Form 10-K
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 28, 2008
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Commission file number 0-9286
(Exact name of registrant as
specified in its charter)
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Delaware
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56-0950585
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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4100
Coca-Cola
Plaza, Charlotte, North Carolina 28211
(Address of principal executive
offices) (Zip Code)
(704)
557-4400
(Registrants telephone
number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $1.00 Par Value
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The Nasdaq Stock Market LLC
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Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
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):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
(Do not check if a smaller
reporting company)
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Smaller reporting
company o
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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
State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to
the price at which the common equity was last sold, or the
average bid and asked price of such common equity, as of the
last business day of the registrants most recently
completed second fiscal quarter.
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Market Value as of
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June 27, 2008
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Common Stock, $l.00 Par Value
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$181,074,096
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Class B Common Stock, $l.00 Par Value
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*
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*
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No market exists for the shares of
Class B Common Stock, which is neither registered under
Section 12 of the Act nor subject to Section 15(d) of
the Act. The Class B Common Stock is convertible into
Common Stock on a share-for-share basis at the option of the
holder.
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Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest
practicable date.
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Outstanding as of
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Class
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February 28, 2009
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Common Stock, $1.00 Par Value
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7,141,447
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Class B Common Stock, $1.00 Par Value
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2,021,882
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Documents
Incorporated by Reference
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Portions of Proxy Statement to be filed pursuant to
Section 14 of the Exchange Act with respect to the 2009
Annual Meeting of Stockholders
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Part III, Items 10-14
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PART I
Introduction
Coca-Cola
Bottling Co. Consolidated, a Delaware corporation (together with
its majority-owned subsidiaries, the Company),
produces, markets and distributes nonalcoholic beverages,
primarily products of The
Coca-Cola
Company, Atlanta, Georgia (The
Coca-Cola
Company) which include some of the most recognized and
popular beverage brands in the world. The Company, which was
incorporated in 1980, and its predecessors have been in the
nonalcoholic beverage manufacturing and distribution business
since 1902. Since 2000, the Company has placed significant
emphasis on new product innovation and product line extensions
as a strategy to increase overall revenue. The Company is the
second largest
Coca-Cola
bottler in the United States.
The
Coca-Cola
Company currently owns approximately 27.1% of the Companys
total outstanding Common Stock and Class B Common Stock on
a combined basis. J. Frank Harrison, III, the Companys
Chairman of the Board and Chief Executive Officer, currently
owns or controls approximately 85% of the combined voting power
of the Companys outstanding Common Stock and Class B
Common Stock.
General
Nonalcoholic beverage products can be broken down into two
categories:
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Sparkling beverages primarily beverages with
carbonation, including energy drinks; and
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Still beverages primarily beverages without
carbonation, including bottled water, tea, ready-to-drink
coffee, enhanced water, juices and sports drinks.
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Sales of sparkling beverages were approximately 83%, 84% and 86%
of total net sales for 2008, 2007 and 2006, respectively. Sales
of still beverages were approximately 17%, 16% and 14% of total
net sales for 2008, 2007 and 2006, respectively.
The Company holds Cola Beverage Agreements and Allied Beverage
Agreements under which it produces, distributes and markets, in
certain regions, sparkling beverage products of The
Coca-Cola
Company. The Company also holds Still Beverage Agreements under
which it distributes and markets in certain regions still
beverages of The
Coca-Cola
Company such as POWERade, Minute Maid Adult Refreshments and
Minute Maid Juices To Go.
The Company holds agreements to produce and market Dr Pepper in
some of its regions. The Company also distributes and markets
various other products, including Monster Energy products,
Cinnabon Premium Coffee Lattes and Sundrop, in one or more of
the Companys regions under agreements with the companies
that hold and license the use of their trademarks for these
beverages. In addition, the Company also produces beverages for
other
Coca-Cola
bottlers. In some instances, the Company distributes beverages
without a written agreement.
The Companys principal sparkling beverage is
Coca-Cola
classic. In each of the last three fiscal years, sales of
products bearing the
Coca-Cola
or Coke trademark have accounted for more than half
of the Companys bottle/can volume to retail customers. In
total, the products of The
Coca-Cola
Company accounted for approximately 89%, 89% and 90% of the
Companys bottle/can volume to retail customers during
fiscal years 2008, 2007 and 2006, respectively.
The Company offers a range of flavors designed to meet the
demands of the Companys consumers. The main packaging
materials for the Companys beverages are plastic bottles
and aluminum cans. In addition, the Company provides restaurants
and other immediate consumption outlets with fountain products
(post-mix). Fountain products are dispensed through
equipment that mixes the fountain syrup with carbonated or still
water, enabling fountain retailers to sell finished products to
consumers in cups or glasses.
Over the last two and a half years, the Company has developed
and begun to market and distribute certain products which it
owns. These products include Country Breeze tea, diet Country
Breeze tea and Tum-E Yummies, a vitamin C enhanced flavored
drink. The Company may market and sell these products nationally.
1
The following table sets forth some of the Companys most
important products, including both products that The
Coca-Cola
Company and other beverage companies have licensed to the
Company and products that the Company owns.
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The Coca-Cola Company
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Sparkling Beverages
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Products Licensed
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(Including Energy
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by Other Beverage
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Company Owned
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Products)
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Still Beverages
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Companies
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Products
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Coca-Cola
classic
Diet Coke
Coca-Cola
Zero
Sprite
Fanta Flavors
Sprite Zero
Mello Yello
Vault
Coke Cherry
Seagrams Ginger Ale
Coke Zero Cherry
Diet Coke Plus
Diet Coke Splenda
Vault Zero
Fresca
Pibb Xtra
Barqs Root Beer
Tab
Full Throttle
NOS©
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smartwater
vitaminwater
vitaminenergy
Dasani
Dasani Flavors
Dasani Plus
POWERade
Minute Maid Adult
Refreshments
Minute Maid Juices
To Go
Nestea
Gold Peak tea
FUZE
V8 juice products
from Campbell
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Dr Pepper
Diet Dr Pepper
Sundrop
Cinnabon Premium
Coffee Lattes
Monster Energy
products
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Tum-E Yummies
Country Breeze tea
diet Country Breeze tea
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Beverage
Agreements
The Company holds contracts with The
Coca-Cola
Company which entitle the Company to produce, market and
distribute in its exclusive territory The
Coca-Cola
Companys nonalcoholic beverages in bottles, cans and five
gallon pressurized pre-mix containers. The Company has similar
arrangements with Dr Pepper Snapple Group and other beverage
companies.
Cola and Allied Beverage Agreements with The
Coca-Cola
Company. The Company purchases concentrates
from The
Coca-Cola
Company and markets, produces, and distributes its principal
sparkling beverage products within its territories under two
basic forms of beverage agreements with The
Coca-Cola
Company: (i) beverage agreements that cover sparkling
beverages bearing the trademark
Coca-Cola
or Coke (the
Coca-Cola
Trademark Beverages and Cola Beverage
Agreements), and (ii) beverage agreements that cover
other sparkling beverages of The
Coca-Cola
Company (the Allied Beverages and Allied
Beverage Agreements) (referred to collectively in this
report as the Cola and Allied Beverage Agreements),
although in some instances the Company distributes sparkling
beverages without a written agreement. The Company is a party to
Cola Beverage Agreements and to Allied Beverage Agreements for
various specified territories.
Cola
Beverage Agreements with The
Coca-Cola
Company.
Exclusivity. The Cola Beverage
Agreements provide that the Company will purchase its entire
requirements of concentrates or syrups for
Coca-Cola
Trademark Beverages from The
Coca-Cola
Company at prices, terms of payment, and other terms and
conditions of supply determined from time-to-time by The
Coca-Cola
Company at its sole discretion. The Company may not produce,
distribute, or handle cola products other than those of The
Coca-Cola
Company. The Company has the exclusive right to manufacture and
distribute
Coca-Cola
Trademark Beverages for sale in authorized containers within its
territories. The
Coca-Cola
Company may determine, at its sole discretion, what types of
containers are authorized for use with products of The
Coca-Cola
Company. The Company may not sell
Coca-Cola
Trademark Beverages outside its territories.
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Company Obligations. The Company is
obligated to:
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maintain such plant and equipment, staff and distribution, and
vending facilities as are capable of manufacturing, packaging,
and distributing
Coca-Cola
Trademark Beverages in accordance with the Cola Beverage
Agreements and in sufficient quantities to satisfy fully the
demand for these beverages in its territories;
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undertake adequate quality control measures and maintain
sanitation standards prescribed by The
Coca-Cola
Company;
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develop, stimulate and satisfy fully the demand for
Coca-Cola
Trademark Beverages in its territories;
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use all approved means and spend such funds on advertising and
other forms of marketing as may be reasonably required to
satisfy that objective; and
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maintain such sound financial capacity as may be reasonably
necessary to ensure its performance of its obligations to The
Coca-Cola
Company.
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The Company is required to meet annually with The
Coca-Cola
Company to present its marketing, management, and advertising
plans for the
Coca-Cola
Trademark Beverages for the upcoming year, including financial
plans showing that the Company has the consolidated financial
capacity to perform its duties and obligations to The
Coca-Cola
Company. The
Coca-Cola
Company may not unreasonably withhold approval of such plans. If
the Company carries out its plans in all material respects, the
Company will be deemed to have satisfied its obligations to
develop, stimulate, and satisfy fully the demand for the
Coca-Cola
Trademark Beverages and to maintain the requisite financial
capacity. Failure to carry out such plans in all material
respects would constitute an event of default that if not cured
within 120 days of written notice of the failure would give
The
Coca-Cola
Company the right to terminate the Cola Beverage Agreements. If
the Company, at any time, fails to carry out a plan in all
material respects in any geographic segment of its territory, as
defined by The
Coca-Cola
Company, and if such failure is not cured within six months of
written notice of the failure, The
Coca-Cola
Company may reduce the territory covered by that Cola Beverage
Agreement by eliminating the portion of the territory in which
such failure has occurred.
The
Coca-Cola
Company has no obligation under the Cola Beverage Agreements to
participate with the Company in expenditures for advertising and
marketing. As it has in the past, The
Coca-Cola
Company may contribute to such expenditures and undertake
independent advertising and marketing activities, as well as
advertising and sales promotion programs which require mutual
cooperation and financial support of the Company. The future
levels of marketing funding support and promotional funds
provided by The
Coca-Cola
Company may vary materially from the levels provided during the
periods covered by the information included in this report.
Acquisition of Other Bottlers. If the
Company acquires control, directly or indirectly, of any bottler
of Coca-Cola
Trademark Beverages, or any party controlling a bottler of
Coca-Cola
Trademark Beverages, the Company must cause the acquired bottler
to amend its agreement for the
Coca-Cola
Trademark Beverages to conform to the terms of the Cola Beverage
Agreements.
Term and Termination. The Cola Beverage
Agreements are perpetual, but they are subject to termination by
The
Coca-Cola
Company upon the occurrence of an event of default by the
Company. Events of default with respect to each Cola Beverage
Agreement include:
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production, sale or ownership in any entity which produces or
sells any cola product not authorized by The
Coca-Cola
Company; or a cola product that might be confused with or is an
imitation of the trade dress, trademark, tradename or authorized
container of a cola product of The
Coca-Cola
Company;
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insolvency, bankruptcy, dissolution, receivership, or the like;
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any disposition by the Company of any voting securities of any
bottling company subsidiary without the consent of The
Coca-Cola
Company; and
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any material breach of any of its obligations under that Cola
Beverage Agreement that remains unresolved for 120 days
after written notice by The
Coca-Cola
Company.
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If any Cola Beverage Agreement is terminated because of an event
of default, The
Coca-Cola
Company has the right to terminate all other Cola Beverage
Agreements the Company holds.
No Assignments. The Company is
prohibited from assigning, transferring or pledging its Cola
Beverage Agreements or any interest therein, whether voluntarily
or by operation of law, without the prior consent of The
Coca-Cola
Company.
Allied
Beverage Agreements with The
Coca-Cola
Company.
The Allied Beverages are beverages of The
Coca-Cola
Company or its subsidiaries that are sparkling beverages, but
not
Coca-Cola
Trademark Beverages. The Allied Beverage Agreements contain
provisions that are similar to those of the Cola Beverage
Agreements with respect to the sale of beverages outside its
territories, authorized containers, planning, quality control,
transfer restrictions, and related matters but have certain
significant differences from the Cola Beverage Agreements.
Exclusivity. Under the Allied Beverage
Agreements, the Company has exclusive rights to distribute the
Allied Beverages in authorized containers in specified
territories. Like the Cola Beverage Agreements, the Company has
advertising, marketing, and promotional obligations, but without
restriction for most brands as to the marketing of products with
similar flavors, as long as there is no manufacturing or
handling of other products that would imitate, infringe upon, or
cause confusion with, the products of The
Coca-Cola
Company. The
Coca-Cola
Company has the right to discontinue any or all Allied
Beverages, and the Company has a right, but not an obligation,
under the Allied Beverage Agreements to elect to market any new
beverage introduced by The
Coca-Cola
Company under the trademarks covered by the respective Allied
Beverage Agreements.
Term and Termination. Allied Beverage
Agreements have a term of 10 years and are renewable by the
Company for an additional 10 years at the end of each term.
Renewal is at the Companys option. The Company currently
intends to renew substantially all the Allied Beverage
Agreements as they expire. The Allied Beverage Agreements are
subject to termination in the event of default by the Company.
The
Coca-Cola
Company may terminate an Allied Beverage Agreement in the event
of:
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insolvency, bankruptcy, dissolution, receivership, or the like;
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termination of a Cola Beverage Agreement by either party for any
reason; or
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any material breach of any of the Companys obligations
under the Allied Beverage Agreement that remains unresolved for
120 days after required prior written notice by The
Coca-Cola
Company.
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Pricing. Pursuant to the beverage
agreements, except as provided in the Supplementary Agreement
and under the Incidence Pricing Agreement (described below), The
Coca-Cola
Company establishes the prices charged to the Company for
concentrates for
Coca-Cola
Trademark Beverages, Allied Beverages, still beverages, and
post-mix. The
Coca-Cola
Company has no rights under the beverage agreements to establish
the resale prices at which the Company sells its products.
The Company entered into an agreement with The
Coca-Cola
Company to test an incidence pricing model for 2008 for all
Coca-Cola
Trademark Beverages and Allied Beverages for which the Company
purchases concentrate from The
Coca-Cola
Company. For 2009, the Company intends to utilize the incidence
pricing model and will not revert to purchasing concentrates at
standard concentrate prices during 2009.
4
Supplementary
Agreement Relating to Cola and Allied Beverage Agreements with
The
Coca-Cola
Company.
The Company and The
Coca-Cola
Company are also parties to a Supplementary Agreement (the
Supplementary Agreement) that modifies some of the
provisions of the Cola and Allied Beverage Agreements. The
Supplementary Agreement provides that The
Coca-Cola
Company will:
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exercise good faith and fair dealing in its relationship with
the Company under the Cola and Allied Beverage Agreements;
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offer marketing funding support and exercise its rights under
the Cola and Allied Beverage Agreements in a manner consistent
with its dealings with comparable bottlers;
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offer to the Company any written amendment to the Cola and
Allied Beverage Agreements (except amendments dealing with
transfer of ownership) which it offers to any other bottler in
the United States; and
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subject to certain limited exceptions, sell syrups and
concentrates to the Company at prices no greater than those
charged to other bottlers which are parties to contracts
substantially similar to the Cola and Allied Beverage Agreements.
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The Supplementary Agreement permits transfers of the
Companys capital stock that would otherwise be limited by
the Cola and Allied Beverage Agreements.
Still
Beverage Agreements with The
Coca-Cola
Company.
The Company purchases and distributes certain still beverages
such as isotonics and juice drinks from The
Coca-Cola
Company, or its designees or joint ventures, and markets,
produces, and distributes Dasani water products, pursuant to the
terms of marketing and distribution agreements (the Still
Beverage Agreements), although in some instances the
Company distributes certain still beverages without a written
agreement. The Still Beverage Agreements contain provisions that
are similar to the Cola and Allied Beverage Agreements with
respect to authorized containers, planning, quality control,
transfer restrictions, and related matters but have certain
significant differences from the Cola and Allied Beverage
Agreements.
Exclusivity. Unlike the Cola and Allied
Beverage Agreements, which grant the Company exclusivity in the
distribution of the covered beverages in its territory, the
Still Beverage Agreements grant exclusivity but permit The
Coca-Cola
Company to test-market the still beverage products in its
territory, subject to the Companys right of first refusal,
and to sell the still beverages to commissaries for delivery to
retail outlets in the territory where still beverages are
consumed on-premises, such as restaurants. The
Coca-Cola
Company must pay the Company certain fees for lost volume,
delivery, and taxes in the event of such commissary sales.
Approved alternative route to market projects undertaken by the
Company, The
Coca-Cola
Company, and other bottlers of
Coca-Cola
would, in some instances, permit delivery of certain products of
The
Coca-Cola
Company into the territories of almost all bottlers, in exchange
for compensation in most circumstances, despite the terms of the
beverage agreements making such territories exclusive. Also,
under the Still Beverage Agreements, the Company may not sell
other beverages in the same product category.
Pricing. The
Coca-Cola
Company, at its sole discretion, establishes the prices the
Company must pay for the still beverages or, in the case of
Dasani, the concentrate or finished good, but has agreed, under
certain circumstances for some products, to give the benefit of
more favorable pricing if such pricing is offered to other
bottlers of
Coca-Cola
products.
Term. Each of the Still Beverage
Agreements has a term of 10 or 15 years and is renewable by
the Company for an additional 10 years at the end of each
term. The Company currently intends to renew substantially all
of the Still Beverage Agreements as they expire.
Other
Beverage Agreements with The
Coca-Cola
Company.
The Company has entered into a distribution agreement with
Energy Brands Inc. (Energy Brands), a wholly owned
subsidiary of The
Coca-Cola
Company. Energy Brands, also known as glacéau, is a
producer and distributor
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of branded enhanced water products including vitaminwater,
smartwater, and vitaminenergy. The agreement has a term of
10 years, and will automatically renew for succeeding
10-year
terms, subject to a
12-month
nonrenewal notification by the Company. The agreement covers
most of the Companys territories, requires the Company to
distribute Energy Brands enhanced water products exclusively,
and permits Energy Brands to distribute the products in some
channels within its territories. In conjunction with the
execution of the Energy Brands agreement, the Company entered
into an agreement with The
Coca-Cola
Company whereby the Company agreed not to introduce new third
party brands or certain third party brand extensions through
August 31, 2010, unless mutually agreed to by the Company
and The
Coca-Cola
Company.
The Company is distributing Campbell Soup Company
(Campbell) fruit and vegetable juice beverages under
an interim subdistribution agreement with The
Coca-Cola
Company. The Campbell interim subdistribution agreement may be
terminated by either party upon 30 days written notice. The
interim agreements covers all of the Companys territories,
and permits Campbell and certain other sellers of Campbell
beverages to continue distribution in the Companys
territories. The Company purchases Campbell beverages from a
subsidiary of Campbell under a separate purchase agreement.
Post-Mix Rights and Sales to Other
Bottlers. The Company also sells
Coca-Cola
and other post-mix products of The
Coca-Cola
Company and post-mix products of Dr Pepper Snapple Group on a
non-exclusive basis. In addition, the Company produces some
products for sale to other
Coca-Cola
bottlers. Sales to other bottlers have lower margins but allow
the Company to achieve higher utilization of its production
equipment and facilities.
Brand Innovation Agreement with The
Coca-Cola
Company. The Company has entered into an
agreement with The
Coca-Cola
Company regarding brand innovation and distribution
collaboration. Under the agreement, the Company granted to The
Coca-Cola
Company the option to purchase any nonalcoholic beverage brands
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 into the market with a minimum level
of net operating revenue, with the exception 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.
Beverage
Agreements with Other Licensors.
The Company has beverage agreements with Dr Pepper Snapple Group
for Dr Pepper and Sundrop brands which are similar to those for
the Cola and Allied Beverage Agreements. These beverage
agreements are perpetual in nature but may be terminated by the
Company upon 90 days notice. The price the beverage
companies may charge for syrup or concentrate is set by the
beverage companies from time to time. These beverage agreements
also contain similar restrictions on the use of trademarks,
approved bottles, cans and labels and sale of imitations or
substitutes as well as termination for cause provisions.
The Company is distributing products of Monster brand energy
drinks under a distribution agreement with Hansen Beverage
Company, including Monster and Java Monster. The agreement
contains provisions that are similar to the Cola and Allied
Beverage Agreements with respect to pricing, promotion,
planning, territory and trademark restrictions, transfer
restrictions, and related matters as well as termination for
cause provisions. The agreement has a 20 year term and will
renew automatically. The agreement may be terminated without
cause by either party. However, any such termination by Hansen
Beverage Company requires compensation in the form of severance
payments to the Company under the terms of the agreement.
The territories covered by beverage agreements with other
licensors are not always aligned with the territories covered by
the Cola and Allied Beverage Agreements but are generally within
those territory boundaries. Sales of beverages by the Company
under these agreements represented approximately 11%, 11% and
10% of the Companys bottle/can volume to retail customers
for 2008, 2007 and 2006, respectively.
Markets
and Production and Distribution Facilities
The Company currently holds bottling rights from The
Coca-Cola
Company covering the majority of North Carolina, South Carolina
and West Virginia, and portions of Alabama, Mississippi,
Tennessee, Kentucky, Virginia,
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Pennsylvania, Georgia and Florida. The total population within
the Companys bottling territory is approximately
19.2 million.
The Company currently operates in seven principal geographic
markets. Certain information regarding each of these markets
follows:
1. North Carolina. This region
includes the majority of North Carolina, including Raleigh,
Greensboro, Winston-Salem, High Point, Hickory, Asheville,
Fayetteville, Wilmington, Charlotte and the surrounding areas.
The region has an estimated population of 8.5 million. A
production/distribution facility is located in Charlotte and 15
sales distribution facilities are located in the region.
2. South Carolina. This region
includes the majority of South Carolina, including Charleston,
Columbia, Greenville, Myrtle Beach and the surrounding areas.
The region has an estimated population of 3.5 million.
There are 5 sales distribution facilities in the region.
3. South Alabama. This region
includes a portion of southwestern Alabama, including Mobile and
surrounding areas, and a portion of southeastern Mississippi.
The region has an estimated population of .9 million. A
production/distribution facility is located in Mobile and 4
sales distribution facilities are located in the region.
4. South Georgia. This region
includes a small portion of eastern Alabama, a portion of
southwestern Georgia including Columbus and surrounding areas
and a portion of the Florida Panhandle. This region has an
estimated population of 1.1 million. There are 4 sales
distribution facilities located in the region.
5. Middle Tennessee. This region
includes a portion of central Tennessee, including Nashville and
surrounding areas, a small portion of southern Kentucky and a
small portion of northwest Alabama. The region has an estimated
population of 2.2 million. A production/distribution
facility is located in Nashville and 4 sales distribution
facilities are located in the region.
6. Western Virginia. This region
includes most of southwestern Virginia, including Roanoke and
surrounding areas, a portion of the southern piedmont of
Virginia, a portion of northeastern Tennessee and a portion of
southeastern West Virginia. The region has an estimated
population of 1.6 million. A production/distribution
facility is located in Roanoke and 4 sales distribution
facilities are located in the region.
7. West Virginia. This region
includes most of the state of West Virginia and a portion of
southwestern Pennsylvania. The region has an estimated
population of 1.4 million. There are 8 sales distribution
facilities located in the region.
The Company is a member of South Atlantic Canners, Inc.
(SAC), a manufacturing cooperative located in
Bishopville, South Carolina. All eight members of SAC are
Coca-Cola
bottlers and each member has equal voting rights. The Company
receives a fee for managing the day-to-day operations of SAC
pursuant to a management agreement. Management fees earned from
SAC were $1.4 million, $1.4 million and
$1.6 million in 2008, 2007 and 2006, respectively.
SACs bottling lines supply a portion of the Companys
volume requirements for finished products. The Company has a
commitment with SAC that requires minimum annual purchases of
17.5 million cases of finished products through May 2014.
Purchases from SAC by the Company for finished products were
$142 million, $149 million and $133 million in
2008, 2007 and 2006, respectively, or 27.8 million cases,
30.6 million cases and 29.3 million cases of finished
product, respectively.
Raw
Materials
In addition to concentrates obtained from The
Coca-Cola
Company and other beverage companies for use in its beverage
manufacturing, the Company also purchases sweetener, carbon
dioxide, plastic bottles, cans, closures and other packaging
materials as well as equipment for the production, distribution
and marketing of nonalcoholic beverages. Except for sweetener,
cans and plastic bottles, the Company purchases its raw
materials from multiple suppliers.
The Company purchases substantially all of its plastic bottles
(12-ounce, 16-ounce, 20-ounce, half-liter, 1-liter, 2-liter and
300 ml sizes) from manufacturing plants which are owned and
operated by Southeastern Container and
7
Western Container, two entities owned by
Coca-Cola
bottlers including the Company. The Company currently obtains
all of its aluminum cans (8-ounce, 12-ounce and 16-ounce sizes)
from one domestic supplier.
None of the materials or supplies used by the Company are
currently in short supply, although the supply of specific
materials (including plastic bottles, which are formulated using
petroleum-based products) could be adversely affected by
strikes, weather conditions, governmental controls or national
emergency conditions.
Along with all the 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 has negotiated
the procurement for the majority of the Companys raw
materials (excluding concentrate) since 2004.
The Company is exposed to price risk on commodities such as
aluminum, corn, PET resin (an oil based product) and fuel which
affects the cost of raw materials used in the production of
finished products. The Company both produces and procures these
finished products. Examples of the raw materials affected are
aluminum cans and plastic bottles used for packaging and high
fructose corn syrup used as a product ingredient. Further, the
Company is exposed to commodity price risk on oil which impacts
the Companys cost of fuel used in the movement and
delivery of the Companys products. The Company
participates in commodity hedging and risk mitigation programs
administered both by CCBSS and by the Company itself.
High fructose corn syrup costs increased significantly during
2008 as a result of increasing demand for corn products around
the world for purposes such as ethanol production. The combined
impact of increasing costs for plastic bottles and high fructose
corn syrup increased cost of sales during 2008. In addition,
there is no limit on the price The
Coca-Cola
Company and other beverage companies can charge for concentrate.
Customers
and Marketing
The Companys products are sold and distributed directly to
retail stores and other outlets, including food markets,
institutional accounts and vending machine outlets. During 2008,
approximately 68% of the Companys bottle/can volume to
retail customers was sold for future consumption. The remaining
bottle/can volume to retail customers of approximately 32% was
sold for immediate consumption, primarily through dispensing
machines owned either by the Company, retail outlets or third
party vending companies. The Companys largest customer,
Wal-Mart Stores, Inc., accounted for approximately 19% of the
Companys total bottle/can volume to retail customers and
the second largest customer, Food Lion, LLC, accounted for
approximately 12% of the Companys total bottle/can volume
to retail customers. Wal-Mart Stores, Inc. accounted for
approximately 14% of the Companys total net sales. The
loss of either Wal-Mart Stores, Inc. or Food Lion, LLC as
customers would have a material adverse effect on the Company.
All of the Companys sales are to customers in the United
States.
New product introductions, packaging changes and sales
promotions have been the primary sales and marketing practices
in the nonalcoholic beverage industry in recent years and have
required and are expected to continue to require substantial
expenditures. Brand introductions from The
Coca-Cola
Company in the last three years include
Coca-Cola
Zero, Vault, Vault Zero, Dasani flavors, Full Throttle, Gold
Peak tea products and Dasani Plus. The Company began
distribution of three of its own products, Country Breeze tea,
diet Country Breeze tea and Tum-E Yummies, in 2007. In addition,
the Company also began distribution of
NOS©
products (energy drinks from FUZE, a subsidiary of The
Coca-Cola
Company), juice products from FUZE and V8 products from Campbell
during 2007. In the fourth quarter of 2007, the Company began
distribution of glacéau products, a wholly-owned subsidiary
of The
Coca-Cola
Company that produces branded enhanced beverages including
vitaminwater, smartwater and vitaminenergy. The Company entered
into a distribution agreement in October 2008 with subsidiaries
of Hansen Natural Corporation, the developer, marketer, seller
and distributor of Monster Energy drinks, the leading volume
brand in the U.S. energy drink category. Under this
agreement, the Company began distributing Monster Energy drinks
in certain of the Companys territories in November 2008.
New packaging introductions include the 20-ounce
grip bottle during 2007. New product and packaging
introductions have resulted in increased operating costs for the
Company due to special marketing efforts, obsolescence of
replaced items and, in some cases, higher raw material costs.
8
The Company sells its products primarily in nonrefillable
bottles and cans, in varying proportions from market to market.
There may be as many as 27 different packages for
Coca-Cola
classic within a single geographic area. Bottle/can volume to
retail customers during 2008 was approximately 46% cans, 53%
nonrefillable bottles and 1% other containers.
Advertising in various media, primarily television and radio, is
relied upon extensively in the marketing of the Companys
products. The
Coca-Cola
Company and Dr Pepper Snapple Group (the Beverage
Companies) make substantial expenditures on advertising in
the Companys territories. The Company has also benefited
from national advertising programs conducted by the Beverage
Companies. In addition, the Company expends substantial funds on
its own behalf for extensive local sales promotions of the
Companys products. Historically, these expenses have been
partially offset by marketing funding support which the Beverage
Companies provide to the Company in support of a variety of
marketing programs, such as point-of-sale displays and
merchandising programs. However, the Beverage Companies are
under no obligation to provide the Company with marketing
funding support in the future.
The substantial outlays which the Company makes for marketing
and merchandising programs are generally regarded as necessary
to maintain or increase revenue, and any significant curtailment
of marketing funding support provided by the Beverage Companies
for marketing programs which benefit the Company could have a
material adverse effect on the operating and financial results
of the Company.
Seasonality
Sales are seasonal with the highest sales volume occurring in
May, June, July and August. The Company has adequate production
capacity to meet sales demand for sparkling and still beverages
during these peak periods. Sales volume can be impacted by
weather conditions. See Item 2. Properties for
information relating to utilization of the Companys
production facilities.
Competition
The nonalcoholic beverage market is highly competitive. The
Companys competitors include bottlers and distributors of
nationally advertised and marketed products, regionally
advertised and marketed products, as well as bottlers and
distributors of private label beverages in supermarket stores.
The sparkling beverage market (including energy products)
comprised 85% of the Companys bottle/can volume to retail
customers in 2008. In each region in which the Company operates,
between 85% and 95% of sparkling beverage sales in bottles, cans
and pre-mix containers are accounted for by the Company and its
principal competition, which in each region includes the local
bottler of Pepsi-Cola and, in some regions, also includes the
local bottler of Dr Pepper, Royal Crown
and/or
7-Up
products.
The principal methods of competition in the soft drink industry
are point-of-sale merchandising, new product introductions, new
vending and dispensing equipment, packaging changes, pricing,
price promotions, product quality, retail space management,
customer service, frequency of distribution and advertising. The
Company believes that it is competitive in its territories with
respect to these methods of competition.
Government Regulation
The production and marketing of beverages are subject to the
rules and regulations of the United States Food and Drug
Administration (FDA) and other federal, state and
local health agencies. The FDA also regulates the labeling of
containers.
As a manufacturer, distributor and seller of beverage products
of The
Coca-Cola
Company and other soft drink manufacturers in exclusive
territories, the Company is subject to antitrust laws of general
applicability. However, pursuant to the United States Soft Drink
Interbrand Competition Act, soft drink bottlers such as the
Company may have an exclusive right to manufacture, distribute
and sell a soft drink product in a defined geographic territory
if that soft drink product is in substantial and effective
competition with other products of the same general class in the
market. The Company believes there is such substantial and
effective competition in each of the exclusive geographic
territories in the United States in which the Company operates.
9
From time to time, legislation has been proposed in Congress and
by certain state and local governments which would prohibit the
sale of soft drink products in nonrefillable bottles and cans or
require a mandatory deposit as a means of encouraging the return
of such containers in an attempt to reduce solid waste and
litter. The Company is currently not impacted by this type of
proposed legislation.
Soft drink and similar-type taxes have been in place in West
Virginia and Tennessee for several years.
The Company has experienced public policy challenges regarding
the sale of soft drinks in schools, particularly elementary,
middle and high schools. At December 28, 2008, a number of
states had regulations restricting the sale of soft drinks and
other foods in schools. Many of these restrictions have existed
for several years in connection with subsidized meal programs in
schools. The focus has more recently turned to the growing
health, nutrition and obesity concerns of todays youth.
Restrictive legislation, if widely enacted, could have an
adverse impact on the Companys products, image and
reputation.
The Company is subject to audit by taxing authorities in
jurisdictions where it conducts business. These audits may
result in assessments that are subsequently resolved with the
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.
Environmental
Remediation
The Company does not currently have any material capital
expenditure commitments for environmental compliance or
environmental remediation for any of its properties. The Company
does not believe compliance with federal, state and local
provisions that have been enacted or adopted regarding the
discharge of materials into the environment, or otherwise
relating to the protection of the environment, will have a
material effect on its capital expenditures, earnings or
competitive position.
Employees
As of February 1, 2009, the Company had approximately
5,300 full-time employees, of whom approximately 425 were
union members. The total number of employees, including
part-time employees, was approximately 6,200. Approximately 7%
of the Companys labor force is currently covered by
collective bargaining agreements. Two collective bargaining
agreements covering approximately 5% of the Companys
employees expired during 2008 and the Company entered into new
agreements during 2008. One collective bargaining agreement
covering approximately .5% of the Companys employees
expires during 2009.
Exchange
Act Reports
The Company makes available free of charge through its Internet
website, www.cokeconsolidated.com, its annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and all amendments to those reports as soon as reasonably
practicable after such materials are electronically filed with
or furnished to the Securities and Exchange Commission (SEC).
The SEC maintains an Internet website, www.sec.gov, which
contains reports, proxy and information statements, and other
information filed electronically with the SEC. Any materials
that the Company files with the SEC may also be read and copied
at the SECs Public Reference Room, 100 F Street,
N.E., Room 1580, Washington, D. C. 20549.
Information on the operations of the Public Reference Room is
available by calling the SEC at
1-800-SEC-0330.
The information provided on the Companys website is not
part of this report and is not incorporated herein by reference.
In addition to other information in this
Form 10-K,
the following risk factors should be considered carefully in
evaluating the Companys business. The Companys
business, financial condition or results of operations could be
materially and adversely affected by any of these risks.
Additional risks and uncertainties, including risks and
10
uncertainties not presently known to the Company or that the
Company currently deems immaterial, may also impair its business
and results of operations.
The
Company may not be able to respond successfully to changes in
the marketplace.
The Company operates in the highly competitive nonalcoholic
beverage industry and faces strong competition from other
general and specialty beverage companies. The Companys
response to continued and increased customer and competitor
consolidations and marketplace competition may result in lower
than expected net pricing of the Companys products. The
Companys ability to gain or maintain the Companys
share of sales or gross margins may be limited by the actions of
the Companys competitors, which may have advantages in
setting their prices due to lower raw material costs.
Competitive pressures in the markets in which the Company
operates may cause channel and product mix to shift away from
more profitable channels and packages. If the Company is unable
to maintain or increase volume in higher-margin products and in
packages sold through higher-margin channels (e.g., immediate
consumption), pricing and gross margins could be adversely
affected. The Companys efforts to improve pricing may
result in lower than expected sales volume.
Changes
in how significant customers market or promote the
Companys products could reduce revenue.
The Companys revenue is impacted by how significant
customers market or promote the Companys products. Revenue
has been negatively impacted by less aggressive price promotion
by some retailers in the future consumption channels over the
past several years. If the Companys significant customers
change the manner in which they market or promote the
Companys products, the Companys revenue and
profitability could be adversely impacted.
Changes
in public and consumer preferences related to nonalcoholic
beverages could reduce demand for the Companys products
and reduce profitability.
The Companys business depends substantially on consumer
tastes and preferences that change in often unpredictable ways.
The success of the Companys business depends in large
measure on working with the Beverage Companies to meet the
changing preferences of the broad consumer market. Health and
wellness trends throughout the marketplace have resulted in a
shift from sugar sparkling beverages to diet sparkling
beverages, tea, sports drinks, enhanced water and bottled water
over the past several years. Failure to satisfy changing
consumer preferences could adversely affect the profitability of
the Companys business.
The
Companys sales can be impacted by the health and stability
of the general economy.
Unfavorable changes in general economic conditions, such as a
recession or economic slowdown in the geographic markets in
which the Company does business, may have the temporary effect
of reducing the demand for certain of the Companys
products. For example, economic forces may cause consumers to
shift away from purchasing higher-margin products and packages
sold through immediate consumption and other highly profitable
channels. Adverse economic conditions could also increase the
likelihood of customer delinquencies and bankruptcies, which
would increase the risk of uncollectibility of certain accounts.
Each of these factors could adversely affect the Companys
revenue, price realization, gross margins and overall financial
condition and operating results.
Miscalculation
of the Companys need for infrastructure investment could
impact the Companys financial results.
Projected requirements of the Companys infrastructure
investments may differ from actual levels if the Companys
volume growth is not as the Company anticipates. The
Companys infrastructure investments are generally
long-term in nature; therefore, it is possible that investments
made today may not generate the returns expected by the Company
due to future changes in the marketplace. Significant changes
from the Companys expected returns on cold drink
equipment, fleet, technology and supply chain infrastructure
investments could adversely affect the Companys
consolidated financial results.
11
The
Companys inability to meet requirements under its beverage
agreements could result in the loss of distribution
rights.
Approximately 89% of the Companys bottle/can volume to
retail customers consists of products of The
Coca-Cola
Company, which is the sole supplier of these products or of the
concentrates or syrups required to manufacture these products.
The remaining 11% of the Companys bottle/can volume to
retail customers consists of products of other beverage
companies and the Companys own products. The Company must
satisfy various requirements under its beverage agreements.
Failure to satisfy these requirements could result in the loss
of distribution rights for the respective products.
Material
changes in, or the Companys inability to satisfy, the
performance requirements for marketing funding support, or
decreases from historic levels of marketing funding support,
could reduce the Companys profitability.
Material changes in the performance requirements, or decreases
in the levels of marketing funding support historically
provided, under marketing programs with The
Coca-Cola
Company and other beverage companies, or the Companys
inability to meet the performance requirements for the
anticipated levels of such marketing funding support payments,
could adversely affect the Companys profitability. The
Coca-Cola
Company and other beverage companies are under no obligation to
continue marketing funding support at historic levels.
Changes
in The
Coca-Cola
Companys and other beverage companies levels of
advertising, marketing spending and product innovation could
reduce the Companys sales volume.
The
Coca-Cola
Companys and other beverage companies levels of
advertising, marketing spending and product innovation directly
impact the Companys operations. While the Company does not
believe there will be significant changes in the levels of
marketing and advertising by the Beverage Companies, there can
be no assurance that historic levels will continue. In addition,
if the volume of sugar sparkling beverages continues to decline,
the Companys volume growth will continue to be dependent
on product innovation by the Beverage Companies, especially The
Coca-Cola
Company. Decreases in marketing, advertising and product
innovation by the Beverage Companies could adversely impact the
profitability of the Company.
The
inability of the Companys aluminum can or plastic bottle
suppliers to meet the Companys purchase requirements could
reduce the Companys profitability.
The Company currently obtains all of its aluminum cans from one
domestic supplier and all of its plastic bottles from two
domestic cooperatives. The inability of these aluminum can or
plastic bottle suppliers to meet the Companys requirements
for containers could result in short-term shortages until
alternative sources of supply can be located. The Company
attempts to mitigate these risks by working closely with key
suppliers and by purchasing business interruption insurance
where appropriate. Failure of the aluminum can or plastic bottle
suppliers to meet the Companys purchase requirements could
reduce the Companys profitability.
The
inability of the Company to offset higher raw material costs
with higher selling prices, increased
bottle/can
volume or reduced expenses could have an adverse impact on the
Companys profitability.
Packaging costs, primarily plastic bottles, and high fructose
corn syrup cost increased significantly in 2008. In addition,
there are no limits on the prices The
Coca-Cola
Company and other beverage companies can charge for concentrate.
If the Company cannot offset higher raw material costs with
higher selling prices, increased sales volume or reductions in
other costs, the Companys profitability could be adversely
affected.
The Company primarily uses supplier pricing agreements and may,
at times, use derivative financial instruments to manage the
volatility and market risk with respect to certain commodities.
Generally, these hedging instruments establish the purchase
price for these commodities in advance of the time of delivery.
As such, it is possible that these hedging instruments may lock
the Company into prices that are ultimately greater than the
actual market price at the time of delivery.
12
In recent years, there has been consolidation among suppliers of
certain of the Companys raw materials. The reduction in
the number of competitive sources of supply could have an
adverse effect upon the Companys ability to negotiate the
lowest costs and, in light of the Companys relatively
small in-plant raw material inventory levels, has the potential
for causing interruptions in the Companys supply of raw
materials.
With the introduction of FUZE, Campbell and glacéau
products into the Companys portfolio during 2007 and
Monster Energy products during 2008, the Company is becoming
increasingly reliant on purchased finished goods from external
sources versus the Companys internal production. As a
result, the Company is subject to incremental risk including,
but not limited to, product availability, price variability,
product quality and production capacity shortfalls for
externally purchased finished goods.
Sustained
increases in fuel prices or the inability of the Company to
secure adequate supplies of fuel could have an adverse impact on
the Companys profitability.
The Company has experienced significant increases in fuel prices
as a result primarily of macro-economic factors beyond the
Companys control. The Company uses significant amounts of
fuel in the distribution of its products. Events such as natural
disasters could impact the supply of fuel and could impact the
timely delivery of the Companys products to its customers.
While the Company is working to reduce fuel consumption, there
can be no assurance that the Company will succeed in limiting
future cost increases. Continued upward pressure in these costs
could reduce the profitability of the Companys operations.
Sustained
increases in workers compensation, employment practices
and vehicle accident costs could reduce the Companys
profitability.
The Company is generally self-insured for the costs of
workers compensation, employment practices and vehicle
accident claims. Losses are accrued using assumptions and
procedures followed in the insurance industry, adjusted for
company-specific history and expectations. Although the Company
has actively sought to control increases in these costs, there
can be no assurance that the Company will succeed in limiting
future cost increases. Continued upward pressure in these costs
could reduce the profitability of the Companys operations.
Sustained
increases in the cost of employee benefits could reduce the
Companys profitability.
The Companys profitability is substantially affected by
the cost of pension retirement benefits, postretirement medical
benefits and current employees medical benefits. In recent
years, the Company has experienced significant increases in
these costs as a result of macro-economic factors beyond the
Companys control, including increases in health care
costs, declines in investment returns on pension assets and
changes in discount rates used to calculate pension and related
liabilities. A significant decrease in the value of the
Companys pension plan assets in 2008 will cause a
significant increase in pension plan costs in 2009. Although the
Company has actively sought to control increases in these costs,
there can be no assurance the Company will succeed in limiting
future cost increases, and continued upward pressure in these
costs could reduce the profitability of the Companys
operations.
Product
liability claims brought against the Company or product recalls
could negatively affect the Companys business, financial
results and brand image.
The Company may be liable if the consumption of the
Companys products causes injury or illness. The Company
may also be required to recall products if they become
contaminated or are damaged or mislabeled. A significant product
liability or other product-related legal judgment against the
Company or a widespread recall of the Companys products
could negatively impact the Companys business, financial
results and brand image.
Technology
failures could disrupt the Companys operations and
negatively impact the Companys business.
The Company increasingly relies on information technology
systems to process, transmit and store electronic information.
For example, the Companys production and distribution
facilities, inventory management and driver handheld devices all
utilize information technology to maximize efficiencies and
minimize costs. Furthermore, a significant portion of the
communication between personnel, customers and suppliers depends
on information
13
technology. Like most companies, the Companys information
technology systems may be vulnerable to a variety of
interruptions due to events beyond the Companys control,
including, but not limited to, natural disasters, terrorist
attacks, telecommunications failures, computer viruses, hackers
and other security issues. The Company has technology security
initiatives and disaster recovery plans in place to mitigate the
Companys risk to these vulnerabilities, but these measures
may not be adequate or implemented properly to ensure that the
Companys operations are not disrupted.
Changes
in interest rates could adversely affect the profitability of
the Company.
Approximately 6.3% of the Companys debt and capital lease
obligations of $669.1 million as of December 28, 2008
was subject to changes in short-term interest rates. In
addition, the Companys pension and postretirement medical
benefits costs are subject to changes in interest rates. If
interest rates increase in the future, there can be no assurance
that future increases in interest expense will not reduce the
Companys overall profitability.
The
Companys credit rating could be negatively impacted by The
Coca-Cola
Company.
The Companys credit rating could be significantly impacted
by capital management activities of The
Coca-Cola
Company
and/or
changes in the credit rating of The
Coca-Cola
Company. A lower credit rating could significantly increase the
Companys interest costs or could have an adverse effect on
the Companys ability to obtain additional financing at
acceptable interest rates or to refinance existing debt.
Changes
in legal contingencies could adversely impact the Companys
future profitability.
Changes from expectations for the resolution of outstanding
legal claims and assessments could have a material adverse
impact on the Companys profitability and financial
condition. In addition, the Companys failure to abide by
laws, orders or other legal commitments could subject the
Company to fines, penalties or other damages.
Legislative
changes that affect the Companys distribution and
packaging could reduce demand for the Companys products or
increase the Companys costs.
The Companys business model is dependent on the
availability of the Companys various products and packages
in multiple channels and locations versus those of the
Companys competitors to better satisfy the needs of the
Companys customers and consumers. Laws that restrict the
Companys ability to distribute products in schools and
other venues, as well as laws that require deposits for certain
types of packages or those that limit the Companys ability
to design new packages or market certain packages, could
negatively impact the financial results of the Company. In
addition, taxes imposed by individual states and localities
could cause consumers to shift away from purchasing products of
the Company.
Additional
taxes resulting from tax audits could adversely impact the
Companys future profitability.
An assessment of additional taxes resulting from audits of the
Companys tax filings could have an adverse impact on the
Companys profitability, cash flows and financial condition.
Natural
disasters and unfavorable weather could negatively impact the
Companys future profitability.
Natural disasters or unfavorable weather conditions in the
geographic regions in which the Company does business could have
an adverse impact on the Companys revenue and
profitability. For example, prolonged drought conditions in the
geographic regions in which the Company does business could lead
to restrictions on the use of water, which could adversely
affect the Companys ability to manufacture and distribute
products and the Companys cost to do so.
Issues
surrounding labor relations could adversely impact the
Companys future profitability and/or its operating
efficiency.
Approximately 7% of the Companys employees are covered by
collective bargaining agreements. The inability to renegotiate
subsequent agreements on satisfactory terms and conditions could
result in work
14
interruptions or stoppages, which could have a material impact
on the profitability of the Company. Also, the terms and
conditions of existing or renegotiated agreements could increase
costs, or otherwise affect the Companys ability to fully
implement operational changes to improve overall efficiency. Two
collective bargaining agreements covering approximately 5% of
the Companys employees expired during 2008 and the Company
entered into new agreements during 2008. One collective
bargaining agreement covering approximately .5% of the
Companys employees expires during 2009.
The
Companys ability to change distribution methods and
business practices could be negatively affected by United States
bottler system disputes.
Litigation filed by some United States bottlers of
Coca-Cola
products indicates that disagreements may exist within the
Coca-Cola
bottler system concerning distribution methods and business
practices. Although the litigation has been resolved,
disagreements among various
Coca-Cola
bottlers could adversely affect the Companys ability to
fully implement its business plans in the future.
Managements
use of estimates and assumptions could have a material effect on
reported results.
The Companys consolidated financial statements and
accompanying notes to the consolidated financial statements
include estimates and assumptions by management that impact
reported amounts. Actual results could materially differ from
those estimates.
The
Company has experienced public policy challenges regarding the
sale of soft drinks in schools, particularly elementary, middle
and high schools.
A number of states have regulations restricting the sale of soft
drinks and other foods in schools. Many of these restrictions
have existed for several years in connection with subsidized
meal programs in schools. The focus has more recently turned to
the growing health, nutrition and obesity concerns of
todays youth. The impact of restrictive legislation, if
widely enacted, could have an adverse impact on the
Companys products, image and reputation.
Recent
volatility in the financial market may negatively impact the
Companys ability to access the credit
markets.
Recently the capital and credit markets have become increasingly
volatile as a result of adverse conditions that have caused the
failure and near failure of a number of large financial services
companies. If the capital and credit markets continue to
experience volatility and availability of funds remains limited,
it is possible that the Companys ability to access the
credit markets may be limited by these factors at a time when
the Company would like, or need to do so. The Company has debt
maturities of $119.3 million in May 2009 and
$57.4 million in July 2009. The Company anticipates using
cash flow generated from operations, its $200 million
revolving credit facility ($200 million
facility) and potentially other sources, including bank
borrowings or issuance of debentures or equity securities, to
repay or refinance these debt maturities. The Company currently
has, and anticipates it will continue to have, capacity under
its $200 million facility and cash on hand to repay or
refinance these debt maturities in the event other financing
sources are not available. The limitation of availability of
funds could have an impact on the Companys ability to
refinance the maturing debt
and/or react
to changing economic and business conditions.
The
concentration of the Companys capital stock ownership with
the Harrison family limits other stockholders ability to
influence corporate matters.
Members of the Harrison family, including the Companys
Chairman and Chief Executive Officer, J. Frank
Harrison, III, beneficially own shares of Common Stock and
Class B Common Stock representing approximately 85% of the
total voting power of the Companys outstanding capital
stock. In addition, two members of the Harrison family,
including Mr. Harrison, III, serve on the Board of
Directors of the Company. As a result, members of the Harrison
family have the ability to exert substantial influence or actual
control over the Companys management and affairs and over
substantially all matters requiring action by the Companys
stockholders. This concentration of
15
ownership may also have the effect of delaying or preventing a
change in control otherwise favored by the Companys other
stockholders and could depress the stock price.
Additionally, as a result of the Harrison familys
significant beneficial ownership of the Companys
outstanding voting stock, the Company has relied on the
controlled company exemption from certain corporate
governance requirements of The Nasdaq Stock Market LLC. This
concentration of control limits other stockholders ability
to influence corporate matters and, as a result, the Company may
take actions that the Companys stockholders do not view as
beneficial.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
The principal properties of the Company include its corporate
headquarters, its four production/distribution facilities and
its 44 sales distribution centers. The Company owns two
production/distribution facilities and 37 sales distribution
centers, and leases its corporate headquarters, two other
production/distribution facilities and seven sales distribution
centers.
The Company leases its 110,000 square foot corporate
headquarters and a 65,000 square foot adjacent office
building from a related party. The lease has a fifteen year term
and expires in December 2021. Rental payments for these
facilities were $3.7 million in 2008.
The Company leases its 542,000 square foot Snyder
Production Center and an adjacent 105,000 square foot
distribution center in Charlotte, North Carolina from a related
party for a ten-year term expiring in December 2010. Rental
payments under this lease totaled $3.8 million in 2008.
The Company leases its 330,000 square foot
production/distribution facility in Nashville, Tennessee. The
lease requires monthly payments through December 2009. Rental
payments under this lease totaled $.4 million in 2008.
The Company leases a 150,000 square foot warehouse which
serves as additional space for its Charlotte, North Carolina
distribution center. The lease requires monthly payments through
March 2012. Rental payments under this lease totaled
$.4 million in 2008.
The Company leases its 130,000 square foot sales
distribution center in Lavergne, Tennessee. The lease requires
monthly payments through August 2011. Rental payments under this
lease totaled $.3 million in 2008.
The Company leases its 50,000 square foot sales
distribution center in Charleston, South Carolina. The lease
requires monthly payments through January 2017. Rental payments
under this lease totaled $.4 million in 2008.
The Company leases its 57,000 square foot sales
distribution center in Greenville, South Carolina. The lease
requires monthly payments through July 2018. Rental payments
under this lease totaled $.6 million in 2008.
The Companys other real estate leases are not material.
The Company owns and operates a 316,000 square foot
production/distribution facility in Roanoke, Virginia and a
271,000 square foot production/distribution facility in
Mobile, Alabama.
The approximate percentage utilization of the Companys
production facilities is indicated below:
Production
Facilities
|
|
|
|
|
|
|
Percentage
|
|
Location
|
|
Utilization *
|
|
|
Charlotte, North Carolina
|
|
|
65
|
%
|
Mobile, Alabama
|
|
|
47
|
%
|
Nashville, Tennessee
|
|
|
66
|
%
|
Roanoke, Virginia
|
|
|
71
|
%
|
|
|
|
* |
|
Estimated 2009 production divided by capacity (based on
operations of 6 days per week and 20 hours per day). |
16
The Company currently has sufficient production capacity to meet
its operational requirements. In addition to the production
facilities noted above, the Company utilizes a portion of the
production capacity at SAC, a cooperative located in
Bishopville, South Carolina, that owns a 261,000 square
foot production facility.
The Companys products are generally transported to sales
distribution facilities for storage pending sale. The number of
sales distribution facilities by market area as of
February 1, 2009 was as follows:
Sales
Distribution Facilities
|
|
|
|
|
|
|
Number of
|
|
Region
|
|
Facilities
|
|
|
North Carolina
|
|
|
15
|
|
South Carolina
|
|
|
5
|
|
South Alabama
|
|
|
4
|
|
South Georgia
|
|
|
4
|
|
Middle Tennessee
|
|
|
4
|
|
Western Virginia
|
|
|
4
|
|
West Virginia
|
|
|
8
|
|
|
|
|
|
|
Total
|
|
|
44
|
|
|
|
|
|
|
The Companys facilities are all in good condition and are
adequate for the Companys operations as presently
conducted.
The Company also operates approximately 3,700 vehicles in the
sale and distribution of its beverage products, of which
approximately 1,400 are route delivery trucks. In addition, the
Company owns approximately 196,000 beverage dispensing and
vending machines for the sale of its products in its bottling
territories.
|
|
Item 3.
|
Legal
Proceedings
|
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 that 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.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
There were no matters submitted to a vote of security holders
during the fourth quarter of the fiscal year ended
December 28, 2008.
The following is a list of names and ages of all the executive
officers of the Company indicating all positions and offices
with the Company held by each such person. All officers have
served in their present capacities for the past five years
except as otherwise stated.
J. FRANK HARRISON, III, age 54, is
Chairman of the Board of Directors and Chief Executive Officer
of the Company. Mr. Harrison, III was appointed
Chairman of the Board of Directors in December 1996.
Mr. Harrison, III served as Vice Chairman from
November 1987 through December 1996 and was appointed as the
Companys Chief Executive Officer in May 1994. He was first
employed by the Company in 1977 and has served as a
Division Sales Manager and as a Vice President.
WILLIAM B. ELMORE, age 53, is President and
Chief Operating Officer and a Director of the Company, positions
he has held since January 2001. Previously, he was Vice
President, Value Chain from July 1999 and Vice President,
Business Systems from August 1998 to June 1999. He was Vice
President, Treasurer from June 1996 to
17
July 1998. He was Vice President, Regional Manager for the
Virginia Division, West Virginia Division and Tennessee Division
from August 1991 to May 1996.
HENRY W. FLINT, age 54, is Vice Chairman of
the Board of Directors of the Company, a position he has held
since April 2007. Previously, he was Executive Vice President
and Assistant to the Chairman of the Company, a position to
which he was appointed in July 2004. Prior to that, he was a
Managing Partner at the law firm of Kennedy Covington
Lobdell & Hickman, L.L.P. with which he was associated
from 1980 to 2004.
STEVEN D. WESTPHAL, age 54, is Executive Vice
President of Operations and Systems, a position to which he was
appointed in September 2007. He was Chief Financial Officer from
May 2005 to January 2008 and prior to that Vice President and
Controller, a position he had held from November 1987.
WILLIAM J. BILLIARD, age 42, is Vice
President, Controller and Chief Accounting Officer, a position
to which he was appointed on February 20, 2006. Before
joining the Company, he was Senior Vice President, Interim Chief
Financial Officer and Corporate Controller of Portrait
Corporation of America, Inc., a portrait photography studio
company, from September 2005 to January 2006 and Senior Vice
President, Corporate Controller from August 2001 to September
2005. Prior to that, he served as Vice President, Chief
Financial Officer of Tailored Management, a long-term staffing
company, from August 2000 to August 2001. Portrait Corporation
of America, Inc. filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code in August
2006.
ROBERT G. CHAMBLESS, age 43, is Senior Vice
President of Sales, a position he has held since June 2008.
Previously, Robert held the position of Vice
President Franchise Sales from early 2003 to June
2008 and Region Sales Manager for our Southern Division between
2000 and 2003. Prior to this position, Robert was Sales Manager
in our Columbia, SC branch between 1997 and 2000. Robert has
been with the Company for 22 years, starting in the
Charleston, SC warehouse in 1986.
CLIFFORD M. DEAL, III, age 47, is Vice
President and Treasurer, a position he has held since June 1999.
Previously, he was Director of Compensation and Benefits from
October 1997 to May 1999. He was Corporate Benefits Manager from
December 1995 to September 1997 and was Manager of Tax
Accounting from November 1993 to November 1995.
NORMAN C. GEORGE, age 53, is President of BYB
Brands, Inc, a wholly-owned subsidiary of the Company that
distributes and markets Cinnabon Premium Coffee Lattes, Tum-E
Yummies and other products developed by the Company, a position
he has held since July 2006. Prior to that he was Senior Vice
President, Chief Marketing and Customer Officer, a position he
was appointed to in September 2001. Prior to that, he was Vice
President, Marketing and National Sales, a position he was
appointed to in December 1999. Prior to that, he was Vice
President, Corporate Sales, a position he had held since August
1998. Previously, he was Vice President, Sales for the Carolinas
South Region, a position he held beginning in November 1991.
JAMES E. HARRIS, age 46, is Senior Vice
President and Chief Financial Officer, a position he has held
since January 28, 2008. He served as a Director of the
Company from August 2003 until January 25, 2008 and was a
member of the Audit Committee and the Finance Committee. He
served as Executive Vice President and Chief Financial Officer
of MedCath Corporation, an operator of cardiovascular hospitals,
from December 1999 to January 2008. From 1998 to 1999 he was
Chief Financial Officer of Fresh Foods, Inc., a manufacturer of
fully cooked food products. From 1987 to 1998, he served in
several different officer positions with The Shelton Companies,
Inc. He also served two years with Ernst & Young LLP
as a senior accountant.
KEVIN A. HENRY, age 41, is Chief Human
Resources Officer, a position he has held since September 2007
and Senior Vice President of Human Resources, a position he held
since February 2001. Prior to joining the Company, he was Senior
Vice President, Human Resources at Nationwide Credit Inc., where
he was an employee since January 1997. Prior to that, he was
Director, Human Resources, at Office Depot Inc. beginning in
December 1994.
18
UMESH M. KASBEKAR, age 51, is Senior Vice
President, Planning and Administration, a position he has held
since January 1995. Prior to that, he was Vice President,
Planning, a position he was appointed to in December 1988.
MELVIN F. LANDIS, III, age 43, is Senior
Vice President, Chief Marketing and Customer Officer, a position
he has held since December 2006. Prior to that he was Vice
President, Marketing and Corporate Customers from July 2006 to
December 2006 and Vice President, Customer Management from July
2004 to June 2006. Prior to joining the Company in July 2004, he
was employed at The Clorox Company, a manufacturer and marketer
of consumer products, from 1994. While at The Clorox Company, he
held a number of positions, including Region Sales Manager,
Sales Merchandising Manager Kingsford Charcoal,
Director Corporate Trade and Category Management,
Team Leader Wal-Mart/Sams and Senior Director
US Grocery Sales.
LAUREN C. STEELE, age 54, is Vice President,
Corporate Affairs, a position he has held since May 1989. He is
responsible for governmental, media and community relations for
the Company.
19
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
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 under the symbol COKE. The
table below sets forth for the periods indicated the high and
low reported sales prices per share of Common Stock. There is no
established public trading market for the Class B Common
Stock. Shares of Class B Common Stock are convertible on a
share-for-share basis into shares of Common Stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2008
|
|
|
2007
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
First quarter
|
|
$
|
62.20
|
|
|
$
|
54.38
|
|
|
$
|
68.65
|
|
|
$
|
52.62
|
|
Second quarter
|
|
|
62.13
|
|
|
|
38.30
|
|
|
|
58.50
|
|
|
|
49.78
|
|
Third quarter
|
|
|
44.03
|
|
|
|
31.41
|
|
|
|
60.95
|
|
|
|
50.10
|
|
Fourth quarter
|
|
|
46.65
|
|
|
|
35.00
|
|
|
|
64.19
|
|
|
|
53.95
|
|
A quarterly dividend rate of $.25 per share on both Common Stock
and Class B Common Stock was maintained throughout 2007 and
2008. Common Stock and Class B Common Stock have
participated equally in dividends since 1994.
Pursuant to the Companys certificate of incorporation, no
cash dividend or dividend of property or stock other than stock
of the Company, as specifically described in the 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.
The amount and frequency of future dividends will be determined
by the Companys Board of Directors in light of the
earnings and financial condition of the Company at such time,
and no assurance can be given that dividends will be declared in
the future.
The number of stockholders of record of the Common Stock and
Class B Common Stock, as of February 28, 2009, was
3,832 and 10, respectively.
On February 27, 2008, the Compensation Committee determined
that 20,000 shares of restricted Class B Common Stock,
$1.00 par value, vested and should be issued pursuant to a
performance-based award to J. Frank Harrison, III, in
connection with his services in 2007 as Chairman of the Board of
Directors and Chief Executive Officer of the Company.
On March 4, 2009, the Compensation Committee determined
that 20,000 shares of restricted Class B Common Stock,
$1.00 par value, vested and should be issued pursuant to a
performance-based award to J. Frank Harrison, III, in
connection with his services in 2008 as Chairman of the Board of
Directors and Chief Executive Officer of the Company.
The awards to Mr. Harrison, III, were issued without
registration under the Securities Act of 1933 (the
Securities Act) in reliance on Section 4(2) of the
Securities Act.
On February 19, 2009, The
Coca-Cola
Company converted all of its 497,670 shares of the
Companys Class B Common Stock into an equivalent
number of shares of the Common Stock of the Company. The shares
of Common Stock were issued to The Coca-Cola Company without
registration under Section 3(a)(9) of the Securities Act.
20
Presented below is a line graph comparing the yearly percentage
change in the cumulative total return on the Companys
Common Stock to the cumulative total return of the
Standard & Poors 500 Index and two different
peer group indices, the Old Peer Group and the
New Peer Group for the period commencing
December 26, 2003 and ending December 28, 2008. The
Old Peer Group is comprised of Anheuser-Busch Companies, Inc.;
Cadbury Schweppes plc (ADS);
Coca-Cola
Enterprises Inc.; The
Coca-Cola
Company; Cott Corporation; National Beverage Corp.; PepsiCo,
Inc.; Pepsi Bottling Group, Inc. and PepsiAmericas. The New Peer
Group is comprised of Dr Pepper Snapple Group,
Coca-Cola
Enterprises Inc.; The
Coca-Cola
Company; Cott Corporation; National Beverage Corp.; PepsiCo,
Inc.; Pepsi Bottling Group, Inc. and PepsiAmericas. The Company
has elected to change its peer group because the Company
believes the companies reflected in the New Peer Group are more
reflective of the Companys business and therefore provide
a more meaningful comparison of stock performance.
The graph assumes that $100 was invested in the Companys
Common Stock, the Standard & Poors 500 Index and
each peer group on December 26, 2003 and that all dividends
were reinvested on a quarterly basis. Returns for the companies
included in each peer group have been weighted on the basis of
the total market capitalization for each company.
CUMULATIVE
TOTAL RETURN
Based upon an initial investment of $100 on December 26,
2003
with dividends reinvested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/26/03
|
|
|
12/31/04
|
|
|
12/30/05
|
|
|
12/29/06
|
|
|
12/28/07
|
|
|
12/26/08
|
Coca-Cola
Bottling Co. Consolidated (CCBCC)
|
|
|
$
|
100
|
|
|
|
$
|
110
|
|
|
|
$
|
85
|
|
|
|
$
|
136
|
|
|
|
$
|
118
|
|
|
|
$
|
89
|
|
S&P 500
|
|
|
$
|
100
|
|
|
|
$
|
111
|
|
|
|
$
|
116
|
|
|
|
$
|
135
|
|
|
|
$
|
142
|
|
|
|
$
|
90
|
|
Old Peer Group
|
|
|
$
|
100
|
|
|
|
$
|
100
|
|
|
|
$
|
105
|
|
|
|
$
|
118
|
|
|
|
$
|
149
|
|
|
|
$
|
102
|
|
New Peer Group
|
|
|
$
|
100
|
|
|
|
$
|
97
|
|
|
|
$
|
103
|
|
|
|
$
|
116
|
|
|
|
$
|
146
|
|
|
|
$
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
Item 6.
|
Selected
Financial Data
|
The following table sets forth certain selected financial data
concerning the Company for the five years ended
December 28, 2008. The data for the five years ended
December 28, 2008 is derived from audited consolidated
financial statements of the Company. This information should be
read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
set forth in Item 7 hereof and is qualified in its entirety
by reference to the more detailed consolidated financial
statements and notes contained in Item 8 hereof. This
information should also be read in conjunction with the
Risk Factors set forth in Item 1A.
SELECTED
FINANCIAL DATA*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year**
|
|
In thousands (except per share data)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Summary of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,463,615
|
|
|
$
|
1,435,999
|
|
|
$
|
1,431,005
|
|
|
$
|
1,380,172
|
|
|
$
|
1,267,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
848,409
|
|
|
|
814,865
|
|
|
|
808,426
|
|
|
|
761,261
|
|
|
|
666,534
|
|
Selling, delivery and administrative expenses
|
|
|
555,728
|
|
|
|
539,251
|
|
|
|
537,915
|
|
|
|
526,783
|
|
|
|
516,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
1,404,137
|
|
|
|
1,354,116
|
|
|
|
1,346,341
|
|
|
|
1,288,044
|
|
|
|
1,182,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
59,478
|
|
|
|
81,883
|
|
|
|
84,664
|
|
|
|
92,128
|
|
|
|
84,349
|
|
Interest expense
|
|
|
39,601
|
|
|
|
47,641
|
|
|
|
50,286
|
|
|
|
49,279
|
|
|
|
43,983
|
|
Minority interest
|
|
|
2,392
|
|
|
|
2,003
|
|
|
|
3,218
|
|
|
|
4,097
|
|
|
|
3,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
17,485
|
|
|
|
32,239
|
|
|
|
31,160
|
|
|
|
38,752
|
|
|
|
36,550
|
|
Income taxes
|
|
|
8,394
|
|
|
|
12,383
|
|
|
|
7,917
|
|
|
|
15,801
|
|
|
|
14,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
9,091
|
|
|
$
|
19,856
|
|
|
$
|
23,243
|
|
|
$
|
22,951
|
|
|
$
|
21,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
.99
|
|
|
$
|
2.18
|
|
|
$
|
2.55
|
|
|
$
|
2.53
|
|
|
$
|
2.41
|
|
Class B Common Stock
|
|
$
|
.99
|
|
|
$
|
2.18
|
|
|
$
|
2.55
|
|
|
$
|
2.53
|
|
|
$
|
2.41
|
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
.99
|
|
|
$
|
2.17
|
|
|
$
|
2.55
|
|
|
$
|
2.53
|
|
|
$
|
2.41
|
|
Class B Common Stock
|
|
$
|
.99
|
|
|
$
|
2.17
|
|
|
$
|
2.54
|
|
|
$
|
2.53
|
|
|
$
|
2.41
|
|
Cash dividends per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
Class B Common Stock
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
|
$
|
1.00
|
|
Other Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
6,644
|
|
|
|
6,644
|
|
|
|
6,643
|
|
|
|
6,643
|
|
|
|
6,643
|
|
Class B Common Stock
|
|
|
2,500
|
|
|
|
2,480
|
|
|
|
2,460
|
|
|
|
2,440
|
|
|
|
2,420
|
|
Weighted average number of common shares outstanding
assuming dilution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
9,160
|
|
|
|
9,141
|
|
|
|
9,120
|
|
|
|
9,083
|
|
|
|
9,063
|
|
Class B Common Stock
|
|
|
2,516
|
|
|
|
2,497
|
|
|
|
2,477
|
|
|
|
2,440
|
|
|
|
2,420
|
|
Year-End Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,315,772
|
|
|
$
|
1,291,799
|
|
|
$
|
1,364,467
|
|
|
$
|
1,341,839
|
|
|
$
|
1,314,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt
|
|
|
176,693
|
|
|
|
7,400
|
|
|
|
100,000
|
|
|
|
6,539
|
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of obligations under capital leases
|
|
|
2,781
|
|
|
|
2,602
|
|
|
|
2,435
|
|
|
|
1,709
|
|
|
|
1,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations under capital leases
|
|
|
74,833
|
|
|
|
77,613
|
|
|
|
75,071
|
|
|
|
77,493
|
|
|
|
79,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
414,757
|
|
|
|
591,450
|
|
|
|
591,450
|
|
|
|
691,450
|
|
|
|
700,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
76,309
|
|
|
|
120,504
|
|
|
|
93,953
|
|
|
|
75,134
|
|
|
|
64,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
See Managements Discussion and Analysis of Financial
Condition and Results of Operations and the accompanying notes
to consolidated financial statements for additional information. |
|
** |
|
All years presented are 52-week fiscal years except 2004 which
was a 53-week year. |
22
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following Managements Discussion and Analysis of
Financial Condition and Results of Operations
(M,D&A) should be read in conjunction with
Coca-Cola
Bottling Co. Consolidateds (the Company)
consolidated financial statements and the accompanying notes to
consolidated financial statements. M,D&A includes the
following sections:
|
|
|
|
|
Our Business and the Nonalcoholic Beverage Industry
a general description of the Companys business and the
nonalcoholic beverage industry.
|
|
|
|
Areas of Emphasis a summary of the Companys
key priorities.
|
|
|
|
Overview of Operations and Financial Condition a
summary of key information and trends concerning the financial
results for the three years ended 2008.
|
|
|
|
Discussion of Critical Accounting Policies, Estimates and New
Accounting Pronouncements a discussion of accounting
policies that are most important to the portrayal of the
Companys financial condition and results of operations and
that require critical judgments and estimates and the expected
impact of new accounting pronouncements.
|
|
|
|
Results of Operations an analysis of the
Companys results of operations for the three years
presented in the consolidated financial statements.
|
|
|
|
Financial Condition an analysis of the
Companys financial condition as of the end of the last two
years as presented in the consolidated financial statements.
|
|
|
|
Liquidity and Capital Resources an analysis of
capital resources, cash sources and uses, investing activities,
financing activities, off-balance sheet arrangements, aggregate
contractual obligations and hedging activities.
|
|
|
|
Cautionary Information Regarding Forward-Looking Statements.
|
The fiscal years presented are the 52-week periods ended
December 28, 2008, December 30, 2007 and
December 31, 2006. The Companys fiscal year ends on
the Sunday closest to December 31 of each year.
The consolidated financial statements include the consolidated
operations of the Company and its majority-owned subsidiaries
including Piedmont
Coca-Cola
Bottling Partnership (Piedmont). Minority interest
consists of The
Coca-Cola
Companys interest in Piedmont, which was 22.7% for all
periods presented.
Our
Business and the Nonalcoholic Beverage Industry
The Company produces, markets and distributes nonalcoholic
beverages, primarily products of The
Coca-Cola
Company, which include some of the most recognized and popular
beverage brands in the world. The Company is the second largest
bottler of products of The
Coca-Cola
Company in the United States, distributing these products in
eleven states primarily in the Southeast. The Company also
distributes several other beverage brands. These product
offerings include both sparkling and still beverages. Sparkling
beverages are primarily carbonated beverages, including energy
products. Still beverages are primarily noncarbonated beverages
such as bottled water, tea, ready to drink coffee, enhanced
water, juices and sports drinks. The Company had net sales of
$1.5 billion in 2008.
The nonalcoholic beverage market is highly competitive. The
Companys competitors include bottlers and distributors of
nationally and regionally advertised and marketed products and
private label products. In each region in which the Company
operates, between 85% and 95% of sparkling beverage sales in
bottles, cans and other containers are accounted for by the
Company and its principal competitors, which in each region
includes the local bottler of Pepsi-Cola and, in some regions,
the local bottler of Dr Pepper, Royal Crown
and/or
7-Up
products. During the past several years, industry sales of sugar
sparkling beverages, other than energy products, have declined.
The decline in sales of sugar sparkling beverages has generally
been offset by growth in other nonalcoholic beverage product
categories. The sparkling beverage category (including energy
products) represents 82% of the Companys 2008 bottle/can
net sales.
23
The Companys net sales by product category were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Bottle/can sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sparkling beverages (including energy products)
|
|
$
|
1,011,656
|
|
|
$
|
1,007,583
|
|
|
$
|
1,009,652
|
|
Still beverages
|
|
|
227,171
|
|
|
|
201,952
|
|
|
|
180,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total bottle/can sales
|
|
|
1,238,827
|
|
|
|
1,209,535
|
|
|
|
1,189,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to other
Coca-Cola
bottlers
|
|
|
128,651
|
|
|
|
127,478
|
|
|
|
152,426
|
|
Post-mix and other
|
|
|
96,137
|
|
|
|
98,986
|
|
|
|
88,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other sales
|
|
|
224,788
|
|
|
|
226,464
|
|
|
|
241,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
1,463,615
|
|
|
$
|
1,435,999
|
|
|
$
|
1,431,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Areas
of Emphasis
Key priorities for the Company include revenue management,
product innovation and beverage portfolio expansion,
distribution cost management and productivity.
Revenue
Management
Revenue management requires a strategy which reflects
consideration for pricing of brands and packages within product
categories and channels, as well as highly effective working
relationships with customers and disciplined fact-based
decision-making. Revenue management has been and continues to be
a key driver which has significant impact on the Companys
results of operations.
Product
Innovation and Beverage Portfolio Expansion
Sparkling beverage volume, other than energy products, has
declined over the past several years. Innovation of both new
brands and packages has been and will continue to be critical to
the Companys overall revenue. The Company began
distributing Monster Energy drinks in certain of the
Companys territories beginning in November 2008. The
Company introduced the following new products during 2007:
smartwater, vitaminwater, vitaminenergy, Gold Peak and Country
Breeze tea products, Diet Coke Plus, Dasani Plus, juice products
from FUZE (a subsidiary of The
Coca-Cola
Company) and V8 juice products from Campbell Soup Company
(Campbell). The Company also modified its energy
product portfolio in 2007 with the addition of
NOS©
products from FUZE.
In October 2008, the Company entered into a distribution
agreement with Hansen Beverage Company (Hansen), the
developer, marketer, seller and distributor of Monster Energy
drinks, the leading volume brand in the U.S. energy drink
category. Under this agreement, the Company has the right to
distribute Monster Energy drinks in certain of the
Companys territories. The agreement has a term of
20 years and can be terminated by either party under
certain circumstances, subject to a termination penalty in
certain cases. In conjunction with the execution of this
agreement, the Company was required to pay Hansen
$2.3 million. This amount equals the amount that Hansen is
required to pay to the existing distributors of Monster Energy
drinks to terminate their existing distribution agreements. The
Company has recorded the payment to Hansen as distribution
rights and will amortize the amount on a straight-line basis to
selling, delivery and administrative (S,D&A)
expenses over the 20 year term of the agreement.
In August 2007, the Company entered into a distribution
agreement with Energy Brands Inc. (Energy Brands), a
wholly-owned subsidiary of The
Coca-Cola
Company. Energy Brands, also known as glacéau, is a
producer and distributor of branded enhanced beverages including
vitaminwater, smartwater and vitaminenergy. The distribution
agreement is effective November 1, 2007 for a period of ten
years and, unless earlier terminated, will be automatically
renewed for succeeding ten-year terms, subject to a one year
non-renewal notification by the Company. In conjunction with the
execution of the distribution agreement, the Company entered
into an agreement
24
with The
Coca-Cola
Company whereby the Company agreed not to introduce new third
party brands or certain third party brand extensions in the
United States through August 31, 2010 unless mutually
agreed to by the Company and The
Coca-Cola
Company.
The Company has invested in its own brand portfolio with
products such as Tum-E Yummies, a vitamin C enhanced flavored
drink, Country Breeze tea and diet Country Breeze tea and became
the exclusive licensee of Cinnabon Premium Coffee Lattes. These
brands enable the Company to participate in strong growth
categories and capitalize on distribution channels that include
the Companys traditional
Coca-Cola
franchise territory as well as third party distributors outside
the Companys traditional franchise territory. While the
growth prospects of Company-owned or exclusive licensed brands
appear promising, the cost of developing, marketing and
distributing these brands is anticipated to be significant as
well.
Distribution
Cost Management
Distribution costs represent the costs of transporting finished
goods from Company locations to customer outlets. Total
distribution costs amounted to $201.6 million,
$194.9 million and $193.8 million in 2008, 2007 and
2006, respectively. Over the past several years, the Company has
focused on converting its distribution system from a
conventional routing system to a predictive system. This
conversion to a predictive system has allowed the Company to
more efficiently handle increasing numbers of products. In
addition, the Company has closed a number of smaller sales
distribution centers reducing its fixed warehouse-related costs.
The Company has three primary delivery systems for its current
business:
|
|
|
|
|
bulk delivery for large supermarkets, mass merchandisers and
club stores;
|
|
|
|
advanced sale delivery for convenience stores, drug stores,
small supermarkets and on-premises accounts; and
|
|
|
|
full service delivery for its full service vending customers.
|
Distribution cost management will continue to be a key area of
emphasis for the Company.
Productivity
A key driver in the Companys S,D&A expense management
relates to ongoing improvements in labor productivity and asset
productivity. The Company initiated plans to reorganize the
structure in its operating units and support services in July
2008. The reorganization resulted in the elimination of
approximately 350 positions, or approximately 5% of the
Companys workforce. The Company implemented these changes
in order to improve its efficiency and to help offset
significant increases in the cost of raw materials and operating
expenses. The Company anticipates substantial annual savings
from this reorganization plan. The plan was completed in the
fourth quarter of 2008.
On February 2, 2007, the Company initiated a restructuring
plan to simplify and streamline its operating management
structure, which included a separation of the sales function
from the delivery function to provide dedicated focus on each
function and enhanced productivity. The Company continues to
focus on its supply chain and distribution functions for ongoing
opportunities to improve productivity.
Overview
of Operations and Financial Condition
The following is a summary of key information concerning the
Companys financial results for the three years ended
December 28, 2008.
The following items affect the comparability of the financial
results presented below:
2008
|
|
|
|
|
a $2.0 million pre-tax charge for a
mark-to-market
adjustment related to the Companys fuel hedging program;
|
25
|
|
|
|
|
a $14.0 million pre-tax charge to freeze the Companys
liability to the Central States, Southeast and Southwest Areas
Pension Fund (Central States), a multi-employer
pension fund, while preserving the pension benefits previously
earned by Company employees covered by the plan and the expense
to settle a strike by the employees covered by this plan;
|
|
|
|
a $4.6 million pre-tax charge for restructuring expense
related to the Companys plan initiated in the third
quarter of 2008 to reorganize the structure of its operating
units and support services, which resulted in the elimination of
approximately 350 positions; and
|
|
|
|
a $2.6 million credit adjustment to pre-tax income to
increase the Companys equity investment in a plastic
bottle cooperative.
|
2007
|
|
|
|
|
a $2.8 million pre-tax charge related to a simplification
of the Companys operating management structure and
reduction in workforce.
|
2006
|
|
|
|
|
a $4.9 million credit to income tax expense related to
agreements with two state tax authorities to settle certain
prior tax positions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands (except per share data)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Net sales
|
|
$
|
1,463,615
|
|
|
$
|
1,435,999
|
|
|
$
|
1,431,005
|
|
Gross margin
|
|
|
615,206
|
|
|
|
621,134
|
|
|
|
622,579
|
|
S,D&A expenses
|
|
|
555,728
|
|
|
|
539,251
|
|
|
|
537,915
|
|
Income from operations
|
|
|
59,478
|
|
|
|
81,883
|
|
|
|
84,664
|
|
Interest expense
|
|
|
39,601
|
|
|
|
47,641
|
|
|
|
50,286
|
|
Income before income taxes
|
|
|
17,485
|
|
|
|
32,239
|
|
|
|
31,160
|
|
Income taxes
|
|
|
8,394
|
|
|
|
12,383
|
|
|
|
7,917
|
|
Net income
|
|
|
9,091
|
|
|
|
19,856
|
|
|
|
23,243
|
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
.99
|
|
|
$
|
2.18
|
|
|
$
|
2.55
|
|
Class B Common Stock
|
|
$
|
.99
|
|
|
$
|
2.18
|
|
|
$
|
2.55
|
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
.99
|
|
|
$
|
2.17
|
|
|
$
|
2.55
|
|
Class B Common Stock
|
|
$
|
.99
|
|
|
$
|
2.17
|
|
|
$
|
2.54
|
|
The Companys net sales grew 2.3% from 2006 to 2008. The
net sales increase was primarily due to an increase in average
sales price per bottle/can unit of 4.1% offset by a
$23.8 million decrease in sales to other
Coca-Cola
bottlers (bottler sales). The decrease in bottler
sales was due to decreased sales of energy drinks.
The Company has seen declines in the demand for sugar sparkling
beverages (other than energy products) and bottled water over
the past several years and anticipates this trend may continue.
The Company anticipates overall bottle/can sales growth will be
primarily dependent upon continued growth in diet sparkling
products, sports drinks, enhanced water, tea and energy products
as well as the introduction of new beverage products and the
appropriate pricing of brands and packages within sales channels.
Gross margin dollars decreased 1.2% from 2006 to 2008. The
Companys gross margin as a percentage of net sales
declined from 43.5% in 2006 to 42.0% in 2008. The decrease in
gross margin percentage was primarily due to higher raw material
costs and a higher percentage of sales of purchased products
which have lower gross margin percentage than manufactured
products, partially offset by higher sales price per unit and
increases in marketing funding support from The
Coca-Cola
Company.
S,D&A expenses increased 3.3% from 2006 to 2008. The
increase in S,D&A expenses was primarily attributable to
the charge in 2008 to freeze the Companys liability to
Central States while preserving the pension
26
benefits previously earned by employees covered by the plan,
restructuring expense recorded in 2008 and increased fuel costs.
Employee benefit plan costs decreased primarily due to the
amendment of the principal Company-sponsored pension plan in
2006, offset by increases in the Companys 401(k) Savings
Plan contributions.
Net interest expense decreased 21.2% in 2008 compared to 2006.
The decrease was primarily due to lower effective interest rates
and lower borrowing levels offset by a decrease in interest
earned on short-term cash investments. The Companys
overall weighted average interest rate was 5.7% for 2008
compared to 6.6% for 2006. Interest earned on short-term cash
investments in 2008 was $.1 million compared to
$1.4 million in 2006.
Income tax expense increased 6.0% from 2006 to 2008. The lower
rate in 2006 reflected the effect from agreements with state
taxing authorities. The Companys effective tax rate was
48.0% for 2008 compared to 25.4% for 2006. The effective tax
rates differ from statutory rates as a result of adjustments to
the reserve for uncertain tax positions, adjustments to the
deferred tax asset valuation allowance and other nondeductible
items.
Net debt and capital lease obligations were summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
|
Dec. 31,
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Debt
|
|
$
|
591,450
|
|
|
$
|
598,850
|
|
|
$
|
691,450
|
|
Capital lease obligations
|
|
|
77,614
|
|
|
|
80,215
|
|
|
|
77,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt and capital lease obligations
|
|
|
669,064
|
|
|
|
679,065
|
|
|
|
768,956
|
|
Less: Cash and cash equivalents
|
|
|
45,407
|
|
|
|
9,871
|
|
|
|
61,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net debt and capital lease obligations(1)
|
|
$
|
623,657
|
|
|
$
|
669,194
|
|
|
$
|
707,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The non-GAAP measure Total net debt and capital lease
obligations is used to provide investors with additional
information which management believes is helpful in the
evaluation of the Companys capital structure and financial
leverage. |
Discussion
of Critical Accounting Policies, Estimates and New Accounting
Pronouncements
Critical
Accounting Policies and Estimates
In the ordinary course of business, the Company has made a
number of estimates and assumptions relating to the reporting of
results of operations and financial position in the preparation
of its consolidated financial statements in conformity with
accounting principles generally accepted in the United States of
America. Actual results could differ significantly from those
estimates under different assumptions and conditions. The
Company believes the following discussion addresses the
Companys most critical accounting policies, which are
those most important to the portrayal of the Companys
financial condition and results of operations and require
managements most difficult, subjective and complex
judgments, often as a result of the need to make estimates about
the effect of matters that are inherently uncertain.
The Company did not make changes in any critical accounting
policies during 2008. Any changes in critical accounting
policies and estimates are discussed with the Audit Committee of
the Board of Directors of the Company during the quarter in
which a change is contemplated and prior to making such change.
Allowance
for Doubtful Accounts
The Company evaluates the collectibility of its trade accounts
receivable based on a number of factors. In circumstances where
the Company becomes aware of a customers inability to meet
its financial obligations to the Company, a specific reserve for
bad debts is estimated and recorded which reduces the recognized
receivable to the estimated amount the Company believes will
ultimately be collected. In addition to specific customer
identification of potential bad debts, bad debt charges are
recorded based on the Companys recent past loss history
and an overall assessment of past due trade accounts receivable
outstanding.
The Companys review of potential bad debts considers the
specific industry in which a particular customer operates, such
as supermarket retailers, convenience stores and mass
merchandise retailers, and the general
27
economic conditions that currently exist in that specific
industry. The Company then considers the effects of
concentration of credit risk in a specific industry and for
specific customers within that industry.
Property,
Plant and Equipment
Property, plant and equipment is recorded at cost and is
depreciated on a straight-line basis over the estimated useful
lives of such assets. Changes in circumstances such as
technological advances, changes to the Companys business
model or changes in the Companys capital spending strategy
could result in the actual useful lives differing from the
Companys current estimates. Factors such as changes in the
planned use of manufacturing equipment, cold drink dispensing
equipment, transportation equipment, warehouse facilities or
software could also result in shortened useful lives. In those
cases where the Company determines that the useful life of
property, plant and equipment should be shortened, the Company
depreciates the net book value in excess of the estimated
salvage value over its revised remaining useful life.
The Company evaluates the recoverability of the carrying amount
of its property, plant and equipment when events or changes in
circumstances indicate that the carrying amount of an asset or
asset group may not be recoverable. If the Company determines
that the carrying amount of an asset or asset group is not
recoverable based upon the expected undiscounted future cash
flows of the asset or asset group, an impairment loss is
recorded equal to the excess of the carrying amounts over the
estimated fair value of the long-lived assets.
Franchise
Rights
The Company considers franchise rights with The
Coca-Cola
Company and other beverage companies to be indefinite lived
because the agreements are perpetual or, in situations where
agreements are not perpetual, the Company anticipates the
agreements will continue to be renewed upon expiration. The cost
of renewals is minimal and the Company has not had any renewals
denied. The Company considers franchise rights as indefinite
lived intangible assets under the Statement of Financial
Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142) and
therefore, does not amortize the value of such assets. Instead,
franchise rights are tested at least annually for impairment.
Impairment
Testing of Franchise Rights and Goodwill
SFAS No. 142 requires testing of intangible assets
with indefinite lives and goodwill for impairment at least
annually. The Company conducts its annual impairment test as of
the first day of the fourth quarter of each fiscal year. The
Company also reviews intangible assets with indefinite lives and
goodwill for impairment if there are significant changes in
business conditions that could result in impairment.
For the annual impairment analysis of franchise rights, the fair
value for the Companys franchise rights is estimated using
a discounted cash flows approach. This approach involves
projecting future cash flows attributable to the franchise
rights and discounting those estimated cash flows using an
appropriate discount rate. The estimated fair value is compared
to the carrying value on an aggregated basis. As a result of
this analysis, there was no impairment of the Companys
recorded franchise rights in 2008, 2007 or 2006. In addition to
the discount rate, the estimated fair value includes a number of
assumptions such as projected net sales, cost of sales,
operating expenses and income taxes. Changes in the assumptions
required to estimate the present value of the cash flows
attributable to franchise rights could materially impact the
fair value estimate.
The Company has determined that it has one reporting unit for
the Company as a whole for purposes of assessing goodwill for
potential impairment. For the annual impairment analysis of
goodwill, the Company develops an estimated fair value for the
reporting unit using an average of three different approaches:
|
|
|
|
|
market value, using the Companys stock price plus
outstanding debt;
|
|
|
|
discounted cash flow analysis; and
|
|
|
|
multiple of earnings before interest, taxes, depreciation and
amortization based upon relevant industry data.
|
The estimated fair value of the reporting unit is then compared
to its carrying amount including goodwill. If the estimated fair
value exceeds the carrying amount, goodwill will be considered
not to be impaired and the second
28
step of the SFAS No. 142 impairment test is not
necessary. If the carrying amount including goodwill exceeds its
estimated fair value, the second step of the impairment test is
performed to measure the amount of the impairment, if any. Based
on this analysis, there was no impairment of the Companys
recorded goodwill in 2008, 2007 or 2006. The discounted cash
flow analysis includes a number of assumptions such as weighted
average cost of capital, projected sales volume, net sales, cost
of sales and operating expenses. Changes in these assumptions
could materially impact the fair value estimates.
The Company uses its overall market capitalization as part of
its estimate of fair value of the reporting unit and in
assessing the reasonableness of the Companys internal
estimates of fair value.
To the extent that actual and projected cash flows decline in
the future, or if market conditions deteriorate significantly,
the Company may be required to perform an interim impairment
analysis that could result in an impairment of franchise rights
and goodwill. The Company has determined that there has not been
an interim impairment trigger since the first day of the fourth
quarter of 2008 annual test date.
Income
Tax Estimates
The Company records a valuation allowance to reduce the carrying
value of its deferred tax assets if, based on the weight of
available evidence, it is determined it is more likely than not
that such assets will not ultimately be realized. While the
Company considers future taxable income and prudent and feasible
tax planning strategies in assessing the need for a valuation
allowance, should the Company determine it will not be able to
realize all or part of its net deferred tax assets in the
future, an adjustment to the valuation allowance will be charged
to income in the period in which such determination is made. A
reduction in the valuation allowance and corresponding
adjustment to income may be required if the likelihood of
realizing existing deferred tax assets increases to a more
likely than not level. The Company regularly reviews the
realizability of deferred tax assets and initiates a review when
significant changes in the Companys business occur that
could impact the realizability assessment.
In addition to a valuation allowance related to net operating
loss carryforwards, the Company records liabilities for
uncertain tax positions related to certain state and federal
income tax positions. These liabilities reflect the
Companys best estimate of the ultimate income tax
liability based on currently known facts and information.
Material changes in facts or information as well as the
expiration of statutes of limitations
and/or
settlements with individual state or federal jurisdictions may
result in material adjustments to these estimates in the future.
The Company recorded adjustments to its valuation allowance and
reserve for uncertain tax positions in 2006 and 2008 as a result
of settlements reached with certain states on a basis more
favorable than previously estimated. The Company did not record
any adjustment to its valuation allowance and reserve for
uncertain tax positions in 2007 as a result of settlements with
any states.
The Company adopted the Financial Accounting Standards Board
(FASB) Interpretation No. 48, Accounting
for Uncertainty in Income Taxes (FIN 48)
and FASB Staff Position
FIN 48-1,
Definition of Settlement in FASB Interpretation
No. 48 (FSP
FIN 48-1)
during 2007. See Note 14 of the consolidated financial
statements for additional information.
Risk
Management Programs
In general, the Company is self-insured for the costs of
workers compensation, employment practices, vehicle
accident claims and medical claims. The Company uses commercial
insurance for claims as a risk reduction strategy to minimize
catastrophic losses. Losses are accrued using assumptions and
procedures followed in the insurance industry, adjusted for
company-specific history and expectations. The Company has
standby letters of credit, primarily related to its property and
casualty insurance programs. On December 28, 2008, these
letters of credit totaled $19.3 million.
Pension
and Postretirement Benefit Obligations
The Company sponsors pension plans covering substantially all
full-time nonunion employees and certain union employees who
meet eligibility requirements. As discussed below, the Company
ceased further benefit accruals under the principal
Company-sponsored pension plan effective June 30, 2006.
Several statistical and other factors, which attempt to
anticipate future events, are used in calculating the expense
and liability related to the plans. These factors include
assumptions about the discount rate, expected return on plan
assets, employee turnover and age at retirement, as determined
by the Company, within certain guidelines. In addition, the
Company uses subjective factors such as
29
mortality rates to estimate the projected benefit obligation.
The actuarial assumptions used by the Company may differ
materially from actual results due to changing market and
economic conditions, higher or lower withdrawal rates or longer
or shorter life spans of participants. These differences may
result in a significant impact to the amount of net periodic
pension cost recorded by the Company in future periods. The
discount rate used in determining the actuarial present value of
the projected benefit obligation for the Companys pension
plans changed from 6.25% in 2007 to 6.0% in 2008. The discount
rate assumption is generally the estimate which can have the
most significant impact on net periodic pension cost and the
projected benefit obligation for these pension plans. The
Company determines an appropriate discount rate annually based
on the annual yield on long-term corporate bonds as of the
measurement date and reviews the discount rate assumption at the
end of each year.
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 annual expense/income for
Company-sponsored pension plans changed from $8.1 million
in expense in 2006 to $2.3 million in income in 2008.
Annual pension expense is estimated to be $11.5 million in
2009. The large increase in annual pension expense is primarily
due to a significant decrease in the fair market value of
pension plan assets in 2008.
A .25% increase or decrease in the discount rate assumption
would have impacted the projected benefit obligation and net
periodic pension cost of the Company-sponsored pension plans as
follows:
|
|
|
|
|
|
|
|
|
In thousands
|
|
.25% Increase
|
|
|
.25% Decrease
|
|
|
(Decrease) increase in:
|
|
|
|
|
|
|
|
|
Projected benefit obligation at December 28, 2008
|
|
$
|
(7,354
|
)
|
|
$
|
7,804
|
|
Net periodic pension cost in 2008
|
|
|
(426
|
)
|
|
|
841
|
|
The weighted average expected long-term rate of return of plan
assets was 8% for 2006, 2007 and 2008. This rate reflects an
estimate of long-term future returns for the pension plan
assets. This estimate is primarily a function of the asset
classes (equities versus fixed income) in which the pension plan
assets are invested and the analysis of past performance of
these asset classes over a long period of time. This analysis
includes expected long-term inflation and the risk premiums
associated with equity and fixed income investments. See
Note 17 to the consolidated financial statements for the
details by asset type of the Companys pension plan assets
at December 28, 2008 and December 30, 2007, and the
weighted average expected long-term rate of return of each asset
type. The actual return of pension plan assets was a loss of
28.6% for 2008 and a gain of 8.6% for 2007.
The Company sponsors a postretirement health care plan for
employees meeting specified qualifying criteria. Several
statistical and other factors, which attempt to anticipate
future events, are used in calculating the net periodic
postretirement benefit cost and postretirement benefit
obligation for this plan. These factors include assumptions
about the discount rate and the expected growth rate for the
cost of health care benefits. In addition, the Company uses
subjective factors such as withdrawal and mortality rates to
estimate the projected liability under this plan. The actuarial
assumptions used by the Company may differ materially from
actual results due to changing market and economic conditions,
higher or lower withdrawal rates or longer or shorter life spans
of participants. The Company does not pre-fund its
postretirement benefits and has the right to modify or terminate
certain of these benefits in the future.
The discount rate assumption, the annual health care cost trend
and the ultimate trend rate for health care costs are key
estimates which can have a significant impact on the net
periodic postretirement benefit cost and postretirement
obligation in future periods. The Company annually determines
the health care cost trend based on recent actual medical trend
experience and projected experience for subsequent years.
The discount rate assumptions used to determine the pension and
postretirement benefit obligations are based on yield rates
available on double-A bonds as of each plans measurement
date. The discount rate used in determining the postretirement
benefit obligation was 6.25% in both 2007 and 2008. The discount
rate for 2008 was derived using the Citigroup Pension Discount
Curve which is a set of yields on hypothetical double-A
zero-coupon bonds with maturities up to 30 years. Projected
benefit payouts from each plan are matched to the Citigroup
Pension Discount Curve and an equivalent flat discount rate is
derived and then rounded to the nearest quarter percent.
30
A .25% increase or decrease in the discount rate assumption
would have impacted the projected benefit obligation and service
cost and interest cost of the Companys postretirement
benefit plan as follows:
|
|
|
|
|
|
|
|
|
In thousands
|
|
.25% Increase
|
|
|
.25% Decrease
|
|
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
Postretirement benefit obligation at December 28, 2008
|
|
$
|
(882
|
)
|
|
$
|
922
|
|
Service cost and interest cost in 2008
|
|
|
8
|
|
|
|
(9
|
)
|
A 1% increase or decrease in the annual health care cost trend
would have impacted the postretirement benefit obligation and
service cost and interest cost of the Companys
postretirement benefit plan as follows:
|
|
|
|
|
|
|
|
|
In thousands
|
|
1% Increase
|
|
|
1% Decrease
|
|
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
Postretirement benefit obligation at December 28, 2008
|
|
$
|
4,230
|
|
|
$
|
(3,675
|
)
|
Service cost and interest cost in 2008
|
|
|
377
|
|
|
|
(327
|
)
|
New
Accounting Pronouncements
Recently
Adopted Pronouncements
In September 2006, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 158, Employers
Accounting for Defined Pension and Other Postretirement
Plans, which was effective for the year ending
December 31, 2006 except for the requirement that benefit
plan assets and obligations be measured as of the date of the
employers statement of financial position, which was
effective for the year ending December 28, 2008. The impact
of the adoption of the change in measurement dates was not
material to the consolidated financial statements. See
Note 15 and Note 17 of the consolidated financial
statements for additional information.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurement. This Statement defines fair
value, establishes a framework for measuring fair value in
generally accepted accounting principles (GAAP) and expands
disclosures about fair value measurements. The Statement does
not require any new fair value measurements but could change the
current practices in measuring current fair value measurements.
The Statement was effective at the beginning of the first
quarter of 2008 for all financial assets and liabilities and for
nonfinancial assets and liabilities recognized or disclosed at
fair value on a recurring basis. The adoption of this Statement
did not have a material impact on the consolidated financial
statements. See Note 11 to the consolidated financial
statements for additional information. In February 2008, 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. The Company is in the process
of evaluating the impact related to the Companys
nonfinancial assets and liabilities not valued on a recurring
basis.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities. This Statement permits entities to choose to
measure many financial instruments and certain other items at
fair value. This Statement was effective at the beginning of the
first quarter of 2008. The Company has not applied the fair
value option to any of its outstanding instruments; therefore,
the Statement did not have an impact on the consolidated
financial statements.
In May 2008, the FASB issued SFAS No. 162, The
Hierarchy of Generally Accepted Accounting Principles.
This Statement identifies the sources of accounting principles
and the framework for selecting the principles to be used in the
preparation of financial statements that are presented in
conformity with generally accepted accounting principles in the
United States. This Statement was effective on November 15,
2008 and did not have a material impact on the consolidated
financial statements.
In October 2008, the FASB issued FSP
No. 157-3,
Determining the Fair Value of a Financial Asset When the
Market for That Asset Is Not Active
(FSP 157-3).
FSP 157-3
clarifies the application of SFAS No. 157 in a market
that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial
31
asset when the market for that financial asset is not active.
The adoption of this FSP did not have an impact on the
Companys consolidated financial statements.
In December 2008, the FASB issued FASB Staff Position
FAS 140-4
and FIN 46(R)-8, Disclosures by Public Entities
(Enterprises) About Transfers of Financial Assets and Interest
in Variable Interest Entities
(FSP 140-4).
FSP 140-4
requires additional disclosure about transfers of financial
assets and an enterprises involvement with variable
interest entities.
FSP 140-4
was effective for the first reporting period ending after
December 15, 2008.
FSP 140-4
did not have a material impact on the Companys
consolidated financial statements.
Recently
Issued Pronouncements
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interest in Consolidated Financial
Statements an amendment of ARB No. 51.
This Statement amends Accounting Research
Bulletin No. 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary
(commonly referred to as minority interest) and for the
deconsolidation of a subsidiary. The Statement is effective for
fiscal years beginning on or after December 15, 2008. The
Company anticipates that the adoption of this Statement will not
have a material impact on the consolidated financial statements,
although changes in financial statement presentation will be
required.
In December 2007, the FASB revised SFAS No. 141,
Business Combinations (SFAS No. 141(R)).
This Statement established principles and requirements for
recognizing and measuring identifiable assets and goodwill
acquired, liabilities assumed and any noncontrolling interest in
an acquisition, at their fair values as of the acquisition date.
The Statement is effective for fiscal years beginning on or
after December 15, 2008. The impact on the Company of
adopting SFAS No. 141(R) will depend on the nature,
terms and size of business combinations completed after the
effective date.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133 (SFAS No. 161). This
Statement amends and expands the disclosure requirements of
Statement No. 133 to provide an enhanced understanding of
why an entity uses derivative instruments, how derivative
instruments and related hedged items are accounted for and how
they affect an entitys financial position, financial
performance and cash flows. The Statement is effective for
fiscal years and interim periods beginning on or after
November 15, 2008. The adoption of this Statement will not
impact the consolidated financial statements other than expanded
footnote disclosures related to derivative instruments and
related hedged items.
In April 2008, the FASB issued FASB Staff Position
No. 142-3,
Determination of the Useful Life of Intangible
Assets
(FSP 142-3).
FSP 142-3
amends the factors to be considered in developing renewal or
extension assumptions used to determine the useful life of
intangible assets under SFAS No. 142, Goodwill
and Other Intangible Assets. The intent of
FSP 142-3
is to improve the consistency between the useful life of an
intangible asset and the period of expected cash flows used to
measure its fair value.
FSP 142-3
is effective for fiscal years beginning after December 15,
2008. The Company is in the process of evaluating the impact of
FSP 142-3,
but does not expect it to have a material impact on the
Companys consolidated financial statements.
In September 2008, the FASB issued FASB Staff Position
No. 133-1
and
FIN 45-4,
Disclosures About Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45; and Clarification of the Effective
Date of FASB Statement No. 161
(FSP 133-1).
FSP 133-1
amends Statement 133 to require a seller of credit derivatives
to provide certain disclosures for each credit derivative (or
group of similar credit derivatives).
FSP 133-1
also amends Interpretation No. 45 to require guarantors to
disclose the current status of payment/performance risk of
guarantees and clarifies the effective date of
SFAS No. 161. The Company is in the process of
evaluating the impact of
FSP 133-1,
but does not expect it to have a material impact on the
Companys consolidated financial statements.
In December 2008, the FASB issued FASB Staff Position
No. 132(R)-1, Employers Disclosures about
Postretirement Benefit Plan Assets
(FSP 132(R)-1). FSP 132(R)-1 requires
enhanced detail disclosures about plan assets of a
companys defined benefit pension and other postretirement
plans. The enhanced disclosures are intended to provide users of
financial statements with a greater understanding of
(1) employers investment
32
strategies; (2) major categories of plan assets;
(3) the inputs and valuation techniques used to measure the
fair value of plan assets; (4) the effect of fair value
measurements using significant unobservable inputs
(Level 3) on changes in plan assets for the period;
and (5) concentration of risk within plan assets.
FSP 132(R)-1 is effective for fiscal years ending after
December 15, 2009. The adoption of this Statement will not
impact the Companys financial statements other than
expanded footnote disclosures related to the Companys
pension plan assets.
Results
of Operations
2008
Compared to 2007
A summary of key information concerning the Companys
financial results for 2008 and 2007 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
|
|
|
|
In thousands (except per share data)
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
% Change
|
|
|
Net sales
|
|
$
|
1,463,615
|
|
|
$
|
1,435,999
|
|
|
$
|
27,616
|
|
|
|
1.9
|
|
Gross margin
|
|
|
615,206
|
(1)
|
|
|
621,134
|
|
|
|
(5,928
|
)
|
|
|
(1.0
|
)
|
S,D&A expenses
|
|
|
555,728
|
(2)(3)(4)
|
|
|
539,251
|
(5)
|
|
|
16,477
|
|
|
|
3.1
|
|
Interest expense
|
|
|
39,601
|
|
|
|
47,641
|
|
|
|
(8,040
|
)
|
|
|
(16.9
|
)
|
Minority interest
|
|
|
2,392
|
|
|
|
2,003
|
|
|
|
389
|
|
|
|
19.4
|
|
Income before income taxes
|
|
|
17,485
|
(1)(2)(3)(4)
|
|
|
32,239
|
(5)
|
|
|
(14,754
|
)
|
|
|
(45.8
|
)
|
Income taxes
|
|
|
8,394
|
|
|
|
12,383
|
|
|
|
(3,989
|
)
|
|
|
(32.2
|
)
|
Net income
|
|
|
9,091
|
(1)(2)(3)(4)
|
|
|
19,856
|
(5)
|
|
|
(10,765
|
)
|
|
|
(54.2
|
)
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
.99
|
|
|
$
|
2.18
|
|
|
|
(1.19
|
)
|
|
|
(54.6
|
)
|
Class B Common Stock
|
|
$
|
.99
|
|
|
$
|
2.18
|
|
|
|
(1.19
|
)
|
|
|
(54.6
|
)
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
.99
|
|
|
$
|
2.17
|
|
|
|
(1.18
|
)
|
|
|
(54.4
|
)
|
Class B Common Stock
|
|
$
|
.99
|
|
|
$
|
2.17
|
|
|
|
(1.18
|
)
|
|
|
(54.4
|
)
|
|
|
|
(1) |
|
Results in 2008 included a change in estimate of
$2.6 million (pre-tax), or $1.3 million after tax,
regarding the Companys equity investment in a plastic
bottle cooperative, which was reflected as a reduction in cost
of sales. |
|
(2) |
|
Results in 2008 included restructuring costs of
$4.6 million (pre-tax), or $2.4 million after tax,
related to the Companys plan to reorganize the structure
of its operating units and support services and resulted in the
elimination of approximately 350 positions, which were reflected
in S,D&A expenses. |
|
(3) |
|
Results in 2008 included a charge of $14.0 million
(pre-tax), or $7.3 million after tax, to freeze the
Companys liability to the Central States pension plan and
to settle a strike by employees covered by this plan, while
preserving the pension benefits previously earned by these
employees, which was reflected in S,D&A expenses. |
|
(4) |
|
Results in 2008 included a charge of $2.0 million
(pre-tax), or $1.0 million after tax, related to the
Companys fuel hedging program, which was reflected in
S,D&A expenses. |
|
(5) |
|
Results for 2007 included restructuring costs of
$2.8 million (pre-tax), or $1.7 million after tax,
related to the simplification of the Companys operating
management structure to improve operating efficiencies across
its business, which were reflected in S,D&A expenses. |
33
Net
Sales
Net sales increased $27.6 million, or 1.9%, to
$1.46 billion in 2008 compared to $1.44 billion in
2007. The increase in net sales was a result of the following:
|
|
|
|
|
Amount
|
|
|
Attributable to:
|
(In millions)
|
|
|
|
|
$
|
26.3
|
|
|
3.2% increase in bottle/can sales price per unit (in response to
increases in product costs) primarily due to increased sales of
enhanced water, which have higher per unit prices, and higher
per unit prices of sparkling products other than energy
products, offset by decreases in sales of higher price packages
in higher margin channels (primarily convenience) and lower
sales price per unit for bottled water
|
|
3.3
|
|
|
4.8% increase in post-mix sales price per unit (in response to
increases in product costs)
|
|
3.0
|
|
|
.6% decrease in bottle/can volume primarily due to a decrease in
sparkling products other than energy products and bottled water
volume offset by an increase in enhanced water volume (higher
per unit prices of enhanced products resulted in increased sales
despite volume decrease)
|
|
2.6
|
|
|
2.0% increase in bottler sales volume primarily due to increase
in sparkling products (excluding energy) offset by decreases in
tea products volume
|
|
(8.1
|
)
|
|
10.4% decrease in post-mix volume
|
|
(1.4
|
)
|
|
1.1% decrease in bottler sales price per unit primarily due to a
decrease in energy drink volume as a percentage of total volume
(energy drinks have a higher sales price per unit)
|
|
1.9
|
|
|
Other
|
|
|
|
|
|
$
|
27.6
|
|
|
Total increase in net sales
|
|
|
|
|
|
In 2008, the Companys bottle/can sales to retail customers
accounted for 85% of the Companys total net sales.
Bottle/can net pricing is based on the invoice price charged to
customers reduced by promotional allowances. Bottle/can net
pricing per unit is impacted by the price charged per package,
the volume generated in each package and the channels in which
those packages are sold. The increase in the Companys
bottle/can net price per unit in 2008 compared to 2007 was
primarily due to sales price increases in all product
categories, except water and energy, and increases in sales
volume of enhanced water which has a higher sales price per
unit, partially offset by decreases in sales of higher price
packages (primarily in the convenience store channel) and a
lower sales price per unit for bottled water.
Product category sales volume in 2008 and 2007 as a percentage
of total bottle/can sales volume and the percentage change by
product category were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bottle/Can Sales Volume
|
|
|
Bottle/Can Sales Volume
|
|
Product Category
|
|
2008
|
|
|
2007
|
|
|
% Increase (Decrease)
|
|
|
Sparkling beverages (including energy products)
|
|
|
84.6
|
%
|
|
|
85.1
|
%
|
|
|
(1.3
|
)
|
Still beverages
|
|
|
15.4
|
%
|
|
|
14.9
|
%
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total bottle/can volume
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys products are sold and distributed through
various channels. These channels include selling directly to
retail stores and other outlets such as food markets,
institutional accounts and vending machine outlets. During 2008,
approximately 68% of the Companys bottle/can volume was
sold for future consumption. The remaining bottle/can volume of
approximately 32% was sold for immediate consumption. The
Companys largest customer, Wal-Mart Stores, Inc.,
accounted for approximately 19% of the Companys total
bottle/can volume during 2008. The Companys second largest
customer, Food Lion, LLC, accounted for approximately 12% of the
Companys total bottle/can volume in 2008. All of the
Companys sales are to customers in the United States.
The Company recorded delivery fees in net sales of
$6.7 million in both 2008 and 2007. These fees are used to
offset a portion of the Companys delivery and handling
costs.
34
Cost of
Sales
Cost of sales includes the following: raw material costs,
manufacturing labor, manufacturing overhead including
depreciation expense, manufacturing warehousing costs and
shipping and handling costs related to the movement of finished
goods from manufacturing locations to sales distribution centers.
Cost of sales increased 4.1%, or $33.5 million, to
$848.4 million in 2008 compared to $814.9 million in
2007.
The increase in cost of sales was principally attributable to
the following:
|
|
|
|
|
Amount
|
|
|
Attributable to:
|
(In millions)
|
|
|
|
|
$
|
38.2
|
|
|
Increase in costs primarily due to an increase in purchased
products and an increase in raw material costs such as high
fructose corn syrup and plastic bottles
|
|
6.6
|
|
|
.6% decrease in bottle/can volume primarily due to a decrease in
sparkling products other than energy products and bottled water
volume offset by an increase in enhanced water volume (higher
per unit costs of enhanced products resulted in increased cost
despite volume decrease)
|
|
2.5
|
|
|
2.0% increase in bottler sales volume primarily due to increase
in sparkling products (excluding energy) offset by decreases in
tea products volume
|
|
(5.5
|
)
|
|
10.4% decrease in post-mix volume
|
|
(4.6
|
)
|
|
Increase in marketing funding support received primarily from
The
Coca-Cola
Company
|
|
(2.6
|
)
|
|
Increase in equity investment in a plastic bottle cooperative
|
|
(1.8
|
)
|
|
Decrease in bottler cost per unit primarily due to a decrease in
energy drink volume as a percentage of total volume (energy
drinks have a higher cost per unit)
|
|
0.7
|
|
|
Other
|
|
|
|
|
|
$
|
33.5
|
|
|
Total increase in cost of sales
|
|
|
|
|
|
The Company recorded an increase in its equity investment in a
plastic bottle cooperative in the second quarter of 2008 which
resulted in a pre-tax credit of $2.6 million. This increase
was made based on information received from the cooperative
during the quarter and reflected a higher share of the
cooperatives retained earnings compared to the amount
previously recorded by the Company. The Company classifies its
equity in earnings of the cooperative in cost of sales
consistent with the classification of purchases from the
cooperative.
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 concentrates,
syrups and finished products to the Company make substantial
marketing and 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 continue to
provide marketing funding support, it is not obligated to do so
under the Companys Beverage Agreements. Significant
decreases in marketing funding support from The
Coca-Cola
Company or other beverage companies could adversely impact
operating results of the Company in the future.
Total marketing funding support from The
Coca-Cola
Company and other beverage companies, which includes direct
payments to the Company and payments to customers for marketing
programs, was $51.8 million in 2008 compared to
$47.2 million in 2007.
Gross
Margin
Gross margin dollars decreased 1.0%, or $5.9 million, to
$615.2 million in 2008 compared to $621.1 million in
2007. Gross margin as a percentage of net sales decreased to
42.0% in 2008 from 43.3% in 2007.
35
The decrease in gross margin was primarily the result of the
following:
|
|
|
|
|
Amount
|
|
|
Attributable to:
|
(In millions)
|
|
|
|
|
$
|
(38.2
|
)
|
|
Increase in costs primarily due to an increase in purchased
products and an increase in raw material costs such as high
fructose corn syrup and plastic bottles
|
|
26.3
|
|
|
3.2% increase in bottle/can sales price per unit (in response to
increases in product costs) primarily due to increased sales of
enhanced water, which have higher per unit prices, and higher
per unit prices of sparkling products other than energy
products, offset by decreases in sales of higher price packages
in higher margin channels (primarily convenience) and a lower
sales price per unit for bottled water
|
|
4.6
|
|
|
Increase in marketing funding support received primarily from
The Coca-Cola Company
|
|
(3.6
|
)
|
|
.6% decrease in bottle/can volume primarily due to a decrease in
sparkling products other than energy products and bottled water
volume offset by an increase in enhanced water volume
|
|
3.3
|
|
|
4.8% increase in post-mix sales price per unit (in response to
increases in product costs)
|
|
(1.4
|
)
|
|
1.1% decrease in bottler sales price per unit primarily due to a
decrease in energy drink volume as a percentage of total volume
(energy drinks have a higher sales price per unit)
|
|
(2.6
|
)
|
|
10.4% decrease in post-mix volume
|
|
2.6
|
|
|
Increase in equity investment in a plastic bottle cooperative
|
|
3.1
|
|
|
Other
|
|
|
|
|
|
$
|
(5.9
|
)
|
|
Total decrease in gross margin
|
|
|
|
|
|
The decrease in gross margin percentage was primarily due to
increased raw material costs, increased sales of purchased
products, a lower percentage of sales of higher margin packages
and a lower sales price per unit for bottled water, partially
offset by higher sales prices per unit for other products,
increased marketing funding support and the increase in the
equity investment in a plastic bottle cooperative.
The Companys gross margins may not be comparable to other
companies, since some entities include all costs related to
their distribution network in cost of sales. The Company
includes a portion of these costs in S,D&A expenses.
S,D&A
Expenses
S,D&A expenses include the following: sales management
labor costs, distribution costs from sales distribution centers
to customer locations, sales distribution center warehouse
costs, depreciation expense related to sales centers, delivery
vehicles and cold drink equipment,
point-of-sale
expenses, advertising expenses, cold drink equipment repair
costs, amortization of intangibles and administrative support
labor and operating costs such as treasury, legal, information
services, accounting, internal control services, human resources
and executive management costs.
S,D&A expenses increased by $16.5 million, or 3.1%, to
$555.7 million in 2008 from $539.3 million in 2007.
36
The increase in S,D&A expenses was primarily due to the
following:
|
|
|
|
|
Amount
|
|
|
Attributable to:
|
(In millions)
|
|
|
|
|
$
|
14.0
|
|
|
Charge to freeze the Companys liability to a
multi-employer pension plan and settle a strike by employees
covered by this plan
|
|
7.9
|
|
|
Increase in fuel and other energy costs related to the movement
of finished goods from sales distribution centers to customer
locations
|
|
(3.2
|
)
|
|
Decrease in employee benefit costs primarily due to lower
pension plan costs and health insurance costs offset by
increases in the Companys 401(k) Savings Plan contributions
|
|
3.1
|
|
|
Increase in property and casualty insurance costs
|
|
(2.6
|
)
|
|
Decrease in marketing costs
|
|
1.9
|
|
|
Increase in restructuring costs
|
|
(1.7
|
)
|
|
Decrease in depreciation costs due to decreased capital
expenditures
|
|
(2.9
|
)
|
|
Other
|
|
|
|
|
|
$
|
16.5
|
|
|
Total increase in S,D&A expenses
|
|
|
|
|
|
Shipping and handling costs related to the movement of finished
goods from manufacturing locations to sales distribution centers
are included in cost of sales. Shipping and handling costs
related to the movement of finished goods from sales
distribution centers to customer locations are included in
S,D&A expenses and totaled $201.6 million and
$194.9 million in 2008 and 2007, respectively.
The net impact of the fuel hedges was to increase fuel costs by
$.8 million in 2008 and decrease fuel costs by
$.9 million in 2007. Included in the 2008 increase was a
$2.0 million charge for a
mark-to-market
adjustment related to fuel hedging contracts for 2009 diesel
fuel purchases.
On February 2, 2007, the Company initiated plans to
simplify its management structure and reduce its workforce in
order to improve operating efficiencies across the
Companys business. The restructuring expenses consisted
primarily of one-time termination benefits and other associated
costs, primarily relocation expenses for certain employees. The
Company incurred $2.8 million in restructuring expenses in
2007.
On July 15, 2008, the Company initiated a plan to
reorganize the structure of its operating units and support
services, which resulted in the elimination of approximately 350
positions, or approximately 5% of its workforce. As a result of
this plan, the Company incurred $4.6 million in
restructuring expenses in 2008 for one-time termination
benefits. The plan was completed in 2008 and the majority of
cash expenditures occurred in 2008.
The Company entered into a new agreement with a collective
bargaining unit in the third quarter of 2008. The collective
bargaining unit represents approximately 270 employees, or
approximately 4% of the Companys total workforce. The new
agreement allows the Company to freeze its liability to Central
States, a multi-employer pension fund, while preserving the
pension benefits previously earned by the employees. As a result
of the new agreement, the Company recorded a charge of
$13.6 million in 2008. The Company paid $3.0 million
in 2008 to the Southern States Savings and Retirement Plan
(Southern States) under this agreement. The
remaining $10.6 million is the present value amount, using
a discount rate of 7%, that will be paid under the agreement and
has been recorded in other liabilities. The Company will pay
approximately $1 million annually over the next
20 years to Central States. The Company will also make
future contributions on behalf of these employees to the
Southern States, a multi-employer defined contribution plan. In
addition, the Company incurred approximately $.4 million in
expense to settle a strike by union employees covered by this
plan.
Primarily due to the performance of the Companys pension
plan investments during 2008, the Companys expense related
to the two Company-sponsored pension plans will increase from a
$2.3 million credit in 2008 to an estimated
$11.5 million expense in 2009.
On February 20, 2009, the Company announced that it would
suspend matching contributions to its Retirement Savings Plan
(401(k) plan) effective April 1, 2009. The Company
anticipates this suspension will reduce benefit costs in 2009 by
approximately $7 million.
37
Interest
Expense
Net interest expense decreased 16.9%, or $8.0 million in
2008 compared to 2007. The decrease in interest expense in 2008
was primarily due to lower interest rates and lower levels of
borrowing offset by a $2.6 million decrease in interest
earned on short-term investments. The Companys overall
weighted average interest rate decreased to 5.7% during 2008
from 6.7% in 2007. See the Liquidity and Capital
Resources Hedging Activities Interest
Rate Hedging section of M,D&A for additional
information.
Based on current interest rates, the Company would expect that
interest expense for 2009 would be lower if the 2009 debt
maturities were refinanced on a short-term basis with the
$200 million revolving credit facility
($200 million facility) than if refinanced with
longer term bonds. The difference between these refinancing
alternatives would be contingent on both short-term and
long-term interest rates; however, the Company estimates the
impact of the difference between refinancing alternatives on
interest expense to be in the range of approximately
$1 million to $2 million in 2009.
Minority
Interest
The Company recorded minority interest of $2.4 million in
2008 compared to $2.0 million in 2007 related to the
portion of Piedmont owned by The
Coca-Cola
Company. The increased amount in 2008 was due to higher net
income at Piedmont.
Income
Taxes
The Companys effective income tax rate for 2008 was 48.0%
compared to 38.4% in 2007. The higher effective income tax rate
for 2008 resulted primarily from an increase in the
Companys reserve for uncertain tax positions. See
Note 14 of the consolidated financial statements for
additional information.
The Companys income tax assets and liabilities are subject
to adjustment in future periods based on the Companys
ongoing evaluations of such assets and liabilities and new
information that becomes available to the Company.
2007
Compared to 2006
A summary of key information concerning the Companys
financial results for 2007 and 2006 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
|
|
|
|
In thousands (except per share data)
|
|
2007
|
|
|
2006
|
|
|
Change
|
|
|
% Change
|
|
|
Net sales
|
|
$
|
1,435,999
|
|
|
$
|
1,431,005
|
|
|
$
|
4,994
|
|
|
|
.3
|
|
Gross margin
|
|
|
621,134
|
|
|
|
622,579
|
|
|
|
(1,445
|
)
|
|
|
(.2
|
)
|
S,D&A expenses
|
|
|
539,251
|
(1)
|
|
|
537,915
|
|
|
|
1,336
|
|
|
|
.2
|
|
Interest expense
|
|
|
47,641
|
|
|
|
50,286
|
|
|
|
(2,645
|
)
|
|
|
(5.3
|
)
|
Minority interest
|
|
|
2,003
|
|
|
|
3,218
|
|
|
|
(1,215
|
)
|
|
|
(37.8
|
)
|
Income before income taxes
|
|
|
32,239
|
(1)
|
|
|
31,160
|
|
|
|
1,079
|
|
|
|
3.5
|
|
Income taxes
|
|
|
12,383
|
|
|
|
7,917
|
(2)
|
|
|
4,466
|
|
|
|
56.4
|
|
Net income
|
|
|
19,856
|
(1)
|
|
|
23,243
|
(2)
|
|
|
(3,387
|
)
|
|
|
(14.6
|
)
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
2.18
|
|
|
$
|
2.55
|
|
|
$
|
(.37
|
)
|
|
|
(14.5
|
)
|
Class B Common Stock
|
|
$
|
2.18
|
|
|
$
|
2.55
|
|
|
$
|
(.37
|
)
|
|
|
(14.5
|
)
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
2.17
|
|
|
$
|
2.55
|
|
|
$
|
(.38
|
)
|
|
|
(14.9
|
)
|
Class B Common Stock
|
|
$
|
2.17
|
|
|
$
|
2.54
|
|
|
$
|
(.37
|
)
|
|
|
(14.6
|
)
|
|
|
|
(1) |
|
Results for 2007 included restructuring costs of
$2.8 million (pre-tax), or $1.7 million after tax,
related to the simplification of the Companys operating
management structure to improve operating efficiencies across
its business, which were reflected in S,D&A expenses. |
|
(2) |
|
Results for 2006 included a favorable adjustment of
$4.9 million related to agreements with two state taxing
authorities to settle certain prior tax positions resulting in
the reduction of the valuation allowance on related deferred tax
assets and the reduction of the liability for uncertain tax
positions, which was reflected as a reduction of income tax
expense. |
38
Net
Sales
Net sales increased $5.0 million, or .3%, to
$1.44 billion in 2007 compared to $1.43 billion in
2006.
The increase in net sales was a result of the following:
|
|
|
|
|
Amount
|
|
|
Attributable to:
|
(In millions)
|
|
|
|
|
$
|
(16.4
|
)
|
|
10.8% decrease in volume of bottler sales primarily due to a
decrease in volume of energy drinks offset partially by an
increase in volume of tea products
|
|
13.9
|
|
|
2.1% increase in bottle/can sales price per unit primarily due
to higher net pricing for sparkling beverages offset by lower
net pricing for bottled water
|
|
(8.5
|
)
|
|
6.2% decrease in bottler sales price per unit primarily due to a
decrease in energy drink volume as a percentage of total volume
(energy drinks have higher sales price per unit)
|
|
6.0
|
|
|
Increase in bottle/can sales due to an increase in still
beverage volume as a percentage of total volume (still beverages
generally have higher sales price per unit)
|
|
4.2
|
|
|
5.8% increase in sales price per unit of post-mix
|
|
3.1
|
|
|
Increase in delivery fees to certain customers
|
|
2.7
|
|
|
Other
|
|
|
|
|
|
$
|
5.0
|
|
|
Total increase in net sales
|
|
|
|
|
|
In 2007, the Companys bottle/can volume to retail
customers accounted for 84% of the Companys total net
sales. The increase in the Companys bottle/can net price
per unit in 2007 compared to 2006 was primarily due to higher
prices for sparkling beverages offset by a decrease in net
pricing of bottled water in the supermarket channel. During 2006
and the first half of 2007, the Company produced the energy
drink, Full Throttle, for many of the
Coca-Cola
bottlers in the eastern half of the United States. During the
second half of 2007, most of these
Coca-Cola
bottlers found an alternative source for the product.
Product category sales volume in 2007 and 2006 as a percentage
of total bottle/can sales volume and the percentage change by
product category were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bottle/Can Sales Volume
|
|
|
Bottle/Can Sales Volume
|
|
Product Category
|
|
2007
|
|
|
2006
|
|
|
% Increase (Decrease)
|
|
|
Sparkling beverages (including energy products)
|
|
|
85.1
|
%
|
|
|
86.7
|
%
|
|
|
(1.8
|
)
|
Still beverages
|
|
|
14.9
|
%
|
|
|
13.3
|
%
|
|
|
12.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total bottle/can volume
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning in the first quarter of 2007, the Company began
distribution of Enviga and Gold Peak, new tea products from The
Coca-Cola
Company, and distribution of two of its own products, Respect
and Tum-E Yummies. Respect is an all-natural, vitamin enhanced
beverage, while Tum-E Yummies is a vitamin C enhanced flavored
drink. Beginning in the second quarter of 2007, the Company
began distribution of Diet Coke Plus, a vitamin enhanced cola,
and Dasani Plus, an enhanced water beverage, two new products
from The
Coca-Cola
Company. Beginning in the third quarter of 2007, the Company
began distribution of
NOS©
products (energy drinks from FUZE), juice products from FUZE, V8
juice products from Campbell and Country Breeze tea products. In
the fourth quarter of 2007, the Company began distribution of
Energy Brands Inc. products. Energy Brands Inc., also known as
glacéau, is a wholly-owned subsidiary of The
Coca-Cola
Company that produces branded enhanced beverages including
vitaminwater, smartwater and vitaminenergy.
The Companys products are sold and distributed through
various channels. These channels include selling directly to
retail stores and other outlets such as food markets,
institutional accounts and vending machine outlets. During 2007,
approximately 68% of the Companys bottle/can volume was
sold for future consumption. The remaining bottle/can volume of
approximately 32% was sold for immediate consumption. The
Companys largest customer, Wal-Mart Stores, Inc.,
accounted for approximately 19% of the Companys total
bottle/can volume
39
during 2007. The Companys second largest customer, Food
Lion, LLC, accounted for approximately 12% of the Companys
total bottle/can volume in 2007. All of the Companys sales
are to customers in the United States.
The Company recorded delivery fees in net sales of
$6.7 million and $3.6 million in 2007 and 2006,
respectively. These fees are used to offset a portion of the
Companys delivery and handling costs.
Cost of
Sales
Cost of sales increased .8%, or $6.4 million, to
$814.9 million in 2007 compared to $808.4 million in
2006. The increase in cost of sales was principally attributable
to the following:
|
|
|
|
|
Amount
|
|
|
Attributable to:
|
(In millions)
|
|
|
|
|
$
|
43.7
|
|
|
Increase in raw material costs (primarily aluminum packaging,
sweetener and concentrate costs)
|
|
(15.9
|
)
|
|
10.8% decrease in bottler sales volume primarily due to a
decrease in volume of energy drinks offset partially by an
increase in volume of tea products
|
|
(14.0
|
)
|
|
Increase in marketing funding support received primarily from
The
Coca-Cola
Company
|
|
(9.5
|
)
|
|
6.2% decrease in bottler sales cost per unit primarily due to a
decrease in energy drink volume as a percentage of total volume
(energy drinks have higher cost per unit)
|
|
5.3
|
|
|
Increase in bottle/can cost due to an increase in still beverage
volume as a percentage of total volume (still beverages
generally have higher cost per unit)
|
|
(3.9
|
)
|
|
Decrease in manufacturing overhead costs
|
|
0.7
|
|
|
Other
|
|
|
|
|
|
$
|
6.4
|
|
|
Total increase in cost of sales
|
|
|
|
|
|
Beginning in the first quarter of 2007, the majority of the
Companys aluminum packaging requirements did not have any
ceiling price protection. The cost of aluminum cans increased
approximately 18% in 2007. High fructose corn syrup costs also
increased significantly during 2007 as a result of increasing
demand for corn products around the world such as for ethanol
production. The cost of high fructose corn syrup increased
approximately 21% in 2007.
Total marketing funding support from The
Coca-Cola
Company and other beverage companies, which includes direct
payments to the Company and payments to customers for marketing
programs, was $47.2 million for 2007 compared to
$33.2 million for 2006.
Gross
Margin
Gross margin dollars decreased .2%, or $1.4 million, to
$621.1 million in 2007 compared to $622.6 million in
2006. Gross margin as a percentage of net sales decreased to
43.3% in 2007 from 43.5% in 2006.
40
The decrease in gross margin was primarily the result of the
following:
|
|
|
|
|
Amount
|
|
|
Attributable to:
|
(In millions)
|
|
|
|
|
$
|
(43.7
|
)
|
|
Increase in raw material costs (primarily aluminum packaging,
sweetener and concentrate costs)
|
|
13.9
|
|
|
2.1% increase in bottle/can sales price per unit primarily due
to higher net pricing for sparkling beverages offset by lower
net pricing for water
|
|
14.0
|
|
|
Increase in marketing funding support received primarily from
The
Coca-Cola
Company
|
|
3.9
|
|
|
Decrease in manufacturing overhead costs
|
|
4.2
|
|
|
5.8% increase in sales price per unit of post-mix
|
|
3.1
|
|
|
Increase in delivery fees to certain customers
|
|
3.2
|
|
|
Other
|
|
|
|
|
|
$
|
(1.4
|
)
|
|
Total decrease in gross margin
|
|
|
|
|
|
The decrease in gross margin percentage was primarily due to
higher raw material costs, partially offset by higher bottle/can
sales price per unit, increases in marketing funding support
from The
Coca-Cola
Company and reduced manufacturing overhead costs.
S,D&A
Expenses
S,D&A expenses increased by $1.3 million, or .2%, to
$539.3 million in 2007 from $537.9 million in 2006.
The increase in S,D&A expenses was primarily due to the
following:
|
|
|
|
|
Amount
|
|
|
Attributable to:
|
(In millions)
|
|
|
|
|
$
|
5.4
|
|
|
Increase in employee related expenses primarily related to wage
increases
|
|
2.8
|
|
|
Restructuring costs related to the simplification of the
Companys operating management structure and reduction in
workforce in order to improve operating efficiencies
|
|
(1.9
|
)
|
|
Decrease in property and casualty claims and insurance costs
|
|
(1.6
|
)
|
|
Decrease in employee benefit costs primarily due to the
amendment of the principal Company-sponsored pension plan, net
of increases in the Companys 401(k) Savings Plan
contributions and health insurance expenses
|
|
(1.6
|
)
|
|
Gain on sale of aviation equipment
|
|
(1.8
|
)
|
|
Other
|
|
|
|
|
|
$
|
1.3
|
|
|
Total increase in S,D&A expenses
|
|
|
|
|
|
Shipping and handling costs related to the movement of finished
goods from manufacturing locations to sales distribution centers
are included in cost of sales. Shipping and handling costs
related to the movement of finished goods from sales
distribution centers to customer locations are included in
S,D&A expenses and totaled $194.9 million and
$193.8 million in 2007 and 2006, respectively.
On February 2, 2007, the Company initiated plans to
simplify its management structure and reduce its workforce in
order to improve operating efficiencies across the
Companys business. The restructuring expenses consisted
primarily of one-time termination benefits and other associated
costs, primarily relocation expenses for certain employees. The
Company incurred $2.8 million in restructuring expenses in
2007.
In February 2006, the Company announced an amendment to its
principal Company-sponsored pension plan to cease further
benefit accruals under the plan effective June 30, 2006.
Net periodic pension expense decreased to $.2 million in
2007 from $8.1 million in 2006. The Company also announced
in February 2006 plans to enhance its 401(k) Savings Plan for
eligible employees beginning in the first quarter of 2007. The
Companys expense related to its 401(k) Savings Plan
increased to $8.5 million in 2007 from $4.7 million in
2006.
41
Interest
Expense
Net interest expense decreased 5.3%, or $2.6 million in
2007 compared to 2006. The decrease in interest expense in 2007
was primarily due to an increase in interest earned on
short-term investments. Interest earned on short-term
investments in 2007 was $2.7 million compared to
$1.4 million in 2006. The overall weighted average interest
rate was 6.7% for 2007 compared to 6.6% for 2006. See the
Liquidity and Capital Resources Hedging
Activities Interest Rate Hedging section of
M,D&A for additional information.
Minority
Interest
The Company recorded minority interest of $2.0 million in
2007 compared to $3.2 million in 2006 related to the
portion of Piedmont owned by The
Coca-Cola
Company. The decreased amount in 2007 was due to lower net
income at Piedmont.
Income
Taxes
The Companys effective income tax rate for 2007 was 38.4%
compared to 25.4% in 2006. The lower effective tax rate in 2006
compared to 2007 resulted primarily from agreements reached with
state taxing authorities in 2006. See Note 14 of the
consolidated financial statements for additional information.
The adoption of FIN 48 and FSP
FIN 48-1
effective January 1, 2007, did not have a material impact
on the consolidated financial statements. See Note 14 of
the consolidated financial statements for additional information
related to the implementation of FIN 48 and FSP
FIN 48-1.
In 2006, the Company reached agreements with state taxing
authorities to settle certain prior tax positions for which the
Company had previously provided reserves due to uncertainty of
resolution. As a result, the Company reduced the valuation
allowance on related deferred tax assets by $2.6 million
and reduced the liability for uncertain tax positions by
$2.3 million in 2006. This $4.9 million adjustment was
reflected as a reduction of income tax expense in 2006. Also
during 2006, the Company increased the liability for uncertain
tax positions by $.5 million to reflect an interest accrual
and an adjustment of the reserve for uncertain tax positions.
The net effect of adjustments to the valuation allowance and
liability for uncertain tax positions during 2006 was a
reduction in income tax expense of $4.4 million.
Financial
Condition
Total assets increased to $1.32 billion at
December 28, 2008 from $1.29 billion at
December 30, 2007 primarily due to increases in cash and
cash equivalents and accounts receivable, trade offset by a
decrease in property, plant and equipment, net. Property, plant
and equipment, net decreased primarily due to lower levels of
capital spending over the past several years.
Net working capital, defined as current assets less current
liabilities, decreased by $136.8 million to a negative
$97.8 million at December 28, 2008 from
December 30, 2007.
Significant changes in net working capital from
December 30, 2007 to December 28, 2008 were as follows:
|
|
|
|
|
An increase in current portion of long-term debt of
$169.3 million primarily due to the reclassification from
long-term debt to current of $176.7 million of debentures
which mature in May 2009 and July 2009.
|
|
|
|
An increase in cash and cash equivalents of $35.5 million
primarily due to cash flow from operations.
|
|
|
|
An increase in accounts receivable, trade of $7.4 million
due to the timing of collection of payments.
|
|
|
|
An increase in accounts payable to The
Coca-Cola
Company of $23.7 million primarily due to timing of
payments.
|
|
|
|
A decrease in accounts payable, trade of $8.9 million
primarily due to the timing of payments.
|
Debt and capital lease obligations were $669.1 million as
of December 28, 2008 compared to $679.1 million as of
December 30, 2007. Debt and capital lease obligations as of
December 28, 2008 and December 30, 2007 included
$77.6 million and $80.2 million, respectively, of
capital lease obligations related primarily to Company
facilities.
42
The Company recorded a minimum pension liability adjustment of
$5.4 million, net of tax, as of December 31, 2006 as a
result of the plan curtailment discussed in Note 17 to the
consolidated financial statements. The Company adopted the
provisions of SFAS No. 158 at the end of 2006. Pension
and postretirement liabilities were adjusted to reflect the
excess of the projected benefit obligation (pension) and the
accumulated postretirement benefit obligation (postretirement
medical) over available plan assets. The total
SFAS No. 158 adjustment to increase benefit
liabilities was $2.6 million, net of tax, with a
corresponding adjustment to other comprehensive loss. The
Company increased the pension liability by $73.1 million
with a corresponding increase in other comprehensive loss, net
of tax, in 2008 primarily as a result of the decrease in the
value of the pension plan assets during 2008. Contributions to
the Companys pension plans were $.2 million in 2008.
There were no contributions to the Companys pension plans
in 2007. The Company anticipates that contributions to the
principal Company-sponsored pension plan in 2009 will be in the
range of $8 million to $12 million.
Liquidity
and Capital Resources
Capital
Resources
The Companys sources of capital include cash flow from
operations, available credit facilities and the issuance of debt
and equity securities. Management believes the Company has
sufficient financial resources available to finance its business
plan, meet its working capital requirements and maintain an
appropriate level of capital spending. The amount and frequency
of future dividends will be determined by the Companys
Board of Directors in light of the earnings and financial
condition of the Company at such time, and no assurance can be
given that dividends will be declared in the future.
As of December 28, 2008, the Company had $200 million
available under its $200 million facility to meet its cash
requirements. The $200 million facility contains two
financial covenants: a fixed charge coverage ratio of
greater than 1.5:1 and a debt to operating cash flow ratio
of less than 6:1, each as defined in the credit agreement. The
Company is currently in compliance with these covenants. To the
extent the Company finances the debt maturities in May 2009 and
July 2009 with borrowing under the $200 million facility,
the Company believes it will continue to be in compliance with
these financial covenants.
As mentioned above, the Company has debt maturities of
$119.3 million in May 2009 and $57.4 million in July
2009. The Company anticipates using cash flow generated from
operations, its $200 million facility and potentially other
sources, including bank borrowings or issuance of debentures or
equity securities, to repay or refinance these debt maturities.
The Company currently has, and anticipates it will continue to
have, capacity under its $200 million facility and cash on
hand to repay or refinance these debt maturities in the event
other financing sources are not available. The Company currently
believes that all of the banks participating in the
Companys $200 million facility have the ability to
and will meet any funding requests from the Company.
The Company has obtained the majority of its long-term
financing, other than capital leases, from public markets. As of
December 28, 2008, $591.5 million of the
Companys total outstanding balance of debt and capital
lease obligations of $669.1 million was financed through
publicly offered debt. The Company had capital lease obligations
of $77.6 million as of December 28, 2008. There were
no amounts outstanding on the $200 million facility as of
December 28, 2008.
Cash
Sources and Uses
The primary sources of cash for the Company has been cash
provided by operating activities, investing activities and
financing activities. The primary uses of cash have been for
capital expenditures, the payment of debt and capital lease
obligations, dividend payments and income tax payments.
43
A summary of cash activity for 2008 and 2007 follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In millions
|
|
2008
|
|
|
2007
|
|
|
Cash sources
|
|
|
|
|
|
|
|
|
Cash provided by operating activities (excluding income tax
payments)
|
|
$
|
103.6
|
|
|
$
|
116.9
|
|
Proceeds from the termination of interest rate swap agreements
|
|
|
5.1
|
|
|
|
|
|
Proceeds from the sale of property, plant and equipment
|
|
|
4.2
|
|
|
|
8.6
|
|
Other
|
|
|
|
|
|
|
.1
|
|
|
|
|
|
|
|
|
|
|
Total cash sources
|
|
$
|
112.9
|
|
|
$
|
125.6
|
|
|
|
|
|
|
|
|
|
|
Cash uses
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
47.9
|
|
|
$
|
48.2
|
|
Investment in plastic bottle manufacturing cooperative
|
|
|
1.0
|
|
|
|
3.4
|
|
Investment in distribution agreement
|
|
|
2.3
|
|
|
|
|
|
Payment of debt and capital lease obligations
|
|
|
10.0
|
|
|
|
95.1
|
|
Income tax payments
|
|
|
7.0
|
|
|
|
21.4
|
|
Dividends
|
|
|
9.1
|
|
|
|
9.1
|
|
Other
|
|
|
.1
|
|
|
|
.4
|
|
|
|
|
|
|
|
|
|
|
Total cash uses
|
|
$
|
77.4
|
|
|
$
|
177.6
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
$
|
35.5
|
|
|
$
|
(52.0
|
)
|
|
|
|
|
|
|
|
|
|
Based on current projections, which include a number of
assumptions such as the Companys pre-tax earnings, the
Company anticipates its cash requirements for income taxes will
be between $11 million and $16 million in 2009.
Investing
Activities
Additions to property, plant and equipment during 2008 were
$47.9 million compared to $48.2 million in 2007.
Capital expenditures during 2008 were funded with cash flows
from operations and borrowings from the Companys revolving
credit facility. The Company anticipates that additions to
property, plant and equipment in 2009 will be in the range of
$45 million to $60 million. Leasing is used for
certain capital additions when considered cost effective
relative to other sources of capital. The Company currently
leases its corporate headquarters, two production facilities and
several sales distribution facilities and administrative
facilities.
Financing
Activities
On March 8, 2007, the Company entered into a
$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%, dependent on the length of the term of the borrowing. 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 Companys
long-term senior unsecured debt rating. The $200 million
facility contains two financial covenants: a fixed charge
coverage ratio of greater than 1.5:1 and a debt to
operating cash flow ratio of less than 6:1, each as defined in
the credit agreement. On August 25, 2008, the Company
entered into an amendment to the $200 million facility. The
amendment clarified that charges incurred by the Company
resulting from the Companys withdrawal from the Central
States would be excluded from the calculations of the financial
covenants to the extent they are recognized before
March 29, 2009 and do not exceed $15 million. See
Note 17 of the consolidated financial statements for
additional details on the withdrawal. The Company is currently
in compliance with these covenants. There were no amounts
outstanding under the $200 million facility at
December 28, 2008 and December 30, 2007.
The Company had borrowed periodically under uncommitted lines of
credit. These uncommitted lines of credit were made available at
the discretion of participating banks at rates negotiated at the
time of borrowing. The
44
uncommitted lines of credit were temporarily terminated by the
participating banks in late fall of 2008. In January 2009, one
of the participating banks reinstated their uncommitted line of
credit for $65 million. On December 30, 2007,
$7.4 million was outstanding under uncommitted lines of
credit.
The Company filed a $300 million shelf registration for
debt and equity securities in November 2008. The Company
currently has the full $300 million available for use under
this shelf registration which, subject to the Companys
ability to consummate a transaction on acceptable terms, could
be used for long-term financing or refinancing of debt
maturities.
All of the outstanding debt has been issued by the Company with
none having been issued by any of the Companys
subsidiaries. There are no guarantees of the Companys
debt. The Company or its subsidiaries have entered into four
capital leases.
At December 28, 2008, the Companys credit ratings
were as follows:
|
|
|
|
|
|
|
Long-Term Debt
|
|
|
Standard & Poors
|
|
|
BBB
|
|
Moodys
|
|
|
Baa2
|
|
The Companys credit ratings are reviewed periodically by
the respective rating agencies. Changes in the Companys
operating results or financial position could result in changes
in the Companys credit ratings. Lower credit ratings could
result in higher borrowing costs for the Company. There were no
changes in these credit ratings from the prior year.
The Companys public debt is not subject to financial
covenants but does limit the incurrence of certain liens and
encumbrances as well as indebtedness by the Companys
subsidiaries in excess of certain amounts.
Off-Balance
Sheet Arrangements
The Company is a member of two manufacturing cooperatives and
has guaranteed $39.9 million of debt and related lease
obligations for these entities as of December 28, 2008. In
addition, the Company has an equity ownership in each of the
entities. 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 Companys guarantees. As of December 28, 2008, the
Companys maximum exposure, if the entities borrowed up to
their borrowing capacity, would have been $65.6 million
including the Companys equity interest. See Note 13
of the consolidated financial statements for additional
information about these entities.
45
Aggregate
Contractual Obligations
The following table summarizes the Companys contractual
obligations and commercial commitments as of December 28,
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 and
|
|
In thousands
|
|
Total
|
|
|
2009
|
|
|
2010-2011
|
|
|
2012-2013
|
|
|
Thereafter
|
|
|
Contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt, net of interest
|
|
$
|
591,450
|
|
|
$
|
176,693
|
|
|
$
|
|
|
|
$
|
150,000
|
|
|
$
|
264,757
|
|
Capital lease obligations, net of interest
|
|
|
77,614
|
|
|
|
2,781
|
|
|
|
6,153
|
|
|
|
7,043
|
|
|
|
61,637
|
|
Estimated interest on debt and capital lease obligations(1)
|
|
|
253,505
|
|
|
|
32,602
|
|
|
|
55,512
|
|
|
|
47,359
|
|
|
|
118,032
|
|
Purchase obligations(2)
|
|
|
507,298
|
|
|
|
93,655
|
|
|
|
187,310
|
|
|
|
187,310
|
|
|
|
39,023
|
|
Other long-term liabilities(3)
|
|
|
109,595
|
|
|
|
7,478
|
|
|
|
14,532
|
|
|
|
13,807
|
|
|
|
73,778
|
|
Operating leases
|
|
|
16,259
|
|
|
|
3,258
|
|
|
|
4,257
|
|
|
|
2,281
|
|
|
|
6,463
|
|
Long-term contractual arrangements(4)
|
|
|
26,960
|
|
|
|
7,007
|
|
|
|
11,647
|
|
|
|
7,607
|
|
|
|
699
|
|
Postretirement obligations
|
|
|
36,832
|
|
|
|
2,291
|
|
|
|
4,811
|
|
|
|
5,200
|
|
|
|
24,530
|
|
Purchase orders(5)
|
|
|
32,093
|
|
|
|
32,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
1,651,606
|
|
|
$
|
357,858
|
|
|
$
|
284,222
|
|
|
$
|
420,607
|
|
|
$
|
588,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes interest payments based on contractual terms and
current interest rates for variable rate debt. |
|
(2) |
|
Represents an estimate of the Companys obligation to
purchase 17.5 million cases of finished product on an
annual basis through May 2014 from South Atlantic Canners, a
manufacturing cooperative. |
|
(3) |
|
Includes obligations under executive benefit plans, unrecognized
income tax benefits, the liability to exit from a multi-employer
pension plan and other long-term liabilities. |
|
(4) |
|
Includes contractual arrangements with certain prestige
properties, athletic venues and other locations, and other
long-term marketing commitments. |
|
(5) |
|
Purchase orders include commitments in which a written purchase
order has been issued to a vendor, but the goods have not been
received or the services performed. |
The Company has $10.5 million of unrecognized income tax
benefits including accrued interest as of December 28, 2008
(included in other long-term liabilities in the above table) of
which $9.4 million would affect the Companys
effective tax rate if recognized. It is expected that the amount
of unrecognized tax benefits may change in the next
12 months. During this period, it is reasonably possible
that tax audits could reduce unrecognized tax benefits. The
Company cannot reasonably estimate the change in the amount of
unrecognized tax benefits until further information is made
available during the progress of the audits. See Note 14 of
the consolidated financial statements for additional information.
The Company is a member of Southeastern Container, a plastic
bottle manufacturing cooperative, from which the Company is
obligated to purchase at least 80% of its requirements of
plastic bottles for certain designated territories. This
obligation is not included in the Companys table of
contractual obligations and commercial commitments since there
are no minimum purchase requirements.
As of December 28, 2008, the Company has $19.3 million
of standby letters of credit, primarily related to its property
and casualty insurance programs. See Note 13 of the
consolidated financial statements for additional information
related to commercial commitments, guarantees, legal and tax
matters.
The Company contributed $.2 million to one of its
Company-sponsored pension plans in 2008. The Company anticipates
that it will be required to make contributions to its two
Company-sponsored pension plans in 2009. Based on information
currently available, the Company estimates cash contributions in
2009 will be in the range of $8 million to
$12 million. Postretirement medical care payments are
expected to be approximately $2.3 million in 2009. See
Note 17 to the consolidated financial statements for
additional information related to pension and postretirement
obligations.
46
Hedging
Activities
Interest
Rate Hedging
The Company periodically uses interest rate hedging products to
mitigate 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
Companys debt level and the potential impact of changes in
interest rates on the Companys overall financial
condition. Sensitivity analyses are performed to review the
impact on the Companys financial position and coverage of
various interest rate movements. The Company does not use
derivative financial instruments for trading purposes nor does
it use leveraged financial instruments.
In September 2008, the Company terminated six interest rate swap
agreements with a notional amount of $225 million it had
outstanding. The Company received $6.2 million in cash
proceeds including $1.1 million for previously accrued
interest receivable. After accounting for the previously accrued
interest receivable, the Company will amortize a gain of
$5.1 million over the remaining term of the underlying debt.
During 2008, 2007 and 2006, interest expense was reduced by
$2.2 million, $1.7 million and $1.7 million,
respectively, due to amortization of the deferred gains on
previously terminated interest rate swap agreements and forward
interest rate agreements. Interest expense will be reduced by
the amortization of these deferred gains in 2009 through 2013 as
follows: $2.1 million, $1.2 million,
$1.3 million, $1.2 million and $.6 million,
respectively.
The Companys interest rate derivative contracts were with
several different financial institutions to minimize the
concentration of credit risk. The Company had master agreements
with the counterparties to its derivative financial agreements
that provide for net settlement of derivative transactions.
The weighted average interest rate of the Companys debt
and capital lease obligations after taking into account all of
the interest rate hedging activities was 5.9% as of
December 28, 2008 compared to 6.2% as of December 30,
2007. The Companys overall weighted average interest rate
on its debt and capital lease obligations, decreased to 5.7% in
2008 from 6.7% in 2007. Approximately 6.3% of the Companys
debt and capital lease obligations of $669.1 million as of
December 28, 2008 was maintained on a floating rate basis
and was subject to changes in short-term interest rates.
Assuming no changes in the Companys capital structure, if
market interest rates average 1% higher for the next twelve
months than the interest rates as of December 28, 2008,
interest expense for the next twelve months would increase by
approximately $.4 million. This amount is determined by
calculating the effect of a hypothetical interest rate increase
of 1% on outstanding floating rate debt and capital lease
obligations as of December 28, 2008. This calculated,
hypothetical increase in interest expense for the following
twelve months may be different from the actual increase in
interest expense from a 1% increase in interest rates due to
varying interest rate reset dates on the Companys floating
rate debt.
Fuel
Hedging
During the first quarter of 2007, the Company began using
derivative instruments to hedge the majority of the
Companys vehicle fuel purchases. These derivative
instruments relate to diesel fuel and unleaded gasoline used in
the Companys delivery fleet. Derivative instruments used
include puts, calls and caps which effectively establish a limit
on the Companys price of fuel within periods covered by
the instruments. The Company pays a fee for these instruments
which is amortized over the corresponding period of the
instrument. The Company accounts for its fuel hedges on a
mark-to-market
basis with any expense or income reflected as an adjustment of
fuel costs.
The net impact of the fuel hedges was to increase fuel costs by
$.8 million in 2008 and decrease fuel costs by
$.9 million in 2007.
In October 2008, the Company entered into derivative contracts
to hedge the majority of its diesel fuel purchases for 2009
establishing an upper and lower limit on the Companys
price of diesel fuel. During the fourth quarter of 2008, the
Company recorded a pre-tax
mark-to-market
loss of $2.0 million related to these 2009 contracts.
47
In February 2009, the Company entered into derivative contracts
to hedge the majority of its diesel purchases for 2010
establishing an upper limit to the Companys price of
diesel fuel.
CAUTIONARY
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on
Form 10-K,
as well as information included in 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, forward-looking management comments and other
statements that reflect managements current outlook for
future periods. These statements include, among others,
statements relating to:
|
|
|
|
|
the Companys belief that other parties to certain
contractual arrangements will perform their obligations;
|
|
|
|
potential marketing funding support from The
Coca-Cola
Company and other beverage companies;
|
|
|
|
the Companys belief that the risk of loss with respect to
funds deposited with banks is minimal;
|
|
|
|
the Companys belief that disposition of certain claims and
legal proceedings will not have a material adverse effect on its
financial condition, cash flows or results of operations and
that no material amount of loss in excess of recorded amounts is
reasonably possible;
|
|
|
|
managements belief that the Company has adequately
provided for any ultimate amounts that are likely to result from
tax audits;
|
|
|
|
managements belief that the Company has sufficient
resources available to finance its business plan, meet its
working capital requirements and maintain an appropriate level
of capital spending;
|
|
|
|
the Companys belief that the cooperatives whose debt and
lease obligations the Company guarantees have sufficient assets
and the ability to adjust selling prices of their products to
adequately mitigate the risk of material loss and that the
cooperatives will perform their obligations under their debt and
lease agreements;
|
|
|
|
the Companys ability to issue $300 million of
securities under acceptable terms under its shelf registration
statement;
|
|
|
|
the Companys belief that certain franchise rights are
perpetual or will be renewed upon expiration;
|
|
|
|
the Companys key priorities which are revenue management,
product innovation and beverage portfolio expansion,
distribution cost management and productivity;
|
|
|
|
the Companys expectation that new product introductions,
packaging changes and sales promotions will continue to require
substantial expenditures;
|
|
|
|
the Companys belief that there is substantial and
effective competition in each of the exclusive geographic
territories in the United States in which it operates for the
purposes of the United States Soft Drink Interbrand Competition
Act;
|
|
|
|
the Companys hypothetical calculation of the impact of a
1% increase in interest rates on outstanding floating rate debt
and capital lease obligations for the next twelve months as of
December 28, 2008;
|
|
|
|
the Companys belief that it may market and sell nationally
certain products it has developed and owns;
|
|
|
|
the Companys belief that cash requirements for income
taxes will be in the range of $11 million to
$16 million in 2009;
|
|
|
|
the Companys anticipation that pension expense related to
the two Company-sponsored pension plans is estimated to be
approximately $11.5 million in 2009;
|
|
|
|
the Companys anticipation that the suspension of the
Retirement Saving Plan (401(k) plan) will reduce benefit costs
by approximately $7 million in 2009;
|
|
|
|
the Companys belief that cash contributions in 2009 to its
two Company-sponsored pension plans will be in the range of
$8 million to $12 million;
|
|
|
|
the Companys belief that postretirement benefit payments
are expected to be approximately $2.3 million in 2009;
|
48
|
|
|
|
|
the Companys expectation that additions to property, plant
and equipment in 2009 will be in the range of $45 million
to $60 million;
|
|
|
|
the Companys belief that compliance with environmental
laws will not have a material adverse effect on its capital
expenditures, earnings or competitive position;
|
|
|
|
the Companys belief that the demand for sugar sparkling
beverages (other than energy products) may continue to decline;
|
|
|
|
the Companys expectation that its overall bottle/can
revenue will be primarily dependent upon continued growth in
diet sparkling products, sports drinks, enhanced water and
energy products, the introduction of new products and the
pricing of brands and packages within channels;
|
|
|
|
the Companys belief that the majority of its deferred tax
assets will be realized;
|
|
|
|
the Companys intention to renew substantially all the
Allied Beverage Agreements and Still Beverage Agreements as they
expire;
|
|
|
|
the Companys beliefs and estimates regarding the impact of
the adoption of certain new accounting pronouncements;
|
|
|
|
the Companys belief that innovation of new brands and
packages will continue to be critical to the Companys
overall revenue;
|
|
|
|
the Companys beliefs that the growth prospects of
Company-owned or exclusive licensed brands appear promising and
the cost of developing, marketing and distributing these brands
may be significant;
|
|
|
|
the Companys expectation that unrecognized tax benefits
may be reduced over the next 12 months as a result of tax
audits;
|
|
|
|
the Companys expectation that it will use cash flow
generated from operations, its $200 million facility and
potentially other sources, including bank borrowings or issuance
of debentures or equity securities, to repay or refinance
debentures maturing in May 2009 and July 2009;
|
|
|
|
the Companys belief that all of the banks participating in
the Companys $200 million facility have the ability
to and will meet any funding requests from the Company;
|
|
|
|
the Companys belief that the reorganization of its
operating units and support services and its workforce reduction
plan was completed by the end of 2008, that the majority of cash
expenditures were incurred in 2008 and the Companys
anticipation of substantial annual savings from the plan;
|
|
|
|
the Companys belief that it is competitive in its
territories with respect to the principal methods of competition
in the nonalcoholic beverage industry; and
|
|
|
|
the Companys estimate that a 10% increase in the market
price of certain commodities over the current market prices
would cumulatively increase costs during the next 12 months
by approximately $22 million assuming flat volume.
|
These statements and expectations are based on currently
available competitive, financial and economic data along with
the Companys operating plans, and are subject to future
events and uncertainties that could cause anticipated events not
to occur or actual results to differ materially from historical
or anticipated results. Factors that could impact those
differences or adversely affect future periods include, but are
not limited to, the factors set forth under
Item 1A. Risk Factors.
Caution should be taken not to place undue reliance on the
Companys forward-looking statements, which reflect the
expectations of management of the Company only as of the time
such statements are made. The Company undertakes no obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
49
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
The Company is exposed to certain market risks that arise in the
ordinary course of business. The Company may enter into
derivative financial instrument transactions to manage or reduce
market risk. The Company does not enter into derivative
financial instrument transactions for trading purposes. A
discussion of the Companys primary market risk exposure
and interest rate risk is presented below.
Debt and
Derivative Financial Instruments
The Company is subject to interest rate risk on its fixed and
floating rate debt. 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 Companys overall financial condition. Sensitivity
analyses are performed to review the impact on the
Companys financial position and coverage of various
interest rate movements. The counterparties to these interest
rate hedging arrangements are major financial institutions with
which the Company also has other financial relationships. The
Company did not have any interest rate hedging products as of
December 28, 2008. The Company generally maintains between
40% and 60% of total borrowings at variable interest rates after
taking into account all of the interest rate hedging activities.
While this is the target range for the percentage of total
borrowings at variable interest rates, the financial position of
the Company and market conditions may result in strategies
outside of this range at certain points in time. Approximately
6.3% of the Companys debt and capital lease obligations of
$669.1 million as of December 28, 2008 was subject to
changes in short-term interest rates.
As it relates to the Companys variable rate debt and
variable rate leases, assuming no changes in the Companys
financial structure, if market interest rates average 1% more
over the next twelve months than the interest rates as of
December 28, 2008, interest expense for the next twelve
months would increase by approximately $.4 million. This
amount was determined by calculating the effect of the
hypothetical interest rate on our variable rate debt and
variable rate leases. This calculated, hypothetical increase in
interest expense for the following twelve months may be
different from the actual increase in interest expense from a 1%
increase in interest rates due to varying interest rate reset
dates on the Companys floating rate debt.
Raw
Material and Commodity Prices
The Company is also subject to commodity price risk arising from
price movements for certain other commodities included as part
of its raw materials. The Company manages this commodity price
risk in some cases by entering into contracts with adjustable
prices. The Company has not historically used derivative
commodity instruments in the management of this risk. The
Company estimates that a 10% increase in the market prices of
these commodities over the current market prices would
cumulatively increase costs during the next 12 months by
approximately $22 million assuming flat volume.
The Company uses derivative instruments to hedge the majority of
the Companys vehicle fuel purchases. These derivative
instruments relate to diesel fuel and unleaded gasoline used in
the Companys delivery fleet. Instruments used include
puts, calls and caps which effectively establish a limit on the
Companys price of fuel within periods covered by the
instruments. The Company pays a fee for these instruments which
is amortized over the corresponding period of the instrument.
The Company accounts for its fuel hedges on a mark-to-market
basis with any expense or income reflected as an adjustment of
fuel costs.
Effect of
Changing Prices
The principal effect of inflation on the Companys
operating results is to increase costs. The Company may raise
selling prices to offset these cost increases; however, the
resulting impact on retail prices may reduce volumes purchased
by consumers.
50
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
COCA-COLA
BOTTLING CO. CONSOLIDATED
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands (except per share data)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Net sales
|
|
$
|
1,463,615
|
|
|
$
|
1,435,999
|
|
|
$
|
1,431,005
|
|
Cost of sales
|
|
|
848,409
|
|
|
|
814,865
|
|
|
|
808,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
615,206
|
|
|
|
621,134
|
|
|
|
622,579
|
|
Selling, delivery and administrative expenses
|
|
|
555,728
|
|
|
|
539,251
|
|
|
|
537,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
59,478
|
|
|
|
81,883
|
|
|
|
84,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
39,601
|
|
|
|
47,641
|
|
|
|
50,286
|
|
Minority interest
|
|
|
2,392
|
|
|
|
2,003
|
|
|
|
3,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
17,485
|
|
|
|
32,239
|
|
|
|
31,160
|
|
Income taxes
|
|
|
8,394
|
|
|
|
12,383
|
|
|
|
7,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
9,091
|
|
|
$
|
19,856
|
|
|
$
|
23,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
.99
|
|
|
$
|
2.18
|
|
|
$
|
2.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Common Stock shares outstanding
|
|
|
6,644
|
|
|
|
6,644
|
|
|
|
6,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Common Stock
|
|
$
|
.99
|
|
|
$
|
2.18
|
|
|
$
|
2.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Class B Common Stock shares
outstanding
|
|
|
2,500
|
|
|
|
2,480
|
|
|
|
2,460
|
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
.99
|
|
|
$
|
2.17
|
|
|
$
|
2.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Common Stock shares
outstanding assuming dilution
|
|
|
9,160
|
|
|
|
9,141
|
|
|
|
9,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Common Stock
|
|
$
|
.99
|
|
|
$
|
2.17
|
|
|
$
|
2.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Class B Common Stock shares
outstanding assuming dilution
|
|
|
2,516
|
|
|
|
2,497
|
|
|
|
2,477
|
|
See Accompanying Notes to Consolidated Financial Statements.
51
COCA-COLA
BOTTLING CO. CONSOLIDATED
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
In thousands (except share data)
|
|
2008
|
|
|
2007
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
45,407
|
|
|
$
|
9,871
|
|
Accounts receivable, trade, less allowance for doubtful accounts
of $1,188 and $1,137, respectively
|
|
|
99,849
|
|
|
|
92,499
|
|
Accounts receivable from The
Coca-Cola
Company
|
|
|
3,454
|
|
|
|
3,800
|
|
Accounts receivable, other
|
|
|
12,990
|
|
|
|
7,867
|
|
Inventories
|
|
|
65,497
|
|
|
|
63,534
|
|
Prepaid expenses and other current assets
|
|
|
21,121
|
|
|
|
20,758
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
248,318
|
|
|
|
198,329
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
338,156
|
|
|
|
359,930
|
|
Leased property under capital leases, net
|
|
|
66,730
|
|
|
|
70,862
|
|
Other assets
|
|
|
33,937
|
|
|
|
35,655
|
|
Franchise rights, net
|
|
|
520,672
|
|
|
|
520,672
|
|
Goodwill, net
|
|
|
102,049
|
|
|
|
102,049
|
|
Other identifiable intangible assets, net
|
|
|
5,910
|
|
|
|
4,302
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,315,772
|
|
|
$
|
1,291,799
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
52
COCA-COLA
BOTTLING CO. CONSOLIDATED
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current portion of debt
|
|
$
|
176,693
|
|
|
$
|
7,400
|
|
Current portion of obligations under capital leases
|
|
|
2,781
|
|
|
|
2,602
|
|
Accounts payable, trade
|
|
|
42,383
|
|
|
|
51,323
|
|
Accounts payable to The
Coca-Cola
Company
|
|
|
35,311
|
|
|
|
11,597
|
|
Other accrued liabilities
|
|
|
57,504
|
|
|
|
54,511
|
|
Accrued compensation
|
|
|
23,285
|
|
|
|
23,447
|
|
Accrued interest payable
|
|
|
8,139
|
|
|
|
8,417
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
346,096
|
|
|
|
159,297
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
139,338
|
|
|
|
168,540
|
|
Pension and postretirement benefit obligations
|
|
|
107,005
|
|
|
|
32,758
|
|
Other liabilities
|
|
|
107,037
|
|
|
|
93,632
|
|
Obligations under capital leases
|
|
|
74,833
|
|
|
|
77,613
|
|
Long-term debt
|
|
|
414,757
|
|
|
|
591,450
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,189,066
|
|
|
|
1,123,290
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 13)
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
50,397
|
|
|
|
48,005
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Convertible Preferred Stock, $100.00 par value:
|
|
|
|
|
|
|
|
|
Authorized-50,000 shares; Issued-None
|
|
|
|
|
|
|
|
|
Nonconvertible Preferred Stock, $100.00 par value:
|
|
|
|
|
|
|
|
|
Authorized-50,000 shares; Issued-None
|
|
|
|
|
|
|
|
|
Preferred Stock, $.01 par value:
|
|
|
|
|
|
|
|
|
Authorized-20,000,000 shares; Issued-None
|
|
|
|
|
|
|
|
|
Common Stock, $1.00 par value:
|
|
|
|
|
|
|
|
|
Authorized-30,000,000 shares; Issued-9,706,051 shares
|
|
|
9,706
|
|
|
|
9,706
|
|
Class B Common Stock, $1.00 par value:
|
|
|
|
|
|
|
|
|
Authorized-10,000,000 shares; Issued-3,127,766 and
3,107,766 shares, respectively
|
|
|
3,127
|
|
|
|
3,107
|
|
Class C Common Stock, $1.00 par value:
|
|
|
|
|
|
|
|
|
Authorized-20,000,000 shares; Issued-None
|
|
|
|
|
|
|
|
|
Capital in excess of par value
|
|
|
103,582
|
|
|
|
102,469
|
|
Retained earnings
|
|
|
79,021
|
|
|
|
79,227
|
|
Accumulated other comprehensive loss
|
|
|
(57,873
|
)
|
|
|
(12,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
137,563
|
|
|
|
181,758
|
|
|
|
|
|
|
|
|
|
|
Less-Treasury stock, at cost:
|
|
|
|
|
|
|
|
|
Common Stock-3,062,374 shares
|
|
|
60,845
|
|
|
|
60,845
|
|
Class B Common Stock-628,114 shares
|
|
|
409
|
|
|
|
409
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
76,309
|
|
|
|
120,504
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,315,772
|
|
|
$
|
1,291,799
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
53
COCA-COLA
BOTTLING CO. CONSOLIDATED
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
9,091
|
|
|
$
|
19,856
|
|
|
$
|
23,243
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
67,572
|
|
|
|
67,881
|
|
|
|
67,334
|
|
Amortization of intangibles
|
|
|
701
|
|
|
|
445
|
|
|
|
550
|
|
Deferred income taxes
|
|
|
559
|
|
|
|
(4,165
|
)
|
|
|
(7,030
|
)
|
Losses on sale of property, plant and equipment
|
|
|
159
|
|
|
|
445
|
|
|
|
1,340
|
|
Provision for liabilities to exit multi-employer pension plan
|
|
|
14,012
|
|
|
|
|
|
|
|
|
|
Amortization of debt costs
|
|
|
2,449
|
|
|
|
2,678
|
|
|
|
2,638
|
|
Stock compensation expense
|
|
|
1,130
|
|
|
|
1,171
|
|
|
|
929
|
|
Amortization of deferred gains related to terminated interest
rate agreements
|
|
|
(2,160
|
)
|
|
|
(1,698
|
)
|
|
|
(1,689
|
)
|
Minority interest
|
|
|
2,392
|
|
|
|
2,003
|
|
|
|
3,218
|
|
Decrease in current assets less current liabilities
|
|
|
5,912
|
|
|
|
1,947
|
|
|
|
5,863
|
|
Decrease in other noncurrent assets
|
|
|
627
|
|
|
|
1,058
|
|
|
|
3,585
|
|
Increase (decrease) in other noncurrent liabilities
|
|
|
(5,635
|
)
|
|
|
3,854
|
|
|
|
2,736
|
|
Other
|
|
|
(180
|
)
|
|
|
23
|
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
87,538
|
|
|
|
75,642
|
|
|
|
79,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
96,629
|
|
|
|
95,498
|
|
|
|
102,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
(47,866
|
)
|
|
|
(48,226
|
)
|
|
|
(63,179
|
)
|
Proceeds from the sale of property, plant and equipment
|
|
|
4,231
|
|
|
|
8,566
|
|
|
|
2,454
|
|
Investment in plastic bottle manufacturing cooperative
|
|
|
(968
|
)
|
|
|
(3,377
|
)
|
|
|
(2,338
|
)
|
Investment in distribution agreement
|
|
|
(2,309
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
(243
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(46,912
|
)
|
|
|
(43,037
|
)
|
|
|
(63,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of current portion of long-term debt
|
|
|
|
|
|
|
(100,000
|
)
|
|
|
(39
|
)
|
Proceeds (payment) of lines of credit, net
|
|
|
(7,400
|
)
|
|
|
7,400
|
|
|
|
(6,500
|
)
|
Cash dividends paid
|
|
|
(9,144
|
)
|
|
|
(9,124
|
)
|
|
|
(9,103
|
)
|
Excess tax benefits from stock-based compensation
|
|
|
3
|
|
|
|
173
|
|
|
|
|
|
Principal payments on capital lease obligations
|
|
|
(2,602
|
)
|
|
|
(2,435
|
)
|
|
|
(1,696
|
)
|
Proceeds from termination of interest rate swap agreements
|
|
|
5,142
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(180
|
)
|
|
|
(427
|
)
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(14,181
|
)
|
|
|
(104,413
|
)
|
|
|
(17,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
35,536
|
|
|
|
(51,952
|
)
|
|
|
22,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of year
|
|
|
9,871
|
|
|
|
61,823
|
|
|
|
39,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
45,407
|
|
|
$
|
9,871
|
|
|
$
|
61,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Class B Common Stock in connection with stock
award
|
|
$
|
1,171
|
|
|
$
|
929
|
|
|
$
|
860
|
|
Capital lease obligations incurred
|
|
|
|
|
|
|
5,144
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
54
COCA-COLA
BOTTLING CO. CONSOLIDATED
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B
|
|
|
Capital in
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Common
|
|
|
Excess of
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
|
|
In thousands
|
|
Stock
|
|
|
Stock
|
|
|
Par Value
|
|
|
Earnings
|
|
|
Loss
|
|
|
Stock
|
|
|
Total
|
|
|
Balance on January 1, 2006
|
|
$
|
9,705
|
|
|
$
|
3,068
|
|
|
$
|
99,376
|
|
|
$
|
54,355
|
|
|
$
|
(30,116
|
)
|
|
$
|
(61,254
|
)
|
|
$
|
75,134
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,243
|
|
|
|
|
|
|
|
|
|
|
|
23,243
|
|
Net change in minimum pension liability adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,442
|
|
|
|
|
|
|
|
5,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,685
|
|
Adjustment to initially apply SFAS No. 158, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,552
|
)
|
|
|
|
|
|
|
(2,552
|
)
|
Cash dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common ($1.00 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,643
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,643
|
)
|
Class B Common ($1.00 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,460
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,460
|
)
|
Issuance of 20,000 shares of Class B Common Stock
|
|
|
|
|
|
|
20
|
|
|
|
840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
860
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on December 31, 2006
|
|
$
|
9,705
|
|
|
$
|
3,088
|
|
|
$
|
101,145
|
|
|
$
|
68,495
|
|
|
$
|
(27,226
|
)
|
|
$
|
(61,254
|
)
|
|
$
|
93,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,856
|
|
|
|
|
|
|
|
|
|
|
|
19,856
|
|
Foreign currency translation adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
23
|
|
Pension and postretirement benefit adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,452
|
|
|
|
|
|
|
|
14,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,331
|
|
Cash dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common ($1.00 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,644
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,644
|
)
|
Class B Common ($1.00 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,480
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,480
|
)
|
Issuance of 20,000 shares of Class B Common Stock
|
|
|
|
|
|
|
20
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
1,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,344
|
|
Conversion of Class B Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock into Common Stock
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on December 30, 2007
|
|
$
|
9,706
|
|
|
$
|
3,107
|
|
|
$
|
102,469
|
|
|
$
|
79,227
|
|
|
$
|
(12,751
|
)
|
|
$
|
(61,254
|
)
|
|
$
|
120,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,091
|
|
|
|
|
|
|
|
|
|
|
|
9,091
|
|
Foreign currency translation adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(9
|
)
|
Pension and postretirement benefit adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,999
|
)
|
|
|
|
|
|
|
(44,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35,917
|
)
|
Adjustment to change measurement date for
SFAS No. 158, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(153
|
)
|
|
|
(114
|
)
|
|
|
|
|
|
|
(267
|
)
|
Cash dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common ($1.00 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,644
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,644
|
)
|
Class B Common ($1.00 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,500
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,500
|
)
|
Issuance of 20,000 shares of Class B Common Stock
|
|
|
|
|
|
|
20
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
1,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on December 28, 2008
|
|
$
|
9,706
|
|
|
$
|
3,127
|
|
|
$
|
103,582
|
|
|
$
|
79,021
|
|
|
$
|
(57,873
|
)
|
|
$
|
(61,254
|
)
|
|
$
|
76,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements
55
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
1.
|
Significant
Accounting Policies
|
Coca-Cola
Bottling Co. Consolidated (the Company) produces,
markets and distributes nonalcoholic beverages, primarily
products of The
Coca-Cola
Company. The Company operates principally in the southeastern
region of the United States and has one reportable segment.
The consolidated financial statements include the accounts of
the Company and its majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
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 fiscal years presented are the 52-week periods ended
December 28, 2008, December 30, 2007 and
December 31, 2006. The Companys fiscal year ends on
the Sunday closest to December 31 of each year.
Certain prior year amounts have been reclassified to conform to
current classifications.
The Companys significant accounting policies are as
follows:
Cash
and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks
and cash equivalents, which are highly liquid debt instruments
with maturities of less than 90 days. The Company maintains
cash deposits with major banks which from time to time may
exceed federally insured limits. The Company periodically
assesses the financial condition of the institutions and
believes that the risk of any loss is minimal.
Credit
Risk of Trade Accounts Receivable
The Company sells its products to supermarkets, convenience
stores and other customers and extends credit, generally without
requiring collateral, based on an ongoing evaluation of the
customers business prospects and financial condition. The
Companys trade accounts receivable are typically collected
within approximately 30 days from the date of sale. The
Company monitors its exposure to losses on trade accounts
receivable and maintains an allowance for potential losses or
adjustments. Past due trade accounts receivable balances are
written off when the Companys collection efforts have been
unsuccessful in collecting the amount due.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined on the
first-in,
first-out method for finished products and manufacturing
materials and on the average cost method for plastic shells,
plastic pallets and other inventories.
Property,
Plant and Equipment
Property, plant and equipment are recorded at cost and
depreciated using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements on operating
leases are depreciated over the shorter of the estimated useful
lives or the term of the lease, including renewal options the
Company determines are reasonably assured. Additions and major
replacements or betterments are added to the assets at cost.
Maintenance and repair costs and minor replacements are charged
to expense when incurred. When assets are replaced or otherwise
disposed, the cost and accumulated depreciation are removed from
the accounts and the gains or losses, if any, are reflected in
the statement of operations. Gains or losses on the disposal of
manufacturing equipment and manufacturing facilities are
included in cost of sales. Gains or losses on the disposal of
all other property, plant and
56
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
equipment are included in selling, delivery and administrative
(S,D&A) expenses. Disposals of property, plant
and equipment generally occur when it is not cost effective to
repair an asset.
The Company evaluates the recoverability of the carrying amount
of its property, plant and equipment when events or changes in
circumstances indicate that the amount of an asset or asset
group may not be recoverable. If the Company determines that the
carrying amount of an asset or asset group is not recoverable
based upon the expected undiscounted future cash flows of the
asset or asset group, an impairment loss is recorded equal to
the excess of the carrying amounts over the estimated fair value
of the long-lived assets.
Leased
Property Under Capital Leases
Leased property under capital leases is depreciated using the
straight-line method over the lease term.
Internal
Use Software
The Company capitalizes costs incurred in the development or
acquisition of internal use software. The Company expenses costs
incurred in the preliminary project planning stage. Costs, such
as maintenance and training, are also expensed as incurred.
Capitalized costs are amortized over their estimated useful
lives using the straight-line method. Amortization expense,
which is included in depreciation expense, for internal-use
software was $6.3 million, $5.6 million and
$5.1 million in 2008, 2007 and 2006, respectively.
Franchise
Rights and Goodwill
Under the provisions of Statement of Financial Accounting
Standards No. 141, Business Combinations, and
Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, all business
combinations are accounted for using the purchase method and
goodwill and intangible assets with indefinite useful lives are
not amortized but instead are tested for impairment annually, or
more frequently if facts and circumstances indicate such assets
may be impaired. The only intangible assets the Company
classifies as indefinite lived are franchise rights and
goodwill. The Company performs its annual impairment test as of
the first day of the fourth quarter of each year.
For the annual impairment analysis of franchise rights, the fair
value of the Companys acquired franchise rights is
estimated using a discounted cash flows approach. This approach
involves a projection of future cash flows, attributable to the
franchise rights and discounting those estimated cash flows
using an appropriate discount rate. The estimated fair value is
compared to the carrying value on an aggregated basis.
The Company has determined that it has one reporting unit for
the Company as a whole for purposes of assessing goodwill for
potential impairment. For the annual impairment analysis of
goodwill, the Company develops an estimated fair value for the
reporting unit using an average of three different approaches:
|
|
|
|
|
market value, using the Companys stock price plus
outstanding debt;
|
|
|
|
discounted cash flow analysis; and
|
|
|
|
multiple of earnings before interest, taxes, depreciation and
amortization based upon relevant industry data.
|
The estimated fair value of the reporting unit is then compared
to its carrying amount including goodwill. If the estimated fair
value exceeds the carrying amount, goodwill is considered not
impaired, and the second step of the impairment test is not
necessary. If the carrying amount including goodwill exceeds its
estimated fair value, the second step of the impairment test is
performed to measure the amount of the impairment, if any.
The Company uses its overall market capitalization as part of
its estimate of fair value of the reporting unit and in
assessing the reasonableness of the Companys internal
estimates of fair value.
To the extent that actual and projected cash flows decline in
the future, or if market conditions deteriorate significantly,
the Company may be required to perform an interim impairment
analysis that could result in an impairment of franchise rights
and goodwill.
57
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Other
Identifiable Intangible Assets
Other identifiable intangible assets primarily represent
customer relationships and distribution rights and are amortized
on a straight-line basis over their estimated useful lives.
Pension
and Postretirement Benefit Plans
The Company has a noncontributory pension plan covering
substantially all nonunion employees and one noncontributory
pension plan covering certain union employees. Costs of the
plans are charged to current operations and consist of several
components of net periodic pension cost based on various
actuarial assumptions regarding future experience of the plans.
In addition, certain other union employees are covered by plans
provided by their respective union organizations and the Company
expenses amounts as paid in accordance with union agreements.
The Company recognizes the cost of postretirement benefits,
which consist principally of medical benefits, during
employees periods of active service.
Amounts recorded for benefit plans reflect estimates related to
interest rates, investment returns, employee turnover and health
care costs. The discount rate assumptions used to determine the
pension and postretirement benefit obligations are based on
yield rates available on double-A bonds as of each plans
measurement date.
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 158, Employers
Accounting for Defined Pension and Other Postretirement
Plans (SFAS No. 158), at the end of
2006. Liabilities for pension and postretirement liabilities
were adjusted to reflect the excess of the projected benefit
obligation (pension) and the accumulated postretirement benefit
obligation (postretirement medical), respectively, over plan
assets. The Company changed its measurement date for pension
plans from November 30 to the Companys year-end. The
Company changed its measurement for postretirement benefits from
September 30 to the Companys year-end.
On February 22, 2006, the Board of Directors of the Company
approved an amendment to the pension plan covering substantially
all nonunion employees to cease further accruals under the plan
effective June 30, 2006. The plan amendment was accounted
for as a plan curtailment under Statement of
Financial Accounting Standards No. 88,
Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for
Termination Benefits (as amended)
(SFAS No. 88). The curtailment resulted in
a reduction of the Companys projected benefit obligation
which was offset against the Companys unrecognized net
loss.
See Note 17 to the consolidated financial statements for
additional information on the pension curtailment and the
effects of adopting SFAS No. 158.
Income
Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to operating loss and
tax credit carryforwards as well as differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.
A valuation allowance will be provided against deferred tax
assets if the Company determines it is more likely than not,
such assets will not ultimately be realized.
The Company does not recognize a tax benefit unless it concludes
that it is more likely than not that the benefit will be
sustained on audit by the taxing authority based solely on the
technical merits of the associated tax position. If the
recognition threshold is met, the Company recognizes a tax
benefit measured at the largest amount of the tax benefit that,
in the Companys judgment, is greater than 50 percent
likely to be realized. The Company records interest and
penalties related to unrecognized tax positions in income tax
expense.
58
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Revenue
Recognition
Revenues are recognized when finished products are delivered to
customers and both title and the risks and benefits of ownership
are transferred, price is fixed and determinable, collection is
reasonably assured and, in the case of full service vending,
when cash is collected from the vending machines. Appropriate
provision is made for uncollectible accounts.
The Company receives service fees from The
Coca-Cola
Company related to the delivery of fountain syrup products to
The
Coca-Cola
Companys fountain customers. In addition, the Company
receives service fees from The
Coca-Cola
Company related to the repair of fountain equipment owned by The
Coca-Cola
Company. The fees received from The
Coca-Cola
Company for the delivery of fountain syrup products to their
customers and the repair of their fountain equipment are
recognized as revenue when the respective services are
completed. Service revenue represents approximately 1% of net
sales.
Revenues do not include sales or other taxes collected from
customers.
Marketing
Programs and Sales Incentives
The Company participates in various marketing and sales programs
with The
Coca-Cola
Company and other beverage companies and arrangements with
customers to increase the sale of its products by its customers.
Among the programs negotiated with customers are arrangements
under which allowances can be earned for attaining
agreed-upon
sales levels
and/or for
participating in specific marketing programs. Coupon programs
are also developed on a territory-specific basis. The cost of
these various marketing programs and sales incentives with The
Coca-Cola
Company and other beverage companies, included as deductions to
net sales, totaled $49.4 million, $44.9 million and
$47.2 million in 2008, 2007 and 2006, respectively.
Marketing
Funding Support
The Company receives marketing funding support payments in cash
from The
Coca-Cola
Company and other beverage companies. Payments to the Company
for marketing programs to promote the sale of bottle/can volume
and fountain syrup volume are recognized in earnings primarily
on a per unit basis over the year as product is sold. Payments
for periodic programs are recognized in the periods for which
they are earned.
Under the provisions of Emerging Issues Task Force Issue
No. 02-16
Accounting by a Customer (Including a Reseller) for
Certain Consideration Received from a Vendor, cash
consideration received by a customer from a vendor is presumed
to be a reduction of the prices of the vendors products or
services and is, therefore, to be accounted for as a reduction
of cost of sales in the statements of operations unless those
payments are specific reimbursements of costs or payments for
services. Payments the Company receives from The
Coca-Cola
Company and other beverage companies for marketing funding
support are classified as reductions of cost of sales.
Derivative
Financial Instruments
The Company records all derivative instruments in the financial
statements at fair value.
The Company uses derivative financial instruments to manage its
exposure to movements in interest rates and fuel prices. The use
of these financial instruments modifies the Companys
exposure to these risks with the intent of reducing risk over
time. The Company does not use financial instruments for trading
purposes, nor does it use leveraged financial instruments.
Credit risk related to the derivative financial instruments is
managed by requiring high credit standards for its
counterparties and periodic settlements.
59
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Interest
Rate Hedges
The Company periodically enters into derivative financial
instruments. The Company has standardized procedures for
evaluating the accounting for financial instruments. These
procedures include:
|
|
|
|
|
Identifying and matching of the hedging instrument and the
hedged item to ensure that significant features coincide such as
maturity dates and interest reset dates;
|
|
|
|
Identifying the nature of the risk being hedged and the
Companys intent for undertaking the hedge;
|
|
|
|
Assessing the hedging instruments effectiveness in
offsetting the exposure to changes in the hedged items
fair value or variability to cash flows attributable to the
hedged risk;
|
|
|
|
Assessing evidence that, at the hedges inception and on an
ongoing basis, it is expected that the hedging relationship will
be highly effective in achieving an offsetting change in the
fair value or cash flows that are attributable to the hedged
risk; and
|
|
|
|
Maintaining a process to review all hedges on an ongoing basis
to ensure continued qualification for hedge accounting.
|
To the extent the interest rate agreements meet the specified
criteria; they are accounted for as either fair value or cash
flow hedges. Changes in the fair values of designated and
qualifying fair value hedges are recognized in earnings as
offsets to changes in the fair value of the related hedged
liabilities. Changes in the fair value of cash flow hedging
instruments are recognized in accumulated other comprehensive
income and are subsequently reclassified to earnings as an
adjustment to interest expense in the same periods the
forecasted payments affect earnings. Ineffectiveness of a cash
flow hedge, defined as the amount by which the change in the
value of the hedge does not exactly offset the change in the
value of the hedged item, is reflected in current results of
operations.
The Company evaluates its mix of fixed and floating rate debt on
an ongoing basis. Periodically, the Company may terminate an
interest rate derivative when the underlying debt remains
outstanding in order to achieve its desired fixed/floating rate
mix. Upon termination of an interest rate derivative accounted
for as a cash flow hedge, amounts reflected in accumulated other
comprehensive income are reclassified to earnings consistent
with the variability of the cash flows previously hedged, which
is generally over the life of the related debt that was hedged.
Upon termination of an interest rate derivative accounted for as
a fair value hedge, the value of the hedge as recorded on the
Companys balance sheet is eliminated against either the
cash received or cash paid for settlement and the fair value
adjustment of the related debt is amortized to earnings over the
remaining life of the debt instrument as an adjustment to
interest expense.
Interest rate derivatives designated as cash flow hedges are
used to hedge the variability of cash flows related to a
specific component of the Companys long-term debt.
Interest rate derivatives designated as fair value hedges are
used to hedge the fair value of a specific component of the
Companys long-term debt. If the hedged component of
long-term debt is repaid or refinanced, the Company generally
terminates the related hedge due to the fact the forecasted
schedule of payments will not occur or the changes in fair value
of the hedged debt will not occur and the derivative will no
longer qualify as a hedge. Any gain or loss on the termination
of an interest rate derivative related to the repayment or
refinancing of long-term debt is recognized currently in the
Companys statement of operations as an adjustment to
interest expense. In the event a derivative previously accounted
for as a hedge was retained and did not qualify for hedge
accounting, changes in the fair value would be recognized in the
statement of operations currently as an adjustment to interest
expense.
Fuel
Hedges
The Company uses derivative instruments to hedge the majority of
the Companys vehicle fuel purchases. These derivative
instruments relate to diesel fuel and unleaded gasoline used in
the Companys delivery fleet. Instruments used include
puts, calls and caps which effectively establish a limit on the
Companys price of fuel
60
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
within periods covered by the instruments. The Company pays a
fee for these instruments which is amortized over the
corresponding period of the instrument. The Company accounts for
its fuel hedges on a mark-to-market basis with any expense or
income reflected as an adjustment of fuel costs which are
included in S,D&A expenses.
Risk
Management Programs
In general, the Company is self-insured for the costs of
workers compensation, employment practices, vehicle
accident claims and medical claims. The Company uses commercial
insurance for claims as a risk reduction strategy to minimize
catastrophic losses. Losses are accrued using assumptions and
procedures followed in the insurance industry, adjusted for
company-specific history and expectations.
Cost
of Sales
The following expenses are included in cost of sales: raw
material costs, manufacturing labor, manufacturing overhead
including depreciation expense, manufacturing warehousing costs
and shipping and handling costs related to the movement of
finished goods from manufacturing locations to sales
distribution centers.
Selling,
Delivery and Administrative Expenses
The following expenses are included in S,D&A expenses:
sales management labor costs, distribution costs from sales
distribution centers to customer locations, sales distribution
center warehouse costs, depreciation expense related to sales
centers, delivery vehicles and cold drink equipment,
point-of-sale expenses, advertising expenses, cold drink
equipment repair costs, amortization of intangibles and
administrative support labor and operating costs such as
treasury, legal, information services, accounting, internal
control services, human resources and executive management costs.
Shipping
and Handling Costs
Shipping and handling costs related to the movement of finished
goods from manufacturing locations to sales distribution centers
are included in cost of sales. Shipping and handling costs
related to the movement of finished goods from sales
distribution centers to customer locations are included in
S,D&A expenses and were $201.6 million,
$194.9 million and $193.8 million in 2008, 2007 and
2006, respectively.
The Company recorded delivery fees in net sales of
$6.7 million, $6.7 million and $3.6 million in
2008, 2007 and 2006, respectively. These fees are used to offset
a portion of the Companys delivery and handling costs.
Restricted
Stock with Contingent Vesting
The Company provides its Chairman of the Board of Directors and
Chief Executive Officer, J. Frank Harrison, III, with a
restricted stock award. Under the award, restricted stock is
granted at a rate of 20,000 shares per year over a 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 Companys 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.
The Companys only share-based compensation is the
restricted stock award to the Companys Chairman of the
Board of Directors and Chief Executive Officer as described
above. Each annual 20,000 share tranche has an independent
performance requirement as it is not established until the
Companys Annual Bonus Plan targets are approved each year
by the Compensation Committee of the Companys 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 recognizes
compensation expense over the requisite service period (one
fiscal year) based on the Companys stock price at the
measurement date (date approved by the Board of Directors),
unless the
61
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
achievement of the performance requirement for the fiscal year
is considered unlikely. See Note 16 to the consolidated
financial statements for additional information.
On March 4, 2009, the Compensation Committee determined
that 20,000 shares of restricted Class B Common Stock,
$1.00 par value, vested and should be issued pursuant to a
performance-based award to J. Frank Harrison, III, in
connection with his services in 2008 as Chairman of the Board of
Directors and Chief Executive Officer of the Company.
Net
Income Per Share
The Company applies the two-class method for calculating and
presenting net income per share. As noted in Statement of
Financial Accounting Standards No. 128, Earnings per
Share (as amended), the two-class method is an earnings
allocation formula that determines earnings per share for each
class of common stock according to dividends declared (or
accumulated) and participation rights in undistributed earnings.
Under this method:
|
|
|
|
(a)
|
Income from continuing operations (net income) is
reduced by the amount of dividends declared in the current
period for each class of stock and by the contractual amount of
dividends that must be paid for the current period.
|
|
|
|
|
(b)
|
The remaining earnings (undistributed earnings) are
allocated to Common Stock and Class B Common Stock to the
extent that each security may share in earnings as if all of the
earnings for the period had been distributed. The total earnings
allocated to each security is determined by adding together the
amount allocated for dividends and the amount allocated for a
participation feature.
|
|
|
|
|
(c)
|
The total earnings allocated to each security is then divided by
the number of outstanding shares of the security to which the
earnings are allocated to determine the earnings per share for
the security.
|
|
|
|
|
(d)
|
Basic and diluted earnings per share (EPS) data are
presented for each class of common stock.
|
In applying the two-class method, the Company determined that
undistributed earnings should be allocated equally on a per
share basis between the Common Stock and Class B Common
Stock due to the aggregate participation rights of the
Class B Common Stock (i.e., the voting and conversion
rights) and the Companys history of paying dividends
equally on a per share basis on the Common Stock and
Class B Common Stock.
Under the Companys certificate of incorporation, the Board
of Directors may declare dividends on Common Stock without
declaring equal or any dividends on the Class B Common
Stock. Notwithstanding this provision, Class B Common Stock
has voting and conversion rights that allow the Class B
Common Stock stockholders to participate equally on a per share
basis with the Common Stock stockholders.
The Class B Common Stock is entitled to 20 votes per share
and the Common Stock is entitled to one vote per share with
respect to each matter to be voted upon by the stockholders of
the Company. With the exception of any matter required by law,
the holders of the Class B Common Stock and Common Stock
vote together as a single class on all matters submitted to the
Companys stockholders, including the election of the Board
of Directors. As a result of this voting structure, the holders
of the Class B Common Stock control approximately 85% of
the total voting power of the stockholders of the Company and
control the election of the Board of Directors. The Board of
Directors has declared and the Company has paid dividends on the
Class B Common Stock and Common Stock and each class of
common stock has participated equally in all dividends declared
by the Board of Directors and paid by the Company since 1994.
The Class B Common Stock conversion rights allow the
Class B Common Stock to participate in dividends equally
with the Common Stock. The Class B Common Stock is
convertible into Common Stock on a one-for-one per share basis
at any time at the option of the holder (i.e., via an action
within the holders control). Accordingly, the holders of
the Class B Common Stock can participate equally in any
dividends declared on the Common Stock by exercising their
conversion rights.
62
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
As a result of the Class B Common Stocks aggregated
participation rights, the Company has determined that
undistributed earnings should be allocated equally on a per
share basis to the Common Stock and Class B Common Stock
under the two-class method.
Basic EPS excludes potential common shares that were dilutive
and is computed by dividing net income available for common
stockholders by the weighted average number of Common and
Class B Common shares outstanding. Diluted EPS for Common
Stock and Class B Common Stock gives effect to all
securities representing potential common shares that were
dilutive and outstanding during the period.
|
|
2.
|
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 operations of Piedmont pursuant to a management
agreement. These intercompany transactions are eliminated in the
consolidated financial statements.
Minority interest as of December 28, 2008,
December 30, 2007 and December 31, 2006 represents the
portion of Piedmont which is owned by The
Coca-Cola
Company. The
Coca-Cola
Companys interest in Piedmont was 22.7% in all periods
reported.
Inventories were summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Finished products
|
|
$
|
36,418
|
|
|
$
|
37,649
|
|
Manufacturing materials
|
|
|
12,620
|
|
|
|
9,198
|
|
Plastic shells, plastic pallets and other inventories
|
|
|
16,459
|
|
|
|
16,687
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
65,497
|
|
|
$
|
63,534
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
Property,
Plant and Equipment
|
The principal categories and estimated useful lives of property,
plant and equipment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
|
Estimated
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Useful Lives
|
|
|
Land
|
|
$
|
12,167
|
|
|
$
|
12,280
|
|
|
|
|
|
Buildings
|
|
|
109,384
|
|
|
|
110,721
|
|
|
|
10-50 years
|
|
Machinery and equipment
|
|
|
118,934
|
|
|
|
106,180
|
|
|
|
5-20 years
|
|
Transportation equipment
|
|
|
176,084
|
|
|
|
174,882
|
|
|
|
4-17 years
|
|
Furniture and fixtures
|
|
|
38,254
|
|
|
|
38,350
|
|
|
|
4-10 years
|
|
Cold drink dispensing equipment
|
|
|
319,188
|
|
|
|
323,629
|
|
|
|
6-13 years
|
|
Leasehold and land improvements
|
|
|
60,142
|
|
|
|
60,023
|
|
|
|
5-20 years
|
|
Software for internal use
|
|
|
59,786
|
|
|
|
51,681
|
|
|
|
3-10 years
|
|
Construction in progress
|
|
|
4,891
|
|
|
|
6,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, at cost
|
|
|
898,830
|
|
|
|
884,381
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
560,674
|
|
|
|
524,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
338,156
|
|
|
$
|
359,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Depreciation and amortization expense was $67.6 million,
$67.9 million and $67.3 million in 2008, 2007 and
2006, respectively. These amounts included amortization expense
for leased property under capital leases.
|
|
5.
|
Leased
Property Under Capital Leases
|
Leased property under capital leases was summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
|
Estimated
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Useful Lives
|
|
|
Leased property under capital leases
|
|
$
|
88,619
|
|
|
$
|
88,619
|
|
|
|
3-29 years
|
|
Less: Accumulated amortization
|
|
|
21,889
|
|
|
|
17,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased property under capital leases, net
|
|
$
|
66,730
|
|
|
$
|
70,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 28, 2008, real estate represented all of the
leased property under capital leases and $61.2 million of
this real estate is leased from related parties as described in
Note 18 to the consolidated financial statements.
|
|
6.
|
Franchise
Rights and Goodwill
|
Franchise rights and goodwill were summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Franchise rights
|
|
$
|
677,769
|
|
|
$
|
677,769
|
|
Goodwill
|
|
|
155,487
|
|
|
|
155,487
|
|
|
|
|
|
|
|
|
|
|
Franchise rights and goodwill
|
|
|
833,256
|
|
|
|
833,256
|
|
Less: Accumulated amortization
|
|
|
210,535
|
|
|
|
210,535
|
|
|
|
|
|
|
|
|
|
|
Franchise rights and goodwill, net
|
|
$
|
622,721
|
|
|
$
|
622,721
|
|
|
|
|
|
|
|
|
|
|
The Company performed its annual impairment test of franchise
rights and goodwill as of the first day of the fourth quarter of
2008, 2007 and 2006 and determined there was no impairment of
the carrying value of these assets.
There was no activity for franchise rights and goodwill in 2008
or 2007.
|
|
7.
|
Other
Identifiable Intangible Assets
|
Other identifiable intangible assets were summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
|
Estimated
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Useful Lives
|
|
|
Other identifiable intangible assets
|
|
$
|
8,909
|
|
|
$
|
6,599
|
|
|
|
1-20 years
|
|
Less: Accumulated amortization
|
|
|
2,999
|
|
|
|
2,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other identifiable intangible assets, net
|
|
$
|
5,910
|
|
|
$
|
4,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other identifiable intangible assets primarily represent
customer relationships and distribution rights. Amortization
expense related to other identifiable intangible assets was
$.7 million, $.4 million and $.6 million in 2008,
2007 and 2006, respectively. Assuming no impairment of these
other identifiable intangible assets, amortization expense in
future years based upon recorded amounts as of December 28,
2008 will be $.6 million, $.5 million,
$.4 million, $.4 million and $.3 million for 2009
through 2013, respectively.
64
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
8.
|
Other
Accrued Liabilities
|
Other accrued liabilities were summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Accrued marketing costs
|
|
$
|
9,001
|
|
|
$
|
6,787
|
|
Accrued insurance costs
|
|
|
17,132
|
|
|
|
14,228
|
|
Accrued taxes (other than income taxes)
|
|
|
374
|
|
|
|
502
|
|
Employee benefit plan accruals
|
|
|
8,626
|
|
|
|
9,933
|
|
Checks and transfers yet to be presented for payment from zero
balance cash account
|
|
|
11,074
|
|
|
|
13,279
|
|
All other accrued expenses
|
|
|
11,297
|
|
|
|
9,782
|
|
|
|
|
|
|
|
|
|
|
Total other accrued liabilities
|
|
$
|
57,504
|
|
|
$
|
54,511
|
|
|
|
|
|
|
|
|
|
|
Debt was summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
Interest
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
In thousands
|
|
Maturity
|
|
|
Rate
|
|
|
Paid
|
|
2008
|
|
|
2007
|
|
|
Lines of Credit
|
|
|
2008
|
|
|
|
|
|
|
Varies
|
|
$
|
|
|
|
$
|
7,400
|
|
Debentures
|
|
|
2009
|
|
|
|
7.20
|
%
|
|
Semi-annually
|
|
|
57,440
|
|
|
|
57,440
|
|
Debentures
|
|
|
2009
|
|
|
|
6.375
|
%
|
|
Semi-annually
|
|
|
119,253
|
|
|
|
119,253
|
|
Senior Notes
|
|
|
2012
|
|
|
|
5.00
|
%
|
|
Semi-annually
|
|
|
150,000
|
|
|
|
150,000
|
|
Senior Notes
|
|
|
2015
|
|
|
|
5.30
|
%
|
|
Semi-annually
|
|
|
100,000
|
|
|
|
100,000
|
|
Senior Notes
|
|
|
2016
|
|
|
|
5.00
|
%
|
|
Semi-annually
|
|
|
164,757
|
|
|
|
164,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
591,450
|
|
|
|
598,850
|
|
Less: Current portion of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
176,693
|
|
|
|
7,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
$
|
414,757
|
|
|
$
|
591,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The principal maturities of debt outstanding on
December 28, 2008 were as follows:
|
|
|
|
|
In thousands
|
|
|
|
|
2009
|
|
$
|
176,693
|
|
2010
|
|
|
|
|
2011
|
|
|
|
|
2012
|
|
|
150,000
|
|
2013
|
|
|
|
|
Thereafter
|
|
|
264,757
|
|
|
|
|
|
|
Total debt
|
|
$
|
591,450
|
|
|
|
|
|
|
The Company has obtained the majority of its long-term debt
financing other than capital leases from the public markets. As
of December 28, 2008, the Companys total outstanding
balance of debt and capital lease obligations was
$669.1 million of which $591.5 million was financed
through publicly offered debt. The Company had capital lease
obligations of $77.6 million as of December 28, 2008.
The Company mitigates its financing risk by using multiple
financial institutions and enters into credit arrangements only
with institutions with investment grade credit ratings. The
Company monitors counterparty credit ratings on an ongoing basis.
65
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
On March 8, 2007, the Company entered into a
$200 million revolving credit facility
($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%, dependent on the length of the term of the
borrowing. 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
Companys long-term senior unsecured debt rating. The
$200 million facility contains two financial covenants: a
fixed charge coverage ratio of greater than 1.5:1 and a
debt to operating cash flow ratio of less than 6:1, each as
defined in the credit agreement. On August 25, 2008, the
Company entered into an amendment to the $200 million
facility. The amendment clarified that charges incurred by the
Company resulting from the Companys withdrawal from the
Central States Pension Plan would be excluded from the
calculations of the financial covenants to the extent they are
recognized before March 29, 2009 and do not exceed
$15 million. See Note 17 of the consolidated financial
statements for additional details on the withdrawal. The Company
is currently in compliance with these covenants. On
December 28, 2008 and December 30, 2007, the Company
had no outstanding borrowings on the $200 million facility.
Prior to October 3, 2008, the Company borrowed periodically
under uncommitted lines of credit from certain banks
participating in the $200 million facility. These
uncommitted lines of credit made available at the discretion of
participating banks were temporarily terminated in late fall of
2008. On December 30, 2007, $7.4 million was
outstanding under uncommitted lines of credit of
$60 million available. In January 2009, one of the
participating banks reinstated their uncommitted line of credit
for $65 million.
The Company currently provides financing for Piedmont under an
agreement that expires on December 31, 2010. Piedmont pays
the Company interest on its borrowings at the Companys
average cost of funds plus 0.50%. The loan balance at
December 28, 2008 was $61.9 million. The loan and
interest were eliminated in consolidation.
The Company filed a $300 million shelf registration for
debt and equity securities in November 2008. The Company
currently has the full $300 million available for use under
this shelf registration which, subject to the Companys
ability to consummate a transaction on acceptable terms, could
be used for long-term financing or refinancing of debt
maturities.
After taking into account all of the interest rate hedging
activities, the Company had a weighted average interest rate of
5.9% and 6.2% for its debt and capital lease obligations as of
December 28, 2008 and December 30, 2007, respectively.
The Companys overall weighted average interest rate on its
debt and capital lease obligations was 5.7%, 6.7% and 6.6% for
2008, 2007 and 2006, respectively. As of December 28, 2008,
approximately 6.3% of the Companys debt and capital lease
obligations of $669.1 million was subject to changes in
short-term interest rates.
The Companys 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
Companys 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 Companys
subsidiaries. There are no guarantees of the Companys debt.
|
|
10.
|
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
Companys debt level and the potential impact of changes in
interest rates on the Companys overall financial
condition. Sensitivity analyses are performed to review the
impact on the Companys financial position and coverage of
various interest rate movements. The Company does not use
derivative financial instruments for trading purposes nor does
it use leveraged financial instruments.
66
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
On September 18, 2008, the Company terminated six
outstanding interest rate swap agreements with a notional amount
of $225 million receiving $6.2 million in cash
proceeds including $1.1 million for previously accrued
interest receivable. After accounting for previously accrued
interest receivable, the Company will amortize a gain of
$5.1 million over the remaining term of the underlying
debt. All of the Companys interest rate swap agreements
were LIBOR-based.
Derivative financial instruments were summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 28, 2008
|
|
|
Dec. 30, 2007
|
|
|
|
Notional
|
|
|
Remaining
|
|
|
Notional
|
|
|
Remaining
|
|
In thousands
|
|
Amount
|
|
|
Term
|
|
|
Amount
|
|
|
Term
|
|
|
Interest rate swap agreement-floating
|
|
|
|
|
|
|
|
|
|
$
|
50,000
|
|
|
|
1.4 years
|
|
Interest rate swap agreement-floating
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
1.5 years
|
|
Interest rate swap agreement-floating
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
4.9 years
|
|
Interest rate swap agreement-floating
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
1.3 years
|
|
Interest rate swap agreement-floating
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
7.2 years
|
|
Interest rate swap agreement-floating
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
4.9 years
|
|
During 2008, 2007 and 2006, the Company amortized deferred gains
related to previously terminated interest rate swap agreements
and forward interest rate agreements, which reduced interest
expense by $2.2 million, $1.7 million and
$1.7 million, respectively. Interest expense will be
reduced by the amortization of these deferred gains in 2009
through 2013 as follows: $2.1 million, $1.2 million,
$1.3 million, $1.2 million and $.6 million,
respectively.
The counterparties to these contractual arrangements were major
financial institutions with which the Company also has other
financial relationships. The Company used several different
financial institutions for interest rate derivative contracts to
minimize the concentration of credit risk. While the Company was
exposed to credit loss in the event of nonperformance by these
counterparties, the Company did not anticipate nonperformance by
these parties. The Company had master agreements with the
counterparties to its derivative financial agreements that
provided for net settlement of 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 Companys delivery fleet.
Derivative instruments used include puts, calls and caps which
effectively establish a limit on the Companys 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 reflected as an adjustment of fuel
costs.
The net impact of the fuel hedges was to increase fuel cost by
$.8 million in 2008 and decrease fuel cost by
$.9 million in 2007.
|
|
11.
|
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 Companys public debt securities are
based on estimated current market prices.
67
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Non-Public
Variable Rate Debt
The carrying amounts of the Companys 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 Companys interest rate swap and
fuel hedging agreements are based on current settlement values.
Credit risk related to the derivative financial instruments is
managed by requiring high standards for its counterparties and
periodic settlements. The Company considers nonperformance risk
in determining the fair value of derivative financial
instruments.
Letters
of Credit
The fair values of the Companys letters of credit,
obtained from financial institutions, are based on the notional
amounts of the instruments. These letters of credit primarily
relate to the Companys property and casualty insurance
programs.
The carrying amounts and fair values of the Companys debt,
deferred compensation plan assets, derivative financial
instruments and letters of credit were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 28, 2008
|
|
|
Dec. 30, 2007
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
In thousands
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
Public debt securities
|
|
$
|
591,450
|
|
|
$
|
559,963
|
|
|
$
|
591,450
|
|
|
$
|
575,833
|
|
Non-public variable rate debt
|
|
|
|
|
|
|
|
|
|
|
7,400
|
|
|
|
7,400
|
|
Interest rate swap agreements
|
|
|
|
|
|
|
|
|
|
|
(2,337
|
)
|
|
|
(2,337
|
)
|
Deferred compensation plan assets
|
|
|
5,446
|
|
|
|
5,446
|
|
|
|
6,386
|
|
|
|
6,386
|
|
Fuel hedging agreements
|
|
|
1,985
|
|
|
|
1,985
|
|
|
|
(340
|
)
|
|
|
(340
|
)
|
Letters of credit
|
|
|
|
|
|
|
19,274
|
|
|
|
|
|
|
|
21,389
|
|
On September 18, 2008, the Company terminated all of its
outstanding interest rate swap agreements. The fair value of
interest rate swap agreements at December 30, 2007
represented the estimated amount the Company would have received
upon termination of these agreements. The fair value increased
to $6.2 million at the date the interest rate swap
agreements were terminated.
The fair value of the fuel hedging agreements at
December 28, 2008 represented the estimated amount the
Company would have paid upon termination of these agreements.
The fair value of the fuel hedging agreements at
December 30, 2007 represented 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, 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
disclosure that establishes a framework for measuring fair value
in GAAP, and expands disclosures about fair value measurements.
SFAS No. 157 is intended to
68
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
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 deferred
compensation plan assets and liabilities by the above categories
as of December 28, 2008:
|
|
|
|
|
|
|
|
|
In thousands
|
|
Level 1
|
|
|
Level 2
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Deferred compensation plan assets
|
|
$
|
5,446
|
|
|
|
|
|
Fuel hedging agreements
|
|
|
|
|
|
$
|
1,985
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Deferred compensation plan liabilities
|
|
$
|
5,446
|
|
|
|
|
|
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. The fair value
of the mutual funds is based on the quoted market value of the
securities held within the funds (Level 1). The related
deferred compensation liability represents the fair value of the
investment assets.
The Companys fuel hedging agreements are based on NYMEX
and Weekly US Department of Energy Daily Average rates that are
observable and quoted periodically over the full term of the
agreement and are considered Level 2 items.
12. Other
Liabilities
Other liabilities were summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Accruals for executive benefit plans
|
|
$
|
77,299
|
|
|
$
|
75,438
|
|
Other
|
|
|
29,738
|
|
|
|
18,194
|
|
|
|
|
|
|
|
|
|
|
Total other liabilities
|
|
$
|
107,037
|
|
|
$
|
93,632
|
|
|
|
|
|
|
|
|
|
|
The accruals for executive benefit plans relate to four benefit
programs for eligible executives of the Company. These benefit
programs are the Supplemental Savings Incentive Plan
(Supplemental Savings Plan), the Officer Retention
Plan (Retention Plan), a replacement benefit plan
and a Long-Term Performance Plan (Performance Plan).
Pursuant to the Supplemental Savings Plan, as amended effective
January 1, 2007, eligible participants may elect to defer a
portion of their annual salary and bonus. Prior to 2006, the
Company matched 30% of the first 6% of salary (excluding
bonuses) deferred by the participant. Participants are
immediately vested in all deferred contributions they make and
become fully vested in Company contributions upon completion of
five years of service, termination of employment due to death,
retirement or a change in control. Participant deferrals and
Company contributions made in years prior to 2006 are deemed
invested in either a fixed benefit option or certain investment
funds specified by the Company. Beginning in 2006, the Company
matches 50% of the first 6% of salary (excluding bonuses)
deferred by the participant. The Company also made additional
contributions during 2006, 2007 and 2008 of 20% of a
participants annual salary (excluding bonuses), with
contributions above the 10% level depending on the attainment by
the Company of certain annual performance objectives. The
Company may also
69
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
make discretionary contributions to participants accounts.
The long-term liability under this plan was $49.2 million
and $50.3 million as of December 28, 2008 and
December 30, 2007, respectively.
Under the Retention Plan, as amended effective January 1,
2007, eligible participants may elect to receive an annuity
payable in equal monthly installments over a 10, 15 or
20-year
period commencing at retirement or, in certain instances, upon
termination of employment. The benefits under the Retention Plan
increase with each year of participation as set forth in an
agreement between the participant and the Company. Benefits
under the Retention Plan are 50% vested until age 50. After
age 50, the vesting percentage increases by an additional
5% each year until the benefits are fully vested at age 60.
The long-term liability under this plan was $26.3 million
and $24.2 million as of December 28, 2008 and
December 30, 2007, respectively.
In conjunction with the elimination in 2003 of a split-dollar
life insurance benefit for officers of the Company, a
replacement benefit plan was established. The replacement
benefit plan provides a supplemental benefit to eligible
participants that increases with each additional year of service
and is comparable to benefits provided to eligible participants
previously through certain split-dollar life insurance
agreements. Upon separation from the Company, participants
receive an annuity payable in up to ten annual installments or a
lump sum. The long-term liability was $.9 million under
this plan as of both December 28, 2008 and
December 30, 2007.
Under the Performance Plan, adopted as of January 1, 2007,
the Compensation Committee of the Companys Board of
Directors establishes dollar amounts to which a participant
shall be entitled upon attainment of the applicable performance
measures. Bonus awards under the Performance Plan are made based
on the relative achievement of performance measures in terms of
the Company-sponsored objectives or objectives related to the
performance of the individual participants or of the subsidiary,
division, department, region or function in which the
participant is employed. The long-term liability under this plan
was $.9 million as of December 28, 2008.
|
|
13.
|
Commitments
and Contingencies
|
Rental expense incurred for noncancellable operating leases was
$3.9 million, $3.9 million and $3.6 million
during 2008, 2007 and 2006, respectively. See Note 5 and
Note 18 to the consolidated financial statements for
additional information regarding leased property under capital
leases.
The Company leases office and warehouse space, machinery and
other equipment under noncancellable operating lease agreements
which expire at various dates through 2018. These leases
generally contain scheduled rent increases or escalation
clauses, renewal options, or in some cases, purchase options.
The Company leases certain warehouse space and other equipment
under capital lease agreements which expire at various dates
through 2030. These leases contain scheduled rent increases or
escalation clauses. Amortization of assets recorded under
capital leases is included in depreciation expense.
70
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of future minimum lease payments for
all capital leases and noncancellable operating leases as of
December 28, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands
|
|
Capital Leases
|
|
|
Operating Leases
|
|
|
Total
|
|
|
2009
|
|
$
|
9,743
|
|
|
$
|
3,258
|
|
|
$
|
13,001
|
|
2010
|
|
|
9,733
|
|
|
|
2,356
|
|
|
|
12,089
|
|
2011
|
|
|
9,856
|
|
|
|
1,901
|
|
|
|
11,757
|
|
2012
|
|
|
9,983
|
|
|
|
1,219
|
|
|
|
11,202
|
|
2013
|
|
|
10,155
|
|
|
|
1,062
|
|
|
|
11,217
|
|
Thereafter
|
|
|
152,106
|
|
|
|
6,463
|
|
|
|
158,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
201,576
|
|
|
$
|
16,259
|
|
|
$
|
217,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Amounts representing interest
|
|
|
123,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of minimum lease payments
|
|
|
77,614
|
|
|
|
|
|
|
|
|
|
Less: Current portion of obligations under capital leases
|
|
|
2,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion of obligations under capital leases
|
|
$
|
74,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future minimum lease payments for noncancellable operating and
capital leases in the preceding table include renewal options
the Company has determined to be reasonably assured.
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 18 to the consolidated financial statements for
additional information concerning SAC and Southeastern.
The Company guarantees a portion of SACs and
Southeasterns debt and lease obligations. The amounts
guaranteed were $39.9 million and $45.4 million as of
December 28, 2008 and December 30, 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 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 Companys guarantees.
In the event either of these cooperatives fail to fulfill their
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 Companys maximum
exposure under these guarantees on December 28, 2008 would
have been $25.2 million for SAC and $25.3 million for
Southeastern and the Companys maximum total exposure,
including its equity investment, would have been
$29.3 million for SAC and $36.3 million for
Southeastern.
The Company has been purchasing plastic bottles from
Southeastern and finished products from SAC 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
December 28, 2008, SAC had total assets of approximately
$42 million and total debt of approximately
$19 million. SAC had total revenues for 2008 of
approximately $183 million. As of December 28,
71
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
2008, Southeastern had total assets of approximately
$395 million and total debt of approximately
$247 million. Southeastern had total revenue for 2008 of
approximately $594 million.
The Company has standby letters of credit, primarily related to
its property and casualty insurance programs. On
December 28, 2008, these letters of credit totaled
$19.3 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 December 28, 2008 amounted
to $27.0 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 other 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 taxing authorities in
jurisdictions where it conducts business. These audits may
result in assessments that are subsequently resolved with the
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.
The current income tax provision represents the estimated amount
of income taxes paid or payable for the year, as well as changes
in estimates from prior years. The deferred income tax provision
represents the change in deferred tax liabilities and assets.
The following table presents the significant components of the
provision for income taxes for 2008, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
7,661
|
|
|
$
|
16,393
|
|
|
$
|
14,359
|
|
State
|
|
|
174
|
|
|
|
155
|
|
|
|
588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current provision
|
|
$
|
7,835
|
|
|
$
|
16,548
|
|
|
$
|
14,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(177
|
)
|
|
$
|
(5,589
|
)
|
|
$
|
(4,881
|
)
|
State
|
|
|
736
|
|
|
|
1,424
|
|
|
|
(2,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred provision (benefit)
|
|
$
|
559
|
|
|
$
|
(4,165
|
)
|
|
$
|
(7,030
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
8,394
|
|
|
$
|
12,383
|
|
|
$
|
7,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The Companys effective tax rate was 48.0%, 38.4% and 25.4%
for 2008, 2007 and 2006, respectively. The following table
provides a reconciliation of income tax expense at the statutory
federal rate to actual income tax expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Statutory expense
|
|
$
|
6,120
|
|
|
$
|
11,283
|
|
|
$
|
10,906
|
|
State income taxes, net of federal benefit
|
|
|
762
|
|
|
|
1,404
|
|
|
|
1,357
|
|
Change in reserve for uncertain tax positions
|
|
|
1,228
|
|
|
|
309
|
|
|
|
(1,673
|
)
|
Valuation allowance change
|
|
|
(286
|
)
|
|
|
(269
|
)
|
|
|
(2,637
|
)
|
Manufacturing deduction benefit
|
|
|
(490
|
)
|
|
|
(1,120
|
)
|
|
|
(595
|
)
|
Meals and entertainment
|
|
|
740
|
|
|
|
597
|
|
|
|
701
|
|
Other, net
|
|
|
320
|
|
|
|
179
|
|
|
|
(142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
8,394
|
|
|
$
|
12,383
|
|
|
$
|
7,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In June 2006, the Financial Accounting Standards Board
(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
in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties,
accounting in interim periods and disclosure. In May 2007, the
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 28,
2008, the Company had $10.5 million of unrecognized tax
benefits including accrued interest of which $9.4 million
would affect the Companys effective rate if recognized. It
is expected that the amount of unrecognized tax benefits may
change in the next 12 months. During this period, it is
reasonably possible that tax audits could reduce unrecognized
tax benefits. The Company cannot reasonably estimate the change
in the amount of unrecognized tax benefits until further
information is made available during the progress of the audits.
A reconciliation of the beginning and ending balances of the
total amounts of unrecognized tax benefits (excludes accrued
interest) is as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Gross unrecognized tax benefits at the beginning of the year
|
|
$
|
7,258
|
|
|
$
|
11,384
|
|
Increase in the unrecognized tax benefit as a result of tax
positions taken during a prior period
|
|
|
938
|
|
|
|
370
|
|
Decrease in the unrecognized tax benefits principally related to
temporary differences as a result of tax positions taken in a
prior period
|
|
|
(133
|
)
|
|
|
(4,656
|
)
|
Increase in the unrecognized tax benefits as a result of tax
positions taken in the current period
|
|
|
240
|
|
|
|
459
|
|
Change in the unrecognized tax benefits relating to settlements
with taxing authorities
|
|
|
|
|
|
|
|
|
Reduction to unrecognized tax benefits as a result of a lapse of
the applicable statute of limitations
|
|
|
(303
|
)
|
|
|
(299
|
)
|
|
|
|
|
|
|
|
|
|
Gross unrecognized tax benefits at the end of the year
|
|
$
|
8,000
|
|
|
$
|
7,258
|
|
|
|
|
|
|
|
|
|
|
73
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The Company recognizes potential interest and penalties related
to uncertain tax positions in income tax expense. As of
December 28, 2008 and December 30, 2007, the Company
had approximately $2.5 million and $2.0 million of
accrued interest related to uncertain tax positions,
respectively. Income tax expense in 2008 and 2007 included
approximately $.5 million and $.4 million of interest,
respectively.
Various tax years from 1990 remain open to examination by taxing
jurisdictions to which the Company is subject due to loss
carryforwards.
The Companys income tax assets and liabilities are subject
to adjustment in future periods based on the Companys
ongoing evaluations of such assets and liabilities and new
information that becomes available to the Company.
In October 2004, the American Jobs Creation Act of 2004 (the
Jobs Act) was enacted. The Jobs Act provided for a
tax deduction for qualified production activities. In December
2004, the FASB issued FASB Staff Position
No. FAS 109-1,
Application of FASB Statement No. 109, Accounting for
Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of
2004
(FAS 109-1),
which was effective immediately.
FAS 109-1
provides guidance on the accounting for the provision within the
Jobs Act that provides a tax deduction on qualified production
activities. The deduction for qualified production activities
provided within the Jobs Act and the Companys related
adoption of
FAS 109-1
reduced the Companys effective income tax rate by
approximately 1.9% in 2006, 3.5% in 2007 and 2.8% in 2008.
In 2006, the Company reached agreements with state taxing
authorities to settle certain prior tax positions for which the
Company had previously provided reserves due to uncertainty of
resolution. As a result, the Company reduced the valuation
allowance on related deferred tax assets by $2.6 million
and reduced the liability for uncertain tax positions by
$2.3 million. This adjustment was reflected as a
$4.9 million reduction of income tax expense in 2006. Also
during 2006, the Company increased the liability for uncertain
tax positions by $.5 million to reflect accrued interest
and an adjustment of the reserve for uncertain tax positions.
The net effect of adjustments to the valuation allowance and
liability for uncertain tax positions during 2006 was a
reduction in income tax expense of $4.4 million.
The Companys income tax assets and liabilities are subject
to adjustment in future periods based on the Companys
ongoing evaluations of such liabilities and new information that
becomes available to the Company.
The valuation allowance decreases in 2008, 2007 and 2006 were
due to the Companys assessments of its ability to use
certain state net operating loss carryforwards primarily due to
agreements with state taxing authorities as previously discussed.
74
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes are recorded based upon temporary
differences between the financial statement and tax bases of
assets and liabilities and available net operating loss and tax
credit carryforwards. Temporary differences and carryforwards
that comprised deferred income tax assets and liabilities were
as follows:
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Intangible assets
|
|
$
|
120,956
|
|
|
$
|
119,991
|
|
Depreciation
|
|
|
66,513
|
|
|
|
66,417
|
|
Investment in Piedmont
|
|
|
40,152
|
|
|
|
37,578
|
|
Pension (nonunion)
|
|
|
11,550
|
|
|
|
7,364
|
|
Debt exchange premium
|
|
|
2,726
|
|
|
|
3,217
|
|
Inventory
|
|
|
5,550
|
|
|
|
5,558
|
|
|
|
|
|
|
|
|
|
|
Gross deferred income tax liabilities
|
|
|
247,447
|
|
|
|
240,125
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
(10,565
|
)
|
|
|
(12,535
|
)
|
Deferred compensation
|
|
|
(31,594
|
)
|
|
|
(30,284
|
)
|
Postretirement benefits
|
|
|
(14,567
|
)
|
|
|
(14,534
|
)
|
Termination of interest rate agreements
|
|
|
(2,791
|
)
|
|
|
(1,618
|
)
|
Capital lease agreements
|
|
|
(3,939
|
)
|
|
|
(3,306
|
)
|
Pension (union)
|
|
|
(4,262
|
)
|
|
|
(53
|
)
|
Other
|
|
|
(6,157
|
)
|
|
|
(3,856
|
)
|
|
|
|
|
|
|
|
|
|
Gross deferred income tax assets
|
|
|
(73,875
|
)
|
|
|
(66,186
|
)
|
|
|
|
|
|
|
|
|
|
Valuation allowance for deferred tax assets
|
|
|
535
|
|
|
|
822
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax liability
|
|
|
174,107
|
|
|
|
174,761
|
|
Net current deferred income tax liability (asset)
|
|
|
(3,081
|
)
|
|
|
(2,253
|
)
|
|
|
|
|
|
|
|
|
|
Net noncurrent deferred income tax liability before
accumulated other comprehensive income
|
|
|
177,188
|
|
|
|
177,014
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes recognized in other comprehensive income
|
|
|
(37,850
|
)
|
|
|
(8,474
|
)
|
|
|
|
|
|
|
|
|
|
Net noncurrent deferred income tax liability
|
|
$
|
139,338
|
|
|
$
|
168,540
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets are recognized for the tax benefit of
deductible temporary differences and for federal and state net
operating loss and tax credit carryforwards. Valuation
allowances are recognized on these assets if the Company
believes that it is more likely than not that some or all of the
deferred tax assets will not be realized. The Company believes
the majority of the deferred tax assets will be realized due to
the reversal of certain significant temporary differences and
anticipated future taxable income from operations.
In addition to a valuation allowance related to net operating
loss carryforwards, the Company records liabilities for
uncertain tax positions related to certain state and federal
income tax positions. These liabilities reflect the
Companys best estimate of the ultimate income tax
liability based on currently known facts and information.
Material changes in facts or information as well as the
expiration of statutes
and/or
settlements with individual state or federal jurisdictions may
result in material adjustments to these estimates in the future.
The valuation allowance of $.5 million and $.8 million
as of December 28, 2008 and December 30, 2007,
respectively, was established primarily for net operating loss
carryforwards which expire in varying amounts through 2024.
75
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
15.
|
Accumulated
Other Comprehensive Income (Loss)
|
Accumulated other comprehensive loss is comprised of adjustments
relative to the Companys 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
primarily in Europe. The Company adopted SFAS No. 158
at the end of 2006.
A summary of accumulated other comprehensive loss is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application of
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 30,
|
|
|
SFAS No. 158
|
|
|
Pre-tax
|
|
|
Tax
|
|
|
Dec. 28,
|
|
In thousands
|
|
2007
|
|
|
After tax(1)
|
|
|
Activity
|
|
|
Effect
|
|
|
2008
|
|
|
Net pension activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss
|
|
$
|
(12,684
|
)
|
|
$
|
23
|
|
|
$
|
(72,660
|
)
|
|
$
|
28,604
|
|
|
$
|
(56,717
|
)
|
Prior service costs
|
|
|
(55
|
)
|
|
|
1
|
|
|
|
16
|
|
|
|
(7
|
)
|
|
|
(45
|
)
|
Net postretirement benefits activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss
|
|
|
(9,928
|
)
|
|
|
141
|
|
|
|
253
|
|
|
|
(91
|
)
|
|
|
(9,625
|
)
|
Prior service costs
|
|
|
9,833
|
|
|
|
(275
|
)
|
|
|
(1,784
|
)
|
|
|
685
|
|
|
|
8,459
|
|
Transition asset
|
|
|
60
|
|
|
|
(4
|
)
|
|
|
(25
|
)
|
|
|
10
|
|
|
|
41
|
|
Foreign currency translation adjustment
|
|
|
23
|
|
|
|
|
|
|
|
(17
|
)
|
|
|
8
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(12,751
|
)
|
|
$
|
(114
|
)
|
|
$
|
(74,217
|
)
|
|
$
|
29,209
|
|
|
$
|
(57,873
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note 17 of the consolidated financial statements for
additional information. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31,
|
|
|
Pre-tax
|
|
|
Tax
|
|
|
Dec. 30,
|
|
In thousands
|
|
2006
|
|
|
Activity
|
|
|
Effect
|
|
|
2007
|
|
|
Net pension activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss
|
|
$
|
(24,673
|
)
|
|
$
|
19,771
|
|
|
$
|
(7,782
|
)
|
|
$
|
(12,684
|
)
|
Prior service costs
|
|
|
(31
|
)
|
|
|
(39
|
)
|
|
|
15
|
|
|
|
(55
|
)
|
Net postretirement benefits activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss (gain)
|
|
|
(13,512
|
)
|
|
|
5,910
|
|
|
|
(2,326
|
)
|
|
|
(9,928
|
)
|
Prior service costs
|
|
|
10,915
|
|
|
|
(1,784
|
)
|
|
|
702
|
|
|
|
9,833
|
|
Transition asset
|
|
|
75
|
|
|
|
(25
|
)
|
|
|
10
|
|
|
|
60
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
37
|
|
|
|
(14
|
)
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(27,226
|
)
|
|
$
|
23,870
|
|
|
$
|
(9,395
|
)
|
|
$
|
(12,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The only change in accumulated other comprehensive loss in 2006
was a decrease in minimum pension liability adjustment, net of
tax, of $5.4 million.
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
Marketsm
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.
No cash dividend or dividend of property or stock other than
stock of the Company, as specifically described in the
Companys certificate of incorporation, may be declared and
paid on the Class B Common Stock unless an equal
76
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
or greater dividend is declared and paid on the Common Stock.
During 2008, 2007 and 2006, dividends of $1.00 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 and
each share of Class B Common Stock is entitled to 20 votes
per share at all meetings of shareholders. Except as 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 Companys stockholders. In the event of
liquidation, there is no preference between the two classes of
common stock.
On February 19, 2009, the Company entered into an Amended
and Restated Stock Rights and Restrictions Agreement (the
Amended Rights and Restrictions Agreement) with The
Coca-Cola
Company and J. Frank Harrison, III, the Companys
Chairman and Chief Executive Officer. The Amended Rights and
Restrictions Agreement provides, among other things, (1) that so
long as no person or group controls more of the Companys
voting power than is controlled by Mr. Harrison, III,
trustees under the will of J. Frank Harrison, Jr. and any
trust that holds shares of the Companys stock for the
benefit of descendents of J. Frank Harrison, Jr. (collectively,
the Harrison Family), The Coca-Cola Company will not
acquire additional shares of the Company without the
Companys consent and the Company will have a right of
first refusal with respect to any proposed sale by The Coca-Cola
Company of shares of Company stock; (2) the Company has the
right through January 2019 to redeem shares of the
Companys stock to reduce The Coca-Cola Companys
equity ownership to 20% at a price not less than $42.50 per
share; (3) registration rights for the shares of Company stock
owned by The Coca-Cola Company; (4) and certain rights of The
Coca-Cola Company regarding the election of a designee on the
Companys Board of Directors. The Amended Rights and
Restrictions Agreement also provides The Coca-Cola Company the
right to convert its 497,670 shares of the Companys
Common Stock into shares of the Companys Class B
Common Stock in the event any person or group acquires more of
the Companys voting power than is controlled by the
Harrison Family.
On May 12, 1999, the stockholders of the Company approved a
restricted stock award program for J. Frank Harrison, III,
the Companys Chairman of the Board of Directors and Chief
Executive Officer, consisting of 200,000 shares of the
Companys 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 Companys 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 to
Mr. Harrison, III 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 for
the fiscal year ended December 30, 2007.
On March 4, 2009, the Compensation Committee determined
that 20,000 shares of restricted Class B Common Stock
vested and should be issued to Mr. Harrison, III for the
fiscal year ended December 28, 2008.
Each annual 20,000 share tranche has an independent
performance requirement as it is not established until the
Companys Annual Bonus Plan targets are approved each year
by the Companys 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 Companys Annual Bonus Plan targets, which
establish the performance requirement for the restricted stock
awards, are approved by the Compensation Committee of the Board
of Directors in the first quarter of each year.
77
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
A summary of restricted stock awards is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
|
Shares
|
|
|
Grant-Date
|
|
|
Compensation
|
|
Year
|
|
Awarded
|
|
|
Price
|
|
|
Expense
|
|
|
2006
|
|
|
20,000
|
|
|
$
|
46.45
|
|
|
$
|
929,000
|
|
2007
|
|
|
20,000
|
|
|
|
58.53
|
|
|
|
1,170,600
|
|
2008
|
|
|
20,000
|
|
|
|
56.50
|
|
|
|
1,130,000
|
|
In addition, 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 over
the one-year service period.
On April 29, 2008, the stockholders of the Company 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 Companys 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 number of Units that vest each year will
equal the product of 40,000 multiplied by the overall goal
achievement factor (not to exceed 100%) under the Companys
Annual Bonus Plan. The Performance Unit Award Agreement will
replace the restricted stock award discussed above which expires
at the end of 2008 and did not affect the Companys results
of operations or financial position for the fiscal year ending
December 28, 2008.
The increase in the number of shares outstanding in 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 outstanding in 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.
On February 19, 2009, The
Coca-Cola
Company converted all of its 497,670 shares of the
Companys Class B Common Stock into an equivalent
number of shares of the Common Stock of the Company.
Adopted
Pronouncement
The Company adopted SFAS No. 158, at the end of fiscal
2006 except for the requirement that the benefit plan assets and
obligations be measured as of the date of the employers
statement of financial position. The Company applied the
modified prospective transition method and prior periods were
not restated. The incremental effect of applying
SFAS No. 158 on the balance sheet as of
December 31, 2006 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recording
|
|
|
Minimum
|
|
|
Before
|
|
|
|
|
|
After
|
|
|
|
Minimum Pension
|
|
|
Pension
|
|
|
Application
|
|
|
|
|
|
Application
|
|
|
|
Liability
|
|
|
Liability
|
|
|
of SFAS
|
|
|
|
|
|
of SFAS
|
|
In thousands
|
|
Adjustment
|
|
|
Adjustment
|
|
|
No. 158
|
|
|
Adjustments
|
|
|
No. 158
|
|
|
Other accrued liabilities
|
|
$
|
3,328
|
|
|
$
|
|
|
|
$
|
3,328
|
|
|
$
|
|
|
|
$
|
3,328
|
|
Pension and postretirement benefit obligations
|
|
|
62,524
|
|
|
|
(8,977
|
)
|
|
|
53,547
|
|
|
|
4,210
|
|
|
|
57,757
|
|
Deferred income taxes
|
|
|
160,817
|
|
|
|
3,535
|
|
|
|
164,352
|
|
|
|
(1,658
|
)
|
|
|
162,694
|
|
Total liabilities
|
|
|
1,227,402
|
|
|
|
(5,442
|
)
|
|
|
1,221,960
|
|
|
|
2,552
|
|
|
|
1,224,512
|
|
Accumulated other comprehensive loss
|
|
|
(30,116
|
)
|
|
|
5,442
|
|
|
|
(24,674
|
)
|
|
|
(2,552
|
)
|
|
|
(27,226
|
)
|
Total stockholders equity
|
|
|
91,063
|
|
|
|
5,442
|
|
|
|
96,505
|
|
|
|
(2,552
|
)
|
|
|
93,953
|
|
78
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The Company adopted the measurement date provisions of
SFAS No. 158 on the first day of 2008 and used the
one measurement approach. The incremental effect of
applying the measurement date provisions on the balance sheet as
of December 30, 2007 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 employees length of service,
average compensation over the five consecutive years which gives
the highest average compensation and the average of the Social
Security taxable wage base during the
35-year
period before a participant reaches Social Security retirement
age. Contributions to the plans are based on the projected unit
credit actuarial funding method and are limited to the amounts
that are 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 plan amendment was accounted for as a
plan curtailment under SFAS No. 88. The
curtailment resulted in a reduction of the Companys
projected benefit obligation which was offset against the
Companys unrecognized net loss. As a result of the
curtailment, the impact on net income and on net pension expense
prior to the effective date of June 30, 2006 was
immaterial. Periodic pension expense was reduced beginning in
the third quarter of 2006 as current service cost no longer
accrues.
The following tables set forth pertinent information for the two
Company-sponsored pension plans:
Changes
in Projected Benefit Obligation
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Projected benefit obligation at beginning of year
|
|
$
|
175,592
|
|
|
$
|
185,804
|
|
Service cost(1)
|
|
|
89
|
|
|
|
78
|
|
Interest cost(1)
|
|
|
11,706
|
|
|
|
10,536
|
|
Actuarial (gain) loss(1)
|
|
|
8,292
|
|
|
|
(15,091
|
)
|
Benefits paid(1)
|
|
|
(6,696
|
)
|
|
|
(5,798
|
)
|
Change in plan provisions
|
|
|
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end of year
|
|
$
|
188,983
|
|
|
$
|
175,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2008 amounts are for the 13 month period from the 2007
measurement date (November 30) to the 2008 year-end. |
The Company recognized an actuarial loss of $73.1 million
in 2008 primarily due to a decrease in the fair market value of
the plan assets in 2008. The actuarial loss, net of tax, was
recorded in other comprehensive income.
79
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The projected benefit obligations and accumulated benefit
obligations for both of the Companys pension plans were in
excess of plan assets at December 28, 2008 and
December 30, 2007. The accumulated benefit obligation was
$189.0 million and $175.6 million at December 28,
2008 and December 30, 2007, respectively.
Change in
Plan Assets
|
|
|
|
|
|
|
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
173,099
|
|
|
$
|
163,808
|
|
Actual return on plan assets(1)
|
|
|
(50,034
|
)
|
|
|
15,089
|
|
Employer contributions(1)
|
|
|
150
|
|
|
|
|
|
Benefits paid(1)
|
|
|
(6,696
|
)
|
|
|
(5,798
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
$
|
116,519
|
|
|
$
|
173,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2008 amounts are for the 13 month period from the 2007
measurement date (November 30) to the 2008 year-end. |
Funded
Status
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Projected benefit obligation
|
|
$
|
(188,983
|
)
|
|
$
|
(175,592
|
)
|
Plan assets at fair value
|
|
|
116,519
|
|
|
|
173,099
|
|
|
|
|
|
|
|
|
|
|
Net funded status
|
|
$
|
(72,464
|
)
|
|
$
|
(2,493
|
)
|
|
|
|
|
|
|
|
|
|
Amounts
Recognized in the Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Current liabilities
|
|
$
|
|
|
|
$
|
(2,493
|
)
|
Noncurrent liabilities
|
|
|
(72,464
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(72,464
|
)
|
|
$
|
(2,493
|
)
|
|
|
|
|
|
|
|
|
|
Net
Periodic Pension Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Service cost
|
|
$
|
82
|
|
|
$
|
78
|
|
|
$
|
5,386
|
|
Interest cost
|
|
|
10,806
|
|
|
|
10,536
|
|
|
|
10,377
|
|
Expected return on plan assets
|
|
|
(13,641
|
)
|
|
|
(12,899
|
)
|
|
|
(12,106
|
)
|
Amortization of prior service cost
|
|
|
16
|
|
|
|
24
|
|
|
|
24
|
|
Recognized net actuarial loss
|
|
|
444
|
|
|
|
2,490
|
|
|
|
4,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost (income)
|
|
$
|
(2,293
|
)
|
|
$
|
229
|
|
|
$
|
8,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Significant
Assumptions Used
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Projected benefit obligation at the measurement date:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.00
|
%
|
|
|
6.25
|
%
|
|
|
5.75
|
%
|
Weighted average rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Net periodic pension cost for the fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.25
|
%
|
|
|
5.75
|
%
|
|
|
5.75
|
%
|
Weighted average expected long-term rate of return on plan assets
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
Weighted average rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
4.00
|
%
|
Cash
Flows
|
|
|
|
|
In thousands
|
|
|
|
|
Anticipated future pension benefit payments for the fiscal years:
|
|
|
|
|
2009
|
|
$
|
6,080
|
|
2010
|
|
|
6,400
|
|
2011
|
|
|
6,733
|
|
2012
|
|
|
7,171
|
|
2013
|
|
|
7,696
|
|
2014 2018
|
|
|
45,776
|
|
Anticipated contributions for the two Company-sponsored pension
plans will be in the range of $8 million to
$12 million in 2009.
Plan
Assets
The Companys pension plans target asset allocation for
2009, actual asset allocation at December 28, 2008 and
December 30, 2007 and the expected weighted average
long-term rate of return by asset category were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
|
|
|
|
Target
|
|
|
Percentage of Plan
|
|
|
Long-Term
|
|
|
|
Allocation
|
|
|
Assets at Fiscal Year-End
|
|
|
Rate of
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Return - 2008
|
|
|
U.S. large capitalization equity securities
|
|
|
40
|
%
|
|
|
42
|
%
|
|
|
47
|
%
|
|
|
3.9
|
%
|
U.S. small/mid-capitalization equity securities
|
|
|
10
|
%
|
|
|
4
|
%
|
|
|
5
|
%
|
|
|
0.5
|
%
|
International equity securities
|
|
|
15
|
%
|
|
|
12
|
%
|
|
|
15
|
%
|
|
|
1.4
|
%
|
Debt securities
|
|
|
35
|
%
|
|
|
42
|
%
|
|
|
33
|
%
|
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
8.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The investments in the Companys pension plans include
U.S. equities, international equities and debt securities.
All of the plan assets are invested in institutional investment
funds managed by professional investment advisors. The objective
of the Companys investment philosophy is to earn the
plans targeted rate of return over longer periods without
assuming excess investment risk. The general guidelines for plan
investments include 30% 50% in large capitalization
equity securities, 0% 20% in U.S. small and
mid-capitalization equity securities, 0% 20% in
international equity securities and 10% 50% in debt
securities. The Company currently has 58% of its plan
investments in equity securities and 42% in debt securities.
81
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
U.S. large capitalization equity securities include
domestic based companies that are generally included in common
market indices such as the S&P
500tm
and the Russell
1000tm.
U.S. small and mid-capitalization equity securities include
small domestic equities as represented by the Russell
2000tm
index. International equity securities include companies from
developed markets outside of the United States. Debt securities
at December 28, 2008 are comprised of investments in two
institutional bond funds with a weighted average duration of
approximately three years.
The weighted average expected long-term rate of return of plan
assets of 8% was used in determining net periodic pension cost
in both 2008 and 2007. This rate reflects an estimate of
long-term future returns for the pension plan assets. This
estimate is primarily a function of the asset classes (equities
versus fixed income) in which the pension plan assets are
invested and the analysis of past performance of these asset
classes over a long period of time. This analysis includes
expected long-term inflation and the risk premiums associated
with equity investments and fixed income investments.
Retirement
Savings Plan 401(k) Plan
The Company provides a 401(k) Savings Plan for substantially all
of its employees who are not part of collective bargaining
agreements. In conjunction with the change to the principal
Company-sponsored pension plan previously discussed, the
Companys Board of Directors also approved an amendment to
the 401(k) Savings Plan to increase the Companys matching
contribution under the 401(k) Savings Plan effective
January 1, 2007. The amendment to the 401(k) Savings Plan
provided for fully vested matching contributions equal to one
hundred percent of a participants elective deferrals to
the 401(k) Savings Plan up to a maximum of 5% of a
participants eligible compensation. The total costs for
this benefit in 2008, 2007 and 2006 were $10.0 million,
$8.5 million and $4.7 million, respectively.
On February 20, 2009, the Company announced that it would
suspend matching contributions to the 401(k) plan effective
April 1, 2009.
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.
82
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth a reconciliation of the beginning
and ending balances of the benefit obligation, a reconciliation
of the beginning and ending balances of the fair value of plan
assets and funded status of the Companys postretirement
benefit plan:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Benefit obligation at beginning of year
|
|
$
|
35,437
|
|
|
$
|
39,724
|
|
Service cost(1)
|
|
|
638
|
|
|
|
425
|
|
Interest cost(1)
|
|
|
2,681
|
|
|
|
2,209
|
|
Plan participants contributions(1)
|
|
|
675
|
|
|
|
523
|
|
Actuarial loss (gain)(1)
|
|
|
678
|
|
|
|
(4,680
|
)
|
Benefits paid(1)
|
|
|
(3,368
|
)
|
|
|
(2,840
|
)
|
Medicare Part D subsidy reimbursement
|
|
|
91
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
36,832
|
|
|
$
|
35,437
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
|
|
|
$
|
|
|
Employer contributions(1)
|
|
|
2,602
|
|
|
|
2,241
|
|
Plan participants contributions(1)
|
|
|
675
|
|
|
|
523
|
|
Benefits paid(1)
|
|
|
(3,368
|
)
|
|
|
(2,840
|
)
|
Medicare Part D subsidy reimbursement
|
|
|
91
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2008 amounts are for the 15 month period from the 2007
measurement date (September 30) to the 2008 year-end. |
|
|
|
|
|
|
|
|
|
|
|
Dec. 28,
|
|
|
Dec. 30,
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
Contributions between measurement date and fiscal year-end
|
|
$
|
|
|
|
$
|
502
|
|
Benefit obligation
|
|
|
(36,832
|
)
|
|
|
(35,437
|
)
|
|
|
|
|
|
|
|
|
|
Accrued liability
|
|
$
|
(36,832
|
)
|
|
$
|
(34,935
|
)
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
(2,291
|
)
|
|
$
|
(2,177
|
)
|
Noncurrent liabilities
|
|
|
(34,541
|
)
|
|
|
(32,758
|
)
|
|
|
|
|
|
|
|
|
|
Accrued liability at end of year
|
|
$
|
(36,832
|
)
|
|
$
|
(34,935
|
)
|
|
|
|
|
|
|
|
|
|
The components of net periodic postretirement benefit cost were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Service cost
|
|
$
|
511
|
|
|
$
|
425
|
|
|
$
|
332
|
|
Interest cost
|
|
|
2,145
|
|
|
|
2,209
|
|
|
|
2,227
|
|
Amortization of unrecognized transitional assets
|
|
|
(25
|
)
|
|
|
(25
|
)
|
|
|
(25
|
)
|
Recognized net actuarial loss
|
|
|
916
|
|
|
|
1,220
|
|
|
|
1,355
|
|
Amortization of prior service cost
|
|
|
(1,784
|
)
|
|
|
(1,784
|
)
|
|
|
(1,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic postretirement benefit cost
|
|
$
|
1,763
|
|
|
$
|
2,045
|
|
|
$
|
2,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Significant
Assumptions Used
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Benefit obligation at the measurement date:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.25
|
%
|
|
|
6.25
|
%
|
|
|
5.75
|
%
|
Net periodic postretirement benefit cost for the fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.25
|
%
|
|
|
5.75
|
%
|
|
|
5.50
|
%
|
The weighted average health care cost trend used in measuring
the postretirement benefit expense in 2008 was 9% graded down to
an ultimate rate of 5% by 2013. The weighted average health care
cost trend used in measuring the postretirement benefit expense
in 2007 was 9% graded down to an ultimate rate of 5% by 2012.
The weighted average health care cost trend used in measuring
the postretirement benefit expense in 2006 was 9% graded down to
an ultimate rate of 5% by 2011.
A 1% increase or decrease in this annual health care cost trend
would have impacted the postretirement benefit obligation and
service cost and interest cost of the Companys
postretirement benefit plan as follows:
|
|
|
|
|
|
|
|
|
In thousands
|
|
1% Increase
|
|
|
1% Decrease
|
|
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
Postretirement benefit obligation at December 28, 2008
|
|
$
|
4,230
|
|
|
$
|
(3,675
|
)
|
Service cost and interest cost in 2008
|
|
|
377
|
|
|
|
(327
|
)
|
Cash
Flows
|
|
|
|
|
In thousands
|
|
|
|
|
Anticipated future postretirement benefit payments reflecting
expected future service for the fiscal years:
|
|
|
|
|
2009
|
|
$
|
2,291
|
|
2010
|
|
|
2,361
|
|
2011
|
|
|
2,451
|
|
2012
|
|
|
2,585
|
|
2013
|
|
|
2,614
|
|
2014 2018
|
|
|
14,002
|
|
Anticipated future postretirement benefit payments are shown net
of Medicare Part D subsidy reimbursements, which are not
material.
84
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The amounts in accumulated other comprehensive income that have
not yet been recognized as components of net periodic benefit
cost at December 30, 2007, the activity during 2008, and
the balances at December 28, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 30,
|
|
|
Application of
|
|
|
Actuarial
|
|
|
Reclassification
|
|
|
Dec. 28,
|
|
In thousands
|
|
2007
|
|
|
SFAS No. 158
|
|
|
Loss
|
|
|
Adjustments
|
|
|
2008
|
|
|
Pension Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss
|
|
$
|
(21,114
|
)
|
|
$
|
39
|
|
|
$
|
(73,103
|
)
|
|
$
|
443
|
|
|
$
|
(93,735
|
)
|
Prior service costs
|
|
|
(90
|
)
|
|
|
1
|
|
|
|
|
|
|
|
16
|
|
|
|
(73
|
)
|
Postretirement Medical:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss
|
|
|
(16,372
|
)
|
|
|
228
|
|
|
|
(664
|
)
|
|
|
917
|
|
|
|
(15,891
|
)
|
Prior service costs
|
|
|
16,216
|
|
|
|
(447
|
)
|
|
|
|
|
|
|
(1,784
|
)
|
|
|
13,985
|
|
Transition asset
|
|
|
98
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(21,262
|
)
|
|
$
|
(185
|
)
|
|
$
|
(73,767
|
)
|
|
$
|
(433
|
)
|
|
$
|
(95,647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts of accumulated other comprehensive income that are
expected to be recognized as components of net periodic cost
during 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
|
In thousands
|
|
Plans
|
|
|
Medical
|
|
|
Total
|
|
|
Actuarial loss
|
|
$
|
9,355
|
|
|
$
|
872
|
|
|
$
|
10,227
|
|
Prior service cost (credit)
|
|
|
12
|
|
|
|
(1,784
|
)
|
|
|
(1,772
|
)
|
Transitional asset
|
|
|
|
|
|
|
(25
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,367
|
|
|
$
|
(937
|
)
|
|
$
|
8,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-Employer
Benefits
The Company also participates in various multi-employer pension
plans covering certain employees who are part of collective
bargaining agreements. Total pension expense for multi-employer
plans in 2008, 2007 and 2006 was $1.0 million,
$1.4 million and $1.4 million, respectively.
The Company entered into a new agreement in the third quarter of
2008 when one of its collective bargaining contracts expired in
July 2008. The new agreement allows the Company to freeze its
liability to the Central States, a multi-employer defined
benefit pension fund, while preserving the pension benefits
previously earned by the employees. As a result of freezing the
Companys liability to the Central States, the Company
recorded a charge of $13.6 million in 2008. The Company has
paid $3.0 million in 2008 to the Southern States Savings
and Retirement Plan (Southern States) under the
agreement to freeze the Central States liability. The remaining
$10.6 million is the present value amount, using a discount
rate of 7%, that will be paid to the Central States and had been
recorded in other liabilities. The Company will pay
approximately $1 million annually over the next
20 years. The Company will also make future contributions
on behalf of these employees to the Southern States. In
addition, the Company incurred approximately $.4 million in
expense to settle a strike by union employees covered by this
plan.
|
|
18.
|
Related
Party Transactions
|
The Companys 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
December 28, 2008, The
Coca-Cola
Company had a 27.1% interest in the Companys total
outstanding Common Stock and Class B Common Stock on a
combined basis.
85
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
In August 2007, the Company entered into a distribution
agreement with Energy Brands Inc. (Energy Brands), a
wholly-owned subsidiary of The
Coca-Cola
Company. Energy Brands, also known as glacéau, is a
producer and distributor of branded enhanced beverages including
vitaminwater, smartwater and vitaminenergy. The distribution
agreement is effective November 1, 2007 for a period of ten
years and, unless earlier terminated, will be automatically
renewed for succeeding ten-year terms, subject to a one year
non-renewal notification by the Company. In conjunction with the
execution of the distribution agreement, the Company entered
into an agreement with The
Coca-Cola
Company whereby the Company agreed not to introduce new third
party brands or certain third party brand extensions in the
United States through August 31, 2010 unless mutually
agreed to by the Company and The
Coca-Cola
Company.
The following table summarizes the significant transactions
between the Company and The
Coca-Cola
Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In millions
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Payments by the Company for concentrate, syrup, sweetener and
other purchases
|
|
$
|
362.5
|
|
|
$
|
334.9
|
|
|
$
|
341.7
|
|
Marketing funding support payments to the Company
|
|
|
42.9
|
|
|
|
38.1
|
|
|
|
23.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments by the Company net of marketing funding support
|
|
$
|
319.6
|
|
|
$
|
296.8
|
|
|
$
|
318.4
|
|
Payments by the Company for customer marketing programs
|
|
$
|
48.6
|
|
|
$
|
44.2
|
|
|
$
|
46.6
|
|
Payments by the Company for cold drink equipment parts
|
|
|
7.1
|
|
|
|
5.7
|
|
|
|
6.0
|
|
Fountain delivery and equipment repair fees paid to the Company
|
|
|
10.4
|
|
|
|
9.3
|
|
|
|
8.8
|
|
Presence marketing support provided by The
Coca-Cola
Company on the Companys behalf
|
|
|
4.0
|
|
|
|
4.3
|
|
|
|
4.2
|
|
Sales of finished products to The
Coca-Cola
Company
|
|
|
6.3
|
|
|
|
26.1
|
|
|
|
40.9
|
|
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 agreement were
$40.2 million, $40.2 million and $56.5 million in
2008, 2007 and 2006, respectively. Purchases from CCE under this
arrangement were $18.4 million, $13.9 million and
$15.7 million in 2008, 2007 and 2006, respectively. The
Coca-Cola
Company has significant equity interests in the Company and CCE.
As of December 28, 2008, CCE held 6.7% of the
Companys outstanding Common Stock but held no shares of
the Companys Class B Common Stock.
Along with all the 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 negotiated the
procurement for the majority of the Companys raw materials
(excluding concentrate) in 2008, 2007 and 2006. The Company paid
$.3 million to CCBSS for its share of CCBSS
administrative costs in each of the years 2008, 2007 and 2006.
Amounts due from CCBSS for rebates on raw material purchases
were $4.1 million and $3.2 million as of
December 28, 2008 and December 30, 2007, respectively.
CCE is also a member of CCBSS.
The Companys Snyder Production Center (SPC) in
Charlotte, North Carolina, is leased from Harrison Limited
Partnership One (HLP) pursuant to a ten-year lease
that expires on December 31, 2010. 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 H. Everhart, a director of the
Company, are trustees and beneficiaries. The annual base rent
the Company is obligated to pay for its lease of this property
is subject to adjustment for an inflation factor and for
increases or decreases in interest rates, using LIBOR as the
measurement device. The principal balance outstanding under this
capital lease as of December 28, 2008 was
$37.7 million.
86
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The minimum rentals and contingent rental payments that relate
to this lease were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In millions
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Minimum rentals
|
|
$
|
4.7
|
|
|
$
|
4.6
|
|
|
$
|
4.5
|
|
Contingent rentals
|
|
|
(.9
|
)
|
|
|
(.4
|
)
|
|
|
(.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rental payments
|
|
$
|
3.8
|
|
|
$
|
4.2
|
|
|
$
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The contingent rentals in 2008, 2007 and 2006 reduce the minimum
rentals as a result of changes in interest rates, using LIBOR as
the measurement device. Increases or decreases in lease payments
that result from changes in the interest rate factor are
recorded as adjustments to interest expense.
On June 1, 1993, the Company entered into a lease agreement
with Beacon Investment Corporation (Beacon) related
to the Companys headquarters office facility.
Beacons sole shareholder is J. Frank Harrison, III.
On January 5, 1999, the Company entered into a new ten-year
lease agreement with Beacon which included the Companys
headquarters office facility and an adjacent office facility. On
March 1, 2004, the Company recorded a capital lease of
$32.4 million related to these facilities when the Company
received a renewal option to extend the term of the lease. On
December 18, 2006, the Company modified the lease agreement
(effective January 1, 2007) with Beacon related to the
Companys headquarters office facility which expires in
December 2021. The modified lease would not have changed the
classification of the existing lease had it been in effect on
March 1, 2004 when the lease was capitalized and did not
extend the term of the lease (remaining lease term was reduced
from 21 years to 15 years). Accordingly, the present
value of the leased property under capital lease and capital
lease obligations was adjusted by an amount equal to the
difference between the future minimum lease payments under the
modified lease agreement and the present value of the existing
obligation on the commencement date of the modified lease
(January 1, 2007). The capital lease obligation and leased
property under capital leases was increased by $5.1 million
on January 1, 2007. The principal balance outstanding under
this capital lease as of December 28, 2008 was
$32.7 million. The annual base rent the Company is
obligated to pay under the modified lease is subject to
adjustment for increases in the Consumer Price Index. The prior
lease annual base rent was subject to adjustment for increases
in the Consumer Price Index and for increases or decreases in
interest rates using the adjusted Eurodollar Rate as the
measurement device.
The minimum rentals and contingent rental payments that relate
to this lease were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In millions
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Minimum rentals
|
|
$
|
3.5
|
|
|
$
|
3.6
|
|
|
$
|
3.2
|
|
Contingent rentals
|
|
|
.2
|
|
|
|
|
|
|
|
.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rental payments
|
|
$
|
3.7
|
|
|
$
|
3.6
|
|
|
$
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The contingent rentals in 2006 that relate to this lease
increase minimum rentals as a result of changes in the Consumer
Price Index partially offset by decreases in interest rates. The
contingent rentals in 2008 are a result of changes in the
Consumer Price Index. Increases or decreases in lease payments
that result from changes in the Consumer Price Index or changes
in the interest rate factor are recorded as adjustments to
interest expense.
The Company is a shareholder in two entities from which it
purchases substantially all of its requirements for plastic
bottles. Net purchases from these entities were
$72.7 million, $69.2 million and $70.0 million in
2008, 2007 and 2006, respectively. In conjunction with its
participation in one of these entities, the Company has
guaranteed a portion of the entitys debt. Such guarantee
amounted to $20.6 million as of December 28, 2008. The
Companys equity investment in one of these entities,
Southeastern, was $11.0 million and $7.4 million as of
December 28, 2008 and December 30, 2007, respectively.
87
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
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 $142 million, $149 million and
$133 million in 2008, 2007 and 2006, respectively. The
Company manages the operations of SAC pursuant to a management
agreement. Management fees earned from SAC were
$1.4 million, $1.4 million and $1.6 million in
2008, 2007 and 2006, respectively. The Company has also
guaranteed a portion of debt for SAC. Such guarantee was
$19.3 million as of December 28, 2008. The
Companys equity investment in SAC was $4.1 million
and $4.0 million as of December 28, 2008 and
December 30, 2007, respectively.
|
|
19.
|
Net Sales
by Product Category
|
Net sales by product category were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Bottle/can sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sparkling beverages (including energy products)
|
|
$
|
1,011,656
|
|
|
$
|
1,007,583
|
|
|
$
|
1,009,652
|
|
Still beverages
|
|
|
227,171
|
|
|
|
201,952
|
|
|
|
180,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total bottle/can sales
|
|
|
1,238,827
|
|
|
|
1,209,535
|
|
|
|
1,189,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to other
Coca-Cola
bottlers
|
|
|
128,651
|
|
|
|
127,478
|
|
|
|
152,426
|
|
Post-mix and other
|
|
|
96,137
|
|
|
|
98,986
|
|
|
|
88,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other sales
|
|
|
224,788
|
|
|
|
226,464
|
|
|
|
241,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
1,463,615
|
|
|
$
|
1,435,999
|
|
|
$
|
1,431,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sparkling beverages are primarily carbonated beverages while
still beverages are primarily noncarbonated beverages.
88
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the computation of basic net
income per share and diluted net income per share under the
two-class method. See Note 1 to the consolidated financial
statements for additional information related to net income per
share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands (except per share data)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Numerator for basic and diluted net income per Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
and Class B Common Stock share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
9,091
|
|
|
$
|
19,856
|
|
|
$
|
23,243
|
|
Less dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
6,644
|
|
|
|
6,644
|
|
|
|
6,643
|
|
Class B Common Stock
|
|
|
2,500
|
|
|
|
2,480
|
|
|
|
2,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undistributed earnings
|
|
$
|
(53
|
)
|
|
$
|
10,732
|
|
|
$
|
14,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock undistributed earnings basic
|
|
$
|
(39
|
)
|
|
$
|
7,815
|
|
|
$
|
10,319
|
|
Class B Common Stock undistributed earnings
basic
|
|
|
(14
|
)
|
|
|
2,917
|
|
|
|
3,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undistributed earnings
|
|
$
|
(53
|
)
|
|
$
|
10,732
|
|
|
$
|
14,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock undistributed earnings diluted
|
|
$
|
(38
|
)
|
|
$
|
7,800
|
|
|
$
|
10,300
|
|
Class B Common Stock undistributed earnings
diluted
|
|
|
(15
|
)
|
|
|
2,932
|
|
|
|
3,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undistributed earnings diluted
|
|
$
|
(53
|
)
|
|
$
|
10,732
|
|
|
$
|
14,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic net income per Common Stock share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on Common Stock
|
|
$
|
6,644
|
|
|
$
|
6,644
|
|
|
$
|
6,643
|
|
Common Stock undistributed earnings basic
|
|
|
(39
|
)
|
|
|
7,815
|
|
|
|
10,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic net income per Common Stock share
|
|
$
|
6,605
|
|
|
$
|
14,459
|
|
|
$
|
16,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic net income per Class B Common Stock
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on Class B Common Stock
|
|
$
|
2,500
|
|
|
$
|
2,480
|
|
|
$
|
2,460
|
|
Class B Common Stock undistributed earnings
basic
|
|
|
(14
|
)
|
|
|
2,917
|
|
|
|
3,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic net income per Class B Common Stock
share
|
|
$
|
2,486
|
|
|
$
|
5,397
|
|
|
$
|
6,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for diluted net income per Common Stock share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on Common Stock
|
|
$
|
6,644
|
|
|
$
|
6,644
|
|
|
$
|
6,643
|
|
Dividends on Class B Common Stock assumed converted to
Common Stock
|
|
|
2,500
|
|
|
|
2,480
|
|
|
|
2,460
|
|
Common Stock undistributed earnings diluted
|
|
|
(53
|
)
|
|
|
10,732
|
|
|
|
14,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for diluted net income per Common Stock share
|
|
$
|
9,091
|
|
|
$
|
19,856
|
|
|
$
|
23,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands (except per share data)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Numerator for diluted net income per Class B Common Stock
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on Class B Common Stock
|
|
$
|
2,500
|
|
|
$
|
2,480
|
|
|
$
|
2,460
|
|
Class B Common Stock undistributed earnings
diluted
|
|
|
(15
|
)
|
|
|
2,932
|
|
|
|
3,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for diluted net income per Class B Common Stock
share
|
|
$
|
2,485
|
|
|
$
|
5,412
|
|
|
$
|
6,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net income per Common Stock and
Class B Common Stock share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock weighted average shares outstanding
basic
|
|
|
6,644
|
|
|
|
6,644
|
|
|
|
6,643
|
|
Class B Common Stock weighted average shares
outstanding basic
|
|
|
2,500
|
|
|
|
2,480
|
|
|
|
2,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted net income per Common Stock and
Class B Common Stock share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock weighted average shares outstanding
diluted (assumes conversion of Class B Common Stock to
Common Stock)
|
|
|
9,160
|
|
|
|
9,141
|
|
|
|
9,120
|
|
Class B Common Stock weighted average shares
outstanding diluted
|
|
|
2,516
|
|
|
|
2,497
|
|
|
|
2,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
.99
|
|
|
$
|
2.18
|
|
|
$
|
2.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Common Stock
|
|
$
|
.99
|
|
|
$
|
2.18
|
|
|
$
|
2.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
.99
|
|
|
$
|
2.17
|
|
|
$
|
2.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Common Stock
|
|
$
|
.99
|
|
|
$
|
2.17
|
|
|
$
|
2.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO
TABLE
|
|
|
(1) |
|
For purposes of the diluted net income per share computation for
Common Stock, shares of Class B Common Stock are assumed to
be converted; therefore, 100% of undistributed earnings is
allocated to Common Stock. |
|
(2) |
|
For purposes of the diluted net income per share computation for
Class B Common Stock, weighted average shares of
Class B Common Stock are assumed to be outstanding for the
entire period and not converted. |
|
(3) |
|
Denominator for diluted net income per share for Common Stock
and Class B Common Stock for 2008 and 2007 includes the diluted
effect of shares relative to the restricted stock award. |
|
|
21.
|
Risks and
Uncertainties
|
Approximately 89% of the Companys 2008 bottle/can volume
to retail customers are products of The
Coca-Cola
Company, which is the sole supplier of these products or of the
concentrates or syrups required to manufacture these products.
The remaining 11% of the Companys 2008 bottle/can volume
to retail customers are products of other beverage companies and
the Company. The Company has beverage agreements under which it
has various requirements to meet. Failure to meet the
requirements of these beverage agreements could result in the
loss of distribution rights for the respective product.
The Companys products are sold and distributed directly by
its employees to retail stores and other outlets. During 2008,
approximately 68% of the Companys bottle/can volume to
retail customers was sold for future consumption. The remaining
bottle/can volume to retail customers of approximately 32% was
sold for immediate consumption. The Companys largest
customers, Wal-Mart Stores, Inc. and Food Lion, LLC, accounted
for approximately 19% and 12% of the Companys total
bottle/can volume to retail customers during 2008, respectively.
Wal-Mart Stores, Inc. accounted for approximately 14% of the
Companys total net sales.
90
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The Company currently obtains all of its aluminum cans from one
domestic supplier. The Company currently obtains all of its
plastic bottles from two domestic entities. See Note 18 of
the consolidated financial statements for additional information.
The Company is exposed to price risk on such commodities as
aluminum, corn and resin which affects the cost of raw materials
used in the production of finished products. The Company both
produces and procures these finished products. Examples of the
raw materials affected are aluminum cans and plastic bottles
used for packaging and high fructose corn syrup used as a
product ingredient. Further, the Company is exposed to commodity
price risk on oil which impacts the Companys cost of fuel
used in the movement and delivery of the Companys
products. The Company participates in commodity hedging and risk
mitigation programs administered both by CCBSS and by the
Company itself.
High fructose corn syrup costs increased significantly during
2008 as a result of increasing demand for corn products around
the world for such purposes as ethanol production. The combined
impact of increasing costs for aluminum cans and high fructose
corn syrup increased cost of sales during 2008. In addition,
there is no limit on the price The
Coca-Cola
Company and other beverage companies can charge for concentrate.
Certain liabilities of the Company are subject to risk of
changes in both long-term and short-term interest rates. These
liabilities include floating rate debt, leases with payments
determined on floating interest rates, postretirement benefit
obligations and the Companys pension liability.
Approximately 7% of the Companys labor force is currently
covered by collective bargaining agreements. Two collective
bargaining agreements covering approximately 5% of the
Companys employees expired during 2008 and the Company
entered into new agreements in 2008. One collective bargaining
contract covering approximately .5% of the Companys
employees expires during 2009.
|
|
22.
|
Supplemental
Disclosures of Cash Flow Information
|
Changes in current assets and current liabilities affecting cash
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
In thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Accounts receivable, trade, net
|
|
$
|
(7,350
|
)
|
|
$
|
(1,200
|
)
|
|
$
|
3,277
|
|
Accounts receivable from The
Coca-Cola
Company
|
|
|
346
|
|
|
|
1,115
|
|
|
|
(2,196
|
)
|
Accounts receivable, other
|
|
|
(5,123
|
)
|
|
|
698
|
|
|
|
(177
|
)
|
Inventories
|
|
|
(1,963
|
)
|
|
|
3,521
|
|
|
|
(8,822
|
)
|
Prepaid expenses and other current assets
|
|
|
(573
|
)
|
|
|
(7,318
|
)
|
|
|
(4,806
|
)
|
Accounts payable, trade
|
|
|
(8,940
|
)
|
|
|
7,273
|
|
|
|
8,717
|
|
Accounts payable to The
Coca-Cola
Company
|
|
|
23,714
|
|
|
|
(10,151
|
)
|
|
|
6,232
|
|
Other accrued liabilities
|
|
|
6,241
|
|
|
|
5,824
|
|
|
|
1,738
|
|
Accrued compensation
|
|
|
(162
|
)
|
|
|
3,776
|
|
|
|
1,562
|
|
Accrued interest payable
|
|
|
(278
|
)
|
|
|
(1,591
|
)
|
|
|
338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in current assets less current liabilities
|
|
$
|
5,912
|
|
|
$
|
1,947
|
|
|
$
|
5,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments for interest and income taxes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
In thousands
|
|
2008
|
|
2007
|
|
2006
|
|
Interest
|
|
$
|
35,133
|
|
|
$
|
51,277
|
|
|
$
|
50,843
|
|
Income taxes
|
|
|
6,954
|
|
|
|
21,361
|
|
|
|
17,213
|
|
91
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
23.
|
New
Accounting Pronouncements
|
Recently
Adopted Pronouncements
In September 2006, the FASB issued SFAS No. 158 which
was effective for the year ending December 31, 2006 except
for the requirement that benefit plan assets and obligations be
measured as of the date of the employers statement of
financial position, which was effective for the year ending
December 28, 2008. The impact of the adoption of the change
in measurement dates was not material to the consolidated
financial statements. See Note 15 and Note 17 of the
consolidated financial statements for additional information.
In September 2006, the FASB issued SFAS No. 157 which
defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP) and
expands disclosures about fair value measurements. The Statement
does not require any new fair value measurements but could
change the current practices in measuring current fair value
measurements. The Statement was effective at the beginning of
the first quarter of 2008 for all financial assets and
liabilities and for nonfinancial assets and liabilities
recognized or disclosed at fair value on a recurring basis. The
adoption of this Statement did not have a material impact on the
consolidated financial statements. See Note 11 to the
consolidated financial statements for additional information. In
February 2008, the 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. The Company is in the process
of evaluating the impact related to the Companys
nonfinancial assets and liabilities not valued on a recurring
basis.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities. This Statement permits entities to choose to
measure many financial instruments and certain other items at
fair value. This Statement was effective at the beginning of the
first quarter of 2008. The Company has not applied the fair
value option to any of its outstanding instruments; therefore,
the Statement did not have an impact on the consolidated
financial statements.
In May 2008, the FASB issued SFAS No. 162, The
Hierarchy of Generally Accepted Accounting Principles.
This Statement identifies the sources of accounting principles
and the framework for selecting the principles to be used in the
preparation of financial statements that are presented in
conformity with generally accepted accounting principles in the
United States. This Statement was effective on November 15,
2008 and did not have a material impact on the consolidated
financial statements.
In October 2008, the FASB issued FSP
No. 157-3,
Determining the Fair Value of a Financial Asset When the
Market for That Asset Is Not Active
(FSP 157-3).
FSP 157-3
clarifies the application of SFAS No. 157 in a market
that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial
asset when the market for that financial asset is not active.
The adoption of this FSP did not have an impact on the
Companys consolidated financial statements.
In December 2008, the FASB issued FASB Staff Position
FAS 140-4
and FIN 46(R)-8, Disclosures by Public Entities
(Enterprises) About Transfers of Financial Assets and Interest
in Variable Interest Entities
(FSP 140-4).
FSP 140-4
requires additional disclosure about transfers of financial
assets and an enterprises involvement with variable
interest entities.
FSP 140-4
was effective for the first reporting period ending after
December 15, 2008.
FSP 140-4
did not have a material impact on the Companys
consolidated financial statements.
Recently
Issued Pronouncements
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interest in Consolidated Financial
Statements an amendment of ARB No. 51.
This Statement amends Accounting Research
Bulletin No. 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary
(commonly referred to as minority interest) and for the
deconsolidation of a subsidiary. The Statement is effective for
fiscal years beginning
92
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
on or after December 15, 2008. The Company anticipates that
the adoption of this Statement will not have a material impact
on the consolidated financial statements, although changes in
financial statement presentation will be required.
In December 2007, the FASB revised SFAS No. 141,
Business Combinations (SFAS No. 141(R)).
This Statement established principles and requirements for
recognizing and measuring identifiable assets and goodwill
acquired, liabilities assumed and any noncontrolling interest in
an acquisition, at their fair values as of the acquisition date.
The Statement is effective for fiscal years beginning on or
after December 15, 2008. The impact on the Company of
adopting SFAS No. 141(R) will depend on the nature,
terms and size of business combinations completed after the
effective date.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133 (SFAS No. 161). This
Statement amends and expands the disclosure requirements of
Statement No. 133 to provide an enhanced understanding of
why an entity uses derivative instruments, how derivative
instruments and related hedged items are accounted for and how
they affect an entitys financial position, financial
performance and cash flows. The Statement is effective for
fiscal years and interim periods beginning on or after
November 15, 2008. The adoption of this Statement will not
impact the consolidated financial statements other than expanded
footnote disclosures related to derivative instruments and
related hedged items.
In April 2008, the FASB issued FASB Staff Position
No. 142-3,
Determination of the Useful Life of Intangible
Assets
(FSP 142-3).
FSP 142-3
amends the factors to be considered in developing renewal or
extension assumptions used to determine the useful life of
intangible assets under SFAS No. 142, Goodwill
and Other Intangible Assets. The intent of
FSP 142-3
is to improve the consistency between the useful life of an
intangible asset and the period of expected cash flows used to
measure its fair value.
FSP 142-3
is effective for fiscal years beginning after December 15,
2008. The Company is in the process of evaluating the impact of
FSP 142-3,
but does not expect it to have a material impact on the
Companys consolidated financial statements.
In September 2008, the FASB issued FASB Staff Position
No. 133-1
and
FIN 45-4,
Disclosures About Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45; and Clarification of the Effective
Date of FASB Statement No. 161
(FSP 133-1).
FSP 133-1
amends Statement 133 to require a seller of credit derivatives
to provide certain disclosures for each credit derivative (or
group of similar credit derivatives).
FSP 133-1
also amends Interpretation No. 45 to require guarantors to
disclose the current status of payment/performance risk of
guarantees and clarifies the effective date of
SFAS No. 161. The Company is in the process of
evaluating the impact of
FSP 133-1,
but does not expect it to have a material impact on the
Companys consolidated financial statements.
In December 2008, the FASB issued FASB Staff Position
No. 132(R)-1, Employers Disclosures about
Postretirement Benefit Plan Assets
(FSP 132(R)-1). FSP 132(R)-1 requires
enhanced detail disclosures about plan assets of a
companys defined benefit pension and other postretirement
plans. The enhanced disclosures are intended to provide users of
financial statements with a greater understanding of
(1) employers investment strategies; (2) major
categories of plan assets; (3) the inputs and valuation
techniques used to measure the fair value of plan assets;
(4) the effect of fair value measurements using significant
unobservable inputs (Level 3) on changes in plan
assets for the period; and (5) concentration of risk within
plan assets. FSP 132(R)-1 is effective for fiscal years
ending after December 15, 2009. The adoption of this
Statement will not impact the Companys financial
statements other than expanded footnote disclosures related to
the Companys pension plan assets.
93
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
24.
|
Quarterly
Financial Data (Unaudited)
|
Set forth below are unaudited quarterly financial data for the
fiscal years ended December 28, 2008 and December 30,
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Year Ended December 28, 2008
|
|
1
|
|
|
2(1)
|
|
|
3(2)
|
|
|
4(3)
|
|
In thousands (except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
337,674
|
|
|
$
|
396,003
|
|
|
$
|
381,563
|
|
|
$
|
348,375
|
|
Gross margin
|
|
|
139,918
|
|
|
|
171,880
|
|
|
|
155,827
|
|
|
|
147,581
|
|
Net income (loss)
|
|
|
(4,335
|
)
|
|
|
15,155
|
|
|
|
(3,145
|
)
|
|
|
1,416
|
|
Basic net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
(.47
|
)
|
|
|
1.66
|
|
|
|
(.34
|
)
|
|
|
.15
|
|
Class B Common Stock
|
|
|
(.47
|
)
|
|
|
1.66
|
|
|
|
(.34
|
)
|
|
|
.15
|
|
Diluted net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
(.47
|
)
|
|
|
1.65
|
|
|
|
(.34
|
)
|
|
|
.15
|
|
Class B Common Stock
|
|
|
(.47
|
)
|
|
|
1.65
|
|
|
|
(.34
|
)
|
|
|
.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Year Ended December 30, 2007
|
|
1(4)
|
|
|
2
|
|
|
3
|
|
|
4
|
|
In thousands (except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
337,556
|
|
|
$
|
390,443
|
|
|
$
|
367,360
|
|
|
$
|
340,640
|
|
Gross margin
|
|
|
151,491
|
|
|
|
169,290
|
|
|
|
155,212
|
|
|
|
145,141
|
|
Net income (loss)
|
|
|
4,651
|
|
|
|
11,691
|
|
|
|
5,273
|
|
|
|
(1,759
|
)
|
Basic net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
.51
|
|
|
|
1.28
|
|
|
|
.58
|
|
|
|
(.19
|
)
|
Class B Common Stock
|
|
|
.51
|
|
|
|
1.28
|
|
|
|
.58
|
|
|
|
(.19
|
)
|
Diluted net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
.51
|
|
|
|
1.28
|
|
|
|
.58
|
|
|
|
(.19
|
)
|
Class B Common Stock
|
|
|
.51
|
|
|
|
1.28
|
|
|
|
.58
|
|
|
|
(.19
|
)
|
Sales are seasonal, with the highest sales volume occurring in
May, June, July and August.
|
|
|
(1) |
|
Net income in the second quarter of 2008 included a
$2.6 million ($1.6 million net of tax, or $0.17 per
basic common share) increase in equity investment in plastic
bottle cooperative. |
|
(2) |
|
Net income in the third quarter of 2008 included a
$13.8 million ($7.2 million net of tax, or $0.78 per
basic common share) charge to exit from a multi-employer pension
plan and $4.0 million ($2.1 million net of tax, or
$0.23 per basic common share) charge for restructuring
activities. |
|
(3) |
|
Net income in the fourth quarter of 2008 included a
$2.0 million ($1.0 million net of tax, or $0.11 per
basic common share) charge for a mark-to-market adjustment
related to the Companys fuel hedging program. |
|
(4) |
|
Net income in the first quarter of 2007 included a
$2.6 million ($1.5 million net of tax, or $0.16 per
basic common share) charge for restructuring activities. |
94
COCA-COLA
BOTTLING CO. CONSOLIDATED
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
25.
|
Restructuring
Expenses
|
On February 2, 2007, the Company initiated plans to
simplify its operating management structure and reduce its
workforce in order to improve operating efficiencies across the
Companys business. The restructuring expenses consist
primarily of one-time termination benefits and other associated
costs, primarily relocation expenses for certain employees.
Total pre-tax restructuring expenses under these plans were
$2.8 million, all of which were recorded in fiscal year
2007.
On July 15, 2008, the Company initiated a plan to
reorganize the structure of its operating units and support
services, which resulted in the elimination of approximately 350
positions, or approximately 5% of its workforce. As a result of
this plan, the Company incurred $4.6 million in pre-tax
restructuring expenses in 2008 for one-time termination
benefits. The plan was substantially completed in 2008 and the
majority of cash expenditures occurred in 2008.
The following table summarizes restructuring activity, which is
included in selling, delivery and administrative expenses for
2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Pay
|
|
|
Relocation
|
|
|
|
|
In thousands
|
|
and Benefits
|
|
|
and Other
|
|
|
Total
|
|
|
Balance at December 31, 2006
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Provision
|
|
|
1,607
|
|
|
|
1,146
|
|
|
|
2,753
|
|
Cash payments
|
|
|
1,607
|
|
|
|
1,146
|
|
|
|
2,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 30, 2007
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 30, 2007
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Provision
|
|
|
4,559
|
|
|
|
63
|
|
|
|
4,622
|
|
Cash payments
|
|
|
3,583
|
|
|
|
50
|
|
|
|
3,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 28, 2008
|
|
$
|
976
|
|
|
$
|
13
|
|
|
$
|
989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
Managements
Report on Internal Control over Financial Reporting
Management of
Coca-Cola
Bottling Co. Consolidated (the Company) is
responsible for establishing and maintaining adequate internal
control over financial reporting as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act. The Companys internal control over
financial reporting is a process designed under the supervision
of the Companys chief executive and chief financial
officers to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the
Companys consolidated financial statements for external
purposes in accordance with the U.S. generally accepted
accounting principles. The Companys internal control over
financial reporting includes policies and procedures that:
(i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect transactions
and dispositions of assets of the Company;
(ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted
accounting principles, and that receipts and expenditures are
being made only in accordance with authorizations of management
and the directors of the Company; and
(iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of the Companys assets that could have a material effect
on the Companys financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect all misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate due to changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
As of December 28, 2008, management assessed the
effectiveness of the Companys internal control over
financial reporting based on the framework established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this assessment, management
determined that the Companys internal control over
financial reporting as of December 28, 2008 is effective.
The effectiveness of the Companys internal control over
financial reporting as of December 28, 2008, has been
audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated in their report appearing on
page 97.
March 12, 2009
96
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
of Coca-Cola
Bottling Co Consolidated:
In our opinion, the consolidated financial statements listed in
the index appearing under Item 15(a)(1) present fairly, in
all material respects, the financial position of
Coca-Cola
Bottling Co. Consolidated and its subsidiaries at
December 28, 2008 and December 30, 2007, and the
results of their operations and their cash flows for each of the
three years in the period ended December 28, 2008 in
conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the
financial statement schedule listed in the index appearing under
Item 15(a)(2), presents fairly, in all material respects,
the information set forth therein when read in conjunction with
the related consolidated financial statements. Also in our
opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of
December 28, 2008, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Companys management is responsible
for these financial statements and financial statement schedule,
for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the
accompanying Managements Report on Internal Control over
Financial Reporting. Our responsibility is to express opinions
on these financial statements, on the financial statement
schedule, and on the Companys internal control over
financial reporting based on our integrated audits. We conducted
our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our
opinions.
As discussed in Note 14 to the consolidated financial
statements, the Company adopted Financial Accounting Standards
Board Interpretation No. 48, Accounting for Uncertainty
in Income Taxes an Interpretation of FASB Statement
109, as of January 1, 2007.
As discussed in Note 17 to the consolidated financial
statements, the Company changed the manner in which it accounts
for pension and postretirement benefits in 2006.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 12, 2009
97
The financial statement schedule required by
Regulation S-X
is set forth in response to Item 15 below.
The supplementary data required by Item 302 of
Regulation S-K
is set forth in Note 24 to the consolidated financial
statements.
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
Not applicable.
|
|
Item 9A.
|
Controls
and Procedures
|
As of the end of the period covered by this report, the Company
carried out an evaluation, under the supervision and with the
participation of the Companys management, including the
Companys Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures
(as defined in
Rule 13a-15(e)
of the Securities Exchange Act of 1934 (the Exchange
Act)) pursuant to
Rule 13a-15(b)
of the Exchange Act. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the
Companys disclosure controls and procedures are effective
for the purpose of providing reasonable assurance that the
information required to be disclosed in the reports the Company
files or submits under the Exchange Act (i) is recorded,
processed, summarized and reported within the time periods
specified in the SECs rules and forms and (ii) is
accumulated and communicated to the Companys management,
including its Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding
required disclosures.
See page 96 for Managements Report on Internal
Control over Financial Reporting. See page 97 for the
Report of Independent Registered Public Accounting
Firm.
There has been no change in the Companys internal control
over financial reporting during the quarter ended
December 28, 2008 that has materially affected, or is
reasonably likely to materially affect, the Companys
internal control over financial reporting.
|
|
Item 9B.
|
Other
Information
|
Not applicable.
98
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
For information with respect to the executive officers of the
Company, see Executive Officers of the Company
included as a separate item at the end of Part I of this
Report. For information with respect to the Directors of the
Company, see the Proposal 1: Election of
Directors section of the Proxy Statement for the 2009
Annual Meeting of Stockholders, which is incorporated herein by
reference. For information with respect to Section 16
reports, see the Section 16(a) Beneficial Ownership
Reporting Compliance section of the Proxy Statement for
the 2009 Annual Meeting of Stockholders, which is incorporated
herein by reference. For information with respect to the Audit
Committee of the Board of Directors, see the Corporate
Governance The Audit Committee section of the
Proxy Statement for the 2009 Annual Meeting of Stockholders,
which is incorporated herein by reference.
The Company has adopted a Code of Ethics for Senior Financial
Officers, which is intended to qualify as a code of
ethics within the meaning of Item 406 of
Regulation S-K
of the Exchange Act (the Code of Ethics). The Code
of Ethics applies to the Companys Chief Executive Officer;
Chief Operating Officer; Chief Financial Officer; Vice
President, Controller; Vice President, Treasurer and any other
person performing similar functions. The Code of Ethics is
available on the Companys website at
www.cokeconsolidated.com. The Company intends to disclose
any substantive amendments to, or waivers from, its Code of
Ethics on its website or in a report on
Form 8-K.
|
|
Item 11.
|
Executive
Compensation
|
For information with respect to executive and director
compensation, see the Executive Compensation,
Compensation Committee Interlocks and Insider
Participation, Compensation Committee Report
and Director Compensation sections of the Proxy
Statement for the 2009 Annual Meeting of Stockholders, which are
incorporated herein by reference.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
For information with respect to security ownership of certain
beneficial owners and management, see the Principal
Stockholders and Beneficial Ownership of
Management sections of the Proxy Statement for the 2009
Annual Meeting of Stockholders, which are incorporated herein by
reference. For information with respect to securities authorized
for issuance under equity compensation plans, see the
Equity Compensation Plan Information section of the
Proxy Statement for the 2009 Annual Meeting of Stockholders,
which is incorporated herein by reference.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
For information with respect to certain relationships and
related transactions, see the Certain Transactions
section of the Proxy Statement for the 2009 Annual Meeting of
Stockholders, which is incorporated herein by reference. For
certain information with respect to director independence, see
the disclosures in the Corporate Governance section
of the Proxy Statement for the 2009 Annual Meeting of
Stockholders regarding director independence, which are
incorporated herein by reference.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
For information with respect to principal accountant fees and
services, see the Proposal 2: Ratification of
Selection of our Independent Registered Public Accounting Firm
for Fiscal Year 2009 section of the Proxy Statement for
the 2009 Annual Meeting of Stockholders, which is incorporated
herein by reference.
99
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
|
|
|
|
|
(a)
|
|
List of documents filed as part of this report.
|
|
|
|
|
|
|
|
1.
|
|
Financial Statements
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations
|
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
Consolidated Statements of Changes in Stockholders Equity
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
|
Managements Report on Internal Control over Financial
Reporting
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
2.
|
|
Financial Statement Schedule
|
|
|
|
|
|
|
|
|
|
Schedule II Valuation and Qualifying Accounts
and Reserves
|
|
|
|
|
|
|
|
|
|
All other financial statements and schedules not listed have
been omitted because the required information is included in the
consolidated financial statements or the notes thereto, or is
not applicable or required.
|
|
|
|
|
|
|
|
3.
|
|
Listing of Exhibits
|
The agreements included in the following exhibits to this report
are included to provide information regarding their terms and
are not intended to provide any other factual or disclosure
information about the Company or the other parties to the
agreements. The agreements contain representations and
warranties by each of the parties to the applicable agreements.
These representations and warranties have been made solely for
the benefit of the other parties to the applicable agreement and:
|
|
|
|
|
should not in all instances be treated as categorical statements
of fact, but rather as a way of allocating the risk to one of
the parties if those statements prove to be inaccurate;
|
|
|
|
may have been qualified by disclosures that were made to the
other party in connection with the negotiation of the applicable
agreement, which disclosures are not necessarily reflected in
the agreement;
|
|
|
|
may apply standards of materiality in a way that is different
from what may be viewed as material to you or other investors;
and
|
|
|
|
were made only as of the date of the applicable agreement or
such other date or dates as may be specified in the agreement
and are subject to more recent developments.
|
Accordingly, these representations and warranties may not
describe the actual state of affairs as of the date they were
made or at any other time.
100
Exhibit Index
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
Number
|
|
Description
|
|
or Filed Herewith
|
|
|
(3
|
.1)
|
|
Restated Certificate of Incorporation of the Company.
|
|
Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q
for the quarter ended June 29, 2003 (File No. 0-9286).
|
|
(3
|
.2)
|
|
Amended and Restated Bylaws of the Company.
|
|
Exhibit 3.1 to the Companys Current Report on Form 8-K
filed on December 10, 2007 (File No. 0-9286).
|
|
(4
|
.1)
|
|
Specimen of Common Stock Certificate.
|
|
Exhibit 4.1 to the Companys Registration Statement (File
No. 2-97822) on Form S-1 as filed on May 31, 1985 (File No.
0-9286).
|
|
(4
|
.2)
|
|
Supplemental Indenture, dated as of March 3, 1995, between
the Company and Citibank, N.A. (as successor to NationsBank of
Georgia, National Association, the initial trustee).
|
|
Exhibit 4.2 to the Companys Annual Report on Form 10-K for
the fiscal year ended December 29, 2002 (File No. 0-9286).
|
|
(4
|
.3)
|
|
Form of the Companys 7.20% Debentures due 2009.
|
|
Exhibit 4.6 to the Companys Annual Report on Form 10-K for
the fiscal year ended December 29, 2002 (File No. 0-9286).
|
|
(4
|
.4)
|
|
Form of the Companys 6.375% Debentures due 2009.
|
|
Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q
for the quarter ended April 4, 1999 (File No. 0-9286).
|
|
(4
|
.5)
|
|
Form of the Companys 5.00% Senior Notes due 2012.
|
|
Exhibit 4.1 to the Companys Current Report on Form 8-K
filed on November 21, 2002 (File No. 0-9286).
|
|
(4
|
.6)
|
|
Form of the Companys 5.30% Senior Notes due 2015.
|
|
Exhibit 4.1 to the Companys Current Report on Form 8-K
filed on March 27, 2003 (File No. 0-9286).
|
|
(4
|
.7)
|
|
Form of the Companys 5.00% Senior Notes due 2016.
|
|
Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q
for the quarter ended October 2, 2005 (File No.
0-9286).
|
|
(4
|
.8)
|
|
Second Amended and Restated Promissory Note, dated as of
August 25, 2005, by and between the Company and Piedmont
Coca-Cola
Bottling Partnership.
|
|
Exhibit 4.2 to the Companys Quarterly Report on Form 10-Q
for the quarter ended October 2, 2005 (File No.
0-9286).
|
101
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
Number
|
|
Description
|
|
or Filed Herewith
|
|
|
(4
|
.9)
|
|
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 consolidated subsidiaries which
authorizes a total amount of securities not in excess of
10 percent of the total assets of the registrant and its
subsidiaries on a consolidated basis.
|
|
|
|
(10
|
.1)
|
|
U.S. $200,000,000 Amended and Restated Credit Agreement, dated
as of March 8, 2007, by and among the Company, the banks
named therein and Citibank, N.A., as Administrative Agent.
|
|
Exhibit 10.1 to the Companys Current Report on Form 8-K
filed on March 14, 2007 (File No. 0-9286).
|
|
(10
|
.2)
|
|
Amendment No. 1, dated as of August 25, 2008, to U.S.
$200,000,000 Amended and Restated Credit Agreement, dated as of
March 8, 2007, by and among the Company, the banks named
therein and Citibank, N.A., as Administrative Agent.
|
|
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
for the quarter ended September 28, 2008 (File No. 0-9286).
|
|
(10
|
.3)
|
|
Amended and Restated Guaranty Agreement, effective as of
July 15, 1993, made by the Company and each of the other
guarantor parties thereto in favor of Trust Company Bank
and Teachers Insurance and Annuity Association of America.
|
|
Exhibit 10.10 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 29, 2002 (File No. 0-9286).
|
|
(10
|
.4)
|
|
Amended and Restated Guaranty Agreement, dated, as of
May 18, 2000, made by the Company in favor of Wachovia
Bank, N.A.
|
|
Exhibit 10.17 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 30, 2001 (File No. 0-9286).
|
|
(10
|
.5)
|
|
Guaranty Agreement, dated as of December 1, 2001, made by
the Company in favor of Wachovia, N.A.
|
|
Exhibit 10.18 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 30, 2001 (File No. 0-9286).
|
|
(10
|
.6)
|
|
Amended and Restated Stock Rights and Restrictions Agreement,
dated February 19, 2009, by and among the Company, The
Coca-Cola
Company and J. Frank Harrison, III.
|
|
Exhibit 10.1 to the Companys Current Report on Form 8-K
filed on February 19, 2009 (File No. 0-9286).
|
|
(10
|
.7)
|
|
Termination of Irrevocable Proxy and Voting Agreement, dated
February 19, 2009, by and between The
Coca-Cola
Company and J. Frank Harrison, III.
|
|
Exhibit 10.2 to the Companys Current Report on Form 8-K
filed on February 19, 2009 (File No. 0-9286).
|
|
(10
|
.8)
|
|
Example of bottling franchise agreement, effective as of
May 18, 1999, between the Company and The
Coca-Cola
Company.
|
|
Exhibit 10.2 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 29, 2002 (File No. 0-9286).
|
|
(10
|
.9)
|
|
Letter Agreement, dated as of March 10, 2008, by and
between the Company and The
Coca-Cola
Company.
|
|
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
for the quarter ended March 30, 2008 (File No. 0-9286).
|
|
(10
|
.10)
|
|
Lease, dated as of January 1, 1999, by and between the
Company and Ragland Corporation.
|
|
Exhibit 10.5 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2000 (File No. 0-9286).
|
102
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
Number
|
|
Description
|
|
or Filed Herewith
|
|
|
(10
|
.11)
|
|
First Amendment to Lease and First Amendment to Memorandum of
Lease, dated as of August 30, 2002, between the Company and
Ragland Corporation.
|
|
Exhibit 10.33 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 29, 2002 (File No. 0-9286).
|
|
(10
|
.12)
|
|
Lease Agreement, dated as of December 15, 2000, between the
Company and Harrison Limited Partnership One.
|
|
Exhibit 10.10 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2000 (File No. 0-9286).
|
|
(10
|
.13)
|
|
Lease Agreement, dated as of December 18, 2006, between
CCBCC Operations, LLC and Beacon Investment Company.
|
|
Exhibit 10.1 to the Companys Current Report on Form 8-K
filed on December 21, 2006 (File No. 0-9286).
|
|
(10
|
.14)
|
|
Limited Liability Company Operating Agreement of
Coca-Cola
Bottlers Sales & Services Company, LLC, made as
of January 1, 2003, by and between
Coca-Cola
Bottlers Sales & Services Company, LLC and
Consolidated Beverage Co., a wholly-owned subsidiary of the
Company.
|
|
Exhibit 10.35 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 29, 2002 (File No. 0-9286).
|
|
(10
|
.15)
|
|
Amended and Restated Can Supply Agreement, effective as of
January 1, 2006, by and between Rexam Beverage Can Company
and
Coca-Cola
Bottlers Sales & Services Company, LLC, in its
capacity as agent for the Company.
|
|
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
for the quarter ended April 1, 2007 (File No. 0-9286).
|
|
(10
|
.16)
|
|
Partnership Agreement of Piedmont
Coca-Cola
Bottling Partnership (formerly known as Carolina
Coca-Cola
Bottling Partnership), dated as of July 2, 1993, by and
among Carolina
Coca-Cola
Bottling Investments, Inc.,
Coca-Cola
Ventures, Inc.,
Coca-Cola
Bottling Co. Affiliated, Inc., Fayetteville
Coca-Cola
Bottling Company and Palmetto Bottling Company.
|
|
Exhibit 10.7 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 29, 2002 (File No. 0-9286).
|
|
(10
|
.17)
|
|
Master Amendment to Partnership Agreement, Management Agreement
and Definition and Adjustment Agreement, dated as of
January 2, 2002, by and among Piedmont
Coca-Cola
Bottling Partnership, CCBCC of Wilmington, Inc., The
Coca-Cola
Company, Piedmont Partnership Holding Company,
Coca-Cola
Ventures, Inc. and the Company.
|
|
Exhibit 10.1 to the Companys Current Report on Form 8-K
filed January 14, 2002 (File No. 0-9286).
|
|
(10
|
.18)
|
|
Fourth Amendment to Partnership Agreement, dated as of
March 28, 2003, by and among Piedmont
Coca-Cola
Bottling Partnership, Piedmont Partnership Holding Company and
Coca-Cola
Ventures, Inc.
|
|
Exhibit 4.2 to the Companys Quarterly Report on Form 10-Q
for the quarter ended March 30, 2003 (File No. 0-9286).
|
|
(10
|
.19)
|
|
Management Agreement, dated as of July 2, 1993, by and
among the Company, Piedmont
Coca-Cola
Bottling Partnership (formerly known as Carolina
Coca-Cola
Bottling Partnership), CCBC of Wilmington, Inc., Carolina
Coca-Cola
Bottling Investments, Inc.,
Coca-Cola
Ventures, Inc. and Palmetto Bottling Company.
|
|
Exhibit 10.8 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 29, 2002 (File No. 0-9286).
|
|
(10
|
.20)
|
|
First Amendment to Management Agreement (relating to the
Management Agreement designated as Exhibit 10.16 of this
Exhibit Index) dated as of January 1, 2001.
|
|
Exhibit 10.14 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2000 (File No. 0-9286).
|
103
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
Number
|
|
Description
|
|
or Filed Herewith
|
|
|
(10
|
.21)
|
|
Transfer and Assumption of Liabilities Agreement, dated
December 19, 1996, by and between CCBCC, Inc., (a
wholly-owned subsidiary of the Company) and Piedmont
Coca-Cola
Bottling Partnership.
|
|
Exhibit 10.17 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 29, 2002 (File No. 0-9286).
|
|
(10
|
.22)
|
|
Management Agreement, dated as of June 1, 2004, by and
among CCBCC Operations LLC, a wholly-owned subsidiary of the
Company, and South Atlantic Canners, Inc.
|
|
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
for the quarter ended June 27, 2004 (File No. 0-9286).
|
|
(10
|
.23)
|
|
Agreement, dated as of March 1, 1994, between the Company
and South Atlantic Canners, Inc.
|
|
Exhibit 10.12 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 29, 2002 (File No. 0-9286).
|
|
(10
|
.24)
|
|
Coca-Cola
Bottling Co. Consolidated Amended and Restated Annual Bonus
Plan, effective January 1, 2007.*
|
|
Appendix B to the Companys Proxy Statement for the 2007
Annual Meeting of Stockholders (File No. 0-9286).
|
|
(10
|
.25)
|
|
Coca-Cola
Bottling Co. Consolidated Long-Term Performance Plan, effective
January 1, 2007.*
|
|
Appendix C to the Companys Proxy Statement for the 2007
Annual Meeting of Stockholders (File No. 0-9286).
|
|
(10
|
.26)
|
|
Restricted Stock Award to J. Frank Harrison, III, effective
January 4, 1999.*
|
|
Annex A to the Companys Proxy Statement for the 1999
Annual Meeting of Stockholders (File No. 0-9286).
|
|
(10
|
.27)
|
|
Amendment to Restricted Stock Award Agreement, effective
February 28, 2007.*
|
|
Appendix D to the Companys Proxy Statement for the 2007
Annual Meeting of Stockholders (File No. 0-9286).
|
|
(10
|
.28)
|
|
Performance Unit Award Agreement, dated February 27, 2008.*
|
|
Appendix A to the Companys Proxy Statement for the 2008
Annual Meeting of Stockholders (File No. 0-9286).
|
|
(10
|
.29)
|
|
Supplemental Savings Incentive Plan, as amended and restated
effective January 1, 2007*
|
|
Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q
for the quarter ended April 1, 2007 (File No. 0-9286).
|
|
(10
|
.30)
|
|
Coca-Cola
Bottling Co. Consolidated Director Deferral Plan, effective
January 1, 2005.*
|
|
Exhibit 10.17 to the Companys Annual Report on Form 10-K
for the fiscal year ended January 1, 2006 (File No.
0-9286).
|
|
(10
|
.31)
|
|
Officer Retention Plan, as amended and restated effective
January 1, 2007.*
|
|
Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q
for the quarter ended April 1, 2007 (File No. 0-9286).
|
|
(10
|
.32)
|
|
Amendment No. 1 to Officer Retention Plan, effective
January 1, 2009.*
|
|
Filed herewith.
|
104
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
Number
|
|
Description
|
|
or Filed Herewith
|
|
|
(10
|
.33)
|
|
Amendment to Officer Retention Plan Agreement by and between the
Company and David V. Singer, effective as of January 12,
2004.*
|
|
Exhibit 10.31 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 28, 2003 (File No. 0-9286).
|
|
(10
|
.34)
|
|
Life Insurance Benefit Agreement, effective as of
December 28, 2003, by and between the Company and Jan M.
Harrison, Trustee under the J. Frank Harrison, III 2003
Irrevocable Trust, John R. Morgan, Trustee under the Harrison
Family 2003 Irrevocable Trust, and J. Frank Harrison, III.*
|
|
Exhibit 10.37 to the Companys Annual Report on Form 10-K
for the fiscal year ended December 28, 2003 (File No. 0-9286).
|
|
(10
|
.35)
|
|
Form of Amended and Restated Split-Dollar and Deferred
Compensation Replacement Benefit Agreement, effective as of
January 1, 2005, between the Company and eligible employees
of the Company.*
|
|
Exhibit 10.24 to the Companys Annual Report on Form 10-K
for the fiscal year ended January 1, 2006 (File No. 0-9286).
|
|
(10
|
.36)
|
|
Form of Split-Dollar and Deferred Compensation Replacement
Benefit Agreement Election Form and Agreement Amendment,
effective as of June 20, 2005, between the Company and
certain executive officers of the Company.*
|
|
Exhibit 10.1 to the Companys Current Report on Form 8-K
filed on June 24, 2005 (File No. 0-9286).
|
|
(10
|
.37)
|
|
Consulting Agreement, dated as of June 1, 2005, between the
Company and David V. Singer.*
|
|
Exhibit 10.1 to the Companys Current Report on Form 8-K
filed on June 3, 2005 (File No. 0-9286).
|
|
(12)
|
|
|
Ratio of earnings to fixed charges.
|
|
Filed herewith.
|
|
(21)
|
|
|
List of subsidiaries.
|
|
Filed herewith.
|
|
(23)
|
|
|
Consent of Independent Registered Public Accounting Firm to
Incorporation by reference into
Form S-3
(Registration
No. 333-155635).
|
|
Filed herewith.
|
|
(31
|
.1)
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
Filed herewith.
|
|
(31
|
.2)
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
Filed herewith.
|
|
(32)
|
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
Filed herewith.
|
|
|
|
* |
|
Management contracts and compensatory plans and arrangements
required to be filed as exhibits to this form pursuant to
Item 15(c) of this report. |
(b) Exhibits.
See Item 15(a)3
(c) Financial
Statement Schedules.
See Item 15(a)2
105
Schedule II
COCA-COLA
BOTTLING CO. CONSOLIDATED
VALUATION
AND QUALIFYING ACCOUNTS AND RESERVES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
|
|
|
Balance
|
|
|
|
Beginning
|
|
|
Costs and
|
|
|
|
|
|
at End
|
|
Description
|
|
of Year
|
|
|
Expenses
|
|
|
Deductions
|
|
|
of Year
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended December 28, 2008
|
|
$
|
1,137
|
|
|
$
|
523
|
|
|
$
|
472
|
|
|
$
|
1,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended December 30, 2007
|
|
$
|
1,334
|
|
|
$
|
213
|
|
|
$
|
410
|
|
|
$
|
1,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended December 31, 2006
|
|
$
|
1,318
|
|
|
$
|
314
|
|
|
$
|
298
|
|
|
$
|
1,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
|
|
|
|
By:
|
/s/ J.
Frank Harrison, III
|
J. Frank
Harrison, III
Chairman of the Board of
Directors
and Chief Executive
Officer
Date: March 13, 2009
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
By: /s/ J.
Frank Harrison, III
J.
Frank Harrison, III
|
|
Chairman of the Board of Directors, Chief Executive Officer and
Director
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ H.
W. McKay Belk
H.
W. McKay Belk
|
|
Director
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ Sharon
A. Decker
Sharon
A. Decker
|
|
Director
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ William
B. Elmore
William
B. Elmore
|
|
President, Chief Operating Officer and Director
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ Henry
W. Flint
Henry
W. Flint
|
|
Vice Chairman of the Board of Directors and Director
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ Deborah
H. Everhart
Deborah
H. Everhart
|
|
Director
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ Ned
R. McWherter
Ned
R. McWherter
|
|
Director
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ James
H. Morgan
James
H. Morgan
|
|
Director
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ John
W. Murrey, III
John
W. Murrey, III
|
|
Director
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ Carl
Ware
Carl
Ware
|
|
Director
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ Dennis
A. Wicker
Dennis
A. Wicker
|
|
Director
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ James
E. Harris
James
E. Harris
|
|
Senior Vice President and
Chief Financial Officer
|
|
March 13, 2009
|
|
|
|
|
|
By: /s/ William
J. Billiard
William
J. Billiard
|
|
Vice President, Controller and
Chief Accounting Officer
|
|
March 13, 2009
|
107
EX-10.32
Exhibit 10.32
Amendment No. 1
to the
Coca-Cola Bottling Co. Consolidated
Officer Retention Plan
(As Amended and Restated Effective January 1, 2007)
THIS AMENDMENT to the Coca-Cola Bottling Co. Consolidated Officer Retention
Plan (as amended and restated effective January 1, 2007) (the Plan) is adopted by the Plan
Administrator.
WHEREAS,
Coca-Cola Bottling Co. Consolidated (the Company) has adopted and maintained the Plan to provide benefits to selected key employees; and
WHEREAS, the Plan authorizes the Plan Administrator to make ministerial and
nonsubstantive amendments to the Plan which may be necessary or appropriate to facilitate the
administration, management and interpretation of the Plan, provided the amendment does not
materially affect the estimated cost to the Company of maintaining the Plan.
NOW THEREFORE, the Plan is amended as follows effective as of January 1, 2009:
1. The
last sentence of Section 1.16 of the Plan is hereby amended in its entirety to read as follows:
|
|
|
The Participants ORP Accrued Retirement Benefit shall increase pro
rata with each completed calendar month for any partial Year of Plan
Participation the Participant completes. |
2. Section 1.32 of the Plan is hereby amended by the addition of the
following language at the end thereof:
|
|
|
Age and Vested Percentage shown above shall be interpolated based on
completed months. |
3. The Coca-Cola Bottling Co. Consolidated Officer Retention Plan (as amended
and restated effective January 1, 2007), as amended by this Amendment No. 1, is hereby ratified
and confirmed in all respects.
|
|
|
|
|
|
|
|
Plan Administrator |
|
|
|
|
|
|
|
By:
|
|
/s/ Henry W. Flint |
|
|
|
|
|
|
|
|
|
|
Date: November 17, 2008 |
|
|
|
|
EX-12
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
Coca-Cola Bottling Co. Consolidated
Earnings to Fixed Charges
(In Thousands, Except Ratios)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Computation of Earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
$ |
17,485 |
|
|
$ |
32,239 |
|
|
$ |
31,160 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
2,392 |
|
|
|
2,003 |
|
|
|
3,218 |
|
Interest expense |
|
|
37,231 |
|
|
|
47,670 |
|
|
|
47,648 |
|
Amortization of debt
premium/discount and expenses |
|
|
2,449 |
|
|
|
2,678 |
|
|
|
2,638 |
|
Interest portion of rent expense |
|
|
1,325 |
|
|
|
1,299 |
|
|
|
1,199 |
|
|
|
|
|
|
|
|
|
|
|
Earnings as adjusted |
|
$ |
60,882 |
|
|
$ |
85,889 |
|
|
$ |
85,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computation of Fixed Charges: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
$ |
37,231 |
|
|
$ |
47,670 |
|
|
$ |
47,648 |
|
Capitalized interest |
|
|
375 |
|
|
|
405 |
|
|
|
531 |
|
Amortization of debt premium/discount and expenses |
|
|
2,449 |
|
|
|
2,678 |
|
|
|
2,638 |
|
Interest portion of rent expense |
|
|
1,325 |
|
|
|
1,299 |
|
|
|
1,199 |
|
|
|
|
|
|
|
|
|
|
|
Fixed charges |
|
$ |
41,380 |
|
|
$ |
52,052 |
|
|
$ |
52,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Earnings to Fixed Charges |
|
|
1.47 |
|
|
|
1.65 |
|
|
|
1.65 |
|
|
|
|
|
|
|
|
|
|
|
EX-21
Exhibit 21
COCA-COLA BOTTLING CO. CONSOLIDATED
LIST OF SUBSIDIARIES AS OF DECEMBER 28, 2008
|
|
|
|
|
|
|
|
|
|
|
State/Country & |
|
|
|
|
Legal Name |
|
Date Inc./Organized |
|
Owned by |
|
Ownership % |
CCBCC, Inc.
|
|
Delaware
|
|
Consolidated
|
|
|
100 |
% |
|
|
12/20/93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBCC Operations, LLC
|
|
Delaware
|
|
Consolidated
|
|
|
100 |
% |
|
|
10/15/2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chesapeake Treatment Company, LLC
|
|
North Carolina
|
|
Operations
|
|
|
100 |
% |
|
|
6/5/95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coca-Cola Ventures, Inc.
|
|
Delaware
|
|
Consolidated
|
|
|
100 |
% |
|
|
6/17/93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Beverage Co.
|
|
Delaware
|
|
Consolidated
|
|
|
100 |
% |
|
|
1/8/97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Real Estate Group, LLC
|
|
North Carolina
|
|
Consolidated
|
|
|
100 |
% |
|
|
01/04/2000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BYB Brands, Inc.
|
|
North Carolina
|
|
Consolidated
|
|
|
100 |
% |
|
|
03/08/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data Ventures, Inc.
|
|
North Carolina
|
|
Consolidated
|
|
|
100 |
% |
|
|
09/25/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heath Oil Co., Inc.
|
|
South Carolina
|
|
Operations
|
|
|
100 |
% |
|
|
9/9/86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TXN, Inc.
|
|
Delaware
|
|
Data Ventures Inc.
|
|
|
100 |
% |
|
|
01/03/90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tennessee Soft Drink Production Company
|
|
Tennessee
|
|
Operations
|
|
|
100 |
% |
|
|
12/22/88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Piedmont Coca-Cola Bottling Partnership
|
|
Delaware
|
|
CC Ventures
|
|
|
77.326 |
% |
|
|
07/02/93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBC of Wilmington, Inc.
|
|
Delaware
|
|
Piedmont
|
|
|
100 |
% |
|
|
06/17/93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swift Water Logistics, Inc.
|
|
North Carolina
|
|
Consolidated
|
|
|
100 |
% |
|
|
04/24/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data Ventures Europe BV
|
|
Netherlands
|
|
Data Ventures Inc.
|
|
|
100 |
% |
|
|
01/23/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Red Classic Brokerage, Inc.
|
|
North Carolina
|
|
Operations
|
|
|
100 |
% |
|
|
09/21/2007 |
|
|
|
|
|
|
EX-23
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Forms S-3 (No.
333-155635) of Coca-Cola Bottling Co. Consolidated of our report
dated March 12, 2009 relating to
the financial statements, financial statement schedule and the effectiveness of internal control
over financial reporting, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 13, 2009
EX-31.1
Exhibit 31.1
MANAGEMENT CERTIFICATION
I, J. Frank Harrison, III, certify that:
1. |
|
I have reviewed this annual report on Form 10-K of Coca-Cola Bottling Co. Consolidated; |
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
|
4. |
|
The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
|
|
b) |
|
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; |
|
|
c) |
|
Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and |
|
|
d) |
|
Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and |
5. |
|
The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting, which are reasonably likely to adversely
affect the registrants ability to record, process, summarize and report financial
information; and |
|
|
b) |
|
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial
reporting. |
|
|
|
|
|
/s/ J. Frank Harrison, III |
|
|
|
Date:
March 13, 2009
|
|
J. Frank Harrison, III
Chairman of the Board of Directors
and Chief Executive Officer |
EX-31.2
Exhibit 31.2
MANAGEMENT CERTIFICATION
I, James E. Harris, certify that:
1. |
|
I have reviewed this annual report on Form 10-K of Coca-Cola Bottling Co. Consolidated; |
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
|
4. |
|
The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
|
|
b) |
|
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; |
|
|
c) |
|
Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and |
|
|
d) |
|
Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and |
5. |
|
The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting, which are reasonably likely to adversely
affect the registrants ability to record, process, summarize and report financial
information; and |
|
|
b) |
|
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial
reporting. |
|
|
|
|
|
/s/ James E. Harris |
|
|
|
Date: March 13, 2009
|
|
James E. Harris
Senior Vice President and Chief Financial Officer |
EX-32
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Coca-Cola Bottling Co. Consolidated (the Company) on Form
10-K for the year ending December 28, 2008 as filed with the Securities and Exchange Commission on
the date hereof (the Report) we, J. Frank Harrison, III, Chairman of the Board of Directors and
Chief Executive Officer of the Company, and James E. Harris, Senior Vice President and Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350 as adopted pursuant to §
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly represents, in all material respects, the
financial condition and results of operations of the Company.
|
|
|
|
/s/ J. Frank Harrison, III |
|
J. Frank Harrison, III
Chairman of the Board of Directors and
Chief Executive Officer
March 13, 2009 |
|
|
|
/s/ James E. Harris |
|
James E. Harris
Senior Vice President and
Chief Financial Officer
March 13, 2009 |