Coca-Cola Consolidated, Inc. Reports Fourth Quarter 2018 and Fiscal 2018 Results
Source Coca-Cola Consolidated, Inc.
February 26, 2019 16:10 ET
Fourth Quarter 2018 Highlights
- Q4 2018 net sales grew 1.7% versus Q4 2017.
- Gross margin was flat in Q4 2018 compared to prior year. Adjusted(a) gross margin increased 70 basis points from Q4 2017.
- Income from operations was $12.8 million in Q4 2018, as compared to $0.5 million in Q4 2017. Adjusted(a) income from operations in Q4 2018 was up $21.6 million versus prior year.
“We are pleased with our fourth quarter operating results and the momentum we are carrying into 2019. The progress we made in pricing, operating expense management and capital spending delivered meaningful sequential improvement in our operating results. We are grateful for the hard work of our teammates as we believe these actions have positioned us well in the marketplace for 2019.”
- Frank HarrisonChairman & CEOCoca-Cola Consolidated
Fourth Quarter 2018 Review
CHARLOTTE, N.C., Feb. 26, 2019 (GLOBE NEWSWIRE) -- Coca‑Cola Consolidated, Inc. (NASDAQ:COKE) today reported operating results for the fourth quarter and fiscal year ended December 30, 2018.
Revenue grew 1.7% for the quarter. Revenue growth for the full year was 7.9% versus 2017, reflecting full year physical case volume growth of 4.3%. This revenue growth reflected the results of strong pricing initiatives across our territories, partially offset by a decrease in sales of manufactured products to other Coca‑Cola bottlers, which approximated a 2% decrease to revenue for the quarter. The Company’s results in Q4 2018 are now comparable on a territory basis, as we have cycled all the transactions completed during our system transformation initiative.
Our Q4 2018 results include sales of the newest addition to our brand portfolio, BodyArmor. While the initial sales of BodyArmor were not material to our Q4 2018 results, we are excited to have this fast-growing, premium sports drink brand in a large portion of our territories.
Gross margin in Q4 2018 was flat compared to prior year (33.5% in both periods), and adjusted(a) gross margin was 70 basis points higher in Q4 2018 than in Q4 2017 (34.2% versus 33.5%). This improvement, on an adjusted(a) basis, reflects the results of pricing initiatives taken throughout the second half of the year as the Company worked to overcome significantly higher input costs. Dave Katz, President and Chief Operating Officer, commented, “Our team moved aggressively and swiftly in the second half of the year to offset higher input and freight costs. These actions enabled us to start 2019 with product margins which we believe more accurately reflect the value of our brands and provide an operating structure that will enable continued success in the marketplace. We anticipate these actions, combined with a strong focus on execution and operating efficiency, will drive improved profits and free cash flow in 2019.”
Selling, delivery and administrative (“SD&A”) expenses in Q4 2018 decreased $6.6 million, or 1.8%, as compared to prior year. Our SD&A leverage in the quarter improved 110 basis points versus Q4 2017 (32.4% versus 33.5%). The favorability was driven by actions taken in the latter part of Q2 2018 to optimize our operating structure and diligently manage expenses. During the latter part of Q4 2018, we took additional actions to drive efficiency and productivity. These actions required severance and outplacement expenses totaling $3.8 million during the quarter. We believe these actions will result in annual cost savings of $5 million to $7 million. We continue to look for opportunities to drive scale advantages and leverage our cost structure.
We have completed our system transformation transactions and are nearing steady state from an IT system perspective. Our Q4 2018 results included $10.6 million of system transformation expenses, which was a $6.6 million improvement versus prior year. We anticipate spending between $5 million to $7 million on system transformation expenses in the first half of fiscal 2019 as we complete our IT conversion.
Income from operations was $12.8 million in Q4 2018, up $12.3 million from Q4 2017. Adjusted(a) income from operations was $38.7 million in Q4 2018, up $21.6 million versus prior year.
Capital spending for Q4 2018 was $25.1 million, bringing full year 2018 capital investments to $138.2 million. This lower spending level reflects actions taken in 2018 to reduce capital spending in order to preserve cash during a challenging year. We anticipate capital spending in fiscal 2019 to be in the range of $150 million to $180 million as we continue our focus on making prudent, long-term investments to support the growth of the Company. Cash flows from operations for Q4 2018 and full year 2018 were $142.9 million and $168.9 million, respectively. 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 more than 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 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 2017 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.
