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 soft drink products are manufactured. As of January 3, 2016, The Coca-Cola Company had a 34.8% interest in the Company’s outstanding Common Stock, representing approximately 5.0% of the total voting power of the Company’s Common Stock and Class B Common Stock voting together as a single class. As long as The Coca-Cola Company holds the number of shares of Common Stock that it currently owns, it has the right to have its designee proposed by the Company for the nomination to the Company’s Board of Directors, and J. Frank Harrison, III, the Chairman of the Board and the Chief Executive Officer of the Company, and trustees of certain trusts established for the benefit of certain relatives of J. Frank Harrison, Jr., have agreed to vote their share of the Company’s Class B Common Stock which they control in favor of such designee. The Coca-Cola Company does not own any shares of Class B Common Stock of the Company.

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

	Fiscal Year
In Millions	2015		2014		2013
Payments by the Company for concentrate, syrup, sweetener and other purchases	$	482.7	$	424.0	$	410.6
Marketing funding support payments to the Company		56.3		46.5		43.5
Payments by the Company net of marketing funding support	$	426.4	$	377.5	$	367.1

Payments by the Company for customer marketing programs	$	70.8	$	61.1	$	56.4
Payments by the Company for cold drink equipment parts		16.3		7.7		9.3
Fountain delivery and equipment repair fees paid to the Company		17.4		13.5		12.7
Presence marketing support provided by The Coca-Cola Company on the Company’s behalf		2.4		5.9		5.4
Payments to the Company to facilitate the distribution of certain brands and packages to other Coca-Cola bottlers		4.7		3.9		4.0

The Company has a production arrangement with CCR to buy and sell finished products at cost. Sales to CCR under this arrangement were $30.5 million, $53.5 million and $60.2 million in 2015, 2014 and 2013, respectively. Purchases from CCR under this arrangement were $230.0 million, $68.8 million and $46.7 million in 2015, 2014 and 2013, respectively. Prior to the sale of BYB to The Coca-Cola Company, CCR distributed one of the Company’s own brands (Tum-E Yummies). Total sales to CCR for this brand were $14.8 million, $22.0 million and $23.8 million in 2015, 2014 and 2013, respectively. During the third quarter of 2015, the Company sold BYB, the subsidiary that owned and distributed the Company’s brand (Tum-E Yummies), to The Coca-Cola Company and recorded a gain of $22.7 million on the sale. The Company continues to distribute Tum-E Yummies following the sale. In addition, the Company transports product for CCR to the Company’s and other Coca-Cola bottlers’ locations. Total sales to CCR for transporting CCR’s product were $16.5 million, $2.9 million, and $0.9 million in 2015, 2014, and 2013, respectively.

The Company and CCR have entered into, and closed the following asset purchase agreements relating to certain territories previously served by CCR’s facilities and equipment located in these territories:

	Asset Agreement	Acquisition Closing
Territory	Date	Date
Johnson City and Morristown, Tennessee	May 7, 2014	May 23, 2014
Knoxville, Tennessee	August 28, 2014	October 24, 2014
Cleveland and Cookeville, Tennessee	December 5, 2014	January 30, 2015
Louisville, Kentucky and Evansville, Indiana	December 17, 2014	February 27, 2015
Paducah and Pikeville, Kentucky	February 13, 2015	May 1, 2015
Norfolk, Fredericksburg and Staunton, Virginia and Elizabeth City, North Carolina	September 23, 2015	October 30, 2015

As part of the asset purchase agreements, the Company signed CBAs which have terms of ten years and are automatically renewed for successive additional terms of ten years each unless the Company gives notice to terminate at least one year prior to the expiration of a ten year term or unless earlier terminated as provided therein. Under the CBAs, the Company will make a quarterly sub-bottling payment to CCR on a continuing basis for the grant of exclusive rights to distribute, promote, market and sell the authorized brands of The Coca-Cola Company and related products in the Expansion Territories. The quarterly sub-bottling payment will be based on sales of certain beverages and beverage products that are sold under the same trademarks that identify a covered beverage, beverage product or certain cross-licensed brands. As of January 3, 2016, the Company had recorded a liability of $136.6 million to reflect the estimated fair value of the contingent consideration related to the future sub-bottling payments. Payments to CCR under the CBAs were $4.0 million and $0.2 million during 2015 and 2014, respectively.

On October 17, 2014, the Company entered into an asset exchange agreement with CCR, pursuant to which the Company exchanged its facilities and equipment located in Jackson, Tennessee for territory previously served by CCR’s facilities and equipment located in Lexington, Kentucky. This transaction closed on May 1, 2015.

As part of the Expansion Transactions, on October 30, 2015 the Company acquired from CCR a “make-ready center” in Annapolis, Maryland for approximately $5.3 million, subject to a final post-closing adjustment. The Company recorded a bargain purchase gain of $2.0 million on this transaction after applying a deferred tax liability of approximately $1.3 million. The Company uses the make-ready center to deploy and refurbish vending and other sales equipment for use in the marketplace.

Along with all the 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 $0.7 million, $0.5 million and $0.5 million in 2015, 2014 and 2013, respectively. Amounts due from CCBSS for rebates on raw material purchases were $5.9 million and $4.5 million as of January 3, 2016 and December 28, 2014, 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 $145 million, $132 million and $137 million in 2015, 2014 and 2013, respectively. In addition, the Company transports product for SAC to the Company’s and other Coca-Cola bottlers’ locations. Total sales to SAC for transporting SAC’s product were $8.3 million, $7.7 million, and $7.6 million in 2015, 2014, and 2013, respectively. The Company also manages the operations of SAC pursuant to a management agreement. Management fees earned from SAC were $1.9 million, $1.8 million and $1.6 million in 2015, 2014 and 2013, respectively. The Company has also guaranteed a portion of debt for SAC. Such guarantee amounted to $19.1 million as of January 3, 2016. The Company’s equity investment in SAC was $4.1 million as of both January 3, 2016 and December 28, 2014.

The Company is a shareholder in two entities from which it purchases substantially all of its requirements for plastic bottles. Net purchases from these entities were $73.0 million, $78.4 million and $79.1 million in 2015, 2014 and 2013, respectively. In conjunction with the Company’s participation in one of these entities, Southeastern, the Company has guaranteed a portion of the entity’s debt. Such guarantee amounted to $11.5 million as of January 3, 2016. The Company’s equity investment in Southeastern was $18.3 million and $18.4 million as of January 3, 2016 and December 28, 2014, respectively, and was recorded in other assets on the Company’s consolidated balance sheets.

The Company holds no assets as collateral against the SAC or Southeastern guarantees, the fair value of which is immaterial.

The Company monitors its investments in SAC and Southeastern 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 SAC or Southeastern has been identified as of January 3, 2016 nor was there any impairment in 2015, 2014 and 2013.

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 lease expires on December 31, 2020. The annual base rent the Company is obligated to pay under the lease is subject to an adjustment for an inflation factor. The principal balance outstanding under this capital lease as of January 3, 2016 was $17.5 million. Rental payments related to this lease were $3.8 million, $3.7 million and $3.6 million in 2015, 2014 and 2013, 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 majority shareholder is J. Frank Harrison, III, and Morgan H. Everett, his daughter and a member of the Company’s Board of Directors, is a minority shareholder. The principal balance outstanding under this capital lease as of January 3, 2016 was $18.1 million. The annual base rent the Company is obligated to pay under the lease is subject to adjustment for increases in the Consumer Price Index.

The minimum rentals and contingent rental payments that relate to this lease were as follows:

	Fiscal Year
In Millions	2015		2014		2013
Minimum rentals	$	3.5	$	3.5	$	3.5
Contingent rentals		0.7		0.6		0.6
Total rental payments	$	4.2	$	4.1	$	4.1

The contingent rentals in 2015, 2014 and 2013 are a result of changes in the Consumer Price Index. Increases or decreases in lease payments that result from changes in the Consumer Price Index were recorded as adjustments to interest expense.