Coca-Cola Consolidated, Inc. (NASDAQ:COKE) today reported operating
results for the first quarter ended March 29, 2020.
“This is a challenging time for our country and our local
communities as we all respond to the COVID-19 pandemic. I am
especially proud of our teammates throughout our territory for
their unwavering focus on serving our customers and consumers
during this difficult period,” said J. Frank Harrison, III,
Chairman and Chief Executive Officer. “We are actively adjusting
our operations to meet the changing schedules and needs of our
customers while remaining focused on the health and well-being of
our teammates and their families.”
Revenue grew 6.4% in the first quarter of 2020, primarily due to
an increase in physical case volume of 6.1%. Volume growth was
strong in both Sparkling and Still categories as we introduced
Coca-Cola line extensions and new products such as Coke Energy, AHA
and enhanced waters. Volume growth was particularly strong in the
last three weeks of the quarter as consumers prepared for
COVID-19-related stay-at-home orders which shifted consumer buying
patterns to take home multi-serve packages sold in larger retail
stores. We estimate approximately two-thirds of our first quarter
2020 volume growth is attributable to heavy increases in demand
during the last three weeks of March. Revenue from our bottle/can
Sparkling beverages increased 6.0% in the first quarter of 2020,
driven primarily by volume growth and price realization within this
category. Revenue from our Still beverages grew 10.4% in the first
quarter of 2020, related to the successful introduction of AHA,
Coke Energy and continued strong BodyArmor performance.
“Our first quarter business results were strong as we started
the year with a substantial number of new products and innovation
from our brand partners. Our teammates did an outstanding job
bringing these new products to market and the positive consumer
response enabled us to drive higher volume, revenue and profit
growth in the first quarter,” said Dave Katz, President and Chief
Operating Officer.
Gross profit increased $16.0 million, or 4.1%, in the first
quarter of 2020, driven by higher volumes, while gross margin
decreased 70 basis points to 34.6% due to the shift in our
product mix away from single-serve sales and towards take home
multi-serve sales. On an adjusted(b) basis, gross profit grew
$22.1 million, or 5.7%, and gross margin decreased
20 basis points. We continue to focus on price realization and
margin improvement across our portfolio. However, the higher growth
rates for Still products, which generally have lower gross margins
than Sparkling products, continue to put pressure on our overall
gross margin. We estimate the shift in consumer buying patterns in
the last three weeks of the quarter impacted our gross margin by
approximately 20 basis points.
Selling, delivery and administrative (“SD&A”) expenses in
the first quarter of 2020 increased $3.3 million, or 0.9%.
SD&A expenses as a percentage of net sales decreased
170 basis points in the first quarter of 2020. Adjusted(b)
SD&A expenses in the first quarter of 2020 increased
$6.1 million, or 1.7%. The substantial improvement in SD&A
expenses as a percentage of net sales relates to our ability to
leverage our operating model during such a period of strong revenue
growth along with diligent management of our variable operating
expenses.
Income from operations in the first quarter of 2020 was
$32.8 million, compared to $20.2 million in the first
quarter of 2019, an increase of 62.9%. Adjusted(b) income from
operations in the first quarter of 2020 was $36.8 million, an
increase of 77.3%.
“Our first quarter results benefited from heavy consumer demand
for our take home packages as demand shifted from small stores and
on-premise outlets to larger retail stores,” Mr. Katz continued.
“While this was a benefit to our first quarter results, we
recognize that consumer buying patterns and demand are highly
volatile in the current environment and will likely have a negative
financial impact on our second quarter results and potentially
impact future quarters as well. We are fortunate to be a
Coca-Cola bottler which enables us to serve our customers during
this incredibly difficult time and I am thankful for the hard work
and dedication our teammates demonstrate every day across our
territory.”
Net income in the first quarter of 2020 was $14.7 million,
compared to a net loss of $6.8 million in the first quarter of
2019, an improvement of $21.5 million.
Cash flows provided by operations for the first quarter of 2020
were $32.3 million, compared to $5.6 million for the
first quarter of 2019. Improved cash generation continues to be a
key management focus area as we continue to work to improve our
profitability and further strengthen our balance sheet.
COVID-19 Impact
While our volume and revenue growth were strong in the first
quarter, sales trends slowed dramatically in the month of April
2020 as our business felt the full impact of local stay-at-home
orders and the closing of non-essential businesses. Consumer buying
patterns have shifted away from single-serve purchases in small
stores and on-premise outlets to purchases of take home multi-serve
packages in larger retail stores. The combination of this mix shift
and lower overall volume is expected to have a significant impact
on our sales for the full year. However, it is difficult to
estimate the full financial impact of these changes given the
uncertainly around a number of factors, including the duration of
these stay-at-home orders, the pace that on-premise outlets and
other accounts will fully reopen in the future and the willingness
of consumers to return to these venues and to their prior
purchasing behavior. We believe we can offset a portion of this
sales shortfall with lower commodity costs, tight controls of
discretionary spending and adjustments to our operating model to
lower our overall expenses. These adjustments include the recent
furlough of 700 of our teammates in April. We will continue
to evaluate additional actions to lower expenses depending on the
duration and the severity of the business slowdown, while
maintaining our focus on taking appropriate actions to help protect
the health and safety of our teammates and customers during this
pandemic. We are also reducing our planned capital spending for the
year to maintain cash flows in the current environment. For further
detail on the Company's COVID-19 health and safety actions, refer
to Management's Discussion and Analysis of Financial Condition and
Results of Operations within the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 29, 2020.
(a) All comparisons are to the corresponding period
in the prior year unless specified otherwise.(b) The
discussion of the results for the first quarter ended
March 29, 2020 includes selected non-GAAP financial
information, such as “adjusted” results. The schedules in this news
release reconcile such non-GAAP financial measures to the most
directly comparable GAAP financial measures.
About Coca-Cola Consolidated, Inc.Coca-Cola
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 118 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 approximately 66 million consumers in territories
spanning 14 states and the District of Columbia. Headquartered
in Charlotte, N.C., Coca-Cola 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
Coca-Cola 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 Coca-Cola
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; the impact of the
COVID-19 pandemic; 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 “Item 1A.
Risk Factors” in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 29, 2019. 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
STATEMENTS CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED) |
|
|
|
|
|
|
|
First Quarter |
(in thousands, except per
share data) |
|
2020 |
|
2019 |
Net sales |
|
$ |
1,173,021 |
|
|
$ |
1,102,912 |
|
Cost of sales |
|
767,726 |
|
|
713,604 |
|
Gross profit |
|
405,295 |
|
|
389,308 |
|
Selling, delivery and
administrative expenses |
|
372,474 |
|
|
369,154 |
|
Income from operations |
|
32,821 |
|
|
20,154 |
|
Interest expense, net |
|
9,561 |
|
|
12,886 |
|
Other expense, net |
|
2,298 |
|
|
15,851 |
|
Income (loss) before income
taxes |
|
20,962 |
|
|
(8,583 |
) |
Income tax expense (benefit) |
|
5,361 |
|
|
(3,005 |
) |
Net income (loss) |
|
15,601 |
|
|
(5,578 |
) |
Less: Net income attributable to noncontrolling interest |
|
939 |
|
|
1,253 |
|
Net income (loss)
attributable to Coca-Cola Consolidated, Inc. |
|
$ |
14,662 |
|
|
$ |
(6,831 |
) |
|
|
|
|
|
Basic net income (loss)
per share based on net income (loss) attributable to Coca-Cola
Consolidated, Inc.: |
|
|
|
|
Common Stock |
|
$ |
1.56 |
|
|
$ |
(0.73 |
) |
Weighted average number of Common
Stock shares outstanding |
|
7,141 |
|
|
7,141 |
|
|
|
|
|
|
Class B Common Stock |
|
$ |
1.56 |
|
|
$ |
(0.73 |
) |
Weighted average number of Class
B Common Stock shares outstanding |
|
2,232 |
|
|
2,219 |
|
|
|
|
|
|
Diluted net income (loss)
per share based on net income (loss) attributable to Coca-Cola
Consolidated, Inc.: |
|
|
|
|
Common Stock |
|
$ |
1.55 |
|
|
$ |
(0.73 |
) |
Weighted average number of Common
Stock shares outstanding – assuming dilution |
|
9,444 |
|
|
9,360 |
|
|
|
|
|
|
Class B Common Stock |
|
$ |
1.55 |
|
|
$ |
(0.73 |
) |
Weighted average number of Class
B Common Stock shares outstanding – assuming dilution |
|
2,303 |
|
|
2,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
STATEMENTS CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED) |
|
|
|
|
|
|
|
|
|
(in thousands) |
|
March 29, 2020 |
|
December 29, 2019 |
ASSETS |
|
|
|
|
Current
Assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
47,748 |
|
|
$ |
9,614 |
|
Trade accounts receivable,
net |
|
454,706 |
|
|
419,770 |
|
Accounts receivable,
other |
|
98,815 |
|
|
105,505 |
|
Inventories |
|
228,624 |
|
|
225,926 |
|
Prepaid expenses and other
current assets |
|
73,592 |
|
|
69,461 |
|
Total current assets |
|
903,485 |
|
|
830,276 |
|
Property, plant and equipment,
net |
|
984,769 |
|
|
997,403 |
|
Right-of-use assets -
operating leases |
|
138,447 |
|
|
111,376 |
|
Leased property under
financing leases, net |
|
12,498 |
|
|
17,960 |
|
Other assets |
|
106,433 |
|
|
113,269 |
|
Goodwill |
|
165,903 |
|
|
165,903 |
|
Other identifiable intangible
assets, net |
|
884,208 |
|
|
890,739 |
|
Total assets |
|
$ |
3,195,743 |
|
|
$ |
3,126,926 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Current
Liabilities: |
|
|
|
|
Current portion of obligations
under operating leases |
|
$ |
17,837 |
|
|
$ |
15,024 |
|
Current portion of obligations
under financing leases |
|
5,099 |
|
|
9,403 |
|
Accounts payable and accrued
expenses |
|
585,054 |
|
|
597,768 |
|
Total current liabilities |
|
607,990 |
|
|
622,195 |
|
Deferred income taxes |
|
131,024 |
|
|
125,130 |
|
Pension and postretirement
benefit obligations and other liabilities |
|
771,683 |
|
|
783,397 |
|
Noncurrent portion of
obligations under operating leases |
|
124,698 |
|
|
97,765 |
|
Noncurrent portion of
obligations under financing leases |
|
13,436 |
|
|
17,403 |
|
Long-term debt |
|
1,082,589 |
|
|
1,029,920 |
|
Total liabilities |
|
2,731,420 |
|
|
2,675,810 |
|
|
|
|
|
|
Equity: |
|
|
|
|
Stockholders’ equity |
|
359,220 |
|
|
346,952 |
|
Noncontrolling interest |
|
105,103 |
|
|
104,164 |
|
Total liabilities and equity |
|
$ |
3,195,743 |
|
|
$ |
3,126,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
STATEMENTS CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED) |
|
|
|
|
|
|
|
First Quarter |
(in thousands) |
|
2020 |
|
2019 |
Cash Flows from Operating Activities: |
|
|
|
|
Net income (loss) |
|
$ |
15,601 |
|
|
$ |
(5,578 |
) |
Depreciation expense,
amortization of intangible assets and deferred proceeds, net |
|
43,559 |
|
|
45,772 |
|
Fair value adjustment of
acquisition related contingent consideration |
|
712 |
|
|
14,046 |
|
Deferred income taxes |
|
5,910 |
|
|
(3,445 |
) |
Stock compensation
expense |
|
— |
|
|
2,045 |
|
Change in assets and
liabilities |
|
(34,204 |
) |
|
(49,920 |
) |
Other |
|
711 |
|
|
2,676 |
|
Net cash provided by
operating activities |
|
$ |
32,289 |
|
|
$ |
5,596 |
|
|
|
|
|
|
Cash Flows from
Investing Activities: |
|
|
|
|
Additions to property, plant
and equipment |
|
$ |
(33,093 |
) |
|
$ |
(29,315 |
) |
Other |
|
765 |
|
|
(4,459 |
) |
Net cash used in
investing activities |
|
$ |
(32,328 |
) |
|
$ |
(33,774 |
) |
|
|
|
|
|
Cash Flows from
Financing Activities: |
|
|
|
|
Payments on revolving credit
facility and term loan facility |
|
$ |
(132,500 |
) |
|
$ |
(97,339 |
) |
Borrowings under revolving
credit facility |
|
185,000 |
|
|
131,339 |
|
Payments of acquisition
related contingent consideration |
|
(10,452 |
) |
|
(6,237 |
) |
Cash dividends paid |
|
(2,344 |
) |
|
(2,339 |
) |
Principal payments on
financing obligations |
|
(1,485 |
) |
|
(2,114 |
) |
Debt issuance fees |
|
(46 |
) |
|
(183 |
) |
Net cash provided by
financing activities |
|
$ |
38,173 |
|
|
$ |
23,127 |
|
|
|
|
|
|
Net increase (decrease) in
cash during period |
|
$ |
38,134 |
|
|
$ |
(5,051 |
) |
Cash at beginning of
period |
|
9,614 |
|
|
13,548 |
|
Cash at end of
period |
|
$ |
47,748 |
|
|
$ |
8,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-GAAP
FINANCIAL MEASURES(c) The following tables reconcile reported
results (GAAP) to adjusted results (non-GAAP): |
|
|
|
|
|
First Quarter 2020 |
(in thousands, except per
share data) |
|
Grossprofit |
|
SD&Aexpenses |
|
Incomefromoperations |
|
Income (loss)beforeincome taxes |
|
Netincome(loss) |
|
Basic netincome (loss)per share |
Reported results (GAAP) |
|
$ |
405,295 |
|
|
$ |
372,474 |
|
|
$ |
32,821 |
|
|
$ |
20,962 |
|
|
$ |
14,662 |
|
|
$ |
1.56 |
|
Fair value adjustment of
acquisition related contingent consideration |
|
— |
|
|
— |
|
|
— |
|
|
712 |
|
|
535 |
|
|
0.06 |
|
Fair value adjustments for
commodity hedges |
|
1,536 |
|
|
(2,329 |
) |
|
3,865 |
|
|
3,865 |
|
|
2,906 |
|
|
0.31 |
|
Supply chain and asset
optimization |
|
648 |
|
|
571 |
|
|
77 |
|
|
77 |
|
|
58 |
|
|
0.01 |
|
Other tax adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(171 |
) |
|
(0.02 |
) |
Total reconciling
items |
|
2,184 |
|
|
(1,758 |
) |
|
3,942 |
|
|
4,654 |
|
|
3,328 |
|
|
0.36 |
|
Adjusted results
(non-GAAP) |
|
$ |
407,479 |
|
|
$ |
370,716 |
|
|
$ |
36,763 |
|
|
$ |
25,616 |
|
|
$ |
17,990 |
|
|
$ |
1.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
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 |
|
— |
|
|
(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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) The Company reports its financial results in
accordance with accounting principles generally accepted in the
United States (“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. 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.
|
MEDIA CONTACT: |
INVESTOR CONTACT: |
Kimberly Kuo |
Scott Anthony |
Senior Vice President Public
Affairs, Communications & Communities |
Executive Vice President &
Chief Financial Officer |
Kimberly.Kuo@cokeconsolidated.com |
Scott.Anthony@cokeconsolidated.com |
(704) 557-4584 |
(704) 557-4633 |
|
A PDF accompanying this release is available
at: http://ml.globenewswire.com/Resource/Download/9344d9df-8ccd-49cd-a5e1-1f9561e8951d
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