CHARLOTTE, N.C., May 08, 2018 -- Coca‑Cola Bottling Co. Consolidated reported operating results for the first quarter ended April 1, 2018.
Our Company delivered strong volume and sales growth during the first quarter of 2018. Volume increased to 78.0 million physical cases in Q1 2018, from 65.2 million physical cases in Q1 2017, an increase of 19.6%. Most of this growth was driven by acquisition (net of divestitures) results, as well as organic volume growth of 2.2%. In addition, we achieved price and mix realization greater than volume growth, which drove net sales growth of 23.8% for our total business and 2.4% organic growth. These results were driven by growth in both the sparkling and still beverage categories, with sparkling bottle/can sales growing 17.3% and still bottle/can sales growing 26.7%. While these volume and net sales results were strong, we believe poor weather and product sourcing challenges associated with our evolving integrated business platform exerted significant pressure on our Q1 2018 results, as compared to Q1 2017. This pressure was partially offset by the shift of the Easter holiday.
While volume and top line growth were strong, we experienced margin compression compared to the same period last year. Gross margin declined to 34.0% in Q1 2018 from 38.4% in Q1 2017. The primary drivers of this margin compression were (i) recent commodity and transportation cost pressures, (ii) the acquisition of new territories that generally experience margins lower than our legacy territories, and (iii) the continued volume shift to lower-margin still products to meet changing consumer preferences. We expect these drivers to continue throughout 2018, and we are taking pricing actions in certain markets to help offset the cost pressures. In addition to the operating headwinds in our business, structural changes in our underlying financial results reduced reported gross margin, which included (i) the amortization of our legacy distribution rights that converted from franchise rights in Q2 2017, and (ii) the new profit margin structure on sales to other Coca‑Cola bottlers as part of a Coca‑Cola system governance agreement. Incremental amortization expense related to converted legacy distribution rights in Q1 2018 totaled $2.2 million. Total sales to other Coca‑Cola bottlers in Q1 2018 totaled $101.7 million, as compared to $64.7 million in Q1 2017, an increase of $37.0 million or 57.2%.
Selling, delivery and administrative expenses increased by $66.8 million, or 21.1%, in Q1 2018 as compared to Q1 2017, reflecting the increased volume delivered, incremental effort and costs associated with managing two ERP systems and our continued costs to integrate our acquired territory into our overall business. While we were successful in leveraging our selling, delivery and administrative expenses on increased sales volume, we believe there are additional opportunities to secure scale advantages and further leverage our cost structure against our expanded territories. Initiatives are underway to address these scale opportunities, including both operational and back office synergies.
Income (loss) from operations in Q1 2018 was lower than in Q1 2017. We experienced an operating loss of $19.0 million in Q1 2018, as compared to operating income of $15.0 million in Q1 2017.
While we completed our system transformation acquisitions and divestitures in October 2017, we continue integrating the acquired distribution territories, manufacturing facilities and related operations and investing resources to improve efficiencies, capabilities and market share. While doing so, we are focused on balancing these investments with our overall financial management strategy and debt reduction goals. We have revised our capital spending plans for the balance of 2018 in order to optimize our focus on strategic capital priorities and operational initiatives. We now estimate spending between $160 million and $180 million on capital expenditures in 2018, as compared to our previous estimated range of $200 million to $230 million.
We also continue to devote significant time and resources to our system transformation work, particularly converting all of our legacy information technology systems to the new CONA system which, when completed, will enable us to operate on one integrated information technology system going forward. We expect this conversion to be completed later this year. During Q1 2018, we incurred non-recurring expenses relating to our system transformation of approximately $12.5 million, the majority of which were IT-related costs. We anticipate incurring an additional $30 million to $35 million of related expenses in the remainder of 2018.
About Coca‑Cola Bottling Co. Consolidated
Coca‑Cola Consolidated is the largest Coca-Cola bottler in the United States. Our Purpose is to honor God, serve others, pursue excellence and grow profitably. For more than 115 years, we have been deeply committed to the consumers, customers, and communities we serve and passionate about the broad portfolio of beverages and services we offer. We make, sell, and deliver beverages of The Coca‑Cola Company and other partner companies in more than 300 brands and flavors to 65 million consumers in territories spanning 14 states and the District of Columbia.
Headquartered in Charlotte, N.C., Coca‑Cola Consolidated is traded on the NASDAQ under the symbol COKE. More information about the company is available at www.cokeconsolidated.com. Follow Coca‑Cola Consolidated on Facebook, Twitter, Instagram and LinkedIn.
