Coca-Cola Consolidated, Inc. 10-Q

Item 1. Financial Statements. COCA ‑ COLA CONSOLIDATED, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) First Quarter (in thousands, except per share data) 2022 2021 Net sales $ 1,404,358 $ 1,269,857 Cost of sales 896,782 821,154 Gross profit 507,576 448,703 Selling, delivery and administrative expenses 376,591 354,519 Income from operations 130,985 94,184 Interest expense, net 7,699 8,746 Other (income) expense, net ( 3,279 ) 12,055 Income before taxes 126,565 73,383 Income tax expense 33,175 20,020 Net income $ 93,390 $ 53,363 Basic net income per share: Common Stock $ 9.96 $ 5.69 Weighted average number of Common Stock shares outstanding 7,357 7,141 Class B Common Stock $ 9.99 $ 5.69 Weighted average number of Class B Common Stock shares outstanding 2,016 2,232 Diluted net income per share: Common Stock $ 9.94 $ 5.67 Weighted average number of Common Stock shares outstanding – assuming dilution 9,396 9,409 Class B Common Stock $ 9.96 $ 5.67 Weighted average number of Class B Common Stock shares outstanding – assuming dilution 2,039 2,268 Cash dividends per share: Common Stock $ 0.25 $ 0.25 Class B Common Stock $ 0.25 $ 0.25 See accompanying notes to condensed consolidated financial statements. 1 COCA ‑ COLA CONSOLIDATED, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) First Quarter (in thousands) 2022 2021 Net income $ 93,390 $ 53,363 Other comprehensive income, net of tax: Defined benefit plans reclassification including pension costs: Actuarial gain 746 916 Prior service credits — 1 Postretirement benefits reclassification including benefit costs: Actuarial gain 69 140 Interest rate swap — 312 Foreign currency translation adjustment — ( 37 ) Other comprehensive income, net of tax 815 1,332 Comprehensive income $ 94,205 $ 54,695 See accompanying notes to condensed consolidated financial statements. 2 COCA ‑ COLA CONSOLIDATED, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except share data) April 1, 2022 December 31, 2021 ASSETS Current Assets: Cash and cash equivalents $ 127,085 $ 142,314 Accounts receivable, trade 475,303 472,270 Allowance for doubtful accounts ( 16,762 ) ( 17,336 ) Accounts receivable from The Coca‑Cola Company 55,302 57,737 Accounts receivable, other 36,839 33,878 Inventories 276,278 302,851 Prepaid expenses and other current assets 94,151 78,068 Assets held for sale 3,022 6,880 Total current assets 1,051,218 1,076,662 Property, plant and equipment, net 1,071,731 1,030,688 Right-of-use assets - operating leases 138,856 139,877 Leased property under financing leases, net 7,666 64,211 Other assets 119,340 120,486 Goodwill 165,903 165,903 Distribution agreements, net 860,703 836,777 Customer lists, net 10,515 10,966 Total assets $ 3,425,932 $ 3,445,570 LIABILITIES AND EQUITY Current Liabilities: Current portion of obligations under operating leases $ 23,556 $ 22,048 Current portion of obligations under financing leases 2,171 6,060 Accounts payable, trade 273,702 319,318 Accounts payable to The Coca‑Cola Company 159,506 145,671 Other accrued liabilities 230,568 226,769 Accrued compensation 73,330 110,894 Accrued interest payable 6,238 4,096 Current portion of debt 125,000 — Total current liabilities 894,071 834,856 Deferred income taxes 169,827 136,432 Pension and postretirement benefit obligations 96,398 93,391 Other liabilities 734,337 758,610 Noncurrent portion of obligations under operating leases 119,814 122,046 Noncurrent portion of obligations under financing leases 9,264 65,006 Long-term debt 598,574 723,443 Total liabilities 2,622,285 2,733,784 Commitments and Contingencies Equity: Common Stock, $ 1.00 par value: 30,000,000 shares authorized; 11,431,367 and 10,203,821 shares issued, respectively 11,431 10,204 Class B Common Stock, $ 1.00 par value: 10,000,000 shares authorized; 1,632,810 and 2,860,356 shares issued, respectively 1,633 2,860 Additional paid-in capital 135,953 135,953 Retained earnings 815,532 724,486 Accumulated other comprehensive loss ( 99,648 ) ( 100,463 ) Treasury stock, at cost: Common Stock – 3,062,374 shares ( 60,845 ) ( 60,845 ) Treasury stock, at cost: Class B Common Stock – 628,114 shares ( 409 ) ( 409 ) Total equity 803,647 711,786 Total liabilities and equity $ 3,425,932 $ 3,445,570 See accompanying notes to condensed consolidated financial statements. 3 COCA ‑ COLA CONSOLIDATED, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) First Quarter (in thousands) 2022 2021 Cash Flows from Operating Activities: Net income $ 93,390 $ 53,363 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense from property, plant and equipment and financing leases 37,361 37,716 Deferred income taxes 33,130 19,980 Amortization of intangible assets and deferred proceeds, net 5,908 5,810 Fair value adjustment of acquisition related contingent consideration ( 5,457 ) 10,998 Loss on sale of property, plant and equipment 439 1,098 Amortization of debt costs 249 277 Impairment and abandonment of property, plant and equipment — 500 Change in current assets less current liabilities ( 32,415 ) ( 38,662 ) Change in other noncurrent assets 8,189 4,197 Change in other noncurrent liabilities ( 9,913 ) ( 13,330 ) Other — ( 37 ) Total adjustments 37,491 28,547 Net cash provided by operating activities $ 130,881 $ 81,910 Cash Flows from Investing Activities: Additions to property, plant and equipment $ ( 104,353 ) $ ( 37,204 ) Acquisition of BODYARMOR distribution rights ( 30,149 ) ( 1,998 ) Proceeds from the sale of property, plant and equipment 2,178 74 Investment in CONA Services LLC ( 197 ) ( 514 ) Net cash used in investing activities $ ( 132,521 ) $ ( 39,642 ) Cash Flows from Financing Activities: Payments of acquisition related contingent consideration $ ( 9,822 ) $ ( 10,046 ) Cash dividends paid ( 2,344 ) ( 2,343 ) Payments on financing lease obligations ( 1,375 ) ( 1,447 ) Debt issuance fees ( 48 ) ( 147 ) Payments on term loan facility — ( 31,250 ) Net cash used in financing activities $ ( 13,589 ) $ ( 45,233 ) Net decrease in cash during period $ ( 15,229 ) $ ( 2,965 ) Cash at beginning of period 142,314 54,793 Cash at end of period $ 127,085 $ 51,828 Significant non-cash investing and financing activities: Reductions to leased property under financing leases $ 55,465 $ — Additions to property, plant and equipment accrued and recorded in accounts payable, trade 12,703 16,192 Right-of-use assets obtained in exchange for operating lease obligations 5,048 — See accompanying notes to condensed consolidated financial statements. 4 COCA ‑ COLA CONSOLIDATED, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) (in thousands, except share data) Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock - Common Stock Treasury Stock - Class B Common Stock Total Equity Balance on December 31, 2021 $ 10,204 $ 2,860 $ 135,953 $ 724,486 $ ( 100,463 ) $ ( 60,845 ) $ ( 409 ) $ 711,786 Net income — — — 93,390 — — — 93,390 Other comprehensive income, net of tax — — — — 815 — — 815 Cash dividends paid: Common Stock ($ 0.25 per share) — — — ( 1,786 ) — — — ( 1,786 ) Class B Common Stock ($ 0.25 per share) — — — ( 558 ) — — — ( 558 ) Conversion of 1,227,546 shares of Class B Common Stock 1,227 ( 1,227 ) — — — — — — Balance on April 1, 2022 $ 11,431 $ 1,633 $ 135,953 $ 815,532 $ ( 99,648 ) $ ( 60,845 ) $ ( 409 ) $ 803,647 (in thousands, except share data) Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock - Common Stock Treasury Stock - Class B Common Stock Total Equity Balance on December 31, 2020 $ 10,204 $ 2,860 $ 135,953 $ 544,280 $ ( 119,053 ) $ ( 60,845 ) $ ( 409 ) $ 512,990 Net income — — — 53,363 — — — 53,363 Other comprehensive income, net of tax — — — — 1,332 — — 1,332 Cash dividends paid: Common Stock ($ 0.25 per share) — — — ( 1,785 ) — — — ( 1,785 ) Class B Common Stock ($ 0.25 per share) — — — ( 558 ) — — — ( 558 ) Balance on April 2, 2021 $ 10,204 $ 2,860 $ 135,953 $ 595,300 $ ( 117,721 ) $ ( 60,845 ) $ ( 409 ) $ 565,342 See accompanying notes to condensed consolidated financial statements. 5 COCA ‑ COLA CONSOLIDATED, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Critical Accounting Policies The condensed consolidated financial statements include the accounts and the consolidated operations of Coca‑Cola Consolidated, Inc. and its majority-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated. The condensed consolidated financial statements reflect all adjustments, including normal, recurring accruals, which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. Each of the Company’s quarters, other than the fourth quarter, ends on the Friday closest to the last day of the corresponding quarterly calendar period. The Company’s fourth quarter and fiscal year end on December 31 regardless of the day of the week on which December 31 falls. The condensed consolidated financial statements presented are: • The financial position as of April 1, 2022 and December 31, 2021. • The results of operations, comprehensive income and changes in stockholders’ equity for the three-month periods ended April 1, 2022 (the “first quarter” of fiscal 2022 (“2022”)) and April 2, 2021 (the “first quarter” of fiscal 2021 (“2021”)). • The changes in cash flows for the first quarter of 2022 and the first quarter of 2021. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. The accounting policies followed in the presentation of interim financial results are consistent with those followed on an annual basis. These policies are presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for 2021 filed with the United States Securities and Exchange Commission. The preparation of condensed consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Critical Accounting Estimates In the ordinary course of business, the Company has made a number of estimates and assumptions relating to the reporting of its results of operations and financial position in the preparation of its condensed consolidated financial statements in conformity with GAAP. Actual results could differ significantly from those estimates under different assumptions and conditions. The Company included in its Annual Report on Form 10-K for 2021 under the caption “Discussion of Critical Accounting Estimates” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” a discussion of the Company’s most critical accounting estimates, which are those the Company believes to be the most important to the portrayal of its financial condition and results of operations and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Any changes in critical accounting estimates are discussed with the Audit Committee of the Company’s Board of Directors during the quarter in which a change is contemplated and prior to making such change. 2. Related Party Transactions The Coca‑Cola Company The Company’s business consists primarily of the distribution, marketing and manufacture of nonalcoholic beverages of The Coca‑Cola Company, which is the sole owner of the formulas under which the primary components of its soft drink products, either concentrate or syrup, are manufactured. On March 17, 2022, the Company entered into a stockholder conversion agreement (the “Stockholder Conversion Agreement”) with the JFH Family Limited Partnership—SW1, the Anne Lupton Carter Trust f/b/o Sue Anne H. Wells, the JFH Family Limited Partnership—DH1 and the Anne Lupton Carter Trust f/b/o Deborah S. Harrison (collectively, the “Converting Stockholders”), pursuant to which the Company and the Converting Stockholders agreed upon the process for converting an aggregate of 1,227,546 shares of the Company’s Class B Common Stock owned by the Converting Stockholders on a one share for one share 6 basis into shares of the Company’s Common Stock, effective as of March 17, 2022 (the “Converted Shares”). In the Stockholder Conversion Agreement, the Company agreed to cause the Converted Shares to be registered for resale pursuant to the Company’s existing automatic shelf registration statement and the Converting Stockholders agreed to certain restrictions on their resale of the Converted Shares, including a trade volume limitation that prohibits the sale of more than 175,000 of the Converted Shares in the aggregate during any three -consecutive month period. J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, controls 1,004,394 shares of the Company’s Class B Common Stock, which represent approximately 71 % of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. In addition, other members of the Harrison family control shares of the Company’s Common Stock representing approximately 4 % of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. As of April 1, 2022, The Coca‑Cola Company owned shares of the Company’s Common Stock representing approximately 9 % of the total voting power of the Company’s outstanding Common Stock and Class B Common Stock on a consolidated basis. The number of shares of the Company’s Common Stock currently held by The Coca‑Cola Company gives it the right to have a designee proposed by the Company for nomination to the Company’s Board of Directors in the Company’s annual proxy statement. J. Frank Harrison, III and the trustees of certain trusts established for the benefit of descendants of the late J. Frank Harrison, Jr., have agreed to vote the shares of the Company’s Class B Common Stock and Common Stock that they control in favor of such designee. The Coca‑Cola Company does not own any shares of the Company’s Class B Common Stock. The following table summarizes the significant cash transactions between the Company and The Coca‑Cola Company: First Quarter (in thousands) 2022 2021 Payments made by the Company to The Coca-Cola Company (1) $ 419,708 $ 349,345 Payments made by The Coca-Cola Company to the Company 59,669 29,677 (1) This excludes acquisition related sub-bottling payments made by the Company to Coca-Cola Refreshments USA, Inc., a wholly owned subsidiary of The Coca‑Cola Company, but includes the purchase price of certain additional BODYARMOR distribution rights, each as discussed below. On January 1, 2022, the Company entered into an agreement to acquire $ 30.1 million of additional BODYARMOR distribution rights with an estimated useful life of 40 years. More than 80 % of the payments made by the Company to The Coca‑Cola Company were for concentrate, syrup, sweetener and other finished goods products, which were recorded in cost of sales in the condensed consolidated statements of operations and represent the primary components of the soft drink products the Company manufactures and distributes. Payments made by the Company to The Coca‑Cola Company also included payments for marketing programs associated with large, national customers managed by The Coca‑Cola Company on behalf of the Company, which were recorded as a reduction to net sales in the condensed consolidated statements of operations. Other payments made by the Company to The Coca‑Cola Company related to cold drink equipment parts, fees associated with the rights to distribute certain brands and other customary items. Payments made by The Coca‑Cola Company to the Company included annual funding in connection with the Company’s agreement to support certain business initiatives developed by The Coca‑Cola Company and funding associated with the delivery of post-mix products to various customers, both of which were recorded as a reduction to cost of sales in the condensed consolidated statements of operations. Post-mix products are dispensed through equipment that mixes fountain syrups with carbonated or still water, enabling fountain retailers to sell finished products to consumers in cups or glasses. Payments made by The Coca‑Cola Company to the Company also included transportation services and fountain product delivery and equipment repair services performed by the Company on The Coca‑Cola Company’s equipment, all of which were recorded in net sales in the condensed consolidated statements of operations. Coca‑Cola Refreshments USA, Inc. (“CCR”) The Company, The Coca‑Cola Company and CCR entered into comprehensive beverage agreements (collectively, the “CBA”), related to a multi-year series of transactions, which were completed in October 2017, through which the Company acquired and exchanged distribution territories and manufacturing plants (the “System Transformation”). The CBA requires the Company to make quarterly sub-bottling payments to CCR on a continuing basis in exchange for the grant of exclusive rights to distribute, promote, market and sell the authorized brands of The Coca‑Cola Company and related products in certain distribution territories the Company acquired from CCR. These sub-bottling payments are based on gross profit derived from the Company’s sales of 7 certain beverages and beverage products that are sold under the same trademarks that identify a covered beverage, a beverage product or certain cross-licensed brands applicable to the System Transformation (“acquisition related sub-bottling payments”). Acquisition related sub-bottling payments to CCR were $ 9.8 million in the first quarter of 2022 and $ 10.0 million in the first quarter of 2021. The following table summarizes the liability recorded by the Company to reflect the estimated fair value of contingent consideration related to future expected acquisition related sub‑bottling payments to CCR: (in thousands) April 1, 2022 December 31, 2021 Current portion of acquisition related contingent consideration $ 47,218 $ 51,518 Noncurrent portion of acquisition related contingent consideration 480,708 490,587 Total acquisition related contingent consideration $ 527,926 $ 542,105 Southeastern Container (“Southeastern”) The Company is a shareholder of Southeastern, a plastic bottle manufacturing cooperative. The Company accounts for Southeastern as an equity method investment. The Company’s investment in Southeastern, which was classified as other assets in the condensed consolidated balance sheets, was $ 21.8 million as of April 1, 2022 and $ 21.7 million as of December 31, 2021. South Atlantic Canners, Inc. (“SAC”) The Company is a shareholder of SAC, a manufacturing cooperative located in Bishopville, South Carolina. All of SAC’s shareholders are Coca‑Cola bottlers and each has equal voting rights. The Company accounts for SAC as an equity method investment. The Company’s investment in SAC, which was classified as other assets in the condensed consolidated balance sheets, was $ 8.2 million as of both April 1, 2022 and December 31, 2021. The Company also guarantees a portion of SAC’s debt; see Note 20 for additional information. The Company receives a fee for managing the day-to-day operations of SAC pursuant to a management agreement. Proceeds from management fees received from SAC, which were recorded as a reduction to cost of sales in the condensed consolidated statements of operations, were $ 2.1 million in the first quarter of 2022 and $ 2.3 million in the first quarter of 2021. Coca‑Cola Bottlers’ Sales & Services Company LLC (“CCBSS”) Along with all other Coca‑Cola bottlers in the United States and Canada, the Company is a member of CCBSS, a company formed to provide certain procurement and other services with the intention of enhancing the efficiency and competitiveness of the Coca‑Cola bottling system. The Company accounts for CCBSS as an equity method investment and its investment in CCBSS is not material. CCBSS negotiates the procurement for the majority of the Company’s raw materials, excluding concentrate, and the Company receives a rebate from CCBSS for the purchase of these raw materials. The Company had rebates due from CCBSS of $ 8.9 million on April 1, 2022 and $ 7.9 million on December 31, 2021, which were classified as accounts receivable, other in the condensed consolidated balance sheets. In addition, the Company pays an administrative fee to CCBSS for its services. The Company incurred administrative fees to CCBSS of $ 0.3 million in the first quarter of 2022 and $ 0.6 million in the first quarter of 2021, which were classified as selling, delivery and administrative (“SD&A”) expenses in the condensed consolidated statements of operations. CONA Services LLC (“CONA”) The Company is a member of CONA, an entity formed with The Coca‑Cola Company and certain other Coca‑Cola bottlers to provide business process and information technology services to its members. The Company accounts for CONA as an equity method investment. The Company’s investment in CONA, which was classified as other assets in the condensed consolidated balance sheets, was $ 14.7 million as of April 1, 2022 and $ 13.7 million as of December 31, 2021. Pursuant to an amended and restated master services agreement with CONA, the Company is authorized to use the Coke One North America system (the “CONA System”), a uniform information technology system developed to promote operational efficiency and uniformity among North American Coca‑Cola bottlers. In exchange for the Company’s rights to use the CONA System and receive CONA-related services, it is charged service fees by CONA. The Company incurred CONA service fees of $ 6.0 million in the first quarter of 2022 and $ 5.9 million in the first quarter of 2021. 8 Related Party Leases The Company leases its headquarters office facility and an adjacent office facility in Charlotte, North Carolina from Beacon Investment Corporation, of which J. Frank Harrison, III is the majority stockholder and Morgan H. Everett, Vice Chair of the Company’s Board of Directors, is a minority stockholder. The annual base rent the Company is obligated to pay under this lease is subject to an adjustment for an inflation factor and the lease expires on December 31, 2029. The principal balance outstanding under this lease was $ 27.6 million on April 1, 2022 and $ 28.2 million on December 31, 2021. The Company previously leased the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina (the “Snyder Production Center”) from Harrison Limited Partnership One (“HLP”), which is directly and indirectly owned by trusts of which J. Frank Harrison, III and Sue Anne H. Wells, a former director of the Company, are trustees and beneficiaries and of which Morgan H. Everett is a permissible, discretionary beneficiary. On March 17, 2022, CCBCC Operations, LLC (“Operations”), a wholly owned subsidiary of the Company, entered into a definitive purchase and sale agreement with HLP, pursuant to which Operations purchased the Snyder Production Center from HLP on such date for a purchase price of $ 60.0 million. This lease, which was scheduled to expire on December 31, 2035, was terminated in connection with the purchase of the Snyder Production Center by Operations. There was no principal balance outstanding under this lease on April 1, 2022 and there was a principal balance outstanding of $ 59.1 million on December 31, 2021. A summary of rental payments for these leases related to the first quarter of 2022 and the first quarter of 2021 is as follows: First Quarter (in thousands) 2022 2021 Company headquarters $ 963 $ 945 Snyder Production Center 927 1,113 Long-Term Performance Equity Plan The Long-Term Performance Equity Plan compensates J. Frank Harrison, III based on the Company’s performance. Awards granted to Mr. Harrison under the Long-Term Performance Equity Plan are earned based on the Company’s attainment during a performance period of certain performance measures, each as specified by the Compensation Committee of the Company’s Board of Directors. These awards may be settled in cash and/or shares of the Company’s Class B Common Stock, based on the average of the closing prices of shares of the Company’s Common Stock during the last 20 trading days of the performance period. Compensation expense for the Long-Term Performance Equity Plan, which was included in SD&A expenses in the condensed consolidated statements of operations, was $ 2.0 million in the first quarter of 2022 and $ 1.9 million in the first quarter of 2021. 3. Revenue Recognition The Company’s sales are divided into two main categories: (i) bottle/can sales and (ii) other sales. Bottle/can sales include products packaged primarily in plastic bottles and aluminum cans. Bottle/can net pricing is based on the invoice price charged to customers reduced by any promotional allowances. Bottle/can net pricing per unit is impacted by the price charged per package, the sales volume generated for each package and the channels in which those packages are sold. Other sales include sales to other Coca‑Cola bottlers, post-mix products, transportation revenue and equipment maintenance revenue. The Company’s contracts are derived from customer orders, including customer sales incentives, generated through an order processing and replenishment model. Generally, the Company’s service contracts and contracts related to the delivery of specifically identifiable products have a single performance obligation. Revenues do not include sales or other taxes collected from customers. The Company has defined its performance obligations for its contracts as either at a point in time or over time. Bottle/can sales, sales to other Coca‑Cola bottlers and post-mix sales are recognized when control transfers to a customer, which is generally upon delivery and is considered a single point in time (“point in time”). Point in time sales accounted for approximately 97 % of the Company’s net sales in the first quarter of 2022 and approximately 96 % of the Company’s net sales in the first quarter of 2021. Other sales, which include revenue for service fees related to the repair of cold drink equipment and delivery fees for freight hauling and brokerage services, are recognized over time (“over time”). Revenues related to cold drink equipment repair are recognized as the respective services are completed using a cost-to-cost input method. Repair services are generally completed in less than one day but can extend up to one month . Revenues related to freight hauling and brokerage services are recognized as the delivery occurs using a miles driven output method. Generally, delivery occurs and freight charges are recognized in the same 9 day. Over time sales orders open at the end of a financial period are not material to the condensed consolidated financial statements. The following table represents a disaggregation of revenue from contracts with customers: First Quarter (in thousands) 2022 2021 Point in time net sales: Nonalcoholic Beverages - point in time $ 1,362,251 $ 1,225,212 Total point in time net sales $ 1,362,251 $ 1,225,212 Over time net sales: Nonalcoholic Beverages - over time $ 10,970 $ 9,878 All Other - over time 31,137 34,767 Total over time net sales $ 42,107 $ 44,645 Total net sales $ 1,404,358 $ 1,269,857 The Company’s allowance for doubtful accounts in the condensed consolidated balance sheets includes a reserve for customer returns and an allowance for credit losses. The Company experiences customer returns primarily as a result of damaged or out-of-date product. At any given time, the Company estimates less than 1 % of bottle/can sales and post-mix sales could be at risk for return by customers. Returned product is recognized as a reduction to net sales. The Company’s reserve for customer returns was $ 3.0 million as of both April 1, 2022 and December 31, 2021. The Company estimates an allowance for credit losses, based on historic days’ sales outstanding trends, aged customer balances, previously written-off balances and expected recoveries up to balances previously written off, in order to present the net amount expected to be collected. Accounts receivable balances are written off when determined uncollectible and are recognized as a reduction to the allowance for credit losses. Following is a summary of activity for the allowance for credit losses during the first quarter of 2022 and the first quarter of 2021: First Quarter (in thousands) 2022 2021 Beginning balance - allowance for credit losses $ 14,336 $ 18,070 Additions charged to expenses and as reductions to net sales 27 1,270 Deductions ( 601 ) ( 2,242 ) Ending balance - allowance for credit losses $ 13,762 $ 17,098 4. Segments The Company evaluates segment reporting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 280, Segment Reporting, each reporting period, including evaluating the reporting package reviewed by the Chief Operating Decision Maker (the “CODM”). The Company has concluded the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer, as a group, represent the CODM. Asset information is not provided to the CODM. The Company believes three operating segments exist. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated net sales and income from operations. The additional two operating segments do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, and, therefore, have been combined into “All Other.” 10 The Company’s segment results are as follows: First Quarter (in thousands) 2022 2021 Net sales: Nonalcoholic Beverages $ 1,373,221 $ 1,235,090 All Other 96,163 89,949 Eliminations (1) ( 65,026 ) ( 55,182 ) Consolidated net sales $ 1,404,358 $ 1,269,857 Income from operations: Nonalcoholic Beverages $ 134,558 $ 95,042 All Other ( 3,573 ) ( 858 ) Consolidated income from operations $ 130,985 $ 94,184 Depreciation and amortization: Nonalcoholic Beverages $ 40,286 $ 40,551 All Other 2,983 2,975 Consolidated depreciation and amortization $ 43,269 $ 43,526 (1) The entire net sales elimination represents net sales from the All Other segment to the Nonalcoholic Beverages segment. Sales between these segments are recognized at either fair market value or cost depending on the nature of the transaction. 5. Net Income Per Share The following table sets forth the computation of basic net income per share and diluted net income per share under the two-class method: First Quarter (in thousands, except per share data) 2022 2021 Numerator for basic and diluted net income per Common Stock and Class B Common Stock share: Net income $ 93,390 $ 53,363 Less dividends: Common Stock 1,786 1,785 Class B Common Stock 558 558 Total undistributed earnings $ 91,046 $ 51,020 Common Stock undistributed earnings – basic $ 71,463 $ 38,871 Class B Common Stock undistributed earnings – basic 19,583 12,149 Total undistributed earnings – basic $ 91,046 $ 51,020 Common Stock undistributed earnings – diluted $ 71,288 $ 38,722 Class B Common Stock undistributed earnings – diluted 19,758 12,298 Total undistributed earnings – diluted $ 91,046 $ 51,020 Numerator for basic net income per Common Stock share: Dividends on Common Stock $ 1,786 $ 1,785 Common Stock undistributed earnings – basic 71,463 38,871 Numerator for basic net income per Common Stock share $ 73,249 $ 40,656 Numerator for basic net income per Class B Common Stock share: Dividends on Class B Common Stock $ 558 $ 558 Class B Common Stock undistributed earnings – basic 19,583 12,149 Numerator for basic net income per Class B Common Stock share $ 20,141 $ 12,707 11 First Quarter (in thousands, except per share data) 2022 2021 Numerator for diluted net income per Common Stock share: Dividends on Common Stock $ 1,786 $ 1,785 Dividends on Class B Common Stock assumed converted to Common Stock 558 558 Common Stock undistributed earnings – diluted 91,046 51,020 Numerator for diluted net income per Common Stock share $ 93,390 $ 53,363 Numerator for diluted net income per Class B Common Stock share: Dividends on Class B Common Stock $ 558 $ 558 Class B Common Stock undistributed earnings – diluted 19,758 12,298 Numerator for diluted net income per Class B Common Stock share $ 20,316 $ 12,856 Denominator for basic net income per Common Stock and Class B Common Stock share: Common Stock weighted average shares outstanding – basic 7,357 7,141 Class B Common Stock weighted average shares outstanding – basic 2,016 2,232 Denominator for diluted net income per Common Stock and Class B Common Stock share: Common Stock weighted average shares outstanding – diluted (assumes conversion of Class B Common Stock to Common Stock) 9,396 9,409 Class B Common Stock weighted average shares outstanding – diluted 2,039 2,268 Basic net income per share: Common Stock $ 9.96 $ 5.69 Class B Common Stock $ 9.99 $ 5.69 Diluted net income per share: Common Stock $ 9.94 $ 5.67 Class B Common Stock $ 9.96 $ 5.67 NOTES TO TABLE (1) For purposes of the diluted net income per share computation for Common Stock, all shares of Class B Common Stock are assumed to be converted; therefore, 100 % of undistributed earnings is allocated to Common Stock. (2) For purposes of the diluted net income per share computation for Class B Common Stock, weighted average shares of Class B Common Stock are assumed to be outstanding for the entire period and not converted. (3) For periods presented during which the Company has net income, the denominator for diluted net income per share for Common Stock and Class B Common Stock includes the dilutive effect of shares relative to the Long-Term Performance Equity Plan . For periods presented during which the Company has net loss, the unvested shares granted pursuant to the Long-Term Performance Equity Plan are excluded from the computation of diluted net loss per share, as the effect would have been anti-dilutive. See Note 2 for additional information on the Long-Term Performance Equity Plan . (4) The Long-Term Performance Equity Plan awards may be settled in cash and/or shares of the Company’s Class B Common Stock. Once an election has been made to settle an award in cash, the dilutive effect of shares relative to such award is prospectively removed from the denominator in the computation of diluted net income per share. (5) The Company did no t have anti-dilutive shares for any periods presented. (6) 1,227,546 shares of the Company’s Class B Common Stock were converted on a one share for one share basis into shares of the Company’s Common Stock, effective as of March 17, 2022. See Note 2 for additional information on the Stockholder Conversion Agreement. 12 6. Inventories Inventories consisted of the following: (in thousands) April 1, 2022 December 31, 2021 Finished products $ 173,622 $ 181,751 Manufacturing materials 62,857 81,183 Plastic shells, plastic pallets and other inventories 39,799 39,917 Total inventories $ 276,278 $ 302,851 7. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following: (in thousands) April 1, 2022 December 31, 2021 Repair parts $ 27,568 $ 26,643 Commodity hedges at fair market value 21,433 7,714 Prepaid software 6,671 7,038 Prepaid marketing 5,454 4,380 Prepaid taxes 3,874 4,079 Other prepaid expenses and other current assets 29,151 28,214 Total prepaid expenses and other current assets $ 94,151 $ 78,068 8. Assets Held for Sale As of April 1, 2022, certain properties owned by the Company met the accounting guidance criteria to be classified as assets held for sale. The properties primarily relate to warehousing and distribution operations that have been consolidated into new facilities. All properties classified as held for sale are included in the Nonalcoholic Beverages segment. There are not any liabilities held for sale associated with these properties and none meet the accounting guidance criteria to be classified as discontinued operations. Following is a summary of the assets held for sale: (in thousands) April 1, 2022 December 31, 2021 Land $ 1,691 $ 2,906 Buildings and leasehold and land improvements 1,331 3,974 Total assets held for sale $ 3,022 $ 6,880 9. Property, Plant and Equipment, Net The principal categories and estimated useful lives of property, plant and equipment, net were as follows: (in thousands) April 1, 2022 December 31, 2021 Estimated Useful Lives Land $ 87,037 $ 80,261 Buildings 335,737 265,070 8 - 50 years Machinery and equipment 441,988 443,592 5 - 20 years Transportation equipment 471,059 466,238 3 - 20 years Furniture and fixtures 94,336 95,062 3 - 10 years Cold drink dispensing equipment 436,016 436,954 3 - 17 years Leasehold and land improvements 163,392 178,809 5 - 20 years Software for internal use 47,936 47,982 3 - 10 years Construction in progress 27,401 23,496 Total property, plant and equipment, at cost 2,104,902 2,037,464 Less: Accumulated depreciation and amortization 1,033,171 1,006,776 Property, plant and equipment, net $ 1,071,731 $ 1,030,688 13 10. Leases Following is a summary of the weighted average remaining lease term and the weighted average discount rate for the Company’s leases: April 1, 2022 December 31, 2021 Weighted average remaining lease term: Operating leases 8.0 years 8.3 years Financing leases 5.0 years 12.5 years Weighted average discount rate: Operating leases 3.6 % 3.6 % Financing leases 5.2 % 3.1 % During the first quarter of 2022, the Company terminated its financing lease for the Snyder Production Center, which was scheduled to expire on December 31, 2035. See Note 2 for additional information on the lease termination. Following is a summary of the Company’s leases within the condensed consolidated statements of operations: First Quarter (in thousands) 2022 2021 Operating lease costs $ 7,303 $ 6,254 Short-term and variable leases 3,580 3,877 Depreciation expense from financing leases 1,080 1,414 Interest expense on financing lease obligations 470 584 Total lease cost $ 12,433 $ 12,129 The future minimum lease payments related to the Company’s leases include renewal options the Company has determined to be reasonably certain and exclude payments to landlords for real estate taxes and common area maintenance. Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of April 1, 2022: (in thousands) Operating Leases Financing Leases Remainder of 2022 $ 20,696 $ 2,027 2023 26,590 2,750 2024 22,312 2,808 2025 16,762 2,869 2026 15,597 1,233 Thereafter 65,713 1,304 Total minimum lease payments including interest $ 167,670 $ 12,991 Less: Amounts representing interest 24,300 1,556 Present value of minimum lease principal payments 143,370 11,435 Less: Current portion of lease liabilities 23,556 2,171 Noncurrent portion of lease liabilities $ 119,814 $ 9,264 14 Following is a summary of future minimum lease payments for all noncancelable operating leases and financing leases as of December 31, 2021: (in thousands) Operating Leases Financing Leases 2022 $ 26,026 $ 7,145 2023 24,893 7,201 2024 20,639 7,396 2025 16,740 7,593 2026 15,575 6,100 Thereafter 65,695 49,728 Total minimum lease payments including interest $ 169,568 $ 85,163 Less: Amounts representing interest 25,474 14,097 Present value of minimum lease principal payments 144,094 71,066 Less: Current portion of lease liabilities 22,048 6,060 Noncurrent portion of lease liabilities $ 122,046 $ 65,006 Following is a summary of the Company’s leases within the condensed consolidated statements of cash flows: First Quarter (in thousands) 2022 2021 Cash flows from operating activities impact: Operating leases $ 7,006 $ 6,129 Interest payments on financing lease obligations 470 316 Total cash flows from operating activities impact $ 7,476 $ 6,445 Cash flows from financing activities impact: Principal payments on financing lease obligations $ 1,375 $ 1,447 Total cash flows from financing activities impact $ 1,375 $ 1,447 As of April 1, 2022, the Company had three operating lease commitments that had not yet commenced. These lease commitments have a lease term of approximately three to five years and are expected to commence during the second quarter of 2022. The additional lease liability associated with these lease commitments is expected to be $ 2.5 million. 11. Distribution Agreements, Net Distribution agreements, net, which are amortized on a straight-line basis and have an estimated useful life of 20 to 40 years, consisted of the following: (in thousands) April 1, 2022 December 31, 2021 Distribution agreements at cost $ 990,191 $ 960,042 Less: Accumulated amortization 129,488 123,265 Distribution agreements, net $ 860,703 $ 836,777 Following is a summary of activity for distribution agreements, net during the first quarter of 2022 and the first quarter of 2021: First Quarter (in thousands) 2022 2021 Beginning balance - distribution agreements, net $ 836,777 $ 853,753 BODYARMOR distribution rights 30,149 14 Additional accumulated amortization ( 6,223 ) ( 6,122 ) Ending balance - distribution agreements, net $ 860,703 $ 847,645 15 12. Customer Lists, Net Customer lists, net, which are amortized on a straight-line basis and have an estimated useful life of five to 12 years, consisted of the following: (in thousands) April 1, 2022 December 31, 2021 Customer lists at cost $ 25,288 $ 25,288 Less: Accumulated amortization 14,773 14,322 Customer lists, net $ 10,515 $ 10,966 13. Other Accrued Liabilities Other accrued liabilities consisted of the following: (in thousands) April 1, 2022 December 31, 2021 Accrued insurance costs $ 53,619 $ 51,645 Current portion of acquisition related contingent consideration 47,218 51,518 Accrued marketing costs 31,989 32,249 Employee and retiree benefit plan accruals 31,061 32,007 Current portion of deferred payroll taxes under CARES Act 18,739 18,739 Accrued taxes (other than income taxes) 8,590 6,638 All other accrued expenses 39,352 33,973 Total other accrued liabilities $ 230,568 $ 226,769 The Company has taken advantage of certain provisions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which allowed an employer to defer the deposit and payment of the employer’s portion of social security taxes that would otherwise have been due on or after March 27, 2020 and before January 1, 2021. The law permits an employer to deposit half of these deferred payments by December 31, 2021 and the other half by December 31, 2022. The Company repaid a portion of the deferred payroll taxes during 2021 and intends to repay the remaining portion of the deferred payroll taxes during 2022. 14. Commodity Derivative 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 commodity derivative instruments. The Company does not use commodity derivative instruments for trading or speculative purposes. These commodity derivative instruments are not designated as hedging instruments under GAAP and are used as “economic hedges” to manage certain commodity price risk. 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 counterparties. Commodity derivative instruments held by the Company are marked to market on a monthly basis and are recognized in earnings consistent with the expense classification of the underlying hedged item. The Company generally pays a fee for these commodity derivative instruments, which is amortized over the corresponding period of each commodity derivative instrument. Settlements of commodity derivative instruments are included in cash flows from operating activities in the condensed consolidated statements of cash flows. The following table summarizes pre-tax changes in the fair values of the Company’s commodity derivative instruments and the classification of such changes in the condensed consolidated statements of operations: First Quarter (in thousands) 2022 2021 Cost of sales $ 7,494 $ 288 Selling, delivery and administrative expenses 6,225 560 Total gain $ 13,719 $ 848 All commodity derivative instruments are recorded at fair value as either assets or liabilities in the condensed consolidated balance sheets. The Company has master agreements with the counterparties to its commodity derivative instruments 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 condensed consolidated balance sheets and the net amounts of derivative liabilities are recognized in either other accrued liabilities or other liabilities in the condensed consolidated balance sheets. The 16 following table summarizes the fair values of the Company’s commodity derivative instruments and the classification of such instruments in the condensed consolidated balance sheets: (in thousands) April 1, 2022 December 31, 2021 Prepaid expenses and other current assets $ 21,433 $ 7,714 Total assets $ 21,433 $ 7,714 The following table summarizes the Company’s gross commodity derivative instrument assets and gross commodity derivative instrument liabilities in the condensed consolidated balance sheets: (in thousands) April 1, 2022 December 31, 2021 Gross commodity derivative instrument assets $ 24,911 $ 9,200 Gross commodity derivative instrument liabilities 3,478 1,486 The following table summarizes the Company’s outstanding commodity derivative instruments: (in thousands) April 1, 2022 December 31, 2021 Notional amount of outstanding commodity derivative instruments $ 53,346 $ 74,558 Latest maturity date of outstanding commodity derivative instruments December 2022 December 2022 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 below methods and assumptions were used by the Company in estimating the fair values of its financial instruments. There were no transfers of assets or liabilities between levels in any period presented. Financial Instrument Fair Value Level Methods and Assumptions Deferred compensation plan assets and liabilities Level 1 The fair value of the Company’s nonqualified deferred compensation plan for certain executives and other highly compensated employees is based on the fair values of associated assets and liabilities, which are held in mutual funds and are based on the quoted market values of the securities held within the mutual funds. Commodity derivative instruments Level 2 The fair values of the Company’s commodity derivative instruments are based on current settlement values at each balance sheet date, which represent the estimated amounts the Company would have received or paid upon termination of these instruments. The Company’s credit risk related to the commodity derivative instruments is managed by requiring high standards for its counterparties and periodic settlements. The Company considers nonperformance risk in determining the fair values of commodity derivative instruments. Debt Level 2 The carrying amounts of the Company’s variable rate debt approximate the fair values due to variable interest rates with short reset periods. The fair values of the Company’s fixed rate debt are based on estimated current market prices. Acquisition related contingent consideration Level 3 The fair value of the Company’s acquisition related contingent consideration is based on internal forecasts and the weighted average cost of capital (“WACC”) derived from market data. 17 The following tables summarize the carrying amounts and fair values by level of the Company’s deferred compensation plan assets and liabilities, commodity derivative instruments, debt and acquisition related contingent consideration: April 1, 2022 (in thousands) Carrying Amount Total Fair Value Fair Value Level 1 Fair Value Level 2 Fair Value Level 3 Assets: Deferred compensation plan assets $ 58,260 $ 58,260 $ 58,260 $ — $ — Commodity derivative instruments 21,433 21,433 — 21,433 — Liabilities: Deferred compensation plan liabilities 58,260 58,260 58,260 — — Debt 723,574 734,100 — 734,100 — Acquisition related contingent consideration 527,926 527,926 — — 527,926 December 31, 2021 (in thousands) Carrying Amount Total Fair Value Fair Value Level 1 Fair Value Level 2 Fair Value Level 3 Assets: Deferred compensation plan assets $ 60,461 $ 60,461 $ 60,461 $ — $ — Commodity derivative instruments 7,714 7,714 — 7,714 — Liabilities: Deferred compensation plan liabilities 60,461 60,461 60,461 — — Debt 723,443 772,600 — 772,600 — Acquisition related contingent consideration 542,105 542,105 — — 542,105 The acquisition related contingent consideration was valued using a probability weighted discounted cash flow model based on internal forecasts and the WACC derived from market data, which are considered Level 3 inputs. Each reporting period, the Company adjusts its acquisition related contingent consideration liability related to the distribution territories subject to acquisition related sub-bottling payments to fair value by discounting future expected acquisition related sub-bottling payments required under the CBA using the Company’s estimated WACC. The future expected acquisition related sub-bottling payments extend through the life of the applicable distribution assets acquired from CCR, which is generally 40 years. As a result, the fair value of the acquisition related contingent consideration liability is impacted by the Company’s WACC, management’s estimate of the acquisition related sub-bottling payments that will be made in the future under the CBA, and current acquisition related sub-bottling payments (all Level 3 inputs). Changes in any of these Level 3 inputs, particularly the underlying risk-free interest rate used to estimate the Company’s WACC, could result in material changes to the fair value of the acquisition related contingent consideration liability and could materially impact the amount of non-cash expense (or income) recorded each reporting period. The acquisition related contingent consideration liability is the Company’s only Level 3 asset or liability. A summary of the Level 3 activity is as follows: First Quarter (in thousands) 2022 2021 Beginning balance - Level 3 liability $ 542,105 $ 434,694 Payments of acquisition related contingent consideration ( 9,822 ) ( 10,046 ) Reclassification to current payables 1,100 100 Increase (decrease) in fair value ( 5,457 ) 10,998 Ending balance - Level 3 liability $ 527,926 $ 435,746 As of April 1, 2022 and April 2, 2021, discount rates of 8.1 % and 7.9 %, respectively, were utilized in the valuation of the Company’s acquisition related contingent consideration liability. The decrease in the fair value of the acquisition related contingent consideration liability in the first quarter of 2022 was primarily driven by an increase in the discount rate used to calculate fair value, partially offset by higher projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments. This fair value adjustment was recorded in other (income) expense, net in the condensed consolidated statement of operations for the first quarter of 2022. 18 The Company anticipates that the amount it could pay annually under the acquisition related contingent consideration arrangements for the distribution territories subject to acquisition related sub-bottling payments will be in the range of $ 38 million to $ 64 million. 16. Income Taxes The Company’s effective income tax rate was 26.2 % for the first quarter of 2022 and 27.3 % for the first quarter of 2021. The Company’s income tax expense was $ 33.2 million for the first quarter of 2022 and $ 20.0 million for the first quarter of 2021. The increase in income tax expense was primarily attributable to higher income before taxes during the first quarter of 2022 compared to the first quarter of 2021. The Company had uncertain tax positions, including accrued interest, of $ 1.7 million on both April 1, 2022 and December 31, 2021, all of which would affect the Company’s effective income 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 material impact on the condensed consolidated financial statements. Prior tax years beginning in year 2018 remain open to examination by the Internal Revenue Service, and various tax years beginning in year 1999 remain open to examination by certain state tax jurisdictions due to loss carryforwards. 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 that 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) 2022 2021 Service cost $ 1,860 $ 1,863 Interest cost 2,659 2,453 Expected return on plan assets ( 2,035 ) ( 3,250 ) Recognized net actuarial loss 989 1,219 Amortization of prior service cost — 1 Net periodic pension cost $ 3,473 $ 2,286 The Company did not make any contributions to the two Company-sponsored pension plans during the first quarter of 2022. Contributions to the two Company-sponsored pension plans in 2022 are expected to be in the range of $ 20 million to $ 30 million. Postretirement Benefits The Company provides postretirement benefits for employees meeting specified criteria . The Company recognizes the cost of postretirement benefits, which consist principally of medical benefits, during employees’ periods of active service. The Company does not prefund 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) 2022 2021 Service cost $ 383 $ 403 Interest cost 474 447 Recognized net actuarial loss 92 186 Net periodic postretirement benefit cost $ 949 $ 1,036 19 18. Other Liabilities Other liabilities consisted of the following: (in thousands) April 1, 2022 December 31, 2021 Noncurrent portion of acquisition related contingent consideration $ 480,708 $ 490,587 Accruals for executive benefit plans 133,950 147,135 Noncurrent deferred proceeds from related parties 105,538 106,304 Other 14,141 14,584 Total other liabilities $ 734,337 $ 758,610 19. Debt Following is a summary of the Company’s debt: (in thousands) Maturity Date Interest Rate Interest Paid Public/ Nonpublic April 1, 2022 December 31, 2021 Senior notes 2/27/2023 3.28 % Semi-annually Nonpublic $ 125,000 $ 125,000 Senior bonds (1) 11/25/2025 3.80 % Semi-annually Public 350,000 350,000 2021 Revolving Credit Facility 7/9/2026 Variable Varies Nonpublic — — Senior notes 10/10/2026 3.93 % Quarterly Nonpublic 100,000 100,000 Senior notes 3/21/2030 3.96 % Quarterly Nonpublic 150,000 150,000 Unamortized discount on senior bonds (1) 11/25/2025 ( 32 ) ( 34 ) Debt issuance costs ( 1,394 ) ( 1,523 ) Total debt 723,574 723,443 Less: Current portion of debt 125,000 — Total long-term debt $ 598,574 $ 723,443 (1) The senior bonds 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. The indenture under which the Company’s senior bonds were issued does not include financial covenants but does 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 was 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 agreement. The Company was in compliance with these covenants as of April 1, 2022. These covenants do not currently, and the Company does not anticipate they will, restrict its liquidity or capital resources. All outstanding 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 6.5 million cases and 7.2 million cases of finished product from SAC in the first quarter of 2022 and the first quarter of 2021, respectively. 20 The following table summarizes the Company’s purchases from these manufacturing cooperatives: First Quarter (in thousands) 2022 2021 Purchases from Southeastern $ 32,022 $ 27,544 Purchases from SAC 45,366 41,253 Total purchases from manufacturing cooperatives $ 77,388 $ 68,797 The Company guarantees a portion of SAC’s debt, which expires in 2024. The amount guaranteed was $ 9.5 million on both April 1, 2022 and December 31, 2021. 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. The Company holds no assets as collateral against the SAC guarantee, the fair value of which is immaterial to the condensed consolidated financial statements. The Company monitors its investment in SAC and would be required to write down its investment if an impairment, other than a temporary impairment, was identified. No impairment of the Company’s investment in SAC was identified as of April 1, 2022, and there was no impairment identified in 2021. 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 $ 37.6 million on both April 1, 2022 and December 31, 2021. The Company participates in long-term marketing contractual arrangements with certain prestige properties, athletic venues and other locations. As of April 1, 2022, the future payments related to these contractual arrangements, which expire at various dates through 2033, amounted to $ 139.7 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 the ultimate disposition of these matters will not have a material adverse effect on the financial condition, results of operations or cash flows 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 condensed consolidated financial statements. 21. Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) (“AOCI(L)”) is comprised of adjustments to the Company’s pension and postretirement medical benefit plans and the foreign currency translation for a subsidiary of the Company that performs data analysis and provides consulting services outside the United States. 21 Following is a summary of AOCI(L) for the first quarter of 2022 and the first quarter of 2021: (in thousands) December 31, 2021 Pre-tax Activity Tax Effect April 1, 2022 Net pension activity: Actuarial loss $ ( 78,882 ) $ 989 $ ( 243 ) $ ( 78,136 ) Prior service credits 11 — — 11 Net postretirement benefits activity: Actuarial loss ( 1,239 ) 92 ( 23 ) ( 1,170 ) Prior service costs ( 624 ) — — ( 624 ) Foreign currency translation adjustment ( 9 ) — — ( 9 ) Reclassification of stranded tax effects ( 19,720 ) — — ( 19,720 ) Total AOCI(L) $ ( 100,463 ) $ 1,081 $ ( 266 ) $ ( 99,648 ) (in thousands) December 31, 2020 Pre-tax Activity Tax Effect April 2, 2021 Net pension activity: Actuarial loss $ ( 93,847 ) $ 1,219 $ ( 303 ) $ ( 92,931 ) Prior service credits 8 1 — 9 Net postretirement benefits activity: Actuarial loss ( 4,328 ) 186 ( 46 ) ( 4,188 ) Prior service costs ( 624 ) — — ( 624 ) Interest rate swap (1) ( 556 ) 415 ( 103 ) ( 244 ) Foreign currency translation adjustment 14 ( 49 ) 12 ( 23 ) Reclassification of stranded tax effects ( 19,720 ) — — ( 19,720 ) Total AOCI(L) $ ( 119,053 ) $ 1,772 $ ( 440 ) $ ( 117,721 ) (1) In 2019, the Company entered into a $ 100 million fixed rate swap to hedge a portion of the interest rate risk on its previous term loan facility, both of which matured on June 7, 2021. This interest rate swap was designated as a cash flow hedging instrument and changes in its fair value were not material to the condensed consolidated balance sheets. Following is a summary of the impact of AOCI(L) on the condensed consolidated statements of operations: First Quarter 2022 (in thousands) Net Pension Activity Net Postretirement Benefits Activity Total Cost of sales $ 278 $ 41 $ 319 Selling, delivery and administrative expenses 711 51 762 Subtotal before taxes 989 92 1,081 Income tax expense 243 23 266 Total after tax effect $ 746 $ 69 $ 815 First Quarter 2021 (in thousands) Net Pension Activity Net Postretirement Benefits Activity Interest Rate Swap Foreign Currency Translation Adjustment Total Cost of sales $ 348 $ 103 $ — $ — $ 451 Selling, delivery and administrative expenses 872 83 415 ( 49 ) 1,321 Subtotal before taxes 1,220 186 415 ( 49 ) 1,772 Income tax expense (benefit) 303 46 103 ( 12 ) 440 Total after tax effect $ 917 $ 140 $ 312 $ ( 37 ) $ 1,332 22 22. Supplemental Disclosures of Cash Flow Information Changes in current assets and current liabilities affecting cash were as follows: First Quarter (in thousands) 2022 2021 Accounts receivable, trade $ ( 3,033 ) $ ( 34,577 ) Allowance for doubtful accounts ( 574 ) ( 972 ) Accounts receivable from The Coca‑Cola Company 2,435 ( 13,529 ) Accounts receivable, other ( 56 ) 4,475 Inventories 26,573 ( 31,606 ) Prepaid expenses and other current assets ( 16,083 ) ( 2,446 ) Accounts payable, trade ( 23,357 ) 13,192 Accounts payable to The Coca‑Cola Company 13,835 35,114 Other accrued liabilities 3,267 14,443 Accrued compensation ( 37,564 ) ( 25,072 ) Accrued interest payable 2,142 2,316 Change in current assets less current liabilities $ ( 32,415 ) $ ( 38,662 ) 23