coke-ex991

CHARLOTTE, May 9, 2017 – Coca‑Cola Bottling Co. Consolidated (NASDAQ: COKE) today reported operating results for the first quarter ended April 2, 2017.

Frank Harrison, Chairman and Chief Executive Officer, said, “In the first quarter of 2017, we continued to expand our distribution territory, welcome talented new teammates and integrate new manufacturing facilities. At the same time, we grew our organic business operations. The growth of our Company’s purpose, culture, geographical reach and financial strength is a tribute to the tireless efforts of all of our teammates throughout this season of significant growth and change.”

Hank Flint, President and Chief Operating Officer, added, “We are pleased with our first quarter results including the strong growth from acquisitions and the continued growth in our comparable revenue. As we enter the fourth year of our distribution territory expansion, we believe our commitment to all aspects of our business has allowed us to continue to drive revenue growth in our core business throughout this period. The integration of our newly acquired distribution territories and manufacturing facilities continues to go smoothly and we are excited about the opportunities this expansion provides. During this time of rapid growth and increasing operational complexity, our teammates have shown total commitment to excellence in delivering both outstanding service to our customers, consumers and communities and our financial results.”

^(a)The discussion of the first quarter 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.

Comparable income from operations, which represents the same geographic territories in the first quarter of 2017 and the first quarter of 2016, decreased $1.9 million, or 10.2%, to $16.5 million in the first quarter of 2017, as compared to $18.4 million in the first quarter of 2016. The decrease was primarily driven by the shift in the Easter holiday and an increase in selling, delivery and administrative expenses needed to enhance the corporate support service functions of the Company both during its current stage of growth and in preparation for the conclusion of all territory acquisition and exchange transactions.

The mark-to-market adjustment was $12.2 million in the first quarter of 2017, as compared to $17.2 million in the first quarter of 2016. The adjustment in the first quarter of 2017 was primarily a result of the final settlement of territory values for the Paducah and Pikeville, Kentucky expansion territory acquisitions and the Norfolk, Fredericksburg and Staunton, Virginia, and Elizabeth City, North Carolina expansion territory acquisitions, which were originally acquired in May 2015 and October 2015, respectively. The adjustment in the first quarter of 2016 was driven primarily by a change in projected future operating results of the acquired territories subject to sub-bottling fees.

In the first quarter of 2017, cash payments by the Company for the acquired territories and related assets totaled $155.6 million, which includes $140.0 million for expansion transactions and $15.6 million for the rights to market, promote, distribute and sell glacéau products in certain geographic territories. Additions to property, plant and equipment during the first quarter of 2017 were $41.6 million, which excludes $108.4 million in property, plant and equipment acquired in the Company’s expansion transactions completed during the first quarter of 2017.

The Company expects to be a net user of cash in 2017 as it continues to acquire distribution rights in additional territories and manufacturing facilities included in the Company’s previously announced Coca‑Cola system transformation transactions with The Coca‑Cola Company.

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 16 states to over 50 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.

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.

	First Quarter
(in thousands, except per share data)	2017			2016
Net sales	$	865,702		$	625,456
Cost of sales		533,681			381,558
Gross profit		332,021			243,898
Selling, delivery and administrative expenses		318,413			231,497
Income from operations		13,608			12,401
Interest expense, net		9,470			9,361
Other expense, net		12,246			17,151
Loss before income taxes		(8,108	)		(14,111	)
Income tax benefit		(3,691	)		(5,078	)
Net loss		(4,417	)		(9,033	)
Less: Net income attributable to noncontrolling interest		634			1,008
Net loss attributable to Coca-Cola Bottling Co. Consolidated	$	(5,051	)	$	(10,041	)

Basic net loss per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:
Common Stock	$	(0.54	)	$	(1.08	)
Weighted average number of Common Stock shares outstanding		7,141			7,141

Class B Common Stock	$	(0.54	)	$	(1.08	)
Weighted average number of Class B Common Stock shares outstanding		2,178			2,157

Diluted net loss per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:
Common Stock	$	(0.54	)	$	(1.08	)
Weighted average number of Common Stock shares outstanding – assuming dilution		9,319			9,298

Class B Common Stock	$	(0.54	)	$	(1.08	)
Weighted average number of Class B Common Stock shares outstanding – assuming dilution		2,178			2,157

(in thousands)	April 2, 2017		January 1, 2017
ASSETS
Current Assets:
Cash and cash equivalents	$	31,940	$	21,850
Trade accounts receivable, net		288,046		267,213
Accounts receivable, other		97,521		97,361
Inventories		180,052		143,553
Prepaid expenses and other current assets		61,604		63,834
Total current assets		659,163		593,811
Property, plant and equipment, net		924,177		812,989
Leased property under capital leases, net		32,121		33,552
Other assets		92,421		86,091
Franchise rights		-		533,040
Goodwill		149,383		144,586
Other identifiable intangible assets, net		807,555		245,415
Total assets	$	2,664,820	$	2,449,484

LIABILITIES AND EQUITY
Current Liabilities:
Current portion of obligations under capital leases	$	7,699	$	7,527
Accounts payable and accrued expenses		458,612		450,380
Total current liabilities		466,311		457,907
Deferred income taxes		156,460		174,854
Pension, postretirement and other liabilities		640,156		505,251
Long-term debt and obligations under capital leases		1,041,503		948,448
Total liabilities		2,304,430		2,086,460

Equity:
Stockholders' equity		273,863		277,131
Noncontrolling interest		86,527		85,893
Total liabilities and equity	$	2,664,820	$	2,449,484

	First Quarter
(in thousands)	2017			2016
Cash Flows from Operating Activities:
Consolidated net loss	$	(4,417	)	$	(9,033	)
Depreciation expense and intangibles amortization		34,981			24,390
Deferred income taxes		(15,495	)		(5,078	)
Proceeds from conversion of Legacy Territory bottling agreements		87,066			-
Stock compensation expense		2,060			1,627
Fair value adjustment of acquisition related contingent consideration		12,246			17,151
Change in assets and liabilities (exclusive of acquisition)		(1,014	)		(45,292	)
Other		1,091			1,018
Net cash provided by (used in) operating activities		116,518			(15,217	)

Cash Flows from Investing Activities:
Acquisition of Expansion Territories, net of cash acquired and Glacéau distribution agreement consideration		(155,556	)		(100,907	)
Additions to property, plant and equipment (exclusive of acquisition)		(41,580	)		(36,785	)
Other		77			(1,073	)
Net cash used in investing activities		(197,059	)		(138,765	)

Cash Flows from Financing Activities:
Borrowings under Revolving Credit Facility, Term Loan Facility and Senior Notes		245,000			140,000
Payment on Revolving Credit Facility and Senior Notes		(150,000	)		-
Cash dividends paid		(2,328	)		(2,323	)
Payment on acquisition related contingent consideration		-			(4,959	)
Principal payments on capital lease obligations		(1,828	)		(1,726	)
Other		(213	)		92
Net cash provided by financing activities		90,631			131,084

Net increase (decrease) during the period		10,090			(22,898	)
Cash at beginning of period		21,850			55,498
Cash at end of period	$	31,940		$	32,600

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 first quarter of 2017 and the first quarter of 2016:

	First Quarter 2017
(in thousands, except per share data)	Net sales			Income from operations			Income (loss) before income taxes			Net income (loss)			Basic net income (loss) per share
Reported results (GAAP)	$	865,702		$	13,608		$	(8,108	)	$	(5,051	)	$	(0.54	)
Fair value adjustments for commodity hedges		-			(327	)		(327	)		(201	)		(0.02	)
2017 & 2016 acquisitions impact		(264,906	)		(4,450	)		(4,450	)		(2,732	)		(0.29	)
Expansion transaction expenses		-			7,652			7,652			4,698			0.49
Fair value adjustment of acquisition related contingent consideration		-			-			12,246			7,519			0.81
Total reconciling items		(264,906	)		2,875			15,121			9,284			0.99
Comparable results (non-GAAP)	$	600,796		$	16,483		$	7,013		$	4,233		$	0.45

	First Quarter 2016
(in thousands, except per share data)	Net sales			Income from operations			Income (loss) before income taxes			Net income (loss)			Basic net income (loss) per share
Reported results (GAAP)	$	625,456		$	12,401		$	(14,111	)	$	(10,041	)	$	(1.08	)
Fair value adjustments for commodity hedges		-			(1,040	)		(1,040	)		(640	)		(0.07	)
2016 acquisitions impact		(35,311	)		(1,206	)		(1,206	)		(742	)		(0.08	)
Expansion transaction expenses		-			6,423			6,423			3,950			0.43
Special charitable contribution		-			4,000			4,000			2,460			0.26
Impact of changes in product supply governance		-			(2,213	)		(2,213	)		(1,361	)		(0.15	)
Fair value adjustment of acquisition related contingent consideration		-			-			17,151			10,548			1.14
Total reconciling items		(35,311	)		5,964			23,115			14,215			1.53
Comparable results (non-GAAP)	$	590,145		$	18,365		$	9,004		$	4,174		$	0.45

	% Change
	First Quarter 2017
	Consolidated			Comparable^(a)

Net sales		38.4	%		1.8	%
Income from operations		9.7	%		-10.2	%
Net loss per share - basic		50.0	%		-
Equivalent unit case volume^(b)		38.3	%		2.6	%
Sparkling		35.5	%		1.3	%
Still		45.9	%		6.0	%