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 formulas under which the primary components of its soft drink products, either concentrate or syrup, are manufactured.

As of December 30, 2018, The Coca‑Cola Company owned approximately 27% of the Company’s total outstanding Common Stock and Class B Common Stock on a consolidated basis, representing approximately 5% of the total voting power of the Company’s Common Stock and Class B Common Stock voting together. As long as The Coca‑Cola Company holds the number of shares of Common Stock it currently owns, it has the right to have its designee proposed by the Company for nomination to the Company’s Board of Directors, and J. Frank Harrison, III, the Chairman of the Board and 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 the shares of the Company’s Class B Common Stock which they control, representing approximately 86% of the total voting power of the Company’s combined Common Stock and Class B Common Stock, in favor of such designee. The Coca‑Cola Company does not own any shares of the Company’s Class B Common Stock.

The following table and the subsequent descriptions summarize the significant transactions between the Company and The Coca‑Cola Company:

	Fiscal Year
(in thousands)	2018		2017		2016
Payments made by the Company to The Coca-Cola Company for:
Concentrate, syrup, sweetener and other purchases	$	1,188,818	$	1,085,898	$	669,783
Customer marketing programs		145,019		139,542		116,537
Cold drink equipment parts		30,065		25,381		21,558
Glacéau distribution agreement consideration		-		15,598		-

Payments made by The Coca-Cola Company to the Company for:
Conversion of bottling agreements	$	-	$	91,450	$	-
Marketing funding support payments		86,483		83,177		73,513
Fountain delivery and equipment repair fees		40,023		35,335		27,624
Legacy Facilities Credit (excluding portion related to Mobile, Alabama facility)		1,320		30,647		-
Portion of Legacy Facilities Credit related to Mobile, Alabama facility		-		12,364		-
Facilitating the distribution of certain brands and packages to other Coca-Cola bottlers		9,683		10,474		7,193
Cold drink equipment		3,789		8,400		-
Presence marketing funding support on the Company’s behalf		8,311		4,843		2,064

The Company previously had a production arrangement with CCR to buy and sell finished products at cost and transported products for CCR to the Company’s and other Coca‑Cola bottlers’ locations. Following the completion of the October 2017 Transactions discussed in Note 4, the Company no longer transacts with CCR other than making quarterly sub-bottling payments, as discussed below. The following table summarizes purchases and sales under these arrangements between the Company and CCR prior to the closing of the October 2017 Transactions:

As discussed in Note 4 to the consolidated financial statements, the Company and CCR recently concluded a series of System Transformation Transactions involving several asset purchase and asset exchange transactions for the acquisition and exchange of the following distribution territories and regional manufacturing facilities:

Distribution Territories		Acquisition / Exchange Date
Johnson City and Morristown, Tennessee		May 23, 2014
Knoxville, Tennessee		October 24, 2014
Cleveland and Cookeville, Tennessee		January 30, 2015
Louisville, Kentucky and Evansville, Indiana		February 27, 2015
Paducah and Pikeville, Kentucky		May 1, 2015
Lexington, Kentucky for Jackson, Tennessee Exchange		May 1, 2015
Norfolk, Fredericksburg and Staunton, Virginia and Elizabeth City, North Carolina		October 30, 2015
Easton and Salisbury, Maryland and Richmond and Yorktown, Virginia		January 29, 2016
Alexandria, Virginia and Capitol Heights and La Plata, Maryland		April 1, 2016
Baltimore, Hagerstown and Cumberland, Maryland		April 29, 2016
Cincinnati, Dayton, Lima and Portsmouth, Ohio and Louisa, Kentucky		October 28, 2016
Anderson, Fort Wayne, Lafayette, South Bend and Terre Haute, Indiana		January 27, 2017
Indianapolis and Bloomington, Indiana and Columbus and Mansfield, Ohio		March 31, 2017
Akron, Elyria, Toledo, Willoughby and Youngstown, Ohio		April 28, 2017
Memphis, Tennessee		October 2, 2017
Little Rock and West Memphis, Arkansas for Leroy, Mobile and Robertsdale, Alabama, Panama City, Florida, Bainbridge, Columbus and Sylvester, Georgia, Ocean Springs, Mississippi and Somerset, Kentucky (as part of the CCR Exchange Transaction)		October 2, 2017

Manufacturing Plants		Acquisition / Exchange Date
Annapolis, Maryland Make-Ready Center		October 30, 2015
Sandston, Virginia		January 29, 2016
Silver Spring and Baltimore, Maryland		April 29, 2016
Cincinnati, Ohio		October 28, 2016
Indianapolis and Portland, Indiana		March 31, 2017
Twinsburg, Ohio		April 28, 2017
Memphis, Tennessee and West Memphis, Arkansas for Mobile, Alabama (as part of the CCR Exchange Transaction)		October 2, 2017

Pursuant to the CBA, the Company is required to make quarterly sub-bottling payments 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 territories acquired in the System Transformation, excluding territories the Company acquired in an exchange transaction. These sub-bottling payments are based on gross profit derived from 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. Sub-bottling payments to CCR were $24.7 million in 2018, $16.7 million in 2017 and $13.5 million in 2016. The following table summarizes the liability recorded by the Company to reflect the estimated fair value of contingent consideration related to future sub‑bottling payments to CCR:

On January 1, 2017, the Company obtained the rights to market, promote, distribute and sell glacéau vitaminwater, glacéau smartwater and glacéau vitaminwater zero drops in certain geographic territories including the District of Columbia and portions of Delaware, Maryland and Virginia, pursuant to an agreement entered into by the Company, The Coca‑Cola Company and CCR in June 2016. Pursuant to the agreement, the Company made a payment of $15.6 million during the first quarter of 2017 to The Coca‑Cola Company, which represented a portion of the total payment made by The Coca‑Cola Company to terminate a distribution arrangement with a prior distributor in this territory.

Upon the conversion of the Company’s then-existing bottling agreements to the CBA on March 31, 2017, the Company received from CCR the Territory Conversion Fee, which, after final adjustments made during the second quarter of 2017, totaled $91.5 million, pursuant to a territory conversion agreement entered into by the Company, The Coca‑Cola Company and CCR in September 2015 (as amended). The Territory Conversion Fee was equivalent to 0.5 times the EBITDA the Company and its subsidiaries generated during the twelve-month period ended January 1, 2017 from sales in the distribution territories the Company served prior to the System Transformation of certain beverages owned by or licensed to The Coca‑Cola Company or Monster Energy Company on which the Company and its subsidiaries pay, and The Coca‑Cola Company receives, a facilitation fee. The Territory Conversion Fee was recorded as a deferred liability and will be amortized as a reduction to cost of sales over a period of 40 years. The portion of the deferred liability that is expected to be amortized in the next twelve months was classified in other accrued liabilities on the consolidated balance sheets.

In December 2017, The Coca‑Cola Company agreed to provide the Company the Legacy Facilities Credit, which, after final adjustments made during the third quarter of 2018, totaled $44.3 million. The Legacy Facilities Credit compensated the Company for the net economic impact of changes made by The Coca‑Cola Company to the authorized pricing on sales of covered beverages produced at the regional manufacturing facilities owned by Company prior to the System Transformation and sold to The Coca‑Cola Company and certain U.S. Coca‑Cola bottlers pursuant to new pricing mechanisms included in the RMA.

The Company immediately recognized $12.4 million of the Legacy Facilities Credit, which represented the portion applicable to a regional manufacturing facility in Mobile, Alabama which the Company transferred to CCR as part of the CCR Exchange Transaction. The remaining balance of the Legacy Facilities Credit will be amortized as a reduction to cost of sales over a period of 40 years. The portion of the deferred liability that is expected to be amortized in the next twelve months was classified in other accrued liabilities on the consolidated balance sheets.

The Company is a shareholder of South Atlantic Canners, Inc., a manufacturing cooperative in Bishopville, South Carolina. All of SAC’s shareholders are Coca‑Cola bottlers and each has equal voting rights. The Company accounts for SAC as an equity method investment. The Company’s investment in SAC as of December 30, 2018 was $8.2 million.

The Company receives a fee for managing the day-to-day operations of SAC pursuant to a management agreement. Proceeds from management fees received from SAC were $9.0 million in 2018, $9.1 million in 2017 and $9.0 million in 2016.

The Company is a shareholder of Southeastern Container, a plastic bottle manufacturing cooperative. The Company accounts for Southeastern as an equity method investment. The Company’s investment in Southeastern as of December 30, 2018 was $23.6 million.

In December 2017, CCR redistributed a portion of its investment in Southeastern Container. As a result of this redistribution, the Company increased its investment in Southeastern Container by $6.0 million, which was recorded as income in other expense, net in the consolidated financial statements.

Along with other Coca‑Cola bottlers in the United States and Canada, the Company is a member of CCBSS, a company formed in 2003 to provide certain procurement and other services with the intention of enhancing the efficiency and competitiveness of the Coca‑Cola bottling system. The Company accounts for CCBSS as an equity method investment and its investment in CCBSS is not material.

CCBSS negotiates the procurement for the majority of the Company’s raw materials, excluding concentrate, and the Company receives a rebate from CCBSS for the purchase of these raw materials. The Company had rebates due from CCBSS of $10.4 million on December 30, 2018 and $11.2 million on December 31, 2017, which were classified as accounts receivable, other in the consolidated balance sheets.

In addition, the Company pays an administrative fee to CCBSS for its services. The Company incurred administrative fees to CCBSS $2.8 million in 2018, $2.3 million in 2017 and $1.3 million in 2016, which were classified as SD&A expenses in the consolidated statements of operations.

The Company is a member of CONA Services LLC (“CONA”), an entity formed with The Coca‑Cola Company and certain other Coca‑Cola bottlers to provide business process and information technology services to its members. The Company accounts for CONA as an equity method investment. The Company’s investment in CONA as of December 30, 2018 was $8.0 million.

During the fourth quarter of 2018, the Company recorded an out-of-period adjustment to correct previously understated SD&A expenses in the amount of $6.9 million to properly account for the Company’s portion of CONA’s historical operating losses as an equity method investment. The unrecorded amounts in prior years were immaterial to the consolidated financial statements, and the adjustment was not material to the current period.

The Company is party to an amended and restated master services agreement with CONA (the “CONA MSA”), pursuant to which CONA agreed to make available, and the Company became authorized to use, the Coke One North America system (the “CONA System”), a uniform information technology system developed to promote operational efficiency and uniformity among North American Coca‑Cola bottlers. As part of making the CONA System available to the Company, CONA provides the Company with certain business process and information technology services, including the planning, development, management and operation of the CONA System in connection with the Company’s direct store delivery and manufacture of products.

The Company is authorized under the CONA MSA to use the CONA System in connection with its distribution, promotion, marketing, sale and manufacture of beverages it is authorized to distribute or manufacture under the CBA, the RMA or any other agreement with The Coca‑Cola Company, subject to the provisions of the CONA operating agreement and any licenses or other agreements relating to products or services provided by third parties and used in connection with the CONA System. In exchange for the Company’s rights to use the CONA System and receive CONA-related services under the CONA MSA, it is charged service fees by CONA. The Company is obligated to pay the service fees under the CONA MSA even if it is not using the CONA System for all or any portion of its distribution and manufacturing operations. The Company incurred CONA service fees of $21.5 million in 2018 and $12.6 million in 2017.

The Company leases its headquarters office facility and an adjacent office facility in Charlotte, North Carolina from Beacon Investment Corporation, of which J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, is the majority stockholder and Morgan H. Everett, Vice President and a director of the Company, is a minority stockholder. The annual base rent the Company is obligated to pay under this lease agreement is subject to adjustment for increases in the Consumer Price Index and the lease expires on December 31, 2021. The principal balance outstanding under this capital lease was $9.9 million on December 30, 2018 and $12.8 million on December 31, 2017.

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

	Fiscal Year
(in thousands)	2018		2017		2016
Minimum rentals	$	3,511	$	3,509	$	3,526
Contingent rentals		927		877		767
Total rental payments	$	4,438	$	4,386	$	4,293

The contingent rentals in 2018, 2017 and 2016 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 on the Company’s consolidated statements of operations.

The Company leases the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina from Harrison Limited Partnership One, which is directly and indirectly owned by trusts of which J. Frank Harrison, III, and Sue Anne H. Wells, a director of the Company, are trustees and beneficiaries and of which Morgan H. Everett is a permissible, discretionary beneficiary. The annual base rent the Company is obligated to pay under this lease agreement is subject to an adjustment for an inflation factor and the lease expires on December 31, 2020.

The principal balance outstanding under this capital lease was $8.1 million on December 30, 2018 and $11.6 million on December 31, 2017. The annual base rent the Company is obligated to pay under the lease is subject to an adjustment for an inflation factor. Rental payments related to this lease were $4.2 million in 2018, $4.1 million in 2017 and $4.0 million in 2016.