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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________________________
FORM 10-Q
______________________________________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number: 0-9286
______________________________________________________________________________________________
COCA-COLA CONSOLIDATED, INC.
(Exact name of registrant as specified in its charter)
______________________________________________________________________________________________
Delaware
56-0950585
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
4100 CocaCola Plaza

Charlotte, NC
28211
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (704) 557-4400
______________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $1.00 per share
Trading Symbol(s)
COKE
Name of each exchange on which registered
NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No  
As of April 22, 2022, there were 8,368,993 shares of the registrant’s Common Stock, par value $1.00 per share, and 1,004,696 shares of the registrant’s Class B Common Stock, par value $1.00 per share, outstanding.



COCACOLA CONSOLIDATED, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED APRIL 1, 2022

i


PART I - FINANCIAL INFORMATION
Item 1.    Financial Statements.
COCACOLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

First Quarter
(in thousands, except per share data)20222021
Net sales$1,404,358 $1,269,857 
Cost of sales896,782 821,154 
Gross profit507,576 448,703 
Selling, delivery and administrative expenses376,591 354,519 
Income from operations130,985 94,184 
Interest expense, net7,699 8,746 
Other (income) expense, net(3,279)12,055 
Income before taxes126,565 73,383 
Income tax expense33,175 20,020 
Net income$93,390 $53,363 
Basic net income per share:
Common Stock$9.96 $5.69 
Weighted average number of Common Stock shares outstanding7,357 7,141 
Class B Common Stock$9.99 $5.69 
Weighted average number of Class B Common Stock shares outstanding2,016 2,232 
Diluted net income per share:
Common Stock$9.94 $5.67 
Weighted average number of Common Stock shares outstanding – assuming dilution9,396 9,409 
Class B Common Stock$9.96 $5.67 
Weighted average number of Class B Common Stock shares outstanding – assuming dilution2,039 2,268 
Cash dividends per share:
Common Stock$0.25 $0.25 
Class B Common Stock$0.25 $0.25 


















See accompanying notes to condensed consolidated financial statements.
1


COCACOLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

First Quarter
(in thousands)20222021
Net income$93,390 $53,363 
Other comprehensive income, net of tax:
Defined benefit plans reclassification including pension costs:
Actuarial gain746 916 
Prior service credits 1 
Postretirement benefits reclassification including benefit costs:
Actuarial gain69 140 
Interest rate swap 312 
Foreign currency translation adjustment (37)
Other comprehensive income, net of tax815 1,332 
Comprehensive income$94,205 $54,695 






































See accompanying notes to condensed consolidated financial statements.
2


COCACOLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share data)April 1, 2022December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents$127,085 $142,314 
Accounts receivable, trade475,303 472,270 
Allowance for doubtful accounts(16,762)(17,336)
Accounts receivable from The Coca‑Cola Company55,302 57,737 
Accounts receivable, other36,839 33,878 
Inventories276,278 302,851 
Prepaid expenses and other current assets94,151 78,068 
Assets held for sale3,022 6,880 
Total current assets1,051,218 1,076,662 
Property, plant and equipment, net1,071,731 1,030,688 
Right-of-use assets - operating leases138,856 139,877 
Leased property under financing leases, net7,666 64,211 
Other assets119,340 120,486 
Goodwill165,903 165,903 
Distribution agreements, net860,703 836,777 
Customer lists, net10,515 10,966 
Total assets$3,425,932 $3,445,570 
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of obligations under operating leases$23,556 $22,048 
Current portion of obligations under financing leases2,171 6,060 
Accounts payable, trade273,702 319,318 
Accounts payable to The Coca‑Cola Company159,506 145,671 
Other accrued liabilities230,568 226,769 
Accrued compensation73,330 110,894 
Accrued interest payable6,238 4,096 
Current portion of debt125,000  
Total current liabilities894,071 834,856 
Deferred income taxes169,827 136,432 
Pension and postretirement benefit obligations96,398 93,391 
Other liabilities734,337 758,610 
Noncurrent portion of obligations under operating leases119,814 122,046 
Noncurrent portion of obligations under financing leases9,264 65,006 
Long-term debt598,574 723,443 
Total liabilities2,622,285 2,733,784 
Commitments and Contingencies
Equity:
Common Stock, $1.00 par value: 30,000,000 shares authorized; 11,431,367 and 10,203,821 shares issued, respectively
11,431 10,204 
Class B Common Stock, $1.00 par value: 10,000,000 shares authorized; 1,632,810 and 2,860,356 shares issued, respectively
1,633 2,860 
Additional paid-in capital135,953 135,953 
Retained earnings815,532 724,486 
Accumulated other comprehensive loss(99,648)(100,463)
Treasury stock, at cost:  Common Stock – 3,062,374 shares
(60,845)(60,845)
Treasury stock, at cost:  Class B Common Stock – 628,114 shares
(409)(409)
Total equity803,647 711,786 
Total liabilities and equity$3,425,932 $3,445,570 
See accompanying notes to condensed consolidated financial statements.
3


COCACOLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

First Quarter
(in thousands)20222021
Cash Flows from Operating Activities:
Net income$93,390 $53,363 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense from property, plant and equipment and financing leases37,361 37,716 
Deferred income taxes33,130 19,980 
Amortization of intangible assets and deferred proceeds, net5,908 5,810 
Fair value adjustment of acquisition related contingent consideration(5,457)10,998 
Loss on sale of property, plant and equipment439 1,098 
Amortization of debt costs249 277 
Impairment and abandonment of property, plant and equipment 500 
Change in current assets less current liabilities(32,415)(38,662)
Change in other noncurrent assets8,189 4,197 
Change in other noncurrent liabilities(9,913)(13,330)
Other (37)
Total adjustments37,491 28,547 
Net cash provided by operating activities$130,881 $81,910 
Cash Flows from Investing Activities:
Additions to property, plant and equipment$(104,353)$(37,204)
Acquisition of BODYARMOR distribution rights(30,149)(1,998)
Proceeds from the sale of property, plant and equipment2,178 74 
Investment in CONA Services LLC(197)(514)
Net cash used in investing activities$(132,521)$(39,642)
Cash Flows from Financing Activities:
Payments of acquisition related contingent consideration$(9,822)$(10,046)
Cash dividends paid(2,344)(2,343)
Payments on financing lease obligations(1,375)(1,447)
Debt issuance fees(48)(147)
Payments on term loan facility (31,250)
Net cash used in financing activities$(13,589)$(45,233)
Net decrease in cash during period$(15,229)$(2,965)
Cash at beginning of period142,314 54,793 
Cash at end of period$127,085 $51,828 
Significant non-cash investing and financing activities:
Reductions to leased property under financing leases$55,465 $ 
Additions to property, plant and equipment accrued and recorded in accounts payable, trade12,703 16,192 
Right-of-use assets obtained in exchange for operating lease obligations5,048  







See accompanying notes to condensed consolidated financial statements.
4


COCACOLA CONSOLIDATED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)

(in thousands, except share data)Common
Stock
Class B
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock - Common
Stock
Treasury Stock - Class B Common StockTotal
Equity
Balance on December 31, 2021$10,204 $2,860 $135,953 $724,486 $(100,463)$(60,845)$(409)$711,786 
Net income— — — 93,390 — — — 93,390 
Other comprehensive income, net of tax— — — — 815 — — 815 
Cash dividends paid:
Common Stock ($0.25 per share)
— — — (1,786)— — — (1,786)
Class B Common Stock ($0.25 per share)
— — — (558)— — — (558)
Conversion of 1,227,546 shares of Class B Common Stock
1,227 (1,227)— — — — —  
Balance on April 1, 2022$11,431 $1,633 $135,953 $815,532 $(99,648)$(60,845)$(409)$803,647 
(in thousands, except share data)Common
Stock
Class B
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock - Common
Stock
Treasury Stock - Class B Common StockTotal
Equity
Balance on December 31, 2020$10,204 $2,860 $135,953 $544,280 $(119,053)$(60,845)$(409)$512,990 
Net income— — — 53,363 — — — 53,363 
Other comprehensive income, net of tax— — — — 1,332 — — 1,332 
Cash dividends paid:
Common Stock ($0.25 per share)
— — — (1,785)— — — (1,785)
Class B Common Stock ($0.25 per share)
— — — (558)— — — (558)
Balance on April 2, 2021$10,204 $2,860 $135,953 $595,300 $(117,721)$(60,845)$(409)$565,342 




























See accompanying notes to condensed consolidated financial statements.
5


COCACOLA CONSOLIDATED, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.    Critical Accounting Policies

The condensed consolidated financial statements include the accounts and the consolidated operations of Coca‑Cola Consolidated, Inc. and its majority-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated. The condensed consolidated financial statements reflect all adjustments, including normal, recurring accruals, which, in the opinion of management, are necessary for a fair statement of the results for the periods presented.

Each of the Company’s quarters, other than the fourth quarter, ends on the Friday closest to the last day of the corresponding quarterly calendar period. The Company’s fourth quarter and fiscal year end on December 31 regardless of the day of the week on which December 31 falls. The condensed consolidated financial statements presented are:

The financial position as of April 1, 2022 and December 31, 2021.
The results of operations, comprehensive income and changes in stockholders’ equity for the three-month periods ended April 1, 2022 (the “first quarter” of fiscal 2022 (“2022”)) and April 2, 2021 (the “first quarter” of fiscal 2021 (“2021”)).
The changes in cash flows for the first quarter of 2022 and the first quarter of 2021.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. The accounting policies followed in the presentation of interim financial results are consistent with those followed on an annual basis. These policies are presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for 2021 filed with the United States Securities and Exchange Commission.

The preparation of condensed consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Critical Accounting Estimates

In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of its results of operations and financial position in the preparation of its condensed consolidated financial statements in conformity with GAAP. Actual results could differ significantly from those estimates under different assumptions and conditions. The Company included in its Annual Report on Form 10-K for 2021 under the caption “Discussion of Critical Accounting Estimates” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” a discussion of the Company’s most critical accounting estimates, which are those the Company believes to be the most important to the portrayal of its financial condition and results of operations and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Any changes in critical accounting estimates are discussed with the Audit Committee of the Company’s Board of Directors during the quarter in which a change is contemplated and prior to making such change.

2.    Related Party Transactions

The Coca‑Cola Company

The Company’s business consists primarily of the distribution, marketing and manufacture 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.

On March 17, 2022, the Company entered into a stockholder conversion agreement (the “Stockholder Conversion Agreement”) with the JFH Family Limited Partnership—SW1, the Anne Lupton Carter Trust f/b/o Sue Anne H. Wells, the JFH Family Limited Partnership—DH1 and the Anne Lupton Carter Trust f/b/o Deborah S. Harrison (collectively, the “Converting Stockholders”), pursuant to which the Company and the Converting Stockholders agreed upon the process for converting an aggregate of 1,227,546 shares of the Company’s Class B Common Stock owned by the Converting Stockholders on a one share for one share
6


basis into shares of the Company’s Common Stock, effective as of March 17, 2022 (the “Converted Shares”). In the Stockholder Conversion Agreement, the Company agreed to cause the Converted Shares to be registered for resale pursuant to the Company’s existing automatic shelf registration statement and the Converting Stockholders agreed to certain restrictions on their resale of the Converted Shares, including a trade volume limitation that prohibits the sale of more than 175,000 of the Converted Shares in the aggregate during any three-consecutive month period.

J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, controls 1,004,394 shares of the Company’s Class B Common Stock, which represent approximately 71% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. In addition, other members of the Harrison family control shares of the Company’s Common Stock representing approximately 4% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis.

As of April 1, 2022, The Coca‑Cola Company owned shares of the Company’s Common Stock representing approximately 9% of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. The number of shares of the Company’s Common Stock currently held by The Coca‑Cola Company gives it the right to have a designee proposed by the Company for nomination to the Company’s Board of Directors in the Company’s annual proxy statement. J. Frank Harrison, III and the trustees of certain trusts established for the benefit of descendants of the late J. Frank Harrison, Jr., have agreed to vote the shares of the Company’s Class B Common Stock and Common Stock that they control 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 summarizes the significant cash transactions between the Company and The Coca‑Cola Company:

First Quarter
(in thousands)20222021
Payments made by the Company to The Coca-Cola Company(1)
$419,708 $349,345 
Payments made by The Coca-Cola Company to the Company59,669 29,677 

(1)This excludes acquisition related sub-bottling payments made by the Company to Coca-Cola Refreshments USA, Inc., a wholly owned subsidiary of The Coca‑Cola Company, but includes the purchase price of certain additional BODYARMOR distribution rights, each as discussed below.

On January 1, 2022, the Company entered into an agreement to acquire $30.1 million of additional BODYARMOR distribution rights with an estimated useful life of 40 years.

More than 80% of the payments made by the Company to The Coca‑Cola Company were for concentrate, syrup, sweetener and other finished goods products, which were recorded in cost of sales in the condensed consolidated statements of operations and represent the primary components of the soft drink products the Company manufactures and distributes. Payments made by the Company to The Coca‑Cola Company also included payments for marketing programs associated with large, national customers managed by The Coca‑Cola Company on behalf of the Company, which were recorded as a reduction to net sales in the condensed consolidated statements of operations. Other payments made by the Company to The Coca‑Cola Company related to cold drink equipment parts, fees associated with the rights to distribute certain brands and other customary items.

Payments made by The Coca‑Cola Company to the Company included annual funding in connection with the Company’s agreement to support certain business initiatives developed by The Coca‑Cola Company and funding associated with the delivery of post-mix products to various customers, both of which were recorded as a reduction to cost of sales in the condensed consolidated statements of operations. Post-mix products are dispensed through equipment that mixes fountain syrups with carbonated or still water, enabling fountain retailers to sell finished products to consumers in cups or glasses. Payments made by The Coca‑Cola Company to the Company also included transportation services and fountain product delivery and equipment repair services performed by the Company on The Coca‑Cola Company’s equipment, all of which were recorded in net sales in the condensed consolidated statements of operations.

Coca‑Cola Refreshments USA, Inc. (“CCR”)

The Company, The Coca‑Cola Company and CCR entered into comprehensive beverage agreements (collectively, the “CBA”), related to a multi-year series of transactions, which were completed in October 2017, through which the Company acquired and exchanged distribution territories and manufacturing plants (the “System Transformation”). The CBA requires the Company to make quarterly sub-bottling payments to CCR on a continuing basis in exchange for the grant of exclusive rights to distribute, promote, market and sell the authorized brands of The Coca‑Cola Company and related products in certain distribution territories the Company acquired from CCR. These sub-bottling payments are based on gross profit derived from the Company’s sales of
7


certain beverages and beverage products that are sold under the same trademarks that identify a covered beverage, a beverage product or certain cross-licensed brands applicable to the System Transformation (“acquisition related sub-bottling payments”).

Acquisition related sub-bottling payments to CCR were $9.8 million in the first quarter of 2022 and $10.0 million in the first quarter of 2021. The following table summarizes the liability recorded by the Company to reflect the estimated fair value of contingent consideration related to future expected acquisition related sub‑bottling payments to CCR:

(in thousands)April 1, 2022December 31, 2021
Current portion of acquisition related contingent consideration$47,218 $51,518 
Noncurrent portion of acquisition related contingent consideration480,708 490,587 
Total acquisition related contingent consideration$527,926 $542,105 

Southeastern Container (“Southeastern”)

The Company is a shareholder of Southeastern, a plastic bottle manufacturing cooperative. The Company accounts for Southeastern as an equity method investment. The Company’s investment in Southeastern, which was classified as other assets in the condensed consolidated balance sheets, was $21.8 million as of April 1, 2022 and $21.7 million as of December 31, 2021.

South Atlantic Canners, Inc. (“SAC”)

The Company is a shareholder of SAC, a manufacturing cooperative located 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, which was classified as other assets in the condensed consolidated balance sheets, was $8.2 million as of both April 1, 2022 and December 31, 2021. The Company also guarantees a portion of SAC’s debt; see Note 20 for additional information.

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, which were recorded as a reduction to cost of sales in the condensed consolidated statements of operations, were $2.1 million in the first quarter of 2022 and $2.3 million in the first quarter of 2021.

Coca‑Cola Bottlers’ Sales & Services Company LLC (“CCBSS”)

Along with all other Coca‑Cola bottlers in the United States and Canada, the Company is a member of CCBSS, a company formed 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 $8.9 million on April 1, 2022 and $7.9 million on December 31, 2021, which were classified as accounts receivable, other in the condensed consolidated balance sheets.

In addition, the Company pays an administrative fee to CCBSS for its services. The Company incurred administrative fees to CCBSS of $0.3 million in the first quarter of 2022 and $0.6 million in the first quarter of 2021, which were classified as selling, delivery and administrative (“SD&A”) expenses in the condensed consolidated statements of operations.

CONA Services LLC (“CONA”)

The Company is a member of 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, which was classified as other assets in the condensed consolidated balance sheets, was $14.7 million as of April 1, 2022 and $13.7 million as of December 31, 2021.

Pursuant to an amended and restated master services agreement with CONA, the Company is 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. In exchange for the Company’s rights to use the CONA System and receive CONA-related services, it is charged service fees by CONA. The Company incurred CONA service fees of $6.0 million in the first quarter of 2022 and $5.9 million in the first quarter of 2021.
8



Related Party Leases

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 is the majority stockholder and Morgan H. Everett, Vice Chair of the Company’s Board of Directors, is a minority stockholder. The annual base rent the Company is obligated to pay under this lease is subject to an adjustment for an inflation factor and the lease expires on December 31, 2029. The principal balance outstanding under this lease was $27.6 million on April 1, 2022 and $28.2 million on December 31, 2021.

The Company previously leased the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina (the “Snyder Production Center”) from Harrison Limited Partnership One (“HLP”), which is directly and indirectly owned by trusts of which J. Frank Harrison, III and Sue Anne H. Wells, a former director of the Company, are trustees and beneficiaries and of which Morgan H. Everett is a permissible, discretionary beneficiary. On March 17, 2022, CCBCC Operations, LLC (“Operations”), a wholly owned subsidiary of the Company, entered into a definitive purchase and sale agreement with HLP, pursuant to which Operations purchased the Snyder Production Center from HLP on such date for a purchase price of $60.0 million. This lease, which was scheduled to expire on December 31, 2035, was terminated in connection with the purchase of the Snyder Production Center by Operations. There was no principal balance outstanding under this lease on April 1, 2022 and there was a principal balance outstanding of $59.1 million on December 31, 2021.

A summary of rental payments for these leases related to the first quarter of 2022 and the first quarter of 2021 is as follows:

First Quarter
(in thousands)20222021
Company headquarters$963 $945 
Snyder Production Center927 1,113 

Long-Term Performance Equity Plan

The Long-Term Performance Equity Plan compensates J. Frank Harrison, III based on the Company’s performance. Awards granted to Mr. Harrison under the Long-Term Performance Equity Plan are earned based on the Company’s attainment during a performance period of certain performance measures, each as specified by the Compensation Committee of the Company’s Board of Directors. These awards may be settled in cash and/or shares of the Company’s Class B Common Stock, based on the average of the closing prices of shares of the Company’s Common Stock during the last 20 trading days of the performance period. Compensation expense for the Long-Term Performance Equity Plan, which was included in SD&A expenses in the condensed consolidated statements of operations, was $2.0 million in the first quarter of 2022 and $1.9 million in the first quarter of 2021.

3.    Revenue Recognition

The Company’s sales are divided into two main categories: (i) bottle/can sales and (ii) other sales. Bottle/can sales include products packaged primarily in plastic bottles and aluminum cans. Bottle/can net pricing is based on the invoice price charged to customers reduced by any promotional allowances. Bottle/can net pricing per unit is impacted by the price charged per package, the sales volume generated for each package and the channels in which those packages are sold. Other sales include sales to other Coca‑Cola bottlers, post-mix products, transportation revenue and equipment maintenance revenue.

The Company’s contracts are derived from customer orders, including customer sales incentives, generated through an order processing and replenishment model. Generally, the Company’s service contracts and contracts related to the delivery of specifically identifiable products have a single performance obligation. Revenues do not include sales or other taxes collected from customers. The Company has defined its performance obligations for its contracts as either at a point in time or over time. Bottle/can sales, sales to other Coca‑Cola bottlers and post-mix sales are recognized when control transfers to a customer, which is generally upon delivery and is considered a single point in time (“point in time”). Point in time sales accounted for approximately 97% of the Company’s net sales in the first quarter of 2022 and approximately 96% of the Company’s net sales in the first quarter of 2021.

Other sales, which include revenue for service fees related to the repair of cold drink equipment and delivery fees for freight hauling and brokerage services, are recognized over time (“over time”). Revenues related to cold drink equipment repair are recognized as the respective services are completed using a cost-to-cost input method. Repair services are generally completed in less than one day but can extend up to one month. Revenues related to freight hauling and brokerage services are recognized as the delivery occurs using a miles driven output method. Generally, delivery occurs and freight charges are recognized in the same
9


day. Over time sales orders open at the end of a financial period are not material to the condensed consolidated financial statements.

The following table represents a disaggregation of revenue from contracts with customers:

First Quarter
(in thousands)20222021
Point in time net sales:
Nonalcoholic Beverages - point in time$1,362,251 $1,225,212 
Total point in time net sales$1,362,251 $1,225,212 
Over time net sales:
Nonalcoholic Beverages - over time$10,970 $9,878 
All Other - over time31,137 34,767 
Total over time net sales$42,107 $44,645 
Total net sales$1,404,358 $1,269,857 

The Company’s allowance for doubtful accounts in the condensed consolidated balance sheets includes a reserve for customer returns and an allowance for credit losses. The Company experiences customer returns primarily as a result of damaged or out-of-date product. At any given time, the Company estimates less than 1% of bottle/can sales and post-mix sales could be at risk for return by customers. Returned product is recognized as a reduction to net sales. The Company’s reserve for customer returns was $3.0 million as of both April 1, 2022 and December 31, 2021.

The Company estimates an allowance for credit losses, based on historic days’ sales outstanding trends, aged customer balances, previously written-off balances and expected recoveries up to balances previously written off, in order to present the net amount expected to be collected. Accounts receivable balances are written off when determined uncollectible and are recognized as a reduction to the allowance for credit losses. Following is a summary of activity for the allowance for credit losses during the first quarter of 2022 and the first quarter of 2021:

First Quarter
(in thousands)20222021
Beginning balance - allowance for credit losses$14,336 $18,070 
Additions charged to expenses and as reductions to net sales27 1,270 
Deductions(601)(2,242)
Ending balance - allowance for credit losses$13,762 $17,098 

4.    Segments

The Company evaluates segment reporting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 280, Segment Reporting, each reporting period, including evaluating the reporting package reviewed by the Chief Operating Decision Maker (the “CODM”). The Company has concluded the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer, as a group, represent the CODM. Asset information is not provided to the CODM.

The Company believes three operating segments exist. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated net sales and income from operations. The additional two operating segments do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, and, therefore, have been combined into “All Other.”

10


The Company’s segment results are as follows:

First Quarter
(in thousands)20222021
Net sales:
Nonalcoholic Beverages$1,373,221 $1,235,090 
All Other96,163 89,949 
Eliminations(1)
(65,026)(55,182)
Consolidated net sales$1,404,358 $1,269,857 
Income from operations:
Nonalcoholic Beverages$134,558 $95,042 
All Other(3,573)(858)
Consolidated income from operations$130,985 $94,184 
Depreciation and amortization:
Nonalcoholic Beverages$40,286 $40,551 
All Other2,983 2,975 
Consolidated depreciation and amortization$43,269 $43,526 

(1)The entire net sales elimination represents net sales from the All Other segment to the Nonalcoholic Beverages segment. Sales between these segments are recognized at either fair market value or cost depending on the nature of the transaction.

5.    Net Income Per Share

The following table sets forth the computation of basic net income per share and diluted net income per share under the two-class method:

First Quarter
(in thousands, except per share data)20222021
Numerator for basic and diluted net income per Common Stock and Class B Common Stock share:
Net income$93,390 $53,363 
Less dividends:
Common Stock1,786 1,785 
Class B Common Stock558 558 
Total undistributed earnings$91,046 $51,020 
Common Stock undistributed earnings – basic$71,463 $38,871 
Class B Common Stock undistributed earnings – basic19,583 12,149 
Total undistributed earnings – basic$91,046 $51,020 
Common Stock undistributed earnings – diluted$71,288 $38,722 
Class B Common Stock undistributed earnings – diluted19,758 12,298 
Total undistributed earnings – diluted$91,046 $51,020 
Numerator for basic net income per Common Stock share:
Dividends on Common Stock$1,786 $1,785 
Common Stock undistributed earnings – basic71,463 38,871 
Numerator for basic net income per Common Stock share$73,249 $40,656 
Numerator for basic net income per Class B Common Stock share:
Dividends on Class B Common Stock$558 $558 
Class B Common Stock undistributed earnings – basic19,583 12,149 
Numerator for basic net income per Class B Common Stock share$20,141 $12,707 
11


First Quarter
(in thousands, except per share data)20222021
Numerator for diluted net income per Common Stock share:
Dividends on Common Stock$1,786 $1,785 
Dividends on Class B Common Stock assumed converted to Common Stock558 558 
Common Stock undistributed earnings – diluted91,046 51,020 
Numerator for diluted net income per Common Stock share$93,390 $53,363 
Numerator for diluted net income per Class B Common Stock share:
Dividends on Class B Common Stock$558 $558 
Class B Common Stock undistributed earnings – diluted19,758 12,298 
Numerator for diluted net income per Class B Common Stock share$20,316 $12,856 
Denominator for basic net income per Common Stock and Class B Common Stock share:
Common Stock weighted average shares outstanding – basic7,357 7,141 
Class B Common Stock weighted average shares outstanding – basic2,016 2,232 
Denominator for diluted net income per Common Stock and Class B Common Stock share:
Common Stock weighted average shares outstanding – diluted (assumes conversion of Class B Common Stock to Common Stock)9,396 9,409 
Class B Common Stock weighted average shares outstanding – diluted2,039 2,268 
Basic net income per share:
Common Stock$9.96 $5.69 
Class B Common Stock$9.99 $5.69 
Diluted net income per share:
Common Stock$9.94 $5.67 
Class B Common Stock$9.96 $5.67 

NOTES TO TABLE

(1)For purposes of the diluted net income per share computation for Common Stock, all shares of Class B Common Stock are assumed to be converted; therefore, 100% of undistributed earnings is allocated to Common Stock.
(2)For purposes of the diluted net income per share computation for Class B Common Stock, weighted average shares of Class B Common Stock are assumed to be outstanding for the entire period and not converted.
(3)For periods presented during which the Company has net income, the denominator for diluted net income per share for Common Stock and Class B Common Stock includes the dilutive effect of shares relative to the Long-Term Performance Equity Plan. For periods presented during which the Company has net loss, the unvested shares granted pursuant to the Long-Term Performance Equity Plan are excluded from the computation of diluted net loss per share, as the effect would have been anti-dilutive. See Note 2 for additional information on the Long-Term Performance Equity Plan.
(4)The Long-Term Performance Equity Plan awards may be settled in cash and/or shares of the Company’s Class B Common Stock. Once an election has been made to settle an award in cash, the dilutive effect of shares relative to such award is prospectively removed from the denominator in the computation of diluted net income per share.
(5)The Company did not have anti-dilutive shares for any periods presented.
(6)1,227,546 shares of the Company’s Class B Common Stock were converted on a one share for one share basis into shares of the Company’s Common Stock, effective as of March 17, 2022. See Note 2 for additional information on the Stockholder Conversion Agreement.

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6.    Inventories

Inventories consisted of the following:

(in thousands)April 1, 2022December 31, 2021
Finished products$173,622 $181,751 
Manufacturing materials62,857 81,183 
Plastic shells, plastic pallets and other inventories39,799 39,917 
Total inventories$276,278 $302,851 

7.    Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

(in thousands)April 1, 2022December 31, 2021
Repair parts$27,568 $26,643 
Commodity hedges at fair market value21,433 7,714 
Prepaid software6,671 7,038 
Prepaid marketing5,454 4,380 
Prepaid taxes3,874 4,079 
Other prepaid expenses and other current assets29,151 28,214 
Total prepaid expenses and other current assets$94,151 $78,068 

8.    Assets Held for Sale

As of April 1, 2022, certain properties owned by the Company met the accounting guidance criteria to be classified as assets held for sale. The properties primarily relate to warehousing and distribution operations that have been consolidated into new facilities. All properties classified as held for sale are included in the Nonalcoholic Beverages segment. There are not any liabilities held for sale associated with these properties and none meet the accounting guidance criteria to be classified as discontinued operations.

Following is a summary of the assets held for sale:

(in thousands)April 1, 2022December 31, 2021
Land$1,691 $2,906 
Buildings and leasehold and land improvements1,331 3,974 
Total assets held for sale$3,022 $6,880 

9.    Property, Plant and Equipment, Net

The principal categories and estimated useful lives of property, plant and equipment, net were as follows:

(in thousands)April 1, 2022December 31, 2021Estimated Useful Lives
Land$87,037 $80,261 
Buildings335,737 265,070 
8-50 years
Machinery and equipment441,988 443,592 
5-20 years
Transportation equipment471,059 466,238 
3-20 years
Furniture and fixtures94,336 95,062 
3-10 years
Cold drink dispensing equipment436,016 436,954 
3-17 years
Leasehold and land improvements163,392 178,809 
5-20 years
Software for internal use47,936 47,982 
3-10 years
Construction in progress27,401 23,496 
Total property, plant and equipment, at cost2,104,902 2,037,464 
Less:  Accumulated depreciation and amortization1,033,171 1,006,776 
Property, plant and equipment, net$1,071,731 $1,030,688 

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10.    Leases

Following is a summary of the weighted average remaining lease term and the weighted average discount rate for the Company’s leases:

April 1, 2022December 31, 2021
Weighted average remaining lease term:
Operating leases8.0 years8.3 years
Financing leases5.0 years12.5 years
Weighted average discount rate:
Operating leases3.6 %3.6 %
Financing leases5.2 %3.1 %

During the first quarter of 2022, the Company terminated its financing lease for the Snyder Production Center, which was scheduled to expire on December 31, 2035. See Note 2 for additional information on the lease termination.

Following is a summary of the Company’s leases within the condensed consolidated statements of operations:

First Quarter
(in thousands)20222021
Operating lease costs$7,303 $6,254 
Short-term and variable leases3,580 3,877 
Depreciation expense from financing leases1,080 1,414 
Interest expense on financing lease obligations470 584 
Total lease cost$12,433 $12,129 

The future minimum lease payments related to the Company’s leases include renewal options the Company has determined to be reasonably certain and exclude payments to landlords for real estate taxes and common area maintenance. Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of April 1, 2022:

(in thousands)Operating LeasesFinancing Leases
Remainder of 2022$20,696 $2,027 
202326,590 2,750 
202422,312 2,808 
202516,762 2,869 
202615,597 1,233 
Thereafter65,713 1,304 
Total minimum lease payments including interest$167,670 $12,991 
Less:  Amounts representing interest24,300