Coca-Cola Consolidated, Inc. - Quarter Report: 2009 March (Form 10-Q)

 

 

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 March 29, 2009

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 organization)		(I.R.S. Employer Identification No.)

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

(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company 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 April 30, 2009
Common Stock, $1.00 Par Value		7,141,447
Class B Common Stock, $1.00 Par Value		2,021,882

 

 

COCA-COLA BOTTLING CO. CONSOLIDATED
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 29, 2009

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 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			37
Item 3. Quantitative and Qualitative Disclosures About Market Risk			58
Item 4. Controls and Procedures			59
PART II – OTHER INFORMATION
Item 1A. Risk Factors			60
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			60
Item 6. Exhibits			61
Signatures			62
EX-12
EX-31.1
EX-31.2
EX-32

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

Coca-Cola Bottling Co. Consolidated

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

		First Quarter
		2009				2008
Net sales		$	336,261			$	337,674
Cost of sales			189,132				197,756
Gross margin			147,129				139,918
Selling, delivery and administrative expenses			125,988				136,243
Income from operations			21,141				3,675
Interest expense			9,258				10,434
Income (loss) before income taxes			11,883				(6,759	)
Income tax provision (benefit)			3,060				(2,085	)
Net income (loss)			8,823				(4,674	)
Less: Net income (loss) attributable to the noncontrolling interest			292				(339	)
Net income (loss) attributable to Coca-Cola Bottling Co. Consolidated		$	8,531			$	(4,335	)
Basic net income (loss) per share:
Common Stock		$	.93			$	(.47	)
Weighted average number of Common Stock shares outstanding			6,857				6,644
Class B Common Stock		$	.93			$	(.47	)
Weighted average number of Class B Common Stock shares outstanding			2,306				2,500
Diluted net income (loss) per share:
Common Stock		$	.93			$	(.47	)
Weighted average number of Common Stock shares outstanding – assuming dilution			9,174				9,144
Class B Common Stock		$	.93			$	(.47	)
Weighted average number of Class B Common Stock shares outstanding – assuming dilution			2,317				2,500
Cash dividends per share:
Common Stock		$	.25			$	.25
Class B Common Stock		$	.25			$	.25

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED BALANCE SHEETS
In Thousands (Except Share Data)

		Unaudited								Unaudited
		March 29,				Dec. 28,				March 30,
		2009				2008				2008
ASSETS
Current Assets:
Cash and cash equivalents		$	37,996			$	45,407			$	9,930
Accounts receivable, trade, less allowance for doubtful accounts of $1,820, $1,188 and $858, respectively			97,647				99,849				107,412
Accounts receivable from The Coca-Cola Company			20,857				3,454				14,158
Accounts receivable, other			11,969				12,990				6,655
Inventories			72,924				65,497				65,556
Prepaid expenses and other current assets			23,261				21,121				24,881
Total current assets			264,654				248,318				228,592
Property, plant and equipment, net			329,896				338,156				358,626
Leased property under capital leases, net			55,051				66,730				69,829
Other assets			40,260				33,937				35,662
Franchise rights, net			520,672				520,672				520,672
Goodwill, net			102,049				102,049				102,049
Other identifiable intangible assets, net			5,770				5,910				4,192
Total		$	1,318,352			$	1,315,772			$	1,319,622

See Accompanying Notes to Consolidated Financial Statements

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

		Unaudited								Unaudited
		March 29,				Dec. 28,				March 30,
		2009				2008				2008
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of debt		$	66,693			$	176,693			$	42,100
Current portion of obligations under capital leases			3,557				2,781				2,645
Accounts payable, trade			41,569				42,383				44,887
Accounts payable to The Coca-Cola Company			33,384				35,311				22,610
Other accrued liabilities			71,830				57,504				55,540
Accrued compensation			13,629				23,285				12,935
Accrued interest payable			13,606				8,139				14,337
Total current liabilities			244,268				346,096				195,054
Deferred income taxes			140,932				139,338				165,988
Pension and postretirement benefit obligations			104,898				107,005				33,645
Other liabilities			106,863				107,037				95,045
Obligations under capital leases			62,124				74,833				76,935
Long-term debt			524,757				414,757				591,450
Total liabilities			1,183,842				1,189,066				1,158,117
Commitments and Contingencies (Note 14)
Equity:
Common Stock, $1.00 par value:
Authorized – 30,000,000 shares;
Issued – 10,203,821, 9,706,051 and 9,706,051 shares, respectively			10,204				9,706				9,706
Class B Common Stock, $1.00 par value:
Authorized – 10,000,000 shares;
Issued – 2,649,996, 3,127,766 and 3,127,766 shares, respectively			2,649				3,127				3,127
Capital in excess of par value			103,562				103,582				102,732
Retained earnings			85,261				79,021				72,453
Accumulated other comprehensive loss			(56,601	)			(57,873	)			(12,925	)
			145,075				137,563				175,093
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 equity of Coca-Cola Bottling Co. Consolidated			83,821				76,309				113,839
Noncontrolling interest			50,689				50,397				47,666
Total equity			134,510				126,706				161,505
Total		$	1,318,352			$	1,315,772			$	1,319,622

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
In Thousands

										Capital								Accumulated
						Class B				in								Other								Total
		Common				Common				Excess of				Retained				Comprehensive				Treasury				Equity				Noncontrolling				Total
		Stock				Stock				Par Value				Earnings				Loss				Stock				of CCBCC				Interest				Equity
Balance on December 30, 2007		$	9,706			$	3,107			$	102,469			$	79,227			$	(12,751	)		$	(61,254	)		$	120,504			$	48,005			$	168,509
Comprehensive income:
Net income															(4,335	)											(4,335	)			(339	)			(4,674	)
Foreign currency translation adjustments, net of tax																			7								7								7
Pension and postretirement benefit adjustments, net of tax																			(67	)							(67	)							(67	)
Total comprehensive income																											(4,395	)			(339	)			(4,734	)
Adjustment to change measurement date for SFAS No. 158, net of tax															(153	)			(114	)							(267	)							(267	)
Cash dividends paid
Common ($.25 per share)															(1,661	)											(1,661	)							(1,661	)
Class B Common ($.25 per share)															(625	)											(625	)							(625	)
Issuance of 20,000 shares of Class B Common Stock							20				(20	)															—								—
Stock compensation expense											283																283								283
Balance on March 30, 2008		$	9,706			$	3,127			$	102,732			$	72,453			$	(12,925	)		$	(61,254	)		$	113,839			$	47,666			$	161,505
Balance on December 28, 2008		$	9,706			$	3,127			$	103,582			$	79,021			$	(57,873	)		$	(61,254	)		$	76,309			$	50,397			$	126,706
Comprehensive income:
Net income															8,531												8,531				292				8,823
Foreign currency translation adjustments, net of tax																			(6	)							(6	)							(6	)
Pension and postretirement benefit adjustments, net of tax																			1,278								1,278								1,278
Total comprehensive income																											9,803				292				10,095
Cash dividends paid
Common ($.25 per share)															(1,661	)											(1,661	)							(1,661	)
Class B Common ($.25 per share)															(630	)											(630	)							(630	)
Issuance of 20,000 shares of Class B Common Stock							20				(20	)															—								—
Conversion of Class B Common Stock into Common Stock			498				(498	)																			—								—
Balance on March 29, 2009		$	10,204			$	2,649			$	103,562			$	85,261			$	(56,601	)		$	(61,254	)		$	83,821			$	50,689			$	134,510

See Accompanying Notes to Consolidated Financial Statements

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
In Thousands

		First Quarter
		2009				2008
Cash Flows from Operating Activities
Net income (loss)		$	8,823			$	(4,674	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense			15,060				16,629
Amortization of intangibles			140				110
Deferred income taxes			(747	)			(2,085	)
(Gain) loss on sale of property, plant and equipment			(250	)			369
Amortization of debt costs			603				615
Amortization of deferred gain related to terminated interest rate agreements			(850	)			(426	)
Stock compensation expense			517				283
Increase in current assets less current liabilities			(13,087	)			(28,879	)
(Increase) decrease in other noncurrent assets			(6,814	)			147
Increase (decrease) in other noncurrent liabilities			(1,616	)			1,753
Other			(56	)			(152	)
Total adjustments			(7,100	)			(11,636	)
Net cash provided by (used in) operating activities			1,723				(16,310	)
Cash Flows from Investing Activities
Additions to property, plant and equipment			(6,249	)			(14,835	)
Proceeds from the sale of property, plant and equipment			135				174
Investment in plastic bottle manufacturing cooperative			—				(729	)
Net cash used in investing activities			(6,114	)			(15,390	)
Cash Flows from Financing Activities
Proceeds from lines of credit, net			—				34,700
Cash dividends paid			(2,291	)			(2,286	)
Principal payments on capital lease obligations			(643	)			(635	)
Other			(86	)			(20	)
Net cash provided by (used in) financing activities			(3,020	)			31,759
Net increase (decrease) in cash			(7,411	)			59
Cash at beginning of period			45,407				9,871
Cash at end of period		$	37,996			$	9,930
Significant non-cash investing and financing activities:
Issuance of Class B Common Stock in connection with stock award		$	1,130			$	1,171
Capital lease obligations incurred			660				—

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 28, 2008 filed with the United States Securities and Exchange Commission.

Effective December 29, 2008, the beginning of the first quarter of 2009 (“Q1 2009”), the Company implemented Statement of Financial Accounting Standards (“SFAS”) No. 160, “Noncontrolling Interest in Consolidated Financial Statements – an amendment of ARB No. 51.” This Statement changes the accounting and reporting standards for the noncontrolling interest in a subsidiary (commonly referred to previously as minority interest). Piedmont Coca-Cola Bottling Partnership (“Piedmont”) is the Company’s only subsidiary that has a noncontrolling interest. Noncontrolling interest income of $.3 million in Q1 2009 and noncontrolling interest loss of $.3 million in the first quarter of 2008 (“Q1 2008”) have been reclassified to be included in net income on the Company’s consolidated statement of operations. In addition, the amount of consolidated net income attributable to both the Company and the noncontrolling interest are shown on the Company’s consolidated statement of operations. Noncontrolling interest related to Piedmont totaled $50.7 million, $50.4 million and $47.4 million at March 29, 2009, December 28, 2008 and March 30, 2008, respectively. These amounts have been reclassified as noncontrolling interest in the equity section of the Company’s consolidated balance sheets.

2. Seasonality of Business

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

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

3. Piedmont Coca-Cola Bottling Partnership

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

Noncontrolling interest as of March 29, 2009, December 28, 2008 and March 30, 2008 represents the portion of Piedmont owned by The Coca-Cola Company. The Coca-Cola Company’s interest in Piedmont was 22.7% for all periods presented.

4. Inventories

Inventories were summarized as follows:

		March 29,				Dec. 28,				March 30,
In Thousands		2009				2008				2008
Finished products		$	45,781			$	36,418			$	41,822
Manufacturing materials			9,091				12,620				6,923
Plastic shells, plastic pallets and other inventories			18,052				16,459				16,811
Total inventories		$	72,924			$	65,497			$	65,556

5. Property, Plant and Equipment

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

		March 29,				Dec. 28,				March 30,				Estimated
In Thousands		2009				2008				2008				Useful Lives
Land		$	12,167			$	12,167			$	12,280
Buildings			109,403				109,384				110,721			10-50 years
Machinery and equipment			119,277				118,934				106,575			5-20 years
Transportation equipment			175,984				176,084				174,785			4-17 years
Furniture and fixtures			37,629				38,254				38,587			4-10 years
Cold drink dispensing equipment			316,487				319,188				325,586			6-15 years
Leasehold and land improvements			60,154				60,142				60,047			5-20 years
Software for internal use			63,479				59,786				52,155			3-10 years
Construction in progress			3,672				4,891				13,336
Total property, plant and equipment, at cost			898,252				898,830				894,072
Less: Accumulated depreciation and amortization			568,356				560,674				535,446
Property, plant and equipment, net		$	329,896			$	338,156			$	358,626

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

5. Property, Plant and Equipment

Depreciation and amortization expense was $15.1 million and $16.6 million in Q1 2009 and Q1 2008, respectively. These amounts included amortization expense for leased property under capital leases.

The Company changed the useful lives of certain cold drink dispensing equipment in Q1 2009 to better reflect actual useful lives. The change in useful lives reduced depreciation expense in Q1 2009 by $1.2 million.

6. Leased Property Under Capital Leases

Leased property under capital leases was summarized as follows:

		March 29,				Dec. 28,				March 30,				Estimated
In Thousands		2009				2008				2008				Useful Lives
Leased property under capital leases		$	76,877			$	88,619			$	88,619			3-20 years
Less: Accumulated amortization			21,826				21,889				18,790
Leased property under capital leases, net		$	55,051			$	66,730			$	69,829

As of March 29, 2009, real estate represented $54.4 million of the leased property under capital leases and $52.7 million of this real estate is leased from related parties as described in Note 19 to the consolidated financial statements.

The Company modified a related party lease and terminated a second lease in Q1 2009. See Note 19 to the consolidated financial statements for additional information on the lease modification.

7. Franchise Rights and Goodwill

There was no change in the carrying amounts of franchise rights and goodwill in the periods presented. The Company performs its annual impairment test of franchise rights and goodwill as of the first day of the fourth quarter. During Q1 2009, the Company believes it did not experience any events or changes in circumstances that indicated the carrying amounts of the Company’s franchise rights or goodwill exceeded fair values. As such, the Company did not perform an interim impairment test during Q1 2009 and did not record any impairments of franchise rights or goodwill.

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

8. Other Identifiable Intangible Assets

Other identifiable intangible assets were summarized as follows:

		March 29,				Dec. 28,				March 30,				Estimated
In Thousands		2009				2008				2008				Useful Lives
Other identifiable intangible assets		$	8,665			$	8,909			$	6,599			1-20 years
Less: Accumulated amortization			2,895				2,999				2,407
Other identifiable intangible assets, net		$	5,770			$	5,910			$	4,192

Other identifiable intangible assets primarily represent customer relationships and distribution rights.

9. Other Accrued Liabilities

Other accrued liabilities were summarized as follows:

		March 29,				Dec. 28,				March 30,
In Thousands		2009				2008				2008
Accrued marketing costs		$	7,591			$	9,001			$	6,406
Accrued insurance costs			17,540				17,132				15,281
Accrued taxes (other than income taxes)			1,880				374				2,080
Employee benefit plan accruals			11,184				8,626				8,936
Checks and transfers yet to be presented for payment from zero balance cash account			20,339				11,074				13,550
All other accrued liabilities			13,296				11,297				9,287
Total other accrued liabilities		$	71,830			$	57,504			$	55,540

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

10. Debt

Debt was summarized as follows:

				Interest				Interest		March 29,				Dec. 28,				March 30,
In Thousands		Maturity		Rate				Paid		2009				2008				2008
Lines of Credit		2008			—			Varies		$	—			$	—			$	42,100
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
											591,450				591,450				633,550
Less: Current portion of debt											66,693				176,693				42,100
Long-term debt										$	524,757			$	414,757			$	591,450

On March 8, 2007, the Company entered into a $200 million revolving credit facility (“$200 million facility”), replacing its $100 million facility. The $200 million facility matures in March 2012 and includes an option to extend the term for an additional year at the discretion of the participating banks. The $200 million facility bears interest at a floating base rate or a floating rate of LIBOR plus an interest rate spread of .35%, dependent on the length of the term of the borrowing. In addition, the Company must pay an annual facility fee of .10% of the lenders’ aggregate commitments under the facility. Both the interest rate spread and the facility fee are determined from a commonly-used pricing grid based on the Company’s long-term senior unsecured debt rating. The $200 million facility contains two financial covenants: a fixed charges coverage ratio and a debt to operating cash flow ratio, each as defined in the credit agreement. The fixed charges coverage ratio requires the Company to maintain a consolidated cash flow to fixed charges ratio of 1.5 to 1 or higher. The operating cash flow ratio requires the Company to maintain a debt to cash flow ratio of 6.0 to 1 or lower. On August 25, 2008, the Company entered into an amendment to the $200 million facility. The amendment clarified that charges incurred by the Company resulting from the Company’s withdrawal from the Central States Pension Fund (“Central States”) would be excluded from the calculations of the financial covenants to the extent they are recognized before March 29, 2009 and do not exceed $15 million. See Note 18 to the consolidated financial statements for additional details on the withdrawal. The Company is currently in compliance with these covenants and the amendment to the $200 million facility. These covenants do not currently, and the Company does not anticipate they will, restrict its liquidity or capital resources. On March 29, 2009, December 28, 2008 and March 30, 2008, the Company had no outstanding borrowings under the $200 million facility.

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

10. Debt

The Company borrows periodically under an uncommitted line of credit provided from a bank participating in the $200 million facility. This uncommitted line of credit made available at the discretion of the participating bank was temporarily terminated in the fourth quarter of 2008. In January 2009, the participating bank reinstated their uncommitted line of credit for $65 million. This uncommitted line of credit was terminated after March 29, 2009.

After taking into account all of its interest rate hedging activities, the Company had a weighted average interest rate of 5.6%, 5.9% and 5.9% for its debt and capital lease obligations as of March 29, 2009, December 28, 2008 and March 30, 2008, respectively. The Company’s overall weighted average interest rate on its debt and capital lease obligations was 5.6% for Q1 2009 compared to 5.9% for Q1 2008. As of March 29, 2009, approximately 4.6% of the Company’s debt and capital lease obligations of $657.1 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.

In April 2009, the Company issued $110 million of unsecured 7% Senior Notes due in 2019. The proceeds plus cash on hand were used to repay the $119.3 million debt maturity on May 1, 2009. Current portion of debt reflected the $176.7 million of debt maturing in May and July of 2009 less the $110 million of debt which was repaid from the proceeds of the 7% Senior Notes.

11. Derivative Financial Instruments

Interest

The Company periodically uses interest rate hedging products to modify risk from interest rate fluctuations. The Company has historically altered its fixed/floating rate mix based upon anticipated cash flows from operations relative to the Company’s debt level and the potential impact of changes in interest rates on the Company’s overall financial condition. Sensitivity analyses are performed to review the impact on the Company’s financial position and coverage of various interest rate movements. The Company does not use derivative financial instruments for trading purposes nor does it use leveraged financial instruments.

On September 18, 2008, the Company terminated six outstanding interest rate swap agreements with a notional amount of $225 million receiving $6.2 million in cash proceeds including $1.1 million for previously accrued interest receivable. After accounting for previously accrued interest receivable, the Company will amortize a

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

11. Derivative Financial Instruments

gain of $5.1 million over the remaining term of the underlying debt. During Q1 2009, $.4 million of the gain was amortized. The remaining amount to be amortized is $4.3 million. All of the Company’s interest rate swap agreements were LIBOR-based.

Interest rate swap agreements were summarized as follows:

		March 29, 2009								December 28, 2008								March 30, 2008
		Notional				Remaining				Notional				Remaining				Notional				Remaining
In Thousands		Amount				Term				Amount				Term				Amount				Term
Interest rate swap agreement — floating			—				—				—				—			$	50,000			1.2 years
Interest rate swap agreement — floating			—				—				—				—				50,000			1.3 years
Interest rate swap agreement — floating			—				—				—				—				50,000			4.7 years
Interest rate swap agreement — floating			—				—				—				—				25,000			1.1 years
Interest rate swap agreement — floating			—				—				—				—				25,000			7.0 years
Interest rate swap agreement — floating			—				—				—				—				25,000			4.7 years

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 and commodity derivative instruments, described below, to minimize the concentration of credit risk. While the Company is exposed to credit loss in the event of nonperformance by these counterparties, the Company does not anticipate nonperformance by these parties. The Company has master agreements with the counterparties to its derivative financial agreements that provided for net settlement of the derivative transactions.

Commodities

The Company is subject to the risk of loss arising from adverse changes in commodity prices. In the normal course of business, the Company manages these risks through a variety of strategies, including the use of derivative instruments. The Company does not use derivative instruments for trading or speculative purposes. All derivative instruments are recorded at fair value as either assets or liabilities in the Company’s consolidated balance sheets. These derivative instruments are not designated as hedging instruments under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and are used as “economic hedges” to manage certain commodity risk. Currently the Company has derivative instruments to hedge its projected diesel fuel and aluminum purchase requirements. These derivative instruments are marked to market on a periodic basis and recognized in earnings consistent with the expense classification of the underlying hedged item.

The Company uses derivative instruments to hedge all of its projected diesel fuel purchases for 2009 and 2010. These derivative instruments relate to diesel fuel used by the Company’s delivery fleet. At the end of Q1 2009, the Company began using derivative instruments to hedge 75% of the Company’s projected 2010 aluminum purchase requirements. Subsequent to Q1 2009, the Company entered into derivative contracts to hedge 75% of the Company’s projected 2011 aluminum purchase requirements.

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

11. Derivative Financial Instruments

The following summarizes the gains and the classification in the consolidated statement of operations of derivative instruments for Q1 2009:

In Thousands		Classification of Gain		Gain Recognized
Fuel hedges		Selling, delivery and administrative expenses		$	1,451
Aluminum hedges		Cost of sales			663
Total Gain				$	2,114

The following summarizes the fair values and classification in the consolidated balance sheets of derivative instruments held by the Company as of March 29, 2009:

				March 29,
In Thousands		Balance Sheet Classification		2009
Assets
Aluminum hedges at fair market value		Prepaid and other assets		$	663
Unamortized cost of fuel hedging contracts		Prepaid and other assets			1,441
Unamortized cost of aluminum hedging contracts		Prepaid and other assets			1,197
Liabilities
Fuel hedges at fair market value		Other accrued liabilities			215

In addition, the Company paid $2.5 million in April 2009 to enter aluminum hedging contracts relative to the hedging of 75% of the Company’s projected 2011 aluminum purchase requirements.

The following table summarizes the Company’s outstanding derivative contracts as of March 29, 2009:

		Notional		Latest
In Thousands		Amount		Maturity
Diesel fuel hedging contracts	$	29,759			December 2010
Aluminum hedging contracts		23,569			December 2010

In addition, the notional amount of the derivative contracts entered into subsequent to Q1 2009 to hedge 75% of the Company’s projected 2011 aluminum purchase requirements was $29.6 million.

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 current market prices.

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

12. Fair Value of Financial Instruments

Non-Public Variable Rate Debt

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

Deferred Compensation Plan Assets

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

Derivative Financial Instruments

The fair values for the Company’s interest rate swap, fuel hedging and aluminum hedging agreements are based on current settlement values. Credit risk related to the derivative financial instruments is managed by requiring high standards for it counterparties and periodic settlements. The Company considers nonperformance risk in determining the fair value of derivative financial instruments.

Letters of Credit

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

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

		March 29, 2009								December 28, 2008								March 30, 2008
		Carrying				Fair				Carrying				Fair				Carrying				Fair
In Thousands		Amount				Value				Amount				Value				Amount				Value
Public debt securities		$	591,450			$	569,606			$	591,450			$	559,963			$	591,450			$	588,616
Non-public variable rate debt			—				—				—				—				42,100				42,100
Deferred compensation plan assets			5,841				5,841				5,446				5,446				6,810				6,810
Interest rate swap agreements			—				—				—				—				(8,405	)			(8,405	)
Fuel hedging agreements			215				215				1,985				1,985				(654	)			(654	)
Aluminum hedging agreements			(663	)			(663	)			—				—				—				—
Letters of credit			—				19,200				—				19,274				—				21,496

On September 18, 2008, the Company terminated all of its outstanding interest rate swap agreements. The fair value of interest rate swap agreements at March 30, 2008 represented the estimated amount the Company would have received upon termination of these agreements.

The fair values of the fuel hedging agreements at March 29, 2009 and December 28, 2008 represented the estimated amount the Company would have paid upon termination of these agreements. The fair value of the fuel hedging agreements at March 30, 2008 represented the estimated amount the Company would have received upon termination of these agreements.

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

12. Fair Values of Financial Instruments

The fair value of the aluminum hedging agreements at March 29, 2009 represented the estimated amount the Company would have received upon termination of these agreements.

The Company adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurement” (“SFAS No. 157”) as of December 31, 2007, the beginning of Q1 2008, and there was no material impact to the consolidated financial statements. SFAS No. 157 currently applies to all financial assets and liabilities and for nonfinancial assets and liabilities recognized or disclosed at fair value on a recurring basis. In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position SFAS No. 157-2, “Effective Date of FASB Statement No. 157,” which deferred the application date of the provisions of SFAS No. 157 for all nonfinancial assets and liabilities until Q1 2009 except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. There was no material impact of the adoption of SFAS No. 157 for nonfinancial assets and liabilities in Q1 2009, but could have a material effect in the future. SFAS No. 157 requires disclosure that establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS No. 157 is intended to enable the readers of financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. SFAS No. 157 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The following table summarizes, by assets and liabilities, the valuation of the Company’s deferred compensation plan, aluminum hedging agreements, fuel hedging agreements and interest rate swap agreements for the categories above:

		March 29, 2009								December 28, 2008								March 30, 2008
In Thousands		Level 1				Level 2				Level 1				Level 2				Level 1				Level 2
Assets
Deferred compensation plan assets		$	5,841							$	5,446							$	6,810
Aluminum hedging agreements						$	663
Fuel hedging agreements																						$	654
Interest rate swap agreements																							8,405
Liabilities
Deferred compensation plan liabilities			5,841								5,446								6,810
Fuel hedging agreements							215							$	1,985

The Company maintains a non-qualified deferred compensation plan for certain executives and other highly compensated employees. The investment assets are held in mutual funds. The fair value of the mutual funds is based on the quoted market value of the securities held within the funds (Level 1). The related deferred compensation liability represents the fair value of the investment assets.

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

12. Fair Values of Financial Instruments

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

The Company’s aluminum hedging agreements are based upon LME rates that are observable and quoted periodically over the full term of the agreement and are considered Level 2 items.

The Company’s interest rate swap agreements were fair value hedges, meaning the Company received fixed and paid variable rates based on LIBOR swap rates. LIBOR swap rates are observable and quoted periodically over the full term of the agreements and are considered Level 2 items.

The Company does not have Level 3 assets or liabilities.

13. Other Liabilities

Other liabilities were summarized as follows:

		March 29,				Dec. 28,				March 30,
In Thousands		2009				2008				2008
Accruals for executive benefit plans		$	79,177			$	77,299			$	77,222
Other			27,686				29,738				17,823
Total other liabilities		$	106,863			$	107,037			$	95,045

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 $40.3 million, $39.9 million and $45.4 million as of March 29, 2009, December 28, 2008 and March 30, 2008, respectively. The Company has not recorded any liability associated with these guarantees and holds no assets as collateral against these guarantees. The guarantees relate to the debt and lease obligations of SAC and Southeastern, which resulted primarily from the purchase of production equipment and facilities. These guarantees expire at various dates through 2021. The members of both cooperatives consist solely of Coca-Cola bottlers. The Company does not anticipate either of these cooperatives will fail to fulfill their commitments. The Company further believes each of these cooperatives has sufficient assets, including production equipment, facilities and working capital, and the ability to adjust selling prices of their products which adequately mitigate the risk of material loss from the Company’s guarantees.

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

14. Commitments and Contingencies

In the event either of these cooperatives fails to fulfill its commitments under the related debt and lease obligations, the Company would be responsible for payments to the lenders up to the level of the guarantees. If these cooperatives had borrowed up to their borrowing capacity, the Company’s maximum exposure under these guarantees on March 29, 2009 would have been $25.2 million for SAC and $25.3 million for Southeastern and the Company’s maximum total exposure, including its equity investment, would have been $30.8 million for SAC and $38.4 million for Southeastern.

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

The Company has an equity ownership in each of the entities in addition to the guarantees of certain indebtedness and records its investment in each under the equity method. As of March 29, 2009, SAC had total assets of approximately $42 million and total debt of approximately $21 million. SAC had total revenues for Q1 2009 of approximately $39 million. As of March 29, 2009, Southeastern had total assets of approximately $402 million and total debt of approximately $230 million. Southeastern had total revenue for Q1 2009 of approximately $141 million.

The Company has standby letters of credit, primarily related to its property and casualty insurance programs. On March 29, 2009, these letters of credit totaled $19.2 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 March 29, 2009 amounted to $25.3 million and expire at various dates through 2017.

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

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

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

15. Income Taxes

The Company’s effective income tax rate for Q1 2009 and Q1 2008 was 26.4% and 32.5%, respectively.

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

		First Quarter
In Thousands		2009				2008
Statutory expense (benefit)		$	4,057			$	(2,247	)
State income taxes (benefits), net of federal effect			505				(279	)
Manufacturing deduction benefit			(315	)			128
Meals and entertainment			247				(103	)
Adjustment for uncertain tax positions			(1,686	)			159
Other, net			252				257
Income tax expense (benefit)		$	3,060			$	(2,085	)

As of December 28, 2008, the Company had $10.5 million of unrecognized tax benefits, including accrued interest, of which $9.4 million would affect the Company’s effective tax rate if recognized. As of March 29, 2009, the Company had $9.3 million of unrecognized tax benefits, including accrued interest, of which $8.3 million would affect the Company’s effective rate if recognized. It is expected that the amount of unrecognized tax benefits may change in the next 12 months. During this period, it is reasonably possible that tax audits could reduce unrecognized tax benefits. The Company cannot reasonably estimate the change in the amount of unrecognized tax benefits until further information is made available during the progress of the audits.

The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense. As of December 28, 2008, the Company had approximately $2.5 million of accrued interest related to uncertain tax positions. As of March 29, 2009, the Company had approximately $1.8 million of accrued interest related to uncertain tax positions. Income tax expense included interest credit of approximately $.7 million in Q1 2009 and interest expense of approximately $.1 million in Q1 2008.

In Q1 2009, the Company reached an agreement with a state taxing authority to settle prior tax positions for which the Company had previously provided reserves due to uncertainty of resolution. As a result, the Company reduced the liability for uncertain tax positions by $1.7 million. The net effect of the adjustment was a decrease to income tax expense of approximately $1.7 million.

Various tax years from 1990 remain open to examination by taxing jurisdictions to which the Company is subject due to loss carryforwards.

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

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

16. Accumulated Other Comprehensive Loss

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

A summary of accumulated other comprehensive loss is as follows:

		Dec. 28,				Pre-tax				Tax				March 29,
In Thousands		2008				Activity				Effect				2009
Net pension activity:
Actuarial loss		$	(56,717	)		$	2,339			$	(921	)		$	(55,299	)
Prior service costs			(45	)			4				(1	)			(42	)
Net postretirement benefits activity:
Actuarial loss			(9,625	)			217				(86	)			(9,494	)
Prior service costs			8,459				(446	)			176				8,189
Transition asset			41				(6	)			2				37
Foreign currency translation adjustment			14				(10	)			4				8
Total		$	(57,873	)		$	2,098			$	(826	)		$	(56,601	)

						Application of
		Dec. 30,				SFAS No. 158				Pre-tax				Tax				March 30,
In Thousands		2007				After tax (1)				Activity				Effect				2008
Net pension activity:
Actuarial loss		$	(12,684	)		$	23			$	111			$	(43	)		$	(12,593	)
Prior service costs			(55	)			1				4				(2	)			(52	)
Net postretirement benefits activity:
Actuarial loss			(9,928	)			141				229				(88	)			(9,646	)
Prior service costs			9,833				(275	)			(446	)			171				9,283
Transition asset			60				(4	)			(6	)			3				53
Foreign currency translation adjustment			23				—				12				(5	)			30
Total		$	(12,751	)		$	(114	)		$	(96	)		$	36			$	(12,925	)

17. Capital Transactions

The Company has two classes of common stock outstanding, Common Stock and Class B Common Stock. The Common Stock is traded on the NASDAQ Global Select Market^sm 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

No cash dividend or dividend of property or stock other than stock of the Company, as specifically described in the Company’s 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 Q1 2009 and Q1 2008, dividends of $.25 per share were declared and paid on both Common Stock and Class B Common Stock.

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

On May 12, 1999, the stockholders of the Company approved a restricted stock award for J. Frank Harrison, III, the Company’s Chairman of the Board of Directors and Chief Executive Officer, consisting of 200,000 shares of the Company’s Class B Common Stock. Under the award, shares of restricted stock were granted at a rate of 20,000 shares per year over a ten-year period. The vesting of each annual installment was 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 did not entitle Mr. Harrison, III to participate in dividend or voting rights until each installment had vested and the shares were issued. The restricted stock award expired at the end of fiscal year 2008.

On February 27, 2008, the Compensation Committee of the Board of Directors determined 20,000 shares of restricted Class B Common Stock vested and should be issued to Mr. Harrison, III for the fiscal year ended December 30, 2007. On March 4, 2009, the Compensation Committee determined an additional 20,000 shares of restricted Class B Common Stock vested and should be issued to Mr. Harrison, III for the fiscal year ended December 28, 2008.

Each annual 20,000 share tranche had an independent performance requirement as it was not established until the Company’s Annual Bonus Plan targets were approved each year by the Company’s Board of Directors. As a result, each 20,000 share tranche was 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, were approved by the Compensation Committee of the Board of Directors in the first quarter of each year.

A summary of the restricted stock award was as follows:

										Potential
										Annual				First Quarter
		Shares				Grant-Date				Compensation				Compensation
Year		Awarded				Price				Expense				Expense
2008			20,000			$	56.50			$	1,130,000			$	282,500

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

17. Capital Transactions

In addition, the Company reimbursed Mr. Harrison, III for income taxes to be paid on the shares if the performance requirement was met and the shares were issued. The Company accrued the estimated cost of the income tax reimbursement over the one-year service period.

On April 29, 2008, the stockholders of the Company approved a Performance Unit Award Agreement for Mr. Harrison, III consisting of 400,000 performance units (“Units”). Each Unit represents the right to receive one share of the Company’s Class B Common Stock, subject to certain terms and conditions. The Units will vest in annual increments over a ten-year period starting in fiscal year 2009. The number of Units that vest each year will equal the product of 40,000 multiplied by the overall goal achievement factor (not to exceed 100%) under the Company’s Annual Bonus Plan. The Performance Unit Award Agreement replaced the restricted stock award discussed above.

Each annual 40,000 unit tranche has an independent performance requirement as it is not established until the Company’s Annual Bonus Plan targets are approved each year by the Company’s Board of Directors. As a result, each 40,000 unit tranche is considered to have its own service inception date and requisite service period. The Company’s Annual Bonus Plan targets, which establish the performance requirements for the Performance Unit Award Agreement, are approved by the Compensation Committee of the Board of Directors in the first quarter of each year. The Performance Unit Award Agreement does not entitle Mr. Harrison, III to participate in dividends or voting rights until each installment has vested and the shares are issued.

Compensation expense recognized in Q1 2009 was $.5 million, which was based upon a share price of $51.68 on March 27, 2009.

On February 19, 2009, The Coca-Cola Company converted all of its 497,670 shares of the Company’s Class B Common Stock into an equivalent number of shares of the Company’s Common Stock.

The increase in the total number of shares outstanding in Q1 2009 was due to the issuance of 20,000 shares of Class B Common Stock related to the restricted stock award.

The increase in the number of shares of Common Stock was due to the conversion by The Coca-Cola Company of 497,670 shares of Class B Common Stock into 497,670 shares of Common Stock plus the conversion of another 100 shares of Class B Common Stock into 100 shares of Common Stock. The decrease in the number of shares of Class B Common Stock was due to the conversion by The Coca-Cola Company of 497,670 shares of Class B Common Stock into 497,670 shares of Common Stock plus the conversion of another 100 shares of Class B Common Stock into 100 shares of Common Stock, offset by the issuance of 20,000 shares of Class B Common Stock related to the restricted stock award.

The increase in the total number of shares outstanding in Q1 2008 was due to the issuance of 20,000 shares of Class B Common Stock related to the restricted stock award.

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

18. Benefit Plans

Recently Adopted Pronouncement

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

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

Pension Plans

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

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

		First Quarter
In Thousands		2009				2008
Service cost		$	23			$	21
Interest cost			2,788				2,701
Expected return on plan assets			(2,270	)			(3,410	)
Amortization of prior service cost			4				4
Recognized net actuarial loss			2,339				111
Net periodic pension cost (income)		$	2,884			$	(573	)

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

18. Benefit Plans

The Company did not contribute to its Company-sponsored pension plans during Q1 2009. The Company expects contributions to its two Company-sponsored pension plans during the remainder of 2009 will be in the $8 million to $12 million range.

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:

		First Quarter
In Thousands		2009				2008
Service cost		$	158			$	128
Interest cost			557				536
Amortization of unrecognized transitional assets			(6	)			(6	)
Recognized net actuarial loss			217				229
Amortization of prior service cost			(446	)			(446	)
Net periodic postretirement benefit cost		$	480			$	441

401(k) Savings Plan

The Company provides a 401(k) Savings Plan for substantially all of its employees who are not part of collective bargaining agreements. The total cost for this benefit in Q1 2009 and Q1 2008 was $2.3 million and $2.5 million, respectively.

On February 20, 2009, the Company announced that it would suspend matching contributions to the 401(k) Savings Plan effective April 1, 2009.

Multi-Employer Benefits

The Company entered into a new agreement in the third quarter of 2008 when one of its collective bargaining contracts expired in July 2008. The new agreement allows the Company to freeze its liability to Central States, a multi-employer defined benefit pension fund, while preserving the pension benefits previously earned by the employees. As a result of freezing the Company’s liability to Central States, the Company recorded a charge of $13.6 million in the second half of 2008. The Company paid $3.0 million in the fourth quarter of 2008 to the Southern States Savings and Retirement Plan (“Southern States”) under the agreement to freeze the Central States liability. The remaining $10.6 million was the present value amount, using a discount rate of 7% that will be paid to Central States and was recorded in other liabilities. The Company will pay approximately

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

18. Benefit Plans

$1 million annually over the next 20 years. In addition, the Company will also make future contributions on behalf of these employees to Southern States.

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 beverage products are manufactured. As of March 29, 2009, The Coca-Cola Company had a 27.1% interest in the Company’s total outstanding Common Stock and Class B Common Stock on a combined basis.

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

		First Quarter
In Millions		2009				2008
Payments by the Company for concentrate, syrup, sweetener and other purchases		$	83.8			$	87.3
Marketing funding support payments to the Company			9.6				8.5
Payments by the Company net of marketing funding support		$	74.2			$	78.8
Payments by the Company for customer marketing programs		$	11.1			$	11.0
Payments by the Company for cold drink equipment parts			1.5				1.6
Fountain delivery and equipment repair fees paid to the Company			2.9				2.3
Presence marketing funding support provided by The Coca-Cola Company on the Company’s behalf			1.0				1.1
Sales of finished products to The Coca-Cola Company			.6				3.7

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 $11.1 million and $8.5 million in Q1 2009 and Q1 2008, respectively. Purchases from CCE under this arrangement were $2.6 million and $5.3 million in Q1 2009 and Q1 2008, respectively. The Coca-Cola Company has significant equity interests in the Company and CCE. As of March 29, 2009, CCE held approximately 6% of the Company’s outstanding Common Stock and held no shares of the Company’s Class B Common Stock.

Along with all other Coca-Cola bottlers in the United States, the Company is a member in Coca-Cola Bottlers’ Sales and Services Company, LLC (“CCBSS”), which was formed in 2003 for the purposes of facilitating various procurement functions and distributing certain specified beverage products of The Coca-Cola Company with the intention of enhancing the efficiency and competitiveness of the Coca-Cola

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

19. Related Party Transactions

bottling system in the United States. CCBSS negotiates the procurement for the majority of the Company’s raw materials (excluding concentrate). The Company pays an administrative fee to CCBSS for its services.

The Company is a member of SAC, a manufacturing cooperative. SAC sells finished products to the Company and Piedmont at cost. Purchases from SAC by the Company and Piedmont for finished products were $30.4 million and $36.7 million in Q1 2009 and Q1 2008, respectively. The Company also manages the operations of SAC pursuant to a management agreement. Management fees earned from SAC were $.4 million in Q1 2009 and $.3 million in Q1 2008. The Company has also guaranteed a portion of debt for SAC. Such guarantee amounted to $21.1 million as of March 29, 2009. The Company’s equity investment in SAC was $5.6 million, $4.1 million and $4.1 million as of March 29, 2009, December 28, 2008 and March 30, 2008, respectively.

The Company is a shareholder in two entities from which it purchases substantially all its requirements for plastic bottles. Net purchases from these entities were $16.6 million in both Q1 2009 and Q1 2008. In connection with its participation in one of these entities, the Company has guaranteed a portion of the entity’s debt. Such guarantee amounted to $19.2 million as of March 29, 2009. The Company’s equity investment in one of these entities, Southeastern, was $13.2 million, $11.0 million and $8.2 million as of March 29, 2009, December 28, 2008 and March 30, 2008, respectively.

The Company monitors its investments in cooperatives and would be required to write down its investment if an impairment is identified and determined to be other than temporary. No impairment of the Company’s investments in cooperatives has been identified as of March 29, 2009.

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

The Company leases from Harrison Limited Partnership One (“HLP”) the Snyder Production Center and an adjacent sales facility, which are located in Charlotte, North Carolina. The lease expires on December 31, 2010. HLP is directly and indirectly owned by trusts of which J. Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, and Deborah H. Everhart, a director of the Company, are trustees and beneficiaries. On March 23, 2009, the Company modified the lease agreement (new terms to begin January 1, 2011) with HLP related to the SPC lease. The modified lease would not have changed the classification of the existing lease had it been in effect in the first quarter of 2002, when the capital lease was recorded, as the Company received a renewal option to extend the term of the lease, which it expected to exercise. The modified lease did not extend the term of the existing lease (remaining lease term was reduced from approximately 22 years to approximately 12 years). Accordingly, the present value of the leased property under capital leases 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 modification date.

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

19. Related Party Transactions

The capital lease obligations and leased property under capital leases were both decreased by $7.5 million in March 2009. The annual base rent the Company is obligated to pay under the modified lease is subject to an adjustment for an inflation factor. The prior lease annual base rent was subject to adjustment for an inflation factor and for increases or decreases in interest rates, using LIBOR as the measurement device. The principal balance outstanding under this capital lease as of March 29, 2009 was $30.0 million. Rental payments related to this lease were $.9 million and $1.0 million in Q1 2009 and Q1 2008, respectively.

The Company leases from Beacon Investment Corporation (“Beacon”) the Company’s headquarters office facility and an adjacent office facility. The lease expires on December 31, 2021. Beacon’s sole shareholder is J. Frank Harrison, III. The principal balance outstanding under this capital lease as of March 29, 2009 was $32.2 million. Rental payments related to the lease were $.9 million in both Q1 2009 and Q1 2008.

20. Net Sales by Product Category

Net sales by product category were as follows:

		First Quarter
In Thousands		2009				2008
Bottle/can sales:
Sparkling beverages (including energy products)		$	235,455			$	234,552
Still beverages			46,750				53,456
Total bottle/can sales			282,205				288,008
Other sales:
Sales to other Coca-Cola bottlers			31,133				28,028
Post-mix and other			22,923				21,638
Total other sales			54,056				49,666
Total net sales		$	336,261			$	337,674

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 (Loss) Per Share

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

		First Quarter
In Thousands (Except Per Share Data)		2009				2008
Numerator for basic and diluted net income (loss) per Common Stock and Class B Common Stock share:
Net income (loss) attributable to Coca-Cola Bottling Co. Consolidated		$	8,531			$	(4,335	)
Less dividends:
Common Stock			1,714				1,661
Class B Common Stock			577				625
Total undistributed earnings (losses)		$	6,240			$	(6,621	)
Common Stock undistributed earnings (losses) – basic		$	4,670			$	(4,811	)
Class B Common Stock undistributed earnings (losses) – basic			1,570				(1,810	)
Total undistributed earnings (losses) – basic		$	6,240			$	(6,621	)
Common Stock undistributed earnings (losses) – diluted		$	4,664			$	(4,811	)
Class B Common Stock undistributed earnings (losses) – diluted			1,576				(1,810	)
Total undistributed earnings (losses) – diluted		$	6,240			$	(6,621	)
Numerator for basic net income (loss) per Common Stock share:
Dividends on Common Stock		$	1,714			$	1,661
Common Stock undistributed earnings (losses) – basic			4,670				(4,811	)
Numerator for basic net income (loss) per Common Stock share		$	6,384			$	(3,150	)
Numerator for basic net income (loss) per Class B Common Stock share:
Dividends on Class B Common Stock		$	577			$	625
Class B Common Stock undistributed earnings (losses) – basic			1,570				(1,810	)
Numerator for basic net income (loss) per Class B Common Stock share		$	2,147			$	(1,185	)