UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 29, 1998 --------------------------------------------- Commission File Number 0-9286 ------------------------------------------------------ COCA-COLA BOTTLING CO. CONSOLIDATED ----------------------------------- (Exact name of registrant as specified in its charter) Delaware 56-0950585 -------- ---------- (State or other jurisdiction of incorporation or (I.R.S. Employer organization) Identification Number) 1900 Rexford Road, Charlotte, North Carolina 28211 --------------------------------------------------------- (Address of principal executive offices) (Zip Code) (704) 551-4400 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 1, 1998 ----- -------------------------- Common Stock, $1 Par Value 7,045,047 Class B Common Stock, $1 Par Value 1,319,800
PART I - FINANCIAL INFORMATION Item l. Financial Statements Coca-Cola Bottling Co. Consolidated CONSOLIDATED BALANCE SHEETS (UNAUDITED) In Thousands (Except Share Data) <TABLE> <CAPTION> March 29, Dec. 28, March 30, 1998 1997 1997 ----------- ---------- ---------- ASSETS - ------ Current Assets: - --------------- <S> <C> <C> <C> Cash $ 5,177 $ 4,427 $ 3,557 Accounts receivable, trade, less allowance for doubtful accounts of $512, $513 and $416 52,599 55,258 47,193 Accounts receivable from The Coca-Cola Company 11,594 4,690 6,333 Due from Piedmont Coca-Cola Bottling Partnership 1,931 2,009 4,613 Accounts receivable, other 5,983 8,776 7,009 Inventories 40,154 38,738 32,770 Prepaid expenses and other current assets 13,414 12,674 9,645 ----------- ---------- ---------- Total current assets 130,852 126,572 111,120 ----------- ---------- ---------- Property, plant and equipment, less accumulated depreciation of $182,197, $175,766 and $166,615 251,663 250,904 251,980 Investment in Piedmont Coca-Cola Bottling Partnership 61,601 63,326 63,645 Other assets 45,525 43,138 35,464 Identifiable intangible assets, less accumulated amortization of $107,937, $105,334 and $97,870 259,620 231,034 238,348 Excess of cost over fair value of net assets of businesses acquired, less accumulated amortization of $29,132, $28,560 and $26,842 62,486 63,059 64,777 ----------- ---------- ---------- Total $811,747 $778,033 $765,334 =========== ========== ========== </TABLE> See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated CONSOLIDATED BALANCE SHEETS (UNAUDITED) In Thousands (Except Share Data) <TABLE> <CAPTION> March 29, Dec. 28, March 30, 1998 1997 1997 ---------- --------- ----------- <S> <C> <C> <C> LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current Liabilities: - -------------------- Portion of long-term debt payable within one year $ 72,733 $ 12,000 $ 135 Accounts payable and accrued liabilities 65,609 71,583 59,017 Accounts payable to The Coca-Cola Company 7,639 4,108 2,215 Accrued compensation 3,297 5,075 3,060 Accrued interest payable 9,515 14,038 7,521 ---------- --------- ----------- Total current liabilities 158,793 106,804 71,948 Deferred income taxes 110,142 111,594 107,512 Deferred credits 6,545 7,139 9,381 Other liabilities 56,275 49,434 46,464 Long-term debt 475,272 493,789 529,749 ---------- --------- ----------- Total liabilities 807,027 768,760 765,054 ---------- --------- ----------- Shareholders' Equity: Convertible Preferred Stock, $100 par value: Authorized-50,000 shares; Issued-None Nonconvertible Preferred Stock, $100 par value: Authorized-50,000 shares; Issued-None Preferred Stock, $.01 par value: Authorized-20,000,000 shares; Issued-None Common Stock, $1 par value: Authorized-30,000,000 shares; Issued-10,107,421, 10,107,421 and 10,107,359 shares 10,107 10,107 10,107 Class B Common Stock, $1 par value: Authorized-10,000,000 shares; Issued-1,947,914, 1,947,914 and 1,947,976 shares 1,948 1,948 1,948 Class C Common Stock, $1 par value: Authorized-20,000,000 shares; Issued-None Capital in excess of par value 100,983 103,074 109,347 Accumulated deficit (47,064) (44,602) (59,764) Minimum pension liability adjustment (104) ---------- --------- ----------- 65,974 70,527 61,534 Less-Treasury stock, at cost: Common - 3,062,374 shares 60,845 60,845 60,845 Class B Common - 628,114 shares 409 409 409 ---------- --------- ----------- Total shareholders' equity 4,720 9,273 280 ---------- --------- ----------- Total $811,747 $778,033 $765,334 ========== ========= =========== </TABLE> See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) In Thousands <TABLE> <CAPTION> Capital Minimum Class B in Pension Common Common Excess of Accumulated Liability Treasury Stock Stock Par Value Deficit Adjustment Stock ---------- --------- --------- ----------- ---------- --------- <S> <C> <C> <C> <C> <C> <C> Balance on December 29, 1996 $ 10,107 $ 1,948 $111,439 $ (59,868) $ (104) $ 41,253 Net income 104 Cash dividends paid: Common (2,092) Purchase of Common Stock 20,001 ---------- --------- --------- ----------- ---------- --------- Balance on March 30, 1997 $ 10,107 $ 1,948 $109,347 $ (59,764) $ (104) $ 61,254 ========== ========= ========= =========== ========== ========= Balance on December 28, 1997 $ 10,107 $ 1,948 $103,074 $ (44,602) $ - $ 61,254 Net loss (2,462) Cash dividends paid: Common (2,091) ---------- --------- --------- ----------- ---------- --------- Balance on March 29, 1998 $ 10,107 $ 1,948 $100,983 $ (47,064) $ - $ 61,254 ========== ========= ========= =========== ========== ========= </TABLE> See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) In Thousands (Except Per Share Data) <TABLE> <CAPTION> First Quarter --------------------------------- 1998 1997 --------- --------- <S> <C> <C> Net sales (includes sales to Piedmont of $12,203 and $10,591) $ 203,331 $ 178,395 Cost of sales, excluding depreciation shown below (includes $10,835 and $8,603 related to sales to Piedmont) 118,397 99,450 --------- --------- Gross margin 84,934 78,945 --------- --------- Selling expenses, excluding depreciation shown below 50,698 44,064 General and administrative expenses 15,781 13,988 Depreciation expense 8,734 8,133 Amortization of goodwill and intangibles 3,221 3,064 --------- --------- Income from operations 6,500 9,696 Interest expense 9,258 9,124 Other income (expense), net (1,157) (407) --------- --------- Income (loss) before income taxes (3,915) 165 Income taxes (benefit) (1,453) 61 --------- --------- Net income (loss) $ (2,462) $ 104 ========= ========= Basic net income (loss) per share $ (.29) $ .01 Diluted net income (loss) per share $ (.29) $ .01 Weighted average number of common shares outstanding 8,365 8,535 Weighted average number of common shares outstanding - assuming dilution 8,493 8,624 </TABLE> See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) In Thousands <TABLE> <CAPTION> First Quarter 1998 1997 ---------- ----------- <S> <C> <C> Cash Flows from Operating Activities - ------------------------------------ Net income (loss) $ (2,462) $ 104 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation expense 8,734 8,133 Amortization of goodwill and intangibles 3,221 3,064 Deferred income taxes (benefit) (1,453) 61 Losses on sale of property, plant and equipment 729 298 Amortization of debt costs 149 141 Undistributed losses of Piedmont Coca-Cola Bottling Partnership 1,725 817 Increase in current assets less current liabilities (11,402) (7,829) Increase in other noncurrent assets (2,556) (1,017) Increase in other noncurrent liabilities 6,248 2,461 Other 3 ---------- ----------- Total adjustments 5,398 6,129 ---------- ----------- Net cash provided by operating activities 2,936 6,233 ---------- ----------- Cash Flows from Financing Activities - ------------------------------------ Proceeds from the issuance of long-term debt 90,521 Increase in current portion of long-term debt 60,733 30 Payments on long-term debt (18,517) (226) Purchase of Common Stock (20,001) Cash dividends paid (2,091) (2,092) Other (11) ---------- ----------- Net cash provided by financing activities 40,114 68,232 ---------- ----------- Cash Flows from Investing Activities - ------------------------------------ Additions to property, plant and equipment (8,906) (70,339) Proceeds from the sale of property, plant and equipment 10 1 Acquisition of companies, net of cash acquired (33,404) (3,511) ---------- ----------- Net cash used in investing activities (42,300) (73,849) ---------- ----------- Net increase in cash 750 616 Cash at beginning of period 4,427 2,941 ---------- ----------- Cash at end of period $ 5,177 $ 3,557 ========== =========== </TABLE> See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 1. Accounting Policies The consolidated financial statements include the accounts of Coca-Cola Bottling Co. Consolidated and its majority owned subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated. The information contained in the financial statements is unaudited. The statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal, recurring nature. The accounting policies followed in the presentation of interim financial results are the same as those followed on an annual basis. These policies are presented in Note 1 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 28, 1997 filed with the Securities and Exchange Commission. Certain prior year amounts have been reclassified to conform to current year classifications.
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 2. Summarized Income Statement Data of Piedmont Coca-Cola Bottling Partnership On July 2, 1993, the Company and The Coca-Cola Company formed Piedmont Coca-Cola Bottling Partnership ("Piedmont") to distribute and market soft drink products primarily in portions of North Carolina and South Carolina. The Company and The Coca-Cola Company, through their respective subsidiaries, each beneficially own a 50% interest in Piedmont. The Company provides a portion of the soft drink products to Piedmont at cost and receives a fee for managing the business of Piedmont pursuant to a management agreement. Summarized income statement data for Piedmont is as follows: First Quarter --------------------------- In Thousands 1998 1997 - -------------------------------------------------------------------------------- Net sales $ 57,358 $ 52,831 Gross margin 24,725 23,728 Income (loss) from operations (219) 1,384 Net loss (3,450) (1,634) 3. Inventories Inventories are summarized as follows: Mar. 29, Dec. 28, Mar. 30, In Thousands 1998 1997 1997 - -------------------------------------------------------------------------------- Finished products $24,066 $21,542 $18,068 Manufacturing materials 12,684 14,171 8,824 Plastic pallets and other 3,404 3,025 5,878 Total inventories $40,154 $38,738 $32,770 Substantially all merchandise inventories are valued by the LIFO method. The amounts included above for inventories valued by the LIFO method were greater than replacement or current cost by approximately $2.7 million, $2.8 million and $2.1 million on March 29, 1998, December 28, 1997 and March 30, 1997, respectively, as a result of inventory premiums associated with certain acquisitions.
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 4. Long-Term Debt Long-term debt is summarized as follows: <TABLE> <CAPTION> Fixed(F) or Interest Variable Interest Mar. 29, Dec. 28, Mar. 30, In Thousands Maturity Rate (V) Rate Paid 1998 1997 1997 - --------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> Lines of Credit 2002 5.63% V Varies $ 20,400 $10,300 $134,250 Term Loan Agreement 2004 6.33% V Varies 85,000 85,000 170,000 Term Loan Agreement 2005 6.33% V Varies 85,000 85,000 Medium-Term Notes 1998 6.28% V Quarterly 10,000 10,000 10,000 Medium-Term Notes 1998 10.05% F Semi- 2,000 2,000 2,000 annually Medium-Term Notes 1999 7.99% F Semi- 28,585 28,585 28,585 annually Medium-Term Notes 2000 10.00% F Semi- 25,500 25,500 25,500 annually Medium-Term Notes 2002 8.56% F Semi- 47,000 47,000 47,000 annually Debentures 2007 6.85% F Semi- 100,000 100,000 100,000 annually Debentures 2009 7.20% F Semi- 100,000 100,000 annually Other notes payable 1998 - 6.50% - F Varies 44,520 12,404 12,549 2001 10.00% -------- -------- ------- 548,005 505,789 529,884 Less: Portion of long- term debt payable within one year 72,733 12,000 135 - --------------------------------------------------------------------------------------------------------------------------------- Long-term debt $475,272 $493,789 $529,749 - --------------------------------------------------------------------------------------------------------------------------------- </TABLE>
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 4. Long-Term Debt (cont.) It is the Company's intent to renew its lines of credit and borrowings under the revolving credit facility as they mature. To the extent that these borrowings do not exceed the amount available under the Company's $170 million revolving credit facility, they are classified as noncurrent liabilities. On October 12, 1994, a $400 million shelf registration for debt and equity securities filed with the Securities and Exchange Commission became effective and the securities thereunder became available for issuance. On November 1, 1995, the Company issued $100 million of 6.85% debentures due 2007 pursuant to such registration. In July 1997, the Company issued $100 million of 7.20% debentures due 2009. The net proceeds from these issuances were used for refinancing a portion of existing public debt with the remainder used to repay other debt. On November 20, 1995, the Company entered into a $170 million term loan agreement with $85 million maturing in July 2004 and $85 million maturing in July 2005. This loan was used to repay two $60 million loans previously entered into by the Company and other bank debt. The Company has guaranteed a portion of the debt for two cooperatives in which the Company is a member. The amounts guaranteed were $30.3 million, $31.1 million and $31.8 million as of March 29, 1998, December 28, 1997 and March 30, 1997, respectively.
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 5. Derivative Financial Instruments The Company uses derivative financial instruments to modify risk from interest rate fluctuations in its underlying debt. The Company has historically altered its fixed/floating interest rate mix based upon anticipated operating cash flows of the Company relative to its debt level and the Company's ability to absorb increases in interest rates. These derivative financial instruments are not used for trading purposes. The Company had weighted average interest rates for its debt portfolio of approximately 7.1%, 7.1% and 6.9% as of March 29, 1998, December 28, 1997 and March 30, 1997, respectively. The Company's overall weighted average interest rate on its long-term debt increased from an average of 6.9% during the first quarter of 1997 to an average of 7.1% during the first quarter of 1998. After taking into account the effect of all of the interest rate swap activities, approximately 21%, 50% and 59% of the total debt portfolio was subject to changes in short-term interest rates as of March 29, 1998, December 28, 1997 and March 30, 1997, respectively. A rate increase of 1% on the floating rate component of the Company's debt would have increased interest expense for the first quarter of 1998 by approximately $2.7 million and the net loss for the first quarter ended March 29, 1998 would have been increased by approximately $1.7 million. The Company currently has three interest rate swap agreements, including a new fixed rate interest swap for $50 million added in the first quarter of 1998. Derivative financial instruments were as follows: <TABLE> <CAPTION> March 29, 1998 December 28, 1997 March 30, 1997 ---------------------------------------------------------------------------------- Remaining Remaining Remaining In Thousands Amount Term Amount Term Amount Term - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Interest rate swaps-floating $ 60,000 5.5 years $ 60,000 5.75 years $ 60,000 6.5 years Interest rate swaps-floating 100,000 11.5 years Interest rate swaps-fixed 60,000 5.5 years 60,000 5.75 years 60,000 6.5 years Interest rate swaps-fixed 50,000 7.0 years </TABLE> In January 1998, the Company terminated two floating rate interest swaps with a total notional amount of $100 million. The gain of $6.5 million resulting from this termination will be amortized over 11.5 years, the remaining term of the initial swap agreements.
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 5. Derivative Financial Instruments (cont.) The carrying amounts and fair values of the Company's balance sheet and off-balance-sheet instruments were as follows: <TABLE> <CAPTION> March 29, 1998 December 28, 1997 March 30, 1997 ---------------------- ---------------------- ---------------------- Carrying Fair Carrying Fair Carrying Fair In Thousands Amount Value Amount Value Amount Value - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Balance Sheet Instruments - ------------------------- Public debt $313,085 $326,544 $313,085 $327,486 $213,085 $213,908 Non-public variable rate long-term term debt 190,400 190,400 180,300 180,300 304,250 304,250 Non-public fixed rate long-term debt 44,520 45,456 12,404 13,297 12,549 13,141 Off-Balance-Sheet Instruments - ----------------------------- Interest rate swaps (2,450) 1,854 (3,879) Interest rate cap 41 80 </TABLE> The fair values of the interest rate swaps at March 29, 1998 and March 30, 1997 represent the estimated amounts the Company would have had to pay to terminate these agreements. The fair values of the interest rate cap and the fair value of the interest rate swap at December 28, 1997 represents the estimated amounts the Company would have received upon termination of these agreements.
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 6. Supplemental Disclosures of Cash Flow Information Changes in current assets and current liabilities affecting cash, net of effect of acquisition, were as follows: <TABLE> <CAPTION> First Quarter ------------------------------ In Thousands 1998 1997 - ---------------------------------------------------------------------------------------------------------------- <S> <C> <C> Accounts receivable, trade, net $ 3,286 $ 3,725 Accounts receivable, The Coca-Cola Company (6,904) (3,173) Due from Piedmont Coca-Cola Bottling Partnership 78 1,275 Accounts receivable, other 2,820 439 Inventories (1,228) (1,983) Prepaid expenses and other current assets (518) (192) Accounts payable and accrued liabilities (6,146) (1,081) Accounts payable, The Coca-Cola Company 3,531 (1,034) Accrued compensation (1,798) (2,214) Accrued interest payable (4,523) (3,591) --------- ---------- Increase in current assets less current liabilities $(11,402) $ (7,829) ========= ========== </TABLE> 7. Acquisition On January 21, 1998, the Company purchased the franchise rights and operating assets of a Coca-Cola bottler located in Florence, Alabama for $33.6 million. The bottling territory covers portions of northwest Alabama and south central Tennessee and is contiguous to the Company's Tennessee bottling territory. The Company issued notes payable to the seller for approximately $32.1 million and used the Company's existing lines of credit to fund the cash portion of the acquisition. A portion of the notes payable issued is due on July 15, 1998 with the remaining notes payable due on January 31, 1999. The interest rate for the notes payable issued is 6.5%. The acquisition was accounted for using the purchase method of accounting. Accordingly, the Company's financial statements reflect the operating results since the acquisition date.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Introduction: - ------------- The following discussion presents management's analysis of the results of operations for the first three months of 1998 compared to the first three months of 1997 and changes in financial condition from March 30, 1997 and December 28, 1997 to March 29, 1998. The Company reported a net loss of $2.5 million or $.29 per share for the first quarter of 1998 compared with net income of $.1 million or $.01 per share for the same period in 1997. The decrease in earnings from the prior year was due to several factors including an extremely competitive pricing environment, increases in the cost of packaging and ingredients and increased selling expenses, primarily related to employment costs. The Company has continued to make significant investments in the form of both capital expenditures and personnel to support its growth initiatives. Expenses related to these ongoing investments are recognized ratably throughout the year, while the revenue generated from the additional investments tends to be more seasonal, with significantly more revenue generated in the second and third quarters of each fiscal year. In January 1998, the Company purchased the franchise rights and operating assets of a Coca-Cola bottler located in Florence, Alabama for $33.6 million. This bottling territory covers portions of northwest Alabama and south central Tennessee and is contiguous to the Company's Tennessee bottling territory. The results for interim periods are not necessarily indicative of the results to be expected for the year due to seasonal factors. Results of Operations: - ---------------------- The quarter was highlighted by strong volume growth across both the Company's core brands and newer brands. Net sales for the first quarter of 1998 increased almost 14% from the first quarter of 1997. Franchise equivalent volume grew by 12% in the first quarter, driven by a special promotion with a key retailer, focused marketing initiatives, lower pricing and the additional cold drink equipment the Company has placed over the past 12 months. The increased volume was offset by a 2% per unit decrease in net selling prices and an increase of almost 2% per unit in cost of sales. The sales volume growth was broad-based across all significant channels. In addition, the Company posted a 16% increase in fountain volume. Sprite continued its strong growth with another double-digit volume increase over the first quarter of the prior year. Sales volume of Surge, a product introduced throughout the Company's franchise territory in the fourth quarter of 1997 and the first quarter of 1998, continues to exceed initial expectations. The Company's non-carbonated beverages experienced tremendous growth with a volume increase in excess of 100% over the same period in the prior year.
Selling expenses for the first quarter of 1998 increased 15% over the first quarter of 1997. Selling expenses increased due to increased employment costs reflecting additional sales personnel added to support the Company's growth and key customer initiatives, higher sales commission costs related to the sales volume increase, increased marketing costs and increased expenses related to sales development programs. General and administrative expenses increased by 13% primarily due to higher employment costs associated with additional administrative personnel and wage increases necessary to compete in highly competitive labor markets. Depreciation expense increased 7% between the first quarter of 1997 and the first quarter of 1998. This increase was due primarily to depreciation expense on new capital investments in 1997 that totaled approximately $100 million. Depreciation expense is recognized on a straight-line basis throughout the year while the revenue generated by these assets tends to be more seasonal, with the majority of the revenue coming in the second and third quarters. Interest expense of $9.3 million was relatively unchanged from the first quarter of 1997. The Company's overall weighted average interest rate increased from an average of 6.9% during the first quarter of 1997 to an average of 7.1% during the first quarter of 1998. Other income (expense), net for the first quarter 1998 was $750,000 higher than the first quarter of 1997 primarily due to increased losses on disposals of cold drink equipment. Over the past several years, the Company has increased significantly its cold drink asset base. Changes in Financial Condition: - ------------------------------- Working capital decreased $47.7 million from December 28, 1997 and decreased $67.1 million from March 30, 1997 to March 29, 1998. The decrease from December 28, 1997 is primarily attributable to an increase in the current portion of long-term debt of $60.7 million, offset by decreases in accounts payable and accruals of $6.0 million and a decrease in accrued interest of $4.5 million. The increase in the current portion of long-term debt is attributable to the maturing of $28.6 million of the Company's Medium-Term Notes in the first quarter of 1999 and additional debt related to the acquisition of a Coca-Cola bottler in northwest Alabama in January 1998. Working capital decreased by $67.1 million from March 30, 1997 due to an increase in the current portion of long-term debt of $72.6 million. The $72.6 million increase in the current portion of long-term debt reflects the increases discussed above as well as an additional $12 million of Medium-Term Notes that mature in the second quarter of 1998. Some of the other significant changes in working capital from the first quarter of 1997 to the first quarter of 1998 included an increase in trade accounts receivable of $5.4 million, an increase in accounts receivable from The Coca-Cola Company of $5.3 million and an increase of $7.4 million in inventories. The increase in trade accounts receivable is due to the significant increase in sales volume over the prior year. The increase in inventories is also due to the significant increase in sales volume as well as an increase in the number of stockkeeping units, such as Surge, 20 pack cans and 15 pack 20 oz bottles. Other decreases in working capital were due to an increase of $6.6 million in accounts payable and accruals and a $5.4 million increase in amounts payable to The Coca-Cola Company.
Capital expenditures in the first quarter of 1998 were $8.9 million compared to $4.0 million in the first quarter of 1997. Capital expenditures for the first quarter of 1997 of $4.0 million exclude the purchase of $66.3 million of previously leased equipment completed during the quarter. Long-term debt decreased by $54.5 million from March 30, 1997 and decreased $18.5 million from December 28, 1997. The decrease from March 30, 1997 is due primarily to the reclassification of $40.6 million of the Company's Medium-Term Notes to current liabilities as of March 29, 1998. The decrease from December 28, 1997 to March 29, 1998 is primarily attributable to the reclassification of $28.6 million of Medium-Term Notes to current liabilities offset partially by additional borrowings to fund working capital requirements. The Company currently intends to use its informal lines of credit to refinance the Medium-Term Notes as they come due. It is the Company's intent to renew any borrowings under its $170 million revolving credit facility and the informal lines of credit as they mature and, to the extent that any borrowings under the revolving credit facility and the informal lines of credit do not exceed the amount available under the Company's $170 million revolving credit facility, they are classified as noncurrent liabilities. As of March 29, 1998, the Company had no outstanding balances under the revolving credit facility and $20.4 million outstanding under the informal lines of credit. As of March 29, 1998 the debt portfolio had a weighted average interest rate of 7.1% and approximately 21% of the total portfolio of $548 million was subject to changes in short-term interest rates. Other liabilities increased from December 28, 1997 to March 29, 1998 by $6.8 million primarily due to a $6.5 gain which resulted from the termination of two interest rate swaps in January 1998. The $6.5 million gain will be amortized over 11.5 years, the remaining term of the initial swap agreements. Management believes that the Company, through the generation of cash flow from operations and the utilization of unused borrowing capacity, has sufficient financial resources available to maintain its current operations and provide for its current capital expenditure requirements. The Company considers the acquisition of additional franchise territories on an ongoing basis.
PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description ------ ----------- 10.1 Coca-Cola Bottling Co. Consolidated Director Deferral Plan. 27 Financial data schedule for period ended March 29, 1998. (b) Reports on Form 8-K None.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COCA-COLA BOTTLING CO. CONSOLIDATED (REGISTRANT) Date: May 12, 1998 By: /s/ David V. Singer ---------------------------------- David V. Singer Principal Financial Officer of the Registrant and Vice President - Chief Financial Officer