What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-22 compared with 2022-02-22 · 210 added, 241 removed, 1266 unchanged (26% of the section changed)

34 unchanged sentences

Actuarial gain (loss) 7,742 14,965 ( 673 )

Prior service credits 3 15 17

Prior service credits (costs) ( 116 ) 3 15

Postretirement benefits reclassification including benefit costs:

Actuarial gain (loss) 7,991 3,089 ( 3,137 )

Prior service costs — — ( 975 )

Interest rate swap — 556 ( 286 )

3 unchanged sentences

Comprehensive income attributable to noncontrolling interest — — 9,604

Comprehensive income (loss) attributable to Coca‑Cola Consolidated, Inc.

Comprehensive income attributable to Coca‑Cola Consolidated, Inc.

$ 445,784 $ 208,170 $ 168,442

30 unchanged sentences

Accrued interest payable 2,677 4,096

Dividends payable 32,808 —

Total current liabilities 905,156 834,856

18 unchanged sentences

authorized - 30,000,000 shares;

issued - 10,203,821 shares

issued - 11,431,367 and 10,203,821 shares, respectively

11,431 10,204

1 unchanged sentence

authorized - 10,000,000 shares;

issued - 2,860,356 shares

issued - 1,632,810 and 2,860,356 shares, respectively

Class C Common Stock, $ 1.00 par value:

25 unchanged sentences

Loss on sale of property, plant and equipment 5,642 5,921 5,187

Impairment and abandonment of property, plant and equipment 3,200 8,030 8,798

Amortization of debt costs 1,012 1,256 1,050

Stock compensation expense — — 2,045

Impairment and abandonment of property, plant and equipment — 3,200 8,030

Change in current assets less current liabilities ( 74,784 ) 30,595 36,901

6 unchanged sentences

Additions to property, plant and equipment $ ( 298,611 ) $ ( 155,693 ) $ ( 202,034 )

Other distribution agreements ( 8,993 ) — ( 4,654 )

Acquisition of distribution rights ( 30,649 ) ( 8,993 ) —

Proceeds from the sale of property, plant and equipment 7,369 5,274 3,385

2 unchanged sentences

Cash Flows from Financing Activities:

Payments on revolving credit facility $ ( 55,000 ) $ ( 280,000 ) $ ( 550,339 )

Borrowings under revolving credit facility 55,000 235,000 515,339

Payments on term loan facilities ( 287,500 ) ( 45,000 ) ( 140,000 )

Borrowings under term loan facility 70,000 — —

Proceeds from issuance of senior notes — — 100,000

Purchase of noncontrolling interest in Piedmont Coca-Cola Bottling Partnership — ( 100,000 ) —

Payments on term loan facility and senior notes $ ( 125,000 ) $ ( 287,500 ) $ ( 45,000 )

Payments of acquisition related contingent consideration ( 36,515 ) ( 39,097 ) ( 43,400 )

2 unchanged sentences

Debt issuance fees ( 310 ) ( 1,542 ) ( 228 )

Borrowings under term loan facility — 70,000 —

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

Borrowings under revolving credit facility — 55,000 235,000

Purchase of noncontrolling interest in Piedmont Coca-Cola Bottling Partnership — — ( 100,000 )

Net cash used in financing activities $ ( 174,187 ) $ ( 272,291 ) $ ( 248,863 )

Net increase (decrease) in cash $ 87,521 $ 45,179 $ ( 3,934 )

Net increase in cash $ 55,334 $ 87,521 $ 45,179

Cash at beginning of year 142,314 54,793 9,614

15 unchanged sentences

Other comprehensive loss, net of tax — — — — ( 4,051 ) — — ( 4,051 ) — ( 4,051 )

Cash dividends paid:

Dividends declared:

Common Stock ($ 1.00 per share)

3 unchanged sentences

— — — ( 2,233 ) — — — ( 2,233 ) — ( 2,233 )

Issuance of 19,224 shares of Class B Common Stock

— 21 4,755 — — — — 4,776 — 4,776

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

Purchase of noncontrolling interest in Piedmont Coca-Cola Bottling Partnership — — 6,970 — — — — 6,970 ( 113,768 ) ( 106,798 )

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

Net income — — — 189,580 — — — 189,580 — 189,580

Other comprehensive loss, net of tax — — — — ( 4,051 ) — — ( 4,051 ) — ( 4,051 )

Cash dividends paid:

Other comprehensive income, net of tax — — — — 18,590 — — 18,590 — 18,590

Dividends declared:

Common Stock ($ 1.00 per share)

3 unchanged sentences

— — — ( 2,233 ) — — — ( 2,233 ) — ( 2,233 )

Purchase of noncontrolling interest in Piedmont Coca-Cola Bottling Partnership — — 6,970 — — — — 6,970 ( 113,768 ) ( 106,798 )

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

1 unchanged sentence

Other comprehensive income, net of tax — — — — 15,626 — — 15,626 — 15,626

Cash dividends paid:

Dividends declared:

Common Stock ($ 4.50 per share)

3 unchanged sentences

— — — ( 4,828 ) — — — ( 4,828 ) — ( 4,828 )

Conversion of 1,227,546 shares of Class B Common Stock

1,227 ( 1,227 ) — — — — — — — —

Balance on December 31, 2022 $ 11,431 $ 1,633 $ 135,953 $ 1,112,462 $ ( 84,837 ) $ ( 60,845 ) $ ( 409 ) $ 1,115,388 $ — $ 1,115,388

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Description of Business and Summary of Significant Accounting Policies

Description of Business and Summary of Critical Accounting Policies

Description of Business

3 unchanged sentences

The Company also distributes products for several other beverage companies, including Keurig Dr Pepper Inc.

(“Dr Pepper”) and Monster Energy Company (“Monster Energy”).

and Monster Energy Company.

The Company offers a range of nonalcoholic beverage products and flavors, including both sparkling and still beverages, designed to meet the demands of its consumers.

6 unchanged sentences

Principles of Consolidation

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

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

All significant intercompany accounts and transactions have been eliminated.

2 unchanged sentences

Actual results could differ from those estimates.

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 fiscal years presented are the periods ended December 31, 2021 (“2021”), December 31, 2020 (“2020”) and December 29, 2019 (“2019”).

Cash and Cash Equivalents

22 unchanged sentences

Maintenance and repair costs and minor replacements are charged to expense when incurred.

When assets are replaced or otherwise disposed, the cost and accumulated depreciation are removed from the accounts and the gains or losses, if any, are reflected in the statements of operations.

When assets are replaced or otherwise disposed, the cost and accumulated depreciation are removed from the accounts and the gains or losses, if any, are reflected in the consolidated statements of operations.

Gains or losses on the disposal of manufacturing equipment and manufacturing plants are included in cost of sales.

23 unchanged sentences

Certain leases include renewal options to extend the lease term and/or purchase options to purchase the leased asset.

The Company assesses these options using a threshold of reasonably certain, which

is a high threshold and, therefore, the majority of the Company’s leases do not include renewal periods or purchase options for the measurement of the right-of-use asset and the associated lease liability.

The Company assesses these options using a threshold of reasonably certain, which is a high threshold and, therefore, the majority of the Company’s leases do not include renewal periods or purchase options for the measurement of the right-of-use asset and the associated lease liability.

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

10 unchanged sentences

Capitalized costs are amortized over their estimated useful lives using the straight-line method.

Amortization expense, which is included in depreciation expense, for internal use software was $ 5.4 million in 2021, $ 6.7 million in 2020 and $ 7.7 million in 2019.

Amortization expense for internal use software, which is included in depreciation expense, was $ 3.0 million in 2022, $ 5.4 million in 2021 and $ 6.7 million in 2020.

All business combinations are accounted for using the acquisition method.

18 unchanged sentences

(“CCR”), a wholly owned subsidiary of The Coca‑Cola Company, over the useful life of the related distribution rights.

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 weighted average cost of capital (“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.

The CBA relates 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”).

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 weighted average cost of capital (“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 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.

Pension and Postretirement Benefit Plans

4 unchanged sentences

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.

The expense and liability amounts recorded for the benefit plans reflect estimates related to interest rates, investment returns, employee turnover and age at retirement, mortality rates and healthcare costs.

The discount rate assumptions used to determine the pension and postretirement benefit obligations are based on yield rates available on the Aon AA Above Median yield curve as of each plan’s measurement date.

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.

See Note 16 for additional discussion of the anticipated termination of the Primary Plan.

The Company determines an appropriate discount rate annually for the Bargaining Plan and the postretirement healthcare 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.

The service cost components of the net periodic benefit cost of the plans are charged to current operations, and the non-service cost components of the net periodic benefit cost of the plans are classified as other expense, net.

5 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.

5 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.

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.

3 unchanged sentences

The Company has defined its performance obligations for its contracts as either at a point in time or over time.

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”).

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”).

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”).

19 unchanged sentences

As such, the cash received is accounted for as a reduction to cost of sales unless it is a specific reimbursement of costs or payments for services.

Payments the Company receives from The Coca‑Cola Company and other beverage companies for marketing funding support are classified as reductions to cost of sales.

Derivative Financial Instruments

Payments the Company receives from The Coca‑Cola Company and other beverage companies for marketing funding support are classified as a reduction to cost of sales.

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.

7 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 consolidated balance sheets and the net amounts of derivative liabilities are recognized in either other accrued liabilities or other liabilities in the consolidated balance sheets.

Accordingly, the net amounts of derivative assets are recognized in either prepaid expenses and other current

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

Risk Management Programs

4 unchanged sentences

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.

8 unchanged sentences

Harrison based on the Company’s attainment during a performance period of performance measures specified by the Compensation Committee of the Company’s Board of Directors.

Harrison may elect to have awards earned under the Long‑Term Performance Equity Plan settled in cash and/or shares of Class B Common Stock.

In 2018, the Long-Term Performance Equity Plan replaced a performance unit award agreement (the “Performance Unit Award Agreement”).

The Performance Unit Award Agreement expired at the end of 2018, with the final award issued in 2019 in connection with Mr.

Harrison’s services during 2018.

See Note 2 for additional information on Mr.

Harrison’s stock compensation programs.

Harrison may elect to have awards earned under the Long‑Term Performance Equity Plan settled in cash and/or shares of the Company’s Class B Common Stock.

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

Common Stock and Class B Common Stock

12 unchanged sentences

The 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 declared by the Board of Directors and paid by the Company since 1994.

During 2021, 2020 and 2019, dividends of $ 1.00 per share were declared and paid on both Common Stock and Class B Common Stock.

During 2022, dividends of $ 4.50 per share were declared and dividends of $ 1.00 per share were paid on both the Common Stock and the Class B Common Stock.

The remaining $ 3.50 per share of dividends declared but not yet paid as of December 31, 2022 were paid on February 10, 2023 to stockholders of record of the Common Stock and the Class B Common Stock as of the close of business on January 27, 2023.

During 2021 and 2020, dividends of $ 1.00 per share were declared and paid on both the Common Stock and the Class B Common Stock.

Total cash dividends paid were $ 9.4 million per year in 2022, 2021 and 2020.

4 unchanged sentences

(i) Income from continuing operations (“net income”) is reduced by the amount of dividends declared in the current period for each class of stock and by the contractual amount of dividends that must be paid for the current period.

(ii) The remaining earnings (“undistributed earnings”) are allocated to Common Stock and Class B Common Stock to the extent each security may share in earnings as if all the earnings for the period had been distributed.

(ii) The remaining earnings (“undistributed earnings”) are allocated to the Common Stock and the Class B Common Stock to the extent each security may share in earnings as if all the earnings for the period had been distributed.

The total earnings allocated to each security is determined by adding together the amount allocated for dividends and the amount allocated for a participation feature.

1 unchanged sentence

(iv) Basic and diluted net income per share data are presented for each class of common stock.

In applying the two-class method, the Company determined undistributed earnings should be allocated equally on a per share basis between the Common Stock and Class B Common Stock due to the aggregate participation rights of the Class B Common Stock (i.e., the voting and conversion rights) and the Company’s history of paying dividends equally on a per share basis on the Common Stock and the Class B Common Stock.

In applying the two-class method, the Company determined undistributed earnings should be allocated equally on a per share basis between the Common Stock and the Class B Common Stock due to the aggregate participation rights of the Class B Common Stock (i.e., the voting and conversion rights) and the Company’s history of paying dividends equally on a per share basis on the Common Stock and the Class B Common Stock.

The Class B Common Stock conversion rights allow the Class B Common Stock to participate in dividends equally with the Common Stock.

4 unchanged sentences

The Company does no t have anti-dilutive shares.

Recently Adopted Accounting Pronouncements

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

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

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

Recently Issued Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2022-04, “Liabilities-Supplier Finance Programs,” which requires additional quantitative and qualitative disclosures related to a Company’s supplier finance programs to enhance the transparency of these programs.

The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023.

The Company evaluated the impact ASU 2022-04 will have on its consolidated financial statements and does not expect a material impact upon adoption in 2023.

Related Party Transactions

1 unchanged sentence

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

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

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

As of December 31, 2021, The Coca‑Cola Company owned shares of the Company’s Common Stock representing approximately 5 % of the total voting power of the Company’s Common Stock and Class B Common Stock on a consolidated basis.

On March 17, 2022, the Company entered into a stockholder conversion agreement (the “Stockholder Conversion Agreement”) with the JFH Family Limited Partnership—SW1, the Anne Lupton Carter Trust f/b/o Sue Anne H.

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”).

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.

On June 21, 2022, the Company filed a prospectus supplement with the SEC pursuant to the Company’s existing automatic shelf registration statement, registering the Converted Shares for resale by the Converting Stockholders.

The Company will not receive any proceeds from any resale of the Converted Shares by the Converting Stockholders.

As of December 31, 2022, J.

Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, controlled 1,004,394 shares of the Company’s Class B Common Stock, which represented approximately 71 % of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis.

As of December 31, 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.

Frank Harrison, III and the trustees of the J.

Frank Harrison, III and the trustees of certain trusts established for the benefit of certain relatives of the late J.

Frank Harrison, Jr.

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

have agreed to vote the shares of the Company’s Common Stock and Class B Common Stock that they control in favor of such designee.

The Coca‑Cola Company does not own any shares of the Company’s Class B Common Stock.

4 unchanged sentences

Payments made by The Coca-Cola Company to the Company 256,333 207,073 128,749

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

(1) This excludes acquisition related sub-bottling payments made by the Company to Coca-Cola Refreshments USA, Inc., a wholly owned subsidiary of The Coca‑Cola Company, but includes the purchase price of certain additional BODYARMOR distribution rights, each as discussed below.

On January 1, 2022, the Company entered into an agreement to acquire $ 30.1 million of additional BODYARMOR distribution rights with an estimated useful life of 40 years.

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

2 unchanged sentences

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

Post-mix products are dispensed through equipment that mixes fountain syrups with carbonated or still water, enabling fountain retailers to sell finished products to consumers in cups or glasses.

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

Coca‑Cola Refreshments USA, Inc.

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

These sub-bottling payments are based on gross profit derived from the Company’s sales of certain beverages and beverage products that are sold under the same trademarks that identify a covered beverage, a beverage product or certain cross-licensed brands.

Sub-bottling payments to CCR were $ 39.1 million in 2021, $ 43.4 million in 2020 and $ 27.2 million in 2019.

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

The CBA requires the Company 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.

These acquisition related 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 to CCR were $ 36.5 million in 2022, $ 39.1 million in 2021 and $ 43.4 million in 2020.

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) December 31, 2022 December 31, 2021

10 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 consolidated balance sheets, was $ 8.2 million as of December 31, 2021 and $ 8.0 million as of December 31, 2020.

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

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

7 unchanged sentences

The Company had rebates due from CCBSS of $ 25.7 million on December 31, 2022 and $ 7.9 million on December 31, 2021, which were classified as accounts receivable, other in the 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.

1 unchanged sentence

CONA Services LLC (“CONA”)

The Company is a member of CONA, an entity formed with The Coca‑Cola Company and certain other Coca‑Cola bottlers to provide business process and information technology services to its members.

Along with certain other Coca‑Cola bottlers, the Company is a member of CONA, an entity formed to provide business process and information technology services to its members.

The Company accounts for CONA as an equity method investment.

2 unchanged sentences

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 $ 24.1 million in 2021, $ 22.0 million in 2020 and $ 22.2 million in 2019.

The Company incurred service fees to CONA of $ 25.7 million in 2022, $ 24.1 million in 2021 and $ 22.0 million in 2020.

Related Party Leases

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

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

Frank Harrison, III is the majority stockholder and Morgan H.

Everett, Vice Chair of the Company’s Board of Directors, is a minority stockholder.

The annual base rent the Company is obligated to pay is subject to an adjustment for an inflation factor and the lease expires on December 31, 2029.

The principal balance outstanding under this lease agreement was $ 28.2 million on December 31, 2021 and $ 30.8 million on December 31, 2020.

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

The annual base rent the Company is obligated to pay under this lease is subject to an adjustment for an inflation factor and the lease expires on December 31, 2029.

The principal balance outstanding under this lease was $ 25.5 million on December 31, 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.

Wells, a director of the Company, are trustees and beneficiaries and of which Morgan H.

Wells, a former director of the Company, are trustees and beneficiaries and of which Morgan H.

Everett is a permissible, discretionary beneficiary.

The annual base rent the Company is obligated to pay under the financing lease is subject to an adjustment for an inflation factor and the lease expires on December 31, 2035.

The principal balance outstanding under this lease was $ 59.1 million on December 31, 2021 and $ 61.9 million on December 31, 2020.

On March 17, 2022, CCBCC Operations, LLC (“Operations”), a wholly owned subsidiary of the Company, entered into a definitive purchase and sale agreement with HLP, pursuant to which Operations purchased the Snyder Production Center from HLP on such date for a purchase price of $ 60.0 million.

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 December 31, 2022 and there was a principal balance outstanding under this lease of $ 59.1 million on December 31, 2021.

A summary of rental payments for these leases related to 2022, 2021 and 2020 is as follows:

1 unchanged sentence

Company headquarters $ 3,854 $ 3,778 $ 3,304

$ 3,778 $ 3,304 $ 4,525

Snyder Production Center 927 4,451 4,451

(1) 2019 fell under a previous lease agreement with Beacon and included contingent rental payments that were a result of changes in the Consumer Price Index minimum, which were recorded as adjustments to interest expense, net in the consolidated statements of operations .

Long-Term Performance Equity Plan

3 unchanged sentences

Harrison under the Long-Term Performance Equity Plan are earned based on the Company’s attainment during a performance period of certain performance measures, each as specified by the Compensation Committee of the Company’s Board of Directors.

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

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 consolidated statements of operations, was $ 10.1 million in 2022, $ 9.8 million in 2021 and $ 9.2 million in 2020.

During 2019, J.

Frank Harrison, III received 34,700 shares of the Company’s Class B Common Stock in connection with his services as Chairman of the Board of Directors and Chief Executive Officer of the Company during 2018, pursuant to the Performance Unit Award Agreement.

The Performance Unit Award Agreement expired at the end of 2018, with the final award issued in 2019.

As permitted under the terms of the Performance Unit Award Agreement, 15,476 shares were settled in cash to satisfy tax withholding obligations in connection with the vesting of the performance units and the remaining 19,224 shares increased the total shares of Class B Common Stock outstanding.

Compensation expense for the awards issued pursuant to the Performance Unit Award Agreement, recognized based on the closing share price of Common Stock as of the last trading day prior to the end of each fiscal period, was $ 2.0 million in 2019.

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.

3 unchanged sentences

Point in time sales accounted for approximately 97 % of the Company’s net sales in 2021, 97 % of the Company’s net sales in 2020 and 96 % of the Company’s net sales in 2019.

Point in time sales accounted for approximately 97 % of the Company’s net sales in each of 2022, 2021 and 2020.

Other sales, which include revenue for service fees related to the repair of cold drink equipment and delivery fees for freight hauling and brokerage services, are recognized over time.

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Returned product is recognized as a reduction to net sales.

The Company’s reserve for customer returns was $ 3.0 million as of December 31, 2021 and $ 3.6 million as of December 31, 2020.

The Company’s reserve for customer returns was $ 3.0 million as of both December 31, 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 2021:

Following is a summary of activity for the allowance for credit losses during 2022, 2021 and 2020:

(in thousands) 2022 2021 2020

Beginning balance - allowance for credit losses $ 14,336 $ 18,070 $ 10,232

Additions charged to expenses and as reductions to net sales 4,638 14,265

Additions charged to expenses and as a reduction to net sales 4,326 4,638 14,265

Deductions ( 5,543 ) ( 8,372 ) ( 6,427 )

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Nonalcoholic Beverages represents the vast majority of the Company’s consolidated net sales and income from operations.

The additional two operating segments do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, and, therefore, have been combined into “All Other.” The Company’s segment results are as follows:

The additional two operating segments do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, and, therefore, have been combined into “All Other.”

The Company’s segment results are as follows:

(in thousands) 2022 2021 2020

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(2) For purposes of the diluted net income per share computation for Class B Common Stock, weighted average shares of Class B Common Stock are assumed to be outstanding for the entire period and not converted.

(3) For periods presented during which the Company has net income, the denominator for diluted net income per share for Common Stock and Class B Common Stock includes the dilutive effect of shares relative to the Long-Term Performance Equity Plan and the Performance Unit Award Agreement.

For periods presented during which the Company has net loss, the unvested performance units granted pursuant to the Long-Term Performance Equity Plan and the Performance Unit Award Agreement are excluded from the computation of diluted net loss per share, as the effect would have been anti-dilutive.

See Note 2 for additional information on the Long-Term Performance Equity Plan and the Performance Unit Award Agreement.

For periods presented during which the Company has net loss, the unvested performance units granted pursuant to the Long-Term Performance Equity Plan are excluded from the computation of diluted net loss per share, as the effect would have been anti-dilutive.

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

(4) The Long-Term Performance Equity Plan awards may be settled in cash and/or shares of the Company’s Class B Common Stock.

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(5) The Company did no t have anti-dilutive shares for any periods presented.

(6) 1,227,546 shares of the Company’s Class B Common Stock were converted on a one share for one share basis into shares of the Company’s Common Stock, effective as of March 17, 2022.

See Note 2 for additional information on the Stockholder Conversion Agreement.

Inventories consisted of the following:

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Repair parts $ 35,088 $ 26,643

Commodity hedges at fair market value 7,714 2,417

Prepaid taxes 7,829 4,079

Prepaid software 7,398 7,038

Commodity hedges at fair market value 4,808 7,714

Prepaid marketing 4,303 4,380

Prepaid taxes 4,079 8,428

Other prepaid expenses and other current assets 34,837 28,214

Total prepaid expenses and other current assets $ 94,263 $ 78,068

Assets Held for Sale

As of December 31, 2021, certain properties owned by the Company met the accounting guidance criteria to be classified as assets held for sale.

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

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

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

Following is a summary of the assets held for sale:

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

Land $ 2,906 $ 2,559

Buildings and leasehold and land improvements 3,974 3,870

Total assets held for sale $ 6,880 $ 6,429

An impairment of $ 1.6 million was recorded in 2020 for the locations classified as assets held for sale as of December 31, 2020 as a result of the net book value exceeding the agreed upon purchase price of one of the locations.

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

Property, Plant and Equipment, Net

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Financing leases 5.2 % 3.1 %

On March 17, 2022, the Company terminated its financing lease for the Snyder Production Center, which was scheduled to expire on December 31, 2035.

See Note 2 for additional information on the lease termination.

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

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Total cash flows from financing activities impact $ 2,988 $ 4,778 $ 5,861

As of December 31, 2021, the Company had four operating lease commitments that had not yet commenced.

These lease commitments have a lease term of approximately three to five years and are expected to commence during the first quarter of 2022.

The additional lease liability associated with these lease commitments is expected to be $ 6.1 million.

The Company did not enter into any material operating lease commitments subsequent to year-end.

Distribution Agreements, Net

10 unchanged sentences

Ending balance - distribution agreements, net $ 842,035 $ 836,777

Subsequent to year-end, the Company entered into an agreement with a related party to acquire $ 30.1 million of additional distribution rights with an estimated useful life of 40 years.

Assuming no impairment of distribution agreements, net, amortization expense in future years based upon recorded amounts as of December 31, 2021 will be $ 24.9 million for each fiscal year 2022 through 2026.

Assuming no impairment of distribution agreements, net, amortization expense in future years based upon recorded amounts as of December 31, 2022 will be approximately $ 25 million for each fiscal year 2023 through 2027.

Customer Lists, Net

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Employee and retiree benefit plan accruals 31,711 32,007

Current portion of deferred payroll taxes under CARES Act 18,739 18,706

Accrued taxes (other than income taxes) 7,127 6,638

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

All other accrued expenses 31,847 33,973

Total other accrued liabilities $ 198,300 $ 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.

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

The Company intends to repay the remaining portion of the deferred payroll taxes during 2022, and, thus, classified the remaining balance as current as of December 31, 2021.

Derivative Financial Instruments

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

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Selling, delivery and administrative expenses 427 1,772 791

Total gain $ 5,241 $ 2,787 $ 10,138

Total gain (loss) $ ( 2,906 ) $ 5,241 $ 2,787

All commodity derivative instruments are recorded at fair value as either assets or liabilities in the consolidated balance sheets.

4 unchanged sentences

Prepaid expenses and other current assets $ 4,808 $ 7,714

Other assets — 56

Total assets $ 4,808 $ 7,714

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Acquisition related contingent consideration Level 3 The fair value of the Company’s acquisition related contingent consideration is based on internal forecasts and the 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, pension plan assets, commodity derivative instruments, long-term 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, pension plan assets, commodity derivative instruments, long-term debt and acquisition related contingent consideration:

December 31, 2022

21 unchanged sentences

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

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

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

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.

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.

As a result, the fair value of the acquisition related contingent consideration liability is impacted by the Company’s WACC, management’s estimate of 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.

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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

1 unchanged sentence

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

As of December 31, 2021 and December 31, 2020, discount rates of 7.5 % 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 2021 was primarily driven by higher projections of future cash flows in the distribution territories subject to sub-bottling fees.

This fair value adjustment was recorded in other expense, net in the consolidated statement of operations.

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.

As of December 31, 2022 and December 31, 2021, discount rates of 9.1 % and 7.5 %, 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 2022 was primarily 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 consolidated statement of operations for 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 $ 42 million to $ 74 million.

The current income tax provision represents the estimated amount of income taxes paid or payable for the year, as well as changes in estimates from prior years.

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Valuation allowance change ( 932 ) ( 0.2 ) ( 902 ) ( 0.4 ) ( 1,900 ) ( 0.8 )

Nondeductible fees and expenses 47 — 311 0.1 887 2.6

Noncontrolling interest – Piedmont — — — — ( 2,447 ) ( 1.0 )

1 unchanged sentence

Income tax expense $ 144,929 25.2 % $ 65,569 25.7 % $ 58,943 24.5 %

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 and 57.9 % for 2019.

The Company had no net income attributable to noncontrolling interest during 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 had no net income attributable to noncontrolling interest during 2022 or 2021.

The Company records liabilities for uncertain tax positions related to income tax positions.

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The Company had uncertain tax positions, including accrued interest, of $ 0.3 million on December 31, 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 no t expect such change would have a significant impact on the consolidated financial statements.

While it is expected the amount of uncertain tax positions may change in the next 12 months, the Company does no t expect such change would have a material impact on the consolidated financial statements.

A reconciliation of uncertain tax positions, excluding accrued interest, is as follows:

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Operating lease liabilities 35,832 35,382

Deferred revenue 26,852 27,882

Accrued liabilities 30,064 26,253

Deferred revenue 27,976 26,852

Deferred compensation 23,102 24,018

Postretirement benefits 11,511 13,969

Pension 4,617 11,055

Transactional costs 3,532 3,976

Pension 808 4,617

Financing lease agreements 614 1,820

Net operating loss carryforwards 532 1,418

Charitable contribution carryover 631 3,236

Other 3,875 3,830

2 unchanged sentences

Net deferred income tax asset $ 266,953 $ 270,877

Intangible assets $ ( 177,214 ) $ ( 182,585 )

Depreciation $ ( 182,174 ) $ ( 173,124 )

Intangible assets ( 173,560 ) ( 177,214 )

Right-of-use assets - operating leases ( 34,410 ) ( 34,347 )

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Participants are immediately vested in all deferred contributions they make and become fully vested in Company contributions upon completion of five years of service with the Company, termination of employment due to death or retirement or a change in control.

Participant deferrals and Company contributions made in years prior to 2006 are invested in either a fixed benefit option or certain investment funds determined by the participant.

Participant deferrals and Company

contributions made in years prior to 2006 are invested in either a fixed benefit option or certain investment funds determined by the participant.

Beginning in 2010, the Company may elect at its discretion to match up to 50 % of the first 6 % of salary, excluding bonuses, deferred by the participant.

1 unchanged sentence

The Company may also make discretionary contributions to participants’ accounts.

Under the Director Deferral Plan, as amended and restated effective January 1, 2014, non-employee directors may defer payment of all or a portion of their annual retainer and meeting fees until they no longer serve on the Board of Directors.

Under the Director Deferral Plan, as amended and restated effective January 1, 2014, non-employee directors may defer payment of all or a portion of their annual retainer and meeting fees.

There is no Company matching contribution under the Director Deferral Plan.

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Total liability - Supplemental Savings Incentive Plan and Director Deferral Plan $ 83,123 $ 94,775

Under the Long-Term Retention Plan, effective March 5, 2014, the Company accrues a defined amount each year for an eligible participant based upon an award schedule.

Under the Long-Term Retention Plan, effective March 5, 2014, and as amended thereafter, the Company accrues a defined amount each year for an eligible participant based upon an award schedule.

Amounts awarded may earn an investment return based on certain investment funds specified by the Company.

8 unchanged sentences

Total liability - Long-Term Retention Plan $ 7,422 $ 6,993

Under the Officer Retention Plan, as amended and restated effective January 1, 2007, eligible participants may elect to receive an annuity payable in equal monthly installments over a 10 -, 15 - or 20 -year period commencing at retirement or, in certain instances, upon termination of employment.

Under the Officer Retention Plan, as amended and restated effective January 1, 2007, and as further amended thereafter, eligible participants may elect to receive an annuity payable in equal monthly installments over a 10 -, 15 - or 20 -year period commencing at retirement or, in certain instances, upon termination of employment.

The benefits under the Officer Retention Plan increase with each year of participation as set forth in an agreement between the participant and the Company.

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Total liability - Officer Retention Plan $ 39,689 $ 41,044

Under the Long-Term Performance Plan, as amended and restated effective January 1, 2018, the Compensation Committee of the Board of Directors establishes dollar amounts to which a participant shall be entitled upon attainment of the applicable performance measures.

Bonus awards under the Long-Term Performance Plan are made based on the relative achievement of performance

measures in terms of the Company-sponsored objectives or objectives related to the performance of the individual participant or of the subsidiary, division, department, region or function in which the participant is employed.

Under the Long-Term Performance Plan, as amended and restated effective January 1, 2018, and as further amended thereafter, the Compensation Committee of the Company’s Board of Directors establishes dollar amounts to which a participant shall be entitled upon attainment of the applicable performance measures.

Bonus awards under the Long-Term Performance Plan are made based on the relative achievement of performance measures in terms of the Company-sponsored objectives or objectives related to the performance of the individual participant or of the subsidiary, division, department, region or function in which the participant is employed.

The liability under this plan was as follows:

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

The Company updates its mortality assumptions used in the calculation of its pension liability each year using The Society of Actuaries’ latest mortality tables and mortality projection scales.

updates its mortality assumptions used in the calculation of its pension liability each year using The Society of Actuaries’ latest mortality tables and mortality projection scales.

During 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.

The assumptions used to estimate the fair value during the annual measurement reflect the incremental cost to terminate the Primary Plan.

The following tables set forth pertinent information for the two Company-sponsored pension plans:

3 unchanged sentences

Interest cost 10,642 9,846

Actuarial (gain) loss ( 12,735 ) 31,300

Plan amendments 154 —

Actuarial gain ( 93,626 ) ( 12,735 )

Benefits paid ( 13,088 ) ( 13,410 )

1 unchanged sentence

Changes in Projected Benefit Obligation

The projected benefit obligations and the accumulated benefit obligations for both Company-sponsored pension plans were in excess of plan assets as of December 31, 2021 and December 31, 2020.

The projected benefit obligation and the accumulated benefit obligation for both Company-sponsored pension plans were in excess of plan assets as of December 31, 2022 and December 31, 2021.

The accumulated benefit obligation was $ 270.1 million on December 31, 2022 and $ 359.5 million on December 31, 2021.

The increase in the discount rates in 2021, as compared to 2020, was the primary driver of actuarial gains in 2021.

The decrease in discount rates in 2020, as compared to 2019, was the primary driver of actuarial losses in 2020.

The actuarial gains and losses, net of tax, were recorded in accumulated other comprehensive loss in the consolidated balance sheets.

The increase in the discount rates for both the Primary Plan and the Bargaining Plan, as compared to the previous years, was the primary driver of the actuarial gains in both 2022 and 2021.

The actuarial gains, net of tax, were recorded in accumulated other comprehensive loss in the consolidated balance sheets.

Change in Plan Assets

21 unchanged sentences

Recognized net actuarial loss 3,990 4,954 4,619

Amortization of prior service cost 3 19 22

Amortization of prior service costs — 3 19

Net periodic pension cost $ 13,075 $ 9,332 $ 8,309

18 unchanged sentences

2028 - 2032 11,892

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

The anticipated future pension benefit payments for 2023 include the payments associated with the termination of the Primary Plan, which will be made from the related plan assets.

The remaining anticipated future pension benefit payments for 2023, and all anticipated future pension benefit payments beyond 2023, relate to the Bargaining Plan.

The Company expects to make cash contributions of approximately $ 5 million to $ 10 million to the Primary Plan during 2023 to fund the termination of the Primary Plan.

The Company also expects to make cash contributions of approximately $ 5 million to $ 10 million to the Bargaining Plan during 2023 to fund the ongoing projected benefit obligation of the Bargaining Plan.

All assets in the Company’s pension plans are invested in institutional investment funds managed by professional investment advisors which hold U.S.

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The objective of the Company’s investment philosophy is to earn the plans’ targeted rate of return over longer periods without assuming excess investment risk.

The weighted average expected long-term rate of return assumption for the pension plan assets, which will be used to compute 2022 net periodic pension costs, is based

upon target asset allocation and is determined using forward-looking performance and duration assumptions in the context of historical returns and volatilities for each asset class.

The weighted average expected long-term rate of return assumption for the pension plan assets, which will be used to compute 2023 net periodic pension cost, is based upon target asset allocation and is determined using forward-looking performance and duration assumptions in the context of historical returns and volatilities for each asset class.

The Company evaluates the rate of return assumption on an annual basis.

The Company’s pension plans target asset allocation for 2022, actual asset allocation at December 31, 2021 and December 31, 2020, and the weighted average expected long-term rate of return by asset category for the Primary Plan were as follows:

The Company’s

actual asset allocation at December 31, 2022 and December 31, 2021 and target asset allocation for 2023 by asset category for the Primary Plan were as follows:

Percentage of Plan

Assets at Fiscal Year-End Target

Allocation Weighted Average Expected

Long-Term Rate of Return

Assets at Fiscal Year-End Target Asset

2022 2021 2023

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Total 100 % 100 % 100 %

The Company’s actual asset allocation at December 31, 2022 and December 31, 2021 and target asset allocation for 2023 by asset category for the Bargaining Plan were as follows:

Percentage of Plan

Assets at Fiscal Year-End Target

Allocation Weighted Average Expected

Long-Term Rate of Return

Assets at Fiscal Year-End Target Asset

2022 2021 2023

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Total 100 % 100 % 100 %

Debt securities as of December 31, 2021 are comprised of investments in government and corporate bonds with a weighted average maturity of approximately 13 years for the Primary Plan and approximately 22 years for the Bargaining Plan.

Both plans also hold an institutional high yield bond fund with a modified duration of approximately 3 years.

equity securities include:

The expected long-term rate of return on assets for the Primary Plan and the Bargaining Plan as of December 31, 2022 were 5.00 % and 7.00 %, respectively.

Debt securities as of December 31, 2022 were comprised primarily of investments in government and corporate bonds with a weighted average maturity of approximately 12 years for the Primary Plan and approximately 19 years for the Bargaining Plan.

equity securities in the Bargaining Plan as of December 31, 2022 included:

(i) large-capitalization domestic equity funds as represented by the S&P 500 index, (ii) mid-capitalization domestic equity funds as represented by the Russell Mid Cap Growth and Value indexes, (iii) small-capitalization domestic equity funds as represented by the Russell Small Cap Growth and Value indexes and (iv) alternative investment funds as represented by the HFRX Global index and the MSCI US REIT index.

International equity securities include companies from both developed and emerging markets outside the United States.

International equity securities in the Bargaining Plan as of December 31, 2022 included companies from both developed and emerging markets outside the United States.

Cash and cash equivalents have a weighted average duration of less than one year .

14 unchanged sentences

Postretirement Benefits

The Company provides postretirement benefits for employees meeting specified criteria.

The Company provides postretirement benefits for employees meeting specified qualifying criteria.

The Company recognizes the cost of postretirement benefits, which consist principally of medical benefits, during employees’ periods of active service.

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Plan participants’ contributions 657 930

Actuarial (gain) loss ( 3,414 ) 4,555

Actuarial gain ( 10,138 ) ( 3,414 )

Benefits paid ( 3,757 ) ( 3,313 )

Benefit obligation at end of year $ 55,299 $ 65,156

The increase in the discount rate for the postretirement benefit plan, as compared to the previous years, was the primary driver of the actuarial gain in both 2022 and 2021.

The actuarial gain, net of tax, was recorded in accumulated other comprehensive loss in the consolidated balance sheets.

Reconciliation of Plan Assets Fair Value

15 unchanged sentences

Recognized net actuarial loss 444 682 383

Amortization of prior service cost — — ( 1,293 )

Net periodic postretirement benefit cost $ 3,825 $ 3,970 $ 3,868

1 unchanged sentence

2022 2021 2020

Benefit obligation discount rate at measurement date 2.98 % 2.70 % 3.32 %

Benefit obligation at the measurement date:

Weighted average healthcare cost trend rate - Pre-Medicare 6.58 % 6.04 % 6.26 %

Weighted average healthcare cost trend rate - Post-Medicare 6.89 % 6.29 % 6.54 %

Benefit obligation discount rate 5.19 % 2.98 % 2.70 %

Net periodic postretirement benefit cost discount rate for fiscal year 2.98 % 2.70 % 3.32 %

10 unchanged sentences

2028 - 2032 22,825

A reconciliation of the amounts in accumulated other comprehensive loss not yet recognized as components of net periodic benefit cost is as follows:

A reconciliation of the gross amounts in accumulated other comprehensive loss not yet recognized as components of net periodic benefit cost is as follows:

(in thousands) December 31,

2020 Actuarial

Loss Reclassification

2021 Actuarial Gain (Loss) Reclassification

Adjustments December 31,

2 unchanged sentences

Prior service costs ( 4 ) ( 154 ) — ( 158 )

Postretirement Benefits:

Actuarial loss ( 13,908 ) 3,414 682 ( 9,812 )

Postretirement Medical:

Actuarial gain (loss) ( 9,812 ) 10,138 444 770

Total within accumulated other comprehensive loss $ ( 137,629 ) $ 16,247 $ 4,434 $ ( 116,948 )

9 unchanged sentences

The Company does not anticipate withdrawing from the Teamsters Plan.

In 2015, the Company increased its contribution rates to the Teamsters Plan, with additional increases occurring annually, as part of a rehabilitation plan, which was incorporated into the renewal of collective bargaining agreements with the unions effective

April 28, 2014 and adopted by the Company as a rehabilitation plan effective January 1, 2015.

This is a result of the Teamsters Plan being certified by its actuary as being in “critical” status for the plan year beginning January 1, 2013.

7 unchanged sentences

According to the Teamsters Plan’s Form 5500 for both the plan years ended December 31, 2021 and December 31, 2020, the Company was not listed as providing more than 5% of the total contributions.

At the date these financial statements were issued, a Form 5500 was not available for the plan year ended December 31, 2021.

At the date these consolidated financial statements were issued, a Form 5500 was not available for the plan year ended December 31, 2022.

The Company has a liability recorded for withdrawing from a multiemployer pension plan in 2008 and is required to make payments of approximately $ 1 million to this multiemployer pension plan each year through 2028.

6 unchanged sentences

Noncurrent deferred proceeds from related parties 103,240 106,304

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

Other 10,915 14,584

11 unchanged sentences

2022 December 31,

2016 Term Loan Facility (1)

6/7/2021 Variable Varies Nonpublic $ — $ 217,500

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

2021 Term Loan Facility (2)

7/9/2024 Variable Varies Nonpublic — —

Senior notes (1)

2/27/2023 3.28 % Semi-annually Nonpublic $ — $ 125,000

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 below) balance was classified as long term as the Company intended to refinance outstanding principal payments due in the next 12 months using the 2018 Revolving Credit Facility (as defined below), which was classified as long-term debt, and the Company was not restricted by any subjective acceleration clause within the agreement for the 2018 Revolving Credit Facility.

(2) The 2021 Term Loan Facility 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 monitors counterparty credit ratings on an ongoing basis.

On June 7, 2021, the Company used a combination of cash on hand and borrowings under its 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 Secured Overnight Funding Rate 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.

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 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.

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

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

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

Commitments and Contingencies

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

The amount guaranteed was $ 9.5 million on December 31, 2021 and $ 14.7 million on December 31, 2020.

The amount guaranteed was $ 9.5 million on both December 31, 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.

The Company does not anticipate SAC will fail to fulfill its commitments related to the debt.

The Company further believes SAC has sufficient assets, including production equipment, facilities and working capital, and the ability to adjust selling prices of its products to adequately mitigate the risk of material loss from the Company’s guarantee.

The Company further believes SAC has sufficient assets, including production equipment, facilities and working capital, and the ability to adjust the selling prices of its products to adequately mitigate the risk of material loss from the Company’s guarantee.

The Company holds no assets as collateral against the SAC guarantee, the fair value of which is immaterial to the consolidated financial statements.

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Failure to meet the requirements of these beverage agreements could result in the loss of distribution rights for the respective products.

The Company faces concentration risks related to a few customers comprising a large portion of the Company’s annual sales volume and net revenue.

The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers, as well as the percentage of the Company’s total net sales, which are included in the Nonalcoholic Beverages segment, that such volume represents.

The Company faces concentration risks related to a few customers comprising a large portion of the Company’s annual sales volume and net sales.

The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers,

as well as the percentage of the Company’s total net sales, which are included in the Nonalcoholic Beverages segment, that such volume represents.

No other customer represented greater than 10% of the Company’s total net sales for any years presented.

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Total approximate percent of the Company’s total net sales 26 % 23 % 24 %

The Company purchases all of the plastic bottles used in its manufacturing plants from Southeastern and Western Container, two manufacturing cooperatives the Company co-owns with several other Coca‑Cola bottlers, and a majority of its aluminum cans from two domestic suppliers.

The Company began sourcing aluminum cans from international locations in 2020.

The Company purchases all of the plastic bottles used in its manufacturing plants from Southeastern and Western Container, two manufacturing cooperatives the Company co-owns with several other Coca‑Cola bottlers, and all of its aluminum cans from two domestic suppliers.

See Note 2 and Note 19 for additional information.

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The Company participates in commodity hedging and risk mitigation programs, including programs administered by CCBSS and programs we administer.

Certain liabilities of the Company, including floating rate debt, retirement benefit obligations and the Company’s pension liability, are subject to risk of changes in both long-term and short-term interest rates.

Certain liabilities of the Company, including retirement benefit obligations and the Company’s pension liability, are subject to risk of changes in both long-term and short-term interest rates.

The Company’s contingent consideration liability resulting from the acquisition of certain distribution territories is subject to risk as a result of changes in the Company’s probability weighted discounted cash flow model, which is based on internal forecasts, and changes in the Company’s WACC, which is derived from market data.

Approximately 13 % of the Company’s labor force is covered by collective bargaining agreements.

The Company’s collective bargaining agreements, which generally have 3 - to 5 -year terms, expire at various dates through 2026.

Approximately 13 % of the Company’s workforce is covered by collective bargaining agreements.

The Company’s collective bargaining agreements, which generally have three - to five-year terms, expire at various dates through 2027.

Terms and conditions of new labor union agreements could increase the Company’s exposure to work interruptions or stoppages.

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Actuarial loss $ ( 78,882 ) $ 6,263 $ ( 1,533 ) $ 3,990 $ ( 978 ) $ ( 71,140 )

Prior service credits 8 — — 3 — 11

Prior service credits (costs) 11 ( 154 ) 38 — — ( 105 )

Net postretirement benefits activity:

Actuarial loss ( 4,328 ) 3,414 ( 838 ) 682 ( 169 ) ( 1,239 )

Actuarial gain (loss) ( 1,239 ) 10,138 ( 2,481 ) 444 ( 110 ) 6,752

Prior service costs ( 624 ) — — — — ( 624 )

Interest rate swap (1)

( 556 ) — — 739 ( 183 ) —

Foreign currency translation adjustment ( 9 ) — — 11 ( 2 ) —

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Total AOCI(L) $ ( 100,463 ) $ 16,247 $ ( 3,976 ) $ 4,445 $ ( 1,090 ) $ ( 84,837 )

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

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

Gains (Losses) During the Period Reclassification to Income

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Actuarial loss $ ( 93,847 ) $ 14,897 $ ( 3,658 ) $ 4,954 $ ( 1,228 ) $ ( 78,882 )

Prior service credits (costs) ( 7 ) — — 19 ( 4 ) 8

Prior service credits 8 — — 3 — 11

Net postretirement benefits activity:

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Interest rate swap (1)

( 556 ) — — 739 ( 183 ) —

Foreign currency translation adjustment 14 — — ( 32 ) 9 ( 9 )

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Total AOCI(L) $ ( 119,053 ) $ 18,311 $ ( 4,496 ) $ 6,346 $ ( 1,571 ) $ ( 100,463 )

(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 consolidated balance sheets.

Gains (Losses) During the Period Reclassification to Income

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Actuarial loss $ ( 93,174 ) $ ( 5,521 ) $ 1,369 $ 4,619 $ ( 1,140 ) $ ( 93,847 )

Prior service costs ( 24 ) — — 22 ( 5 ) ( 7 )

Prior service credits (costs) ( 7 ) — — 19 ( 4 ) 8

Net postretirement benefits activity:

Actuarial loss ( 1,191 ) ( 4,555 ) 1,129 383 ( 94 ) ( 4,328 )

Prior service credits (costs) 351 — — ( 1,293 ) 318 ( 624 )

Prior service costs ( 624 ) — — — — ( 624 )

Interest rate swap ( 270 ) — — ( 378 ) 92 ( 556 )

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Activity Net Postretirement

Benefits Activity Interest Rate

Swap Foreign Currency

Benefits Activity Foreign Currency

Translation Adjustment Total

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(in thousands) 2022 2021 2020

Additions (reductions) to leased property under financing leases $ ( 55,465 ) $ — $ 61,121

Additions to property, plant and equipment accrued and recorded in accounts payable, trade 44,775 35,809 17,025

Dividends declared but not yet paid 32,808 — —

Right-of-use assets obtained in exchange for operating lease obligations 25,130 26,907 42,698

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

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

Management’s Report on Internal Control over Financial Reporting

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We have audited the accompanying consolidated balance sheets of Coca‑Cola Consolidated, Inc.

and its subsidiaries (the “Company”) as of December 31, 2021 and December 31, 2020, and the related consolidated statements of operations, of comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes and schedule of valuation and qualifying accounts and reserves for each of the three years in the period ended December 31, 2021 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and schedule of valuation and qualifying accounts and reserves for each of the three years in the period ended December 31, 2022 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and December 31, 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

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(“CCR”), a wholly owned subsidiary of The Coca‑Cola Company, 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.

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 using a probability weighted discounted cash flow model and discounting future expected sub-bottling payments required under the CBA using the Company’s estimated weighted average cost of capital (“WACC”).

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

The principal considerations for our determination that performing procedures relating to the acquisition related contingent consideration liability is a critical audit matter are (i) the significant judgment by management when estimating the fair value of the acquisition related contingent consideration liability, which in turn led to (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the WACC and current and future sub-bottling payments under the CBA, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

The CBA relates 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.

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 using a probability weighted discounted cash flow model and discounting future expected acquisition related sub-bottling payments required under the CBA using the Company’s estimated weighted average cost of capital (“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 forty 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.

The principal considerations for our determination that performing procedures relating to the acquisition related contingent consideration liability is a critical audit matter are (i) the significant judgment by management when estimating the fair value of the acquisition related contingent consideration liability, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the WACC and current and future acquisition related sub-bottling payments under the CBA, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

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testing the completeness and accuracy of the underlying data used in the model;

and evaluating the reasonableness of the significant assumptions related to the WACC and current and future sub-bottling payments under the CBA.

Evaluating management’s assumptions related to the WACC and current and future sub-bottling payments involved evaluating whether the assumptions used were reasonable considering (i) the current and past performance of the distribution territories acquired from CCR, (ii) relevant industry forecasts and macroeconomic conditions, (iii) management’s historical forecasting accuracy, and (iv) whether these assumptions were consistent with evidence obtained in other areas of the audit.

and evaluating the reasonableness of the significant assumptions related to the WACC and current and future acquisition related sub-bottling payments under the CBA.

Evaluating management’s assumptions related to the WACC and current and future acquisition related sub-bottling payments involved evaluating whether the assumptions used were reasonable considering (i) the current and past performance of the distribution territories acquired from CCR, (ii) relevant industry forecasts and macroeconomic conditions, (iii) management’s historical forecasting accuracy, and (iv) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the discounted cash flow model and evaluating the reasonableness of the WACC.

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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 8. Financial Statements and Supplementary Data