# Coca-Cola Consolidated, Inc. (COKE) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Coca-Cola Consolidated, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/317540/000031754025000025/coke-20241231.htm
Accession: 0000317540-25-000025
Filing date: 2025-02-20
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/COKE/
All MD&A years: /company/COKE/mda/
Previous year: /company/COKE/mda/fy2023/ (FY 2023)
Next year: /company/COKE/mda/fy2025/ (FY 2025)

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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. The consolidated financial statements include the accounts and the consolidated operations of the Company and its majority-owned subsidiaries. All comparisons are to the prior year unless specified otherwise.

The periods presented are the fiscal years ended December 31, 2024 (“2024”) and December 31, 2023 (“2023”). Information concerning the fiscal year ended December 31, 2022 (“2022”) and a comparison of 2023 and 2022 may be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10‑K for 2023, filed with the SEC on February 21, 2024.

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 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 3.7% to $6.90 billion in 2024, with standard physical case volume down 0.6% when compared to the prior year. In the second quarter of 2024, we shifted the distribution of casepack Dasani water sold in Walmart stores to a non-direct store delivery (“DSD”) method of distribution. As a result, these cases are not included in our 2024 reported case volume. The impact of this distribution change reduced our reported case volume by 0.8% for the fiscal year. Sparkling and Still net sales increased 5.5% and 3.6%, respectively, compared to 2023. The net sales improvement was driven by the continued strength in Sparkling volume growth and pricing actions taken at the beginning of 2024. In addition, several brands within our Still portfolio, including Monster, Powerade and smartwater, had strong volume performance, which also fueled the overall growth in net sales in 2024. Lastly, sales to our large retail customers, including club and value stores, outpaced other selling channels as consumer demand for multi-serve, value-oriented packages remained strong throughout the year.

Gross profit in 2024 increased $154.5 million, or 5.9%, while gross margin increased 80 basis points to 39.9%. The improvement in gross profit resulted primarily from higher prices for our products and a continued moderation of costs on certain commodities. Compared to 2023, gross margin also benefited from the increased mix of Sparkling beverages, which generally carry higher gross margins than Still products.

Selling, delivery and administrative (“SD&A”) expenses in 2024 increased $68.6 million, or 3.9%. SD&A expenses as a percentage of net sales in 2024 increased 10 basis points to 26.6% as compared to 2023. The increase in SD&A expenses related primarily to annual wage and benefits adjustments.

Income from operations in 2024 increased $85.9 million to $920.4 million and net income in 2024 increased $224.8 million to $633.1 million, as compared to 2023. The Company’s income tax expense increased $74.4 million to $223.5 million in 2024, as compared to $149.1 million in 2023, primarily as a result of higher income before taxes. Net income in the prior year was adversely impacted by the settlement of our primary pension plan benefit liabilities, which resulted in a non-cash charge of $112.8 million in 2023. Additionally, net income for both 2024 and 2023 was adversely impacted by routine, non-cash fair value adjustments to our acquisition related contingent consideration liability, driven by changes in the discount rate and future cash flow projections used to compute the fair value of the liability.

Cash flows from operations for 2024 were $876.4 million, compared to $810.7 million for 2023. Cash flows from operations reflected our strong operating performance during 2024. In 2024, we invested $371.0 million in capital expenditures as we continue to enhance our supply chain and invest for future growth.

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 and maintaining a digitally enabled selling platform.

Commercial Execution: Our success is dependent on our ability to execute our commercial strategy within our customers’ stores. Our ability to obtain shelf space within stores and remain in-stock across our portfolio of brands and packages in a profitable manner will have a significant impact on our results. 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

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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. We also continue to focus on opportunities to enhance the customer experience by adapting to changes in our customer landscape, enabling operational flexibility and focusing on customer service.

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.

Supply Chain Optimization: We are continually focused on optimizing our supply chain, which includes identifying nearby warehousing and distribution operations that can be consolidated into new facilities to increase capacity, expand production capabilities, reduce overall production costs and add automation to allow the Company to better serve its customers and consumers. The Company undertook significant capital expenditures to optimize our supply chain and to invest for future growth during 2024, and expects to continue to make significant investments during fiscal year 2025. During 2024, we purchased our Nashville, Tennessee production facility, which was previously leased, for approximately $56 million. Over the past five years, the Company made capital expenditures of approximately $200 million related to fleet, $125 million related to automation and $470 million related to supply chain improvements.

Cash Flow Generation: We have several initiatives in place to optimize cash flow, improve profitability, prudently manage capital expenditures and enhance capital returns to our stockholders. We believe strengthening our balance sheet gives us the flexibility to make optimal capital allocation decisions for long-term value creation. We have and expect to continue to return value to our stockholders.

Optimal Route to Market: We are focused on implementing optimal methods of distribution of our products within our territory. DSD is our preferred and primary route to market. Our typical DSD method uses Company-owned vehicles and warehouses, but we increasingly shifted to alternative methods of distribution in 2024 as compared to 2023. For example, in instances of post-mix delivery for use in fountain machines, we have shifted and continue to shift our delivery method towards alternative distributors in order to enhance profitability and customer service. In instances of bottle/can delivery, we have shifted certain products for certain customers and channels of business to alternative routes to market. These alternative routes to market include third-party distributors, the manufacturer of the product or the customer’s supply chain infrastructure. These bottle/can arrangements generally come with favorable commercial terms for the Company. During 2024, nearly two-thirds of our post-mix gallons and less than 10% of our bottle/can volume was delivered through alternative routes to market. We expect to continue to use alternative methods of distribution to deliver post-mix and bottle/can products in future years and, where beneficial, to seek out additional opportunities to shift to alternative methods of distribution.

Digitally Enabled Selling Platform: Through our investment in CONA, we, along with other Coca-Cola bottlers, have built a digitally enabled selling platform called MyCoke that we believe has and will continue to enable us to better serve our customers. This platform creates a more seamless order and payment platform for certain customers and we expect this platform will continue to enable us to enhance customer service and create more selling opportunities for our teammates. This platform is currently targeted to certain on-premise and small store customers.

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Results of Operations

The Company’s results of operations for 2024 and 2023 are highlighted in the table below and discussed in the following paragraphs.

[[GREPCENT_TABLE]]
[["","","Fiscal Year"],["(in thousands)","","2024","","2023","","Change"],["Net sales","","$","6,899,716","","","$","6,653,858","","","$","245,858"],["Cost of sales","","4,146,537","","","4,055,147","","","91,390"],["Gross profit","","2,753,179","","","2,598,711","","","154,468"],["Selling, delivery and administrative expenses","","1,832,829","","","1,764,260","","","68,569"],["Income from operations","","920,350","","","834,451","","","85,899"],["Interest expense (income), net","","1,848","","","(918)","","","2,766"],["Mark-to-market on acquisition related contingent consideration","","59,166","","","159,354","","","(100,188)"],["Pension plan settlement expense","","\u2014","","","112,796","","","(112,796)"],["Other expense, net","","2,682","","","5,738","","","(3,056)"],["Income before taxes","","856,654","","","557,481","","","299,173"],["Income tax expense","","223,529","","","149,106","","","74,423"],["Net income","","633,125","","","408,375","","","224,750"],["Other comprehensive income, net of tax","","6,161","","","80,561","","","(74,400)"],["Comprehensive income","","$","639,286","","","$","488,936","","","$","150,350"]]
[[/GREPCENT_TABLE]]

Net Sales

Net sales increased $245.9 million, or 3.7%, to $6.90 billion in 2024, as compared to $6.65 billion in 2023. The largest driver of the increase in net sales was higher average bottle/can sales price per unit charged to retail customers, which increased net sales by approximately $250 million.

Net sales by product category were as follows:

[[GREPCENT_TABLE]]
[["","","Fiscal Year"],["(in thousands)","","2024","","2023","","% Change"],["Bottle/can sales:"],["Sparkling beverages","","$","4,106,073","","","$","3,892,133","","","5.5","%"],["Still beverages","","2,227,243","","","2,149,639","","","3.6","%"],["Total bottle/can sales","","6,333,316","","","6,041,772","","","4.8","%"],["Other sales:"],["Sales to other Coca\u2011Cola bottlers","","345,586","","","353,819","","","(2.3)","%"],["Post-mix sales and other","","220,814","","","258,267","","","(14.5)","%"],["Total other sales","","566,400","","","612,086","","","(7.5)","%"],["Total net sales","","$","6,899,716","","","$","6,653,858","","","3.7","%"]]
[[/GREPCENT_TABLE]]

The decline in post-mix sales and other in 2024 as compared to 2023 was related primarily to a shift in how we deliver post-mix products to our customers in order to enhance profitability and customer service. During 2024, the Company shifted to a broader use of alternative distributors, rather than Company-owned vehicles and warehouses, to deliver post-mix products to customers in our territory. We receive a fee from our brand partners on these post-mix gallons delivered to locally managed customers in our territory, which is recorded as a reduction to cost of sales. This transition has occurred over the past several years and accelerated throughout 2024. Nearly two-thirds of the post-mix gallons sold to local customers in our franchise territory in 2024 were delivered using these alternative methods of distribution. We expect to continue to shift to a broader use of alternative distributors to deliver post-mix products to customers in our territory in future years.

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Product category sales volume of standard physical cases (as defined below) and the percentage change by product category were as follows:

[[GREPCENT_TABLE]]
[["","","Fiscal Year"],["(in thousands)","","2024","","2023","","% Change"],["Bottle/can sales volume:"],["Sparkling beverages","","266,686","","263,872","","1.1","%"],["Still beverages","","86,417","","91,495","","(5.6)","%"],["Total bottle/can sales volume","","353,103","","355,367","","(0.6)","%"]]
[[/GREPCENT_TABLE]]

A standard physical case is a volume metric used to standardize differing package configurations in order to measure delivered cases on an equivalent basis. As the Company evaluates its volume metrics, it reassesses the way in which physical case volume is measured, which may lead to differences from previously presented results in order to conform with current period standard volume measurement techniques, as used by management. Additionally, as the Company introduces new products, it reassesses the category assigned to its products at the SKU level, therefore categorization could differ from previously presented results in order to conform with current period categorization. Any differences are not material.

The bottle/can sales volume above represents volume that is delivered directly to our customer outlets using Company-owned vehicles and warehouses. In order to serve our customers in the most efficient way, respond to customer demands and increase profitability, the Company has, in certain circumstances, shifted the delivery of our products to third-party distributors, the manufacturer of the product or the customer’s supply chain infrastructure, rather than through Company-owned vehicles and warehouses. We have shifted the distribution of casepack Dasani water sold in Walmart stores to a non-DSD method of distribution. As a result, these cases are not included in our 2024 reported case sales. The impact of this distribution change reduced our reported case sales by 0.8% during 2024.

As a result of not physically delivering the product, the sales volume delivered using these alternative methods of distribution is not reflected in our volume metrics. However, because we have the exclusive distribution rights for nonalcoholic beverages within our franchise territory, we receive fees from our brand partners for the delivery of qualified product in our territory. These fees are reported in net sales. Changes in the delivery of our products to our customers impacted our reported volume and net sales in 2024 as compared to 2023 as we accelerated the transition of bottle/can sales volume to alternative methods of distribution. Less than 10% of the bottle/can volume sold in our franchise territory in 2024 was delivered using these alternative methods of distribution. We expect to continue to use alternative methods of distribution to deliver bottle/can products in future years and, where beneficial, to seek out additional opportunities to shift to alternative methods of distribution.

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:

[[GREPCENT_TABLE]]
[["","","Fiscal Year"],["","","2024","","2023"],["Approximate percent of the Company\u2019s total bottle/can sales volume:"],["Walmart Inc.(1)","","21","%","","21","%"],["The Kroger Co.(2)","","15","%","","14","%"],["Total approximate percent of the Company\u2019s total bottle/can sales volume","","36","%","","35","%"],["Approximate percent of the Company\u2019s total net sales:"],["Walmart Inc.(1)","","17","%","","17","%"],["The Kroger Co.(2)","","12","%","","11","%"],["Total approximate percent of the Company\u2019s total net sales","","29","%","","28","%"]]
[[/GREPCENT_TABLE]]

(1)Includes bottle/can sales volume related to the Walmart, Sam’s Club and Walmart Neighborhood Market chains.

(2)Includes bottle/can sales volume related to the Kroger and Harris Teeter chains.

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. 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,

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distribution fees of certain products and marketing credits and post-mix funding from brand companies. Input costs, including underlying commodity costs for aluminum cans, plastic bottles, carbon dioxide and sweetener, as well as labels and other packaging materials, and excluding concentrate, represent approximately 20% of total cost of sales on an annual basis.

Cost of sales increased $91.4 million, or 2.3%, to $4.15 billion in 2024, as compared to $4.06 billion in 2023. The increase in cost of sales was primarily driven by higher input costs, including concentrate and manufacturing costs, which increased cost of sales by approximately $120 million.

The Company relies extensively on advertising and sales promotions in the marketing of its products. The Coca‑Cola Company and other beverage companies that supply concentrates, syrups and finished products to the Company make substantial marketing and advertising expenditures, including national advertising programs, to develop their brand identities and to promote sales in the Company’s territories. Our brand partners also provide funding related to the delivery of post-mix gallons to locally managed customers within the Company’s territory. Certain of these marketing, advertising and other funding expenditures are made pursuant to annual arrangements. Total 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 $186.5 million in 2024, as compared to $164.5 million in 2023.

Selling, Delivery and Administrative Expenses

SD&A expenses include the following: sales management labor costs, distribution costs resulting from transporting finished products from distribution centers to customer locations, distribution center overhead including depreciation expense, distribution center warehousing costs, delivery vehicles and cold drink equipment, point-of-sale expenses, advertising expenses, cold drink equipment repair costs, amortization of intangible assets and administrative support labor and operating costs. Labor costs represent approximately 60% of total SD&A expenses on an annual basis.

SD&A expenses increased $68.6 million, or 3.9%, to $1.83 billion in 2024, as compared to $1.76 billion in 2023. SD&A expenses as a percentage of net sales increased to 26.6% in 2024 from 26.5% in 2023. Of the increase in SD&A expenses, approximately $48 million was related to an increase in labor costs, mostly related to annual wage adjustments and increased incentive compensation expense reflecting the strong operating performance in 2024.

Shipping and handling costs included in SD&A expenses were approximately $806 million in 2024 and approximately $780 million in 2023.

Interest Expense (Income), Net

Interest expense (income), net changed $2.8 million to $1.8 million of interest expense, net in 2024, as compared to $0.9 million of interest income, net in 2023. The change in interest expense (income), net was primarily due to an increase in interest expense on higher debt balances in 2024 as compared to 2023, partially offset by an increase in interest income due to higher cash, cash equivalent and short-term investment balances. In 2024, the Company had $62.0 million of interest expense and $60.2 million of interest income. In 2023, the Company had $23.9 million of interest expense and $24.8 million of interest income.

Mark-to-Market on Acquisition Related Contingent Consideration

Each reporting period, the Company adjusts its acquisition related contingent consideration liability to fair value, which is determined by discounting future expected acquisition related sub-bottling payments using the Company’s estimated WACC and future cash flow projections, and records the fair value adjustment as mark-to-market on acquisition related contingent consideration in the consolidated statement of operations.

Mark-to-market on acquisition related contingent consideration was an increase of $59.2 million in 2024 and an increase of $159.4 million in 2023. During 2024, the $59.2 million increase in the fair value of the acquisition related contingent consideration liability was primarily driven by higher projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments, partially offset by increases in the WACC used to calculate the fair value of the liability. During 2023, the $159.4 million increase in the fair value of the acquisition related contingent consideration liability was primarily driven by higher projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments, as well as decreases in the WACC used to calculated the fair value of the liability.

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Other Expense, Net

Other expense, net decreased $3.1 million to $2.7 million in 2024, as compared to $5.7 million in 2023. The decrease in other expense, net was primarily driven by changes in the actuarial assumptions related to our pension and postretirement medical benefit plan liabilities.

Income Tax Expense

The Company’s effective income tax rate was 26.1% for 2024 and 26.7% for 2023. The Company’s income tax expense increased $74.4 million, or 49.9%, to $223.5 million in 2024, as compared to $149.1 million in 2023. The decrease in the effective income tax rate was primarily attributable to higher income before taxes.

Other Comprehensive Income, Net of Tax

Other comprehensive income, net of tax was $6.2 million in 2024 and $80.6 million in 2023. The decrease was primarily related to the settlement of the primary Company-sponsored pension plan (the “Primary Plan”) benefit liabilities during 2023, which resulted in the reclassification of the gross actuarial losses associated with the Primary Plan out of accumulated other comprehensive income (loss) during that period.

Segment Operating Results

The Company evaluates segment reporting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 280, Segment Reporting, each reporting period, including evaluating the reporting package reviewed by the Chief Operating Decision Maker (the “CODM”). The Company has concluded the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer, as a group, represent the CODM. Segment asset information is not provided to the CODM.

The Company has three operating segments, each identified by its unique products and services. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated net sales and income from operations. The additional two operating segments, which include Data Ventures, Inc. and the Red Classic subsidiaries, do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, and, therefore, have been combined into “All Other.” The accounting policies of the Nonalcoholic Beverages segment are the same as those described in the summary of significant accounting policies.

The CODM uses net sales, gross profit and income from operations in the annual budgeting and forecasting process. Monthly, the CODM considers budget-to-actual variances and current year to prior year variances for these profit measures when making strategic business decisions and allocating resources to Company operations.

The Company’s segment results are as follows:

[[GREPCENT_TABLE]]
[["","","Fiscal Year 2024"],["(in thousands)","","Nonalcoholic Beverages","","All Other","","Eliminations(1)","","Total"],["Net sales","","$","6,839,045","","","$","346,377","","","$","(285,706)","","","$","6,899,716"],["Cost of goods sold","","4,138,869","","","219,204","","","(211,536)","","","4,146,537"],["Gross profit","","2,700,176","","","127,173","","","(74,170)","","","2,753,179"],["Selling, delivery and administrative expenses:"],["Payroll costs(2)","","$","1,146,375","","","$","53,656","","","$","\u2014","","","$","1,200,031"],["Fleet costs(3)","","103,444","","","31,475","","","\u2014","","","134,919"],["Depreciation and amortization expense(4)","","103,444","","","2,000","","","\u2014","","","105,444"],["All other segment items(5)","","439,686","","","26,919","","","(74,170)","","","392,435"],["Total selling, delivery and administrative expenses","","1,792,949","","","114,050","","","(74,170)","","","1,832,829"],["Income from operations","","$","907,227","","","$","13,123","","","$","\u2014","","","$","920,350"],["Total depreciation and amortization expense(4)","","$","177,521","","","$","16,270","","","$","\u2014","","","$","193,791"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","Fiscal Year 2023"],["(in thousands)","","Nonalcoholic Beverages","","All Other","","Eliminations(1)","","Total"],["Net sales","","$","6,562,622","","","$","370,748","","","$","(279,512)","","","$","6,653,858"],["Cost of goods sold","","3,999,292","","","263,307","","","(207,452)","","","4,055,147"],["Gross profit","","2,563,330","","","107,441","","","(72,060)","","","2,598,711"],["Selling, delivery and administrative expenses:"],["Payroll costs(2)","","$","1,094,849","","","$","56,729","","","$","\u2014","","","$","1,151,578"],["Fleet costs(3)","","106,235","","","32,945","","","\u2014","","","139,180"],["Depreciation and amortization expense(4)","","95,320","","","2,114","","","\u2014","","","97,434"],["All other segment items(5)","","425,434","","","22,694","","","(72,060)","","","376,068"],["Total selling, delivery and administrative expenses","","1,721,838","","","114,482","","","(72,060)","","","1,764,260"],["Income from operations","","$","841,492","","","$","(7,041)","","","$","\u2014","","","$","834,451"],["Total depreciation and amortization expense(4)","","$","164,484","","","$","12,482","","","$","\u2014","","","$","176,966"]]
[[/GREPCENT_TABLE]]

(1)The entire net sales elimination represents net sales from the All Other segment to the Nonalcoholic Beverages segment. The entire cost of goods sold and SD&A eliminations represent costs incurred by the All Other segment in the generation of net sales to the Nonalcoholic Beverages segment.

(2)Payroll costs includes compensation, incentive plans, defined contribution plans, healthcare benefits and tax-advantaged spending accounts.

(3)Fleet costs includes fleet repairs, maintenance and fuel and oil costs.

(4)Total depreciation and amortization expense is included within both cost of goods sold and SD&A expenses. For segment reporting, the difference between total depreciation and amortization expense and the portion within SD&A expenses is the amount within cost of goods sold.

(5)All other segment items includes information technology costs, stewardship, insurance and other costs incurred in the selling and delivery of the Company’s products.

Comparable and Adjusted Results (Non-GAAP)

The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”). 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. 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.

The tables below reconcile reported results (GAAP) to comparable and adjusted results (non-GAAP). Results for 2024 include one additional selling day compared to 2023. For comparison purposes, the estimated impact of the additional selling day in 2024 has been excluded from our comparable volume results.

[[GREPCENT_TABLE]]
[["","","Fiscal Year"],["(in thousands)","","2024","","2023","","Change"],["Standard physical case volume","","353,103","","","355,367","","","(0.6)","%"],["Volume related to extra day in fiscal period","","(965)","","","\u2014"],["Comparable standard physical case volume","","352,138","","","355,367","","","(0.9)","%"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","Fiscal Year 2024"],["(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)","","$","2,753,179","","","$","1,832,829","","","$","920,350","","","$","856,654","","","$","633,125","","","$","70.10"],["Fair value adjustment of acquisition related contingent consideration(1)","","\u2014","","","\u2014","","","\u2014","","","59,166","","","44,493","","","4.92"],["Fair value adjustments for commodity derivative instruments(2)","","728","","","(547)","","","1,275","","","1,275","","","959","","","0.11"],["Total reconciling items","","728","","","(547)","","","1,275","","","60,441","","","45,452","","","5.03"],["Adjusted results (non-GAAP)","","$","2,753,907","","","$","1,832,282","","","$","921,625","","","$","917,095","","","$","678,577","","","$","75.13"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Adjusted percentage change versus 2023","","6.0","%","","4.0","%","","10.3","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","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)","","\u2014","","","\u2014","","","\u2014","","","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"],["Pension plan settlement expense(3)","","\u2014","","","\u2014","","","\u2014","","","112,796","","","84,823","","","9.05"],["Total reconciling items","","(1,220)","","","(2,281)","","","1,061","","","273,211","","","205,455","","","21.92"],["Adjusted results (non-GAAP)","","$","2,597,491","","","$","1,761,979","","","$","835,512","","","$","830,692","","","$","613,830","","","$","65.48"]]
[[/GREPCENT_TABLE]]

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.

(2)The Company enters into commodity derivative instruments from time to time to hedge some or all of its projected purchases of aluminum, PET resin, diesel fuel and unleaded gasoline in order to mitigate commodity price risk. The Company accounts for its commodity derivative instruments on a mark-to-market basis.

(3)This non-cash settlement expense relates to the settlement of the Primary Plan benefit liabilities during 2023.

Financial Condition

Total assets increased $1.02 billion to $5.31 billion on December 31, 2024, as compared to $4.29 billion on December 31, 2023. Net working capital, defined as current assets less current liabilities, was $1.23 billion on December 31, 2024, which was an increase of $620.3 million from December 31, 2023.

Significant changes in net working capital as of December 31, 2024 as compared to December 31, 2023 were as follows:

•An increase in cash and cash equivalents of $500.6 million, primarily as a result of bond proceeds received of $1.20 billion and strong operating performance, partially offset by share repurchases and related fee payments totaling $625.7 million, as further discussed below.

•An increase in short-term investments of $301.2 million, primarily due to the purchase of short-term investments during 2024.

•An increase in accounts receivable from The Coca-Cola Company of $37.9 million, primarily driven by the timing of cash receipts.

•An increase in current portion of debt of $349.7 million due to the Company’s senior bonds maturing on November 25, 2025.

•A decrease in accounts payable, trade of $48.7 million, primarily due to the timing of cash payments.

•An increase in accounts payable to The Coca‑Cola Company of $47.8 million, primarily due to the timing of cash payments and increases in certain raw material and concentrate input costs, higher payments related to certain marketing programs and increases in our acquisition related sub-bottling payments.

•A decrease in dividends payable of $154.7 million, due to the payment of a special cash dividend declared in 2023 during the first quarter of 2024.

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. As of December 31, 2024, the Company had $1.14 billion in cash and cash equivalents. The Company’s cash equivalent

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balance at December 31, 2024 consisted predominantly of investments in money market funds, time deposits and commercial paper with maturities of 90 days or less. As of December 31, 2024, the Company had $301.2 million in short-term investments, which consisted primarily of U.S. Treasury securities and investment-grade corporate bonds with maturities of one year or less. The Company has obtained its debt from public markets, private placements and bank facilities. Management believes the Company has sufficient sources of capital available to finance its business plan, to meet its working capital requirements and to maintain an appropriate level of capital spending for at least the next 12 months from the issuance of the consolidated financial statements.

On May 6, 2024, the Company announced its intention to purchase up to $3.10 billion in value of Common Stock through both a modified “Dutch auction” tender offer (the “Tender Offer”) for up to $2.00 billion of Common Stock and a separate share purchase agreement (the “Purchase Agreement”) with Carolina Coca-Cola Bottling Investments, Inc., an indirect wholly owned subsidiary of The Coca‑Cola Company (“CCCBI”). On May 20, 2024, the Company launched its offer to purchase, for cash, shares of Common Stock at prices specified by the tendering stockholders of not less than $850 nor greater than $925 per share, with shares having an aggregate purchase price of no more than $2.00 billion. In accordance with the terms and conditions of the Tender Offer, the Company repurchased 14,391.5 shares of Common Stock at a purchase price of $925 per share, for an aggregate purchase price of $13.3 million, excluding fees and expenses relating to the Tender Offer. The shares repurchased represented 0.2% of the shares of Common Stock that were issued and outstanding as of June 18, 2024.

Pursuant to the Purchase Agreement entered into on May 6, 2024 with CCCBI, the Company agreed to purchase and CCCBI agreed to sell, at the purchase price in the Tender Offer, a number of shares of Common Stock (the “Share Repurchase”) such that CCCBI would beneficially own shares of Common Stock representing 21.5% of the total outstanding shares of Common Stock and Class B Common Stock immediately following the closing of the Share Repurchase (calculated assuming all issued and outstanding shares of Class B Common Stock were converted into Common Stock and taking into account the shares of Common Stock purchased in the Tender Offer). On July 5, 2024, the Company repurchased and retired 598,619 shares of Common Stock in the Share Repurchase at a purchase price of $925 per share, for an aggregate purchase price of $553.7 million.

On August 20, 2024, the Company announced that its Board of Directors had approved a share repurchase program under which the Company is authorized to repurchase up to $1.00 billion of Common Stock. The Company expects share repurchases to be made from time to time in the open market or through private transactions or block trades. The timing and amount of repurchases will depend on market conditions, the prevailing market price, applicable legal requirements and other factors. The share repurchase authorization is discretionary and has no expiration date. As of December 31, 2024, the Company had repurchased 42,895 shares of Common Stock under the share repurchase program for an aggregate purchase price of $51.6 million, excluding fees and expenses relating to the share repurchases.

The Company’s debt as of December 31, 2024 and December 31, 2023 was as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","Maturity Date","","December 31, 2024","","December 31, 2023"],["Senior bonds (the \u201c2025 Senior Bonds\u201d)(1)","","11/25/2025","","$","350,000","","","$","350,000"],["Senior notes","","10/10/2026","","100,000","","","100,000"],["Senior bonds (the \u201c2029 Senior Bonds\u201d)(2)(3)","","6/1/2029","","700,000","","","\u2014"],["Revolving credit facility(4)","","6/10/2029","","\u2014","","","\u2014"],["Senior notes","","3/21/2030","","150,000","","","150,000"],["Senior bonds (the \u201c2034 Senior Bonds\u201d)(3)(5)","","6/1/2034","","500,000","","","\u2014"],["Unamortized discount on senior bonds(1)(2)(5)","","Various","","(1,482)","","","(17)"],["Debt issuance costs","","","","(12,170)","","","(824)"],["Total debt","","","","$","1,786,348","","","$","599,159"],["Less: Current portion of debt(1)","","","","349,699","","","\u2014"],["Total long-term debt","","","","$","1,436,649","","","$","599,159"]]
[[/GREPCENT_TABLE]]

(1)The 2025 Senior Bonds were issued at 99.975% of par. As of December 31, 2024, the 2025 Senior Bonds, net of debt issuance costs and unamortized discount, were classified as current portion of debt in the consolidated balance sheets.

(2)The 2029 Senior Bonds were issued at 99.843% of par.

(3)The 2029 Senior Bonds and the 2034 Senior Bonds were issued in connection with the financing of the Tender Offer and the Share Repurchase, as discussed above.

(4)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.

(5)The 2034 Senior Bonds were issued at 99.893% of par.

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On May 29, 2024, the Company completed the issuance and sale of $700 million aggregate principal amount of the 2029 Senior Bonds and $500 million aggregate principal amount of the 2034 Senior Bonds. The 2029 Senior Bonds and the 2034 Senior Bonds are the Company’s senior unsecured obligations and rank equally with the Company’s existing and future senior unsecured and unsubordinated indebtedness. The 2029 Senior Bonds mature on June 1, 2029 and the 2034 Senior Bonds mature on June 1, 2034, in each case, unless earlier redeemed or repurchased by the Company. The 2029 Senior Bonds bear interest at a rate of 5.250% per annum and the 2034 Senior Bonds bear interest at a rate of 5.450% per annum. The Company pays interest on the 2029 Senior Bonds and the 2034 Senior Bonds semi-annually in arrears on June 1 and December 1 of each year.

On June 10, 2024, the Company entered into an amended and restated credit agreement (the “Revolving Credit Facility Agreement”), providing for a five-year unsecured revolving credit facility with an aggregate maximum borrowing capacity of $500 million (the “Revolving Credit Facility”), maturing on June 10, 2029. The Revolving Credit Facility Agreement replaced the Company’s previous credit agreement, dated as of July 9, 2021. Subject to obtaining commitments from lenders and satisfying other conditions specified therein, at the Company’s option, the Revolving Credit Facility may be increased by up to $250 million. Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to, at the Company’s option, either (i) the Base Rate (as defined in the Revolving Credit Facility Agreement) plus an applicable rate or (ii) Term SOFR (as defined in the Revolving Credit Facility Agreement) plus the SOFR Adjustment (as defined in the Revolving Credit Facility Agreement) and an applicable rate, depending on the rating for the Company’s long-term senior unsecured, non-credit-enhanced debt (“Debt Rating”). In addition, the Company must pay a facility fee on the lenders’ aggregate commitments under the Revolving Credit Facility ranging from 0.060% to 0.175% per annum, depending on the Company’s Debt Rating. 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.

The indentures under which the 2025 Senior Bonds, the 2029 Senior Bonds and the 2034 Senior Bonds were issued do not include financial covenants, but do limit the incurrence of certain liens and encumbrances as well as indebtedness by the Company’s subsidiaries in excess of certain amounts. The agreements under which the Company’s nonpublic debt, including the Revolving Credit Facility, 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, 2024. These covenants have not restricted, and are not expected to restrict, the Company’s liquidity or capital resources.

All outstanding debt has been issued by the Company and none has been issued by any of its subsidiaries. There are no guarantees of the Company’s debt.

The Company’s credit ratings are reviewed periodically by certain nationally recognized rating agencies. 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. As of December 31, 2024, the Company’s credit ratings and outlook for its debt were as follows:

[[GREPCENT_TABLE]]
[["","","Credit Rating","","Rating Outlook"],["Moody\u2019s","","Baa1","","Stable"],["Standard & Poor\u2019s","","BBB+","","Stable"]]
[[/GREPCENT_TABLE]]

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 declared by the Board of Directors and paid by the Company for more than 30 years. The amount and frequency of future dividends will be determined by the Company’s Board of Directors in light of the earnings and financial condition of the Company at such time, and no assurance can be given that dividends will be declared or paid in the future. On August 20, 2024, the Company announced that its Board of Directors had approved an increase in the regular quarterly cash dividend from $0.50 per share to $2.50 per share on the Common Stock and the Class B Common Stock.

We review supplier terms and conditions on an ongoing basis, and we have negotiated payment term extensions in recent years in connection with our efforts to improve cash flow and working capital. Separate from those term extension actions, the Company has an agreement with a third-party financial institution to facilitate a supply chain finance program (“SCF program”), which allows qualifying suppliers to sell their receivables from the Company to the financial institution in order to negotiate shorter payment terms on their outstanding receivable arrangements. The Company’s obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted by a supplier’s participation in the SCF program. See Note 13 to the consolidated financial statements for additional information related to the Company’s SCF program.

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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. Following is a summary of the Level 3 activity:

[[GREPCENT_TABLE]]
[["","","Fiscal Year"],["(in thousands)","","2024","","2023"],["Beginning balance - Level 3 liability","","$","669,337","","","$","541,491"],["Payments of acquisition related contingent consideration","","(64,312)","","","(28,208)"],["Reclassification to current payables","","(10,000)","","","(3,300)"],["Increase in fair value","","59,166","","","159,354"],["Ending balance - Level 3 liability","","$","654,191","","","$","669,337"]]
[[/GREPCENT_TABLE]]

Cash Sources and Uses

A summary of cash-based activity is as follows:

[[GREPCENT_TABLE]]
[["","","Fiscal Year"],["(in thousands)","","2024","","2023"],["Cash Sources:"],["Proceeds from bond issuance","","$","1,200,000","","","$","\u2014"],["Net cash provided by operating activities(1)","","876,357","","","810,690"],["Proceeds from the disposal of short-term investments","","150,274","","","\u2014"],["Proceeds from the sale of property, plant and equipment","","569","","","695"],["Total cash sources","","$","2,227,200","","","$","811,385"],["Cash Uses:"],["Payments related to share repurchases","","$","625,654","","","$","\u2014"],["Purchases of short-term investments","","446,309","","","\u2014"],["Additions to property, plant and equipment","","371,015","","","282,304"],["Cash dividends paid","","185,635","","","46,868"],["Payments of acquisition related contingent consideration","","64,312","","","28,208"],["Investment in equity method investees","","15,720","","","13,741"],["Debt issuance fees","","15,512","","","340"],["Payments on financing lease obligations","","2,488","","","2,303"],["Total cash uses","","$","1,726,645","","","$","373,764"],["Net increase in cash during period","","$","500,555","","","$","437,621"]]
[[/GREPCENT_TABLE]]

(1)Net cash provided by operating activities in 2024 included net income tax payments of $224.0 million, interest payments of $56.1 million and pension plan contributions of $2.0 million. Net cash provided by operating activities in 2023 included net income tax payments of $200.8 million, interest payments of $24.0 million and pension plan contributions of $16.3 million.

Cash Flows From Operating Activities

During 2024, cash provided by operating activities was $876.4 million, which was an increase of $65.7 million as compared to 2023. The increase was primarily a result of our strong operating performance during 2024.

Cash Flows From Investing Activities

During 2024, cash used in investing activities was $682.2 million, which was an increase of $386.9 million as compared to 2023. The increase was partially a result of higher additions to property, plant and equipment, which were $371.0 million during 2024 and $282.3 million during 2023. There were $44.9 million and $59.0 million of additions to property, plant and equipment accrued in accounts payable, trade as of December 31, 2024 and December 31, 2023, respectively. The Company also had purchases of short-term investments, net of proceeds, of $296.0 million during 2024, as compared to no net activity during 2023.

The additions to property, plant and equipment reflect the Company’s focus on optimizing its supply chain and investing for future growth. During 2024, the Company purchased its Nashville, Tennessee production facility, which was previously leased, for approximately $56 million. The Company expects additions to property, plant and equipment in 2025 to be approximately

34

$300 million. The Company anticipates additions to property, plant and equipment over the next five years will be in the range of approximately $250 million to $300 million annually.

Cash Flows From Financing Activities

During 2024, cash provided by financing activities was $306.4 million, as compared to cash used in financing activities of $77.7 million during 2023, a change of $384.1 million. The change was primarily the result of bond proceeds of $1.20 billion, offset by share repurchases and related fee payments of $625.7 million and dividend payments of $185.6 million during 2024. The dividend payments of $185.6 million during 2024 included a special cash dividend of $16.00 per share, as compared to dividend payments of $46.9 million during 2023 (which included a special cash dividend of $3.00 per share).

The Company had cash payments for acquisition related contingent consideration of $64.3 million during 2024 and $28.2 million during 2023. For the next five years (including in fiscal year 2025), 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 $80 million.

Material Contractual Obligations

The Company had a number of contractual obligations and commercial obligations as of December 31, 2024 that are material to an assessment of the Company’s short- and long-term cash requirements.

The Company has outstanding debt of $1.80 billion, approximately $350 million of which is contractually due in fiscal year 2025 and classified as current debt on the consolidated balance sheets. The remaining interest payments on the Company’s debt obligations are $468.9 million determined in reference to the contractual terms of such debt, of which $85.9 million is due in fiscal year 2025. All of the Company’s 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, 2024.

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 $654.2 million as of December 31, 2024. 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 short-term portion of the acquisition related contingent consideration liability was $64.0 million as of December 31, 2024 and was included within other accrued liabilities in the consolidated balance sheets.

The Company is obligated to purchase 16.0 million cases of finished product from SAC on an annual basis through June 2034. Based on information available as of December 31, 2024, the Company estimates this purchase obligation to be $1.30 billion, of which an estimated $135 million of purchases is expected to occur in fiscal year 2025.

The Company has $131.4 million in total minimum operating lease obligations including interest, of which $26.8 million are due in fiscal year 2025. The Company has $5.4 million in total minimum financing lease obligations including interest, of which $2.9 million are due in fiscal year 2025.

As of December 31, 2024, the Company estimated obligations for its executive benefit plans to be $203.5 million, of which $40.0 million is expected to be paid in fiscal year 2025.

The Company provides postretirement benefits for employees meeting specified qualifying criteria. The Company recognizes the cost of postretirement benefits, which consist principally of medical benefits, during employees’ periods of active service. The Company does not prefund these benefits and has the right to modify or terminate certain of these benefits in the future. As of December 31, 2024, the Company had obligations related to its postretirement benefits plan of $62.1 million, of which $3.6 million is expected to be paid in fiscal year 2025.

The Company is a shareholder of Southeastern Container (“Southeastern”), a plastic bottle manufacturing cooperative from which the Company is obligated to purchase at least 80% of its requirements of plastic bottles for certain designated territories. This obligation has no minimum purchase requirements; however, purchases from Southeastern were $142.2 million during 2024 and are expected to remain material in future foreseeable periods. See Note 21 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. As of December 31, 2024, the future payments related to these contractual arrangements, which expire at various dates through 2034, amounted to $135.5 million, of which $36.8 million is expected to be paid in fiscal year 2025.

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Hedging Activities

The Company uses commodity derivative instruments to manage its exposure to fluctuations in certain commodity prices. 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 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 net impact of the commodity derivative instruments on the consolidated statements of operations was as follows:

[[GREPCENT_TABLE]]
[["","","Fiscal Year"],["(in thousands)","","2024","","2023"],["(Decrease) increase in cost of sales","","$","(590)","","","$","1,656"],["Increase in SD&A expenses","","2,647","","","5,928"],["Net impact","","$","2,057","","","$","7,584"]]
[[/GREPCENT_TABLE]]

Discussion of Critical Accounting Estimates

In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of its results of operations and financial position in the preparation of its consolidated financial statements in conformity with GAAP. Actual results could differ significantly from those estimates under different assumptions and conditions. The Company believes the following discussion addresses the Company’s most critical accounting estimates, which are those the Company believes to be the most important to the portrayal of its financial condition and results of operations and that require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Any changes in critical accounting estimates are discussed with the Audit Committee of the Company’s Board of Directors during the quarter in which a change is contemplated and prior to making such change.

Revenue Recognition

The Company’s sales are divided into two main categories: (i) bottle/can sales and (ii) other sales. Bottle/can sales include products packaged primarily in plastic bottles and aluminum cans. Bottle/can net pricing is based on the invoice price charged to customers reduced by any promotional allowances. Bottle/can net pricing per unit is impacted by the price charged per package, the sales volume generated for each package and the channels in which those packages are sold. Other sales include sales to other Coca‑Cola bottlers, post-mix sales, transportation revenue and equipment maintenance revenue.

The Company’s contracts are derived from customer orders, including customer sales incentives, generated through an order processing and replenishment model. Generally, the Company’s service contracts and contracts related to the delivery of specifically identifiable products have a single performance obligation. Revenues do not include sales or other taxes collected from customers. The Company has defined its performance obligations for its contracts as either at a point in time or over time. Bottle/can sales, sales to other Coca‑Cola bottlers and post-mix sales are recognized when control transfers to a customer, which is generally upon delivery and is considered a single point in time (“point in time”).

Other sales, which include revenue for service fees related to the repair of cold drink equipment and delivery fees for freight hauling and brokerage services, are recognized over time (“over time”). Revenues related to cold drink equipment repair are recognized as the respective services are completed using a cost-to-cost input method. Repair services are generally completed in less than one day but can extend up to one month. Revenues related to freight hauling and brokerage services are recognized as the delivery occurs using a miles driven output method. Generally, delivery occurs and freight charges are recognized in the same day. Over time sales orders open at the end of a financial period are not material to the consolidated financial statements.

The Company sells its products and extends credit, generally without requiring collateral, based on an ongoing evaluation of the customer’s business prospects and financial condition. The Company evaluates the collectability of its trade accounts receivable based on a number of factors, including the Company’s historic collections pattern and changes to a specific customer’s ability to meet its financial obligations. The Company typically collects payment from customers within 30 days from the date of sale.

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The Company has established an allowance for doubtful accounts to adjust the recorded receivable to the estimated amount the Company believes will ultimately be collected. The Company’s allowance for doubtful accounts in the consolidated balance sheets includes a reserve for customer returns and an allowance for credit losses. The Company experiences customer returns primarily as a result of damaged or out-of-date product. At any given time, the Company estimates less than 1% of bottle/can sales and post-mix sales could be at risk for return by customers. Returned product is recognized as a reduction to net sales.

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

Valuation of Long-Lived Assets, Goodwill and Other Intangibles

Management performs recoverability and impairment tests of long-lived assets, goodwill and other intangibles in accordance with GAAP, during which management makes numerous assumptions which involve a significant amount of judgment. When performing impairment tests, management estimates the fair values of the assets using its best assumptions, which management believes would be consistent with what a hypothetical marketplace participant would use. Estimates and assumptions used in these tests are evaluated and updated as appropriate. For certain assets, recoverability and/or impairment tests are required only when conditions exist that indicate the carrying value may not be recoverable. For other assets, impairment tests are required at least annually, or more frequently if events or circumstances indicate that an asset may be impaired.

The Company evaluates the recoverability of the carrying amount of its property, plant and equipment and other intangibles when events or circumstances indicate the carrying amount of an asset or asset group may not be recoverable. These evaluations are performed at a level where independent cash flows may be attributed to either an asset or an asset group. If the Company determines the carrying amount of an asset or asset group is not recoverable based upon the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair values of the long-lived assets. During 2024 and 2023, the Company did not identify any impairment triggers related to property, plant and equipment and other intangibles.

All business combinations are accounted for using the acquisition method. All of the Company’s goodwill resides within one reporting unit within the Nonalcoholic Beverages reportable segment and, therefore, the Company has determined it has one reporting unit for the purpose of assessing goodwill for potential impairment. The Company performs its annual goodwill impairment test as of the first day of the fourth quarter each year, and more frequently if facts and circumstances indicate such assets may be impaired, including significant declines in actual or future projected cash flows and significant deterioration of market conditions.

The Company uses its overall market capitalization as part of its estimate of fair value of the reporting unit and in assessing the reasonableness of the Company’s internal estimates of fair value. The Company’s goodwill impairment assessment includes a qualitative assessment to determine whether it is more likely than not that the fair value of the goodwill is below its carrying value, each year, and more often if there are significant changes in business conditions that could result in impairment. 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.

The estimated fair value of the reporting unit is then compared to its carrying amount, including goodwill. 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 Company performed its annual impairment test of goodwill as of the first day of the fourth quarter during both 2024 and 2023 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 2024 annual test date.

Acquisition Related Contingent Consideration Liability

The acquisition related contingent consideration liability consists of the estimated amounts due to The Coca‑Cola Company under the CBA with The Coca‑Cola Company and CCR over the useful life of the related distribution rights. Pursuant to the CBA, the Company is required 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. This acquisition related contingent consideration is valued using a probability weighted discounted cash flow model based on internal forecasts and the WACC derived from market data, which are considered Level 3 inputs.

37

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 by discounting future expected acquisition related sub-bottling payments required under the CBA using the Company’s estimated WACC. These 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. As a result, the fair value of the acquisition related contingent consideration liability is impacted by the Company’s WACC, management’s estimate of the acquisition related sub-bottling payments that will be made in the future under the CBA, and current acquisition related sub-bottling payments (all Level 3 inputs). Changes in any of these Level 3 inputs, particularly the underlying risk-free interest rate used to estimate the Company’s WACC, 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. 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. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating losses and tax credit carryforwards, as well as the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance will be provided against deferred tax assets if the Company determines it is more likely than not such assets will not ultimately be realized.

The Company does not recognize a tax benefit unless it concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. 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

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. During 2023, the Primary Plan was fully settled. There were no remaining benefit liabilities or associated estimates related to the Primary Plan as of December 31, 2023 or December 31, 2024.

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. Contributions to the Bargaining Plan 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 Bargaining Plan. 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 actuarial assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of net periodic pension cost recorded by the Company in future periods. See Note 18 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 5.89% in 2024 and 5.16% in 2023. The discount rate assumption is generally the estimate which can have the most significant impact on the projected benefit obligation and the net periodic pension cost for the Bargaining Plan. 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 18 to the consolidated financial statements for additional information.

Pension costs for the Bargaining Plan were $3.7 million in both 2024 and 2023.

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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:

[[GREPCENT_TABLE]]
[["(in thousands)","","0.25% Increase","","0.25% Decrease"],["Increase (decrease) in:"],["Projected benefit obligation at December 31, 2024","","$","(1,842)","","","$","1,965"],["Net periodic pension cost in 2024","","(211)","","","224"]]
[[/GREPCENT_TABLE]]

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 both 2024 and 2023. 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. See Note 18 to the consolidated financial statements for the details by asset type for the Bargaining Plan. The actual return on pension plan assets for the Bargaining Plan was a gain of 3.7% in 2024 and a gain of 13.5% in 2023.

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 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. In addition, the Company uses subjective factors such as withdrawal and mortality rates to estimate the projected liability under this plan. The actuarial assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. The Company does not prefund its postretirement benefits and has the right to modify or terminate certain of these benefits in the future.

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.

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 discount rate used in determining the postretirement benefit obligation was 5.68% in 2024 and 5.02% in 2023. 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.

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:

[[GREPCENT_TABLE]]
[["(in thousands)","","0.25% Increase","","0.25% Decrease"],["Increase (decrease) in:"],["Postretirement benefit obligation at December 31, 2024","","$","(1,415)","","","$","1,476"],["Net periodic postretirement benefit cost in 2024","","(13)","","","156"]]
[[/GREPCENT_TABLE]]

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. These forward-looking statements involve risks and uncertainties which we expect will or may occur in the future and may impact our business, financial condition and results of operations. The words “anticipate,” “believe,” “expect,” “intend,” “project,” “may,” “will,” “should,” “could” and similar expressions are intended to identify those forward-looking statements. These forward-looking statements reflect the Company’s best judgment based on current information, and, although we base these statements on circumstances that we believe to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information. As such, the forward-looking statements are not guarantees of future performance, and actual results may vary materially from the projected results and expectations discussed in this report. 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) or disruption, 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, recycling, sustainability and product safety; decreases from historic levels of marketing funding support provided to us by

39

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 in our best interest 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 third-party service providers’, business partners’, customers’, suppliers’ or other third parties’ information technology systems; unfavorable changes in the general economy; changes in trade policies, including the imposition of, or increase in, tariffs on imported goods; 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; and the risks discussed in “Item 1A. Risk Factors” of this report and elsewhere herein.

Caution should be taken not to place undue reliance on the forward-looking statements included in this report. The Company assumes no obligation to update any forward-looking statements, except as may be required by law. 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.