SEC Filing | Coca-Cola Consolidated, Inc.

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coke-20210402

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________________________________________

FORM 10-Q

______________________________________________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 2, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 0-9286

______________________________________________________________________________________________

COCA-COLA CONSOLIDATED, INC.

(Exact name of registrant as specified in its charter)

______________________________________________________________________________________________


Delaware			56-0950585
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

4100 Coca‑Cola Plaza
Charlotte, NC			28211
(Address of principal executive offices)			(Zip Code)

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

______________________________________________________________________________________________

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


Title of each class Common Stock, par value $1.00 per share			Trading Symbol(s) COKE			Name of each exchange on which registered NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, 2021, there were 7,141,447 shares of the registrant’s Common Stock, par value $1.00 per share, and 2,232,242 shares of the registrant’s Class B Common Stock, par value $1.00 per share, outstanding.

COCA‑COLA CONSOLIDATED, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED APRIL 2, 2021

TABLE OF CONTENTS


		Page

	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Operations	1

	Condensed Consolidated Statements of Comprehensive Income	2

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Cash Flows	4

	Condensed Consolidated Statements of Changes in Equity	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 6.	Exhibits	38

	Signatures	39

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

COCA‑COLA CONSOLIDATED, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	First Quarter
(in thousands, except per share data)	2021		2020
Net sales	$	1,269,857	$	1,173,021
Cost of sales	821,154		767,726
Gross profit	448,703		405,295
Selling, delivery and administrative expenses	354,519		372,474
Income from operations	94,184		32,821
Interest expense, net	8,746		9,561
Other expense, net	12,055		2,298
Income before income taxes	73,383		20,962
Income tax expense	20,020		5,361
Net income	53,363		15,601
Less: Net income attributable to noncontrolling interest	—		939
Net income attributable to Coca‑Cola Consolidated, Inc.	$	53,363	$	14,662

Basic net income per share based on net income attributable to Coca‑Cola Consolidated, Inc.:
Common Stock	$	5.69	$	1.56
Weighted average number of Common Stock shares outstanding	7,141		7,141

Class B Common Stock	$	5.69	$	1.56
Weighted average number of Class B Common Stock shares outstanding	2,232		2,232

Diluted net income per share based on net income attributable to Coca‑Cola Consolidated, Inc.:
Common Stock	$	5.67	$	1.55
Weighted average number of Common Stock shares outstanding – assuming dilution	9,409		9,444

Class B Common Stock	$	5.67	$	1.55
Weighted average number of Class B Common Stock shares outstanding – assuming dilution	2,268		2,303

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.

COCA‑COLA CONSOLIDATED, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	First Quarter
(in thousands)	2021		2020
Net income	$	53,363	$	15,601

Other comprehensive income (loss), net of tax:
Defined benefit plans reclassification including pension costs:
Actuarial gains	916		896
Prior service credits	1		4
Postretirement benefits reclassification included in benefits costs:
Actuarial gains	140		66
Interest rate swap	312		(1,015)
Foreign currency translation adjustment	(37)		(1)
Other comprehensive income (loss), net of tax	1,332		(50)

Comprehensive income	54,695		15,551
Less: Comprehensive income attributable to noncontrolling interest	—		939
Comprehensive income attributable to Coca‑Cola Consolidated, Inc.	$	54,695	$	14,612

See accompanying notes to condensed consolidated financial statements.

COCA‑COLA CONSOLIDATED, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except share data)	April 2, 2021		December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	51,828	$	54,793
Accounts receivable, trade	460,022		425,445
Allowance for doubtful accounts	(20,648)		(21,620)
Accounts receivable from The Coca‑Cola Company	62,732		49,203
Accounts receivable, other	32,609		37,084
Inventories	257,363		225,757
Prepaid expenses and other current assets	76,592		74,146
Assets held for sale	6,350		6,429
Total current assets	926,848		851,237
Property, plant and equipment, net	1,021,198		1,022,722
Right-of-use assets - operating leases	129,445		134,383
Leased property under financing leases, net	68,453		69,867
Other assets	112,995		111,781
Goodwill	165,903		165,903
Distribution agreements, net	847,645		853,753
Customer lists, net	12,345		12,804
Total assets	$	3,284,832	$	3,222,450

LIABILITIES AND EQUITY
Current Liabilities:
Current portion of obligations under operating leases	$	19,388	$	19,766
Current portion of obligations under financing leases	5,909		5,860
Accounts payable, trade	227,935		217,560
Accounts payable to The Coca‑Cola Company	142,295		107,181
Other accrued liabilities	219,584		205,141
Accrued compensation	62,536		87,608
Accrued interest payable	6,260		3,944
Total current liabilities	683,907		647,060
Deferred income taxes	159,845		139,423
Pension and postretirement benefit obligations	115,306		113,325
Other liabilities	666,885		679,280
Noncurrent portion of obligations under operating leases	115,487		119,923
Noncurrent portion of obligations under financing leases	68,756		69,984
Long-term debt	909,304		940,465
Total liabilities	2,719,490		2,709,460
Commitments and Contingencies
Equity:
Common Stock, $1.00 par value: 30,000,000 shares authorized; 10,203,821 shares issued	10,204		10,204
Class B Common Stock, $1.00 par value: 10,000,000 shares authorized; 2,860,356 shares issued	2,860		2,860
Additional paid-in capital	135,953		135,953
Retained earnings	595,300		544,280
Accumulated other comprehensive loss	(117,721)		(119,053)
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	565,342		512,990
Total liabilities and equity	$	3,284,832	$	3,222,450

See accompanying notes to condensed consolidated financial statements.

COCA‑COLA CONSOLIDATED, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	First Quarter
(in thousands)	2021		2020
Cash Flows from Operating Activities:
Net income	$	53,363	$	15,601
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense from property, plant and equipment and financing leases	37,716		37,799
Amortization of intangible assets and deferred proceeds, net	5,810		5,760
Deferred income taxes	19,980		5,910
Fair value adjustment of acquisition related contingent consideration	10,998		712
Loss on sale of property, plant and equipment	1,098		491
Impairment of property, plant and equipment	500		—
Amortization of debt costs	277		220
Change in current assets less current liabilities	(38,662)		(42,310)
Change in other noncurrent assets	4,197		12,223
Change in other noncurrent liabilities	(13,330)		(4,117)
Other	(37)		—
Total adjustments	28,547		16,688
Net cash provided by operating activities	$	81,910	$	32,289

Cash Flows from Investing Activities:
Additions to property, plant and equipment	$	(37,204)	$	(33,093)
Other distribution agreements	(1,998)		—
Investment in CONA Services LLC	(514)		(893)
Proceeds from the sale of property, plant and equipment	74		1,658
Net cash used in investing activities	$	(39,642)	$	(32,328)

Cash Flows from Financing Activities:
Borrowings under revolving credit facility	$	—	$	185,000
Payments on revolving credit facility	—		(125,000)
Payments on term loan facility	(31,250)		(7,500)
Payments of acquisition related contingent consideration	(10,046)		(10,452)
Cash dividends paid	(2,343)		(2,344)
Payments on financing lease obligations	(1,447)		(1,485)
Debt issuance fees	(147)		(46)
Net cash provided by (used in) financing activities	$	(45,233)	$	38,173

Net increase (decrease) in cash during period	$	(2,965)	$	38,134
Cash at beginning of period	54,793		9,614
Cash at end of period	$	51,828	$	47,748

Significant non-cash investing and financing activities:
Additions to property, plant and equipment accrued and recorded in accounts payable, trade	$	16,192	$	12,748
Right-of-use assets obtained in exchange for operating lease obligations	—		31,691

See accompanying notes to condensed consolidated financial statements.

COCA‑COLA CONSOLIDATED, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN 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 of Coca‑Cola Consolidated, Inc.		Non- controlling Interest		Total Equity
Balance on December 29, 2019	$	10,204	$	2,860	$	128,983	$	381,161	$	(115,002)	$	(60,845)	$	(409)	$	346,952	$	104,164	$	451,116
Net income	—		—		—		14,662		—		—		—		14,662		939		15,601
Other comprehensive loss, net of tax	—		—		—		—		(50)		—		—		(50)		—		(50)
Cash dividends paid:
Common Stock ($0.25 per share)	—		—		—		(1,786)		—		—		—		(1,786)		—		(1,786)
Class B Common Stock ($0.25 per share)	—		—		—		(558)		—		—		—		(558)		—		(558)
Balance on March 29, 2020	$	10,204	$	2,860	$	128,983	$	393,479	$	(115,052)	$	(60,845)	$	(409)	$	359,220	$	105,103	$	464,323

Balance on December 31, 2020	$	10,204	$	2,860	$	135,953	$	544,280	$	(119,053)	$	(60,845)	$	(409)	$	512,990	$	—	$	512,990
Net income	—		—		—		53,363		—		—		—		53,363		—		53,363
Other comprehensive income, net of tax	—		—		—		—		1,332		—		—		1,332		—		1,332
Cash dividends paid:
Common Stock ($0.25 per share)	—		—		—		(1,785)		—		—		—		(1,785)		—		(1,785)
Class B Common Stock ($0.25 per share)	—		—		—		(558)		—		—		—		(558)		—		(558)
Balance on April 2, 2021	$	10,204	$	2,860	$	135,953	$	595,300	$	(117,721)	$	(60,845)	$	(409)	$	565,342	$	—	$	565,342

See accompanying notes to condensed consolidated financial statements.

COCA‑COLA CONSOLIDATED, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Critical Accounting Policies and Recent Accounting Pronouncements

The condensed consolidated 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 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 quarters 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 2, 2021 and December 31, 2020.

•The results of operations and comprehensive income for the three-month periods ended April 2, 2021 (the “first quarter” of fiscal 2021 (“2021”)) and March 29, 2020 (the “first quarter” of fiscal 2020 (“2020”)).

•The changes in cash flows and equity for the first quarter of 2021 and the first quarter of 2020.

The condensed consolidated financial statements include the consolidated operations of the Company and its majority-owned subsidiaries. During 2020, Piedmont Coca-Cola Bottling Partnership (“Piedmont”) was the Company’s only subsidiary that had a significant noncontrolling interest. On December 9, 2020, an indirect wholly owned subsidiary of the Company purchased the remaining 22.7% general partnership interest in Piedmont from an indirect wholly owned subsidiary of The Coca‑Cola Company, and Piedmont became an indirect wholly owned subsidiary of the Company.

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 2020 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 Policies

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 2020 under the caption “Discussion of Critical Accounting Policies and Estimates and Recent Accounting Pronouncements” in “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 Company’s Board of Directors during the quarter in which a change is contemplated and prior to making such change.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019‑12, “Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in income tax accounting and improves consistent application of and simplifies GAAP for other areas of income tax accounting by clarifying and amending existing guidance. The new guidance is effective for fiscal years

beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2019-12 in the first quarter of 2021 and the adoption did not have a material impact on its condensed consolidated financial statements.

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.

J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, together with the trustees of certain trusts established for the benefit of certain relatives of the late J. Frank Harrison, Jr., control shares representing approximately 86% of the total voting power of the Company’s total outstanding Common Stock and Class B Common Stock on a consolidated basis.

As of April 2, 2021, 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. 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 the J. Frank Harrison, Jr. family trusts described above, have agreed to vote the shares of the Company’s Class B 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 transactions between the Company and The Coca‑Cola Company:


	First Quarter
(in thousands)	2021		2020
Payments made by the Company to The Coca‑Cola Company for:
Concentrate, syrup, sweetener, finished products, and other purchases	$	307,425	$	287,707
Customer marketing programs	32,694		32,991
Cold drink equipment parts	5,036		6,341
Brand investment programs	4,190		3,262

Payments made by The Coca‑Cola Company to the Company for:
Marketing funding support payments	$	18,351	$	21,546
Fountain delivery and equipment repair fees	8,818		9,090
Facilitating the distribution of certain brands and packages	2,508		1,157
Presence marketing funding support on the Company’s behalf	—		1,735

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

The Company, The Coca‑Cola Company and CCR, a wholly owned subsidiary of The Coca‑Cola Company, entered into comprehensive beverage agreements (collectively, the “CBA”). 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 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.

Sub-bottling payments to CCR were $10.0 million in the first quarter of 2021 and $10.5 million in the first quarter of 2020. 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)	April 2, 2021		December 31, 2020
Current portion of acquisition related contingent consideration	$	38,014	$	36,020
Noncurrent portion of acquisition related contingent consideration	397,732		398,674
Total acquisition related contingent consideration	$	435,746	$	434,694

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 $22.4 million as of April 2, 2021 and $21.9 million as of December 31, 2020.

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 April 2, 2021 and $8.0 million as of December 31, 2020. 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 classified as a reduction to cost of sales in the condensed consolidated statements of operations, were $2.3 million in the first quarter of 2021 and $2.4 million in the first quarter of 2020.

Coca‑Cola Bottlers’ Sales and 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 $7.6 million on April 2, 2021 and $6.3 million on December 31, 2020, 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 $0.6 million in both the first quarter of 2021 and the first quarter of 2020, 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 $12.0 million as of April 2, 2021 and $11.5 million as of December 31, 2020.

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 $5.9 million in the first quarter of 2021 and $5.8 million in the first quarter of 2020.

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 $30.2 million on April 2, 2021 and $30.8 million on December 31, 2020.

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 is subject to an adjustment for an inflation factor and the lease expires on December 31, 2035. The principal balance outstanding under this lease was $61.2 million on April 2, 2021 and $61.9 million on December 31, 2020.

A summary of rental payments for these leases related to the first quarter of 2021 and the first quarter of 2020 is as follows:


	First Quarter
(in thousands)	2021		2020
Company headquarters	$	945	$	826
Snyder Production Center	1,113		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 Class B Common Stock, based on the average of the closing prices of shares of 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 on the condensed consolidated statements of operations, was $1.9 million in the first quarter of 2021 and $1.8 million in the first quarter of 2020.

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. 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.

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 96% of the Company’s net sales in the first quarter of 2021 and approximately 97% of the Company’s net sales in the first quarter of 2020.

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 condensed consolidated financial statements.

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


	First Quarter
(in thousands)	2021		2020
Point in time net sales:
Nonalcoholic Beverages - point in time	$	1,225,212	$	1,132,475
Total point in time net sales	$	1,225,212	$	1,132,475

Over time net sales:
Nonalcoholic Beverages - over time	$	9,878	$	10,106
All Other - over time	34,767		30,440
Total over time net sales	$	44,645	$	40,546

Total net sales	$	1,269,857	$	1,173,021

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 $3.6 million as of both April 2, 2021 and December 31, 2020.

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. A reconciliation of the activity for the allowance for credit losses is as follows:


	First Quarter
(in thousands)	2021		2020
Beginning balance - allowance for credit losses	$	18,070	$	10,232
Additions charged to costs and expenses	1,270		3,167
Deductions	(2,242)		(787)
Ending balance - allowance for credit losses	$	17,098	$	12,612

4. Segments

The Company evaluates segment reporting in accordance with the FASB 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.” The Company’s segment results are as follows:


	First Quarter
(in thousands)	2021		2020
Net sales:
Nonalcoholic Beverages	$	1,235,090	$	1,142,581
All Other	89,949		81,301
Eliminations(1)	(55,182)		(50,861)
Consolidated net sales	$	1,269,857	$	1,173,021


	First Quarter
(in thousands)	2021		2020
Income from operations:
Nonalcoholic Beverages	$	95,042	$	35,617
All Other	(858)		(2,796)
Consolidated income from operations	$	94,184	$	32,821

Depreciation and amortization:
Nonalcoholic Beverages	$	40,551	$	40,758
All Other	2,975		2,801
Consolidated depreciation and amortization	$	43,526	$	43,559

(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)	2021		2020
Numerator for basic and diluted net income per Common Stock and Class B Common Stock share:
Net income attributable to Coca‑Cola Consolidated, Inc.	$	53,363	$	14,662
Less dividends:
Common Stock	1,785		1,786
Class B Common Stock	558		558
Total undistributed earnings	$	51,020	$	12,318

Common Stock undistributed earnings – basic	$	38,871	$	9,385
Class B Common Stock undistributed earnings – basic	12,149		2,933
Total undistributed earnings – basic	$	51,020	$	12,318

Common Stock undistributed earnings – diluted	$	38,722	$	9,314
Class B Common Stock undistributed earnings – diluted	12,298		3,004
Total undistributed earnings – diluted	$	51,020	$	12,318

Numerator for basic net income per Common Stock share:
Dividends on Common Stock	$	1,785	$	1,786
Common Stock undistributed earnings – basic	38,871		9,385
Numerator for basic net income per Common Stock share	$	40,656	$	11,171

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	12,149		2,933
Numerator for basic net income per Class B Common Stock share	$	12,707	$	3,491

Numerator for diluted net income per Common Stock share:
Dividends on Common Stock	$	1,785	$	1,786
Dividends on Class B Common Stock assumed converted to Common Stock	558		558
Common Stock undistributed earnings – diluted	51,020		12,318
Numerator for diluted net income per Common Stock share	$	53,363	$	14,662


	First Quarter
(in thousands, except per share data)	2021		2020
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	12,298		3,004
Numerator for diluted net income per Class B Common Stock share	$	12,856	$	3,562

Denominator for basic net income 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	2,232		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)	9,409		9,444
Class B Common Stock weighted average shares outstanding – diluted	2,268		2,303

Basic net income per share:
Common Stock	$	5.69	$	1.56
Class B Common Stock	$	5.69	$	1.56

Diluted net income per share:
Common Stock	$	5.67	$	1.55
Class B Common Stock	$	5.67	$	1.55

NOTES TO TABLE

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

(2)For purposes of the diluted net income per share computation for Class B Common Stock, weighted average shares of Class B Common Stock are assumed to be outstanding for the entire period and not converted.

(3)For periods presented during which the Company has net income, the denominator for diluted net income per share for Common Stock and Class B Common Stock includes the dilutive effect of shares relative to the Long-Term Performance Equity Plan. For periods presented during which the Company has net loss, the unvested shares granted pursuant to the Long-Term Performance Equity Plan are excluded from the computation of diluted net loss per share, as the effect would have been anti-dilutive. See Note 2 for additional information on the Long-Term Performance Equity Plan.

(4)The Long-Term Performance Equity Plan awards may be settled in cash and/or shares of the Company’s Class B Common Stock. Once an election has been made to settle an award in cash, the dilutive effect of shares relative to such award is prospectively removed from the denominator in the computation of diluted net income per share.

(5)The Company did not have anti-dilutive shares for any periods presented.

6. Inventories

Inventories consisted of the following:


(in thousands)	April 2, 2021		December 31, 2020
Finished products	$	166,978	$	140,080
Manufacturing materials	50,045		47,081
Plastic shells, plastic pallets and other inventories	40,340		38,596
Total inventories	$	257,363	$	225,757

7. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


(in thousands)	April 2, 2021		December 31, 2020
Repair parts	$	26,955	$	26,811
Prepaid taxes	7,873		8,428
Prepaid software	6,581		6,650
Prepaid marketing	6,023		4,773
Commodity hedges at fair market value	3,321		2,417
Other prepaid expenses and other current assets	25,839		25,067
Total prepaid expenses and other current assets	$	76,592	$	74,146

8. Assets Held for Sale

Subsequent to the end of the first quarter of 2021, the Company opened a new, automated distribution center in Whitestown, Indiana, which allowed the Company to consolidate certain nearby warehousing and distribution operations into this one new facility. The Company believes the increased capacity and automation in Whitestown will allow the Company to optimize its supply chain and to better serve its customers and consumers in Indiana and the surrounding areas. In addition, the Company is in the process of integrating its Memphis, Tennessee manufacturing plant with its West Memphis, Arkansas operations, which is expected to greatly expand its West Memphis production capabilities and to reduce its overall production costs.

As of April 2, 2021, certain properties owned by the Company, which are primarily those being consolidated in the Company’s supply chain optimization discussed above, met the accounting guidance criteria to be classified as assets held for sale. 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 2, 2021		December 31, 2020
Land	$	2,547	$	2,559
Buildings and leasehold and land improvements	3,803		3,870
Total assets held for sale	$	6,350	$	6,429

An impairment of $1.6 million was recorded in 2020 for these locations as a result of the net book value exceeding the agreed upon purchase price of one of the locations.

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 2, 2021		December 31, 2020		Estimated Useful Lives
Land	$	81,981	$	81,981
Buildings	259,748		240,173		8-50 years
Machinery and equipment	405,341		392,998		5-20 years
Transportation equipment	449,350		445,218		3-20 years
Furniture and fixtures	94,923		96,606		3-10 years
Cold drink dispensing equipment	456,953		465,881		3-17 years
Leasehold and land improvements	164,792		155,077		5-20 years
Software for internal use	47,139		46,569		3-10 years
Construction in progress	31,460		54,505
Total property, plant and equipment, at cost	1,991,687		1,979,008
Less: Accumulated depreciation and amortization	970,489		956,286
Property, plant and equipment, net	$	1,021,198	$	1,022,722

10. Leases

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