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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Coca Cola Consolidated Inc | NASDAQ:COKE | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
10.77 | 1.28% | 851.80 | 850.00 | 870.95 | 853.16 | 837.51 | 850.00 | 42,672 | 01:00:00 |
Frank Harrison, Chairman and Chief Executive Officer, said, “We are excited about completing the significant expansion of our Company in early October with the final transactions in our planned growth through the acquisition of additional franchise distribution territory and production capacity from The Coca‑Cola Company. Our expansion, which began in 2014, has seen the Company grow significantly, expanding our geographic footprint and customers and consumers we serve. This expansion has also brought 10,000 new teammates to the Coke Consolidated family, helping to extend our Company’s impact on many new communities.”
Hank Flint, President and Chief Operating Officer, added, “The third quarter was one of the more challenging quarters we have experienced in several years with softer than expected sales performance in certain channels of trade. The third quarter was also impacted by hurricanes, which resulted in negative product sourcing impacts and a noticeable shift in product mix during September to lower margin case pack water. Despite these challenges, the Company continued to grow with total sales rising by almost 37%, comparable net sales increasing by 1.4% and comparable equivalent unit case volume growing by 1.0%. We have continued to build our capability and capacity to serve our significantly larger distribution footprint and, with our expansion now completed, we will strengthen our focus on our expanded sales and commercial opportunities and driving operational improvement and efficiency across the entire Company. We are also most grateful to our over 16,000 teammates whose commitment and outstanding efforts have been integral to our successful growth.”
Third Quarter 2017 Operating Review
Third Quarter 2017% Change Compared toThird Quarter 2016 | First Three Quarters 2017% Change Compared toFirst Three Quarters 2016 | |||||||||||||
Consolidated | Comparable(a) | Consolidated | Comparable(a) | |||||||||||
Net sales | 36.9 | % | 1.4 | % | 38.1 | % | 2.0 | % | ||||||
Income from operations | -9.2 | % | -15.0 | % | -9.2 | % | -5.1 | % | ||||||
Net income per share - basic | -25.0 | % | -29.5 | % | -35.3 | % | -9.2 | % | ||||||
Equivalent unit case volume(b) | 31.8 | % | 1.0 | % | 34.1 | % | 1.6 | % | ||||||
Sparkling | 27.2 | % | -0.6 | % | 30.5 | % | 0.5 | % | ||||||
Still | 41.2 | % | 4.3 | % | 42.3 | % | 4.1 | % |
(a) The discussion of the third quarter and first three quarters results includes selected non-GAAP financial information, such as “comparable” results. See discussion of “Non-GAAP Financial Measures” for descriptions and reconciliations.(b) Equivalent unit case volume is defined as 24 8-ounce servings or 192 ounces.
About Coca‑Cola Bottling Co. Consolidated
Coke Consolidated is the largest independent Coca‑Cola bottler in the United States. Our Purpose is to honor God, serve others, pursue excellence and grow profitably. For 115 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 distribute beverages of The Coca‑Cola Company and other partner companies in more than 300 brands and flavors across 14 states and the District of Columbia to over 65 million consumers.
Headquartered in Charlotte, N.C., Coke Consolidated is traded on the NASDAQ 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 expansion 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 2016 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.
—Enjoy Coca‑Cola—
Financial Statements
COCA‑COLA BOTTLING CO. CONSOLIDATED | ||||||||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Third Quarter | First Three Quarters | |||||||||||||||
(in thousands, except per share data) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 1,162,526 | $ | 849,028 | $ | 3,197,519 | $ | 2,314,868 | ||||||||
Cost of sales | 752,202 | 521,838 | 2,039,996 | 1,424,073 | ||||||||||||
Gross profit | 410,324 | 327,190 | 1,157,523 | 890,795 | ||||||||||||
Selling, delivery and administrative expenses | 374,194 | 287,389 | 1,060,472 | 783,857 | ||||||||||||
Income from operations | 36,130 | 39,801 | 97,051 | 106,938 | ||||||||||||
Interest expense, net | 10,697 | 8,452 | 30,607 | 27,621 | ||||||||||||
Other income (expense), net | 5,226 | 7,325 | (32,569 | ) | (26,100 | ) | ||||||||||
Loss on exchange of franchise territory | - | - | - | 692 | ||||||||||||
Income before income taxes | 30,659 | 38,674 | 33,875 | 52,525 | ||||||||||||
Income tax expense | 11,748 | 13,121 | 11,800 | 18,681 | ||||||||||||
Net income | 18,911 | 25,553 | 22,075 | 33,844 | ||||||||||||
Less: Net income attributable to noncontrolling interest | 1,595 | 2,411 | 3,462 | 5,091 | ||||||||||||
Net income attributable to Coca-Cola Bottling Co. Consolidated | $ | 17,316 | $ | 23,142 | $ | 18,613 | $ | 28,753 | ||||||||
Basic net income per share based on net income attributable to Coca-Cola Bottling Co. Consolidated: | ||||||||||||||||
Common Stock | $ | 1.86 | $ | 2.48 | $ | 2.00 | $ | 3.09 | ||||||||
Weighted average number of Common Stock shares outstanding | 7,141 | 7,141 | 7,141 | 7,141 | ||||||||||||
Class B Common Stock | $ | 1.86 | $ | 2.48 | $ | 2.00 | $ | 3.09 | ||||||||
Weighted average number of Class B Common Stock shares outstanding | 2,193 | 2,172 | 2,188 | 2,167 | ||||||||||||
Diluted net income per share based on net income attributable to Coca-Cola Bottling Co. Consolidated: | ||||||||||||||||
Common Stock | $ | 1.85 | $ | 2.47 | $ | 1.99 | $ | 3.08 | ||||||||
Weighted average number of Common Stock shares outstanding – assuming dilution | 9,374 | 9,353 | 9,369 | 9,348 | ||||||||||||
Class B Common Stock | $ | 1.84 | $ | 2.47 | $ | 1.97 | $ | 3.07 | ||||||||
Weighted average number of Class B Common Stock shares outstanding – assuming dilution | 2,233 | 2,212 | 2,228 | 2,207 | ||||||||||||
COCA‑COLA BOTTLING CO. CONSOLIDATED | ||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
(in thousands) | October 1, 2017 | January 1, 2017 | ||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 11,922 | $ | 21,850 | ||||
Trade accounts receivable, net | 376,236 | 267,213 | ||||||
Accounts receivable, other | 103,978 | 97,361 | ||||||
Inventories | 191,943 | 143,553 | ||||||
Prepaid expenses and other current assets | 129,674 | 63,834 | ||||||
Assets held for sale | 128,963 | - | ||||||
Total current assets | 942,716 | 593,811 | ||||||
Property, plant and equipment, net | 939,270 | 812,989 | ||||||
Leased property under capital leases, net | 29,259 | 33,552 | ||||||
Other assets | 104,111 | 86,091 | ||||||
Franchise rights | - | 533,040 | ||||||
Goodwill | 152,701 | 144,586 | ||||||
Other identifiable intangible assets, net | 743,039 | 245,415 | ||||||
Total assets | $ | 2,911,096 | $ | 2,449,484 | ||||
LIABILITIES AND EQUITY | ||||||||
Current Liabilities: | ||||||||
Current portion of obligations under capital leases | $ | 7,963 | $ | 7,527 | ||||
Accounts payable and accrued expenses | 559,152 | 450,380 | ||||||
Liabilities held for sale | 19,967 | - | ||||||
Total current liabilities | 587,082 | 457,907 | ||||||
Deferred income taxes | 153,765 | 174,854 | ||||||
Pension, postretirement and other liabilities | 624,122 | 505,251 | ||||||
Long-term debt and obligations under capital leases | 1,163,011 | 948,448 | ||||||
Total liabilities | 2,527,980 | 2,086,460 | ||||||
Equity: | ||||||||
Stockholders' equity | 293,761 | 277,131 | ||||||
Noncontrolling interest | 89,355 | 85,893 | ||||||
Total liabilities and equity | $ | 2,911,096 | $ | 2,449,484 | ||||
COCA‑COLA BOTTLING CO. CONSOLIDATED | ||||||||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
First Three Quarters | ||||||||
(in thousands) | 2017 | 2016 | ||||||
Cash Flows from Operating Activities: | ||||||||
Consolidated net income | $ | 22,075 | $ | 33,844 | ||||
Depreciation expense and amortization of intangible assets and deferred proceeds | 120,293 | 83,386 | ||||||
Deferred income taxes | (24,741 | ) | 5,509 | |||||
Proceeds from conversion of Legacy Territories bottling agreements | 87,066 | - | ||||||
Stock compensation expense | 6,473 | 4,445 | ||||||
Fair value adjustment of acquisition related contingent consideration | 23,140 | 26,060 | ||||||
Change in assets and liabilities (exclusive of acquisitions) | (36,173 | ) | (29,620 | ) | ||||
Other | 4,292 | 4,501 | ||||||
Net cash provided by operating activities | 202,425 | 128,125 | ||||||
Cash Flows from Investing Activities: | ||||||||
Acquisition of Expansion Territories related investing activities | (291,465 | ) | (174,571 | ) | ||||
Additions to property, plant and equipment (exclusive of acquisitions) | (114,953 | ) | (124,599 | ) | ||||
Other | (1,483 | ) | (6,883 | ) | ||||
Net cash used in investing activities | (407,901 | ) | (306,053 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Borrowings under Revolving Credit Facility, Term Loan Facility and Senior Notes | 458,000 | 610,000 | ||||||
Payments on Revolving Credit Facility and Senior Notes | (238,000 | ) | (409,757 | ) | ||||
Cash dividends paid | (6,995 | ) | (6,980 | ) | ||||
Payments on acquisition related contingent consideration | (11,650 | ) | (10,470 | ) | ||||
Principal payments on capital lease obligations | (5,594 | ) | (5,279 | ) | ||||
Other | (213 | ) | (867 | ) | ||||
Net cash provided by financing activities | 195,548 | 176,647 | ||||||
Net decrease during period | (9,928 | ) | (1,281 | ) | ||||
Cash at beginning of period | 21,850 | 55,498 | ||||||
Cash at end of period | $ | 11,922 | $ | 54,217 |
Non-GAAP Financial Measures
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 expansion transactions with The Coca‑Cola Company, 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.
The following tables reconcile reported GAAP results to comparable results for the third quarter of 2017 and the third quarter of 2016:
Third Quarter 2017 | ||||||||||||||||||||
(in thousands, except per share data) | Netsales | Incomefrom operations | Income beforeincome taxes | Netincome | Basic net incomeper share | |||||||||||||||
Reported results (GAAP) | $ | 1,162,526 | $ | 36,130 | $ | 30,659 | $ | 17,316 | $ | 1.86 | ||||||||||
Fair value adjustments for commodity hedges | A | - | (3,401 | ) | (3,401 | ) | (2,088 | ) | (0.22 | ) | ||||||||||
Amortization of converted distribution rights | B | - | 2,760 | 2,760 | 1,695 | 0.18 | ||||||||||||||
2017 & 2016 acquisitions impact | C | (478,272 | ) | (10,329 | ) | (10,329 | ) | (6,342 | ) | (0.68 | ) | |||||||||
Expansion transaction expenses | D | - | 13,148 | 13,148 | 8,073 | 0.85 | ||||||||||||||
Fair value adjustment of acquisition related contingent consideration | E | - | - | (5,225 | ) | (3,208 | ) | (0.34 | ) | |||||||||||
Total reconciling items | (478,272 | ) | 2,178 | (3,047 | ) | (1,870 | ) | (0.21 | ) | |||||||||||
Comparable results (non-GAAP) | $ | 684,254 | $ | 38,308 | $ | 27,612 | $ | 15,446 | $ | 1.65 | ||||||||||
Third Quarter 2016 | ||||||||||||||||||||
(in thousands, except per share data) | Netsales | Incomefrom operations | Income beforeincome taxes | Netincome | Basic net incomeper share | |||||||||||||||
Reported results (GAAP) | $ | 849,028 | $ | 39,801 | $ | 38,674 | $ | 23,142 | $ | 2.48 | ||||||||||
Fair value adjustments for commodity hedges | A | - | (388 | ) | (388 | ) | (239 | ) | (0.03 | ) | ||||||||||
2016 acquisitions impact | C | (174,420 | ) | (2,512 | ) | (2,512 | ) | (1,545 | ) | (0.17 | ) | |||||||||
Expansion transaction expenses | D | - | 9,780 | 9,780 | 6,015 | 0.65 | ||||||||||||||
Impact of changes in product supply governance | F | - | (1,614 | ) | (1,614 | ) | (993 | ) | (0.11 | ) | ||||||||||
Fair value adjustment of acquisition related contingent consideration | E | - | - | (7,365 | ) | (4,530 | ) | (0.48 | ) | |||||||||||
Total reconciling items | (174,420 | ) | 5,266 | (2,099 | ) | (1,292 | ) | (0.14 | ) | |||||||||||
Comparable results (non-GAAP) | $ | 674,608 | $ | 45,067 | $ | 36,575 | $ | 21,850 | $ | 2.34 |
The following tables reconcile reported GAAP results to comparable results for the first three quarters of 2017 and the first three quarters of 2016:
First Three Quarters 2017 | ||||||||||||||||||||
(in thousands, except per share data) | Netsales | Income fromoperations | Income beforeincome taxes | Netincome | Basic net incomeper share | |||||||||||||||
Reported results (GAAP) | $ | 3,197,519 | $ | 97,051 | $ | 33,875 | $ | 18,613 | $ | 2.00 | ||||||||||
Fair value adjustments for commodity hedges | A | - | (2,541 | ) | (2,541 | ) | (1,560 | ) | (0.16 | ) | ||||||||||
Amortization of converted distribution rights | B | - | 5,520 | 5,520 | 3,390 | 0.36 | ||||||||||||||
January 2016 Expansion Transactions settlement | G | - | - | 9,442 | 5,797 | 0.62 | ||||||||||||||
2017 & 2016 acquisitions impact | C | (1,215,827 | ) | (30,099 | ) | (30,099 | ) | (18,480 | ) | (1.97 | ) | |||||||||
Expansion transaction expenses | D | - | 32,374 | 32,374 | 19,877 | 2.09 | ||||||||||||||
Fair value adjustment of acquisition related contingent consideration | E | - | - | 23,140 | 14,208 | 1.52 | ||||||||||||||
Total reconciling items | (1,215,827 | ) | 5,254 | 37,836 | 23,232 | 2.46 | ||||||||||||||
Comparable results (non-GAAP) | $ | 1,981,692 | $ | 102,305 | $ | 71,711 | $ | 41,845 | $ | 4.46 |
First Three Quarters 2016 | ||||||||||||||||||||
(in thousands, except per share data) | Netsales | Income fromoperations | Income beforeincome taxes | Netincome | Basic net incomeper share | |||||||||||||||
Reported results (GAAP) | $ | 2,314,868 | $ | 106,938 | $ | 52,525 | $ | 28,753 | $ | 3.09 | ||||||||||
Fair value adjustments for commodity hedges | A | - | (4,198 | ) | (4,198 | ) | (2,583 | ) | (0.28 | ) | ||||||||||
2016 acquisitions impact | C | (372,550 | ) | (17,220 | ) | (17,220 | ) | (10,591 | ) | (1.14 | ) | |||||||||
Expansion transaction expenses | D | - | 23,208 | 23,208 | 14,273 | 1.54 | ||||||||||||||
Special charitable contribution | H | - | 4,000 | 4,000 | 2,460 | 0.26 | ||||||||||||||
Exchange of franchise territories | I | - | - | 692 | 426 | 0.05 | ||||||||||||||
Impact of changes in product supply governance | F | - | (4,932 | ) | (4,932 | ) | (3,034 | ) | (0.33 | ) | ||||||||||
Fair value adjustment of acquisition related contingent consideration | E | - | - | 26,060 | 16,027 | 1.72 | ||||||||||||||
Total reconciling items | (372,550 | ) | 858 | 27,610 | 16,978 | 1.82 | ||||||||||||||
Comparable results (non-GAAP) | $ | 1,942,318 | $ | 107,796 | $ | 80,135 | $ | 45,731 | $ | 4.91 |
Following is an explanation of non-GAAP adjustments:
A. The Company enters into derivative instruments from time to time to hedge some or all of its projected purchases of aluminum, PET resin, diesel fuel and unleaded gasoline for the Company’s delivery fleet and other vehicles in order to mitigate commodity risk. The Company accounts for commodity hedges on a mark-to-market basis.
B. The Company and The Coca‑Cola Company entered into a comprehensive beverage agreement on March 31, 2017 (as amended, the "Final CBA"). Concurrent with entering into the Final CBA in the first quarter of 2017, the Company converted its franchise rights for the Legacy Territories to distribution rights, to be amortized over an estimated useful life of 40 years. Adjustment reflects the net amortization expense associated with the conversion of the Company's franchise rights.
C. Adjustment reflects the financial performance of the 2016 and 2017 Expansion Transactions.
D. Adjustment reflects expenses related to the Expansion Transactions, which primarily include professional fees and expenses related to due diligence, and information technologies system conversions.
E. This non-cash, fair value adjustment of acquisition-related contingent consideration fluctuates based on factors such as long-term interest rates, projected future results, and final settlements of acquired territory values.
F. Adjustment reflects the gross profit on sales to other Coca‑Cola bottlers prior to the adoption of the Final Regional Manufacturing Agreement (the “Final RMA”) on March 31, 2017. Under the terms of the Final RMA, a standardized pricing methodology was implemented, which reduced the gross profit on net sales of the Company to other Coca‑Cola bottlers. To compensate the Company for its reduction of gross profit under the terms of the Final RMA, The Coca‑Cola Company has agreed to provide the Company an aggregate valuation adjustment through a payment or credit.
G. Adjustment includes a charge within other expense for net working capital and other fair value adjustments related to the January 2016 Expansion Transactions that were made beyond one year from the acquisition date.
H. A special charitable contribution was made during the first quarter of 2016.
I. Adjustment relates to the post-closing adjustment under the 2015 Asset Exchange Agreement completed in the second quarter of 2016.
Media Contact:Kimberly Kuo Senior Vice President, Public Affairs,Communications and Communities704-557-4584
Investor Contact:Clifford M. Deal, III Senior Vice President & CFO704-557-4633
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