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Related Party Transactions | 6 Months Ended
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Jun. 28, 2024
Related Party Transactions [Abstract] |
Related Party Transactions | Related Party Transactions J. Frank Harrison, III As of June 28, 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, which represented approximately 71% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. 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 June 28, 2024, The Coca‑Cola Company owned shares of the Company’s Common Stock representing approximately 9% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. The number of shares of the Company’s Common Stock currently held by The Coca‑Cola Company gives it the right to have a designee proposed by the Company for nomination to the Company’s Board of Directors in the Company’s annual proxy statement. 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 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, which is referred to herein as the “fully diluted calculation”). The Share Repurchase was conditioned on, among other things, 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. Based on the fully diluted calculation following the expiration of the Tender Offer, the Company announced on June 21, 2024 its intention to purchase 598,619 shares of its Common Stock from CCCBI in the Share Repurchase at a price of $925 per share, for an aggregate purchase price of $553.7 million. The $553.7 million aggregate purchase price is reflected as share repurchase obligation to The Coca‑Cola Company in the condensed consolidated balance sheet as of June 28, 2024. The shares repurchased pursuant to the Purchase Agreement are classified as treasury stock in the condensed consolidated balance sheet as of June 28, 2024. The closing of the Share Repurchase occurred on July 5, 2024, the 11 th business day after the expiration of the Tender Offer. After the Share Repurchase was completed, The Coca‑Cola Company beneficially owned 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 and approximately 7% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. The following table summarizes the significant cash transactions between the Company and The Coca‑Cola Company:
|  | Second Quarter |  | First Half
(in thousands) |  | 2024 |  | 2023 |  | 2024 |  | 2023
Payments made by the Company to The Coca-Cola Company(1) |  | $ | 538,789 |  |  | $ | 523,191 |  |  | $ | 996,033 |  |  | $ | 992,718 |
Payments made by The Coca-Cola Company to the Company |  | 63,804 |  |  | 55,495 |  |  | 119,202 |  |  | 102,934 |
(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. 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 $23.7 million in the first half of 2024 and $13.4 million in the first half 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) |  | June 28, 2024 |  | December 31, 2023
Current portion of acquisition related contingent consideration |  | $ | 74,313 |  |  | $ | 64,528 |
Noncurrent portion of acquisition related contingent consideration |  | 582,933 |  |  | 604,809 |
Total acquisition related contingent consideration |  | $ | 657,246 |  |  | $ | 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 June 28, 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 investment. The Company’s investment in SAC, which was classified as other assets in the condensed consolidated balance sheets, was $21.0 million as of June 28, 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 $4.5 million in the first half of 2024 and $4.6 million in the first half 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 $12.0 million as of June 28, 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 $23.6 million as of June 28, 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 $13.0 million in the first half of 2024 and $13.6 million in the first half 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 $20.9 million on June 28, 2024 and $22.5 million on December 31, 2023. Rental payments for this lease were $1.0 million in both the second quarter of 2024 and the second quarter of 2023 and $2.0 million in both the first half of 2024 and the first half of 2023. 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 $3.8 million and $3.7 million in the second quarter of 2024 and the second quarter of 2023, respectively, and $5.8 million and $5.7 million in the first half of 2024 and the first half of 2023, respectively.

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