and 8.5%, respectively, compared to 2021.

Sparkling volume grew 0.6% in 2022, driven by strong consumer demand for our multi-serve can and small bottle PET packages, while Still volume decreased 1.3% in 2022.

Brands within the Sparkling category benefited from solid demand in our on-premise sales channels, including restaurants, universities, sports venues, amusement parks and other immediate consumption outlets.

Gross profit in 2022 increased $323.8 million, or 17%, while gross margin increased 160 basis points to 36.7%.

The improvement in gross profit resulted from higher prices for our products, stable volume and prices for certain commodities moderating from historically high levels.

Compared to 2021, gross margin also benefited from the increased mix of Sparkling beverages, which generally carry higher gross margins than Still packages.

Selling, delivery and administrative (“SD&A”) expenses in 2022 increased $121.9 million, or 8%.

SD&A expenses as a percentage of net sales decreased approximately 200 basis points to 27.2% in 2021.

SD&A expenses as a percentage of net sales in 2022 decreased 80 basis points to 26.4% as compared to 2021.

The increase in SD&A expenses related primarily to an increase in labor costs.

During 2021, we provided incentives to attract, reward and retain our front-line teammates and we increased the base pay in certain competitive markets.

Additionally, as channels of business and local economies re-opened compared to the prior year, our labor costs increased.

Over the last year, we have made certain investments in our teammates to reward performance for their contributions in achieving strong operating results and to remain competitive in the current labor environment.

In addition, we experienced broad inflationary increases across a number of SD&A categories.

Income from operations in 2022 increased $201.9 million to $641.0 million.

Net income increased $17.1 million in 2021 to $189.6 million as compared to 2020.

Net income in 2021 was adversely impacted by fair value adjustments to our acquisition related contingent consideration liability, driven primarily by changes in future cash flow projections.

Fair value adjustments to this liability are routine and non-cash in nature.

Cash flows provided by operations for 2021 were $521.8 million, compared to $494.5 million in 2020.

The Company reduced outstanding indebtedness by $217.0 million during 2021.

COVID-19 Impact

As COVID-19-related quarantines and other restrictions were loosened throughout 2021, demand for products sold for immediate consumption through smaller retail stores and on-premise locations increased.

We also continued to experience strong demand for our products across our take-home channels in 2021.

We are optimistic about top‑line growth opportunities in 2022 as we execute a robust commercial plan with our brand partners.

However, given the uncertainty related to the duration of the COVID-19 pandemic and its

influence on our consumers, customers, suppliers, teammates and communities, the Company recognizes 2022 will be a challenging year in which to plan and operate.

While we currently expect another solid year of financial performance in 2022, we face increasing uncertainty related to a constrained labor pool, increased input costs, continued delays in supply movement and future COVID-19 variants and the resulting direct and indirect impacts.

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

The Company continues to implement its COVID-19 Response Program, including numerous actions to protect and promote the health and safety of its consumers, customers, suppliers, teammates and communities, while it continues to manufacture and distribute products.

Such actions include following prescribed Company and other accepted health and safety standards and protocols, including those adopted by the Centers for Disease Control and Prevention (the “CDC”) and local health authorities, and working closely with local health departments and appropriate agencies to manage and monitor teammate cases and exposures.

Risk mitigation and safety activities continue;

examples include adhering to sanitation protocols and promoting hygiene practices recommended by the CDC;

implementing work-from-home routines for teammates whose work duties permit it;

offering extended supplemental sick time for non-exempt teammates;

and modifying our health and welfare plans for COVID-19-related events.

The Company is actively monitoring the status of announced and potential regulations concerning vaccination or periodic testing for COVID-19 and the impact that such regulations, if implemented, may have on its workforce.

If a significant number of our teammates are negatively impacted by regulations requiring vaccination or periodic testing of unvaccinated teammates, it may result in teammate attrition and our business operations may be adversely affected.

At this time and based on current trends, we do not currently expect the COVID-19 pandemic to materially impact our liquidity position or access to capital in 2022.

We also have not experienced, and do not expect, any material impairments or adjustments to the fair values of our assets or the collectability of our receivables as a result of the COVID-19 pandemic.

We have assessed COVID-19-related circumstances around work routines, including remote work arrangements, and the impact on our internal controls over financial reporting.

We have not identified, and do not anticipate, any material impact to our control procedures that would materially affect our internal controls over financial reporting.

We will continue to monitor the impact of the COVID-19 pandemic on our business and make adjustments as needed.

Net income increased $240.6 million in fiscal year 2022 to $430.2 million as compared to fiscal year 2021.

Net income in 2022 and 2021 was adversely impacted by fair value adjustments to our acquisition related contingent consideration liability, driven by changes in future cash flow projections and the discount rate used to compute the fair value of the liability.

Income tax expense for 2022 was $144.9 million, compared to $65.6 million in 2021.

The increase in income tax expense was the result of higher pre-tax income.

Cash flows provided by operations in 2022 were $554.5 million, compared to $521.8 million in 2021.

Cash flows from operations were impacted by our strong operating performance and the timing of certain working capital payments and receipts during the current year.

During 2022, we invested $298.6 million in capital expenditures as we continue to optimize our supply chain and invest for future growth.

The Company reduced outstanding indebtedness by $125.0 million during the year.

Areas of Emphasis

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

Commercial Execution :

Our success is dependent on our ability to execute our commercial strategy within our customers’ stores.

Our ability to obtain shelf space within stores and remain in-stock across our portfolio of brands and packages in a profitable manner will have a significant impact on our results.

We are focused on execution at every step in our supply chain, including raw material and finished product procurement, manufacturing conversion, transportation, warehousing and distribution, to ensure in-store execution can occur.

We continue to invest in tools and technology to enable our teammates to operate more effectively and efficiently with our customers and drive long-term value in our business.

Revenue Management :

Our revenue management strategy focuses on pricing our brands and packages optimally within product categories and channels, creating effective working relationships with our customers and making disciplined fact-based decisions.

Pricing decisions are made considering a variety of factors, including brand strength, competitive environment, input costs, the roles certain brands play in our product portfolio and other market conditions.

Supply Chain Optimization :

We are continually focused on optimizing our supply chain, which includes identifying nearby warehousing and distribution operations that can be consolidated into new facilities to increase capacity, expand production capabilities, reduce overall production costs and add automation to allow the Company to better serve its customers and consumers.

The Company undertook significant capital expenditures to optimize our supply chain and to invest for future growth during 2022, and expects to continue to make significant investments during 2023.

Cash Flow Generation :

We have several initiatives in place to optimize cash flow, improve profitability and prudently manage capital expenditures.

We believe strengthening our balance sheet gives us the flexibility to make optimal capital allocation decisions for long-term value creation.

Results of Operations

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Net income 430,158 189,580 240,578

Net income attributable to noncontrolling interest — 9,604 (9,604)

Net income attributable to Coca‑Cola Consolidated, Inc.

189,580 172,493 17,087

Other comprehensive income (loss), net of tax 18,590 (4,051) 22,641

Comprehensive income attributable to Coca‑Cola Consolidated, Inc.

$ 208,170 $ 168,442 $ 39,728

Areas of Emphasis

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

Commercial Execution :

Our success is dependent on our ability to execute our commercial strategy within our customers’ stores.

Our ability to obtain shelf space within stores and remain in-stock across our portfolio of brands and packages in a profitable manner will have a significant impact on our results.

We continue to invest in tools and technology to enable our teammates to operate more effectively and efficiently with our customers and drive long-term value in our business.

Revenue Management :

Supply Chain Optimization :

Cash Flow Generation :

We have several initiatives in place to optimize cash flow, improve profitability and prudently manage capital expenditures, as we continue to prioritize debt repayment and to focus on strengthening our balance sheet.

Other comprehensive income, net of tax 15,626 18,590 (2,964)

Comprehensive income $ 445,784 $ 208,170 $ 237,614

Net sales increased $638.2 million, or 11.5%, to $6.20 billion in 2022, as compared to $5.56 billion in 2021.

The increase in net sales was primarily attributable to the following (in millions):

Fiscal Year 2021 Attributable to:

$ 412.5 Increase in net sales related to price increases and the shift in product mix.

Approximately 70% of this increase was driven by an increase in average bottle/can sales price per unit charged to retail customers, while approximately 30% was related to the shift in product mix to higher revenue still products in order to meet consumer preferences.

95.5 Increased physical case volume

28.3 The increase in fountain syrup and other related sales mainly sold in on-premise locations

17.6 Increased physical case volume to other Coca-Cola bottlers

1.5 Increased volume of external freight revenue to external customers (other than nonalcoholic beverages)

$ 555.4 Total increase in net sales

The largest driver of the increase in net sales was higher average bottle/can sales price per unit charged to retail customers, which led to approximately $610 million in additional net sales.

Throughout 2022, the Company executed price increases across our portfolio, which, combined with steady overall volume, led to significant growth in net sales of both Sparkling and Still beverages.

Net sales by product category were as follows:

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Sales to other Coca‑Cola bottlers 349,837 347,185 0.8 %

Post-mix and other 333,480 275,240 21.2 %

Post-mix sales and other 309,747 333,480 (7.1) %

Total other sales 659,584 680,665 (3.1) %

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Inputs representing a substantial portion of the Company’s cost of sales include:

(i) purchases of finished products, (ii) raw material costs, including aluminum cans, plastic bottles and sweetener, (iii) concentrate costs and (iv) manufacturing costs, including labor, overhead and warehouse costs.

(i) purchases of finished products, (ii) raw material costs, including aluminum cans, plastic bottles, carbon dioxide and sweetener, (iii) concentrate costs and (iv) manufacturing costs, including labor, overhead and warehouse costs.

In addition, cost of sales includes shipping, handling and fuel costs related to the movement of finished products from manufacturing plants to distribution centers, amortization expense of distribution rights, distribution fees of certain products and marketing credits from brand companies.

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Cost of sales increased $314.5 million, or 8.7%, to $3.92 billion in 2022, as compared to $3.61 billion in 2021.

The increase in cost of sales was primarily attributable to the following (in millions):

Fiscal Year 2021 Attributable to:

$ 253.6 Increased input costs, including aluminum, PET resin and transportation costs, partially due to the impacts of inflation, as well as the shift in product mix to meet consumer preferences

69.6 Increased physical case volume

21.0 The increase in fountain syrup and other related sales mainly sold in on-premise locations

17.9 Increased physical case volume to other Coca-Cola bottlers

8.0 Increased volume of external freight revenue to external customers (other than nonalcoholic beverages)

$ 370.1 Total increase in cost of sales

The increase in cost of sales was driven by approximately $365 million in increased input costs, including aluminum, PET resin and transportation costs, largely due to the impacts of continued inflation, as well as the shift in product mix to meet consumer preferences.

The Company relies extensively on advertising and sales promotions in the marketing of its products.

The Coca‑Cola Company and other beverage companies that supply concentrates, syrups and finished products to the Company make substantial marketing and advertising expenditures, including national advertising programs, to develop their brand identities and promote sales in the Company’s territories.

Certain of these marketing and advertising expenditures are made pursuant to annual arrangements.

Total marketing funding support from The Coca‑Cola Company and other beverage companies, which includes both direct payments to the Company and payments to customers for marketing programs, was $147.3 million in 2022, as compared to $133.1 million in 2021.

SD&A Expenses

Selling, Delivery and Administrative Expenses

SD&A expenses include the following:

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SD&A expenses increased $121.9 million, or 8.0%, to $1.64 billion in 2022, as compared to $1.52 billion in 2021.

SD&A expenses as a percentage of sales decreased to 27.2% in 2021 from 29.1% in 2020.

The increase in SD&A expenses was primarily attributable to the following (in millions):

Fiscal Year 2021 Attributable to:

$ 43.2 Increase in payroll expenses as we made adjustments to remain competitive in a challenging labor market

11.2 Increase in cash donations to various charities and donor-advised funds in light of the Company’s financial performance

$ 59.5 Total increase in SD&A expenses

SD&A expenses as a percentage of net sales decreased to 26.4% in 2022 from 27.2% in 2021.

Of the increase in SD&A expenses, approximately $75 million was driven by an increase in payroll expense due to certain investments in our teammates to reward them for their

contributions in achieving strong operating results and to remain competitive in the current labor environment.

In addition, approximately $15 million of the increase in SD&A expenses was driven by an increase in commitments to various charities and donor-advised funds in light of the Company’s financial performance.

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

Shipping and handling costs included in SD&A expenses were $756.9 million in 2022 and $674.3 million in 2021.

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Interest expense, net decreased $8.7 million, or 25.9%, to $24.8 million in 2022, as compared to $33.4 million in 2021.

The decrease was primarily a result of lower average debt balances.

The decrease was primarily a result of lower average debt balances, as well as an increase in interest income due to higher cash equivalent balances and increased yields.

Other Expense, Net

A summary of other expense, net is as follows:

(in thousands) 2021 2020

Increase in the fair value of the acquisition related contingent consideration liability $ 146,308 $ 31,210

Non-service cost component of net periodic benefit cost 4,265 4,393

Total other expense, net $ 150,573 $ 35,603

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.

The fair value is determined by discounting future expected sub-bottling payments required under the CBA, which extend through the life of the applicable distribution assets, using the Company’s estimated weighted average cost of capital (“WACC”), which is impacted by many factors, including long-term interest rates and future cash flow projections.

Other expense, net decreased $109.4 million to $41.2 million in 2022, as compared to $150.6 million in 2021.

The decrease in other expense, net was driven by $114.0 million related to the change in the fair value of acquisition related contingent consideration liability.

The decrease in other expense, net was partially offset by an increase of $4.6 million in the non-service cost component of net periodic benefit cost.

During 2023, the Company anticipates a significant non-cash charge related to the termination of the primary Company-sponsored pension plan (the “Primary Plan”), which will be recorded in other expense, net in the consolidated statement of operations.

The charge will relate primarily to a reclassification of actuarial losses from accumulated other comprehensive loss.

As of December 31, 2022, the gross actuarial losses included in accumulated other comprehensive loss associated with the Primary Plan were approximately $117 million.

See Note 16 to the consolidated financial statements for additional information related to the Company’s pension plans.

The fair value is determined by discounting future expected acquisition related sub-bottling payments required under the CBA, which extend through the life of the related distribution assets acquired in each distribution territory, using the Company’s estimated weighted average cost of capital (“WACC”), which is impacted by many factors, including long-term interest rates and future cash flow projections.

The life of these distribution assets is generally 40 years.

The Company is required to pay the current portion of the sub-bottling fee on a quarterly basis.

The increase in the fair value of the acquisition related contingent consideration liability in 2021 as compared to 2020 was primarily driven by higher projections of future cash flows in the distribution territories subject to sub-bottling fees and changes to the discount rate used to calculate fair value throughout 2021 as compared to 2020.

The Company is required to pay the current portion of the acquisition related sub-bottling payments on a quarterly basis.

The change in the fair value of the acquisition related contingent consideration liability in 2022 as compared to 2021 was primarily driven by an increase in the discount rate used to calculate fair value, as well as the change in projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments.

Income Tax Expense

The Company’s effective income tax rate, calculated by dividing income tax expense by income before taxes, was 25.2% for 2022 and 25.7% for 2021.

The Company’s effective income tax rate, calculated by dividing income tax expense by income before taxes minus net income attributable to noncontrolling interest, was 25.5% for 2020.

The Company’s income tax expense increased $79.4 million, or 121.0%, to $144.9 million in 2022, as compared to $65.6 million in 2021.

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

Noncontrolling Interest

The Company recorded net income attributable to noncontrolling interest of $9.6 million in 2020 related to the portion of Piedmont owned by The Coca‑Cola Company.

On December 9, 2020, an indirect wholly owned subsidiary of the Company purchased the remaining 22.7% general partnership interest in Piedmont.

Other Comprehensive Income (Loss), Net of Tax

The Company had other comprehensive income, net of tax of $18.6 million in 2021 and other comprehensive loss, net of tax of $4.1 million in 2020.

The improvement was primarily a result of actuarial gains on the Company’s pension and postretirement plans.

Other Comprehensive Income, Net of Tax

The Company had other comprehensive income, net of tax of $15.6 million in 2022 and $18.6 million in 2021.

The decline was primarily a result of changes in actuarial gains on the Company’s pension and postretirement benefit plans in 2022 as compared to 2021.

As noted in the discussion of other expense, net above, the Company anticipates a significant non-cash charge during 2023 related to the termination of the Primary Plan, which will also impact other comprehensive income, net of tax.

See Note 16 to the consolidated financial statements for additional information related to the Company’s pension plans.

Segment Operating Results

The Company evaluates segment reporting in accordance with the Financial Accounting Standards Board 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 Financial Accounting Standards Board 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.

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

Comparable and Adjusted Non-GAAP Results

Adjusted Results (Non-GAAP)

The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”).

However, management believes certain non-GAAP financial measures provide users of the financial statements with additional, meaningful financial information that should be considered when assessing the Company’s ongoing performance.

However, management believes that certain non-GAAP financial measures provide users of the financial statements with additional, meaningful financial information that should be considered when assessing the Company’s ongoing performance.

Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance.

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The Company’s non-GAAP financial information does not represent a comprehensive basis of accounting.

The following tables reconcile reported results (GAAP) to comparable and adjusted results (non-GAAP):

(in millions) 2021 2020 Change

Physical case volume 366.0 358.8 2.0 %

Volume related to extra days in fiscal year — 3.4

Comparable physical case volume 366.0 355.4 3.0 %

The following tables reconcile reported results (GAAP) to adjusted results (non-GAAP):

Fiscal Year 2022

(in thousands, except per share data) Net sales Gross

(in thousands, except per share data) Gross

expenses Income from

operations Income before

income taxes Net

income Basic net income

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3,333 427 2,906 2,906 2,187 0.23

Supply chain optimization and consolidation (3)

Supply chain optimization (3)

533 (73) 606 606 456 0.05

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Fiscal Year 2021

(in thousands, except per share data) Net sales Gross

(in thousands, except per share data) Gross

expenses Income from

operations Income before

income taxes Net

income Basic net income

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(3,469) 1,772 (5,241) (5,241) (3,931) (0.42)

Supply chain optimization and consolidation (3)

— 4,984 596 4,388 4,388 3,291 0.35

Results of extra days in fiscal year (4)

Supply chain optimization (3)

7,542 (947) 8,489 8,489 6,367 0.68

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Following is an explanation of non-GAAP adjustments:

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

(2) The Company enters into commodity derivative instruments from time to time to hedge some or all of its projected purchases of aluminum, PET resin, diesel fuel and unleaded gasoline in order to mitigate commodity risk.

The Company accounts for its commodity derivative instruments on a mark-to-market basis.

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

(4) Adjustment reflects three extra days in 2020, as compared to 2021.

Financial Condition

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• An increase in accounts receivable, trade of $59.8 million, driven primarily by increased net sales and the timing of cash receipts.

• An increase in inventories of $77.1 million, driven primarily by higher inventory levels to support anticipated consumer demand and increased input costs due to inflation.

• An increase in accounts payable, trade of $101.8 million due to the extension of payment terms for certain vendors and the timing of cash payments.

• An increase in accounts payable to The Coca‑Cola Company of $38.5 million primarily as a result of the timing of cash payments.

• An increase in accrued compensation of $23.3 million, primarily driven by improved financial results.

• An increase in inventories of $44.7 million, driven primarily by higher inventory levels and increased input costs due to inflation.

• An increase in accounts payable, trade of $32.4 million due to the timing of cash payments.

• A decrease in other accrued liabilities of $28.5 million primarily due to the payment of the remaining deferred payroll taxes under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) during 2022, as well as a reduction in the current portion of acquisition related contingent consideration liability.

Liquidity and Capital Resources

Capital Resources

The Company’s sources of capital include cash flows from operations, available credit facilities and the issuance of debt and equity securities.

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The Company has obtained its long-term debt from public markets, private placements and bank facilities.

Management believes the Company has sufficient sources of capital available to refinance its maturing debt, finance its business plan, meet its working capital requirements and maintain an appropriate level of capital spending for at least the next 12 months from the issuance of the consolidated financial statements.

At this time, the Company does not expect the COVID-19 pandemic to have a material impact on its liquidity or access to capital.

Management believes the Company has sufficient sources of capital available to finance its business plan, meet its working capital requirements and maintain an appropriate level of capital spending for at least the next 12 months from the issuance of the consolidated financial statements.

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

(in thousands) Maturity Date December 31, 2022 December 31, 2021

2016 Term Loan Facility (1)

6/7/2021 $ — $ 217,500

Senior notes (1)

2021 Term Loan Facility (2)

2/27/2023 $ — $ 125,000

Senior bonds and unamortized discount on senior bonds (2)

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Total long-term debt $ 598,817 $ 723,443

(1) As of December 31, 2020, the 2016 Term Loan Facility (as defined under “Cash Flows From Financing Activities”) 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 under “Cash Flows From Financing Activities”), 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 2021 Term Loan Facility (as defined under “Cash Flows From Financing Activities”) was fully repaid during the fourth quarter of 2021.

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

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

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

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The Company was in compliance with these covenants as of December 31, 2022.

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

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

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

There are no guarantees of the Company’s debt.

The Company’s Board of Directors has declared, and the Company has paid, dividends on the Common Stock and the Class B Common Stock and each class of common stock has participated equally in all dividends each quarter for more than 25 years.

The amount and frequency of future dividends will be determined by the Company’s Board of Directors in light of the earnings and financial condition of the Company at such time, and no assurance can be given that dividends will be declared or paid in the future.

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

The Company’s credit ratings are reviewed periodically by certain nationally recognized rating agencies.

Changes in the Company’s operating results or financial position could result in changes in the Company’s credit ratings.

Lower credit ratings could result in higher borrowing costs for the Company or reduced access to capital markets, which could have a material adverse impact on the

Company’s operating results or financial position.

Changes in the Company’s operating results or financial position can result in changes in the Company’s credit ratings.

During 2022, Standard & Poor’s upgraded the Company’s credit rating from BBB with a positive outlook to BBB+ with a stable outlook.

Lower credit ratings could result in higher borrowing costs for the Company or reduced access to capital markets, which could have a material adverse impact on the Company’s operating results or financial position.

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

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Moody’s Baa1 Stable

Standard & Poor’s BBB Positive

Standard & Poor’s BBB+ Stable

On December 7, 2022, the Company announced that its Board of Directors had declared an increase in the regular quarterly cash dividend from $0.25 per share to $0.50 per share on the Common Stock and the Class B Common Stock of the Company, which represented an increase of 100%, beginning with the dividend payment on February 10, 2023 to stockholders of record as of the close of business on January 27, 2023.

The Company’s Board of Directors also declared a special cash dividend of $3.00 per share on the Common Stock and the Class B Common Stock of the Company, also payable on February 10, 2023 to stockholders of record as of the close of business on January 27, 2023.

The total dividends paid on February 10, 2023 were $32.8 million.

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

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Beginning balance - Level 3 liability $ 542,105 $ 434,694

Payment of acquisition related contingent consideration (39,097) (43,400)

Payments of acquisition related contingent consideration (36,515) (39,097)

Reclassification to current payables 3,600 200

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Ending balance - Level 3 liability $ 541,491 $ 542,105

Material Contractual Obligations

The Company had a number of contractual obligations and commercial obligations as of December 31, 2021 that are material to an assessment of the Company’s short- and long-term cash requirements.

The Company has long-term debt of $725.0 million, none of which is contractually due in 2022.

The remaining interest payments on the Company’s debt obligations is an estimated $124.5 million determined in reference to the contractual terms of such debt, of which an estimated $27.3 million is due in 2022.

The Company’s acquisition related contingent consideration liability relates to sub-bottling fees in distribution territories subject to sub-bottling payments required under the CBA and totaled $542.1 million as of December 31, 2021.

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

The Company expects to pay $51.5 million of the acquisition related contingent consideration liability in 2022, which is classified as other accrued liabilities in the consolidated balance sheets.

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

The Company estimates this purchase obligation to be $298.0 million, of which an estimated $119.2 million of purchases is expected to occur in 2022.

The Company has $169.6 million in total minimum operating lease obligations including interest, of which $26.0 million are due in 2022.

The Company has $85.2 million in total minimum financing lease obligations including interest, of which $7.1 million are due in 2022.

The Company estimates obligations for its executive benefit plans to be $178.4 million, of which an estimated $32.1 million of payments is expected to occur in 2022.

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

As of December 31, 2021, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $137.0 million.

Payments for these contractual arrangements are expected to be $31.4 million in 2022.

The Company is a shareholder of Southeastern Container (“Southeastern”), a plastic bottle manufacturing cooperative from which the Company is obligated to purchase at least 80% of its requirements of plastic bottles for certain designated territories.

This obligation has no minimum purchase requirements;

however, purchases from Southeastern were $125.1 million during 2021 and are expected to remain material in future foreseeable periods.

See Note 20 to the consolidated financial statements for additional information related to Southeastern.

Cash Sources and Uses

4 unchanged sentences

$ 554,506 $ 521,755

Proceeds from the sale of property, plant and equipment 7,369 5,274

Borrowings under term loan facility — 70,000

Borrowings under revolving credit facility — 55,000

Proceeds from the sale of property, plant and equipment 5,274 3,385

Total cash sources $ 561,875 $ 652,029

Payments on term loan facilities $ 287,500 $ 45,000

Additions to property, plant and equipment $ 298,611 $ 155,693

Payments on revolving credit facility 55,000 280,000

Payments on term loan facility and senior notes 125,000 287,500

Payments of acquisition related contingent consideration 36,515 39,097

Acquisition of distribution rights 30,649 8,993

Cash dividends paid 9,374 9,374

Other distribution agreements 8,993 —

Payments on financing lease obligations 2,988 4,778

Purchase of noncontrolling interest in Piedmont — 100,000

Payments on revolving credit facility — 55,000

Other 3,404 4,073

1 unchanged sentence

Net increase in cash $ 55,334 $ 87,521

(1) Net cash provided by operating activities in 2021 included net income tax payments of $71.0 million, payment of deferred payroll taxes under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) of $18.7 million and pension plan contributions of $6.8 million.

Net cash provided by operating activities in 2020 included net income tax payments of $55.8 million, deferral of payroll taxes under the CARES Act of $37.4 million and pension plan contributions of $16.3 million.

(1) Net cash provided by operating activities in 2022 included net income tax payments of $141.0 million, payment of deferred payroll taxes under the CARES Act of $18.7 million and pension plan contributions of $26.0 million.

Net cash provided by operating activities in 2021 included net income tax payments of $71.0 million, payment of deferred payroll taxes under the CARES Act of $18.7 million and pension plan contributions of $6.8 million.

Cash Flows From Operating Activities

During 2022, cash provided by operating activities was $554.5 million, which was an increase of $32.8 million, as compared to 2021.

The cash flows from operations were primarily the result of our strong operating performance.

The cash flows from operations were primarily the result of our strong operating performance, which the Company expects to sustain during the next 12 months.

Cash flows from operations were also impacted by the timing of certain working capital payments and receipts.

As a result of the Company’s strong cash flows from operations, the Company was able to invest in property, plant and equipment and to reduce our debt obligations, as further discussed in the following sections.

Cash Flows From Investing Activities

During 2021, cash used in investing activities was $161.9 million, which was a decrease of $38.5 million, as compared to 2020.

The decrease was primarily a result of additions to property, plant and equipment, which were $155.7 million during 2021 and $202.0 million during 2020.

During 2022, cash used in investing activities was $325.0 million, which was an increase of $163.0 million, as compared to 2021.

The increase was primarily a result of additions to property, plant and equipment, which were $298.6 million during 2022 and $155.7 million during 2021.

CCBCC Operations, LLC, a wholly owned subsidiary of the Company, purchased the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina on March 17, 2022 for a purchase price of $60.0 million, which was

included in additions to property, plant and equipment.

There were $44.8 million and $35.8 million of additions to property, plant and equipment accrued in accounts payable, trade as of December 31, 2022 and December 31, 2021, respectively.

The increase in property, plant and equipment reflects the Company’s focus on optimizing our supply chain and investing for future growth.

The Company anticipates additions to property, plant and equipment in 2023 to be in the range of $250 million to $300 million.

The increase in cash used in investing activities as compared to 2021 was also driven by the acquisition of additional distribution rights.

On January 1, 2022, the Company acquired $30.1 million of additional BODYARMOR distribution rights.

Cash Flows From Financing Activities

During 2021, cash used in financing activities was $272.3 million, which was an increase of $23.4 million, as compared to 2020.

The increase was primarily a result of net repayments of debt of $217.5 million in 2021, stemming from our improved financial results.

During 2022, cash used in financing activities was $174.2 million, which was a decrease of $98.1 million, as compared to 2021.

The decrease was primarily a result of higher net repayments of debt during 2021 as compared to 2022.

The Company continues to prioritize the reduction of debt obligations and the strengthening of our balance sheet, as indicated by the early repayment of $125 million of senior notes during 2022.

The Company had cash payments for acquisition related contingent consideration of $36.5 million during 2022 and $39.1 million during 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 $35 million to $62 million.

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”).

The 2021 Revolving Credit Facility’s underlying credit agreement includes successor LIBOR rate provisions, providing that the SOFR will be used as the LIBOR replacement rate for borrowings under the facility after June 30, 2023, unless the Company and its lenders agree to an alternative reference rate based on prevailing market convention at the replacement date.

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 bore 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.

During the fourth quarter of 2021, the Company repaid the $70 million of borrowings outstanding under the 2021 Term Loan Facility.

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 $42 million to $74 million.

Material Contractual Obligations

The Company had a number of contractual obligations and commercial obligations as of December 31, 2022 that are material to an assessment of the Company’s short- and long-term cash requirements.

The Company has outstanding long-term debt of $600.0 million, none of which is contractually due in 2023.

The remaining interest payments on the Company’s debt obligations are $96.6 million determined in reference to the contractual terms of such debt, of which $23.2 million is due in 2023.

All of the Company’s long-term debt instruments have fixed interest rates, and thus are not impacted by fluctuations in interest rates, with the exception of the Company’s revolving credit facility, which did not have any outstanding borrowings as of December 31, 2022.

The Company’s acquisition related contingent consideration liability relates to acquisition related sub-bottling payments required in certain distribution territories under the CBA and totaled $541.5 million as of December 31, 2022.

The future expected acquisition related sub-bottling payments extend through the life of the related distribution assets acquired in each distribution territory, which is generally 40 years.

The Company expects to pay $40.1 million of the acquisition related contingent consideration liability in 2023, which is classified as other accrued liabilities in the consolidated balance sheets.

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

Based on information available as of December 31, 2022, the Company estimates this purchase obligation to be $214.5 million, of which an estimated $143.0 million of purchases is expected to occur in 2023.

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

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

As of December 31, 2022, the Company estimated obligations for its executive benefit plans to be $167.7 million, of which $30.0 million is expected to be paid in 2023.

This obligation has no minimum purchase requirements;

however, purchases from Southeastern were $154.0 million during 2022 and are expected to remain material in future foreseeable periods.

See Note 19 to the consolidated financial statements for additional information related to Southeastern.

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

As of December 31, 2022, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $128.8 million, of which $28.1 million is expected to be paid in 2023.

On December 7, 2022, the Board of Directors of the Company declared a regular quarterly cash dividend of $0.50 per share, as well as a special cash dividend of $3.00 per share, on the Common Stock and the Class B Common Stock of the Company.

Both dividends are payable on February 10, 2023 to stockholders of record as of the close of business on January 27, 2023.

As of December 31, 2022, dividends declared but not yet paid were $32.8 million.

Hedging Activities

6 unchanged sentences

(in thousands) 2022 2021

Decrease in cost of sales $ (12,647) $ (518)

Increase (decrease) in SD&A expenses (4,183) 2,343

Increase (decrease) in cost of sales $ 3,335 $ (12,647)

Decrease in SD&A expenses (16,390) (4,183)

Net impact $ (13,055) $ (16,830)

COVID-19 Impact

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

The Company continues to implement its COVID-19 Response Program as dictated by current conditions, including numerous actions to protect and promote the health and safety of its consumers, customers, suppliers, teammates and communities.

Risk mitigation and safety activities continue;

examples include adhering to sanitation protocols and promoting hygiene practices recommended by the CDC;

offering supplemental sick time for non-exempt teammates;

providing access to personal protective equipment and educational resources;

and modifying our health and welfare plans for COVID-19-related events.

At this time and based on current trends, we do not expect the COVID-19 pandemic to materially impact our liquidity position or access to capital in 2023.

Discussion of Critical Accounting Estimates

In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of its consolidated financial statements in conformity with GAAP.

In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of its results of operations and financial position in the preparation of its consolidated financial statements in conformity with GAAP.

Actual results could differ significantly from those estimates under different assumptions and conditions.

The Company believes the following discussion addresses the Company’s most critical accounting estimates, which are those most important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of inherently uncertain matters.

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

The Company believes the following discussion addresses the Company’s most critical accounting estimates, which are those the Company believes to be the most important to the portrayal of its financial condition and results of operations and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

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

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.

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.

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.

46 unchanged sentences

The acquisition related contingent consideration liability consists of the estimated amounts due to The Coca‑Cola Company under the CBA with The Coca‑Cola Company and CCR over the useful life of the related distribution rights.

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

Pursuant to the CBA, the Company is required to make quarterly acquisition related sub-bottling payments to CCR on a continuing basis in exchange for the grant of exclusive rights to distribute, promote, market and sell the authorized brands of The Coca‑Cola Company and related products in certain distribution territories the Company acquired from CCR.

This acquisition related contingent consideration is valued using a probability weighted discounted cash flow model based on internal forecasts and the WACC derived from market data, which are considered Level 3 inputs.

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

These future expected sub-bottling payments extend through the life of the related distribution assets acquired in each distribution territory, which is generally 40 years.

As a result, the fair value of the acquisition related contingent consideration liability is impacted by the Company’s WACC, management’s estimate of the amounts that will be paid in the future under the CBA and current sub-bottling payments (all Level 3 inputs).

Changes in any of these Level 3 inputs, particularly the underlying risk-free interest rate used to estimate the Company’s WACC, could result in material changes to the fair value of the acquisition related contingent consideration and could materially impact the amount of non-cash expense (or income) recorded each reporting period.

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

These future expected acquisition related sub-bottling payments extend through the life of the related distribution assets acquired in each distribution territory, which is generally 40 years.

As a result, the fair value of the acquisition related contingent consideration liability is impacted by the Company’s WACC, management’s estimate of the acquisition related sub-bottling payments that will be made in the future under the CBA and current acquisition related sub-bottling payments (all Level 3 inputs).

Changes in any of these Level 3 inputs, particularly the underlying risk-free interest rate used to estimate the Company’s WACC, could result in material changes to the fair value of the acquisition related contingent consideration liability and could materially impact the amount of non-cash expense (or income) recorded each reporting period.

The Company estimates a 10 basis point change in the underlying risk-free interest rate used to estimate the Company’s WACC would result in a change of approximately $5 million to the Company’s acquisition related contingent consideration liability.

Income Tax Estimates

4 unchanged sentences

The Company does not recognize a tax benefit unless it concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position.

If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in the Company’s judgment, is greater than 50 percent likely to be realized.

If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in the Company’s judgment, is greater than 50% likely to be realized.

The Company records interest and penalties related to uncertain tax positions in income tax expense.

1 unchanged sentence

There are two Company-sponsored pension plans.

The primary Company-sponsored pension plan (the “Primary Plan”) was frozen as of June 30, 2006 and no benefits accrued to participants after that date.

The Primary Plan was frozen as of June 30, 2006 and no benefits accrued to participants after that date.

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

1 unchanged sentence

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

The Company also sponsors a postretirement healthcare plan for employees meeting specified criteria.

The Company also sponsors a postretirement healthcare plan for employees meeting specified qualifying criteria.

Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the plans.

These factors include assumptions about the discount rate, expected return on plan assets, employee turnover and age at retirement, as determined by the Company, within certain guidelines.

In addition, the Company uses subjective factors such as mortality rates to estimate the projected benefit obligation.

The actuarial assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of

participants.

In addition, the Company uses subjective factors such as

mortality rates to estimate the projected benefit obligation.

These differences may result in a significant impact to the amount of net periodic pension cost recorded by the Company in future periods.

2 unchanged sentences

The discount rate assumption is generally the estimate which can have the most significant impact on net periodic pension cost and the projected benefit obligation for these pension plans.

The Company determines an appropriate discount rate annually based on the Aon AA Above Median yield curve as of the measurement date and reviews the discount rate assumption at the end of each year.

Given the anticipated termination of the Primary Plan, the Company determined an appropriate discount rate for the Primary Plan in 2022 based on lump sum segment interest rates, expected lump sum election rates and estimated annuity purchase rates.

The Company determines an appropriate discount rate annually for the Bargaining Plan based on the Aon AA Above Median yield curve as of the measurement date and reviews the discount rate assumption at the end of each year.

See Note 16 to the consolidated financial statements for additional information.

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

A 0.25% increase or decrease in the discount rate assumption would have impacted the projected benefit obligation and net periodic pension cost of the Company-sponsored pension plans as follows:

A 0.25% increase or decrease in the discount rate assumption would have impacted the projected benefit obligation and the net periodic pension cost for the Primary Plan as indicated below.

The portion of the liability expected to be paid as a lump sum during 2023 in connection with the anticipated termination of the Primary Plan does not vary based on changes in discount rates, as the interest rate basis upon which the lump sums will be calculated is known and will not change.

(in thousands) 0.25% Increase 0.25% Decrease

2 unchanged sentences

Net periodic pension cost for Primary Plan in 2022 79 (95)

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

(in thousands) 0.25% Increase 0.25% Decrease

2 unchanged sentences

Net periodic pension cost for Bargaining Plan in 2022 (605) 651

The weighted average expected long-term rate of return of plan assets used in computing net periodic pension costs for the Primary Plan was 4.75% in 2021 and 5.50% in 2020.

The weighted average expected long-term rate of return of plan assets used in computing net periodic pension costs for the Bargaining Plan was 5.75% in 2021 and 6.25% in 2020.

The weighted average expected long-term rate of return of plan assets used in computing net periodic pension cost for the Primary Plan was 3.00% in 2022 and 4.75% in 2021.

The weighted average expected long-term rate of return of plan assets used in computing net periodic pension cost for the Bargaining Plan was 5.50% in 2022 and 5.75% in 2021.

These rates reflect an estimate of long-term future returns for the pension plan assets.

1 unchanged sentence

This analysis includes expected long-term inflation and the risk premiums associated with equity and fixed income investments.

The analysis also includes planned changes to asset allocations related to the expected termination of the Primary Plan.

See Note 16 to the consolidated financial statements for the details by asset type of the Company’s pension plan assets and the weighted average expected long-term rate of return of each asset type.

The actual return on pension plan assets for the Primary Plan was a gain of 5.0% in 2021 and 14.3% in 2020.

The actual return on pension plan assets for the Bargaining Plan was a gain of 10.5% in 2021 and 13.9% in 2020.

The actual return on pension plan assets for the Primary Plan was a loss of 21.1% in 2022 and a gain of 5.0% in 2021.

The actual return on pension plan assets for the Bargaining Plan was a loss of 24.6% in 2022 and a gain of 10.5% in 2021.

The Company sponsors a postretirement healthcare plan for employees meeting specified qualifying criteria.

6 unchanged sentences

The Company annually determines the healthcare cost trend based on recent actual medical trend experience and projected experience for subsequent years.

The discount rate assumptions used to determine the pension and postretirement benefit obligations are based on the annual yield on long-term corporate bonds as of each plan’s measurement date.

The discount rate assumptions used to determine the postretirement benefit obligation are based on the annual yield on long-term corporate bonds as of the plan’s measurement date.

The discount rate used in determining the postretirement benefit obligation was 5.19% in 2022 and 2.98% in 2021.

The discount rate was derived using the Aon AA Above Median yield curve.

Projected benefit payouts for each plan were matched to the Aon AA Above Median yield curve and an equivalent flat rate was derived.

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

Projected benefit payouts for the plan were matched to the Aon AA Above Median yield curve and an equivalent flat rate was derived.

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

(in thousands) 0.25% Increase 0.25% Decrease

2 unchanged sentences

Net periodic postretirement benefit cost in 2022 (154) 161

Cautionary Information Regarding Forward-Looking Statements

Certain statements contained in this report, or in other public filings, press releases, or other written or oral communications made by the Company or its representatives, which are not historical facts, are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements address, among other things, Company plans, activities or events which the Company expects will or may occur in the future and may include express or implied projections of revenue or expenditures; statements of plans and objectives for future operations, growth or initiatives; statements of future economic performance, including, but not limited to, the state of the economy, capital investment and financing plans, net sales, cost of sales, SD&A expenses, gross profit, income tax rates, net income per diluted share, dividends, pension plan contributions and estimated acquisition related contingent consideration payments; statements regarding the outcome or impact of certain recent accounting pronouncements and pending or threatened litigation;

or statements regarding the impact of the COVID-19 pandemic on the Company’s business, financial condition, results of operations or cash flows.

These forward-looking statements may be identified by the use of the words “will,” “may,” “believe,” “plan,” “estimate,” “expect,” “anticipate,” “probably,” “should,” “project,” “intend,” “continue,” “could,” “strive” and other similar terms and expressions.

Various factors, risks and uncertainties may cause the Company’s actual results to differ materially from those expressed or implied in any forward-looking statements.

Factors, risks and uncertainties that may result in actual results differing from such forward-looking information include, but are not limited to, those listed in “Item 1A.

Risk Factors” of this report and elsewhere herein, including, without limitation, the factors described under “Critical Accounting Estimates” in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operation” of this report, or in other filings or statements made by the Company.

All of the forward-looking statements in this report and other documents or statements are qualified by these and other factors, risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

Certain statements made in this report, or in other public filings, press releases, or other written or oral communications made by the Company, which are not historical facts, are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve risks and uncertainties which we expect will or may occur in the future and may impact our business, financial condition and results of operations.

The words “anticipate,” “believe,” “expect,” “intend,” “project,” “may,” “will,” “should,” “could” and similar expressions are intended to identify those forward-looking statements.

These forward-looking statements reflect the Company’s best judgment based on current information, and, although we base these statements on circumstances that we believe to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information.

As such, the forward-looking statements are not guarantees of future performance, and actual results may vary materially from the projected results and expectations discussed in this report.

Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to:

increased costs (including due to inflation), disruption of supply or unavailability or shortages of raw materials, fuel and other supplies;

the reliance on purchased finished products from external sources;

changes in public and consumer perception and preferences, including concerns related to product safety and sustainability, artificial ingredients, brand reputation and obesity;

the inability to attract and retain front-line employees in a tight labor market;

changes in government regulations related to nonalcoholic beverages, including regulations related to obesity, public health, artificial ingredients and product safety and sustainability;

decreases from historic levels of marketing funding support provided to us by The Coca‑Cola Company and other beverage companies;

material changes in the performance requirements for marketing funding support or our inability to meet such requirements;

decreases from historic levels of advertising, marketing and product innovation spending by The Coca‑Cola Company and other beverage companies, or advertising campaigns that are negatively perceived by the public;

any failure of the several Coca‑Cola system governance entities of which we are a participant to function efficiently or on our best behalf and any failure or delay of ours to receive anticipated benefits from these governance entities;

provisions in our beverage distribution and manufacturing agreements with The Coca‑Cola Company that could delay or prevent a change in control of us or a sale of our Coca‑Cola distribution or manufacturing businesses;

the concentration of our capital stock ownership;

our inability to meet requirements under our beverage distribution and manufacturing agreements;

changes in the inputs used to calculate our acquisition related contingent consideration liability;

technology failures or cyberattacks on our technology systems or our effective response to technology failures or cyberattacks on our customers’, suppliers’ or other third parties’ technology systems;

unfavorable changes in the general economy;

changes in our top customer relationships and marketing strategies;

lower than expected net pricing of our products resulting from continued and increased customer and competitor consolidations and marketplace competition;

the effect of changes in our level of debt, borrowing costs and credit ratings on our access to capital and credit markets, operating flexibility and ability to obtain additional financing to fund future needs;

the failure to attract, train and retain qualified employees while controlling labor costs, and other labor issues;

the failure to maintain productive relationships with our employees covered by collective bargaining agreements, including failing to renegotiate collective bargaining agreements;

changes in accounting standards;

our use of estimates and assumptions;

changes in tax laws, disagreements with tax authorities or additional tax liabilities;

changes in legal contingencies;

natural disasters, changing weather patterns and unfavorable weather;

climate change or legislative or regulatory responses to such change;

and the risks discussed in “Item 1A.

Risk Factors” of this report and elsewhere herein.

Caution should be taken not to place undue reliance on the forward-looking statements included in this report.

The Company assumes no obligation to update any forward-looking statements, even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law.

In evaluating forward-looking statements, these risks and uncertainties should be considered, together with the other risks described from time to time in the Company’s other reports and documents filed with the SEC.

The Company assumes no obligation to update any forward-looking statements, except as may be required by law.

In evaluating forward-looking statements, these risks and uncertainties should be considered, together with the other risks described from time to time in the Company’s reports and other filings with the SEC.

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-K

Item 7. Management’s Discussion and Analysis