Coca-Cola Consolidated, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of Coca‑Cola Consolidated, Inc., a Delaware corporation (together with its majority-owned subsidiaries, the “Company,” “we,” “us” or “our”), is intended to help the reader understand our financial condition and results of operations and is provided as an addition to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes to the condensed consolidated financial statements. The condensed consolidated financial statements include the accounts and the consolidated operations of the Company and its majority-owned subsidiaries. All comparisons are to the corresponding period in the prior year unless specified otherwise. Each of the Company’s quarters, other than the fourth quarter, ends on the Friday closest to the last day of the corresponding quarterly calendar period. The Company’s fourth quarter and fiscal year end on December 31 regardless of the day of the week on which December 31 falls. The condensed consolidated financial statements presented are: • 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 We distribute, market and manufacture nonalcoholic beverages in territories spanning 14 states and the District of Columbia. The Company was incorporated in 1980 and, together with its predecessors, has been in the nonalcoholic beverage manufacturing and distribution business since 1902. We are the largest Coca‑Cola bottler in the United States. Approximately 85% of our total bottle/can sales volume to retail customers consists of products of The Coca‑Cola Company, which include some of the most recognized and popular beverage brands in the world. We also distribute products for several other beverage companies, including Keurig Dr Pepper Inc. (“Dr Pepper”) and Monster Energy Company. Our Purpose is to honor God in all we do, to serve others, to pursue excellence and to grow profitably. Our Common Stock, par value $1.00 per share (“Common Stock”), is traded on The Nasdaq Global Select Market under the symbol “COKE.” We offer a range of nonalcoholic beverage products and flavors, including both sparkling and still beverages, designed to meet the demands of our consumers. Sparkling beverages are carbonated beverages and the Company’s principal sparkling beverage is Coca‑Cola. Still beverages include energy products and noncarbonated beverages such as bottled water, ready-to-drink tea, ready-to-drink coffee, enhanced water, juices and sports drinks. Our sales are divided into two main categories: (i) bottle/can sales and (ii) other sales. Bottle/can sales include products packaged primarily in plastic bottles and aluminum cans. Bottle/can net pricing is based on the invoice price charged to customers reduced by any promotional allowances. Bottle/can net pricing per unit is impacted by the price charged per package, the sales volume generated for each package and the channels in which those packages are sold. Other sales include sales to other Coca‑Cola bottlers, post-mix sales, transportation revenue and equipment maintenance revenue. Post-mix products are dispensed through equipment that mixes fountain syrups with carbonated or still water, enabling fountain retailers to sell finished products to consumers in cups or glasses. The Company’s products are sold and distributed in the United States through various channels, which include selling directly to customers, including grocery stores, mass merchandise stores, club stores, convenience stores and drug stores, selling to on-premise locations, where products are typically consumed immediately, such as restaurants, schools, amusement parks and recreational facilities, and selling through other channels such as vending machine outlets. The Company also distributes its products using alternative routes to market, which include third-party distributors, the manufacturer of the product or the customer’s supply chain infrastructure. The nonalcoholic beverage industry is highly competitive for both sparkling and still beverages. Our competitors include bottlers and distributors of nationally and regionally advertised and marketed products, as well as bottlers and distributors of private label beverages. Our principal competitors include local bottlers of PepsiCo, Inc. 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 27 space management, customer service, frequency of distribution and advertising. We believe we are competitive in our territories with respect to these methods of competition. Business seasonality results primarily from higher unit sales of the Company’s products in the second and third quarters of the fiscal year, as sales of our products are typically correlated with warmer weather. We believe that we and other manufacturers from whom we purchase finished products have adequate production capacity to meet sales demand for sparkling and still beverages during these peak periods. Sales volume can also be impacted by weather conditions. Fixed costs, such as depreciation expense, are not significantly impacted by business seasonality. Executive Summary 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 28 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 Key priorities for the Company include executing our commercial strategy, executing our revenue management strategy, optimizing our supply chain, generating cash flow, determining the optimal route to market and creating and maintaining a digitally enabled selling platform. Commercial Execution : Our success is dependent on our ability to execute our commercial strategy within our customers’ stores. Our ability to obtain shelf space within stores and remain in-stock across our portfolio of brands and packages in a profitable manner will have a significant impact on our results. We are focused on execution at every step in our supply chain, including raw material and finished product procurement, manufacturing conversion, transportation, warehousing and distribution, to ensure in-store execution can occur. We continue to invest in tools and technology to enable our teammates to operate more effectively and efficiently with our customers and to drive long-term value in our business. We also continue to focus on opportunities to enhance the customer experience by adapting to changes in our customer landscape, enabling operational flexibility and focusing on customer service. Revenue Management : Our revenue management strategy focuses on pricing our brands and packages optimally within product categories and channels, creating effective working relationships with our customers and making disciplined fact-based decisions. Pricing decisions are made considering a variety of factors, including brand strength, competitive environment, input costs, the roles certain brands play in our product portfolio and other market conditions. Supply Chain Optimization : We are continually focused on optimizing our supply chain, which includes identifying nearby warehousing and distribution operations that can be consolidated into new facilities to increase capacity, expand production capabilities, reduce overall production costs and add automation to allow the Company to better serve its customers and consumers. The Company expects to continue to make significant capital investments to optimize our supply chain and to invest for future growth during 2025. Cash Flow Generation : We have several initiatives in place to optimize cash flow, improve profitability, prudently manage capital expenditures and enhance capital returns to our stockholders. We believe strengthening our balance sheet gives us the flexibility to make optimal capital allocation decisions for long-term value creation. We have returned, and expect to continue to return, value to our stockholders. Optimal Route to Market : We are focused on implementing optimal methods of distribution of our products within our territory. 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. We receive a fee from our brand partners on these post-mix gallons delivered to locally managed customers in our territory, which is recorded as a reduction to cost of sales. In instances of bottle/can delivery, we have shifted certain products for certain customers and channels of business to alternative routes to market. 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, 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 29 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 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 Net sales $ 1,855,519 $ 1,795,943 $ 59,576 Cost of sales 1,113,023 1,079,233 33,790 Gross profit 742,496 716,710 25,786 Selling, delivery and administrative expenses 470,412 457,570 12,842 Income from operations 272,084 259,140 12,944 Interest expense (income), net 5,948 (1,620) 7,568 Mark-to-market on acquisition related contingent consideration 12,390 27,826 (15,436) Other expense, net 754 709 45 Income before taxes 252,992 232,225 20,767 Income tax expense 65,605 59,413 6,192 Net income 187,387 172,812 14,575 Other comprehensive (loss) income, net of tax (32) 26 (58) Comprehensive income $ 187,355 $ 172,838 $ 14,517 Net Sales 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: Second Quarter (in thousands) 2025 2024 % Change Bottle/can sales: Sparkling beverages $ 1,079,956 $ 1,048,874 3.0 % Still beverages 626,078 597,485 4.8 % Total bottle/can sales 1,706,034 1,646,359 3.6 % Other sales: Sales to other Coca‑Cola bottlers 95,373 92,393 3.2 % Post-mix sales and other 54,112 57,191 (5.4) % Total other sales 149,485 149,584 (0.1) % Total net sales $ 1,855,519 $ 1,795,943 3.3 % 30 Product category sales volume of standard physical cases (as defined below) and the percentage change by product category were as follows: Second Quarter (in thousands) 2025 2024 % Change Bottle/can sales volume: Sparkling beverages 67,487 67,662 (0.3) % Still beverages 23,219 23,791 (2.4) % Total bottle/can sales volume 90,706 91,453 (0.8) % A standard physical case is a volume metric used to standardize differing package configurations in order to measure delivered cases on an equivalent basis. As the Company evaluates its volume metrics, it reassesses the way in which physical case volume is measured, which may lead to differences from previously presented results in order to conform with current period standard volume measurement techniques, as used by management. Additionally, as the Company introduces new products, it reassesses the category assigned to its products at the SKU level, therefore categorization could differ from previously presented results in order to conform with current period categorization. Any differences are not material. The bottle/can sales volume above represents volume that is delivered directly to our customer outlets using Company-owned vehicles and warehouses. 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. 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. 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 Inputs representing a substantial portion of the Company’s cost of sales include: (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 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. The Coca‑Cola Company and other beverage companies that supply concentrates, syrups and finished products to the Company make substantial marketing and advertising expenditures, including national advertising programs, to develop their brand identities and to promote sales in the Company’s territories. Our brand partners also provide funding related to the delivery of post-mix gallons to locally managed customers within the Company’s territory. 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 $52.4 million in the second quarter of 2025 and $49.3 million in the second quarter of 2024. Selling, Delivery and Administrative Expenses SD&A expenses include the following: sales management labor costs, distribution costs resulting from transporting finished products from distribution centers to customer locations, distribution center overhead including depreciation expense, distribution center warehousing costs, delivery vehicles and cold drink equipment, point-of-sale expenses, advertising expenses, cold drink equipment repair costs, amortization of intangible assets and administrative support labor and operating costs. Labor costs represent approximately 60% of total annual SD&A expenses. 31 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 $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 $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 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 25.9% 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. 32 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. First Half (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 Comprehensive income $ 290,952 $ 338,426 $ (47,474) Net Sales 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: First Half (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 % Other sales: 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: First Half (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) % 33 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 Half 2025 2024 Approximate percent of the Company’s total bottle/can sales volume: Walmart Inc. (1) 21 % 21 % The Kroger Co. (2) 15 % 15 % Total approximate percent of the Company’s total bottle/can sales volume 36 % 36 % Approximate percent of the Company’s total net sales: Walmart Inc. (1) 17 % 17 % The Kroger Co. (2) 12 % 12 % 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. 34 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 The Company evaluates segment reporting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 280, Segment Reporting, each reporting period, including evaluating the reporting package reviewed by the Chief Operating Decision Maker (the “CODM”). The Company has concluded the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer, as a group, represent the CODM. Segment asset information is not provided to the CODM. The Company has three operating segments, each identified by its unique products and services. Nonalcoholic Beverages represents the vast majority of the Company’s consolidated net sales and income from operations. The additional two operating segments, which include Data Ventures, Inc. and the Red Classic subsidiaries, do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, and, therefore, have been combined into “All Other.” The accounting policies of the Nonalcoholic Beverages segment are the same as those described in the summary of significant accounting policies presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for 2024. The CODM uses net sales, gross profit and income from operations in the annual budgeting and forecasting process. Monthly, the CODM considers budget-to-actual variances and current year to prior year variances for these profit measures when making strategic business decisions and allocating resources to Company operations. The Company’s segment results are as follows: Second Quarter 2025 (in thousands) Nonalcoholic Beverages All Other Eliminations (1) Total Net sales $ 1,845,061 $ 81,210 $ (70,752) $ 1,855,519 Cost of goods sold 1,121,401 44,880 (53,258) 1,113,023 Gross profit 723,660 36,330 (17,494) 742,496 Selling, delivery and administrative expenses: Payroll costs (2) $ 294,939 $ 13,151 $ — $ 308,090 Fleet costs (3) 23,262 6,690 — 29,952 Depreciation and amortization expense (4) 29,126 547 — 29,673 All other segment items (5) 112,469 7,722 (17,494) 102,697 Total selling, delivery and administrative expenses 459,796 28,110 (17,494) 470,412 Income from operations $ 263,864 $ 8,220 $ — $ 272,084 Total depreciation and amortization expense (4) $ 49,386 $ 5,379 $ — $ 54,765 35 Second Quarter 2024 (in thousands) Nonalcoholic Beverages All Other Eliminations (1) Total Net sales $ 1,780,152 $ 86,598 $ (70,807) $ 1,795,943 Cost of goods sold 1,077,535 54,485 (52,787) 1,079,233 Gross profit 702,617 32,113 (18,020) 716,710 Selling, delivery and administrative expenses: Payroll costs (2) $ 283,052 $ 13,392 $ — $ 296,444 Fleet costs (3) 25,701 7,671 — 33,372 Depreciation and amortization expense (4) 25,482 495 — 25,977 All other segment items (5) 113,357 6,440 (18,020) 101,777 Total selling, delivery and administrative expenses 447,592 27,998 (18,020) 457,570 Income from operations $ 255,025 $ 4,115 $ — $ 259,140 Total depreciation and amortization expense (4) $ 43,723 $ 3,935 $ — $ 47,658 First Half 2025 (in thousands) Nonalcoholic Beverages All Other Eliminations (1) Total 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) Total 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. The entire cost of goods sold and SD&A eliminations represent costs incurred by the All Other segment in the generation of net sales to the Nonalcoholic Beverages segment. (2) Payroll costs includes compensation, incentive plans, defined contribution plans, healthcare benefits and tax-advantaged spending accounts. (3) Fleet costs includes fleet repairs, maintenance and fuel and oil costs. 36 (4) Total depreciation and amortization expense is included within both cost of goods sold and SD&A expenses. For segment reporting, the difference between total depreciation and amortization expense and the portion within SD&A expenses is the amount within cost of goods sold. (5) All other segment items includes information technology costs, stewardship, insurance and other costs incurred in the selling and delivery of the Company’s products. Comparable and Adjusted Results (Non-GAAP) The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”). However, management believes that certain non-GAAP financial measures provide users of the financial statements with additional, meaningful financial information that should be considered, in addition to the measures reported in accordance with GAAP, when assessing the Company’s ongoing 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 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. First Half (in thousands) 2025 2024 Change Standard physical case volume 167,433 173,564 (3.5) % Volume related to extra days in fiscal period — (1,760) Comparable standard physical case volume 167,433 171,804 (2.5) % 37 First Half 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) $ 1,369,600 $ 907,696 $ 461,904 $ 392,465 $ 290,998 $ 3.34 Fair value adjustment of acquisition related contingent consideration (2) — — — 55,118 41,449 0.48 Fair value adjustments for commodity derivative instruments (3) (521) 854 (1,375) (1,375) (1,034) (0.01) Total reconciling items (521) 854 (1,375) 53,743 40,415 0.47 Adjusted results (non-GAAP) $ 1,369,079 $ 908,550 $ 460,529 $ 446,208 $ 331,413 $ 3.81 First Half 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) $ 1,357,269 $ 882,723 $ 474,546 $ 455,060 $ 338,553 $ 3.63 Fair value adjustment of acquisition related contingent consideration (2) — — — 22,285 16,778 0.18 Fair value adjustments for commodity derivative instruments (3) 81 211 (130) (130) (98) — Total reconciling items 81 211 (130) 22,155 16,680 0.18 Adjusted results (non-GAAP) $ 1,357,350 $ 882,934 $ 474,416 $ 477,215 $ 355,233 $ 3.81 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. (3) The Company enters into commodity derivative instruments from time to time to hedge some or all of its projected purchases of aluminum, PET resin, diesel fuel and unleaded gasoline in order to mitigate commodity price risk. The Company accounts for its commodity derivative instruments on a mark-to-market basis. Financial Condition 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 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 38 investments, which consisted primarily of U.S. Treasury securities and investment-grade corporate bonds with maturities of one year or less. The Company has obtained its debt from public markets, private placements and bank facilities. 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 (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. The Company expects share repurchases to be made from time to time in the open market or through private transactions or block trades. The timing and amount of repurchases will depend on market conditions, the prevailing market price, applicable legal requirements and other factors. The share repurchase authorization is discretionary and has no expiration date. 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) 11/25/2025 $ 350,000 $ 350,000 Senior notes 10/10/2026 100,000 100,000 Senior bonds (the “2029 Senior Bonds”) (2) 6/1/2029 700,000 700,000 Revolving credit facility (3) 6/10/2029 — — Senior notes 3/21/2030 150,000 150,000 Senior bonds (the “2034 Senior Bonds”) (4) 6/1/2034 500,000 500,000 Unamortized discount on senior bonds (1)(2)(4) Various (1,342) (1,482) Debt issuance costs (10,989) (12,170) Total debt 1,787,669 1,786,348 Less: Current portion of debt (1) 349,863 349,699 Total long-term debt $ 1,437,806 $ 1,436,649 (1) The 2025 Senior Bonds were issued at 99.975% of par. 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. (3) The Company’s revolving credit facility has an aggregate maximum borrowing capacity of $500 million. The Company currently believes all banks participating in the revolving credit facility have the ability to and will meet any funding requests from the Company. (4) The 2034 Senior Bonds were issued at 99.893% of par. 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: 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 June 27, 2025. These covenants have not restricted, and are not expected to restrict, the Company’s liquidity or capital resources. 39 All outstanding debt has been issued by the Company and none has been issued by any of its subsidiaries. There are no guarantees of the Company’s debt. The Company’s credit ratings are reviewed periodically by certain nationally recognized rating agencies. Changes in the Company’s operating results or financial position could result in changes in the Company’s credit ratings. 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 June 27, 2025, the Company’s credit ratings and outlook for its debt were as follows: Credit Rating Rating Outlook Moody’s Baa1 Stable Standard & Poor’s BBB+ Stable The Company’s Board of Directors has declared, and the Company has paid, dividends on the Common Stock and the Class B Common Stock and each class of common stock has participated equally in all dividends declared by the Board of Directors and paid by the Company for more than 30 years. The amount and frequency of future dividends will be determined by the Company’s Board of Directors in light of the earnings and financial condition of the Company at such time, and no assurance can be given that dividends will be declared or paid in the future. We review supplier terms and conditions on an ongoing basis, and we have negotiated payment term extensions in recent years in connection with our efforts to improve cash flow and working capital. Separate from those term extension actions, the Company has an agreement with a third-party financial institution to facilitate a supply chain finance program (the “SCF program”), which allows qualifying suppliers to sell their receivables from the Company to the financial institution in order to negotiate shorter payment terms on their outstanding receivable arrangements. The Company’s obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted by a supplier’s participation in the SCF program. See Note 13 to the condensed consolidated financial statements for additional information related to the SCF program. The Company’s only Level 3 asset or liability is the acquisition related contingent consideration liability. There were no transfers of assets or liabilities from Level 1 or Level 2 in any period presented. Fair value adjustments were non-cash and, therefore, did not impact the Company’s liquidity or capital resources. Following is a summary of the Level 3 activity: Second Quarter First Half (in thousands) 2025 2024 2025 2024 Beginning balance - Level 3 liability $ 681,800 $ 649,596 $ 654,191 $ 669,337 Payments of acquisition related contingent consideration (15,390) (13,976) (35,209) (23,676) Reclassification to current payables (3,500) (6,200) 1,200 (10,700) 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 40 Cash Sources and Uses A summary of cash-based activity is as follows: First Half (in thousands) 2025 2024 Cash Sources: Net cash provided by operating activities (1) $ 406,221 $ 437,131 Proceeds from the disposal of short-term investments 224,485 16,643 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 Cash Uses: Purchases of short-term investments $ 270,144 $ 213,123 Additions to property, plant and equipment 157,383 159,400 Cash dividends paid 43,589 159,353 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 Payments on financing lease obligations 1,320 1,221 Debt issuance fees 233 12,212 Total cash uses $ 552,882 $ 590,005 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 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 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. The Company anticipates additions to property, plant and equipment in 2025 will be approximately $300 million. Cash Flows From Financing Activities 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 41 pay annually under the acquisition related contingent consideration arrangements for the distribution territories subject to acquisition related sub-bottling payments will be in the range of approximately $50 million to $80 million. Hedging Activities The Company uses commodity derivative instruments to manage its exposure to fluctuations in certain commodity prices. Fees paid by the Company for commodity derivative instruments are amortized over the corresponding period of the instrument. The Company accounts for its commodity derivative instruments on a mark-to-market basis with any expense or income being reflected as an adjustment to cost of sales or SD&A expenses, consistent with the expense classification of the underlying hedged item. The Company uses several different financial institutions for commodity derivative instruments to minimize the concentration of credit risk. The Company has master agreements with the counterparties to its commodity derivative instruments that provide for net settlement of derivative transactions. The net impact of the commodity derivative instruments on the condensed consolidated statements of operations was as follows: Second Quarter First Half (in thousands) 2025 2024 2025 2024 (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 Cautionary Note Regarding Forward-Looking Statements Certain statements made in this report, or in other public filings, press releases, or other written or oral communications made by the Company, which are not historical facts, are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties which we expect will or may occur in the future and may impact our business, financial condition and results of operations. The words “anticipate,” “believe,” “expect,” “intend,” “project,” “may,” “will,” “should,” “could” and similar expressions are intended to identify those forward-looking statements. These forward-looking statements reflect the Company’s best judgment based on current information, and, although we base these statements on circumstances that we believe to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information. As such, the forward-looking statements are not guarantees of future performance, and actual results may vary materially from the projected results and expectations discussed in this report. Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: increased costs (including due to inflation) or disruption, unavailability or shortages of raw materials, fuel and other supplies; the reliance on purchased finished products from external sources; changes in public and consumer perception and preferences, including concerns related to product safety and sustainability, artificial ingredients, brand reputation and obesity; changes in government regulations related to nonalcoholic beverages, including regulations related to obesity, public health, artificial ingredients, recycling, sustainability and product safety; decreases from historic levels of marketing funding support provided to us by The Coca‑Cola Company and other beverage companies; material changes in the performance requirements for marketing funding support or our inability to meet such requirements; decreases from historic levels of advertising, marketing and product innovation spending by The Coca‑Cola Company and other beverage companies, or advertising campaigns that are negatively perceived by the public; any failure of the several Coca‑Cola system governance entities of which we are a participant to function efficiently or in our best interest and any failure or delay of ours to receive anticipated benefits from these governance entities; provisions in our beverage distribution and manufacturing agreements with The Coca‑Cola Company that could delay or prevent a change in control of us or a sale of our Coca‑Cola distribution or manufacturing businesses; the concentration of our capital stock ownership; our inability to meet requirements under our beverage distribution and manufacturing agreements; changes in the inputs used to calculate our acquisition related contingent consideration liability; technology failures or cyberattacks on our information technology systems or our effective response to technology failures or cyberattacks on our third-party service providers’, business partners’, customers’, suppliers’ or other third parties’ information technology systems; unfavorable changes in the general economy; changes in trade policies, including the imposition of, or increase in, tariffs on imported goods; the concentration risks among our customers and suppliers; lower than expected net pricing of our products resulting from continued and increased customer and competitor consolidations and marketplace competition; the effect of changes in our level of debt, borrowing costs and credit ratings on our access to capital and credit markets, operating flexibility and ability to obtain additional financing to fund future needs; the failure to attract, train and retain qualified employees while controlling labor costs and other labor issues; the failure to maintain productive relationships with our employees covered by collective bargaining agreements, including failing to renegotiate collective bargaining agreements; changes in accounting standards; our use of estimates and assumptions; changes in 42 tax laws, disagreements with tax authorities or additional tax liabilities; changes in legal contingencies; natural disasters, changing weather patterns and unfavorable weather; climate change or legislative or regulatory responses to such change; and the risks discussed in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for 2024 and elsewhere in this report. Caution should be taken not to place undue reliance on the forward-looking statements included in this report. The Company assumes no obligation to update any forward-looking statements, except as may be required by law. In evaluating forward-looking statements, these risks and uncertainties should be considered, together with the other risks described from time to time in the Company’s reports and other filings with the United States Securities and Exchange Commission.