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. The
se 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