What changed in this filing

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Item 1. Financial Statements

2023-11-01 compared with 2023-08-02 · 118 added, 136 removed, 712 unchanged (26% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Second Quarter First Half

Third Quarter First Nine Months

(in thousands, except per share data) 2023 2022 2023 2022

4 unchanged sentences

Income from operations 216,260 189,930 655,984 468,208

Interest expense, net 1,353 7,146 4,282 14,845

Interest (income) expense, net ( 1,516 ) 6,083 2,766 20,928

Pension plan settlement expense 77,319 — 117,096 —

19 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2023 2022 2023 2022

2 unchanged sentences

Defined benefit plans reclassification including pension costs:

Actuarial (loss) gain ( 2,221 ) 745 ( 1,486 ) 1,491

Actuarial gain (loss) 1,183 746 ( 303 ) 2,237

Prior service credits 3 — 9 —

7 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data) June 30, 2023 December 31, 2022

(in thousands, except share data) September 29, 2023 December 31, 2022

Current Assets:

43 unchanged sentences

Retained earnings 1,435,627 1,112,462

Accumulated other comprehensive loss ( 56,276 ) ( 84,837 )

Accumulated other comprehensive income (loss) 938 ( 84,837 )

Treasury stock, at cost:

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

First Nine Months

(in thousands) 2023 2022

4 unchanged sentences

Amortization of intangible assets and deferred proceeds, net 17,632 17,722

Fair value adjustment of acquisition related contingent consideration 67,174 ( 1,436 )

Pension plan settlement expense 117,096 —

Fair value adjustment of acquisition related contingent consideration 86,038 21,132

Deferred income taxes ( 34,881 ) 10,749

1 unchanged sentence

Amortization of debt costs 742 768

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

Change in current assets less current liabilities 35,791 ( 61,657 )

14 unchanged sentences

Debt issuance fees ( 244 ) ( 219 )

Payments on term loan facility and senior notes — ( 125,000 )

Net cash used in financing activities $ ( 65,117 ) $ ( 163,111 )

14 unchanged sentences

Earnings Accumulated

Comprehensive

Comprehensive Income

(Loss) Treasury

1 unchanged sentence

Stock Treasury Stock - Class B Common Stock Total

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

Balance on June 30, 2023 $ 11,431 $ 1,633 $ 135,953 $ 1,348,221 $ ( 56,276 ) $ ( 60,845 ) $ ( 409 ) $ 1,379,708

Net income — — — 92,093 — — — 92,093

5 unchanged sentences

— — — ( 503 ) — — — ( 503 )

Balance on June 30, 2023 $ 11,431 $ 1,633 $ 135,953 $ 1,348,221 $ ( 56,276 ) $ ( 60,845 ) $ ( 409 ) $ 1,379,708

Balance on September 29, 2023 $ 11,431 $ 1,633 $ 135,953 $ 1,435,627 $ 938 $ ( 60,845 ) $ ( 409 ) $ 1,524,328

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

6 unchanged sentences

— — — ( 1,005 ) — — — ( 1,005 )

Balance on June 30, 2023 $ 11,431 $ 1,633 $ 135,953 $ 1,348,221 $ ( 56,276 ) $ ( 60,845 ) $ ( 409 ) $ 1,379,708

Balance on September 29, 2023 $ 11,431 $ 1,633 $ 135,953 $ 1,435,627 $ 938 $ ( 60,845 ) $ ( 409 ) $ 1,524,328

(in thousands, except share data) Common

7 unchanged sentences

Stock Treasury Stock - Class B Common Stock Total

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

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

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

5 unchanged sentences

— — — ( 251 ) — — — ( 251 )

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

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

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

8 unchanged sentences

1,227 ( 1,227 ) — — — — — —

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

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

See accompanying notes to condensed consolidated financial statements.

9 unchanged sentences

The condensed consolidated financial statements presented are:

• The financial position as of June 30, 2023 and December 31, 2022.

• The results of operations, comprehensive income and changes in stockholders’ equity for the three-month periods ended June 30, 2023 (the “second quarter” of fiscal 2023 (“2023”)) and July 1, 2022 (the “second quarter” of fiscal 2022 (“2022”)) and the six-month periods ended June 30, 2023 (the “first half” of 2023) and July 1, 2022 (the “first half” of 2022).

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

• The financial position as of September 29, 2023 and December 31, 2022.

• The results of operations, comprehensive income and changes in stockholders’ equity for the three-month periods ended September 29, 2023 (the “third quarter” of fiscal 2023 (“2023”)) and September 30, 2022 (the “third quarter” of fiscal 2022 (“2022”)) and the nine-month periods ended September 29, 2023 (the “first nine months” of 2023) and September 30, 2022 (the “first nine months” of 2022).

• The changes in cash flows for the first nine months of 2023 and the first nine months 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.

17 unchanged sentences

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 June 30, 2023, J.

As of September 29, 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 June 30, 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.

As of September 29, 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.

4 unchanged sentences

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

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2023 2022 2023 2022

15 unchanged sentences

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 $ 13.4 million in the first half of 2023 and $ 18.7 million in the first half of 2022.

Acquisition related sub-bottling payments to CCR were $ 21.0 million in the first nine months of 2023 and $ 28.4 million in the first nine months 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) June 30, 2023 December 31, 2022

(in thousands) September 29, 2023 December 31, 2022

Current portion of acquisition related contingent consideration $ 55,355 $ 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 June 30, 2023 and $ 21.2 million as of December 31, 2022.

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 29, 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 $ 12.8 million as of June 30, 2023 and $ 8.2 million as of December 31, 2022.

The Company’s investment in SAC, which was classified as other assets in the condensed consolidated balance sheets, was $ 14.9 million as of September 29, 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 $ 4.6 million in the first half of 2023 and $ 4.4 million in the first half of 2022.

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 $ 6.9 million in the first nine months of 2023 and $ 6.7 million in the first nine months 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 $ 24.5 million on June 30, 2023 and $ 25.7 million on December 31, 2022, which were classified as accounts receivable, other in the condensed consolidated balance sheets.

The Company had rebates due from CCBSS of $ 19.5 million on September 29, 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.

2 unchanged sentences

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 $ 19.8 million as of June 30, 2023 and $ 16.9 million as of December 31, 2022.

The Company’s investment in CONA, which was classified as other assets in the condensed consolidated balance sheets, was $ 20.6 million as of September 29, 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 $ 13.6 million in the first half of 2023 and $ 13.0 million in the first half of 2022.

The Company incurred service fees to CONA of $ 20.6 million in the first nine months of 2023 and $ 19.9 million in the first nine months 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 $ 24.0 million on June 30, 2023 and $ 25.5 million on December 31, 2022.

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

Second Quarter First Half

The principal balance outstanding under this lease was $ 23.2 million on September 29, 2023 and $ 25.5 million on December 31, 2022.

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

Third Quarter First Nine Months

(in thousands) 2023 2022 2023 2022

8 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 selling, delivery and administrative (“SD&A”) expenses in the condensed consolidated statements of operations, was $ 3.7 million and $ 3.6 million in the second quarter of 2023 and the second quarter of 2022, respectively, and $ 5.7 million and $ 5.6 million in the first half of 2023 and the first half of 2022, 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 $ 2.3 million in both the third quarter of 2023 and the third quarter of 2022 and $ 8.0 million and $ 7.9 million in the first nine months of 2023 and the first nine months of 2022, respectively.

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 98 % of the Company’s net sales in the first half of 2023 and approximately 97 % of the Company’s net sales in the first half of 2022.

Point in time sales accounted for approximately 98 % of the Company’s net sales in the first nine months of 2023 and approximately 97 % of the Company’s net sales in the first nine months 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:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2023 2022 2023 2022

11 unchanged sentences

Returned product is recognized as a reduction to net sales.

The Company’s reserve for customer returns was $ 3.8 million as of June 30, 2023 and $ 3.0 million as of December 31, 2022.

The Company’s reserve for customer returns was $ 4.1 million as of September 29, 2023 and $ 3.0 million as of 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 half of 2023 and the first half of 2022:

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

First Nine Months

(in thousands) 2023 2022

10 unchanged sentences

The Company’s segment results are as follows:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2023 2022 2023 2022

6 unchanged sentences

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

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2023 2022 2023 2022

9 unchanged sentences

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

Second Quarter First Half

Third Quarter First Nine Months

(in thousands, except per share data) 2023 2022 2023 2022

28 unchanged sentences

Numerator for diluted net income per Class B Common Stock share $ 10,048 $ 13,086 $ 36,314 $ 45,678

Second Quarter First Half

Third Quarter First Nine Months

(in thousands, except per share data) 2023 2022 2023 2022

22 unchanged sentences

Inventories consisted of the following:

(in thousands) June 30, 2023 December 31, 2022

(in thousands) September 29, 2023 December 31, 2022

Finished products $ 211,128 $ 211,089

4 unchanged sentences

Prepaid expenses and other current assets consisted of the following:

(in thousands) June 30, 2023 December 31, 2022

(in thousands) September 29, 2023 December 31, 2022

Repair parts $ 35,304 $ 35,088

Prepaid software 8,629 7,398

Prepaid marketing 5,394 4,303

Prepaid taxes 6,918 7,829

Prepaid marketing 5,499 4,303

Commodity hedges at fair market value 1,080 4,808

3 unchanged sentences

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

(in thousands) June 30, 2023 December 31, 2022 Estimated Useful Lives

(in thousands) September 29, 2023 December 31, 2022 Estimated Useful Lives

Land $ 99,790 $ 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:

June 30, 2023 December 31, 2022

September 29, 2023 December 31, 2022

Weighted average remaining lease term:

5 unchanged sentences

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

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2023 2022 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 June 30, 2023:

Following is a

summary of future minimum lease payments for all noncancelable operating leases and financing leases as of September 29, 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

(in thousands) 2023 2022

8 unchanged sentences

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) June 30, 2023 December 31, 2022

(in thousands) September 29, 2023 December 31, 2022

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

1 unchanged sentence

Distribution agreements, net $ 823,366 $ 842,035

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

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

First Nine Months

(in thousands) 2023 2022

5 unchanged sentences

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

(in thousands) June 30, 2023 December 31, 2022

(in thousands) September 29, 2023 December 31, 2022

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

8 unchanged sentences

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 $ 54.1 million as of June 30, 2023 and $ 44.2 million as of December 31, 2022.

The Company’s outstanding confirmed obligations included in accounts payable, trade in the condensed consolidated balance sheets were $ 50.5 million as of September 29, 2023 and $ 44.2 million as of December 31, 2022.

Other Accrued Liabilities

Other accrued liabilities consisted of the following:

(in thousands) June 30, 2023 December 31, 2022

Accrued insurance costs $ 58,535 $ 54,180

(in thousands) September 29, 2023 December 31, 2022

Current portion of acquisition related contingent consideration $ 55,355 $ 40,060

Employee and retiree benefit plan accruals 44,246 31,711

Accrued insurance costs 54,025 54,180

Accrued marketing costs 38,179 33,375

Employee and retiree benefit plan accruals 33,986 31,711

Accrued taxes (other than income taxes) 8,076 7,127

5 unchanged sentences

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

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.

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.

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:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2023 2022 2023 2022

1 unchanged sentence

Selling, delivery and administrative expenses 703 ( 4,711 ) ( 2,211 ) 2,512

Total (loss) gain $ ( 1,321 ) $ ( 12,665 ) $ ( 4,406 ) $ 1,054

Total gain (loss) $ 678 $ ( 3,611 ) $ ( 3,728 ) $ ( 2,557 )

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

2 unchanged sentences

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

(in thousands) June 30, 2023 December 31, 2022

(in thousands) September 29, 2023 December 31, 2022

Prepaid expenses and other current assets $ 1,080 $ 4,808

1 unchanged sentence

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) June 30, 2023 December 31, 2022

(in thousands) September 29, 2023 December 31, 2022

Gross commodity derivative instrument assets $ 1,080 $ 4,808

1 unchanged sentence

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

(in thousands) June 30, 2023 December 31, 2022

(in thousands) September 29, 2023 December 31, 2022

Notional amount of outstanding commodity derivative instruments $ 20,076 $ 61,128

17 unchanged sentences

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:

June 30, 2023

September 29, 2023

(in thousands) Carrying

25 unchanged sentences

A summary of the Level 3 activity is as follows:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2023 2022 2023 2022

2 unchanged sentences

Reclassification to current payables — 1,800 ( 900 ) 2,100

Increase (decrease) in fair value 25,520 4,021 67,174 ( 1,436 )

Increase in fair value 18,864 22,568 86,038 21,132

Ending balance - Level 3 liability $ 605,650 $ 536,916 $ 605,650 $ 536,916

As of both June 30, 2023 and July 1, 2022, a discount rate of 8.9 % was utilized in the valuation of the Company’s acquisition related contingent consideration liability.

The increase in the fair value of the acquisition related contingent consideration liability in the first half of 2023 was driven by higher projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments and a decrease in the discount rate used to calculate fair value from 9.1 % as of December 31, 2022 to 8.9 % as of June 30, 2023.

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

For the next five years , 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 approximately $ 30 million to $ 60 million.

The Company’s effective income tax rate was 25.8 % for the first half of 2023 and 25.9 % for the first half of 2022.

The Company’s income tax expense was $ 83.5 million for the first half of 2023 and $ 67.6 million for the first half of 2022.

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

The Company had uncertain tax positions, including accrued interest, of $ 0.4 million on June 30, 2023 and $ 0.3 million on December 31, 2022, all of which would affect the Company’s effective income tax rate if recognized.

As of September 29, 2023 and September 30, 2022, discount rates of 9.2 % and 9.3 %, 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 2023 was primarily driven by higher projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments.

This fair value adjustment was recorded in other expense, net in the condensed consolidated statement of operations for the first nine months of 2023.

For the next five future years, 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 approximately $ 45 million to $ 65 million.

The Company’s effective income tax rate was 25.3 % for the first nine months of 2023 and 25.7 % for the first nine months of 2022.

The Company’s income tax expense was $ 112.4 million for the first nine months of 2023 and $ 107.9 million for the first nine months of 2022.

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

The Company had uncertain tax positions, including accrued interest, of $ 0.4 million on September 29, 2023 and $ 0.3 million on 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.

2 unchanged sentences

Pension Plans

There are two Company-sponsored pension plans.

The Company has historically sponsored two pension plans.

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

3 unchanged sentences

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

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

Settlement payments were made to those participants who selected the lump sum benefit payout option during the second quarter of 2023.

Additionally, a settlement expense of $ 39.8 million was recognized related primarily to pre-tax actuarial losses that were reclassified out of accumulated other comprehensive loss associated with the lump sum benefit payout option.

During the second quarter of 2023, the Company also entered into a group annuity contract that will transfer the remaining pension benefit obligation for the Primary Plan to an insurance company.

With full settlement of the Primary Plan expected to occur during the third quarter of 2023, the remaining liability related to the Primary Plan was reclassified from noncurrent liabilities to current liabilities as of June 30, 2023.

The liability for the unfunded

portion of the Primary Plan, which was classified as other accrued liabilities in the condensed consolidated balance sheets, was $ 12.9 million as of June 30, 2023.

Upon final settlement of the Primary Plan, which occurred subsequent to the end of the second quarter of 2023, the remainder of the gross actuarial losses associated with the Primary Plan will be reclassified out of accumulated other comprehensive loss, resulting in additional settlement expense during the third quarter of 2023.

As of June 30, 2023 and December 31, 2022, the gross actuarial losses included in accumulated other comprehensive loss associated with the Primary Plan were approximately $ 79 million and $ 117 million, respectively.

In connection with the termination process, the Company offered a lump sum benefit payout option to certain plan participants.

During the second quarter of 2023, payments were made to those participants who selected the lump sum benefit payout option.

The Company recognized a settlement expense of $ 39.8 million in the second quarter of 2023 related primarily to pre-tax actuarial losses associated with the lump sum benefit payments that were reclassified out of accumulated other comprehensive income (loss).

The remaining assets of the Primary Plan were used to purchase a group annuity contract that transferred the remaining Primary Plan benefit liabilities to an insurance company during the third quarter of 2023.

Upon full settlement of the Primary Plan benefit liabilities, the remainder of the gross actuarial losses associated with the Primary Plan were reclassified out of accumulated other

comprehensive income (loss), resulting in a settlement expense of $ 77.3 million during the third quarter of 2023.

There was no remaining liability for the unfunded portion of the Primary Plan as of September 29, 2023.

As of September 29, 2023, there were no gross actuarial losses included in accumulated other comprehensive income (loss) associated with the Primary Plan.

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

The components of total pension expense were as follows:

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2023 2022 2023 2022

7 unchanged sentences

Total pension expense $ 78,330 $ 3,472 $ 123,448 $ 10,417

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

Subsequent to the end of the second quarter of 2023, the Company contributed approximately $ 12 million to fund the termination of the Primary Plan.

The Company expects to make additional cash contributions of approximately $ 1 million to the Primary Plan during the second half of 2023 to fund the remainder of its obligation in connection with 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.

The Company contributed $ 12.0 million to fund the termination of the Primary Plan during the first nine months of 2023.

The Company contributed $ 4.3 million to the Bargaining Plan during the first nine months of 2023 to fund the ongoing projected benefit obligation of the Bargaining Plan.

The Company does not anticipate making additional contributions to the Bargaining Plan during the fourth quarter of 2023.

Postretirement Benefits

3 unchanged sentences

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

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2023 2022 2023 2022

5 unchanged sentences

Other liabilities consisted of the following:

(in thousands) June 30, 2023 December 31, 2022

(in thousands) September 29, 2023 December 31, 2022

Noncurrent portion of acquisition related contingent consideration $ 550,295 $ 501,431

8 unchanged sentences

Rate Interest

Nonpublic June 30,

Nonpublic September 29,

2023 December 31,

10 unchanged sentences

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

(2) During the first half 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.

(2) The Company’s revolving credit facility has an aggregate maximum borrowing capacity of $ 500 million.

The Company currently believes all banks participating in the revolving credit facility have the ability to and will meet any funding requests from the Company.

(3) During the first nine months 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.

3 unchanged sentences

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 June 30, 2023.

The Company was in compliance with these covenants as of September 29, 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 13.1 million cases and 13.4 million cases of finished product from SAC in the first half of 2023 and the first half of 2022, respectively.

The Company purchased 19.3 million cases and 20.1 million cases of finished product from SAC in the first nine months of 2023 and the first nine months of 2022, respectively.

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

Second Quarter First Half

Third Quarter First Nine Months

(in thousands) 2023 2022 2023 2022

3 unchanged sentences

The Company guarantees a portion of SAC’s debt, which expires in 2028.

The amount guaranteed was $ 9.5 million on both June 30, 2023 and December 31, 2022.

The amount guaranteed was $ 9.5 million on both September 29, 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.

2 unchanged sentences

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 June 30, 2023, and there was no impairment identified in 2022.

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 29, 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 June 30, 2023 and December 31, 2022.

These letters of credit totaled $ 37.6 million on both September 29, 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 June 30, 2023, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 134.5 million.

As of September 29, 2023, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 137.3 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 formerly provided consulting services outside the United States.

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

(in thousands) March 31, 2023 Pre-tax Activity Tax Effect June 30, 2023

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

(in thousands) June 30, 2023 Pre-tax Activity Tax Effect September 29, 2023

Net pension activity:

2 unchanged sentences

Pension plan settlement (1)

30,041 77,319 ( 36,202 ) 71,158

Net postretirement benefits activity:

2 unchanged sentences

Reclassification of stranded tax effects (1)

( 19,720 ) — 14,911 ( 4,809 )

Total AOCI(L) $ ( 56,276 ) $ 78,890 $ ( 21,676 ) $ 938

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

(1) The stranded tax effect activity for the third quarter of 2023 is associated with the full settlement of the Primary Plan benefit liabilities.

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

Net pension activity:

7 unchanged sentences

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

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

(in thousands) December 31, 2022 Pre-tax Activity Tax Effect June 30, 2023

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

(in thousands) December 31, 2022 Pre-tax Activity Tax Effect September 29, 2023

Net pension activity:

7 unchanged sentences

Total AOCI(L) $ ( 84,837 ) $ 116,707 $ ( 30,932 ) $ 938

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

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

Net pension activity:

7 unchanged sentences

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

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

Second Quarter 2023

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

Cost of sales $ 416 $ — $ 416

Selling, delivery and administrative expenses 561 — 561

Subtotal pre-tax 977 — 977

Income tax expense 239 — 239

Total after-tax effect $ 738 $ — $ 738

Second Quarter 2022

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

Cost of sales $ 266 $ 37 $ 303

Selling, delivery and administrative expenses 722 54 776

Subtotal pre-tax 988 91 1,079

Income tax expense 243 22 265

Total after-tax effect $ 745 $ 69 $ 814

First Half 2023

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

Cost of sales $ 835 $ — $ 835

Selling, delivery and administrative expenses 1,119 — 1,119

Subtotal pre-tax 1,954 — 1,954

Income tax expense 478 — 478

Total after-tax effect $ 1,476 $ — $ 1,476

First Half 2022

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

Cost of sales $ 544 $ 78 $ 622

Selling, delivery and administrative expenses 1,433 105 1,538

Subtotal pre-tax 1,977 183 2,160

Income tax expense 486 45 531

Total after-tax effect $ 1,491 $ 138 $ 1,629

Supplemental Disclosures of Cash Flow Information

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

First Nine Months

(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