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 July 3, 2026 and December 31, 2025. • The results of operations, comprehensive income and changes in stockholders’ (deficit) equity for the three-month periods ended July 3, 2026 (the “second quarter” of fiscal 2026 (“2026”)) and June 27, 2025 (the “second quarter” of fiscal 2025 (“2025”)) and the six-month periods ended July 3, 2026 (the “first half” of 2026) and June 27, 2025 (the “first half” of 2025). • The changes in cash flows for the first half of 2026 and the first half of 2025. 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 Monster Energy Company and Keurig Dr Pepper Inc. (“Dr Pepper”). 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 (“ARTM”), which include distribution by 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 26 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 up 7.6% in the second quarter of 2026 and up 10.3% in the first half of the year, or 7.1% on an adjusted basis, as presented in the “Adjusted Results (Non-GAAP)” section, for the first half of 2026. Our Sparkling category volume increased 7.0% in the second quarter of 2026 and 9.4% in the first half of 2026, or 6.2% on an adjusted basis, as presented in the “Adjusted Results (Non-GAAP)” section. Sparkling volume growth reflected broad-based gains across the portfolio, led by our zero-sugar and flavor offerings. Still category volume increased 9.4% in the second quarter of 2026 and 12.9% in the first half of 2026, or 9.8% on an adjusted basis, as presented in the “Adjusted Results (Non-GAAP)” section. The Still category volume growth was driven by strong performance across many brands, including Core Power, Powerade, smartwater and Monster. Dasani casepack water, which carries a lower net selling price as compared to other Still products, also contributed to a portion of the growth within our Still category. In addition, total volume in the second quarter of 2026 was also higher as compared to the second quarter of 2025 due to the timing of the Fourth of July holiday, which we estimate impacted total volume by approximately 1.0%. Net sales increased 10.6% to $2.1 billion in the second quarter of 2026. The growth in net sales was primarily the result of our volume growth and annual pricing actions, as well as a shift in the timing of the Fourth of July holiday. Sparkling and Still net sales increased 9.7% and 11.5%, respectively, in the second quarter of 2026 compared to the second quarter of 2025. The increase in Sparkling category net sales was driven primarily by sales of multi-pack, take-home aluminum can packages sold within our large store, club and value channels. Net sales of our Still products were especially strong in our convenience and value store channels. Gross profit in the second quarter of 2026 was $778.4 million, an increase of $35.9 million, or 4.8%. On an adjusted basis, as defined in the “Adjusted Results (Non-GAAP)” section, gross profit increased $47.3 million, or 6.4%. Gross margin in the second quarter of 2026 decreased 210 basis points to 37.9%. Adjusted gross margin in the second quarter of 2026, as presented in the “Adjusted Results (Non-GAAP)” section, decreased 150 basis points to 38.4%. The reduction in gross margin resulted primarily from an increase in aluminum costs, which was caused by geopolitical conflicts, supply constraints and the impact of elevated tariffs. These elevated aluminum costs resulted in approximately $45 million in additional input costs compared to the second quarter of 2025, which outpaced our annual pricing actions. Selling, delivery and administrative (“SD&A”) expenses in the second quarter of 2026 increased $36.7 million, or 7.8%. SD&A expenses as a percentage of net sales decreased to 24.7% in the second quarter of 2026 from 25.4% in the second quarter of 2025. The increase in SD&A expenses was primarily driven by an additional investment in the base wages of our front-line teammates, which became effective at the beginning of the third quarter of 2025. The growth in SD&A expenses was also driven by an increase in labor costs related to annual wage adjustments, higher employee benefit costs and elevated fuel costs. In addition, increased volume in the second quarter was also a driver of variable expenses during the quarter. SD&A expenses in the first half of 2026 increased $88.9 million or 9.8%. Approximately $25.0 million of the increase was related to the six additional days in the first half of 2026. Income from operations in the second quarter of 2026 was $271.3 million, compared to $272.1 million in the second quarter of 2025, a decrease of $0.7 million, or 0.3%. On an adjusted basis, as defined in the “Adjusted Results (Non-GAAP)” section, income from operations in the second quarter of 2026 was $284.9 million, an increase of $14.9 million. Operating margin for the second quarter of 2026 was 13.2% as compared to 14.7% for the second quarter of 2025, a decrease of 150 basis points. Adjusted operating margin for the second quarter of 2026, as presented in the “Adjusted Results (Non-GAAP)” section, was 13.9% as compared to 14.6% for the second quarter of 2025, a decrease of 70 basis points. For the first half of 2026, income from operations increased $47.0 million, or 10.2%. The six additional selling days in the first half of 2026 accounted for approximately $30.0 million of the increase in income from operations. Net income in the second quarter of 2026 was $158.8 million, compared to $187.4 million in the second quarter of 2025, a decline of $28.6 million, or 15.2%. On an adjusted basis, as defined in the “Adjusted Results (Non-GAAP)” section, net income in the second quarter of 2026 was $187.7 million, compared to $195.2 million in the second quarter of 2025, a decrease of $7.5 million, 27 or 3.8%. Net income in the second quarter of 2026 was adversely impacted by non-cash, fair value adjustments to both our acquisition related contingent consideration and commodity hedging instruments, as well as an increase in net interest expense. Net income for the first half of 2026 was $270.4 million, compared to $291.0 million in the first half of 2025, a decline of $20.6 million, or 7.1%. Net income for the first half of 2026 was adversely impacted by an increase in net interest expense and non-cash, fair value adjustments to our acquisition related contingent consideration. These decreases in net income were offset by the six additional days in the first half of 2026, which increased net income by approximately $22.6 million during the period. Income tax expense in the first half of 2026 was $96.0 million, compared to $101.5 million in the first half of 2025, resulting in an effective income tax rate of approximately 26% for both periods. Cash flows from operations for the first half of 2026 were $420.6 million, compared to $406.2 million for the first half of 2025. During the first half of 2026, we invested approximately $147 million in capital expenditures. In fiscal year 2026, we expect capital expenditures to be approximately $300 million. During the second quarter of 2026, we made early repayments of $125 million of principal on one of our term loans, for total year-to-date early term loan repayments of $275 million. As noted above, the first quarter of 2026 included six extra days as compared to the first quarter of 2025. The fourth quarter of 2026 will include six fewer days as compared to the fourth quarter of 2025. The full fiscal years of 2026 and 2025 have the same number of days. 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 2026. 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 territories. 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, or ARTM, beginning in 2024 and intend to continue using ARTM at similar rates for the foreseeable future. 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 territories, which is recorded as a reduction to cost of sales. 28 In instances of bottle/can delivery, we have shifted certain products for certain customers and channels of business to ARTM. These ARTM 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 territories, we receive fees from our brand partners for the delivery of qualified product in our territories. These fees are reported in net sales but not our reported volume metrics. During the first half of 2026, approximately two-thirds of our post-mix gallons and less than 10% of our bottle/can volume were delivered through ARTM. These ratios are consistent with the first half of 2025. 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 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 2026 and the second quarter of 2025 are highlighted in the table below and discussed in the following paragraphs. Second Quarter (in thousands) 2026 2025 Change Net sales $ 2,052,420 $ 1,855,519 $ 196,901 Cost of sales 1,274,007 1,113,023 160,984 Gross profit 778,413 742,496 35,917 Selling, delivery and administrative expenses 507,074 470,412 36,662 Income from operations 271,339 272,084 (745) Interest expense, net 30,481 5,948 24,533 Mark-to-market on acquisition related contingent consideration 24,723 12,390 12,333 Other expense, net 1,015 754 261 Income before taxes 215,120 252,992 (37,872) Income tax expense 56,299 65,605 (9,306) Net income 158,821 187,387 (28,566) Other comprehensive income (loss), net of tax 1,160 (32) 1,192 Comprehensive income $ 159,981 $ 187,355 $ (27,374) Net Sales Net sales increased $196.9 million, or 10.6%, to $2.05 billion in the second quarter of 2026, as compared to $1.86 billion in the second quarter of 2025. The growth in net sales was primarily the result of increased case sales volume during the second quarter of 2026, which was up 7.6% as compared to the second quarter of 2025. The growth in net sales was also attributable to higher average bottle/can sales price per unit charged to retail customers, largely as a result of annual pricing actions, as well as a shift in the timing of the Fourth of July holiday. 29 Net sales by product category were as follows: Second Quarter (in thousands) 2026 2025 % Change Bottle/can sales: Sparkling beverages $ 1,184,336 $ 1,079,956 9.7 % Still beverages 697,878 626,078 11.5 % Total bottle/can sales 1,882,214 1,706,034 10.3 % Other sales: Sales to other Coca‑Cola bottlers 95,663 95,373 0.3 % Post-mix sales and other 74,543 54,112 37.8 % Total other sales 170,206 149,485 13.9 % Total net sales $ 2,052,420 $ 1,855,519 10.6 % 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) 2026 2025 % Change Bottle/can sales volume: Sparkling beverages 72,217 67,487 7.0 % Still beverages 25,406 23,219 9.4 % Total bottle/can sales volume 97,623 90,706 7.6 % 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, these cases are not included in our reported case sales volume for the first half of 2026 or 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% to 25% of total annual cost of sales. Cost of sales increased $161.0 million, or 14.5%, to $1.27 billion in the second quarter of 2026, as compared to $1.11 billion in the second quarter of 2025. The increase in cost of sales was largely driven by the increase in case sales volume as compared to the second quarter of 2025. Cost of sales also continued to be impacted by higher input costs, specifically aluminum costs, which reflected the uncertainty surrounding geopolitical conflicts, supply constraints and the impact of elevated tariffs, and resulted in approximately $45 million in additional input costs compared to the second quarter of 2025. 30 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 territories. 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 $58.0 million in the second quarter of 2026 and $52.4 million in the second quarter of 2025. 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 two-thirds of total annual SD&A expenses. SD&A expenses increased $36.7 million, or 7.8%, to $507.1 million in the second quarter of 2026, as compared to $470.4 million in the second quarter of 2025. SD&A expenses increased due to an additional investment in the base wages of our front-line teammates, which became effective at the beginning of the third quarter of 2025. The increase in SD&A expenses was also driven by an increase in labor costs related to annual wage adjustments, higher employee benefit costs and elevated fuel costs during the quarter. In addition, increased volume in the second quarter was also a driver of variable expense during the quarter. SD&A expenses as a percentage of net sales decreased to 24.7% in the second quarter of 2026 from 25.4% in the second quarter of 2025. Shipping and handling costs included in SD&A expenses were approximately $219 million in the second quarter of 2026 and approximately $207 million in the second quarter of 2025. Interest Expense, Net Interest expense, net increased $24.5 million to $30.5 million in the second quarter of 2026, as compared to $5.9 million in the second quarter of 2025. The increase in interest expense, net was driven by a reduction in interest income primarily related to lower cash and short-term investment balances in the second quarter of 2026 as compared to the second quarter of 2025. The increase in interest expense, net was also driven by an increase in interest expense on higher debt balances in the second quarter of 2026 as compared to the second quarter of 2025. 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 $24.7 million in the second quarter of 2026 and an increase of $12.4 million in the second quarter of 2025. During the second quarter of 2026, the $24.7 million increase in the fair value of the acquisition related contingent consideration liability was primarily driven by higher 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. 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. Other Expense, Net Other expense, net was $1.0 million in the second quarter of 2026, as compared to $0.8 million in the second quarter of 2025. 31 Income Tax Expense The Company’s effective income tax rate was 26.2% for the second quarter of 2026 and 25.9% for the second quarter of 2025. The Company’s income tax expense decreased $9.3 million, or 14.2%, to $56.3 million for the second quarter of 2026, as compared to $65.6 million for the second quarter of 2025. The decrease in income tax expense was primarily attributable to lower income before taxes during the second quarter of 2026 as compared to the second quarter of 2025. Other Comprehensive Income (Loss), Net of Tax Other comprehensive income (loss), net of tax was income of $1.2 million in the second quarter of 2026 and $0.0 million in the second quarter of 2025. The primary driver of the other comprehensive income, net of tax during the second quarter of 2026 was the mark-to-market adjustments recorded to the Company’s interest rate swap instruments during the period. First Half Results Our results of operations for the first half of 2026 and the first half of 2025 are highlighted in the table below and discussed in the following paragraphs. Results for the first half of 2026 include six additional days compared to the first half of 2025. First Half (in thousands) 2026 2025 Change Net sales $ 3,899,088 $ 3,435,496 $ 463,592 Cost of sales 2,393,595 2,065,896 327,699 Gross profit 1,505,493 1,369,600 135,893 Selling, delivery and administrative expenses 996,630 907,696 88,934 Income from operations 508,863 461,904 46,959 Interest expense, net 62,544 12,822 49,722 Mark-to-market on acquisition related contingent consideration 78,114 55,118 22,996 Other expense, net 1,866 1,499 367 Income before taxes 366,339 392,465 (26,126) Income tax expense 95,962 101,467 (5,505) Net income 270,377 290,998 (20,621) Other comprehensive income (loss), net of tax 2,498 (46) 2,544 Comprehensive income $ 272,875 $ 290,952 $ (18,077) Net Sales Net sales increased $463.6 million, or 13.5%, to $3.90 billion in the first half of 2026, as compared to $3.44 billion in the first half of 2025. The six additional days in the first half of 2026 as compared to the first half of 2025 accounted for approximately $132 million of the increase in net sales during the first half of 2026. Additionally, the increase in net sales was driven by higher case sales volume during the first half of 2026 as compared to the first half of 2025. On an adjusted basis, as presented in the “Adjusted Results (Non-GAAP)” section, sales volume increased by 7.1% in the first half of 2026. The increase in net sales was also attributable to higher average bottle/can sales price per unit charged to retail customers, largely as a result of annual pricing actions. 32 Net sales by product category were as follows: First Half (in thousands) 2026 2025 % Change Bottle/can sales: Sparkling beverages $ 2,274,114 $ 2,013,792 12.9 % Still beverages 1,303,012 1,135,235 14.8 % Total bottle/can sales 3,577,126 3,149,027 13.6 % Other sales: Sales to other Coca‑Cola bottlers 187,756 181,309 3.6 % Post-mix sales and other 134,206 105,160 27.6 % Total other sales 321,962 286,469 12.4 % Total net sales $ 3,899,088 $ 3,435,496 13.5 % Product category sales volume of standard physical cases and the percentage change by product category were as follows: First Half (in thousands) 2026 2025 % Change Bottle/can sales volume: Sparkling beverages 137,982 126,116 9.4 % Still beverages 46,666 41,317 12.9 % Total bottle/can sales volume 184,648 167,433 10.3 % 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 2026 2025 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) 18 % 17 % The Kroger Co. (2) 12 % 12 % Total approximate percent of the Company’s total net sales 30 % 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 $327.7 million, or 15.9%, to $2.39 billion in the first half of 2026, as compared to $2.07 billion in the first half of 2025. The increase in cost of sales was largely driven by an increase in case sales volume as compared to the first half of 2025, including the impact of six additional days in the first half of 2026, which accounted for approximately $77 million of the increase in cost of sales during the first half of 2026. Cost of sales was also impacted throughout the first half of 2026 by higher input costs, specifically aluminum costs, which reflected the uncertainty surrounding geopolitical conflicts, supply constraints and the impact of elevated tariffs, and resulted in approximately $80 million in additional input costs compared to the first half of 2025. Total funding support from The Coca‑Cola Company and other beverage companies was $105.8 million in the first half of 2026, as compared to $97.6 million in the first half of 2025. 33 Selling, Delivery and Administrative Expenses SD&A expenses increased $88.9 million, or 9.8%, to $1.00 billion in the first half of 2026, as compared to $907.7 million in the first half of 2025. The increase in SD&A expenses was partially driven by the six additional days in the first half of 2026 as compared to the first half of 2025, which accounted for approximately $25 million of the increase in SD&A expenses during the first half of 2026. Additionally, SD&A expenses increased due to an additional investment in the base wages of our front-line teammates, which became effective at the beginning of the third quarter of 2025, an increase in labor costs related to annual wage adjustments and higher employee benefit costs. SD&A expenses as a percentage of net sales decreased to 25.6% in the first half of 2026 from 26.4% in the first half of 2025. Shipping and handling costs included in SD&A expenses were approximately $435 million in the first half of 2026 and approximately $401 million in the first half of 2025. The increase in shipping and handling costs was also impacted by the six additional days in the first half of 2026. Interest Expense, Net Interest expense, net increased $49.7 million to $62.5 million in the first half of 2026, as compared to $12.8 million in the first half of 2025. The increase in interest expense, net was driven by a reduction in interest income primarily related to lower cash and short-term investment balances in the first half of 2026 as compared to the first half of 2025. The increase was also driven by an increase in interest expense on higher debt balances in the first half of 2026 as compared to the first half of 2025. Mark-to-Market on Acquisition Related Contingent Consideration Mark-to-market on acquisition related contingent consideration was an increase of $78.1 million in the first half of 2026 compared to an increase of $55.1 million in the first half of 2025. During the first half of 2026, the $78.1 million increase in the fair value of the acquisition related contingent consideration liability was driven by higher projections of future cash flows in the distribution territories subject to acquisition related sub-bottling payments and a decrease in the WACC used to calculate the fair value of the liability. 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. Other Expense, Net Other expense, net was $1.9 million in the first half of 2026 and $1.5 million in the first half of 2025. Income Tax Expense The Company’s effective income tax rate was 26.2% for the first half of 2026 and 25.9% for the first half of 2025. The Company’s income tax expense decreased $5.5 million, or 5.4%, to $96.0 million for the first half of 2026, as compared to $101.5 million for the first half of 2025. The decrease in income tax expense was primarily attributable to lower income before taxes during the first half of 2026 as compared to the first half of 2025. Other Comprehensive Income (Loss), Net of Tax Other comprehensive income (loss), net of tax was $2.5 million in the first half of 2026 and $0.0 million in the first half of 2025. The primary driver of the other comprehensive income, net of tax during the first half of 2026 was the mark-to-market adjustments recorded to the Company’s interest rate swap instruments during the period. 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 two 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 accounting policies of the 34 Nonalcoholic Beverages operating 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 2025. The additional operating segment, which includes the Red Classic subsidiaries, does not meet the quantitative threshold for separate reporting and, therefore, has been reported as “All Other.” Previously, the Company had three operating segments, Nonalcoholic Beverages and two additional operating segments, which included Data Ventures, Inc. and the Red Classic subsidiaries. Since the two additional operating segments did not meet the quantitative thresholds for separate reporting, either individually or in the aggregate, they were combined into “All Other.” As of December 31, 2025, the Data Ventures, Inc. operating segment was liquidated, dissolved and merged into the Nonalcoholic Beverages operating segment. For reporting purposes, all prior periods presented have been retroactively adjusted to reflect the dissolution of the Data Ventures, Inc. operating segment within the All Other operating segment and the merger of the Data Ventures, Inc. operating segment with the Nonalcoholic Beverages operating segment. 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 2026 (in thousands) Nonalcoholic Beverages All Other Eliminations (1) Total Net sales $ 2,038,945 $ 92,343 $ (78,868) $ 2,052,420 Cost of goods sold 1,277,498 57,939 (61,430) 1,274,007 Gross profit 761,447 34,404 (17,438) 778,413 Selling, delivery and administrative expenses: Payroll costs (2) $ 320,542 $ 13,628 $ — $ 334,170 Fleet costs (3) 27,127 7,337 — 34,464 Depreciation and amortization expense (4) 31,153 585 — 31,738 All other segment items (5) 116,518 7,622 (17,438) 106,702 Total selling, delivery and administrative expenses 495,340 29,172 (17,438) 507,074 Income from operations $ 266,107 $ 5,232 $ — $ 271,339 Total depreciation and amortization expense (4) $ 52,634 $ 5,517 $ — $ 58,151 Second Quarter 2025 (in thousands) Nonalcoholic Beverages All Other Eliminations (1) Total Net sales $ 1,845,061 $ 80,402 $ (69,944) $ 1,855,519 Cost of goods sold 1,121,401 44,880 (53,258) 1,113,023 Gross profit 723,660 35,522 (16,686) 742,496 Selling, delivery and administrative expenses: Payroll costs (2) $ 295,639 $ 12,451 $ — $ 308,090 Fleet costs (3) 23,262 6,690 — 29,952 Depreciation and amortization expense (4) 29,128 545 — 29,673 All other segment items (5) 111,767 7,616 (16,686) 102,697 Total selling, delivery and administrative expenses 459,796 27,302 (16,686) 470,412 Income from operations $ 263,864 $ 8,220 $ — $ 272,084 Total depreciation and amortization expense (4) $ 49,387 $ 5,378 $ — $ 54,765 35 First Half 2026 (in thousands) Nonalcoholic Beverages All Other Eliminations (1) Total Net sales $ 3,872,764 $ 181,823 $ (155,499) $ 3,899,088 Cost of goods sold 2,401,711 111,392 (119,508) 2,393,595 Gross profit 1,471,053 70,431 (35,991) 1,505,493 Selling, delivery and administrative expenses: Payroll costs (2) $ 633,446 $ 27,458 $ — $ 660,904 Fleet costs (3) 41,760 16,089 — 57,849 Depreciation and amortization expense (4) 61,687 1,163 — 62,850 All other segment items (5) 236,675 14,343 (35,991) 215,027 Total selling, delivery and administrative expenses 973,568 59,053 (35,991) 996,630 Income from operations $ 497,485 $ 11,378 $ — $ 508,863 Total depreciation and amortization expense (4) $ 104,224 $ 10,829 $ — $ 115,053 First Half 2025 (in thousands) Nonalcoholic Beverages All Other Eliminations (1) Total Net sales $ 3,414,158 $ 155,512 $ (134,174) $ 3,435,496 Cost of goods sold 2,076,336 90,173 (100,613) 2,065,896 Gross profit 1,337,822 65,339 (33,561) 1,369,600 Selling, delivery and administrative expenses: Payroll costs (2) $ 562,318 $ 24,477 $ — $ 586,795 Fleet costs (3) 47,089 14,373 — 61,462 Depreciation and amortization expense (4) 57,384 1,081 — 58,465 All other segment items (5) 219,924 14,611 (33,561) 200,974 Total selling, delivery and administrative expenses 886,715 54,542 (33,561) 907,696 Income from operations $ 451,107 $ 10,797 $ — $ 461,904 Total depreciation and amortization expense (4) $ 97,437 $ 10,701 $ — $ 108,138 (1) The entire net sales elimination represents net sales from the All Other operating segment to the Nonalcoholic Beverages operating segment. The entire cost of goods sold and SD&A eliminations represent costs incurred by the All Other operating segment in the generation of net sales to the Nonalcoholic Beverages operating 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. (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. 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. 36 The following tables reconcile reported results (GAAP) to adjusted results (non-GAAP) for the second quarter of 2026 and the second quarter of 2025: Second Quarter 2026 (in thousands, except per share data) Net sales Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share Reported results (GAAP) $ 2,052,420 $ 778,413 $ 507,074 $ 271,339 $ 215,120 $ 158,821 $ 2.39 Fair value adjustment of acquisition related contingent consideration (1) — — — — 24,723 18,617 0.28 Fair value adjustments for commodity derivative instruments (2) — 10,086 (3,523) 13,609 13,609 10,248 0.16 Total reconciling items — 10,086 (3,523) 13,609 38,332 28,865 0.44 Adjusted results (non-GAAP) $ 2,052,420 $ 788,499 $ 503,551 $ 284,948 $ 253,452 $ 187,686 $ 2.83 Reported margin percentage (3) 37.9 % 13.2 % Adjusted margin percentage (3) 38.4 % 13.9 % Second Quarter 2025 (in thousands, except per share data) Net sales Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share Reported results (GAAP) $ 1,855,519 $ 742,496 $ 470,412 $ 272,084 $ 252,992 $ 187,387 $ 2.15 Fair value adjustment of acquisition related contingent consideration (1) — — — — 12,390 9,275 0.11 Fair value adjustments for commodity derivative instruments (2) — (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) $ 1,855,519 $ 741,176 $ 471,101 $ 270,075 $ 263,373 $ 195,151 $ 2.24 Reported margin percentage (3) 40.0 % 14.7 % Adjusted margin percentage (3) 39.9 % 14.6 % Results for the first half of 2026 include six additional days compared to the first half of 2025. For comparison purposes, the estimated impact of the additional selling days in the first half of 2026 has been excluded from our adjusted volume results and adjusted net sales results. First Half 2026 (in millions) Sparkling Still Total Volume 138.0 46.7 184.6 Volume related to extra days in fiscal period (4.1) (1.3) (5.4) Adjusted volume 133.9 45.4 179.3 First Half 2025 (in millions) Sparkling Still Total Volume 126.1 41.3 167.4 Reported % Change vs. First Half 2025 9.4 % 12.9 % 10.3 % Adjusted % Change vs. First Half 2025 6.2 % 9.8 % 7.1 % 37 First Half 2026 (in millions) Sparkling Still Total Bottle/can beverage sales $ 2,274.1 $ 1,303.0 $ 3,577.1 Bottle/can beverage sales related to extra days in fiscal period (75.8) (42.1) (117.9) Adjusted bottle/can beverage sales $ 2,198.3 $ 1,260.9 $ 3,459.2 First Half 2025 (in millions) Sparkling Still Total Bottle/can beverage sales $ 2,013.8 $ 1,135.2 $ 3,149.0 Reported % Change vs. First Half 2025 12.9 % 14.8 % 13.6 % Adjusted % Change vs. First Half 2025 9.2 % 11.1 % 9.8 % The following tables reconcile reported results (GAAP) to adjusted results (non-GAAP) for the first half of 2026 and the first half of 2025: First Half 2026 (in thousands, except per share data) Net sales Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share Reported results (GAAP) $ 3,899,088 $ 1,505,493 $ 996,630 $ 508,863 $ 366,339 $ 270,377 $ 4.06 Fair value adjustment of acquisition related contingent consideration (1) — — — — 78,114 58,820 0.88 Fair value adjustments for commodity derivative instruments (2) — 7,588 6,854 734 734 553 0.01 Results of extra days in fiscal period (4) (132,000) (55,000) (25,000) (30,000) (30,000) (22,590) (0.34) Total reconciling items (132,000) (47,412) (18,146) (29,266) 48,848 36,783 0.55 Adjusted results (non-GAAP) $ 3,767,088 $ 1,458,081 $ 978,484 $ 479,597 $ 415,187 $ 307,160 $ 4.61 First Half 2025 (in thousands, except per share data) Net sales Gross profit SD&A expenses Income from operations Income before taxes Net income Basic net income per share Reported results (GAAP) $ 3,435,496 $ 1,369,600 $ 907,696 $ 461,904 $ 392,465 $ 290,998 $ 3.34 Fair value adjustment of acquisition related contingent consideration (1) — — — — 55,118 41,449 0.48 Fair value adjustments for commodity derivative instruments (2) — (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) $ 3,435,496 $ 1,369,079 $ 908,550 $ 460,529 $ 446,208 $ 331,413 $ 3.81 Following is an explanation of non-GAAP adjustments: (1) 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. (2) The Company enters into commodity derivative instruments from time to time to hedge some of its projected purchases of aluminum, as well as some or all of its projected purchases of 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. (3) Reported gross margin and reported operating margin are calculated as gross profit and operating income, respectively, as a percentage of net sales. Adjusted gross margin and adjusted operating margin are calculated as adjusted gross profit and adjusted operating income, respectively, which adjust for the impact of fair value changes to our commodity derivative instruments, as a percentage of net sales. 38 (4) Due to the shift in the fiscal calendar, the first half of 2026 contained six extra days when compared to the first half of 2025. The fourth quarter of 2026 will include six fewer days as compared to the fourth quarter of 2025. The full fiscal years of 2026 and 2025 have the same number of days. Financial Condition Total assets were $4.43 billion as of July 3, 2026, which was an increase of $129.5 million from December 31, 2025. Net working capital, defined as current assets less current liabilities, was $266.4 million as of July 3, 2026, which was a decrease of $31.6 million from December 31, 2025. Significant changes in net working capital as of July 3, 2026 as compared to December 31, 2025 were as follows: • A decrease in cash and cash equivalents of $110.2 million, primarily as a result of the repayment of $275 million on the Five-Year Term Loan Facility (as defined below) and additions to property, plant and equipment of approximately $147 million during the first half of 2026, partially offset by the Company’s strong operating performance. • An increase in accounts receivable, trade of $123.2 million and an increase in accounts receivable from The Coca-Cola Company of $56.1 million due to strong sales performance and the timing of cash receipts. • An increase in inventories of $34.8 million, primarily driven by the timing of seasonal inventory levels. • An increase in accounts payable, trade of $66.0 million and an increase in accounts payable to The Coca-Cola Company of $116.8 million, primarily driven by the timing of cash payments. • A decrease in accrued compensation of $41.1 million, primarily as a result of the timing of bonus and incentive payments in the first half of 2026. 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 July 3, 2026, the Company had $171.7 million in cash and cash equivalents. The Company’s cash equivalent balance as of July 3, 2026 consisted predominantly of investments in money market funds. As of July 3, 2026, the Company did not have any short-term investments. Historically, short-term investments have 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 November 7, 2025, the Company entered into a purchase agreement (the “Repurchase Agreement”) with Carolina Coca-Cola Bottling Investments, Inc. (the “Seller”), an indirect wholly owned subsidiary of The Coca‑Cola Company, The Coca‑Cola Company and J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, pursuant to which the Company agreed to purchase and the Seller agreed to sell all of the Seller’s shares of Common Stock for a cash payment in the aggregate amount of $2.40 billion (the “Repurchase”). The closing of the Repurchase also occurred on November 7, 2025. The Company funded the purchase price for the Repurchase with cash on hand and a term loan obtained under a certain bridge loan agreement (the “Bridge Facility”), as further discussed below. Upon completion of the Repurchase, the 18,835,460 shares of Common Stock repurchased from the Seller were retired and recorded as a reduction to Common Stock at par value, with the excess of carrying value over par value recorded as a deduction from retained (deficit) earnings. As a result, the Company was in a deficit position as of July 3, 2026. This deficit position does not impact the Company’s ability to pay dividends. 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 its 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. 39 On August 20, 2024, the Company announced that its Board of Directors had approved a share repurchase program (the “Share Repurchase Program”) under which the Company was initially authorized to repurchase up to $1.00 billion of Common Stock. On November 7, 2025, the Company’s Board of Directors reduced the total authorization under the Share Repurchase Program from $1.00 billion to $400.0 million. 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 2026, the Company did not repurchase any shares of Common Stock under the Share Repurchase Program. As of July 3, 2026, the total remaining authorization under the Share Repurchase Program was $136.3 million. The Company’s debt as of July 3, 2026 and December 31, 2025 was as follows: (in thousands) Maturity Date July 3, 2026 December 31, 2025 Senior notes (1) 10/10/2026 $ 100,000 $ 100,000 Term loan facility (the “Three-Year Term Loan Facility”) (2) 12/8/2028 900,000 900,000 Senior bonds (the “2029 Senior Bonds”) (3) 6/1/2029 700,000 700,000 Revolving credit facility (4) 6/10/2029 — — Senior notes 3/21/2030 150,000 150,000 Term loan facility (the “Five-Year Term Loan Facility”) (2) 12/6/2030 175,000 450,000 Senior bonds (the “2034 Senior Bonds”) (5) 6/1/2034 500,000 500,000 Unamortized discount on senior bonds (3)(5) Various (1,065) (1,201) Debt issuance costs (10,823) (12,790) Total debt 2,513,112 2,786,009 Less: Current portion of debt (1) 100,000 100,000 Total long-term debt $ 2,413,112 $ 2,686,009 (1) As of July 3, 2026 and December 31, 2025, the senior notes maturing in 2026 were classified as current portion of debt in the condensed consolidated balance sheets. (2) The Term Loan Facilities (as defined below) were issued in connection with the financing of the Repurchase, as further discussed above. (3) The 2029 Senior Bonds were issued at 99.843% of par. (4) 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. (5) The 2034 Senior Bonds were issued at 99.893% of par. The Company entered into the Bridge Facility, dated as of November 7, 2025, providing for a 364-day senior unsecured bridge term loan facility in the aggregate principal amount of $1.20 billion to fund the Repurchase. Also on November 7, 2025, the Company borrowed $1.20 billion under the Bridge Facility, the full amount available under the Bridge Facility. On December 8, 2025, the Company entered into a term loan agreement, providing for (i) the Three-Year Term Loan Facility, a senior unsecured term loan facility in the aggregate principal amount of up to $900 million, maturing on December 8, 2028 and (ii) the Five-Year Term Loan Facility, a senior unsecured term loan facility in the aggregate principal amount of up to $450 million, maturing on December 6, 2030 (collectively, the “Term Loan Facilities”). Also on December 8, 2025, the Company borrowed $1.35 billion under the Term Loan Facilities, the full amount available under the Term Loan Facilities. In conjunction with the borrowings under the Term Loan Facilities, the Company modified and extinguished the Bridge Facility discussed above, fully repaying the $1.20 billion outstanding under the Bridge Facility through a net cash settlement with the lender. As of July 3, 2026, the Company has repaid $275 million of the $450 million aggregate principal balance outstanding under the Five-Year Term Loan Facility using cash on hand, bringing the aggregate principal balance outstanding to $175 million. The indenture under which the 2029 Senior Bonds and the 2034 Senior Bonds were issued does not include financial covenants, but does 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 and the Term Loan Facilities, 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 July 3, 2026. These covenants have not restricted the Company’s liquidity or capital resources. 40 On February 12, 2026, the Company entered into three $150 million fixed rate swap agreements, maturing on February 8, 2027, August 8, 2027 and February 8, 2028 to hedge a portion of the interest rate risk on the Three-Year Term Loan Facility and the Five-Year Term Loan Facility. Over the next 12 months, the Company expects approximately $2 million related to these interest rate swaps to be released from accumulated other comprehensive loss. These interest rate swaps are designated as cash flow hedging instruments and changes in their fair values are not expected to be material to the condensed consolidated balance sheets. Changes in the fair values of these interest rate swaps were classified as accumulated other comprehensive loss on the condensed consolidated balance sheets and included in the condensed consolidated statements of comprehensive income. 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 July 3, 2026, 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+ Negative 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 12 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 (in thousands) 2026 2025 Beginning balance - Level 3 liability $ 753,029 $ 681,800 Payments of acquisition related contingent consideration (18,056) (15,390) Reclassification to current payables 700 (3,500) Increase in fair value 24,723 12,390 Ending balance - Level 3 liability $ 760,396 $ 675,300 41 Cash Sources and Uses A summary of cash-based activity is as follows: First Half (in thousands) 2026 2025 Cash Sources: Net cash provided by operating activities (1) $ 420,647 $ 406,221 Proceeds from the sale of property, plant and equipment 334 6,277 Proceeds from the disposal of short-term investments — 224,485 Total cash sources $ 420,981 $ 636,983 Cash Uses: Payments on term loan facility $ 275,000 $ — Additions to property, plant and equipment 147,354 157,383 Payments of acquisition related contingent consideration 37,126 35,209 Cash dividends paid 33,282 43,589 Investment in equity method investees 9,927 10,594 Payments on financing lease obligations 275 1,320 Debt issuance fees 276 233 Purchases of short-term investments — 270,144 Payments related to share repurchases 27,972 34,410 Total cash uses $ 531,212 $ 552,882 Net (decrease) increase in cash and cash equivalents during period $ (110,231) $ 84,101 (1) Net cash provided by operating activities in the first half of 2026 included net income tax payments of $89.5 million and net interest payments of $66.1 million. 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. Cash Flows from Operating Activities During the first half of 2026, cash provided by operating activities was $420.6 million, which was an increase of $14.4 million as compared to the first half of 2025. Cash Flows from Investing Activities During the first half of 2026, cash used in investing activities was $156.9 million, which was a decrease of $50.4 million as compared to the first half of 2025. The decline in cash used in investing activities was primarily a result of the net outflow related to purchases and disposals of short-term investments of $45.7 million in the first half of 2025, as compared to no activity in the first half of 2026. Additions to property, plant and equipment were $147.4 million during the first half of 2026 and $157.4 million during the first half of 2025. There were $27.4 million and $34.8 million of additions to property, plant and equipment accrued in accounts payable, trade as of July 3, 2026 and June 27, 2025, 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 2026 will be approximately $300 million. Cash Flows from Financing Activities During the first half of 2026, cash used in financing activities was $373.9 million, which was an increase of $259 million as compared to the first half of 2025. The increase in cash used in financing activities was primarily driven by the repayment of $275 million of the $450 million aggregate principal balance outstanding under the Five-Year Term Loan Facility during the first half of 2026. The Company had cash payments for acquisition related contingent consideration of $37.1 million during the first half of 2026 and $35.2 million during the first half of 2025. For 2026, the Company estimates the annual sub-bottling payments will be in the 42 range of approximately $70 million to $80 million. For the next five future years (beginning with fiscal year 2027), the Company anticipates that the amount it could pay annually will be in the range of approximately $50 million to $70 million. Commodity Hedging Activities The Company uses commodity derivative instruments, where practicable, 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 each 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) 2026 2025 2026 2025 Increase (decrease) in cost of sales $ 6,447 $ (565) $ 2,135 $ 428 Increase (decrease) in SD&A expenses 5 (330) (11,948) (263) Net impact $ 6,452 $ (895) $ (9,813) $ 165 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 uncertainty around tariffs) 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, product safety and benefit programs, including SNAP; 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 tax laws, disagreements with tax authorities or additional tax liabilities; changes in legal contingencies; natural disasters, changing weather patterns and unfavorable weather, or the increased frequency of any such events due to 43 climate change, and public expectations around combatting 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 2025 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.