SEC Filing | Coca-Cola Consolidated, Inc.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JULY 4, 1999 --------------------------------------- Commission File Number 0-9286 --------------------------------------- COCA-COLA BOTTLING CO. CONSOLIDATED (Exact name of registrant as specified in its charter) DELAWARE 56-0950585 (State or other jurisdiction of incorporation or (I.R.S. Employer organization) Identification Number) 4100 COCA-COLA PLAZA, CHARLOTTE, NORTH CAROLINA 28211 (Address of principal executive offices) (Zip Code) (704) 551-4400 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 30, 1999 ----- ---------------------------- Common Stock, $1 Par Value 6,392,252 Class B Common Stock, $1 Par Value 2,341,077

PART I - FINANCIAL INFORMATION Item l. Financial Statements Coca-Cola Bottling Co. Consolidated CONSOLIDATED BALANCE SHEETS (UNAUDITED) In Thousands (Except Share Data) July 4, Jan. 3, June 28, 1999 1999 1998 ---- ---- ---- ASSETS Current Assets: Cash $ 8,209 $ 6,691 $ 5,518 Accounts receivable, trade, less allowance for doubtful accounts of $649, $600 and $528 73,186 57,217 62,320 Accounts receivable from The Coca-Cola Company 9,793 10,091 12,971 Due from Piedmont Coca-Cola Bottling Partnership 6,187 127 Accounts receivable, other 5,542 7,997 7,752 Inventories 48,772 41,010 46,536 Prepaid expenses and other current assets 18,030 15,545 15,821 ---------- ---------- ---------- Total current assets 169,719 138,551 151,045 --------- --------- --------- Property, plant and equipment, net 446,286 258,329 257,417 Leased property under capital leases, net 12,368 Investment in Piedmont Coca-Cola Bottling Partnership 61,302 62,847 62,999 Other assets 62,627 51,576 45,879 Identifiable intangible assets, less accumulated amortization of $121,478, $116,015 and $110,630 285,119 253,156 257,757 Excess of cost over fair value of net assets of businesses acquired, less accumulated amortization of $31,995, $30,850 and $29,705 59,623 60,769 61,914 --------- ---------- --------- Total $1,097,044 $825,228 $837,011 ========== ======== ======== See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated CONSOLIDATED BALANCE SHEETS (UNAUDITED) In Thousands (Except Share Data) July 4, Jan. 3, June 28, 1999 1999 1998 ---- ---- ---- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Portion of long-term debt payable within one year $ 25,530 $ 30,115 $ 60,884 Current portion of obligations under capital leases 5,081 Accounts payable and accrued liabilities 76,942 72,623 67,117 Accounts payable to The Coca-Cola Company 5,052 5,194 9,985 Due to Piedmont Coca-Cola Bottling Partnership 435 Accrued compensation 6,964 10,239 4,944 Accrued interest payable 12,981 15,325 14,273 ---------- --------- --------- Total current liabilities 132,550 133,931 157,203 Deferred income taxes 116,748 120,659 115,680 Deferred credits 3,754 4,838 5,968 Other liabilities 63,136 58,780 57,074 Obligations under capital leases 6,087 Long-term debt 739,518 491,234 489,068 --------- -------- -------- Total liabilities 1,061,793 809,442 824,993 --------- -------- -------- Shareholders' Equity: Convertible Preferred Stock, $100 par value: Authorized-50,000 shares; Issued-None Nonconvertible Preferred Stock, $100 par value: Authorized-50,000 shares; Issued-None Preferred Stock, $.01 par value: Authorized-20,000,000 shares; Issued-None Common Stock, $1 par value: Authorized - 30,000,000 shares Issued - 9,454,626, 9,086,113 and 10,107,421 shares 9,454 9,086 10,107 Class B Common Stock, $1 par value: Authorized-10,000,000 shares Issued - 2,969,191, 2,969,222 and 1,947,914 shares 2,969 2,969 1,948 Class C Common Stock, $1 par value: Authorized-20,000,000 shares; Issued-None Capital in excess of par value 112,120 94,709 98,892 Accumulated deficit (28,038) (29,724) (37,675) ---------- ---------- ---------- 96,505 77,040 73,272 Less-Treasury stock, at cost: Common-3,062,374 shares 60,845 60,845 60,845 Class B Common-628,114 shares 409 409 409 ------------ ------------ ------------ Total shareholders' equity 35,251 15,786 12,018 ---------- ---------- ---------- Total $1,097,044 $825,228 $837,011 ========== ======== ======== See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) In Thousands (Except Per Share Data) Second Quarter First Half 1999 1998 1999 1998 ----------- ----------- ----------- -------- Net sales (includes sales to Piedmont of $20,129, $18,699, $35,310 and $30,902) $ 261,037 $ 241,415 $ 481,300 $ 444,746 Cost of sales, excluding depreciation shown below (includes $16,131, $13,621, $29,736 and $24,456 related to sales to Piedmont) 145,391 137,037 273,502 255,434 --------- ---------- --------- ---------- Gross margin 115,646 104,378 207,798 189,312 --------- ---------- --------- ---------- Selling expenses, excluding depreciation shown below 57,319 49,048 106,874 99,746 General and administrative expenses 17,540 17,740 36,209 33,521 Depreciation expense 14,266 9,111 28,914 17,891 Amortization of goodwill and intangibles 3,346 3,267 6,608 6,442 ---------- ----------- ----------- ------------ Income from operations 23,175 25,212 29,193 31,712 Interest expense 12,450 9,088 24,145 18,346 Other income (expense), net (1,239) (1,196) (2,454) (2,353) ----------- ----------- ----------- ----------- Income before income taxes 9,486 14,928 2,594 11,013 Federal and state income taxes 3,320 5,539 908 4,086 ----------- ----------- ----------- ----------- Net income $ 6,166 $ 9,389 $ 1,686 $ 6,927 ========== =========== ========== =========== Basic net income per share $ .72 $ 1.12 $ .20 $ .83 Diluted net income per share $ .71 $ 1.11 $ .20 $ .82 Weighted average number of common shares outstanding 8,519 8,365 8,442 8,365 Weighted average number of common shares outstanding - assuming dilution 8,638 8,496 8,563 8,495 See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) In Thousands Capital Class B in Common Common Excess of Accumulated Treasury Stock Stock Par Value Deficit Stock ----- ----- --------- ------- ----- Balance on December 28, 1997 $10,107 $ 1,948 $103,074 $ (44,602) $ 61,254 Net income 6,927 Cash dividends paid (4,182) Balance on ------- ------- --------- ---------- -------- June 28, 1998 $10,107 $ 1,948 $ 98,892 $ (37,675) $ 61,254 ======= ======= ========= ========== ======== Balance on January 3, 1999 $ 9,086 $ 2,969 $ 94,709 $ (29,724) $ 61,254 Net income 1,686 Cash dividends paid (4,182) Issuance of Common Stock 368 21,593 ------- -------- -------- --------- -------- Balance on July 4, 1999 $ 9,454 $ 2,969 $112,120 $ (28,038) $ 61,254 ======= ======== ======== ========== ======== See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) In Thousands First Half ------------------------ 1999 1998 --------- ---------- Cash Flows from Operating Activities Net income $ 1,686 $ 6,927 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation expense 28,914 17,891 Amortization of goodwill and intangibles 6,608 6,442 Deferred income taxes 908 4,086 Losses on sale of property, plant and equipment 1,425 1,445 Amortization of debt costs 378 297 Amortization of deferred gain related to terminated interest rate swaps (282) (282) Undistributed losses of Piedmont Coca-Cola Bottling Partnership 1,545 327 Increase in current assets less current liabilities (30,748) (21,142) Increase in other noncurrent assets (7,222) (2,968) (Decrease) increase in other noncurrent liabilities (3,397) 339 Other 10 (5) --------- --------- Total adjustments (1,861) 6,430 --------- --------- Net cash provided by (used in) operating activities (175) 13,357 --------- -------- Cash Flows from Financing Activities Proceeds from the issuance of long-term debt 248,283 (Decrease) increase in current portion of long-term debt (4,585) 48,884 Payments on long-term debt (4,721) Cash dividends paid (4,182) (4,182) Payments on capital lease obligations (2,409) Proceeds from interest rate swap termination 6,480 Debt fees paid (3,221) (11) Other (204) (67) --------- -------- Net cash provided by financing activities 233,682 46,383 --------- -------- Cash Flows from Investing Activities Additions to property, plant and equipment (213,663) (24,511) Proceeds from the sale of property, plant and equipment 60 656 Acquisition of companies, net of cash acquired (18,386) (34,794) --------- -------- Net cash used in investing activities (231,989) (58,649) --------- -------- Net increase in cash 1,518 1,091 Cash at beginning of period 6,691 4,427 --------- --------- Cash at end of period $ 8,209 $ 5,518 =========== ========= Significant noncash investing and financing activities: Issuance of Common Stock for business acquired $ 21,961 See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 1. Accounting Policies The consolidated financial statements include the accounts of Coca-Cola Bottling Co. Consolidated and its majority owned subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated. The information contained in the financial statements is unaudited. The statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal, recurring nature. The accounting policies followed in the presentation of interim financial results are the same as those followed on an annual basis. These policies are presented in Note 1 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended January 3, 1999 filed with the Securities and Exchange Commission. Certain prior year amounts have been reclassified to conform to current year classifications.

Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 2. Summarized Income Statement Data of Piedmont Coca-Cola Bottling Partnership On July 2, 1993, the Company and The Coca-Cola Company formed Piedmont Coca-Cola Bottling Partnership ("Piedmont") to distribute and market soft drink products primarily in portions of North Carolina and South Carolina. The Company and The Coca-Cola Company, through their respective subsidiaries, each beneficially own a 50% interest in Piedmont. The Company provides a portion of the soft drink products to Piedmont at cost and receives a fee for managing the business of Piedmont pursuant to a management agreement. Summarized income statement data for Piedmont is as follows: Second Quarter First Half In Thousands 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------------------------------- Net sales $74,645 $71,168 $137,971 $128,526 Gross margin 34,089 31,541 61,740 56,266 Income from operations 3,629 5,862 3,381 5,643 Net income (loss) 432 2,796 (3,090) (654) 3. Inventories Inventories are summarized as follows: July 4, Jan. 3, June 28, In Thousands 1999 1999 1998 - ------------------------------------------------------------------------------------------------------------------ Finished products $30,251 $26,300 $30,523 Manufacturing materials 13,313 10,382 12,545 Plastic pallets and other 5,208 4,328 3,468 --------- ------- ------- Total inventories $48,772 $41,010 $46,536 ======= ======= ======= The amounts included above for inventories valued by the LIFO method were greater than replacement or current cost by approximately $3.2 million, $3.2 million and $2.7 million on July 4, 1999, January 3, 1999 and June 28, 1998, respectively, as a result of inventory premiums associated with certain acquisitions.

Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 4. Property, Plant and Equipment The principal categories and estimated useful lives of property, plant and equipment were as follows: July 4, Jan. 3, June 28, Estimated In Thousands 1999 1999 1998 Useful Lives - --------------------------------------------------------------------------------------------------------------------------- Land $ 11,856 $ 11,781 $ 10,090 Buildings 82,945 81,527 80,013 10-50 years Machinery and equipment 90,587 84,047 80,193 5-20 years Transportation equipment 116,761 60,620 59,025 4-10 years Furniture and fixtures 29,533 26,395 26,883 7-10 years Vending equipment 279,872 152,163 148,329 6-13 years Leasehold and land improvements 34,538 33,894 31,467 5-20 years Construction in progress 21,502 4,532 7,861 - -------------------------------------------------------------------------------------------------------------------------- Total property, plant and equipment, at cost 667,594 454,959 443,861 Less: Accumulated depreciation 221,308 196,630 186,444 - -------------------------------------------------------------------------------------------------------------------------- Property, plant and equipment, net $446,286 $258,329 $257,417 - -------------------------------------------------------------------------------------------------------------------------- On January 15, 1999, the Company purchased approximately $155 million of equipment (principally vehicles and vending equipment) previously leased under various operating lease agreements. The assets purchased will continue to be used in the distribution and sale of the Company's products and will be depreciated over their remaining useful lives, which range from three years to 12.5 years. The Company used a combination of its revolving credit facility and its informal lines of credit with certain banks to finance this purchase. 5. Leased Property Under Capital Leases The category and terms of the capital leases were as follows: In Thousands July 4, 1999 Terms - -------------------------------------------------------------------------------------------------------- Transportation equipment $ 13,576 1-4 years Less: Accumulated amortization 1,208 --------- Leased property under capital leases, net $ 12,368 ========-

Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 6. Long-Term Debt Long-term debt is summarized as follows: Fixed(F) or Interest Variable Interest July 4, Jan 3, June 28, In Thousands Maturity Rate (V) Rate Paid 1999 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------ Lines of Credit 2002 5.28% - V Varies $60,000 $36,400 $34,200 5.39% Term Loan Agreement 2004 5.76% V Varies 85,000 85,000 85,000 Term Loan Agreement 2005 5.76% V Varies 85,000 85,000 85,000 Medium-Term Notes 1999 7.99% F Semi- 28,585 28,585 annually Medium-Term Notes 2000 10.00% F Semi- 25,500 25,500 25,500 annually Medium-Term Notes 2002 8.56% F Semi- 47,000 47,000 47,000 annually Debentures 2007 6.85% F Semi- 100,000 100,000 100,000 annually Debentures 2009 7.20% F Semi- 100,000 100,000 100,000 annually Debentures 2009 6.375% F Semi- 250,000 annually Other notes payable 1999 - 5.75% - F Varies 12,548 13,864 44,667 2001 10.00% ---------- --------- -------- 765,048 521,349 549,952 Less: Portion of long-term debt payable within one year 25,530 30,115 60,884 - ------------------------------------------------------------------------------------------------------------------------------ Long-term debt $739,518 $491,234 $489,068 - ------------------------------------------------------------------------------------------------------------------------------

Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 6. Long-Term Debt (cont.) It is the Company's intent to renew its lines of credit and borrowings under the revolving credit facility as they mature. To the extent that these borrowings do not exceed the amount available under the Company's $170 million revolving credit facility, they are classified as noncurrent liabilities. On October 12, 1994, a $400 million shelf registration for debt and equity securities filed with the Securities and Exchange Commission became effective and the securities thereunder became available for issuance. On November 1, 1995, the Company issued $100 million of 6.85% debentures due 2007 pursuant to such registration. In July 1997, the Company issued $100 million of 7.20% debentures due 2009. On April 26, 1999, the Company issued $250 million of 10-year debentures at a fixed interest rate of 6.375% under the Company's $800 million shelf registration filed in January 1999. The net proceeds from these issuances were used for refinancing a portion of existing public debt that had matured with the remainder used to repay other debt. The Company has guaranteed a portion of the debt for two cooperatives in which the Company is a member. The amounts guaranteed were $30.3 million, $30.7 million and $30.7 million as of July 4, 1999, January 3, 1999 and June 28, 1998, respectively.

Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 7. Derivative Financial Instruments The Company uses derivative financial instruments to modify risk from interest rate fluctuations in its underlying debt. The Company has historically altered its fixed/floating interest rate mix based upon anticipated operating cash flows of the Company relative to its debt level and the Company's ability to absorb increases in interest rates. These derivative financial instruments are not used for trading purposes. The Company had weighted average interest rates for its debt portfolio of approximately 6.7%, 7.3% and 7.1% as of July 4, 1999, January 3, 1999 and June 28, 1998, respectively. The Company's overall weighted average interest rate on its long-term debt decreased from an average of 7.1% during the second quarter of 1998 to an average of 6.3% during the second quarter of 1999. After taking into account the effect of all of the interest rate swap activities, approximately 32%, 23% and 28% of the total debt portfolio was subject to changes in short-term interest rates as of July 4, 1999, January 3, 1999 and June 28, 1998, respectively. A rate increase of 1% on the floating rate component of the Company's debt would have increased interest expense for the first half of 1999 by approximately $1.2 million and net income for the six months ended July 4, 1999 would have decreased by approximately $.8 million. Derivative financial instruments were as follows: July 4, 1999 January 3, 1999 June 28, 1998 ----------------------------------------------------------------------------------- Remaining Remaining Remaining In Thousands Amount Term Amount Term Amount Term --------------------------------------------------------------------------------------------------------------------- Interest rate swaps-floating $ 60,000 4.25 years $ 60,000 4.75 years $ 60,000 5.25 years Interest rate swaps-floating $ 50,000 9.75 years Interest rate swaps-floating $ 50,000 9.75 years Interest rate swaps-fixed $ 60,000 4.25 years 60,000 4.75 years 60,000 5.25 years Interest rate swaps-fixed $ 50,000 5.5 years 50,000 6 years 50,000 6.5 years Interest rate cap $ 35,000 1 year 35,000 1.5 years 35,000 2.0 years The Company entered into 10-year floating interest rate swap agreements for $100 million in April related to the 6.375% 10-year debentures issued on April 26, 1999.

Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 7. Derivative Financial Instruments (cont.) The carrying amounts and fair values of the Company's balance sheet and off-balance-sheet instruments were as follows: July 4, 1999 January 3, 1999 June 28, 1998 --------------------- --------------------- ------------------------- Carrying Fair Carrying Fair Carrying Fair In Thousands Amount Value Amount Value Amount Value - ------------------------------------------------------------------------------------------------------------------------------ Balance Sheet Instruments Public debt $522,500 $505,305 $301,085 $312,118 $301,085 $311,965 Non-public variable rate long-term debt 230,000 230,000 206,400 206,400 204,200 204,200 Non-public fixed rate long-term debt 12,548 13,293 13,864 14,476 44,667 45,429 Off-Balance-Sheet Instruments Interest rate swaps (4,441) (2,030) (397) Interest rate cap 5 10 18 The fair values of the interest rate swaps at July 4, 1999, January 3, 1999 and June 28, 1998 represent the estimated amounts the Company would have had to expense to terminate these agreements. The fair values of the interest rate cap at July 4, 1999, January 3, 1999 and June 28, 1998 represent the estimated amount the Company would have received upon termination of this agreement.

Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 8. Supplemental Disclosures of Cash Flow Information Changes in current assets and current liabilities affecting cash, net of effect of acquisition, were as follows: First Half --------------------------- In Thousands 1999 1998 - ---------------------------------------------------------------------------------------------------------------- Accounts receivable, trade, net $(14,601) $(6,444) Accounts receivable from The Coca-Cola Company 298 (8,281) Accounts receivable, other 2,564 1,069 Inventories (6,891) (7,610) Prepaid expenses and other current assets (2,562) (3,058) Accounts payable and accrued liabilities 2,826 (4,661) Accounts payable to The Coca-Cola Company (142) 5,877 Accrued compensation (3,274) (151) Accrued interest payable (2,344) 235 Due to (from) Piedmont Coca-Cola Bottling Partnership (6,622) 1,882 --------- -------- Increase in current assets less current liabilities $(30,748) $(21,142) ======== ======== 9. Acquisition On May 28, 1999, the Company acquired substantially all of the outstanding capital stock of Carolina Coca-Cola Bottling Company, Inc. ("Carolina") in exchange for 368,482 shares of the Company's Common Stock, installment notes and cash. The purchase price for all of the outstanding capital stock of Carolina was $36.6 million, as adjusted for required shareholders' equity of Carolina as of the acquisition date. The Company used its informal lines of credit for the cash portion of the acquisition. The acquisition has been accounted for under the purchase method of accounting.

Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 10. Earnings Per Share The following table sets forth the computation of basic net income per share and diluted net income per share: Second Quarter First Half ---------------- ------------------- In Thousands (Except Per Share Data) 1999 1998 1999 1998 - -------------------------------------------------------------------------- ---------------------------------------- NUMERATOR: Numerator for basic net income and diluted net income $ 6,166 $ 9,389 $ 1,686 $ 6,927 DENOMINATOR: Denominator for basic net income per share - weighted average common shares 8,519 8,365 8,442 8,365 Effect of dilutive securities - stock options 119 131 121 130 --------- --------- --------- --------- Denominator for diluted net income per share - adjusted weighted average common shares 8,638 8,496 8,563 8,495 ======== ======== ======== ======== Basic net income per share $ .72 $ 1.12 $ .20 $ .83 ========= ========== ========= ========= Diluted net income per share $ .71 $ 1.11 $ .20 $ .82 ========= ========== ========= ========= 11. Estimates and Assumptions The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION: The following discussion presents management's analysis of the results of operations for the second quarter and first six months of 1999 compared to the second quarter and first six months of 1998 and changes in financial condition from June 28, 1998 and January 3, 1999 to July 4, 1999. The Company reported net income of $6.2 million or $.72 per share for the second quarter of 1999 compared with net income of $9.4 million or $1.12 per share for the same period in 1998. For the first half of 1999, net income was $1.7 million or $.20 per share compared to net income of $6.9 million or $.83 per share for the first half of 1998. The first half and second quarter of 1999 were highlighted by solid volume growth, which significantly exceeded the U.S. soft drink industry average, and increased net selling prices. The volume growth of 6% in the first half of 1999 is on top of 11% volume growth for all of 1998. The decline in earnings from the first quarter and first half of the prior year reflects the Company's continued investment in its infrastructure to support accelerated growth. These investments include additional sales personnel, vehicles, cold drink equipment, additional support personnel required to service the cold drink equipment and additional facilities for corporate headquarters. The Company is also working on a Value Chain initiative which should improve the efficiency of its inventory management, warehousing and transportation of finished products. The Company plans to test the re-designed processes with a pilot project in the first quarter of 2000. Despite strong growth in gross margin, these significant infrastructure costs have adversely affected short-term operating results. The Company acquired substantially all of the outstanding capital stock of Carolina Coca-Cola Bottling Company, a Coca-Cola bottler with operations in central South Carolina, in May 1999. The Company also purchased the franchise rights and operating assets of a small Coca-Cola bottler in central North Carolina in May 1999. It is the Company's intention to continue to grow through acquisitions of other Coca-Cola bottlers. Acquisition related costs including interest expense and non-cash charges such as amortization of intangible assets may be incurred. To the extent these expenses are incurred and are not offset by cost savings or increased sales, the Company's acquisition strategy may depress short-term earnings. The Company believes that the continued growth through acquisition will enhance long-term shareholder value. The results for interim periods are not necessarily indicative of the results to be expected for the year due to seasonal factors. RESULTS OF OPERATIONS: The Company experienced strong growth in gross margin for the second quarter and first half of 1999. Gross margin increased by 11% for the second quarter and 10% for the first half of 1999

over the same periods in 1998. The growth in gross margin was attributable to volume growth of 6% and an increase in net selling price of 1.7%. Net sales for the second quarter and first half increased 8% over the same periods in 1998. Sales related to the 4th of July holiday impacted the second quarter in 1999 versus the third quarter in 1998. The volume and sales gains for the second quarter and first half of 1998 were primarily attributable to targeted marketing programs with key accounts and the Company's significant investments in cold drink equipment. Net selling prices were up 1.7% for the second quarter and first half of 1999. Sprite sales volume continued to grow at a double-digit rate. Non-carbonated beverages experienced significant volume growth in the first half of 1999. The growth in non-carbonated beverages (excluding bottled water), including POWERaDE, Fruitopia, Minute Maid Juices To Go and Cool from Nestea, is on top of 70% volume growth for all of 1998. The Company introduced The Coca-Cola Company's new bottled water, Dasani, on April 1, 1999. Non-carbonated products including bottled water, currently account for over 6% of the Company's total sales volume. Selling expenses for the second quarter and first half of 1999 increased by 17% and 7%, respectively, from 1998 levels. The increase in selling costs reflects additional expenses related to the Company's higher sales volume and continued investment in its infrastructure. Significant components of the increased costs include employment costs for additional sales personnel, increased commission costs related to higher sales volume, additional personnel and vehicle costs for employees to support the Company's cold drink program as well as additional purchases of cold drink equipment and additional marketing expenses related to the Company's sales development programs. The Company has made a significant investment in its sales force and anticipates that over time the increases in sales revenue from this investment will outpace the growth in costs. The significant growth in selling expenses reflects the Company's commitment to higher levels of growth. During January 1999, the Company purchased $155 million of equipment that had previously been leased. As a result of this transaction, lease expense for the second quarter and first half of 1999 declined by $4.3 million and $7.7 million, respectively. Additionally, the terms of certain leases that were previously recorded as operating leases were changed during the first quarter of 1999. Due to the changes in the terms of the leases, they are now reflected in the Company's financial statements as capital leases. As of July 4, 1999, leased property under capital leases, net of accumulated amortization, was $12.4 million. The Company relies extensively on advertising and sales promotion in the marketing of its products. The Coca-Cola Company and other beverage companies that supply concentrate, syrups and finished products to the Company make substantial advertising expenditures to promote sales in the local territories served by the Company. The Company also benefits from national advertising programs conducted by The Coca-Cola Company and other beverage companies. Certain of the marketing expenditures by The Coca-Cola Company and other beverage companies are made pursuant to annual arrangements. Although The Coca-Cola Company has advised the Company that it intends to provide marketing funding support in 1999, it is not obligated to do so under the Company's Master Bottle Contract. Also, The Coca-Cola Company has agreed to

provide additional marketing funding under a multi-year program to support the Company's cold drink infrastructure. Total marketing funding and infrastructure support for bottle and can products from The Coca-Cola Company and other beverage companies in the first half of 1999 and 1998 was $26.7 million and $25.8 million, respectively. General and administrative expenses for the first six months of 1999 increased by 8% over 1998 first half levels. The increase in general and administrative expense was due to hiring of additional support personnel to support growth, management incentive programs for certain employees that were not in place during the first half of 1998, higher employment costs in certain of the Company's labor markets and expanded corporate headquarters facilities. Depreciation expense increased 57% and 62% between the second quarter and first half of 1999 and the comparable periods in 1998. This increase was due primarily to the purchase of previously leased equipment, as discussed above, and to the significant investments the Company continues to make in cold drink equipment. In addition, the Company invested in additional manufacturing equipment in order to produce its new bottled water, Dasani. Interest expense during the second quarter of 1999 increased 37% from the second quarter of 1998. Interest expense for the first half of 1999 increased by 32% over the first half of 1998. The increase in interest expense for both the second quarter and the first half of 1999 is primarily attributable to the purchase of assets that were previously leased, as discussed above, and additional debt related to acquisitions of other Coca-Cola bottlers during 1998 and 1999. The Company's overall weighted average interest rate decreased from an average of 7.1% during the first half of 1998 to an average of 6.3% during the first half of 1999. CHANGES IN FINANCIAL CONDITION: Working capital increased $32.5 million from January 3, 1999 and $43.3 million from June 28, 1998 to July 4, 1999. The increase in working capital from January 3, 1999 is primarily attributable to growth in sales volume, seasonal increases in trade accounts receivable and inventories, an increase in the amount due from Piedmont Coca-Cola Bottling Partnership of $6.6 million and a decrease in the current portion of long-term debt of $4.6 million. The working capital increase of $43.3 million from June 28, 1998 is primarily attributable to a decrease in the current portion of long-term debt of $35.4 million and an increase in trade accounts receivable of $10.9 million. The decrease in the current portion of long-term debt reflects the refinancing of maturing Medium-Term Notes and other short-term borrowings. The increase in trade accounts receivable is due to the higher sales volume the Company has experienced. Capital expenditures in the first half of 1999 were $213.7 million compared to $24.5 million in the first half of 1998. The significant increase in capital expenditures in the first half of 1999 relates primarily to the purchase of approximately $155 million of previously leased equipment. In addition, the Company is purchasing its fleet requirements in 1999. The Company leased additions to fleet during 1998.

Long-term debt increased by $250.5 million from June 28, 1998 and $248.3 million from January 3, 1999. The increases from June 28, 1998 and January 3, 1999 are due primarily to the purchase of approximately $155 million of previously leased equipment discussed above, the acquisitions of other Coca-Cola bottlers and the refinancing of debt classified as a current liability at June 28, 1998 and January 3, 1999. It is the Company's intent to renew any borrowings under its $170 million revolving credit facility and the informal lines of credit as they mature and, to the extent that any borrowings under the revolving credit facility and the informal lines of credit do not exceed the amount available under the Company's $170 million revolving credit facility, they are classified as noncurrent liabilities. As of July 4, 1999, the Company had no amounts outstanding under the revolving credit facility and $60 million outstanding under the informal lines of credit. On April 26, 1999 the Company issued $250 million of 10-year debentures at a fixed rate of 6.375% under the Company's $800 million shelf registration filed in January 1999. The Company subsequently entered into 10-year floating interest rate swap agreements on $100 million of the newly issued debentures. The proceeds from the issuance of debentures were used to refinance the borrowings used to finance the buyout of the operating leases discussed above, refinance certain Medium-Term Notes that matured and repay other corporate borrowings. As of July 4, 1999 the debt portfolio had a weighted average interest rate of approximately 6.7% and approximately 32% of the total portfolio of $765 million was subject to changes in short-term interest rates. On May 28, 1999 the Company acquired substantially all of the outstanding capital stock of Carolina Coca-Cola Bottling Company, Inc. ("Carolina") in exchange for 368,482 shares of the Company's Common Stock, installment notes and cash. The purchase price for all of the outstanding capital stock of Carolina was $36.6 million, as adjusted for required shareholders' equity of Carolina as of the acquisition date. The Company used its informal lines of credit for the cash portion of the acquisition. The acquisition has been accounted for under the purchase method of accounting. Management believes that the Company, through the generation of cash flow from operations and the utilization of unused borrowing capacity, has sufficient financial resources available to maintain its current operations and provide for its current capital expenditure requirements. The Company considers the acquisition of additional bottling territories on an ongoing basis. YEAR 2000: Since many computer systems and other equipment with embedded chips or processors (collectively, "business systems") use only two digits to represent the year, these business systems may be unable to process accurately certain data before, during or after the year 2000. As a result, business and governmental entities are at risk for possible miscalculations or systems failures causing disruptions in their business operations. This is commonly known as the Year

2000 issue. The Year 2000 issue can arise at any point in the Company's supply, manufacturing, distribution and financial chains. The Company began work on the Year 2000 issue in 1997. The scope of the project includes: ensuring the compliance of all applications, operating systems and hardware on mainframe, PC and LAN platforms; addressing issues related to non-IT embedded software and equipment and addressing the compliance of key suppliers and customers. The project has four phases: assessment of systems and equipment affected by the Year 2000 issue; definition of strategies to address affected systems and equipment; remediation or replacement of affected systems and equipment and testing that each is Year 2000 compliant. With respect to ensuring the compliance of all applications, operating systems and hardware on the Company's various computer platforms, the assessment and definition of strategies phases have been completed. It is estimated that more than 95% of the remediation or replacement phase has been completed with the balance of this phase expected to be completed by September 1999. The testing phase is approximately 95% complete and is expected to be completed by the end of the third quarter of 1999. Approximately 80% of the internal application development resources were committed to Year 2000 remediation efforts in 1997, 1998 and the first quarter of 1999. Approximately 70% of the Company's internal application development resources were committed to this effort in the second quarter of 1999. In the third quarter of 1999, the Company expects approximately 20% of its internal application development resources will be committed to the Year 2000 issue. The Company has also utilized contract programmers to identify Year 2000 noncompliance problems and modify code. With respect to addressing issues related to non-IT embedded software and equipment, which principally exists in the Company's four manufacturing plants, the assessment and definition of strategies phases have been completed. Approximately 95% of the remediation or replacement phase has been completed with the balance of this phase expected to be completed by the end of August 1999. Testing is approximately 95% complete and should be completed by the end of third quarter of 1999. The Company relies on third party suppliers for raw materials, water, utilities, transportation and other key services. Interruption of supplier operations due to Year 2000 issues could affect the Company operations. The Company plans to accumulate additional inventory in its warehouses as a means of mitigating somewhat the risk of business interruption due to supplier failures. Also, the Company has completed its review and evaluation of its critical suppliers' Year 2000 readiness and has received satisfactory responses from all of its mission critical suppliers. The Company is also dependent upon our customers for sales and cash flow. Year 2000 interruptions in our customers' operations could result in reduced sales, increased inventory or receivable levels, increased bad debt write-offs and cash flow reductions. While these events are possible, the Company's customer base is broad enough to minimize the effects of a single occurrence.

The Company is in the process of developing contingency plans for those areas that are mission critical to our business. These contingency plans will be designed to mitigate serious disruptions to our business flow beyond the end of 1999, where possible. The major efforts related to contingency planning are expected to be completed by the end of third quarter 1999. Contingency plan manuals will be distributed and reviewed with key management personnel during the fourth quarter of 1999. It is currently estimated that the aggregate cost of the Company's Year 2000 efforts will be approximately $5.0 million to $5.5 million, of which approximately $4.2 million has been spent to date. These costs are being expensed as they are incurred and are being funded through operating cash flow. These costs do not include any costs associated with the implementation of contingency plans, which are currently being developed. The costs associated with the replacement of computerized systems, hardware or equipment (currently estimated to be $4.8 million), substantially all of which would be capitalized, are not included in the above estimates. The Company's Year 2000 program is an ongoing process and the estimates of costs and completion dates for various components of the program described above are subject to change. The failure to correct a material Year 2000 issue could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures could materially and adversely affect the Company's results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the Year 2000 issue, resulting in part from the uncertainty of the Year 2000 readiness of third-party suppliers and customers, the Company is unable to determine at this time whether the consequences of Year 2000 failures will have a material impact on the Company's results of operations, liquidity or financial condition. FORWARD-LOOKING STATEMENTS: This Quarterly Report on Form 10-Q, as well as information included in, or incorporated by reference from, future filings by the Company with the Securities and Exchange Commission and information contained in written material, press releases and oral statements issued by or on behalf of the Company, contains, or may contain, certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such "forward-looking statements" include information relating to, among other matters, the Company's future prospects, developments and business strategies for its operations. These forward-looking statements are identified by their use of terms and phrases such as "expect", "estimate", "project", "believe" and similar terms and phrases. Such forward-looking statements are contained in various sections of this Quarterly Report. These statements are based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors they believe are appropriate under the circumstances, and involve risks and uncertainties that may cause actual future activities and results of operations to be materially

different from that suggested or described in this Quarterly Report or in such other documents. These risks include, but are not limited to (A) risks associated with any changes in the historical level of marketing funding support which the Company receives from the The Coca-Cola Company, (B) risks associated with interruptions in the Company's business operations as a result of any failure to adequately correct the Year 2000 computer problem in any systems or equipment of the Company or a similar problem in one of its major suppliers or customers and (C) other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. You are cautioned that any such statements are not guarantees of future performance. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary from those expected, estimated or projected.

PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of the Company's shareholders was held on May 12, 1999. (b) The meeting was held to consider and vote upon (i) fixing the number of the Company's directors at ten, (ii) electing three directors, each for a term of three years or until his successor shall be elected and shall qualify, and (iii) approving an award of restricted stock to the Company's Chief Executive Officer, in order to permit such award to qualify as "performance-based" compensation within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. The votes cast on the question of fixing the number of directors at ten are summarized as follows: For Against Abstain Total Votes --- ------- ------- ----------- 51,806,863 14,300 4,216 51,825,379 The votes cast with respect to each director are summarized as follows: Director Name For Abstain Total Votes ------------- --- ------- ----------- John M. Belk 51,810,172 15,207 51,825,379 Charles L. Wallace 51,810,128 15,251 51,825,379 Reid M. Henson 51,809,435 15,944 51,825,379 The votes cast for approving the Restricted Stock Award are summarized as follows: For Against Abstain Total Votes ---- ------- ------- ----------- 51,664,018 143,913 17,448 51,825,379

Item 6. Exhibits and Reports on Form 10-Q (a) Exhibits Exhibit No. Description 4.1 The Registrant, by signing this report, agrees to furnish the Securities and Exchange Commission, upon its request, a copy of any instrument which defines the rights of holders of long-term debt of the Registrant and its subsidiaries for which consolidated financial statements are required to be filed, and which authorizes a total amount of securities not in excess of 10 percent of total assets of the Registrant and its subsidiaries on a consolidated basis. 10.1 Amendment to Soft Toll Agreement dated as of July 1, 1999 between Alcoa, Inc. and the Company. 27 Financial data schedule for period ended July 4, 1999. (b) Reports on Form 8-K None.

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COCA-COLA BOTTLING CO. CONSOLIDATED (REGISTRANT) Date: August 17, 1999 By: /s/ David V. Singer ---------------------------------------- David V. Singer Principal Financial Officer of the Registrant and Vice President - Chief Financial Officer

[COCA-COLA LOGO APPEARS HERE] James L. Moore President and C.O.O. July 1, 1999 Mr. Michael Coleman, President Alcoa RPD Division 900 South Gay Street Suite 1100 Knoxville, Tennessee 37902 Subject: Amendment to Soft Toll Agreement (Agreement) Dear Mike: Confirming our companies' recent conversation about can promotional activities, both parties have agreed to modify the Agreement as noted below: 1. Sections 7 and 9 shall be eliminated in their entirety; and 2. The Coca-Cola Bottling Co. Consolidated (CCBCC) Metal Cost (as defined in the Agreement) shall be subject to an $0.85 midwest ceiling for the term of the Agreement at no cost to CCBCC; all other provisions of Exhibit I shall remain in full force and effect. Enclosed are three signed originals of this letter amendment. Please indicate your agreement to the above by executing where indicated and returning one original to me, and another original to Ken Carty. Sincerely, James L. Moore President and C.O.O. cc: File Coca-Cola Bottling Co. Consolidated ALCOA, Inc. By: /s/ James L. Moore By: /s/ Mike Coleman ------------------- ------------------ Title: President and COO Title: Vice President ------------------ --------------- Date: July 1, 1999 Date: July 1, 1999 ------------------- ---------------- 4100 Coca-Cola Plaza, (704) 551-4603 P.O. Box 31487, Charlotte, North Carolina 28211 Charlotte, North Carolina 28231

5 This schedule contains summary financial information extracted from the financial statements as of and for the six months ended July 4, 1999 and is qualified in its entirety by reference to such financial statements. 0000317540 Coca-Cola Bottling Co. Consolidated 1,000 U.S. Dollars 6-MOS JAN-02-2000 JAN-04-1999 JUL-04-1999 1 8,209 0 73,835 649 48,772 169,719 667,594 221,308 1,097,044 132,550 739,518 12,423 0 0 22,828 1,097,044 481,300 481,300 273,502 273,502 178,605 0 24,145 2,594 908 1,686 0 0 0 1,686 0.20 0.20