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What changed in Coca-Cola Consolidated, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Coca-Cola Consolidated, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+250 added−231 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in Coca-Cola Consolidated, Inc.'s 2023 10-K

250 paragraphs added · 231 removed · 196 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe sell our products primarily in single-use, recyclable bottles and cans, in varying package configurations from market to market. For example, there may be up to 26 different packages for Diet Coke within a single geographic area. Total bottle/can sales volume to retail customers during 2022 was approximately 51% bottles and 49% cans.
Biggest changeFor example, there may be up to 25 different packages for Diet Coke within a single geographic area. Total bottle/can sales volume to retail customers during 2023 was approximately 49% bottles and 51% cans. We rely extensively on advertising in various media outlets, primarily online, television and radio, for the marketing of our products.
In addition to customary termination and default rights, the CBA requires us to make minimum, ongoing capital expenditures in our distribution business and to meet certain minimum volume requirements, gives The Coca‑Cola Company certain approval and other rights in connection with a sale of the Company or of the distribution business of the Company and prohibits us from producing, manufacturing, preparing, packaging, distributing, selling, dealing in or otherwise using or handling any beverages, beverage components or other beverage products other than the beverages and beverage products of The Coca‑Cola Company and certain expressly permitted cross-licensed brands without the consent of The Coca-Cola Company.
In addition to customary termination and default rights, the CBA requires us to make minimum, ongoing capital expenditures in our distribution business and to meet certain minimum volume requirements, gives The Coca‑Cola Company certain approval and other rights in connection with a sale of the Company or the distribution business of the Company and prohibits us from producing, manufacturing, preparing, packaging, distributing, selling, dealing in or otherwise using or handling any beverages, beverage components or other beverage products other than the beverages and beverage products of The Coca‑Cola Company and certain expressly permitted cross-licensed brands without the consent of The Coca-Cola Company.
To meet our talent objectives, we utilize key strategies and processes related to recruitment, onboarding and learning development. Through our Total Rewards Program, we strive to offer competitive compensation, benefits and services to our full-time teammates, including incentive plans, recognition plans, defined contribution plans, healthcare benefits, tax-advantaged spending accounts, corporate chaplaincy and employee assistance programs and other programs.
To meet our talent objectives, we utilize key strategies and processes related to recruitment, onboarding and learning development. Through our Total Rewards Program, we strive to offer competitive compensation, benefits and services to our full-time teammates, including incentive plans, recognition plans, defined contribution plans, healthcare benefits, tax-advantaged spending accounts, corporate chaplaincy, employee assistance programs and other programs.
Management monitors market compensation and benefits to be able to attract, retain and promote teammates and reduce turnover and its associated costs. In recent years, the Company has faced periods of high teammate turnover, periodic labor shortages and wage inflation in our front-line workforce due to tight conditions in the labor market.
Management monitors market compensation and benefits to be able to attract, retain and promote teammates and to reduce turnover and its associated costs. In recent years, the Company has faced periods of high teammate turnover, periodic labor shortages and wage inflation in our front-line workforce due to tight conditions in the labor market.
We provide a leadership program designed to challenge and grow our future servant leaders through a series of learning experiences, including on-the-job training, mentorship, peer coaching and formal leadership courses. This program focuses on developing 7 leadership skills, building cohesive teams and strengthening business acumen to prepare teammates for a leadership position at Coca‑Cola Consolidated.
We provide a leadership program designed to challenge and grow our future servant leaders through a series of learning experiences, including on-the-job training, mentorship, peer coaching and formal leadership courses. This program focuses on developing leadership skills, building cohesive teams and strengthening business acumen to prepare teammates for a leadership position at Coca‑Cola Consolidated.
We believe such competition exists in each of the exclusive geographic territories in the United States in which we operate. In response to growing health, nutrition and wellness concerns for today’s youth, a number of states and local governments have regulations restricting the sale of soft drinks and other foods in schools, particularly elementary, middle and high schools.
We believe such competition exists in each of the exclusive geographic territories in the United States in which we operate. In response to growing health, nutrition and wellness concerns for today’s youth, a number of state and local governments have regulations restricting the sale of soft drinks and other foods in schools, particularly elementary, middle and high schools.
After onboarding, our teammates may participate in numerous learning experiences offered by the Company to help them develop and improve their skills and capabilities to advance in their careers, including at one of our two dedicated experiential learning centers where teammates can develop and grow their skills through a hands-on experience.
After onboarding, our teammates may participate in numerous learning experiences offered by the Company to help them develop and improve their skills and capabilities to advance in their careers, including at one of 7 our two dedicated experiential learning centers where teammates can develop and grow their skills through a hands-on experience.
Under the Ancillary Business Letter, the consent of The Coca‑Cola Company, which consent may not be unreasonably withheld, would be required for us to acquire or develop (i) any grocery, quick service restaurant, or convenience and petroleum store business engaged in the sale of beverages, beverage components and other beverage products not otherwise authorized or permitted by the CBA or (ii) any other line of business for which beverage activities otherwise prohibited under the CBA represent more than a certain threshold of net sales (subject to certain limited exceptions). 3 Markets Served and Facilities As of December 31, 2022, we served approximately 60 million consumers within our territories, which comprised five principal markets.
Under the Ancillary Business Letter, the consent of The Coca‑Cola Company, which consent may not be unreasonably withheld, would be required for us to acquire or develop (i) any grocery, quick service restaurant, or convenience and petroleum store business engaged in the sale of beverages, beverage components or other beverage products not otherwise authorized or permitted by the CBA or (ii) any other line of business for which beverage activities otherwise prohibited under the CBA represent more than a certain threshold of net sales (subject to certain limited exceptions). 3 Markets Served and Facilities As of December 31, 2023, we served approximately 60 million consumers within our territories, which comprised five principal markets.
Approximately 86% of our total bottle/can sales volume to retail customers consists of products of The Coca‑Cola Company, which include some of the most recognized and popular beverage brands in the world. We also distribute products for several other beverage companies, including Keurig Dr Pepper Inc. (“Dr Pepper”) and Monster Energy Company (“Monster Energy”).
Approximately 85% of our total bottle/can sales volume to retail customers consists of products of The Coca‑Cola Company, which include some of the most recognized and popular beverage brands in the world. We also distribute products for several other beverage companies, including Keurig Dr Pepper Inc. (“Dr Pepper”) and Monster Energy Company (“Monster Energy”).
Human Capital Resources At Coca-Cola Consolidated, our teammates are the heart of our business and the key to our success. As of December 31, 2022, we employed approximately 17,000 employees which we refer to as “teammates,” of which approximately 15,000 were full-time and approximately 2,000 were part-time. Approximately 13% of our workforce is covered by collective bargaining agreements.
Human Capital Resources At Coca-Cola Consolidated, our teammates are the heart of our business and the key to our success. As of December 31, 2023, we employed approximately 17,000 employees which we refer to as “teammates,” of which approximately 15,000 were full-time and approximately 2,000 were part-time. Approximately 15% of our workforce is covered by collective bargaining agreements.
As of December 31, 2022, 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.
As of December 31, 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 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 of the Company’s distribution territories.
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.
The task force and discussion groups led by our senior executive leadership team strive to enhance Company-wide engagement on diversity and inclusion, provide opportunities for teammates to discuss diversity and inclusion, develop initiatives to support our diversity framework and monitor progress across these initiatives.
The task force and discussion groups led by our senior executive leadership team strive to enhance Company-wide engagement on diversity, equity and inclusion (“DEI”), provide opportunities for teammates to discuss DEI, develop initiatives to support our diversity framework and monitor progress across these initiatives.
Our Purpose is to honor God in all we do, to serve others, to pursue excellence and to grow profitably. Ownership As of December 31, 2022, J.
Our Purpose is to honor God in all we do, to serve others, to pursue excellence and to grow profitably. Ownership As of December 31, 2023, J.
The following table sets forth some of our principal products, including products of The Coca‑Cola Company and products licensed to us by other beverage companies: Sparkling Beverages Still Beverages The Coca-Cola Company Products: Barqs Root Beer Fresca AHA Peace Tea Cherry Coca-Cola Mello Yello BODYARMOR products POWERade Cherry Coca-Cola Zero Mello Yello Zero Core Power POWERade Zero Coca-Cola Minute Maid Sparkling Dasani Tum-E Yummies Coca-Cola Vanilla Pibb Xtra fairlife products Coca-Cola Zero Sugar Seagrams Ginger Ale glacéau smartwater Diet Coke Sprite glacéau vitaminwater Fanta Sprite Zero Sugar Gold Peak Tea Fanta Zero Minute Maid Juices To Go Products Licensed to Us by Other Beverage Companies: Diet Dr Pepper Sundrop Dunkin’ Donuts products NOS® Diet Sundrop Full Throttle Reign products Dr Pepper Monster Energy products 1 Beverage Distribution and Manufacturing Agreements We have rights to distribute, promote, market and sell certain nonalcoholic beverages of The Coca‑Cola Company pursuant to comprehensive beverage agreements (collectively, the “CBA”) with The Coca‑Cola Company and Coca‑Cola Refreshments USA, Inc.
The following table sets forth some of our principal products, including products of The Coca‑Cola Company and products licensed to us by other beverage companies: Sparkling Beverages Still Beverages The Coca-Cola Company Products: Barqs Root Beer Fanta Zero Sugar BODYARMOR Minute Maid Coca-Cola Fresca Core Power POWERade Coca-Cola Cherry Mello Yello Dasani Tum-E Yummies Coca-Cola Vanilla Pibb Xtra fairlife Coca-Cola Zero Sugar Seagrams Ginger Ale glacéau smartwater Diet Coke Sprite glacéau vitaminwater Fanta Sprite Zero Sugar Gold Peak Products Licensed to Us by Other Beverage Companies: Diet Dr Pepper Sundrop Bang Energy Monster Energy Diet Sundrop Dunkin’ Coffee NOS® Dr Pepper Full Throttle Reign/Reign Storm 1 Beverage Distribution and Manufacturing Agreements We have rights to distribute, promote, market and sell certain nonalcoholic beverages of The Coca‑Cola Company pursuant to comprehensive beverage agreements (collectively, the “CBA”) with The Coca‑Cola Company and Coca‑Cola Refreshments USA, Inc.
Sales of beverages under these agreements with other beverage companies represented approximately 14%, 17% and 16% of our total bottle/can sales volume to retail customers in 2022, 2021 and 2020, respectively. Finished Goods Supply Arrangements We have finished goods supply arrangements with other U.S.
Sales of beverages under these agreements with other beverage companies represented approximately 15%, 14% and 17% of our total bottle/can sales volume to retail customers in 2023, 2022 and 2021, respectively. Finished Goods Supply Arrangements We have finished goods supply arrangements with other U.S.
In 2022, the Company made cash donations of approximately $37 million to various charities and donor-advised funds in light of the Company’s financial performance, distribution territory footprint and future business prospects. The Company intends to continue its charitable contributions in future years, subject to the Company’s financial performance and other business factors.
In 2023, the Company made cash donations of approximately $49 million to various charities and donor-advised funds in light of the Company’s financial performance, distribution territory footprint and future business prospects. The Company intends to continue its charitable contributions in future years, subject to the Company’s financial performance and other business factors.
An important part of attracting and retaining top talent is teammate satisfaction, and we conduct an annual engagement survey administered and analyzed by an independent third party to assess teammate satisfaction and engagement and the effectiveness of our teammate development and compensation programs. In 2022, 79% of our teammates participated in the survey.
An important part of attracting and retaining top talent is teammate satisfaction, and we conduct an annual engagement survey administered and analyzed by an independent third party to assess teammate satisfaction and engagement and the effectiveness of our teammate development and compensation programs. In 2023, 81% of our teammates participated in the survey.
The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers, as well as the percentage of the Company’s total net sales that such volume represents: Fiscal Year 2022 2021 Approximate percent of the Company’s total bottle/can sales volume: Wal-Mart Stores, Inc. 20 % 20 % The Kroger Company 12 % 13 % Total approximate percent of the Company’s total bottle/can sales volume 32 % 33 % Approximate percent of the Company’s total net sales: Wal-Mart Stores, Inc. 16 % 14 % The Kroger Company 10 % 9 % Total approximate percent of the Company’s total net sales 26 % 23 % The loss of Wal-Mart Stores, Inc. or The Kroger Company as a customer could have a material adverse effect on the operating and financial results of the Company.
The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers, as well as the percentage of the Company’s total net sales that such volume represents: Fiscal Year 2023 2022 Approximate percent of the Company’s total bottle/can sales volume: Wal-Mart Stores, Inc. 21 % 20 % The Kroger Company 14 % 12 % Total approximate percent of the Company’s total bottle/can sales volume 35 % 32 % Approximate percent of the Company’s total net sales: Wal-Mart Stores, Inc. 17 % 16 % The Kroger Company 11 % 10 % Total approximate percent of the Company’s total net sales 28 % 26 % The loss of Wal-Mart Stores, Inc. or The Kroger Company as a customer could have a material adverse effect on the operating and financial results of the Company.
In addition to our marketing and merchandising programs, we believe a sustained and planned charitable giving program to support the communities we serve is an essential component to the success of our brand and, by extension, our net sales.
We consider the funds we expend for marketing and merchandising programs necessary to maintain or increase revenue. In addition to our marketing and merchandising programs, we believe a sustained and planned charitable giving program to support the communities we serve is an essential component to the success of our brand and, by extension, our net sales.
Similarly, we are aware of proposed legislation that would impose fees or taxes on various types of containers that are used in our business, as well as proposed legislation around new recycling regulations and the reduction of single-use plastics.
Similarly, we are aware of proposed legislation that would impose fees or taxes on various types of containers that are used in our business, implement new recycling regulations and the reduction of single-use plastics and place the onus on plastic suppliers to identify recycling solutions.
Historically, these expenses have been partially offset by marketing funding support provided to us by The Coca‑Cola Company and other beverage companies in support of a variety of marketing programs, such as point-of-sale displays and merchandising programs. We consider the funds we expend for marketing and merchandising programs necessary to maintain or increase revenue.
We also expend substantial funds on our own behalf for extensive local sales promotions of our products. Historically, these expenses have been partially offset by marketing funding support provided to us by The Coca‑Cola Company and other beverage companies in support of a variety of marketing programs, such as point-of-sale displays and merchandising programs.
The Company responded to these challenges by making certain investments in our teammates to reward them for their contributions in achieving strong operating results and to remain competitive in the current labor environment. We are a learning organization committed to the goal of continuous improvement and the development of our teams and teammates.
The Company responded to these challenges by making certain investments in our teammates to reward them for their contributions in achieving strong operating results and to remain competitive in the current labor environment. The Company continues to reward teammates for their contributions to the Company’s strong operating results.
We are not currently impacted by the policies in these types of proposed legislation, but it is possible that similar or more restrictive legal requirements may be proposed or enacted within our distribution territories in the future. 6 We are also subject to federal, state and local environmental laws, including laws related to water consumption and treatment, wastewater discharge and air emissions.
We are not currently impacted by the policies in these types of 6 proposed legislation, but it is possible that similar or more restrictive legal requirements may be proposed or enacted within our distribution territories in the future.
New brand and product introductions, packaging changes and sales promotions are the primary sales and marketing practices in the nonalcoholic beverage industry and have required, and are expected to continue to require, substantial expenditures. Recent introductions include Coca‑Cola Creations, Dr Pepper & Cream Soda, fairlife milk products and Minute Maid Aguas Frescas.
New brand and product introductions, packaging changes and sales promotions are the primary sales and marketing practices in the nonalcoholic beverage industry and have required, and are expected to continue to require, substantial expenditures.
To empower our teammates to unlock their potential, we offer a wide range of learning experiences and resources. Our teammate onboarding experiences involve online learning, job-specific training and on-the-job development to learn about our Company, our products and our industry. Job-specific training includes activity-based classes that focus on how teammates can safely and efficiently sell, merchandise and display our products.
We are a learning organization committed to the goal of continuous improvement and the development of our teams and teammates. To empower our teammates to unlock their potential, we offer a wide range of learning experiences and resources. Our teammate onboarding experiences involve online learning, job-specific training and on-the-job development to learn about our Company, our products and our industry.
Diversity and Inclusion We strive to cultivate diversity in our workforce and believe teammates with diverse backgrounds, experiences and viewpoints bring value to our organization. We have a diversity task force comprised of diverse teammates from across the organization and led by our President and Chief Operating Officer with a focus on cultivating diversity at Coca‑Cola Consolidated.
We have a diversity task force comprised of diverse teammates from across the organization and led by our President and Chief Operating Officer with a focus on cultivating diversity at Coca‑Cola Consolidated. This task force developed a diversity framework focused on four pillars – communication, accountability, empowerment and partnerships.
Although The Coca‑Cola Company and other beverage companies have provided us with marketing funding support in the past, our beverage agreements generally do not obligate such funding. We also expend substantial funds on our own behalf for extensive local sales promotions of our products.
The Coca‑Cola Company, Dr Pepper and Monster Energy make substantial expenditures on advertising programs in our territories from which we benefit. Although The Coca‑Cola Company and other beverage companies have provided us with marketing funding support in the past, our beverage agreements generally do not obligate such funding.
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We rely extensively on advertising in various media outlets, primarily online, television and radio, for the marketing of our products. The Coca‑Cola Company, Dr Pepper and Monster Energy make substantial expenditures on advertising programs in our territories from which we benefit.
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Recent introductions include new energy products, such as Bang Energy and Reign Storm, as well as new glacéau smartwater and BODYARMOR brands and the 12.9-ounce Discovery Contour bottle for our sparkling products. We sell our products primarily in single-use, recyclable bottles and cans in varying package configurations from market to market.
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This task force developed a diversity framework focused on four pillars – communication, accountability, empowerment and partnerships.
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We are also subject to federal, state and local environmental laws, including laws related to water consumption and treatment, wastewater discharge and air emissions.
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Job-specific training includes activity-based classes that focus on how teammates can safely and efficiently sell, merchandise and display our products.
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The Company also sponsors a scholarship program intended to support eligible teammates and their immediate family members in pursuing additional educational opportunities, including a two- or four-year college degree, license or certification, and to promote personal development and growth.
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Additionally, in 2023, we hired a Health & Wellness Director to further promote the overall physical, mental and emotional well-being of our teammates. Diversity and Inclusion We strive to cultivate diversity in our workforce and believe teammates with diverse backgrounds, experiences and viewpoints bring value to our organization.
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In response to the annual engagement survey, as discussed above, the Company has continued to increase its focus on DEI, including developing a “seat at the table” framework coupled with additional education and training, creating a specific DEI manager role, launching a dedicated DEI site on the Company intranet and promoting expanded DEI celebrations for all teammates.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, because other Coca‑Cola bottlers are also users of the CONA System and would likely experience similar service interruptions, the Company may not be able to have another bottler process orders on its behalf during any such interruption. 11 The Company is also a member of the NPSG, which is comprised of The Coca‑Cola Company, the Company and certain other Coca‑Cola bottlers who are regional producing bottlers in The Coca‑Cola Company’s national product supply system.
Biggest changeAny service interruptions of the CONA System could result in increased costs or adversely impact the Company’s results of operations. In addition, because other Coca‑Cola bottlers are also users of the CONA System and would likely experience similar service interruptions, the Company may not be able to have another bottler process orders on its behalf during any such interruption.
This concentration of ownership may have the effect of delaying or preventing a change in control otherwise favored by the Company’s other stockholders and could depress the stock price or limit other stockholders’ ability to influence corporate matters, which could result in the Company making decisions that stockholders outside the Harrison family may not view as beneficial.
This concentration of ownership could have the effect of delaying or preventing a change in control otherwise favored by the Company’s other stockholders and could depress the stock price or limit other stockholders’ ability to influence corporate matters, which could result in the Company making decisions that stockholders outside the Harrison family may not view as beneficial.
Further, a decline in the interest rates used to discount the Company’s pension and postretirement medical liabilities could increase the cost of these benefits and the amount of the liabilities. 14 In assessing the Company’s credit strength, credit rating agencies consider the Company’s capital structure, financial policies, consolidated balance sheet and other financial information, and may also consider financial information of other bottling and beverage companies.
Further, a decline in the interest rates used to discount the Company’s pension and postretirement medical benefits could increase the cost of these benefits and the amount of the liabilities. 14 In assessing the Company’s credit strength, credit rating agencies consider the Company’s capital structure, financial policies, consolidated balance sheet and other financial information, and may also consider financial information of other bottling and beverage companies.
These customers typically make purchase decisions based on a combination of price, product quality, consumer demand and customer service performance and generally do not enter into long-term contracts. The Company faces risks related to maintaining the volume demanded on a short-term basis from these customers, which can also divert resources away from other customers.
These customers typically make purchase decisions based on a combination of price, product quality, consumer demand and customer service performance and generally do not enter into long-term contracts. The Company faces risks related to maintaining the volume 13 demanded on a short-term basis from these customers, which can also divert resources away from other customers.
If the Company’s technology systems, or those of its third-party service providers or business partners, are damaged, breached or cease to function properly, the Company may incur significant financial and other resources to mitigate, upgrade, repair or replace them, and the Company may suffer interruptions in its business operations, resulting in lost revenues and potential delays in reporting its financial results.
If the Company’s information technology systems, or those of its third-party service providers or business partners, are damaged, breached or cease to function properly, the Company may incur significant financial and other resources to mitigate, upgrade, repair or replace them, and the Company may suffer interruptions in its business operations, resulting in lost revenues and potential delays in reporting its financial results.
If a change in control or sale of one of our businesses is delayed or prevented by the provisions in the CBA and the RMA, the market price of our Common Stock could be negatively affected. The concentration of the Company’s capital stock ownership with our Chairman and Chief Executive Officer limits other stockholders’ ability to influence corporate matters.
If a change in control 11 or sale of one of our businesses is delayed or prevented by the provisions in the CBA and the RMA, the market price of our Common Stock could be negatively affected. The concentration of the Company’s capital stock ownership with our Chairman and Chief Executive Officer limits other stockholders’ ability to influence corporate matters.
Any of these factors may reduce consumers’ willingness to purchase the Company’s products and any inability on the part of the Company to anticipate or react to such 9 changes could result in reduced demand for the Company’s products or erode the Company’s competitive and financial position and could adversely affect the Company’s business, reputation, financial condition or results of operations.
Any of these factors may reduce consumers’ willingness to purchase the Company’s products and any inability on the part of the Company to anticipate or react to such changes could result in reduced demand for the Company’s products or erode the Company’s competitive and financial position and could adversely affect the Company’s business, reputation, financial condition or results of operations.
Any pervasive nutrition label changes could increase the Company’s costs and could inhibit sales of one or more of the Company’s major products. Most beverage products sold by the Company are classified as food or food products and are therefore eligible for purchase using SNAP benefits by consumers purchasing them for home consumption.
Any pervasive nutrition label changes could increase the Company’s costs and could inhibit sales of one or more of the Company’s major products. 10 Most beverage products sold by the Company are classified as food or food products and are therefore eligible for purchase using SNAP benefits by consumers purchasing them for home consumption.
Harrison has the ability to exert substantial influence or actual control over the Company’s management and affairs and over substantially all matters requiring action by the Company’s stockholders, including the election of directors and significant corporate transactions, such as a merger or other sale of the Company or its assets.
Harrison has the ability to exert substantial influence or actual control over the Company’s management and affairs and over substantially all matters requiring action by the Company’s stockholders, including the election of directors and the approval of significant corporate transactions, such as a merger or other sale of the Company or its assets.
General Risk Factors Technology failures or cyberattacks on the Company’s technology systems or the Company’s effective response to technology failures or cyberattacks on its customers’, suppliers’ or other third parties’ technology systems could disrupt the Company’s operations and negatively impact the Company’s reputation, business, financial condition or results of operations.
General Risk Factors Technology failures or cyberattacks on the Company’s information technology systems or the Company’s effective response to technology failures or cyberattacks on its customers’, suppliers’ or other third parties’ information technology systems could disrupt the Company’s operations and negatively impact the Company’s reputation, business, financial condition or results of operations.
Changes in business conditions or other events could materially change both the future cash flow projections and the discount rate used in the calculation of the fair value of 12 contingent consideration under the CBA.
Changes in business conditions or other events could materially change both the future cash flow projections and the discount rate used in the calculation of the fair value of contingent consideration under the CBA.
These changes could result in material changes to the fair value of the acquisition related contingent consideration and could materially impact the amount of non-cash expense (or income) recorded each reporting period.
These changes could result in material changes to the fair value of the acquisition related contingent consideration liability and could materially impact the amount of non-cash expense (or income) recorded each reporting period.
In addition, efforts by the government to curb inflation may cause a general economic slowdown. Adverse economic conditions could also increase the likelihood of customer delinquencies and bankruptcies, which would increase the risk of uncollectability of certain accounts. Each of these factors could adversely affect the Company’s overall business, financial condition and results of operations.
In addition, efforts by the government to curb inflation may cause a general economic slowdown. Adverse economic conditions could also increase the likelihood of customer delinquencies and bankruptcies, which would increase the risk of collectability of certain accounts. Each of these factors could adversely affect the Company’s overall business, financial condition and results of operations.
The Company’s freight cost and the timely delivery of its products may be adversely impacted by a number of factors which could reduce the profitability of the Company’s operations, including driver shortages, reduced availability of independent contractor drivers, higher fuel costs, weather conditions, traffic congestion, increased government regulation and other matters.
The Company’s freight cost and the timely delivery of its products may be adversely impacted by a number of factors that could reduce the profitability of the Company’s operations, including driver shortages, reduced availability of independent contractor drivers, higher fuel costs, weather conditions, traffic congestion, increased government regulation and other matters.
In response to growing health, nutrition and wellness concerns for today’s youth, a number of states and local governments have regulations restricting the sale of soft drinks and other foods in schools, particularly elementary, middle and high schools. Many of these restrictions have existed for several years in connection with subsidized meal programs in schools.
In response to growing health, nutrition and wellness concerns for today’s youth, a number of state and local governments have regulations restricting the sale of soft drinks and other foods in schools, particularly elementary, middle and high schools. Many of these restrictions have existed for several years in connection with subsidized meal programs in schools.
As of December 31, 2022, 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. Mr.
As of December 31, 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. Mr.
Failure to maintain productive relationships with our employees covered by collective bargaining agreements, including failing to renegotiate collective bargaining agreements, could have an adverse effect on the Company’s business, financial condition and results of operations. Approximately 13% of the Company’s employees are covered by collective bargaining agreements.
Failure to maintain productive relationships with our employees covered by collective bargaining agreements, including failing to renegotiate collective bargaining agreements, could have an adverse effect on the Company’s business, financial condition and results of operations. Approximately 15% of the Company’s employees are covered by collective bargaining agreements.
Further, the Company’s net sales are affected by promotion of the Company’s products by significant customers, such as in-store displays created by customers or the promotion of the Company’s products in customers’ periodic advertising.
Moreover, the Company’s net sales are affected by promotion of the Company’s products by significant customers, such as in-store displays created by customers or the promotion of the Company’s products in customers’ periodic advertising.
Macro-economic factors beyond the Company’s control, including increases in healthcare costs, declines in investment returns on pension assets and changes in discount rates used to calculate pension and related liabilities, could result in significant increases in these costs for the Company.
Macroeconomic factors beyond the Company’s control, including increases in healthcare costs, declines in investment returns on pension assets and changes in discount rates used to calculate pension and related liabilities, could result in significant increases in these costs for the Company.
Limited suppliers for certain of the Company’s raw materials could have an adverse effect on the Company’s ability to negotiate the lowest costs and, in light of the Company’s relatively low in-plant raw material inventory levels, has the potential for causing interruptions in the Company’s supply of raw materials and in its manufacture of finished goods.
This concentration could have an adverse effect on the Company’s ability to negotiate the lowest costs and, in light of the Company’s relatively low in-plant raw material inventory levels, has the potential for causing interruptions in the Company’s supply of raw materials and in its manufacture of finished goods.
Changes in the Company’s level of debt, borrowing costs and credit ratings could impact access to capital and credit markets, restrict the Company’s operating flexibility and limit the Company’s ability to obtain additional financing to fund future needs. As of December 31, 2022, the Company had $598.8 million of debt outstanding.
Changes in the Company’s level of debt, borrowing costs and credit ratings could impact the Company’s access to capital and credit markets, restrict the Company’s operating flexibility and limit the Company’s ability to obtain additional financing to fund future needs. As of December 31, 2023, the Company had $599.2 million of debt outstanding.
The Company’s acquisition related contingent consideration liability, which totaled $541.5 million as of December 31, 2022, consists of the estimated amounts due to The Coca‑Cola Company as acquisition related sub-bottling payments under the CBA with The Coca‑Cola Company and CCR over the useful life of the related distribution rights.
The Company’s acquisition related contingent consideration liability, which totaled $669.3 million as of December 31, 2023, consists of the estimated amounts due to The Coca‑Cola Company as acquisition related sub-bottling payments under the CBA with The Coca‑Cola Company and CCR over the useful life of the related distribution rights.
Risks Related to Our Business The Company’s business and results of operations may be adversely affected by increased costs, disruption of supply or unavailability or shortages of raw materials, fuel and other supplies.
The Company’s business, financial condition or results of operations could be materially and adversely affected by any of these risks. 8 Risks Related to Our Business The Company’s business and results of operations may be adversely affected by increased costs, disruption of supply or unavailability or shortages of raw materials, fuel and other supplies.
The Company’s largest customers, Wal-Mart Stores, Inc. and The Kroger Company, accounted for approximately 32% of the Company’s 2022 total bottle/can sales volume to retail customers and approximately 26% of the Company’s 2022 total net sales.
The Company’s largest customers, Wal-Mart Stores, Inc. and The Kroger Company, accounted for approximately 35% of the Company’s 2023 total bottle/can sales volume to retail customers and approximately 28% of the Company’s 2023 total net sales.
In order to address risks to its technology systems, the Company continues to monitor networks and systems, upgrade security policies and train its employees, and it requires third-party service providers and business partners, customers, suppliers and other third parties to do the same.
In addition, the Company continuously upgrades and updates current technology or installs new technology. In order to address risks to its information technology systems, the Company continues to monitor networks and systems, to upgrade security policies and to train its employees, and it requires third-party service providers and business partners, customers, suppliers and other third parties to do the same.
International or domestic geopolitical or other events, including armed conflict or the imposition of tariffs and/or quotas by the U.S. government on any of these raw materials, could adversely impact the supply and cost of these raw materials to the Company.
International or domestic geopolitical or other events, including pandemics, armed conflict or the imposition of tariffs and/or quotas by the U.S. government on any of these raw materials, could adversely impact the supply and cost of these raw materials to the Company or render them unavailable at commercially favorable terms or at all.
As a result, the effects of climate change could have a long-term adverse impact on the Company’s business and results of operations.
As a result, the effects of climate change could have a long-term adverse impact on the Company’s business and results of operations. Item 1B. Unresolved Staff Comments. None.
If the Company cannot offset higher raw material costs with higher selling prices, effective commodity price hedging, increased sales volume or reductions in other costs, the Company’s results of operations and profitability could be adversely affected.
In addition, there are no limits on the prices The Coca‑Cola Company and other beverage companies can charge for concentrate. If the Company cannot offset higher raw material costs with higher selling prices, effective commodity price hedging, increased sales volume or reductions in other costs, the Company’s results of operations and profitability could be adversely affected.
Similarly, the Company is aware of proposed legislation that would impose fees or 10 taxes on various types of containers used in its business, as well as proposed legislation around new recycling regulations and the reduction of single-use plastics.
Similarly, the Company is aware of proposed legislation that would impose fees or taxes on various types of containers that are used in its business, implement new recycling regulations and the reduction of single-use plastics and place the onus on plastic suppliers to identify recycling solutions.
Failure to attract, train and retain qualified employees while controlling labor costs, and other labor issues could have an adverse effect on the Company’s reputation, business, financial condition and results of operations or profitability. The Company’s future growth and performance depend on its ability to attract, hire, train, develop, motivate and retain a highly skilled, diverse and properly credentialed workforce.
Failure to attract, train and retain qualified employees while controlling labor costs, and other labor issues could have an adverse effect on the Company’s reputation, business, financial condition and results of operations or profitability.
In addition, third-party providers of data hosting or cloud services, as well as other vendors, customers and suppliers, are vulnerable to cybersecurity incidents involving data the Company shares with them. While incidents at our third-party service providers have not materially impacted our business operations, one or more of these incidents could significantly impact the Company in the future.
In addition, third-party providers of data hosting or cloud services, as well as other vendors, customers and suppliers, are vulnerable to cybersecurity incidents involving data the Company shares with them.
The Company’s success also depends in large part on its ability and the ability of The Coca‑Cola Company and other beverage companies it works with to maintain the brand image of existing products, build up brand image for new products and brand extensions and maintain its corporate reputation and social license to operate.
However, if beverage products taken to market are or become contaminated or adulterated, the Company may be required to conduct costly product recalls and may become subject to product liability claims and negative publicity, which could cause its business and reputation to suffer. 9 The Company’s success also depends in large part on its ability and the ability of The Coca‑Cola Company and other beverage companies it works with to maintain the brand image of existing products, build up brand image for new products and brand extensions and maintain its corporate reputation and social license to operate.
Item 1A. Risk Factors. In addition to other information in this report, the following risk factors should be considered carefully in evaluating the Company’s business. The Company’s business, financial condition or results of operations could be materially and adversely affected by any of these risks.
Item 1A. Risk Factors. In addition to other information in this report, the following risk factors should be considered carefully in evaluating the Company’s business.
If the Company’s significant customers change the manner in which they market or promote the Company’s products, or if the marketing efforts by significant customers become ineffective, the Company’s sales volume and net sales could be adversely impacted. The Company may not be able to respond successfully to changes in the marketplace.
If the Company’s significant customers change the manner in which they market or promote the Company’s products, or if the marketing efforts by significant customers become ineffective, the Company’s sales volume and net sales could be adversely impacted. Further, the suppliers of certain inputs of the Company’s key products, particularly plastic bottles and aluminum cans, are highly concentrated.
The Company depends heavily upon the efficient operation of technological resources and a failure in these technology systems or controls could negatively impact the Company’s business, financial condition or results of operations. In addition, the Company continuously upgrades and updates current technology or installs new technology.
While incidents at our third-party service providers have not materially impacted our business operations, one or more of these incidents could significantly impact the Company in the future. 12 The Company depends heavily upon the efficient operation of technological resources and a failure in these information technology systems or controls could negatively impact the Company’s business, financial condition or results of operations.
Failure of the plastic bottle or aluminum can suppliers to meet the Company’s purchase requirements could negatively impact inventory levels, customer confidence and results of operations, including sales levels and profitability. The Company continues to make significant reinvestments in its business in order to evolve its operating model and to accommodate future growth and portfolio expansion, including supply chain optimization.
Failure of the plastic bottle or aluminum can suppliers to meet the Company’s purchase requirements could negatively impact inventory levels, customer confidence and results of operations, including sales levels and profitability. The Company may not be able to respond successfully to changes in the marketplace.
Consequently, the Company’s access to capital may be 13 diminished. Any such event of default or failure could negatively impact the Company’s business, financial condition and results of operations. Changes in the Company’s top customer relationships and marketing strategies could impact sales volume and net sales.
Consequently, the Company’s access to capital may be diminished. Any such event of default or failure could negatively impact the Company’s business, financial condition and results of operations. The concentration risks among the Company’s customers and suppliers could impact our sales and our ability to access necessary product inputs at commercially advantageous prices.
Removed
In 8 recent years, the COVID-19 pandemic resulted in certain raw materials not being available at commercially favorable terms or at all, and future pandemics or other events causing widespread supply chain disruption may also have such an effect. In addition, there are no limits on the prices The Coca‑Cola Company and other beverage companies can charge for concentrate.
Added
The Company continues to make significant reinvestments in its business in order to evolve its operating model and to accommodate future growth and portfolio expansion, including supply chain optimization.
Removed
For example, during 2022, the Company experienced intermittent shortages of carbon dioxide supply that caused work stoppages at certain of its manufacturing facilities. These work stoppages were offset by increased production at other facilities, but similar stoppages in the future could adversely affect the Company’s results of operations and profitability.
Added
The Company is also a member of the NPSG, which is comprised of The Coca‑Cola Company, the Company and certain other Coca‑Cola bottlers who are regional producing bottlers in The Coca‑Cola Company’s national product supply system.
Removed
However, if beverage products taken to market are or become contaminated or adulterated, the Company may be required to conduct costly product recalls and may become subject to product liability claims and negative publicity, which could cause its business and reputation to suffer.
Added
Additionally, the failure of the Company to successfully migrate key data to new systems could lead to data integrity issues, service interruptions or delays and other increased costs that could adversely impact the Company’s business, financial condition or results of operations.
Removed
The Company’s business and results of operations may be adversely affected by the inability to attract and retain front-line employees in a tight labor market. In recent years, the U.S. economy has experienced a challenging labor market as the supply of available workers frequently fell short of the number of workers necessary to fill all available jobs.
Added
The Company’s future growth and performance depend on its ability to attract, hire, train, develop, motivate and retain a highly skilled, diverse and properly credentialed workforce, including front-line employees.
Removed
As a result, the Company experienced difficulty in attracting and retaining front-line workers and faced periods of high turnover. Tight labor markets and a lack of available workers has led, and may lead in the future, to increased labor costs in the form of higher salaries, increased overtime and other compensation adjustments to remain competitive in a challenging labor market.
Removed
If the Company cannot retain adequate front-line employees to produce and deliver its products, its business operations may be adversely affected and higher labor costs have had, and may have in the future, an adverse effect on our results of operations.
Removed
Any service interruptions of the CONA System could result in increased costs or adversely impact the Company’s results of operations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFollowing is a summary of the Company’s manufacturing plants and certain other properties: Facility Type Location Square Feet Leased / Owned Lease Expiration Distribution Center/Manufacturing Plant Combination (1) Charlotte, NC 650,000 Owned — Distribution Center Whitestown, IN 415,000 Owned — Manufacturing Plant Indianapolis, IN 400,000 Owned — Warehouse Charlotte, NC 380,000 Leased 2028 Manufacturing Plant Cincinnati, OH 368,000 Owned — Warehouse Chester, VA 353,000 Leased 2028 Distribution Center/Manufacturing Plant Combination Sandston, VA 319,000 Owned — Manufacturing Plant Roanoke, VA 310,000 Owned — Distribution Center Erlanger, KY 301,000 Leased 2034 Distribution Center Louisville, KY 300,000 Leased 2030 Manufacturing Plant Twinsburg, OH 287,000 Owned — Warehouse Hanover, MD 278,000 Leased 2027 Distribution Center Hanover, MD 276,000 Leased 2034 Distribution Center Memphis, TN 266,000 Leased 2025 Distribution Center Clayton, NC 233,000 Leased 2026 Manufacturing Plant Nashville, TN 220,000 Leased 2024 Distribution Center La Vergne, TN 220,000 Leased 2026 Corporate Headquarters (2)(3) Charlotte, NC 172,000 Leased 2029 Manufacturing Plant Baltimore, MD 155,000 Owned — Manufacturing Plant West Memphis, AR 116,000 Owned — Manufacturing Plant Silver Spring, MD 104,000 Owned — (1) Includes a 535,000-square foot manufacturing plant and an adjacent 115,000-square foot distribution center.
Biggest changeFollowing is a summary of the Company’s manufacturing plants and certain other properties: Facility Type Location Square Feet Leased / Owned Lease Expiration Distribution Center/Manufacturing Plant Combination (1) Charlotte, NC 650,000 Owned — Distribution Center Whitestown, IN 415,000 Owned — Manufacturing Plant Indianapolis, IN 400,000 Owned — Warehouse Charlotte, NC 380,000 Leased 2028 Manufacturing Plant Cincinnati, OH 368,000 Owned — Warehouse Chester, VA 353,000 Leased 2028 Manufacturing Plant Sandston, VA 326,000 Owned — Manufacturing Plant West Memphis, AR 326,000 Owned — Manufacturing Plant Roanoke, VA 310,000 Owned — Distribution Center Erlanger, KY 301,000 Leased 2034 Distribution Center Louisville, KY 300,000 Leased 2030 Manufacturing Plant Twinsburg, OH 287,000 Owned — Warehouse Hanover, MD 278,000 Leased 2027 Distribution Center Hanover, MD 276,000 Leased 2034 Distribution Center Memphis, TN 266,000 Leased 2025 Distribution Center Clayton, NC 233,000 Leased 2026 Manufacturing Plant Nashville, TN 220,000 Leased 2029 Distribution Center La Vergne, TN 220,000 Leased 2026 Distribution Center Sandston, VA 210,000 Owned — Corporate Headquarters (2)(3) Charlotte, NC 172,000 Leased 2029 Manufacturing Plant Baltimore, MD 155,000 Owned — Manufacturing Plant Silver Spring, MD 104,000 Owned — (1) Includes a 535,000-square foot manufacturing plant and an adjacent 115,000-square foot distribution center.
In addition to the facilities noted above, the Company utilizes a portion of the production capacity from the 261,000-square foot manufacturing plant owned by SAC, a manufacturing cooperative located in Bishopville, South Carolina. 17 The Company’s products are generally transported to distribution centers for storage pending sale.
In addition to the facilities noted above, the Company utilizes a portion of the production capacity from the 261,000-square foot manufacturing plant owned by SAC, a manufacturing cooperative located in Bishopville, South Carolina. The Company’s products are generally transported to distribution centers for storage pending sale.
There were no changes to the number of distribution centers by market area between December 31, 2022 and January 27, 2023. As of January 27, 2023, the Company owned and operated approximately 4,200 vehicles in the sale and distribution of the Company’s beverage products, of which approximately 2,700 were route delivery trucks.
There were no changes to the number of distribution centers by market area between December 31, 2023 and January 26, 2024. 18 As of January 26, 2024, the Company owned and operated approximately 4,300 vehicles in the sale and distribution of the Company’s beverage products, of which approximately 2,700 were route delivery trucks.
Item 2. Properties. As of January 27, 2023, the principal properties of the Company included its corporate headquarters, subsidiary headquarters, 60 distribution centers and 10 manufacturing plants. The Company owns 47 distribution centers and 9 manufacturing plants, and leases its corporate headquarters, subsidiary headquarters, 13 distribution centers and one manufacturing plant.
Item 2. Properties. As of January 26, 2024, the principal properties of the Company included its corporate headquarters, subsidiary headquarters, 60 distribution centers and 10 manufacturing plants. The Company owns 47 distribution centers and nine manufacturing plants, and leases its corporate headquarters, subsidiary headquarters, 13 distribution centers and one manufacturing plant.
The estimated utilization percentage of the Company’s manufacturing plants, which fluctuates with the seasonality of the business, as of December 31, 2022, is indicated below: Location Utilization (1) Location Utilization (1) Roanoke, VA 96 % Indianapolis, IN 77 % Charlotte, NC 89 % Cincinnati, OH 75 % Nashville, TN 89 % Silver Spring, MD 70 % Baltimore, MD 83 % Sandston, VA 68 % West Memphis, AR 82 % Twinsburg, OH 59 % (1) Estimated production divided by capacity, based on expected operations of six days per week and 20 hours per day.
The estimated utilization percentage of the Company’s manufacturing plants, which fluctuates with the seasonality of the business, as of December 31, 2023, is indicated below: Location Utilization (1) Location Utilization (1) Roanoke, VA 94 % Cincinnati, OH 80 % Nashville, TN 83 % Charlotte, NC 76 % Indianapolis, IN 82 % West Memphis, AR 72 % Silver Spring, MD 81 % Sandston, VA 72 % Baltimore, MD 80 % Twinsburg, OH 58 % (1) Estimated production divided by capacity, based on expected operations of six days per week and 20 hours per day.
In addition, the Company owned approximately 429,000 beverage dispensing and vending machines for the sale of beverage products in the Company’s territories as of January 27, 2023.
In addition, the Company owned approximately 452,000 beverage dispensing and vending machines for the sale of beverage products in the Company’s territories as of January 26, 2024.
Removed
During 2022, CCBCC Operations, LLC, a wholly owned subsidiary of the Company, purchased the Snyder Production Center, which consists of a distribution center/manufacturing plant combination in Charlotte, North Carolina. In connection with this transaction, the lease for the Snyder Production Center was terminated.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

13 edited+6 added−3 removed12 unchanged
Biggest changeBeauregarde Fisher III Executive Vice President, General Counsel and Secretary 54 Christine A. Motherwell Senior Vice President, Human Resources 44 Jeffrey L. Turney Senior Vice President, Strategy & Business Transformation 55 Mr. J. Frank Harrison, III was elected Chairman of the Board of Directors of the Company in December 1996 and Chief Executive Officer of the Company in May 1994.
Biggest changeFrank Harrison, III was elected Chairman of the Board of Directors of the Company in December 1996 and Chief Executive Officer of the Company in May 1994. Mr. Harrison served as Vice Chairman of the Board of Directors of the Company from November 1987 to December 1996.
Prior to that, he served in various positions within the Company, including Executive Vice President, Franchise Strategy and Operations from April 2016 to January 2018, Senior Vice President, Sales, Field Operations and Marketing from August 2010 to March 2016, Senior Vice President, Sales from June 2008 to July 2010, Vice President – Franchise Sales from 2003 to 2008, Region Sales Manager for the Company’s Southern Division from 2000 to 2003 and Sales Manager in the Company’s Columbia, South Carolina branch from 1997 to 2000.
Prior to that, he served in various positions within the Company, including Executive Vice President, Franchise Strategy and Operations from April 2016 to January 2018, Senior Vice President, Sales, Field Operations and Marketing from August 2010 to March 2016, Senior Vice President, Sales from June 2008 to July 2010, Vice President – Franchise Sales from 2003 to 2008, Region Sales Manager for the Company’s Southern Division from 2000 to 2003 and Sales Manager in the Company’s Columbia, South 20 Carolina branch from 1997 to 2000.
He also served the Company in several other positions prior to 1997 and was first employed by the Company in 1986. 19 Mr. Donell W. Etheridge was elected Executive Vice President, Product Supply Operations of the Company in March 2021.
He also served the Company in several other positions prior to 1997 and was first employed by the Company in 1986. Mr. Donell W. Etheridge was elected Executive Vice President, Product Supply Operations of the Company in March 2021.
Item 4. Mine Safety Disclosures. Not applicable. 18 Information About Our Executive Officers The following is a description of the names and ages of the executive officers of the Company, indicating all positions and offices with the Company held by each such person and each person’s principal occupation or employment during the past five years.
Item 4. Mine Safety Disclosures. Not applicable. 19 Information About Our Executive Officers The following is a description of the names and ages of the executive officers of the Company, indicating all positions and offices with the Company held by each such person and each person’s principal occupation or employment during the past five years.
Each executive officer of the Company is elected by the Board of Directors and holds office from the date of election until thereafter removed by the Board. Name Position and Office Age J. Frank Harrison, III Chairman of the Board of Directors and Chief Executive Officer 68 David M. Katz President and Chief Operating Officer 54 F.
Each executive officer of the Company is elected by the Board of Directors and holds office from the date of election until thereafter removed by the Board. Name Position and Office Age J. Frank Harrison, III Chairman of the Board of Directors and Chief Executive Officer 69 David M. Katz President and Chief Operating Officer 55 F.
He held the position of Senior Vice President, Midwest Region for CCR, a wholly owned subsidiary of The Coca‑Cola Company, from November 2010 to December 2012. Prior to the formation of CCR, Mr. Katz was Vice President, Sales Operations for the East Business Unit of Coca‑Cola Enterprises Inc. (“CCE”) from January 2010 to December 2010.
He held the position of Senior Vice President, Midwest Region for CCR, a wholly owned subsidiary of The Coca‑Cola Company, from November 2010 to December 2012. Previously, Mr. Katz was Vice President, Sales Operations for the East Business Unit of Coca‑Cola Enterprises Inc.
Scott Anthony Executive Vice President and Chief Financial Officer 59 Matthew J. Blickley Senior Vice President, Financial Planning and Chief Accounting Officer 41 Robert G. Chambless Executive Vice President, Franchise Beverage Operations 57 Donell W. Etheridge Executive Vice President, Product Supply Operations 54 Morgan H. Everett Vice Chair of the Board of Directors 41 E.
Scott Anthony Executive Vice President and Chief Financial Officer 60 Matthew J. Blickley Senior Vice President, Financial Planning and Chief Accounting Officer 42 Robert G. Chambless Executive Vice President, Franchise Beverage Operations 58 Donell W. Etheridge Executive Vice President, Product Supply Operations 55 Morgan H. Everett Vice Chair of the Board of Directors 42 E.
Mr. Harrison served as Vice Chairman of the Board of Directors of the Company from November 1987 to December 1996. He was first employed by the Company in 1977 and also served as a Division Sales Manager and as a Vice President. Mr. David M. Katz was elected President and Chief Operating Officer of the Company in December 2018.
He was first employed by the Company in 1977 and also served as a Division Sales Manager and as a Vice President. Mr. David M. Katz was elected President and Chief Operating Officer of the Company in December 2018.
Prior to that, he served as Senior Vice President, Treasurer of the Company from November 2018 to December 2018. Before joining the Company, Mr. Anthony served as Executive Vice President, Chief Financial Officer of Ventura Foods, LLC, a privately held food solutions company, from April 2011 to September 2018. Previously, Mr.
Anthony served as Executive Vice President, Chief Financial Officer of Ventura Foods, LLC, a privately held food solutions company, from April 2011 to September 2018. Previously, Mr.
Motherwell was with CCR, a wholly owned subsidiary of The Coca‑Cola Company, where she served as Director, Sales from January 2011 to December 2011 and as Sales Center Manager from October 2009 to December 2010. Mr. Jeffrey L. Turney was elected Senior Vice President, Strategy & Business Transformation of the Company in January 2019.
Motherwell was with CCR, a wholly owned subsidiary of The Coca‑Cola Company, where she served as Director, Sales from January 2011 to December 2011 and as Sales Center Manager from October 2009 to December 2010. Mr. N.
Anthony spent 21 years with CCE in a variety of roles, including Vice President, Chief Financial Officer of CCE’s North America division, Vice President, Investor Relations & Planning, and Director, Acquisitions & Investor Relations. Mr. Matthew J. Blickley was elected Senior Vice President, Financial Planning and Chief Accounting Officer of the Company in July 2020, effective August 2020.
Anthony spent 21 years with CCE, a distributor, marketer and manufacturer of nonalcoholic beverages primarily for The Coca‑Cola Company, in a variety of roles, including Vice President, Chief Financial Officer of CCE’s North America division, Vice President, Investor Relations & Planning, and Director, Acquisitions & Investor Relations. Mr. Matthew J.
From 2008 to 2010, he served as Chief Procurement Officer and as President and Chief Executive Officer of Coca‑Cola Bottlers’ Sales & Services Company LLC. He began his Coca‑Cola career in 1993 with CCE as a Logistics Consultant. Mr. F. Scott Anthony was elected Executive Vice President and Chief Financial Officer of the Company in December 2018.
From 2008 to 2010, he served as Chief Procurement Officer and as President and Chief Executive Officer 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. He began his Coca‑Cola career in 1993 with CCE as a Logistics Consultant. Mr. F.
Prior to that, he served as Senior Vice President, Planning & Administration of the Company from January 2018 to December 2018 and as Vice President, Planning & Administration of the Company from December 2015 to December 2017. Before joining the Company, Mr.
Scott Anthony was elected Executive Vice President and Chief Financial Officer of the Company in December 2018. Prior to that, he served as Senior Vice President, Treasurer of the Company from November 2018 to December 2018. Before joining the Company, Mr.
Removed
Turney was Vice President, Strategy & Business Development of The Coca‑Cola Company, the world’s largest nonalcoholic beverage company, from January 2011 to December 2015. Mr. Turney joined The Coca‑Cola Company in May 2002, serving in various other strategic planning, commercial operations, customer sales and finance positions with the Coca‑Cola North America division of The Coca‑Cola Company.
Added
Beauregarde Fisher III Executive Vice President, General Counsel and Secretary 55 Christine A. Motherwell Senior Vice President, Human Resources 45 N. Brent Tollison Senior Vice President, Public Affairs, Communications, Community, and Sustainability 50 Mr. J.
Removed
Prior to his time in the Coca‑Cola system, Mr. Turney served consumer products and retail industry clients with Arthur Andersen Consulting from 1999 to 2002. From 1989 to 1999, he held various management and leadership roles in the consumer products and supermarket retail industry. Mr.
Added
(“CCE”), a distributor, marketer and manufacturer of nonalcoholic beverages primarily for The Coca‑Cola Company, from January 2010 to November 2010.
Removed
Turney has notified the Company that he will retire in the second fiscal quarter of 2023. 20 PART II
Added
Blickley was elected Senior Vice President, Financial Planning and Chief Accounting Officer of the Company in July 2020, effective August 2020.
Added
Brent Tollison was elected Senior Vice President, Public Affairs, Communications, Community, and Sustainability of the Company in May 2023, a role he had held in an interim capacity since November 2022. From June 2021 to August 2023, he served as Senior Vice President, Assistant to the President and Chief Operating Officer of the Company. Prior to that, Mr.
Added
Tollison was Vice President of Commercial Sales at W.W. Grainger, Inc., a broad line, business-to-business distributor of maintenance, repair and operating products and services with operations primarily in North America, Japan and the United Kingdom, from May 2014 to June 2021.
Added
Previously, he served in various roles of increasing responsibility within the Coca‑Cola system for approximately 18 years, including Vice President of Sales and Operations – Northeast of The Coca‑Cola Company, the world’s largest nonalcoholic beverage company, from June 2013 to April 2014, Vice President of Region Sales – New York Market Unit of CCR, a wholly owned subsidiary of The Coca‑Cola Company, from October 2011 to June 2013, Market Unit Vice President – Virginia of CCR from January 2011 to October 2011, Vice President of Convenience Retail – East Business Unit of CCE, a distributor, marketer and manufacturer of nonalcoholic beverages primarily for The Coca‑Cola Company, from November 2008 to January 2011 and Vice President of Convenience Retail – Southeast Business Unit of CCE from September 2007 to November 2008. 21 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeNo assurance can be given that dividends will be declared or paid in the future. As of January 27, 2023, the number of stockholders of record of the Common Stock and the Class B Common Stock was 1,008 and 6, respectively.
Biggest changeNo assurance can be given that dividends will be declared or paid in the future. As of January 26, 2024, the number of stockholders of record of the Common Stock and the Class B Common Stock was 1,198 and six, respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company has two classes of common stock outstanding, Common Stock and Class B Common Stock. The Common Stock is traded on The Nasdaq Global Select Market under the symbol COKE. There is no established public trading market for the Class B Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company has two classes of common stock outstanding, Common Stock and Class B Common Stock. The Common Stock is traded on The Nasdaq Global Select Market under the symbol “COKE.” There is no established public trading market for the Class B Common Stock.
Returns for the companies included in the peer group have been weighted on the basis of the total market capitalization for each company. COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN* Among Coca-Cola Consolidated, Inc., the S&P 500 Index and a Peer Group * Assumes $100 invested on 12/31/2017 in stock or index, including reinvestment of dividends.
Returns for the companies included in the peer group have been weighted on the basis of the total market capitalization for each company. COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN* Among Coca-Cola Consolidated, Inc., the S&P 500 Index and a Peer Group * Assumes $100 invested on 12/30/2018 in stock or index, including reinvestment of dividends.
The graph assumes $100 was invested in the Company’s Common Stock, the Standard & Poor’s 500 Index and each of the companies within the peer group on December 31, 2017, and that all dividends were reinvested on a quarterly basis.
The graph assumes $100 was invested in the Company’s Common Stock, the Standard & Poor’s 500 Index and each of the companies within the peer group on December 30, 2018, and that all dividends were reinvested on a quarterly basis.
Stock Performance Graph Presented below is a line graph comparing the yearly percentage change in the cumulative total return on the Company’s Common Stock to the cumulative total return of the Standard & Poor’s 500 Index and a peer group for the period commencing December 31, 2017 and ending December 31, 2022.
Stock Performance Graph Presented below is a line graph comparing the yearly percentage change in the cumulative total return on the Company’s Common Stock to the cumulative total return of the Standard & Poor’s 500 Index and a peer group for the period commencing December 30, 2018 and ending December 31, 2023.
Index calculated on a month-end basis. Item 6. [Reserved] 21
Index calculated on a month-end basis. Item 6. [Reserved] 22

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

98 edited+38 added−21 removed52 unchanged
Biggest changeThe following tables reconcile reported results (GAAP) to adjusted results (non-GAAP): Fiscal Year 2022 (in thousands, except per share data) Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share Reported results (GAAP) $ 2,277,954 $ 1,636,907 $ 641,047 $ 575,087 $ 430,158 $ 45.88 Fair value adjustment of acquisition related contingent consideration (1) — — — 32,301 24,306 2.59 Fair value adjustments for commodity derivative instruments (2) 3,333 427 2,906 2,906 2,187 0.23 Supply chain optimization (3) 533 (73) 606 606 456 0.05 Total reconciling items 3,866 354 3,512 35,813 26,949 2.87 Adjusted results (non-GAAP) $ 2,281,820 $ 1,637,261 $ 644,559 $ 610,900 $ 457,107 $ 48.75 Adjusted percentage change versus 2021 16.5 % 8.0 % 45.7 % 26 Fiscal Year 2021 (in thousands, except per share data) Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share Reported results (GAAP) $ 1,954,187 $ 1,515,016 $ 439,171 $ 255,149 $ 189,580 $ 20.23 Fair value adjustment of acquisition related contingent consideration (1) — — — 146,308 109,731 11.70 Fair value adjustments for commodity derivative instruments (2) (3,469) 1,772 (5,241) (5,241) (3,931) (0.42) Supply chain optimization (3) 7,542 (947) 8,489 8,489 6,367 0.68 Total reconciling items 4,073 825 3,248 149,556 112,167 11.96 Adjusted results (non-GAAP) $ 1,958,260 $ 1,515,841 $ 442,419 $ 404,705 $ 301,747 $ 32.19 Following is an explanation of non-GAAP adjustments: (1) This non-cash, fair value adjustment of acquisition related contingent consideration fluctuates based on factors such as long-term interest rates and future cash flow projections of the distribution territories subject to acquisition related sub-bottling payments.
Biggest changeThe Company’s non-GAAP financial information does not represent a comprehensive basis of accounting. 28 The following tables reconcile reported results (GAAP) to adjusted results (non-GAAP): Fiscal Year 2023 (in thousands, except per share data) Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share Reported results (GAAP) $ 2,598,711 $ 1,764,260 $ 834,451 $ 557,481 $ 408,375 $ 43.56 Fair value adjustment of acquisition related contingent consideration (1) — — — 159,354 119,834 12.78 Fair value adjustments for commodity derivative instruments (2) (1,220) (2,281) 1,061 1,061 798 0.09 Supply chain optimization (3) 1,296 — 1,296 1,296 975 0.10 Pension plan settlement expense (4) — — — 112,796 84,823 9.05 Total reconciling items 76 (2,281) 2,357 274,507 206,430 22.02 Adjusted results (non-GAAP) $ 2,598,787 $ 1,761,979 $ 836,808 $ 831,988 $ 614,805 $ 65.58 Adjusted percentage change versus 2022 13.9 % 7.6 % 29.8 % Fiscal Year 2022 (in thousands, except per share data) Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share Reported results (GAAP) $ 2,277,954 $ 1,636,907 $ 641,047 $ 575,087 $ 430,158 $ 45.88 Fair value adjustment of acquisition related contingent consideration (1) — — — 32,301 24,306 2.59 Fair value adjustments for commodity derivative instruments (2) 3,333 427 2,906 2,906 2,187 0.23 Supply chain optimization (3) 533 (73) 606 606 456 0.05 Total reconciling items 3,866 354 3,512 35,813 26,949 2.87 Adjusted results (non-GAAP) $ 2,281,820 $ 1,637,261 $ 644,559 $ 610,900 $ 457,107 $ 48.75 Following is an explanation of non-GAAP adjustments: (1) This non-cash fair value adjustment of acquisition related contingent consideration fluctuates based on factors such as long-term interest rates and future cash flow projections of the distribution territories subject to acquisition related sub-bottling payments.
The discount rate assumption, the annual healthcare cost trend and the ultimate trend rate for healthcare costs are key estimates which can have a significant impact on the net periodic postretirement benefit cost and postretirement benefit obligation in future periods.
The discount rate assumption, the annual healthcare cost trend and the ultimate trend rate for healthcare costs are key estimates which can have a significant impact on the net periodic postretirement benefit cost and the postretirement benefit obligation in future periods.
The Company annually determines the healthcare cost trend based on recent actual medical trend experience and projected experience for subsequent years. 34 The discount rate assumptions used to determine the postretirement benefit obligation are based on the annual yield on long-term corporate bonds as of the plan’s measurement date.
The Company annually determines the healthcare cost trend based on recent actual medical trend experience and projected experience for subsequent years. The discount rate assumptions used to determine the postretirement benefit obligation are based on the annual yield on long-term corporate bonds as of the plan’s measurement date.
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. 25 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 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.
These factors include assumptions about the discount rate, expected return on plan assets, employee turnover and age at retirement, as determined by the Company, within certain guidelines. In addition, the Company uses subjective factors such as 33 mortality rates to estimate the projected benefit obligation.
These factors include assumptions about the discount rate, expected return on plan assets, employee turnover and age at retirement, as determined by the Company, within certain guidelines. In addition, the Company uses subjective factors such as mortality rates to estimate the projected benefit obligation.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand our financial condition and results of operations and is provided as an addition to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to the consolidated financial statements.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company is intended to help the reader understand our financial condition and results of operations and is provided as an addition to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to the consolidated financial statements.
Lower credit ratings could result in higher borrowing costs for the Company or reduced access to capital markets, which could have a material adverse impact on the Company’s operating results or financial position.
Changes in the Company’s operating results or financial position could result in changes in the Company’s credit ratings. Lower credit ratings could result in higher borrowing costs for the Company or reduced access to capital markets, which could have a material adverse impact on the Company’s operating results or financial position.
In evaluating forward-looking statements, these risks and uncertainties should be considered, together with the other risks described from time to time in the Company’s reports and other filings with the SEC. 35
In evaluating forward-looking statements, these risks and uncertainties should be considered, together with the other risks described from time to time in the Company’s reports and other filings with the SEC.
As of December 31, 2022, the Company’s credit ratings and outlook for its long-term debt were as follows: Credit Rating Rating Outlook Moody’s Baa1 Stable Standard & Poor’s BBB+ Stable The Company’s Board of Directors has declared, and the Company has paid, dividends on the Common Stock and the Class B Common Stock and each class of common stock has participated equally in all dividends each quarter for more than 25 years.
As of December 31, 2023, the Company’s credit ratings and outlook for its long-term debt were as follows: Credit Rating Rating Outlook Moody’s Baa1 Stable Standard & Poor’s BBB+ Stable The Company’s Board of Directors has declared, and the Company has paid, dividends on the Common Stock and the Class B Common Stock and each class of common stock has participated equally in all dividends each quarter for more than 25 years.
Other sales include sales to other Coca‑Cola bottlers, post-mix sales, transportation revenue and equipment maintenance revenue. 31 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.
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 33 identifiable products have a single performance obligation.
The Company estimates a 10 basis point change in the underlying risk-free interest rate used to estimate the Company’s WACC would result in a change of approximately $5 million to the Company’s acquisition related contingent consideration liability. Income Tax Estimates Income taxes are accounted for under the asset and liability method.
The Company estimates a 10-basis point change in the underlying risk-free interest rate used to estimate the Company’s WACC would result in a change of approximately $6 million to the Company’s acquisition related contingent consideration liability. Income Tax Estimates Income taxes are accounted for under the asset and liability method.
Material Contractual Obligations The Company had a number of contractual obligations and commercial obligations as of December 31, 2022 that are material to an assessment of the Company’s short- and long-term cash requirements. The Company has outstanding long-term debt of $600.0 million, none of which is contractually due in 2023.
Material Contractual Obligations The Company had a number of contractual obligations and commercial obligations as of December 31, 2023 that are material to an assessment of the Company’s short- and long-term cash requirements. The Company has outstanding long-term debt of $600.0 million, none of which is contractually due in 2024.
The Company determines an appropriate discount rate annually for the Bargaining Plan based on the Aon AA Above Median yield curve as of the measurement date and reviews the discount rate assumption at the end of each year. See Note 16 to the consolidated financial statements for additional information.
The Company determines an appropriate discount rate annually for the Bargaining Plan based on the Aon AA Above Median yield curve as of the measurement date and reviews the discount rate assumption at the end of each year. See Note 17 to the consolidated financial statements for additional information.
The agreements under which the Company’s nonpublic debt was issued include two financial covenants: a consolidated cash flow/fixed charges ratio and a consolidated funded indebtedness/cash flow ratio, each as defined in the respective agreement. The Company was in compliance with these covenants as of December 31, 2022.
The agreements under which the Company’s nonpublic debt was issued include two financial covenants: a consolidated cash flow/fixed charges ratio and a consolidated funded indebtedness/cash flow ratio, each as defined in the respective agreement. The Company was in compliance with these covenants as of December 31, 2023.
The Company undertook significant capital expenditures to optimize our supply chain and to invest for future growth during 2022, and expects to continue to make significant investments during 2023. Cash Flow Generation : We have several initiatives in place to optimize cash flow, improve profitability and prudently manage capital expenditures.
The Company undertook significant capital expenditures to optimize our supply chain and to invest for future growth during 2023, and expects to continue to make significant investments during 2024. Cash Flow Generation: We have several initiatives in place to optimize cash flow, improve profitability and prudently manage capital expenditures.
Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: increased costs (including due to inflation), disruption of supply or unavailability or shortages of raw materials, fuel and other supplies; the reliance on purchased finished products from external sources; changes in public and consumer perception and preferences, including concerns related to product safety and sustainability, artificial ingredients, brand reputation and obesity; the inability to attract and retain front-line employees in a tight labor market; changes in government regulations related to nonalcoholic beverages, including regulations related to obesity, public health, artificial ingredients and product safety and sustainability; decreases from historic levels of marketing funding support provided to us by The Coca‑Cola Company and other beverage companies; material changes in the performance requirements for marketing funding support or our inability to meet such requirements; decreases from historic levels of advertising, marketing and product innovation spending by The Coca‑Cola Company and other beverage companies, or advertising campaigns that are negatively perceived by the public; any failure of the several Coca‑Cola system governance entities of which we are a participant to function efficiently or on our best behalf and any failure or delay of ours to receive anticipated benefits from these governance entities; provisions in our beverage distribution and manufacturing agreements with The Coca‑Cola Company that could delay or prevent a change in control of us or a sale of our Coca‑Cola distribution or manufacturing businesses; the concentration of our capital stock ownership; our inability to meet requirements under our beverage distribution and manufacturing agreements; changes in the inputs used to calculate our acquisition related contingent consideration liability; technology failures or cyberattacks on our technology systems or our effective response to technology failures or cyberattacks on our customers’, suppliers’ or other third parties’ technology systems; unfavorable changes in the general economy; changes in our top customer relationships and marketing strategies; lower than expected net pricing of our products resulting from continued and increased customer and competitor consolidations and marketplace competition; the effect of changes in our level of debt, borrowing costs and credit ratings on our access to capital and credit markets, operating flexibility and ability to obtain additional financing to fund future needs; the failure to attract, train and retain qualified employees while controlling labor costs, and other labor issues; the failure to maintain productive relationships with our employees covered by collective bargaining agreements, including failing to renegotiate collective bargaining agreements; changes in accounting standards; our use of estimates and assumptions; changes in tax laws, disagreements with tax authorities or additional tax liabilities; changes in legal contingencies; natural disasters, changing weather patterns and unfavorable weather; climate change or legislative or regulatory responses to such change; and the risks discussed in “Item 1A.
Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: increased costs (including due to inflation), disruption of supply or unavailability or shortages of raw materials, fuel and other supplies; the reliance on purchased finished products from external sources; changes in public and consumer perception and preferences, including concerns related to product safety and sustainability, artificial ingredients, brand reputation and obesity; changes in government regulations related to nonalcoholic beverages, including regulations related to obesity, public health, artificial ingredients and product safety and sustainability; decreases from historic levels of marketing funding support provided to us by The Coca‑Cola Company and other beverage companies; material changes in the performance requirements for marketing funding support or our inability to meet such requirements; decreases from historic levels of advertising, marketing and product innovation spending by The Coca‑Cola Company and other beverage companies, or advertising campaigns that are negatively perceived by the public; any failure of the several Coca‑Cola system governance entities of which we are a participant to function efficiently or on our best behalf and any failure or delay of ours to receive anticipated benefits from these governance entities; provisions in our beverage distribution and manufacturing agreements with The Coca‑Cola Company that could delay or prevent a change in control of us or a sale of our Coca‑Cola distribution or manufacturing businesses; the concentration of our capital stock ownership; our inability to meet requirements under our beverage distribution and manufacturing agreements; changes in the inputs used to calculate our acquisition related contingent consideration liability; technology failures or cyberattacks on our information technology systems or our effective response to technology failures or cyberattacks on our customers’, suppliers’ or other third parties’ information technology systems; unfavorable changes in the general economy; the concentration risks among our customers and suppliers; lower than expected net pricing of our products resulting from continued and increased customer and competitor consolidations and marketplace competition; the effect of changes in our level of debt, borrowing costs and credit ratings on our access to capital and credit markets, operating flexibility and ability to obtain additional financing to fund future needs; the failure to attract, train and retain qualified employees while controlling labor costs, and other labor issues; the failure to maintain productive relationships with our employees covered by collective bargaining agreements, including failing to renegotiate collective bargaining agreements; changes in accounting standards; our use of estimates and assumptions; changes in tax laws, disagreements with tax authorities or additional tax liabilities; changes in legal contingencies; natural disasters, changing weather patterns and unfavorable weather; climate change or legislative or regulatory responses to such change; the impact of any pandemic or public health situation; and the risks discussed in “Item 1A.
All of the Company’s long-term debt instruments have fixed interest rates, and thus are not impacted by fluctuations in interest rates, with the exception of the Company’s revolving credit facility, which did not have any outstanding borrowings as of December 31, 2022.
All of the Company’s long-term debt instruments have fixed interest rates, and, thus, are not impacted by fluctuations in interest rates, with the exception of the Company’s revolving credit facility, which did not have any outstanding borrowings as of December 31, 2023.
During 2022 and 2021, the Company performed periodic reviews of property, plant and equipment and other intangibles and determined no material impairment existed. All business combinations are accounted for using the acquisition method.
During 2023 and 2022, the Company performed periodic reviews of property, plant and equipment and other intangibles and determined no material impairment existed. All business combinations are accounted for using the acquisition method.
In addition, cost of sales includes shipping, handling and fuel costs related to the movement of finished products from manufacturing plants to distribution centers, amortization expense of distribution rights, distribution fees of certain products and marketing credits from brand companies. Raw material costs represent approximately 20% of total cost of sales on an annual basis.
In addition, cost of sales includes shipping, handling and fuel costs related to the movement of finished products from manufacturing plants to distribution centers, amortization expense of distribution rights, distribution fees of certain products and marketing credits and post-mix funding from brand companies. Raw material costs represent approximately 20% of total cost of sales on an annual basis.
The Company performed its annual impairment test of goodwill as of the first day of the fourth quarter during both 2022 and 2021 and determined there was no impairment of the carrying values of these assets.
The Company performed its annual impairment test of goodwill as of the first day of the fourth quarter during both 2023 and 2022 and determined there was no impairment of the carrying values of these assets.
The Company has determined there has not been an interim impairment trigger since the first day of the fourth quarter of 2022 annual test date.
The Company has determined there has not been an interim impairment trigger since the first day of the fourth quarter of 2023 annual test date.
However, management believes that certain non-GAAP financial measures provide users of the financial statements with additional, meaningful financial information that should be considered when assessing the Company’s ongoing performance. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance.
However, management believes that certain non-GAAP financial measures provide users of the financial statements with additional, meaningful financial information that should be considered, in addition to the measures reported in accordance with GAAP, when assessing the Company’s ongoing performance. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance.
If the carrying amount, including goodwill, exceeds its estimated fair value, any excess of the carrying value of goodwill of the reporting unit over its fair value is recorded as an impairment.
If the estimated fair value exceeds the carrying amount, goodwill is not considered impaired. If the carrying amount, including goodwill, exceeds its estimated fair value, any excess of the carrying value of goodwill of the reporting unit over its fair value is recorded as an impairment.
The discount rate assumption is generally the estimate which can have the most significant impact on net periodic pension cost and the projected benefit obligation for these pension plans.
The discount rate assumption is generally the estimate which can have the most significant impact on net periodic pension cost and the projected benefit obligation.
A 0.25% increase or decrease in the discount rate assumption would have impacted the postretirement benefit obligation and the net periodic postretirement benefit cost for the Company’s postretirement healthcare plan as follows: (in thousands) 0.25% Increase 0.25% Decrease Increase (decrease) in: Postretirement benefit obligation at December 31, 2022 $ (1,317) $ 1,378 Net periodic postretirement benefit cost in 2022 (154) 161 Cautionary Note Regarding Forward-Looking Statements Certain statements made in this report, or in other public filings, press releases, or other written or oral communications made by the Company, which are not historical facts, are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
A 0.25% increase or decrease in the discount rate assumption would have impacted the postretirement benefit obligation and the net periodic postretirement benefit cost for the Company’s postretirement healthcare plan as follows: (in thousands) 0.25% Increase 0.25% Decrease Increase (decrease) in: Postretirement benefit obligation at December 31, 2023 $ (1,616) $ 1,692 Net periodic postretirement benefit cost in 2023 25 (26) 36 Cautionary Note Regarding Forward-Looking Statements Certain statements made in this report, or in other public filings, press releases, or other written or oral communications made by the Company, which are not historical facts, are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
The Company’s acquisition related contingent consideration liability relates to acquisition related sub-bottling payments required in certain distribution territories under the CBA and totaled $541.5 million as of December 31, 2022. The future expected acquisition related sub-bottling payments extend through the life of the related distribution assets acquired in each distribution territory, which is generally 40 years.
The Company’s acquisition related contingent consideration liability relates to acquisition related sub-bottling payments required in certain distribution territories under the CBA and totaled $669.3 million as of December 31, 2023. The future expected acquisition related sub-bottling payments extend through the life of the related distribution assets acquired in each distribution territory, which is generally 40 years.
The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers, as well as the percentage of the Company’s total net sales that such volume represents: Fiscal Year 2022 2021 Approximate percent of the Company’s total bottle/can sales volume: Wal-Mart Stores, Inc. 20 % 20 % The Kroger Company 12 % 13 % Total approximate percent of the Company’s total bottle/can sales volume 32 % 33 % Approximate percent of the Company’s total net sales: Wal-Mart Stores, Inc. 16 % 14 % The Kroger Company 10 % 9 % Total approximate percent of the Company’s total net sales 26 % 23 % Cost of Sales Inputs representing a substantial portion of the Company’s cost of sales include: (i) purchases of finished products, (ii) raw material costs, including aluminum cans, plastic bottles, carbon dioxide and sweetener, (iii) concentrate costs and (iv) manufacturing costs, including labor, overhead and warehouse costs.
The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers, as well as the percentage of the Company’s total net sales that such volume represents: Fiscal Year 2023 2022 Approximate percent of the Company’s total bottle/can sales volume: Wal-Mart Stores, Inc. 21 % 20 % The Kroger Company 14 % 12 % Total approximate percent of the Company’s total bottle/can sales volume 35 % 32 % Approximate percent of the Company’s total net sales: Wal-Mart Stores, Inc. 17 % 16 % The Kroger Company 11 % 10 % Total approximate percent of the Company’s total net sales 28 % 26 % Cost of Sales Inputs representing a substantial portion of the Company’s cost of sales include: (i) purchases of finished products, (ii) raw material costs, including aluminum cans, plastic bottles, carbon dioxide and sweetener, (iii) concentrate costs and (iv) manufacturing costs, including labor, overhead and warehouse costs.
The discount rate used in determining the postretirement benefit obligation was 5.19% in 2022 and 2.98% in 2021. The discount rate was derived using the Aon AA Above Median yield curve. Projected benefit payouts for the plan were matched to the Aon AA Above Median yield curve and an equivalent flat rate was derived.
The discount rate used in determining the postretirement benefit obligation was 5.02% in 2023 and 5.19% in 2022. The discount rate was derived using the Aon AA Above Median yield curve. Projected benefit payouts for the plan were matched to the Aon AA Above Median yield curve and an equivalent flat rate was derived.
This obligation has no minimum purchase requirements; however, purchases from Southeastern were $154.0 million during 2022 and are expected to remain material in future foreseeable periods. See Note 19 to the consolidated financial statements for additional information related to Southeastern. The Company participates in long-term marketing contractual arrangements with certain prestige properties, athletic venues and other locations.
This obligation has no minimum purchase requirements; however, purchases from Southeastern were $146.9 million during 2023 and are expected to remain material in future foreseeable periods. See Note 20 to the consolidated financial statements for additional information related to Southeastern. The Company participates in long-term marketing contractual arrangements with certain prestige properties, athletic venues and other locations.
CCBCC Operations, LLC, a wholly owned subsidiary of the Company, purchased the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina on March 17, 2022 for a purchase price of $60.0 million, which was 29 included in additions to property, plant and equipment.
CCBCC Operations, LLC, a wholly owned subsidiary of the Company, purchased the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina during 2022 for a purchase price of $60.0 million, which was included in additions to property, plant and equipment for that period.
Total marketing funding support from The Coca‑Cola Company and other beverage companies, which includes both direct payments to the Company and payments to customers for marketing programs, was $147.3 million in 2022, as compared to $133.1 million in 2021.
Total marketing funding support from The Coca‑Cola Company and other beverage companies, which includes both direct payments to the Company and payments to customers for marketing programs, was $164.5 million in 2023, as compared to $147.3 million in 2022.
Compared to 2021, gross margin also benefited from the increased mix of Sparkling beverages, which generally carry higher gross margins than Still packages. Selling, delivery and administrative (“SD&A”) expenses in 2022 increased $121.9 million, or 8%. SD&A expenses as a percentage of net sales in 2022 decreased 80 basis points to 26.4% as compared to 2021.
Compared to 2022, gross margin also benefited from the increased mix of Sparkling beverages, which generally carry higher gross margins than Still packages. Selling, delivery and administrative (“SD&A”) expenses in 2023 increased $127.4 million, or 8%. SD&A expenses as a percentage of net sales in 2023 increased 10 basis points to 26.5% as compared to 2022.
If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in the Company’s judgment, is greater than 50% likely to be realized. The Company records interest and penalties related to uncertain tax positions in income tax expense. Pension and Postretirement Benefit Obligations There are two Company-sponsored pension plans.
If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in the Company’s judgment, is greater than 50% likely to be realized. The Company records interest and penalties related to uncertain tax positions in income tax expense.
The Company sponsors a postretirement healthcare plan for employees meeting specified qualifying criteria. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the net periodic postretirement benefit cost and postretirement benefit obligation for this plan. These factors include assumptions about the discount rate and the expected growth rate for the cost of healthcare benefits.
Several statistical and other factors, which attempt to anticipate future events, are used in calculating the net periodic postretirement benefit cost and the postretirement benefit obligation for this plan. These factors include assumptions about the discount rate and the expected growth rate for the cost of healthcare benefits.
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.” Executive Summary Net sales increased 11% to $6.20 billion in 2022, with physical case volume flat when compared to the prior year.
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.” Executive Summary Net sales increased 7% to $6.65 billion in 2023, with standard physical case volume down 1.9% when compared to the prior year.
The remaining interest payments on the Company’s debt obligations are $96.6 million determined in reference to the contractual terms of such debt, of which $23.2 million is due in 2023.
The remaining interest payments on the Company’s debt obligations are $73.4 million determined in reference to the contractual terms of such debt, of which $23.2 million is due in 2024.
The Company has $11.0 million in total minimum financing lease obligations including interest, of which $2.8 million are due in 2023. As of December 31, 2022, the Company estimated obligations for its executive benefit plans to be $167.7 million, of which $30.0 million is expected to be paid in 2023.
The Company has $8.2 million in total minimum financing lease obligations including interest, of which $2.8 million are due in 2024. As of December 31, 2023, the Company estimated obligations for its executive benefit plans to be $184.4 million, of which $30.9 million is expected to be paid in 2024.
The Company anticipates that the amount it could pay annually under the acquisition related contingent consideration arrangements for the distribution territories subject to acquisition related sub-bottling payments will be in the range of $42 million to $74 million.
For the next five years, the Company anticipates that the amount it could pay annually under the acquisition related contingent consideration arrangements for the distribution territories subject to acquisition related sub-bottling payments will be in the range of approximately $50 million to $70 million.
When a quantitative analysis is considered necessary for the annual impairment analysis of goodwill, the Company develops an estimated fair value for the 32 reporting unit considering three different approaches: 1) market value, using the Company’s stock price plus outstanding debt; 2) discounted cash flow analysis; and 3) multiple of earnings before interest, taxes, depreciation and amortization based upon relevant industry data.
When a quantitative analysis is considered necessary for the annual impairment analysis of goodwill, the Company develops an estimated fair value for the reporting unit considering three different approaches: (i) market value, using the Company’s stock price plus outstanding debt; (ii) discounted cash flow analysis; and (iii) multiple of earnings before interest, taxes, depreciation and amortization based upon relevant industry data. 34 The estimated fair value of the reporting unit is then compared to its carrying amount, including goodwill.
See Note 16 to the consolidated financial statements for additional information. The discount rate used in determining the actuarial present value of the projected benefit obligation for the Primary Plan and the Bargaining Plan was 5.33% and 5.34%, respectively, in 2022 and 2.97% and 3.31%, respectively, in 2021.
See Note 17 to the consolidated financial statements for additional information. The discount rate used in determining the actuarial present value of the projected benefit obligation for the Bargaining Plan was 5.16% in 2023 and 5.34% in 2022.
This estimate is primarily a function of the asset classes (equities versus fixed income) in which the pension plan assets are invested and the analysis of past performance of these asset classes over a long period of time. This analysis includes expected long-term inflation and the risk premiums associated with equity and fixed income investments.
These rates reflect an estimate of long-term future returns for the pension plan assets, and the estimate is primarily a function of the asset classes (equities versus fixed income) in which the Bargaining Plan assets are invested. This analysis includes expected long-term inflation and the risk premiums associated with equity and fixed income investments.
Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP. The Company’s non-GAAP financial information does not represent a comprehensive basis of accounting.
Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP.
Net working capital, defined as current assets less current liabilities, was $340.6 million on December 31, 2022, which was an increase of $98.8 million from December 31, 2021.
Net working capital, defined as current assets less current liabilities, was $613.8 million on December 31, 2023, which was an increase of $273.1 million from December 31, 2022.
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: Fiscal Year (in thousands) 2022 2021 Net sales: Nonalcoholic Beverages $ 6,081,357 $ 5,432,669 All Other 399,359 366,855 Eliminations (1) (279,759) (236,810) Consolidated net sales $ 6,200,957 $ 5,562,714 Income from operations: Nonalcoholic Beverages $ 639,136 $ 456,713 All Other 1,911 (17,542) Consolidated income from operations $ 641,047 $ 439,171 (1) The entire net sales elimination represents net sales from the All Other segment to the Nonalcoholic Beverages segment.
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: Fiscal Year (in thousands) 2023 2022 Net sales: Nonalcoholic Beverages $ 6,562,622 $ 6,081,357 All Other 370,748 399,359 Eliminations (1) (279,512) (279,759) Consolidated net sales $ 6,653,858 $ 6,200,957 Income from operations: Nonalcoholic Beverages $ 841,491 $ 639,136 All Other (7,040) 1,911 Consolidated income from operations $ 834,451 $ 641,047 (1) The entire net sales elimination represents net sales from the All Other segment to the Nonalcoholic Beverages segment.
The increase in net sales was driven primarily by price increases taken across our portfolio during the year while volume continued to outperform the price elasticities we have historically experienced with higher pricing. Sparkling and Still net sales increased 16.6% and 8.5%, respectively, compared to 2021.
The increase in net sales was driven primarily by price increases across our product portfolio during the second half of 2022 and the beginning of 2023. Volume continued to outperform the price elasticities we have historically experienced with higher pricing. Sparkling and Still net sales increased 10.5% and 6.4%, respectively, compared to 2022.
Contributions to the plans are based on actuarially determined amounts and are limited to the amounts currently deductible for income tax purposes. The Company also sponsors a postretirement healthcare plan for employees meeting specified qualifying criteria. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the plans.
The Company also sponsors a postretirement healthcare plan for employees meeting specified qualifying criteria. 35 Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the Bargaining Plan.
The Company expects to pay $40.1 million of the acquisition related contingent consideration liability in 2023, which is classified as other accrued liabilities in the consolidated balance sheets. The Company is obligated to purchase 17.5 million cases of finished product from SAC on an annual basis through June 2024.
The Company’s short-term portion of the acquisition related contingent consideration liability was $64.5 million as of December 31, 2023 and was included within other accrued liabilities in the consolidated balance sheets. The Company is obligated to purchase 17.5 million cases of finished product from SAC on an annual basis through June 2024.
The Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk. The Company has master agreements with the counterparties to its commodity derivative instruments that provide for net settlement of derivative transactions.
The Company has master agreements with the counterparties to its commodity derivative instruments that provide for net settlement of derivative transactions.
The change in the fair value of the acquisition related contingent consideration liability in 2022 as compared to 2021 was primarily driven by an increase in the discount rate used to calculate fair value, as well as the change in projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments.
The change in the fair value of the acquisition related contingent consideration liability in 2023 as compared to 2022 was primarily driven by changes in the discount rate and projections of future cash flows used to calculate the fair value of the liability.
Net cash provided by operating activities in 2021 included net income tax payments of $71.0 million, payment of deferred payroll taxes under the CARES Act of $18.7 million and pension plan contributions of $6.8 million.
Net cash provided by operating activities in 2022 included net income tax payments of $141.0 million, pension plan contributions of $26.0 million and payment of deferred payroll taxes under the Coronavirus Aid, Relief and Economic Security Act of $18.7 million.
Net income in 2022 and 2021 was adversely impacted by fair value adjustments to our acquisition related contingent consideration liability, driven by changes in future cash flow projections and the discount rate used to compute the fair value of the liability. Income tax expense for 2022 was $144.9 million, compared to $65.6 million in 2021.
Net income in 2023 was adversely impacted by fair value adjustments to our acquisition related contingent consideration liability, driven by changes in the discount rate and future cash flow projections used to calculate the fair value of the liability.
(in thousands) 0.25% Increase 0.25% Decrease Increase (decrease) in: Projected benefit obligation for Primary Plan at December 31, 2022 $ (3,575) $ 3,722 Net periodic pension cost for Primary Plan in 2022 79 (95) A 0.25% increase or decrease in the discount rate assumption would have impacted the projected benefit obligation and the net periodic pension cost for the Bargaining Plan as follows: (in thousands) 0.25% Increase 0.25% Decrease Increase (decrease) in: Projected benefit obligation for Bargaining Plan at December 31, 2022 $ (1,695) $ 1,814 Net periodic pension cost for Bargaining Plan in 2022 (605) 651 The weighted average expected long-term rate of return of plan assets used in computing net periodic pension cost for the Primary Plan was 3.00% in 2022 and 4.75% in 2021.
A 0.25% increase or decrease in the discount rate assumption would have impacted the projected benefit obligation and the net periodic pension cost for the Bargaining Plan as follows: (in thousands) 0.25% Increase 0.25% Decrease Increase (decrease) in: Projected benefit obligation at December 31, 2023 $ (1,996) $ 2,136 Net periodic pension cost in 2023 (194) 206 The weighted average expected long-term rate of return of plan assets used in computing net periodic pension cost for the Bargaining Plan was 7.00% in 2023 and 5.50% in 2022.
The Company currently believes all banks participating in the revolving credit facility have the ability to and will meet any funding requests from the Company.
(2) The Company’s revolving credit facility has an aggregate maximum borrowing capacity of $500 million. The Company currently believes all banks participating in the revolving credit facility have the ability to and will meet any funding requests from the Company.
Fees paid by the Company for commodity derivative instruments are amortized over the corresponding period of the instrument. The Company accounts for its commodity derivative instruments on a mark-to-market basis with any expense or income being reflected as an adjustment to cost of sales or SD&A expenses, consistent with the expense classification of the underlying hedged item.
The Company accounts for its commodity derivative instruments on a mark-to-market basis with any expense or income being reflected as an adjustment to cost of sales or SD&A expenses, consistent with the expense classification of the underlying hedged item. The Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk.
Based on information available as of December 31, 2022, the Company estimates this purchase obligation to be $214.5 million, of which an estimated $143.0 million of purchases is expected to occur in 2023. The Company has $168.6 million in total minimum operating lease obligations including interest, of which $31.7 million are due in 2023.
Based on information available as of December 31, 2023, the Company estimates this purchase obligation to be $71.1 million, all of which is expected to occur in 2024. The Company has $146.9 million in total minimum operating lease obligations including interest, of which $29.9 million are due in 2024.
We are focused on execution at every step in our supply chain, including raw material and finished product procurement, manufacturing conversion, transportation, warehousing and distribution, to ensure in-store execution can occur.
We are focused on execution at every step in our supply chain, including raw material and finished product procurement, manufacturing conversion, transportation, warehousing and distribution, to ensure in-store execution can occur. We continue to invest in tools and technology to enable our teammates to operate more effectively and efficiently with our customers and to drive long-term value in our business.
SD&A expenses increased $121.9 million, or 8.0%, to $1.64 billion in 2022, as compared to $1.52 billion in 2021. SD&A expenses as a percentage of net sales decreased to 26.4% in 2022 from 27.2% in 2021.
SD&A expenses increased $127.4 million, or 7.8%, to $1.76 billion in 2023, as compared to $1.64 billion in 2022. SD&A expenses as a percentage of net sales increased to 26.5% in 2023 from 26.4% in 2022.
(3) Adjustment reflects expenses within the Nonalcoholic Beverages segment as the Company continues to optimize efficiency opportunities across its business. Financial Condition Total assets increased $264.0 million to $3.71 billion on December 31, 2022, as compared to $3.45 billion on December 31, 2021.
(3) This adjustment reflects expenses within the Nonalcoholic Beverages segment as the Company continues to optimize efficiency opportunities across its business. (4) This non-cash settlement expense relates to the termination of the Primary Plan during 2023. Financial Condition Total assets increased $579.4 million to $4.29 billion on December 31, 2023, as compared to $3.71 billion on December 31, 2022.
Cash Flows From Operating Activities During 2022, cash provided by operating activities was $554.5 million, which was an increase of $32.8 million, as compared to 2021. The cash flows from operations were primarily the result of our strong operating performance, which the Company expects to sustain during the next 12 months.
Cash Flows From Operating Activities During 2023, cash provided by operating activities was $810.7 million, which was an increase of $256.2 million as compared to 2022. The cash flows from operations were primarily the result of our strong operating performance.
As of December 31, 2022, the gross actuarial losses included in accumulated other comprehensive loss associated with the Primary Plan were approximately $117 million. See Note 16 to the consolidated financial statements for additional information related to the Company’s pension plans.
As of December 31, 2022, there were approximately $117 million of gross actuarial losses included in accumulated other comprehensive loss associated with the Primary Plan.
Pricing decisions are made considering a variety of factors, including brand strength, competitive environment, input costs, the roles certain brands play in our product portfolio and other market conditions.
Revenue Management: Our revenue management strategy focuses on pricing our brands and packages optimally within product categories and channels, creating effective working relationships with our customers and making disciplined fact-based decisions. Pricing decisions are made considering a variety of factors, including brand strength, competitive environment, input costs, the roles certain brands play in our product portfolio and other market conditions.
The total dividends paid on February 10, 2023 were $32.8 million. 28 The Company’s only Level 3 asset or liability is the acquisition related contingent consideration liability. There were no transfers from Level 1 or Level 2 in any period presented. Fair value adjustments were non-cash and, therefore, did not impact the Company’s liquidity or capital resources.
There were no transfers from Level 1 or Level 2 in any period presented. Fair value adjustments were non-cash and, therefore, did not impact the Company’s liquidity or capital resources.
Of the increase in SD&A expenses, approximately $75 million was driven by an increase in payroll expense due to certain investments in our teammates to reward them for their 24 contributions in achieving strong operating results and to remain competitive in the current labor environment.
Of the increase in SD&A expenses, approximately $72 million was related to an increase in labor costs and certain investments in our teammates, including incentive compensation expense, to reward their performance and contributions in achieving strong operating results.
Following is a summary of the Level 3 activity: Fiscal Year (in thousands) 2022 2021 Beginning balance - Level 3 liability $ 542,105 $ 434,694 Payments of acquisition related contingent consideration (36,515) (39,097) Reclassification to current payables 3,600 200 Increase in fair value 32,301 146,308 Ending balance - Level 3 liability $ 541,491 $ 542,105 Cash Sources and Uses A summary of cash-based activity is as follows: Fiscal Year (in thousands) 2022 2021 Cash Sources: Net cash provided by operating activities (1) $ 554,506 $ 521,755 Proceeds from the sale of property, plant and equipment 7,369 5,274 Borrowings under term loan facility — 70,000 Borrowings under revolving credit facility — 55,000 Total cash sources $ 561,875 $ 652,029 Cash Uses: Additions to property, plant and equipment $ 298,611 $ 155,693 Payments on term loan facility and senior notes 125,000 287,500 Payments of acquisition related contingent consideration 36,515 39,097 Acquisition of distribution rights 30,649 8,993 Cash dividends paid 9,374 9,374 Payments on financing lease obligations 2,988 4,778 Payments on revolving credit facility — 55,000 Other 3,404 4,073 Total cash uses $ 506,541 $ 564,508 Net increase in cash $ 55,334 $ 87,521 (1) Net cash provided by operating activities in 2022 included net income tax payments of $141.0 million, payment of deferred payroll taxes under the CARES Act of $18.7 million and pension plan contributions of $26.0 million.
Following is a summary of the Level 3 activity: Fiscal Year (in thousands) 2023 2022 Beginning balance - Level 3 liability $ 541,491 $ 542,105 Payments of acquisition related contingent consideration (28,208) (36,515) Reclassification to current payables (3,300) 3,600 Increase in fair value 159,354 32,301 Ending balance - Level 3 liability $ 669,337 $ 541,491 Cash Sources and Uses A summary of cash-based activity is as follows: Fiscal Year (in thousands) 2023 2022 Cash Sources: Net cash provided by operating activities (1) $ 810,690 $ 554,506 Proceeds from the sale of property, plant and equipment 695 7,369 Total cash sources $ 811,385 $ 561,875 Cash Uses: Additions to property, plant and equipment $ 282,304 $ 298,611 Cash dividends paid 46,868 9,374 Payments of acquisition related contingent consideration 28,208 36,515 Investment in equity method investees 13,741 3,094 Payments on financing lease obligations 2,303 2,988 Debt issuance fees 340 310 Acquisition of distribution rights — 30,649 Payments on term loan facility and senior notes — 125,000 Total cash uses $ 373,764 $ 506,541 Net increase in cash $ 437,621 $ 55,334 (1) Net cash provided by operating activities in 2023 included net income tax payments of $200.8 million and pension plan contributions of $16.3 million.
Each reporting period, the Company adjusts its acquisition related contingent consideration liability related to the distribution territories subject to acquisition related sub-bottling payments to fair value.
Mark-to-Market on Acquisition Related Contingent Consideration Mark-to-market on acquisition related contingent consideration increased $127.1 million to $159.4 million in 2023, as compared to $32.3 million in 2022. Each reporting period, the Company adjusts its acquisition related contingent consideration liability related to the distribution territories subject to acquisition related sub-bottling payments to fair value.
The Company’s Board of Directors also declared a special cash dividend of $3.00 per share on the Common Stock and the Class B Common Stock of the Company, also payable on February 10, 2023 to stockholders of record as of the close of business on January 27, 2023.
On December 5, 2023, the Company announced that its Board of Directors had declared (i) a regular quarterly cash dividend of $0.50 per share on the Common Stock and the Class B Common Stock of the Company and (ii) a special cash dividend of $16.00 per share on the Common Stock and the Class B Common Stock of the Company, each payable on February 9, 2024 to stockholders of record of 30 the Common Stock and the Class B Common Stock as of the close of business on January 26, 2024.
The decrease was primarily a result of lower average debt balances, as well as an increase in interest income due to higher cash equivalent balances and increased yields. Other Expense, Net Other expense, net decreased $109.4 million to $41.2 million in 2022, as compared to $150.6 million in 2021.
Interest (Income) Expense, Net Interest (income) expense, net in 2023 totaled $0.9 million of interest income, net, as compared to $24.8 million of interest expense, net in 2022. The change in interest (income) expense, net was primarily a result of an increase in interest income due to higher cash and cash equivalent balances and increased yields as compared to 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10‑K for 2021, filed with the SEC on February 22, 2022. The Company manages its business on the basis of three operating segments. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated net sales and income from operations.
The Company manages its business on the basis of three operating segments. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated net sales and income from operations.
The Company anticipates additions to property, plant and equipment in 2023 to be in the range of $250 million to $300 million. The increase in cash used in investing activities as compared to 2021 was also driven by the acquisition of additional distribution rights. On January 1, 2022, the Company acquired $30.1 million of additional BODYARMOR distribution rights.
There were $59.0 million and $44.8 million of additions to property, plant and equipment accrued in accounts payable, trade as of December 31, 2023 and December 31, 2022, respectively. The decrease in cash used in investing activities as compared to 2022 was also driven by the acquisition of $30.1 million of additional BODYARMOR distribution rights during 2022.
Gross profit in 2022 increased $323.8 million, or 17%, while gross margin increased 160 basis points to 36.7%. The improvement in gross profit resulted from higher prices for our products, stable volume and prices for certain commodities moderating from historically high levels.
Gross profit in 2023 increased $320.8 million, or 14%, while gross margin increased 240 basis points to 39.1%. The improvement in gross profit resulted primarily from higher prices for our products and a moderation of prices for certain commodities.
In addition, approximately $15 million of the increase in SD&A expenses was driven by an increase in commitments to various charities and donor-advised funds in light of the Company’s financial performance. The remaining increase in SD&A expenses was primarily driven by broad inflationary increases across a number of SD&A categories as compared to 2021.
Approximately $12 million of the increase in SD&A expenses was driven by an increase in commitments to various charities and donor-advised funds in light of the Company’s financial performance. Shipping and handling costs included in SD&A expenses were approximately $780 million in 2023 and approximately $757 million in 2022.
Income Tax Expense The Company’s effective income tax rate, calculated by dividing income tax expense by income before taxes, was 25.2% for 2022 and 25.7% for 2021. The Company’s income tax expense increased $79.4 million, or 121.0%, to $144.9 million in 2022, as compared to $65.6 million in 2021.
The Company’s income tax expense increased $4.2 million, or 2.9%, to $149.1 million in 2023, as compared to $144.9 million in 2022. The increase in the effective income tax rate was primarily attributable to lower income before taxes and an increase in certain nondeductible amounts during 2023 as compared to 2022.
During 2022, we invested $298.6 million in capital expenditures as we continue to optimize our supply chain and invest for future growth. The Company reduced outstanding indebtedness by $125.0 million during the year. Areas of Emphasis Key priorities for the Company include commercial execution, revenue management, supply chain optimization and cash flow generation.
During 2023, we invested $282.3 million in capital expenditures as we continued to optimize our supply chain and invest for future growth. 23 Areas of Emphasis Key priorities for the Company include executing our commercial strategy, executing our revenue management strategy, optimizing our supply chain, generating cash flow, determining the optimal route to market and creating a digitally enabled selling platform.
As of December 31, 2022, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $128.8 million, of which $28.1 million is expected to be paid in 2023. 30 On December 7, 2022, the Board of Directors of the Company declared a regular quarterly cash dividend of $0.50 per share, as well as a special cash dividend of $3.00 per share, on the Common Stock and the Class B Common Stock of the Company.
As of December 31, 2023, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $130.5 million, of which $30.0 million is expected to be paid in 2024.
Significant changes in net working capital on December 31, 2022 from December 31, 2021 were as follows: • An increase in cash and cash equivalents of $55.3 million primarily as a result of our strong operating performance. • An increase in accounts receivable, trade of $59.8 million, driven primarily by increased net sales and the timing of cash receipts. • An increase in inventories of $44.7 million, driven primarily by higher inventory levels and increased input costs due to inflation. • An increase in accounts payable, trade of $32.4 million due to the timing of cash payments. • A decrease in other accrued liabilities of $28.5 million primarily due to the payment of the remaining deferred payroll taxes under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) during 2022, as well as a reduction in the current portion of acquisition related contingent consideration liability.
Significant changes in net working capital as of December 31, 2023 as compared to December 31, 2022 were as follows: • An increase in cash and cash equivalents of $437.6 million, primarily as a result of cash flows relating to our strong operating performance. • An increase in accounts receivable, trade of $23.9 million, driven primarily by increased net sales and the timing of cash receipts. • A decrease in inventories of $25.6 million, primarily due to lower inventory levels for certain manufacturing materials compared to December 31, 2022. • An increase in accounts payable, trade of $31.8 million, primarily due to the timing of cash payments. • A decrease in accounts payable to The Coca‑Cola Company of $23.3 million, primarily as a result of the timing of cash payments. • An increase in other accrued liabilities of $37.0 million, primarily due to an increase in the current portion of the acquisition related contingent consideration liability. 29 Liquidity and Capital Resources The Company’s sources of capital include cash flows from operations, available credit facilities and the issuance of debt and equity securities.
Management believes the Company has sufficient sources of capital available to finance its business plan, meet its working capital requirements and maintain an appropriate level of capital spending for at least the next 12 months from the issuance of the consolidated financial statements. 27 The Company’s long-term debt as of December 31, 2022 and December 31, 2021 was as follows: (in thousands) Maturity Date December 31, 2022 December 31, 2021 Senior notes (1) 2/27/2023 $ — $ 125,000 Senior bonds and unamortized discount on senior bonds (2) 11/25/2025 349,974 349,966 Revolving Credit Facility (3) 7/9/2026 — — Senior notes 10/10/2026 100,000 100,000 Senior notes 3/21/2030 150,000 150,000 Debt issuance costs (1,157) (1,523) Total long-term debt $ 598,817 $ 723,443 (1) On September 13, 2022, the Company used cash on hand to repay the $125 million of senior notes with a stated maturity date of February 27, 2023.
The Company’s long-term debt as of December 31, 2023 and December 31, 2022 was as follows: (in thousands) Maturity Date December 31, 2023 December 31, 2022 Senior bonds and unamortized discount on senior bonds (1) 11/25/2025 $ 349,983 $ 349,974 Revolving credit facility (2)(3) 7/9/2026 — — Senior notes 10/10/2026 100,000 100,000 Senior notes 3/21/2030 150,000 150,000 Debt issuance costs (824) (1,157) Total long-term debt $ 599,159 $ 598,817 (1) The senior bonds due in 2025 were issued at 99.975% of par.
Both dividends are payable on February 10, 2023 to stockholders of record as of the close of business on January 27, 2023. As of December 31, 2022, dividends declared but not yet paid were $32.8 million. Hedging Activities The Company uses commodity derivative instruments to manage its exposure to fluctuations in certain commodity prices.
Both dividends are payable on February 9, 2024 to stockholders of record of the Common Stock and the Class B Common Stock as of the close of business on January 26, 2024. As of December 31, 2023, dividends declared but not yet paid were $154.7 million.
Sparkling volume grew 0.6% in 2022, driven by strong consumer demand for our multi-serve can and small bottle PET packages, while Still volume decreased 1.3% in 2022. Brands within the Sparkling category benefited from solid demand in our on-premise sales channels, including restaurants, universities, sports venues, amusement parks and other immediate consumption outlets.
While Sparkling volume decreased 0.3% in 2023, we experienced strong consumer demand for our multi-serve can packages as well as our Immediate Consumption products. Brands within the Sparkling category benefited from solid performance in our on-premise sales channels, as more consumers returned to pre-COVID work and leisure routines.
Cash Flows From Investing Activities During 2022, cash used in investing activities was $325.0 million, which was an increase of $163.0 million, as compared to 2021. The increase was primarily a result of additions to property, plant and equipment, which were $298.6 million during 2022 and $155.7 million during 2021.
The Company anticipates additions to property, plant and equipment in 2024 to be in the range of approximately $300 million to $350 million. Cash Flows From Financing Activities During 2023, cash used in financing activities was $77.7 million, which was a decrease of $96.5 million as compared to 2022.
The Primary Plan was frozen as of June 30, 2006 and no benefits accrued to participants after that date. The second Company-sponsored pension plan (the “Bargaining Plan”) is for certain employees under collective bargaining agreements. Benefits under the Bargaining Plan are determined in accordance with negotiated formulas for the respective participants.
Pension and Postretirement Benefit Obligations The Company has historically sponsored two pension plans. The Primary Plan was frozen as of June 30, 2006 and no benefits accrued to participants after that date.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe annual rate of inflation in the United States, as measured by year-over-year changes in the Consumer Price Index (the “CPI”), was 6.5% in 2022, 7.0% in 2021 and 1.4% in 2020.
Biggest changeThe annual rate of inflation in the United States, as measured by year-over-year changes in the Consumer Price Index (the “CPI”), was 3.4% in 2023, 6.5% in 2022 and 7.0% in 2021. Inflation in the prices of those commodities important to the Company’s business is reflected in changes in the CPI.
The Company’s acquisition related contingent consideration liability, which is adjusted to fair value each reporting period, is also impacted by changes in interest rates. The risk-free interest rate used to estimate the Company’s WACC is a component of the discount rate used to calculate the present value of expected future acquisition related sub-bottling payments due under the CBA.
The Company’s acquisition related contingent consideration liability, which is adjusted to fair value each reporting period, is also impacted by changes in interest rates. The risk-free interest rate used to estimate the Company’s WACC is a component of the discount rate used to calculate the present value of future expected acquisition related sub-bottling payments due under the CBA.
Although the Company can offset these cost increases by increasing selling prices for its products, consumers may not have the buying power to cover these increased costs and may reduce their volume of purchases of those products. In that event, selling price increases may not be sufficient to offset completely the Company’s cost increases. 36
Although the Company can offset these cost increases by increasing selling prices for its products, consumers may not have the buying power to cover these increased costs and may reduce their volume of purchases of those products. In that event, selling price increases may not be sufficient to offset completely the Company’s cost increases. 38
The Company estimates a 10% increase in the market prices of commodities included as part of its raw materials over the current market prices would cumulatively increase costs during the next 12 months by approximately $74 million assuming no change in volume.
The Company estimates a 10% increase in the market prices of commodities included as part of its raw materials over the current market prices would cumulatively increase costs during the next 12 months by approximately $71 million assuming no change in volume.
As such, assuming no changes in the Company’s capital structure, if market interest rates average 1% more over the next 12 months than the interest rates as of December 31, 2022, there would be no change to interest expense for the next 12 months.
As such, assuming no changes in the Company’s capital structure, if market interest rates average 1% more over the next 12 months than the interest rates as of December 31, 2023, there would be no change to interest expense for the next 12 months.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The Company is subject to interest rate risk on its revolving credit facility and did not have any outstanding borrowings on its revolving credit facility as of December 31, 2022.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The Company is subject to interest rate risk on its revolving credit facility and did not have any outstanding borrowings on its revolving credit facility as of December 31, 2023.
The Company estimates a 10 basis point change in the underlying risk-free interest rate used to estimate the Company’s WACC would result in a change of approximately $5 million to the Company’s acquisition related contingent consideration liability. The Company is exposed to certain market risks and commodity price risk that arise in the ordinary course of business.
The Company estimates a 10-basis point change in the underlying risk-free interest rate used to estimate the Company’s WACC would result in a change of approximately $6 million to the Company’s acquisition related contingent consideration liability. 37 The Company is exposed to certain market risks and commodity price risk that arise in the ordinary course of business.
The principal effect of inflation in both commodity and consumer prices on the Company’s operating results is to increase costs, both of goods sold and SD&A expenses.
The principal effect of inflation in both commodity and consumer prices on the Company’s operating results is to increase both cost of goods sold and SD&A expenses.
Removed
Inflation in the prices of those commodities important to the Company’s business is reflected in changes in the CPI, but commodity prices are volatile and in recent years have moved at a faster rate of change than the CPI.

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