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 September 27, 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.
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 $19.5 million, 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 $81.1 million, 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 $40.2 million, or 9.3%, in the third quarter of 2020, while gross margin increased 160 basis points to 35.6%. On an adjusted(b) basis, gross profit increased $39.0 million, 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 $49.7 million, or 4.0%, while gross margin increased 60 basis points to 35.1%. On an adjusted(b) basis, gross profit increased $47.9 million 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 $9.8 million, or 2.6%. SD&A expenses as a percentage of net sales decreased 210 basis points in the third quarter of 2020. Adjusted(b) SD&A expenses in the third quarter of 2020 decreased $7.4 million, 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 $28.8 million, or 2.6%. SD&A expenses as a percentage of net sales decreased 140 basis 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 $103.8 million, compared to $53.8 million in the third quarter of 2019, an increase of 92.9%. Adjusted(b) income from operations in the third quarter of 2020 was $105.2 million, an increase of 79.1%. For the first nine months of 2020, income from operations increased $78.6 million to $219.8 million. Adjusted(b) income from operations in the first nine months of 2020 was $223.6 million, an increase of $66.6 million, or 42.4%, compared to the first nine months of 2019.
Net income in the third quarter of 2020 was $51.9 million, compared to $13.0 million in the third quarter of 2019, an improvement of $38.9 million. 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 $84.6 million for the first nine months of 2020 to $106.1 million, as compared to the first nine months of 2019.
Cash flows provided by operations for the first nine months of 2020 were $376.4 million, compared to $204.6 million 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.
| (a) | All comparisons are to the corresponding period in the prior year unless specified otherwise. |
| (b) | The discussion of the results for the third quarter ended September 27, 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. |
| (c) | Fountain syrups are dispensed through equipment that mixes with 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 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 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 66 million 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, Instagram and LinkedIn.
