Coca‑Cola Consolidated, Inc. (NASDAQ:COKE) today reported operating
results for the first quarter ended March 31, 2019.
“I am very pleased with our strong revenue growth and improved
operating performance in the first quarter,” said Frank Harrison,
Chairman and CEO of Coca-Cola Consolidated. “Our results reflect
the benefits of the strategic actions we took in the second half of
2018 to improve our margins and reduce our operating expenses. Our
pricing actions are delivering meaningful revenue and profit growth
as we remain highly focused on leveraging the scale of our expanded
territory.”
Revenue grew 3.6% in the first quarter, driven by increases in
the selling prices of our products. Volume for the quarter was flat
to prior year as growth of Still beverages offset declines of
Sparkling products. Bottle/can sales of Sparkling beverages
increased 4.6% for the quarter, driven by increased selling prices
and the introduction of new products into our portfolio, including
Orange Vanilla Coke. Sales of Still beverages grew 7.1%, driven
primarily by growth in our Sports Drinks and Energy categories. Q1
2019 was our first full quarter of distribution of BodyArmor
products, which helped to fuel our overall net sales growth.
“Our portfolio of brands and the activation of those brands in
the marketplace by our 17,000 teammates continue to generate
excitement and value for our retail partners and our consumers,”
said Dave Katz, President and Chief Operating Officer. “I am
particularly pleased with the performance of our Sparkling
beverages in the first quarter as improved trends enabled us to
grow our value share in this important category.”
Gross margin increased 170 basis points in the first quarter to
35.3%. On an adjusted(a) basis, gross margin increased
100 basis points over the prior year. This improvement is
primarily the result of pricing actions taken in the second half of
2018 to overcome significantly higher input costs. While input
costs remain at elevated levels, overall commodity prices have been
more stable so far this year, contributing to our first quarter
margin improvement. In addition, our actions to optimize our supply
chain and reduce our sourcing costs resulted in reduced
transportation costs compared to prior year.
Selling, delivery and administrative (“SD&A”) expenses in
Q1 2019 decreased $7.4 million, or 2.0%, as compared to
prior year. Our SD&A as a percent of sales improved 190 basis
points versus Q1 2018 (33.5% versus 35.4%, respectively) largely
driven by a decrease in costs from our system transformation
initiative. Our Q1 2019 results included $4.7 million of
system transformation expenses relating to our information
technology system conversion, an improvement of $7.5 million versus
prior year. We expect our system conversion to be completed by the
end of the second quarter of 2019. In addition, our first quarter
expenses reflect the benefit of the operating structure changes we
completed in 2018. While we are pleased with the progress we have
made in SD&A expenses, we continue to look for opportunities to
drive scale advantages and leverage our business model.
Income from operations was $20.2 million in Q1 2019,
an increase of $39.2 million from Q1 2018. Adjusted(a)
income from operations was $20.7 million in Q1 2019, up
from an adjusted(a) operating loss of $3.6 million in Q1 2018.
Operating results in the first half of 2019, as compared to the
first half of 2018, benefit from results in 2018 that were
negatively impacted by high commodity and transportation
costs.
Capital spending for Q1 2019 was $29.3 million. We continue
to anticipate capital spending in fiscal 2019 will be in the range
of $150 million to $180 million as we remain focused on
making prudent, long-term investments to support the growth of the
Company. Cash flows provided by operations for Q1 2019 were
$5.6 million, compared to cash flows used in operations of
$80.7 million in Q1 2018. Improved cash generation is a key
focus area for 2019 as we work to improve our profitability, reduce
our financial leverage and further strengthen our balance
sheet.
About Coca‑Cola Consolidated, Inc.
Coke Consolidated is the largest Coca-Cola bottler in the United
States. Our Purpose is to honor God, serve others, pursue
excellence and grow profitably. For 117 years, we have been deeply
committed to the consumers, customers, and communities we serve and
passionate about the broad portfolio of beverages and services we
offer. We make, sell, and deliver beverages of
The Coca‑Cola Company and other partner companies in more
than 300 brands and flavors to 66 million consumers in territories
spanning 14 states and the District of Columbia.
Headquartered in Charlotte, N.C., Coke Consolidated is traded on
the NASDAQ Global Select Market under the symbol “COKE.” More
information about the company is available at
www.cokeconsolidated.com. Follow Coke Consolidated on Facebook,
Twitter, Instagram and LinkedIn.
Cautionary Information Regarding Forward-Looking
Statements
Certain statements contained in this news release are
“forward-looking statements” that involve risks and uncertainties.
The words “believe,” “expect,” “project,” “will,” “should,” “could”
and similar expressions are intended to identify those
forward-looking statements. Factors that might cause Coke
Consolidated’s actual results to differ materially from those
anticipated in forward-looking statements include, but are not
limited to: our inability to integrate the operations and employees
acquired in system transformation transactions; lower than expected
selling pricing resulting from increased marketplace competition;
changes in how significant customers market or promote our
products; changes in our top customer relationships; changes in
public and consumer preferences related to nonalcoholic beverages,
including concerns related to obesity and health concerns;
unfavorable changes in the general economy; miscalculation of our
need for infrastructure investment; our inability to meet
requirements under beverage agreements; material changes in the
performance requirements for marketing funding support or our
inability to meet such requirements; decreases from historic levels
of marketing funding support; changes in
The Coca‑Cola Company’s and other beverage companies’
levels of advertising, marketing and spending on brand innovation;
the inability of our aluminum can or plastic bottle suppliers to
meet our purchase requirements; our inability to offset higher raw
material costs with higher selling prices, increased bottle/can
sales volume or reduced expenses; consolidation of raw material
suppliers; incremental risks resulting from increased purchases of
finished goods; sustained increases in fuel costs or our inability
to secure adequate supplies of fuel; sustained increases in the
cost of labor and employment matters, product liability claims or
product recalls; technology failures or cyberattacks; changes in
interest rates; the impact of debt levels on operating flexibility
and access to capital and credit markets; adverse changes in our
credit rating (whether as a result of our operations or prospects
or as a result of those of The Coca‑Cola Company or other
bottlers in the Coca‑Cola system); changes in legal contingencies;
legislative changes affecting our distribution and packaging;
adoption of significant product labeling or warning requirements;
additional taxes resulting from tax audits; natural disasters and
unfavorable weather; global climate change or legal or regulatory
responses to such change; issues surrounding labor relations with
unionized employees; bottler system disputes; our use of estimates
and assumptions; changes in accounting standards; the impact of
volatility in the financial markets on access to the credit
markets; the impact of acquisitions or dispositions of bottlers by
their franchisors; changes in the inputs used to calculate our
acquisition related contingent consideration liability; and the
concentration of our capital stock ownership. These and other
factors are discussed in the Company’s regulatory filings with the
Securities and Exchange Commission, including those in the
Company’s fiscal 2018 Annual Report on Form 10‑K, Item 1A. Risk
Factors. The forward-looking statements contained in this news
release speak only as of this date, and the Company does not assume
any obligation to update them except as required by law.
|
FINANCIAL STATEMENTSCONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS(UNAUDITED) |
|
|
|
|
|
|
First Quarter |
|
(in
thousands, except per share data) |
|
2019 |
|
|
2018 |
|
Net sales(b) |
|
$ |
1,102,912 |
|
|
$ |
1,064,757 |
|
Cost of sales |
|
|
713,604 |
|
|
|
707,116 |
|
Gross profit(b) |
|
|
389,308 |
|
|
|
357,641 |
|
Selling, delivery and
administrative expenses(b) |
|
|
369,154 |
|
|
|
376,638 |
|
Income (loss) from
operations |
|
|
20,154 |
|
|
|
(18,997 |
) |
Interest expense, net |
|
|
12,886 |
|
|
|
12,046 |
|
Other income (expense),
net |
|
|
(15,851 |
) |
|
|
4,510 |
|
Loss before income taxes |
|
|
(8,583 |
) |
|
|
(26,533 |
) |
Income tax benefit |
|
|
(3,005 |
) |
|
|
(12,971 |
) |
Net loss |
|
|
(5,578 |
) |
|
|
(13,562 |
) |
Less: Net income attributable to noncontrolling interest |
|
|
1,253 |
|
|
|
623 |
|
Net loss attributable
to Coca-Cola Consolidated, Inc. |
|
$ |
(6,831 |
) |
|
$ |
(14,185 |
) |
|
|
|
|
|
|
|
|
|
Basic net loss per
share based on net loss attributable to Coca-Cola Consolidated,
Inc.: |
|
|
|
|
|
|
|
|
Common Stock |
|
$ |
(0.73 |
) |
|
$ |
(1.52 |
) |
Weighted average number of
Common Stock shares outstanding |
|
|
7,141 |
|
|
|
7,141 |
|
|
|
|
|
|
|
|
|
|
Class B Common Stock |
|
$ |
(0.73 |
) |
|
$ |
(1.52 |
) |
Weighted average number of
Class B Common Stock shares outstanding |
|
|
2,219 |
|
|
|
2,199 |
|
|
|
|
|
|
|
|
|
|
Diluted net loss per
share based on net loss attributable to Coca-Cola Consolidated,
Inc.: |
|
|
|
|
|
|
|
|
Common Stock |
|
$ |
(0.73 |
) |
|
$ |
(1.52 |
) |
Weighted average number of
Common Stock shares outstanding – assuming dilution |
|
|
9,360 |
|
|
|
9,340 |
|
|
|
|
|
|
|
|
|
|
Class B Common Stock |
|
$ |
(0.73 |
) |
|
$ |
(1.52 |
) |
Weighted average number of Class
B Common Stock shares outstanding – assuming dilution |
|
|
2,219 |
|
|
|
2,199 |
|
|
|
|
|
|
|
|
|
|
(b) Consideration paid to customers under certain contractual
arrangements for exclusive distribution rights and sponsorship
privileges was presented as SD&A expense in Q1 2018. The
Company has revised the presentation of the consideration paid to a
reduction of net sales for Q1 2018, which it believes is consistent
with the presentation used by other companies in the beverage
industry.
|
FINANCIAL
STATEMENTSCONSOLIDATED CONDENSED BALANCE
SHEETS(UNAUDITED) |
|
|
|
|
|
|
|
(in thousands) |
|
March 31, 2019 |
|
|
December 30, 2018 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
8,497 |
|
|
$ |
13,548 |
|
Trade accounts receivable,
net |
|
|
414,361 |
|
|
|
427,749 |
|
Accounts receivable,
other |
|
|
95,899 |
|
|
|
75,408 |
|
Inventories |
|
|
220,317 |
|
|
|
210,033 |
|
Prepaid expenses and other
current assets |
|
|
69,357 |
|
|
|
70,680 |
|
Total current assets |
|
|
808,431 |
|
|
|
797,418 |
|
Property, plant and equipment,
net |
|
|
970,499 |
|
|
|
990,532 |
|
Right of use assets -
operating leases |
|
|
84,592 |
|
|
|
- |
|
Leased property under
financing or capital leases, net |
|
|
22,435 |
|
|
|
23,720 |
|
Other assets |
|
|
113,537 |
|
|
|
115,490 |
|
Goodwill |
|
|
165,903 |
|
|
|
165,903 |
|
Other identifiable intangible
assets, net |
|
|
910,291 |
|
|
|
916,865 |
|
Total assets |
|
$ |
3,075,688 |
|
|
$ |
3,009,928 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
|
|
Current portion of obligations
under operating leases |
|
$ |
13,555 |
|
|
$ |
- |
|
Current portion of obligations
under financing or capital leases |
|
|
8,833 |
|
|
|
8,617 |
|
Accounts payable and accrued
expenses |
|
|
536,753 |
|
|
|
593,120 |
|
Total current liabilities |
|
|
559,141 |
|
|
|
601,737 |
|
Deferred income taxes |
|
|
123,920 |
|
|
|
127,174 |
|
Pension and postretirement
benefit obligations and other liabilities |
|
|
705,664 |
|
|
|
694,817 |
|
Noncurrent portion of
obligations under operating leases |
|
|
71,345 |
|
|
|
- |
|
Noncurrent portion of
obligations under financing or capital leases |
|
|
24,515 |
|
|
|
26,631 |
|
Long-term debt |
|
|
1,138,500 |
|
|
|
1,104,403 |
|
Total liabilities |
|
|
2,623,085 |
|
|
|
2,554,762 |
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
354,371 |
|
|
|
358,187 |
|
Noncontrolling interest |
|
|
98,232 |
|
|
|
96,979 |
|
Total liabilities and equity |
|
$ |
3,075,688 |
|
|
$ |
3,009,928 |
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTSCONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS(UNAUDITED) |
|
|
|
|
|
|
First Quarter |
|
(in
thousands) |
|
2019 |
|
|
2018 |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(5,578 |
) |
|
$ |
(13,562 |
) |
Depreciation expense,
amortization of intangible assets and deferred proceeds, net |
|
|
45,772 |
|
|
|
47,220 |
|
Deferred income taxes |
|
|
(3,445 |
) |
|
|
(15,394 |
) |
Stock compensation
expense |
|
|
2,045 |
|
|
|
752 |
|
Fair value adjustment of
acquisition related contingent consideration |
|
|
14,046 |
|
|
|
(5,186 |
) |
Change in assets and
liabilities |
|
|
(49,920 |
) |
|
|
(96,817 |
) |
Other |
|
|
2,676 |
|
|
|
2,241 |
|
Net cash provided by
(used in) operating activities |
|
$ |
5,596 |
|
|
$ |
(80,746 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities: |
|
|
|
|
|
|
|
|
Additions to property, plant
and equipment |
|
$ |
(29,315 |
) |
|
$ |
(42,048 |
) |
Other |
|
|
(4,459 |
) |
|
|
1,824 |
|
Net cash used in
investing activities |
|
$ |
(33,774 |
) |
|
$ |
(40,224 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities: |
|
|
|
|
|
|
|
|
Borrowings under revolving
credit facility and proceeds from issuance of senior notes |
|
$ |
131,339 |
|
|
$ |
320,000 |
|
Payments on revolving credit
facility and term loan facility |
|
|
(97,339 |
) |
|
|
(197,000 |
) |
Cash dividends paid |
|
|
(2,339 |
) |
|
|
(2,333 |
) |
Payment of acquisition related
contingent consideration |
|
|
(6,237 |
) |
|
|
(5,882 |
) |
Principal payments on
financing or capital lease obligations |
|
|
(2,114 |
) |
|
|
(2,053 |
) |
Debt issuance fees |
|
|
(183 |
) |
|
|
(185 |
) |
Net cash provided by
financing activities |
|
$ |
23,127 |
|
|
$ |
112,547 |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash during
period |
|
$ |
(5,051 |
) |
|
$ |
(8,423 |
) |
Cash at beginning of
period |
|
|
13,548 |
|
|
|
16,902 |
|
Cash at end of
period |
|
$ |
8,497 |
|
|
$ |
8,479 |
|
|
|
|
|
|
|
|
|
|
|
NON-GAAP FINANCIAL MEASURES(c)The
following tables reconcile reported GAAP results to adjusted
results (non-GAAP): |
|
|
|
|
|
|
First Quarter 2019 |
|
(in
thousands, except per share data) |
|
Grossprofit |
|
|
SD&Aexpenses |
|
|
Incomefromoperations |
|
|
Income(loss) beforeincome
taxes |
|
|
Netincome(loss) |
|
|
Basic netincome
(loss)per share |
|
Reported results (GAAP) |
|
$ |
389,308 |
|
|
$ |
369,154 |
|
|
$ |
20,154 |
|
|
$ |
(8,583 |
) |
|
$ |
(6,831 |
) |
|
$ |
(0.73 |
) |
System Transformation
Transactions expenses |
|
|
- |
|
|
|
(4,730 |
) |
|
|
4,730 |
|
|
|
4,730 |
|
|
|
3,557 |
|
|
|
0.38 |
|
Fair value adjustment of
acquisition related contingent consideration |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,046 |
|
|
|
10,563 |
|
|
|
1.13 |
|
Fair value adjustments for
commodity hedges |
|
|
(3,905 |
) |
|
|
2,715 |
|
|
|
(6,620 |
) |
|
|
(6,620 |
) |
|
|
(4,978 |
) |
|
|
(0.53 |
) |
Capitalization threshold
change for certain assets(d) |
|
|
- |
|
|
|
(2,476 |
) |
|
|
2,476 |
|
|
|
2,476 |
|
|
|
1,862 |
|
|
|
0.20 |
|
Other tax adjustments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(845 |
) |
|
|
(0.09 |
) |
Total reconciling
items |
|
|
(3,905 |
) |
|
|
(4,491 |
) |
|
|
586 |
|
|
|
14,632 |
|
|
|
10,159 |
|
|
|
1.09 |
|
Adjusted results
(non-GAAP) |
|
$ |
385,403 |
|
|
$ |
364,663 |
|
|
$ |
20,740 |
|
|
$ |
6,049 |
|
|
$ |
3,328 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter 2018 |
|
(in
thousands, except per share data) |
|
Grossprofit |
|
|
SD&Aexpenses |
|
|
Loss fromoperations |
|
|
Loss beforeincome taxes |
|
|
Net loss |
|
|
Basic net lossper
share |
|
Reported results (GAAP) |
|
$ |
357,641 |
|
|
$ |
376,638 |
|
|
$ |
(18,997 |
) |
|
$ |
(26,533 |
) |
|
$ |
(14,185 |
) |
|
$ |
(1.52 |
) |
System Transformation
Transactions expenses |
|
|
199 |
|
|
|
(12,251 |
) |
|
|
12,450 |
|
|
|
12,450 |
|
|
|
9,362 |
|
|
|
1.00 |
|
Fair value adjustment of
acquisition related contingent consideration |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5,186 |
) |
|
|
(3,900 |
) |
|
|
(0.42 |
) |
Fair value adjustments for
commodity hedges |
|
|
2,765 |
|
|
|
(202 |
) |
|
|
2,967 |
|
|
|
2,967 |
|
|
|
2,231 |
|
|
|
0.24 |
|
Other tax adjustments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,343 |
) |
|
|
(0.25 |
) |
Total reconciling
items |
|
|
2,964 |
|
|
|
(12,453 |
) |
|
|
15,417 |
|
|
|
10,231 |
|
|
|
5,350 |
|
|
|
0.57 |
|
Adjusted results
(non-GAAP) |
|
$ |
360,605 |
|
|
$ |
364,185 |
|
|
$ |
(3,580 |
) |
|
$ |
(16,302 |
) |
|
$ |
(8,835 |
) |
|
$ |
(0.95 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) The Company reports its financial results in accordance with
U.S. generally accepted accounting principles (“GAAP”). However,
management believes that certain non-GAAP financial measures
provide users with additional meaningful financial information that
should be considered when assessing the Company’s ongoing
performance. Further, given the transformation of the Company’s
business through system transformation transactions with
The Coca‑Cola Company and the conversion of its
information technology systems, the Company believes these non‑GAAP
financial measures allow users to better appreciate the impact of
these transactions on the Company’s performance. Management also
uses these non-GAAP financial measures in making financial,
operating and planning decisions and in evaluating the Company’s
performance. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, the Company’s reported
results prepared in accordance with GAAP. The Company’s non-GAAP
financial information does not represent a comprehensive basis of
accounting.(d) Reflects the prospective change of increasing the
capitalization thresholds on certain low-cost, short-lived assets.
This change is not expected to be material to the consolidated
condensed financial statements.
|
MEDIA CONTACT:Kimberly KuoSenior Vice President
Public Affairs, Communications &
CommunitiesKimberly.Kuo@ccbcc.com(704) 557-4584 |
INVESTOR CONTACT:Scott AnthonyExecutive Vice
President &Chief Financial OfficerScott.Anthony@ccbcc.com (704)
557-4633 |
|
A PDF accompanying this announcement is available at
http://ml.globenewswire.com/Resource/Download/f53ba814-f0af-49d6-b6ed-9cbae6de0c19
.
Coca Cola Consolidated (NASDAQ:COKE)
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