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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 October 1, 2021
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 CocaCola Plaza

Charlotte, NC
28211
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (704) 557-4400
______________________________________________________________________________________________
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
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 filerAccelerated filer
Non-accelerated filerSmaller 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 29, 2021, there were 7,141,447 shares of the registrant’s Common Stock, par value $1.00 per share, and 2,232,242 shares of the registrant’s Class B Common Stock, par value $1.00 per share, outstanding.



COCACOLA CONSOLIDATED, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED OCTOBER 1, 2021

i


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

Third QuarterFirst Nine Months
(in thousands, except per share data)2021202020212020
Net sales$1,457,432 $1,328,484 $4,160,375 $3,728,720 
Cost of sales939,720 856,046 2,699,020 2,421,686 
Gross profit517,712 472,438 1,461,355 1,307,034 
Selling, delivery and administrative expenses380,681 368,594 1,109,279 1,087,251 
Income from operations137,031 103,844 352,076 219,783 
Interest expense, net8,097 9,033 25,208 27,778 
Other expense, net34,982 21,394 94,078 39,826 
Income before income taxes93,952 73,417 232,790 152,179 
Income tax expense25,022 18,363 62,317 38,911 
Net income68,930 55,054 170,473 113,268 
Less: Net income attributable to noncontrolling interest 3,170  7,153 
Net income attributable to Coca‑Cola Consolidated, Inc.$68,930 $51,884 $170,473 $106,115 
Basic net income per share based on net income attributable to Coca‑Cola Consolidated, Inc.:
Common Stock$7.36 $5.53 $18.19 $11.32 
Weighted average number of Common Stock shares outstanding7,141 7,141 7,141 7,141 
Class B Common Stock$7.36 $5.53 $18.19 $11.32 
Weighted average number of Class B Common Stock shares outstanding2,232 2,232 2,232 2,232 
Diluted net income per share based on net income attributable to Coca‑Cola Consolidated, Inc.:
Common Stock$7.32 $5.51 $18.11 $11.25 
Weighted average number of Common Stock shares outstanding – assuming dilution9,409 9,430 9,413 9,430 
Class B Common Stock$7.31 $5.51 $18.10 $11.24 
Weighted average number of Class B Common Stock shares outstanding – assuming dilution2,268 2,289 2,272 2,289 
Cash dividends per share:
Common Stock$0.25 $0.25 $0.75 $0.75 
Class B Common Stock$0.25 $0.25 $0.75 $0.75 










See accompanying notes to condensed consolidated financial statements.
1


COCACOLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Third QuarterFirst Nine Months
(in thousands)2021202020212020
Net income$68,930 $55,054 $170,473 $113,268 
Other comprehensive income, net of tax:
Defined benefit plans reclassification including pension costs:
Actuarial gains916 896 2,745 2,689 
Prior service credits1 4 2 11 
Postretirement benefits reclassification including benefits costs:
Actuarial gains140 66 419 198 
Interest rate swap 303 556 (710)
Foreign currency translation adjustment(6)11 (15)13 
Other comprehensive income, net of tax1,051 1,280 3,707 2,201 
Comprehensive income69,981 56,334 174,180 115,469 
Less: Comprehensive income attributable to noncontrolling interest 3,170  7,153 
Comprehensive income attributable to Coca‑Cola Consolidated, Inc.$69,981 $53,164 $174,180 $108,316 


































See accompanying notes to condensed consolidated financial statements.
2


COCACOLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(in thousands, except share data)October 1, 2021December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents$186,878 $54,793 
Accounts receivable, trade482,211 425,445 
Allowance for doubtful accounts(16,610)(21,620)
Accounts receivable from The Coca‑Cola Company58,323 49,203 
Accounts receivable, other29,238 37,084 
Inventories240,495 225,757 
Prepaid expenses and other current assets84,152 74,146 
Assets held for sale6,932 6,429 
Total current assets1,071,619 851,237 
Property, plant and equipment, net1,009,325 1,022,722 
Right-of-use assets - operating leases140,410 134,383 
Leased property under financing leases, net65,625 69,867 
Other assets120,230 111,781 
Goodwill165,903 165,903 
Distribution agreements, net835,403 853,753 
Customer lists, net11,425 12,804 
Total assets$3,419,940 $3,222,450 
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of obligations under operating leases$20,650 $19,766 
Current portion of obligations under financing leases6,009 5,860 
Accounts payable, trade270,937 217,560 
Accounts payable to The Coca‑Cola Company153,701 107,181 
Other accrued liabilities214,101 205,141 
Accrued compensation96,617 87,608 
Accrued interest payable6,281 3,944 
Total current liabilities768,296 647,060 
Deferred income taxes151,558 139,423 
Pension and postretirement benefit obligations110,582 113,325 
Other liabilities726,292 679,280 
Noncurrent portion of obligations under operating leases123,627 119,923 
Noncurrent portion of obligations under financing leases66,268 69,984 
Long-term debt793,177 940,465 
Total liabilities2,739,800 2,709,460 
Commitments and Contingencies
Equity:
Common Stock, $1.00 par value: 30,000,000 shares authorized; 10,203,821 shares issued
10,204 10,204 
Class B Common Stock, $1.00 par value: 10,000,000 shares authorized; 2,860,356 shares issued
2,860 2,860 
Additional paid-in capital135,953 135,953 
Retained earnings707,723 544,280 
Accumulated other comprehensive loss(115,346)(119,053)
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 equity680,140 512,990 
Total liabilities and equity$3,419,940 $3,222,450 

See accompanying notes to condensed consolidated financial statements.
3


COCACOLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

First Nine Months
(in thousands)20212020
Cash Flows from Operating Activities:
Net income$170,473 $113,268 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense from property, plant and equipment and financing leases117,910 117,203 
Amortization of intangible assets and deferred proceeds, net17,431 17,286 
Fair value adjustment of acquisition related contingent consideration90,905 35,068 
Deferred payroll taxes under CARES Act(18,739)24,648 
Deferred income taxes10,907 5,302 
Loss on sale of property, plant and equipment4,017 3,656 
Impairment and abandonment of property, plant and equipment3,200 7,908 
Amortization of debt costs790 778 
Change in current assets less current liabilities60,546 57,651 
Change in other noncurrent assets10,355 16,360 
Change in other noncurrent liabilities(27,905)(23,775)
Other(15)1,048 
Total adjustments269,402 263,133 
Net cash provided by operating activities$439,875 $376,401 
Cash Flows from Investing Activities:
Additions to property, plant and equipment$(119,620)$(110,717)
Proceeds from the sale of property, plant and equipment4,215 2,397 
Investment in CONA Services LLC(2,194)(1,770)
Other distribution agreements(1,998) 
Net cash used in investing activities$(119,597)$(110,090)
Cash Flows from Financing Activities:
Borrowings under revolving credit facility$55,000 $235,000 
Payments on revolving credit facility(55,000)(280,000)
Borrowings under term loan facility70,000  
Payments on term loan facility(217,500)(22,500)
Payments of acquisition related contingent consideration(28,640)(31,999)
Cash dividends paid(7,030)(7,030)
Payments on financing lease obligations(3,567)(4,428)
Debt issuance fees(1,456)(145)
Net cash used in financing activities$(188,193)$(111,102)
Net increase in cash during period$132,085 $155,209 
Cash at beginning of period54,793 9,614 
Cash at end of period$186,878 $164,823 
Significant non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease obligations$21,759 $38,317 
Additions to property, plant and equipment accrued and recorded in accounts payable, trade9,612 25,477 
Additions to leased property under financing leases 61,121 




See accompanying notes to condensed consolidated financial statements.
4


COCACOLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)

(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
Stock
Total
Equity
of Coca‑Cola
Consolidated,
Inc.
Non-
controlling
Interest
Total
Equity
Balance on July 2, 2021$10,204 $2,860 $135,953 $641,136 $(116,397)$(60,845)$(409)$612,502 $ $612,502 
Net income— — — 68,930 — — — 68,930 — 68,930 
Other comprehensive income, net of tax— — — — 1,051 — — 1,051 — 1,051 
Cash dividends paid:
Common Stock
($0.25 per share)
— — — (1,785)— — — (1,785)— (1,785)
Class B Common Stock
($0.25 per share)
— — — (558)— — — (558)— (558)
Balance on October 1, 2021$10,204 $2,860 $135,953 $707,723 $(115,346)$(60,845)$(409)$680,140 $ $680,140 
Balance on December 31, 2020$10,204 $2,860 $135,953 $544,280 $(119,053)$(60,845)$(409)$512,990 $ $512,990 
Net income— — — 170,473 — — — 170,473 — 170,473 
Other comprehensive income, net of tax— — — — 3,707 — — 3,707 — 3,707 
Cash dividends paid:
Common Stock
($0.75 per share)
— — — (5,356)— — — (5,356)— (5,356)
Class B Common Stock
($0.75 per share)
— — — (1,674)— — — (1,674)— (1,674)
Balance on October 1, 2021$10,204 $2,860 $135,953 $707,723 $(115,346)$(60,845)$(409)$680,140 $ $680,140 

(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
Stock
Total
Equity
of Coca‑Cola
Consolidated,
Inc.
Non-
controlling
Interest
Total
Equity
Balance on June 28, 2020$10,204 $2,860 $128,983 $430,706 $(114,081)$(60,845)$(409)$397,418 $108,147 $505,565 
Net income— — — 51,884 — — — 51,884 3,170 55,054 
Other comprehensive income, net of tax— — — — 1,280 — — 1,280 — 1,280 
Cash dividends paid:
Common Stock
($0.25 per share)
— — — (1,785)— — — (1,785)— (1,785)
Class B Common Stock
($0.25 per share)
— — — (559)— — — (559)— (559)
Balance on September 27, 2020$10,204 $2,860 $128,983 $480,246 $(112,801)$(60,845)$(409)$448,238 $111,317 $559,555 
Balance on December 29, 2019$10,204 $2,860 $128,983 $381,161 $(115,002)$(60,845)$(409)$346,952 $104,164 $451,116 
Net income— — — 106,115 — — — 106,115 7,153 113,268 
Other comprehensive income, net of tax— — — — 2,201 — — 2,201 — 2,201 
Cash dividends paid:
Common Stock
($0.75 per share)
— — — (5,356)— — — (5,356)— (5,356)
Class B Common Stock
($0.75 per share)
— — — (1,674)— — — (1,674)— (1,674)
Balance on September 27, 2020$10,204 $2,860 $128,983 $480,246 $(112,801)$(60,845)$(409)$448,238 $111,317 $559,555 





See accompanying notes to condensed consolidated financial statements.
5


COCACOLA CONSOLIDATED, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.    Critical Accounting Policies and Recent Accounting Pronouncements

The condensed consolidated financial statements include the accounts 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 October 1, 2021 and December 31, 2020.
The results of operations, comprehensive income and changes in equity for the three-month periods ended October 1, 2021 (the “third quarter” of fiscal 2021 (“2021”)) and September 27, 2020 (the “third quarter” of fiscal 2020 (“2020”)) and the nine-month periods ended October 1, 2021 (the “first nine months” of 2021) and September 27, 2020 (the “first nine months” of 2020).
The changes in cash flows for the first nine months of 2021 and the first nine months of 2020.

The condensed consolidated financial statements include the consolidated operations of the Company and its majority-owned subsidiaries. During 2020, Piedmont Coca-Cola Bottling Partnership (“Piedmont”) was the Company’s only subsidiary that had a significant noncontrolling interest. On December 9, 2020, an indirect wholly owned subsidiary of the Company purchased the remaining 22.7% general partnership interest in Piedmont from an indirect wholly owned subsidiary of The Coca‑Cola Company, and Piedmont became an indirect wholly owned subsidiary of the Company.

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 2020 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 Policies

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 2020 under the caption “Discussion of Critical Accounting Policies and Estimates and Recent Accounting Pronouncements” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” a discussion of the Company’s most critical accounting policies, 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 policies and 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 December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019‑12, “Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in income tax accounting and improves consistent application of and simplifies GAAP for
6


other areas of income tax accounting by clarifying and amending existing guidance. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2019-12 in the first quarter of 2021 and the adoption did not have a material impact on its condensed consolidated financial statements.

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 its soft drink products, either concentrate or syrup, are manufactured.

J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, together with the trustees of certain trusts established for the benefit of certain relatives of the late J. Frank Harrison, Jr., control shares representing approximately 86% of the total voting power of the Company’s total outstanding Common Stock and Class B Common Stock on a consolidated basis.

As of October 1, 2021, 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. 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 the J. Frank Harrison, Jr. family trusts described above, have agreed to vote the shares of the Company’s 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)2021202020212020
Payments made by the Company to The Coca-Cola Company(1)
$403,889 $369,186 $1,120,042 $1,012,568 
Payments made by The Coca-Cola Company to the Company51,024 30,458 131,026 91,086 
(1)This excludes payments by the Company to Coca-Cola Refreshments USA, Inc., a wholly owned subsidiary of The Coca‑Cola Company, as discussed in the next section.

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”). The CBA requires the Company to make quarterly 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 sub-bottling payments are based on gross profit derived
7


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.

Sub-bottling payments to CCR were $28.6 million in the first nine months of 2021 and $32.0 million in the first nine months of 2020. 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)October 1, 2021December 31, 2020
Current portion of acquisition related contingent consideration$47,212 $36,020 
Noncurrent portion of acquisition related contingent consideration449,447 398,674 
Total acquisition related contingent consideration$496,659 $434,694 

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 $22.4 million as of October 1, 2021 and $21.9 million as of December 31, 2020.

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 $8.2 million as of October 1, 2021 and $8.0 million as of December 31, 2020. 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 $6.6 million in the first nine months of 2021 and $6.9 million in the first nine months of 2020.

Coca‑Cola Bottlers’ Sales and 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 $4.4 million on October 1, 2021 and $6.3 million on December 31, 2020, 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 $2.2 million in the first nine months of 2021 and $2.1 million in the first nine months of 2020, 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 $13.3 million as of October 1, 2021 and $11.5 million as of December 31, 2020.

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 $18.9 million in the first nine months of 2021 and $17.4 million in the first nine months of 2020.
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 $28.9 million on October 1, 2021 and $30.8 million on December 31, 2020.

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 is subject to an adjustment for an inflation factor and the lease expires on December 31, 2035. The principal balance outstanding under this lease was $59.8 million on October 1, 2021 and $61.9 million on December 31, 2020.

A summary of rental payments for these leases related to the third quarter and the first nine months of 2021 and 2020 is as follows:

Third QuarterFirst Nine Months
(in thousands)2021202020212020
Company headquarters$944 $826 $2,834 $2,478 
Snyder Production Center1,112 1,112 3,338 3,338 

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 Class B Common Stock, based on the average of the closing prices of shares of 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 SD&A expenses in the condensed consolidated statements of operations, was $7.6 million in the first nine months of 2021 and $7.2 million in the first nine months of 2020.

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 products, 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 97% of the Company’s net sales in both the first nine months of 2021 and the first nine months of 2020.

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)2021202020212020
Point in time net sales:
Nonalcoholic Beverages - point in time$1,415,643 $1,286,542 $4,029,846 $3,607,502 
Total point in time net sales$1,415,643 $1,286,542 $4,029,846 $3,607,502 
Over time net sales:
Nonalcoholic Beverages - over time$11,328 $8,729 $32,130 $25,874 
All Other - over time30,461 33,213 98,399 95,344 
Total over time net sales$41,789 $41,942 $130,529 $121,218 
Total net sales$1,457,432 $1,328,484 $4,160,375 $3,728,720 

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 $3.0 million as of October 1, 2021 and $3.6 million as of December 31, 2020.

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. A reconciliation of the activity for the allowance for credit losses is as follows:

First Nine Months
(in thousands)2021