GlobeNewswire Inc | Nov 3, 2020 04:10PM EST

November 03, 2020

-- Third quarter 2020 net sales increased 4.5% versus the third quarter of 2019, with physical case volume up 3.9% for the quarter(a). -- Gross profit increased $40.2million, or 9.3%, in the third quarter of 2020. Gross margin improved 160basis points due to selling price increases and favorable input costs. -- Third quarter 2020 income from operations was $103.8million, up $50.0million. On an adjusted(b) basis, income from operations increased $46.5million versus the third quarter of 2019.

Key Results

Third Quarter First Nine Months (inmillions,except per 2020 2019 Change 2020 2019 Changesharedata)Physicalcase 94.1 90.6 3.9 % 268.1 259.3 3.4 %volumeNet sales $ 1,328.5 $ 1,271.0 4.5 % $ 3,728.7 $ 3,647.6 2.2 %Gross $ 472.4 $ 432.2 9.3 % $ 1,307.0 $ 1,257.3 4.0 %profitGross 35.6 % 34.0 % 35.1 % 34.5 % marginIncomefrom $ 103.8 $ 53.8 92.9 % $ 219.8 $ 141.2 55.6 %operationsBasic netincome per $ 5.53 $ 1.39 $ 4.14 $ 11.32 $ 2.30 $ 9.02 share RetailBeverage Third Quarter First Nine Months Sales(in 2020 2019 Change 2020 2019 Changemillions)Sparkling $ 703.5 $ 657.5 7.0 % $ 2,040.1 $ 1,928.3 5.8 %bottle/canStill $ 464.9 $ 438.6 6.0 % $ 1,239.3 $ 1,201.0 3.2 %bottle/canFountain^ $ 36.0 $ 55.5 (35.2 )% $ 99.3 $ 150.0 (33.8 )%(c)

Third Quarter and First Nine Months 2020 Review

CHARLOTTE, N.C., Nov. 03, 2020 (GLOBE NEWSWIRE) -- Coca-Cola Consolidated, Inc. (NASDAQ:COKE) today reported operating results for the third quarter and first nine months ended September27, 2020.

Our strong third quarter results are a testament to the hard work of our teammates across our territory and the overall strength of the Coca-Cola system, said J. Frank Harrison, III, Chairman and Chief Executive Officer. Based on the strength of our year-to-date results and our outlook for the remainder of the year, we are moving forward with a number of large capital projects designed to increase our manufacturing capacity, expand key warehouses and improve the use of automation and technology within our business.

My family has been a Coca-Cola bottler for over 118 years and our long-term view of this business enables us to look past the business volatility and economic uncertainty we are currently facing, Mr. Harrison continued. We are confident that the operating and reinvestment decisions we are making this year will strengthen the long-term health of our business by supporting future growth and making our operations more efficient and effective.

Physical case volume increased 3.9% in the third quarter of 2020, as sales of multi-serve packages in larger retail stores remained strong and single-serve sales began to gradually improve in small stores and accounts where our products are consumed on-premise. Sparkling category volume increased 3.6% in the third quarter of 2020, while Still beverages grew 4.5%. Still beverage sales are more tied to smaller outlets than our Sparkling category, and sales of Still products improved as certain government-imposed restrictions were eased or lifted during the third quarter. While volume growth was strong for the third quarter of 2020, sales volume softened in the last two months of the quarter, as indicated by the monthly volume summary shown below.

Bottle/can physical case volume (in millions) July August September Third Quarter 2020 30.6 28.5 35.0 94.1 2019 27.7 28.6 34.3 90.6 Change 2.9 (0.1) 0.8 3.5 % Change 10.3% (0.4)% 2.2% 3.9%

Revenue increased 4.5% in the third quarter of 2020. Revenue from our bottle/can Sparkling beverages increased 7.0% in the third quarter of 2020, driven primarily by volume growth and price realization within this category. Sales of multi-serve PET packages were especially strong in the quarter as we adjusted our commercial plans to emphasize PET packages and limit product assortment in cans as demand for aluminum cans has exceeded supply this year. Revenue from our Still beverages increased 6.0% in the third quarter of 2020 as a result of higher sales volume in small stores and on-premise outlets. Revenue from fountain syrup, which is primarily sold through restaurants, convenience stores, amusement parks, and other on-premise outlets, declined $19.5million, or 35.2%, during the third quarter of 2020. While the decline in fountain syrup revenue was significant, we are experiencing gradual improvement within this revenue stream as compared to the second quarter of 2020, as traffic continues to increase at our on-premise outlets.

For the first nine months of 2020, revenue increased $81.1million, or 2.2%. While sales within our Sparkling and Still categories grew 5.8% and 3.2% for the first nine months of 2020, respectively, fountain syrup sales decreased 33.8%.

Gross profit increased $40.2million, or 9.3%, in the third quarter of 2020, while gross margin increased 160basis points to 35.6%. On an adjusted(b) basis, gross profit increased $39.0million, or 9.0%, in the third quarter of 2020. The improvement in gross profit and gross margin was primarily due to price realization within our Sparkling category, favorable input costs, and lower manufacturing costs. Gross profit in the first nine months of 2020 increased $49.7million, or 4.0%, while gross margin increased 60 basis points to 35.1%. On an adjusted(b) basis, gross profit increased $47.9million compared to the first nine months of 2019.

We made tough decisions in the early days of the pandemic to adjust both our commercial plan and our operating model. Demand for our products remained strong in the third quarter as consumers continued to adapt to changes in local markets and fluctuations in their daily routines, said Dave Katz, President and Chief Operating Officer. We are staying nimble with our business plans and adjusting our operating model, as needed. Our team has done an incredible job working through raw material supply issues and manufacturing constraints to keep our products in-stock to support our retail partners and loyal consumers.

Selling, delivery and administrative (SD&A) expenses in the third quarter of 2020 decreased $9.8million, or 2.6%. SD&A expenses as a percentage of net sales decreased 210basis points in the third quarter of 2020. Adjusted(b) SD&A expenses in the third quarter of 2020 decreased $7.4million, or 2.0%. The decrease in SD&A expenses related to lower labor and benefits costs as a result of adjustments we made to our operating model earlier in the year in response to COVID-19-related impacts on our business. Additionally, we generated favorable results in a number of expense categories due to the diligent management of our variable operating expenses. SD&A expenses in the first nine months of 2020 decreased $28.8million, or 2.6%. SD&A expenses as a percentage of net sales decreased 140basis points in the first nine months of 2020 as compared to the first nine months of 2019.

Our 2020 margins, profit and cash flow are all exceeding our initial expectations as we generate strong top-line growth, realize favorable input costs, and tightly manage our operating expenses. Lower single-serve sales during the pandemic resulted in gross profit shortfalls that we have more than offset by significantly reducing spending in a number of categories during this unique time, Mr. Katz continued. While we are working to maximize our results in 2020, we recognize it will be difficult to maintain this low level of spending in the months ahead. Our operating expenses will increase as businesses, educational institutions, and entertainment venues reopen and consumer activity returns to pre-COVID levels, and we expect moderate commodity price inflation to return in 2021 as well.

Income from operations in the third quarter of 2020 was $103.8million, compared to $53.8million in the third quarter of 2019, an increase of 92.9%. Adjusted(b) income from operations in the third quarter of 2020 was $105.2million, an increase of 79.1%. For the first nine months of 2020, income from operations increased $78.6million to $219.8million. Adjusted(b) income from operations in the first nine months of 2020 was $223.6million, an increase of $66.6million, or 42.4%, compared to the first nine months of 2019.

Net income in the third quarter of 2020 was $51.9million, compared to $13.0million in the third quarter of 2019, an improvement of $38.9million. Net income in the third quarter of 2020 was adversely impacted by fair value adjustments to our acquisition related contingent consideration liability, driven by changes in future cash flow projections. Fair value adjustments to this liability are non-cash in nature and a routine part of our quarterly financial closing process. Net income increased $84.6million for the first nine months of 2020 to $106.1million, as compared to the first nine months of 2019.

Cash flows provided by operations for the first nine months of 2020 were $376.4million, compared to $204.6million for the first nine months of 2019. The significant increase in operating cash flows for the first nine months of 2020 was a result of our strong operating performance and working capital improvement, primarily related to lower inventory and the timing of accounts payable.

^ All comparisons are to the corresponding period in the prior year unless(a) specified otherwise. The discussion of the results for the third quarter ended September27,^ 2020 includes selected non-GAAP financial information, such as ?adjusted?(b) results. The schedules in this news release reconcile such non-GAAP financial measures to the most directly comparable GAAP financial measures.^ Fountain syrups are dispensed through equipment that mixes with(c) carbonated or still water, enabling fountain retailers to sell finished products to consumers in cups or glasses.

About Coca-Cola Consolidated, Inc.Coca-Cola Consolidated is the largest Coca-Cola bottler in the United States. Our Purpose is to honor God in all we do, serve others, pursue excellence and grow profitably. For over 118years, 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 TheCoca-ColaCompany and other partner companies in more than 300brands and flavors across 14states and the District of Columbia to over 66million consumers.

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, Instagramand 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 anticipate, believe, expect, project, may, will, should, could and similar expressions are intended to identify those forward-looking statements. These forward-looking statements reflect the Companys best judgment based on current information, and, although we base these statements on circumstances that we believe to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information. As such, the forward-looking statements are not guarantees of future performance, and actual results may vary materially from the projected results and expectations discussed in this news release. Factors that might cause the Companys actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: increased costs, disruption of supply or shortages of raw materials, fuel and other supplies; the reliance on purchased finished products from external sources; changes in public and consumer perception and preferences, including concerns related to obesity, artificial ingredients, product safety and sustainability and brand reputation; changes in government regulations related to nonalcoholic beverages, including regulations related to obesity, public health, artificial ingredients and product safety and sustainability; technology failures or cyberattacks on our technology systems or our effective response to technology failures or cyberattacks on our customers, suppliers or other third parties technology systems; decreases from historic levels of marketing funding support provided to us by The CocaCola Company and other beverage companies; material changes in the performance requirements for marketing funding support or our inability to meet such requirements; decreases from historic levels of advertising, marketing and product innovation spending by The CocaCola Company and other beverage companies, or advertising campaigns that are negatively perceived by the public; any failure of the several CocaCola system governance entities of which we are a participant to function efficiently or on our best behalf and any failure or delay of ours to receive anticipated benefits from these governance entities; provisions in our beverage distribution and manufacturing agreements with The CocaCola Company that could delay or prevent a change in control of us or a sale of our CocaCola distribution or manufacturing businesses; the concentration of our capital stock ownership; unfavorable changes in the general economy; changes in our top customer relationships and marketing strategies; lower than expected net pricing of our products resulting from continued and increased customer and competitor consolidations and marketplace competition; our inability to meet requirements under our beverage distribution and manufacturing agreements; the effect of changes in our level of debt, borrowing costs and credit ratings on our access to capital and credit markets, operating flexibility and ability to obtain additional financing to fund future needs; the failure to attract, train and retain qualified employees while controlling labor costs, and other labor issues; the failure to maintain productive relationships with our employees covered by collective bargaining agreements, including failing to renegotiate collective bargaining agreements; changes in accounting standards; our use of estimates and assumptions; changes in the inputs used to calculate our acquisition related contingent consideration liability; changes in tax laws, disagreements with tax authorities or additional tax liabilities; changes in legal contingencies; natural disasters, changing weather patterns and unfavorable weather; climate change or legislative or regulatory responses to such change; and the COVID-19 pandemic and other pandemic outbreaks in the future. These and other factors are discussed in the Companys regulatory filings with the Securities and Exchange Commission, including those in Item 1A. Risk Factors of the Companys Annual Report on Form 10-K for the fiscal year ended December 29, 2019 and in Item 1A. Risk Factors of the Companys Quarterly Report on Form 10-Q for the quarter ended June 28, 2020. 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 applicable law.

FINANCIAL STATEMENTSCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)

Third Quarter First Nine Months(in thousands, except 2020 2019 2020 2019per share data)Net sales $ 1,328,484 $ 1,271,029 $ 3,728,720 $ 3,647,600Cost of sales 856,046 838,805 2,421,686 2,390,289Gross profit 472,438 432,224 1,307,034 1,257,311Selling, delivery and 368,594 378,378 1,087,251 1,116,097administrative expensesIncome from operations 103,844 53,846 219,783 141,214Interest expense, net 9,033 10,965 27,778 35,846Other expense, net 21,394 20,711 39,826 67,743Income before income 73,417 22,170 152,179 37,625taxesIncome tax expense 18,363 6,624 38,911 10,801Net income 55,054 15,546 113,268 26,824Less: Net incomeattributable to 3,170 2,540 7,153 5,279noncontrolling interestNet income attributableto Coca-Cola $ 51,884 $ 13,006 $ 106,115 $ 21,545Consolidated, Inc. Basic net income pershare based on netincome attributable to Coca-Cola Consolidated,Inc.:Common Stock $ 5.53 $ 1.39 $ 11.32 $ 2.30Weighted average numberof Common Stock shares 7,141 7,141 7,141 7,141outstanding Class B Common Stock $ 5.53 $ 1.39 $ 11.32 $ 2.30Weighted average numberof Class B Common Stock 2,232 2,232 2,232 2,228shares outstanding Diluted net income pershare based on netincome attributable to Coca-Cola Consolidated,Inc.:Common Stock $ 5.51 $ 1.38 $ 11.25 $ 2.29Weighted average numberof Common Stock shares 9,430 9,413 9,430 9,409outstanding ? assumingdilution Class B Common Stock $ 5.51 $ 1.38 $ 11.24 $ 2.28Weighted average numberof Class B Common Stock 2,289 2,272 2,289 2,268shares outstanding ?assuming dilution

FINANCIAL STATEMENTSCONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)

(in thousands) September 27, December 29, 2020 2019ASSETS Current Assets: Cash and cash equivalents $ 164,823 $ 9,614 Trade accounts receivable, net 428,352 419,770 Accounts receivable, other 99,085 105,505 Inventories 207,773 225,926 Prepaid expenses and other current assets 69,829 69,461 Assets held for sale 7,036 ? Total current assets 976,898 830,276 Property, plant and equipment, net 979,210 997,403 Right-of-use assets - operating leases 135,559 111,376 Leased property under financing leases, net 71,281 17,960 Other assets 111,775 113,269 Goodwill 165,903 165,903 Other identifiable intangible assets, net 872,267 890,739 Total assets $ 3,312,893 $ 3,126,926 LIABILITIES AND EQUITY Current Liabilities: Current portion of obligations under operating $ 18,812 $ 15,024 leasesCurrent portion of obligations under financing 5,814 9,403 leasesAccounts payable and accrued expenses 659,364 597,768 Total current liabilities 683,990 622,195 Deferred income taxes 131,218 125,130 Pension and postretirement benefit obligations 782,792 783,397 and other liabilitiesNoncurrent portion of obligations under 121,288 97,765 operating leasesNoncurrent portion of obligations under 71,183 17,403 financing leasesLong-term debt 962,867 1,029,920 Total liabilities 2,753,338 2,675,810 Equity: Stockholders? equity 448,238 346,952 Noncontrolling interest 111,317 104,164 Total liabilities and equity $ 3,312,893 $ 3,126,926

FINANCIAL STATEMENTSCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)

First Nine Months(in thousands) 2020 2019Cash Flows from Operating Activities: Net income $ 113,268 $ 26,824 Depreciation expense, amortization of intangible 134,489 136,416 assets and deferred proceeds, netFair value adjustment of acquisition related 35,068 62,017 contingent considerationDeferred income taxes 5,302 5,254 Stock compensation expense ? 2,045 Change in assets and liabilities 74,884 (39,071 )Other 13,390 11,098 Net cash provided by operating activities $ 376,401 $ 204,583 Cash Flows from Investing Activities: Additions to property, plant and equipment $ (110,717 ) $ (96,747 )Other 627 (5,339 )Net cash used in investing activities $ (110,090 ) $ (102,086 ) Cash Flows from Financing Activities: Payments on revolving credit facility, term loan $ (302,500 ) $ (508,839 )facility and senior notesBorrowings under revolving credit facility and 235,000 431,339 proceeds from issuance of senior notesPayments of acquisition related contingent (31,999 ) (18,784 )considerationCash dividends paid (7,030 ) (7,026 )Principal payments on financing obligations (4,428 ) (6,441 )Debt issuance fees (145 ) (305 )Net cash used in financing activities $ (111,102 ) $ (110,056 ) Net increase (decrease) in cash during period $ 155,209 $ (7,559 )Cash at beginning of period 9,614 13,548 Cash at end of period $ 164,823 $ 5,989

NON-GAAP FINANCIAL MEASURES^(d) The following tables reconcile reported results(GAAP) to adjusted results (non-GAAP):

Third Quarter 2020(in Income Basicthousands, Gross SD&A Income before Net netexcept per profit expenses from income income incomeshare data) operations taxes per shareReportedresults $ 472,438 $ 368,594 $ 103,844 $ 73,417 $ 51,884 $ 5.53 (GAAP)Fair valueadjustment ofacquisition ? ? ? 19,808 14,895 1.59 relatedcontingentconsiderationFair valueadjustmentsfor commodity (1,194 ) 575 (1,769 ) (1,769 ) (1,330 ) (0.14 )derivativeinstrumentsSupply chainand asset 3,122 ? 3,122 3,122 2,348 0.25 optimizationOther tax ? ? ? ? (421 ) (0.04 )adjustmentsTotalreconciling $ 1,928 $ 575 $ 1,353 $ 21,161 $ 15,492 1.66 itemsAdjustedresults $ 474,366 $ 369,169 $ 105,197 $ 94,578 $ 67,376 $ 7.19 (non-GAAP)

Third Quarter 2019 Income Basic(in thousands, Gross SD&A Income before Net netexcept per profit expenses from income income incomeshare data) operations taxes per shareReported $ 432,224 $ 378,378 $ 53,846 $ 22,170 $ 13,006 $ 1.39 results (GAAP)Fair valueadjustment ofacquisition ? ? ? 18,749 14,099 1.51 relatedcontingentconsiderationFair valueadjustmentsfor commodity (487 ) (74 ) (413 ) (413 ) (311 ) (0.04 )derivativeinstrumentsSupply chainand asset 3,581 ? 3,581 3,581 2,693 0.29 optimizationCapitalizationthreshold ? (1,732 ) 1,732 1,732 1,302 0.14 change forcertain assetsOther tax ? ? ? ? 1,482 0.15 adjustmentsTotalreconciling 3,094 (1,806 ) 4,900 23,649 19,265 2.05 itemsAdjustedresults $ 435,318 $ 376,572 $ 58,746 $ 45,819 $ 32,271 $ 3.44 (non-GAAP)

First Nine Months 2020(in Income Income Basic netthousands, Gross SD&A from before Net incomeexcept per profit expenses operations income income per shareshare data) taxesReportedresults $ 1,307,034 $ 1,087,251 $ 219,783 $ 152,179 $ 106,115 $ 11.32 (GAAP)Fair valueadjustment ofacquisition ? ? ? 35,068 26,371 2.81 relatedcontingentconsiderationFair valueadjustmentsfor commodity (924 ) (949 ) 25 25 19 ? derivativeinstrumentsSupply chainand asset 4,441 601 3,840 3,840 2,888 0.31 optimizationOther tax ? ? ? ? (1,103 ) (0.11 )adjustmentsTotalreconciling 3,517 (348 ) 3,865 38,933 28,175 3.01 itemsAdjustedresults $ 1,310,551 $ 1,086,903 $ 223,648 $ 191,112 $ 134,290 $ 14.33 (non-GAAP)

First Nine Months 2019 Income Basic(in thousands, Gross SD&A Income before Net netexcept per profit expenses from income income incomeshare data) operations taxes per shareReported $ 1,257,311 $ 1,116,097 $ 141,214 $ 37,625 $ 21,545 $ 2.30 results (GAAP)Fair valueadjustment ofacquisition ? ? ? 62,017 46,637 4.98 relatedcontingentconsiderationFair valueadjustmentsfor commodity 482 2,575 (2,093 ) (2,093 ) (1,574 ) (0.17 )derivativeinstrumentsSupply chainand asset 4,875 ? 4,875 4,875 3,666 0.39 optimizationCapitalizationthreshold ? (6,111 ) 6,111 6,111 4,595 0.49 change forcertain assetsSystemtransformation ? (6,915 ) 6,915 6,915 5,200 0.56 expensesOther tax ? ? ? ? (2,178 ) (0.24 )adjustmentsTotalreconciling 5,357 (10,451 ) 15,808 77,825 56,346 6.01 itemsAdjustedresults $ 1,262,668 $ 1,105,646 $ 157,022 $ 115,450 $ 77,891 $ 8.31 (non-GAAP)

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(d) 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 AnthonySenior Vice President Executive Vice President &Public Affairs, Communications Chief Financial Officer& CommunitiesKimberly.Kuo@cokeconsolidated.com Scott.Anthony@cokeconsolidated.com(704) 557-4584 (704) 557-4633

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