Coca-Cola Consolidated(COKE) - 2023 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q1 2023 show the company's financial position and performance Condensed Consolidated Statements of Operations Q1 2023 vs Q1 2022 Statement of Operations Highlights | (in thousands, except per share data) | First Quarter 2023 | First Quarter 2022 | | :--- | :--- | :--- | | Net sales | $1,571,642 | $1,404,358 | | Gross profit | $624,106 | $507,576 | | Income from operations | $206,054 | $130,985 | | Net income | $118,127 | $93,390 | | Diluted net income per share (Common) | $12.57 | $9.94 | | Cash dividends per share (Common) | $3.50 | $0.25 | Condensed Consolidated Balance Sheets Balance Sheet Highlights | (in thousands) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $1,353,627 | $1,245,801 | | Total assets | $3,799,695 | $3,709,545 | | Total current liabilities | $812,575 | $905,156 | | Total liabilities | $2,565,442 | $2,594,157 | | Total equity | $1,234,253 | $1,115,388 | Condensed Consolidated Statements of Cash Flows Q1 2023 vs Q1 2022 Cash Flow Summary | (in thousands) | First Quarter 2023 | First Quarter 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $184,694 | $130,881 | | Net cash used in investing activities | $(52,542) | $(132,521) | | Net cash used in financing activities | $(40,019) | $(13,589) | | Net increase (decrease) in cash | $92,133 | $(15,229) | Notes to Condensed Consolidated Financial Statements - The Coca-Cola Company owned approximately 9% of the total voting power of the Company's outstanding stock as of March 31, 2023[33] Disaggregation of Revenue from Contracts with Customers (Q1 2023) | (in thousands) | First Quarter 2023 | First Quarter 2022 | | :--- | :--- | :--- | | Nonalcoholic Beverages - point in time | $1,533,288 | $1,362,251 | | Nonalcoholic Beverages - over time | $12,124 | $10,970 | | All Other - over time | $26,230 | $31,137 | | Total net sales | $1,571,642 | $1,404,358 | Segment Operating Results (Q1 2023 vs Q1 2022) | (in thousands) | First Quarter 2023 | First Quarter 2022 | | :--- | :--- | :--- | | Net sales - Nonalcoholic Beverages | $1,545,412 | $1,373,221 | | Income from operations - Nonalcoholic Beverages | $209,779 | $134,558 | | Net sales - All Other | $92,376 | $96,163 | | Income from operations - All Other | $(3,725) | $(3,573) | - The fair value of the acquisition related contingent consideration liability increased in Q1 2023, with the liability standing at $576.4 million as of March 31, 2023[86] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2023 performance, noting a 12% net sales increase driven by pricing actions Executive Summary - Net sales increased 12% to $1.57 billion in Q1 2023, primarily driven by price increases across the product portfolio[121] - Standard physical case volume declined 3.1%, with Sparkling category volume up 0.2% and Still category volume down 7.9% on a comparable basis[122] - Gross profit increased 23% to $624.1 million, with gross margin improving 360 basis points to 39.7%[123][125] - Cash flow from operations was strong at $184.7 million, with expected fiscal 2023 capital expenditures between $250 million and $300 million[127] Results of Operations Net Sales by Product Category (Q1 2023 vs Q1 2022) | (in thousands) | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Sparkling beverages | $920,562 | $775,584 | 18.7% | | Still beverages | $509,628 | $467,933 | 8.9% | | Total bottle/can sales | $1,430,190 | $1,243,517 | 15.0% | | Total other sales | $141,452 | $160,841 | (12.1)% | | Total net sales | $1,571,642 | $1,404,358 | 11.9% | - Cost of sales increased by 5.7% to $947.5 million, driven by approximately $60 million in higher input and transportation costs[139][140] - SD&A expenses rose 11.0% to $418.1 million, primarily due to increased labor costs, higher fuel costs, and broad inflationary pressures[143] - Other expense, net was $43.9 million, a significant increase from $3.3 million of other income in the prior year due to non-cash fair value adjustments[146] Liquidity and Capital Resources - As of March 31, 2023, the company had $289.8 million in cash and cash equivalents and believes it has sufficient capital for the next 12 months[162] Long-Term Debt Summary | (in thousands) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Senior bonds and unamortized discount | $349,977 | $349,974 | | Revolving credit facility | — | — | | Senior notes | $250,000 | $250,000 | | Debt issuance costs | $(1,117) | $(1,157) | | Total long-term debt | $598,860 | $598,817 | - Cash provided by operating activities increased to $184.7 million in Q1 2023 from $130.9 million in Q1 2022, reflecting strong operating performance[169][170] - Cash used in investing activities decreased to $52.5 million in Q1 2023 from $132.5 million in Q1 2022, due to lower capital expenditures[171][174] Quantitative and Qualitative Disclosures About Market Risk The company details its market risk exposure, primarily from interest rates and commodity price fluctuations - A 10-basis point change in the risk-free interest rate would alter its contingent consideration liability by approximately $6 million[184] - A 10% increase in raw material prices would raise annual costs by approximately $74 million, assuming no change in volume[186] Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures as of the quarter's end - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective[191] - There were no material changes in the Company's internal control over financial reporting during the quarter ended March 31, 2023[192] PART II – OTHER INFORMATION Legal Proceedings Ongoing legal matters are not expected to have a material adverse effect on the company's financial condition - Management believes the ultimate disposition of various legal proceedings will not have a material adverse effect on the company's financial condition or results[195] Risk Factors No material changes to the company's risk factors were reported since the last annual filing - There have been no material changes in the Company's risk factors from those disclosed in the Annual Report on Form 10-K for 2022[196] Exhibits The report lists all exhibits filed, including required officer certifications and XBRL data files - The report lists several exhibits, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act of 2002 and Inline XBRL documents[198]