Coca-Cola Consolidated, Inc. 10-Q

Item 1. Financial Statements. COCA ‑ COLA CONSOLIDATED, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Third Quarter First Nine Months (in thousands, except per share data) 2024 2023 2024 2023 Net sales $ 1,765,652 $ 1,712,428 $ 5,153,221 $ 5,022,902 Cost of sales 1,067,616 1,050,878 3,097,916 3,065,669 Gross profit 698,036 661,550 2,055,305 1,957,233 Selling, delivery and administrative expenses 470,981 445,290 1,353,704 1,301,249 Income from operations 227,055 216,260 701,601 655,984 Interest expense (income), net 2,187 ( 1,516 ) ( 2,149 ) 2,766 Mark-to-market on acquisition related contingent consideration 68,592 18,864 90,877 86,038 Pension plan settlement expense — 77,319 — 117,096 Other expense, net 713 609 2,250 5,146 Income before taxes 155,563 120,984 610,623 444,938 Income tax expense 39,939 28,891 156,446 112,399 Net income $ 115,624 $ 92,093 $ 454,177 $ 332,539 Basic net income per share: Common Stock $ 13.20 $ 9.82 $ 49.71 $ 35.47 Weighted average number of Common Stock shares outstanding 7,756 8,369 8,141 8,369 Class B Common Stock $ 13.20 $ 9.82 $ 49.25 $ 35.47 Weighted average number of Class B Common Stock shares outstanding 1,005 1,005 1,005 1,005 Diluted net income per share: Common Stock $ 13.18 $ 9.80 $ 49.59 $ 35.38 Weighted average number of Common Stock shares outstanding – assuming dilution 8,772 9,395 9,158 9,398 Class B Common Stock $ 13.18 $ 9.79 $ 49.00 $ 35.29 Weighted average number of Class B Common Stock shares outstanding – assuming dilution 1,016 1,026 1,017 1,029 Cash dividends per share: Common Stock $ 0.50 $ 0.50 $ 17.50 $ 4.50 Class B Common Stock $ 0.50 $ 0.50 $ 17.50 $ 4.50 See accompanying notes to condensed consolidated financial statements. 1 COCA ‑ COLA CONSOLIDATED, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Third Quarter First Nine Months (in thousands) 2024 2023 2024 2023 Net income $ 115,624 $ 92,093 $ 454,177 $ 332,539 Other comprehensive income, net of tax: Defined benefit plans reclassification including pension costs: Actuarial gain (loss) — 1,183 — ( 303 ) Prior service credits 3 3 9 9 Pension plan settlement — 56,028 — 86,069 Postretirement benefits reclassification including benefit costs: Actuarial gain 20 — 60 — Unrealized gain on short-term investments 428 — 255 — Other comprehensive income, net of tax 451 57,214 324 85,775 Comprehensive income $ 116,075 $ 149,307 $ 454,501 $ 418,314 See accompanying notes to condensed consolidated financial statements. 2 COCA ‑ COLA CONSOLIDATED, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except share data) September 27, 2024 December 31, 2023 ASSETS Current Assets: Cash and cash equivalents $ 1,236,006 $ 635,269 Short-term investments 215,044 — Accounts receivable, trade 572,859 555,933 Allowance for doubtful accounts ( 16,158 ) ( 16,060 ) Accounts receivable from The Coca‑Cola Company 88,447 51,936 Accounts receivable, other 46,833 67,533 Inventories 334,681 321,932 Prepaid expenses and other current assets 93,421 88,585 Total current assets 2,571,133 1,705,128 Property, plant and equipment, net 1,454,746 1,320,563 Right-of-use assets - operating leases 102,330 122,708 Leased property under financing leases, net 3,550 4,785 Other assets 170,304 145,213 Goodwill 165,903 165,903 Distribution agreements, net 798,475 817,143 Customer lists, net 6,283 7,499 Total assets $ 5,272,724 $ 4,288,942 LIABILITIES AND EQUITY Current Liabilities: Current portion of obligations under operating leases $ 22,323 $ 26,194 Current portion of obligations under financing leases 2,635 2,487 Accounts payable, trade 346,997 383,562 Accounts payable to The Coca‑Cola Company 229,181 139,499 Other accrued liabilities 276,743 237,994 Accrued compensation 141,074 146,932 Dividends payable 21,902 154,666 Total current liabilities 1,040,855 1,091,334 Deferred income taxes 110,510 128,435 Pension and postretirement benefit obligations 61,615 60,614 Other liabilities 900,076 866,499 Noncurrent portion of obligations under operating leases 85,863 102,271 Noncurrent portion of obligations under financing leases 3,036 5,032 Long-term debt 1,785,782 599,159 Total liabilities 3,987,737 2,853,344 Commitments and Contingencies Equity: Common Stock, $ 1.00 par value: 30,000,000 shares authorized; 10,832,748 and 11,431,367 shares issued, respectively 10,833 11,431 Class B Common Stock, $ 1.00 par value: 10,000,000 shares authorized; 1,632,810 shares issued 1,633 1,633 Additional paid-in capital 135,953 135,953 Retained earnings 1,216,235 1,352,111 Accumulated other comprehensive loss ( 3,952 ) ( 4,276 ) Treasury stock, at cost: Common Stock – 3,076,765 and 3,062,374 shares, respectively ( 75,306 ) ( 60,845 ) Treasury stock, at cost: Class B Common Stock – 628,114 shares ( 409 ) ( 409 ) Total equity 1,284,987 1,435,598 Total liabilities and equity $ 5,272,724 $ 4,288,942 See accompanying notes to condensed consolidated financial statements. 3 COCA ‑ COLA CONSOLIDATED, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) First Nine Months (in thousands) 2024 2023 Cash Flows from Operating Activities: Net income $ 454,177 $ 332,539 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense from property, plant and equipment and financing leases 125,593 113,664 Amortization of intangible assets and deferred proceeds, net 17,586 17,632 Fair value adjustment of acquisition related contingent consideration 90,877 86,038 Deferred income taxes ( 18,030 ) ( 34,881 ) Loss on sale of property, plant and equipment 4,081 5,863 Amortization of debt costs 1,496 742 Pension plan settlement expense — 117,096 Change in current assets less current liabilities 55,763 35,791 Change in other noncurrent assets 7,595 13,417 Change in other noncurrent liabilities ( 31,245 ) ( 43,352 ) Total adjustments 253,716 312,010 Net cash provided by operating activities $ 707,893 $ 644,549 Cash Flows from Investing Activities: Additions to property, plant and equipment $ ( 287,333 ) $ ( 152,260 ) Purchases of short-term investments ( 283,488 ) — Proceeds from the disposal of short-term investments 72,232 — Investment in equity method investees ( 9,794 ) ( 9,044 ) Proceeds from the sale of property, plant and equipment 425 441 Net cash used in investing activities $ ( 507,958 ) $ ( 160,863 ) Cash Flows from Financing Activities: Proceeds from bond issuance $ 1,200,000 $ — Payments related to share repurchases ( 574,009 ) — Cash dividends paid ( 163,733 ) ( 42,182 ) Payments of acquisition related contingent consideration ( 44,243 ) ( 20,979 ) Debt issuance fees ( 15,365 ) ( 244 ) Payments on financing lease obligations ( 1,848 ) ( 1,712 ) Net cash provided by (used in) financing activities $ 400,802 $ ( 65,117 ) Net increase in cash during period $ 600,737 $ 418,569 Cash at beginning of period 635,269 197,648 Cash at end of period $ 1,236,006 $ 616,217 Significant non-cash investing and financing activities: Additions to property, plant and equipment accrued and recorded in accounts payable, trade $ 34,791 $ 32,388 Right-of-use assets obtained in exchange for operating lease obligations 1,299 4,253 See accompanying notes to condensed consolidated financial statements. 4 COCA ‑ COLA CONSOLIDATED, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) (in thousands, except per share data) Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock - Common Stock Treasury Stock - Class B Common Stock Total Equity Balance on June 28, 2024 $ 11,431 $ 1,633 $ 135,953 $ 1,685,977 $ ( 4,403 ) $ ( 634,988 ) $ ( 409 ) $ 1,195,194 Net income — — — 115,624 — — — 115,624 Other comprehensive income, net of tax — — — — 451 — — 451 Dividends declared: Common Stock ($ 3.00 per share) — — — ( 23,267 ) — — — ( 23,267 ) Class B Common Stock ($ 3.00 per share) — — — ( 3,015 ) — — — ( 3,015 ) Share repurchases (1) ( 598 ) — — ( 559,084 ) — 559,682 — — Balance on September 27, 2024 $ 10,833 $ 1,633 $ 135,953 $ 1,216,235 $ ( 3,952 ) $ ( 75,306 ) $ ( 409 ) $ 1,284,987 Balance on December 31, 2023 $ 11,431 $ 1,633 $ 135,953 $ 1,352,111 $ ( 4,276 ) $ ( 60,845 ) $ ( 409 ) $ 1,435,598 Net income — — — 454,177 — — — 454,177 Other comprehensive income, net of tax — — — — 324 — — 324 Dividends declared: Common Stock ($ 3.50 per share) — — — ( 27,452 ) — — — ( 27,452 ) Class B Common Stock ($ 3.50 per share) — — — ( 3,517 ) — — — ( 3,517 ) Share repurchases (1) ( 598 ) — — ( 559,084 ) — ( 14,461 ) — ( 574,143 ) Balance on September 27, 2024 $ 10,833 $ 1,633 $ 135,953 $ 1,216,235 $ ( 3,952 ) $ ( 75,306 ) $ ( 409 ) $ 1,284,987 (1) The share repurchases relate to shares repurchased in a tender offer and a separate share repurchase transaction with a subsidiary of The Coca‑Cola Company, both of which are further discussed in Note 2 below. (in thousands, except per share data) Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock - Common Stock Treasury Stock - Class B Common Stock Total Equity 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 Other comprehensive income, net of tax — — — — 57,214 — — 57,214 Dividends declared: Common Stock ($ 0.50 per share) — — — ( 4,184 ) — — — ( 4,184 ) Class B Common Stock ($ 0.50 per share) — — — ( 503 ) — — — ( 503 ) 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 Net income — — — 332,539 — — — 332,539 Other comprehensive income, net of tax — — — — 85,775 — — 85,775 Dividends declared: Common Stock ($ 1.00 per share) — — — ( 8,369 ) — — — ( 8,369 ) Class B Common Stock ($ 1.00 per share) — — — ( 1,005 ) — — — ( 1,005 ) Balance on September 29, 2023 $ 11,431 $ 1,633 $ 135,953 $ 1,435,627 $ 938 $ ( 60,845 ) $ ( 409 ) $ 1,524,328 See accompanying notes to condensed consolidated financial statements. 5 COCA ‑ COLA CONSOLIDATED, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Critical Accounting Policies The condensed consolidated financial statements include the accounts and the consolidated operations of Coca‑Cola Consolidated, Inc. and its majority-owned subsidiaries (collectively referred to herein as the “Company”). All significant intercompany accounts and transactions have been eliminated. The condensed consolidated financial statements reflect all adjustments, including normal, recurring accruals, which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. Each of the Company’s quarters, other than the fourth quarter, ends on the Friday closest to the last day of the corresponding quarterly calendar period. The Company’s fourth quarter and fiscal year end on December 31 regardless of the day of the week on which December 31 falls. The condensed consolidated financial statements presented are: • The financial position as of September 27, 2024 and December 31, 2023. • The results of operations, comprehensive income and changes in stockholders’ equity for the three-month periods ended September 27, 2024 (the “third quarter” of fiscal 2024 (“2024”)) and September 29, 2023 (the “third quarter” of fiscal 2023 (“2023”)) and the nine-month periods ended September 27, 2024 (the “first nine months” of 2024) and September 29, 2023 (the “first nine months” of 2023). • The changes in cash flows for the first nine months of 2024 and the first nine months of 2023. 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 2023 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. Actual results could differ from those estimates. Critical Accounting Estimates In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of its results of operations and financial position in the preparation of its condensed consolidated financial statements in conformity with GAAP. Actual results could differ significantly from those estimates under different assumptions and conditions. The Company included in its Annual Report on Form 10-K for 2023 under the caption “Discussion of Critical Accounting Estimates” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” a discussion of the Company’s most critical accounting estimates, which are those the Company believes to be the most important to the portrayal of its financial condition and results of operations and that require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Any changes in critical accounting estimates are discussed with the Audit Committee of the Company’s Board of Directors during the quarter in which a change is contemplated and prior to making such change. Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires additional disclosure of significant segment expenses included in the reported measure of segment profit or loss and regularly provided to the Chief Operating Decision Maker (the “CODM”). It also requires disclosure and a description of the composition of other amounts by reportable segment, disclosure of a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods and disclosure of the CODM’s title and process for assessing a reportable segment’s profit or loss. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years beginning after December 15, 2024. The Company has evaluated the impact ASU 2023-07 will have on its consolidated financial statements and does not expect a material impact upon adoption. 6 In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disclosure of specific categories in the rate reconciliation, including additional information for reconciling items that meet a quantitative threshold, and specific disaggregation of income taxes paid and tax expense. The amendment is effective for annual periods beginning after December 15, 2024. The Company has evaluated the impact ASU 2023-09 will have on its consolidated financial statements and does not expect a material impact upon adoption. 2. Related Party Transactions J. Frank Harrison, III As of September 27, 2024, 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, par value $ 1.00 per share (“Class B Common Stock”), which represented approximately 72 % of the total voting power of the Company’s outstanding Common Stock, par value $ 1.00 per share (“Common Stock”), and Class B Common Stock on a consolidated basis. 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 the Company’s soft drink products, either concentrate or syrup, are manufactured. As of September 27, 2024, The Coca‑Cola Company owned shares of the Company’s Common Stock representing approximately 7 % 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. J. 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. On May 6, 2024, the Company announced its intention to purchase up to $ 3.10 billion in value of its Common Stock through both a modified “Dutch auction” tender offer (the “Tender Offer”) for up to $ 2.00 billion of its Common Stock and a separate share purchase agreement (the “Purchase Agreement”) with Carolina Coca-Cola Bottling Investments, Inc., an indirect wholly owned subsidiary of The Coca‑Cola Company (“CCCBI”). On May 20, 2024, the Company launched its offer to purchase, for cash, shares of its Common Stock at prices specified by the tendering stockholders of not less than $ 850 nor greater than $ 925 per share, with shares having an aggregate purchase price of no more than $ 2.00 billion. On June 21, 2024, the Company announced the final results of the Tender Offer, which expired on June 18, 2024. In accordance with the terms and conditions of the Tender Offer, the Company repurchased 14,391.5 shares of its Common Stock at a purchase price of $ 925 per share, for an aggregate purchase price of $ 13.3 million, excluding fees and expenses relating to the Tender Offer. The shares repurchased represented 0.2 % of the shares of the Company’s Common Stock that were issued and outstanding as of June 18, 2024. Pursuant to the Purchase Agreement entered into on May 6, 2024 with CCCBI, the Company agreed to purchase and CCCBI agreed to sell, at the purchase price in the Tender Offer, a number of shares of the Company’s Common Stock (the “Share Repurchase”) such that CCCBI would beneficially own shares of the Company’s Common Stock representing 21.5 % of the Company’s total outstanding shares of Common Stock and Class B Common Stock immediately following the closing of the Share Repurchase (calculated assuming all issued and outstanding shares of Class B Common Stock were converted into Common Stock and taking into account the shares of Common Stock purchased in the Tender Offer). The Share Repurchase was conditioned on, among other things, the completion of the Tender Offer and, in the case of CCCBI’s obligation to close, the purchase price being no less than $ 925 per share. On July 5, 2024, the Company repurchased and retired 598,619 shares of its Common Stock in the Share Repurchase at a purchase price of $ 925 per share, for an aggregate purchase price of $ 553.7 million. 7 The following table summarizes the significant cash transactions between the Company and The Coca‑Cola Company: Third Quarter First Nine Months (in thousands) 2024 2023 2024 2023 Payments made by the Company to The Coca-Cola Company (1) $ 585,967 $ 552,154 $ 1,582,000 $ 1,544,872 Payments made by The Coca-Cola Company to the Company 65,592 67,890 184,794 170,824 (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, as well as the payment made to repurchase shares pursuant to the Purchase Agreement entered into on May 6, 2024 with CCCBI (as further discussed above). More than 80 % of the payments made by the Company to The Coca‑Cola Company were for concentrate, syrup, sweetener and other finished goods products, which were recorded in cost of sales in the condensed consolidated statements of operations and represent the primary components of the soft drink products the Company manufactures and distributes. Payments made by the Company to The Coca‑Cola Company also included payments for marketing programs associated with large, national customers managed by The Coca‑Cola Company on behalf of the Company, which were recorded as a reduction to net sales in the condensed consolidated statements of operations. Other payments made by the Company to The Coca‑Cola Company related to cold drink equipment parts, fees associated with the rights to distribute certain brands and other customary items. Payments made by The Coca‑Cola Company to the Company included annual funding in connection with the Company’s agreement to support certain business initiatives developed by The Coca‑Cola Company and funding associated with the delivery of post-mix products to various customers, both of which were recorded as a reduction to cost of sales in the condensed consolidated statements of operations. Post-mix products are dispensed through equipment that mixes fountain syrups with carbonated or still water, enabling fountain retailers to sell finished products to consumers in cups or glasses. Payments made by The Coca‑Cola Company to the Company also included fountain product delivery and equipment repair services performed by the Company on The Coca‑Cola Company’s equipment, all of which were recorded in net sales in the condensed consolidated statements of operations. Coca‑Cola Refreshments USA, Inc. (“CCR”) 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 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 $ 44.2 million in the first nine months of 2024 and $ 21.0 million in the first nine months of 2023. 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 27, 2024 December 31, 2023 Current portion of acquisition related contingent consideration $ 75,742 $ 64,528 Noncurrent portion of acquisition related contingent consideration 629,829 604,809 Total acquisition related contingent consideration $ 705,571 $ 669,337 Southeastern Container (“Southeastern”) The Company is a shareholder of Southeastern, a plastic bottle manufacturing cooperative. 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 $ 21.4 million as of September 27, 2024 and $ 20.9 million as of December 31, 2023. South Atlantic Canners, Inc. (“SAC”) The Company is a shareholder of SAC, a manufacturing cooperative located in Bishopville, South Carolina. All of SAC’s shareholders are Coca‑Cola bottlers and each has equal voting rights. The Company accounts for SAC as an equity method 8 investment. The Company’s investment in SAC, which was classified as other assets in the condensed consolidated balance sheets, was $ 23.1 million as of September 27, 2024 and $ 17.2 million as of December 31, 2023. 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 $ 6.9 million in both the first nine months of 2024 and the first nine months of 2023. Coca‑Cola Bottlers’ Sales & Services Company LLC (“CCBSS”) Along with all other Coca‑Cola bottlers in the United States and Canada, the Company is a member of CCBSS, a company formed to provide certain procurement and other services with the intention of enhancing the efficiency and competitiveness of the Coca‑Cola bottling system. The Company accounts for CCBSS as an equity method investment and its investment in CCBSS is not material. 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 $ 19.8 million as of September 27, 2024 and $ 14.3 million as of December 31, 2023, 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. CONA Services LLC (“CONA”) 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 $ 23.8 million as of September 27, 2024 and $ 22.1 million as of December 31, 2023. 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 $ 20.2 million in the first nine months of 2024 and $ 20.6 million in the first nine months of 2023. Related Party Leases The Company leases its headquarters office facility and an adjacent office facility in Charlotte, North Carolina from Beacon Investment Corporation, of which J. Frank Harrison, III is the majority stockholder and Morgan H. Everett, Vice Chair of the Company’s Board of Directors, is a minority stockholder. The annual base rent the Company is obligated to pay 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 $ 20.1 million on September 27, 2024 and $ 22.5 million on December 31, 2023. Rental payments for this lease were $ 1.0 million in both the third quarter of 2024 and the third quarter of 2023 and $ 3.0 million and $ 2.9 million in the first nine months of 2024 and the first nine months of 2023, respectively. Long-Term Performance Equity Plan The Long-Term Performance Equity Plan compensates J. Frank Harrison, III based on the Company’s performance. Awards granted to Mr. Harrison under the Long-Term Performance Equity Plan are earned based on the Company’s attainment during a performance period of certain performance measures, each as specified by the Compensation Committee of the Company’s Board of Directors. These awards may be settled in cash and/or shares of 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 expenses in the condensed consolidated statements of operations, was $ 2.3 million in both the third quarter of 2024 and the third quarter of 2023 and $ 8.1 million and $ 8.0 million in the first nine months of 2024 and the first nine months of 2023, respectively. 3. Revenue Recognition The Company’s sales are divided into two main categories: (i) bottle/can sales and (ii) other sales. Bottle/can sales include products packaged primarily in plastic bottles and aluminum cans. Bottle/can net pricing is based on the invoice price charged to 9 customers reduced by any promotional allowances. Bottle/can net pricing per unit is impacted by the price charged per package, the sales volume generated for each package and the channels in which those packages are sold. Other sales include sales to other Coca‑Cola bottlers, post-mix sales, transportation revenue and equipment maintenance revenue. The Company’s contracts are derived from customer orders, including customer sales incentives, generated through an order processing and replenishment model. Generally, the Company’s service contracts and contracts related to the delivery of specifically identifiable products have a single performance obligation. Revenues do not include sales or other taxes collected from customers. The Company has defined its performance obligations for its contracts as either at a point in time or over time. Bottle/can sales, sales to other Coca‑Cola bottlers and post-mix sales are recognized when control transfers to a customer, which is generally upon delivery and is considered a single point in time (“point in time”). Point in time sales accounted for approximately 98 % of the Company’s net sales in both the first nine months of 2024 and the first nine months of 2023. 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”). Revenues related to cold drink equipment repair are recognized as the respective services are completed using a cost-to-cost input method. Repair services are generally completed in less than one day but can extend up to one month . Revenues related to freight hauling and brokerage services are recognized as the delivery occurs using a miles driven output method. Generally, delivery occurs and freight charges are recognized in the same day. Over time sales orders open at the end of a financial period are not material to the condensed consolidated financial statements. The following table represents a disaggregation of revenue from contracts with customers: Third Quarter First Nine Months (in thousands) 2024 2023 2024 2023 Point in time net sales: Nonalcoholic Beverages - point in time $ 1,736,286 $ 1,677,221 $ 5,063,822 $ 4,911,999 Total point in time net sales $ 1,736,286 $ 1,677,221 $ 5,063,822 $ 4,911,999 Over time net sales: Nonalcoholic Beverages - over time $ 15,209 $ 13,839 $ 42,537 $ 39,335 All Other - over time 14,157 21,368 46,862 71,568 Total over time net sales $ 29,366 $ 35,207 $ 89,399 $ 110,903 Total net sales $ 1,765,652 $ 1,712,428 $ 5,153,221 $ 5,022,902 The Company’s allowance for doubtful accounts in the condensed consolidated balance sheets includes a reserve for customer returns and an allowance for credit losses. The Company experiences customer returns primarily as a result of damaged or out-of-date product. At any given time, the Company estimates less than 1 % of bottle/can sales and post-mix sales could be at risk for return by customers. Returned product is recognized as a reduction to net sales. The Company’s reserve for customer returns was $ 5.2 million as of September 27, 2024 and $ 4.5 million as of December 31, 2023. 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 2024 and the first nine months of 2023: First Nine Months (in thousands) 2024 2023 Beginning balance - allowance for credit losses $ 11,560 $ 13,119 Additions charged to expenses and as a reduction to net sales 2,254 4,268 Deductions ( 2,806 ) ( 3,328 ) Ending balance - allowance for credit losses $ 11,008 $ 14,059 10 4. Segments 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 CODM. The Company has concluded the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer, as a group, represent the CODM. Segment asset information is not provided to the CODM. The Company believes three operating segments exist. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated net sales and income from operations. The additional two operating segments do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, and, therefore, have been combined into “All Other.” The Company’s segment results are as follows: Third Quarter First Nine Months (in thousands) 2024 2023 2024 2023 Net sales: Nonalcoholic Beverages $ 1,751,495 $ 1,691,060 $ 5,106,359 $ 4,951,334 All Other 86,230 93,636 260,930 281,186 Eliminations (1) ( 72,073 ) ( 72,268 ) ( 214,068 ) ( 209,618 ) Consolidated net sales $ 1,765,652 $ 1,712,428 $ 5,153,221 $ 5,022,902 Income from operations: Nonalcoholic Beverages $ 224,072 $ 217,405 $ 691,239 $ 661,395 All Other 2,983 ( 1,145 ) 10,362 ( 5,411 ) Consolidated income from operations $ 227,055 $ 216,260 $ 701,601 $ 655,984 Depreciation and amortization: Nonalcoholic Beverages $ 44,511 $ 41,003 $ 131,332 $ 122,262 All Other 4,259 3,108 11,847 9,034 Consolidated depreciation and amortization $ 48,770 $ 44,111 $ 143,179 $ 131,296 (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. 5. 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 (in thousands, except per share data) 2024 2023 2024 2023 Numerator for basic and diluted net income per Common Stock and Class B Common Stock share: Net income $ 115,624 $ 92,093 $ 454,177 $ 332,539 Less dividends: Common Stock 3,878 4,184 146,151 37,660 Class B Common Stock 502 503 17,582 4,522 Total undistributed earnings $ 111,244 $ 87,406 $ 290,444 $ 290,357 Common Stock undistributed earnings – basic $ 98,483 $ 78,035 $ 258,529 $ 259,227 Class B Common Stock undistributed earnings – basic 12,761 9,371 31,915 31,130 Total undistributed earnings – basic $ 111,244 $ 87,406 $ 290,444 $ 290,357 Common Stock undistributed earnings – diluted $ 98,359 $ 77,861 $ 258,190 $ 258,565 Class B Common Stock undistributed earnings – diluted 12,885 9,545 32,254 31,792 Total undistributed earnings – diluted $ 111,244 $ 87,406 $ 290,444 $ 290,357 11 Third Quarter First Nine Months (in thousands, except per share data) 2024 2023 2024 2023 Numerator for basic net income per Common Stock share: Dividends on Common Stock $ 3,878 $ 4,184 $ 146,151 $ 37,660 Common Stock undistributed earnings – basic 98,483 78,035 258,529 259,227 Numerator for basic net income per Common Stock share $ 102,361 $ 82,219 $ 404,680 $ 296,887 Numerator for basic net income per Class B Common Stock share: Dividends on Class B Common Stock $ 502 $ 503 $ 17,582 $ 4,522 Class B Common Stock undistributed earnings – basic 12,761 9,371 31,915 31,130 Numerator for basic net income per Class B Common Stock share $ 13,263 $ 9,874 $ 49,497 $ 35,652 Numerator for diluted net income per Common Stock share: Dividends on Common Stock $ 3,878 $ 4,184 $ 146,151 $ 37,660 Dividends on Class B Common Stock assumed converted to Common Stock 502 503 17,582 4,522 Common Stock undistributed earnings – diluted 111,244 87,406 290,444 290,357 Numerator for diluted net income per Common Stock share $ 115,624 $ 92,093 $ 454,177 $ 332,539 Numerator for diluted net income per Class B Common Stock share: Dividends on Class B Common Stock $ 502 $ 503 $ 17,582 $ 4,522 Class B Common Stock undistributed earnings – diluted 12,885 9,545 32,254 31,792 Numerator for diluted net income per Class B Common Stock share $ 13,387 $ 10,048 $ 49,836 $ 36,314 Denominator for basic net income per Common Stock and Class B Common Stock share: Common Stock weighted average shares outstanding – basic 7,756 8,369 8,141 8,369 Class B Common Stock weighted average shares outstanding – basic 1,005 1,005 1,005 1,005 Denominator for diluted net income per Common Stock and Class B Common Stock share: Common Stock weighted average shares outstanding – diluted (assumes conversion of Class B Common Stock to Common Stock) 8,772 9,395 9,158 9,398 Class B Common Stock weighted average shares outstanding – diluted 1,016 1,026 1,017 1,029 Basic net income per share: Common Stock $ 13.20 $ 9.82 $ 49.71 $ 35.47 Class B Common Stock $ 13.20 $ 9.82 $ 49.25 $ 35.47 Diluted net income per share: Common Stock $ 13.18 $ 9.80 $ 49.59 $ 35.38 Class B Common Stock $ 13.18 $ 9.79 $ 49.00 $ 35.29 NOTES TO TABLE (1) For purposes of the diluted net income per share computation for Common Stock, all shares of Class B Common Stock are assumed to be converted; therefore, 100 % of undistributed earnings is allocated to Common Stock. (2) For purposes of the diluted net income per share computation for Class B Common Stock, weighted average shares of Class B Common Stock are assumed to be outstanding for the entire period and not converted. (3) For periods presented during which the Company has net income, the denominator for diluted net income per share for Common Stock and Class B Common Stock includes the dilutive effect of unvested performance shares relative to the Long-Term Performance Equity Plan . For periods presented during which the Company has net loss, the unvested performance shares granted pursuant to the Long-Term Performance Equity Plan are excluded from the computation of diluted net loss per share, as the effect would have been anti-dilutive. See Note 2 for additional information on the Long-Term Performance Equity Plan . 12 (4) The Long-Term Performance Equity Plan awards may be settled in cash and/or shares of the Company’s Class B Common Stock. Once an election has been made to settle an award in cash, the dilutive effect of unvested performance shares relative to such award is prospectively removed from the denominator in the computation of diluted net income per share. (5) The Company did no t have anti-dilutive unvested performance shares for any periods presented. (6) The Company repurchased 14,391.5 shares of its Common Stock in the Tender Offer, which expired on June 18, 2024, and repurchased 598,619 shares of its Common Stock pursuant to the Purchase Agreement entered into on May 6, 2024 with CCCBI. See Note 2 for additional information on the Tender Offer and the Purchase Agreement. (7) On August 20, 2024, the Company announced that its Board of Directors had approved a new share repurchase program under which the Company is authorized to repurchase up to $ 1.00 billion of the Company’s Common Stock. The new share repurchase authorization is discretionary and has no expiration date. As of September 27, 2024, the Company had not repurchased any shares of Common Stock under the new share repurchase program. 6. Short-Term Investments Short-term investments that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Short-term investments that are not classified as held-to-maturity are carried at fair value and classified as available-for-sale. As of September 27, 2024, all of the Company’s short-term investments were classified as available-for-sale. As of December 31, 2023, the Company did not have any short-term investments. Realized gains and losses on available-for-sale investments are included in net income. Unrealized gains and losses, net of tax, on available-for-sale investments are included in the condensed consolidated balance sheet as a component of accumulated other comprehensive income (loss). As of September 27, 2024, the Company’s available-for-sale investments consisted of the following cost, unrealized positions and estimated fair value, disaggregated by class of instrument: Gross Unrealized (in thousands) Cost Gains Losses Estimated Fair Value U.S. Treasury securities $ 128,935 $ 124 $ — $ 129,059 Corporate bonds 76,811 193 ( 1 ) 77,003 Commercial paper instruments 6,922 15 — 6,937 Asset-backed securities 2,038 7 — 2,045 Total short-term investments $ 214,706 $ 339 $ ( 1 ) $ 215,044 As of September 27, 2024, all of the Company’s available-for-sale investments were classified as short-term investments in the condensed consolidated balance sheet and had weighted average maturities of less than one year. The Company did not identify any other-than-temporary impairment on its available-for-sale investments during the first nine months of 2024. The sale and/or maturity of available-for-sale investments resulted in proceeds of $ 55.6 million and $ 72.2 million during the third quarter of 2024 and the first nine months of 2024, respectively. There were no gross realized gains or losses in the third quarter of 2024 or the first nine months of 2024. There was no realized activity during the third quarter of 2023 or the first nine months of 2023, as the Company did not have any short-term investments during those periods. 7. Inventories Inventories consisted of the following: (in thousands) September 27, 2024 December 31, 2023 Finished products $ 218,246 $ 207,912 Manufacturing materials 71,848 71,560 Plastic shells, plastic pallets and other inventories 44,587 42,460 Total inventories $ 334,681 $ 321,932 13 8. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following: (in thousands) September 27, 2024 December 31, 2023 Repair parts $ 32,946 $ 35,256 Prepaid software 9,078 9,427 Prepaid taxes 7,763 9,020 Prepaid marketing 6,372 4,703 Commodity hedges at fair market value 4,087 3,747 Other prepaid expenses and other current assets 33,175 26,432 Total prepaid expenses and other current assets $ 93,421 $ 88,585 9. Property, Plant and Equipment, Net The principal categories and estimated useful lives of property, plant and equipment, net were as follows: (in thousands) September 27, 2024 December 31, 2023 Estimated Useful Life Land $ 132,543 $ 99,858 Buildings 435,775 390,852 8 - 50 years Machinery and equipment 540,137 498,737 5 - 20 years Transportation equipment 667,501 611,001 3 - 20 years Furniture and fixtures 106,146 107,072 3 - 10 years Cold drink dispensing equipment 454,859 449,508 3 - 17 years Leasehold and land improvements 165,713 179,146 5 - 20 years Software for internal use 49,740 49,611 3 - 10 years Construction in progress 132,167 95,623 Total property, plant and equipment, at cost 2,684,581 2,481,408 Less: Accumulated depreciation and amortization 1,229,835 1,160,845 Property, plant and equipment, net $ 1,454,746 $ 1,320,563 10. Leases Following is a summary of the weighted average remaining lease term and the weighted average discount rate for the Company’s leases: September 27, 2024 December 31, 2023 Weighted average remaining lease term: Operating leases 6.4 years 6.7 years Financing leases 3.0 years 3.5 years Weighted average discount rate: Operating leases 3.9 % 3.8 % Financing leases 5.2 % 5.2 % Following is a summary of the Company’s leases within the condensed consolidated statements of operations: Third Quarter First Nine Months (in thousands) 2024 2023 2024 2023 Operating lease costs $ 7,289 $ 8,293 $ 22,553 $ 24,871 Short-term and variable leases 3,421 4,151 9,820 11,942 Depreciation expense from financing leases 412 413 1,235 1,235 Interest expense on financing lease obligations 77 109 253 346 Total lease cost $ 11,199 $ 12,966 $ 33,861 $ 38,394 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 14 summary of future minimum lease payments for all noncancelable operating leases and financing leases as of September 27, 2024: (in thousands) Operating Leases Financing Leases Remainder of 2024 $ 7,402 $ 707 2025 24,090 2,869 2026 20,862 1,233 2027 18,362 338 2028 13,634 345 Thereafter 38,748 620 Total minimum lease payments including interest $ 123,098 $ 6,112 Less: Amounts representing interest 14,912 441 Present value of minimum lease principal payments 108,186 5,671 Less: Current portion of lease liabilities 22,323 2,635 Noncurrent portion of lease liabilities $ 85,863 $ 3,036 Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of December 31, 2023: (in thousands) Operating Leases Financing Leases 2024 $ 29,932 $ 2,808 2025 24,329 2,869 2026 21,115 1,233 2027 18,614 338 2028 13,890 345 Thereafter 39,022 620 Total minimum lease payments including interest $ 146,902 $ 8,213 Less: Amounts representing interest 18,437 694 Present value of minimum lease principal payments 128,465 7,519 Less: Current portion of lease liabilities 26,194 2,487 Noncurrent portion of lease liabilities $ 102,271 $ 5,032 Following is a summary of the Company’s leases within the condensed consolidated statements of cash flows: First Nine Months (in thousands) 2024 2023 Cash flows from operating activities impact: Operating leases $ 22,454 $ 24,666 Interest payments on financing lease obligations 253 346 Total cash flows from operating activities impact $ 22,707 $ 25,012 Cash flows from financing activities impact: Principal payments on financing lease obligations $ 1,848 $ 1,712 Total cash flows from financing activities impact $ 1,848 $ 1,712 11. Distribution Agreements, Net Distribution agreements, net, which are amortized on a straight-line basis and have estimated useful lives of 20 to 40 years, consisted of the following: (in thousands) September 27, 2024 December 31, 2023 Distribution agreements at cost $ 990,191 $ 990,191 Less: Accumulated amortization 191,716 173,048 Distribution agreements, net $ 798,475 $ 817,143 15 12. Customer Lists, Net Customer lists, net, which are amortized on a straight-line basis and have estimated useful lives of five to 12 years, consisted of the following: (in thousands) September 27, 2024 December 31, 2023 Customer lists at cost $ 25,288 $ 25,288 Less: Accumulated amortization 19,005 17,789 Customer lists, net $ 6,283 $ 7,499 13. Supply Chain Finance Program The Company has an agreement with a third-party financial institution to facilitate a supply chain finance program (“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 the 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 $ 59.8 million as of September 27, 2024 and $ 55.1 million as of December 31, 2023. 14. Other Accrued Liabilities Other accrued liabilities consisted of the following: (in thousands) September 27, 2024 December 31, 2023 Current portion of acquisition related contingent consideration $ 75,742 $ 64,528 Accrued insurance costs 56,545 54,040 Accrued marketing costs 45,602 55,799 Employee and retiree benefit plan accruals 33,045 34,203 Accrued interest payable 27,418 2,520 Accrued taxes (other than income taxes) 8,812 7,474 All other accrued expenses 29,579 19,430 Total other accrued liabilities $ 276,743 $ 237,994 15. Commodity Derivative Instruments The Company is subject to the risk of increased costs arising from adverse changes in certain commodity prices. In the normal course of business, the Company manages this risk through a variety of strategies, including the use of commodity derivative instruments. The Company does not use commodity derivative instruments for trading or speculative purposes. 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. Commodity derivative instruments held by the Company are marked to market on a quarterly basis and are recognized in earnings consistent with the expense classification of the underlying hedged item. The Company generally pays a fee for these commodity derivative instruments, which is amortized over the corresponding period of each commodity derivative instrument. Settlements of commodity derivative instruments are included in cash flows from operating activities in the condensed consolidated 16 statements of cash flows. 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 (in thousands) 2024 2023 2024 2023 Cost of sales $ 1,426 $ ( 25 ) $ 1,345 $ ( 1,517 ) Selling, delivery and administrative expenses ( 631 ) 703 ( 420 ) ( 2,211 ) Total gain (loss) $ 795 $ 678 $ 925 $ ( 3,728 ) All commodity derivative instruments are recorded at fair value as either assets or liabilities in the condensed consolidated balance sheets. 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. 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 27, 2024 December 31, 2023 Assets: Prepaid expenses and other current assets $ 4,087 $ 3,747 Other assets 585 — Total assets $ 4,672 $ 3,747 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 27, 2024 December 31, 2023 Gross commodity derivative instrument assets $ 4,672 $ 3,747 Gross commodity derivative instrument liabilities — — The following table summarizes the Company’s outstanding commodity derivative instruments: (in thousands) September 27, 2024 December 31, 2023 Notional amount of outstanding commodity derivative instruments $ 61,455 $ 50,187 Latest maturity date of outstanding commodity derivative instruments December 2025 December 2024 16. Fair Values of Financial Instruments GAAP requires assets and liabilities carried at fair value to be classified and disclosed in one of the following categories: • Level 1: Quoted market prices in active markets for identical assets or liabilities. • Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. • Level 3: Unobservable inputs that are not corroborated by market data. 17 The below methods and assumptions were used by the Company in estimating the fair values of its financial instruments. There were no transfers of assets or liabilities between levels in any period presented. Financial Instrument Fair Value Level Methods and Assumptions Deferred compensation plan assets and liabilities Level 1 The fair value of the Company’s nonqualified deferred compensation plan for certain executives and other highly compensated employees is based on the fair values of associated assets and liabilities, which are held in mutual funds and are based on the quoted market prices of the securities held within the mutual funds. Short-term investments Level 1 The fair values of the Company’s Level 1 short-term investments, which are U.S. Treasury securities, corporate bonds and asset-backed securities, are based on the quoted market prices of those securities which are actively traded on national exchanges. Short-term investments Level 2 The fair values of the Company’s Level 2 short-term investments, which are commercial paper instruments, are based on estimated current market prices and have readily determinable fair market values. Commodity derivative instruments Level 2 The fair values of the Company’s commodity derivative instruments are based on current settlement values at each balance sheet date, which represent the estimated amounts the Company would have received or paid upon termination of these instruments. The Company’s credit risk related to the commodity derivative instruments is managed by requiring high standards for its counterparties and periodic settlements. The Company considers nonperformance risk in determining the fair values of commodity derivative instruments. Long-term debt Level 2 The carrying amounts of the Company’s variable rate debt approximate the fair values due to variable interest rates with short reset periods. The fair values of the Company’s fixed rate debt are based on estimated current market prices. Acquisition related contingent consideration Level 3 The fair value of the Company’s acquisition related contingent consideration is based on internal forecasts and the weighted average cost of capital (“WACC”) derived from market data. The following tables summarize the carrying amounts and the fair values by level of the Company’s deferred compensation plan assets and liabilities, short-term investments, commodity derivative instruments, long‑term debt and acquisition related contingent consideration: September 27, 2024 (in thousands) Carrying Amount Total Fair Value Fair Value Level 1 Fair Value Level 2 Fair Value Level 3 Assets: Deferred compensation plan assets $ 79,791 $ 79,791 $ 79,791 $ — $ — Short-term investments 215,044 215,044 208,107 6,937 — Commodity derivative instruments 4,672 4,672 — 4,672 — Liabilities: Deferred compensation plan liabilities 79,791 79,791 79,791 — — Long-term debt 1,785,782 1,853,400 — 1,853,400 — Acquisition related contingent consideration 705,571 705,571 — — 705,571 December 31, 2023 (in thousands) Carrying Amount Total Fair Value Fair Value Level 1 Fair Value Level 2 Fair Value Level 3 Assets: Deferred compensation plan assets $ 64,769 $ 64,769 $ 64,769 $ — $ — Commodity derivative instruments 3,747 3,747 — 3,747 — Liabilities: Deferred compensation plan liabilities 64,769 64,769 64,769 — — Long-term debt 599,159 579,000 — 579,000 — Acquisition related contingent consideration 669,337 669,337 — — 669,337 The acquisition related contingent consideration was valued using a probability weighted discounted cash flow model based on internal forecasts and the WACC derived from market data, which are considered Level 3 inputs. Each reporting period, the 18 Company adjusts its acquisition related contingent consideration liability related to the distribution territories subject to acquisition related sub-bottling payments to fair value by discounting future expected acquisition related sub-bottling payments required under the CBA using the Company’s estimated WACC. The future expected acquisition related sub-bottling payments extend through the life of the related distribution assets acquired in each distribution territory, which is generally 40 years. As a result, the fair value of the acquisition related contingent consideration liability is impacted by the Company’s WACC, management’s estimate of the acquisition related sub-bottling payments that will be made in the future under the CBA, and current acquisition related sub-bottling payments (all Level 3 inputs). Changes in any of these Level 3 inputs, particularly the underlying risk-free interest rate used to estimate the Company’s WACC, could result in material changes to the fair value of the acquisition related contingent consideration liability and could materially impact the amount of non-cash expense (or income) recorded each reporting period. The 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 (in thousands) 2024 2023 2024 2023 Beginning balance - Level 3 liability $ 657,246 $ 594,389 $ 669,337 $ 541,491 Payments of acquisition related contingent consideration ( 20,567 ) ( 7,603 ) ( 44,243 ) ( 20,979 ) Reclassification to current payables 300 — ( 10,400 ) ( 900 ) Increase in fair value 68,592 18,864 90,877 86,038 Ending balance - Level 3 liability $ 705,571 $ 605,650 $ 705,571 $ 605,650 As of September 27, 2024 and September 29, 2023, a WACC of 8.6 % and 9.2 %, respectively, 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 during the first nine months of 2024 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 mark-to-market on acquisition related contingent consideration in the condensed consolidated statement of operations for the first nine months of 2024. 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 $ 50 million to $ 80 million. 17. Income Taxes The Company’s effective income tax rate was 25.6 % for the first nine months of 2024 and 25.3 % for the first nine months of 2023. The Company’s income tax expense was $ 156.4 million for the first nine months of 2024 and $ 112.4 million for the first nine months of 2023. The increase in income tax expense was primarily attributable to higher income before taxes during the first nine months of 2024 compared to the first nine months of 2023. The Company had uncertain tax positions, including accrued interest, of $ 0.5 million on September 27, 2024 and $ 0.4 million on December 31, 2023, 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. Prior tax years beginning in year 2020 remain open to examination by the Internal Revenue Service, and various tax years beginning in year 2000 remain open to examination by certain state tax jurisdictions due to loss carryforwards. 18. Pension and Postretirement Benefit Obligations 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. The Primary Plan was terminated during 2023, as discussed below. The second Company-sponsored pension plan (the “Bargaining Plan”) is for certain employees under collective bargaining agreements. Benefits under the Bargaining Plan are determined in accordance with negotiated formulas for the respective participants. 19 During the second quarter of 2023, the Company began recognizing the termination of the Primary Plan. The Company recognized settlement expense of $ 112.8 million during the final three quarters of 2023 in conjunction with the full settlement of the Primary Plan benefit liabilities. This settlement expense related primarily to the reclassification of the gross actuarial losses associated with the Primary Plan out of accumulated other comprehensive loss and was recorded as pension plan settlement expense in the consolidated statement of operations for 2023. See Note 22 for additional information related to the impact on accumulated other comprehensive loss of the Primary Plan termination during 2023. The components of total pension expense were as follows: Third Quarter First Nine Months (in thousands) 2024 2023 2024 2023 Service cost $ 1,092 $ 1,099 $ 3,274 $ 3,298 Interest cost 588 517 1,765 7,533 Expected return on plan assets ( 762 ) ( 609 ) ( 2,287 ) ( 6,437 ) Recognized net actuarial loss — — — 1,946 Amortization of prior service cost 4 4 12 12 Net periodic pension cost 922 1,011 2,764 6,352 Settlement expense — 77,319 — 117,096 Total pension expense $ 922 $ 78,330 $ 2,764 $ 123,448 Contributions to the Bargaining Plan are based on actuarially determined amounts and are limited to the amounts currently deductible for income tax purposes. The Company contributed $ 2.0 million to the Bargaining Plan during the first nine months of 2024 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 2024. Postretirement Benefits 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. The Company does not prefund these benefits and has the right to modify or terminate certain of these benefits in the future. The components of net periodic postretirement benefit cost were as follows: Third Quarter First Nine Months (in thousands) 2024 2023 2024 2023 Service cost $ 310 $ 294 $ 930 $ 882 Interest cost 781 697 2,343 2,092 Recognized net actuarial loss 26 — 78 — Net periodic postretirement benefit cost $ 1,117 $ 991 $ 3,351 $ 2,974 19. Other Liabilities Other liabilities consisted of the following: (in thousands) September 27, 2024 December 31, 2023 Noncurrent portion of acquisition related contingent consideration $ 629,829 $ 604,809 Accruals for executive benefit plans 162,635 153,428 Noncurrent deferred proceeds from related parties 97,878 100,176 Other 9,734 8,086 Total other liabilities $ 900,076 $ 866,499 20 20. Long-Term Debt Following is a summary of the Company’s long-term debt: (in thousands) Maturity Date Interest Rate Interest Paid Public/ Nonpublic September 27, 2024 December 31, 2023 Senior bonds (the “2025 Senior Bonds”) (1) 11/25/2025 3.800 % Semi-annually Public $ 350,000 $ 350,000 Senior notes 10/10/2026 3.930 % Quarterly Nonpublic 100,000 100,000 Senior bonds (the “2029 Senior Bonds”) (2) 6/1/2029 5.250 % Semi-annually Public 700,000 — Revolving credit facility (3) 6/10/2029 Variable Varies Nonpublic — — Senior notes 3/21/2030 3.960 % Quarterly Nonpublic 150,000 150,000 Senior bonds (the “2034 Senior Bonds”) (4) 6/1/2034 5.450 % Semi-annually Public 500,000 — Unamortized discount on senior bonds (1)(2)(4) Various ( 1,553 ) ( 17 ) Debt issuance costs ( 12,665 ) ( 824 ) Total long-term debt $ 1,785,782 $ 599,159 (1) The 2025 Senior Bonds were issued at 99.975 % of par. (2) The 2029 Senior Bonds were issued at 99.843 % of par. (3) 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. (4) The 2034 Senior Bonds were issued at 99.893 % of par. 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 May 29, 2024, the Company completed the issuance and sale of $ 700 million aggregate principal amount of the 2029 Senior Bonds and $ 500 million aggregate principal amount of the 2034 Senior Bonds. The 2029 Senior Bonds and the 2034 Senior Bonds are the Company’s senior unsecured obligations and rank equally with the Company’s existing senior unsecured and unsubordinated indebtedness. The 2029 Senior Bonds mature on June 1, 2029 and the 2034 Senior Bonds mature on June 1, 2034, in each case, unless earlier redeemed or repurchased by the Company. The 2029 Senior Bonds bear interest at a rate of 5.250 % per annum and the 2034 Senior Bonds bear interest at a rate of 5.450 % per annum. The Company will pay interest on the 2029 Senior Bonds and the 2034 Senior Bonds semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2024. On June 10, 2024, the Company entered into an amended and restated credit agreement (the “Revolving Credit Facility Agreement”), providing for a five-year unsecured revolving credit facility with an aggregate maximum borrowing capacity of $ 500 million (the “Revolving Credit Facility”), maturing on June 10, 2029. The Revolving Credit Facility Agreement replaced the Company’s previous credit agreement, dated as of July 9, 2021. Subject to obtaining commitments from lenders and satisfying other conditions specified therein, at the Company’s option, the Revolving Credit Facility may be increased by up to $ 250 million. Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to, at the Company’s option, either (i) the Base Rate (as defined in the Revolving Credit Facility Agreement) plus an applicable rate or (ii) Term SOFR (as defined in the Revolving Credit Facility Agreement) plus the SOFR Adjustment (as defined in the Revolving Credit Facility Agreement) and an applicable rate, depending on the rating for the Company’s long-term senior unsecured, non-credit-enhanced debt (“Debt Rating”). In addition, the Company must pay a facility fee on the lenders’ aggregate commitments under the Revolving Credit Facility ranging from 0.060 % to 0.175 % per annum, depending on the Company’s Debt Rating. The Company currently believes all banks participating in the Revolving Credit Facility have the ability to and will meet any funding requests from the Company. The indentures under which the 2025 Senior Bonds, the 2029 Senior Bonds and the 2034 Senior Bonds were issued do not include financial covenants but do limit the incurrence of certain liens and encumbrances as well as indebtedness by the Company’s subsidiaries in excess of certain amounts. The agreements under which the Company’s nonpublic debt, including the Revolving Credit Facility, was issued include two financial covenants: a consolidated cash flow/fixed charges ratio and a consolidated 21 funded indebtedness/cash flow ratio, each as defined in the respective agreement. The Company was in compliance with these covenants as of September 27, 2024. These covenants have not restricted the Company’s liquidity or capital resources. All outstanding long-term debt has been issued by the Company and none has been issued by any of its subsidiaries. There are no guarantees of the Company’s long-term debt. 21. Commitments and Contingencies Manufacturing Cooperatives The Company is obligated to purchase at least 80 % of its requirements of plastic bottles for certain designated territories from Southeastern. The Company is also obligated to purchase 16.0 million cases of finished product from SAC on an annual basis through June 2034. The Company purchased 19.0 million cases and 19.3 million cases of finished product from SAC in the first nine months of 2024 and the first nine months of 2023, respectively. The following table summarizes the Company’s purchases from these manufacturing cooperatives: Third Quarter First Nine Months (in thousands) 2024 2023 2024 2023 Purchases from Southeastern $ 34,887 $ 31,087 $ 108,983 $ 113,673 Purchases from SAC 55,056 47,505 154,981 150,217 Total purchases from manufacturing cooperatives $ 89,943 $ 78,592 $ 263,964 $ 263,890 The Company guarantees a portion of SAC’s debt, which matures in 2028, based on the ratio of SAC’s total liabilities to SAC’s shareholders’ equity as of December 31 of each year. As of September 27, 2024 and December 31, 2023, the amount of the Company’s guarantee of SAC’s debt was $ 0 and $ 9.5 million, respectively. 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 relating to 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 27, 2024, and there was no impairment identified in 2023. 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 $ 39.0 million on September 27, 2024 and $ 37.6 million on December 31, 2023. The Company participates in long-term marketing contractual arrangements with certain prestige properties, athletic venues and other locations. As of September 27, 2024, the future payments related to these contractual arrangements, which expire at various dates through 2034, amounted to $ 139.6 million. The Company is involved in various claims and legal proceedings which have arisen in the ordinary course of its business. Although it is difficult to predict the ultimate outcome of these claims and legal proceedings, management believes the ultimate disposition of these matters will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company. No material amount of loss in excess of recorded amounts is believed to be reasonably possible as a result of these claims and legal proceedings. The Company is subject to audits by tax authorities in jurisdictions where it conducts business. These audits may result in assessments that are subsequently resolved with the authorities or potentially through the courts. Management believes the Company has adequately provided for any assessments likely to result from these audits; however, final assessments, if any, could be different than the amounts recorded in the condensed consolidated financial statements. 22 22. Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) (“AOCI(L)”) is comprised of adjustments to the Company’s pension and postretirement medical benefit plans and unrealized gains/losses on the Company’s short-term investments. Following is a summary of AOCI(L) for the third quarter of 2024 and the third quarter of 2023: (in thousands) June 28, 2024 Pre-tax Activity Tax Effect September 27, 2024 Net pension activity: Actuarial gain $ 533 $ — $ — $ 533 Prior service costs ( 91 ) 4 ( 1 ) ( 88 ) Net postretirement benefits activity: Actuarial gain 761 26 ( 6 ) 781 Prior service costs ( 624 ) — — ( 624 ) Unrealized (loss) gain on short-term investments ( 173 ) 566 ( 138 ) 255 Reclassification of stranded tax effects ( 4,809 ) — — ( 4,809 ) Total AOCI(L) $ ( 4,403 ) $ 596 $ ( 145 ) $ ( 3,952 ) As of September 27, 2024, there were no gross actuarial losses or prior service costs included in accumulated other comprehensive loss associated with the Primary Plan, as the Primary Plan settlement was completed during 2023. All pension activity during 2024 was related to the Bargaining Plan. (in thousands) June 30, 2023 Pre-tax Activity Tax Effect September 29, 2023 Net pension activity: Actuarial loss $ ( 72,626 ) $ 1,567 $ ( 384 ) $ ( 71,443 ) Prior service costs ( 99 ) 4 ( 1 ) ( 96 ) Pension plan settlement 30,041 77,319 ( 36,202 ) 71,158 Net postretirement benefits activity: Actuarial gain 6,752 — — 6,752 Prior service costs ( 624 ) — — ( 624 ) Reclassification of stranded tax effects ( 19,720 ) — 14,911 ( 4,809 ) Total AOCI(L) $ ( 56,276 ) $ 78,890 $ ( 21,676 ) $ 938 Following is a summary of AOCI(L) for the first nine months of 2024 and the first nine months of 2023: (in thousands) December 31, 2023 Pre-tax Activity Tax Effect September 27, 2024 Net pension activity: Actuarial gain $ 533 $ — $ — $ 533 Prior service costs ( 97 ) 12 ( 3 ) ( 88 ) Net postretirement benefits activity: Actuarial gain 721 78 ( 18 ) 781 Prior service costs ( 624 ) — — ( 624 ) Unrealized gain on short-term investments — 338 ( 83 ) 255 Reclassification of stranded tax effects ( 4,809 ) — — ( 4,809 ) Total AOCI(L) $ ( 4,276 ) $ 428 $ ( 104 ) $ ( 3,952 ) 23 (in thousands) December 31, 2022 Pre-tax Activity Tax Effect September 29, 2023 Net pension activity: Actuarial loss $ ( 71,140 ) $ ( 401 ) $ 98 $ ( 71,443 ) Prior service costs ( 105 ) 12 ( 3 ) ( 96 ) Pension plan settlement — 117,096 ( 45,938 ) 71,158 Net postretirement benefits activity: Actuarial gain 6,752 — — 6,752 Prior service costs ( 624 ) — — ( 624 ) Reclassification of stranded tax effects ( 19,720 ) — 14,911 ( 4,809 ) Total AOCI(L) $ ( 84,837 ) $ 116,707 $ ( 30,932 ) $ 938 23. Supplemental Disclosures of Cash Flow Information Changes in current assets and current liabilities affecting cash were as follows: First Nine Months (in thousands) 2024 2023 Short-term investments $ ( 3,450 ) $ — Accounts receivable, trade ( 16,881 ) ( 26,086 ) Allowance for doubtful accounts 98 2,015 Accounts receivable from The Coca‑Cola Company ( 36,511 ) ( 19,911 ) Accounts receivable, other 20,713 1,779 Inventories ( 12,749 ) 27,144 Prepaid expenses and other current assets ( 4,836 ) 2,954 Accounts payable, trade ( 13,194 ) 7,628 Accounts payable to The Coca‑Cola Company 89,682 17,904 Other accrued liabilities 38,749 23,566 Accrued compensation ( 5,858 ) ( 1,202 ) Change in current assets less current liabilities $ 55,763 $ 35,791 24