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Item 1. Financial Statements

2023-05-03 compared with 2022-11-01 · 142 added, 228 removed, 644 unchanged (36% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Third Quarter First Nine Months

First Quarter

(in thousands, except per share data) 2023 2022

5 unchanged sentences

Interest expense, net 2,929 7,699

Other expense, net 24,746 34,982 27,666 94,078

Other expense (income), net 43,923 ( 3,279 )

Income before taxes 159,202 126,565

17 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Third Quarter First Nine Months

First Quarter

(in thousands) 2023 2022

6 unchanged sentences

Actuarial gain — 69

Interest rate swap — — — 556

Foreign currency translation adjustment — ( 6 ) — ( 15 )

Other comprehensive income, net of tax 738 815

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(in thousands, except share data) March 31, 2023 December 31, 2022

Current Assets:

6 unchanged sentences

Prepaid expenses and other current assets 88,288 94,263

Assets held for sale 3,045 6,880

Total current assets 1,353,627 1,245,801

16 unchanged sentences

Accrued interest payable 5,842 2,677

Dividends payable — 32,808

Total current liabilities 812,575 905,156

9 unchanged sentences

30,000,000 shares authorized;

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

11,431,367 shares issued

11,431 11,431

1 unchanged sentence

10,000,000 shares authorized;

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

1,632,810 shares issued

Additional paid-in capital 135,953 135,953

12 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

First Nine Months

First Quarter

(in thousands) 2023 2022

5 unchanged sentences

Fair value adjustment of acquisition related contingent consideration 41,654 ( 5,457 )

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

Deferred income taxes 40,743 33,130

1 unchanged sentence

Amortization of debt costs 246 249

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

Change in current assets less current liabilities ( 49,538 ) ( 32,415 )

5 unchanged sentences

Additions to property, plant and equipment $ ( 52,700 ) $ ( 104,353 )

Acquisition of BODYARMOR distribution rights ( 30,149 ) ( 1,998 )

Proceeds from the sale of property, plant and equipment 158 2,178

Acquisition of distribution rights — ( 30,149 )

Investment in CONA Services LLC — ( 197 )

1 unchanged sentence

Cash Flows from Financing Activities:

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

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

Cash dividends paid $ ( 32,808 ) $ ( 2,344 )

Payments of acquisition related contingent consideration ( 6,499 ) ( 9,822 )

Payments on financing lease obligations ( 558 ) ( 1,375 )

Debt issuance fees ( 154 ) ( 48 )

Borrowings under term loan facility — 70,000

Payments on revolving credit facility — ( 55,000 )

Borrowings under revolving credit facility — 55,000

Net cash used in financing activities $ ( 40,019 ) $ ( 13,589 )

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

Net increase (decrease) in cash during period $ 92,133 $ ( 15,229 )

Cash at beginning of period 197,648 142,314

1 unchanged sentence

Significant non-cash investing and financing activities:

Reductions to leased property under financing leases $ 55,465 $ —

Additions to property, plant and equipment accrued and recorded in accounts payable, trade $ 18,112 $ 12,703

Right-of-use assets obtained in exchange for operating lease obligations 723 5,048

Reductions to leased property under financing leases — 55,465

See accompanying notes to condensed consolidated financial statements.

10 unchanged sentences

Stock Treasury Stock - Class B Common Stock Total

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

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

Other comprehensive income, net of tax — — — — 815 — — 815

Cash dividends paid:

Common Stock ($ 0.25 per share)

— — — ( 2,092 ) — — — ( 2,092 )

Class B Common Stock ($ 0.25 per share)

— — — ( 251 ) — — — ( 251 )

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

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

1 unchanged sentence

Other comprehensive income, net of tax — — — — 738 — — 738

Cash dividends paid:

Dividends declared:

Common Stock ($ 0.00 per share)

2 unchanged sentences

— — — — — — — —

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

1,227 ( 1,227 ) — — — — — —

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

Balance on March 31, 2023 $ 11,431 $ 1,633 $ 135,953 $ 1,230,589 $ ( 84,099 ) $ ( 60,845 ) $ ( 409 ) $ 1,234,253

(in thousands, except share data) Common

7 unchanged sentences

Stock Treasury Stock - Class B Common Stock Total

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

Net income — — — 68,930 — — — 68,930

Other comprehensive income, net of tax — — — — 1,051 — — 1,051

Cash dividends paid:

Common Stock ($ 0.25 per share)

— — — ( 1,785 ) — — — ( 1,785 )

Class B Common Stock ($ 0.25 per share)

— — — ( 558 ) — — — ( 558 )

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

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

1 unchanged sentence

Other comprehensive income, net of tax — — — — 815 — — 815

Cash dividends paid:

Dividends declared:

Common Stock ($ 0.25 per share)

2 unchanged sentences

— — — ( 558 ) — — — ( 558 )

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

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

1,227 ( 1,227 ) — — — — — —

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

See accompanying notes to condensed consolidated financial statements.

9 unchanged sentences

The condensed consolidated financial statements presented are:

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

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

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

• The financial position as of March 31, 2023 and December 31, 2022.

• The results of operations, comprehensive income and changes in stockholders’ equity for the three-month periods ended March 31, 2023 (the “first quarter” of fiscal 2023 (“2023”)) and April 1, 2022 (the “first quarter” of fiscal 2022 (“2022”)).

• The changes in cash flows for the first quarter of 2023 and the first quarter of 2022.

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

The accounting policies followed in the presentation of interim financial results are consistent with those followed on an annual basis.

These policies are presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for 2021 filed with the United States Securities and Exchange Commission (the “SEC”).

These policies are presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for 2022 filed with the United States Securities and Exchange Commission.

The preparation of condensed consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

6 unchanged sentences

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

Recently Adopted 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 supply chain 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 adopted ASU 2022-04 in the first quarter of 2023, with the exception of the amendment on rollforward information, and the adoption did not have a material impact on its condensed consolidated financial statements.

See Note 12 for disclosures related to the Company’s supply chain finance programs.

Related Party Transactions

The Coca‑Cola Company

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.

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.

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

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

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

The 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 the Company’s soft drink products, either concentrate or syrup, are manufactured.

As of March 31, 2023, 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 March 31, 2023, 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 certain trusts established for the benefit of descendants of the late J.

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

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

Frank Harrison, Jr.

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.

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

Third Quarter First Nine Months

First Quarter

(in thousands) 2023 2022

2 unchanged sentences

Payments made by The Coca-Cola Company to the Company 47,439 59,669

(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.

(1) This excludes acquisition related sub-bottling payments made by the Company to CCR (as defined below), 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.

7 unchanged sentences

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

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

These sub-bottling payments are based on gross profit derived from the Company’s sales of certain beverages and beverage products that are sold under the same trademarks that identify a covered beverage, a beverage product or certain cross-licensed brands applicable to the System Transformation (“acquisition related sub-bottling payments”).

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

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 $ 6.5 million in the first quarter of 2023 and $ 9.8 million in the first quarter of 2022.

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) September 30, 2022 December 31, 2021

(in thousands) March 31, 2023 December 31, 2022

Current portion of acquisition related contingent consideration $ 42,206 $ 40,060

4 unchanged sentences

The Company accounts for Southeastern as an equity method investment.

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

The Company’s investment in Southeastern, which was classified as other assets in the condensed consolidated balance sheets, was $ 21.8 million as of March 31, 2023 and $ 21.2 million as of December 31, 2022.

South Atlantic Canners, Inc.

2 unchanged sentences

The Company accounts for SAC as an equity method investment.

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

The Company’s investment in SAC, which was classified as other assets in the condensed consolidated balance sheets, was $ 10.4 million as of March 31, 2023 and $ 8.2 million as of December 31, 2022.

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

1 unchanged sentence

The Company receives a fee for managing the day-to-day operations of SAC pursuant to a management agreement.

Proceeds from management fees received from SAC, which were recorded as a reduction to cost of sales in the condensed consolidated statements of operations, were $ 6.7 million in the first nine months of 2022 and $ 6.6 million in the first nine months of 2021.

Proceeds from management fees received from SAC, which were recorded as a reduction to cost of sales in the condensed consolidated statements of operations, were $ 2.2 million in the first quarter of 2023 and $ 2.1 million in the first quarter of 2022.

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

2 unchanged sentences

CCBSS negotiates the procurement for the majority of the Company’s raw materials, excluding concentrate, and the Company receives a rebate from CCBSS for the purchase of these raw materials.

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

The Company had rebates due from CCBSS of $ 20.7 million on March 31, 2023 and $ 25.7 million on December 31, 2022, which were classified as accounts receivable, other in the condensed consolidated balance sheets.

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

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

The Company incurred administrative fees to CCBSS of $ 1.9 million in the first nine months of 2022 and $ 2.2 million in the first nine months of 2021, which were classified as selling, delivery and administrative (“SD&A”) expenses in the condensed consolidated statements of operations.

CONA Services LLC (“CONA”)

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.

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

The Company’s investment in CONA, which was classified as other assets in the condensed consolidated balance sheets, was $ 17.9 million as of March 31, 2023 and $ 16.9 million as of December 31, 2022.

Pursuant to an amended and restated master services agreement with CONA, the Company is authorized to use the Coke One North America system (the “CONA System”), a uniform information technology system developed to promote operational efficiency and uniformity among North American Coca‑Cola bottlers.

In exchange for the Company’s rights to use the CONA System and receive CONA-related services, it is charged service fees by CONA.

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

The Company incurred service fees to CONA of $ 6.4 million in the first quarter of 2023 and $ 6.0 million in the first quarter of 2022.

Related Party Leases

3 unchanged sentences

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

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

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

Frank Harrison, III and Sue Anne H.

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

Everett is a permissible, discretionary beneficiary.

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 September 30, 2022 and there was a principal balance outstanding of $ 59.1 million on December 31, 2021.

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

Third Quarter First Nine Months

The principal balance outstanding under this lease was $ 24.7 million on March 31, 2023 and $ 25.5 million on December 31, 2022.

A summary of rental payments for related party leases for the first quarter of 2023 and the first quarter of 2022 is as follows:

First Quarter

(in thousands) 2023 2022

1 unchanged sentence

Snyder Production Center (1)

(1) The lease for the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina (together, the “Snyder Production Center”) was terminated during the first quarter of 2022 in connection with the purchase of the Snyder Production Center by CCBCC Operations, LLC, a wholly owned subsidiary of the Company.

Long-Term Performance Equity Plan

4 unchanged sentences

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

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

Compensation expense for the Long-Term Performance Equity Plan, which was included in selling, delivery and administrative (“SD&A”) expenses in the condensed consolidated statements of operations, was $ 2.0 million in both the first quarter of 2023 and the first quarter of 2022.

Revenue Recognition

10 unchanged sentences

Bottle/can sales, sales to other Coca‑Cola bottlers and post-mix sales are recognized when control transfers to a customer, which is generally upon delivery and is considered a single point in time (“point in time”).

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

Point in time sales accounted for approximately 98 % of the Company’s net sales in the first quarter of 2023 and approximately 97 % of the Company’s net sales in the first quarter of 2022.

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

5 unchanged sentences

The following table represents a disaggregation of revenue from contracts with customers:

Third Quarter First Nine Months

First Quarter

(in thousands) 2023 2022

11 unchanged sentences

Returned product is recognized as a reduction to net sales.

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

The Company’s reserve for customer returns was $ 3.0 million as of both March 31, 2023 and December 31, 2022.

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

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

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

First Nine Months

Following is a summary of activity for the allowance for credit losses during the first quarter of 2023 and the first quarter of 2022:

First Quarter

(in thousands) 2023 2022

Beginning balance - allowance for credit losses $ 13,119 $ 14,336

Additions charged to expenses and as reductions to net sales 1,987 2,619

Additions charged to expenses and as a reduction to net sales 1,631 27

Deductions ( 744 ) ( 601 )

Ending balance - allowance for credit losses $ 14,006 $ 13,762

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

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

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

4 unchanged sentences

The Company’s segment results are as follows:

Third Quarter First Nine Months

First Quarter

(in thousands) 2023 2022

4 unchanged sentences

Consolidated net sales $ 1,571,642 $ 1,404,358

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

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

First Quarter

(in thousands) 2023 2022

Income from operations:

6 unchanged sentences

Consolidated depreciation and amortization $ 43,509 $ 43,269

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

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

Net Income Per Share

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

Third Quarter First Nine Months

First Quarter

(in thousands, except per share data) 2023 2022

15 unchanged sentences

Numerator for basic net income per Common Stock share $ 105,463 $ 73,249

Third Quarter First Nine Months

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

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

11 unchanged sentences

Numerator for diluted net income per Class B Common Stock share $ 12,834 $ 20,316

First Quarter

(in thousands, except per share data) 2023 2022

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

20 unchanged sentences

(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:

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

(in thousands) March 31, 2023 December 31, 2022

Finished products $ 220,027 $ 211,089

4 unchanged sentences

Prepaid expenses and other current assets consisted of the following:

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

(in thousands) March 31, 2023 December 31, 2022

Repair parts $ 35,850 $ 35,088

Prepaid software 7,660 7,398

Prepaid marketing 5,516 4,380

Prepaid taxes 6,966 7,829

Prepaid marketing 5,082 4,303

Commodity hedges at fair market value 1,723 4,808

1 unchanged sentence

Total prepaid expenses and other current assets $ 88,288 $ 94,263

Assets Held for Sale

As of September 30, 2022, certain properties owned by the Company met the accounting guidance criteria to be classified as assets held for sale.

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

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) September 30, 2022 December 31, 2021

Land $ 1,691 $ 2,906

Buildings and leasehold and land improvements 1,354 3,974

Total assets held for sale $ 3,045 $ 6,880

Property, Plant and Equipment, Net

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

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

(in thousands) March 31, 2023 December 31, 2022 Estimated Useful Lives

Land $ 88,185 $ 88,185

11 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Weighted average remaining lease term:

4 unchanged sentences

Financing leases 5.2 % 5.2 %

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 condensed consolidated statements of operations:

Third Quarter First Nine Months

First Quarter

(in thousands) 2023 2022

5 unchanged sentences

The future minimum lease payments related to the Company’s leases include renewal options the Company has determined to be reasonably certain and exclude payments to landlords for real estate taxes and common area maintenance.

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

Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of March 31, 2023:

(in thousands) Operating Leases Financing Leases

24 unchanged sentences

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

First Nine Months

First Quarter

(in thousands) 2023 2022

6 unchanged sentences

Total cash flows from financing activities impact $ 558 $ 1,375

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

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

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

Distribution Agreements, Net

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

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

(in thousands) March 31, 2023 December 31, 2022

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

1 unchanged sentence

Distribution agreements, net $ 835,812 $ 842,035

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

First Nine Months

Following is a summary of activity for distribution agreements, net during the first quarter of 2023 and the first quarter of 2022:

First Quarter

(in thousands) 2023 2022

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

BODYARMOR distribution rights 30,149 14

Other distribution agreements — 30,149

Additional accumulated amortization ( 6,223 ) ( 6,223 )

2 unchanged sentences

Customer lists, net, which are amortized on a straight-line basis and have an estimated useful life of five to 12 years, consisted of the following:

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

(in thousands) March 31, 2023 December 31, 2022

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

1 unchanged sentence

Customer lists, net $ 8,714 $ 9,165

Supply Chain Finance Programs

The Company has an agreement with a third-party financial institution to facilitate a supply chain finance (“SCF”) program, which allows qualifying suppliers to sell their receivables from the Company to the financial institution.

The participating suppliers negotiate their outstanding receivable arrangements and associated fees directly with the financial institution, and the Company is not party to those agreements.

Once a qualifying supplier elects to participate in the SCF program and reaches an agreement with a financial institution, the supplier elects which individual Company invoices it sells to the financial institution.

The supplier invoices that have been confirmed as valid under the SCF program require payment in full by the financial institution to the supplier by the original maturity date of the invoice, or discounted payment at an earlier date as agreed upon with the supplier.

The Company’s obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted by a supplier’s participation in the SCF program.

All outstanding amounts related to suppliers participating in the SCF program are recorded in accounts payable, trade in the condensed consolidated balance sheets, and associated payments are included in operating activities in the condensed consolidated statements of cash flows.

The Company’s outstanding confirmed obligations included in accounts payable, trade in the condensed consolidated balance sheets were $ 47.3 million as of March 31, 2023 and $ 44.2 million as of December 31, 2022.

Other Accrued Liabilities

Other accrued liabilities consisted of the following:

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

(in thousands) March 31, 2023 December 31, 2022

Accrued insurance costs $ 59,835 $ 54,180

Current portion of acquisition related contingent consideration 42,206 40,060

Accrued marketing costs 33,858 33,375

Employee and retiree benefit plan accruals 29,692 31,711

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

Accrued taxes (other than income taxes) 9,508 7,127

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

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

All other accrued expenses 26,481 31,847

Total other accrued liabilities $ 201,580 $ 198,300

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

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

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

Commodity Derivative Instruments

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These commodity derivative instruments are not designated as hedging instruments under GAAP and are used as “economic hedges” to manage certain commodity price risk.

The Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk.

The Company uses several different financial institutions for commodity derivative instruments to

minimize the concentration of credit risk.

While the Company would be exposed to credit loss in the event of nonperformance by these counterparties, the Company does not anticipate nonperformance by these counterparties.

3 unchanged sentences

The following table summarizes pre-tax changes in the fair values of the Company’s commodity derivative instruments and the classification of such changes in the condensed consolidated statements of operations:

Third Quarter First Nine Months

First Quarter

(in thousands) 2023 2022

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

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

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

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

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

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

(in thousands) March 31, 2023 December 31, 2022

Prepaid expenses and other current assets $ 1,723 $ 4,808

Other assets 777 —

Total assets $ 1,723 $ 4,808

Other accrued liabilities $ 625 $ —

Total liabilities $ 625 $ —

The following table summarizes the Company’s gross commodity derivative instrument assets and gross commodity derivative instrument liabilities in the condensed consolidated balance sheets:

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

(in thousands) March 31, 2023 December 31, 2022

Gross commodity derivative instrument assets $ 1,723 $ 4,808

1 unchanged sentence

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

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

(in thousands) March 31, 2023 December 31, 2022

Notional amount of outstanding commodity derivative instruments $ 51,696 $ 61,128

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

September 30, 2022

March 31, 2023

(in thousands) Carrying

5 unchanged sentences

Deferred compensation plan liabilities 57,203 57,203 57,203 — —

Commodity derivative instruments 625 625 — 625 —

Long-term debt 598,860 584,000 — 584,000 —

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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 applicable distribution assets acquired from CCR, which is generally 40 years.

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 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.

Changes in any of these Level 3 inputs, particularly the underlying risk-free interest rate used to estimate the Company’s

WACC, could result in material changes to the fair value of the acquisition related contingent consideration liability and could materially impact the amount of non-cash expense (or income) recorded each reporting period.

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

A summary of the Level 3 activity is as follows:

Third Quarter First Nine Months

First Quarter

(in thousands) 2023 2022

2 unchanged sentences

Reclassification to current payables ( 200 ) 1,100

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

Increase (decrease) in fair value 41,654 ( 5,457 )

Ending balance - Level 3 liability $ 576,446 $ 527,926

As of September 30, 2022 and October 1, 2021, discount rates of 9.3 % and 7.6 %, respectively, were utilized in the valuation of the Company’s acquisition related contingent consideration liability.

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

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

As of March 31, 2023 and April 1, 2022, discount rates of 8.7 % and 8.1 %, respectively, were utilized in the valuation of the Company’s acquisition related contingent consideration liability.

The increase in the fair value of the acquisition related contingent consideration liability in the first quarter of 2023 was driven by a decrease in the discount rate used to calculate fair value from 9.1 % as of December 31, 2022 to 8.7 % as of March 31, 2023, as well as higher projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments.

This fair value adjustment was recorded in other expense (income), net in the condensed consolidated statement of operations for the first quarter of 2023.

The Company anticipates that the amount it could pay annually under the acquisition related contingent consideration arrangements for the distribution territories subject to acquisition related sub-bottling payments will be in the range of $ 35 million to $ 76 million.

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

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

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

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

The Company’s effective income tax rate was 25.8 % for the first quarter of 2023 and 26.2 % for the first quarter of 2022.

The Company’s income tax expense was $ 41.1 million for the first quarter of 2023 and $ 33.2 million for the first quarter of 2022.

The increase in income tax expense was primarily attributable to higher income before taxes during the first quarter of 2023 compared to the first quarter of 2022.

The Company had uncertain tax positions, including accrued interest, of $ 0.3 million on both March 31, 2023 and December 31, 2022, all of which would affect the Company’s effective income tax rate if recognized.

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

7 unchanged sentences

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

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

During 2023, the Company has offered a lump sum benefit payout option to certain plan participants.

The Company expects to complete the purchase of group annuity contracts that will transfer the pension benefit obligation for the Primary Plan to an insurance company in 2023.

The components of net periodic pension cost were as follows:

Third Quarter First Nine Months

First Quarter

(in thousands) 2023 2022

5 unchanged sentences

Net periodic pension cost $ 2,670 $ 3,473

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

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

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

The Company did no t make any contributions to the two Company-sponsored pension plans during the first quarter of 2023.

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.

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.

1 unchanged sentence

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

Third Quarter First Nine Months

First Quarter

(in thousands) 2023 2022

5 unchanged sentences

Other liabilities consisted of the following:

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

(in thousands) March 31, 2023 December 31, 2022

Noncurrent portion of acquisition related contingent consideration $ 534,240 $ 501,431

8 unchanged sentences

Rate Interest

Nonpublic September 30,

Nonpublic March 31,

2023 December 31,

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

Senior bonds (1)

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

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

Revolving credit facility (2)

7/9/2026 Variable Varies Nonpublic — —

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

5 unchanged sentences

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

(2) During the first quarter of 2023, the Company amended its revolving credit facility to complete the transition of the interest rate index from the London InterBank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR), as contemplated in the revolving credit facility.

The Company mitigates its financing risk by using multiple financial institutions and only entering into credit arrangements with institutions with investment grade credit ratings.

The Company monitors counterparty credit ratings on an ongoing basis.

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

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

The indenture under which the Company’s senior bonds were issued does not include financial covenants but does limit the incurrence of certain liens and encumbrances as well as indebtedness by the Company’s subsidiaries in excess of certain amounts.

1 unchanged sentence

a consolidated cash flow/fixed charges ratio and a consolidated funded indebtedness/cash flow ratio, each as defined in the respective agreement.

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

The Company was in compliance with these covenants as of March 31, 2023.

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

5 unchanged sentences

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

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

The Company purchased 6.2 million cases and 6.5 million cases of finished product from SAC in the first quarter of 2023 and the first quarter of 2022, respectively.

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

Third Quarter First Nine Months

First Quarter

(in thousands) 2023 2022

3 unchanged sentences

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

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

The amount guaranteed was $ 9.5 million on both March 31, 2023 and December 31, 2022.

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 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 condensed consolidated financial statements.

The Company monitors its investment in SAC and would be required to write down its investment if an impairment, other than a temporary impairment, was identified.

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

The Company monitors its investment in SAC and would be required to write down its

investment if an impairment, other than a temporary impairment, was identified.

No impairment of the Company’s investment in SAC was identified as of March 31, 2023, and there was no impairment identified in 2022.

Other Commitments and Contingencies

The Company has standby letters of credit, primarily related to its property and casualty insurance programs.

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

These letters of credit totaled $ 37.6 million on both March 31, 2023 and December 31, 2022.

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

As of September 30, 2022, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 132.7 million.

As of March 31, 2023, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 137.1 million.

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

7 unchanged sentences

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

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

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

Net pension activity:

Actuarial loss $ ( 77,391 ) $ 989 $ ( 243 ) $ ( 76,645 )

Prior service credits 11 — — 11

Net postretirement benefits activity:

Actuarial loss ( 1,101 ) 92 ( 23 ) ( 1,032 )

Prior service costs ( 624 ) — — ( 624 )

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

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

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

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

Following is a summary of AOCI(L) for the first quarter of 2023 and the first quarter of 2022:

(in thousands) December 31, 2022 Pre-tax Activity Tax Effect March 31, 2023

Net pension activity:

Actuarial loss $ ( 71,140 ) $ 973 $ ( 238 ) $ ( 70,405 )

Prior service credits 9 1 — 10

Net postretirement benefits activity:

Actuarial loss ( 4,049 ) 186 ( 46 ) ( 3,909 )

Prior service costs ( 105 ) 4 ( 1 ) ( 102 )

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

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

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

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

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

Net pension activity:

Actuarial loss $ ( 78,882 ) $ 2,966 $ ( 729 ) $ ( 76,645 )

Prior service credits 11 — — 11

Net postretirement benefits activity:

Actuarial loss ( 1,239 ) 275 ( 68 ) ( 1,032 )

Actuarial gain 6,752 — — 6,752

Prior service costs ( 624 ) — — ( 624 )

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

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

Total AOCI(L) $ ( 84,837 ) $ 977 $ ( 239 ) $ ( 84,099 )

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

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

Net pension activity:

4 unchanged sentences

Prior service costs ( 624 ) — — ( 624 )

Interest rate swap (1)

( 556 ) 739 ( 183 ) —

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

1 unchanged sentence

Total AOCI(L) $ ( 100,463 ) $ 1,081 $ ( 266 ) $ ( 99,648 )

(1) In 2019, the Company entered into a $ 100 million fixed rate swap to hedge a portion of the interest rate risk on its previous term loan facility, both of which matured on June 7, 2021.

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

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

Third Quarter 2022

First Quarter 2023

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

4 unchanged sentences

Total after-tax effect $ 738 $ — $ 738

Third Quarter 2021

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

Cost of sales $ 364 $ 97 $ — $ 461

Selling, delivery and administrative expenses 856 89 ( 8 ) 937

Subtotal pre-tax 1,220 186 ( 8 ) 1,398

Income tax expense 303 46 ( 2 ) 347

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

First Nine Months 2022

First Quarter 2022

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

4 unchanged sentences

Total after-tax effect $ 746 $ 69 $ 815

First Nine Months 2021

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

Cost of sales $ 1,068 $ 304 $ — $ — $ 1,372

Selling, delivery and administrative expenses 2,588 253 739 ( 21 ) 3,559

Subtotal pre-tax 3,656 557 739 ( 21 ) 4,931

Income tax expense 909 138 183 ( 6 ) 1,224

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

Supplemental Disclosures of Cash Flow Information

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

First Nine Months

First Quarter

(in thousands) 2023 2022

12 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements