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Related Party Transactions | 12 Months Ended
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Jan. 01, 2017
Related Party Transactions [Abstract] |
Related Party Transactions |
19. | Related Party Transactions
The Coca‑Cola Company The Company’s business consists primarily of the production, marketing and distribution of nonalcoholic beverages of The Coca‑Cola Company, which is the sole owner of the secret formulas under which the primary components, either concentrate or syrup, of its soft drink products are manufactured. As of January 1, 2017, The Coca‑Cola Company owned approximately 35% of the Company’s total outstanding Common Stock, representing approximately 5% of the total voting power of the Company’s Common Stock and Class B Common Stock voting together. As long as The Coca‑Cola Company holds the number of shares of Common Stock it currently owns, it has the right to have a designee proposed by the Company for nomination to the Company’s Board of Directors, and J. Frank Harrison, III, the Chairman of the Board and the Chief Executive Officer of the Company, and trustees of certain trusts established for the benefit of certain relatives of J. Frank Harrison, Jr. have agreed to vote the shares of the Company’s Class B Common Stock which they control in favor of such designee. The Coca‑Cola Company does not own any shares of Class B Common Stock of the Company. The following table and the subsequent descriptions summarize the significant transactions between the Company and The Coca‑Cola Company:
|  | Fiscal Year |
(in thousands) |  | 2016 |  |  | 2015 |  |  | 2014 |
Payments made by the Company to The Coca-Cola Company for: |  |  |  |  |  |  |  |  |  |  |  |
Concentrate, syrup, sweetener and other purchases |  | $ | 669,783 |  |  | $ | 482,673 |  |  | $ | 423,983 |
Customer marketing programs |  |  | 116,537 |  |  |  | 70,754 |  |  |  | 61,106 |
Cold drink equipment parts |  |  | 21,558 |  |  |  | 16,260 |  |  |  | 7,654 |
Payments made by The Coca-Cola Company to the Company for: |  |  |  |  |  |  |  |  |  |  |  |
Marketing funding support payments |  | $ | 73,513 |  |  | $ | 56,284 |  |  | $ | 46,492 |
Fountain delivery and equipment repair fees |  |  | 27,624 |  |  |  | 17,400 |  |  |  | 13,530 |
Presence marketing funding support on the Company’s behalf |  |  | 2,064 |  |  |  | 2,415 |  |  |  | 5,848 |
Facilitating the distribution of certain brands and packages to other Coca-Cola bottlers |  |  | 7,193 |  |  |  | 4,670 |  |  |  | 3,904 |
Coca‑Cola Refreshments USA, Inc. (“CCR”), a wholly-owned subsidiary of The Coca‑Cola Company The Company has a production arrangement with CCR to buy and sell finished products at cost. In addition, the Company transports product for CCR to the Company’s and other Coca-Cola bottlers’ locations. The following table summarizes purchases and sales under these arrangements between the Company and CCR:
|  | Fiscal Year |
(in thousands) |  | 2016 |  |  | 2015 |  |  | 2014 |
Purchases from CCR |  | $ | 269,575 |  |  | $ | 229,954 |  |  | $ | 68,819 |
Sales to CCR |  |  | 72,568 |  |  |  | 30,500 |  |  |  | 53,543 |
Sales to CCR for transporting CCR's product |  |  | 21,940 |  |  |  | 16,523 |  |  |  | 2,917 |
Prior to the sale of BYB to The Coca‑Cola Company, CCR distributed one of the Company’s brands, Tum-E Yummies. During the third quarter of 2015, the Company sold BYB, the subsidiary that owned and distributed Tum-E Yummies to The Coca‑Cola Company and recorded a gain of $22.7 million on the sale. The Company continues to distribute Tum-E Yummies following the sale. Total sales to CCR for Tum-E Yummies were $14.8 million in 2015 and $22.0 million in 2014. As discussed above in Note 3 to the consolidated financial statements, the Company and CCR have entered into, and closed the following asset purchase agreements relating to certain territories previously served by CCR’s facilities and equipment located in these territories:
Expansion Territories |  | Definitive Agreement Date |  | Acquisition / Exchange Date
Johnson City and Morristown, Tennessee |  | May 7, 2014 |  | May 23, 2014
Knoxville, Tennessee |  | August 28, 2014 |  | October 24, 2014
Cleveland and Cookeville, Tennessee |  | December 5, 2014 |  | January 30, 2015
Louisville, Kentucky and Evansville, Indiana |  | December 17, 2014 |  | February 27, 2015
Paducah and Pikeville, Kentucky |  | February 13, 2015 |  | May 1, 2015
Norfolk, Fredericksburg and Staunton, Virginia and Elizabeth City, North Carolina |  | September 23, 2015 |  | October 30, 2015
Easton and Salisbury, Maryland and Richmond and Yorktown, Virginia |  | September 23, 2015 |  | January 29, 2016
Alexandria, Virginia and Capitol Heights and La Plata, Maryland |  | September 23, 2015 |  | April 1, 2016
Baltimore, Hagerstown and Cumberland, Maryland |  | September 23, 2015 |  | April 29, 2016
Cincinnati, Dayton, Lima and Portsmouth, Ohio and Louisa, Kentucky |  | September 1, 2016 |  | October 28, 2016
Regional Manufacturing Facilities |  | Definitive Agreement Date |  | Acquisition Date
Sandston, Virginia |  | October 30, 2015 |  | January 29, 2016
Silver Spring and Baltimore, Maryland |  | October 30, 2015 |  | April 29, 2016
Cincinnati, Ohio |  | September 1, 2016 |  | October 28, 2016
As part of the distribution territory closings under these asset purchase agreements, the Company signed CBAs which have terms of ten years and are renewable by the Company indefinitely for successive additional terms of ten years each unless earlier terminated as provided therein. Under the CBAs, the Company makes a quarterly sub-bottling payment to CCR on a continuing basis for the grant of exclusive rights to distribute, promote, market and sell the authorized brands of The Coca‑Cola Company and related products in the Expansion Territories. The quarterly sub-bottling payment will be based on sales of certain beverages and beverage products that are sold under the same trademarks that identify a covered beverage, beverage product or certain cross-licensed brands. The liability recorded by the Company to reflect the estimated fair value of contingent consideration related to future sub-bottling payments was $253.4 million as of January 1, 2017, and $136.6 million as of January 3, 2016. Payments to CCR under the CBAs were $13.5 million, $4.0 million and $0.2 million during 2016, 2015 and 2014, respectively. On October 17, 2014, the Company entered into an asset exchange agreement with CCR, pursuant to which the Company exchanged its facilities and equipment located in Jackson, Tennessee for territory previously served by CCR’s facilities and equipment located in Lexington, Kentucky. This transaction closed on May 1, 2015. As part of the Expansion Transactions, on October 30, 2015, the Company acquired from CCR a “make-ready center” in Annapolis, Maryland for $5.4 million, which includes all post-closing adjustments. The Company recorded a bargain purchase gain of $2.0 million on this transaction after applying a deferred tax liability of approximately $1.3 million. The Company uses the make-ready center to deploy and refurbish vending and other sales equipment for use in the marketplace. Coca‑Cola Bottlers’ Sales and Services Company, LLC (“CCBSS”) Along with all other Coca‑Cola bottlers in the United States, including CCR, the Company is a member of CCBSS. CCBSS was formed in 2003 for the purpose of facilitating various procurement functions and distributing certain specified beverage products of The Coca‑Cola Company with the intention of enhancing the efficiency and competitiveness of the Coca‑Cola bottling system in the United States. 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. As of January 1, 2017 and January 3, 2016, the Company had rebates due from CCBSS of $7.4 million and $5.9 million, respectively. In addition, the Company pays an administrative fee to CCBSS for its services. In 2016, 2015 and 2014, the Company incurred $1.3 million, $0.7 million, and $0.5 million in administrative fees to CCBSS, respectively. National Product Supply Group (“NPSG”) In October 2015, the Company, The Coca‑Cola Company and three other Coca‑Cola bottlers, including CCR, who are considered “Regional Producing Bottlers” (“RPBs”) in The Coca‑Cola Company’s national product supply system, entered into the NPSG Governance Agreement. Pursuant to the NPSG Governance Agreement, The Coca‑Cola Company and the RPBs have formed a national product supply group (the “NPSG”) and agreed to certain binding governance mechanisms, including a governing board (the “NPSG Board”) comprised of a representative of (i) the Company, (ii) The Coca‑Cola Company and (iii) each other RPB. As The Coca‑Cola Company continues its multi-year refranchising effort of its North American bottling territories, additional RPBs may be added to the NPSG Board. As of January 2017, the NPSG Board consisted of The Coca‑Cola‑Company, the Company and five other RPBs, including CCR. The stated objectives of the NPSG include, among others, (i) Coca‑Cola system strategic infrastructure investment and divestment planning; (ii) network optimization of all plant to distribution center sourcing; and (iii) new product/packaging infrastructure planning. The NPSG Board makes and/or oversees and directs certain key decisions regarding the NPSG, including decisions regarding the management and staffing of the NPSG and the funding for its ongoing operations. The Company is obligated to pay a certain portion of the costs of operating the NPSG. Pursuant to the decisions of the NPSG Board made from time to time and subject to the terms and conditions of the NPSG Governance Agreement, the Company and each other Regional Producing Bottler will make investments in their respective manufacturing assets and will implement Coca‑Cola system strategic investment opportunities consistent with the NPSG Governance Agreement. CONA Services LLC (“CONA”) The Company is a member of CONA, an entity formed with The Coca‑Cola Company and certain Coca‑Cola bottlers to provide business process and information technology services to its members. Under the CONA limited liability agreement executed January 27, 2016 (as amended or restated from time to time, the “CONA LLC Agreement”), the Company and other members of CONA are required to make capital contributions to CONA if and when approved by CONA’s board of directors, which is comprised of representatives of the members. The Company currently has the right to designate one of the members of CONA’s board of directors and has a percentage interest in CONA of approximately 19%. During 2016, the Company made $7.9 million of capital contributions to CONA. The Company is a party to a Master Services Agreement (the “Master Services Agreement”) with CONA, pursuant to which CONA agreed to make available, and the Company became 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. Pursuant to the Master Services Agreement, CONA agreed to make available, and authorized the Company to use, the CONA System in connection with the distribution, sale, marketing and promotion of non-alcoholic beverages the Company is authorized to distribute under its comprehensive beverage agreements or any other agreement with The Coca‑Cola Company (the “Beverages”) in the territories the Company serves (the “Territories”), subject to the provisions of the CONA LLC Agreement and any licenses or other agreements relating to products or services provided by third-parties and used in connection with the CONA System. As part of making the CONA System available to the Company, CONA will provide certain business process and information technology services to the Company, including the planning, development, management and operation of the CONA System in connection with the Company’s direct store delivery of products (collectively, the “CONA Services”). In exchange for the Company’s right to use the CONA System and right to receive the CONA Services under the Master Services Agreement, the Company will be charged quarterly service fees by CONA based on the number of physical cases of Beverages distributed by the Company during the applicable period in the Territories where the CONA Services have been implemented (the “Service Fees”). Upon the earlier of (i) all members of CONA beginning to use the CONA System in all territories in which they distribute products of The Coca‑Cola Company (excluding certain territories of CCR that are expected to be sold to bottlers that are neither members of CONA nor users of the CONA System), or (ii) December 31, 2018, the Service Fees will be changed to be an amount per physical case of Beverages distributed in any portion of the Territories equal to the aggregate costs incurred by CONA to maintain and operate the CONA System and provide the CONA Services divided by the total number of cases distributed by all of the members of CONA, subject to certain exceptions. The Company is obligated to pay the Service Fees under the Master Services Agreement even if it is not using the CONA System for all or any portion of its operations in the Territories. During 2016, the Company incurred CONA Service Fees of $7.5 million. Snyder Production Center (“SPC”) The Company leases the SPC and an adjacent sales facility, which are located in Charlotte, North Carolina, from Harrison Limited Partnership One (“HLP”). HLP is directly and indirectly owned by trusts of which J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, Sue Anne H. Wells, a director of the Company, and Deborah H. Everhart, a former director of the Company, are trustees and beneficiaries. Morgan H. Everett, a director of the Company, is a permissible, discretionary beneficiary of the trusts that directly or indirectly own HLP. The SPC lease expires on December 31, 2020. The principal balance outstanding under this capital lease as of January 1, 2017 was $14.7 million and as of January 3, 2016 was $17.5 million. The annual base rent the Company is obligated to pay under the lease is subject to an adjustment for an inflation factor. Rental payments related to this lease were $4.0 million, $3.8 million and $3.7 million in 2016, 2015 and 2014, respectively. Company Headquarters The Company leases its headquarters office facility and an adjacent office facility from Beacon Investment Corporation (“Beacon”). The lease expires on December 31, 2021. J. Frank Harrison, III is Beacon’s majority shareholder and Morgan H. Everett is a minority shareholder. The principal balance outstanding under this capital lease as of January 1, 2017 was $15.5 million and as of January 3, 2016 was $18.1 million. The annual base rent the Company is obligated to pay under the lease is subject to adjustment for increases in the Consumer Price Index. The minimum rentals and contingent rental payments related to this lease were as follows:
|  | Fiscal Year |
(in thousands) |  | 2016 |  |  | 2015 |  |  | 2014 |
Minimum rentals |  | $ | 3,526 |  |  | $ | 3,540 |  |  | $ | 3,539 |
Contingent rentals |  |  | 767 |  |  |  | 682 |  |  |  | 618 |
Total rental payments |  | $ | 4,293 |  |  | $ | 4,222 |  |  | $ | 4,157 |
The contingent rentals in 2016, 2015 and 2014 are a result of changes in the Consumer Price Index. Increases or decreases in lease payments that result from changes in the Consumer Price Index were recorded as adjustments to interest expense.

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(k)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39603-107864 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39622-107864 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39678-107864 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39691-107864 + Details
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