What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-24 compared with 2025-04-30 · 271 added, 148 removed, 329 unchanged (56% of the section changed)

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The condensed consolidated financial statements presented are:

• The financial position as of March 28, 2025 and December 31, 2024.

• The results of operations, comprehensive income and changes in stockholders’ equity for the three-month periods ended March 28, 2025 (the “first quarter” of fiscal 2025 (“2025”)) and March 29, 2024 (the “first quarter” of fiscal 2024 (“2024”)).

• The changes in cash flows for the first quarter of 2025 and the first quarter of 2024.

• The financial position as of June 27, 2025 and December 31, 2024.

• The results of operations, comprehensive income and changes in stockholders’ equity for the three-month periods ended June 27, 2025 (the “second quarter” of fiscal 2025 (“2025”)) and June 28, 2024 (the “second quarter” of fiscal 2024 (“2024”)) and the six-month periods ended June 27, 2025 (the “first half” of 2025) and June 28, 2024 (the “first half” of 2024).

• The changes in cash flows for the first half of 2025 and the first half of 2024.

Our Business and the Nonalcoholic Beverage Industry

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products and, in some regions, local bottlers of Dr Pepper products.

The principal methods of competition in the nonalcoholic beverage industry are new brand and product introductions, point-of-sale merchandising, new vending and dispensing equipment, packaging changes, pricing, sales promotions, product quality, retail space management, customer service, frequency of distribution and advertising.

space management, customer service, frequency of distribution and advertising.

We believe we are competitive in our territories with respect to these methods of competition.

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Executive Summary

Volume was down 6.6% in the first quarter of 2025.

The first quarter of 2025 had two fewer selling days as compared to the first quarter of 2024, which accounted for approximately 2.1% of the volume decline in the quarter, as discussed in the “Comparable and Adjusted Results (Non-GAAP)” section.

Adjusting for the two additional selling days in the first quarter of 2024, our Sparkling and Still category volume declined 3.0% and 9.0%, respectively.

Volume in the first quarter of 2025 was also lower as compared to the prior year due to the timing of the Easter holiday.

In the second quarter of 2024, we shifted the distribution of casepack Dasani water sold in Walmart stores to a non-direct store delivery (“DSD”) method of distribution.

As a result, these cases are not included in our reported case sales volume for the first quarter of 2025.

The impact of this distribution change reduced our reported case sales volume by 1.3% during the first quarter of 2025.

Net sales decreased 0.7% to $1.6 billion in the first quarter of 2025.

Net sales in the first quarter of 2025 was negatively impacted by two fewer selling days as compared to the first quarter of 2024, which accounted for approximately $40 million of net sales, or 2.5% of net sales change in the quarter.

The calendar impacts of two fewer selling days and a shift of the Easter holiday were partially offset by our annual 2025 pricing actions that took effect during the quarter.

Sparkling and Still net sales declined 1.9% and 0.5%, respectively, compared to the first quarter of 2024.

The decline in Sparkling category sales during the quarter was partially driven by softness in the Coca-Cola Original Taste brand.

Sales of most remaining core products within the Sparkling category, including zero-sugar and other flavor offerings, demonstrated solid growth compared to the prior year.

Excluding Dasani, net sales within our Still category increased by 1.8%, led primarily by growth within our sports drinks, protein and enhanced water products.

Gross profit in the first quarter of 2025 was $627.1 million, a decrease of $13.5 million, or 2.1%, while gross margin decreased 50 basis points to 39.7%.

During the first quarter of 2025, our product mix shifted slightly towards Still beverages, which typically carry lower gross margins.

Additionally, the timing of annual price increases in the first quarter of 2025 also contributed to the gross margin compression.

Selling, delivery and administrative (“SD&A”) expenses in the first quarter of 2025 increased $12.1 million, or 2.9%.

SD&A expenses as a percentage of net sales in the first quarter of 2025 increased 100 basis points to 27.7% as compared to the first quarter of 2024.

The increase in SD&A expenses was primarily driven by an increase in labor costs related to annual wage adjustments and inflationary pressures across expense categories during the first quarter of 2025.

SD&A expense growth was partially offset by the impact of the two fewer selling days.

Income from operations in the first quarter of 2025 was $189.8 million, compared to $215.4 million in the first quarter of 2024, a decrease of 11.9%.

The two fewer selling days in the first quarter of 2025 accounted for approximately $10 million of the decline in income from operations.

The timing of the Easter holiday also contributed to the decline in income from operations.

Operating margin for the first quarter of 2025 was 12.0% as compared to 13.5% for the first quarter of 2024, a decrease of 150 basis points.

Net income in the first quarter of 2025 was $103.6 million, compared to $165.7 million in the first quarter of 2024, a decline of $62.1 million.

On an adjusted basis, as defined in the “Comparable and Adjusted Results (Non-GAAP)” section, net income in the first quarter of 2025 was $136.3 million, compared to $162.5 million in the first quarter of 2024, a decrease of $26.2 million.

Net income for the first quarter of 2025 was adversely impacted by routine, non-cash fair value adjustments to our acquisition related contingent consideration liability, driven primarily by a decrease in the discount rate used to compute the fair value of the liability.

Cash flows from operations for the first quarter of 2025 were $198.2 million, compared to $194.3 million for the first quarter of 2024.

In the first quarter of 2025, we invested approximately $98 million in capital expenditures as we continue to optimize our supply chain and invest for future growth.

In 2025, we expect capital expenditures to be approximately $300 million.

Volume was down 0.8% in the second quarter of 2025 and down 3.5% in the first half of the year.

The first half of 2025 had two fewer selling days compared to the first half of 2024, which accounted for approximately 1.0% of the volume decline during the first half of 2025, as discussed in the “Comparable and Adjusted Results (Non-GAAP)” section.

Our Sparkling category volume declined slightly by 0.3% in the second quarter of 2025 and 2.6% in the first half of 2025.

Coca-Cola Original taste continued to be negatively impacted by shifts in consumer demand with the balance of our Sparkling portfolio recording solid growth during the second quarter of 2025.

Still volume declined 2.4% and 6.3% in the second quarter and first half of 2025, respectively.

Volume of our Dasani water packages was down during the second quarter;

however, we experienced solid volume growth in our enhanced water, energy and protein products.

Excluding Dasani, volume within our Still category increased by 2.0% in the second quarter of 2025 and 0.3% in the first half of 2025.

Net sales increased 3.3% to $1.9 billion in the second quarter of 2025 and increased 1.4% to $3.4 billion in the first half of 2025.

Sparkling and Still net sales increased 3.0% and 4.8% in the second quarter of 2025, respectively, compared to the second quarter of 2024.

Sales within supermarkets, club stores and value channels were strong during the second quarter of 2025 as consumers sought value in take-home packages, while sales slowed in our small store convenience outlets and eating and drinking on-premise locations.

The increase in Sparkling category sales during the quarter was driven by pricing realization and solid growth within zero-sugar and other flavor offerings, partially offset by softness in Coca-Cola Original taste.

The increase in sales within our Still category was concentrated in our Monster Energy, Core Power, Topo Chico and smartwater brands.

Gross profit in the second quarter of 2025 was $742.5 million, an increase of $25.8 million, or 3.6%.

Gross margin in the second quarter of 2025 improved 10 basis points to 40.0%.

Pricing realization associated with the annual price increase in the first quarter of 2025 contributed to the modest gross margin expansion.

Gross profit in the first half of 2025 was $1.4 billion, an increase of $12.3 million, or 0.9%.

Selling, delivery and administrative (“SD&A”) expenses in the second quarter of 2025 increased $12.8 million, or 2.8%.

SD&A expenses in the first half of 2025 increased $25.0 million, or 2.8%.

The increase in SD&A expenses in the second quarter and first half of 2025 as compared to the second quarter and first half of 2024 was primarily driven by an increase in labor costs related to annual wage adjustments.

SD&A expenses as a percentage of net sales in the second quarter of 2025 decreased 10 basis points to 25.4% as compared to the second quarter of 2024.

SD&A expenses as a percentage of net sales in the first half of 2025 increased 30 basis points to 26.4% as compared to the first half of 2024.

Income from operations in the second quarter of 2025 was $272.1 million, compared to $259.1 million in the second quarter of 2024, an increase of 5.0%.

Operating margin for the second quarter of 2025 was 14.7% as compared to 14.4% for the second quarter of 2024, an increase of 30 basis points.

For the first half of 2025, income from operations decreased $12.6 million to $461.9 million, a decline of 2.7%.

The two fewer selling days in the first half of 2025 accounted for approximately $10 million of the decrease in income from operations.

Net income in the second quarter of 2025 was $187.4 million, compared to $172.8 million in the second quarter of 2024, an increase of $14.6 million, or 8.4%.

On an adjusted basis, as defined in the “Comparable and Adjusted Results (Non-GAAP)” section, net income in the second quarter of 2025 was $195.2 million, compared to $192.8 million in the second quarter of 2024, an increase of $2.4 million, or 1.2%.

Income tax expense for the second quarter of 2025 was $65.6 million, compared to $59.4 million for the second quarter of 2024, resulting in an effective income tax rate of approximately 26% for both periods.

Net income in the first half of 2025 was $291.0 million, compared to $338.6 million in the first half of 2024, a decline of $47.6 million, or 14.0%.

On an adjusted basis, as defined in the “Comparable and Adjusted Results (Non-GAAP)” section, net income in the first half of 2025 was $331.4 million, compared to $355.2 million in the first half of 2024, a decrease of $23.8 million, or 6.7%.

Net income for the first half of 2025 was adversely impacted by routine, non-cash fair value adjustments

to our acquisition related contingent consideration liability, driven primarily by a decrease in the discount rate and changes in the future cash flow projections used to compute the fair value of the liability.

Cash flows from operations for the first half of 2025 were $406.2 million, compared to $437.1 million for the first half of 2024.

In the first half of 2025, we invested approximately $157 million in capital expenditures as we continue to optimize our supply chain and invest for future growth.

In fiscal year 2025, we expect capital expenditures to be approximately $300 million.

Areas of Emphasis

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The Company expects to continue to make significant capital investments to optimize our supply chain and to invest for future growth during 2025.

During the first quarter of 2025, the Company began operations in a new 430,000-square foot automated distribution center in Columbus, Ohio.

Cash Flow Generation :

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We are focused on implementing optimal methods of distribution of our products within our territory.

DSD is our preferred and primary route to market.

Our typical DSD method uses Company-owned vehicles and warehouses, but we increasingly shifted to alternative methods of distribution during 2024 and the first quarter of 2025.

Direct store delivery (“DSD”) is our preferred and primary route to market.

Our typical DSD method uses Company-owned vehicles and warehouses, but we increasingly shifted to alternative methods of distribution during 2024 and continued to use alternative methods of distribution during the first half of 2025.

For example, in instances of post-mix delivery for use in fountain machines, we have shifted, and continue to shift, our delivery method towards alternative distributors in order to enhance profitability and customer service.

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These alternative routes to market include third-party distributors, the manufacturer of the product or the customer’s supply chain infrastructure.

These bottle/can arrangements generally come with favorable commercial terms for the Company.

During the first quarter of 2025, nearly two-thirds of our post-mix gallons and less than 10% of our bottle/can volume was delivered through alternative routes to market.

These bottle/can arrangements generally come with favorable commercial terms for the Company, and, because we have the exclusive distribution rights for nonalcoholic beverages within our franchise territory, we receive fees from our brand partners for the delivery of qualified product in our territory.

These fees are reported in net sales.

During the first half of 2025, nearly two-thirds of our post-mix gallons and less than 10% of our bottle/can volume was delivered through alternative routes to market.

Digitally Enabled Selling Platform :

Through our investment in CONA Services LLC, we, along with other Coca-Cola bottlers, have built a digitally enabled selling platform called MyCoke that we believe has enabled, and will continue to enable, us to better serve our customers.

This platform creates a more seamless order and payment platform for certain customers and we expect this platform will continue to enable us to enhance customer service and create more selling opportunities for our teammates.

This platform creates a more seamless order and payment platform for certain customers and we expect this

platform will continue to enable us to enhance customer service and create more selling opportunities for our teammates.

This platform is currently targeted to certain on-premise and small store customers.

Results of Operations

First Quarter Results

The Company’s results of operations for the first quarter of 2025 and the first quarter of 2024 are highlighted in the table below and discussed in the following paragraphs.

First Quarter

Second Quarter Results

The Company’s results of operations for the second quarter of 2025 and the second quarter of 2024 are highlighted in the table below and discussed in the following paragraphs.

Second Quarter

(in thousands) 2025 2024 Change

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Net income 187,387 172,812 14,575

Other comprehensive loss, net of tax (14) (153) 139

Other comprehensive (loss) income, net of tax (32) 26 (58)

Comprehensive income

$ 187,355 $ 172,838 $ 14,517

Net sales decreased $11.6 million, or 0.7%, to $1.58 billion in the first quarter of 2025, as compared to $1.59 billion in the first quarter of 2024.

The largest driver of the decrease in net sales was two fewer selling days during the first quarter of 2025 as compared to the first quarter of 2024.

During the first quarter of 2025, lower case sales volume within both the Still and Sparkling categories, which was partially attributable to the two fewer selling days, decreased net sales by approximately $85 million.

Net sales in the first quarter of 2025 was also lower as compared to the first quarter of 2024 due to the timing of the Easter holiday.

The decrease in net sales was partially offset by higher average bottle/can sales price per unit charged to retail customers, which increased net sales by approximately $40 million.

Net sales was also positively impacted by shifts in product mix during the first quarter of 2025, as certain of the Company’s higher-priced products, including sports drinks, protein and enhanced water products, had strong sales during the quarter.

Net sales increased $59.6 million, or 3.3%, to $1.86 billion in the second quarter of 2025, as compared to $1.80 billion in the second quarter of 2024.

The largest driver of the increase in net sales was higher average bottle/can sales price per unit charged to retail customers, which increased net sales by approximately $50 million during the second quarter of 2025.

Net sales was also positively impacted by shifts in product mix during the second quarter of 2025, as certain of the Company’s higher-priced brands, including energy, protein and enhanced water products, had strong sales during the quarter.

The increase in net sales was partially offset by lower case sales volume during the second quarter of 2025 as compared to the second quarter of 2024.

Net sales by product category were as follows:

First Quarter

Second Quarter

(in thousands) 2025 2024 % Change

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Product category sales volume of standard physical cases (as defined below) and the percentage change by product category were as follows:

First Quarter

Second Quarter

(in thousands) 2025 2024 % Change

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In order to serve our customers in the most efficient way, respond to customer demands and increase profitability, the Company has, in certain circumstances, shifted the delivery of our products to third-party distributors, the manufacturer of the product or the customer’s supply chain infrastructure, rather than using Company-owned vehicles and warehouses.

We have shifted the distribution of casepack Dasani water sold in Walmart stores to a non-DSD method of distribution.

As a result, these cases are not included in our reported case sales volume for the first quarter of 2025.

The impact of this distribution change reduced our reported case sales volume by 1.3% during the first quarter of 2025.

There was no impact related to this distribution change during the first quarter of 2024, as the shift had not yet taken place.

As a result of not physically delivering the product, the sales volume delivered using these alternative methods of distribution is not reflected in our volume metrics.

However, because we have the exclusive distribution rights for nonalcoholic beverages within our franchise territory, we receive fees from our brand partners for the delivery of qualified product in our territory.

These fees are reported in net sales.

Changes in the delivery of our products to our customers have increasingly impacted our reported volume and net sales over the past several years as the transition has occurred and accelerated.

Less than 10% of the bottle/can volume sold in our franchise territory during the first quarter of 2025 was delivered using these alternative distribution methods.

The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers, as well as the percentage of the Company’s total net sales that such volume represents:

First Quarter

Approximate percent of the Company’s total bottle/can sales volume:

The Kroger Co.

Total approximate percent of the Company’s total bottle/can sales volume 36 % 36 %

Approximate percent of the Company’s total net sales:

The Kroger Co.

Total approximate percent of the Company’s total net sales 29 % 29 %

(1) Includes bottle/can sales volume related to the Walmart, Sam’s Club and Walmart Neighborhood Market chains.

(2) Includes bottle/can sales volume related to the Kroger and Harris Teeter chains.

Changes in the delivery of our products to our customers impacted our reported volume and net sales during 2024 and the first half of 2025.

Cost of Sales

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(i) purchases of finished products, (ii) raw material costs, including aluminum cans, plastic bottles, carbon dioxide and sweetener, (iii) concentrate costs and (iv) manufacturing costs, including labor, overhead and warehouse costs.

In addition, cost of sales includes shipping, handling and fuel costs related to the movement of finished products from manufacturing plants to distribution centers, amortization expense of

distribution rights, distribution fees of certain products and marketing credits and post-mix funding from brand companies.

Input costs, including underlying commodity costs for aluminum cans, plastic bottles, carbon dioxide and sweetener, as well as labels and other packaging materials, and excluding concentrate, represent approximately 20% of total annual cost of sales.

Cost of sales increased $1.8 million, or 0.2%, to $952.9 million in the first quarter of 2025, as compared to $951.1 million in the first quarter of 2024.

The increase in cost of sales was primarily driven by higher input costs and shifts in product mix as compared to the first quarter of 2024.

The increase in cost of sales was largely offset by lower case sales volume during the first quarter of 2025 as compared to the first quarter of 2024, which was partially attributable to the impact of the two fewer selling days during the first quarter of 2025.

In addition, cost of sales includes shipping, handling and fuel costs related to the movement of finished products from manufacturing plants to distribution centers, amortization expense of distribution rights, distribution fees of certain products and marketing credits and post-mix funding from our brand partners.

Input costs for products we produce, including underlying commodity costs for aluminum cans, plastic bottles, carbon dioxide and sweetener, as well as labels and other packaging materials, and excluding concentrate, represent approximately 20% of total annual cost of sales.

Cost of sales increased $33.8 million, or 3.1%, to $1.11 billion in the second quarter of 2025, as compared to $1.08 billion in the second quarter of 2024.

The increase in cost of sales was primarily driven by higher input costs, which increased cost of sales by approximately $35 million during the second quarter of 2025.

Cost of sales also increased due to shifts in product mix to higher cost Still products as compared to the second quarter of 2024.

The increase in cost of sales was partially offset by lower case sales volume during the second quarter of 2025 as compared to the second quarter of 2024.

The Company relies extensively on advertising and sales promotions in the marketing of its products.

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Certain of these marketing, advertising and other funding expenditures are made pursuant to annual arrangements.

Total funding support from The Coca‑Cola Company and other beverage companies, which includes both direct payments to the Company and payments to customers for marketing programs, was $45.2 million in the first quarter of 2025 and $45.3 million in the first quarter of 2024.

Total funding support from The Coca‑Cola Company and other beverage companies, which includes both direct payments to the Company and payments to customers for marketing programs, was $52.4 million in the second quarter of 2025 and $49.3 million in the second quarter of 2024.

Selling, Delivery and Administrative Expenses

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Labor costs represent approximately 60% of total annual SD&A expenses.

SD&A expenses increased $12.1 million, or 2.9%, to $437.3 million in the first quarter of 2025, as compared to $425.2 million in the first quarter of 2024.

SD&A expenses as a percentage of net sales increased to 27.7% in the first quarter of 2025 from 26.7% in the first quarter of 2024.

The increase in SD&A expenses was partially offset by the impact of two fewer selling days during the first quarter of 2025 as compared to the first quarter of 2024.

Shipping and handling costs included in SD&A expenses were approximately $194 million in the first quarter of 2025 and approximately $193 million in the first quarter of 2024.

SD&A expenses increased $12.8 million, or 2.8%, to $470.4 million in the second quarter of 2025, as compared to $457.6 million in the second quarter of 2024.

The increase in SD&A expenses was primarily driven by an increase in labor costs related to annual wage adjustments.

SD&A expenses as a percentage of net sales decreased to 25.4% in the second quarter of 2025 from 25.5% in the second quarter of 2024.

Shipping and handling costs included in SD&A expenses were approximately $207 million in the second quarter of 2025 and approximately $200 million in the second quarter of 2024.

Interest Expense (Income), Net

Interest expense (income), net changed $9.6 million to $6.9 million of interest expense, net in the first quarter of 2025, as compared to $2.7 million of interest income, net in the first quarter of 2024.

The change in interest expense (income), net was primarily a result of an increase in interest expense on higher debt balances in the first quarter of 2025, as compared to the first quarter of 2024, partially offset by an increase in interest income due to higher cash, cash equivalent and short-term investment balances.

Interest expense (income), net changed $7.6 million to $5.9 million of interest expense, net in the second quarter of 2025, as compared to $1.6 million of interest income, net in the second quarter of 2024.

The change in interest expense (income), net was primarily a result of an increase in interest expense on higher average debt balances in the second quarter of 2025, as compared to the second quarter of 2024.

Mark-to-Market on Acquisition Related Contingent Consideration

Each reporting period, the Company adjusts its acquisition related contingent consideration liability to fair value, which is determined by discounting future expected acquisition related sub-bottling payments using the Company’s estimated weighted average cost of capital (“WACC”) and future cash flow projections, and records the fair value adjustment as mark-to-market on acquisition related contingent consideration in the condensed consolidated statement of operations.

Mark-to-market on acquisition related contingent consideration was an increase of $42.7 million in the first quarter of 2025 and a decrease of $5.5 million in the first quarter of 2024.

During the first quarter of 2025, the $42.7 million increase in the fair value of the acquisition related contingent consideration liability was primarily driven by a decrease in the WACC used to calculate the fair value of the liability, as compared to December 31, 2024.

During the first quarter of 2024, the $5.5 million decrease in the fair value of the acquisition related contingent consideration liability was primarily driven by an increase in the WACC used to

calculate the fair value of the liability, partially offset by higher projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments.

Mark-to-market on acquisition related contingent consideration was an increase of $12.4 million in the second quarter of 2025 and an increase of $27.8 million in the second quarter of 2024.

During the second quarter of 2025, the $12.4 million increase in the fair value of the acquisition related contingent consideration liability was primarily driven by a decrease in the WACC used to calculate the fair value of the liability and changes in projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments.

During the second quarter of 2024, the $27.8 million increase in the fair value of the acquisition related contingent consideration liability was primarily driven by changes in projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments, partially offset by an increase in the WACC used to calculate the fair value of the liability.

Other Expense, Net

Other expense, net decreased $0.1 million to $0.7 million in the first quarter of 2025, as compared to $0.8 million in the first quarter of 2024.

The decrease in other expense, net was primarily driven by changes in the actuarial assumptions related to our pension and postretirement medical benefit plan liabilities.

Other expense, net was $0.8 million in the second quarter of 2025, as compared to $0.7 million in the second quarter of 2024.

Income Tax Expense

The Company’s effective income tax rate was 25.7% for the first quarter of 2025 and 25.6% for the first quarter of 2024.

The Company’s income tax expense decreased $21.2 million, or 37.2%, to $35.9 million for the first quarter of 2025, as compared to $57.1 million for the first quarter of 2024.

The decrease in income tax expense was primarily attributable to lower income before taxes during the first quarter of 2025 compared to the first quarter of 2024.

The Company’s effective income tax rate was 25.9% for the second quarter of 2025 and 25.6% for the second quarter of 2024.

The Company’s income tax expense increased $6.2 million, or 10.4%, to $65.6 million for the second quarter of 2025, as compared to $59.4 million for the second quarter of 2024.

The increase in income tax expense was primarily attributable to higher income before taxes during the second quarter of 2025 compared to the second quarter of 2024.

Other Comprehensive (Loss) Income, Net of Tax

Other comprehensive (loss) income, net of tax was $0.0 million in both the second quarter of 2025 and the second quarter of 2024.

First Half Results

Our results of operations for the first half of 2025 and the first half of 2024 are highlighted in the table below and discussed in the following paragraphs.

(in thousands)

2025 2024 Change

Net sales $ 3,435,496 $ 3,387,569 $ 47,927

Cost of sales 2,065,896 2,030,300 35,596

Gross profit 1,369,600 1,357,269 12,331

Selling, delivery and administrative expenses 907,696 882,723 24,973

Income from operations 461,904 474,546 (12,642)

Interest expense (income), net 12,822 (4,336) 17,158

Mark-to-market on acquisition related contingent consideration 55,118 22,285 32,833

Other expense, net 1,499 1,537 (38)

Income before taxes 392,465 455,060 (62,595)

Income tax expense 101,467 116,507 (15,040)

Net income 290,998 338,553 (47,555)

Other comprehensive loss, net of tax (46) (127) 81

Other comprehensive loss, net of tax was $0.0 million in the first quarter of 2025, as compared to $0.2 million in the first quarter of 2024.

Comprehensive income

$ 290,952 $ 338,426 $ (47,474)

Net sales increased $47.9 million, or 1.4%, to $3.44 billion in the first half of 2025, as compared to $3.39 billion in the first half of 2024.

The largest driver of the increase in net sales was higher average bottle/can sales price per unit charged to retail customers, which increased net sales by approximately $100 million during the first half of 2025.

Net sales was also positively impacted by shifts in product mix during the first half of 2025, as certain of the Company’s higher-priced brands, including protein, energy and enhanced water products, had strong sales during the period.

These improvements were offset by lower case sales volume, which decreased net sales by approximately $120 million, as well as the impact of two fewer selling days in the first half of 2025 as compared to the first half of 2024.

Net sales by product category were as follows:

(in thousands) 2025 2024 % Change

Bottle/can sales:

Sparkling beverages $ 2,013,792 $ 1,996,385 0.9 %

Still beverages 1,135,235 1,108,392 2.4 %

Total bottle/can sales 3,149,027 3,104,777 1.4 %

Sales to other Coca‑Cola bottlers 181,309 171,096 6.0 %

Post-mix sales and other 105,160 111,696 (5.9) %

Total other sales 286,469 282,792 1.3 %

Total net sales $ 3,435,496 $ 3,387,569 1.4 %

Product category sales volume of standard physical cases and the percentage change by product category were as follows:

(in thousands) 2025 2024 % Change

Bottle/can sales volume:

Sparkling beverages 126,116 129,448 (2.6) %

Still beverages 41,317 44,116 (6.3) %

Total bottle/can sales volume 167,433 173,564 (3.5) %

Approximate percent of the Company’s total bottle/can sales volume:

The Kroger Co.

Total approximate percent of the Company’s total bottle/can sales volume 36 % 36 %

Approximate percent of the Company’s total net sales:

The Kroger Co.

Total approximate percent of the Company’s total net sales 29 % 29 %

(1) Includes bottle/can sales volume related to the Walmart, Sam’s Club and Walmart Neighborhood Market chains.

(2) Includes bottle/can sales volume related to the Kroger and Harris Teeter chains.

Cost of Sales

Cost of sales increased $35.6 million, or 1.8%, to $2.07 billion in the first half of 2025, as compared to $2.03 billion in the first half of 2024.

The increase in cost of sales was primarily driven by higher input costs, which increased cost of sales by approximately $80 million during the first half of 2025.

Cost of sales also increased due to shifts in product mix to higher cost Still products as compared to the first half of 2024.

The increase in cost of sales was partially offset by lower case sales volume, which decreased cost of sales by approximately $70 million as compared to the first half of 2024.

Total funding support from The Coca‑Cola Company and other beverage companies was $97.6 million in the first half of 2025, as compared to $94.6 million in the first half of 2024.

Selling, Delivery and Administrative Expenses

SD&A expenses increased $25.0 million, or 2.8%, to $907.7 million in the first half of 2025, as compared to $882.7 million in the first half of 2024.

The increase in SD&A expenses was primarily driven by an increase in labor costs related to annual wage adjustments.

SD&A expenses as a percentage of net sales increased to 26.4% in the first half of 2025 from 26.1% in the first half of 2024.

Shipping and handling costs included in SD&A expenses were approximately $401 million in the first half of 2025 and approximately $393 million in the first half of 2024.

Interest Expense (Income), Net

Interest expense (income), net changed $17.2 million to $12.8 million of interest expense, net in the first half of 2025, as compared to $4.3 million of interest income, net in the first half of 2024.

The change in interest expense (income), net was primarily due to an increase in interest expense on higher average debt balances in the first half of 2025, as compared to the first half of 2024, partially offset by an increase in interest income due to higher cash, cash equivalent and short-term investment balances.

Mark-to-Market on Acquisition Related Contingent Consideration

Mark-to-market on acquisition related contingent consideration was an increase of $55.1 million in the first half of 2025 compared to an increase of $22.3 million in the first half of 2024.

During the first half of 2025, the $55.1 million increase in the fair value of the acquisition related contingent consideration liability was primarily driven by a decrease in the WACC used to calculate the fair value of the liability and changes in projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments.

During the first half of 2024, the $22.3 million increase in the fair value of the acquisition related contingent consideration liability was primarily driven by changes in projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments, partially offset by an increase in the WACC used to calculate the fair value of the liability.

Other Expense, Net

Other expense, net was $1.5 million in both the first half of 2025 and the first half of 2024.

Income Tax Expense

The Company’s effective income tax rate was 25.9% for the first half of 2025 and 25.6% for the first half of 2024.

The Company’s income tax expense decreased $15.0 million, or 12.9%, to $101.5 million for the first half of 2025, as compared to $116.5 million for the first half of 2024.

The decrease in income tax expense was primarily attributable to lower income before taxes during the first half of 2025 compared to the first half of 2024.

Other Comprehensive Loss, Net of Tax

Other comprehensive loss, net of tax was $0.0 million in the first half of 2025 and $0.1 million in the first half of 2024.

Segment Operating Results

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The Company’s segment results are as follows:

First Quarter 2025

Second Quarter 2025

(in thousands) Nonalcoholic Beverages All Other Eliminations (1)

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$ 49,386 $ 5,379 $ — $ 54,765

First Quarter 2024

Second Quarter 2024

(in thousands) Nonalcoholic Beverages All Other Eliminations (1)

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$ 43,723 $ 3,935 $ — $ 47,658

First Half 2025

(in thousands) Nonalcoholic Beverages All Other Eliminations (1)

Net sales $ 3,414,061 $ 157,198 $ (135,763) $ 3,435,496

Cost of goods sold 2,076,336 90,173 (100,613) 2,065,896

Gross profit 1,337,725 67,025 (35,150) 1,369,600

Selling, delivery and administrative expenses:

Payroll costs (2)

$ 560,872 $ 25,923 $ — $ 586,795

Fleet costs (3)

47,089 14,373 — 61,462

Depreciation and amortization expense (4)

57,380 1,085 — 58,465

All other segment items (5)

221,277 14,847 (35,150) 200,974

Total selling, delivery and administrative expenses 886,618 56,228 (35,150) 907,696

Income from operations $ 451,107 $ 10,797 $ — $ 461,904

Total depreciation and amortization expense (4)

$ 97,434 $ 10,704 $ — $ 108,138

First Half 2024

(in thousands) Nonalcoholic Beverages All Other Eliminations (1)

Net sales $ 3,354,864 $ 174,700 $ (141,995) $ 3,387,569

Cost of goods sold 2,023,991 111,246 (104,937) 2,030,300

Gross profit 1,330,873 63,454 (37,058) 1,357,269

Selling, delivery and administrative expenses:

Payroll costs (2)

$ 545,749 $ 26,668 $ — $ 572,417

Fleet costs (3)

51,779 15,786 — 67,565

Depreciation and amortization expense (4)

50,539 989 — 51,528

All other segment items (5)

215,639 12,632 (37,058) 191,213

Total selling, delivery and administrative expenses 863,706 56,075 (37,058) 882,723

Income from operations $ 467,167 $ 7,379 $ — $ 474,546

Total depreciation and amortization expense (4)

$ 86,821 $ 7,588 $ — $ 94,409

(1) The entire net sales elimination represents net sales from the All Other segment to the Nonalcoholic Beverages segment.

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The Company’s non-GAAP financial information does not represent a comprehensive basis of accounting.

The tables below reconcile reported results (GAAP) to comparable and adjusted results (non-GAAP).

Results for the first quarter of 2024 include two additional selling days compared to the first quarter of 2025.

For comparison purposes, the estimated impact of the additional selling days in the first quarter of 2024 has been excluded from our comparable volume results.

First Quarter

The following tables reconcile reported results (GAAP) to comparable and adjusted results (non-GAAP):

Second Quarter 2025

(in thousands, except per share data) Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share (1)

Reported results (GAAP) $ 742,496 $ 470,412 $ 272,084 $ 252,992 $ 187,387 $ 2.15

Fair value adjustment of acquisition related contingent consideration (2)

— — — 12,390 9,275 0.11

Fair value adjustments for commodity derivative instruments (3)

(1,320) 689 (2,009) (2,009) (1,511) (0.02)

Total reconciling items (1,320) 689 (2,009) 10,381 7,764 0.09

Adjusted results (non-GAAP) $ 741,176 $ 471,101 $ 270,075 $ 263,373 $ 195,151 $ 2.24

Second Quarter 2024

(in thousands, except per share data) Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share (1)

Reported results (GAAP) $ 716,710 $ 457,570 $ 259,140 $ 232,225 $ 172,812 $ 1.86

Fair value adjustment of acquisition related contingent consideration (2)

— — — 27,826 20,950 0.22

Fair value adjustments for commodity derivative instruments (3)

(1,075) 254 (1,329) (1,329) (1,001) (0.01)

Total reconciling items (1,075) 254 (1,329) 26,497 19,949 0.21

Adjusted results (non-GAAP) $ 715,635 $ 457,824 $ 257,811 $ 258,722 $ 192,761 $ 2.07

Results for the first half of 2024 include two additional selling days compared to the first half of 2025.

For comparison purposes, the estimated impact of the additional selling days in the first half of 2024 has been excluded from our comparable volume results.

(in thousands) 2025 2024 Change

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Comparable standard physical case volume 167,433 171,804 (2.5) %

First Quarter 2025

(in thousands, except per share data) Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share

First Half 2025

(in thousands, except per share data) Gross

expenses Income from

operations Income before taxes Net

income Basic net income per share (1)

Reported results (GAAP) $ 1,369,600 $ 907,696 $ 461,904 $ 392,465 $ 290,998 $ 3.34

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Adjusted results (non-GAAP) $ 1,369,079 $ 908,550 $ 460,529 $ 446,208 $ 331,413 $ 3.81

First Quarter 2024

(in thousands, except per share data) Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share

First Half 2024

(in thousands, except per share data) Gross

expenses Income from

operations Income before taxes Net

income Basic net income per share (1)

Reported results (GAAP) $ 1,357,269 $ 882,723 $ 474,546 $ 455,060 $ 338,553 $ 3.63

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Following is an explanation of non-GAAP adjustments:

(1) All share or per share amounts impacting the basic net income per share amounts have been retroactively adjusted to reflect the effects of the Stock Split (as defined below) executed by the Company during the second quarter of 2025.

Refer to the discussion in “Liquidity and Capital Resources” below for further details related to the Stock Split.

(2) This non-cash, fair value adjustment of acquisition related contingent consideration fluctuates based on factors such as long-term interest rates and future cash flow projections of the distribution territories subject to acquisition related sub-bottling payments.

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Financial Condition

Total assets were $5.40 billion as of March 28, 2025, which was an increase of $90.6 million from December 31, 2024.

Net working capital, defined as current assets less current liabilities, was $1.32 billion as of March 28, 2025, which was an increase of $89.1 million from December 31, 2024.

Significant changes in net working capital as of March 28, 2025 as compared to December 31, 2024 were as follows:

• An increase in short-term investments of $38.8 million, primarily due to $150.2 million in purchases of short-term investments during the first quarter of 2025, partially offset by disposals of short-term investments of $112.8 million.

• An increase in accounts payable to The Coca-Cola Company of $47.6 million, primarily due to the timing of cash payments.

• A decrease in accrued compensation of $84.3 million, primarily as a result of the timing of bonus and incentive payments in the first quarter of 2025.

Total assets were $5.54 billion as of June 27, 2025, which was an increase of $228.4 million from December 31, 2024.

Net working capital, defined as current assets less current liabilities, was $1.39 billion as of June 27, 2025, which was an increase of $157.9 million from December 31, 2024.

Significant changes in net working capital as of June 27, 2025 as compared to December 31, 2024 were as follows:

• An increase in cash and cash equivalents of $84.1 million, primarily as a result of strong operating performance and working capital management during the first half of 2025.

• An increase in short-term investments of $49.0 million, primarily due to approximately $270 million of short-term investment purchases during the first half of 2025, partially offset by short-term investment maturities of approximately $225 million.

• An increase in accounts receivable, trade of $36.6 million, primarily due to the timing of cash receipts.

• An increase in accounts payable, trade of $31.0 million and an increase in accounts payable to The Coca-Cola Company of $65.4 million, primarily due to the timing of cash payments.

• A decrease in accrued compensation of $85.7 million, primarily as a result of the timing of bonus and incentive payments in the first half of 2025.

Liquidity and Capital Resources

The Company’s sources of capital include cash flows from operations, available credit facilities and the issuance of debt and equity securities.

As of March 28, 2025, the Company had $1.15 billion in cash and cash equivalents.

The Company’s cash equivalent balance as of March 28, 2025 consisted predominantly of investments in money market funds, time deposits and commercial paper with maturities of 90 days or less.

As of March 28, 2025, the Company had $340.1 million in short-term investments, which consisted primarily of U.S.

As of June 27, 2025, the Company had $1.22 billion in cash and cash equivalents.

The Company’s cash equivalent balance as of June 27, 2025 consisted predominantly of investments in money market funds, time deposits and commercial paper with maturities of 90 days or less.

As of June 27, 2025, the Company had $350.2 million in short-term

investments, which consisted primarily of U.S.

Treasury securities and investment-grade corporate bonds with maturities of one year or less.

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Management believes the Company has sufficient sources of capital available to finance its business plan, to meet its working capital requirements and to maintain an appropriate level of capital spending for at least the next 12 months from the issuance of the condensed consolidated financial statements.

On March 4, 2025, the Company announced that its Board of Directors had approved a 10-for-1 forward stock split of Common Stock and the Company’s Class B Common Stock, par value $1.00 per share (“Class B Common Stock”), to be effected through an amendment to the Company’s Restated Certificate of Incorporation (the “Amendment”).

The Amendment would also effect a proportionate increase in the number of authorized shares of Common Stock and Class B Common Stock.

The Amendment is subject to stockholder approval at the Company’s 2025 Annual Meeting of Stockholders, which is scheduled to take place on May 13, 2025.

Subject to stockholder approval of the Amendment, each stockholder of record as of the close of business on May 16, 2025 will have nine additional shares for each share of Common Stock or Class B Common Stock held as of such date reflected in the stockholder’s account on or about May 23, 2025.

Trading is expected to begin on a split-adjusted basis on or about May 27, 2025.

On March 4, 2025, the Company announced that its Board of Directors had approved a 10-for-1 forward stock split (the “Stock Split”) of Common Stock and the Company’s Class B Common Stock, par value $1.00 per share (“Class B Common Stock”).

The Stock Split was effected through an amendment to the Company’s Restated Certificate of Incorporation (the “Amendment”).

The Amendment also effected a proportionate increase in the number of authorized shares of Common Stock and Class B Common Stock.

The Amendment obtained stockholder approval at the Company’s 2025 Annual Meeting of Stockholders, which took place on May 13, 2025.

Each stockholder of record as of the close of business on May 16, 2025 received nine additional shares for each share of Common Stock or Class B Common Stock held as of such date reflected in the stockholder’s account on May 23, 2025.

Trading began on a split-adjusted basis on May 27, 2025.

The par value per share of Common Stock and Class B Common Stock remains unchanged.

On August 20, 2024, the Company announced that its Board of Directors had approved a share repurchase program under which the Company is authorized to repurchase up to $1.00 billion of Common Stock.

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The share repurchase authorization is discretionary and has no expiration date.

There were no shares of Common Stock repurchased under the share repurchase program during the first quarter of 2025.

As of March 28, 2025, the total remaining share repurchase authorization was $948.4 million.

The Company’s debt as of March 28, 2025 and December 31, 2024 was as follows:

(in thousands) Maturity Date March 28, 2025 December 31, 2024

During the second quarter of 2025, the Company repurchased 291,930 split-adjusted shares of Common Stock under the share repurchase program for an aggregate purchase price of $34.4 million, excluding fees and expenses related to the share repurchases.

As of June 27, 2025, the total remaining share repurchase authorization was $914.0 million.

The Company’s debt as of June 27, 2025 and December 31, 2024 was as follows:

(in thousands) Maturity Date June 27, 2025 December 31, 2024

Senior bonds (the “2025 Senior Bonds”) (1)

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(1) The 2025 Senior Bonds were issued at 99.975% of par.

As of March 28, 2025 and December 31, 2024, the 2025 Senior Bonds, net of debt issuance costs and unamortized discount, were classified as current portion of debt in the condensed consolidated balance sheets.

As of June 27, 2025 and December 31, 2024, the 2025 Senior Bonds, net of debt issuance costs and unamortized discount, were classified as current portion of debt in the condensed consolidated balance sheets.

(2) The 2029 Senior Bonds were issued at 99.843% of par.

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The indentures under which the 2025 Senior Bonds, the 2029 Senior Bonds and the 2034 Senior Bonds were issued do not include financial covenants, but do limit the incurrence of certain liens and encumbrances as well as indebtedness by the Company’s subsidiaries in excess of certain amounts.

The agreements under which the Company’s nonpublic debt, including its revolving

credit facility, was issued include two financial covenants:

The agreements under which the Company’s nonpublic debt, including its revolving credit facility, was issued include two financial covenants:

a consolidated cash flow/fixed charges ratio and a consolidated funded indebtedness/cash flow ratio, each as defined in the respective agreement.

The Company was in compliance with these covenants as of March 28, 2025.

The Company was in compliance with these covenants as of June 27, 2025.

These covenants have not restricted, and are not expected to restrict, the Company’s liquidity or capital resources.

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Lower credit ratings could result in higher borrowing costs for the Company or reduced access to capital markets, which could have a material adverse impact on the Company’s operating results or financial position.

As of March 28, 2025, the Company’s credit ratings and outlook for its debt were as follows:

As of June 27, 2025, the Company’s credit ratings and outlook for its debt were as follows:

Credit Rating Rating Outlook

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Following is a summary of the Level 3 activity:

First Quarter

Second Quarter First Half

(in thousands) 2025 2024 2025 2024

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Reclassification to current payables (3,500) (6,200) 1,200 (10,700)

Increase (decrease) in fair value 42,728 (5,541)

Increase in fair value 12,390 27,826 55,118 22,285

Ending balance - Level 3 liability $ 675,300 $ 657,246 $ 675,300 $ 657,246

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A summary of cash-based activity is as follows:

First Quarter

(in thousands) 2025 2024

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Proceeds from the sale of property, plant and equipment 6,277 250

Proceeds from bond issuance — 1,200,000

Total cash sources $ 636,983 $ 1,654,024

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Payments of acquisition related contingent consideration 35,209 23,676

Payments related to share repurchases 34,410 14,471

Investment in equity method investees 10,594 6,549

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Total cash uses $ 552,882 $ 590,005

Net increase (decrease) in cash during period $ 15,981 $ (234,009)

(1) Net cash provided by operating activities in the first quarter of 2025 included net income tax payments of $1.9 million and net interest payments of $2.5 million.

Net cash provided by operating activities in the first quarter of 2024 included net income tax payments of $2.7 million and net interest payments of $2.6 million.

Net increase in cash and cash equivalents during period $ 84,101 $ 1,064,019

(1) Net cash provided by operating activities in the first half of 2025 included net income tax payments of $111.3 million and net interest payments of $43.7 million.

Net cash provided by operating activities in the first half of 2024 included net income tax payments of $109.8 million and net interest payments of $11.9 million.

Cash Flows From Operating Activities

During the first quarter of 2025, cash provided by operating activities was $198.2 million, which was an increase of $3.9 million as compared to the first quarter of 2024.

During the first half of 2025, cash provided by operating activities was $406.2 million, as compared to $437.1 million during the first half of 2024, which was a decrease of $30.9 million.

Cash Flows From Investing Activities

During the first quarter of 2025, cash used in investing activities was $139.7 million, which was a decrease of $123.6 million as compared to the first quarter of 2024.

The decrease was primarily a result of fewer purchases of short-term investments, net of proceeds, as compared to the first quarter of 2024.

Purchases of short-term investments, net of proceeds, were $37.4 million during the first quarter of 2025 and $182.7 million during the first quarter of 2024.

This decrease was partially offset by an increase in additions to property, plant and equipment in the first quarter of 2025 as compared to the first quarter of 2024.

Additions to property, plant and equipment, were $97.9 million during the first quarter of 2025 and $77.0 million during the first quarter of 2024.

There were $28.0 million and $24.3 million of additions to property, plant and equipment accrued in accounts payable, trade as of March 28, 2025 and March 29, 2024, respectively.

During the first half of 2025, cash used in investing activities was $207.4 million, which was a decrease of $154.8 million as compared to the first half of 2024.

The decline was primarily a result of a decrease in purchases of short-term investments, net of proceeds, of approximately $150 million as compared to the first half of 2024.

Additions to property, plant and equipment were $157.4 million during the first half of 2025 and $159.4 million during the first half of 2024.

There were $34.8 million and $29.5 million of additions to property, plant and equipment accrued in accounts payable, trade as of June 27, 2025 and June 28, 2024, respectively.

The additions to property, plant and equipment reflect the Company’s focus on optimizing its supply chain and investing for future growth.

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Cash Flows From Financing Activities

During the first quarter of 2025, cash used in financing activities was $42.5 million, which was a decrease of $122.5 million as compared to the first quarter of 2024.

The primary driver of the decrease was lower dividend payments as compared to the first quarter of 2024.

The Company made dividend payments of approximately $22 million (including a regular cash dividend of $2.50 per share) during the first quarter of 2025, as compared to dividend payments of approximately $155 million (including a special cash dividend of $16.00 per share and a regular cash dividend of $0.50 per share) during the first quarter of 2024.

The Company had cash payments for acquisition related contingent consideration of $19.8 million during the first quarter of 2025 and $9.7 million during the first quarter of 2024.

During the first half of 2025, cash used in financing activities was $114.8 million, as compared to cash provided by financing activities of $989.1 million during the first half of 2024.

The primary driver of the change was the cash received from the issuance of $1.20 billion of bonds during the first half of 2024, partially offset by higher dividend payments during the first half of 2024.

Dividend payments decreased from $159.4 million during the first half of 2024 to $43.6 million during the first half of 2025.

Dividend payments during the first half of 2024 included special dividend payments of approximately $150 million.

The Company had cash payments for acquisition related contingent consideration of $35.2 million during the first half of 2025 and $23.7 million during the first half of 2024.

For the next five future years, the Company anticipates that the amount it could

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The net impact of the commodity derivative instruments on the condensed consolidated statements of operations was as follows:

First Quarter

Second Quarter First Half

(in thousands) 2025 2024 2025 2024

Increase in cost of sales $ 993 $ 1,534

Increase in SD&A expenses 67 323

(Decrease) increase in cost of sales $ (565) $ (1,464) $ 428 $ 70

(Decrease) increase in SD&A expenses (330) 295 (263) 618

Net impact $ (895) $ (1,169) $ 165 $ 688

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis