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Related Party Transactions | 9 Months Ended
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Sep. 29, 2019
Related Party Transactions [Abstract] |
Related Party Transactions | 2.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 formulas under which the primary components of its soft drink products, either concentrate or syrup, are manufactured. As of September 29, 2019, The Coca‑Cola Company owned approximately 27% of the Company’s total outstanding Common Stock and Class B Common Stock on a consolidated basis, 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 the Company’s Common Stock it currently owns, it has the right to have its designee proposed by the Company for nomination to the Company’s Board of Directors, and J. Frank Harrison, III, Chairman of the Board of Directors and 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, representing approximately 86% of the total voting power of the Company’s combined Common Stock and Class B Common Stock, in favor of such designee. The Coca‑Cola Company does not own any shares of the Company’s Class B Common Stock. The following table summarizes the significant transactions between the Company and The Coca‑Cola Company:
|  | Third Quarter |  |  | First Nine Months |
(in thousands) |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Payments made by the Company to The Coca-Cola Company for: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Concentrate, syrup, sweetener and other purchases |  | $ | 306,588 |  |  | $ | 341,949 |  |  | $ | 893,123 |  |  | $ | 904,244 |
Customer marketing programs |  |  | 36,597 |  |  |  | 34,005 |  |  |  | 109,110 |  |  |  | 110,062 |
Cold drink equipment parts |  |  | 4,519 |  |  |  | 7,958 |  |  |  | 18,568 |  |  |  | 22,188 |
Brand investment programs |  |  | 3,616 |  |  |  | 2,546 |  |  |  | 10,209 |  |  |  | 6,440 |
Payments made by The Coca-Cola Company to the Company for: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Marketing funding support payments |  | $ | 25,931 |  |  | $ | 22,632 |  |  | $ | 74,954 |  |  | $ | 65,325 |
Fountain delivery and equipment repair fees |  |  | 10,873 |  |  |  | 10,199 |  |  |  | 31,507 |  |  |  | 29,899 |
Presence marketing funding support on the Company’s behalf |  |  | 2,879 |  |  |  | 1,108 |  |  |  | 7,816 |  |  |  | 6,203 |
Facilitating the distribution of certain brands and packages to other Coca-Cola bottlers |  |  | 1,602 |  |  |  | 1,937 |  |  |  | 3,952 |  |  |  | 7,663 |
Cold drink equipment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,789 |
As part of The Coca‑Cola Company’s plans to refranchise its North American bottling territories, the Company completed a series of transactions from April 2013 to October 2017 with The Coca‑Cola Company, Coca‑Cola Refreshments USA, Inc. (“CCR”), a wholly-owned subsidiary of The Coca‑Cola Company, and Coca‑Cola Bottling Company United, Inc., an independent bottler that is unrelated to the Company, to significantly expand the Company’s distribution and manufacturing operations (the “System Transformation”). The System Transformation included the acquisition and exchange of rights to serve distribution territories and related distribution assets, as well as the acquisition and exchange of regional manufacturing plants and related manufacturing assets. In fiscal 2017, The Coca‑Cola Company agreed to provide the Company a fee to compensate the Company for the net economic impact of changes made by The Coca‑Cola Company to the authorized pricing on sales of covered beverages produced at certain manufacturing plants owned by Company (the “Legacy Facilities Credit”). The Company immediately recognized the portion of the Legacy Facilities Credit applicable to a regional manufacturing plant divested in fiscal 2017 and the remaining balance of the Legacy Facilities Credit will be amortized as a reduction to cost of sales over a period of 40 years. The portion of the deferred liability that is expected to be amortized in the next 12 months is classified as current. Coca‑Cola Refreshments USA, Inc. The Company, The Coca-Cola Company and CCR entered into a comprehensive beverage agreement on March 31, 2017 (as amended, the “CBA”). Pursuant to the CBA, the Company is required to make quarterly sub-bottling payments 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 distribution territories the Company acquired from CCR as part of the System Transformation, excluding territories the Company acquired in an exchange transaction. These sub-bottling payments are based on gross profit derived from 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. Sub-bottling payments to CCR were $18.8 million during the first nine months of 2019 and $18.3 million during the first nine months of 2018. The following table summarizes the liability recorded by the Company to reflect the estimated fair value of contingent consideration related to future sub‑bottling payments to CCR:
(in thousands) |  | September 29, 2019 |  |  | December 30, 2018 |
Current portion of acquisition related contingent consideration |  | $ | 28,583 |  |  | $ | 32,993 |
Noncurrent portion of acquisition related contingent consideration |  |  | 396,608 |  |  |  | 349,905 |
Total acquisition related contingent consideration |  | $ | 425,191 |  |  | $ | 382,898 |
Upon the conversion of the Company’s then-existing bottling agreements in fiscal 2017 pursuant to the CBA, the Company received a fee from CCR (the “Territory Conversion Fee”). The Territory Conversion Fee was recorded as a deferred liability and will be amortized as a reduction to cost of sales over a period of 40 years. The portion of the deferred liability that is expected to be amortized in the next 12 months is classified as current. 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 $23.2 million as of September 29, 2019 and $23.6 million as of December 30, 2018. South Atlantic Canners, Inc. (“SAC”) The Company is a shareholder of SAC, a manufacturing cooperative 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 investment. The Company’s investment in SAC, which was classified as other assets in the condensed consolidated balance sheets, was $8.2 million as of both September 29, 2019 and December 30, 2018. 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 were $7.0 million in the first nine months of 2019 and $6.8 million in the first nine months of 2018. Coca‑Cola Bottlers’ Sales and Services Company, LLC (“CCBSS”) Along with 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 $8.0 million on September 29, 2019 and $10.4 million on December 30, 2018, which were classified as accounts receivable, other in the condensed consolidated balance sheets. In addition, the Company pays an administrative fee to CCBSS for its services. The Company incurred administrative fees to CCBSS of $1.7 million in the first nine months of 2019 and $2.2 million in the first nine months of 2018, which were classified as selling, delivery and administrative (“SD&A”) expenses in the condensed consolidated statements of operations. CONA Services LLC (“CONA”) The Company is a member of CONA, an entity formed with The Coca‑Cola Company and certain other Coca‑Cola bottlers to provide business process and information technology services to its members. 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 $9.7 million as of September 29, 2019 and $8.0 million as of December 30, 2018. 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 CONA service fees of $17.7 million in the first nine months of 2019 and $15.5 million in the first nine months of 2018. 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, Chairman of the Board of Directors and Chief Executive Officer of the Company, is the majority stockholder and Morgan H. Everett, Senior Vice President and a director of the Company, is a minority stockholder. The annual base rent the Company is obligated to pay under this lease agreement is subject to adjustment for increases in the Consumer Price Index (the “CPI”) and the lease expires on December 31, 2021. The principal balance outstanding under this lease was $7.6 million on September 29, 2019 and $9.9 million on December 30, 2018. The Company leases the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina from Harrison Limited Partnership One, which is directly and indirectly owned by trusts of which J. Frank Harrison, III, and Sue Anne H. Wells, a director of the Company, are trustees and beneficiaries and of which Morgan H. Everett is a permissible, discretionary beneficiary. The annual base rent the Company is obligated to pay under this lease agreement is subject to an adjustment for an inflation factor and the lease expires on December 31, 2020. The principal balance outstanding under this lease was $5.3 million on September 29, 2019 and $8.1 million on December 30, 2018. A summary of rental payments related to these leases is as follows:
|  | Third Quarter |  |  | First Nine Months |
(in thousands) |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Company headquarters |  | $ | 1,132 |  |  | $ | 1,110 |  |  | $ | 3,393 |  |  | $ | 3,346 |
Snyder Production Center |  |  | 1,080 |  |  |  | 1,049 |  |  |  | 3,241 |  |  |  | 3,147 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 + Details
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