Related Party Transactions

9 Months Ended

Oct. 02, 2011

Related Party Transactions [Abstract]

Related Party Transactions

19. Related Party Transactions

The Company’s business consists primarily of the production, marketing and distribution of nonalcoholic beverages of The Coca-Cola Company, which is the sole owner of the secret formulas under which the primary components (either concentrate or syrup) of its beverage products are manufactured. As of October 2, 2011, The Coca-Cola Company had a 34.8% interest in the Company’s total outstanding Common Stock, representing 5.1% of the total voting power of the Company’s Common Stock and Class B Common Stock voting together as a single class. The Coca-Cola Company does not own any shares of the Company’s Class B Common Stock.

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

	First Nine Months
In Millions	2011		2010
Payments by the Company for concentrate, syrup, sweetener and other purchases	$	315.2	$	301.6
Marketing funding support payments to the Company		36.2		33.8
Payments by the Company net of marketing funding support	$	279.0	$	267.8
Payments by the Company for customer marketing programs	$	38.7	$	38.6
Payments by the Company for cold drink equipment parts		6.9		6.4
Fountain delivery and equipment repair fees paid to the Company		8.5		7.7
Presence marketing funding support provided by The Coca-Cola Company on the Company’s behalf		3.1		3.3
Payments to the Company to facilitate the distribution of certain brands and packages to other Coca-Cola bottlers		1.6		2.2

The Company has a production arrangement with Coca-Cola Refreshments USA Inc. to buy and sell finished products at cost. The Coca-Cola Company acquired Coca-Cola Enterprises Inc. (“CCE”) on October 2, 2010. In connection with the transaction, CCE changed its name to Coca-Cola Refreshments USA Inc. (“CCR”), and transferred its beverage operations outside of North America to an independent third party. As a result of the transaction, the North American operations of CCE are now included in CCR. References to “CCR,” refer to CCR and CCE as it existed prior to the acquisition by The Coca-Cola Company. Sales to CCR under this arrangement were $42.2 million and $37.6 million in YTD 2011 and YTD 2010, respectively. Purchases from CCR under this arrangement were $18.0 million and $19.4 million in YTD 2011 and YTD 2010, respectively. In addition, CCR began distributing one of the Company’s own brands (Tum-E Yummies) in the first quarter of 2010. Total sales to CCR for this brand were $12.9 million and $10.5 million in YTD 2011 and YTD 2010, respectively.

Along with all other Coca-Cola bottlers in the United States, the Company is a member in Coca-Cola Bottlers’ Sales and Services Company, LLC (“CCBSS”), which was formed in 2003 for the purposes of facilitating various procurement functions and distributing certain specified beverage products of The Coca-Cola Company with the intention of enhancing the efficiency and competitiveness of the Coca-Cola bottling system in the United States. CCBSS negotiates the procurement for the majority of the Company’s raw materials (excluding concentrate). The Company pays an administrative fee to CCBSS for its services. Administrative fees to CCBSS for its services were $.3 million and $.6 million in YTD 2011 and YTD 2010, respectively. Amounts due from CCBSS for rebates on raw materials were $3.8 million, $3.6 million and $3.6 million as of October 2, 2011, January 2, 2011 and October 3, 2010, respectively. CCR is also a member of CCBSS.

The Company is a member of SAC, a manufacturing cooperative. SAC sells finished products to the Company and Piedmont at cost. Purchases from SAC by the Company and Piedmont for finished products were $102.2 million and $100.6 million in YTD 2011 and YTD 2010, respectively. The Company performs management services for SAC pursuant to a management agreement. Management fees earned from SAC were $1.2 million and $1.1 million in YTD 2011 and YTD 2010, respectively. The Company has also guaranteed a portion of debt for SAC. Such guarantee amounted to $19.4 million as of October 2, 2011. The Company has not recorded any liability associated with this guarantee and holds no assets as collateral against this guarantee. The Company’s equity investment in SAC was $6.8 million, $5.6 million and $5.6 million as of October 2, 2011, January 2, 2011 and October 3, 2010, respectively.

The Company is a shareholder in two entities from which it purchases substantially all its requirements for plastic bottles. Net purchases from these entities were $63.9 million in YTD 2011 and $55.5 million in YTD 2010. In connection with its participation in Southeastern, the Company has guaranteed a portion of the entity’s debt. Such guarantee amounted to $15.8 million as of October 2, 2011. The Company has not recorded any liability associated with this guarantee and holds no assets as collateral against this guarantee. The Company’s equity investment in one of these entities, Southeastern, was $17.9 million, $15.7 million and $15.7 million as of October 2, 2011, January 2, 2011 and October 3, 2010, respectively.

The Company monitors its investments in cooperatives and would be required to write down its investment if an impairment is identified and the Company determined it to be other than temporary. No impairment of the Company’s investments in cooperatives has been identified as of October 2, 2011 nor was there any impairment in 2010.

The Company leases from Harrison Limited Partnership One (“HLP”) the Snyder Production Center (“SPC”) and an adjacent sales facility, which are located in Charlotte, North Carolina. HLP is directly and indirectly owned by trusts of which J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, and Deborah H. Everhart, a director of the Company, are trustees and beneficiaries. Morgan H. Everett, a director of the Company, is a permissible, discretionary beneficiary of the trusts that directly or indirectly own HLP. The original lease was to expire on December 31, 2010. On March 23, 2009, the Company modified the lease agreement (new terms began on January 1, 2011) with HLP related to the SPC lease. The modified lease would not have changed the classification of the existing lease had it been in effect in the first quarter of 2002, when the capital lease was recorded, as the Company received a renewal option to extend the term of the lease, which it expected to exercise. The modified lease did not extend the term of the existing lease (remaining lease term was reduced from approximately 22 years to approximately 12 years). Accordingly, the present value of the leased property under capital leases and capital lease obligations was adjusted by an amount equal to the difference between the future minimum lease payments under the modified lease agreement and the present value of the existing obligation on the modification date. The capital lease obligations and leased property under capital leases were both decreased by $7.5 million in March 2009. The annual base rent the Company is obligated to pay under the modified lease is subject to an adjustment for an inflation factor. The prior lease annual base rent was subject to adjustment for an inflation factor and for increases or decreases in interest rates, using LIBOR as the measurement device. The principal balance outstanding under this capital lease as of October 2, 2011 was $26.1 million. Rental payments related to this lease were $2.5 million and $2.4 million in YTD 2011 and YTD 2010, respectively.

The Company leases from Beacon Investment Corporation (“Beacon”) the Company’s headquarters office facility and an adjacent office facility. The lease expires on December 31, 2021. Beacon’s sole shareholder is J. Frank Harrison, III. The principal balance outstanding under this capital lease as of October 2, 2011 was $27.6 million. Rental payments related to the lease were $2.9 million in both YTD 2011 and YTD 2010.