UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES [X] EXCHANGE ACT OF 1934 For the quarterly period ended April 1, 2001 ------------------------------------------------- Commission File Number 0-9286 --------------------------------------------------------- COCA-COLA BOTTLING CO. CONSOLIDATED -------------------------------------------- (Exact name of registrant as specified in its charter) <TABLE> <CAPTION> <S> <C> Delaware 56-0950585 - ------------------------------------------------ ---------------------------------------------- (State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number) organization) </TABLE> 4100 Coca-Cola Plaza, Charlotte, North Carolina 28211 ------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (704) 557-4400 ------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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, 2001 ----- -------------------------- Common Stock, $1.00 Par Value 6,392,277 Class B Common Stock, $1.00 Par Value 2,361,052
PART I - FINANCIAL INFORMATION Item l. Financial Statements Coca-Cola Bottling Co. Consolidated CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) In Thousands (Except Per Share Data) <TABLE> <CAPTION> First Quarter ------------------------------------ 2001 2000 ---- ---- <S> <C> <C> Net sales (includes sales to Piedmont of $13,987 and $15,691) $ 230,057 $ 228,184 Cost of sales, excluding depreciation shown below (includes $10,921 and $12,582 related to sales to Piedmont) 123,590 122,243 ----------- ----------- Gross margin 106,467 105,941 ----------- ----------- Selling, general and administrative expenses, excluding depreciation shown below 76,369 74,242 Depreciation expense 15,803 16,090 Amortization of goodwill and intangibles 3,720 3,664 ----------- ----------- Income from operations 10,575 11,945 Interest expense 12,152 13,936 Other income (expense), net (1,369) (1,019) ----------- ----------- Loss before income taxes (2,946) (3,010) Income taxes (benefit) (1,164) (1,053) ----------- ----------- Net loss $ (1,782) $ (1,957) =========== =========== Basic net loss per share $ (.20) $ (.22) Diluted net loss per share $ (.20) $ (.22) Weighted average number of common shares outstanding 8,753 8,733 Weighted average number of common shares outstanding - assuming dilution 8,753 8,733 Cash dividends per share Common Stock $ .25 $ .25 Class B Common Stock $ .25 $ .25 </TABLE> See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated CONSOLIDATED BALANCE SHEETS (UNAUDITED) In Thousands (Except Share Data) <TABLE> <CAPTION> April 1, Dec. 31, April 2, 2001 2000 2000 -------- -------- -------- ASSETS - ------ <S> <C> <C> <C> Current Assets: - --------------- Cash $ 7,955 $ 8,425 $ 6,622 Accounts receivable, trade, less allowance for doubtful accounts of $809, $918 and $894 62,369 62,661 57,653 Accounts receivable from The Coca-Cola Company 7,788 5,380 11,878 Accounts receivable, other 6,195 8,247 6,496 Inventories 35,925 40,502 41,579 Prepaid expenses and other current assets 16,498 14,026 15,082 ---------- ---------- ---------- Total current assets 136,730 139,241 139,310 ---------- ---------- ---------- Property, plant and equipment, net 431,245 437,926 478,416 Investment in Piedmont Coca-Cola Bottling Partnership 59,316 62,730 60,138 Other assets 60,853 60,846 61,694 Identifiable intangible assets, net 281,827 284,842 302,703 Excess of cost over fair value of net assets of businesses acquired, less accumulated amortization of $36,290, $35,585 and $33,713 75,807 76,512 57,555 ---------- ---------- ---------- Total $1,045,778 $1,062,097 $1,099,816 ========== ========== ========== </TABLE> See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated CONSOLIDATED BALANCE SHEETS (UNAUDITED) In Thousands (Except Share Data) <TABLE> <CAPTION> April 1, Dec. 31, April 2, 2001 2000 2000 ------------- -------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities: - -------------------- <S> <C> <C> <C> Portion of long-term debt payable within one year $ 57,317 $ 9,904 $ 3,266 Accounts payable and accrued liabilities 83,041 84,324 89,670 Accounts payable to The Coca-Cola Company 4,018 3,802 5,275 Due to Piedmont Coca-Cola Bottling Partnership 18,958 16,436 3,110 Accrued interest payable 14,462 10,483 14,076 ------------- -------------- ------------- Total current liabilities 177,796 124,949 115,397 Deferred income taxes 146,512 148,655 123,118 Other liabilities 77,614 77,835 80,060 Long-term debt 620,156 682,246 754,530 ------------- -------------- ------------- Total liabilities 1,022,078 1,033,685 1,073,105 ------------- -------------- ------------- Commitments and Contingencies (Note 12) 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-9,454,651, 9,454,651 and 9,454,626 shares 9,454 9,454 9,454 Class B Common Stock, $1.00 par value: Authorized-10,000,000 shares; Issued-2,989,166, 2,969,166 and 2,969,191 shares 2,989 2,969 2,969 Class C Common Stock, $1.00 par value: Authorized-20,000,000 shares; Issued-None Capital in excess of par value 97,569 99,020 105,570 Accumulated deficit (23,559) (21,777) (30,028) Accumulated other comprehensive loss (1,499) ------------- -------------- ------------- 84,954 89,666 87,965 Less-Treasury stock, at cost: Common - 3,062,374 shares 60,845 60,845 60,845 Class B Common - 628,114 shares 409 409 409 ------------- -------------- ------------- Total stockholders' equity 23,700 28,412 26,711 ------------- -------------- ------------- Total $ 1,045,778 $ 1,062,097 $ 1,099,816 ============= ============== ============= </TABLE> See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) In Thousands <TABLE> <CAPTION> Capital Accumulated Class B in Other Common Common Excess of Accum. Comprehensive Treasury Stock Stock Par Value Deficit Loss Stock Total ----- ----- --------- ------- ------------- ----- ----- <S> <C> <C> <C> <C> <C> <C> <C> Balance on January 2, 2000 $ 9,454 $ 2,969 $107,753 $(28,071) $ $(61,254) $ 30,851 Net loss (1,957) (1,957) Cash dividends paid (2,183) (2,183) -------- -------- -------- -------- --------- -------- -------- Balance on April 2, 2000 $ 9,454 $ 2,969 $105,570 $(30,028) $ $(61,254) $ 26,711 ======== ======== ======== ======== ========= -======= ======== Balance on December 31, 2000 $ 9,454 $ 2,969 $ 99,020 $(21,777) $ $(61,254) $ 28,412 Comprehensive loss: Net loss (1,782) (1,782) Proportionate share of Piedmont's accum. other comprehensive loss (1,499) (1,499) -------- Total comprehensive loss (3,281) Cash dividends paid (2,188) (2,188) Issuance of Class B Common Stock 20 737 757 -------- -------- -------- -------- --------- -------- -------- Balance on April 1, 2001 $ 9,454 $ 2,989 $ 97,569 $(23,559) $ (1,499) $(61,254) $ 23,700 ======== ======== ======== ======== ========= -======= ======== </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 ------------------------------- 2001 2000 ------------- ------------- Cash Flows from Operating Activities - ------------------------------------ <S> <C> <C> Net loss $ (1,782) $ (1,957) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation expense 15,803 16,090 Amortization of goodwill and intangibles 3,720 3,664 Deferred income taxes (benefit) (1,164) (1,053) Losses on sale of property, plant and equipment 524 482 Amortization of debt costs 213 246 Amortization of deferred gain related to terminated interest rate swaps (258) (141) Undistributed losses of Piedmont Coca-Cola Bottling Partnership 935 78 (Increase) decrease in current assets less current liabilities 8,232 (7,402) Increase in other noncurrent assets (184) (1,006) Increase in other noncurrent liabilities 858 2,510 Other 27 (203) ---------- ---------- Total adjustments 28,706 13,265 ---------- ---------- Net cash provided by operating activities 26,924 11,308 ---------- ---------- Cash Flows from Financing Activities - ------------------------------------ Repayment of current portion of long-term debt (1,776) (25,504) Proceeds from (repayment of) lines of credit, net (12,900) 30,701 Cash dividends paid (2,188) (2,183) Payments on capital lease obligations (976) (1,327) Other 193 (375) ---------- ---------- Net cash provided by (used in) financing activities (17,647) 1,312 ---------- ---------- Cash Flows from Investing Activities - ------------------------------------ Additions to property, plant and equipment (10,682) (15,841) Proceeds from the sale of property, plant and equipment 935 952 Acquisition of companies, net of cash acquired (159) ---------- ---------- Net cash used in investing activities (9,747) (15,048) ---------- ---------- Net decrease in cash (470) (2,428) Cash at beginning of period 8,425 9,050 ---------- ---------- Cash at end of period $ 7,955 $ 6,622 ========== ========== Significant non-cash investing and financing activities - ------------------------------------------------------- Issuance of Class B Common Stock in connection with stock award 757 Capital lease obligations incurred 1,313 </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 preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 31, 2000 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. New Accounting Pronouncement On January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS No. 133") as amended, which requires that all derivative instruments be recognized in the financial statements. Currently, the Company uses interest rate swap agreements to manage its exposure to fluctuations in interest rates and to maintain its targeted fixed/floating rate mix. These agreements generally involve the exchange of fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date. The notional amount and interest payments in these agreements match the cash flows of the related liabilities. The notional balances of these agreements represent a balance used to calculate the exchange of cash flows and are not assets or liabilities of the Company. Accordingly, any market risk or opportunity associated with these agreements is offset by the opposite market impact on the related debt. The Company's credit risk related to interest rate swap agreements is considered low because they are entered into only with strong creditworthy counterparties and are generally settled on a net basis. The difference paid or received on interest rate swap agreements is recognized as an adjustment to interest expense. In accordance with the provisions of SFAS No. 133, the Company has designated its current interest rate swap agreements as fair value hedges. The Company has determined that these agreements are highly effective in offsetting the fair value changes in a portion of the Company's debt portfolio. These derivatives and the related hedged debt amounts have been recognized in the financial statements at their fair value. The adoption of SFAS No. 133 did not have a significant impact on the financial statements or results of operations during the first quarter of 2001. See Notes 7, 8 and 9 for additional information regarding long-term debt and current derivative positions. The Company's equity investee, Piedmont Coca-Cola Bottling Partnership ("Piedmont"), has a similar risk management approach and has several interest rate swap agreements that have been designated as cash flow hedges. The effect of adoption of SFAS No. 133 and the impact during the first quarter 2001 related to Piedmont is summarized as follows: Impact of adoption, net of tax $ 924 Change in fair market value of cash flow hedges during first quarter 2001, net of tax 575 ----------- Company's proportionate share of Piedmont's accum. other comprehensive loss $ 1,499 ===========
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 3. Summarized Income Statement Data of Piedmont Coca-Cola Bottling Partnership On July 2, 1993, the Company and The Coca-Cola Company formed 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 was as follows: <TABLE> <CAPTION> First Quarter ------------------------ In Thousands 2001 2000 - ------------------------------------------------------------------------------------------------------------------ <S> <C> <C> Net sales $66,079 $65,452 Gross margin 31,596 31,256 Income from operations 1,310 3,201 Net loss (1,872) (156) 4. Inventories Inventories were summarized as follows: April 1, Dec. 31, April 2, In Thousands 2001 2000 2000 - ------------------------------------------------------------------------------------------------------------------ Finished products $23,099 $22,907 $24,049 Manufacturing materials 8,905 13,330 12,935 Plastic pallets and other 3,921 4,265 4,595 - ------------------------------------------------------------------------------------------------------------------ Total inventories $35,925 $40,502 $41,579 - ------------------------------------------------------------------------------------------------------------------ </TABLE>
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 5. Property, Plant and Equipment The principal categories and estimated useful lives of property, plant and equipment were as follows: <TABLE> <CAPTION> April 1, Dec. 31, April 2, Estimated In Thousands 2001 2000 2000 Useful Lives - -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Land $ 11,208 $ 11,311 $ 12,332 Buildings 96,300 97,012 95,911 10-50 years Machinery and equipment 94,398 94,652 88,749 5-20 years Transportation equipment 137,875 133,828 142,698 4-10 years Furniture and fixtures 36,402 36,519 38,711 4-10 years Vending equipment 287,807 285,772 291,357 6-13 years Leasehold and land improvements 38,938 39,597 41,503 5-20 years Software for internal use 16,392 17,207 13,042 3-7 years Construction in progress 1,700 1,162 9,530 - -------------------------------------------------------------------------------------------------------------------------- Total property, plant and equipment, at cost 721,020 717,060 733,833 Less: Accumulated depreciation and amortization 289,775 279,134 255,417 - -------------------------------------------------------------------------------------------------------------------------- Property, plant and equipment, net $ 431,245 $ 437,926 $ 478,416 - -------------------------------------------------------------------------------------------------------------------------- </TABLE> 6. Identifiable Intangible Assets The principal categories and estimated useful lives of identifiable intangible assets were as follows: <TABLE> <CAPTION> April 1, Dec. 31, April 2, Estimated In Thousands 2001 2000 2000 Useful Lives - -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Franchise rights $ 353,036 $ 353,036 $ 361,722 40 years Customer lists 54,864 54,864 54,864 17-23 years Other 16,668 16,668 16,668 17-23 years - -------------------------------------------------------------------------------------------------------------------------- Identifiable intangible assets 424,568 424,568 433,254 Less: Accumulated amortization 142,741 139,726 130,551 - -------------------------------------------------------------------------------------------------------------------------- Identifiable intangible assets, net $ 281,827 $ 284,842 $ 302,703 - -------------------------------------------------------------------------------------------------------------------------- </TABLE>
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 7. Long-Term Debt Long-term debt was summarized as follows: <TABLE> <CAPTION> Interest Interest April 1, Dec. 31, April 2, In Thousands Maturity Rate Paid 2001 2000 2000 - ----------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Lines of Credit Varies $ $ 12,900 $ 77,300 Term Loan Agreement 2004 5.51% Varies 85,000 85,000 85,000 Term Loan Agreement 2005 5.51% Varies 85,000 85,000 85,000 Medium-Term Notes 2002 8.56% Semi- 47,000 47,000 47,000 annually Debentures 2007 6.85% Semi- 100,000 100,000 100,000 annually Debentures 2009 7.20% Semi- 100,000 100,000 100,000 annually Debentures 2009 6.38% Semi- 250,439 250,000 250,000 annually Other notes payable 2001 - 5.75%- Varies 10,473 12,250 13,496 2006 10.00% - ----------------------------------------------------------------------------------------------------------------------------- 677,912 692,150 757,796 Less: Portion of long-term debt payable within one year 57,317 9,904 3,266 - ----------------------------------------------------------------------------------------------------------------------------- 620,595 Fair market value of interest rate swaps (439) - ----------------------------------------------------------------------------------------------------------------------------- Long-term debt $620,156 $682,246 $754,530 - ----------------------------------------------------------------------------------------------------------------------------- </TABLE>
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 7. Long-Term Debt (cont.) The Company had weighted average interest rates for its debt portfolio of 6.7%, 7.1% and 6.9% as of April 1, 2001, December 31, 2000 and April 2, 2000, respectively. The Company's overall weighted average interest rate on long-term debt decreased from an average of 7.2% during the first quarter of 2000 to an average of 6.8% during the first quarter of 2001. After taking into account the effect of all of the interest rate swap activities, approximately 40%, 41% and 39% of the total debt portfolio was subject to changes in short-term interest rates as of April 1, 2001, December 31, 2000 and April 2, 2000, 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 2001 by approximately $.7 million and the net loss for the first quarter ended April 1, 2001 would have been increased by approximately $.4 million.
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 8. Derivative Financial Instruments The Company uses interest rate hedging products to modify risk from interest rate fluctuations in its underlying debt. The Company has historically used derivative financial instruments from time to time to achieve a targeted fixed/floating rate mix. This target is based upon anticipated cash flows from operations relative to the Company's debt level and the potential impact of increases in interest rates on the Company's overall financial condition. The Company does not use derivative financial instruments for trading or other speculative purposes nor does it use leveraged financial instruments. All of the Company's outstanding interest rate swap agreements are LIBOR-based. Derivative financial instruments were summarized as follows: <TABLE> <CAPTION> April 1, 2001 December 31, 2000 April 2, 2000 - -------------------------------------------------------------------------------------------------------------------------- Notional Remaining Notional Remaining Notional Remaining In Thousands Amount Term Amount Term Amount Term - -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Interest rate swap-floating $ 60,000 3.5 Years Interest rate swap-fixed 60,000 3.5 Years Interest rate swap-fixed 50,000 5.0 Years Interest rate swaps-floating $100,000 8.0 Years $100,000 8.25 Years 100,000 9.0 Years Interest rate cap 35,000 .25 Years </TABLE> The counterparties to these contractual arrangements are major financial institutions with which the Company also has other financial relationships. The Company is exposed to credit loss in the event of nonperformance by these counterparties. However, the Company does not anticipate nonperformance by the other parties.
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 9. Fair Values of Financial Instruments The following methods and assumptions were used by the Company in estimating the fair values of its financial instruments: Public Debt The fair values of the Company's public debt are based on estimated market prices. Non-Public Variable Rate Long-Term Debt The carrying amounts of the Company's variable rate borrowings approximate their fair values. Non-Public Fixed Rate Long-Term Debt The fair values of the Company's fixed rate long-term borrowings are estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Derivative Financial Instruments Fair values for the Company's interest rate swaps are based on current settlement values. The carrying amounts and fair values of the Company's long-term debt and derivative financial instruments were as follows: <TABLE> <CAPTION> April 1, 2001 December 31, 2000 April 2, 2000 ------------------------------------------------------------------------------------- Carrying Fair Carrying Fair Carrying Fair In Thousands Amount Value Amount Value Amount Value - -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Public debt $497,439 $494,473 $497,000 $480,687 $497,000 $466,514 Non-public variable rate long-term debt 170,000 170,000 182,900 182,900 247,300 247,300 Non-public fixed rate long-term debt 10,473 10,533 12,250 12,433 13,496 13,612 Interest rate swaps (439) (439) 1,669 6,893 </TABLE> The fair value of the interest rate swaps at April 1, 2001 represents the estimated amount the Company would have received upon termination of these agreements. The fair values of the interest rate swaps at December 31, 2000 and April 2, 2000 represent the estimated amounts the Company would have had to pay to terminate these agreements.
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 10. Supplemental Disclosures of Cash Flow Information Changes in current assets and current liabilities affecting cash were as follows: <TABLE> <CAPTION> First Quarter ----------------------------- In Thousands 2001 2000 - ------------------------------------------------------------------------------------------------------------- <S> <C> <C> Accounts receivable, trade, net $ 292 $ 2,714 Accounts receivable, The Coca-Cola Company (2,408) (5,860) Accounts receivable, other 2,052 7,442 Inventories 4,577 381 Prepaid expenses and other current assets (2,472) (1,807) Accounts payable and accrued liabilities (526) (10,821) Accounts payable, The Coca-Cola Company 216 2,929 Accrued interest payable 3,979 (2,754) Due to (from) Piedmont 2,522 374 -------- -------- (Increase) decrease in current assets less current liabilities $ 8,232 $ (7,402) ======== ======== </TABLE>
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 11. Earnings Per Share The following table sets forth the computation of basic net loss per share and diluted net loss per share: <TABLE> <CAPTION> First Quarter -------------------------- In Thousands (Except Per Share Data) 2001 2000 - ------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Numerator: - ---------- Numerator for basic net loss and diluted net loss $ (1,782) $ (1,957) Denominator: - ------------ Denominator for basic net loss per share - weighted average common shares 8,753 8,733 Effect of dilutive securities - Stock options * * ---------- ---------- Denominator for diluted net loss per share - adjusted weighted average common shares 8,753 8,733 ========== ========== Basic net loss per share $ (.20) $ (.22) ========== ========== Diluted net loss per share $ (.20) $ (.22) ========== ========== * Antidilutive </TABLE>
Coca-Cola Bottling Co. Consolidated Notes to Consolidated Financial Statements (Unaudited) 12. Commitments and Contingencies The Company has guaranteed a portion of the debt for two cooperatives in which the Company is a member. The amounts guaranteed were $37.4 million, $35.7 million and $31.5 million as of April 1, 2001, December 31, 2000 and April 2, 2000, respectively. The Company is involved in various claims and legal proceedings which have arisen in the ordinary course of business. Although it is difficult to predict the ultimate outcome of these cases, management believes, based on discussions with counsel, that the ultimate disposition of these claims will not have a material adverse effect on the financial condition, cash flows or results of operations of the Company.
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 quarter of 2001 compared to the first quarter of 2000 and changes in financial condition from April 2, 2000 and December 31, 2000 to April 1, 2001. The results for interim periods are not necessarily indicative of the results to be expected for the year due to seasonal factors. Coca-Cola Bottling Co. Consolidated (the "Company") had a net loss of $1.8 million or $.20 per share for the first quarter of 2001 compared with a net loss of $2.0 million or $.22 per share for the same period in 2000. Operating results for the quarter included constant territory physical case volume growth of 2% and higher contract sales to other bottlers. The Company sold most of its bottling territory in Kentucky and Ohio at the end of September 2000. Total marketing funding from The Coca-Cola Company and other beverage companies in the first quarter of 2001 was approximately $1.4 million less than in the first quarter of 2000. Lower interest rates and reduced debt balances resulted in a decrease in interest expense from the first quarter of 2000 of almost $1.8 million. The Company continues to experience strong free cash flow as evidenced by outstanding debt which declined to $677.5 million at April 1, 2001 compared to $757.8 million at April 2, 2000. On January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS No. 133") as amended, which requires that all derivative instruments be recognized in the financial statements. The adoption of SFAS No. 133 did not have a significant impact on the financial statements or results of operations during the first quarter of 2001. Results of Operations: - ---------------------- The Company's net loss for the first quarter of 2001 of $1.8 million or $.20 per share was slightly improved over a net loss of $2.0 million or $.22 per share in the first quarter of 2000. During fiscal year 2000, the Company increased its net selling price by approximately 6.5% to cover increased costs and improve operating margins. The increases in selling price during 2000 impacted unit sales volume which declined by approximately 5%. However, during the fourth quarter of 2000, volume began to rebound as constant territory physical volume increased by approximately 1.5%. In the first quarter of 2001, this trend continued as constant territory physical volume grew by approximately 2.2%. The Company continues to experience solid growth for its bottled water, Dasani, with volume increasing 60% on a constant territory basis over the first quarter of 2000. Physical case volume for the Company's three largest selling brands, Coca-Cola classic, Sprite and diet Coke increased by 3% in the first quarter of 2001 versus the first quarter of 2000 after volume declines during fiscal year 2000. Cost of sales on a per unit basis was relatively unchanged in the first quarter of 2001 compared to the same period in 2000. Increases in raw material costs were offset by a package mix shift from bottles
to cans. Gross margin as a percentage of net sales on a constant territory basis was 46.3% in the first quarter of 2001 compared to 46.5% in the first quarter of 2000. Selling, general and administrative expenses for the first quarter of 2001 increased 3% from the first quarter of 2000. The increase in selling, general and administrative expenses was due primarily to a reduction in marketing funding from The Coca-Cola Company and an increase in sales development costs. Selling, general and administrative employment costs increased by only .7% or $.3 million in the first quarter of 2001 on a constant territory basis. The Company relies extensively on advertising and sales promotion in the marketing of its products. The Coca-Cola Company and other beverage companies that supply concentrate, syrups and finished products to the Company make substantial advertising expenditures to promote sales in the local territories served by the Company. The Company also benefits from national advertising programs conducted by The Coca-Cola Company and other beverage companies. The Coca-Cola Company's marketing spending in the United States for 2001 is expected to be significantly higher than in 2000. Certain of the marketing expenditures by The Coca-Cola Company and other beverage companies are made pursuant to annual arrangements. Although The Coca-Cola Company has advised the Company that it intends to provide marketing funding support in 2001, it is not obligated to do so under the Company's master bottle contract. Total marketing funding support from The Coca-Cola Company and other beverage companies in the first quarter of 2001 and 2000 was $10.7 million and $12.1 million, respectively. Depreciation expense decreased slightly between the first quarter of 2001 and the first quarter of 2000 which reflected the reduced level of capital spending in 2000. The Company expects its capital spending in 2001 will be comparable to the amount expended during 2000. Interest expense of $12.2 million decreased by $1.8 million or 13% from the first quarter of 2000. The decrease is attributable to lower average interest rates on the Company's outstanding debt and lower debt balances. The Company's outstanding debt declined to $677.5 million at April 1, 2001 from $757.8 million at April 2, 2000. The Company's overall weighted average interest rate decreased from an average of 7.2% during the first quarter of 2000 to an average of 6.8% during the first quarter of 2001. The Company's effective income tax rates for the first quarter of 2001 and 2000 were 39.5% and 35.0%, respectively. The effective income tax rate for fiscal year 2000 was 36%. The Company's first quarter 2001 effective tax rate reflects expected fiscal year 2001 earnings. The Company's effective income tax rate for the remainder of 2001 is dependent upon operating results and may change if the results for the year are different from current expectations. Changes in Financial Condition: - ------------------------------- Working capital decreased $55.4 million from December 31, 2000 and $65.0 million from April 2, 2000 to April 1, 2001. The decreases from year-end and the first quarter of 2000 were due to an increase in the current portion of long-term debt of $47.4 million from year-end and $54.1 million from April 1, 2000. The increase in the current maturities reflected the reclassification of $47 million of the Company's Medium-Term Notes that mature in February 2002 and other notes payable of
$10 million that mature within one year. The Company intends to use its free cash flow and available lines of credit to repay these obligations as they mature. Other changes in working capital between December 31, 2000 and April 1, 2001 included a decline in inventories of $4.6 million and an increase in accrued interest of $4.0 million. The decline in inventory balances was a result of the Company's ongoing value chain program which has reduced both raw material and finished goods inventories. The increase in accrued interest was due to the timing of payments on the Company's long-term debentures. Other changes in working capital between April 2, 2000 and April 1, 2001 included an increase in accounts receivable, trade of $4.7 million, a decrease in inventories of $5.7 million, a decrease in accounts payable and accrued liabilities of $6.6 million and an increase in amounts due to Piedmont Coca-Cola Bottling Partnership ("Piedmont") of $15.8 million. The increase in amounts due to Piedmont resulted from increased cash flow at Piedmont as operating margins have improved and the timing of net cash flows. Capital expenditures in the first quarter of 2001 were $10.7 million compared to $15.8 million in the first quarter of 2000. Long-term debt, as of April 1, 2001, decreased by $80.3 million from April 2, 2000 and $14.7 million from December 31, 2000. A significant reduction in capital spending has provided the Company with additional cash flow to reduce long-term debt. Additionally, the Company sold bottling territory in Kentucky and Ohio in the third quarter of 2000 generating approximately $20 million of net cash flow that was used to repay long-term debt. As of April 1, 2001, the Company had no amounts outstanding under its $170 million revolving credit facility or its lines of credit. As of April 1, 2001 the Company's debt portfolio had a weighted average interest rate of approximately 6.7% and approximately 40% of the total portfolio of $677.5 million was subject to changes in short-term interest rates. It is the Company's intent to continue to grow through acquisitions of other Coca-Cola bottlers. Acquisition related costs including interest expense and non-cash charges such as amortization of intangible assets may be incurred. To the extent these expenses are incurred and are not offset by cost savings or increased sales, the Company's acquisition strategy may depress short-term earnings. The Company believes that the continued growth through acquisitions will enhance long-term stockholder value. Sources of capital for the Company include operating cash flows, bank borrowings, issuance of public or private debt and the issuance of equity securities. Management believes that the Company, through these sources, has sufficient financial resources available to maintain its current operations and provide for its current capital expenditure and working capital requirements, scheduled debt payments, interest and income tax liabilities and dividends for stockholders.
FORWARD-LOOKING STATEMENTS - -------------------------- This Quarterly Report on Form 10-Q, as well as information included in, or incorporated by reference from, future filings by the Company with the Securities and Exchange Commission and information contained in written material, press releases and oral statements issued by or on behalf of the Company, contains, or may contain, forward-looking management comments and other statements that reflect management's current outlook for future periods. These statements include, among others, statements relating to: our growth strategy increasing long-term stockholder value; the sufficiency of our financial resources to fund our operations and capital expenditure requirements; our expectations concerning capital expenditures and our expectations concerning The Coca-Cola Company's marketing spending in 2001. These statements and expectations are based on the current available competitive, financial and economic data along with the Company's operating plans, and are subject to future events and uncertainties. Events or uncertainties that could adversely affect future periods include, without limitation: lower than expected net pricing resulting from increased marketplace competition, an inability to meet performance requirements for expected levels of marketing support payments from The Coca-Cola Company, an inability to meet requirements under bottling contracts, the inability of our aluminum can or PET bottle suppliers to meet our demand, material changes from expectations in the cost of raw materials, higher than expected fuel prices, an inability to meet projections for performance in newly acquired bottling territories and unfavorable interest rate fluctuations.
PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description ------ ----------- 4.1 The Registrant, by signing this report, agrees to furnish the Securities and Exchange Commission, upon its request, a copy of any instrument which defines the rights of holders of long-term debt of the Registrant and its subsidiaries for which consolidated financial statements are required to be filed, and which authorizes a total amount of securities not in excess of 10 percent of total assets of the Registrant and its subsidiaries on a consolidated basis. 10.1 Supplemental Savings Incentive Plan, as amended and restated as of January 1, 2001, between Eligible Employees of the Company and the Company. (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 14, 2001 By: /s/ David V. Singer ------------------------------------------------ David V. Singer Principal Financial Officer of the Registrant and Executive Vice President and Chief Financial Officer