UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2008

COCA-COLA BOTTLING CO. CONSOLIDATED

(Exact name of registrant as specified in its charter)

Delaware		56-0950585
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4100 Coca-Cola Plaza, Charlotte, North Carolina 28211
(Address of principal executive offices) (Zip Code)

(704) 557-4400
(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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

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 31, 2008
Common Stock, $1.00 Par Value					6,643,677
Class B Common Stock, $1.00 Par Value					2,499,652

 

 

COCA-COLA BOTTLING CO. CONSOLIDATED
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 29, 2008

INDEX

				Page
		PART I — FINANCIAL INFORMATION
Item 1.		Financial Statements (Unaudited)
		Consolidated Statements of Operations			3
		Consolidated Balance Sheets			4
		Consolidated Statements of Changes in Stockholders’ Equity			6
		Consolidated Statements of Cash Flows			7
		Notes to Consolidated Financial Statements			8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			34
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			57
Item 4.		Controls and Procedures			58
		PART II — OTHER INFORMATION
Item 1A.		Risk Factors			59
Item 4.		Submission of Matters to a Vote of Security Holders			59
Item 6.		Exhibits			60
		Signatures			61
Exhibit 12
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I — FINANCIAL INFORMATION

Item l. Financial Statements.

Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
In Thousands (Except Per Share Data)

		Second Quarter								First Half
		2008				2007				2008				2007
Net sales		$	396,003			$	390,443			$	733,677			$	727,999
Cost of sales			224,123				221,153				421,879				407,218
Gross margin			171,880				169,290				311,798				320,781
Selling, delivery and administrative expenses			135,673				136,796				271,916				267,738
Income from operations			36,207				32,494				39,882				53,043
Interest expense			9,949				12,294				20,383				24,512
Minority interest			1,360				1,169				1,021				1,850
Income before income taxes			24,898				19,031				18,478				26,681
Income tax provision			9,743				7,340				7,658				10,339
Net income		$	15,155			$	11,691			$	10,820			$	16,342
Basic net income per share:
Common Stock		$	1.66			$	1.28			$	1.18			$	1.79
Weighted average number of Common Stock shares outstanding			6,644				6,644				6,644				6,643
Class B Common Stock		$	1.66			$	1.28			$	1.18			$	1.79
Weighted average number of Class B Common Stock shares outstanding			2,500				2,480				2,500				2,480
Diluted net income per share:
Common Stock		$	1.65			$	1.28			$	1.18			$	1.79
Weighted average number of Common Stock shares outstanding — assuming dilution			9,164				9,143				9,157				9,137
Class B Common Stock		$	1.65			$	1.28			$	1.18			$	1.79
Weighted average number of Class B Common Stock shares outstanding — assuming dilution			2,520				2,500				2,513				2,494
Cash dividends per share:
Common Stock		$	.25			$	.25			$	.50			$	.50
Class B Common Stock		$	.25			$	.25			$	.50			$	.50

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated
CONSOLIDATED BALANCE SHEETS
In Thousands (Except Share Data)

		Unaudited								Unaudited
		June 29,				Dec. 30,				July 1,
		2008				2007				2007
ASSETS
Current Assets:
Cash and cash equivalents		$	9,323			$	9,871			$	71,149
Accounts receivable, trade, less allowance for doubtful accounts of $916, $1,137 and $1,024, respectively			118,292				92,499				109,977
Accounts receivable from The Coca-Cola Company			17,243				3,800				22,660
Accounts receivable, other			11,381				7,867				10,296
Inventories			69,467				63,534				66,347
Prepaid expenses and other current assets			22,645				20,758				17,444
Total current assets			248,351				198,329				297,873
Property, plant and equipment, net			358,799				359,930				365,167
Leased property under capital leases, net			68,797				70,862				72,929
Other assets			38,058				35,655				36,767
Franchise rights, net			520,672				520,672				520,672
Goodwill, net			102,049				102,049				102,049
Other identifiable intangible assets, net			4,082				4,302				4,524
Total		$	1,340,808			$	1,291,799			$	1,399,981

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated
CONSOLIDATED BALANCE SHEETS
In Thousands (Except Share Data)

		Unaudited								Unaudited
		June 29,				Dec. 30,				July 1,
		2008				2007				2007
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current portion of debt		$	119,253			$	7,400			$	100,000
Current portion of obligations under capital leases			2,690				2,602				2,517
Accounts payable, trade			45,457				51,323				41,379
Accounts payable to The Coca-Cola Company			40,882				11,597				35,990
Other accrued liabilities			56,321				54,511				57,864
Accrued compensation			14,446				23,447				15,598
Accrued interest payable			7,504				8,417				10,021
Total current liabilities			286,553				159,297				263,369
Deferred income taxes			169,664				168,540				157,440
Pension and postretirement benefit obligations			34,452				32,758				57,489
Other liabilities			96,311				93,632				96,539
Obligations under capital leases			76,246				77,613				78,936
Long-term debt			502,197				591,450				591,450
Total liabilities			1,165,423				1,123,290				1,245,223
Commitments and Contingencies (Note 14)
Minority interest			49,026				48,005				47,853
Stockholders’ Equity:
Common Stock, $1.00 par value:
Authorized — 30,000,000 shares; Issued — 9,706,051, 9,706,051 and 9,706,051 shares, respectively			9,706				9,706				9,706
Class B Common Stock, $1.00 par value:
Authorized — 10,000,000 shares; Issued —3,127,766, 3,107,766 and 3,107,766 shares, respectively			3,127				3,107				3,107
Capital in excess of par value			102,449				102,469				101,711
Retained earnings			85,322				79,227				80,275
Accumulated other comprehensive loss			(12,991	)			(12,751	)			(26,640	)
			187,613				181,758				168,159
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 stockholders’ equity			126,359				120,504				106,905
Total		$	1,340,808			$	1,291,799			$	1,399,981

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
In Thousands

										Capital								Accumulated
						Class B				in								Other
		Common				Common				Excess of				Retained				Comprehensive				Treasury
		Stock				Stock				Par Value				Earnings				Loss				Stock				Total
Balance on December 31, 2006		$	9,705			$	3,088			$	101,145			$	68,495			$	(27,226	)		$	(61,254	)		$	93,953
Comprehensive income:
Net income															16,342												16,342
Foreign currency translation adjustments, net of tax																			2								2
Pension and postretirement benefit adjustments, net of tax																			584								584
Total comprehensive income																											16,928
Cash dividends paid Common ($.50 per share)															(3,322	)											(3,322	)
Class B Common ($.50 per share)															(1,240	)											(1,240	)
Issuance of 20,000 shares of Class B Common Stock							20				(20	)															—
Stock compensation expense											586																586
Conversion of Class B Common Stock into Common Stock			1				(1	)																			—
Balance on July 1, 2007		$	9,706			$	3,107			$	101,711			$	80,275			$	(26,640	)		$	(61,254	)		$	106,905
Balance on December 30, 2007		$	9,706			$	3,107			$	102,469			$	79,227			$	(12,751	)		$	(61,254	)		$	120,504
Comprehensive income:
Net income															10,820												10,820
Foreign currency translation adjustments, net of tax																			7								7
Pension and postretirement benefit adjustments, net of tax																			(133	)							(133	)
Total comprehensive income																											10,694
Adjustment to change measurement date for SFAS No. 158, net of tax															(153	)			(114	)							(267	)
Cash dividends paid Common ($.50 per share)															(3,322	)											(3,322	)
Class B Common ($.50 per share)															(1,250	)											(1,250	)
Issuance of 20,000 shares of Class B Common Stock							20				(20	)															—
Balance on June 29, 2008		$	9,706			$	3,127			$	102,449			$	85,322			$	(12,991	)		$	(61,254	)		$	126,359

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
In Thousands

		First Half
		2008				2007
Cash Flows from Operating Activities
Net income		$	10,820			$	16,342
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense			33,649				33,572
Amortization of intangibles			220				223
Deferred income taxes			7,658				2,023
(Gain) loss on sale of property, plant and equipment			851				(113	)
Amortization of debt costs			1,225				1,412
Amortization of deferred gain related to terminated interest rate agreements			(853	)			(848	)
Stock compensation expense			—				586
Minority interest			1,021				1,850
Increase in current assets less current liabilities			(34,324	)			(18,734	)
Increase in other noncurrent assets			(2,490	)			(645	)
Decrease in other noncurrent liabilities			(2,580	)			(6,486	)
Other			(152	)			—
Total adjustments			4,225				12,840
Net cash provided by operating activities			15,045				29,182
Cash Flows from Investing Activities
Additions to property, plant and equipment			(31,570	)			(19,014	)
Proceeds from the sale of property, plant and equipment			266				6,918
Investment in plastic bottle manufacturing cooperative			(968	)			(1,629	)
Net cash used in investing activities			(32,272	)			(13,725	)
Cash Flows from Financing Activities
Borrowing under revolving credit facility			30,000				—
Repayments of lines of credit			(7,400	)			—
Cash dividends paid			(4,572	)			(4,562	)
Principal payments on capital lease obligations			(1,279	)			(1,197	)
Other			(70	)			(372	)
Net cash provided by (used in) financing activities			16,679				(6,131	)
Net increase (decrease) in cash			(548	)			9,326
Cash at beginning of period			9,871				61,823
Cash at end of period		$	9,323			$	71,149
Significant non-cash investing and financing activities:
Issuance of Class B Common Stock in connection with stock award		$	1,171			$	929
Capital lease obligations incurred			—				5,144

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

1. Significant 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 consolidated financial 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 preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States 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.

The accounting policies followed in the presentation of interim financial results are consistent with 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 December 30, 2007 filed with the United States Securities and Exchange Commission.

Certain prior year amounts have been reclassified to conform to current classifications.

2. Seasonality of Business

Historically, operating results for the second quarter and first half of the fiscal year have not been representative of results for the entire fiscal year. Business seasonality results primarily from higher unit sales of the Company’s products in the second and third quarters versus the first and fourth quarters of the fiscal year. Fixed costs, such as depreciation expense, are not significantly impacted by business seasonality.

3. 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 nonalcoholic beverages primarily in portions of North Carolina and South Carolina. 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. These intercompany transactions are eliminated in the consolidated financial statements.

Minority interest as of June 29, 2008, December 30, 2007 and July 1, 2007 represents the portion of Piedmont owned by The Coca-Cola Company, which was 22.7% for all periods presented.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

4. Inventories

Inventories were summarized as follows:

		June 29,				Dec. 30,				July 1,
In Thousands		2008				2007				2007
Finished products		$	43,652			$	37,649			$	40,459
Manufacturing materials			8,431				9,198				8,685
Plastic shells, plastic pallets and other inventories			17,384				16,687				17,203
Total inventories		$	69,467			$	63,534			$	66,347

5. Property, Plant and Equipment

The principal categories and estimated useful lives of property, plant and equipment were as follows:

		June 29,				Dec. 30,				July 1,				Estimated
In Thousands		2008				2007				2007				Useful Lives
Land		$	12,278			$	12,280			$	12,380
Buildings			111,104				110,721				110,771			10-50 years
Machinery and equipment			117,176				106,180				101,347			5-20 years
Transportation equipment			178,142				174,882				175,837			4-13 years
Furniture and fixtures			38,691				38,350				41,125			4-10 years
Cold drink dispensing equipment			328,683				323,629				327,180			6-13 years
Leasehold and land improvements			60,877				60,023				58,134			5-20 years
Software for internal use			54,156				51,681				48,682			3-10 years
Construction in progress			5,101				6,635				2,808
Total property, plant and equipment, at cost			906,208				884,381				878,264
Less: Accumulated depreciation and amortization			547,409				524,451				513,097
Property, plant and equipment, net		$	358,799			$	359,930			$	365,167

Depreciation and amortization expense was $33.6 million in both the first half of 2008 (“YTD 2008”) and the first half of 2007 (“YTD 2007”). This amount included amortization expense for leased property under capital leases.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

6. Leased Property Under Capital Leases

Leased property under capital leases was summarized as follows:

		June 29,				Dec. 30,				July 1,				Estimated
In Thousands		2008				2007				2007				Useful Lives
Leased property under capital leases		$	88,619			$	88,619			$	88,619			3-29 years
Less: Accumulated amortization			19,822				17,757				15,690
Leased property under capital leases, net		$	68,797			$	70,862			$	72,929

As of June 29, 2008, real estate represented all of the leased property under capital leases and $63.1 million of this real estate is leased from related parties as described in Note 19 to the consolidated financial statements.

7. Franchise Rights and Goodwill

There was no change in franchise rights and goodwill in the periods presented.

8. Other Identifiable Intangible Assets

Other identifiable intangible assets were summarized as follows:

		June 29,				Dec. 30,				July 1,				Estimated
In Thousands		2008				2007				2007				Useful Lives
Other identifiable intangible assets		$	6,599			$	6,599			$	6,599			1-16 years
Less: Accumulated amortization			2,517				2,297				2,075
Other identifiable intangible assets, net		$	4,082			$	4,302			$	4,524

Other identifiable intangible assets primarily represent customer relationships.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

9. Other Accrued Liabilities

Other accrued liabilities were summarized as follows:

		June 29,				Dec. 30,				July 1,
In Thousands		2008				2007				2007
Accrued marketing costs		$	9,173			$	6,787			$	6,524
Accrued insurance costs			15,068				14,228				11,907
Accrued taxes (other than income taxes)			3,048				502				3,244
Accrued income taxes			2,503				—				4,159
Employee benefit plan accruals			7,221				9,933				8,123
Checks and transfers yet to be presented for payment from zero balance cash account			10,840				13,279				13,766
All other accrued liabilities			8,468				9,782				10,141
Total other accrued liabilities		$	56,321			$	54,511			$	57,864

10. Debt

Debt was summarized as follows:

						Interest				Interest				June 29,				Dec. 30,				July 1,
In Thousands		Maturity				Rate				Paid				2008				2007				2007
Lines of Credit			2008				—			Varies				$	—			$	7,400			$	—
Revolving Credit Facility			2012				2.91%			Varies					30,000				—				—
Debentures			2007				—			Semi-annually					—				—				100,000
Debentures			2009				7.20%			Semi-annually					57,440				57,440				57,440
Debentures			2009				6.375%			Semi-annually					119,253				119,253				119,253
Senior Notes			2012				5.00%			Semi-annually					150,000				150,000				150,000
Senior Notes			2015				5.30%			Semi-annually					100,000				100,000				100,000
Senior Notes			2016				5.00%			Semi-annually					164,757				164,757				164,757
															621,450				598,850				691,450
Less: Current portion of debt															119,253				7,400				100,000
Long-term debt														$	502,197			$	591,450			$	591,450

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

10. Debt

On March 8, 2007, the Company entered into a $200 million revolving credit facility (the “$200 million facility”), replacing its $100 million facility. The $200 million facility matures in March 2012 and includes an option to extend the term for an additional year at the discretion of the participating banks. The $200 million facility bears interest at a floating base rate or a floating rate of LIBOR plus an interest rate spread of .35%. In addition, the Company must pay an annual facility fee of .10% of the lenders’ aggregate commitments under the facility. Both the interest rate spread and the facility fee are determined from a commonly-used pricing grid based on the Company’s long-term senior unsecured debt rating. The $200 million facility contains two financial covenants: a fixed charge coverage ratio and a debt to operating cash flow ratio, each as defined in the credit agreement. The Company is currently in compliance with these covenants. On June 29, 2008, the Company had $30.0 million outstanding under the $200 million facility. On December 30, 2007 and July 1, 2007, the Company had no amounts outstanding under the $200 million facility.

The Company borrows periodically under an uncommitted line of credit. This uncommitted line of credit, totaling $35 million at June 29, 2008, is made available at the discretion of a participating bank and may be withdrawn at any time by such bank. The Company uses the $200 million facility to provide appropriate liquidity when the uncommitted line of credit is unavailable. On June 29, 2008 and July 1, 2007, there were no amounts outstanding under the uncommitted lines of credit. On December 30, 2007, $7.4 million was outstanding under uncommitted lines of credit.

After taking into account all of its interest rate hedging activities, the Company had a weighted average interest rate of 5.4%, 6.2% and 6.7% for its debt and capital lease obligations as of June 29, 2008, December 30, 2007 and July 1, 2007, respectively. The Company’s overall weighted average interest rate on its debt and capital lease obligations was 5.8% for YTD 2008 compared to 6.6% for YTD 2007. As of June 29, 2008, approximately 43% of the Company’s debt and capital lease obligations of $700.4 million was subject to changes in short-term interest rates.

The Company’s public debt is not subject to financial covenants but does limit the incurrence of certain liens and encumbrances as well as the incurrence of indebtedness by the Company’s subsidiaries in excess of certain amounts.

All of the outstanding long-term debt has been issued by the Company with none being issued by any of the Company’s subsidiaries. There are no guarantees of the Company’s debt.

11. Derivative Financial Instruments

The Company periodically uses interest rate hedging products to modify risk from interest rate fluctuations. The Company has historically altered its fixed/floating rate mix based upon anticipated cash flows from operations relative to the Company’s debt level and the potential impact of changes in interest rates on the Company’s overall financial condition. Sensitivity analyses are performed to review the impact on the Company’s financial position and coverage of various interest rate movements. The Company does not use

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

11. Derivative Financial Instruments

derivative financial instruments for trading purposes nor does it use leveraged financial instruments. All of the Company’s interest rate swap agreements are LIBOR-based.

Derivative financial instruments were summarized as follows:

		June 29, 2008								December 30, 2007								July 1, 2007
		Notional				Remaining				Notional				Remaining				Notional				Remaining
In Thousands		Amount				Term				Amount				Term				Amount				Term
Interest rate swap agreement — floating		$	—				—			$	—				—			$	25,000			0.4 years
Interest rate swap agreement — floating			—				—				—				—				25,000			0.4 years
Interest rate swap agreement — floating			—				—				—				—				50,000			0.4 years
Interest rate swap agreement — floating			50,000			0.9 years					50,000			1.4 years					50,000			1.9 years
Interest rate swap agreement — floating			50,000			1.0 years					50,000			1.5 years					50,000			2.0 years
Interest rate swap agreement — floating			50,000			4.4 years					50,000			4.9 years					50,000			5.4 years
Interest rate swap agreement — floating			25,000			0.8 years					25,000			1.3 years					25,000			1.8 years
Interest rate swap agreement — floating			25,000			6.8 years					25,000			7.2 years					25,000			7.8 years
Interest rate swap agreement — floating			25,000			4.4 years					25,000			4.9 years					25,000			5.4 years

The Company had six interest rate swap agreements as of June 29, 2008 with varying terms that effectively converted $225 million of the Company’s fixed rate debt to floating rate debt. All of the interest rate swap agreements have been accounted for as fair value hedges.

The counterparties to these contractual arrangements are major financial institutions with which the Company also has other financial relationships. The Company uses several different financial institutions for interest rate derivative contracts to minimize the concentration of credit risk. While the Company is exposed to credit loss in the event of nonperformance by these counterparties, the Company does not anticipate nonperformance by these parties. The Company has master agreements with the counterparties to its derivative financial agreements that provide for net settlement of the derivative transactions.

During the first quarter of 2007, the Company began using derivative instruments to hedge the majority of its vehicle fuel purchases. These derivative instruments relate to diesel fuel and unleaded gasoline used in the Company’s operations. Derivative instruments used include puts, calls and caps which effectively establish an upper and lower limit on the Company’s price of fuel within periods covered by the instruments. The Company currently accounts for its fuel hedges on a mark-to-market basis with any expense or income being reflected as an adjustment of fuel costs.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

12. Fair Values of Financial Instruments

The following methods and assumptions were used by the Company in estimating the fair values of its financial instruments:

Cash and Cash Equivalents, Accounts Receivable and Accounts Payable

The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate carrying values due to the short maturity of these items.

Public Debt Securities

The fair values of the Company’s public debt securities are based on estimated market prices.

Non-Public Variable Rate Debt

The carrying amounts of the Company’s variable rate borrowings approximate their fair values.

Deferred Compensation Plan Assets

The fair values of deferred compensation plan assets, which are held in mutual funds, are based upon the quoted market value of the securities held within the mutual funds.

Derivative Financial Instruments

The fair values for the Company’s interest rate swap and fuel hedging agreements are based on current settlement values.

Letters of Credit

The fair values of the Company’s letters of credit, obtained from financial institutions, are based on the notional amounts of the instruments. These letters of credit primarily relate to the Company’s property and casualty insurance programs.

The carrying amounts and fair values of the Company’s debt, deferred compensation plan assets, derivative financial instruments and letters of credit were as follows:

		June 29, 2008								December 30, 2007								July 1, 2007
		Carrying				Fair				Carrying				Fair				Carrying				Fair
In Thousands		Amount				Value				Amount				Value				Amount				Value
Public debt securities		$	591,450			$	563,915			$	591,450			$	575,833			$	691,450			$	670,475
Non-public variable rate debt			30,000				30,000				7,400				7,400
Deferred compensation plan assets			7,120				7,120				6,386				6,386				5,904				5,904
Interest rate swap agreements			(3,242	)			(3,242	)			(2,337	)			(2,337	)			7,658				7,658
Fuel hedging agreements			(1,143	)			(1,143	)			(340	)			(340	)			(496	)			(496	)
Letters of credit			—				19,450				—				21,389				—				21,271

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

12. Fair Values of Financial Instruments

The fair values of the interest rate swap agreements at June 29, 2008 and December 30, 2007 represent the estimated amounts the Company would have received upon termination of these agreements, which are the current settlement values. The fair value on July 1, 2007 represents the estimated amount the Company would have paid upon the termination of these agreements. The fair value of the fuel hedging agreements at June 29, 2008, December 30, 2007 and July 1, 2007 represents the estimated amount the Company would have received upon termination of these agreements.

The Company adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurement” (“SFAS No. 157”) as of the beginning of the first quarter of 2008 (“Q1 2008”), and there was no material impact to the consolidated financial statements. SFAS No. 157 currently applies to all financial assets and liabilities and for nonfinancial assets and liabilities recognized or disclosed at fair value on a recurring basis. In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position SFAS No. 157-2, “Effective Date of FASB Statement No. 157,” which defers the application date of the provisions of SFAS No. 157 for all nonfinancial assets and liabilities until the first quarter of 2009 except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. SFAS No. 157 requires new disclosure that establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS No. 157 is intended to enable the readers of financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. SFAS No. 157 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.

The following table summarizes the valuation of derivative instruments and deferred compensation plan assets and liabilities by the above categories as of June 29, 2008:

In Thousands		Level 1				Level 2
Assets
Deferred compensation plan assets		$	7,120
Interest rate swap agreements						$	3,242
Fuel hedging agreements							1,143
Liabilities
Deferred compensation plan liabilities			7,120

The Company maintains a non-qualified deferred compensation plan for certain executives and other highly compensated employees. The investment assets are held in mutual funds available under the Company’s 401(k) Savings Plan. The fair value of the mutual funds is based on the quoted market value of the securities

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

12. Fair Value of Financial Instruments

held within the funds (Level 1). The related deferred compensation liability represents the fair value of the investment assets. The Company’s interest rate swap agreements are fair value hedges, meaning the Company receives fixed rates and pays variable rates based on LIBOR swap rates. LIBOR swap rates are observable and quoted periodically over the full term of the agreements and are considered Level 2 items.

The Company’s fuel hedging agreements are based on NYMEX and Weekly US DOE Daily Average rates that are observable and quoted periodically over the full term of the agreement and are considered Level 2 items.

13. Other Liabilities

Other liabilities were summarized as follows:

		June 29,				Dec. 30,				July 1,
In Thousands		2008				2007				2007
Accruals for executive benefit plans		$	78,084			$	75,438			$	73,161
Other			18,227				18,194				23,378
Total other liabilities		$	96,311			$	93,632			$	96,539

14. Commitments and Contingencies

The Company is a member of South Atlantic Canners, Inc. (“SAC”), a manufacturing cooperative from which it is obligated to purchase 17.5 million cases of finished product on an annual basis through May 2014. The Company is also a member of Southeastern Container (“Southeastern”), a plastic bottle manufacturing cooperative, from which it is obligated to purchase at least 80% of its requirements of plastic bottles for certain designated territories. See Note 19 to the consolidated financial statements for additional information concerning SAC and Southeastern.

The Company guarantees a portion of SAC’s and Southeastern’s debt and lease obligations. The amounts guaranteed were $43.2 million, $45.4 million and $47.3 million as of June 29, 2008, December 30, 2007 and July 1, 2007, respectively. The Company has not recorded any liability associated with these guarantees. The Company holds no assets as collateral against these guarantees. The guarantees relate to the debt and lease obligations of SAC and Southeastern, which resulted primarily from the purchase of production equipment and facilities. These guarantees expire at various times through 2021. The members of both cooperatives consist solely of Coca-Cola bottlers. The Company does not anticipate either of these cooperatives will fail to fulfill their commitments. The Company further believes each of these cooperatives has sufficient assets, including production equipment, facilities and working capital, and the ability to adjust selling prices of their products to adequately mitigate the risk of material loss from the Company’s guarantees.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

14. Commitments and Contingencies

In the event either of these cooperatives fails to fulfill its commitments under the related debt and lease obligations, the Company would be responsible for payments to the lenders up to the level of the guarantees. If these cooperatives had borrowed up to their borrowing capacity, the Company’s maximum exposure under these guarantees on June 29, 2008 would have been $50.4 million and the Company’s maximum total exposure, including its equity investment, would have been $29.2 million for SAC and $36.3 million for Southeastern.

The Company has been purchasing plastic bottles and finished products from these cooperatives for more than ten years.

The Company has an equity ownership in each of the entities in addition to the guarantees of certain indebtedness. As of June 29, 2008, SAC had total assets of approximately $43 million and total debt of approximately $22 million. SAC had total revenues for YTD 2008 of approximately $99 million. As of June 29, 2008, Southeastern had total assets of approximately $397 million and total debt of approximately $257 million. Southeastern had total revenue for YTD 2008 of approximately $291 million.

The Company has standby letters of credit, primarily related to its property and casualty insurance programs. On June 29, 2008, these letters of credit totaled $19.5 million.

The Company participates in long-term marketing contractual arrangements with certain prestige properties, athletic venues and other locations. The future payments related to these contractual arrangements as of June 29, 2008 amounted to $27.3 million and expire at various dates through 2017.

The Company is involved in various claims and legal proceedings which have arisen in the ordinary course of its business. Although it is difficult to predict the ultimate outcome of these claims and legal proceedings, management believes the ultimate disposition of these matters will not have a material adverse effect on the financial condition, cash flows or results of operations of the Company. No material amount of loss in excess of recorded amounts is believed to be reasonably possible as a result of these claims and legal proceedings.

The Company is subject to audit by tax authorities in jurisdictions where it conducts business. These audits may result in assessments that are subsequently resolved with the tax authorities or potentially through the courts. Management believes the Company has adequately provided for any assessments that are likely to result from these audits; however, final assessments, if any, could be different than the amounts recorded in the consolidated financial statements.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

15. Income Taxes

The Company’s effective income tax rate for YTD 2008 and YTD 2007 was 41.4% and 38.8%, respectively.

The following table provides a reconciliation of the income tax expense (benefit) at the statutory federal rate to actual income tax expense.

		First Half
In Thousands		2008				2007
Statutory expense		$	6,467			$	9,338
State income taxes, net of federal effect			805				1,162
Manufacturing deduction benefit			(333	)			(755	)
Meals and entertainment			339				288
State income tax adjustment			(83	)			—
Other, net			463				306
Income tax expense		$	7,658			$	10,339

In June 2006, FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. In May 2007, FASB issued FASB Staff Position FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48” (“FSP FIN 48-1”). FSP FIN 48-1 provides guidance on whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The Company adopted the provisions of FIN 48 and FSP FIN 48-1 effective as of January 1, 2007. As a result of the implementation of FIN 48 and FSP FIN 48-1, the Company recognized no material adjustment in the liability for unrecognized income tax benefits. As of December 30, 2007, the Company had $9.2 million of unrecognized tax benefits, including accrued interest, of which $8.0 million would affect the Company’s effective tax rate if recognized. As of June 29, 2008, the Company had $9.5 million of unrecognized tax benefits, including accrued interest, of which $8.4 million would affect the Company’s effective rate if recognized. It is expected that the amount of unrecognized tax benefits will change in the next 12 months; however, the Company does not expect the change to have a significant impact on the consolidated financial statements.

The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense. As of December 30, 2007, the Company had approximately $2.0 million of accrued interest related to uncertain tax positions. As of June 29, 2008, the Company had approximately $2.2 million of accrued interest related to uncertain tax positions. Income tax expense in YTD 2008 and YTD 2007 included approximately $.2 million and $.3 million of interest, respectively.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

15. Income Taxes

Various tax years from 1989 remain open due to loss carryforwards in certain state jurisdictions. The tax years 2004 through 2007 remain open to examination by taxing jurisdictions to which the Company is subject.

The Company’s income tax assets and liabilities are subject to adjustment in future periods based on the Company’s ongoing evaluations of such assets and liabilities and new information that becomes available to the Company.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

16. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss is comprised of adjustments relative to the Company’s pension and postretirement medical benefit plans and foreign currency translation adjustments required for a subsidiary of the Company that performs data analysis and provides consulting services in Europe.

A summary of accumulated other comprehensive loss is as follows:

						Application of
		Dec. 30,				SFAS No. 158				Pre-tax				Tax				June 29,
In Thousands		2007				After tax(1)				Activity				Effect				2008
Net pension activity:
Actuarial loss		$	(12,684	)		$	23			$	222			$	(86	)		$	(12,525	)
Prior service costs			(55	)			1				8				(3	)			(49	)
Net postretirement benefits activity:
Actuarial loss			(9,928	)			141				458				(176	)			(9,505	)
Prior service costs			9,833				(275	)			(892	)			343				9,009
Transition asset			60				(4	)			(12	)			5				49
Foreign currency translation adjustment			23				—				12				(5	)			30
Total		$	(12,751	)		$	(114	)		$	(204	)		$	78			$	(12,991	)

		Dec. 31,				Pre-tax				Tax				July 1,
In Thousands		2006				Activity				Effect				2007
Net pension activity:
Actuarial loss		$	(24,673	)		$	1,245			$	(490	)		$	(23,918	)
Prior service costs			(31	)			12				(5	)			(24	)
Net postretirement benefits activity:
Actuarial loss			(13,512	)			610				(240	)			(13,142	)
Prior service costs			10,915				(892	)			351				10,374
Transition asset			75				(12	)			5				68
Foreign currency translation adjustment			—				3				(1	)			2
Total		$	(27,226	)		$	966			$	(380	)		$	(26,640	)

(1)		See Note 18 of the consolidated financial statements for additional information.

17. Capital Transactions

The Company has two classes of common stock outstanding, Common Stock and Class B Common Stock. The Common Stock is traded on the NASDAQ Global Select Market^sm tier of The NASDAQ Stock Market LLC^® under the symbol COKE. There is no established public trading market for the Class B Common Stock. Shares of the Class B Common Stock are convertible on a share-for-share basis into shares of Common Stock at any time at the option of the holders of Class B Common Stock.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

17. Capital Transactions

Pursuant to the Company’s Restated Certificate of Incorporation, no cash dividend or dividend of property or stock other than stock of the Company, as specifically described in the Restated Certificate of Incorporation, may be declared and paid on the Class B Common Stock unless an equal or greater dividend is declared and paid on the Common Stock. During YTD 2008 and YTD 2007, dividends of $.50 per share were declared and paid on both Common Stock and Class B Common Stock.

Each share of Common Stock is entitled to one vote per share at all meetings of stockholders and each share of Class B Common Stock is entitled to 20 votes per share at such meetings. Except to the extent otherwise required by law, holders of the Common Stock and Class B Common Stock vote together as a single class on all matters brought before the Company’s stockholders. In the event of liquidation, there is no preference between the two classes of common stock.

On May 12, 1999, the stockholders of the Company approved a restricted stock award for J. Frank Harrison, III, the Company’s Chairman of the Board of Directors and Chief Executive Officer, consisting of 200,000 shares of the Company’s Class B Common Stock. Under the award program, the shares of restricted stock are granted at a rate of 20,000 shares per year over the ten-year period. The vesting of each annual installment is contingent upon the Company achieving at least 80% of the overall goal achievement factor in the Company’s Annual Bonus Plan. The restricted stock award does not entitle Mr. Harrison, III to participate in dividend or voting rights until each installment has vested and the shares are issued.

On February 28, 2007, the Compensation Committee of the Board of Directors determined 20,000 shares of restricted Class B Common Stock vested and should be issued, pursuant to the performance-based award discussed above, to Mr. Harrison, III in connection with his services as Chairman of the Board of Directors and Chief Executive Officer of the Company for the fiscal year ended December 31, 2006. On February 27, 2008, the Compensation Committee determined an additional 20,000 shares of restricted Class B Common Stock vested and should be issued to Mr. Harrison, III in connection with his services for the fiscal year ended December 30, 2007.

The Company’s only active share based compensation is the restricted stock award to Mr. Harrison, III, as previously described. Each annual 20,000 share tranche has an independent performance requirement as it is not established until the Company’s Annual Bonus Plan targets are approved each year by the Compensation Committee of the Company’s Board of Directors. As a result, each 20,000 share tranche is considered to have its own service inception date, grant-date fair value and requisite service period. The Company’s Annual Bonus Plan targets, which establish the performance requirement for the restricted stock awards, are approved by the Compensation Committee in the first quarter of each year.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

17. Capital Transactions

A summary of restricted stock awards is as follows:

										Annual				First Half
		Shares				Grant-Date				Compensation				Compensation
Year		Awarded				Price				Expense				Expense
2007			20,000			$	58.53			$	1,170,600			$	585,300
2008			20,000				56.50				1,130,000				—

The Company currently estimates it will not achieve at least 80% of the overall goal achievement factor in the Company’s 2008 Annual Bonus Plan required for the restricted stock award to vest. Accordingly, the estimated expense recorded in Q1 2008 was reversed in the second quarter of 2008 (“Q2 2008”) based upon the Company’s estimate. The Company reimburses Mr. Harrison, III for income taxes to be paid on the shares if the performance requirement is met and the shares are issued. The Company accrues the estimated cost of the income tax reimbursement, if necessary, over the one-year service period.

On April 29, 2008, the stockholders approved a Performance Unit Award Agreement for Mr. Harrison, III consisting of 400,000 performance units (“Units”). Each Unit represents the right to receive one share of the Company’s Class B Common Stock, subject to certain terms and conditions. The Units will vest in annual increments over a ten-year period starting in fiscal year 2009. The Units vested each year will equal the product of 40,000 multiplied by the overall goal achievement factor (not to exceed 100%) as determined under the Company’s existing Annual Bonus Plan based upon annual targets defined by the Compensation Committee. The Performance Unit Award Agreement will replace the restricted stock award discussed above which expires at the end of 2008 and will not affect the Company’s results of operations or financial position during 2008.

The increase in the number of shares outstanding in YTD 2008 was due to the issuance of 20,000 shares of Class B Common Stock related to the restricted stock award. The increase in the number of shares in YTD 2007 was due to the issuance of 20,000 shares of Class B Common Stock related to the restricted stock award and the conversion of 500 shares from Class B Common Stock to Common Stock.

18. Benefit Plans

Recently Adopted Pronouncement

In September 2006, FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Pension and Other Postretirement Plans” (“SFAS No. 158”), which was effective for the year ending December 31, 2006 except for the requirement that the benefit plan assets and obligations be measured as of the date of the employer’s statement of financial position, which is effective for the year ending December 28, 2008. The Company adopted the measurement date provisions of SFAS No. 158 on the first day of Q1 2008 and used the “one measurement” approach. The incremental effect of applying the measurement date provisions on the balance sheet in Q1 2008 was as follows:

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

18. Benefit Plans

		Before								After
		Application of								Application of
In Thousands		SFAS No. 158				Adjustment				SFAS No. 158
Pension and postretirement benefit obligations		$	32,758			$	434			$	33,192
Deferred income taxes			168,540				(167	)			168,373
Total liabilities			1,123,290				267				1,123,557
Retained earnings			79,227				(153	)			79,074
Accumulated other comprehensive loss			(12,751	)			(114	)			(12,865	)
Total stockholders’ equity			120,504				(267	)			120,237

Pension Plans

Retirement benefits under the two Company-sponsored pension plans are based on the employee’s length of service, average compensation over the five consecutive years which gives the highest average compensation and average Social Security taxable wage base during the 35-year period before reaching Social Security retirement age. Contributions to the plans are based on the projected unit credit actuarial funding method and are limited to the amounts currently deductible for income tax purposes. On February 22, 2006, the Board of Directors of the Company approved an amendment to the principal Company-sponsored pension plan to cease further benefit accruals under the plan effective June 30, 2006.

The components of net periodic pension cost (income) were as follows:

		Second Quarter								First Half
In Thousands		2008				2007				2008				2007
Service cost		$	20			$	19			$	41			$	39
Interest cost			2,702				2,634				5,403				5,268
Expected return on plan assets			(3,411	)			(3,225	)			(6,821	)			(6,450	)
Amortization of prior service cost			4				6				8				12
Recognized net actuarial loss			111				622				222				1,245
Net periodic pension cost (income)		$	(574	)		$	56			$	(1,147	)		$	114

The Company did not contribute to its pension plans during YTD 2008 and expects to make contributions of approximately $0.2 million to one of its Company-sponsored pension plans during the remainder of 2008.

Postretirement Benefits

The Company provides postretirement benefits for a portion of its current employees. The Company recognizes the cost of postretirement benefits, which consist principally of medical benefits, during employees’ periods of active service. The Company does not pre-fund these benefits and has the right to modify or terminate certain of these benefits in the future.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

18. Benefit Plans

The components of net periodic postretirement benefit cost were as follows:

		Second Quarter								First Half
In Thousands		2008				2007				2008				2007
Service cost		$	128			$	106			$	256			$	212
Interest cost			536				553				1,072				1,105
Amortization of unrecognized transitional assets			(6	)			(6	)			(12	)			(12	)
Recognized net actuarial loss			229				305				458				610
Amortization of prior service cost			(446	)			(446	)			(892	)			(892	)
Net periodic post retirement benefit cost		$	441			$	512			$	882			$	1,023

401(k) Savings Plan

The Company provides a 401(k) Savings Plan for substantially all of its employees who are not part of collective bargaining agreements. The total cost for this benefit in YTD 2008 and YTD 2007 was $5.2 million and $4.1 million, respectively.

19. Related Party Transactions

The Company’s business consists primarily of the production, marketing and distribution of nonalcoholic beverages of The Coca-Cola Company, which is the sole owner of the secret formulas under which the primary components (either concentrate or syrup) of its soft drink products are manufactured. As of June 29, 2008, The Coca-Cola Company had a 27.1% interest in the Company’s total outstanding Common Stock and Class B Common Stock on a combined basis.

The following table summarizes the significant transactions between the Company and The Coca-Cola Company:

		First Half
In Millions		2008				2007
Payments by the Company for concentrate, syrup, sweetener and other purchases		$	188.4			$	179.2
Marketing funding support payments to the Company			26.9				19.1
Payments by the Company net of marketing funding support		$	161.5			$	160.1
Payments by the Company for customer marketing programs		$	24.4			$	23.0
Payments by the Company for cold drink equipment parts			3.5				2.7
Fountain delivery and equipment repair fees paid to the Company			4.8				3.8
Presence marketing funding support provided by The Coca-Cola Company on the Company’s behalf			2.0				2.1
Sales of finished products to The Coca-Cola Company			5.3				21.1

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

19. Related Party Transactions

On March 10, 2008, the Company entered into a letter agreement with The Coca-Cola Company regarding brand innovation and distribution collaboration. Under the letter agreement, the Company granted to The Coca-Cola Company the option to purchase any nonalcoholic beverage brands then or thereafter owned by the Company. The option is exercisable as to each brand at a formula-based price during the two-year period that begins after that brand has achieved a specified level of net operating revenue or, if earlier, beginning five years after the introduction of that brand in the market with a minimum level of net operating revenue (except that, with respect to brands owned at the date of the letter agreement, the five-year period does not begin earlier than the date of the letter agreement).

The Company has a production arrangement with Coca-Cola Enterprises Inc. (“CCE”) to buy and sell finished products at cost. Sales to CCE under this arrangement were $20.2 million and $23.1 million in YTD 2008 and YTD 2007, respectively. Purchases from CCE under this arrangement were $10.7 million and $6.6 million in YTD 2008 and YTD 2007, respectively. The Coca-Cola Company has significant equity interests in the Company and CCE. As of June 29, 2008, CCE held less than 9% of the Company’s outstanding Common Stock and held no shares of the Company’s Class B Common Stock.

Along with all other Coca-Cola bottlers in the United States, the Company is a member in Coca-Cola Bottlers’ Sales and Services Company, LLC (“CCBSS”), which was formed in 2003 for the purposes of facilitating various procurement functions and distributing certain specified beverage products of The Coca-Cola Company with the intention of enhancing the efficiency and competitiveness of the Coca-Cola bottling system in the United States. CCBSS negotiates the procurement for the majority of the Company’s raw materials (excluding concentrate). The Company pays an administrative fee to CCBSS for its services.

The Company is a member of SAC, a manufacturing cooperative. SAC sells finished products to the Company and Piedmont at cost. Purchases from SAC by the Company and Piedmont for finished products were $76.6 million and $74.1 million in YTD 2008 and YTD 2007, respectively. The Company also manages the operations of SAC pursuant to a management agreement. Management fees earned from SAC were $.7 million in both YTD 2008 and YTD 2007. The Company has also guaranteed a portion of debt for SAC. Such guarantee amounted to $21.8 million as of June 29, 2008. Additionally, the Company has recorded an equity investment of $4.1 million in SAC as of June 29, 2008.

The Company is a shareholder in two entities from which it purchases substantially all its requirements for plastic bottles. Net purchases from these entities were $35.1 million and $34.7 million in YTD 2008 and YTD 2007, respectively. In connection with its participation in one of these entities, the Company has guaranteed a portion of the entity’s debt. Such guarantee amounted to $21.4 million as of June 29, 2008. Additionally, the Company has recorded an equity investment of $11.0 million in one of these entities, Southeastern, as of June 29, 2008.

The Company monitors its investments in cooperatives and would be required to write down its investment if an impairment is identified and is determined to be other than temporary. No impairment of the Company’s investments has been identified as of June 29, 2008.

The Company recorded an adjustment to its equity investment in Southeastern in Q2 2008 which resulted in a nonrecurring pre-tax credit of $2.6 million. This adjustment was made based on information received from Southeastern during the quarter and reflected a higher share of Southeastern’s retained earnings compared to the amount previously recorded by the Company. The Company classifies its equity in earnings of Southeastern in cost of sales consistent with the classification of purchases from Southeastern.

The Company leases from Harrison Limited Partnership One (“HLP”) the Snyder Production Center and an adjacent sales facility, which are located in Charlotte, North Carolina. HLP is directly and indirectly owned by trusts of which J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, and Deborah S. Harrison, a director of the Company, are trustees and beneficiaries. The principal

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

19. Related Party Transactions

balance outstanding under this capital lease as of June 29, 2008 was $33.5 million. Rental payments related to this lease were $1.9 million and $2.1 million in YTD 2008 and YTD 2007, respectively.

The Company leases from Beacon Investment Corporation (“Beacon”) the Company’s headquarters office facility and an adjacent office facility. Beacon’s sole shareholder is J. Frank Harrison, III. The principal balance outstanding under this capital lease as of June 29, 2008 was $38.1 million. Rental payments related to the lease were $1.9 million and $1.8 million in YTD 2008 and YTD 2007, respectively.

20. Net Sales by Product Category

Net sales by product category were as follows:

		Second Quarter								First Half
In Thousands		2008				2007				2008				2007
Bottle/can sales:
Sparkling beverages (including energy products)		$	269,989			$	271,657			$	504,541			$	505,315
Still beverages			66,404				53,982				119,860				99,556
Total bottle/can sales			336,393				325,639				624,401				604,871
Other sales:
Sales to other Coca-Cola bottlers			35,097				39,088				63,125				73,971
Post-mix and other			24,513				25,716				46,151				49,157
Total other sales			59,610				64,804				109,276				123,128
Total net sales		$	396,003			$	390,443			$	733,677			$	727,999

Sparkling beverages are primarily carbonated beverages while still beverages are primarily noncarbonated beverages.

Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)

21. Net Income Per Share

The following table sets forth the computation of basic net income per share and diluted net income per share under the two-class method:

		Second Quarter								First Half
In Thousands (Except Per Share Data)		2008				2007				2008				2007
Numerator for basic and diluted net income per Common Stock and Class B Common Stock share:
Net income		$	15,155			$	11,691			$	10,820			$	16,342
Less dividends:
Common Stock			1,661				1,661				3,322				3,322
Class B Common Stock			625				620				1,250				1,240
Total undistributed earnings		$	12,869			$	9,410			$	6,248			$	11,780
Common Stock undistributed earnings — basic		$	9,351			$	6,852			$	4,540			$	8,578
Class B Common Stock undistributed earnings — basic			3,518				2,558				1,708				3,202
Total undistributed earnings — basic		$	12,869			$	9,410			$	6,248			$	11,780
Common Stock undistributed earnings — diluted		$	9,330			$	6,837			$	4,533			$	8,565
Class B Common Stock undistributed earnings — diluted			3,539				2,573				1,715				3,215
Total undistributed earnings — diluted		$	12,869			$	9,410			$	6,248			$	11,780
Numerator for basic net income per Common Stock share:
Dividends on Common Stock		$	1,661			$	1,661			$	3,322			$	3,322
Common Stock undistributed earnings — basic			9,351				6,852				4,540				8,578
Numerator for basic net income per Common Stock share		$	11,012			$	8,513			$	7,862			$	11,900
Numerator for basic net income per Class B Common Stock share:
Dividends in Class B Common Stock		$	625			$	620			$	1,250			$	1,240
Class B Common Stock undistributed earnings — basic			3,518				2,558				1,708				3,202
Numerator for basic net income per Class B Common Stock share		$	4,143			$	3,178			$	2,958			$	4,442