Coca-Cola Consolidated, Inc. - Quarter Report: 2007 September (Form 10-Q)

Coca-Cola Bottling Co. Consolidated

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2007

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 Identification No.)
organization)

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

(704) 557-4400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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


Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at October 31, 2007

Common Stock, $1.00 Par Value		6,643,677
Class B Common Stock, $1.00 Par Value		2,479,652

COCA-COLA BOTTLING CO. CONSOLIDATED
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007

INDEX


		Page

PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Operations		3
	Consolidated Balance Sheets		4
	Consolidated Statements of Changes in Stockholders’ Equity		6
	Consolidated Statements of Cash Flows		7
	Notes to Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		55
Item 4.	Controls and Procedures		55

PART II — OTHER INFORMATION
Item 1A.	Risk Factors		56
Item 6.	Exhibits		57
	Signature		58
Exhibit 12
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I — FINANCIAL INFORMATION

Item l. Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
In Thousands (Except Per Share Data)


	Third Quarter				First Nine Months
	2007		2006		2007		2006
Net sales	$	367,360	$	370,626	$	1,095,359	$	1,090,429
Cost of sales		212,148		213,237		619,366		619,325

Gross margin		155,212		157,389		475,993		471,104
Selling, delivery and administrative expenses		134,861		135,421		402,376		405,459
Amortization of intangibles		111		136		334		426

Income from operations		20,240		21,832		73,283		65,219

Interest expense		12,135		12,745		36,647		37,808
Minority interest		110		841		1,960		2,546

Income before income taxes		7,995		8,246		34,676		24,865
Income taxes		2,722		3,305		13,061		10,222

Net income	$	5,273	$	4,941	$	21,615	$	14,643


Basic net income per share:
Common Stock	$	.58	$	.54	$	2.37	$	1.61

Weighted average number of Common Stock shares outstanding		6,644		6,643		6,644		6,643

Class B Common Stock	$	.58	$	.54	$	2.37	$	1.61

Weighted average number of Class B Common Stock shares outstanding		2,480		2,460		2,480		2,460

Diluted net income per share:
Common Stock	$	.58	$	.54	$	2.36	$	1.61

Weighted average number of Common Stock shares outstanding — assuming dilution		9,144		9,123		9,140		9,120

Class B Common Stock	$	.58	$	.54	$	2.36	$	1.60

Weighted average number of Class B Common Stock shares outstanding — assuming dilution		2,500		2,480		2,496		2,476

Cash dividends per share:
Common Stock	$	.25	$	.25	$	.75	$	.75
Class B Common Stock	$	.25	$	.25	$	.75	$	.75

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED BALANCE SHEETS

In Thousands (Except Share Data)


	Unaudited				Unaudited
	Sept. 30,		Dec. 31,		Oct. 1,
	2007		2006		2006
ASSETS

Current Assets:
Cash and cash equivalents	$	88,400	$	61,823	$	57,420
Accounts receivable, trade, less allowance for doubtful accounts of $1,056, $1,334 and $1,373, respectively		96,914		91,299		90,749
Accounts receivable from The Coca-Cola Company		19,768		4,915		8,322
Accounts receivable, other		10,128		8,565		8,731
Inventories		62,822		67,055		56,799
Prepaid expenses and other current assets		16,000		13,485		14,627

Total current assets		294,032		247,142		236,648


Property, plant and equipment, net		359,391		384,464		389,856
Leased property under capital leases, net		71,896		69,851		70,681
Other assets		34,670		35,542		36,791
Franchise rights		520,672		520,672		520,672
Goodwill		102,049		102,049		102,049
Other identifiable intangible assets, net		4,413		4,747		4,871


Total	$	1,387,123	$	1,364,467	$	1,361,568

See Accompanying Notes to Consolidated Financial Statements

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


	Unaudited						Unaudited
	Sept. 30,			Dec. 31,			Oct. 1,
	2007			2006			2006
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current portion of debt	$	100,000		$	100,000		$	—
Current portion of obligations under capital leases		2,559			2,435			1,583
Accounts payable, trade		38,445			44,050			34,994
Accounts payable to The Coca-Cola Company		21,896			21,748			22,863
Other accrued liabilities		53,993			51,030			59,087
Accrued compensation		16,652			19,671			14,781
Accrued interest payable		18,760			10,008			18,537

Total current liabilities		252,305			248,942			151,845
Deferred income taxes		152,392			162,694			158,529
Pension and postretirement benefit obligations		57,064			57,757			65,161
Other liabilities		97,175			88,598			90,393
Obligations under capital leases		78,280			75,071			76,328
Long-term debt		591,450			591,450			691,450

Total liabilities		1,228,666			1,224,512			1,233,706


Commitments and Contingencies (Note 14)

Minority interest		47,963			46,002			45,330

Stockholders’ Equity:
Common Stock, $1.00 par value:
Authorized – 30,000,000 shares; Issued – 9,706,051, 9,705,551 and 9,705,551 shares, respectively		9,706			9,705			9,705
Class B Common Stock, $1.00 par value:
Authorized – 10,000,000 shares; Issued – 3,107,766, 3,088,266 and 3,088,266 shares, respectively		3,107			3,088			3,088
Capital in excess of par value		102,003			101,145			100,913
Retained earnings		83,267			68,495			62,171
Accumulated other comprehensive loss		(26,335	)		(27,226	)		(32,091	)

		171,748			155,207			143,786
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		110,494			93,953			82,532


Total	$	1,387,123		$	1,364,467		$	1,361,568

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

In Thousands


						Capital						Accumulated
			Class B			in						Other
	Common		Common			Excess of			Retained			Comprehensive			Treasury
	Stock		Stock			Par Value			Earnings			Loss			Stock			Total
Balance on January 1, 2006	$	9,705	$	3,068		$	99,376		$	54,355		$	(30,116	)	$	(61,254	)	$	75,134
Comprehensive income:
Net income										14,643									14,643
Net change in minimum pension liability adjustment, net of tax													(1,975	)					(1,975	)

Total comprehensive income																			12,668
Cash dividends paid
Common ($.75 per share)										(4,982	)								(4,982	)
Class B Common ($.75 per share)										(1,845	)								(1,845	)
Issuance of 20,000 shares of Class B Common Stock				20			840												860
Stock compensation expense							697												697

Balance on October 1, 2006	$	9,705	$	3,088		$	100,913		$	62,171		$	(32,091	)	$	(61,254	)	$	82,532


Balance on December 31, 2006	$	9,705	$	3,088		$	101,145		$	68,495		$	(27,226	)	$	(61,254	)	$	93,953
Comprehensive income:
Net income										21,615									21,615
Foreign currency translation adjustments, net of tax													15						15
Pension and postretirement benefit adjustments, net of tax													876						876

Total comprehensive income																			22,506
Cash dividends paid
Common ($.75 per share)										(4,983	)								(4,983	)
Class B Common ($.75 per share)										(1,860	)								(1,860	)
Issuance of 20,000 shares of Class B Common Stock				20			(20	)											—
Stock compensation expense							878												878
Conversion of Class B Common Stock into Common Stock		1		(1	)														—

Balance on September 30, 2007	$	9,706	$	3,107		$	102,003		$	83,267		$	(26,335	)	$	(61,254	)	$	110,494

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

In Thousands


	First Nine Months
	2007			2006
Cash Flows from Operating Activities
Net income	$	21,615		$	14,643
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		50,793			50,371
Amortization of intangibles		334			426
Deferred income taxes		5,092			2,061
Losses on disposal of property, plant and equipment		298			1,327
Amortization of debt costs		2,051			1,986
Amortization of deferred gain related to terminated interest rate agreements		(1,273	)		(1,266	)
Stock compensation expense		878			697
Minority interest		1,960			2,546
(Increase) decrease in current assets less current liabilities		(9,154	)		13,168
Decrease in other noncurrent assets		1,499			2,102
Decrease in other noncurrent liabilities		(13,330	)		(4,011	)
Other		15			—

Total adjustments		39,163			69,407

Net cash provided by operating activities		60,778			84,050


Cash Flows from Investing Activities
Additions to property, plant and equipment		(30,603	)		(50,742	)
Proceeds from the sale of property, plant and equipment		7,684			950
Investment in plastic bottle manufacturing cooperative		(2,256	)		(1,515	)
Other		—			(243	)

Net cash used in investing activities		(25,175	)		(51,550	)


Cash Flows from Financing Activities
Payment of current portion of long-term debt		—			(39	)
Payment of lines of credit, net		—			(6,500	)
Cash dividends paid		(6,843	)		(6,827	)
Principal payments on capital lease obligations		(1,811	)		(1,291	)
Other		(372	)		(31	)

Net cash used in financing activities		(9,026	)		(14,688	)


Net increase in cash		26,577			17,812
Cash at beginning of period		61,823			39,608

Cash at end of period	$	88,400		$	57,420


Significant non-cash investing and financing activities:
Issuance of Class B Common Stock in connection with stock award	$	929		$	860
Capital lease obligations incurred		5,144			—

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated

Notes to Consolidated Financial Statements (Unaudited)

1. Significant Accounting Policies

The consolidated financial statements include the accounts of Coca-Cola Bottling Co. Consolidated and its majority owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated.

The consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal, recurring nature.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The accounting policies followed in the presentation of interim financial results are consistent with those followed on an annual basis. These policies are presented in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the United States Securities and Exchange Commission (“SEC”).

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

2. Seasonality of Business

Operating results for the third quarter of 2007 (“Q3 2007”) and the first nine months of 2007 (“YTD 2007”) are not indicative of results that may be expected for the fiscal year ending December 30, 2007 because of business seasonality. Business seasonality results primarily from higher sales of the Company’s products in the second and third quarters versus the first and fourth quarters of the fiscal year. Fixed costs, such as depreciation and interest expense, are not significantly impacted by business seasonality.

3. Piedmont Coca-Cola Bottling Partnership

On July 2, 1993, the Company and The Coca-Cola Company formed Piedmont Coca-Cola Bottling Partnership (“Piedmont”) to distribute and market nonalcoholic beverages primarily in portions of North Carolina and South Carolina. The Company provides a portion of the finished products to Piedmont at cost and receives a fee for managing the business of Piedmont pursuant to a management agreement. These intercompany transactions are eliminated in the consolidated financial statements.

Minority interest as of September 30, 2007, December 31, 2006 and October 1, 2006 represents the portion of Piedmont owned by The Coca-Cola Company, which was 22.7% for all periods presented.

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

4. Inventories

Inventories were summarized as follows:


	Sept. 30,		Dec. 31,		Oct. 1,
In Thousands	2007		2006		2006

Finished products	$	37,340	$	32,934	$	32,884
Manufacturing materials		8,150		19,333		7,397
Plastic shells, pallets and other inventories		17,332		14,788		16,518

Total inventories	$	62,822	$	67,055	$	56,799

5. Property, Plant and Equipment

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


	Sept. 30,		Dec. 31,		Oct. 1,		Estimated
In Thousands	2007		2006		2006		Useful Lives

Land	$	12,280	$	12,455	$	12,495
Buildings		110,454		110,444		110,586	10-50 years
Machinery and equipment		103,400		100,519		99,980	5-20 years
Transportation equipment		176,966		184,861		185,324	4-13 years
Furniture and fixtures		40,363		39,184		40,135	4-10 years
Cold drink dispensing equipment		325,685		331,174		340,617	6-13 years
Leasehold and land improvements		59,047		57,837		57,871	5-20 years
Software for internal use		49,608		36,665		34,778	3-10 years
Construction in progress		3,524		13,464		12,076

Total property, plant and equipment, at cost		881,327		886,603		893,862
Less: Accumulated depreciation and amortization		521,936		502,139		504,006

Property, plant and equipment, net	$	359,391	$	384,464	$	389,856

Depreciation and amortization expense was $50.8 million in YTD 2007 and $50.4 million in the first nine months of 2006 (“YTD 2006”). These amounts included amortization expense for leased property under capital leases.

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

6. Leased Property Under Capital Leases

Leased property under capital leases was summarized as follows:


	Sept. 30,		Dec. 31,		Oct. 1,		Estimated
In Thousands	2007		2006		2006		Useful Lives

Leased property under capital leases	$	88,619	$	83,475	$	84,035	3-29 years
Less: Accumulated amortization		16,723		13,624		13,354

Leased property under capital leases, net	$	71,896	$	69,851	$	70,681

As of September 30, 2007, real estate represented all of the leased property under capital leases and $65.8 million of this real estate is leased from related parties as described in Note 19 to the consolidated financial statements.

7. Franchise Rights and Goodwill

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

8. Other Identifiable Intangible Assets

Other identifiable intangible assets were summarized as follows:


	Sept. 30,		Dec. 31,		Oct. 1,		Estimated
In Thousands	2007		2006		2006		Useful Lives

Other identifiable intangible assets	$	6,599	$	6,599	$	8,374	1-18 years
Less: Accumulated amortization		2,186		1,852		3,503

Other identifiable intangible assets, net	$	4,413	$	4,747	$	4,871

Other identifiable intangible assets primarily represent customer relationships.

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

9. Other Accrued Liabilities

Other accrued liabilities were summarized as follows:


	Sept. 30,		Dec. 31,		Oct. 1,
In Thousands	2007		2006		2006

Accrued marketing costs	$	6,798	$	6,659	$	7,745
Accrued insurance costs		13,392		12,495		12,596
Accrued taxes (other than income taxes)		2,822		2,068		3,029
Accrued income taxes		3,086		1,558		3,132
Employee benefit plan accruals		8,429		8,427		8,872
Checks and transfers yet to be presented for payment from zero balance cash account		9,958		10,199		15,312
All other accrued liabilities		9,508		9,624		8,401

Total other accrued liabilities	$	53,993	$	51,030	$	59,087

10. Debt

Debt was summarized as follows:


			Interest			Interest	Sept. 30,		Dec. 31,		Oct. 1,
In Thousands	Maturity		Rate			Paid	2007		2006		2006

Debentures		2007		6.85	%	Semi-annually	$	100,000	$	100,000	$	100,000
Debentures		2009		7.20	%	Semi-annually		57,440		57,440		57,440
Debentures		2009		6.375	%	Semi-annually		119,253		119,253		119,253
Senior Notes		2012		5.00	%	Semi-annually		150,000		150,000		150,000
Senior Notes		2015		5.30	%	Semi-annually		100,000		100,000		100,000
Senior Notes		2016		5.00	%	Semi-annually		164,757		164,757		164,757

								691,450		691,450		691,450
Less: Current portion of debt								100,000		100,000		—

Long-term debt							$	591,450	$	591,450	$	691,450

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

10. Debt

On March 8, 2007, the Company entered into a $200 million revolving credit facility (“$200 million facility”), replacing its $100 million facility. The $200 million facility matures in March 2012 and includes an option to extend the term for an additional year at the discretion of the participating banks. The $200 million facility bears interest at a floating base rate or a floating rate of LIBOR plus an interest rate spread of .35%. In addition, there is a fee of .10% required for this facility. Both the interest rate spread and the facility fee are determined from a commonly-used pricing grid based on the Company’s long-term senior unsecured debt rating. The $200 million facility contains two financial covenants related to ratio requirements for interest coverage and long-term debt to cash flow, each as defined in the credit agreement. These covenants do not currently, and the Company does not anticipate they will, restrict its liquidity or capital resources. On September 30, 2007, the Company had no outstanding borrowings on the $200 million facility.

The Company borrows periodically under its available lines of credit. These lines of credit, in the aggregate amount of $60 million at September 30, 2007, are made available at the discretion of two participating banks at rates negotiated at the time of borrowing and may be withdrawn at any time by such banks. On September 30, 2007, the Company had no outstanding borrowings on the lines of credit.

After taking into account all of its interest rate hedging activities, the Company had a weighted average interest rate of 6.7%, 6.9% and 6.8% for its debt and capital lease obligations as of September 30, 2007, December 31, 2006 and October 1, 2006, respectively. The Company’s overall weighted average interest rate on its debt and capital lease obligations was 6.7% for YTD 2007 compared to 6.6% for YTD 2006. As of September 30, 2007, approximately 48% of the Company’s debt and capital lease obligations of $772.3 million was subject to changes in short-term interest rates.

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

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

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

11. Derivative Financial Instruments

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 Company’s debt level and the potential impact of changes in interest rates on the Company’s overall financial condition. Sensitivity analyses are performed to review the impact on the Company’s financial position and coverage of various interest rate movements. The Company does not use derivative financial instruments for trading 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:

September 30, 2007

December 31, 2006

October 1, 2006

Notional

Remaining

Notional

Remaining

Notional

Remaining

In Thousands

Amount

Term

Amount

Term

Amount

Term

Interest rate swap agreement - floating

25,000

0.17 years

25,000

0.92 years

25,000

1.17 years

Interest rate swap agreement - floating

25,000

0.17 years

25,000

0.92 years

25,000

1.17 years

Interest rate swap agreement - floating

50,000

1.67 years

50,000

2.42 years

50,000

2.67 years

Interest rate swap agreement - floating

50,000

0.17 years

50,000

0.92 years

50,000

1.17 years

Interest rate swap agreement - floating

50,000

1.83 years

50,000

2.58 years

50,000

2.83 years

Interest rate swap agreement - floating

50,000

5.17 years

50,000

5.92 years

50,000

6.17 years

Interest rate swap agreement - floating

25,000

1.58 years

Interest rate swap agreement - floating

25,000

7.50 years

Interest rate swap agreement - floating

25,000

5.17 years

The Company had nine interest rate swap agreements as of September 30, 2007 with varying terms that effectively converted $325 million of the Company’s fixed rate debt to floating rate debt. All of the interest rate swap agreements have been accounted for as fair value hedges.

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

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

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

12. Fair Values of Financial Instruments

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

Cash and Cash Equivalents, Accounts Receivable and Accounts Payable

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

Public Debt Securities

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

Derivative Financial Instruments

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

Letters of Credit

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

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


	Sept. 30, 2007					Dec. 31, 2006				Oct. 1, 2006
	Carrying		Fair			Carrying		Fair		Carrying		Fair
In Thousands	Amount		Value			Amount		Value		Amount		Value

Public debt securities	$	691,450	$	676,324		$	691,450	$	679,991	$	691,450	$	682,132
Interest rate swap agreements		2,353		2,353			6,950		6,950		7,608		7,608
Fuel hedging agreements		—		(154	)		—		—		—		—
Letters of credit		—		21,271			—		22,068		—		20,927

The fair values of the interest rate swap agreements at September 30, 2007, December 31, 2006 and October 1, 2006 represent the estimated amounts the Company would have paid upon termination of these agreements, which are the current settlement values. The fair value of the fuel hedging agreements at September 30, 2007 represents the estimated amount the Company would have received upon termination of these agreements, which are the current settlement values.

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

13. Other Liabilities

Other liabilities were summarized as follows:


	Sept. 30,		Dec. 31,		Oct. 1,
In Thousands	2007		2006		2006

Accruals for executive benefit plans	$	74,462	$	69,547	$	68,134
Other		22,713		19,051		22,259

Total other liabilities	$	97,175	$	88,598	$	90,393

14. Commitments and Contingencies

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

The Company guarantees a portion of SAC’s and Southeastern’s debt and lease obligations. The amounts guaranteed were $43.0 million, $42.9 million and $41.4 million as of September 30, 2007, December 31, 2006 and October 1, 2006, respectively. The Company has not recorded any liability associated with these guarantees. The Company holds no assets as collateral against these guarantees and no contractual recourse exists that would enable the Company to recover amounts guaranteed. The guarantees relate to the debt and lease obligations of SAC and Southeastern, which resulted primarily from the purchase of production equipment and facilities. These guarantees expire at various times through 2021. The members of both cooperatives consist solely of Coca-Cola bottlers. The Company does not anticipate either of these cooperatives will fail to fulfill their commitments under these agreements. 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.

The Company has identified SAC and Southeastern as variable interest entities and has determined it is not the primary beneficiary of either of the cooperatives. The Company’s variable interest in these cooperatives includes an equity ownership in each of the entities and the guarantee of certain indebtedness. As of September 30, 2007, SAC had total assets of $42.6 million and total debt of $20.6 million. SAC had total revenue for YTD 2007 of $144.2 million. As of September 30, 2007, Southeastern had total assets of $383.5 million and total debt of $269.1 million. Southeastern had total revenue for YTD 2007 of $422.7 million.

In the event either of these cooperatives fails to fulfill its commitments under the related debt and lease obligations, the Company would be responsible for payments to the lenders up to the level of the guarantees. If these cooperatives had borrowed up to their borrowing capacity, the Company’s maximum exposure under these guarantees on September 30, 2007 would have been $55.4 million and the Company’s maximum total exposure, including its equity investment, would have been $34.2 million for SAC and $31.5 million for Southeastern.

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

14. Commitments and Contingencies

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

The Company has standby letters of credit, primarily related to its property and casualty insurance programs. On September 30, 2007, these letters of credit totaled $21.3 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 September 30, 2007 amounted to $23.4 million and expire at various dates through 2016.

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

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

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

15. Income Taxes

The Company’s effective income tax rate for YTD 2007 and YTD 2006 was 37.7% and 41.1%, respectively.

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


	First Nine Months
In Thousands	2007			2006

Statutory expense	$	12,137		$	8,703
State income taxes, net of federal benefit		1,510			1,139
Manufacturing deduction benefit		(1,141	)		(448	)
Meals and entertainment		440			534
Other, net		115			294

Income tax expense	$	13,061		$	10,222

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, 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. At the adoption date of January 1, 2007, the Company had $13.0 million of unrecognized tax benefits, of which $7.6 million would affect the Company’s effective tax rate if recognized. As of September 30, 2007, the Company had $13.0 million of unrecognized tax benefits including accrued interest of which $7.8 million would effect the Company’s effective rate if recognized. It is expected that the amount of unrecognized tax benefits will change in the next 12 months, however, the Company does not expect the change to have a significant impact on the consolidated financial statements.

The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense. At the adoption date of January 1, 2007, the Company had approximately $1.6 million of accrued interest related to uncertain tax positions. As of September 30, 2007, the Company had approximately $2.0 million of accrued interest related to uncertain tax positions.

Various tax years from 1989 forward remain open due to loss carryforwards. The tax years 2004 through 2006 remain open to examination by taxing jurisdictions to which the Company is subject.

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

15. Income Taxes

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

16. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss is comprised of adjustments relative to the Company’s pension and postretirement medical benefit plans and foreign currency translation adjustments required because of a small subsidiary of the Company that performs data analysis and provides consulting services primarily in Europe. The Company adopted Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Pension and Other Postretirement Plans” (“SFAS No. 158”), at the end of 2006.

A summary of accumulated other comprehensive loss is as follows:


	Dec. 31,			Pre-tax			Tax			Sept. 30,
In Thousands	2006			Activity			Effect			2007

Net pension activity:
Actuarial loss	$	(24,673	)	$	1,868		$	(735	)	$	(23,540	)
Prior service costs		(31	)		18			(7	)		(20	)
Net postretirement benefits activity:
Actuarial loss		(13,512	)		916			(360	)		(12,956	)
Prior service costs		10,915			(1,339	)		527			10,103
Transition asset		75			(19	)		7			63
Foreign currency translation adjustment		—			22			(7	)		15

Total	$	(27,226	)	$	1,466		$	(575	)	$	(26,335	)

The only change in accumulated other comprehensive loss in YTD 2006 was an increase in minimum pension liability adjustment, net of tax, of $2.0 million.

17. Capital Transactions

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

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

17. Capital Transactions

Pursuant to the Company’s 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. During YTD 2007 and YTD 2006, dividends of $.75 per share were declared and paid on both Common Stock and Class B Common Stock.

Each share of Common Stock is entitled to one vote per share at all meetings of stockholders and each share of Class B Common Stock is entitled to 20 votes per share at such meetings. Except to the extent otherwise required by law, holders of the Common Stock and Class B Common Stock vote together as a single class on all matters brought before the Company’s stockholders.

In the event of liquidation, there is no preference between the two classes of common stock.

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

On February 22, 2006, the Compensation Committee of the Board of Directors determined 20,000 shares of restricted Class B Common Stock vested and should be issued, pursuant to the performance-based award discussed above, to Mr. Harrison, III in connection with his services as Chairman of the Board of Directors and Chief Executive Officer of the Company for the fiscal year ended January 1, 2006. On February 28, 2007, the Compensation Committee determined an additional 20,000 shares of restricted Class B Common Stock vested and should be issued to Mr. Harrison, III in connection with his services for the fiscal year ended December 31, 2006.

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

The Company’s Annual Bonus Plan targets, which establish the performance requirement for the restricted stock awards, are approved by the Board of Directors in the first quarter of each year.

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

17. Capital Transactions

A summary of restricted stock awards is as follows:


					Annual		Nine Month
	Shares		Grant-Date		Compensation		Compensation
Year	Awarded		Price		Expense		Expense

2006		20,000	$	46.45	$	929,000	$	696,750
2007		20,000		58.53		1,170,600		877,950

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.

The increase in the number of shares outstanding in YTD 2007 was due to the issuance of 20,000 shares of Class B Common Stock related to the restricted stock award and the conversion of 500 shares from Class B Common Stock to Common Stock. The increase in the number of shares outstanding in YTD 2006 was due to the issuance of 20,000 shares of Class B Common Stock related to the restricted stock award and the conversion of 100 shares of Class B Common Stock into 100 shares of Common Stock in the third quarter of 2006.

18. Benefit Plans

Pension Plans

Retirement benefits under the two Company-sponsored pension plans are based on the employee’s length of service, average compensation over the five consecutive years which gives the highest average compensation and 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 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, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits (as amended).” The curtailment resulted in a reduction of the Company’s projected benefit obligation which was offset against the Company’s 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 and current service cost no longer accrues.

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

18. Benefit Plans

The components of net periodic pension cost were as follows:


	Third Quarter						First Nine Months
In Thousands	2007			2006			2007			2006

Service cost	$	20		$	19		$	59		$	5,367
Interest cost		2,634			2,512			7,902			7,866
Expected return on plan assets		(3,224	)		(3,047	)		(9,674	)		(9,056	)
Amortization of prior service cost		6			6			18			18
Recognized net actuarial loss		623			962			1,868			3,482

Net periodic pension cost	$	59		$	452		$	173		$	7,677

The Company did not contribute to its Company-sponsored pension plans during YTD 2007 and does not expect to make contributions to its principal Company-sponsored pension plan during the remainder of 2007.

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.

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


	Third Quarter						First Nine Months
In Thousands	2007			2006			2007			2006

Service cost	$	107		$	83		$	319		$	249
Interest cost		552			557			1,657			1,671
Amortization of unrecognized transitional assets		(7	)		(6	)		(19	)		(18	)
Recognized net actuarial loss		306			339			916			1,017
Amortization of prior service cost		(447	)		(446	)		(1,339	)		(1,338	)

Net periodic postretirement benefit cost	$	511		$	527		$	1,534		$	1,581

401(k) Savings Plan

In conjunction with the change to the principal Company-sponsored pension plan discussed above, the Company’s Board of Directors also approved an amendment to the 401(k) Savings Plan to increase the Company’s 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 100% of a participant’s elective deferrals to the 401(k) Savings Plan up to a maximum of 5% of a participant’s eligible compensation. Total costs for this benefit in YTD 2007 and YTD 2006 were $6.3 million and $3.6 million, respectively.

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

19. Related Party Transactions

The Company’s business consists primarily of the production, marketing and distribution of nonalcoholic beverages of The Coca-Cola Company, which is the sole owner of the secret formulas under which the primary components (either concentrate or syrup) of its soft drink products are manufactured. As of September 30, 2007, The Coca-Cola Company had a 27.2% interest in the Company’s total outstanding Common Stock and Class B Common Stock on a combined basis.

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:


	First Nine Months
In Millions	2007		2006

Payments by the Company for concentrate, syrup, sweetener and other purchases	$	254.4	$	262.2
Marketing funding support payments to the Company		28.4		17.9

Payments net of marketing funding support	$	226.0	$	244.3

Payments by the Company for customer marketing programs	$	35.0	$	35.6
Payments by the Company for cold drink equipment parts		4.2		4.8
Fountain delivery and equipment repair fees paid to the Company		4.7		6.8
Presence marketing funding support provided by The Coca-Cola Company on the Company’s behalf		3.2		4.8
Sales of finished products to The Coca-Cola Company		24.8		31.9

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 arrangement were $31.9 million and $44.5 million in YTD 2007 and YTD 2006, respectively. Purchases from CCE under this arrangement were $10.4 million and $12.0 million in YTD 2007 and YTD 2006, respectively. The Coca-Cola Company has significant equity interests in the Company and CCE. As of September 30, 2007, CCE held 10.0% of the Company’s outstanding Common Stock but held no shares of the Company’s Class B Common Stock, giving CCE a 7.3% interest in the Company’s total outstanding Common Stock and Class B Common Stock on a combined basis.

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

19. Related Party Transactions

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

The Company provides a portion of the finished products for Piedmont at cost and receives a fee for managing the operations of Piedmont pursuant to a management agreement. The Company sold product at cost to Piedmont during YTD 2007 and YTD 2006 totaling $60.2 million and $59.5 million, respectively. The Company received $17.1 million and $16.6 million for management services pursuant to its management agreement with Piedmont for YTD 2007 and YTD 2006, respectively. The Company provides financing for Piedmont at the Company’s average cost of funds plus 0.50%. As of September 30, 2007, the Company had loaned $78.8 million to Piedmont. The loan has a December 31, 2010 maturity date. The Company also subleases various fleet and vending equipment to Piedmont at cost. These sublease rentals amounted to $5.6 million and $6.1 million in YTD 2007 and YTD 2006, respectively. All intercompany accounts and transactions between the Company and Piedmont have been eliminated.

The Company is a shareholder in two cooperatives from which it purchases substantially all its requirements for plastic bottles. Net purchases from these cooperatives were $51.9 million and $53.0 million in YTD 2007 and YTD 2006, respectively. In connection with its participation in one of these cooperatives, the Company has guaranteed a portion of the cooperative’s debt. Such guarantee amounted to $22.4 million as of September 30, 2007.

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 $112.8 million and $103.2 million in YTD 2007 and YTD 2006, respectively. The Company also manages the operations of SAC pursuant to a management agreement. Management fees earned from SAC were $1.0 million and $1.1 million in YTD 2007 and YTD 2006, respectively. The Company has also guaranteed a portion of debt for SAC. Such guarantee amounted to $20.6 million as of September 30, 2007.

The Company leases from Harrison Limited Partnership One (“HLP”) the Snyder Production Center and an adjacent sales facility, which are located in Charlotte, North Carolina. HLP is directly and indirectly owned by trusts of which J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, and Deborah S. Harrison, a director of the Company, are trustees and beneficiaries. The principal balance outstanding under this capital lease as of September 30, 2007 was $38.6 million. Rental payments related to this lease were $3.2 million and $3.0 million in YTD 2007 and YTD 2006, respectively.

The Company leases from Beacon Investment Corporation (“Beacon”), the Company’s headquarters office facility and an adjacent office facility. Beacon’s sole shareholder is J. Frank Harrison, III. On December 18, 2006, the Company modified this lease agreement (effective January 1, 2007) with Beacon which expires in

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

19. Related Party Transactions

December 2021. The modifications 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. 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 obligations under capital leases and leased property under capital leases were increased by $5.1 million on January 1, 2007. The principal balance outstanding as of September 30, 2007 was $34.7 million. Rental payments related to the lease were $2.7 million and $2.8 million in YTD 2007 and YTD 2006, respectively.

20. Net Sales by Product Category

Net sales by product category were as follows:


	Third Quarter				First Nine Months
In Thousands	2007		2006		2007		2006

Bottle/can sales:
Sparkling beverages (including energy products)	$	255,804	$	252,482	$	760,359	$	762,575
Still beverages		58,897		54,617		158,280		143,380

Total bottle/can sales		314,701		307,099		918,639		905,955

Other sales:
Sales to other Coca-Cola bottlers		27,804		39,463		101,774		118,546
Postmix and other		24,855		24,064		74,946		65,928

Total other sales		52,659		63,527		176,720		184,474


Total net sales	$	367,360	$	370,626	$	1,095,359	$	1,090,429

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

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

21. Net Income Per Share

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


	Third Quarter				First Nine Months
In Thousands (Except Per Share Data)	2007		2006		2007		2006

Numerator for basic and diluted net income per Common Stock and Class B Common Stock share:

Net income	$	5,273	$	4,941	$	21,615	$	14,643
Less dividends:
Common Stock		1,661		1,661		4,983		4,982
Class B Common Stock		620		615		1,860		1,845

Total undistributed earnings	$	2,992	$	2,665	$	14,772	$	7,816


Common Stock undistributed earnings – basic	$	2,179	$	1,945	$	10,757	$	5,704
Class B Common Stock undistributed earnings – basic		813		720		4,015		2,112

Total undistributed earnings – basic	$	2,992	$	2,665	$	14,772	$	7,816


Common Stock undistributed earnings – diluted	$	2,174	$	1,941	$	10,738	$	5,694
Class B Common Stock undistributed earnings – diluted		818		724		4,034		2,122

Total undistributed earnings – diluted	$	2,992	$	2,665	$	14,772	$	7,816


Numerator for basic net income per Common Stock share:
Dividends on Common Stock	$	1,661	$	1,661	$	4,983	$	4,982
Common Stock undistributed earnings – basic		2,179		1,945		10,757		5,704

Numerator for basic net income per Common Stock share	$	3,840	$	3,606	$	15,740	$	10,686


Numerator for basic net income per Class B Common Stock share:
Dividends on Class B Common Stock	$	620	$	615	$	1,860	$	1,845
Class B Common Stock undistributed earnings – basic		813		720		4,015		2,112

Numerator for basic net income per Class B Common Stock share	$	1,433	$	1,335	$	5,875	$	3,957

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

21. Net Income Per Share


	Third Quarter				First Nine Months
In Thousands (Except Per Share Data)	2007		2006		2007		2006

Numerator for diluted net income per Common Stock share:
Dividends on Common Stock	$	1,661	$	1,661	$	4,983	$	4,982
Dividends on Class B Common Stock assumed converted to Common Stock		620		615		1,860		1,845
Common Stock undistributed earnings – diluted		2,992		2,665		14,772		7,816

Numerator for diluted net income per Common Stock share	$	5,273	$	4,941	$	21,615	$	14,643


Numerator for diluted net income per Class B Common Stock share:
Dividends on Class B Common Stock	$	620	$	615	$	1,860	$	1,845
Class B Common Stock undistributed earnings – diluted		818		724		4,034		2,122

Numerator for diluted net income per Class B Common Stock share	$	1,438	$	1,339	$	5,894	$	3,967

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

21. Net Income Per Share


	Third Quarter				First Nine Months
In Thousands (Except Per Share Data)	2007		2006		2007		2006

Denominator for basic net income per Common Stock and Class B Common Stock share:
Common Stock weighted average shares outstanding – basic		6,644		6,643		6,644		6,643
Class B Common Stock weighted average shares outstanding – basic		2,480		2,460		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)		9,144		9,123		9,140		9,120
Class B Common Stock weighted average shares outstanding – diluted		2,500		2,480		2,496		2,476

Basic net income per share:
Common Stock	$	.58	$	.54	$	2.37	$	1.61


Class B Common Stock	$	.58	$	.54	$	2.37	$	1.61


Diluted net income per share:
Common Stock	$	.58	$	.54	$	2.36	$	1.61


Class B Common Stock	$	.58	$	.54	$	2.36	$	1.60


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)		The denominator for diluted net income per share for Common Stock and Class B Common Stock includes the diluted effect of shares relative to the restricted stock award.

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

22. Risks and Uncertainties

Approximately 89% of the Company’s YTD 2007 bottle/can volume to retail customers are products of The Coca-Cola Company, which is the sole supplier of the concentrates or syrups required to manufacture these products. The remaining 11% of the Company’s YTD 2007 bottle/can volume to retail customers are products of other beverage companies and the Company. The Company has bottling contracts under which it has various requirements to meet. Failure to meet the requirements of these bottling contracts could result in the loss of distribution rights for the respective product.

The Company’s products are sold and distributed directly by its employees to retail stores and other outlets. During YTD 2007, approximately 68% of the Company’s 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 Company’s largest customers, Wal-Mart Stores, Inc. and Food Lion, LLC, accounted for approximately 18% and 12% of the Company’s total bottle/can volume to retail customers during YTD 2007, respectively. Wal-Mart Stores, Inc. accounted for approximately 13% of the Company’s total net sales during YTD 2007.

The Company obtains all of its aluminum cans from one domestic supplier. The Company currently obtains all of its plastic bottles from two domestic cooperatives.

Certain liabilities of the Company are subject to risk due to 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 Company’s pension liability.

Approximately 7% of the Company’s labor force is currently covered by collective bargaining agreements. One collective bargaining contract covering less than .5% of the Company’s employees will expire during the fourth quarter of 2007.

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

23. Supplemental Disclosures of Cash Flow Information

Changes in current assets and current liabilities affecting cash were as follows:


	First Nine Months
In Thousands	2007			2006

Accounts receivable, trade, net	$	(5,615	)	$	3,827
Accounts receivable from The Coca-Cola Company		(14,853	)		(5,603	)
Accounts receivable, other		(1,563	)		(343	)
Inventories		4,233			1,434
Prepaid expenses and other current assets		(2,564	)		(5,863	)
Accounts payable, trade		(5,605	)		(339	)
Accounts payable to The Coca-Cola Company		148			7,347
Other accrued liabilities		10,932			7,168
Accrued compensation		(3,019	)		(3,328	)
Accrued interest payable		8,752			8,868

(Increase) decrease in current assets less current liabilities	$	(9,154	)	$	13,168

24. New Accounting Pronouncements

Recently Adopted Pronouncements

In September 2006, FASB issued SFAS No. 158, which was effective for fiscal years ending after December 15, 2006, except for the requirement that the benefit plan assets and obligations be measured as of the date of the employer’s statement of financial position, which is effective for fiscal years ending after December 15, 2008. The impact of the adoption of this Statement was to increase the Company’s pension and postretirement liabilities by $4.2 million with a corresponding adjustment to other comprehensive loss, net of tax effect of $1.6 million. The Company anticipates changing the measurement date to its fiscal year end date in fiscal 2008.

In June 2006, FASB issued FIN 48. 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, FASB issued 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. FIN 48 and FSP FIN 48-1 were effective as of January 1, 2007. The adoption of FIN 48 and FSP FIN 48-1 did not have a material impact on the consolidated financial statements. See Note 15 of the consolidated financial statements for additional information.

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

24. New Accounting Pronouncements

presentation of taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions (e.g. sales, use, value added and excise taxes) between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. In addition, for any such taxes that are reported on a gross basis, the amounts of those taxes should be disclosed in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. EITF 06-03 was effective January 1, 2007. The Company records substantially all of the taxes within the scope of EITF 06-03 on a net basis.

Recently Issued Pronouncements

In September 2006, 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 is effective for fiscal years beginning after November 15, 2007. The Company is in the process of determining the impact of this Statement on the consolidated financial statements.

In February 2007, 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 is effective for fiscal years beginning after November 15, 2007. The Company is in the process of determining the impact of this Statement on the consolidated financial statements.

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

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 Company’s business. The restructuring expenses consist primarily of one-time termination benefits and other associated costs, primarily relocation expenses for certain employees. During YTD 2007, the Company incurred $2.6 million in restructuring expenses, which are included in selling, delivery and administrative expenses. The Company anticipates the total restructuring expenses will be in the range of $2.6 million to $2.8 million and anticipates all of the cash expenditures will occur prior to 2007 fiscal year end.

The following summarizes restructuring activity for YTD 2007:


	Severance Pay		Relocation
In Thousands	and Benefits		and Other		Total

Balance at December 31, 2006	$	—	$	—	$	—
Provision		1,607		988		2,595
Cash payments		1,607		988		2,595

Balance at September 30, 2007	$	—	$	—	$	—

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“M,D&A”) should be read in conjunction with Coca-Cola Bottling Co. Consolidated’s (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 Company’s business and the nonalcoholic beverage industry.

	•		Areas of Emphasis – a summary of the Company’s key priorities.

	•		Overview of Operations and Financial Condition – a summary of key information and trends concerning the financial results for the third quarter of 2007 (“Q3 2007”) and the first nine months of 2007 (“YTD 2007”) and changes from the third quarter of 2006 (“Q3 2006”) and the first nine months of 2006 (“YTD 2006”).

	•		Discussion of Critical Accounting Policies, Estimates and New Accounting Pronouncements – a discussion of accounting policies that are most important to the portrayal of the Company’s 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 Company’s results of operations for Q3 2007 and YTD 2007 compared to Q3 2006 and YTD 2006.

	•		Financial Condition – an analysis of the Company’s financial condition as of the end of Q3 2007 compared to year-end 2006 and the end of Q3 2006 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 consolidated statements of operations for the quarters ended September 30, 2007 and October 1, 2006 and YTD 2007 and YTD 2006, the consolidated statements of cash flows for YTD 2007 and YTD 2006 and the consolidated balance sheets at September 30, 2007, December 31, 2006 and October 1, 2006 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 Company’s 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, operating 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 approximately $1.4 billion in 2006.

The nonalcoholic beverage market is highly competitive. The Company’s competitors in this market 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 75% 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 last three years, industry sales of sugar sparkling beverages, other than energy products, have declined. The decline in sugar sparkling beverages has generally been offset by sales growth in other nonalcoholic product categories. The sparkling beverage category (including energy products) represents 83% of the Company’s YTD 2007 bottle/can net sales.

The principal methods of competition in the nonalcoholic beverage 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 it is competitive in its territories with respect to each of these methods of competition.

Operating results for Q3 2007 and YTD 2007 are not indicative of results that may be expected for the fiscal year ending December 30, 2007 because of business seasonality. Business seasonality results primarily from higher unit sales of the Company’s products in the second and third quarters versus the first and fourth quarters of the fiscal year. Fixed costs, such as depreciation and interest expense, are not significantly impacted by business seasonality.

Net sales by product category were as follows:


	Third Quarter				First Nine Months
In Thousands	2007		2006		2007		2006

Bottle/can sales:
Sparkling beverages (including energy products)	$	255,804	$	252,482	$	760,359	$	762,575
Still beverages		58,897		54,617		158,280		143,380

Total bottle/can sales		314,701		307,099		918,639		905,955

Other sales:
Sales to other Coca-Cola bottlers		27,804		39,463		101,774		118,546
Postmix and other		24,855		24,064		74,946		65,928

Total other sales		52,659		63,527		176,720		184,474


Total net sales	$	367,360	$	370,626	$	1,095,359	$	1,090,429

Areas of Emphasis

Key priorities for the Company include revenue management, 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 performance driver which has significant impact on the Company’s results of operations.

Innovation and Beverage Portfolio Expansion

Sparkling beverages 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 Company’s overall revenue. The Company introduced new products, which included Country Breeze tea, juice products from Fuze, a subsidiary of The Coca-Cola Company, and V8 juice products from Campbell’s, during Q3 2007. The Company also modified its energy product portfolio in Q3 2007 with the addition of NOS^© products from Fuze.

The Company has invested in its own brand portfolio with products such as Respect, a vitamin enhanced beverage, Tum-E Yummies, a noncarbonated flavored drink, Country Breeze tea, and its own energy drink, and has become the exclusive licensee of Cinnabon Premium Coffee Lattes in the United States. These brands enable the Company to participate in strong growth categories and capitalize on distribution channels that include the Company’s traditional Coca-Cola franchise territory as well as third party distributors outside the Company’s traditional territory. While the growth prospects of Company-owned or exclusive licensed brands appear very promising, the costs of developing, marketing and distributing these brands is anticipated to be significant as well.

The Company has also fostered innovation as evidenced by the development of specialty packaging for customers, the conversion of a portion of the Company’s operations to the CooLift^®delivery system, and the implementation in the second quarter of 2006 of a service module in our enterprise resource planning software platform (SAP) for the automation, scheduling, installation, delivery and repair of cold drink dispensing equipment.

Distribution Cost Management

Distribution costs represent the costs of transporting finished goods from Company locations to customer outlets. Total distribution costs amounted to $144.1 million and $147.7 million in YTD 2007 and YTD 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 brands and packages. 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;

	•		advance sale delivery for convenience stores, drug stores, small supermarkets and certain on-premise accounts; and

	•		full service delivery for its full service vending customers.

In 2006, the Company began changing its delivery method for its route delivery system. Historically, the Company loaded its trucks at a warehouse with products the route delivery employee would deliver. The delivery employee was responsible for pulling the required products off a side load truck at each customer location to fill the customer’s order. The Company began using a new CooLift^® delivery system in 2006 in a portion of our operations which involves pre-building orders in the warehouse on a small pallet the delivery employee can roll off a truck directly into the customer’s location. The CooLift^® delivery system involves the use of a rear-loading truck rather than conventional side loading truck. The Company anticipates the implementation of this delivery system will continue over the next several years. This rollout will continue to require additional

capital expenditures for the rear-loading delivery vehicle. The Company anticipates that this change in delivery methodology will result in significant savings in future years and more effective delivery of a greater number of products.

Distribution cost management will continue to be a key area of emphasis for the Company for the next several years.

Productivity

A key driver in the Company’s selling, delivery and administrative (“S,D&A”) expense management relates to ongoing improvements in labor and asset productivity. 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 in the future. The Company continues to focus on its supply chain, sales and distribution functions for opportunities to improve its overall productivity.

Overview of Operations and Financial Condition

The following overview provides a summary of key information concerning the Company’s financial results for Q3 2007 and YTD 2007 compared to Q3 2006 and YTD 2006.


	Third Quarter							%
In Thousands (Except Per Share Data)	2007		2006		Change			Change

Net sales	$	367,360	$	370,626	$	(3,266	)		(0.9	)
Gross margin		155,212		157,389		(2,177	)		(1.4	)
S,D&A expenses		134,861		135,421		(560	)		(0.4	)
Income from operations		20,240		21,832		(1,592	)		(7.3	)
Interest expense		12,135		12,745		(610	)		(4.8	)
Income before income taxes		7,995		8,246		(251	)		(3.0	)
Net income		5,273		4,941		332			6.7
Basic net income per share:
Common Stock	$	.58	$	.54	$	.04			7.4
Class B Common Stock	$	.58	$	.54	$	.04			7.4
Diluted net income per share:
Common Stock	$	.58	$	.54	$	.04			7.4
Class B Common Stock	$	.58	$	.54	$	.04			7.4


	First Nine Months							%
In Thousands (Except Per Share Data)	2007		2006		Change			Change

Net sales	$	1,095,359	$	1,090,429	$	4,930			0.5
Gross margin		475,993		471,104		4,889			1.0
S,D&A expenses		402,376		405,459		(3,083	)		(0.8	)
Income from operations		73,283		65,219		8,064			12.4
Interest expense		36,647		37,808		(1,161	)		(3.1	)
Income before income taxes		34,676		24,865		9,811			39.5
Net income		21,615		14,643		6,972			47.6
Basic net income per share:
Common Stock	$	2.37	$	1.61	$	.76			47.2
Class B Common Stock	$	2.37	$	1.61	$	.76			47.2
Diluted net income per share:
Common Stock	$	2.36	$	1.61	$	.75			46.6
Class B Common Stock	$	2.36	$	1.60	$	.76			47.5

The Company’s net sales decreased .9% in Q3 2007 and grew .5% in YTD 2007 from the same periods in 2006. The net sales decrease in Q3 2007 was primarily due to a 29.5%, or $11.7 million, decrease in sales to other Coca-Cola bottlers (“bottler sales”) offset by a 2.4% increase in sales price per unit. The net sales increase in YTD 2007 was primarily due to a 2.4% increase in sales price per unit offset by a 14.1%, or $16.8 million, decrease in bottler sales. Bottle/can volume was relatively flat in Q3 2007 and YTD 2007 compared to the same periods in 2006 as a decrease in sparkling beverages (other than energy) was offset by increases in still beverages (primarily tea sales). The decrease in sparkling beverages volume reflects the impact of higher prices and weak performance of sugar sparkling beverages. The decrease in bottler sales was due to a decrease in sales of sparkling beverages (primarily energy products) partially offset by an increase in tea sales.

The Company has seen declines in the demand for sugar sparkling beverages over the past several years and anticipates this trend will continue. The Company anticipates overall bottle/can revenue will be primarily dependent upon continued growth in diet sparkling products, sports drinks, bottled water, tea and energy products; the introduction of new beverage products and the appropriate pricing of brands and packaging within sales channels.

Gross margin decreased 1.4% in Q3 2007 and increased 1.0% in YTD 2007 compared to Q3 2006 and YTD 2006, respectively. The Company’s gross margin percentage was 42.3% in Q3 2007 compared to 42.5% in Q3 2006 and 43.5% in YTD 2007 compared to 43.2% in YTD 2006. The Company’s gross margin percentage excluding bottler sales, which have lower margins than the Company’s bottle/can sales to retail customers, was 45.5% in Q3 2007 compared to 47.1% in Q3 2006 and 47.5% in YTD 2007 compared to 48.1% in YTD 2006. The decreases in gross margin percentage were primarily due to higher raw material costs, partially offset by higher sales price per unit, increases in marketing funding from The Coca-Cola Company and reduced manufacturing overhead costs.

S,D&A expenses decreased .4% and .8% in Q3 2007 and YTD 2007 from Q3 2006 and YTD 2006, respectively. The decrease in S,D&A expenses in YTD 2007 was primarily attributable to decreases in property and casualty insurance of approximately 15% and a gain from the sale of aircraft, partially offset by restructuring expenses.

Interest expense decreased 4.8% in Q3 2007 compared to Q3 2006 and 3.1% in YTD 2007 compared to YTD 2006. The decrease in Q3 2007 and YTD 2007 was primarily due to an increase in interest earned on short-term investments. The overall weighted average interest rate was 6.7% for YTD 2007 compared to 6.6% for YTD 2006. Interest earned on short-term cash investments in Q3 2007 and YTD 2007 was $.9 million and $2.3 million, respectively, compared to $.4 million and $.8 million in Q3 2006 and YTD 2006, respectively. See the “Liquidity and Capital Resources – Hedging Activities – Interest Rate Hedging” section of M,D&A for additional information.

Net debt and capital lease obligations were summarized as follows:


	Sept. 30,		Dec. 31,		Oct. 1,
In Thousands	2007		2006		2006

Debt	$	691,450	$	691,450	$	691,450
Capital lease obligations		80,839		77,506		77,911

Total debt and capital lease obligations		772,289		768,956		769,361
Less: Cash and cash equivalents		88,400		61,823		57,420

Total net debt and capital lease obligations ⁽¹⁾	$	683,889	$	707,133	$	711,941


⁽¹⁾		The non-GAAP measure “Total net debt and capital lease obligations” is used to provide investors with additional information to more clearly evaluate the Company’s capital structure and financial leverage.

The Company continues to focus on reducing its net debt and capital lease obligations over time.

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 included in its Annual Report on Form 10-K for the year ended December 31, 2006 a discussion of the Company’s most critical accounting policies, which are those most important to the portrayal of the Company’s financial condition and results of operations and require management’s 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 has not made changes in any critical accounting policies during YTD 2007. 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 made.

New Accounting Pronouncements

Recently Adopted Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Pension and Other Postretirement Plans” (“SFAS No. 158”). This Statement was effective for fiscal years ending after December 15, 2006, except for the requirement that the benefit plan assets and obligations be measured as of the date of the employer’s statement of financial position, which is effective for fiscal years ending after December 15, 2008. The impact of the adoption of this Statement was to increase the Company’s pension and postretirement liabilities by $4.2 million with a corresponding adjustment to other comprehensive loss, net of tax effect of $1.6 million. The Company anticipates changing the measurement date to its fiscal year end date in fiscal 2008.

In June 2006, FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). 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, 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. FIN 48 and FSP FIN 48-1 were effective as of January 1, 2007. The adoption of FIN 48 and FSP FIN 48-1 did not have a material impact on the consolidated financial statements. See Note 15 of the consolidated financial statements for additional information.

In June 2006, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 06-03, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation)” (“EITF 06-03”). EITF 06-03 provides that the presentation of taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions (e.g. sales, use, value added and excise taxes) between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy

decision that should be disclosed. In addition, for any such taxes that are reported on a gross basis, the amounts of those taxes should be disclosed in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. EITF 06-03 was effective January 1, 2007. The Company records substantially all of the taxes within the scope of EITF 06-03 on a net basis.

Recently Issued Pronouncements

In February 2007, FASB issued SFAS No. 159, “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 is effective for fiscal years beginning after November 15, 2007. The Company is in the process of determining the impact of this Statement on the consolidated financial statements.

Results of Operations

Q3 2007 Compared to Q3 2006 and YTD 2007 Compared to YTD 2006

Net Sales

Net sales decreased $3.3 million, or .9%, to $367.4 million in Q3 2007 compared to $370.6 million in Q3 2006. Net sales increased $4.9 million, or .5%, to $1,095.4 million in YTD 2007 compared to $1,090.4 million in YTD 2006.

The changes in net sales were the result of the following:


Q3 2007			Attributable to:
(In Millions)
$	7.2		2.4% increase in bottle/can sales price per unit primarily due to higher net pricing for sparkling beverages
	(6.1	)	15.4% decrease in other bottler sales volume primarily due to a decrease in sales of sparkling beverages (primarily energy drinks)
	(5.6	)	16.7% decrease in other bottler sales price per unit primarily due to change in product mix (energy drinks have higher sales price per unit)
	1.2		6.1% increase in sales price per unit of postmix primarily due to higher sales price for sparkling beverages
	1.1		Increase in delivery fees to certain customers
	(1.1	)	Other

$	(3.3	)	Total decrease in net sales


YTD 2007			Attributable to:
(In Millions)
$	13.4		2.4% increase in bottle/can sales price per unit primarily due to higher net pricing for sparkling beverages offset by lower net pricing for water
	(12.6	)	10.7% decrease in other bottler sales volume primarily due to a decrease in sales of sparkling beverages offset partially by an increase in sales of tea products
	(4.2	)	3.9% decrease in other bottler sales price per unit primarily due to change in product mix (energy drinks have higher sales price per unit)
	3.2		5.7% increase in sales price per unit of postmix primarily due to higher sales prices for sparkling beverages
	3.1		Increase in delivery fees to certain customers
	2.0		Other

$	4.9		Total increase in net sales

In Q3 2007 and YTD 2007, the Company’s bottle/can sales to retail customers accounted for 85.7% and 83.9%, respectively, of the Company’s 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. To the extent the Company is able to increase volume in higher margin packages sold through higher margin channels, bottle/can net pricing per unit can increase without an actual increase in wholesale pricing. The Company’s bottle/can net pricing per unit in Q3 2007 and YTD 2007 increased compared to Q3 2006 and YTD 2006 primarily due to higher prices for sparkling beverages offset by a decrease in net pricing of bottled water in the supermarket channel.

Product category sales volume in Q3 2007 and Q3 2006 and YTD 2007 and YTD 2006 as a percentage of total bottle/can sales volume and the percentage change by product category was as follows:


	Bottle/Can Sales Volume						Bottle/Can Sales Volume
Product Category	Q3 2007			Q3 2006			% Increase (Decrease)
Sparkling beverages (including energy products)		83.2	%		84.1	%		(1.4	)
Still beverages		16.8	%		15.9	%		5.6

Total bottle/can sales volume		100.0	%		100.0	%		(0.3	)


	Bottle/Can Sales Volume						Bottle/Can Sales Volume
Product Category	YTD 2007			YTD 2006			% Increase (Decrease)
Sparkling beverages (including energy products)		84.5	%		86.1	%		(2.5	)
Still beverages		15.5	%		13.9	%		10.7

Total bottle/can sales volume		100.0	%		100.0	%		(0.6	)

Product innovation will continue to be an important factor impacting the Company’s overall bottle/can revenue in the future. Beginning in the first quarter of 2007 (“Q1 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 flavored noncarbonated 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, and distribution of BooKoo energy products and the Company’s own energy product. Beginning in Q3 2007, the Company began distribution of NOS^© products (energy drinks from Fuze), juice products from Fuze, V8 juice products from Campbell’s and Country Breeze tea products.

The Company’s 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 YTD 2007, approximately 68% of the Company’s bottle/can volume was sold for future consumption. The remaining bottle/can volume of approximately 32% was sold for immediate consumption. The Company’s largest customer, Wal-Mart Stores, Inc., accounted for approximately 18% of the Company’s total bottle/can volume during YTD 2007. The Company’s second largest customer, Food Lion, LLC, accounted for approximately 12% of the Company’s total bottle/can volume in YTD 2007. All of the Company’s beverage sales are to customers in the United States.

The Company charges certain customers a delivery fee to offset a portion of the Company’s delivery and handling costs. The Company initiated this delivery fee in October 2005. The delivery fee is recorded in net sales and was $5.1 million and $2.0 million in YTD 2007 and YTD 2006, respectively.

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 decreased .5%, or $1.1 million, to $212.1 million in Q3 2007 compared to $213.2 million in Q3 2006. Cost of sales was flat at $619.4 million in YTD 2007 compared to $619.3 million in YTD 2006.

The changes in cost of sales were principally attributable to the following:


Q3 2007			Attributable to:
(In Millions)
$	14.0		Increase in raw material costs (primarily aluminum packaging, sweetener and concentrate costs)
	(5.9	)	15.4% decrease in other bottler sales volume primarily due to a decrease in sales of sparkling beverages (primarily energy drinks)
	(5.1	)	Decrease in other bottler sales cost per unit primarily due to the change in product mix (energy drinks have higher cost per unit)
	(3.5	)	Increase in marketing funding received primarily from The Coca-Cola Company
	(2.3	)	Decrease in manufacturing overhead costs
	1.7		Other

$	(1.1	)	Total decrease in cost of sales


YTD 2007			Attributable to:
(In Millions)
$	33.7		Increase in raw material costs (primarily aluminum packaging, sweetener and concentrate costs)
	(12.2	)	10.7% decrease in other bottler sales volume primarily due to a decrease in sales of sparkling beverages offset partially by an increase in sales of tea products
	(9.9	)	Increase in marketing funding received primarily from The Coca-Cola Company
	(8.1	)	Decrease in manufacturing overhead costs
	(4.9	)	Decrease in other bottler sales cost per unit primarily due to the change in product mix (energy drinks have higher cost per unit)
	1.4		Other

$	—		Total change in cost of sales

Beginning in Q1 2007, the majority of the Company’s aluminum packaging requirements did not have any ceiling price protection. The cost of aluminum cans has increased approximately 18% in YTD 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 has increased approximately 26% in YTD 2007. The combined impact of increasing costs for aluminum cans and high fructose corn syrup is anticipated to continue increasing cost of sales during the remainder of 2007.

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 Company’s Bottle Contracts. 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 $35.5 million for YTD 2007 compared to $25.6 million for YTD 2006 and was recorded as a reduction in cost of sales.

Gross Margin

Gross margin decreased $2.2 million, or 1.4%, to $155.2 million in Q3 2007 from $157.4 million in Q3 2006. Gross margin as a percentage of net sales decreased to 42.3% in Q3 2007 from 42.5% in Q3 2006. Gross margin increased $4.9 million or 1.0%, to $476.0 million in YTD 2007 compared to $471.1 million in YTD 2006. Gross margin as a percentage of net sales increased to 43.5% in YTD 2007 from 43.2% in YTD 2006.

The changes in gross margin were primarily the result of the following:


Q3 2007			Attributable to:
(In Millions)
$	(14.0	)	Increase in raw material costs (primarily aluminum packaging, sweetener and concentrate costs)
	7.2		2.4% increase in bottle/can sales price per unit primarily due to higher net pricing for sparkling beverages
	3.5		Increase in marketing funding received primarily from The Coca-Cola Company
	2.3		Decrease in manufacturing overhead costs
	1.2		6.1% increase in sales price per unit of postmix primarily due to higher sales price for sparkling beverages
	1.1		Increase in delivery fees to certain customers
	(3.5	)	Other

$	(2.2	)	Total decrease in gross margin


YTD 2007			Attributable to:
(In Millions)
$	(33.7	)	Increase in raw material costs (primarily aluminum packaging, sweetener and concentrate costs)
	13.4		2.4% increase in bottle/can sales price per unit primarily due to higher net pricing for sparkling beverages offset by lower net pricing for water
	9.9		Increase in marketing funding received primarily from The Coca-Cola Company
	8.1		Decrease in manufacturing overhead costs
	3.2		5.7% increase in sales price per unit of postmix primarily due to higher sales price for sparkling beverages
	3.1		Increase in delivery fees to certain customers
	0.9		Other

$	4.9		Total increase in gross margin

The Company’s gross margin percentage excluding bottler sales, which have lower margins than the Company’s bottle/can sales to retail customers, was 45.5% in Q3 2007 compared to 47.1% in Q3 2006 and 47.5% in YTD 2007 compared to 48.1% in YTD 2006. The decreases in gross margin percentage were primarily due to higher raw material costs, partially offset by higher sales price per unit, increases in marketing funding from The Coca-Cola Company and reduced manufacturing overhead costs.

The Company’s 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 dispensing equipment repair costs and administrative support labor and operating costs such as treasury, legal, information services, accounting, internal audit, human resources and executive management costs.

S,D&A expenses decreased by $.6 million, or .4%, to $134.9 million in Q3 2007 from $135.4 million in Q3 2006. S,D&A expenses decreased by $3.1 million, or .8%, to $402.4 million in YTD 2007 from $405.5 million in YTD 2006.

The decreases in S,D&A expenses were primarily due to the following:


Q3 2007			Attributable to:
(In Millions)
$	0.7		Increase in employee related expenses primarily related to wage increases
	0.5		Increase in employee benefit costs primarily due to increases in the Company’s 401(k) Savings Plan contributions
	(0.5	)	Decrease in property and casualty claims and insurance costs
	0.2		Restructuring costs related to the simplification of the Company’s operating management structure and reduction in work force in order to improve operating efficiencies
	(1.5	)	Other

$	(0.6	)	Total decrease in S,D&A expenses


YTD 2007			Attributable to:
(In Millions)
$	3.6		Increase in employee related expenses primarily related to wage increases
	(2.5	)	Decrease in employee benefit costs primarily due to the amendment of the principal Company-sponsored pension plan, net of increases in the Company’s 401(k) Savings Plan contributions and health insurance expenses
	2.6		Restructuring costs related to the simplification of the Company’s operating management structure and reduction in work force in order to improve operating efficiencies
	(2.3	)	Decrease in property and casualty claims and insurance costs
	(1.6	)	Gain on sale of aviation equipment
	(1.0	)	Decrease in fuel and other energy costs related to the movement of finished goods from sales distribution centers to customer locations
	(1.9	)	Other

$	(3.1	)	Total decrease 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 $144.1 million and $147.7 million in YTD 2007 and YTD 2006, respectively.

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 Company’s business. The restructuring expenses consist primarily of one-time termination benefits and other associated costs, primarily relocation expenses for certain employees. The Company incurred $.2 million and $2.6 million in restructuring expenses in Q3 2007 and YTD 2007, respectively. The Company anticipates that total restructuring expenses will be in the range of $2.6 million to $2.8 million and that all of the cash expenditures will occur prior to 2007 fiscal year end.

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 less than $.1 million in Q3 2007 from $.5 million in Q3 2006 and to $.2 million in YTD 2007 from $7.7 million in YTD 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 Company’s expense related to its 401(k) Savings Plan increased to $2.2 million in Q3 2007 from $1.2 million in Q3 2006 and $6.3 million in YTD 2007 from $3.6 million in YTD 2006.

Amortization of Intangibles

Amortization of intangibles expense for Q3 2007 and YTD 2007 was flat compared to Q3 2006 and YTD 2006.

Interest Expense

Interest expense decreased 4.8%, or $.6 million, in Q3 2007 compared to Q3 2006 and decreased 3.1%, or $1.2 million, in YTD 2007 compared to YTD 2006. The decrease in Q3 2007 and YTD 2007 was primarily due to an increase in interest earned on short-term investments. The overall weighted average interest rate was 6.7% for YTD 2007 compared to 6.6% for YTD 2006. Interest earned on short-term cash investments in Q3 2007 and YTD 2007 was $.9 million and $2.3 million, respectively, compared to $.4 million and $.8 million in Q3 2006 and YTD 2006, respectively. 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 YTD 2007 compared to $2.5 million in YTD 2006 related to the portion of Piedmont owned by The Coca-Cola Company. The decreased amount in YTD 2007 was due to lower operating results at Piedmont.

Income Taxes

The Company’s effective income tax rate for YTD 2007 was 37.7% compared to 41.1% in YTD 2006. The lower effective tax rate in YTD 2007 resulted primarily from an increased manufacturing deduction benefit in 2007 compared to 2006. The manufacturing deduction was enacted as part of the American Jobs Creation Act of 2004, which provides a tax deduction for qualified production activities. The allowed manufacturing deduction increased to 6% in 2007 from 3% in 2006. The Company’s income tax rate for the remainder of 2007 is dependent upon results of operations and may change if the results for 2007 are different from current expectations.

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 15 to the consolidated financial statements for additional information related to the implementation of FIN 48 and FSP FIN 48-1.

Financial Condition

Total assets increased to $1.39 billion at September 30, 2007 from $1.36 billion at both December 31, 2006 and October 1, 2006 primarily due to an increase in cash and cash equivalents and accounts receivable partially offset by a decrease in property, plant and equipment, net. The decrease in property, plant and equipment, net was primarily due to lower levels of capital spending over the last several years.

Net working capital, defined as current assets less current liabilities, increased by $43.5 million at September 30, 2007 from December 31, 2006 and decreased by $43.1 million at September 30, 2007 from October 1, 2006.

Significant changes in net working capital from December 31, 2006 were as follows:

•		An increase in cash and cash equivalents of $26.6 million primarily due to cash flows from operating activities.

•		An increase in accounts receivable, trade of $5.6 million primarily due to higher sales in September 2007 compared to December 2006.

•		An increase in accounts receivable from The Coca-Cola Company of $14.9 million primarily due to higher marketing funding support and the timing of payments.

•		A decrease in accounts payable, trade of $5.6 million primarily due to the timing of payments.

•		An increase in other accrued interest payable of $8.8 million primarily due to the timing of payments.

Significant changes in net working capital from October 1, 2006 were as follows:

•		An increase in cash and cash equivalents of $31.0 million primarily due to cash flows from operating activities.

•		An increase in accounts receivable, trade of $6.2 million primarily due to higher sales in September 2007 compared to September 2006.

•		An increase in accounts receivable from The Coca-Cola Company of $11.4 million primarily due to higher marketing funding support and the timing of payments.

•		An increase in inventory of $6.0 million primarily due to the introduction of new products.

•		An increase in the current portion of debt of $100 million primarily due to the reclassification from long-term to current of $100 million in debentures which mature in November 2007.

•		A decrease in other accrued liabilities of $5.1 million primarily due to the timing of payments.

Debt and capital lease obligations were $772.3 million as of September 30, 2007 compared to $769.0 million as of December 31, 2006 and $769.4 million as of October 1, 2006. Debt and capital lease obligations as of September 30, 2007 included $80.8 million of capital lease obligations related to Company facilities.

Liquidity and Capital Resources

Capital Resources

The Company’s sources of capital include cash flows from operations, available credit facilities and the issuance of debt and equity securities. Management believes 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 payments and dividends for stockholders. The amount and frequency of future dividends will be determined by the Company’s 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 September 30, 2007, the Company had $200 million available under its revolving credit facility to meet its cash requirements. Also, the Company borrows periodically under its available lines of credit. These lines of credit, in the aggregate amount of $60 million at September 30, 2007, are made available at the discretion of two participating banks at rates negotiated at the time of borrowing and may be withdrawn at any time by such banks.

The Company used its cash on hand and availability under its lines of credit to satisfy the $100 million maturity of debentures in November 2007.

The Company has obtained all of its long-term financing, other than capital leases, from public markets. As of September 30, 2007, $691.5 million of the Company’s total outstanding balance of debt and capital lease obligations of $772.3 million was financed through publicly offered debt. The Company had capital lease obligations of $80.8 million as of September 30, 2007. The Company’s interest rate derivative contracts are with several different financial institutions to minimize the concentration of credit risk. The Company has master agreements with the counterparties to its derivative financial agreements that provide for net settlement of derivative transactions.

Cash Sources and Uses

The primary sources of cash for the Company have been cash provided by operating activities. The primary uses of cash have been for capital expenditures, the payment of debt and capital lease obligations, income tax payments and dividends.

A summary of cash activity for YTD 2007 and YTD 2006 follows:


	First Nine Months
In Millions	2007		2006

Cash Sources
Cash provided by operating activities (excluding income tax payments)	$	77.8	$	100.6
Other		7.7		1.0

Total cash sources	$	85.5	$	101.6


Cash Uses
Capital expenditures	$	30.6	$	50.7
Investment in plastic bottle manufacturing cooperative		2.3		1.5
Payment of debt and capital lease obligations		1.8		7.8
Dividends		6.8		6.8
Income tax payments		17.0		16.5
Other		.4		.5

Total cash uses	$	58.9	$	83.8

Increase in cash	$	26.6	$	17.8

Based on current projections which include a number of assumptions such as the Company’s pre-tax earnings, the Company anticipates its cash requirements for income taxes will be in the range of $18 million to $21 million in 2007 as compared to $17.2 million in 2006. Income tax payments in YTD 2006 included $5.0 million related to the settlement of a state tax audit, which was paid in the first quarter of 2006.

Investing Activities

Additions to property, plant and equipment during YTD 2007 were $30.6 million compared to $50.7 million during YTD 2006. Capital expenditures during YTD 2007 were funded with cash flows from operations and cash on hand. 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.

The Company anticipates additions to property, plant and equipment in fiscal 2007 will be in the range of $45 million to $52 million and plans to fund such additions through cash flows from operations, its available lines of credit and cash on hand. Additions to property, plant and equipment during fiscal 2006 were $63.2 million.

Financing Activities

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%. In addition, there is a fee of .10% required for the facility. Both the interest rate spread and the facility fee are determined from a commonly-used pricing grid based on the Company’s long-term senior unsecured debt rating. The $200 million facility contains two financial covenants related to ratio requirements for interest coverage, and long-term debt to cash flow, each as defined in the credit agreement. These covenants do not currently, and the Company does not

anticipate they will, restrict its liquidity or capital resources. There were no amounts outstanding under the credit facilities at September 30, 2007, December 31, 2006 and October 1, 2006.

The Company borrows periodically under its available lines of credit. These lines of credit, in the aggregate amount of $60 million at September 30, 2007, are made available at the discretion of the two participating banks at rates negotiated at the time of borrowing and may be withdrawn at any time by such banks. The Company can utilize its revolving credit facility in the event the lines of credit are not available. There were no amounts outstanding under the lines of credit at September 30, 2007, December 31, 2006 and October 1, 2006.

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

At September 30, 2007, the Company’s credit ratings were as follows:


		Long-Term Debt
Standard & Poor’s		BBB
Moody’s		Baa2

The Company’s credit ratings are reviewed periodically by the respective rating agencies. Changes in the Company’s operating results or financial position could result in changes in the Company’s 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. It is the Company’s intent to continue to reduce its financial leverage over time.

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

The Company issued 20,000 shares of Class B Common Stock to J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer, with respect to 2006 performance, effective January 1, 2007, under a restricted stock award plan that provides for annual awards of such shares subject to the Company achieving at least 80% of the overall goal achievement factor in the Company’s Annual Bonus Plan.

The Company’s only share based compensation is the restricted stock award to Mr. Harrison, III. The award provides the shares of restricted stock vest at the 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 Company’s Annual Bonus Plan. Each annual 20,000 share tranche has an independent performance requirement as it is not established until the Company’s Annual Bonus Plan targets are approved for each year. As a result, each 20,000 share tranche is considered to have its own service inception date, grant-date fair value and requisite service period. The Company’s Annual Bonus Plan targets, which establish the performance requirement for 2007, were set in Q1 2007 and the Company recorded the 20,000 share award at the grant-date price of $58.53 per share. Total stock compensation expense will be approximately $1.2 million over the one-year service period of which $.9 million was recognized in YTD 2007. 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.

Off-Balance Sheet Arrangements

The Company is a member of two manufacturing cooperatives, which are variable interest entities. The Company has guaranteed $43.0 million of debt and related lease obligations for these cooperatives as of September 30, 2007. The Company’s variable interest in these cooperatives includes an equity ownership in each of the entities and the guarantees. As of September 30, 2007, the Company’s maximum exposure, if the cooperatives borrowed up to their borrowing capacity, would have been $65.7 million including the Company’s equity interest. The Company has determined it is not the primary beneficiary of either of the cooperatives. See Note 14 of the consolidated financial statements for additional information about these cooperatives.

Aggregate Contractual Obligations

The following table summarizes the Company’s contractual obligations and commercial commitments as of September 30, 2007:


	Payments Due by Period
			Oct. 2007-		Oct. 2008-		Oct. 2010-		After
In Thousands	Total		Sept. 2008		Sept. 2010		Sept. 2012		Sept. 2012

Contractual obligations:
Total debt, net of interest	$	691,450	$	100,000	$	176,693	$	—	$	414,757
Capital lease obligations, net of interest		80,839		2,559		5,658		6,471		66,151
Estimated interest on long-term debt and capital lease obligations ⁽¹⁾		300,897		39,322		63,239		55,382		142,954
Purchase obligations ⁽²⁾		607,615		91,424		186,031		186,077		144,083
Other long-term liabilities ⁽³⁾		93,820		5,716		11,027		10,379		66,698
Operating leases		17,061		3,268		4,241		2,442		7,110
Long-term contractual arrangements ⁽⁴⁾		23,407		6,830		9,983		4,423		2,171
Interest rate swap agreements ⁽¹⁾		6,280		2,556		2,410		1,144		170
Purchase orders ⁽⁵⁾		27,515		27,515

Total contractual obligations	$	1,848,884	$	279,190	$	459,282	$	266,318	$	844,094


(1)		Includes interest payments based on contractual terms and current interest rates for variable rate debt.

(2)		Represents an estimate of the Company’s obligation to purchase 17.5 million cases of finished product on an annual basis through May 2014 from South Atlantic Canners, a manufacturing cooperative, and other purchase commitments.

(3)		Includes obligations under executive benefit plans, unrecognized income tax benefits and other long-term liabilities.

(4)		Includes contractual arrangements with certain prestige properties, athletics 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 have not been performed.

The Company has $13.0 million of unrecognized income tax benefits as of September 30, 2007 (included in other long-term liabilities in the above table) pursuant to FIN 48, of which $7.8 million would affect the Company’s effective tax rate if recognized. The Company does not anticipate any material impact on its liquidity and capital resources due to the resolution of income tax positions reserved for as uncertain. See Note 15 of the consolidated financial statements for additional information related to the Company’s adoption of FIN 48.

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 Company’s table of contractual obligations and commercial commitments since there are no minimum purchase requirements.

The Company has $21.3 million of standby letters of credit, primarily related to its property and casualty insurance programs, as of September 30, 2007. See Note 14 of the consolidated financial statements for additional information related to commercial commitments, guarantees, legal and tax matters.

The Company anticipates there will be no contributions to the principal Company-sponsored pension plan in 2007. Postretirement medical care payments are expected to be approximately $2.7 million in 2007. See Note 18 to the consolidated financial statements for additional information related to pension and postretirement obligations.

Hedging Activities

Interest Rate Hedging

The Company currently has nine interest rate swap agreements. These interest rate swap agreements effectively convert $325 million of the Company’s debt from a fixed rate to a floating rate and are accounted for as fair value hedges.

Interest expense was reduced due to the amortization of deferred gains on previously terminated interest rate swap agreements and forward interest rate agreements by $1.3 million during both YTD 2007 and YTD 2006.

The weighted average interest rate of the Company’s debt and capital lease obligations after taking into account all of the interest rate hedging activities was 6.7% as of September 30, 2007 compared to 6.9% as of December 31, 2006 and 6.8% as of October 1, 2006. Approximately 48% of the Company’s debt and capital lease obligations of $772.3 million as of September 30, 2007 was maintained on a floating rate basis and was subject to changes in short-term interest rates.

Assuming no changes in the Company’s capital structure, if market interest rates average 1% more over the next twelve months than the interest rates as of September 30, 2007, interest expense for the next twelve months would increase by approximately $2.8 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 September 30, 2007, including the effects of the Company’s derivative financial instruments. 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 Company’s floating rate debt and derivative financial instruments.

Fuel Hedging

During Q1 2007, the Company began using derivative instruments to hedge a portion of the Company’s vehicle fuel purchases. These derivative instruments relate to diesel fuel and unleaded gasoline used in the Company’s delivery fleet. Derivative instruments used include puts and calls which effectively establish an upper and lower limit on the Company’s 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 currently accounts for its fuel hedges on a mark-to-market basis with any expense or income being reflected as an adjustment of fuel costs.

Cautionary Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, 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 management’s current outlook for future periods.

These statements include, among others, statements relating to:

	•		potential marketing funding support from The Coca-Cola Company and other beverage companies;

	•		the Company’s 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;

	•		management’s belief that the Company has adequately provided for any ultimate amounts that are likely to result from tax audits;

	•		management’s belief that the Company has sufficient financial resources to maintain current operations and provide for its current capital expenditure and working capital requirements, scheduled debt payments, interest and income tax payments and dividends for stockholders;

	•		the Company’s intention to reduce its financial leverage over time;

	•		the Company’s 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 Company’s belief that its liquidity or capital resources will not be restricted by certain financial covenants in the Company’s credit agreements;

	•		the Company’s 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 September 30, 2007;

	•		the Company’s belief that there will be no contribution to the principal Company-sponsored pension plan in 2007;

	•		anticipated cash payments for income taxes will be in the range of $18 million to $21 million in 2007;

	•		anticipated additions to property, plant and equipment in fiscal 2007 will be in the range of $45 million to $52 million;

	•		the Company’s belief that demand for sugar sparkling beverages will continue to decline;

	•		the Company’s beliefs and estimates regarding the impact of the adoption of certain new accounting pronouncements;

	•		the Company’s belief that other parties to certain contractual arrangements will perform their obligations;

	•		the Company’s key priorities which are revenue management, innovation and beverage portfolio expansion, distribution cost management and productivity;

	•		the Company’s belief that postretirement benefit payments are expected to be approximately $2.7 million in 2007;

	•		the Company’s expectation that its overall bottle/can revenue will be primarily dependent upon continued growth in diet sparkling products, sports drinks, bottled water, tea and energy products, the introduction of new products and the pricing of brands and packages within channels;

	•		the Company’s belief that total restructuring expense will be in the range of $2.6 million to $2.8 million and that all of the cash expenditures will occur prior to 2007 fiscal year end;

	•		the Company’s beliefs that the growth of Company-owned or exclusive licensed brands appear very promising and the cost of developing, marketing and distributing these brands may be significant;

	•		the Company’s belief that the implementation of its new route delivery system will continue over the next several years and should generate significant savings and more effective delivery of a greater number of products;

	•		the Company’s belief there will not be any material impact on its liquidity and capital resources due to the resolution of income tax positions reserved for as uncertain;

	•		the Company’s belief that the impact of increasing costs for aluminum cans and high fructose corn syrup is anticipated to increase cost of sales during the remainder of 2007; and

	•		the Company’s belief that changes in unrecognized tax benefits over the next 12 months will not have a significant impact on the consolidated financial statements.

These statements and expectations are based on currently available competitive, financial and economic data along with the Company’s 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 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 under Item 1A. Risk Factors.

Caution should be taken not to place undue reliance on the Company’s 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Raw Material and Commodity Price Risk

Beginning in 2007, the majority of the Company’s aluminum packaging requirements did not have any ceiling price protection and the cost of aluminum cans increased during 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 combined impact of increasing costs for aluminum cans and high fructose corn syrup is anticipated to continue increasing cost of sales during the remainder of 2007. In addition, there is no limit on the price The Coca-Cola Company and other beverage companies can charge for concentrate.

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.

Item 4. 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 Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “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 the Company’s disclosure controls and procedures are effective for the purpose of providing reasonable assurance 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 SEC’s rules and forms and (ii) is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosures.

There has been no change in the Company’s internal control over financial reporting during the quarter ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1A. Risk Factors.

There have been no material changes to the factors disclosed in Part I, Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 6. 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 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.

12		Ratio of earnings to fixed charges (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).

SIGNATURE

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: November 8, 2007	By:	/s/ Steven D. Westphal Steven D. Westphal
		Principal Financial Officer of the Registrant
		and
		Senior Vice President and Chief Financial Officer