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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________________________
FORM 10-Q
______________________________________________________________________________________________
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2023
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number: 0-9286
______________________________________________________________________________________________
COCA-COLA CONSOLIDATED, INC.
(Exact name of registrant as specified in its charter)
______________________________________________________________________________________________
Delaware
56-0950585
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
4100 Coca‑Cola Plaza

Charlotte, NC
28211
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (980) 392-8298
______________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $1.00 per share
Trading Symbol(s)
COKE
Name of each exchange on which registered
The Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒ No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒ No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐ No  ☒
As of October 20, 2023, there were 8,368,993 shares of the registrant’s Common Stock, par value $1.00 per share, and 1,004,696 shares of the registrant’s Class B Common Stock, par value $1.00 per share, outstanding.


COCA‑COLA CONSOLIDATED, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 2023

i

PART I - FINANCIAL INFORMATION
Item 1.    Financial Statements.
COCA‑COLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Third QuarterFirst Nine Months
(in thousands, except per share data)2023202220232022
Net sales$1,712,428 $1,628,589 $5,022,902 $4,628,162 
Cost of sales1,050,878 1,007,482 3,065,669 2,948,820 
Gross profit661,550 621,107 1,957,233 1,679,342 
Selling, delivery and administrative expenses445,290 431,177 1,301,249 1,211,134 
Income from operations216,260 189,930 655,984 468,208 
Interest (income) expense, net(1,516)6,083 2,766 20,928 
Pension plan settlement expense77,319 — 117,096 — 
Other expense, net19,473 24,746 91,184 27,666 
Income before taxes120,984 159,101 444,938 419,614 
Income tax expense28,891 40,340 112,399 107,901 
Net income$92,093 $118,761 $332,539 $311,713 
Basic net income per share:
Common Stock$9.82 $12.67 $35.47 $33.25 
Weighted average number of Common Stock shares outstanding8,369 8,369 8,369 8,032 
Class B Common Stock$9.82 $12.67 $35.47 $33.29 
Weighted average number of Class B Common Stock shares outstanding1,005 1,005 1,005 1,342 
Diluted net income per share:
Common Stock$9.80 $12.63 $35.38 $33.13 
Weighted average number of Common Stock shares outstanding – assuming dilution9,395 9,406 9,398 9,410 
Class B Common Stock$9.79 $12.62 $35.29 $33.15 
Weighted average number of Class B Common Stock shares outstanding – assuming dilution1,026 1,037 1,029 1,378 
Cash dividends per share:
Common Stock$0.50 $0.25 $4.50 $0.75 
Class B Common Stock$0.50 $0.25 $4.50 $0.75 













See accompanying notes to condensed consolidated financial statements.
1

COCA‑COLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Third QuarterFirst Nine Months
(in thousands)2023202220232022
Net income$92,093 $118,761 $332,539 $311,713 
Other comprehensive income, net of tax:
Defined benefit plans reclassification including pension costs:
Actuarial gain (loss)1,183 746 (303)2,237 
Prior service credits3 — 9 — 
Pension plan settlement56,028 — 86,069 — 
Postretirement benefits reclassification including benefit costs:
Actuarial gain— 69 — 207 
Other comprehensive income, net of tax57,214 815 85,775 2,444 
Comprehensive income$149,307 $119,576 $418,314 $314,157 







































See accompanying notes to condensed consolidated financial statements.
2

COCA‑COLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share data)September 29, 2023December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents$616,217 $197,648 
Accounts receivable, trade558,133 532,047 
Allowance for doubtful accounts(18,134)(16,119)
Accounts receivable from The Coca‑Cola Company55,697 35,786 
Accounts receivable, other52,852 54,631 
Inventories320,401 347,545 
Prepaid expenses and other current assets91,309 94,263 
Total current assets1,676,475 1,245,801 
Property, plant and equipment, net1,204,843 1,183,730 
Right-of-use assets - operating leases123,635 140,588 
Leased property under financing leases, net5,196 6,431 
Other assets133,960 115,892 
Goodwill165,903 165,903 
Distribution agreements, net823,366 842,035 
Customer lists, net7,904 9,165 
Total assets$4,141,282 $3,709,545 
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of obligations under operating leases$26,074 $27,635 
Current portion of obligations under financing leases2,440 2,303 
Accounts payable, trade348,370 351,729 
Accounts payable to The Coca‑Cola Company180,687 162,783 
Other accrued liabilities218,701 198,300 
Accrued compensation125,719 126,921 
Accrued interest payable5,842 2,677 
Dividends payable— 32,808 
Total current liabilities907,833 905,156 
Deferred income taxes143,907 150,222 
Pension and postretirement benefit obligations53,294 60,323 
Other liabilities803,549 753,357 
Noncurrent portion of obligations under operating leases103,578 118,763 
Noncurrent portion of obligations under financing leases5,670 7,519 
Long-term debt599,123 598,817 
Total liabilities2,616,954 2,594,157 
Commitments and Contingencies
Equity:
Common Stock, $1.00 par value: 30,000,000 shares authorized; 11,431,367 shares issued
11,431 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 capital135,953 135,953 
Retained earnings1,435,627 1,112,462 
Accumulated other comprehensive income (loss)938 (84,837)
Treasury stock, at cost:  Common Stock – 3,062,374 shares
(60,845)(60,845)
Treasury stock, at cost:  Class B Common Stock – 628,114 shares
(409)(409)
Total equity1,524,328 1,115,388 
Total liabilities and equity$4,141,282 $3,709,545 

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)20232022
Cash Flows from Operating Activities:
Net income$332,539 $311,713 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense from property, plant and equipment and financing leases113,664 110,661 
Amortization of intangible assets and deferred proceeds, net17,632 17,722 
Pension plan settlement expense117,096 — 
Fair value adjustment of acquisition related contingent consideration86,038 21,132 
Deferred income taxes(34,881)10,749 
Loss on sale of property, plant and equipment5,863 2,855 
Amortization of debt costs742 768 
Deferred payroll taxes under CARES Act— (18,739)
Change in current assets less current liabilities35,791 (61,657)
Change in other noncurrent assets13,417 27,806 
Change in other noncurrent liabilities(43,352)(28,701)
Total adjustments312,010 82,596 
Net cash provided by operating activities$644,549 $394,309 
Cash Flows from Investing Activities:
Additions to property, plant and equipment$(152,260)$(183,929)
Investment in equity method investees(9,044)(1,538)
Proceeds from the sale of property, plant and equipment441 5,348 
Acquisition of distribution rights— (30,149)
Net cash used in investing activities$(160,863)$(210,268)
Cash Flows from Financing Activities:
Cash dividends paid$(42,182)$(7,030)
Payments of acquisition related contingent consideration(20,979)(28,421)
Payments on financing lease obligations(1,712)(2,441)
Debt issuance fees(244)(219)
Payments on term loan facility and senior notes— (125,000)
Net cash used in financing activities$(65,117)$(163,111)
Net increase in cash during period$418,569 $20,930 
Cash at beginning of period197,648 142,314 
Cash at end of period$616,217 $163,244 
Significant non-cash investing and financing activities:
Additions to property, plant and equipment accrued and recorded in accounts payable, trade$32,388 $20,049 
Right-of-use assets obtained in exchange for operating lease obligations4,253 18,703 
Reductions to leased property under financing leases— 55,465 







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 share data)Common
Stock		Class B
Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive Income
(Loss)		Treasury
Stock - Common
Stock		Treasury Stock - Class B Common StockTotal
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 
(in thousands, except 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 StockTotal
Equity
Balance on July 1, 2022$11,431 $1,633 $135,953 $912,751 $(98,834)$(60,845)$(409)$901,680 
Net income— — — 118,761 — — — 118,761 
Other comprehensive income, net of tax— — — — 815 — — 815 
Dividends declared:
Common Stock ($0.25 per share)
— — — (2,092)— — — (2,092)
Class B Common Stock ($0.25 per share)
— — — (251)— — — (251)
Balance on September 30, 2022$11,431 $1,633 $135,953 $1,029,169 $(98,019)$(60,845)$(409)$1,018,913 
Balance on December 31, 2021$10,204 $2,860 $135,953 $724,486 $(100,463)$(60,845)$(409)$711,786 
Net income— — — 311,713 — — — 311,713 
Other comprehensive income, net of tax— — — — 2,444 — — 2,444 
Dividends declared:
Common Stock ($0.75 per share)
— — — (5,970)— — — (5,970)
Class B Common Stock ($0.75 per share)
— — — (1,060)— — — (1,060)
Conversion of 1,227,546 shares of Class B Common Stock
1,227 (1,227)— — — — — — 
Balance on September 30, 2022$11,431 $1,633 $135,953 $1,029,169 $(98,019)$(60,845)$(409)$1,018,913 






See accompanying notes to condensed consolidated financial statements.
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 (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 29, 2023 and December 31, 2022.
•The results of operations, comprehensive income and changes in stockholders’ equity for the three-month periods ended September 29, 2023 (the “third quarter” of fiscal 2023 (“2023”)) and September 30, 2022 (the “third quarter” of fiscal 2022 (“2022”)) and the nine-month periods ended September 29, 2023 (the “first nine months” of 2023) and September 30, 2022 (the “first nine months” of 2022).
•The changes in cash flows for the first nine months of 2023 and the first nine months of 2022.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. 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 2022 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 2022 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 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 Adopted Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2022-04, “Liabilities-Supplier Finance Programs,” which requires additional quantitative and qualitative disclosures related to a company’s supply chain finance programs to enhance the transparency of these programs. The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted ASU 2022-04 in the first quarter of 2023, with the exception of the amendment on rollforward information, and the adoption did not have a material impact on its condensed consolidated financial statements. See Note 12 for disclosures related to the Company’s supply chain finance program.

6

2.    Related Party Transactions

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 29, 2023, J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, controlled 1,004,394 shares of the Company’s Class B Common Stock, which represented approximately 71% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis.

As of September 29, 2023, The Coca‑Cola Company owned shares of the Company’s Common Stock representing approximately 9% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. The number of shares of the Company’s Common Stock currently held by The Coca‑Cola Company gives it the right to have a designee proposed by the Company for nomination to the Company’s Board of Directors in the Company’s annual proxy statement. 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.

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

Third QuarterFirst Nine Months
(in thousands)2023202220232022
Payments made by the Company to The Coca-Cola Company(1)
$552,154 $481,021 $1,544,872 $1,411,300 
Payments made by The Coca-Cola Company to the Company67,890 67,540 170,824 187,810 

(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, but includes the purchase price of certain additional BODYARMOR distribution rights, each as discussed below.

On January 1, 2022, the Company entered into an agreement to acquire $30.1 million of additional BODYARMOR distribution rights with an estimated useful life of 40 years.

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 transportation services and 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
7

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 $21.0 million in the first nine months of 2023 and $28.4 million in the first nine months of 2022. The following table summarizes the liability recorded by the Company to reflect the estimated fair value of contingent consideration related to future expected acquisition related sub-bottling payments to CCR:

(in thousands)September 29, 2023December 31, 2022
Current portion of acquisition related contingent consideration$55,355 $40,060 
Noncurrent portion of acquisition related contingent consideration550,295 501,431 
Total acquisition related contingent consideration$605,650 $541,491 

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 $21.8 million as of September 29, 2023 and $21.2 million as of December 31, 2022.

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 $14.9 million as of September 29, 2023 and $8.2 million as of December 31, 2022. The Company also guarantees a portion of SAC’s debt; see Note 20 for additional information.

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 the first nine months of 2023 and $6.7 million in the first nine months of 2022.

Coca‑Cola Bottlers’ Sales & Services Company LLC (“CCBSS”)

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 $19.5 million on September 29, 2023 and $25.7 million on December 31, 2022, which were classified as accounts receivable, other in the condensed consolidated balance sheets. Changes in rebates receivable relate to volatility in raw material prices and the timing of cash receipts of rebates.

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 $20.6 million as of September 29, 2023 and $16.9 million as of December 31, 2022.

Pursuant to an amended and restated master services agreement with CONA, the Company is authorized to use the Coke One North America system (the “CONA System”), a uniform information technology system developed to promote operational efficiency and uniformity among North American Coca‑Cola bottlers. In exchange for the Company’s rights to use the CONA System and receive CONA-related services, it is charged service fees by CONA. The Company incurred service fees to CONA of $20.6 million in the first nine months of 2023 and $19.9 million in the first nine months of 2022.

8

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 $23.2 million on September 29, 2023 and $25.5 million on December 31, 2022.

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

Third QuarterFirst Nine Months
(in thousands)2023202220232022
Company headquarters$983 $963 $2,949 $2,890 
Snyder Production Center(1)
— — — 927 

(1)The lease for the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina (together, the “Snyder Production Center”) was terminated during the first quarter of 2022 in connection with the purchase of the Snyder Production Center by CCBCC Operations, LLC, a wholly owned subsidiary of the Company.

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 (“SD&A”) expenses in the condensed consolidated statements of operations, was $2.3 million in both the third quarter of 2023 and the third quarter of 2022 and $8.0 million and $7.9 million in the first nine months of 2023 and the first nine months of 2022, respectively.

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

Other sales, which include revenue for service fees related to the repair of cold drink equipment and delivery fees for freight hauling and brokerage services, are recognized over time (“over time”). 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.

9

The following table represents a disaggregation of revenue from contracts with customers:

Third QuarterFirst Nine Months
(in thousands)2023202220232022
Point in time net sales:
Nonalcoholic Beverages - point in time$1,677,221 $1,587,771 $4,911,999 $4,500,277 
Total point in time net sales$1,677,221 $1,587,771 $4,911,999 $4,500,277 
Over time net sales:
Nonalcoholic Beverages - over time$13,839 $12,294 $39,335 $35,023 
All Other - over time21,368 28,524 71,568 92,862 
Total over time net sales$35,207 $40,818 $110,903 $127,885 
Total net sales$1,712,428 $1,628,589 $5,022,902 $4,628,162 

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 $4.1 million as of September 29, 2023 and $3.0 million as of December 31, 2022.

The Company estimates an allowance for credit losses, based on historic days’ sales outstanding trends, aged customer balances, previously written-off balances and expected recoveries up to balances previously written off, in order to present the net amount expected to be collected. Accounts receivable balances are written off when determined uncollectible and are recognized as a reduction to the allowance for credit losses. Following is a summary of activity for the allowance for credit losses during the first nine months of 2023 and the first nine months of 2022:

First Nine Months
(in thousands)20232022
Beginning balance - allowance for credit losses$13,119 $14,336 
Additions charged to expenses and as a reduction to net sales4,268 1,987 
Deductions(3,328)(3,706)
Ending balance - allowance for credit losses$14,059 $12,617 

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 Chief Operating Decision Maker (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. 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 QuarterFirst Nine Months
(in thousands)2023202220232022
Net sales:
Nonalcoholic Beverages$1,691,060 $1,600,065 $4,951,334 $4,535,300 
All Other93,636 101,136 281,186 303,209 
Eliminations(1)
(72,268)(72,612)(209,618)(210,347)
Consolidated net sales$1,712,428 $1,628,589 $5,022,902 $4,628,162 

(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.
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Third QuarterFirst Nine Months
(in thousands)2023202220232022
Income from operations:
Nonalcoholic Beverages$217,405 $189,218 $661,395 $467,788 
All Other(1,145)712 (5,411)420 
Consolidated income from operations$216,260 $189,930 $655,984 $468,208 
Depreciation and amortization:
Nonalcoholic Beverages$41,003 $39,578 $122,262 $119,635 
All Other3,108 2,953 9,034 8,748 
Consolidated depreciation and amortization$44,111 $42,531 $131,296 $128,383 

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 QuarterFirst Nine Months
(in thousands, except per share data)2023202220232022
Numerator for basic and diluted net income per Common Stock and Class B Common Stock share:
Net income$92,093 $118,761 $332,539 $311,713 
Less dividends:
Common Stock4,184 2,092 37,660 5,970 
Class B Common Stock503 251 4,522 1,060 
Total undistributed earnings$87,406 $116,418 $290,357 $304,683 
Common Stock undistributed earnings – basic$78,035 $103,937 $259,227 $261,064 
Class B Common Stock undistributed earnings – basic9,371 12,481 31,130 43,619 
Total undistributed earnings – basic$87,406 $116,418 $290,357 $304,683 
Common Stock undistributed earnings – diluted$77,861 $103,583 $258,565 $260,065 
Class B Common Stock undistributed earnings – diluted9,545 12,835 31,792 44,618 
Total undistributed earnings – diluted$87,406 $116,418 $290,357 $304,683 
Numerator for basic net income per Common Stock share:
Dividends on Common Stock$4,184 $2,092 $37,660 $5,970 
Common Stock undistributed earnings – basic78,035 103,937 259,227 261,064 
Numerator for basic net income per Common Stock share$82,219 $106,029 $296,887 $267,034 
Numerator for basic net income per Class B Common Stock share:
Dividends on Class B Common Stock$503 $251 $4,522 $1,060 
Class B Common Stock undistributed earnings – basic9,371 12,481 31,130 43,619 
Numerator for basic net income per Class B Common Stock share$9,874 $12,732 $35,652 $44,679 
Numerator for diluted net income per Common Stock share:
Dividends on Common Stock$4,184 $2,092 $37,660 $5,970 
Dividends on Class B Common Stock assumed converted to Common Stock503 251 4,522 1,060 
Common Stock undistributed earnings – diluted87,406 116,418 290,357 304,683 
Numerator for diluted net income per Common Stock share$92,093 $118,761 $332,539 $311,713 
Numerator for diluted net income per Class B Common Stock share:
Dividends on Class B Common Stock$503 $251 $4,522 $1,060 
Class B Common Stock undistributed earnings – diluted9,545 12,835 31,792 44,618 
Numerator for diluted net income per Class B Common Stock share$10,048 $13,086 $36,314 $45,678 
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Third QuarterFirst Nine Months
(in thousands, except per share data)2023202220232022
Denominator for basic net income per Common Stock and Class B Common Stock share:
Common Stock weighted average shares outstanding – basic8,369 8,369 8,369 8,032 
Class B Common Stock weighted average shares outstanding – basic1,005 1,005 1,005 1,342 
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)9,395 9,406 9,398 9,410 
Class B Common Stock weighted average shares outstanding – diluted1,026 1,037 1,029 1,378 
Basic net income per share:
Common Stock$9.82 $12.67 $35.47 $33.25 
Class B Common Stock$9.82 $12.67 $35.47 $33.29 
Diluted net income per share:
Common Stock$9.80 $12.63 $35.38 $33.13 
Class B Common Stock$9.79 $12.62 $35.29 $33.15 

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 shares relative to the Long-Term Performance Equity Plan. For periods presented during which the Company has net loss, the unvested 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.
(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 shares relative to such award is prospectively removed from the denominator in the computation of diluted net income per share.
(5)The Company did not have anti-dilutive shares for any periods presented.

6.    Inventories

Inventories consisted of the following:

(in thousands)September 29, 2023December 31, 2022
Finished products$211,128 $211,089 
Manufacturing materials63,939 89,300 
Plastic shells, plastic pallets and other inventories45,334 47,156 
Total inventories$320,401 $347,545 

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7.    Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

(in thousands)September 29, 2023December 31, 2022
Repair parts$35,304 $35,088 
Prepaid software8,629 7,398 
Prepaid taxes6,918 7,829 
Prepaid marketing5,499 4,303 
Commodity hedges at fair market value1,080 4,808 
Other prepaid expenses and other current assets33,879 34,837 
Total prepaid expenses and other current assets$91,309 $94,263 

8.    Property, Plant and Equipment, Net

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

(in thousands)September 29, 2023December 31, 2022Estimated Useful Lives
Land$99,790 $88,185 
Buildings354,509 352,114 
8-50 years
Machinery and equipment483,003 462,640 
5-20 years
Transportation equipment538,446 515,752 
3-20 years
Furniture and fixtures101,327 102,099 
3-10 years
Cold drink dispensing equipment441,132 438,879 
3-17 years
Leasehold and land improvements168,617 177,940 
5-20 years
Software for internal use48,670 48,581 
3-10 years
Construction in progress106,878 103,803 
Total property, plant and equipment, at cost2,342,372 2,289,993 
Less:  Accumulated depreciation and amortization1,137,529 1,106,263 
Property, plant and equipment, net$1,204,843 $1,183,730 

9.    Leases

Following is a summary of the weighted average remaining lease term and the weighted average discount rate for the Company’s leases:

September 29, 2023December 31, 2022
Weighted average remaining lease term:
Operating leases6.8 years7.2 years
Financing leases3.7 years4.3 years
Weighted average discount rate:
Operating leases3.7 %3.6 %
Financing leases5.2 %5.2 %

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

Third QuarterFirst Nine Months
(in thousands)2023202220232022
Operating lease costs$8,293 $7,750 $24,871 $22,389 
Short-term and variable leases4,151 3,731 11,942 11,006 
Depreciation expense from financing leases413 411 1,235 1,903 
Interest expense on financing lease obligations109 139 346 753 
Total lease cost$12,966 $12,031 $38,394 $36,051 

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
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summary of future minimum lease payments for all noncancelable operating leases and financing leases as of September 29, 2023:

(in thousands)Operating LeasesFinancing Leases
Remainder of 2023$7,690 $692 
202428,915 2,808 
202522,940 2,869 
202619,773 1,233 
202717,487 338 
Thereafter51,741 965 
Total minimum lease payments including interest$148,546 $8,905 
Less:  Amounts representing interest18,894 795 
Present value of minimum lease principal payments129,652 8,110 
Less:  Current portion of lease liabilities26,074 2,440 
Noncurrent portion of lease liabilities$103,578 $5,670 

Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of December 31, 2022:

(in thousands)Operating LeasesFinancing Leases
2023$31,697 $2,750 
202427,663 2,808 
202521,628 2,869 
202619,036 1,233 
202717,227 338 
Thereafter51,372 966 
Total minimum lease payments including interest$168,623 $10,964 
Less:  Amounts representing interest22,225 1,142 
Present value of minimum lease principal payments146,398 9,822 
Less:  Current portion of lease liabilities27,635 2,303 
Noncurrent portion of lease liabilities$118,763 $7,519 

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

First Nine Months
(in thousands)20232022
Cash flows from operating activities impact:
Operating leases$24,666 $21,502 
Interest payments on financing lease obligations346 753