Coca-Cola Consolidated, Inc. (COKE) - 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended July 3, 2026, and the first half of fiscal year 2026. Coca-Cola Consolidated, Inc. is the largest Coca-Cola bottler in the United States, distributing, marketing, and manufacturing nonalcoholic beverages across 14 states and the District of Columbia. The company operates primarily through two segments: Nonalcoholic Beverages and All Other.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 | YTD 2026 | YTD 2025 |
|---|---|---|---|---|
| Net Sales | $2,052.4 million | $1,855.5 million | $3,899.1 million | $3,435.5 million |
| Gross Profit | $778.4 million | $742.5 million | $1,505.5 million | $1,369.6 million |
| Gross Margin | 37.9% | 40.0% | 38.6% | 39.9% |
| Income from Operations | $271.3 million | $272.1 million | $508.9 million | $461.9 million |
| Net Income | $158.8 million | $187.4 million | $270.4 million | $291.0 million |
| Diluted EPS (Common) | $2.38 | $2.15 | $4.06 | $3.34 |
| Operating Cash Flow (YTD) | $420.6 million (vs. $406.2 million YTD 2025) | |||
| Total Debt | $2.51 billion (as of July 3, 2026) | |||
| Cash & Equivalents | $171.7 million (as of July 3, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 10.6% in Q2 and 13.5% YTD, driven by a 7.6% volume increase in Q2 and annual pricing actions. The first half of 2026 included six additional selling days compared to 2025, contributing approximately $132 million to sales.
- Margin Compression: Gross margin decreased 210 basis points in Q2 to 37.9%. This was primarily due to elevated aluminum costs (approx. $45 million additional input cost in Q2) driven by geopolitical conflicts, supply constraints, and tariffs, which outpaced pricing actions.
- Net Income Decline: GAAP net income decreased 15.2% in Q2 and 7.1% YTD. This decline was significantly impacted by non-cash fair value adjustments to acquisition-related contingent consideration ($24.7 million in Q2; $78.1 million YTD) and increased net interest expense ($30.5 million in Q2 vs. $5.9 million in Q2 2025).
- Debt Reduction: The company repaid $275 million of the Five-Year Term Loan Facility in the first half of 2026, reducing total debt from $2.79 billion at year-end 2025 to $2.51 billion.
Guidance, Outlook, and Risks
- Capital Expenditures: The company expects capital expenditures for fiscal year 2026 to be approximately $300 million.
- Sub-bottling Payments: Estimated annual acquisition-related sub-bottling payments for 2026 are in the range of $70 million to $80 million. For the next five years (2027-2031), the range is anticipated to be $50 million to $70 million annually.
- Non-GAAP Adjusted Results: Management highlights adjusted net income of $187.7 million for Q2 2026 (down 3.8% from prior year) and $307.2 million YTD (up 5.7% from prior year), excluding fair value adjustments and the impact of extra selling days.
- Risks: Key risks include continued volatility in aluminum and other commodity prices, potential increases in tariffs, and the impact of interest rate fluctuations on the fair value of acquisition-related contingent consideration and variable rate debt.
Investor Verification Checklist
- Aluminum Cost Exposure: Verify the sustainability of aluminum pricing and the company's ability to pass costs to consumers without volume erosion.
- Contingent Consideration Volatility: Monitor the fair value adjustments to the $760.4 million acquisition-related contingent consideration liability, which is sensitive to WACC and future cash flow projections.
- Debt Service Capacity: Assess the impact of higher interest rates on the $1.08 billion of variable rate term loans and the company's ability to maintain covenant compliance.
- Volume vs. Price Mix: Analyze whether volume growth (7.6% in Q2) is organic or driven by the timing of the Fourth of July holiday and promotional activities.
- Share Repurchase Program: Note that no shares were repurchased in Q2 2026; remaining authorization is $136.3 million.