Coca-Cola Consolidated, Inc.COKE
Coca-Cola Consolidated, Inc. Fair Value Disclosure
Fair Values of Financial Instruments
GAAP requires assets and liabilities carried at fair value to be classified and disclosed in one of the following categories:
•Level 1: Quoted market prices in active markets for identical assets or liabilities.
•Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
•Level 3: Unobservable inputs that are not corroborated by market data.
The below methods and assumptions were used by the Company in estimating the fair values of its financial instruments. There were no transfers of assets or liabilities between levels in any period presented.
| Financial Instrument | Fair Value Level | Methods and Assumptions | ||||||||||||
| Deferred compensation plan assets and liabilities | Level 1 | The fair value of the Company’s nonqualified deferred compensation plan for certain executives and other highly compensated employees is based on the fair values of associated assets and liabilities, which are held in mutual funds and are based on the quoted market prices of the securities held within the mutual funds. | ||||||||||||
| Pension plan assets | Level 1 | The fair values of the Company’s Level 1 pension plan assets, which are equity securities and fixed income investment vehicles, are valued using the quoted market prices of those securities which are actively traded on national exchanges. | ||||||||||||
| Short-term investments | Level 1 | The fair values of the Company’s Level 1 short-term investments, which are U.S. Treasury securities, corporate bonds and asset-backed securities, are based on the quoted market prices of those securities which are actively traded on national exchanges. | ||||||||||||
| Pension plan assets | Level 2 | The fair values of the Company’s Level 2 pension plan assets, which are investments that are pooled with other investments in a commingled fund, are valued using the net asset value produced by the fund manager. The assets within the commingled funds have a readily determinable fair market value. | ||||||||||||
| Short-term investments | Level 2 | The fair values of the Company’s Level 2 short-term investments, which are commercial paper instruments, are based on estimated current market prices and have readily determinable fair market values. | ||||||||||||
| Commodity derivative instruments | Level 2 | The fair values of the Company’s commodity derivative instruments are based on current settlement values at each balance sheet date, which represent the estimated amounts the Company would have received or paid upon termination of those instruments. The Company’s credit risk related to the commodity derivative instruments is managed by requiring high standards for its counterparties and periodic settlements. The Company considers nonperformance risk in determining the fair values of commodity derivative instruments. | ||||||||||||
| Debt | Level 2 | The carrying amounts of the Company’s variable rate debt approximate the fair values due to variable interest rates with short reset periods. The fair values of the Company’s fixed rate debt are based on estimated current market prices. | ||||||||||||
| Acquisition related contingent consideration | Level 3 | The fair value of the Company’s acquisition related contingent consideration is based on internal forecasts and the WACC derived from market data. | ||||||||||||
The following tables summarize the carrying amounts and the fair values by level of the Company’s deferred compensation plan assets and liabilities, short-term investments, pension plan assets, commodity derivative instruments, debt and acquisition related contingent consideration:
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| (in thousands) | Carrying Amount | Total Fair Value | Fair Value Level 1 | Fair Value Level 2 | Fair Value Level 3 | |||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Deferred compensation plan assets | $ | 95,195 | $ | 95,195 | $ | 95,195 | $ | — | $ | — | ||||||||||||||||||||||
| Pension plan assets | 58,536 | 58,536 | 41,304 | 17,232 | — | |||||||||||||||||||||||||||
| Commodity derivative instruments | 4,242 | 4,242 | — | 4,242 | — | |||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Deferred compensation plan liabilities | 95,195 | 95,195 | 95,195 | — | — | |||||||||||||||||||||||||||
| Debt | 2,786,009 | 2,848,500 | — | 2,848,500 | — | |||||||||||||||||||||||||||
| Acquisition related contingent consideration | 717,908 | 717,908 | — | — | 717,908 | |||||||||||||||||||||||||||
| Commodity derivative instruments | 42 | 42 | — | 42 | — | |||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| (in thousands) | Carrying Amount | Total Fair Value | Fair Value Level 1 | Fair Value Level 2 | Fair Value Level 3 | |||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Deferred compensation plan assets | $ | 81,123 | $ | 81,123 | $ | 81,123 | $ | — | $ | — | ||||||||||||||||||||||
| Short-term investments | 301,210 | 301,210 | 283,547 | 17,663 | ||||||||||||||||||||||||||||
| Pension plan assets | 49,617 | 49,617 | 34,655 | 14,962 | — | |||||||||||||||||||||||||||
| Commodity derivative instruments | 2,472 | 2,472 | — | 2,472 | — | |||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Deferred compensation plan liabilities | 81,123 | 81,123 | 81,123 | — | — | |||||||||||||||||||||||||||
| Debt | 1,786,348 | 1,803,500 | — | 1,803,500 | — | |||||||||||||||||||||||||||
| Acquisition related contingent consideration | 654,191 | 654,191 | — | — | 654,191 | |||||||||||||||||||||||||||
The acquisition related contingent consideration was 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. 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.
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. 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 acquisition related contingent consideration liability is the Company’s only Level 3 asset or liability. A summary of the Level 3 activity is as follows:
| Fiscal Year | ||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||
| Beginning balance - Level 3 liability | $ | 654,191 | $ | 669,337 | ||||||||||
| Payments of acquisition related contingent consideration | (68,884) | (64,312) | ||||||||||||
| Reclassification to current payables | 700 | (10,000) | ||||||||||||
| Increase in fair value | 131,901 | 59,166 | ||||||||||||
| Ending balance - Level 3 liability | $ | 717,908 | $ | 654,191 | ||||||||||
As of December 31, 2025 and December 31, 2024, a WACC of 8.5% and 9.3%, respectively, was utilized in the valuation of the Company’s acquisition related contingent consideration liability. The increase in the fair value of the acquisition related contingent
consideration liability in 2025 was primarily driven by decreases in the WACC used to calculate the fair value of the liability and higher projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments. This fair value adjustment was recorded in mark-to-market on acquisition related contingent consideration in the consolidated statement of operations for 2025.
For the next five years (including in fiscal year 2026), 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.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.