Related Party Transactions

12 Months Ended

Dec. 30, 2012

Related Party Transactions [Abstract]

Related Party Transactions

18.    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 December 30, 2012, The Coca-Cola Company had a 34.8% interest in the Company’s 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 Class B Common Stock of the Company.

In August 2007, the Company entered into a distribution agreement with Energy Brands Inc. (“Energy Brands”), a wholly-owned subsidiary of The Coca-Cola Company. Energy Brands, also known as glacéau, is a producer and distributor of branded enhanced beverages including vitaminwater and smartwater. The distribution agreement is effective November 1, 2007 for a period of ten years and, unless earlier terminated, will be automatically renewed for succeeding ten-year terms, subject to a one year non-renewal notification by the Company. In conjunction with the execution of the distribution agreement, the Company entered into an agreement with The Coca-Cola Company whereby the Company agreed not to introduce new third party brands or certain third party brand extensions in the United States through August 31, 2010 unless mutually agreed to by the Company and The Coca-Cola Company.

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

	Fiscal Year
In Millions	2012			2011			2010
Payments by the Company for concentrate, syrup, sweetener and other purchases	$	406.2		$	399.1		$	393.5
Marketing funding support payments to the Company		(43.2	)		(47.3	)		(45.1	)
Payments by the Company net of marketing funding support	$	363.0		$	351.8		$	348.4
Payments by the Company for customer marketing programs	$	56.8		$	51.4		$	50.7
Payments by the Company for cold drink equipment parts		9.2			9.3			8.6
Fountain delivery and equipment repair fees paid to the Company		11.9			11.4			10.4
Presence marketing support provided by The Coca-Cola Company on the Company’s behalf		3.5			4.1			4.4
Payments to the Company to facilitate the distribution of certain brands and packages to other Coca-Cola bottlers		2.6			2.0			2.8
Sales of finished products to The Coca-Cola Company		0.0			0.0			0.1

The Company has a production arrangement with Coca-Cola Refreshments USA, Inc. (“CCR”) 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 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 $64.6 million, $55.0 million and $48.5 million in 2012, 2011 and 2010, respectively. Purchases from CCR under this arrangement were $31.3 million, $23.4 million and $24.8 million in 2012, 2011 and 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 $22.8 million, $16.8 million and $12.9 million in 2012, 2011 and 2010, respectively.

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 $.5 million, $.4 million and $.5 million in 2012, 2011 and 2010, respectively. Amounts due from CCBSS for rebates on raw material purchases were $3.8 million and $5.2 million as of December 30, 2012 and January 1, 2012, respectively. CCR is also a member of CCBSS.

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 expired on December 31, 2010. On March 23, 2009, the Company modified the lease agreement (new terms began 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 (including renewal options) 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 December 30, 2012 was $24.1 million.

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

	Fiscal Year
In Millions	2012		2011		2010
Minimum rentals	$	3.5	$	3.4	$	4.9
Contingent rentals		0.0		0.0		(1.7	)
Total rental payments	$	3.5	$	3.4	$	3.2

The contingent rentals in 2010 reduce the minimum rentals as a result of changes in interest rates, using LIBOR as the measurement device. Increases or decreases in lease payments that result from changes in the interest rate factor were recorded as adjustments to interest expense.

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 December 30, 2012 was $25.1 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	2012		2011		2010
Minimum rentals	$	3.5	$	3.5	$	3.6
Contingent rentals		0.5		0.4		0.2
Total rental payments	$	4.0	$	3.9	$	3.8

The contingent rentals in 2012, 2011 and 2010 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.

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 $82.3 million, $83.9 million and $74.0 million in 2012, 2011 and 2010, 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 $13.5 million as of December 30, 2012. The Company’s equity investment in Southeastern was $19.5 million and $17.9 million as of December 30, 2012 and January 1, 2012, respectively, and was recorded in other assets on the Company’s consolidated balance sheets.

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 $141 million, $134 million and $131 million in 2012, 2011 and 2010, respectively. The Company also manages the operations of SAC pursuant to a management agreement. Management fees earned from SAC were $1.5 million, $1.6 million and $1.5 million in 2012, 2011 and 2010, respectively. The Company has also guaranteed a portion of debt for SAC. Such guarantee amounted to $22.4 million as of December 30, 2012. The Company’s equity investment in SAC was $4.1 million as of both December 30, 2012 and January 1, 2012.

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

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 December 30, 2012 nor was there any impairment in 2012, 2011 and 2010.