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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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   

March 31, 2019

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 Coca‑Cola Plaza

Charlotte, NC

 

 

28211

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (704) 557-4400

 

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 filer

☒

 

Accelerated filer  

☐

Non-accelerated filer

☐

 

Smaller 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  ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $1.00 Par Value

COKE

The NASDAQ Global Select Market

As of April 28, 2019, there were 7,141,447 shares of the registrant’s Common Stock, $1.00 par value, and 2,232,242 shares of the registrant’s Class B Common Stock, $1.00 par value, outstanding.

 

 

COCA‑COLA CONSOLIDATED, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019

INDEX

 

 

 

 

Page

 

 

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

 

 

 

 

 

 

Consolidated Condensed Statements of Operations

2

 

 

 

 

 

 

Consolidated Condensed Statements of Comprehensive Income

3

 

 

 

 

 

 

Consolidated Condensed Balance Sheets

4

 

 

 

 

 

 

Consolidated Condensed Statements of Cash Flows

5

 

 

 

 

 

 

Consolidated Condensed Statements of Changes in Equity

6

 

 

 

 

 

 

Notes to Consolidated Condensed Financial Statements

7

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

42

 

 

 

 

Item 4.

 

Controls and Procedures

43

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

44

 

 

 

 

Item 1A.

 

Risk Factors

44

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

44

 

 

 

Item 6.

 

Exhibits

45

 

 

 

 

 

 

Signatures

46

 

 

 

 

 

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

COCA‑COLA CONSOLIDATED, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

First Quarter

 

(in thousands, except per share data)

 

2019

 

 

2018

 

Net sales

 

$

1,102,912

 

 

$

1,064,757

 

Cost of sales

 

 

713,604

 

 

 

707,116

 

Gross profit

 

 

389,308

 

 

 

357,641

 

Selling, delivery and administrative expenses

 

 

369,154

 

 

 

376,638

 

Income (loss) from operations

 

 

20,154

 

 

 

(18,997

)

Interest expense, net

 

 

12,886

 

 

 

12,046

 

Other income (expense), net

 

 

(15,851

)

 

 

4,510

 

Loss before income taxes

 

 

(8,583

)

 

 

(26,533

)

Income tax benefit

 

 

(3,005

)

 

 

(12,971

)

Net loss

 

 

(5,578

)

 

 

(13,562

)

Less: Net income attributable to noncontrolling interest

 

 

1,253

 

 

 

623

 

Net loss attributable to Coca-Cola Consolidated, Inc.

 

$

(6,831

)

 

$

(14,185

)

 

 

 

 

 

 

 

 

 

Basic net loss per share based on net loss attributable to Coca-Cola Consolidated, Inc.:

 

 

 

 

 

 

 

 

Common Stock

 

$

(0.73

)

 

$

(1.52

)

Weighted average number of Common Stock shares outstanding

 

 

7,141

 

 

 

7,141

 

 

 

 

 

 

 

 

 

 

Class B Common Stock

 

$

(0.73

)

 

$

(1.52

)

Weighted average number of Class B Common Stock shares outstanding

 

 

2,219

 

 

 

2,199

 

 

 

 

 

 

 

 

 

 

Diluted net loss per share based on net loss attributable to Coca-Cola Consolidated, Inc.:

 

 

 

 

 

 

 

 

Common Stock

 

$

(0.73

)

 

$

(1.52

)

Weighted average number of Common Stock shares outstanding – assuming dilution

 

 

9,360

 

 

 

9,340

 

 

 

 

 

 

 

 

 

 

Class B Common Stock

 

$

(0.73

)

 

$

(1.52

)

Weighted average number of Class B Common Stock shares outstanding – assuming dilution

 

 

2,219

 

 

 

2,199

 

 

 

 

 

 

 

 

 

 

Cash dividends per share:

 

 

 

 

 

 

 

 

Common Stock

 

$

0.25

 

 

$

0.25

 

Class B Common Stock

 

$

0.25

 

 

$

0.25

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated condensed financial statements.

 

2

 

COCA‑COLA CONSOLIDATED, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Net loss

 

$

(5,578

)

 

$

(13,562

)

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

Defined benefit plans reclassification including pension costs:

 

 

 

 

 

 

 

 

Actuarial gains

 

 

679

 

 

 

703

 

Prior service benefits

 

 

4

 

 

 

4

 

Postretirement benefits reclassification included in benefits costs:

 

 

 

 

 

 

 

 

Actuarial gains

 

 

148

 

 

 

377

 

Prior service costs

 

 

(244

)

 

 

(348

)

Foreign currency translation adjustment

 

 

(9

)

 

 

3

 

Other comprehensive income, net of tax

 

 

578

 

 

 

739

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

 

(5,000

)

 

 

(12,823

)

Less: Comprehensive income attributable to noncontrolling interest

 

 

1,253

 

 

 

623

 

Comprehensive loss attributable to Coca-Cola Consolidated, Inc.

 

$

(6,253

)

 

$

(13,446

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated condensed financial statements.

 

3

 

COCA‑COLA CONSOLIDATED, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

 

(in thousands, except share data)

 

March 31, 2019

 

 

December 30, 2018

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,497

 

 

$

13,548

 

Accounts receivable, trade

 

 

425,504

 

 

 

436,890

 

Allowance for doubtful accounts

 

 

(11,143

)

 

 

(9,141

)

Accounts receivable from The Coca-Cola Company

 

 

56,445

 

 

 

44,915

 

Accounts receivable, other

 

 

39,454

 

 

 

30,493

 

Inventories

 

 

220,317

 

 

 

210,033

 

Prepaid expenses and other current assets

 

 

69,357

 

 

 

70,680

 

Total current assets

 

 

808,431

 

 

 

797,418

 

Property, plant and equipment, net

 

 

970,499

 

 

 

990,532

 

Right of use assets - operating leases

 

 

84,592

 

 

 

-

 

Leased property under financing or capital leases, net

 

 

22,435

 

 

 

23,720

 

Other assets

 

 

113,537

 

 

 

115,490

 

Goodwill

 

 

165,903

 

 

 

165,903

 

Distribution agreements, net

 

 

894,269

 

 

 

900,383

 

Customer lists and other identifiable intangible assets, net

 

 

16,022

 

 

 

16,482

 

Total assets

 

$

3,075,688

 

 

$

3,009,928

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Current portion of obligations under operating leases

 

$

13,555

 

 

$

-

 

Current portion of obligations under financing or capital leases

 

 

8,833

 

 

 

8,617

 

Accounts payable, trade

 

 

168,526

 

 

 

152,040

 

Accounts payable to The Coca-Cola Company

 

 

120,778

 

 

 

112,425

 

Other accrued liabilities

 

 

197,755

 

 

 

250,246

 

Accrued compensation

 

 

40,374

 

 

 

72,316

 

Accrued interest payable

 

 

9,320

 

 

 

6,093

 

Total current liabilities

 

 

559,141

 

 

 

601,737

 

Deferred income taxes

 

 

123,920

 

 

 

127,174

 

Pension and postretirement benefit obligations

 

 

85,371

 

 

 

85,682

 

Other liabilities

 

 

620,293

 

 

 

609,135

 

Noncurrent portion of obligations under operating leases

 

 

71,345

 

 

 

-

 

Noncurrent portion of obligations under financing or capital leases

 

 

24,515

 

 

 

26,631

 

Long-term debt

 

 

1,138,500

 

 

 

1,104,403

 

Total liabilities

 

 

2,623,085

 

 

 

2,554,762

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Common Stock, $1.00 par value: 30,000,000 shares authorized; 10,203,821 shares issued

 

 

10,204

 

 

 

10,204

 

Class B Common Stock, $1.00 par value: 10,000,000 shares authorized; 2,860,356 and 2,841,132 shares issued, respectively

 

 

2,860

 

 

 

2,839

 

Capital in excess of par value

 

 

128,983

 

 

 

124,228

 

Retained earnings

 

 

369,985

 

 

 

359,435

 

Accumulated other comprehensive loss

 

 

(96,407

)

 

 

(77,265

)

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 equity of Coca-Cola Consolidated, Inc.

 

 

354,371

 

 

 

358,187

 

Noncontrolling interest

 

 

98,232

 

 

 

96,979

 

Total equity

 

 

452,603

 

 

 

455,166

 

Total liabilities and equity

 

$

3,075,688

 

 

$

3,009,928

 

 

See accompanying notes to consolidated condensed financial statements.

 

4

 

COCA‑COLA CONSOLIDATED, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(5,578

)

 

$

(13,562

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation expense from property, plant and equipment and financing or capital leases

 

 

39,979

 

 

 

41,572

 

Fair value adjustment of acquisition related contingent consideration

 

 

14,046

 

 

 

(5,186

)

Amortization of intangible assets and deferred proceeds, net

 

 

5,793

 

 

 

5,648

 

Deferred income taxes

 

 

(3,445

)

 

 

(15,394

)

Stock compensation expense

 

 

2,045

 

 

 

752

 

Loss on sale of property, plant and equipment

 

 

1,854

 

 

 

1,952

 

Amortization of debt costs

 

 

385

 

 

 

276

 

Change in current assets less current liabilities

 

 

(57,014

)

 

 

(99,994

)

Change in other noncurrent assets

 

 

1,196

 

 

 

2,344

 

Change in other noncurrent liabilities

 

 

5,898

 

 

 

833

 

Other

 

 

437

 

 

 

13

 

Total adjustments

 

 

11,174

 

 

 

(67,184

)

Net cash provided by (used in) operating activities

 

 

5,596

 

 

 

(80,746

)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(29,315

)

 

 

(42,048

)

Other distribution agreements

 

 

(4,654

)

 

 

-

 

Proceeds from the sale of property, plant and equipment

 

 

681

 

 

 

2,894

 

Investment in CONA Services LLC

 

 

(486

)

 

 

(1,070

)

Net cash used in investing activities

 

 

(33,774

)

 

 

(40,224

)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Borrowings under revolving credit facility

 

 

131,339

 

 

 

170,000

 

Proceeds from issuance of senior notes

 

 

-

 

 

 

150,000

 

Payments on revolving credit facility

 

 

(82,339

)

 

 

(197,000

)

Payments on term loan facility

 

 

(15,000

)

 

 

-

 

Payment of acquisition related contingent consideration

 

 

(6,237

)

 

 

(5,882

)

Cash dividends paid

 

 

(2,339

)

 

 

(2,333

)

Payments on financing or capital lease obligations

 

 

(2,114

)

 

 

(2,053

)

Debt issuance fees

 

 

(183

)

 

 

(185

)

Net cash provided by financing activities

 

 

23,127

 

 

 

112,547

 

 

 

 

 

 

 

 

 

 

Net decrease in cash

 

 

(5,051

)

 

 

(8,423

)

Cash at beginning of period

 

 

13,548

 

 

 

16,902

 

Cash at end of period

 

$

8,497

 

 

$

8,479

 

 

 

 

 

 

 

 

 

 

Significant noncash investing and financing activities:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment accrued and recorded in accounts payable, trade

 

$

5,350

 

 

$

16,147

 

Issuance of Class B Common Stock in connection with stock award

 

 

4,776

 

 

 

3,831

 

 

 

 

See accompanying notes to consolidated condensed financial statements.

 

5

 

COCA‑COLA CONSOLIDATED, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

 

(in thousands, except share data)

 

Common

Stock

 

 

Class B

Common

Stock

 

 

Capital

in

Excess of

Par Value

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock - Common Stock

 

 

Treasury

Stock - Class B

Common

Stock

 

 

Total

Equity

of Coca-Cola Consolidated, Inc.

 

 

Non-

controlling

Interest

 

 

Total

Equity

 

Balance on December 31, 2017

 

$

10,204

 

 

$

2,819

 

 

$

120,417

 

 

$

388,718

 

 

$

(94,202

)

 

$

(60,845

)

 

$

(409

)

 

$

366,702

 

 

$

92,205

 

 

$

458,907

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(14,185

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(14,185

)

 

 

623

 

 

 

(13,562

)

Other comprehensive income, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

739

 

 

 

-

 

 

 

-

 

 

 

739

 

 

 

-

 

 

 

739

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock ($0.25 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,785

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,785

)

 

 

-

 

 

 

(1,785

)

Class B Common Stock ($0.25 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(548

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(548

)

 

 

-

 

 

 

(548

)

Issuance of 20,296 shares of Class B Common Stock

 

 

-

 

 

 

20

 

 

 

3,811

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,831

 

 

 

-

 

 

 

3,831

 

Balance on April 1, 2018

 

$

10,204

 

 

$

2,839

 

 

$

124,228

 

 

$

372,200

 

 

$

(93,463

)

 

$

(60,845

)

 

$

(409

)

 

$

354,754

 

 

$

92,828

 

 

$

447,582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance on December 30, 2018

 

$

10,204

 

 

$

2,839

 

 

$

124,228

 

 

$

359,435

 

 

$

(77,265

)

 

$

(60,845

)

 

$

(409

)

 

$

358,187

 

 

$

96,979

 

 

$

455,166

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,831

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,831

)

 

 

1,253

 

 

 

(5,578

)

Other comprehensive income, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

578

 

 

 

-

 

 

 

-

 

 

 

578

 

 

 

-

 

 

 

578

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock ($0.25 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,785

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,785

)

 

 

-

 

 

 

(1,785

)

Class B Common Stock ($0.25 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(554

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(554

)

 

 

-

 

 

 

(554

)

Issuance of 19,224 shares of Class B Common Stock

 

 

-

 

 

 

21

 

 

 

4,755

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,776

 

 

 

-

 

 

 

4,776

 

Reclassification of stranded tax effects

 

 

-

 

 

 

-

 

 

 

-

 

 

 

19,720

 

 

 

(19,720

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Balance on March 31, 2019

 

$

10,204

 

 

$

2,860

 

 

$

128,983

 

 

$

369,985

 

 

$

(96,407

)

 

$

(60,845

)

 

$

(409

)

 

$

354,371

 

 

$

98,232

 

 

$

452,603

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated condensed financial statements.

 

6

 

COCA‑COLA CONSOLIDATED, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

1.Significant Accounting Policies and New Accounting Pronouncements

 

The consolidated condensed financial statements include the accounts of Coca‑Cola Consolidated, Inc. and its majority-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated. The consolidated condensed 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 interim periods presented:

 

 

•

The financial position as of March 31, 2019 and December 30, 2018.

 

•

The results of operations and comprehensive income for the 13 week periods ended March 31, 2019 (the “first quarter” of fiscal 2019 (“2019”)) and April 1, 2018 (the “first quarter” of fiscal 2018 (“2018”)).

 

•

The changes in cash flows and equity for the first quarter of 2019 and the first quarter of 2018.

 

The consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“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 2018 filed with the Securities and Exchange Commission.

 

The preparation of consolidated condensed financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.

 

Significant Accounting Policies

 

In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of its consolidated condensed 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 2018 under the caption “Discussion of Critical Accounting Policies, Estimates and New Accounting Pronouncements” in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” a discussion of the Company’s most critical accounting policies, 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 policies and estimates are discussed with the Audit Committee of the Board of Directors of the Company during the quarter in which a change is contemplated and prior to making such change.

 

Recently Adopted Accounting Pronouncements

 

In February 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2018‑02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which provides the option to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from accumulated other comprehensive income to retained earnings. This standard is required to be applied either in the period of adoption or retrospectively to each period in which the changes in the U.S. federal corporate income tax rate pursuant to the Tax Act are recognized. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and can be early adopted. The Company adopted ASU 2018‑02 in the first quarter of 2019 and recognized a cumulative effect adjustment to the opening balance of retained earnings in 2019. The cumulative effect adjustment increased retained earnings by $19.7 million.

 

In February 2016, the FASB issued ASU 2016-02, “Leases,” (the “lease standard”). The lease standard requires lessees to recognize a right-to-use asset and a lease liability for virtually all leases (other than leases meeting the definition of a short-term lease). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods beginning the following fiscal year. The Company adopted the new accounting standard during the first quarter of 2019 using the optional transition method. See Note 9 to the consolidated condensed financial statements for additional information on the Company’s adoption of the lease standard.

 

 

 

7

 

2.Related Party Transactions

 

The Coca‑Cola Company

 

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 March 31, 2019, 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:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Payments made by the Company to The Coca-Cola Company for:

 

 

 

 

 

 

 

 

Concentrate, syrup, sweetener and other purchases

 

$

266,643

 

 

$

242,468

 

Customer marketing programs

 

 

33,292

 

 

 

34,582

 

Cold drink equipment parts

 

 

6,982

 

 

 

6,141

 

 

 

 

 

 

 

 

 

 

Payments made by The Coca-Cola Company to the Company for:

 

 

 

 

 

 

 

 

Marketing funding support payments

 

$

22,712

 

 

$

20,037

 

Fountain delivery and equipment repair fees

 

 

10,749

 

 

 

9,347

 

Facilitating the distribution of certain brands and packages to other Coca-Cola bottlers

 

 

999

 

 

 

3,868

 

Presence marketing funding support on the Company’s behalf

 

 

435

 

 

 

481

 

 

As part of The Coca‑Cola Company’s plans to refranchise its North American bottling territories, the Company completed a series of transactions from April 2013 to October 2017 with The Coca‑Cola Company, Coca‑Cola Refreshments USA, Inc. (“CCR”), a wholly-owned subsidiary of The Coca‑Cola Company, and Coca‑Cola Bottling Company United, Inc. (“United”), an independent bottler that is unrelated to us, to significantly expand our distribution and manufacturing operations (the “System Transformation”). The System Transformation included the acquisition and exchange of rights to serve distribution territories and related distribution assets, as well as the acquisition and exchange of regional manufacturing facilities and related manufacturing assets.

 

In 2017, The Coca‑Cola Company agreed to provide the Company a fee, which totaled $44.3 million after final adjustments (the “Legacy Facilities Credit”). 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 certain manufacturing facilities owned by Company. The Company immediately recognized the portion of the Legacy Facilities Credit applicable to a regional manufacturing facility divested in 2017 and 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 is classified as current.

 

Coca‑Cola Refreshments USA, Inc.

 

The Company, The Coca-Cola Company and CCR entered into a comprehensive beverage agreement on March 31, 2017 (as amended, the “CBA”). 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 distribution territories the Company acquired from CCR as part of 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.

 

8

 

 

Sub-bottling payments to CCR were $6.2 million during the first quarter of 2019 and $5.9 million during the first quarter of 2018. 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:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Current portion of acquisition related contingent consideration

 

$

31,338

 

 

$

32,993

 

Noncurrent portion of acquisition related contingent consideration

 

 

361,669

 

 

 

349,905

 

Total acquisition related contingent consideration

 

$

393,007

 

 

$

382,898

 

 

Upon the conversion of the Company’s then-existing bottling agreements in 2017 pursuant to the CBA, the Company received a fee from CCR (the “Territory Conversion Fee”). The Territory Conversion Fee, which totaled $91.5 million after final adjustments, 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 is classified as current.

 

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 consolidated condensed balance sheets, was $23.5 million as of March 31, 2019 and $23.6 million as of December 30, 2018.

 

South Atlantic Canners, Inc. (“SAC”)

 

The Company is a shareholder of SAC, 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, which was classified as other assets in the consolidated condensed balance sheets, was $8.2 million as of both March 31, 2019 and December 30, 2018.

 

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 $2.2 million in both the first quarter of 2019 and the first quarter of 2018.

 

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

 

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 $9.8 million on March 31, 2019 and $10.4 million on December 30, 2018, which were classified as accounts receivable, other in the consolidated condensed 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 2019 and $0.7 million in the first quarter of 2018, which were classified as SD&A expenses in the consolidated condensed 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 consolidated condensed balance sheets, was $8.5 million as of March 31, 2019 and $8.0 million as of December 30, 2018.

 

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. CONA provides the Company with certain business process and information

 

9

 

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.

 

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 is obligated to pay the service fees 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 $5.3 million in the first quarter of 2019 and $4.0 million in the first quarter of 2018.

 

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, Chairman of the Board of Directors and Chief Executive Officer of the Company, is the majority stockholder and Morgan H. Everett, Senior 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 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.

 

A summary of the principal balance outstanding under these related party leases is as follows:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Company headquarters

 

$

9,134

 

 

$

9,851

 

Snyder Production Center

 

 

7,243

 

 

 

8,141

 

 

A summary of rental payments related to these leases is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Company headquarters

 

$

1,110

 

 

$

1,126

 

Snyder Production Center

 

 

1,080

 

 

 

1,049

 

 

3.Revenue Recognition

 

The Company offers a range of nonalcoholic beverage products and flavors designed to meet the demands of its consumers, including both sparkling and still beverages. Sparkling beverages are carbonated beverages and the Company’s principal sparkling beverage is Coca‑Cola. Still beverages include energy products and noncarbonated beverages such as bottled water, tea, ready to drink coffee, enhanced water, juices and sports drinks.

 

The Company’s products are sold and distributed through various channels, which include selling directly to retail stores and other outlets such as food markets, institutional accounts and vending machine outlets. All the Company’s beverage sales were to customers in the United States. The Company typically collects payment from customers within 30 days from the date of sale.

 

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. Other sales include sales to other Coca‑Cola bottlers, “post‑mix” products, transportation revenue and equipment maintenance revenue. 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.

 

 

10

 

Net sales by category were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Bottle/can sales:

 

 

 

 

 

 

 

 

Sparkling beverages (carbonated)

 

$

585,973

 

 

$

560,105

 

Still beverages (noncarbonated, including energy products)

 

 

343,695

 

 

 

320,917

 

Total bottle/can sales

 

 

929,668

 

 

 

881,022

 

 

 

 

 

 

 

 

 

 

Other sales:

 

 

 

 

 

 

 

 

Sales to other Coca-Cola bottlers

 

 

81,673

 

 

 

101,734

 

Post-mix and other

 

 

91,571

 

 

 

82,001

 

Total other sales

 

 

173,244

 

 

 

183,735

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

Bottle/can sales represented approximately 84% of the Company’s net sales in the first quarter of 2019 and 83% of the Company’s net sales in the first quarter of 2018. The sparkling beverage category represented approximately 63% and 64% of total bottle/can sales during the first quarter of 2019 and the first quarter of 2018, respectively.

 

The Company’s contracts are derived from customer orders, including customer sales incentives, generated through an order processing and replenishment model. 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 96% of the Company’s net sales in the first quarter of 2019 and 97% of the Company’s net sales in the first quarter of 2018. Substantially all the Company’s revenue is recognized at a point in time and is included in the Nonalcoholic Beverages segment.

 

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

 

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

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Point in time net sales:

 

 

 

 

 

 

 

 

Nonalcoholic - point in time

 

$

1,060,271

 

 

$

1,031,808

 

Total point in time net sales

 

$

1,060,271

 

 

$

1,031,808

 

 

 

 

 

 

 

 

 

 

Over time net sales:

 

 

 

 

 

 

 

 

Nonalcoholic - over time

 

$

11,956

 

 

$

8,614

 

Other - over time

 

 

30,685

 

 

 

24,335

 

Total over time net sales

 

$

42,641

 

 

$

32,949

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

The Company participates in various sales programs with The Coca‑Cola Company, other beverage companies and customers to increase the sale of its products. Programs negotiated with customers include arrangements under which allowances can be earned for attaining agreed-upon sales levels. The cost of these various sales incentives are not considered a separate performance obligation and are included as deductions to net sales.

 

Allowance payments made to customers can be conditional on the achievement of volume targets and/or marketing commitments. Payments made in advance are recorded as prepayments and amortized in the consolidated condensed statements of operations over

 

11

 

the relevant period for which the customer commitment is made. In the event there is no separate identifiable benefit or the fair value of such benefit cannot be established, the amortization of the prepayment is included as a reduction to net sales.

 

The Company historically presented consideration paid to customers under certain contractual arrangements for exclusive distribution rights and sponsorship privileges as a marketing expense within selling, delivery and administrative (“SD&A”) expenses. The Company has now determined such amounts should be presented as a reduction to net sales and has revised the presentation of previously issued financial statements to correct for this error. Management believes the effect on previously reported financial statements is not material. In addition, management believes the revised presentation provides consistency with other companies that operate in the beverage industry. Net sales and SD&A expenses were revised by $7.3 million in the first quarter of 2018. The revision had no impact to net loss or net loss per share.

 

Revenues do not include sales or other taxes collected from customers.

 

The majority of the Company’s contracts include multiple performance obligations related to the delivery of specifically identifiable products, which generally have a duration of less than one year. For sales contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using stated contractual price, which represents the standalone selling price of each distinct good sold under the contract. Generally, the Company’s service contracts have a single performance obligation.

 

The Company sells its products and extends credit, generally without requiring collateral, based on an ongoing evaluation of the customer’s business prospects and financial condition. The Company evaluates the collectibility of its trade accounts receivable based on a number of factors, including the Company’s historic collections pattern and changes to a specific customer’s ability to meet its financial obligations. The Company has established an allowance for doubtful accounts to adjust the recorded receivable to the estimated amount the Company believes will ultimately be collected.

 

The nature of the Company’s contracts gives rise to several types of variable consideration, including prospective and retrospective rebates. The Company accounts for its prospective and retrospective rebates using the expected value method, which estimates the net price to the customer based on the customer’s expected annual sales volume projections.

 

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. The Company’s reserve for customer returns, which was classified as allowance for doubtful accounts in the consolidated condensed balance sheets, was $3.6 million as of March 31, 2019 and $2.3 million as of December 30, 2018. Returned product is recognized as a reduction of net sales.

 

4.Segments

 

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

 

The Company believes four operating segments exist. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated revenues and income from operations. The additional three 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.”

 

 

12

 

The Company’s segment results are as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Net sales:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages(1)

 

$

1,072,227

 

 

$

1,040,422

 

All Other

 

 

87,915

 

 

 

86,599

 

Eliminations(2)

 

 

(57,230

)

 

 

(62,264

)

Consolidated net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

14,641

 

 

$

(22,745

)

All Other

 

 

5,513

 

 

 

3,748

 

Consolidated income (loss) from operations

 

$

20,154

 

 

$

(18,997

)

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

43,351

 

 

$

44,825

 

All Other

 

 

2,421

 

 

 

2,395

 

Consolidated depreciation and amortization

 

$

45,772

 

 

$

47,220

 

 

(1)

The Company historically presented consideration paid to customers under certain contractual arrangements for exclusive distribution rights and sponsorship privileges as a marketing expense within SD&A expenses. The Company has now determined such amounts should be presented as a reduction to net sales and has revised the presentation of previously issued financial statements to correct for this error. Net sales and SD&A expenses were revised by $7.3 million in the first quarter of 2018. See Note 3 to the consolidated condensed financial statements for additional information.

(2)

The entire net sales elimination for each period presented represents net sales from All Other 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 Loss Per Share

 

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

 

 

 

First Quarter

 

(in thousands, except per share data)

 

2019

 

 

2018

 

Numerator for basic and diluted net loss per Common Stock and Class B Common Stock share:

 

 

 

 

 

 

 

 

Net loss attributable to Coca-Cola Consolidated, Inc.

 

$

(6,831

)

 

$

(14,185

)

Less dividends:

 

 

 

 

 

 

 

 

Common Stock

 

 

1,785

 

 

 

1,785

 

Class B Common Stock

 

 

554

 

 

 

548

 

Total undistributed losses

 

$

(9,170

)

 

$

(16,518

)

 

 

 

 

 

 

 

 

 

Common Stock undistributed losses – basic

 

$

(6,996

)

 

$

(12,629

)

Class B Common Stock undistributed losses – basic

 

 

(2,174

)

 

 

(3,889

)

Total undistributed losses – basic

 

$

(9,170

)

 

$

(16,518

)

 

 

 

 

 

 

 

 

 

Common Stock undistributed losses – diluted

 

$

(6,996

)

 

$

(12,629

)

Class B Common Stock undistributed losses – diluted

 

 

(2,174

)

 

 

(3,889

)

Total undistributed losses – diluted

 

$

(9,170

)

 

$

(16,518

)

 

 

 

 

 

 

 

 

 

Numerator for basic net loss per Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Common Stock

 

$

1,785

 

 

$

1,785

 

Common Stock undistributed losses – basic

 

 

(6,996

)

 

 

(12,629

)

Numerator for basic net loss per Common Stock share

 

$

(5,211

)

 

$

(10,844

)

 

13

 

 

 

 

First Quarter

 

(in thousands, except per share data)

 

2019

 

 

2018

 

Numerator for basic net loss per Class B Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Class B Common Stock

 

$

554

 

 

$

548

 

Class B Common Stock undistributed losses – basic

 

 

(2,174

)

 

 

(3,889

)

Numerator for basic net loss per Class B Common Stock share

 

$

(1,620

)

 

$

(3,341

)

 

 

 

 

 

 

 

 

 

Numerator for diluted net loss per Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Common Stock

 

$

1,785

 

 

$

1,785

 

Dividends on Class B Common Stock assumed converted to Common Stock

 

 

554

 

 

 

548

 

Common Stock undistributed losses – diluted

 

 

(9,170

)

 

 

(16,518

)

Numerator for diluted net loss per Common Stock share

 

$

(6,831

)

 

$

(14,185

)

 

 

 

 

 

 

 

 

 

Numerator for diluted net loss per Class B Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Class B Common Stock

 

$

554

 

 

$

548

 

Class B Common Stock undistributed losses – diluted

 

 

(2,174

)

 

 

(3,889

)

Numerator for diluted net loss per Class B Common Stock share

 

$

(1,620

)

 

$

(3,341

)

 

 

 

 

 

 

 

 

 

Denominator for basic net loss per Common Stock and Class B Common Stock share:

 

 

 

 

 

 

 

 

Common Stock weighted average shares outstanding – basic

 

 

7,141

 

 

 

7,141

 

Class B Common Stock weighted average shares outstanding – basic

 

 

2,219

 

 

 

2,199

 

 

 

 

 

 

 

 

 

 

Denominator for diluted net loss 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)

 

 

9,360

 

 

 

9,340

 

Class B Common Stock weighted average shares outstanding – diluted

 

 

2,219

 

 

 

2,199

 

 

 

 

 

 

 

 

 

 

Basic net loss per share:

 

 

 

 

 

 

 

 

Common Stock

 

$

(0.73

)

 

$

(1.52

)

Class B Common Stock

 

$

(0.73

)

 

$

(1.52

)

 

 

 

 

 

 

 

 

 

Diluted net loss per share:

 

 

 

 

 

 

 

 

Common Stock

 

$

(0.73

)

 

$

(1.52

)

Class B Common Stock

 

$

(0.73

)

 

$

(1.52

)

 

NOTES TO TABLE

 

(1)

For purposes of the diluted net loss per share computation for Common Stock, all shares of Class B Common Stock are assumed to be converted; therefore, 100% of undistributed losses is allocated to Common Stock.

(2)

For purposes of the diluted net loss 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 included the dilutive effect of shares relative to the Long-Term Performance Equity Plan and the Performance Unit Award Agreement. For periods presented during which the Company has net loss, the unvested performance units granted pursuant to the Long-Term Performance Equity Plan and the Performance Unit Award Agreement are excluded from the calculation of diluted net loss per share, as the effect of these awards would be anti-dilutive. See Note 21 to the consolidated condensed financial statements for additional information on the Long-Term Performance Equity Plan and the Performance Unit Award Agreement.

(4)

The Company does not have anti-dilutive shares.

 

 

14

 

6.Inventories

 

Inventories consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Finished products

 

$

145,240

 

 

$

135,561

 

Manufacturing materials

 

 

37,049

 

 

 

39,840

 

Plastic shells, plastic pallets and other inventories

 

 

38,028

 

 

 

34,632

 

Total inventories

 

$

220,317

 

 

$

210,033

 

 

7.Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Repair parts

 

$

25,395

 

 

$

26,846

 

Prepayments for sponsorship contracts

 

 

7,042

 

 

 

7,557

 

Prepaid software

 

 

6,015

 

 

 

6,553

 

Prepaid marketing

 

 

5,867

 

 

 

6,097

 

Current portion of income taxes

 

 

5,315

 

 

 

6,637

 

Other prepaid expenses and other current assets

 

 

19,723

 

 

 

16,990

 

Total prepaid expenses and other current assets

 

$

69,357

 

 

$

70,680

 

 

8.Property, Plant and Equipment, Net

 

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

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

 

Estimated Useful Lives

Land

 

$

77,949

 

 

$

78,242

 

 

 

Buildings

 

 

218,075

 

 

 

218,846

 

 

8-50 years

Machinery and equipment

 

 

327,547

 

 

 

328,034

 

 

5-20 years

Transportation equipment

 

 

373,980

 

 

 

372,895

 

 

4-20 years

Furniture and fixtures

 

 

90,277

 

 

 

89,439

 

 

3-10 years

Cold drink dispensing equipment

 

 

495,013

 

 

 

491,161

 

 

5-17 years

Leasehold and land improvements

 

 

132,704

 

 

 

132,837

 

 

5-20 years

Software for internal use

 

 

122,603

 

 

 

122,604

 

 

3-10 years

Construction in progress

 

 

19,973

 

 

 

15,142

 

 

 

Total property, plant and equipment, at cost

 

 

1,858,121

 

 

 

1,849,200

 

 

 

Less:  Accumulated depreciation and amortization

 

 

887,622

 

 

 

858,668

 

 

 

Property, plant and equipment, net

 

$

970,499

 

 

$

990,532

 

 

 

 

9.Leases

 

The Company leases office and warehouse space, machinery and other equipment under noncancelable operating lease agreements and also leases certain warehouse space under financing lease agreements. The Company adopted the lease standard using the optional transition method on December 31, 2018, the transition date. The Company has elected to adopt the following practical expedients as accounting policy upon initial adoption of the lease standard:

 

•

Short-term lease exception: Allows the Company to not recognize leases with a contractual term of less than 12 months on the balance sheet.

•

Election to not separate non-lease components: Allows the Company to not separate lease and non-lease components and to account for both components as a single component, recognized on the balance sheet.

 

15

 

•

Package of practical expedients for transition: Allows the Company to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, and (iii) any initial direct costs for any existing leases as of the transition date.

•

Additional transition method/relief: Allows the Company to apply the transition requirements in the lease standard as of the transition date, with any impact of initially applying the lease standard recognized as a cumulative effect adjustment to retained earnings in the period of adoption. This also requires the Company to maintain previous disclosure requirements for comparative periods.

 

Upon adoption of the lease standard on December 31, 2018, the Company recorded right of use assets for operating leases of $88.0 million and associated lease liabilities of $88.2 million. The adoption of the lease standard did not change previously reported consolidated condensed statements of operations, did not result in a cumulative effect adjustment to retained earnings in the period of adoption and did not impact cash flows.

 

The Company has used the following policies and assumptions in evaluating its population of leases:

 

•

Determining a lease: The Company assesses contracts at inception to determine whether an arrangement is or includes a lease, which conveys the Company’s right to control the use of an identified asset for a period of time in exchange for consideration. Operating lease right of use assets and associated liabilities are recognized at the commencement date and initially measured based on the present value of lease payments over the defined lease term.

•

Allocating lease and non-lease components: The Company has elected the practical expedient to not separate lease and non-lease components for certain classes of underlying assets. The Company has equipment and vehicle lease agreements, which generally have the lease and associated non-lease components accounted for as a single lease component. The Company has real estate lease agreements with lease and non-lease components, which are generally accounted for separately where applicable.

•

Discount rate: The Company calculates the discount rate based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company calculates an incremental borrowing rate using a portfolio approach. The incremental borrowing rate is calculated using the contractual lease term and the Company's borrowing rate.

•

Lease term: The Company does not recognize leases with a contractual term of less than 12 months on the balance sheet. Lease expense for these short-term leases is expensed on a straight-line basis over the lease term.

•

Rent increases or escalation clauses: Certain leases contain scheduled rent increases or escalation clauses, which can be based on the Consumer Price Index or other rates. The Company assesses each contract individually and applies the appropriate variable payments based on the terms of the agreement.

•

Renewal options and/or purchase options: Certain leases include renewal options to extend the lease term and/or purchase options to purchase the leased asset. The Company assesses these options using a threshold of reasonably certain, which is a high threshold and, therefore, the majority of the Company’s leases do not include renewal periods or purchase options for the measurement of the right of use asset and the associated lease liability. For leases the Company is reasonably certain to renew or purchase, those options are included within the lease term and, therefore, included in the measurement of the right of use asset and the associated lease liability.

•

Option to terminate: Certain leases include the option to terminate the lease prior to its scheduled expiration. This allows a contractually bound party to terminate its obligation under the lease contract, typically in return for an agreed upon financial consideration. The terms and conditions of the termination options vary by contract.

•

Residual value guarantees, restrictions or covenants: The Company’s lease agreements do not contain residual value guarantees, restrictions or covenants.

 

Following is a summary of the weighted average remaining lease term and weighted average discount rate for the Company’s population of leases as of March 31, 2019:

 

 

 

March 31, 2019

 

Weighted average remaining lease term:

 

 

 

 

Operating leases

 

7.6 years

 

Financing leases

 

5.1 years

 

Weighted average discount rate:

 

 

 

 

Operating leases

 

 

3.9

%

Financing leases

 

 

5.8

%

 

As of March 31, 2019, the Company had additional operating leases, primarily for real estate and transportation equipment, that have not yet commenced. These operating leases are expected to commence in the remainder of 2019 and have lease terms of 3 to 16 years. The lease liability associated with these future leases is expected to be $23.4 million.

 

 

16

 

Following is a summary of balances related to the Company’s lease portfolio within the Company’s consolidated condensed statement of operations for the first quarter of 2019:

 

(in thousands)

 

First Quarter 2019

 

Cost of sales impact:

 

 

 

 

Operating leases costs

 

$

1,341

 

Short-term and variable leases

 

 

2,262

 

Depreciation expense from financing leases(1)

 

 

353

 

Total cost of sales impact

 

$

3,956

 

 

 

 

 

 

Selling, delivery and administrative expenses impact:

 

 

 

 

Operating leases costs

 

$

2,896

 

Short-term and variable leases

 

 

1,059

 

Depreciation expense from financing leases(1)

 

 

1,139

 

Total selling, delivery and administrative expenses impact

 

$

5,094

 

 

 

 

 

 

Interest expense, net impact:

 

 

 

 

Interest payments on financing lease obligations(2)

 

$

702

 

Total interest expense, net impact

 

$

702

 

 

 

 

 

 

Total lease cost

 

$

9,752

 

 

(1)

During the first quarter of 2018, the Company had depreciation expense from capital leases of $0.4 million and $1.1 million in cost of sales and SD&A expenses, respectively.

(2)

During the first quarter of 2018, the Company had interest payments on capital lease obligations of $0.9 million.

 

The future minimum lease payments related to the Company’s lease portfolio include renewal options the Company has determined to be reasonably assured 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 March 31, 2019:

 

(in thousands)

 

Operating Leases

 

 

Financing Leases

 

 

Total

 

Remainder of 2019

 

$

12,426

 

 

$

7,830

 

 

$

20,256

 

2020

 

 

16,444

 

 

 

10,611

 

 

 

27,055

 

2021

 

 

14,251

 

 

 

6,215

 

 

 

20,466

 

2022

 

 

11,636

 

 

 

2,694

 

 

 

14,330

 

2023

 

 

10,050

 

 

 

2,750

 

 

 

12,800

 

Thereafter

 

 

34,245

 

 

 

8,214

 

 

 

42,459

 

Total minimum lease payments including interest

 

$

99,052

 

 

$

38,314

 

 

$

137,366

 

Less:  Amounts representing interest

 

 

14,152

 

 

 

4,966

 

 

 

19,118

 

Present value of minimum lease principal payments

 

 

84,900

 

 

 

33,348

 

 

 

118,248

 

Less:  Current portion of lease liabilities - operating and financing leases

 

 

13,555

 

 

 

8,833

 

 

 

22,388

 

Noncurrent portion of lease liabilities - operating and financing leases

 

$

71,345

 

 

$

24,515

 

 

$

95,860

 

 

 

17

 

Following is a summary of future minimum lease payments for all noncancelable operating leases and capital leases as of December 30, 2018:

 

(in thousands)

 

Operating Leases

 

 

Capital Leases

 

 

Total

 

2019

 

$

14,146

 

 

$

10,434

 

 

$

24,580

 

2020

 

 

13,526

 

 

 

10,613

 

 

 

24,139

 

2021

 

 

12,568

 

 

 

6,218

 

 

 

18,786

 

2022

 

 

11,161

 

 

 

2,697

 

 

 

13,858

 

2023

 

 

10,055

 

 

 

2,753

 

 

 

12,808

 

Thereafter

 

 

33,805

 

 

 

8,106

 

 

 

41,911

 

Total minimum lease payments including interest

 

$

95,261

 

 

$

40,821

 

 

$

136,082

 

Less:  Amounts representing interest

 

 

 

 

 

 

5,573

 

 

 

 

 

Present value of minimum lease principal payments

 

 

 

 

 

 

35,248

 

 

 

 

 

Less:  Current portion of lease liabilities - capital leases

 

 

 

 

 

 

8,617

 

 

 

 

 

Noncurrent portion of lease liabilities - capital leases

 

 

 

 

 

$

26,631

 

 

 

 

 

 

Following is a summary of balances related to the Company’s lease portfolio within the Company’s consolidated condensed statements of cash flows for the first quarter of 2019:

 

(in thousands)

 

First Quarter 2019

 

Cash flows from operating activities impact:

 

 

 

 

Operating leases

 

$

4,136

 

Interest payments on financing lease obligations(1)

 

 

702

 

Total cash flows from operating activities impact

 

$

4,838

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Principal payments on financing lease obligations(1)

 

$

2,114

 

Total cash flows from financing activities impact

 

$

2,114

 

 

(1)

During the first quarter of 2018, the Company had principal payments on capital lease obligations of $2.1 million and interest payments on capital lease obligations of $0.9 million.

 

10.Goodwill

 

A reconciliation of the activity for goodwill for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - goodwill

 

$

165,903

 

 

$

169,316

 

Measurement period adjustments(1)

 

 

-

 

 

 

946

 

Ending balance - goodwill

 

$

165,903

 

 

$

170,262

 

 

(1)

Measurement period adjustments relate to post-closing adjustments made in accordance with the terms and conditions of the applicable asset purchase agreement or asset exchange agreement for distribution territories acquired or exchanged by the Company in April 2017 and October 2017 as part of the System Transformation. All final post-closing adjustments for these transactions were completed during 2018.

 

The Company’s goodwill resides entirely within the Nonalcoholic Beverages segment. The Company performs its annual impairment test of goodwill as of the first day of the fourth quarter of each fiscal year. During the first quarter of 2019, the Company did not experience any triggering events or changes in circumstances indicating the carrying amounts of the Company’s goodwill exceeded fair values.

 

 

18

 

11.Distribution Agreements, Net

 

Distribution agreements, net, which are amortized on a straight-line basis and have an estimated useful life of 10 to 40 years, consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Distribution agreements at cost

 

$

950,549

 

 

$

950,559

 

Less: Accumulated amortization

 

 

(56,280

)

 

 

(50,176

)

Distribution agreements, net

 

$

894,269

 

 

$

900,383

 

 

A reconciliation of the activity for distribution agreements, net for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - distribution agreements, net

 

$

900,383

 

 

$

913,352

 

Other distribution agreements

 

 

(10

)

 

 

-

 

Additional accumulated amortization

 

 

(6,104

)

 

 

(5,952

)

Ending balance - distribution agreements, net

 

$

894,269

 

 

$

907,400

 

 

12.Customer Lists and Other Identifiable Intangible Assets, Net

 

Customer lists and other identifiable intangible assets, net, which are amortized on a straight-line basis and have an estimated useful life of 5 to 12 years, consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Customer lists and other identifiable intangible assets at cost

 

$

25,288

 

 

$

25,288

 

Less: Accumulated amortization

 

 

(9,266

)

 

 

(8,806

)

Customer lists and other identifiable intangible assets, net

 

$

16,022

 

 

$

16,482

 

 

A reconciliation of the activity for customer lists and other identifiable intangible assets, net for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - customer lists and other identifiable intangible assets, net

 

$

16,482

 

 

$

18,320

 

Additional accumulated amortization

 

 

(460

)

 

 

(459

)

Ending balance - customer lists and other identifiable intangible assets, net

 

$

16,022

 

 

$

17,861

 

 

13.Other Accrued Liabilities

 

Other accrued liabilities consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Accrued insurance costs

 

$

40,387

 

 

$

37,916

 

Checks and transfers yet to be presented for payment from zero balance cash accounts

 

 

37,935

 

 

 

72,701

 

Current portion of acquisition related contingent consideration

 

 

31,338

 

 

 

32,993

 

Employee and retiree benefit plan accruals

 

 

24,903

 

 

 

29,300

 

Accrued marketing costs

 

 

25,633

 

 

 

31,475

 

Accrued taxes (other than income taxes)

 

 

8,935

 

 

 

4,577

 

Commodity hedges at fair market value

 

 

3,950

 

 

 

10,305

 

Current deferred proceeds from Territory Conversion Fee

 

 

2,286

 

 

 

2,286

 

All other accrued expenses

 

 

22,388

 

 

 

28,693

 

Total other accrued liabilities

 

$

197,755

 

 

$

250,246

 

 

 

19

 

14.Derivative Financial Instruments

 

The Company is subject to the risk of increased costs arising from adverse changes in certain commodity prices. In the normal course of business, the Company manages these risks through a variety of strategies, including the use of derivative instruments. The Company does not use derivative instruments for trading or speculative purposes. All derivative instruments are recorded at fair value as either assets or liabilities in the Company’s consolidated condensed balance sheets. These derivative instruments are not designated as hedging instruments under GAAP and are used as “economic hedges” to manage certain commodity price risk. Derivative instruments held are marked to market on a monthly basis and recognized in earnings consistent with the expense classification of the underlying hedged item. Settlements of derivative agreements are included in cash flows from operating activities on the Company’s consolidated condensed statements of cash flows.

 

The Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk. While the Company would be exposed to credit loss in the event of nonperformance by these counterparties, the Company does not anticipate nonperformance by these parties.

 

The following table summarizes pre-tax changes in the fair value of the Company’s commodity derivative financial instruments and the classification of such changes in the consolidated condensed statements of operations.

 

 

 

 

 

First Quarter

 

(in thousands)

 

Classification of Gain (Loss)

 

2019

 

 

2018

 

Commodity hedges

 

Cost of sales

 

$

3,905

 

 

$

(2,765

)

Commodity hedges

 

Selling, delivery and administrative expenses

 

 

2,715

 

 

 

(202

)

Total gain (loss)

 

 

 

$

6,620

 

 

$

(2,967

)

 

The following table summarizes the fair values and classification in the consolidated condensed balance sheets of derivative instruments held by the Company:

 

(in thousands)

 

Balance Sheet Classification

 

March 31, 2019

 

 

December 30, 2018

 

Assets:

 

 

 

 

 

 

 

 

 

 

Commodity hedges at fair market value

 

Other assets

 

$

265

 

 

$

-

 

Total assets

 

 

 

$

265

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Commodity hedges at fair market value

 

Other accrued liabilities

 

$

3,950

 

 

$

10,305

 

Total liabilities

 

 

 

$

3,950

 

 

$

10,305

 

 

The Company has master agreements with the counterparties to its derivative financial agreements that provide for net settlement of derivative transactions. Accordingly, the net amounts of derivative assets are recognized in either prepaid expenses and other current assets or other assets in the Company’s consolidated condensed balance sheets and the net amounts of derivative liabilities are recognized in other accrued liabilities or other liabilities in the consolidated condensed balance sheets. The following table summarizes the Company’s gross derivative assets and gross derivative liabilities in the consolidated condensed balance sheets:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Gross derivative assets

 

$

25,958

 

 

$

28,305

 

Gross derivative liabilities

 

 

29,643

 

 

 

38,610

 

 

The following table summarizes the Company’s outstanding commodity derivative agreements:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Notional amount of outstanding commodity derivative agreements

 

$

152,044

 

 

$

168,388

 

Latest maturity date of outstanding commodity derivative agreements

 

December 2020

 

 

December 2019

 

 

 

20

 

15.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 following 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

 

Method and Assumptions

Deferred compensation plan assets and liabilities

 

Level 1

 

The fair value of the Company’s non-qualified 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 value of the securities held within the mutual funds.

Commodity hedging agreements

 

Level 2

 

The fair values of the Company’s commodity hedging agreements are based on current settlement values at each balance sheet date. The fair values of the commodity hedging agreements at each balance sheet date represent the estimated amounts the Company would have received or paid upon termination of these agreements. The Company’s credit risk related to the derivative financial instruments is managed by requiring high standards for its counterparties and periodic settlements. The Company considers nonperformance risk in determining the fair value of derivative financial instruments.

Nonpublic variable rate debt

 

Level 2

 

The carrying amounts of the Company’s nonpublic variable rate debt approximate their fair values due to variable interest rates with short reset periods.

Nonpublic fixed rate debt

 

Level 2

 

The fair values of the Company’s nonpublic fixed rate debt are based on estimated current market prices.

Public debt securities

 

Level 2

 

The fair values of the Company’s public debt securities are based on estimated current market prices.

Acquisition related contingent consideration

 

Level 3

 

The fair values of acquisition related contingent consideration are based on internal forecasts and the weighted average cost of capital (“WACC”) derived from market data.

 

The following tables summarize, by assets and liabilities, the carrying amounts and fair values by level of the Company’s deferred compensation plan, commodity hedging agreements, debt and acquisition related contingent consideration:

 

 

 

March 31, 2019

 

 

 

Carrying

 

 

Total

 

 

Fair Value

 

 

Fair Value

 

 

Fair Value

 

(in thousands)

 

Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan assets

 

$

36,755

 

 

$

36,755

 

 

$

36,755

 

 

$

-

 

 

$

-

 

Commodity hedging agreements

 

 

265

 

 

 

265

 

 

 

-

 

 

 

265

 

 

 

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan liabilities

 

 

36,755

 

 

 

36,755

 

 

 

36,755

 

 

 

-

 

 

 

-

 

Commodity hedging agreements

 

 

3,950

 

 

 

3,950

 

 

 

-

 

 

 

3,950

 

 

 

-

 

Nonpublic variable rate debt

 

 

406,119

 

 

 

406,500

 

 

 

-

 

 

 

406,500

 

 

 

-

 

Nonpublic fixed rate debt

 

 

274,701

 

 

 

265,200

 

 

 

-

 

 

 

265,200

 

 

 

-

 

Public debt securities

 

 

457,680

 

 

 

464,700

 

 

 

-

 

 

 

464,700

 

 

 

-

 

Acquisition related contingent consideration

 

 

393,007

 

 

 

393,007

 

 

 

-

 

 

 

-

 

 

 

393,007

 

 

 

21

 

 

 

December 30, 2018

 

 

 

Carrying

 

 

Total

 

 

Fair Value

 

 

Fair Value

 

 

Fair Value

 

(in thousands)

 

Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan assets

 

$

33,160

 

 

$

33,160

 

 

$

33,160

 

 

$

-

 

 

$

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan liabilities

 

 

33,160

 

 

 

33,160

 

 

 

33,160

 

 

 

-

 

 

 

-

 

Commodity hedging agreements

 

 

10,305

 

 

 

10,305

 

 

 

-

 

 

 

10,305

 

 

 

-

 

Nonpublic variable rate debt

 

 

372,074

 

 

 

372,500

 

 

 

-

 

 

 

372,500

 

 

 

-

 

Nonpublic fixed rate debt

 

 

274,717

 

 

 

261,200

 

 

 

-

 

 

 

261,200

 

 

 

-

 

Public debt securities

 

 

457,612

 

 

 

455,400

 

 

 

-

 

 

 

455,400

 

 

 

-

 

Acquisition related contingent consideration

 

 

382,898

 

 

 

382,898

 

 

 

-

 

 

 

-

 

 

 

382,898

 

 

The acquisition related contingent consideration is 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 to fair value by discounting future expected sub-bottling payments required under the CBA using the Company’s estimated WACC.

 

The future expected sub-bottling payments extend through the life of the applicable distribution assets acquired in each System Transformation transaction, 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 amounts that will be paid in the future under the CBA, and current 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 and could materially impact the amount of noncash expense (or income) recorded each reporting period.

 

The acquisition related contingent consideration is the Company’s only Level 3 asset or liability. A reconciliation of the Level 3 activity is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - Level 3 liability

 

$

382,898

 

 

$

381,291

 

Measurement period adjustment(1)

 

 

-

 

 

 

(1,059

)

Payment of acquisition related contingent consideration

 

 

(6,237

)

 

 

(5,882

)

Reclassification to current payables

 

 

2,300

 

 

 

(360

)

(Favorable)/unfavorable fair value adjustment

 

 

14,046

 

 

 

(5,186

)

Ending balance - Level 3 liability

 

$

393,007

 

 

$

368,804

 

 

(1)

Measurement period adjustment relates to post-closing adjustments made in accordance with the terms and conditions of the asset purchase agreement for the distribution territories acquired by the Company in April 2017 as part of the System Transformation. All final post-closing adjustments for these transactions were completed during 2018.

 

The fair value adjustments to the acquisition related contingent consideration liability during the first quarter of 2019 and the first quarter of 2018 were primarily driven by changes in the risk-free interest rate. These adjustments were recorded in other income (expense), net in the consolidated condensed statements of operations.

 

The anticipated amount the Company could pay annually under acquisition related contingent consideration arrangements is expected to be in the range of $25 million to $48 million.

 

16.Income Taxes

 

The Company’s effective income tax rate, as calculated by dividing income tax benefit by loss before income taxes, was 35.0% for the first quarter of 2019 and 48.9% for the first quarter of 2018. The decrease in the effective tax rate was primarily driven by improved financial results.

 

The Company’s effective income tax rate, as calculated by dividing income tax benefit by loss before income taxes minus net income attributable to noncontrolling interest, was 30.6% for the first quarter of 2019 and 47.8% for the first quarter of 2018.

 

 

22

 

The Company had uncertain tax positions, including accrued interest, of $3.2 million on March 31, 2019 and $3.1 million on December 30, 2018, all of which would affect the Company’s effective tax rate if recognized. While it is expected the amount of uncertain tax positions may change in the next 12 months, the Company does not expect such change would have a significant impact on the consolidated condensed financial statements.

 

Prior tax years beginning in year 2002 remain open to examination by the Internal Revenue Service, and various tax years beginning in year 1998 remain open to examination by certain state tax jurisdictions.

 

17.Pension and Postretirement Benefit Obligations

 

Pension Plans

 

There are two Company-sponsored pension plans. The primary Company-sponsored pension plan was frozen as of June 30, 2006 and no benefits accrued to participants after this date. The second Company-sponsored pension plan (the “Bargaining Plan”) is for certain employees under collective bargaining agreements. Benefits under the Bargaining Plan are determined in accordance with negotiated formulas for the respective participants. Contributions to the plans are based on actuarially determined amounts and are limited to the amounts currently deductible for income tax purposes.

 

The components of net periodic pension cost were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Service cost

 

$

1,207

 

 

$

1,412

 

Interest cost

 

 

3,063

 

 

 

2,856

 

Expected return on plan assets

 

 

(2,574

)

 

 

(3,852

)

Recognized net actuarial loss

 

 

901

 

 

 

933

 

Amortization of prior service cost

 

 

5

 

 

 

6

 

Net periodic pension cost

 

$

2,602

 

 

$

1,355

 

 

The Company did not make any contributions to the two Company sponsored pension plans during the first quarter of 2019. Contributions to the two Company-sponsored pension plans are expected to be in the range of $1 million to $2 million for the remainder of 2019.

 

Postretirement Benefits

 

The Company provides postretirement benefits for a portion of its current employees. The Company recognizes the cost of postretirement benefits, which consist principally of medical benefits, during covered employees’ periods of active service. The Company does not pre-fund these benefits and has the right to modify or terminate certain of these benefits in the future.

 

The components of net periodic postretirement benefit cost were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Service cost

 

$

389

 

 

$

502

 

Interest cost

 

 

693

 

 

 

696

 

Recognized net actuarial loss

 

 

196

 

 

 

499

 

Amortization of prior service cost

 

 

(324

)

 

 

(462

)

Net periodic postretirement benefit cost

 

$

954

 

 

$

1,235

 

 

Multi-Employer Benefits

 

Certain employees of the Company whose employment is covered under collective bargaining agreements participate in a multiemployer pension plan, the Employers-Teamsters Local Union Nos. 175 and 505 Pension Fund (the “Teamsters Plan”). The Company makes monthly contributions to the Teamsters Plan on behalf of such employees. The collective bargaining agreements covering the Teamsters Plan expire at various times by July 2021. The Company expects these agreements will be re-negotiated.

 

 

23

 

The risks of participating in the Teamsters Plan are different from single employer plans as contributed assets are pooled and may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the Teamsters Plan, the unfunded obligations of the Teamsters Plan may be borne by the remaining participating employers. If the Company chooses to stop participating in the Teamsters Plan, the Company could be required to pay the Teamsters Plan a withdrawal liability based on the underfunded status of the Teamsters Plan. The Company does not anticipate withdrawing from the Teamsters Plan.

 

In 2015, the Company increased its contribution rates to the Teamsters Plan, with additional increases occurring annually, as part of a rehabilitation plan, which was incorporated into the renewal of collective bargaining agreements with the unions effective April 28, 2014 and adopted by the Company as a rehabilitation plan effective January 1, 2015. This was a result of the Teamsters Plan being certified by its actuary as being in “critical” status for the plan year beginning January 1, 2013.

 

18.Other Liabilities

 

Other liabilities consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Noncurrent portion of acquisition related contingent consideration

 

$

361,669

 

 

$

349,905

 

Accruals for executive benefit plans

 

 

131,266

 

 

 

126,103

 

Noncurrent deferred proceeds from Territory Conversion Fee

 

 

84,592

 

 

 

85,163

 

Noncurrent deferred proceeds from Legacy Facilities Credit

 

 

30,169

 

 

 

30,369

 

Other

 

 

12,597

 

 

 

17,595

 

Total other liabilities

 

$

620,293

 

 

$

609,135

 

 

19.Debt

 

Following is a summary of the Company’s debt:

 

 

(in thousands)

 

Maturity

Date

 

Interest

Rate

 

 

Interest

Paid

 

Public or

Nonpublic

 

March 31,

2019

 

 

December 30,

2018

 

Senior notes(1)

 

4/15/2019

 

7.00%

 

 

Semi-annually

 

Public

 

$

110,000

 

 

$

110,000

 

Term loan facility(1)

 

6/7/2021

 

Variable

 

 

Varies

 

Nonpublic

 

 

277,500

 

 

 

292,500

 

Senior notes

 

2/27/2023

 

3.28%

 

 

Semi-annually

 

Nonpublic

 

 

125,000

 

 

 

125,000

 

Revolving credit facility(2)

 

6/8/2023

 

Variable

 

 

Varies

 

Nonpublic

 

 

129,000

 

 

 

80,000

 

Senior notes

 

11/25/2025

 

3.80%

 

 

Semi-annually

 

Public

 

 

350,000

 

 

 

350,000

 

Senior notes

 

3/21/2030

 

3.96%

 

 

Quarterly

 

Nonpublic

 

 

150,000

 

 

 

150,000

 

Unamortized discount on senior notes(3)

 

4/15/2019

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

(78

)

Unamortized discount on senior notes(3)

 

11/25/2025

 

 

 

 

 

 

 

 

 

 

(59

)

 

 

(61

)

Debt issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

(2,930

)

 

 

(2,958

)

Total debt

 

 

 

 

 

 

 

 

 

 

 

 

1,138,500

 

 

 

1,104,403

 

Less: Current portion of debt

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

Long-term debt

 

 

 

 

 

 

 

 

 

 

 

$

1,138,500

 

 

$

1,104,403

 

 

(1)

The senior notes due in 2019 were refinanced on April 10, 2019 using proceeds from the issuance of the senior notes due in 2026 (as discussed below). The Company intends to refinance the term loan facility, which has principal payments that will be due in the next twelve months, and has the capacity to do so under its revolving credit facility, which is classified as long-term debt. As such, any amounts due in the next twelve months were classified as noncurrent.

(2)

The Company’s revolving credit facility has an aggregate maximum borrowing capacity of $500 million, which may be increased at the Company’s option to $750 million, subject to obtaining commitments from the lenders and satisfying other conditions specified in the credit agreement. The Company currently believes all banks participating in the revolving credit facility have the ability to and will meet any funding requests from the Company.

(3)

The senior notes due in 2019 were issued at 98.238% of par and the senior notes due in 2025 were issued at 99.975% of par.

 

The Company mitigates its financing risk by using multiple financial institutions and only entering into credit arrangements with institutions with investment grade credit ratings. The Company monitors counterparty credit ratings on an ongoing basis.

 

Subsequent to the end of the first quarter of 2019, on April 10, 2019, the Company sold $100 million aggregate principal amount of senior unsecured notes due in 2026 to MetLife Investment Advisors, LLC (“MetLife”) and certain of its affiliates pursuant to a Note

 

24

 

Purchase and Private Shelf Agreement dated January 23, 2019 between the Company, MetLife and the other parties thereto. These notes bear interest at 3.93%, payable quarterly in arrears on each January 10, April 10, July 10 and October 10, commencing on July 10, 2019, and will mature on October 10, 2026, unless earlier redeemed by the Company. The Company used the proceeds to refinance the senior notes due on April 15, 2019. The Company may request that MetLife consider the purchase of additional senior unsecured notes of the Company under the agreement in an aggregate principal amount of up to $200 million.

 

The indentures under which the Company’s public debt was issued do not include financial covenants but do limit the incurrence of certain liens and encumbrances as well as indebtedness by the Company’s subsidiaries in excess of certain amounts. The agreements under which the Company’s nonpublic debt were issued include two financial covenants: a consolidated cash flow/fixed charges ratio and a consolidated funded indebtedness/cash flow ratio, each as defined in the respective agreements. The Company was in compliance with these covenants as of March 31, 2019. These covenants do not currently, and the Company does not anticipate they will, restrict its liquidity or capital resources.

 

All outstanding long-term debt has been issued by the Company and none has been issued by any of its subsidiaries. There are no guarantees of the Company’s debt.

 

20.Commitments and Contingencies

 

Manufacturing Cooperatives

 

The Company is obligated to purchase at least 80% of its requirements of plastic bottles for certain designated territories from Southeastern. The Company is also obligated to purchase 17.5 million cases of finished product from SAC on an annual basis through June 2024. The Company purchased 6.8 million cases and 7.2 million cases of finished product from SAC in the first quarter of 2019 and the first quarter of 2018, respectively.

 

The following table summarizes the Company’s purchases from these manufacturing cooperatives:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Purchases from Southeastern

 

$

34,326

 

 

$

29,169

 

Purchases from SAC

 

 

37,446

 

 

 

38,076

 

Total purchases from manufacturing cooperatives

 

$

71,772

 

 

$

67,245

 

 

The Company guarantees a portion of SAC’s debt, which expires at various dates through 2021. The amounts guaranteed were $23.9 million on both March 31, 2019 and December 30, 2018. In the event SAC fails to fulfill its commitments under the related debt, the Company would be responsible for payments to the lenders up to the level of the guarantee. The Company does not anticipate SAC will fail to fulfill its commitment related to the debt. The Company further believes SAC has sufficient assets, including production equipment, facilities and working capital, and the ability to adjust selling prices of its products to adequately mitigate the risk of material loss from the Company’s guarantee.

 

The Company holds no assets as collateral against the SAC guarantee, the fair value of which is immaterial to the Company’s consolidated condensed financial statements. The Company monitors its investments in SAC and would be required to write down its investment if an impairment was identified and the Company determined it to be other than temporary. No impairment of the Company’s investments in SAC was identified as of March 31, 2019, and there was no impairment identified in 2018.

 

Other Commitments and Contingencies

 

The Company has standby letters of credit, primarily related to its property and casualty insurance programs. These letters of credit totaled $35.6 million as of both March 31, 2019 and December 30, 2018.

 

The Company participates in long-term marketing contractual arrangements with certain prestige properties, athletic venues and other locations. As of March 31, 2019, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $171.9 million.

 

The Company is involved in various claims and legal proceedings which have arisen in the ordinary course of its business. Although it is difficult to predict the ultimate outcome of these claims and legal proceedings, management believes that the ultimate disposition of these matters will not have a material adverse effect on the financial condition, cash flows or results of operations of the Company. No

 

25

 

material amount of loss in excess of recorded amounts is believed to be reasonably possible as a result of these claims and legal proceedings.

 

The Company is subject to audits by tax authorities in jurisdictions where it conducts business. These audits may result in assessments that are subsequently resolved with the authorities or potentially through the courts. Management believes the Company has adequately provided for any assessments likely to result from these audits; however, final assessments, if any, could be different than the amounts recorded in the consolidated condensed financial statements.

 

21.Capital Transactions

 

During the first quarter of 2019, J. Frank Harrison, III was eligible to receive shares of the Company’s Class B Common Stock in connection with his services as Chairman of the Board of Directors and Chief Executive Officer of the Company during 2018, pursuant to a ten-year performance unit award agreement approved in 2008 (the “Performance Unit Award Agreement”). The Performance Unit Award Agreement expired at the end of 2018, with the final award issued in the first quarter of 2019.

 

During the first quarter of each year presented, the Compensation Committee of the Company’s Board of Directors (the “Committee”) determined whether any shares of the Company’s Class B Common Stock should be issued to J. Frank Harrison, III pursuant to the Performance Unit Award Agreement in connection with his services for the prior year. As permitted under the terms of the Performance Unit Award Agreement, a number of shares were settled in cash each year to satisfy tax withholding obligations in connection with the vesting of the performance units. The remaining number of shares increased the total shares of Class B Common Stock outstanding. A summary of the awards issued in 2019 and 2018 is as follows:

 

 

 

Fiscal Year

 

 

 

2019

 

 

2018

 

Date of approval for award

 

March 5, 2019

 

 

March 6, 2018

 

Fiscal year of service covered by award

 

2018

 

 

2017

 

Shares settled in cash to satisfy tax withholding obligations

 

 

15,476

 

 

 

16,504

 

Increase in Class B Common Stock shares outstanding

 

 

19,224

 

 

 

20,296

 

Total Class B Common Stock awarded

 

 

34,700

 

 

 

36,800

 

 

Compensation expense for the awards issued pursuant to the Performance Unit Award Agreement, recognized on the closing share price of the last trading day prior to the end of each fiscal period, was $2.0 million in the first quarter of 2019 and $0.8 million in the first quarter of 2018.

 

In 2018, the Committee and the Company’s stockholders approved a long-term performance equity plan (the “Long-Term Performance Equity Plan”), which will compensate J. Frank Harrison, III based on the Company’s performance. The Long-Term Performance Equity Plan succeeded the Performance Unit Award Agreement upon its expiration. Awards granted under the Long-Term Performance Equity Plan will be earned based on the Company’s attainment during a performance period of certain performance measures, each as specified by the Committee. These awards may be settled in cash and/or shares of Class B Common Stock, based on the average of the closing prices of shares of Common Stock during the last twenty trading days of the performance period. Compensation expense for the Long-Term Performance Equity Plan, which is included in SD&A expenses on the consolidated condensed statements of operations, was $3.8 million in the first quarter of 2019.

 

22.Accumulated Other Comprehensive Income (Loss)

 

Accumulated other comprehensive income (loss) (“AOCI(L)”) is comprised of adjustments relative to the Company’s pension and postretirement medical benefit plans and foreign currency translation adjustments required for a subsidiary of the Company that performs data analysis and provides consulting services outside the United States.

 

 

26

 

A summary of AOCI(L) for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

(in thousands)

 

December 30, 2018

 

 

Pre-tax Activity

 

 

Tax Effect

 

 

March 31, 2019

 

Reclassification of stranded tax effects

 

$

-

 

 

$

-

 

 

$

(19,720

)

 

$

(19,720

)

Net pension activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(72,690

)

 

 

901

 

 

 

(222

)

 

 

(72,011

)

Prior service costs

 

 

(24

)

 

 

5

 

 

 

(1

)

 

 

(20

)

Net postretirement benefits activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(4,902

)

 

 

196

 

 

 

(48

)

 

 

(4,754

)

Prior service costs

 

 

351

 

 

 

(324

)

 

 

80

 

 

 

107

 

Foreign currency translation adjustment

 

 

-

 

 

 

(10

)

 

 

1

 

 

 

(9

)

Total AOCI(L)

 

$

(77,265

)

 

$

768

 

 

$

(19,910

)

 

$

(96,407

)

 

(in thousands)

 

December 31, 2017

 

 

Pre-tax Activity

 

 

Tax Effect

 

 

April 1, 2018

 

Net pension activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

$

(78,618

)

 

$

933

 

 

$

(230

)

 

$

(77,915

)

Prior service costs

 

 

(43

)

 

 

6

 

 

 

(2

)

 

 

(39

)

Net postretirement benefits activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(17,299

)

 

 

499

 

 

 

(122

)

 

 

(16,922

)

Prior service costs

 

 

1,744

 

 

 

(462

)

 

 

114

 

 

 

1,396

 

Foreign currency translation adjustment

 

 

14

 

 

 

4

 

 

 

(1

)

 

 

17

 

Total AOCI(L)

 

$

(94,202

)

 

$

980

 

 

$

(241

)

 

$

(93,463

)

 

A summary of the impact of AOCI(L) on certain statements of operations line items is as follows:

 

 

 

First Quarter 2019

 

(in thousands)

 

Net Pension

Activity

 

 

Net Postretirement

Benefits Activity

 

 

Foreign Currency

Translation Adjustment

 

 

Total

 

Cost of sales

 

$

263

 

 

$

(67

)

 

$

-

 

 

$

196

 

Selling, delivery and administrative expenses

 

 

643

 

 

 

(61

)

 

 

(10

)

 

 

572

 

Subtotal pre-tax

 

 

906

 

 

 

(128

)

 

 

(10

)

 

 

768

 

Income tax expense

 

 

223

 

 

 

(32

)

 

 

(1

)

 

 

190

 

Total after tax effect

 

$

683

 

 

$

(96

)

 

$

(9

)

 

$

578

 

 

 

 

First Quarter 2018

 

(in thousands)

 

Net Pension

Activity

 

 

Net Postretirement

Benefits Activity

 

 

Foreign Currency

Translation Adjustment

 

 

Total

 

Cost of sales

 

$

216

 

 

$

6

 

 

$

-

 

 

$

222

 

Selling, delivery and administrative expenses

 

 

723

 

 

 

31

 

 

 

4

 

 

 

758

 

Subtotal pre-tax

 

 

939

 

 

 

37

 

 

 

4

 

 

 

980

 

Income tax expense

 

 

232

 

 

 

8

 

 

 

1

 

 

 

241

 

Total after tax effect

 

$

707

 

 

$

29

 

 

$

3

 

 

$

739

 

 

 

27

 

23.Supplemental Disclosures of Cash Flow Information

 

Changes in current assets and current liabilities affecting cash flows were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Accounts receivable, trade, net

 

$

13,388

 

 

$

(24,039

)

Accounts receivable from The Coca-Cola Company

 

 

(11,530

)

 

 

(3,647

)

Accounts receivable, other

 

 

(8,961

)

 

 

16,118

 

Inventories

 

 

(10,284

)

 

 

(23,545

)

Prepaid expenses and other current assets

 

 

562

 

 

 

(7,854

)

Accounts payable, trade

 

 

24,812

 

 

 

1,274

 

Accounts payable to The Coca-Cola Company

 

 

13,017

 

 

 

10,682

 

Other accrued liabilities

 

 

(52,034

)

 

 

(37,672

)

Accrued compensation

 

 

(29,211

)

 

 

(35,734

)

Accrued interest payable

 

 

3,227

 

 

 

4,423

 

Change in current assets less current liabilities

 

$

(57,014

)

 

$

(99,994

)

 

 

28

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of Coca‑Cola Consolidated, Inc., a Delaware corporation (together with its majority-owned subsidiaries, the “Company,” “we” or “our”), should be read in conjunction with the consolidated condensed financial statements of the Company and the accompanying notes to the consolidated condensed financial statements.

 

The Company’s fiscal year generally ends on the Sunday closest to December 31 of each year. The consolidated condensed financial statements presented are:

 

 

•

The financial position as of March 31, 2019 and December 30, 2018.

 

•

The results of operations and comprehensive income for the 13 week periods ended March 31, 2019 (the “first quarter” of fiscal 2019 (“2019”)) and April 1, 2018 (the “first quarter” of fiscal 2018 (“2018”)).

 

•

The changes in cash flows and equity for the first quarter of 2019 and the first quarter of 2018.

 

The consolidated condensed financial statements include the consolidated operations of the Company and its majority-owned subsidiaries including Piedmont Coca‑Cola Bottling Partnership (“Piedmont”), the Company’s only subsidiary with a significant noncontrolling interest. This noncontrolling interest consists of The Coca‑Cola Company’s interest in Piedmont, which was 22.7% for all periods presented.

 

Our Business and the Nonalcoholic Beverage Industry

 

We distribute, market and manufacture nonalcoholic beverages in territories spanning 14 states and the District of Columbia. The Company was incorporated in 1980 and, together with its predecessors, has been in the nonalcoholic beverage manufacturing and distribution business since 1902. We are the largest Coca‑Cola bottler in the United States. Approximately 86% of our total bottle/can sales volume to retail customers consists of products of The Coca‑Cola Company, which include some of the most recognized and popular beverage brands in the world. We also distribute products for several other beverage companies, including BA Sports Nutrition, LLC (“BodyArmor”), Keurig Dr Pepper Inc. (“Dr Pepper”) and Monster Energy Company (“Monster Energy”). Our purpose is to honor God, to serve others, to pursue excellence and to grow profitably. Our stock is traded on the NASDAQ Global Select Market under the symbol “COKE.”

 

We offer a range of nonalcoholic beverage products and flavors designed to meet the demands of our consumers, including both sparkling and still beverages. Sparkling beverages are carbonated beverages and the Company’s principal sparkling beverage is Coca‑Cola. Still beverages include energy products and noncarbonated beverages such as bottled water, tea, ready to drink coffee, enhanced water, juices and sports drinks.

 

Our 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. Other sales include sales to other Coca‑Cola bottlers, “post-mix” products, transportation revenue and equipment maintenance revenue. 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.

 

Net sales by product category were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Bottle/can sales:

 

 

 

 

 

 

 

 

Sparkling beverages (carbonated)

 

$

585,973

 

 

$

560,105

 

Still beverages (noncarbonated, including energy products)

 

 

343,695

 

 

 

320,917

 

Total bottle/can sales

 

 

929,668

 

 

 

881,022

 

 

 

 

 

 

 

 

 

 

Other sales:

 

 

 

 

 

 

 

 

Sales to other Coca-Cola bottlers

 

 

81,673

 

 

 

101,734

 

Post-mix and other

 

 

91,571

 

 

 

82,001

 

Total other sales

 

 

173,244

 

 

 

183,735

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

 

29

 

The nonalcoholic beverage market is highly competitive for both sparkling and still beverages. Our competitors include bottlers and distributors of nationally and regionally advertised and marketed products, as well as bottlers and distributors of private label beverages. Our principal competitors include local bottlers of PepsiCo, Inc. products and, in some regions, local bottlers of Dr Pepper products.

 

The principal methods of competition in the nonalcoholic beverage industry are point-of-sale merchandising, new product introductions, new vending and dispensing equipment, packaging changes, pricing, price promotions, product quality, retail space management, customer service, frequency of distribution and advertising. We believe we are competitive in our territories with respect to these methods of competition.

 

Business seasonality results primarily from higher unit sales of the Company’s products in the second and third quarters of the fiscal year. We believe that we and other manufacturers from whom we purchase finished products have adequate production capacity to meet sales demand for sparkling and still beverages during these peak periods. Sales volume can also be impacted by weather conditions. Fixed costs, such as depreciation expense, are not significantly impacted by business seasonality.

 

Executive Summary

 

Revenue grew 3.6% in the first quarter of 2019 compared to the first quarter of 2018, driven by increases in the selling prices of our products. Volume for the quarter was flat to prior year as growth of still beverages sales offset declines of sparkling products sales. Bottle/can sales of sparkling beverages increased 4.6% in the first quarter of 2019 versus the prior year period, driven by increased selling prices and the introduction of new products into our portfolio, including Orange Vanilla Coke. Sales of still beverages grew 7.1% in the quarter compared to the prior year period, driven primarily by growth in our Sports Drinks and Energy categories. The first quarter of 2019 was our first full quarter of distribution of BodyArmor products, which helped to fuel our overall net sales growth.

 

Gross margin increased 170 basis points in the first quarter of 2019 to 35.3%, as compared to the first quarter of 2018. On an adjusted basis, as defined in the “Adjusted Non-GAAP Results” section below, gross margin increased 100 basis points over the prior year period. This improvement is primarily the result of pricing actions taken in the second half of 2018 to overcome significantly higher input costs. While input costs remain at elevated levels, overall commodity prices have been more stable during the first quarter of 2019, contributing to our first quarter margin improvement. In addition, our actions to optimize our supply chain and reduce our sourcing costs resulted in reduced transportation costs during the quarter compared to the first quarter of 2018.

 

Selling, delivery and administrative (“SD&A”) expenses in the first quarter of 2019 decreased $7.4 million, or 2.0%, as compared to the first quarter of 2018. Our SD&A as a percent of sales improved 190 basis points in the first quarter of 2019 versus the first quarter of 2018 (33.5% versus 35.4%, respectively) largely driven by a decrease in costs from our system transformation initiative. Our first quarter of 2019 results included $4.7 million of system transformation expenses relating to our information technology system conversion, an improvement of $7.5 million versus the first quarter of 2018. We expect our system conversion to be completed by the end of the second quarter of 2019. In addition, our first quarter 2019 expenses reflect the benefit of the operating structure changes we completed in 2018. While we are pleased with the progress we have made in SD&A expenses, we continue to look for opportunities to drive scale advantages and leverage our business model.

 

Income from operations was $20.2 million in the first quarter of 2019, an increase of $39.2 million from the first quarter of 2018. Adjusted income from operations was $20.7 million in the first quarter of 2019, up from an adjusted operating loss of $3.6 million in the first quarter of 2018. Operating results in the first half of 2019, as compared to the first half of 2018, benefit from results in 2018 that were negatively impacted by high commodity and transportation costs.

 

Capital spending for the first quarter of 2019 was $29.3 million. We continue to anticipate capital spending in fiscal 2019 will be in the range of $150 million to $180 million as we remain focused on making prudent, long-term investments to support the growth of the Company. Cash flows provided by operations for the first quarter of 2019 were $5.6 million, compared to cash flows used in operations of $80.7 million in the first quarter of 2018. Improved cash generation is a key focus area for 2019 as we work to improve our profitability, reduce our financial leverage and further strengthen our balance sheet.

 

Areas of Emphasis

 

Key priorities for the Company include acquisition synergies and cost optimization, revenue management, free cash flow generation and debt repayment, distribution network optimization and cost management.

 

Acquisition Synergies and Cost Optimization: In October 2017, the Company completed a series of distribution territory and regional manufacturing facility acquisitions and exchanges with The Coca‑Cola Company, Coca‑Cola Refreshments USA, Inc., a wholly-

 

30

 

owned subsidiary of The Coca‑Cola Company, and Coca‑Cola Bottling Company United, Inc., an independent bottler that is unrelated to the Company, to significantly expand the Company’s distribution and manufacturing operations (the “System Transformation”). As the Company continues to integrate these acquired territories and facilities into its operations, the Company remains focused on synergy and cost optimization opportunities across its business, including opportunities across its manufacturing network, distribution network and back office functions. The Company anticipates identifying, investing against and executing these synergy and cost optimization opportunities will be a key driver of its results of operations.

 

Revenue Management:  Revenue management requires a strategy that reflects consideration for pricing of brands and packages within product categories and channels, highly effective working relationships with customers and disciplined fact-based decision-making. Pricing decisions are made considering a variety of factors, including brand strength, competitive environment, input costs and other market conditions. Revenue management has been and continues to be a key driver which has a significant impact on the Company’s results of operations.

 

Free Cash Flow Generation and Debt Repayment:  Upon completion of the System Transformation transactions in October 2017, the Company’s debt balance exceeded $1.1 billion. Generating free cash flow and reducing its debt balance will continue to be a key focus for the Company. The Company has several initiatives in place to optimize free cash flow, improve profitability and prudently manage its capital expenditures in order to generate strong free cash flow and reduce its financial leverage.

 

Distribution Network Optimization and Cost Management:  Distribution costs represent the costs of transporting finished goods from Company locations to customer outlets. Total distribution costs, including warehouse costs, were $148.9 million in the first quarter of 2019 and $147.0 million in the first quarter of 2018. Management of these costs will continue to be a key area of emphasis for the Company. The Company believes that optimizing its expanded distribution footprint will be a key area of focus in the short-term in order to manage this significant cost to its business.

 

Results of Operations

 

First Quarter Results

 

Our results of operations for the first quarter of 2019 and the first quarter of 2018 are highlighted in the table below and discussed in the following paragraphs:

 

 

 

First Quarter

 

 

 

 

 

(in thousands)

 

2019

 

 

2018

 

 

Change

 

Net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

$

38,155

 

Cost of sales

 

 

713,604

 

 

 

707,116

 

 

 

6,488

 

Gross profit

 

 

389,308

 

 

 

357,641

 

 

 

31,667

 

Selling, delivery and administrative expenses

 

 

369,154

 

 

 

376,638

 

 

 

(7,484

)

Income (loss) from operations

 

 

20,154

 

 

 

(18,997

)

 

 

39,151

 

Interest expense, net

 

 

12,886

 

 

 

12,046

 

 

 

840

 

Other income (expense), net

 

 

(15,851

)

 

 

4,510

 

 

 

(20,361

)

Loss before income taxes

 

 

(8,583

)

 

 

(26,533

)

 

 

17,950

 

Income tax benefit

 

 

(3,005

)

 

 

(12,971

)

 

 

9,966

 

Net loss

 

 

(5,578

)

 

 

(13,562

)

 

 

7,984

 

Less: Net income attributable to noncontrolling interest

 

 

1,253

 

 

 

623

 

 

 

630

 

Net loss attributable to Coca-Cola Consolidated, Inc.

 

$

(6,831

)

 

$

(14,185

)

 

$

7,354

 

Other comprehensive income, net of tax

 

 

578

 

 

 

739

 

 

 

(161

)

Comprehensive loss attributable to Coca-Cola Consolidated, Inc.

 

$

(6,253

)

 

$

(13,446

)

 

$

7,193

 

 

 

31

 

Items Impacting Operations and Financial Condition

 

The following items affect the comparability of the financial results:

 

First Quarter 2019

 

 

•

$14.0 million recorded in other income (expense), net as a result of an unfavorable fair value adjustment to the Company’s contingent consideration liability;

 

•

$6.6 million pre-tax favorable mark-to-market adjustments related to the Company’s commodity hedging program; and

 

•

$4.7 million of expenses related to the System Transformation transactions, the majority of which were information technology related costs.

 

First Quarter 2018

 

 

•

$12.5 million of expenses related to the System Transformation transactions, the majority of which were information technology related costs;

 

•

$5.2 million recorded in other income (expense), net as a result of a favorable fair value adjustment to the Company’s contingent consideration liability; and

 

•

$3.0 million pre-tax unfavorable mark-to-market adjustments related to the Company’s commodity hedging program.

 

Net Sales

 

Net sales increased $38.2 million, or 3.6%, to $1.10 billion in the first quarter of 2019, as compared to $1.06 billion in the first quarter of 2018. The increase in net sales was primarily attributable to the following (in millions):

 

First Quarter 2019

 

 

Attributable to:

$

46.1

 

 

Increase in net sales primarily related to an increase in average bottle/can sales price per unit to retail customers and the shift in product mix to higher revenue still products in order to meet consumer preferences

 

(20.0

)

 

Decrease in sales volume to other Coca-Cola bottlers

 

5.7

 

 

Increase in net sales related to increased volume

 

6.4

 

 

Other

$

38.2

 

 

Total increase in net sales

 

The Company’s bottle/can sales to retail customers accounted for approximately 84% of the Company’s total net sales in the first quarter of 2019, as compared to approximately 83% in the first quarter of 2018. Bottle/can net pricing is based on the invoice price charged to customers reduced by 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. The Company’s products are sold and distributed through various channels, which include selling directly to retail stores and other outlets such as food markets, institutional accounts and vending machine outlets.

 

Product category sales volume of physical cases in the first quarter of 2019 and the first quarter of 2018 as a percentage of total bottle/can sales volume and the percentage change by product category were as follows:

 

 

 

Bottle/Can Sales Volume

 

 

Bottle/Can

 

 

First Quarter

 

 

Sales Volume

Product Category

 

2019

 

 

2018

 

 

Increase / (Decrease)

Sparkling beverages

 

 

71.3

%

 

 

72.0

%

 

(0.8%)

Still beverages (including energy products)

 

 

28.7

%

 

 

28.0

%

 

2.8%

Total bottle/can sales volume

 

 

100.0

%

 

 

100.0

%

 

0.2%

 

 

32

 

The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers, as well as the percentage of the Company’s total net sales that such volume represents:

 

 

 

First Quarter

 

 

 

2019

 

 

2018

 

Approximate percent of the Company’s total bottle/can sales volume:

 

 

 

 

 

 

 

 

Wal-Mart Stores, Inc.

 

 

20

%

 

 

19

%

The Kroger Company

 

 

12

%

 

 

12

%

Total approximate percent of the Company’s total bottle/can sales volume

 

 

32

%

 

 

31

%

 

 

 

 

 

 

 

 

 

Approximate percent of the Company’s total net sales:

 

 

 

 

 

 

 

 

Wal-Mart Stores, Inc.

 

 

14

%

 

 

14

%

The Kroger Company

 

 

9

%

 

 

8

%

Total approximate percent of the Company’s total net sales

 

 

23

%

 

 

22

%

 

Cost of Sales

 

Inputs representing a substantial portion of the Company’s cost of sales include: (i) purchases of finished products, (ii) raw material costs, including aluminum cans, plastic bottles and sweetener, (iii) concentrate costs, and (iv) manufacturing costs, including labor, overhead, warehouse costs. In addition, cost of sales includes shipping and handling costs related to the movement of finished goods from manufacturing plants to distribution centers, amortization expense of distribution rights, distribution fees of certain products and marketing credits from brand companies. Raw material costs represent approximately 20% of total cost of sales on an annual basis.

 

Cost of sales increased $6.5 million, or 0.9%, to $713.6 million in the first quarter of 2019, as compared to $707.1 million in the first quarter of 2018. The increase in cost of sales was primarily attributable to the following (in millions):

 

First Quarter 2019

 

 

Attributable to:

$

27.2

 

 

Increase in cost of sales primarily related to, in order of magnitude, the change in product mix to meet consumer preferences, an increase in commodity and raw materials costs and an increase in concentrate costs, partially offset by reduction in transportation and sourcing costs

 

(20.7

)

 

Decrease in sales volume to other Coca-Cola bottlers

$

6.5

 

 

Total increase in cost of sales

 

The Company relies extensively on advertising and sales promotion in the marketing of its products. The Coca‑Cola Company and other beverage companies that supply concentrates, syrups and finished products to the Company make substantial marketing and advertising expenditures to promote sales in the Company’s territories. Certain of the marketing expenditures by The Coca‑Cola Company and other beverage companies are made pursuant to annual arrangements. The Company also benefits from national advertising programs conducted by The Coca‑Cola Company and other beverage companies. Total marketing funding support from The Coca‑Cola Company and other beverage companies, which includes both direct payments to the Company and payments to customers for marketing programs, was $31.3 million in the first quarter of 2019, as compared to $30.4 million in the first quarter of 2018.

 

The Company’s cost of sales may not be comparable to other peer companies, as some peer companies include all costs related to their distribution network in cost of sales. The Company includes a portion of these costs in SD&A expenses, as described below.

 

Selling, Delivery and Administrative Expenses

 

SD&A expenses include the following: sales management labor costs, distribution costs resulting from transporting finished products from distribution centers to customer locations, distribution center overhead including depreciation expense, distribution center warehousing costs, delivery vehicles and cold drink equipment, point-of-sale expenses, advertising expenses, cold drink equipment repair costs, amortization of intangibles and administrative support labor and operating costs.

 

 

33

 

SD&A expenses decreased by $7.4 million, or 2.0%, to $369.2 million in the first quarter of 2019, as compared to $376.6 million in the first quarter of 2018. SD&A expenses as a percentage of net sales increased to 33.5% in the first quarter of 2019 from 35.4% in the first quarter of 2018. The decrease in SD&A expenses was primarily attributable to the following (in millions):

 

First Quarter 2019

 

 

Attributable to:

$

(7.5

)

 

Decrease in System Transformation transactions expenses

 

3.0

 

 

Increase in employee benefit costs including bonuses and incentives primarily related to improved financial results, partially offset by a decrease in employee salaries primarily as a result of workforce optimization completed in the second and fourth quarters of 2018

 

(2.9

)

 

Other individually immaterial expense decreases

$

(7.4

)

 

Total decrease in SD&A expenses

 

The Company has three primary delivery systems: (i) bulk delivery for large supermarkets, mass merchandisers and club stores, (ii) advanced sale delivery for convenience stores, drug stores, small supermarkets and on-premise accounts and (iii) full-service delivery for its full-service vending customers. Shipping and handling costs related to the movement of finished goods from manufacturing locations to distribution centers are included in cost of sales. Shipping and handling costs related to the movement of finished goods from distribution centers to customer locations, including distribution center warehousing costs, are included in SD&A expenses and totaled $148.9 million in the first quarter of 2019 and $147.0 million in the first quarter of 2018.

 

In the first quarter of 2019, the Company incurred $4.7 million of System Transformation transactions expenses, which primarily included information technology systems conversions. The Company anticipates additional expenses related to the conversion of its information technology systems, which it expects to complete in the second quarter of 2019, will be in the range of $2 million to $3 million.

 

Interest Expense, Net

 

Interest expense, net, increased $0.9 million to $12.9 million in the first quarter of 2019, as compared to $12.0 million in the first quarter of 2018. The increase was primarily a result of increases in short-term interest rates, partially offset by lower average debt balances in the first quarter of 2019, as compared to the first quarter of 2018.

 

Other Income (Expense), Net

 

A summary of other income (expense), net is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Favorable/(unfavorable) fair value adjustment to acquisition related contingent consideration

 

$

(14,046

)

 

$

5,186

 

Non-service cost component of net periodic benefit cost

 

 

(1,961

)

 

 

(676

)

Other

 

 

156

 

 

 

-

 

Total other income (expense), net

 

$

(15,851

)

 

$

4,510

 

 

Each reporting period, the Company adjusts its contingent consideration liability related to the distribution territories acquired in the System Transformation transactions, excluding territories the Company acquired in an exchange transaction, to fair value. The fair value is determined by discounting future expected sub-bottling payments required under the Company’s comprehensive beverage agreement, which extend through the life of the applicable distribution assets acquired in each System Transformation transaction, using the Company’s estimated weighted average cost of capital (“WACC”), which is impacted by many factors, including long-term interest rates and projected future operating results. The life of these distribution asset is generally 40 years. The Company is required to pay the current portion of the sub-bottling fee on a quarterly basis.

 

The fair value adjustments to the acquisition related contingent consideration liability during the first quarter of 2019 and the first quarter of 2018 were primarily a result of changes in the risk-free interest rate.

 

Income Tax Benefit

 

The Company’s effective income tax rate, calculated by dividing income tax benefit by loss before income taxes, was 35.0% for the first quarter of 2019 and 48.9% for the first quarter of 2018. The decrease in the effective tax rate was primarily driven by improved financial results. The Company’s effective tax rate, calculated by dividing income tax benefit by loss before income taxes minus net

 

34

 

income attributable to noncontrolling interest, was 30.6% for the first quarter of 2019 and 47.8% for the first quarter of 2018. The Company anticipates the annualized effective tax rate for 2019 will be in the low 30% range.

 

Noncontrolling Interest

 

The Company recorded net income attributable to noncontrolling interest of $1.3 million in the first quarter of 2019 and $0.6 million in the first quarter of 2018, each related to the portion of Piedmont owned by The Coca‑Cola Company.

 

Other Comprehensive Income, Net of Tax

 

Other comprehensive income, net of tax was $0.6 million in the first quarter of 2019 and $0.7 million in the first quarter of 2018. The decrease was primarily a result of a decrease in actuarial gains on the Company’s postretirement benefit plans.

 

Segment Operating Results

 

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

 

The Company believes four operating segments exist. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated revenues and income from operations. The additional three 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.”

 

The Company’s segment results are as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Net sales:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages(1)

 

$

1,072,227

 

 

$

1,040,422

 

All Other

 

 

87,915

 

 

 

86,599

 

Eliminations(2)

 

 

(57,230

)

 

 

(62,264

)

Consolidated net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

14,641

 

 

$

(22,745

)

All Other

 

 

5,513

 

 

 

3,748

 

Consolidated income (loss) from operations

 

$

20,154

 

 

$

(18,997

)

 

(1)

The Company historically presented consideration paid to customers under certain contractual arrangements for exclusive distribution rights and sponsorship privileges as a marketing expense within SD&A expenses. The Company has now determined such amounts should be presented as a reduction to net sales and has revised the presentation of previously issued financial statements to correct for this error. Net sales and SD&A expenses were revised by $7.3 million in the first quarter of 2018. See Note 3 to the consolidated condensed financial statements for additional information.

(2)

The entire net sales elimination for each period presented represents net sales from All Other 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.

 

Adjusted Non-GAAP Results

 

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP financial measures provide users with additional meaningful financial information that should be considered when assessing the Company’s ongoing performance. Further, with the conversion of its information technology systems, the Company believes these non-GAAP financial measures allow users to better appreciate the impact of this conversion on the Company’s performance.

 

Management also uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the

 

35

 

Company’s reported results prepared in accordance with GAAP. The Company’s non-GAAP financial information does not represent a comprehensive basis of accounting. The following tables reconcile reported GAAP results to adjusted results (non-GAAP):

 

 

 

First Quarter 2019

 

(in thousands, except per share data)

 

Gross profit

 

 

SD&A expenses

 

 

Income from

operations

 

 

Income (loss) before

income taxes

 

 

Net income (loss)

 

 

Basic net income (loss) per share

 

Reported results (GAAP)

 

$

389,308

 

 

$

369,154

 

 

$

20,154

 

 

$

(8,583

)

 

$

(6,831

)

 

$

(0.73

)

System Transformation transactions expenses(1)

 

 

-

 

 

 

(4,730

)

 

 

4,730

 

 

 

4,730

 

 

 

3,557

 

 

 

0.38

 

Fair value adjustment of acquisition related contingent consideration(2)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,046

 

 

 

10,563

 

 

 

1.13

 

Fair value adjustments for commodity hedges(3)

 

 

(3,905

)

 

 

2,715

 

 

 

(6,620

)

 

 

(6,620

)

 

 

(4,978

)

 

 

(0.53

)

Capitalization threshold change for certain assets(4)

 

 

-

 

 

 

(2,476

)

 

 

2,476

 

 

 

2,476

 

 

 

1,862

 

 

 

0.20

 

Other tax adjustment(5)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(845

)

 

 

(0.09

)

Total reconciling items

 

 

(3,905

)

 

 

(4,491

)

 

 

586

 

 

 

14,632

 

 

 

10,159

 

 

 

1.09

 

Adjusted results (non-GAAP)

 

$

385,403

 

 

$

364,663

 

 

$

20,740

 

 

$

6,049

 

 

$

3,328

 

 

$

0.36

 

 

 

 

First Quarter 2018

 

(in thousands, except per share data)

 

Gross profit

 

 

SD&A expenses

 

 

Loss from operations

 

 

Loss before

income taxes

 

 

Net loss

 

 

Basic net loss

per share

 

Reported results (GAAP)

 

$

357,641

 

 

$

376,638

 

 

$

(18,997

)

 

$

(26,533

)

 

$

(14,185

)

 

$

(1.52

)

System Transformation transactions expenses(1)

 

 

199

 

 

 

(12,251

)

 

 

12,450

 

 

 

12,450

 

 

 

9,362

 

 

 

1.00

 

Fair value adjustment of acquisition related contingent consideration(2)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,186

)

 

 

(3,900

)

 

 

(0.42

)

Fair value adjustments for commodity hedges(3)

 

 

2,765

 

 

 

(202

)

 

 

2,967

 

 

 

2,967

 

 

 

2,231

 

 

 

0.24

 

Other tax adjustment(5)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,343

)

 

 

(0.25

)

Total reconciling items

 

 

2,964

 

 

 

(12,453

)

 

 

15,417

 

 

 

10,231

 

 

 

5,350

 

 

 

0.57

 

Adjusted results (non-GAAP)

 

$

360,605

 

 

$

364,185

 

 

$

(3,580

)

 

$

(16,302

)

 

$

(8,835

)

 

$

(0.95

)

 

Following is an explanation of non-GAAP adjustments:

 

(1)

Adjustment reflects expenses related to the System Transformation transactions, which primarily includes information technology systems conversions.

 

(2)

This non-cash, fair value adjustment of acquisition related contingent consideration fluctuates based on factors such as long-term interest rates and projected future results of distribution territories acquired in the System Transformation.

 

(3)

The Company enters into derivative instruments from time to time to hedge some or all of its projected purchases of aluminum, PET resin, diesel fuel and unleaded gasoline in order to mitigate commodity risk. The Company accounts for commodity hedges on a mark-to-market basis.

 

(4)

Adjustment reflects the prospective change of increasing the capitalization thresholds on certain low-cost, short-lived assets. This change is not expected to be material to the consolidated condensed financial statements.

 

(5)

Includes items impacting the Company’s effective tax rate.

 

Financial Condition

 

Total assets were $3.08 billion on March 31, 2019, which was an increase of $65.8 million from December 30, 2018. Net working capital, defined as current assets less current liabilities, was $249.3 million on March 31, 2019, which was an increase of $53.6 million from December 30, 2018.

 

 

36

 

Significant changes in net working capital on March 31, 2019 from December 30, 2018 were as follows:

 

 

•

A decrease in accounts receivable, trade of $11.4 million and an increase in accounts receivable from The Coca‑Cola Company of $11.5 million primarily as a result of the timing of cash receipts.

 

•

An increase in inventories of $10.3 million primarily as a result of seasonal builds of inventory and product launches.

 

•

The addition of the current portion of obligations under operating leases of $13.6 million as a result of the Company recording balances for operating leases on its consolidated condensed balance sheets.

 

•

An increase in accounts payable, trade of $16.5 million as a result of seasonal builds of inventory.

 

•

A decrease in other accrued liabilities of $52.5 million primarily as a result of the timing of cash payments.

 

•

A decrease in accrued compensation of $31.9 million primarily as a result of the timing of bonus and incentive payments in the first quarter of the fiscal year.

 

Liquidity and Capital Resources

 

The Company’s sources of capital include cash flows from operations, available credit facilities and the issuance of debt and equity securities. The Company has obtained the majority of its long-term debt from public markets, private placements and bank facilities. Management believes the Company has sufficient sources of capital available to refinance its maturing debt, finance its business plan, meet its working capital requirements and maintain an appropriate level of capital spending for at least the next 12 months from the issuance of these consolidated condensed financial statements. The amount and frequency of future dividends will be determined by the Company’s Board of Directors in light of the earnings and financial condition of the Company at such time, and no assurance can be given that dividends will be declared or paid in the future.

 

The Company’s total debt as of March 31, 2019 and December 30, 2018 was as follows:

 

(in thousands)

 

Maturity Date

 

March 31, 2019

 

 

December 30, 2018

 

Senior notes(1)

 

4/15/2019

 

$

110,000

 

 

$

110,000

 

Term loan facility(1)

 

6/7/2021

 

 

277,500

 

 

 

292,500

 

Senior notes

 

2/27/2023

 

 

125,000

 

 

 

125,000

 

Revolving credit facility

 

6/8/2023

 

 

129,000

 

 

 

80,000

 

Senior notes

 

11/25/2025

 

 

350,000

 

 

 

350,000

 

Senior notes

 

3/21/2030

 

 

150,000

 

 

 

150,000

 

Unamortized discount on senior notes(2)

 

4/15/2019

 

 

(11

)

 

 

(78

)

Unamortized discount on senior notes(2)

 

11/25/2025

 

 

(59

)

 

 

(61

)

Debt issuance costs

 

 

 

 

(2,930

)

 

 

(2,958

)

Total debt

 

 

 

$

1,138,500

 

 

$

1,104,403

 

 

(1)

The senior notes due in 2019 were refinanced on April 10, 2019 using proceeds from the issuance of the senior notes due in 2026. The Company intends to refinance the term loan facility, which has principal payments that will be due in the next twelve months, and has the capacity to do so under its revolving credit facility, which is classified as long-term debt. As such, any amounts due in the next twelve months were classified as noncurrent.

(2)

The senior notes due in 2019 were issued at 98.238% of par and the senior notes due in 2025 were issued at 99.975% of par.

 

The Company’s term loan facility matures on June 7, 2021. The original aggregate principal amount borrowed by the Company under the facility was $300 million and repayment of amounts outstanding began in 2018. The Company may request additional term loans under the term loan facility, provided the Company’s aggregate borrowings under the facility do not exceed $500 million.

 

The original aggregate principal amount borrowed by the Company on its senior notes due 2023, which mature on February 27, 2023, was $125 million. Through June 10, 2019, the Company may request the lender consider the purchase of additional senior unsecured notes of the Company in an aggregate principal amount of up to $175 million.

 

As discussed below, subsequent to the end of the first quarter of 2019, the Company sold $100 million aggregate principal amount of senior unsecured notes due in 2026 to MetLife Investment Advisors, LLC (“MetLife”) and certain of its affiliates. The Company may request that MetLife consider the purchase of additional senior unsecured notes of the Company under the agreement in an aggregate principal amount of up to $200 million.

 

The Company’s revolving credit facility matures on June 8, 2023 and has an aggregate maximum borrowing capacity of $500 million, which may be increased at the Company’s option to $750 million, subject to obtaining commitments from the lenders and satisfying other conditions specified in the credit agreement. As of March 31, 2019, the Company had borrowed $129 million under the

 

37

 

revolving credit facility, and therefore had $371 million borrowing capacity remaining. The Company currently believes all banks participating in the revolving credit facility have the ability to and will meet any funding requests from the Company.

 

The indentures under which the Company’s public debt was issued do not include financial covenants but do limit the incurrence of certain liens and encumbrances as well as indebtedness by the Company’s subsidiaries in excess of certain amounts. The Company’s nonpublic debt facilities include two financial covenants: a consolidated cash flow/fixed charges ratio and a consolidated funded indebtedness/cash flow ratio, each as defined in the respective agreements. The Company was in compliance with these covenants as of March 31, 2019. These covenants do not currently, and the Company does not anticipate they will, restrict its liquidity or capital resources.

 

All outstanding long-term debt has been issued by the Company and none has been issued by any of its subsidiaries. There are no guarantees of the Company’s debt.

 

The Company’s credit ratings are reviewed periodically by the respective rating agencies. Changes in the Company’s operating results or financial position could result in changes in the Company’s credit ratings. Lower credit ratings could result in higher borrowing costs for the Company or reduced access to capital markets, which could have a material impact on the Company’s financial position or results of operations. In 2018, Standard & Poor’s reaffirmed the Company’s BBB rating and revised the Company’s rating outlook to negative. Moody’s rating outlook for the Company is currently stable. As of March 31, 2019, the Company’s credit ratings were as follows:

 

 

 

Long-Term Debt

Standard & Poor’s

 

BBB

Moody’s

 

Baa2

 

The Company is subject to interest rate risk on its variable rate debt, including the revolving credit facility and the term loan facility. Assuming no changes in the Company’s financial structure, if market interest rates average 1% more over the next twelve months than the interest rates as of March 31, 2019, interest expense for the next twelve months would increase by approximately $4.1 million.

 

The Company’s only Level 3 asset or liability is the acquisition related contingent consideration liability. There were no transfers from Level 1 or Level 2. Fair value adjustments were noncash, and therefore did not impact the Company’s liquidity or capital resources. Following is a summary of the Level 3 activity:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - Level 3 liability

 

$

382,898

 

 

$

381,291

 

Measurement period adjustment(1)

 

 

-

 

 

 

(1,059

)

Payment of acquisition related contingent consideration

 

 

(6,237

)

 

 

(5,882

)

Reclassification to current payables

 

 

2,300

 

 

 

(360

)

(Favorable)/unfavorable fair value adjustment

 

 

14,046

 

 

 

(5,186

)

Ending balance - Level 3 liability

 

$

393,007

 

 

$

368,804

 

 

(1)

Measurement period adjustment relates to post-closing adjustments made in accordance with the terms and conditions of the asset purchase agreement for the distribution territories acquired by the Company in April 2017 as part of the System Transformation. All final post-closing adjustments for these transactions were completed during 2018.

 

 

38

 

Cash Sources and Uses

 

A summary of cash-based activity is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Cash Sources:

 

 

 

 

 

 

 

 

Borrowings under revolving credit facility

 

$

131,339

 

 

$

170,000

 

Proceeds from issuance of senior notes

 

 

-

 

 

 

150,000

 

Adjusted cash provided by operating activities(1)

 

 

4,211

 

 

 

-

 

Refund of income tax payments

 

 

948

 

 

 

-

 

Proceeds from the sale of property, plant and equipment

 

 

681

 

 

 

2,894

 

Other

 

 

437

 

 

 

13

 

Total cash sources

 

$

137,616

 

 

$

322,907

 

 

 

 

 

 

 

 

 

 

Cash Uses:

 

 

 

 

 

 

 

 

Payments on revolving credit facility

 

$

82,339

 

 

$

197,000

 

Adjusted cash used in operating activities(1)

 

 

-

 

 

 

78,515

 

Additions to property, plant and equipment

 

 

29,315

 

 

 

42,048

 

Payments on term loan facility

 

 

15,000

 

 

 

-

 

Payment of acquisition related contingent consideration

 

 

6,237

 

 

 

5,882

 

Other distribution agreements

 

 

4,654

 

 

 

-

 

Cash dividends paid

 

 

2,339

 

 

 

2,333

 

Income tax payments

 

 

-

 

 

 

2,244

 

Principal payments on financing or capital lease obligations

 

 

2,114

 

 

 

2,053

 

Investment in CONA Services LLC

 

 

486

 

 

 

1,070

 

Debt issuance fees

 

 

183

 

 

 

185

 

Total cash uses

 

$

142,667

 

 

$

331,330

 

Net decrease in cash

 

$

(5,051

)

 

$

(8,423

)

 

(1)

Adjusted cash provided by/used in operating activities excludes net income tax payments/refunds. These line items are non-GAAP measures and provide investors with additional information which management believes is helpful in the evaluation of the Company’s cash sources and uses. This non-GAAP financial information is not presented elsewhere in this Quarterly Report and may not be comparable to the similarly titled measures used by other companies. Additionally, this information should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

 

Cash Flows From Operating Activities

 

During the first quarter of 2019, cash provided by operating activities was $5.6 million and during the first quarter of 2018, cash used in operating activities was $80.7 million. This increase was primarily a result of improved financial results and continued focus on working capital needs in order to optimize free cash flow.

 

Cash Flows From Investing Activities

 

During the first quarter of 2019, cash used in investing activities was $33.8 million, which was a decrease of $6.4 million as compared to the first quarter of 2018. The decrease was driven primarily by a reduction in additions to property, plant and equipment, as we remain focused on making prudent long-term investments to support the growth of the Company.

 

Additions to property, plant and equipment were $29.3 million during the first quarter of 2019. As of March 31, 2019, $5.4 million of additions to property, plant and equipment were accrued in accounts payable, trade. The Company anticipates additions to property, plant and equipment for the remainder of 2019 will be in the range of $120 million to $150 million.

 

Additions to property, plant and equipment during the first quarter of 2018 were $42.0 million. As of April 1, 2018, $16.1 million of additions to property, plant and equipment were accrued in accounts payable, trade.

 

 

39

 

Cash Flows From Financing Activities

 

During the first quarter of 2019, cash provided by financing activities was $23.1 million, which was a decrease of $89.4 million as compared to the first quarter of 2018. The decrease was primarily driven by improved financial results in the first quarter of 2019, as compared to the first quarter of 2018.

 

The Company had cash payments for acquisition related contingent consideration of $6.2 million during the first quarter of 2019 and $5.9 million during the first quarter of 2018. The Company anticipates that the amount it could pay annually under the acquisition related contingent consideration arrangements for the distribution territories acquired as part of the System Transformation, excluding territories the Company acquired in exchange transactions, will be in the range of $25 million to $48 million.

 

In 2018, the Company sold $150 million aggregate principal amount of senior unsecured notes due 2030 to NYL Investors LLC (“NYL”) and certain of its affiliates pursuant to the Note Purchase and Private Shelf Agreement dated March 6, 2018 between the Company, NYL and the other parties thereto. These notes bear interest at 3.96%, payable quarterly in arrears on March 21, June 21, September 21 and December 21 of each year, and will mature on March 21, 2030, unless earlier redeemed by the Company. The Company used the proceeds for general corporate purposes.

 

Subsequent to the end of the first quarter of 2019, on April 10, 2019, the Company sold $100 million aggregate principal amount of senior unsecured notes due in 2026 to MetLife and certain of its affiliates pursuant to a Note Purchase and Private Shelf Agreement dated January 23, 2019 between the Company, MetLife and the other parties thereto. These notes bear interest at 3.93%, payable quarterly in arrears on each January 10, April 10, July 10 and October 10, commencing on July 10, 2019, and will mature on October 10, 2026, unless earlier redeemed by the Company. The Company used the proceeds to refinance the senior notes due on April 15, 2019. The Company may request that MetLife consider the purchase of additional senior unsecured notes of the Company under the agreement in an aggregate principal amount of up to $200 million.

 

Significant Accounting Policies

 

See Note 1, Note 3 and Note 9 to the consolidated condensed financial statements for information on the Company’s significant accounting policies.

 

Off-Balance Sheet Arrangements

 

The Company is a member of, and has equity ownership in, South Atlantic Canners, Inc. (“SAC”), a manufacturing cooperative comprised of Coca‑Cola bottlers, and has guaranteed $23.9 million of SAC’s debt as of March 31, 2019. In the event SAC fails to fulfill its commitments under the related debt, the Company would be responsible for payment to the lenders up to the level of the guarantee. The Company does not anticipate SAC will fail to fulfill its commitments related to the debt. The Company further believes SAC has sufficient assets, including production equipment, facilities and working capital, and the ability to adjust selling prices of its products to adequately mitigate the risk of material loss from the Company’s guarantee. See Note 20 to the consolidated condensed financial statements for additional information.

 

Hedging Activities

 

The Company uses derivative financial instruments to manage its exposure to movements in certain commodity prices. Fees paid by the Company for derivative instruments are amortized over the corresponding period of the instrument. The Company accounts for its commodity hedges on a mark-to-market basis with any expense or income reflected as an adjustment to cost of sales or SD&A expenses.

 

The Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk. The Company has master agreements with the counterparties to its derivative financial agreements that provide for net settlement of derivative transactions. The net impact of the commodity hedges on the consolidated condensed statements of operations was as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Cost of sales - increase/(decrease)

 

$

(1,989

)

 

$

2,662

 

SD&A expenses - increase/(decrease)

 

 

(2,373

)

 

 

8

 

Net impact

 

$

(4,362

)

 

$

2,670

 

 

 

40

 

Cautionary Information Regarding Forward-Looking Statements

 

Certain statements contained in this Quarterly Report, or in other public filings, press releases, or other written or oral communications made by Coca‑Cola Consolidated, Inc. or its representatives, which are not historical facts, are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address, among other things, Company plans, activities or events which the Company expects will or may occur in the future and may include express or implied projections of revenue or expenditures; statements of plans and objectives for future operations, growth or initiatives; statements of future economic performance, including, but not limited to, the state of the economy, capital investment and financing plans, net sales, cost of sales, SD&A expenses, gross profit, income tax rates, net income per diluted share, dividends, pension plan contributions, estimated acquisition related contingent consideration payments; or statements regarding the outcome or impact of certain new accounting pronouncements and pending or threatened litigation. These statements include:

 

 

•

the Company’s beliefs and estimates regarding the impact of the adoption of certain new accounting pronouncements;

 

•

the Company’s belief that, at any given time, less than 1% of bottle/can sales and post-mix sales could be at risk for return by customers;

 

•

the Company’s belief that SAC, whose debt the Company guarantees, has sufficient assets and the ability to adjust selling prices of its products to adequately mitigate the risk of material loss from the Company’s guarantee and that the cooperative will perform its obligations under its debt commitments;

 

•

the Company’s belief that it has, and that other manufacturers from whom the Company purchases finished goods have, adequate production capacity to meet sales demand for sparkling and still beverages during peak periods;

 

•

the Company’s expectation that certain operating leases will commence in the remainder of 2019 and have lease terms of 3 to 16 years and that the lease liability associated with these future leases is expected to be $23.4 million.

 

•

the Company’s belief that the ultimate disposition of various claims and legal proceedings which have arisen in the ordinary course of its business will not have a material adverse effect on its financial condition, cash flows or results of operations and that no material amount of loss in excess of recorded amounts is reasonably possible as a result of these claims and legal proceedings;

 

•

the Company’s belief that it is competitive in its territories with respect to the principal methods of competition in the nonalcoholic beverage industry;

 

•

the Company’s belief that certain non-GAAP financial measures provide users with additional meaningful financial information that should be considered when assessing the Company’s ongoing performance, including information which the Company believes is helpful in the evaluation of its cash sources and uses, capital structure and financial leverage;

 

•

the Company’s belief that it has sufficient sources of capital available to refinance its maturing debt, finance its business plan, meet its working capital requirements and maintain an appropriate level of capital spending for at least the next 12 months;

 

•

the Company’s belief that all the banks participating in the revolving credit facility have the ability to and will meet any funding requests from the Company;

 

•

the Company’s intention to refinance amounts due in the next twelve months under the term loan facility and the indenture under which the senior notes due in 2019 were issued using the capacity under the revolving credit facility;

 

•

the Company’s estimate of the useful lives of certain acquired intangible assets and property, plant and equipment;

 

•

the Company’s estimate that a 10% increase in the market price of certain commodities included as part of its raw materials over the current market prices would cumulatively increase costs during the next 12 months by approximately $58.3 million, assuming no change in volume;

 

•

the Company’s expectation that the amount of uncertain tax positions may change over the next 12 months but that such changes will not have a significant impact on the consolidated condensed financial statements;

 

•

the Company’s belief that innovation of both new brands and packages will continue to be important to the Company’s overall revenue;

 

•

the Company’s estimates of certain inputs used in its calculations, including estimated rates of return, estimates of bad debts and amounts that will ultimately be collected, and estimates of inputs used in the calculation and adjustment of the fair value of its acquisition related contingent consideration liability related to the distribution territories acquired as part of the System Transformation, such as the amounts that will be paid by the Company in the future under the Company’s comprehensive beverage agreement and the Company’s WACC;

 

•

the Company’s belief that the range of undiscounted amounts it could pay annually under the acquisition related contingent consideration arrangements is expected to be between $25 million to $48 million;

 

•

the Company’s belief that the covenants in its nonpublic debt will not restrict its liquidity or capital resources;

 

•

the Company’s belief that other parties to certain of its contractual arrangements will perform their obligations;

 

•

the Company’s belief that contributions to the two Company-sponsored pension plans is expected to be in the range of $1 million to $2 million in 2019;

 

41

 

 

•

the Company’s expectation that it will not withdraw from its participation in the Employers-Teamsters Local Union Nos. 175 and 505 Pension Fund (the “Teamsters Plan”);

 

•

the Company’s expectation that the collective bargaining agreements covering the Teamsters Plan that expire at various times through July 2021 will be re-negotiated;

 

•

the Company’s belief that its additional expenses related to the conversion of its information technology systems, which it expects to complete in the second quarter of 2019, will be in the range of $2 million to $3 million;

 

•

the Company’s belief that additions to property, plant and equipment for the remainder of 2019 are expected to be in the range of $120 million to $150 million;

 

•

the Company’s belief that it has adequately provided for any assessments likely to result from audits by tax authorities in the jurisdictions in which the Company conducts business;

 

•

the Company’s belief that key priorities include acquisition synergies and cost optimization, revenue management, free cash flow generation and debt repayment, distribution and network optimization and cost management;

 

•

the Company’s belief that the annualized effective tax rate for 2019 will be in the low 30% range; and

 

•

the Company’s hypothetical calculation that, if market interest rates average 1% more over the next twelve months than the interest rates as of March 31, 2019, interest expense for the next twelve months would increase by approximately $4.1 million, assuming no changes in the Company’s financial structure.

 

These forward-looking statements may be identified by the use of the words “believe,” “plan,” “estimate,” “expect,” “anticipate,” “probably,” “should,” “project,” “intend,” “continue,” and other similar terms and expressions. Various risks, uncertainties and other factors may cause the Company’s actual results to differ materially from those expressed or implied in any forward-looking statements. Factors, uncertainties and risks that may result in actual results differing from such forward-looking information include, but are not limited to, those listed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for 2018, as well as other factors discussed throughout this Quarterly Report, including, without limitation, the factors described under “Significant Accounting Policies” in our consolidated condensed financial statements, or in other filings or statements made by the Company. All the forward-looking statements in this Quarterly Report and other documents or statements are qualified by these and other factors, risks and uncertainties.

 

Caution should be taken not to place undue reliance on the forward-looking statements included in this Quarterly Report. The Company assumes no obligation to update any forward-looking statements, even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law. In evaluating forward-looking statements, these risks and uncertainties should be considered, together with the other risks described from time to time in the Company’s other reports and documents filed with the Securities and Exchange Commission.

 

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

 

The Company is exposed to certain market risks that arise in the ordinary course of business. The Company may enter into derivative financial instrument transactions to manage or reduce market risk. The Company does not enter into derivative financial instrument transactions for trading or speculative purposes. A discussion of the Company’s primary market risk exposure and interest rate risk is presented below.

 

Debt and Derivative Financial Instruments

 

The Company is subject to interest rate risk on its variable rate debt, including its revolving credit facility and term loan facility. Assuming no changes in the Company’s financial structure, if market interest rates average 1% more over the next twelve months than the interest rates as of March 31, 2019, interest expense for the next twelve months would increase by approximately $4.1 million. This amount was determined by calculating the effect of the hypothetical interest rate on the Company’s variable rate debt. This calculated, hypothetical increase in interest expense for the following twelve months may be different from the actual increase in interest expense from a 1% increase in interest rates due to varying interest rate reset dates on the Company’s variable rate debt.

 

The Company’s acquisition related contingent consideration, which is adjusted to fair value at each reporting period, is also impacted by changes in interest rates. The risk-free interest rate used to estimate the Company’s WACC is a component of the discount rate used to calculate the present value of future cash flows due under the Company’s comprehensive beverage agreement. As a result, any changes in the underlying risk-free interest rates will impact the fair value of the acquisition related contingent consideration and could materially impact the amount of noncash expense (or income) recorded each reporting period.

 

 

42

 

Raw Material and Commodity Price Risk

 

The Company is also subject to commodity price risk arising from price movements for certain commodities included as part of its raw materials. The Company manages this commodity price risk in some cases by entering into contracts with adjustable prices to hedge commodity purchases. The Company periodically uses derivative commodity instruments in the management of this risk. The Company estimates a 10% increase in the market prices of commodities included as part of its raw materials over the current market prices would cumulatively increase costs during the next 12 months by approximately $58.3 million assuming no change in volume.

 

Fees paid by the Company for agreements to hedge commodity purchases are amortized over the corresponding period of the instruments. The Company accounts for commodity hedges on a mark-to-market basis with any expense or income being reflected as an adjustment to cost of sales or SD&A expenses.

 

Effects of Changing Prices

 

The annual rate of inflation in the United States, as measured by year-over-year changes in the Consumer Price Index (the “CPI”), was 2.4% in 2018 and 2.1% in 2017. Inflation in the prices of those commodities important to the Company’s business is reflected in changes in the CPI, but commodity prices are volatile and in recent years have moved at a faster rate of change than the CPI.

 

The principal effect of inflation in both commodity and consumer prices on the Company’s operating results is to increase costs, both of goods sold and SD&A expenses. Although the Company can offset these cost increases by increasing selling prices for its products, consumers may not have the buying power to cover these increased costs and may reduce their volume of purchases of those products. In that event, selling price increases may not be sufficient to offset completely the Company’s cost increases.

 

Item 4.Controls and Procedures.

 

As of the end of the period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), pursuant to Rule 13a-15(b) of the Exchange Act. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2019.

 

There has been no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

43

 

PART II - OTHER INFORMATION

 

Item 1.

 

The Company is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to all such lawsuits, claims and proceedings, the Company records reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on its results of operations, financial position or cash flows. The Company maintains liability insurance for certain risks that is subject to certain self-insurance limits.

 

Item 1A.

Risk Factors.

 

There have been no material changes in the Company’s risk factors from those disclosed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10‑K for 2018.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

Purchase of Equity Securities

 

The following table provides information about repurchase of the Company’s Common Stock during the first quarter of 2019:

 

Period

 

Total Number of Shares Purchased(1)

 

 

Average Price Paid per Share

 

 

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

 

 

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

 

December 31, 2018 through January 27, 2019

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

January 28, 2019 through February 24, 2019

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

February 25, 2019 through March 31, 2019

 

 

15,476

 

 

$

248.42

 

 

 

-

 

 

 

-

 

Total

 

 

15,476

 

 

$

248.42

 

 

 

-

 

 

 

-

 

 

(1)

Represents shares of Common Stock withheld for income tax purposes in connection with the vesting of 34,700 shares of restricted Class B Common Stock issued to J. Frank Harrison, III, in connection with his services as Chairman of the Board of Directors and Chief Executive Officer of the Company during fiscal 2018 pursuant to the Performance Unit Award Agreement. See Note 21 to the consolidated condensed financial statements for additional information on the Performance Unit Award Agreement.

 

 

44

 

Item 6.

Exhibits.

 

Number

 

Description

 

Incorporated by Reference

or Filed Herewith

3.1

 

Restated Certificate of Incorporation of the Company.

 

Exhibit 3.1 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended July 2, 2017 (File No. 0-9286).

3.2

 

Certificate of Amendment to the Restated Certificate of Incorporation of the Company.

 

Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 2, 2019 (File No. 0-9286).

3.3

 

Amended and Restated By-laws of the Company.

 

Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on January 2, 2019 (File No. 0-9286).

4.1

 

Specimen of Common Stock Certificate.

 

Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 19, 2019 (File No. 0-9286).

10.1

 

Note Purchase and Private Shelf Agreement, Dated January 23, 2019, by and among the Company, MetLife Investment Advisors, LLC and the other parties thereto.

 

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 5, 2019 (File No. 0-9286).

10.2

 

Incidence Agreement, dated February 5, 2019, by and between the Company and The Coca‑Cola Company.

 

Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 5, 2019 (File No. 0-9286).

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

Filed herewith.

31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

Filed herewith.

32

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K.

101.INS

 

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

Filed herewith.

101.SCH

 

XBRL Taxonomy Extension Schema Document.

 

Filed herewith.

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document.

 

Filed herewith.

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document.

 

Filed herewith.

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document.

 

Filed herewith.

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document.

 

Filed herewith.

 

 

45

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

COCA‑COLA CONSOLIDATED, INC.

 

(REGISTRANT)

 

 

 

Date:  May 8, 2019

By:

/s/  F. Scott Anthony

 

 

F. Scott Anthony

 

 

Executive Vice President and Chief Financial Officer

 

 

(Principal Financial Officer of the Registrant)

 

 

 

 

 

 

 

 

 

 

 

 

Date:  May 8, 2019

By:            

/s/  William J. Billiard

 

 

William J. Billiard

 

 

Senior Vice President and Chief Accounting Officer

 

 

(Principal Accounting Officer of the Registrant)

 

 

 

 

 

46

 coke-ex311_6.htm

Exhibit 31.1

CERTIFICATION

 

I, J. Frank Harrison, III, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q of Coca-Cola Consolidated, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 8, 2019

 

By:

/s/  J. Frank Harrison, III

 

 

 

J. Frank Harrison, III

 

 

 

Chairman of the Board of Directors

and Chief Executive Officer

 

 

coke-ex312_7.htm

Exhibit 31.2

CERTIFICATION

 

I, F. Scott Anthony, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q of Coca-Cola Consolidated, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 8, 2019

 

By:

/s/  F. Scott Anthony

 

 

 

F. Scott Anthony

 

 

 

Executive Vice President and Chief Financial Officer

 

coke-ex32_9.htm

Exhibit 32

 

 

 

 

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

 

In connection with the Quarterly Report on Form 10-Q of Coca-Cola Consolidated, Inc. (the “Company”) for the quarter ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, and F. Scott Anthony, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

 

  /s/   J. Frank Harrison, III

J. Frank Harrison, III

Chairman of the Board of Directors and

Chief Executive Officer

May 8, 2019

 

 

 

  /s/   F. Scott Anthony

F. Scott Anthony

Executive Vice President and

Chief Financial Officer

May 8, 2019

 

 

v3.19.1
Document and Entity Information - shares
 3 Months Ended
Mar. 31, 2019
Apr. 28, 2019
Document Information [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
Trading Symbol COKE  
Entity Registrant Name Coca-Cola Consolidated, Inc.  
Entity Central Index Key 0000317540  
Current Fiscal Year End Date --12-29  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Common Stock [Member]    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   7,141,447
Class B Common Stock [Member]    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   2,232,242
v3.19.1
Consolidated Condensed Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Net sales $ 1,102,912 $ 1,064,757
Cost of sales 713,604 707,116
Gross profit 389,308 357,641
Selling, delivery and administrative expenses 369,154 376,638
Income (loss) from operations 20,154 (18,997)
Interest expense, net 12,886 12,046
Other income (expense), net (15,851) 4,510
Loss before income taxes (8,583) (26,533)
Income tax benefit (3,005) (12,971)
Net loss (5,578) (13,562)
Less: Net income attributable to noncontrolling interest 1,253 623
Net loss attributable to Coca-Cola Consolidated, Inc. $ (6,831) $ (14,185)
Basic net loss per share based on net loss attributable to Coca-Cola Consolidated, Inc.:    
Common Stock $ (0.73) $ (1.52)
Weighted average number of Common Stock shares outstanding 7,141 7,141
Diluted net loss per share based on net loss attributable to Coca-Cola Consolidated, Inc.:    
Common Stock $ (0.73) $ (1.52)
Weighted average number of Common Stock shares outstanding – assuming dilution 9,360 9,340
Cash dividends per share:    
Cash dividend per share $ 0.25 $ 0.25
Class B Common Stock [Member]    
Basic net loss per share based on net loss attributable to Coca-Cola Consolidated, Inc.:    
Common Stock $ (0.73) $ (1.52)
Weighted average number of Common Stock shares outstanding 2,219 2,199
Diluted net loss per share based on net loss attributable to Coca-Cola Consolidated, Inc.:    
Common Stock $ (0.73) $ (1.52)
Weighted average number of Common Stock shares outstanding – assuming dilution 2,219 2,199
Cash dividends per share:    
Cash dividend per share $ 0.25 $ 0.25
v3.19.1
Consolidated Condensed Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Statement Of Income And Comprehensive Income [Abstract]    
Net loss $ (5,578) $ (13,562)
Defined benefit plans reclassification including pension costs:    
Actuarial gains 679 703
Prior service benefits 4 4
Postretirement benefits reclassification included in benefits costs:    
Actuarial gains 148 377
Prior service costs (244) (348)
Foreign currency translation adjustment (9) 3
Other comprehensive income, net of tax 578 739
Comprehensive loss (5,000) (12,823)
Less: Comprehensive income attributable to noncontrolling interest 1,253 623
Comprehensive loss attributable to Coca-Cola Consolidated, Inc. $ (6,253) $ (13,446)
v3.19.1
Consolidated Condensed Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Current Assets:    
Cash and cash equivalents $ 8,497 $ 13,548
Accounts receivable, trade 425,504 436,890
Allowance for doubtful accounts (11,143) (9,141)
Accounts receivable from The Coca-Cola Company 56,445 44,915
Accounts receivable, other 39,454 30,493
Inventories 220,317 210,033
Prepaid expenses and other current assets 69,357 70,680
Total current assets 808,431 797,418
Property, plant and equipment, net 970,499 990,532
Right of use assets - operating leases 84,592  
Leased property under financing or capital leases, net 22,435 23,720
Other assets 113,537 115,490
Goodwill 165,903 165,903
Total assets 3,075,688 3,009,928
Current Liabilities:    
Current portion of obligations under operating leases 13,555  
Current portion of obligations under financing or capital leases 8,833 8,617
Accounts payable, trade 168,526 152,040
Accounts payable to The Coca-Cola Company 120,778 112,425
Other accrued liabilities 197,755 250,246
Accrued compensation 40,374 72,316
Accrued interest payable 9,320 6,093
Total current liabilities 559,141 601,737
Deferred income taxes 123,920 127,174
Pension and postretirement benefit obligations 85,371 85,682
Other liabilities 620,293 609,135
Noncurrent portion of obligations under operating leases 71,345  
Noncurrent portion of obligations under financing or capital leases 24,515 26,631
Long-term debt 1,138,500 1,104,403
Total liabilities 2,623,085 2,554,762
Commitments and Contingencies
Equity:    
Capital in excess of par value 128,983 124,228
Retained earnings 369,985 359,435
Accumulated other comprehensive loss (96,407) (77,265)
Treasury stock, at cost:    
Total equity of Coca-Cola Consolidated, Inc. 354,371 358,187
Noncontrolling interest 98,232 96,979
Total equity 452,603 455,166
Total liabilities and equity 3,075,688 3,009,928
Common Stock [Member]    
Equity:    
Common Stock 10,204 10,204
Treasury stock, at cost:    
Treasury stock (60,845) (60,845)
Class B Common Stock [Member]    
Equity:    
Common Stock 2,860 2,839
Treasury stock, at cost:    
Treasury stock (409) (409)
Distribution Agreements [Member]    
Current Assets:    
Other identifiable intangible assets, net 894,269 900,383
Customer Lists and Other Identifiable Intangible Assets [Member]    
Current Assets:    
Other identifiable intangible assets, net $ 16,022 $ 16,482
v3.19.1
Consolidated Condensed Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Mar. 31, 2019
Dec. 30, 2018
Common Stock [Member]    
Common stock, par value $ 1.00 $ 1.00
Common stock, shares authorized 30,000,000 30,000,000
Common stock, shares issued 10,203,821 10,203,821
Treasury stock, shares 3,062,374 3,062,374
Class B Common Stock [Member]    
Common stock, par value $ 1.00 $ 1.00
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 2,860,356 2,841,132
Treasury stock, shares 628,114 628,114
v3.19.1
Consolidated Condensed Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Cash Flows from Operating Activities:    
Net loss $ (5,578) $ (13,562)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation expense from property, plant and equipment and financing or capital leases 39,979 41,572
Fair value adjustment of acquisition related contingent consideration 14,046 (5,186)
Amortization of intangible assets and deferred proceeds, net 5,793 5,648
Deferred income taxes (3,445) (15,394)
Stock compensation expense 2,045 752
Loss on sale of property, plant and equipment 1,854 1,952
Amortization of debt costs 385 276
Change in current assets less current liabilities (57,014) (99,994)
Change in other noncurrent assets 1,196 2,344
Change in other noncurrent liabilities 5,898 833
Other 437 13
Total adjustments 11,174 (67,184)
Net cash provided by (used in) operating activities 5,596 (80,746)
Cash Flows from Investing Activities:    
Additions to property, plant and equipment (29,315) (42,048)
Other distribution agreements (4,654)  
Proceeds from the sale of property, plant and equipment 681 2,894
Investment in CONA Services LLC (486) (1,070)
Net cash used in investing activities (33,774) (40,224)
Cash Flows from Financing Activities:    
Borrowings under revolving credit facility 131,339 170,000
Proceeds from issuance of senior notes   150,000
Payments on revolving credit facility (82,339) (197,000)
Payments on term loan facility (15,000)  
Payment of acquisition related contingent consideration (6,237) (5,882)
Cash dividends paid (2,339) (2,333)
Payments on financing or capital lease obligations (2,114) (2,053)
Debt issuance fees (183) (185)
Net cash provided by financing activities 23,127 112,547
Net decrease in cash (5,051) (8,423)
Cash at beginning of period 13,548 16,902
Cash at end of period 8,497 8,479
Significant noncash investing and financing activities:    
Additions to property, plant and equipment accrued and recorded in accounts payable, trade 5,350 16,147
Class B Common Stock [Member]    
Significant noncash investing and financing activities:    
Issuance of Class B Common Stock in connection with stock award $ 4,776 $ 3,831
v3.19.1
Consolidated Condensed Statements of Changes in Equity (Unaudited) (Parenthetical) - $ / shares
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Cash dividend per share $ 0.25 $ 0.25
Class B Common Stock [Member]    
Cash dividend per share $ 0.25 $ 0.25
Class B common stock shares issued 19,224 20,296
v3.19.1
Consolidated Condensed Statements of Changes in Equity (Unaudited) - USD ($)
$ in Thousands
Total
Class B Common Stock [Member]
Common Stock [Member]
Common Stock [Member]
Class B Common Stock [Member]
Capital in Excess of Par Value [Member]
Retained Earnings [Member]
Retained Earnings [Member]
Class B Common Stock [Member]
Accumulated Other Comprehensive Loss [Member]
Treasury Stock - Common Stock [Member]
Treasury Stock - Common Stock [Member]
Class B Common Stock [Member]
Total Equity of Coca-Cola Consolidated, Inc. [Member]
Total Equity of Coca-Cola Consolidated, Inc. [Member]
Class B Common Stock [Member]
Non-controlling Interest [Member]
Beginning Balance at Dec. 31, 2017 $ 458,907   $ 10,204 $ 2,819 $ 120,417 $ 388,718   $ (94,202) $ (60,845) $ (409) $ 366,702   $ 92,205
Net income (loss) (13,562)         (14,185)         (14,185)   623
Other comprehensive income, net of tax 739             739     739    
Cash dividends paid Common Stock ($0.25 per share) (1,785) $ (548)       (1,785) $ (548)       (1,785) $ (548)  
Issuance of shares of Class B Common Stock 3,831     20 3,811           3,831    
Ending Balance at Apr. 01, 2018 447,582   10,204 2,839 124,228 372,200   (93,463) (60,845) (409) 354,754   92,828
Beginning Balance at Dec. 30, 2018 455,166   10,204 2,839 124,228 359,435   (77,265) (60,845) (409) 358,187   96,979
Net income (loss) (5,578)         (6,831)         (6,831)   1,253
Other comprehensive income, net of tax 578             578     578    
Cash dividends paid Common Stock ($0.25 per share) (1,785) $ (554)       (1,785) $ (554)       (1,785) $ (554)  
Issuance of shares of Class B Common Stock 4,776     21 4,755           4,776    
Reclassification of stranded tax effects           19,720   (19,720)          
Ending Balance at Mar. 31, 2019 $ 452,603   $ 10,204 $ 2,860 $ 128,983 $ 369,985   $ (96,407) $ (60,845) $ (409) $ 354,371   $ 98,232
v3.19.1
Significant Accounting Policies and New Accounting Pronouncements
 3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Significant Accounting Policies and New Accounting Pronouncements

1.Significant Accounting Policies and New Accounting Pronouncements

 

The consolidated condensed financial statements include the accounts of Coca‑Cola Consolidated, Inc. and its majority-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated. The consolidated condensed 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 interim periods presented:

 

 

•

The financial position as of March 31, 2019 and December 30, 2018.

 

•

The results of operations and comprehensive income for the 13 week periods ended March 31, 2019 (the “first quarter” of fiscal 2019 (“2019”)) and April 1, 2018 (the “first quarter” of fiscal 2018 (“2018”)).

 

•

The changes in cash flows and equity for the first quarter of 2019 and the first quarter of 2018.

 

The consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“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 2018 filed with the Securities and Exchange Commission.

 

The preparation of consolidated condensed financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.

 

Significant Accounting Policies

 

In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of its consolidated condensed 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 2018 under the caption “Discussion of Critical Accounting Policies, Estimates and New Accounting Pronouncements” in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” a discussion of the Company’s most critical accounting policies, 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 policies and estimates are discussed with the Audit Committee of the Board of Directors of the Company during the quarter in which a change is contemplated and prior to making such change.

 

Recently Adopted Accounting Pronouncements

 

In February 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2018‑02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which provides the option to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from accumulated other comprehensive income to retained earnings. This standard is required to be applied either in the period of adoption or retrospectively to each period in which the changes in the U.S. federal corporate income tax rate pursuant to the Tax Act are recognized. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and can be early adopted. The Company adopted ASU 2018‑02 in the first quarter of 2019 and recognized a cumulative effect adjustment to the opening balance of retained earnings in 2019. The cumulative effect adjustment increased retained earnings by $19.7 million.

 

In February 2016, the FASB issued ASU 2016-02, “Leases,” (the “lease standard”). The lease standard requires lessees to recognize a right-to-use asset and a lease liability for virtually all leases (other than leases meeting the definition of a short-term lease). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods beginning the following fiscal year. The Company adopted the new accounting standard during the first quarter of 2019 using the optional transition method. See Note 9 to the consolidated condensed financial statements for additional information on the Company’s adoption of the lease standard.

 
v3.19.1
Related Party Transactions
 3 Months Ended
Mar. 31, 2019
Related Party Transactions [Abstract]  
Related Party Transactions

2.Related Party Transactions

 

The Coca‑Cola Company

 

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 March 31, 2019, 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:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Payments made by the Company to The Coca-Cola Company for:

 

 

 

 

 

 

 

 

Concentrate, syrup, sweetener and other purchases

 

$

266,643

 

 

$

242,468

 

Customer marketing programs

 

 

33,292

 

 

 

34,582

 

Cold drink equipment parts

 

 

6,982

 

 

 

6,141

 

 

 

 

 

 

 

 

 

 

Payments made by The Coca-Cola Company to the Company for:

 

 

 

 

 

 

 

 

Marketing funding support payments

 

$

22,712

 

 

$

20,037

 

Fountain delivery and equipment repair fees

 

 

10,749

 

 

 

9,347

 

Facilitating the distribution of certain brands and packages to other Coca-Cola bottlers

 

 

999

 

 

 

3,868

 

Presence marketing funding support on the Company’s behalf

 

 

435

 

 

 

481

 

 

As part of The Coca‑Cola Company’s plans to refranchise its North American bottling territories, the Company completed a series of transactions from April 2013 to October 2017 with The Coca‑Cola Company, Coca‑Cola Refreshments USA, Inc. (“CCR”), a wholly-owned subsidiary of The Coca‑Cola Company, and Coca‑Cola Bottling Company United, Inc. (“United”), an independent bottler that is unrelated to us, to significantly expand our distribution and manufacturing operations (the “System Transformation”). The System Transformation included the acquisition and exchange of rights to serve distribution territories and related distribution assets, as well as the acquisition and exchange of regional manufacturing facilities and related manufacturing assets.

 

In 2017, The Coca‑Cola Company agreed to provide the Company a fee, which totaled $44.3 million after final adjustments (the “Legacy Facilities Credit”). 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 certain manufacturing facilities owned by Company. The Company immediately recognized the portion of the Legacy Facilities Credit applicable to a regional manufacturing facility divested in 2017 and 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 is classified as current.

 

Coca‑Cola Refreshments USA, Inc.

 

The Company, The Coca-Cola Company and CCR entered into a comprehensive beverage agreement on March 31, 2017 (as amended, the “CBA”). 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 distribution territories the Company acquired from CCR as part of 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 $6.2 million during the first quarter of 2019 and $5.9 million during the first quarter of 2018. 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:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Current portion of acquisition related contingent consideration

 

$

31,338

 

 

$

32,993

 

Noncurrent portion of acquisition related contingent consideration

 

 

361,669

 

 

 

349,905

 

Total acquisition related contingent consideration

 

$

393,007

 

 

$

382,898

 

 

Upon the conversion of the Company’s then-existing bottling agreements in 2017 pursuant to the CBA, the Company received a fee from CCR (the “Territory Conversion Fee”). The Territory Conversion Fee, which totaled $91.5 million after final adjustments, 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 is classified as current.

 

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 consolidated condensed balance sheets, was $23.5 million as of March 31, 2019 and $23.6 million as of December 30, 2018.

 

South Atlantic Canners, Inc. (“SAC”)

 

The Company is a shareholder of SAC, 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, which was classified as other assets in the consolidated condensed balance sheets, was $8.2 million as of both March 31, 2019 and December 30, 2018.

 

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 $2.2 million in both the first quarter of 2019 and the first quarter of 2018.

 

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

 

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 $9.8 million on March 31, 2019 and $10.4 million on December 30, 2018, which were classified as accounts receivable, other in the consolidated condensed 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 2019 and $0.7 million in the first quarter of 2018, which were classified as SD&A expenses in the consolidated condensed 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 consolidated condensed balance sheets, was $8.5 million as of March 31, 2019 and $8.0 million as of December 30, 2018.

 

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. 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.

 

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 is obligated to pay the service fees 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 $5.3 million in the first quarter of 2019 and $4.0 million in the first quarter of 2018.

 

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, Chairman of the Board of Directors and Chief Executive Officer of the Company, is the majority stockholder and Morgan H. Everett, Senior 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 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.

 

A summary of the principal balance outstanding under these related party leases is as follows:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Company headquarters

 

$

9,134

 

 

$

9,851

 

Snyder Production Center

 

 

7,243

 

 

 

8,141

 

 

A summary of rental payments related to these leases is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Company headquarters

 

$

1,110

 

 

$

1,126

 

Snyder Production Center

 

 

1,080

 

 

 

1,049

 

 
v3.19.1
Revenue Recognition
 3 Months Ended
Mar. 31, 2019
Revenue From Contract With Customer [Abstract]  
Revenue Recognition

3.Revenue Recognition

 

The Company offers a range of nonalcoholic beverage products and flavors designed to meet the demands of its consumers, including both sparkling and still beverages. Sparkling beverages are carbonated beverages and the Company’s principal sparkling beverage is Coca‑Cola. Still beverages include energy products and noncarbonated beverages such as bottled water, tea, ready to drink coffee, enhanced water, juices and sports drinks.

 

The Company’s products are sold and distributed through various channels, which include selling directly to retail stores and other outlets such as food markets, institutional accounts and vending machine outlets. All the Company’s beverage sales were to customers in the United States. The Company typically collects payment from customers within 30 days from the date of sale.

 

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. Other sales include sales to other Coca‑Cola bottlers, “post‑mix” products, transportation revenue and equipment maintenance revenue. 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.

 

Net sales by category were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Bottle/can sales:

 

 

 

 

 

 

 

 

Sparkling beverages (carbonated)

 

$

585,973

 

 

$

560,105

 

Still beverages (noncarbonated, including energy products)

 

 

343,695

 

 

 

320,917

 

Total bottle/can sales

 

 

929,668

 

 

 

881,022

 

 

 

 

 

 

 

 

 

 

Other sales:

 

 

 

 

 

 

 

 

Sales to other Coca-Cola bottlers

 

 

81,673

 

 

 

101,734

 

Post-mix and other

 

 

91,571

 

 

 

82,001

 

Total other sales

 

 

173,244

 

 

 

183,735

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

Bottle/can sales represented approximately 84% of the Company’s net sales in the first quarter of 2019 and 83% of the Company’s net sales in the first quarter of 2018. The sparkling beverage category represented approximately 63% and 64% of total bottle/can sales during the first quarter of 2019 and the first quarter of 2018, respectively.

 

The Company’s contracts are derived from customer orders, including customer sales incentives, generated through an order processing and replenishment model. 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 96% of the Company’s net sales in the first quarter of 2019 and 97% of the Company’s net sales in the first quarter of 2018. Substantially all the Company’s revenue is recognized at a point in time and is included in the Nonalcoholic Beverages segment.

 

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

 

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

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Point in time net sales:

 

 

 

 

 

 

 

 

Nonalcoholic - point in time

 

$

1,060,271

 

 

$

1,031,808

 

Total point in time net sales

 

$

1,060,271

 

 

$

1,031,808

 

 

 

 

 

 

 

 

 

 

Over time net sales:

 

 

 

 

 

 

 

 

Nonalcoholic - over time

 

$

11,956

 

 

$

8,614

 

Other - over time

 

 

30,685

 

 

 

24,335

 

Total over time net sales

 

$

42,641

 

 

$

32,949

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

The Company participates in various sales programs with The Coca‑Cola Company, other beverage companies and customers to increase the sale of its products. Programs negotiated with customers include arrangements under which allowances can be earned for attaining agreed-upon sales levels. The cost of these various sales incentives are not considered a separate performance obligation and are included as deductions to net sales.

 

Allowance payments made to customers can be conditional on the achievement of volume targets and/or marketing commitments. Payments made in advance are recorded as prepayments and amortized in the consolidated condensed statements of operations over

the relevant period for which the customer commitment is made. In the event there is no separate identifiable benefit or the fair value of such benefit cannot be established, the amortization of the prepayment is included as a reduction to net sales.

 

The Company historically presented consideration paid to customers under certain contractual arrangements for exclusive distribution rights and sponsorship privileges as a marketing expense within selling, delivery and administrative (“SD&A”) expenses. The Company has now determined such amounts should be presented as a reduction to net sales and has revised the presentation of previously issued financial statements to correct for this error. Management believes the effect on previously reported financial statements is not material. In addition, management believes the revised presentation provides consistency with other companies that operate in the beverage industry. Net sales and SD&A expenses were revised by $7.3 million in the first quarter of 2018. The revision had no impact to net loss or net loss per share.

 

Revenues do not include sales or other taxes collected from customers.

 

The majority of the Company’s contracts include multiple performance obligations related to the delivery of specifically identifiable products, which generally have a duration of less than one year. For sales contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using stated contractual price, which represents the standalone selling price of each distinct good sold under the contract. Generally, the Company’s service contracts have a single performance obligation.

 

The Company sells its products and extends credit, generally without requiring collateral, based on an ongoing evaluation of the customer’s business prospects and financial condition. The Company evaluates the collectibility of its trade accounts receivable based on a number of factors, including the Company’s historic collections pattern and changes to a specific customer’s ability to meet its financial obligations. The Company has established an allowance for doubtful accounts to adjust the recorded receivable to the estimated amount the Company believes will ultimately be collected.

 

The nature of the Company’s contracts gives rise to several types of variable consideration, including prospective and retrospective rebates. The Company accounts for its prospective and retrospective rebates using the expected value method, which estimates the net price to the customer based on the customer’s expected annual sales volume projections.

 

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. The Company’s reserve for customer returns, which was classified as allowance for doubtful accounts in the consolidated condensed balance sheets, was $3.6 million as of March 31, 2019 and $2.3 million as of December 30, 2018. Returned product is recognized as a reduction of net sales.

 
v3.19.1
Segments
 3 Months Ended
Mar. 31, 2019
Segment Reporting [Abstract]  
Segments

4.Segments

 

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

 

The Company believes four operating segments exist. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated revenues and income from operations. The additional three 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.”

 

The Company’s segment results are as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Net sales:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages(1)

 

$

1,072,227

 

 

$

1,040,422

 

All Other

 

 

87,915

 

 

 

86,599

 

Eliminations(2)

 

 

(57,230

)

 

 

(62,264

)

Consolidated net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

14,641

 

 

$

(22,745

)

All Other

 

 

5,513

 

 

 

3,748

 

Consolidated income (loss) from operations

 

$

20,154

 

 

$

(18,997

)

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

43,351

 

 

$

44,825

 

All Other

 

 

2,421

 

 

 

2,395

 

Consolidated depreciation and amortization

 

$

45,772

 

 

$

47,220

 

 

(1)

The Company historically presented consideration paid to customers under certain contractual arrangements for exclusive distribution rights and sponsorship privileges as a marketing expense within SD&A expenses. The Company has now determined such amounts should be presented as a reduction to net sales and has revised the presentation of previously issued financial statements to correct for this error. Net sales and SD&A expenses were revised by $7.3 million in the first quarter of 2018. See Note 3 to the consolidated condensed financial statements for additional information.

(2)

The entire net sales elimination for each period presented represents net sales from All Other 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.

 
v3.19.1
Net Loss Per Share
 3 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
Net Loss Per Share

5.Net Loss Per Share

 

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

 

 

 

First Quarter

 

(in thousands, except per share data)

 

2019

 

 

2018

 

Numerator for basic and diluted net loss per Common Stock and Class B Common Stock share:

 

 

 

 

 

 

 

 

Net loss attributable to Coca-Cola Consolidated, Inc.

 

$

(6,831

)

 

$

(14,185

)

Less dividends:

 

 

 

 

 

 

 

 

Common Stock

 

 

1,785

 

 

 

1,785

 

Class B Common Stock

 

 

554

 

 

 

548

 

Total undistributed losses

 

$

(9,170

)

 

$

(16,518

)

 

 

 

 

 

 

 

 

 

Common Stock undistributed losses – basic

 

$

(6,996

)

 

$

(12,629

)

Class B Common Stock undistributed losses – basic

 

 

(2,174

)

 

 

(3,889

)

Total undistributed losses – basic

 

$

(9,170

)

 

$

(16,518

)

 

 

 

 

 

 

 

 

 

Common Stock undistributed losses – diluted

 

$

(6,996

)

 

$

(12,629

)

Class B Common Stock undistributed losses – diluted

 

 

(2,174

)

 

 

(3,889

)

Total undistributed losses – diluted

 

$

(9,170

)

 

$

(16,518

)

 

 

 

 

 

 

 

 

 

Numerator for basic net loss per Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Common Stock

 

$

1,785

 

 

$

1,785

 

Common Stock undistributed losses – basic

 

 

(6,996

)

 

 

(12,629

)

Numerator for basic net loss per Common Stock share

 

$

(5,211

)

 

$

(10,844

)

 

 

 

First Quarter

 

(in thousands, except per share data)

 

2019

 

 

2018

 

Numerator for basic net loss per Class B Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Class B Common Stock

 

$

554

 

 

$

548

 

Class B Common Stock undistributed losses – basic

 

 

(2,174

)

 

 

(3,889

)

Numerator for basic net loss per Class B Common Stock share

 

$

(1,620

)

 

$

(3,341

)

 

 

 

 

 

 

 

 

 

Numerator for diluted net loss per Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Common Stock

 

$

1,785

 

 

$

1,785

 

Dividends on Class B Common Stock assumed converted to Common Stock

 

 

554

 

 

 

548

 

Common Stock undistributed losses – diluted

 

 

(9,170

)

 

 

(16,518

)

Numerator for diluted net loss per Common Stock share

 

$

(6,831

)

 

$

(14,185

)

 

 

 

 

 

 

 

 

 

Numerator for diluted net loss per Class B Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Class B Common Stock

 

$

554

 

 

$

548

 

Class B Common Stock undistributed losses – diluted

 

 

(2,174

)

 

 

(3,889

)

Numerator for diluted net loss per Class B Common Stock share

 

$

(1,620

)

 

$

(3,341

)

 

 

 

 

 

 

 

 

 

Denominator for basic net loss per Common Stock and Class B Common Stock share:

 

 

 

 

 

 

 

 

Common Stock weighted average shares outstanding – basic

 

 

7,141

 

 

 

7,141

 

Class B Common Stock weighted average shares outstanding – basic

 

 

2,219

 

 

 

2,199

 

 

 

 

 

 

 

 

 

 

Denominator for diluted net loss 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)

 

 

9,360

 

 

 

9,340

 

Class B Common Stock weighted average shares outstanding – diluted

 

 

2,219

 

 

 

2,199

 

 

 

 

 

 

 

 

 

 

Basic net loss per share:

 

 

 

 

 

 

 

 

Common Stock

 

$

(0.73

)

 

$

(1.52

)

Class B Common Stock

 

$

(0.73

)

 

$

(1.52

)

 

 

 

 

 

 

 

 

 

Diluted net loss per share:

 

 

 

 

 

 

 

 

Common Stock

 

$

(0.73

)

 

$

(1.52

)

Class B Common Stock

 

$

(0.73

)

 

$

(1.52

)

 

NOTES TO TABLE

 

(1)

For purposes of the diluted net loss per share computation for Common Stock, all shares of Class B Common Stock are assumed to be converted; therefore, 100% of undistributed losses is allocated to Common Stock.

(2)

For purposes of the diluted net loss 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 included the dilutive effect of shares relative to the Long-Term Performance Equity Plan and the Performance Unit Award Agreement. For periods presented during which the Company has net loss, the unvested performance units granted pursuant to the Long-Term Performance Equity Plan and the Performance Unit Award Agreement are excluded from the calculation of diluted net loss per share, as the effect of these awards would be anti-dilutive. See Note 21 to the consolidated condensed financial statements for additional information on the Long-Term Performance Equity Plan and the Performance Unit Award Agreement.

(4)

The Company does not have anti-dilutive shares.

 
v3.19.1
Inventories
 3 Months Ended
Mar. 31, 2019
Inventory Disclosure [Abstract]  
Inventories

6.Inventories

 

Inventories consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Finished products

 

$

145,240

 

 

$

135,561

 

Manufacturing materials

 

 

37,049

 

 

 

39,840

 

Plastic shells, plastic pallets and other inventories

 

 

38,028

 

 

 

34,632

 

Total inventories

 

$

220,317

 

 

$

210,033

 

 
v3.19.1
Prepaid Expenses and Other Current Assets
 3 Months Ended
Mar. 31, 2019
Prepaid Expense And Other Assets [Abstract]  
Prepaid Expenses and Other Current Assets

7.Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Repair parts

 

$

25,395

 

 

$

26,846

 

Prepayments for sponsorship contracts

 

 

7,042

 

 

 

7,557

 

Prepaid software

 

 

6,015

 

 

 

6,553

 

Prepaid marketing

 

 

5,867

 

 

 

6,097

 

Current portion of income taxes

 

 

5,315

 

 

 

6,637

 

Other prepaid expenses and other current assets

 

 

19,723

 

 

 

16,990

 

Total prepaid expenses and other current assets

 

$

69,357

 

 

$

70,680

 

 
v3.19.1
Property, Plant and Equipment, Net
 3 Months Ended
Mar. 31, 2019
Property Plant And Equipment [Abstract]  
Property, Plant and Equipment, Net

8.Property, Plant and Equipment, Net

 

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

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

 

Estimated Useful Lives

Land

 

$

77,949

 

 

$

78,242

 

 

 

Buildings

 

 

218,075

 

 

 

218,846

 

 

8-50 years

Machinery and equipment

 

 

327,547

 

 

 

328,034

 

 

5-20 years

Transportation equipment

 

 

373,980

 

 

 

372,895

 

 

4-20 years

Furniture and fixtures

 

 

90,277

 

 

 

89,439

 

 

3-10 years

Cold drink dispensing equipment

 

 

495,013

 

 

 

491,161

 

 

5-17 years

Leasehold and land improvements

 

 

132,704

 

 

 

132,837

 

 

5-20 years

Software for internal use

 

 

122,603

 

 

 

122,604

 

 

3-10 years

Construction in progress

 

 

19,973

 

 

 

15,142

 

 

 

Total property, plant and equipment, at cost

 

 

1,858,121

 

 

 

1,849,200

 

 

 

Less:  Accumulated depreciation and amortization

 

 

887,622

 

 

 

858,668

 

 

 

Property, plant and equipment, net

 

$

970,499

 

 

$

990,532

 

 

 

 
v3.19.1
Leases
 3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Leases

9.Leases

 

The Company leases office and warehouse space, machinery and other equipment under noncancelable operating lease agreements and also leases certain warehouse space under financing lease agreements. The Company adopted the lease standard using the optional transition method on December 31, 2018, the transition date. The Company has elected to adopt the following practical expedients as accounting policy upon initial adoption of the lease standard:

 

•

Short-term lease exception: Allows the Company to not recognize leases with a contractual term of less than 12 months on the balance sheet.

•

Election to not separate non-lease components: Allows the Company to not separate lease and non-lease components and to account for both components as a single component, recognized on the balance sheet.

•

Package of practical expedients for transition: Allows the Company to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, and (iii) any initial direct costs for any existing leases as of the transition date.

•

Additional transition method/relief: Allows the Company to apply the transition requirements in the lease standard as of the transition date, with any impact of initially applying the lease standard recognized as a cumulative effect adjustment to retained earnings in the period of adoption. This also requires the Company to maintain previous disclosure requirements for comparative periods.

 

Upon adoption of the lease standard on December 31, 2018, the Company recorded right of use assets for operating leases of $88.0 million and associated lease liabilities of $88.2 million. The adoption of the lease standard did not change previously reported consolidated condensed statements of operations, did not result in a cumulative effect adjustment to retained earnings in the period of adoption and did not impact cash flows.

 

The Company has used the following policies and assumptions in evaluating its population of leases:

 

•

Determining a lease: The Company assesses contracts at inception to determine whether an arrangement is or includes a lease, which conveys the Company’s right to control the use of an identified asset for a period of time in exchange for consideration. Operating lease right of use assets and associated liabilities are recognized at the commencement date and initially measured based on the present value of lease payments over the defined lease term.

•

Allocating lease and non-lease components: The Company has elected the practical expedient to not separate lease and non-lease components for certain classes of underlying assets. The Company has equipment and vehicle lease agreements, which generally have the lease and associated non-lease components accounted for as a single lease component. The Company has real estate lease agreements with lease and non-lease components, which are generally accounted for separately where applicable.

•

Discount rate: The Company calculates the discount rate based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company calculates an incremental borrowing rate using a portfolio approach. The incremental borrowing rate is calculated using the contractual lease term and the Company's borrowing rate.

•

Lease term: The Company does not recognize leases with a contractual term of less than 12 months on the balance sheet. Lease expense for these short-term leases is expensed on a straight-line basis over the lease term.

•

Rent increases or escalation clauses: Certain leases contain scheduled rent increases or escalation clauses, which can be based on the Consumer Price Index or other rates. The Company assesses each contract individually and applies the appropriate variable payments based on the terms of the agreement.

•

Renewal options and/or purchase options: Certain leases include renewal options to extend the lease term and/or purchase options to purchase the leased asset. The Company assesses these options using a threshold of reasonably certain, which is a high threshold and, therefore, the majority of the Company’s leases do not include renewal periods or purchase options for the measurement of the right of use asset and the associated lease liability. For leases the Company is reasonably certain to renew or purchase, those options are included within the lease term and, therefore, included in the measurement of the right of use asset and the associated lease liability.

•

Option to terminate: Certain leases include the option to terminate the lease prior to its scheduled expiration. This allows a contractually bound party to terminate its obligation under the lease contract, typically in return for an agreed upon financial consideration. The terms and conditions of the termination options vary by contract.

•

Residual value guarantees, restrictions or covenants: The Company’s lease agreements do not contain residual value guarantees, restrictions or covenants.

 

Following is a summary of the weighted average remaining lease term and weighted average discount rate for the Company’s population of leases as of March 31, 2019:

 

 

 

March 31, 2019

 

Weighted average remaining lease term:

 

 

 

 

Operating leases

 

7.6 years

 

Financing leases

 

5.1 years

 

Weighted average discount rate:

 

 

 

 

Operating leases

 

 

3.9

%

Financing leases

 

 

5.8

%

 

As of March 31, 2019, the Company had additional operating leases, primarily for real estate and transportation equipment, that have not yet commenced. These operating leases are expected to commence in the remainder of 2019 and have lease terms of 3 to 16 years. The lease liability associated with these future leases is expected to be $23.4 million.

 

Following is a summary of balances related to the Company’s lease portfolio within the Company’s consolidated condensed statement of operations for the first quarter of 2019:

 

(in thousands)

 

First Quarter 2019

 

Cost of sales impact:

 

 

 

 

Operating leases costs

 

$

1,341

 

Short-term and variable leases

 

 

2,262

 

Depreciation expense from financing leases(1)

 

 

353

 

Total cost of sales impact

 

$

3,956

 

 

 

 

 

 

Selling, delivery and administrative expenses impact:

 

 

 

 

Operating leases costs

 

$

2,896

 

Short-term and variable leases

 

 

1,059

 

Depreciation expense from financing leases(1)

 

 

1,139

 

Total selling, delivery and administrative expenses impact

 

$

5,094

 

 

 

 

 

 

Interest expense, net impact:

 

 

 

 

Interest payments on financing lease obligations(2)

 

$

702

 

Total interest expense, net impact

 

$

702

 

 

 

 

 

 

Total lease cost

 

$

9,752

 

 

(1)

During the first quarter of 2018, the Company had depreciation expense from capital leases of $0.4 million and $1.1 million in cost of sales and SD&A expenses, respectively.

(2)

During the first quarter of 2018, the Company had interest payments on capital lease obligations of $0.9 million.

 

The future minimum lease payments related to the Company’s lease portfolio include renewal options the Company has determined to be reasonably assured 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 March 31, 2019:

 

(in thousands)

 

Operating Leases

 

 

Financing Leases

 

 

Total

 

Remainder of 2019

 

$

12,426

 

 

$

7,830

 

 

$

20,256

 

2020

 

 

16,444

 

 

 

10,611

 

 

 

27,055

 

2021

 

 

14,251

 

 

 

6,215

 

 

 

20,466

 

2022

 

 

11,636

 

 

 

2,694

 

 

 

14,330

 

2023

 

 

10,050

 

 

 

2,750

 

 

 

12,800

 

Thereafter

 

 

34,245

 

 

 

8,214

 

 

 

42,459

 

Total minimum lease payments including interest

 

$

99,052

 

 

$

38,314

 

 

$

137,366

 

Less:  Amounts representing interest

 

 

14,152

 

 

 

4,966

 

 

 

19,118

 

Present value of minimum lease principal payments

 

 

84,900

 

 

 

33,348

 

 

 

118,248

 

Less:  Current portion of lease liabilities - operating and financing leases

 

 

13,555

 

 

 

8,833

 

 

 

22,388

 

Noncurrent portion of lease liabilities - operating and financing leases

 

$

71,345

 

 

$

24,515

 

 

$

95,860

 

 

Following is a summary of future minimum lease payments for all noncancelable operating leases and capital leases as of December 30, 2018:

 

(in thousands)

 

Operating Leases

 

 

Capital Leases

 

 

Total

 

2019

 

$

14,146

 

 

$

10,434

 

 

$

24,580

 

2020

 

 

13,526

 

 

 

10,613

 

 

 

24,139

 

2021

 

 

12,568

 

 

 

6,218

 

 

 

18,786

 

2022

 

 

11,161

 

 

 

2,697

 

 

 

13,858

 

2023

 

 

10,055

 

 

 

2,753

 

 

 

12,808

 

Thereafter

 

 

33,805

 

 

 

8,106

 

 

 

41,911

 

Total minimum lease payments including interest

 

$

95,261

 

 

$

40,821

 

 

$

136,082

 

Less:  Amounts representing interest

 

 

 

 

 

 

5,573

 

 

 

 

 

Present value of minimum lease principal payments

 

 

 

 

 

 

35,248

 

 

 

 

 

Less:  Current portion of lease liabilities - capital leases

 

 

 

 

 

 

8,617

 

 

 

 

 

Noncurrent portion of lease liabilities - capital leases

 

 

 

 

 

$

26,631

 

 

 

 

 

 

Following is a summary of balances related to the Company’s lease portfolio within the Company’s consolidated condensed statements of cash flows for the first quarter of 2019:

 

(in thousands)

 

First Quarter 2019

 

Cash flows from operating activities impact:

 

 

 

 

Operating leases

 

$

4,136

 

Interest payments on financing lease obligations(1)

 

 

702

 

Total cash flows from operating activities impact

 

$

4,838

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Principal payments on financing lease obligations(1)

 

$

2,114

 

Total cash flows from financing activities impact

 

$

2,114

 

 

(1)

During the first quarter of 2018, the Company had principal payments on capital lease obligations of $2.1 million and interest payments on capital lease obligations of $0.9 million.

 
v3.19.1
Goodwill
 3 Months Ended
Mar. 31, 2019
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill

10.Goodwill

 

A reconciliation of the activity for goodwill for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - goodwill

 

$

165,903

 

 

$

169,316

 

Measurement period adjustments(1)

 

 

-

 

 

 

946

 

Ending balance - goodwill

 

$

165,903

 

 

$

170,262

 

 

(1)

Measurement period adjustments relate to post-closing adjustments made in accordance with the terms and conditions of the applicable asset purchase agreement or asset exchange agreement for distribution territories acquired or exchanged by the Company in April 2017 and October 2017 as part of the System Transformation. All final post-closing adjustments for these transactions were completed during 2018.

 

The Company’s goodwill resides entirely within the Nonalcoholic Beverages segment. The Company performs its annual impairment test of goodwill as of the first day of the fourth quarter of each fiscal year. During the first quarter of 2019, the Company did not experience any triggering events or changes in circumstances indicating the carrying amounts of the Company’s goodwill exceeded fair values.

 
v3.19.1
Distribution Agreements, Net
 3 Months Ended
Mar. 31, 2019
Distribution Agreements [Member]  
Other Identifiable Intangible Assets Net

11.Distribution Agreements, Net

 

Distribution agreements, net, which are amortized on a straight-line basis and have an estimated useful life of 10 to 40 years, consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Distribution agreements at cost

 

$

950,549

 

 

$

950,559

 

Less: Accumulated amortization

 

 

(56,280

)

 

 

(50,176

)

Distribution agreements, net

 

$

894,269

 

 

$

900,383

 

 

A reconciliation of the activity for distribution agreements, net for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - distribution agreements, net

 

$

900,383

 

 

$

913,352

 

Other distribution agreements

 

 

(10

)

 

 

-

 

Additional accumulated amortization

 

 

(6,104

)

 

 

(5,952

)

Ending balance - distribution agreements, net

 

$

894,269

 

 

$

907,400

 

 
v3.19.1
Customer Lists and Other Identifiable Intangible Assets, Net
 3 Months Ended
Mar. 31, 2019
Customer Lists and Other Identifiable Intangible Assets [Member]  
Other Identifiable Intangible Assets Net

12.Customer Lists and Other Identifiable Intangible Assets, Net

 

Customer lists and other identifiable intangible assets, net, which are amortized on a straight-line basis and have an estimated useful life of 5 to 12 years, consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Customer lists and other identifiable intangible assets at cost

 

$

25,288

 

 

$

25,288

 

Less: Accumulated amortization

 

 

(9,266

)

 

 

(8,806

)

Customer lists and other identifiable intangible assets, net

 

$

16,022

 

 

$

16,482

 

 

A reconciliation of the activity for customer lists and other identifiable intangible assets, net for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - customer lists and other identifiable intangible assets, net

 

$

16,482

 

 

$

18,320

 

Additional accumulated amortization

 

 

(460

)

 

 

(459

)

Ending balance - customer lists and other identifiable intangible assets, net

 

$

16,022

 

 

$

17,861

 

 
v3.19.1
Other Accrued Liabilities
 3 Months Ended
Mar. 31, 2019
Payables And Accruals [Abstract]  
Other Accrued Liabilities

13.Other Accrued Liabilities

 

Other accrued liabilities consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Accrued insurance costs

 

$

40,387

 

 

$

37,916

 

Checks and transfers yet to be presented for payment from zero balance cash accounts

 

 

37,935

 

 

 

72,701

 

Current portion of acquisition related contingent consideration

 

 

31,338

 

 

 

32,993

 

Employee and retiree benefit plan accruals

 

 

24,903

 

 

 

29,300

 

Accrued marketing costs

 

 

25,633

 

 

 

31,475

 

Accrued taxes (other than income taxes)

 

 

8,935

 

 

 

4,577

 

Commodity hedges at fair market value

 

 

3,950

 

 

 

10,305

 

Current deferred proceeds from Territory Conversion Fee

 

 

2,286

 

 

 

2,286

 

All other accrued expenses

 

 

22,388

 

 

 

28,693

 

Total other accrued liabilities

 

$

197,755

 

 

$

250,246

 

 
v3.19.1
Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2019
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments

14.Derivative Financial Instruments

 

The Company is subject to the risk of increased costs arising from adverse changes in certain commodity prices. In the normal course of business, the Company manages these risks through a variety of strategies, including the use of derivative instruments. The Company does not use derivative instruments for trading or speculative purposes. All derivative instruments are recorded at fair value as either assets or liabilities in the Company’s consolidated condensed balance sheets. These derivative instruments are not designated as hedging instruments under GAAP and are used as “economic hedges” to manage certain commodity price risk. Derivative instruments held are marked to market on a monthly basis and recognized in earnings consistent with the expense classification of the underlying hedged item. Settlements of derivative agreements are included in cash flows from operating activities on the Company’s consolidated condensed statements of cash flows.

 

The Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk. While the Company would be exposed to credit loss in the event of nonperformance by these counterparties, the Company does not anticipate nonperformance by these parties.

 

The following table summarizes pre-tax changes in the fair value of the Company’s commodity derivative financial instruments and the classification of such changes in the consolidated condensed statements of operations.

 

 

 

 

 

First Quarter

 

(in thousands)

 

Classification of Gain (Loss)

 

2019

 

 

2018

 

Commodity hedges

 

Cost of sales

 

$

3,905

 

 

$

(2,765

)

Commodity hedges

 

Selling, delivery and administrative expenses

 

 

2,715

 

 

 

(202

)

Total gain (loss)

 

 

 

$

6,620

 

 

$

(2,967

)

 

The following table summarizes the fair values and classification in the consolidated condensed balance sheets of derivative instruments held by the Company:

 

(in thousands)

 

Balance Sheet Classification

 

March 31, 2019

 

 

December 30, 2018

 

Assets:

 

 

 

 

 

 

 

 

 

 

Commodity hedges at fair market value

 

Other assets

 

$

265

 

 

$

-

 

Total assets

 

 

 

$

265

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Commodity hedges at fair market value

 

Other accrued liabilities

 

$

3,950

 

 

$

10,305

 

Total liabilities

 

 

 

$

3,950

 

 

$

10,305

 

 

The Company has master agreements with the counterparties to its derivative financial agreements that provide for net settlement of derivative transactions. Accordingly, the net amounts of derivative assets are recognized in either prepaid expenses and other current assets or other assets in the Company’s consolidated condensed balance sheets and the net amounts of derivative liabilities are recognized in other accrued liabilities or other liabilities in the consolidated condensed balance sheets. The following table summarizes the Company’s gross derivative assets and gross derivative liabilities in the consolidated condensed balance sheets:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Gross derivative assets

 

$

25,958

 

 

$

28,305

 

Gross derivative liabilities

 

 

29,643

 

 

 

38,610

 

 

The following table summarizes the Company’s outstanding commodity derivative agreements:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Notional amount of outstanding commodity derivative agreements

 

$

152,044

 

 

$

168,388

 

Latest maturity date of outstanding commodity derivative agreements

 

December 2020

 

 

December 2019

 

 
v3.19.1
Fair Values of Financial Instruments
 3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Values of Financial Instruments

15.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 following 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

 

Method and Assumptions

Deferred compensation plan assets and liabilities

 

Level 1

 

The fair value of the Company’s non-qualified 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 value of the securities held within the mutual funds.

Commodity hedging agreements

 

Level 2

 

The fair values of the Company’s commodity hedging agreements are based on current settlement values at each balance sheet date. The fair values of the commodity hedging agreements at each balance sheet date represent the estimated amounts the Company would have received or paid upon termination of these agreements. The Company’s credit risk related to the derivative financial instruments is managed by requiring high standards for its counterparties and periodic settlements. The Company considers nonperformance risk in determining the fair value of derivative financial instruments.

Nonpublic variable rate debt

 

Level 2

 

The carrying amounts of the Company’s nonpublic variable rate debt approximate their fair values due to variable interest rates with short reset periods.

Nonpublic fixed rate debt

 

Level 2

 

The fair values of the Company’s nonpublic fixed rate debt are based on estimated current market prices.

Public debt securities

 

Level 2

 

The fair values of the Company’s public debt securities are based on estimated current market prices.

Acquisition related contingent consideration

 

Level 3

 

The fair values of acquisition related contingent consideration are based on internal forecasts and the weighted average cost of capital (“WACC”) derived from market data.

 

The following tables summarize, by assets and liabilities, the carrying amounts and fair values by level of the Company’s deferred compensation plan, commodity hedging agreements, debt and acquisition related contingent consideration:

 

 

 

March 31, 2019

 

 

 

Carrying

 

 

Total

 

 

Fair Value

 

 

Fair Value

 

 

Fair Value

 

(in thousands)

 

Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan assets

 

$

36,755

 

 

$

36,755

 

 

$

36,755

 

 

$

-

 

 

$

-

 

Commodity hedging agreements

 

 

265

 

 

 

265

 

 

 

-

 

 

 

265

 

 

 

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan liabilities

 

 

36,755

 

 

 

36,755

 

 

 

36,755

 

 

 

-

 

 

 

-

 

Commodity hedging agreements

 

 

3,950

 

 

 

3,950

 

 

 

-

 

 

 

3,950

 

 

 

-

 

Nonpublic variable rate debt

 

 

406,119

 

 

 

406,500

 

 

 

-

 

 

 

406,500

 

 

 

-

 

Nonpublic fixed rate debt

 

 

274,701

 

 

 

265,200

 

 

 

-

 

 

 

265,200

 

 

 

-

 

Public debt securities

 

 

457,680

 

 

 

464,700

 

 

 

-

 

 

 

464,700

 

 

 

-

 

Acquisition related contingent consideration

 

 

393,007

 

 

 

393,007

 

 

 

-

 

 

 

-

 

 

 

393,007

 

 

 

 

December 30, 2018

 

 

 

Carrying

 

 

Total

 

 

Fair Value

 

 

Fair Value

 

 

Fair Value

 

(in thousands)

 

Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan assets

 

$

33,160

 

 

$

33,160

 

 

$

33,160

 

 

$

-

 

 

$

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan liabilities

 

 

33,160

 

 

 

33,160

 

 

 

33,160

 

 

 

-

 

 

 

-

 

Commodity hedging agreements

 

 

10,305

 

 

 

10,305

 

 

 

-

 

 

 

10,305

 

 

 

-

 

Nonpublic variable rate debt

 

 

372,074

 

 

 

372,500

 

 

 

-

 

 

 

372,500

 

 

 

-

 

Nonpublic fixed rate debt

 

 

274,717

 

 

 

261,200

 

 

 

-

 

 

 

261,200

 

 

 

-

 

Public debt securities

 

 

457,612

 

 

 

455,400

 

 

 

-

 

 

 

455,400

 

 

 

-

 

Acquisition related contingent consideration

 

 

382,898

 

 

 

382,898

 

 

 

-

 

 

 

-

 

 

 

382,898

 

 

The acquisition related contingent consideration is 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 to fair value by discounting future expected sub-bottling payments required under the CBA using the Company’s estimated WACC.

 

The future expected sub-bottling payments extend through the life of the applicable distribution assets acquired in each System Transformation transaction, 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 amounts that will be paid in the future under the CBA, and current 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 and could materially impact the amount of noncash expense (or income) recorded each reporting period.

 

The acquisition related contingent consideration is the Company’s only Level 3 asset or liability. A reconciliation of the Level 3 activity is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - Level 3 liability

 

$

382,898

 

 

$

381,291

 

Measurement period adjustment(1)

 

 

-

 

 

 

(1,059

)

Payment of acquisition related contingent consideration

 

 

(6,237

)

 

 

(5,882

)

Reclassification to current payables

 

 

2,300

 

 

 

(360

)

(Favorable)/unfavorable fair value adjustment

 

 

14,046

 

 

 

(5,186

)

Ending balance - Level 3 liability

 

$

393,007

 

 

$

368,804

 

 

(1)

Measurement period adjustment relates to post-closing adjustments made in accordance with the terms and conditions of the asset purchase agreement for the distribution territories acquired by the Company in April 2017 as part of the System Transformation. All final post-closing adjustments for these transactions were completed during 2018.

 

The fair value adjustments to the acquisition related contingent consideration liability during the first quarter of 2019 and the first quarter of 2018 were primarily driven by changes in the risk-free interest rate. These adjustments were recorded in other income (expense), net in the consolidated condensed statements of operations.

 

The anticipated amount the Company could pay annually under acquisition related contingent consideration arrangements is expected to be in the range of $25 million to $48 million.

 
v3.19.1
Income Taxes
 3 Months Ended
Mar. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes

16.Income Taxes

 

The Company’s effective income tax rate, as calculated by dividing income tax benefit by loss before income taxes, was 35.0% for the first quarter of 2019 and 48.9% for the first quarter of 2018. The decrease in the effective tax rate was primarily driven by improved financial results.

 

The Company’s effective income tax rate, as calculated by dividing income tax benefit by loss before income taxes minus net income attributable to noncontrolling interest, was 30.6% for the first quarter of 2019 and 47.8% for the first quarter of 2018.

 

The Company had uncertain tax positions, including accrued interest, of $3.2 million on March 31, 2019 and $3.1 million on December 30, 2018, all of which would affect the Company’s effective tax rate if recognized. While it is expected the amount of uncertain tax positions may change in the next 12 months, the Company does not expect such change would have a significant impact on the consolidated condensed financial statements.

 

Prior tax years beginning in year 2002 remain open to examination by the Internal Revenue Service, and various tax years beginning in year 1998 remain open to examination by certain state tax jurisdictions.

 
v3.19.1
Pension and Postretirement Benefit Obligations
 3 Months Ended
Mar. 31, 2019
Compensation And Retirement Disclosure [Abstract]  
Pension and Postretirement Benefit Obligations

17.Pension and Postretirement Benefit Obligations

 

Pension Plans

 

There are two Company-sponsored pension plans. The primary Company-sponsored pension plan was frozen as of June 30, 2006 and no benefits accrued to participants after this date. The second Company-sponsored pension plan (the “Bargaining Plan”) is for certain employees under collective bargaining agreements. Benefits under the Bargaining Plan are determined in accordance with negotiated formulas for the respective participants. Contributions to the plans are based on actuarially determined amounts and are limited to the amounts currently deductible for income tax purposes.

 

The components of net periodic pension cost were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Service cost

 

$

1,207

 

 

$

1,412

 

Interest cost

 

 

3,063

 

 

 

2,856

 

Expected return on plan assets

 

 

(2,574

)

 

 

(3,852

)

Recognized net actuarial loss

 

 

901

 

 

 

933

 

Amortization of prior service cost

 

 

5

 

 

 

6

 

Net periodic pension cost

 

$

2,602

 

 

$

1,355

 

 

The Company did not make any contributions to the two Company sponsored pension plans during the first quarter of 2019. Contributions to the two Company-sponsored pension plans are expected to be in the range of $1 million to $2 million for the remainder of 2019.

 

Postretirement Benefits

 

The Company provides postretirement benefits for a portion of its current employees. The Company recognizes the cost of postretirement benefits, which consist principally of medical benefits, during covered employees’ periods of active service. The Company does not pre-fund these benefits and has the right to modify or terminate certain of these benefits in the future.

 

The components of net periodic postretirement benefit cost were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Service cost

 

$

389

 

 

$

502

 

Interest cost

 

 

693

 

 

 

696

 

Recognized net actuarial loss

 

 

196

 

 

 

499

 

Amortization of prior service cost

 

 

(324

)

 

 

(462

)

Net periodic postretirement benefit cost

 

$

954

 

 

$

1,235

 

 

Multi-Employer Benefits

 

Certain employees of the Company whose employment is covered under collective bargaining agreements participate in a multiemployer pension plan, the Employers-Teamsters Local Union Nos. 175 and 505 Pension Fund (the “Teamsters Plan”). The Company makes monthly contributions to the Teamsters Plan on behalf of such employees. The collective bargaining agreements covering the Teamsters Plan expire at various times by July 2021. The Company expects these agreements will be re-negotiated.

 

The risks of participating in the Teamsters Plan are different from single employer plans as contributed assets are pooled and may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the Teamsters Plan, the unfunded obligations of the Teamsters Plan may be borne by the remaining participating employers. If the Company chooses to stop participating in the Teamsters Plan, the Company could be required to pay the Teamsters Plan a withdrawal liability based on the underfunded status of the Teamsters Plan. The Company does not anticipate withdrawing from the Teamsters Plan.

 

In 2015, the Company increased its contribution rates to the Teamsters Plan, with additional increases occurring annually, as part of a rehabilitation plan, which was incorporated into the renewal of collective bargaining agreements with the unions effective April 28, 2014 and adopted by the Company as a rehabilitation plan effective January 1, 2015. This was a result of the Teamsters Plan being certified by its actuary as being in “critical” status for the plan year beginning January 1, 2013.

 
v3.19.1
Other Liabilities
 3 Months Ended
Mar. 31, 2019
Other Liabilities Disclosure [Abstract]  
Other Liabilities

18.Other Liabilities

 

Other liabilities consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Noncurrent portion of acquisition related contingent consideration

 

$

361,669

 

 

$

349,905

 

Accruals for executive benefit plans

 

 

131,266

 

 

 

126,103

 

Noncurrent deferred proceeds from Territory Conversion Fee

 

 

84,592

 

 

 

85,163

 

Noncurrent deferred proceeds from Legacy Facilities Credit

 

 

30,169

 

 

 

30,369

 

Other

 

 

12,597

 

 

 

17,595

 

Total other liabilities

 

$

620,293

 

 

$

609,135

 

 
v3.19.1
Debt
 3 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]  
Debt

19.Debt

 

Following is a summary of the Company’s debt:

 

 

(in thousands)

 

Maturity

Date

 

Interest

Rate

 

 

Interest

Paid

 

Public or

Nonpublic

 

March 31,

2019

 

 

December 30,

2018

 

Senior notes(1)

 

4/15/2019

 

7.00%

 

 

Semi-annually

 

Public

 

$

110,000

 

 

$

110,000

 

Term loan facility(1)

 

6/7/2021

 

Variable

 

 

Varies

 

Nonpublic

 

 

277,500

 

 

 

292,500

 

Senior notes

 

2/27/2023

 

3.28%

 

 

Semi-annually

 

Nonpublic

 

 

125,000

 

 

 

125,000

 

Revolving credit facility(2)

 

6/8/2023

 

Variable

 

 

Varies

 

Nonpublic

 

 

129,000

 

 

 

80,000

 

Senior notes

 

11/25/2025

 

3.80%

 

 

Semi-annually

 

Public

 

 

350,000

 

 

 

350,000

 

Senior notes

 

3/21/2030

 

3.96%

 

 

Quarterly

 

Nonpublic

 

 

150,000

 

 

 

150,000

 

Unamortized discount on senior notes(3)

 

4/15/2019

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

(78

)

Unamortized discount on senior notes(3)

 

11/25/2025

 

 

 

 

 

 

 

 

 

 

(59

)

 

 

(61

)

Debt issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

(2,930

)

 

 

(2,958

)

Total debt

 

 

 

 

 

 

 

 

 

 

 

 

1,138,500

 

 

 

1,104,403

 

Less: Current portion of debt

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

Long-term debt

 

 

 

 

 

 

 

 

 

 

 

$

1,138,500

 

 

$

1,104,403

 

 

(1)

The senior notes due in 2019 were refinanced on April 10, 2019 using proceeds from the issuance of the senior notes due in 2026 (as discussed below). The Company intends to refinance the term loan facility, which has principal payments that will be due in the next twelve months, and has the capacity to do so under its revolving credit facility, which is classified as long-term debt. As such, any amounts due in the next twelve months were classified as noncurrent.

(2)

The Company’s revolving credit facility has an aggregate maximum borrowing capacity of $500 million, which may be increased at the Company’s option to $750 million, subject to obtaining commitments from the lenders and satisfying other conditions specified in the credit agreement. The Company currently believes all banks participating in the revolving credit facility have the ability to and will meet any funding requests from the Company.

(3)

The senior notes due in 2019 were issued at 98.238% of par and the senior notes due in 2025 were issued at 99.975% of par.

 

The Company mitigates its financing risk by using multiple financial institutions and only entering into credit arrangements with institutions with investment grade credit ratings. The Company monitors counterparty credit ratings on an ongoing basis.

 

Subsequent to the end of the first quarter of 2019, on April 10, 2019, the Company sold $100 million aggregate principal amount of senior unsecured notes due in 2026 to MetLife Investment Advisors, LLC (“MetLife”) and certain of its affiliates pursuant to a Note

Purchase and Private Shelf Agreement dated January 23, 2019 between the Company, MetLife and the other parties thereto. These notes bear interest at 3.93%, payable quarterly in arrears on each January 10, April 10, July 10 and October 10, commencing on July 10, 2019, and will mature on October 10, 2026, unless earlier redeemed by the Company. The Company used the proceeds to refinance the senior notes due on April 15, 2019. The Company may request that MetLife consider the purchase of additional senior unsecured notes of the Company under the agreement in an aggregate principal amount of up to $200 million.

 

The indentures under which the Company’s public debt was issued do not include financial covenants but do limit the incurrence of certain liens and encumbrances as well as indebtedness by the Company’s subsidiaries in excess of certain amounts. The agreements under which the Company’s nonpublic debt were issued include two financial covenants: a consolidated cash flow/fixed charges ratio and a consolidated funded indebtedness/cash flow ratio, each as defined in the respective agreements. The Company was in compliance with these covenants as of March 31, 2019. These covenants do not currently, and the Company does not anticipate they will, restrict its liquidity or capital resources.

 

All outstanding long-term debt has been issued by the Company and none has been issued by any of its subsidiaries. There are no guarantees of the Company’s debt.

 
v3.19.1
Commitments and Contingencies
 3 Months Ended
Mar. 31, 2019
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

20.Commitments and Contingencies

 

Manufacturing Cooperatives

 

The Company is obligated to purchase at least 80% of its requirements of plastic bottles for certain designated territories from Southeastern. The Company is also obligated to purchase 17.5 million cases of finished product from SAC on an annual basis through June 2024. The Company purchased 6.8 million cases and 7.2 million cases of finished product from SAC in the first quarter of 2019 and the first quarter of 2018, respectively.

 

The following table summarizes the Company’s purchases from these manufacturing cooperatives:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Purchases from Southeastern

 

$

34,326

 

 

$

29,169

 

Purchases from SAC

 

 

37,446

 

 

 

38,076

 

Total purchases from manufacturing cooperatives

 

$

71,772

 

 

$

67,245

 

 

The Company guarantees a portion of SAC’s debt, which expires at various dates through 2021. The amounts guaranteed were $23.9 million on both March 31, 2019 and December 30, 2018. In the event SAC fails to fulfill its commitments under the related debt, the Company would be responsible for payments to the lenders up to the level of the guarantee. The Company does not anticipate SAC will fail to fulfill its commitment related to the debt. The Company further believes SAC has sufficient assets, including production equipment, facilities and working capital, and the ability to adjust selling prices of its products to adequately mitigate the risk of material loss from the Company’s guarantee.

 

The Company holds no assets as collateral against the SAC guarantee, the fair value of which is immaterial to the Company’s consolidated condensed financial statements. The Company monitors its investments in SAC and would be required to write down its investment if an impairment was identified and the Company determined it to be other than temporary. No impairment of the Company’s investments in SAC was identified as of March 31, 2019, and there was no impairment identified in 2018.

 

Other Commitments and Contingencies

 

The Company has standby letters of credit, primarily related to its property and casualty insurance programs. These letters of credit totaled $35.6 million as of both March 31, 2019 and December 30, 2018.

 

The Company participates in long-term marketing contractual arrangements with certain prestige properties, athletic venues and other locations. As of March 31, 2019, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $171.9 million.

 

The Company is involved in various claims and legal proceedings which have arisen in the ordinary course of its business. Although it is difficult to predict the ultimate outcome of these claims and legal proceedings, management believes that the ultimate disposition of these matters will not have a material adverse effect on the financial condition, cash flows or results of operations of the Company. No

material amount of loss in excess of recorded amounts is believed to be reasonably possible as a result of these claims and legal proceedings.

 

The Company is subject to audits by tax authorities in jurisdictions where it conducts business. These audits may result in assessments that are subsequently resolved with the authorities or potentially through the courts. Management believes the Company has adequately provided for any assessments likely to result from these audits; however, final assessments, if any, could be different than the amounts recorded in the consolidated condensed financial statements.
v3.19.1
Capital Transactions
 3 Months Ended
Mar. 31, 2019
Equity [Abstract]  
Capital Transactions

21.Capital Transactions

 

During the first quarter of 2019, J. Frank Harrison, III was eligible to receive shares of the Company’s Class B Common Stock in connection with his services as Chairman of the Board of Directors and Chief Executive Officer of the Company during 2018, pursuant to a ten-year performance unit award agreement approved in 2008 (the “Performance Unit Award Agreement”). The Performance Unit Award Agreement expired at the end of 2018, with the final award issued in the first quarter of 2019.

 

During the first quarter of each year presented, the Compensation Committee of the Company’s Board of Directors (the “Committee”) determined whether any shares of the Company’s Class B Common Stock should be issued to J. Frank Harrison, III pursuant to the Performance Unit Award Agreement in connection with his services for the prior year. As permitted under the terms of the Performance Unit Award Agreement, a number of shares were settled in cash each year to satisfy tax withholding obligations in connection with the vesting of the performance units. The remaining number of shares increased the total shares of Class B Common Stock outstanding. A summary of the awards issued in 2019 and 2018 is as follows:

 

 

 

Fiscal Year

 

 

 

2019

 

 

2018

 

Date of approval for award

 

March 5, 2019

 

 

March 6, 2018

 

Fiscal year of service covered by award

 

2018

 

 

2017

 

Shares settled in cash to satisfy tax withholding obligations

 

 

15,476

 

 

 

16,504

 

Increase in Class B Common Stock shares outstanding

 

 

19,224

 

 

 

20,296

 

Total Class B Common Stock awarded

 

 

34,700

 

 

 

36,800

 

 

Compensation expense for the awards issued pursuant to the Performance Unit Award Agreement, recognized on the closing share price of the last trading day prior to the end of each fiscal period, was $2.0 million in the first quarter of 2019 and $0.8 million in the first quarter of 2018.

 

In 2018, the Committee and the Company’s stockholders approved a long-term performance equity plan (the “Long-Term Performance Equity Plan”), which will compensate J. Frank Harrison, III based on the Company’s performance. The Long-Term Performance Equity Plan succeeded the Performance Unit Award Agreement upon its expiration. Awards granted under the Long-Term Performance Equity Plan will be earned based on the Company’s attainment during a performance period of certain performance measures, each as specified by the Committee. These awards may be settled in cash and/or shares of Class B Common Stock, based on the average of the closing prices of shares of Common Stock during the last twenty trading days of the performance period. Compensation expense for the Long-Term Performance Equity Plan, which is included in SD&A expenses on the consolidated condensed statements of operations, was $3.8 million in the first quarter of 2019.

 
v3.19.1
Accumulated Other Comprehensive Income (Loss)
 3 Months Ended
Mar. 31, 2019
Equity [Abstract]  
Accumulated Other Comprehensive Income (Loss)

22.Accumulated Other Comprehensive Income (Loss)

 

Accumulated other comprehensive income (loss) (“AOCI(L)”) is comprised of adjustments relative to the Company’s pension and postretirement medical benefit plans and foreign currency translation adjustments required for a subsidiary of the Company that performs data analysis and provides consulting services outside the United States.

 

A summary of AOCI(L) for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

(in thousands)

 

December 30, 2018

 

 

Pre-tax Activity

 

 

Tax Effect

 

 

March 31, 2019

 

Reclassification of stranded tax effects

 

$

-

 

 

$

-

 

 

$

(19,720

)

 

$

(19,720

)

Net pension activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(72,690

)

 

 

901

 

 

 

(222

)

 

 

(72,011

)

Prior service costs

 

 

(24

)

 

 

5

 

 

 

(1

)

 

 

(20

)

Net postretirement benefits activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(4,902

)

 

 

196

 

 

 

(48

)

 

 

(4,754

)

Prior service costs

 

 

351

 

 

 

(324

)

 

 

80

 

 

 

107

 

Foreign currency translation adjustment

 

 

-

 

 

 

(10

)

 

 

1

 

 

 

(9

)

Total AOCI(L)

 

$

(77,265

)

 

$

768

 

 

$

(19,910

)

 

$

(96,407

)

 

(in thousands)

 

December 31, 2017

 

 

Pre-tax Activity

 

 

Tax Effect

 

 

April 1, 2018

 

Net pension activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

$

(78,618

)

 

$

933

 

 

$

(230

)

 

$

(77,915

)

Prior service costs

 

 

(43

)

 

 

6

 

 

 

(2

)

 

 

(39

)

Net postretirement benefits activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(17,299

)

 

 

499

 

 

 

(122

)

 

 

(16,922

)

Prior service costs

 

 

1,744

 

 

 

(462

)

 

 

114

 

 

 

1,396

 

Foreign currency translation adjustment

 

 

14

 

 

 

4

 

 

 

(1

)

 

 

17

 

Total AOCI(L)

 

$

(94,202

)

 

$

980

 

 

$

(241

)

 

$

(93,463

)

 

A summary of the impact of AOCI(L) on certain statements of operations line items is as follows:

 

 

 

First Quarter 2019

 

(in thousands)

 

Net Pension

Activity

 

 

Net Postretirement

Benefits Activity

 

 

Foreign Currency

Translation Adjustment

 

 

Total

 

Cost of sales

 

$

263

 

 

$

(67

)

 

$

-

 

 

$

196

 

Selling, delivery and administrative expenses

 

 

643

 

 

 

(61

)

 

 

(10

)

 

 

572

 

Subtotal pre-tax

 

 

906

 

 

 

(128

)

 

 

(10

)

 

 

768

 

Income tax expense

 

 

223

 

 

 

(32

)

 

 

(1

)

 

 

190

 

Total after tax effect

 

$

683

 

 

$

(96

)

 

$

(9

)

 

$

578

 

 

 

 

First Quarter 2018

 

(in thousands)

 

Net Pension

Activity

 

 

Net Postretirement

Benefits Activity

 

 

Foreign Currency

Translation Adjustment

 

 

Total

 

Cost of sales

 

$

216

 

 

$

6

 

 

$

-

 

 

$

222

 

Selling, delivery and administrative expenses

 

 

723

 

 

 

31

 

 

 

4

 

 

 

758

 

Subtotal pre-tax

 

 

939

 

 

 

37

 

 

 

4

 

 

 

980

 

Income tax expense

 

 

232

 

 

 

8

 

 

 

1

 

 

 

241

 

Total after tax effect

 

$

707

 

 

$

29

 

 

$

3

 

 

$

739

 

 
v3.19.1
Supplemental Disclosures of Cash Flow Information
 3 Months Ended
Mar. 31, 2019
Supplemental Cash Flow Elements [Abstract]  
Supplemental Disclosures of Cash Flow Information

23.Supplemental Disclosures of Cash Flow Information

 

Changes in current assets and current liabilities affecting cash flows were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Accounts receivable, trade, net

 

$

13,388

 

 

$

(24,039

)

Accounts receivable from The Coca-Cola Company

 

 

(11,530

)

 

 

(3,647

)

Accounts receivable, other

 

 

(8,961

)

 

 

16,118

 

Inventories

 

 

(10,284

)

 

 

(23,545

)

Prepaid expenses and other current assets

 

 

562

 

 

 

(7,854

)

Accounts payable, trade

 

 

24,812

 

 

 

1,274

 

Accounts payable to The Coca-Cola Company

 

 

13,017

 

 

 

10,682

 

Other accrued liabilities

 

 

(52,034

)

 

 

(37,672

)

Accrued compensation

 

 

(29,211

)

 

 

(35,734

)

Accrued interest payable

 

 

3,227

 

 

 

4,423

 

Change in current assets less current liabilities

 

$

(57,014

)

 

$

(99,994

)

 
v3.19.1
Significant Accounting Policies and New Accounting Pronouncements (Policies)
 3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Significant Accounting Policies

Significant Accounting Policies

 

In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of its consolidated condensed 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 2018 under the caption “Discussion of Critical Accounting Policies, Estimates and New Accounting Pronouncements” in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” a discussion of the Company’s most critical accounting policies, 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 policies and estimates are discussed with the Audit Committee of the Board of Directors of the Company during the quarter in which a change is contemplated and prior to making such change.
Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

 

In February 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2018‑02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which provides the option to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from accumulated other comprehensive income to retained earnings. This standard is required to be applied either in the period of adoption or retrospectively to each period in which the changes in the U.S. federal corporate income tax rate pursuant to the Tax Act are recognized. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and can be early adopted. The Company adopted ASU 2018‑02 in the first quarter of 2019 and recognized a cumulative effect adjustment to the opening balance of retained earnings in 2019. The cumulative effect adjustment increased retained earnings by $19.7 million.

 

In February 2016, the FASB issued ASU 2016-02, “Leases,” (the “lease standard”). The lease standard requires lessees to recognize a right-to-use asset and a lease liability for virtually all leases (other than leases meeting the definition of a short-term lease). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods beginning the following fiscal year. The Company adopted the new accounting standard during the first quarter of 2019 using the optional transition method. See Note 9 to the consolidated condensed financial statements for additional information on the Company’s adoption of the lease standard.

 
Revenue Recognition

The Company offers a range of nonalcoholic beverage products and flavors designed to meet the demands of its consumers, including both sparkling and still beverages. Sparkling beverages are carbonated beverages and the Company’s principal sparkling beverage is Coca‑Cola. Still beverages include energy products and noncarbonated beverages such as bottled water, tea, ready to drink coffee, enhanced water, juices and sports drinks.

 

The Company’s products are sold and distributed through various channels, which include selling directly to retail stores and other outlets such as food markets, institutional accounts and vending machine outlets. All the Company’s beverage sales were to customers in the United States. The Company typically collects payment from customers within 30 days from the date of sale.

 

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. Other sales include sales to other Coca‑Cola bottlers, “post‑mix” products, transportation revenue and equipment maintenance revenue. 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.

 

Net sales by category were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Bottle/can sales:

 

 

 

 

 

 

 

 

Sparkling beverages (carbonated)

 

$

585,973

 

 

$

560,105

 

Still beverages (noncarbonated, including energy products)

 

 

343,695

 

 

 

320,917

 

Total bottle/can sales

 

 

929,668

 

 

 

881,022

 

 

 

 

 

 

 

 

 

 

Other sales:

 

 

 

 

 

 

 

 

Sales to other Coca-Cola bottlers

 

 

81,673

 

 

 

101,734

 

Post-mix and other

 

 

91,571

 

 

 

82,001

 

Total other sales

 

 

173,244

 

 

 

183,735

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

Bottle/can sales represented approximately 84% of the Company’s net sales in the first quarter of 2019 and 83% of the Company’s net sales in the first quarter of 2018. The sparkling beverage category represented approximately 63% and 64% of total bottle/can sales during the first quarter of 2019 and the first quarter of 2018, respectively.

 

The Company’s contracts are derived from customer orders, including customer sales incentives, generated through an order processing and replenishment model. 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 96% of the Company’s net sales in the first quarter of 2019 and 97% of the Company’s net sales in the first quarter of 2018. Substantially all the Company’s revenue is recognized at a point in time and is included in the Nonalcoholic Beverages segment.

 

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

 

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

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Point in time net sales:

 

 

 

 

 

 

 

 

Nonalcoholic - point in time

 

$

1,060,271

 

 

$

1,031,808

 

Total point in time net sales

 

$

1,060,271

 

 

$

1,031,808

 

 

 

 

 

 

 

 

 

 

Over time net sales:

 

 

 

 

 

 

 

 

Nonalcoholic - over time

 

$

11,956

 

 

$

8,614

 

Other - over time

 

 

30,685

 

 

 

24,335

 

Total over time net sales

 

$

42,641

 

 

$

32,949

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

The Company participates in various sales programs with The Coca‑Cola Company, other beverage companies and customers to increase the sale of its products. Programs negotiated with customers include arrangements under which allowances can be earned for attaining agreed-upon sales levels. The cost of these various sales incentives are not considered a separate performance obligation and are included as deductions to net sales.

 

Allowance payments made to customers can be conditional on the achievement of volume targets and/or marketing commitments. Payments made in advance are recorded as prepayments and amortized in the consolidated condensed statements of operations over

the relevant period for which the customer commitment is made. In the event there is no separate identifiable benefit or the fair value of such benefit cannot be established, the amortization of the prepayment is included as a reduction to net sales.

 

The Company historically presented consideration paid to customers under certain contractual arrangements for exclusive distribution rights and sponsorship privileges as a marketing expense within selling, delivery and administrative (“SD&A”) expenses. The Company has now determined such amounts should be presented as a reduction to net sales and has revised the presentation of previously issued financial statements to correct for this error. Management believes the effect on previously reported financial statements is not material. In addition, management believes the revised presentation provides consistency with other companies that operate in the beverage industry. Net sales and SD&A expenses were revised by $7.3 million in the first quarter of 2018. The revision had no impact to net loss or net loss per share.

 

Revenues do not include sales or other taxes collected from customers.

 

The majority of the Company’s contracts include multiple performance obligations related to the delivery of specifically identifiable products, which generally have a duration of less than one year. For sales contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using stated contractual price, which represents the standalone selling price of each distinct good sold under the contract. Generally, the Company’s service contracts have a single performance obligation.

 

The Company sells its products and extends credit, generally without requiring collateral, based on an ongoing evaluation of the customer’s business prospects and financial condition. The Company evaluates the collectibility of its trade accounts receivable based on a number of factors, including the Company’s historic collections pattern and changes to a specific customer’s ability to meet its financial obligations. The Company has established an allowance for doubtful accounts to adjust the recorded receivable to the estimated amount the Company believes will ultimately be collected.

 

The nature of the Company’s contracts gives rise to several types of variable consideration, including prospective and retrospective rebates. The Company accounts for its prospective and retrospective rebates using the expected value method, which estimates the net price to the customer based on the customer’s expected annual sales volume projections.

 

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. The Company’s reserve for customer returns, which was classified as allowance for doubtful accounts in the consolidated condensed balance sheets, was $3.6 million as of March 31, 2019 and $2.3 million as of December 30, 2018. Returned product is recognized as a reduction of net sales.
Lessees

The Company leases office and warehouse space, machinery and other equipment under noncancelable operating lease agreements and also leases certain warehouse space under financing lease agreements. The Company adopted the lease standard using the optional transition method on December 31, 2018, the transition date. The Company has elected to adopt the following practical expedients as accounting policy upon initial adoption of the lease standard:

 

•

Short-term lease exception: Allows the Company to not recognize leases with a contractual term of less than 12 months on the balance sheet.

•

Election to not separate non-lease components: Allows the Company to not separate lease and non-lease components and to account for both components as a single component, recognized on the balance sheet.

•

Package of practical expedients for transition: Allows the Company to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, and (iii) any initial direct costs for any existing leases as of the transition date.

•

Additional transition method/relief: Allows the Company to apply the transition requirements in the lease standard as of the transition date, with any impact of initially applying the lease standard recognized as a cumulative effect adjustment to retained earnings in the period of adoption. This also requires the Company to maintain previous disclosure requirements for comparative periods.

 

Upon adoption of the lease standard on December 31, 2018, the Company recorded right of use assets for operating leases of $88.0 million and associated lease liabilities of $88.2 million. The adoption of the lease standard did not change previously reported consolidated condensed statements of operations, did not result in a cumulative effect adjustment to retained earnings in the period of adoption and did not impact cash flows.

 

The Company has used the following policies and assumptions in evaluating its population of leases:

 

•

Determining a lease: The Company assesses contracts at inception to determine whether an arrangement is or includes a lease, which conveys the Company’s right to control the use of an identified asset for a period of time in exchange for consideration. Operating lease right of use assets and associated liabilities are recognized at the commencement date and initially measured based on the present value of lease payments over the defined lease term.

•

Allocating lease and non-lease components: The Company has elected the practical expedient to not separate lease and non-lease components for certain classes of underlying assets. The Company has equipment and vehicle lease agreements, which generally have the lease and associated non-lease components accounted for as a single lease component. The Company has real estate lease agreements with lease and non-lease components, which are generally accounted for separately where applicable.

•

Discount rate: The Company calculates the discount rate based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company calculates an incremental borrowing rate using a portfolio approach. The incremental borrowing rate is calculated using the contractual lease term and the Company's borrowing rate.

•

Lease term: The Company does not recognize leases with a contractual term of less than 12 months on the balance sheet. Lease expense for these short-term leases is expensed on a straight-line basis over the lease term.

•

Rent increases or escalation clauses: Certain leases contain scheduled rent increases or escalation clauses, which can be based on the Consumer Price Index or other rates. The Company assesses each contract individually and applies the appropriate variable payments based on the terms of the agreement.

•

Renewal options and/or purchase options: Certain leases include renewal options to extend the lease term and/or purchase options to purchase the leased asset. The Company assesses these options using a threshold of reasonably certain, which is a high threshold and, therefore, the majority of the Company’s leases do not include renewal periods or purchase options for the measurement of the right of use asset and the associated lease liability. For leases the Company is reasonably certain to renew or purchase, those options are included within the lease term and, therefore, included in the measurement of the right of use asset and the associated lease liability.

•

Option to terminate: Certain leases include the option to terminate the lease prior to its scheduled expiration. This allows a contractually bound party to terminate its obligation under the lease contract, typically in return for an agreed upon financial consideration. The terms and conditions of the termination options vary by contract.

•

Residual value guarantees, restrictions or covenants: The Company’s lease agreements do not contain residual value guarantees, restrictions or covenants.
v3.19.1
Related Party Transactions (Tables)
 3 Months Ended
Mar. 31, 2019
Related Party Transaction [Line Items]  
Summary of Principal Balance Outstanding under Related Party Leases

 

A summary of the principal balance outstanding under these related party leases is as follows:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Company headquarters

 

$

9,134

 

 

$

9,851

 

Snyder Production Center

 

 

7,243

 

 

 

8,141

 
Summary of Rental Payments Related to Leases

A summary of rental payments related to these leases is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Company headquarters

 

$

1,110

 

 

$

1,126

 

Snyder Production Center

 

 

1,080

 

 

 

1,049

 
The Coca-Cola Company [Member]  
Related Party Transaction [Line Items]  
Summary of Significant Transactions between Company and The Coca-Cola Company

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

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Payments made by the Company to The Coca-Cola Company for:

 

 

 

 

 

 

 

 

Concentrate, syrup, sweetener and other purchases

 

$

266,643

 

 

$

242,468

 

Customer marketing programs

 

 

33,292

 

 

 

34,582

 

Cold drink equipment parts

 

 

6,982

 

 

 

6,141

 

 

 

 

 

 

 

 

 

 

Payments made by The Coca-Cola Company to the Company for:

 

 

 

 

 

 

 

 

Marketing funding support payments

 

$

22,712

 

 

$

20,037

 

Fountain delivery and equipment repair fees

 

 

10,749

 

 

 

9,347

 

Facilitating the distribution of certain brands and packages to other Coca-Cola bottlers

 

 

999

 

 

 

3,868

 

Presence marketing funding support on the Company’s behalf

 

 

435

 

 

 

481

 

 
CCR [Member]  
Related Party Transaction [Line Items]  
Summary of Liability to Estimated Fair Value of Contingent Consideration 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:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Current portion of acquisition related contingent consideration

 

$

31,338

 

 

$

32,993

 

Noncurrent portion of acquisition related contingent consideration

 

 

361,669

 

 

 

349,905

 

Total acquisition related contingent consideration

 

$

393,007

 

 

$

382,898

 

 
v3.19.1
Revenue Recognition (Tables)
 3 Months Ended
Mar. 31, 2019
Revenue From Contract With Customer [Abstract]  
Schedule of Net Sales By Category

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. Other sales include sales to other Coca‑Cola bottlers, “post‑mix” products, transportation revenue and equipment maintenance revenue. 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.

 

Net sales by category were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Bottle/can sales:

 

 

 

 

 

 

 

 

Sparkling beverages (carbonated)

 

$

585,973

 

 

$

560,105

 

Still beverages (noncarbonated, including energy products)

 

 

343,695

 

 

 

320,917

 

Total bottle/can sales

 

 

929,668

 

 

 

881,022

 

 

 

 

 

 

 

 

 

 

Other sales:

 

 

 

 

 

 

 

 

Sales to other Coca-Cola bottlers

 

 

81,673

 

 

 

101,734

 

Post-mix and other

 

 

91,571

 

 

 

82,001

 

Total other sales

 

 

173,244

 

 

 

183,735

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

1,102,912

 

 

$

1,064,757

 

 
Disaggregation of Revenue from Contracts with Customers

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

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Point in time net sales:

 

 

 

 

 

 

 

 

Nonalcoholic - point in time

 

$

1,060,271

 

 

$

1,031,808

 

Total point in time net sales

 

$

1,060,271

 

 

$

1,031,808

 

 

 

 

 

 

 

 

 

 

Over time net sales:

 

 

 

 

 

 

 

 

Nonalcoholic - over time

 

$

11,956

 

 

$

8,614

 

Other - over time

 

 

30,685

 

 

 

24,335

 

Total over time net sales

 

$

42,641

 

 

$

32,949

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

1,102,912

 

 

$

1,064,757

 
v3.19.1
Segments (Tables)
 3 Months Ended
Mar. 31, 2019
Segment Reporting [Abstract]  
Summary of Financial Information by Segment

The Company’s segment results are as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Net sales:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages(1)

 

$

1,072,227

 

 

$

1,040,422

 

All Other

 

 

87,915

 

 

 

86,599

 

Eliminations(2)

 

 

(57,230

)

 

 

(62,264

)

Consolidated net sales

 

$

1,102,912

 

 

$

1,064,757

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

14,641

 

 

$

(22,745

)

All Other

 

 

5,513

 

 

 

3,748

 

Consolidated income (loss) from operations

 

$

20,154

 

 

$

(18,997

)

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

Nonalcoholic Beverages

 

$

43,351

 

 

$

44,825

 

All Other

 

 

2,421

 

 

 

2,395

 

Consolidated depreciation and amortization

 

$

45,772

 

 

$

47,220

 

 

(1)

The Company historically presented consideration paid to customers under certain contractual arrangements for exclusive distribution rights and sponsorship privileges as a marketing expense within SD&A expenses. The Company has now determined such amounts should be presented as a reduction to net sales and has revised the presentation of previously issued financial statements to correct for this error. Net sales and SD&A expenses were revised by $7.3 million in the first quarter of 2018. See Note 3 to the consolidated condensed financial statements for additional information.

(2)

The entire net sales elimination for each period presented represents net sales from All Other 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.
v3.19.1
Net Loss Per Share (Tables)
 3 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
Computation of Basic Net Loss Per Share and Diluted Net Loss Per Share

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

 

 

 

First Quarter

 

(in thousands, except per share data)

 

2019

 

 

2018

 

Numerator for basic and diluted net loss per Common Stock and Class B Common Stock share:

 

 

 

 

 

 

 

 

Net loss attributable to Coca-Cola Consolidated, Inc.

 

$

(6,831

)

 

$

(14,185

)

Less dividends:

 

 

 

 

 

 

 

 

Common Stock

 

 

1,785

 

 

 

1,785

 

Class B Common Stock

 

 

554

 

 

 

548

 

Total undistributed losses

 

$

(9,170

)

 

$

(16,518

)

 

 

 

 

 

 

 

 

 

Common Stock undistributed losses – basic

 

$

(6,996

)

 

$

(12,629

)

Class B Common Stock undistributed losses – basic

 

 

(2,174

)

 

 

(3,889

)

Total undistributed losses – basic

 

$

(9,170

)

 

$

(16,518

)

 

 

 

 

 

 

 

 

 

Common Stock undistributed losses – diluted

 

$

(6,996

)

 

$

(12,629

)

Class B Common Stock undistributed losses – diluted

 

 

(2,174

)

 

 

(3,889

)

Total undistributed losses – diluted

 

$

(9,170

)

 

$

(16,518

)

 

 

 

 

 

 

 

 

 

Numerator for basic net loss per Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Common Stock

 

$

1,785

 

 

$

1,785

 

Common Stock undistributed losses – basic

 

 

(6,996

)

 

 

(12,629

)

Numerator for basic net loss per Common Stock share

 

$

(5,211

)

 

$

(10,844

)

 

 

 

First Quarter

 

(in thousands, except per share data)

 

2019

 

 

2018

 

Numerator for basic net loss per Class B Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Class B Common Stock

 

$

554

 

 

$

548

 

Class B Common Stock undistributed losses – basic

 

 

(2,174

)

 

 

(3,889

)

Numerator for basic net loss per Class B Common Stock share

 

$

(1,620

)

 

$

(3,341

)

 

 

 

 

 

 

 

 

 

Numerator for diluted net loss per Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Common Stock

 

$

1,785

 

 

$

1,785

 

Dividends on Class B Common Stock assumed converted to Common Stock

 

 

554

 

 

 

548

 

Common Stock undistributed losses – diluted

 

 

(9,170

)

 

 

(16,518

)

Numerator for diluted net loss per Common Stock share

 

$

(6,831

)

 

$

(14,185

)

 

 

 

 

 

 

 

 

 

Numerator for diluted net loss per Class B Common Stock share:

 

 

 

 

 

 

 

 

Dividends on Class B Common Stock

 

$

554

 

 

$

548

 

Class B Common Stock undistributed losses – diluted

 

 

(2,174

)

 

 

(3,889

)

Numerator for diluted net loss per Class B Common Stock share

 

$

(1,620

)

 

$

(3,341

)

 

 

 

 

 

 

 

 

 

Denominator for basic net loss per Common Stock and Class B Common Stock share:

 

 

 

 

 

 

 

 

Common Stock weighted average shares outstanding – basic

 

 

7,141

 

 

 

7,141

 

Class B Common Stock weighted average shares outstanding – basic

 

 

2,219

 

 

 

2,199

 

 

 

 

 

 

 

 

 

 

Denominator for diluted net loss 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)

 

 

9,360

 

 

 

9,340

 

Class B Common Stock weighted average shares outstanding – diluted

 

 

2,219

 

 

 

2,199

 

 

 

 

 

 

 

 

 

 

Basic net loss per share:

 

 

 

 

 

 

 

 

Common Stock

 

$

(0.73

)

 

$

(1.52

)

Class B Common Stock

 

$

(0.73

)

 

$

(1.52

)

 

 

 

 

 

 

 

 

 

Diluted net loss per share:

 

 

 

 

 

 

 

 

Common Stock

 

$

(0.73

)

 

$

(1.52

)

Class B Common Stock

 

$

(0.73

)

 

$

(1.52

)

 

NOTES TO TABLE

 

(1)

For purposes of the diluted net loss per share computation for Common Stock, all shares of Class B Common Stock are assumed to be converted; therefore, 100% of undistributed losses is allocated to Common Stock.

(2)

For purposes of the diluted net loss 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 included the dilutive effect of shares relative to the Long-Term Performance Equity Plan and the Performance Unit Award Agreement. For periods presented during which the Company has net loss, the unvested performance units granted pursuant to the Long-Term Performance Equity Plan and the Performance Unit Award Agreement are excluded from the calculation of diluted net loss per share, as the effect of these awards would be anti-dilutive. See Note 21 to the consolidated condensed financial statements for additional information on the Long-Term Performance Equity Plan and the Performance Unit Award Agreement.

(4)

The Company does not have anti-dilutive shares.
v3.19.1
Inventories (Tables)
 3 Months Ended
Mar. 31, 2019
Inventory Disclosure [Abstract]  
Summary of Inventories

Inventories consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Finished products

 

$

145,240

 

 

$

135,561

 

Manufacturing materials

 

 

37,049

 

 

 

39,840

 

Plastic shells, plastic pallets and other inventories

 

 

38,028

 

 

 

34,632

 

Total inventories

 

$

220,317

 

 

$

210,033

 

 
v3.19.1
Prepaid Expenses and Other Current Assets (Tables)
 3 Months Ended
Mar. 31, 2019
Prepaid Expense And Other Assets [Abstract]  
Summary of Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Repair parts

 

$

25,395

 

 

$

26,846

 

Prepayments for sponsorship contracts

 

 

7,042

 

 

 

7,557

 

Prepaid software

 

 

6,015

 

 

 

6,553

 

Prepaid marketing

 

 

5,867

 

 

 

6,097

 

Current portion of income taxes

 

 

5,315

 

 

 

6,637

 

Other prepaid expenses and other current assets

 

 

19,723

 

 

 

16,990

 

Total prepaid expenses and other current assets

 

$

69,357

 

 

$

70,680

 
v3.19.1
Property, Plant and Equipment, Net (Tables)
 3 Months Ended
Mar. 31, 2019
Property Plant And Equipment [Abstract]  
Principal Categories and Estimated Useful Lives of Property, Plant and Equipment, Net

 

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

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

 

Estimated Useful Lives

Land

 

$

77,949

 

 

$

78,242

 

 

 

Buildings

 

 

218,075

 

 

 

218,846

 

 

8-50 years

Machinery and equipment

 

 

327,547

 

 

 

328,034

 

 

5-20 years

Transportation equipment

 

 

373,980

 

 

 

372,895

 

 

4-20 years

Furniture and fixtures

 

 

90,277

 

 

 

89,439

 

 

3-10 years

Cold drink dispensing equipment

 

 

495,013

 

 

 

491,161

 

 

5-17 years

Leasehold and land improvements

 

 

132,704

 

 

 

132,837

 

 

5-20 years

Software for internal use

 

 

122,603

 

 

 

122,604

 

 

3-10 years

Construction in progress

 

 

19,973

 

 

 

15,142

 

 

 

Total property, plant and equipment, at cost

 

 

1,858,121

 

 

 

1,849,200

 

 

 

Less:  Accumulated depreciation and amortization

 

 

887,622

 

 

 

858,668

 

 

 

Property, plant and equipment, net

 

$

970,499

 

 

$

990,532

 

 

 

 
v3.19.1
Leases (Tables)
 3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Summary of Weighted Average Remaining Lease Term and Weighted Average Discount Rate for Population of Leases

Following is a summary of the weighted average remaining lease term and weighted average discount rate for the Company’s population of leases as of March 31, 2019:

 

 

 

March 31, 2019

 

Weighted average remaining lease term:

 

 

 

 

Operating leases

 

7.6 years

 

Financing leases

 

5.1 years

 

Weighted average discount rate:

 

 

 

 

Operating leases

 

 

3.9

%

Financing leases

 

 

5.8

%
Summary of Balances Related to Lease Portfolio within Consolidated Condensed Statement of Operations

Following is a summary of balances related to the Company’s lease portfolio within the Company’s consolidated condensed statement of operations for the first quarter of 2019:

 

(in thousands)

 

First Quarter 2019

 

Cost of sales impact:

 

 

 

 

Operating leases costs

 

$

1,341

 

Short-term and variable leases

 

 

2,262

 

Depreciation expense from financing leases(1)

 

 

353

 

Total cost of sales impact

 

$

3,956

 

 

 

 

 

 

Selling, delivery and administrative expenses impact:

 

 

 

 

Operating leases costs

 

$

2,896

 

Short-term and variable leases

 

 

1,059

 

Depreciation expense from financing leases(1)

 

 

1,139

 

Total selling, delivery and administrative expenses impact

 

$

5,094

 

 

 

 

 

 

Interest expense, net impact:

 

 

 

 

Interest payments on financing lease obligations(2)

 

$

702

 

Total interest expense, net impact

 

$

702

 

 

 

 

 

 

Total lease cost

 

$

9,752

 

 

(1)

During the first quarter of 2018, the Company had depreciation expense from capital leases of $0.4 million and $1.1 million in cost of sales and SD&A expenses, respectively.

(2)

During the first quarter of 2018, the Company had interest payments on capital lease obligations of $0.9 million.
Summary of Future Minimum Lease Payments For Noncancelable Operating And Financing Leases Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of March 31, 2019:

 

(in thousands)

 

Operating Leases

 

 

Financing Leases

 

 

Total

 

Remainder of 2019

 

$

12,426

 

 

$

7,830

 

 

$

20,256

 

2020

 

 

16,444

 

 

 

10,611

 

 

 

27,055

 

2021

 

 

14,251

 

 

 

6,215

 

 

 

20,466

 

2022

 

 

11,636

 

 

 

2,694

 

 

 

14,330

 

2023

 

 

10,050

 

 

 

2,750

 

 

 

12,800

 

Thereafter

 

 

34,245

 

 

 

8,214

 

 

 

42,459

 

Total minimum lease payments including interest

 

$

99,052

 

 

$

38,314

 

 

$

137,366

 

Less:  Amounts representing interest

 

 

14,152

 

 

 

4,966

 

 

 

19,118

 

Present value of minimum lease principal payments

 

 

84,900

 

 

 

33,348

 

 

 

118,248

 

Less:  Current portion of lease liabilities - operating and financing leases

 

 

13,555

 

 

 

8,833

 

 

 

22,388

 

Noncurrent portion of lease liabilities - operating and financing leases

 

$

71,345

 

 

$

24,515

 

 

$

95,860

 

 
Summary of Future Minimum Lease Payments For Noncancelable Operating And Capital Leases

Following is a summary of future minimum lease payments for all noncancelable operating leases and capital leases as of December 30, 2018:

 

(in thousands)

 

Operating Leases

 

 

Capital Leases

 

 

Total

 

2019

 

$

14,146

 

 

$

10,434

 

 

$

24,580

 

2020

 

 

13,526

 

 

 

10,613

 

 

 

24,139

 

2021

 

 

12,568

 

 

 

6,218

 

 

 

18,786

 

2022

 

 

11,161

 

 

 

2,697

 

 

 

13,858

 

2023

 

 

10,055

 

 

 

2,753

 

 

 

12,808

 

Thereafter

 

 

33,805

 

 

 

8,106

 

 

 

41,911

 

Total minimum lease payments including interest

 

$

95,261

 

 

$

40,821

 

 

$

136,082

 

Less:  Amounts representing interest

 

 

 

 

 

 

5,573

 

 

 

 

 

Present value of minimum lease principal payments

 

 

 

 

 

 

35,248

 

 

 

 

 

Less:  Current portion of lease liabilities - capital leases

 

 

 

 

 

 

8,617

 

 

 

 

 

Noncurrent portion of lease liabilities - capital leases

 

 

 

 

 

$

26,631

 

 

 

 

 
Summary of Balances Related to Lease Portfolio within Consolidated Condensed Statement of Cash Flow

Following is a summary of balances related to the Company’s lease portfolio within the Company’s consolidated condensed statements of cash flows for the first quarter of 2019:

 

(in thousands)

 

First Quarter 2019

 

Cash flows from operating activities impact:

 

 

 

 

Operating leases

 

$

4,136

 

Interest payments on financing lease obligations(1)

 

 

702

 

Total cash flows from operating activities impact

 

$

4,838

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Principal payments on financing lease obligations(1)

 

$

2,114

 

Total cash flows from financing activities impact

 

$

2,114

 

 

(1)

During the first quarter of 2018, the Company had principal payments on capital lease obligations of $2.1 million and interest payments on capital lease obligations of $0.9 million.

 
v3.19.1
Goodwill (Tables)
 3 Months Ended
Mar. 31, 2019
Goodwill And Intangible Assets Disclosure [Abstract]  
Schedule of Reconciliation of Activity for Goodwill

A reconciliation of the activity for goodwill for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - goodwill

 

$

165,903

 

 

$

169,316

 

Measurement period adjustments(1)

 

 

-

 

 

 

946

 

Ending balance - goodwill

 

$

165,903

 

 

$

170,262

 

(1)

Measurement period adjustments relate to post-closing adjustments made in accordance with the terms and conditions of the applicable asset purchase agreement or asset exchange agreement for distribution territories acquired or exchanged by the Company in April 2017 and October 2017 as part of the System Transformation. All final post-closing adjustments for these transactions were completed during 2018.
v3.19.1
Distribution Agreements, Net (Tables) - Distribution Agreements [Member]
 3 Months Ended
Mar. 31, 2019
Other Identifiable Intangible Assets Net

Distribution agreements, net, which are amortized on a straight-line basis and have an estimated useful life of 10 to 40 years, consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Distribution agreements at cost

 

$

950,549

 

 

$

950,559

 

Less: Accumulated amortization

 

 

(56,280

)

 

 

(50,176

)

Distribution agreements, net

 

$

894,269

 

 

$

900,383

 
Reconciliation of Activity for Other Identifiable Intangible Assets Net

A reconciliation of the activity for distribution agreements, net for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - distribution agreements, net

 

$

900,383

 

 

$

913,352

 

Other distribution agreements

 

 

(10

)

 

 

-

 

Additional accumulated amortization

 

 

(6,104

)

 

 

(5,952

)

Ending balance - distribution agreements, net

 

$

894,269

 

 

$

907,400

 

 
v3.19.1
Customer Lists and Other Identifiable Intangible Assets, Net (Tables) - Customer Lists and Other Identifiable Intangible Assets [Member]
 3 Months Ended
Mar. 31, 2019
Other Identifiable Intangible Assets Net

Customer lists and other identifiable intangible assets, net, which are amortized on a straight-line basis and have an estimated useful life of 5 to 12 years, consisted of the following:

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Customer lists and other identifiable intangible assets at cost

 

$

25,288

 

 

$

25,288

 

Less: Accumulated amortization

 

 

(9,266

)

 

 

(8,806

)

Customer lists and other identifiable intangible assets, net

 

$

16,022

 

 

$

16,482

 
Reconciliation of Activity for Other Identifiable Intangible Assets Net

A reconciliation of the activity for customer lists and other identifiable intangible assets, net for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - customer lists and other identifiable intangible assets, net

 

$

16,482

 

 

$

18,320

 

Additional accumulated amortization

 

 

(460

)

 

 

(459

)

Ending balance - customer lists and other identifiable intangible assets, net

 

$

16,022

 

 

$

17,861

 
v3.19.1
Other Accrued Liabilities (Tables)
 3 Months Ended
Mar. 31, 2019
Payables And Accruals [Abstract]  
Summary of Other Accrued Liabilities

Other accrued liabilities consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Accrued insurance costs

 

$

40,387

 

 

$

37,916

 

Checks and transfers yet to be presented for payment from zero balance cash accounts

 

 

37,935

 

 

 

72,701

 

Current portion of acquisition related contingent consideration

 

 

31,338

 

 

 

32,993

 

Employee and retiree benefit plan accruals

 

 

24,903

 

 

 

29,300

 

Accrued marketing costs

 

 

25,633

 

 

 

31,475

 

Accrued taxes (other than income taxes)

 

 

8,935

 

 

 

4,577

 

Commodity hedges at fair market value

 

 

3,950

 

 

 

10,305

 

Current deferred proceeds from Territory Conversion Fee

 

 

2,286

 

 

 

2,286

 

All other accrued expenses

 

 

22,388

 

 

 

28,693

 

Total other accrued liabilities

 

$

197,755

 

 

$

250,246

 

 
v3.19.1
Derivative Financial Instruments (Tables)
 3 Months Ended
Mar. 31, 2019
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Summary of Pre-Tax Changes in Fair Value

The following table summarizes pre-tax changes in the fair value of the Company’s commodity derivative financial instruments and the classification of such changes in the consolidated condensed statements of operations.

 

 

 

 

 

First Quarter

 

(in thousands)

 

Classification of Gain (Loss)

 

2019

 

 

2018

 

Commodity hedges

 

Cost of sales

 

$

3,905

 

 

$

(2,765

)

Commodity hedges

 

Selling, delivery and administrative expenses

 

 

2,715

 

 

 

(202

)

Total gain (loss)

 

 

 

$

6,620

 

 

$

(2,967

)

 
Summary of Fair Values and Classification in Consolidated Condensed Balance Sheets of Derivative Instruments

The following table summarizes the fair values and classification in the consolidated condensed balance sheets of derivative instruments held by the Company:

 

(in thousands)

 

Balance Sheet Classification

 

March 31, 2019

 

 

December 30, 2018

 

Assets:

 

 

 

 

 

 

 

 

 

 

Commodity hedges at fair market value

 

Other assets

 

$

265

 

 

$

-

 

Total assets

 

 

 

$

265

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Commodity hedges at fair market value

 

Other accrued liabilities

 

$

3,950

 

 

$

10,305

 

Total liabilities

 

 

 

$

3,950

 

 

$

10,305

 

 
Summary of Gross Derivative Assets and Gross Derivative Liabilities in Consolidated Condensed Balance Sheets The following table summarizes the Company’s gross derivative assets and gross derivative liabilities in the consolidated condensed balance sheets

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Gross derivative assets

 

$

25,958

 

 

$

28,305

 

Gross derivative liabilities

 

 

29,643

 

 

 

38,610

 
Summary of Outstanding Commodity Derivative Agreements

The following table summarizes the Company’s outstanding commodity derivative agreements:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Notional amount of outstanding commodity derivative agreements

 

$

152,044

 

 

$

168,388

 

Latest maturity date of outstanding commodity derivative agreements

 

December 2020

 

 

December 2019

 
v3.19.1
Fair Values of Financial Instruments (Tables)
 3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Deferred Compensation Plan Commodity Hedging Agreements and Acquisition Related Contingent Consideration

 

The following tables summarize, by assets and liabilities, the carrying amounts and fair values by level of the Company’s deferred compensation plan, commodity hedging agreements, debt and acquisition related contingent consideration:

 

 

 

March 31, 2019

 

 

 

Carrying

 

 

Total

 

 

Fair Value

 

 

Fair Value

 

 

Fair Value

 

(in thousands)

 

Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan assets

 

$

36,755

 

 

$

36,755

 

 

$

36,755

 

 

$

-

 

 

$

-

 

Commodity hedging agreements

 

 

265

 

 

 

265

 

 

 

-

 

 

 

265

 

 

 

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan liabilities

 

 

36,755

 

 

 

36,755

 

 

 

36,755

 

 

 

-

 

 

 

-

 

Commodity hedging agreements

 

 

3,950

 

 

 

3,950

 

 

 

-

 

 

 

3,950

 

 

 

-

 

Nonpublic variable rate debt

 

 

406,119

 

 

 

406,500

 

 

 

-

 

 

 

406,500

 

 

 

-

 

Nonpublic fixed rate debt

 

 

274,701

 

 

 

265,200

 

 

 

-

 

 

 

265,200

 

 

 

-

 

Public debt securities

 

 

457,680

 

 

 

464,700

 

 

 

-

 

 

 

464,700

 

 

 

-

 

Acquisition related contingent consideration

 

 

393,007

 

 

 

393,007

 

 

 

-

 

 

 

-

 

 

 

393,007

 

 

 

 

December 30, 2018

 

 

 

Carrying

 

 

Total

 

 

Fair Value

 

 

Fair Value

 

 

Fair Value

 

(in thousands)

 

Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan assets

 

$

33,160

 

 

$

33,160

 

 

$

33,160

 

 

$

-

 

 

$

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan liabilities

 

 

33,160

 

 

 

33,160

 

 

 

33,160

 

 

 

-

 

 

 

-

 

Commodity hedging agreements

 

 

10,305

 

 

 

10,305

 

 

 

-

 

 

 

10,305

 

 

 

-

 

Nonpublic variable rate debt

 

 

372,074

 

 

 

372,500

 

 

 

-

 

 

 

372,500

 

 

 

-

 

Nonpublic fixed rate debt

 

 

274,717

 

 

 

261,200

 

 

 

-

 

 

 

261,200

 

 

 

-

 

Public debt securities

 

 

457,612

 

 

 

455,400

 

 

 

-

 

 

 

455,400

 

 

 

-

 

Acquisition related contingent consideration

 

 

382,898

 

 

 

382,898

 

 

 

-

 

 

 

-

 

 

 

382,898

 

 
Summary of Reconciliation of Acquisition Related Contingent Consideration

The acquisition related contingent consideration is the Company’s only Level 3 asset or liability. A reconciliation of the Level 3 activity is as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Beginning balance - Level 3 liability

 

$

382,898

 

 

$

381,291

 

Measurement period adjustment(1)

 

 

-

 

 

 

(1,059

)

Payment of acquisition related contingent consideration

 

 

(6,237

)

 

 

(5,882

)

Reclassification to current payables

 

 

2,300

 

 

 

(360

)

(Favorable)/unfavorable fair value adjustment

 

 

14,046

 

 

 

(5,186

)

Ending balance - Level 3 liability

 

$

393,007

 

 

$

368,804

 

 

(1)

Measurement period adjustment relates to post-closing adjustments made in accordance with the terms and conditions of the asset purchase agreement for the distribution territories acquired by the Company in April 2017 as part of the System Transformation. All final post-closing adjustments for these transactions were completed during 2018.
v3.19.1
Pension and Postretirement Benefit Obligations (Tables)
 3 Months Ended
Mar. 31, 2019
Compensation And Retirement Disclosure [Abstract]  
Components of Net Periodic Pension Cost

The components of net periodic pension cost were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Service cost

 

$

1,207

 

 

$

1,412

 

Interest cost

 

 

3,063

 

 

 

2,856

 

Expected return on plan assets

 

 

(2,574

)

 

 

(3,852

)

Recognized net actuarial loss

 

 

901

 

 

 

933

 

Amortization of prior service cost

 

 

5

 

 

 

6

 

Net periodic pension cost

 

$

2,602

 

 

$

1,355

 

 
Components of Net Periodic Postretirement Benefit Cost

The components of net periodic postretirement benefit cost were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Service cost

 

$

389

 

 

$

502

 

Interest cost

 

 

693

 

 

 

696

 

Recognized net actuarial loss

 

 

196

 

 

 

499

 

Amortization of prior service cost

 

 

(324

)

 

 

(462

)

Net periodic postretirement benefit cost

 

$

954

 

 

$

1,235

 

 
v3.19.1
Other Liabilities (Tables)
 3 Months Ended
Mar. 31, 2019
Other Liabilities Disclosure [Abstract]  
Summary of Other Liabilities

Other liabilities consisted of the following:

 

(in thousands)

 

March 31, 2019

 

 

December 30, 2018

 

Noncurrent portion of acquisition related contingent consideration

 

$

361,669

 

 

$

349,905

 

Accruals for executive benefit plans

 

 

131,266

 

 

 

126,103

 

Noncurrent deferred proceeds from Territory Conversion Fee

 

 

84,592

 

 

 

85,163

 

Noncurrent deferred proceeds from Legacy Facilities Credit

 

 

30,169

 

 

 

30,369

 

Other

 

 

12,597

 

 

 

17,595

 

Total other liabilities

 

$

620,293

 

 

$

609,135

 

 
v3.19.1
Debt (Tables)
 3 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]  
Summary of Debt

Following is a summary of the Company’s debt:

 

 

(in thousands)

 

Maturity

Date

 

Interest

Rate

 

 

Interest

Paid

 

Public or

Nonpublic

 

March 31,

2019

 

 

December 30,

2018

 

Senior notes(1)

 

4/15/2019

 

7.00%

 

 

Semi-annually

 

Public

 

$

110,000

 

 

$

110,000

 

Term loan facility(1)

 

6/7/2021

 

Variable

 

 

Varies

 

Nonpublic

 

 

277,500

 

 

 

292,500

 

Senior notes

 

2/27/2023

 

3.28%

 

 

Semi-annually

 

Nonpublic

 

 

125,000

 

 

 

125,000

 

Revolving credit facility(2)

 

6/8/2023

 

Variable

 

 

Varies

 

Nonpublic

 

 

129,000

 

 

 

80,000

 

Senior notes

 

11/25/2025

 

3.80%

 

 

Semi-annually

 

Public

 

 

350,000

 

 

 

350,000

 

Senior notes

 

3/21/2030

 

3.96%

 

 

Quarterly

 

Nonpublic

 

 

150,000

 

 

 

150,000

 

Unamortized discount on senior notes(3)

 

4/15/2019

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

(78

)

Unamortized discount on senior notes(3)

 

11/25/2025

 

 

 

 

 

 

 

 

 

 

(59

)

 

 

(61

)

Debt issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

(2,930

)

 

 

(2,958

)

Total debt

 

 

 

 

 

 

 

 

 

 

 

 

1,138,500

 

 

 

1,104,403

 

Less: Current portion of debt

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

Long-term debt

 

 

 

 

 

 

 

 

 

 

 

$

1,138,500

 

 

$

1,104,403

 

 

(1)

The senior notes due in 2019 were refinanced on April 10, 2019 using proceeds from the issuance of the senior notes due in 2026 (as discussed below). The Company intends to refinance the term loan facility, which has principal payments that will be due in the next twelve months, and has the capacity to do so under its revolving credit facility, which is classified as long-term debt. As such, any amounts due in the next twelve months were classified as noncurrent.

(2)

The Company’s revolving credit facility has an aggregate maximum borrowing capacity of $500 million, which may be increased at the Company’s option to $750 million, subject to obtaining commitments from the lenders and satisfying other conditions specified in the credit agreement. The Company currently believes all banks participating in the revolving credit facility have the ability to and will meet any funding requests from the Company.

(3)

The senior notes due in 2019 were issued at 98.238% of par and the senior notes due in 2025 were issued at 99.975% of par.
v3.19.1
Commitments and Contingencies (Tables)
 3 Months Ended
Mar. 31, 2019
Commitments And Contingencies Disclosure [Abstract]  
Summary of Company's Purchases from Manufacturing Cooperatives

The following table summarizes the Company’s purchases from these manufacturing cooperatives:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Purchases from Southeastern

 

$

34,326

 

 

$

29,169

 

Purchases from SAC

 

 

37,446

 

 

 

38,076

 

Total purchases from manufacturing cooperatives

 

$

71,772

 

 

$

67,245

 
v3.19.1
Capital Transactions (Tables)
 3 Months Ended
Mar. 31, 2019
Equity [Abstract]  
Summary of Awards A summary of the awards issued in 2019 and 2018 is as follows:

 

 

 

Fiscal Year

 

 

 

2019

 

 

2018

 

Date of approval for award

 

March 5, 2019

 

 

March 6, 2018

 

Fiscal year of service covered by award

 

2018

 

 

2017

 

Shares settled in cash to satisfy tax withholding obligations

 

 

15,476

 

 

 

16,504

 

Increase in Class B Common Stock shares outstanding

 

 

19,224

 

 

 

20,296

 

Total Class B Common Stock awarded

 

 

34,700

 

 

 

36,800

 
v3.19.1
Accumulated Other Comprehensive Income (Loss) (Tables)
 3 Months Ended
Mar. 31, 2019
Equity [Abstract]  
Summary of Accumulated Other Comprehensive (Loss)

A summary of AOCI(L) for the first quarter of 2019 and the first quarter of 2018 is as follows:

 

(in thousands)

 

December 30, 2018

 

 

Pre-tax Activity

 

 

Tax Effect

 

 

March 31, 2019

 

Reclassification of stranded tax effects

 

$

-

 

 

$

-

 

 

$

(19,720

)

 

$

(19,720

)

Net pension activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(72,690

)

 

 

901

 

 

 

(222

)

 

 

(72,011

)

Prior service costs

 

 

(24

)

 

 

5

 

 

 

(1

)

 

 

(20

)

Net postretirement benefits activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(4,902

)

 

 

196

 

 

 

(48

)

 

 

(4,754

)

Prior service costs

 

 

351

 

 

 

(324

)

 

 

80

 

 

 

107

 

Foreign currency translation adjustment

 

 

-

 

 

 

(10

)

 

 

1

 

 

 

(9

)

Total AOCI(L)

 

$

(77,265

)

 

$

768

 

 

$

(19,910

)

 

$

(96,407

)

 

(in thousands)

 

December 31, 2017

 

 

Pre-tax Activity

 

 

Tax Effect

 

 

April 1, 2018

 

Net pension activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

$

(78,618

)

 

$

933

 

 

$

(230

)

 

$

(77,915

)

Prior service costs

 

 

(43

)

 

 

6

 

 

 

(2

)

 

 

(39

)

Net postretirement benefits activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial loss

 

 

(17,299

)

 

 

499

 

 

 

(122

)

 

 

(16,922

)

Prior service costs

 

 

1,744

 

 

 

(462

)

 

 

114

 

 

 

1,396

 

Foreign currency translation adjustment

 

 

14

 

 

 

4

 

 

 

(1

)

 

 

17

 

Total AOCI(L)

 

$

(94,202

)

 

$

980

 

 

$

(241

)

 

$

(93,463

)

 
Summary of Impact of Accumulated Other Comprehensive Income (Loss) on Statement of Operations

A summary of the impact of AOCI(L) on certain statements of operations line items is as follows:

 

 

 

First Quarter 2019

 

(in thousands)

 

Net Pension

Activity

 

 

Net Postretirement

Benefits Activity

 

 

Foreign Currency

Translation Adjustment

 

 

Total

 

Cost of sales

 

$

263

 

 

$

(67

)

 

$

-

 

 

$

196

 

Selling, delivery and administrative expenses

 

 

643

 

 

 

(61

)

 

 

(10

)

 

 

572

 

Subtotal pre-tax

 

 

906

 

 

 

(128

)

 

 

(10

)

 

 

768

 

Income tax expense

 

 

223

 

 

 

(32

)

 

 

(1

)

 

 

190

 

Total after tax effect

 

$

683

 

 

$

(96

)

 

$

(9

)

 

$

578

 

 

 

 

First Quarter 2018

 

(in thousands)

 

Net Pension

Activity

 

 

Net Postretirement

Benefits Activity

 

 

Foreign Currency

Translation Adjustment

 

 

Total

 

Cost of sales

 

$

216

 

 

$

6

 

 

$

-

 

 

$

222

 

Selling, delivery and administrative expenses

 

 

723

 

 

 

31

 

 

 

4

 

 

 

758

 

Subtotal pre-tax

 

 

939

 

 

 

37

 

 

 

4

 

 

 

980

 

Income tax expense

 

 

232

 

 

 

8

 

 

 

1

 

 

 

241

 

Total after tax effect

 

$

707

 

 

$

29

 

 

$

3

 

 

$

739

 

 
v3.19.1
Supplemental Disclosures of Cash Flow Information (Tables)
 3 Months Ended
Mar. 31, 2019
Supplemental Cash Flow Elements [Abstract]  
Summary of Changes in Current Assets and Current Liabilities Affecting Cash Flows

 

Changes in current assets and current liabilities affecting cash flows were as follows:

 

 

 

First Quarter

 

(in thousands)

 

2019

 

 

2018

 

Accounts receivable, trade, net

 

$

13,388

 

 

$

(24,039

)

Accounts receivable from The Coca-Cola Company

 

 

(11,530

)

 

 

(3,647

)

Accounts receivable, other

 

 

(8,961

)

 

 

16,118

 

Inventories

 

 

(10,284

)

 

 

(23,545

)

Prepaid expenses and other current assets

 

 

562

 

 

 

(7,854

)

Accounts payable, trade

 

 

24,812

 

 

 

1,274

 

Accounts payable to The Coca-Cola Company

 

 

13,017

 

 

 

10,682

 

Other accrued liabilities

 

 

(52,034

)

 

 

(37,672

)

Accrued compensation

 

 

(29,211

)

 

 

(35,734

)

Accrued interest payable

 

 

3,227

 

 

 

4,423

 

Change in current assets less current liabilities

 

$

(57,014

)

 

$

(99,994

)

 
v3.19.1
Significant Accounting Policies and New Accounting Pronouncements - Additional Information (Detail)
$ in Millions
 3 Months Ended
Mar. 31, 2019
USD ($)
Accounting Policies [Abstract]  
Cumulative effect adjustment increase in retained earnings $ 19.7
v3.19.1
Related Party Transactions - Additional Information (Detail) - USD ($)
$ in Thousands
 3 Months Ended 12 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Dec. 31, 2017
Dec. 30, 2018
Related Party Transaction [Line Items]        
Payment of acquisition related contingent consideration $ 6,237 $ 5,882    
Accounts receivable from The Coca-Cola Company $ 56,445     $ 44,915
Legacy Facilities Credit [Member]        
Related Party Transaction [Line Items]        
Amount of compensation paid     $ 44,300  
Amortization period as reduction to cost of sales     40 years  
The Coca-Cola Company [Member]        
Related Party Transaction [Line Items]        
Percentage of interest held in outstanding common stock by The Coca-Cola Company 27.00%      
Voting power of stock held by related party 5.00%      
Harrison Family [Member]        
Related Party Transaction [Line Items]        
Voting power of stock held by related party 86.00%      
CCR [Member]        
Related Party Transaction [Line Items]        
Amortization period as reduction to cost of sales     40 years  
Fee received pursuant to territory conversion agreement     $ 91,500  
CCR [Member] | Comprehensive Beverage Agreement [Member]        
Related Party Transaction [Line Items]        
Payment of acquisition related contingent consideration $ 6,200 5,900    
Southeastern [Member] | Other Assets [Member]        
Related Party Transaction [Line Items]        
Equity investments 23,500     23,600
SAC [Member]        
Related Party Transaction [Line Items]        
Proceeds from management fees received from SAC 2,200 2,200    
SAC [Member] | Other Assets [Member]        
Related Party Transaction [Line Items]        
Equity investments 8,200     8,200
CCBSS [Member]        
Related Party Transaction [Line Items]        
Accounts receivable from The Coca-Cola Company 9,800     10,400
Administrative fees due to CCBSS 300 700    
CONA [Member]        
Related Party Transaction [Line Items]        
Service fees 5,300 $ 4,000    
CONA [Member] | Other Assets [Member]        
Related Party Transaction [Line Items]        
Equity investments $ 8,500     $ 8,000
Beacon Investment Corporation [Member]        
Related Party Transaction [Line Items]        
Lease expiration date Dec. 31, 2021      
HLP, SPC & Adjacent Sales Facility [Member]        
Related Party Transaction [Line Items]        
Lease expiration date Dec. 31, 2020      
v3.19.1
Related Party Transactions - Summary of Significant Transactions between Company and The Coca-Cola Company (Detail) - The Coca-Cola Company [Member] - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Related Party Transaction [Line Items]    
Concentrate, syrup, sweetener and other purchases $ 266,643 $ 242,468
Customer marketing programs 33,292 34,582
Cold drink equipment parts 6,982 6,141
Marketing funding support payments 22,712 20,037
Fountain delivery and equipment repair fees 10,749 9,347
Facilitating the distribution of certain brands and packages to other Coca-Cola bottlers 999 3,868
Presence marketing funding support on the Company’s behalf $ 435 $ 481
v3.19.1
Related Party Transactions - Summary of Liability to Estimated Fair Value of Contingent Consideration (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Related Party Transaction [Line Items]    
Current portion of acquisition related contingent consideration $ 31,338 $ 32,993
Noncurrent portion of acquisition related contingent consideration 361,669 349,905
CCR [Member] | Comprehensive Beverage Agreement [Member]    
Related Party Transaction [Line Items]    
Current portion of acquisition related contingent consideration 31,338 32,993
Noncurrent portion of acquisition related contingent consideration 361,669 349,905
Total acquisition related contingent consideration $ 393,007 $ 382,898
v3.19.1
Related Party Transactions - Summary of Principal Balance Outstanding under Related Party Leases (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Related Party Transaction [Line Items]    
Principal balance outstanding under lease $ 33,348  
Beacon Investment Corporation [Member]    
Related Party Transaction [Line Items]    
Principal balance outstanding under lease 9,134 $ 9,851
HLP, SPC & Adjacent Sales Facility [Member]    
Related Party Transaction [Line Items]    
Principal balance outstanding under lease $ 7,243 $ 8,141
v3.19.1
Related Party Transactions - Summary of Rental Payments Related to Leases (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Beacon Investment Corporation [Member]    
Related Party Transaction [Line Items]    
Rental payments related to leases $ 1,110 $ 1,126
HLP, SPC & Adjacent Sales Facility [Member]    
Related Party Transaction [Line Items]    
Rental payments related to leases $ 1,080 $ 1,049
v3.19.1
Revenue Recognition - Additional Information (Detail)
$ in Millions
 3 Months Ended
Mar. 31, 2019
USD ($)
Category
Apr. 01, 2018
USD ($)
Dec. 30, 2018
USD ($)
Revenue From Contract With Customer [Line Items]      
Description of payment from customers within 30 days from the date of sale    
Number of sales | Category 2    
Reserve for customer return $ 3.6   $ 2.3
Distribution Rights and Sponsorship Privileges [Member]      
Revenue From Contract With Customer [Line Items]      
Impact to net sales and SD&A expenses   $ 7.3  
Point in Time Net Sales [Member]      
Revenue From Contract With Customer [Line Items]      
Sales percentage 96.00% 97.00%  
Bottle/Can Sales [Member]      
Revenue From Contract With Customer [Line Items]      
Sales percentage 84.00% 83.00%  
Bottle/Can Sales [Member] | Sparkling Beverage [Member]      
Revenue From Contract With Customer [Line Items]      
Sales percentage 63.00% 64.00%  
Bottle/Can Sales [Member] | Post-Mix and Other [Member]      
Revenue From Contract With Customer [Line Items]      
Sales return estimated percentage 1.00%    
v3.19.1
Revenue Recognition - Schedule of Net Sales By Category (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Revenue From Contract With Customer [Line Items]    
Net sales $ 1,102,912 $ 1,064,757
Bottle/Can Sales [Member]    
Revenue From Contract With Customer [Line Items]    
Net sales 929,668 881,022
Bottle/Can Sales [Member] | Sparkling Beverages (Carbonated) [Member]    
Revenue From Contract With Customer [Line Items]    
Net sales 585,973 560,105
Bottle/Can Sales [Member] | Still Beverages (Noncarbonated, Including Energy Products) [Member]    
Revenue From Contract With Customer [Line Items]    
Net sales 343,695 320,917
Other Sales [Member]    
Revenue From Contract With Customer [Line Items]    
Net sales 173,244 183,735
Other Sales [Member] | Sales to Other Coca-Cola Bottlers [Member]    
Revenue From Contract With Customer [Line Items]    
Net sales 81,673 101,734
Other Sales [Member] | Post-Mix and Other [Member]    
Revenue From Contract With Customer [Line Items]    
Net sales $ 91,571 $ 82,001
v3.19.1
Revenue Recognition - Disaggregation of Revenue from Contracts with Customers (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Disaggregation Of Revenue [Line Items]    
Net sales $ 1,102,912 $ 1,064,757
Point in Time Net Sales [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 1,060,271 1,031,808
Point in Time Net Sales [Member] | Nonalcoholic [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 1,060,271 1,031,808
Over Time Net Sales [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 42,641 32,949
Over Time Net Sales [Member] | Nonalcoholic [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 11,956 8,614
Over Time Net Sales [Member] | Other - Over Time [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales $ 30,685 $ 24,335
v3.19.1
Segments - Additional Information (Detail)
 3 Months Ended
Mar. 31, 2019
Segment
Segment Reporting Information [Line Items]  
Number of operating segments 4
All Other [Member]  
Segment Reporting Information [Line Items]  
Number of operating segments 3
v3.19.1
Segments - Summary of Financial Information by Segment (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Net sales:    
Net sales $ 1,102,912 $ 1,064,757
Income (loss) from operations:    
Income (loss) from operations 20,154 (18,997)
Depreciation and amortization:    
Depreciation and Amortization 45,772 47,220
Operating Segments [Member] | Nonalcoholic Beverages [Member]    
Net sales:    
Net sales [1] 1,072,227 1,040,422
Income (loss) from operations:    
Income (loss) from operations 14,641 (22,745)
Depreciation and amortization:    
Depreciation and Amortization 43,351 44,825
Operating Segments [Member] | All Other [Member]    
Net sales:    
Net sales 87,915 86,599
Income (loss) from operations:    
Income (loss) from operations 5,513 3,748
Depreciation and amortization:    
Depreciation and Amortization 2,421 2,395
Eliminations [Member]    
Net sales:    
Net sales [2] $ (57,230) $ (62,264)
[1] The Company historically presented consideration paid to customers under certain contractual arrangements for exclusive distribution rights and sponsorship privileges as a marketing expense within SD&A expenses. The Company has now determined such amounts should be presented as a reduction to net sales and has revised the presentation of previously issued financial statements to correct for this error. Net sales and SD&A expenses were revised by $7.3 million in the first quarter of 2018. See Note 3 to the consolidated condensed financial statements for additional information.
[2] The entire net sales elimination for each period presented represents net sales from All Other 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
v3.19.1
Segments - Summary of Financial Information by Segment (Parenthetical) (Detail) - Distribution Rights and Sponsorship Privileges [Member]
$ in Millions
 3 Months Ended
Apr. 01, 2018
USD ($)
Revenue From Contract With Customer [Line Items]  
Impact to net sales and SD&A expenses $ 7.3
Operating Segments [Member] | Nonalcoholic Beverages [Member]  
Revenue From Contract With Customer [Line Items]  
Impact to net sales and SD&A expenses $ 7.3
v3.19.1
Net Loss Per Share - Computation of Basic Net Loss Per Share and Diluted Net Loss Per Share (Detail) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Numerator for basic and diluted net loss per Common Stock and Class B Common Stock share:    
Net loss attributable to Coca-Cola Consolidated, Inc. $ (6,831) $ (14,185)
Less dividends:    
Dividends on Common Stock 1,785 1,785
Total undistributed losses - basic (9,170) (16,518)
Total undistributed losses – diluted (9,170) (16,518)
Numerator for basic net loss per Common Stock share:    
Numerator for basic net loss per Common Stock share (5,211) (10,844)
Numerator for diluted net loss per Common Stock share:    
Numerator for diluted net loss per Common Stock share $ (6,831) $ (14,185)
Denominator for diluted net loss per Common share:    
Weighted average number of Common Stock shares outstanding 7,141 7,141
Denominator for diluted net loss per Common share:    
Weighted average number of Common Stock shares outstanding – assuming dilution 9,360 9,340
Basic net loss per share:    
Common Stock $ (0.73) $ (1.52)
Diluted net loss per share:    
Common Stock $ (0.73) $ (1.52)
Class B Common Stock [Member]    
Less dividends:    
Dividends on Common Stock $ 554 $ 548
Total undistributed losses - basic (2,174) (3,889)
Total undistributed losses – diluted (2,174) (3,889)
Numerator for basic net loss per Common Stock share:    
Numerator for basic net loss per Common Stock share (1,620) (3,341)
Numerator for diluted net loss per Common Stock share:    
Numerator for diluted net loss per Common Stock share $ (1,620) $ (3,341)
Denominator for diluted net loss per Common share:    
Weighted average number of Common Stock shares outstanding 2,219 2,199
Denominator for diluted net loss per Common share:    
Weighted average number of Common Stock shares outstanding – assuming dilution 2,219 2,199
Basic net loss per share:    
Common Stock $ (0.73) $ (1.52)
Diluted net loss per share:    
Common Stock $ (0.73) $ (1.52)
Common Stock [Member]    
Less dividends:    
Total undistributed losses - basic $ (6,996) $ (12,629)
Total undistributed losses – diluted $ (6,996) $ (12,629)
v3.19.1
Net Loss Per Share - Computation of Basic Net Loss Per Share and Diluted Net Loss Per Share (Parenthetical) (Detail) - shares
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Earnings Per Share [Abstract]    
Percentage undistributed earnings (losses) allocated to common stock diluted 100.00% 100.00%
Anti-dilutive shares 0 0
v3.19.1
Inventories - Summary of Inventories (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Inventory Disclosure [Abstract]    
Finished products $ 145,240 $ 135,561
Manufacturing materials 37,049 39,840
Plastic shells, plastic pallets and other inventories 38,028 34,632
Total inventories $ 220,317 $ 210,033
v3.19.1
Prepaid Expenses and Other Current Assets - Summary of Prepaid Expenses and Other Current Assets (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Prepaid Expense And Other Assets [Abstract]    
Repair parts $ 25,395 $ 26,846
Prepayments for sponsorship contracts 7,042 7,557
Prepaid software 6,015 6,553
Prepaid marketing 5,867 6,097
Current portion of income taxes 5,315 6,637
Other prepaid expenses and other current assets 19,723 16,990
Total prepaid expenses and other current assets $ 69,357 $ 70,680
v3.19.1
Property, Plant and Equipment, Net - Principal Categories and Estimated Useful Lives of Property, Plant and Equipment, Net (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Dec. 30, 2018
Property Plant And Equipment [Line Items]    
Total property, plant and equipment, at cost $ 1,858,121 $ 1,849,200
Less: Accumulated depreciation and amortization 887,622 858,668
Property, plant and equipment, net 970,499 990,532
Land [Member]    
Property Plant And Equipment [Line Items]    
Total property, plant and equipment, at cost 77,949 78,242
Buildings [Member]    
Property Plant And Equipment [Line Items]    
Total property, plant and equipment, at cost $ 218,075 218,846
Buildings [Member] | Minimum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 8 years  
Buildings [Member] | Maximum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 50 years  
Machinery and Equipment [Member]    
Property Plant And Equipment [Line Items]    
Total property, plant and equipment, at cost $ 327,547 328,034
Machinery and Equipment [Member] | Minimum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 5 years  
Machinery and Equipment [Member] | Maximum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 20 years  
Transportation Equipment [Member]    
Property Plant And Equipment [Line Items]    
Total property, plant and equipment, at cost $ 373,980 372,895
Transportation Equipment [Member] | Minimum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 4 years  
Transportation Equipment [Member] | Maximum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 20 years  
Furniture and Fixtures [Member]    
Property Plant And Equipment [Line Items]    
Total property, plant and equipment, at cost $ 90,277 89,439
Furniture and Fixtures [Member] | Minimum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 3 years  
Furniture and Fixtures [Member] | Maximum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 10 years  
Cold Drink Dispensing Equipment [Member]    
Property Plant And Equipment [Line Items]    
Total property, plant and equipment, at cost $ 495,013 491,161
Cold Drink Dispensing Equipment [Member] | Minimum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 5 years  
Cold Drink Dispensing Equipment [Member] | Maximum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 17 years  
Leasehold and Land Improvements [Member]    
Property Plant And Equipment [Line Items]    
Total property, plant and equipment, at cost $ 132,704 132,837
Leasehold and Land Improvements [Member] | Minimum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 5 years  
Leasehold and Land Improvements [Member] | Maximum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 20 years  
Software for Internal Use [Member]    
Property Plant And Equipment [Line Items]    
Total property, plant and equipment, at cost $ 122,603 122,604
Software for Internal Use [Member] | Minimum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 3 years  
Software for Internal Use [Member] | Maximum [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful lives 10 years  
Construction in Progress [Member]    
Property Plant And Equipment [Line Items]    
Total property, plant and equipment, at cost $ 19,973 $ 15,142
v3.19.1
Leases - Additional Information (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Dec. 31, 2018
Lessee Lease Description [Line Items]    
Short-term lease description Allows the Company to not recognize leases with a contractual term of less than 12 months on the balance sheet.  
Right of use assets for operating leases $ 84,592 $ 88,000
Lease liabilities for operating leases 84,900 $ 88,200
Lessee, operating lease, not yet commenced, expense $ 23,400  
Minimum [Member]    
Lessee Lease Description [Line Items]    
Lessee, operating lease, not yet commenced, lease term 3 years  
Maximum [Member]    
Lessee Lease Description [Line Items]    
Lessee, operating lease, not yet commenced, lease term 16 years  
v3.19.1
Leases - Summary of Weighted Average Remaining Lease Term and Weighted Average Discount Rate for Population of Leases (Detail)
Mar. 31, 2019
Leases [Abstract]  
Operating leases, weighted average remaining lease term 7 years 7 months 6 days
Financing leases, weighted average remaining lease term 5 years 1 month 6 days
Operating leases, weighted average discount rate 3.90%
Financing leases, weighted average discount rate 5.80%
v3.19.1
Leases - Summary of Balances Related to Lease Portfolio within Consolidated Condensed Statement of Operations (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Lessee Disclosure [Line Items]    
Total lease cost $ 9,752  
Cost of Sales [Member]    
Lessee Disclosure [Line Items]    
Operating leases costs 1,341  
Short-term and variable leases 2,262  
Depreciation expense from financing leases 353 [1] $ 400
Total lease cost 3,956  
Selling, Delivery and Administrative Expenses [Member]    
Lessee Disclosure [Line Items]    
Operating leases costs 2,896  
Short-term and variable leases 1,059  
Depreciation expense from financing leases 1,139 [1] 1,100
Total lease cost 5,094  
Interest Expense, Net [Member]    
Lessee Disclosure [Line Items]    
Interest payments on financing lease obligations 702 [2] $ 900
Total lease cost $ 702  
[1] During the first quarter of 2018, the Company had depreciation expense from capital leases of $0.4 million and $1.1 million in cost of sales and SD&A expenses, respectively.
[2] During the first quarter of 2018, the Company had interest payments on capital lease obligations of $0.9 million.
v3.19.1
Leases - Summary of Balances Related to Lease Portfolio within Consolidated Condensed Statement of Operations (Parenthetical) (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Cost of Sales [Member]    
Lessee Disclosure [Line Items]    
Depreciation expense from capital leases $ 353 [1] $ 400
Selling, Delivery and Administrative Expenses [Member]    
Lessee Disclosure [Line Items]    
Depreciation expense from capital leases 1,139 [1] 1,100
Interest Expense, Net [Member]    
Lessee Disclosure [Line Items]    
Interest payments on capital lease obligations $ 702 [2] $ 900
[1] During the first quarter of 2018, the Company had depreciation expense from capital leases of $0.4 million and $1.1 million in cost of sales and SD&A expenses, respectively.
[2] During the first quarter of 2018, the Company had interest payments on capital lease obligations of $0.9 million.
v3.19.1
Leases - Summary of Future Minimum Lease Payments For Noncancelable Operating And Financing Leases (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Dec. 30, 2018
Lessee Disclosure [Line Items]      
Operating Leases, Remainder of 2019 $ 12,426    
Operating Leases, 2020 16,444    
Operating Leases, 2021 14,251    
Operating Leases, 2022 11,636    
Operating Leases, 2023 10,050    
Operating Leases, Thereafter 34,245    
Total operating leases including interest 99,052    
Less: Amounts representing interest 14,152    
Present value of minimum lease principal payments 84,900 $ 88,200  
Less: Current portion of lease liabilities - operating leases 13,555    
Noncurrent portion of lease liabilities - operating leases 71,345    
Financing Leases, Remainder of 2019 7,830    
Financing Leases, 2020 10,611    
Financing Leases, 2021 6,215    
Financing Leases, 2022 2,694    
Financing Leases, 2023 2,750    
Financing Leases, Thereafter 8,214    
Total financing leases including interest 38,314    
Less: Amounts representing interest 4,966    
Present value of minimum lease principal payments 33,348    
Less: Current portion of lease liabilities - financing leases 8,833   $ 8,617
Noncurrent portion of lease liabilities - financing leases 24,515   $ 26,631
Total Operating and Financing Leases [Member]      
Lessee Disclosure [Line Items]      
Total future minimum payments due remainder of 2019 20,256    
Total future minimum payments due in 2020 27,055    
Total future minimum payments due in 2021 20,466    
Total future minimum payments due in 2022 14,330    
Total future minimum payments due in 2023 12,800    
Total future minimum payments due, in Thereafter 42,459    
Total minimum lease payments including interest 137,366    
Less: Amounts representing interest 19,118    
Present value of minimum lease principal payments 118,248    
Less: Current portion of lease liabilities - operating and financing leases 22,388    
Noncurrent portion of lease liabilities - operating and financing leases $ 95,860    
v3.19.1
Leases - Summary of Future Minimum Lease Payments For Noncancelable Operating And Capital Leases (Detail)
$ in Thousands
Dec. 30, 2018
USD ($)
Lessee Disclosure [Line Items]  
Operating Leases, 2019 $ 14,146
Operating Leases, 2020 13,526
Operating Leases, 2021 12,568
Operating Leases, 2022 11,161
Operating Leases, 2023 10,055
Operating Leases, Thereafter 33,805
Total Operating Leases 95,261
Capital Leases, 2019 10,434
Capital Leases, 2020 10,613
Capital Leases, 2021 6,218
Capital Leases, 2022 2,697
Capital Leases, 2023 2,753
Capital Leases, Thereafter 8,106
Total Capital Leases including interest 40,821
Less: Amounts representing interest 5,573
Present value of minimum lease principal payments 35,248
Less: Current portion of lease liabilities - capital leases 8,617
Noncurrent portion of lease liabilities - capital leases 26,631
Total Capital And Operating Leases [Member]  
Lessee Disclosure [Line Items]  
Total future minimum payments due in 2019 24,580
Total future minimum payments due in 2020 24,139
Total future minimum payments due in 2021 18,786
Total future minimum payments due in 2022 13,858
Total future minimum payments due in 2023 12,808
Total future minimum payments due, in Thereafter 41,911
Total minimum lease payments including interest $ 136,082
v3.19.1
Leases - Summary of Balances Related to Lease Portfolio within Consolidated Condensed Statement of Cash Flow (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Cash flows from operating activities impact:    
Operating leases $ 4,136  
Interest payments on financing lease obligations 702 [1] $ 900
Total cash flows from operating activities impact 4,838  
Cash flows from financing activities:    
Principal payments on financing lease obligations 2,114 [1] $ 2,100
Total cash flows from financing activities impact $ 2,114  
[1] During the first quarter of 2018, the Company had principal payments on capital lease obligations of $2.1 million and interest payments on capital lease obligations of $0.9 million.
v3.19.1
Leases - Summary of Balances Related to Lease Portfolio within Consolidated Condensed Statement of Cash Flow (Parenthetical) (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
 [1]
Apr. 01, 2018
Leases [Abstract]    
Principal payments on capital lease obligations $ 2,114 $ 2,100
Interest payments on capital lease obligations $ 702 $ 900
[1] During the first quarter of 2018, the Company had principal payments on capital lease obligations of $2.1 million and interest payments on capital lease obligations of $0.9 million.
v3.19.1
Goodwill - Schedule of Reconciliation of Activity for Goodwill (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Goodwill And Intangible Assets Disclosure [Abstract]    
Beginning balance - goodwill $ 165,903 $ 169,316
Goodwill, Measurement period adjustments [1] 0 946
Ending balance - goodwill $ 165,903 $ 170,262
[1] Measurement period adjustments relate to post-closing adjustments made in accordance with the terms and conditions of the applicable asset purchase agreement or asset exchange agreement for distribution territories acquired or exchanged by the Company in April 2017 and October 2017 as part of the System Transformation. All final post-closing adjustments for these transactions were completed during 2018.
v3.19.1
Distribution Agreements, Net - Additional Information (Detail) - Distribution Agreements [Member]
 3 Months Ended
Mar. 31, 2019
Minimum [Member]  
Finite Lived Intangible Assets [Line Items]  
Estimated useful life 10 years
Maximum [Member]  
Finite Lived Intangible Assets [Line Items]  
Estimated useful life 40 years
v3.19.1
Distribution Agreements, Net - Other Identifiable Intangible Assets Net (Detail) - Distribution Agreements [Member] - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Apr. 01, 2018
Dec. 31, 2017
Finite Lived Intangible Assets [Line Items]        
Distribution agreements at cost $ 950,549 $ 950,559    
Less: Accumulated amortization (56,280) (50,176)    
Total other identifiable intangible assets, net $ 894,269 $ 900,383 $ 907,400 $ 913,352
v3.19.1
Distribution Agreements, Net - Reconciliation of Activity for Other Identifiable Intangible Assets Net (Detail) - Distribution Agreements [Member] - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Finite Lived Intangible Assets [Line Items]    
Total Other Identifiable Intangible Assets, Beginning Balance $ 900,383 $ 913,352
Other distribution agreements (10)  
Additional accumulated amortization (6,104) (5,952)
Total Other Identifiable Intangible Assets, Ending Balance $ 894,269 $ 907,400
v3.19.1
Customer Lists and Other Identifiable Intangible Assets, Net - Additional Information (Detail) - Customer Lists and Other Identifiable Intangible Assets [Member]
 3 Months Ended
Mar. 31, 2019
Minimum [Member]  
Finite Lived Intangible Assets [Line Items]  
Estimated useful life 5 years
Maximum [Member]  
Finite Lived Intangible Assets [Line Items]  
Estimated useful life 12 years
v3.19.1
Customer Lists and Other Identifiable Intangible Assets, Net - Other Identifiable Intangible Assets (Detail) - Customer Lists and Other Identifiable Intangible Assets [Member] - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Apr. 01, 2018
Dec. 31, 2017
Finite Lived Intangible Assets [Line Items]        
Other identifiable intangible assets, cost $ 25,288 $ 25,288    
Less: Accumulated amortization (9,266) (8,806)    
Total other identifiable intangible assets, net $ 16,022 $ 16,482 $ 17,861 $ 18,320
v3.19.1
Customer Lists and Other Identifiable Intangible Assets, Net - Reconciliation of Activity for Other Identifiable Intangible Assets (Detail) - Customer Lists and Other Identifiable Intangible Assets [Member] - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Finite Lived Intangible Assets [Line Items]    
Total Other Identifiable Intangible Assets, Beginning Balance $ 16,482 $ 18,320
Additional accumulated amortization (460) (459)
Total Other Identifiable Intangible Assets, Ending Balance $ 16,022 $ 17,861
v3.19.1
Other Accrued Liabilities - Summary of Other Accrued Liabilities (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Accounts Payable And Accrued Liabilities Current [Abstract]    
Accrued insurance costs $ 40,387 $ 37,916
Checks and transfers yet to be presented for payment from zero balance cash accounts 37,935 72,701
Current portion of acquisition related contingent consideration 31,338 32,993
Employee and retiree benefit plan accruals 24,903 29,300
Accrued marketing costs 25,633 31,475
Accrued taxes (other than income taxes) 8,935 4,577
Commodity hedges at fair market value 3,950 10,305
Current deferred proceeds from Territory Conversion Fee 2,286 2,286
All other accrued expenses 22,388 28,693
Total other accrued liabilities $ 197,755 $ 250,246
v3.19.1
Derivative Financial Instruments - Summary of Pre-Tax Changes in Fair Value (Detail) - Commodity Contract [Member] - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Derivative Instruments, Gain (Loss) [Line Items]    
Total gain (loss) $ 6,620 $ (2,967)
Cost of Sales [Member]    
Derivative Instruments, Gain (Loss) [Line Items]    
Total gain (loss) 3,905 (2,765)
Selling, Delivery and Administrative Expenses [Member]    
Derivative Instruments, Gain (Loss) [Line Items]    
Total gain (loss) $ 2,715 $ (202)
v3.19.1
Derivative Financial Instruments - Summary of Fair Values and Classification in Consolidated Condensed Balance Sheets of Derivative Instruments (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Assets:    
Total assets $ 265  
Liabilities:    
Total liabilities 3,950 $ 10,305
Commodity Contract [Member] | Not Designated as Hedging Instruments [Member] | Other Assets [Member]    
Assets:    
Total assets 265  
Commodity Contract [Member] | Not Designated as Hedging Instruments [Member] | Other Accrued Liabilities [Member]    
Liabilities:    
Total liabilities $ 3,950 $ 10,305
v3.19.1
Derivative Financial Instruments - Summary of Gross Derivative Assets and Gross Derivative Liabilities in Consolidated Condensed Balance Sheets (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Derivative Instruments And Hedging Activities Disclosure [Abstract]    
Gross derivative assets $ 25,958 $ 28,305
Gross derivative liabilities $ 29,643 $ 38,610
v3.19.1
Derivative Financial Instruments - Summary of Outstanding Commodity Derivative Agreements (Detail) - Commodity Hedging Agreements [Member] - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2019
Dec. 30, 2018
Derivative Instruments And Hedging Activities Disclosures [Line Items]    
Notional amount of outstanding commodity derivative agreements $ 152,044,000 $ 168,388,000
Latest maturity date of outstanding commodity derivative agreements 2020-12 2019-12
v3.19.1
Fair Values of Financial Instruments - Additional Information (Detail) - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Dec. 30, 2018
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]      
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount $ 0 $ 0 $ 0
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount 0 0 0
Fair Value, Liabilities, Level 1 to Level 2 Transfers, Amount 0 0 0
Fair Value, Liabilities, Level 2 to Level 1 Transfers, Amount 0 0 0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers, Net 0 0 0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Transfers, Net 0 $ 0 $ 0
Amount payable annually under acquisition related contingent consideration arrangements, value, low 25,000,000    
Amount payable annually under acquisition related contingent consideration arrangements, value, high $ 48,000,000    
System Transformation Transactions [Member] | Maximum [Member]      
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]      
Estimated useful life 40 years    
v3.19.1
Fair Values of Financial Instruments - Deferred Compensation Plan Commodity Hedging Agreements and Acquisition Related Contingent Consideration (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Apr. 01, 2018
Dec. 31, 2017
Assets:        
Commodity hedging agreements $ 265      
Liabilities:        
Commodity hedging agreements 3,950 $ 10,305    
Fair Value Level 1 [Member]        
Assets:        
Deferred compensation plan assets 36,755 33,160    
Liabilities:        
Deferred compensation plan liabilities 36,755 33,160    
Fair Value Level 2 [Member]        
Liabilities:        
Nonpublic variable rate debt 406,500 372,500    
Nonpublic fixed rate debt 265,200 261,200    
Public debt securities 464,700 455,400    
Fair Value Level 2 [Member] | Commodity Contract [Member]        
Assets:        
Commodity hedging agreements 265      
Liabilities:        
Commodity hedging agreements 3,950 10,305    
Fair Value Level 3 [Member]        
Liabilities:        
Acquisition related contingent consideration 393,007 382,898 $ 368,804 $ 381,291
Carrying Amount [Member]        
Assets:        
Deferred compensation plan assets 36,755 33,160    
Liabilities:        
Deferred compensation plan liabilities 36,755 33,160    
Nonpublic variable rate debt 406,119 372,074    
Nonpublic fixed rate debt 274,701 274,717    
Public debt securities 457,680 457,612    
Acquisition related contingent consideration 393,007 382,898    
Carrying Amount [Member] | Commodity Contract [Member]        
Assets:        
Commodity hedging agreements 265      
Liabilities:        
Commodity hedging agreements 3,950 10,305    
Total Fair Value [Member]        
Assets:        
Deferred compensation plan assets 36,755 33,160    
Liabilities:        
Deferred compensation plan liabilities 36,755 33,160    
Nonpublic variable rate debt 406,500 372,500    
Nonpublic fixed rate debt 265,200 261,200    
Public debt securities 464,700 455,400    
Acquisition related contingent consideration 393,007 382,898    
Total Fair Value [Member] | Commodity Contract [Member]        
Assets:        
Commodity hedging agreements 265      
Liabilities:        
Commodity hedging agreements $ 3,950 $ 10,305    
v3.19.1
Fair Values of Financial Instruments - Summary of Reconciliation of Acquisition Related Contingent Consideration (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]    
Payment of acquisition related contingent consideration $ 6,237 $ 5,882
(Favorable)/unfavorable fair value adjustment 14,046 (5,186)
Level 3 [Member]    
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]    
Beginning balance - Level 3 liability 382,898 381,291
Measurement period adjustment [1]   (1,059)
Payment of acquisition related contingent consideration (6,237) (5,882)
Reclassification to current payables 2,300 (360)
(Favorable)/unfavorable fair value adjustment 14,046 (5,186)
Ending balance - Level 3 liability $ 393,007 $ 368,804
[1] Measurement period adjustment relates to post-closing adjustments made in accordance with the terms and conditions of the asset purchase agreement for the distribution territories acquired by the Company in April 2017 as part of the System Transformation. All final post-closing adjustments for these transactions were completed during 2018.
v3.19.1
Income Taxes - Additional Information (Detail) - USD ($)
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Dec. 30, 2018
Income Tax [Line Items]      
Effective income tax rate (35.00%) (48.90%)  
Effective income tax rate with noncontrolling interest (30.60%) (47.80%)  
Uncertain tax positions $ 3,200,000   $ 3,100,000
Uncertain tax positions that would affect tax rate 3,200,000   $ 3,100,000
Change in uncertain tax positions, expected material impact on consolidated condensed financial statements $ 0    
Earliest Tax Year [Member] | Internal Revenue Service (IRS) [Member]      
Income Tax [Line Items]      
Tax year open for examination 2002    
Earliest Tax Year [Member] | State and Local Jurisdiction [Member]      
Income Tax [Line Items]      
Tax year open for examination 1998    
v3.19.1
Pension and Postretirement Benefit Obligations - Additional Information (Detail)
 3 Months Ended
Mar. 31, 2019
USD ($)
Benefit_Plan
Rehabilitation Plan [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Multi-employer pension plan Rehabilitation Plan adoption effective date Jan. 01, 2015
Collective bargaining agreement, effective date Apr. 28, 2014
Employer-Teamsters and Pension Trust Fund [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Multi-employer plans collective bargaining remainder of arrangements, expiration date Jul. 31, 2021
Pension Plans [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Number of company-sponsored pension plans | Benefit_Plan 2
Entity contribution to pension plans during the period $ 0
Pension Plans [Member] | Minimum [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Benefit pension plan, contributions 1,000,000
Pension Plans [Member] | Maximum [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Benefit pension plan, contributions $ 2,000,000
v3.19.1
Pension and Postretirement Benefit Obligations - Components of Net Periodic Pension Cost (Detail) - Pension Plans [Member] - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Defined Benefit Plan Disclosure [Line Items]    
Service cost $ 1,207 $ 1,412
Interest cost 3,063 2,856
Expected return on plan assets (2,574) (3,852)
Recognized net actuarial loss 901 933
Amortization of prior service cost 5 6
Net periodic benefit cost $ 2,602 $ 1,355
v3.19.1
Pension and Postretirement Benefit Obligations - Components of Net Periodic Postretirement Benefit Cost (Detail) - Net Postretirement Benefits Activity [Member] - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Defined Benefit Plan Disclosure [Line Items]    
Service cost $ 389 $ 502
Interest cost 693 696
Recognized net actuarial loss 196 499
Amortization of prior service cost (324) (462)
Net periodic benefit cost $ 954 $ 1,235
v3.19.1
Other Liabilities - Summary of Other Liabilities (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 30, 2018
Other Liabilities Disclosure [Abstract]    
Noncurrent portion of acquisition related contingent consideration $ 361,669 $ 349,905
Accruals for executive benefit plans 131,266 126,103
Noncurrent deferred proceeds from Territory Conversion Fee 84,592 85,163
Noncurrent deferred proceeds from Legacy Facilities Credit 30,169 30,369
Other 12,597 17,595
Total other liabilities $ 620,293 $ 609,135
v3.19.1
Debt - Summary of Debt (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Dec. 30, 2018
Debt Instrument [Line Items]    
Debt issuance costs $ (2,930) $ (2,958)
Total debt 1,138,500 1,104,403
Long-term debt $ 1,138,500 1,104,403
Revolving Credit Facility [Member] | Non-public [Member]    
Debt Instrument [Line Items]    
Maturity Date Jun. 08, 2023  
Line of credit $ 129,000 80,000
Interest Rate, Term Variable  
Interest Paid Varies  
7.00% Senior Notes 4/15/2019 [Member] | Public [Member]    
Debt Instrument [Line Items]    
Maturity Date Apr. 15, 2019  
Interest Rate 7.00%  
Senior Notes $ 110,000 110,000
Unamortized discount on Senior Notes $ (11) (78)
Interest Paid Semi-annually  
Term Loan Facility [Member] | Non-public [Member]    
Debt Instrument [Line Items]    
Maturity Date Jun. 07, 2021  
Term Loan Facility $ 277,500 292,500
Interest Rate, Term Variable  
Interest Paid Varies  
3.28% Senior Notes 2/27/2023 [Member] | Non-public [Member]    
Debt Instrument [Line Items]    
Maturity Date Feb. 27, 2023  
Interest Rate 3.28%  
Senior Notes $ 125,000 125,000
Interest Paid Semi-annually  
3.80% Senior Notes 11/25/2025 [Member] | Public [Member]    
Debt Instrument [Line Items]    
Maturity Date Nov. 25, 2025  
Interest Rate 3.80%  
Senior Notes $ 350,000 350,000
Unamortized discount on Senior Notes $ (59) (61)
Interest Paid Semi-annually  
3.96% Senior Notes 3/21/2030 [Member] | Non-public [Member]    
Debt Instrument [Line Items]    
Maturity Date Mar. 21, 2030  
Interest Rate 3.96%  
Senior Notes $ 150,000 $ 150,000
Interest Paid Quarterly  
v3.19.1
Debt - Summary of Debt (Parenthetical) (Detail)
Mar. 31, 2019
USD ($)
7.00% Senior Notes 2019 [Member]  
Debt Instrument [Line Items]  
Senior notes, issued at par percentage 98.238%
3.80% Senior Notes 2025 [Member]  
Debt Instrument [Line Items]  
Senior notes, issued at par percentage 99.975%
Revolving Credit Facility [Member]  
Debt Instrument [Line Items]  
Aggregate maximum borrowing capacity $ 500,000,000
Line of credit facility maximum borrowing capacity increased amount subject to obtaining commitments $ 750,000,000
v3.19.1
Debt - Additional Information (Detail) - USD ($)
Apr. 10, 2019
Mar. 31, 2019
Debt Instrument [Line Items]    
Debt issued by subsidiaries   $ 0
Guarantees of company debt   $ 0
Subsequent Event [Member] | Senior Unsecured Notes Due in 2026 [Member] | MetLife Investment Advisors LLC and Certain of Its Affiliates [Member]    
Debt Instrument [Line Items]    
Senior notes, face amount $ 100,000,000  
Debt instrument, interest rate 3.93%  
Debt instrument, frequency of periodic payment quarterly  
Maturity date of debt instruments Oct. 10, 2026  
Aggregate maximum borrowing capacity $ 200,000,000  
v3.19.1
Commitments and Contingencies - Additional Information (Detail)
 3 Months Ended 12 Months Ended
Mar. 31, 2019
USD ($)
Product
Apr. 01, 2018
Product
Dec. 30, 2018
USD ($)
Loss Contingencies [Line Items]      
Letters of credit totaled $ 35,600,000   $ 35,600,000
Long-term marketing contractual arrangements $ 171,900,000    
Southeastern [Member]      
Loss Contingencies [Line Items]      
Purchase requirements of plastic bottles 80.00%    
SAC [Member]      
Loss Contingencies [Line Items]      
Cases of finished product obligated to purchase on an annual basis | Product 17,500,000    
Purchased number of cases finished product from SAC | Product 6,800,000 7,200,000  
Debt guarantee for related party $ 23,900,000   23,900,000
Guaranteed portion of SAC's and Southeastern's debt, collateral held The Company holds no assets as collateral against the SAC guarantee    
Impairment of investments $ 0   $ 0
v3.19.1
Commitments and Contingencies - Summary of Company's Purchases from Manufacturing Cooperatives (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Loss Contingencies [Line Items]    
Total purchases from manufacturing cooperatives $ 71,772 $ 67,245
SAC [Member]    
Loss Contingencies [Line Items]    
Total purchases from manufacturing cooperatives 37,446 38,076
Southeastern [Member]    
Loss Contingencies [Line Items]    
Total purchases from manufacturing cooperatives $ 34,326 $ 29,169
v3.19.1
Capital Transactions - Additional Information (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Apr. 30, 2008
Mar. 31, 2019
Apr. 01, 2018
Capital Transactions [Line Items]      
Share based compensation   $ 2,045 $ 752
Long-Term Performance Equity Plan [Member]      
Capital Transactions [Line Items]      
Award settled in cash or shares, average closing prices of shares during trading days of performance period   20 days  
Long-Term Performance Equity Plan [Member] | Selling, Delivery and Administrative Expenses [Member]      
Capital Transactions [Line Items]      
Share based compensation   $ 3,800  
Class B Common Stock [Member]      
Capital Transactions [Line Items]      
Term of performance unit award agreement 10 years    
Performance unit award agreement expiration period 2018    
v3.19.1
Capital Transactions - Summary of the Awards Each Year (Detail) - Class B Common Stock [Member] - shares
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Schedule of Capitalization, Equity [Line Items]    
Date of approval for award Mar. 05, 2019 Mar. 06, 2018
Fiscal year of service covered by award 2018 2017
Shares settled in cash to satisfy tax withholding obligations 15,476 16,504
Increase in Class B Common Stock shares outstanding 19,224 20,296
Total Class B Common Stock awarded 34,700 36,800
v3.19.1
Accumulated Other Comprehensive Income (Loss) - Summary of Accumulated Other Comprehensive (Loss) (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance $ 455,166 $ 458,907
Pre-tax Activity 768 980
Tax Effect (19,910) (241)
Ending Balance 452,603 447,582
Reclassification of Stranded Tax Effects [Member]    
Accumulated Other Comprehensive Income Loss [Line Items]    
Tax Effect (19,720)  
Ending Balance (19,720)  
Foreign Currency Translation Adjustment [Member]    
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance   14
Pre-tax Activity (10) 4
Tax Effect 1 (1)
Ending Balance (9) 17
Accumulated Other Comprehensive Loss [Member]    
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance (77,265) (94,202)
Ending Balance (96,407) (93,463)
Net Pension Activity [Member] | Actuarial Loss [Member]    
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance (72,690) (78,618)
Pre-tax Activity 901 933
Tax Effect (222) (230)
Ending Balance (72,011) (77,915)
Net Pension Activity [Member] | Prior Service Costs [Member]    
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance (24) (43)
Pre-tax Activity 5 6
Tax Effect (1) (2)
Ending Balance (20) (39)
Net Postretirement Benefits Activity [Member] | Actuarial Loss [Member]    
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance (4,902) (17,299)
Pre-tax Activity 196 499
Tax Effect (48) (122)
Ending Balance (4,754) (16,922)
Net Postretirement Benefits Activity [Member] | Prior Service Costs [Member]    
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance 351 1,744
Pre-tax Activity (324) (462)
Tax Effect 80 114
Ending Balance $ 107 $ 1,396
v3.19.1
Accumulated Other Comprehensive Income (Loss) - Summary of Impact of Accumulated Other Comprehensive Income (Loss) on Statement of Operations (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]    
Cost of sales $ 713,604 $ 707,116
Selling, delivery and administrative expenses 369,154 376,638
Subtotal pre-tax 8,583 26,533
Income tax expense 3,005 12,971
Total after tax effect 6,831 14,185
Reclassification out of Accumulated Other Comprehensive Income [Member]    
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]    
Cost of sales 196 222
Selling, delivery and administrative expenses 572 758
Subtotal pre-tax 768 980
Income tax expense 190 241
Total after tax effect 578 739
Reclassification out of Accumulated Other Comprehensive Income [Member] | Foreign Currency Translation Adjustment [Member]    
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]    
Selling, delivery and administrative expenses (10) 4
Subtotal pre-tax (10) 4
Income tax expense (1) 1
Total after tax effect (9) 3
Net Pension Activity [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]    
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]    
Cost of sales 263 216
Selling, delivery and administrative expenses 643 723
Subtotal pre-tax 906 939
Income tax expense 223 232
Total after tax effect 683 707
Net Postretirement Benefits Activity [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]    
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]    
Cost of sales (67) 6
Selling, delivery and administrative expenses (61) 31
Subtotal pre-tax (128) 37
Income tax expense (32) 8
Total after tax effect $ (96) $ 29
v3.19.1
Supplemental Disclosures of Cash Flow Information - Summary of Changes in Current Assets and Current Liabilities Affecting Cash Flows (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Supplemental Cash Flow Elements [Abstract]    
Accounts receivable, trade, net $ 13,388 $ (24,039)
Accounts receivable from The Coca-Cola Company (11,530) (3,647)
Accounts receivable, other (8,961) 16,118
Inventories (10,284) (23,545)
Prepaid expenses and other current assets 562 (7,854)
Accounts payable, trade 24,812 1,274
Accounts payable to The Coca-Cola Company 13,017 10,682
Other accrued liabilities (52,034) (37,672)
Accrued compensation (29,211) (35,734)
Accrued interest payable 3,227 4,423
Change in current assets less current liabilities $ (57,014) $ (99,994)