UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 2, 2000
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Commission File Number 0-9286
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COCA-COLA BOTTLING CO. CONSOLIDATED
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(Exact name of registrant as specified in its charter)
DELAWARE 56-0950585
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4100 COCA-COLA PLAZA, CHARLOTTE, NORTH CAROLINA 28211
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(Address of principal executive offices) (Zip Code)
(704) 551-4400
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 2000
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Common Stock, $1.00 Par Value 6,392,252
Class B Common Stock, $1.00 Par Value 2,341,077
PART I - FINANCIAL INFORMATION
Item l. Financial Statements
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
In Thousands (Except Per Share Data)
First Quarter
-----------------------------------
2000 1999
----------- ------------
Net sales (includes sales to Piedmont of $15,691 and
$15,181) $ 228,184 $ 220,263
Cost of sales, excluding depreciation shown below
(includes $12,582 and $13,604 related to sales to Piedmont) 122,243 128,111
----------- ------------
Gross margin 105,941 92,152
----------- ------------
Selling, general and administrative expenses, excluding
depreciation shown below 74,242 68,224
Depreciation expense 16,090 14,648
Amortization of goodwill and intangibles 3,664 3,262
----------- ------------
Income from operations 11,945 6,018
Interest expense 13,936 11,695
Other income (expense), net (1,019) (1,215)
----------- ------------
Income (loss) before income taxes (3,010) (6,892)
Income taxes (benefit) (1,053) (2,412)
----------- ------------
Net income (loss) $ (1,957) $ (4,480)
=========== ===========
Basic net income (loss) per share $ (.22) $ (.54)
Diluted net income (loss) per share $ (.22) $ (.54)
Weighted average number of common
shares outstanding 8,733 8,365
Weighted average number of common
shares outstanding - assuming dilution 8,733 8,365
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 (UNAUDITED)
In Thousands (Except Share Data)
April 2, Jan. 2, April 4,
2000 2000 1999
---------- ---------- ----------
ASSETS
Current Assets:
Cash $ 6,622 $ 9,050 $ 6,654
Accounts receivable, trade, less allowance for
doubtful accounts of $894, $850 and $611 57,653 60,367 58,372
Accounts receivable from The Coca-Cola Company 11,878 6,018 13,279
Due from Piedmont Coca-Cola Bottling Partnership 693
Accounts receivable, other 6,496 13,938 6,371
Inventories 44,355 44,736 43,035
Prepaid expenses and other current assets 15,082 13,275 17,200
---------- ---------- ----------
Total current assets 142,086 147,384 145,604
---------- ---------- ----------
Property, plant and equipment, net 456,008 458,799 430,327
Leased property under capital leases, net 10,821 10,785 9,306
Investment in Piedmont Coca-Cola Bottling Partnership 60,138 60,216 61,086
Other assets 73,030 69,824 53,403
Identifiable intangible assets, less accumulated
amortization of $130,551, $127,459 and $118,705 302,352 305,432 250,483
Excess of cost over fair value of net assets of
businesses acquired, less accumulated
amortization of $33,713, $33,141 and $31,423 57,906 58,478 60,196
---------- ---------- ----------
Total $1,102,341 $1,110,918 $1,010,405
========== ========== ==========
See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
In Thousands (Except Share Data)
April 2, Jan. 2, April 4,
2000 2000 1999
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Portion of long-term debt payable within one year $ 3,266 $ 28,635 $ 117,544
Current portion of obligations under capital leases 4,395 4,483 4,176
Accounts payable and accrued liabilities 79,018 88,848 69,082
Accounts payable to The Coca-Cola Company 5,275 2,346 8,103
Due to Piedmont Coca-Cola Bottling Partnership 3,110 2,736
Accrued compensation 6,257 7,160 5,897
Accrued interest payable 14,076 16,830 9,715
---------- ---------- ----------
Total current liabilities 115,397 151,038 214,517
Deferred income taxes 124,055 125,109 118,247
Deferred credits 4,562 4,135 4,319
Other liabilities 71,269 69,765 59,695
Obligations under capital leases 4,229 4,468 5,083
Long-term debt 754,530 723,964 599,329
---------- ---------- ----------
Total liabilities 1,074,042 1,078,479 1,001,190
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Commitments and Contingencies (Note 11)
Stockholders' Equity:
Convertible Preferred Stock, $100.00 par value:
Authorized-50,000 shares; Issued-None
Nonconvertible Preferred Stock, $100.00 par value:
Authorized-50,000 shares; Issued-None
Preferred Stock, $.01 par value:
Authorized-20,000,000 shares; Issued-None
Common Stock, $1.00 par value:
Authorized-30,000,000 shares;
Issued-9,454,626, 9,454,626 and 9,086,113 shares 9,454 9,454 9,086
Class B Common Stock, $1.00 par value:
Authorized-10,000,000 shares;
Issued-2,969,191, 2,969,191 and 2,969,222 shares 2,969 2,969 2,969
Class C Common Stock, $1.00 par value:
Authorized-20,000,000 shares; Issued-None
Capital in excess of par value 105,570 107,753 92,618
Accumulated deficit (28,440) (26,483) (34,204)
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89,553 93,693 70,469
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 28,299 32,439 9,215
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Total $1,102,341 $1,110,918 $1,010,405
========== ========== ==========
See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
In Thousands
Capital
Class B in
Common Common Excess of Accumulated Treasury
Stock Stock Par Value Deficit Stock
--------- -------- -------- --------- -------
Balance on
January 3, 1999 $ 9,086 $ 2,969 $ 94,709 $ (29,724) $61,254
Net loss (4,480)
Cash dividends paid (2,091)
--------- -------- -------- --------- -------
Balance on
April 4, 1999 $ 9,086 $ 2,969 $ 92,618 $ (34,204) $61,254
========= ======== ======== ========= =======
Balance on
January 2, 2000 $ 9,454 $ 2,969 $107,753 $ (26,483) $61,254
Net loss (1,957)
Cash dividends paid (2,183)
--------- -------- -------- --------- -------
Balance on
April 2, 2000 $ 9,454 $ 2,969 $105,570 $ (28,440) $61,254
========= ======== ======== ========= =======
See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
In Thousands
First Quarter
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2000 1999
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Cash Flows from Operating Activities
- ------------------------------------
Net income (loss) $ (1,957) $ (4,480)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation expense 16,090 14,648
Amortization of goodwill and intangibles 3,664 3,262
Deferred income taxes (benefit) (1,053) (2,412)
Losses on sale of property, plant and equipment 482 725
Amortization of debt costs 246 150
Amortization of deferred gain related to terminated
interest rate swaps (141) (141)
Undistributed losses of Piedmont Coca-Cola Bottling
Partnership 78 1,761
Increase in current assets less current liabilities (7,314) (18,108)
Increase in other noncurrent assets (3,525) (1,978)
Increase in other noncurrent liabilities 2,422 804
Other (203) (126)
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Total adjustments 10,746 (1,415)
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Net cash provided by (used in) operating activities 8,789 (5,895)
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Cash Flows from Financing Activities
- ------------------------------------
Proceeds from the issuance of long-term debt 30,566 108,095
Increase (decrease) in current portion of long-term debt (25,369) 87,429
Cash dividends paid (2,183) (2,091)
Payments on capital lease obligations (1,327) (1,045)
Debt fees paid (185)
Other (375) (268)
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Net cash provided by financing activities 1,312 191,935
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Cash Flows from Investing Activities
- ------------------------------------
Additions to property, plant and equipment (13,322) (186,101)
Proceeds from the sale of property, plant and equipment 952 41
Acquisition of companies, net of cash acquired (159) (17)
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Net cash used in investing activities (12,529) (186,077)
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Net decrease in cash (2,428) (37)
Cash at beginning of period 9,050 6,691
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Cash at end of period $ 6,622 $ 6,654
========= =========
Significant non-cash financing activities
Capital lease obligations incurred 1,313 10,304
See Accompanying Notes to Consolidated Financial Statements
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
1. Accounting Policies
The consolidated financial statements include the accounts of Coca-Cola Bottling
Co. Consolidated and its majority owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated.
The information contained in the financial statements is unaudited. The
statements reflect all adjustments which, in the opinion of management, are
necessary for a fair statement of the results for the interim periods presented.
All such adjustments are of a normal, recurring nature.
The accounting policies followed in the presentation of interim financial
results are the same as those followed on an annual basis. These policies are
presented in Note 1 to the Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the year ended January 2, 2000 filed
with the Securities and Exchange Commission.
Certain prior year amounts have been reclassified to conform to current year
classifications.
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
2. Summarized Income Statement Data of Piedmont Coca-Cola Bottling Partnership
On July 2, 1993, the Company and The Coca-Cola Company formed Piedmont Coca-Cola
Bottling Partnership ("Piedmont") to distribute and market soft drink products
primarily in portions of North Carolina and South Carolina. The Company and The
Coca-Cola Company, through their respective subsidiaries, each beneficially own
a 50% interest in Piedmont. The Company provides a portion of the soft drink
products to Piedmont at cost and receives a fee for managing the business of
Piedmont pursuant to a management agreement.
Summarized income statement data for Piedmont is as follows:
First Quarter
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In Thousands 2000 1999
- ---------------------------------------------------------------------------
Net sales $ 65,452 $ 63,326
Gross margin 31,256 27,651
Income (loss) from operations 3,201 (248)
Net loss (156) (3,522)
3. Inventories
Inventories are summarized as follows:
Apr. 2, Jan. 2, Apr. 4,
In Thousands 2000 2000 1999
- -----------------------------------------------------------------------------
Finished products $25,853 $28,618 $27,125
Manufacturing materials 13,907 11,424 11,340
Plastic pallets and other 4,595 4,694 4,570
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Total inventories $44,355 $44,736 $43,035
======= ======= =======
Finished products and manufacturing materials are valued by the LIFO method. The
amounts included above for inventories valued by the LIFO method were greater
than replacement or current cost by approximately $2.8 million, $3.3 million and
$3.2 million on April 2, 2000, January 2, 2000 and April 4, 1999, respectively,
as a result of inventory premiums associated with certain acquisitions. Plastic
pallets and other inventories are valued by the first-in, first-out method.
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
4. Property, Plant and Equipment
The principal categories and estimated useful lives of property, plant and
equipment were as follows:
Apr. 2, Jan. 2, Apr. 4, Estimated
In Thousands 2000 2000 1999 Useful Lives
- -----------------------------------------------------------------------------------------------------
Land $ 12,332 $ 12,251 $ 11,781
Buildings 95,911 96,072 81,566 10-50 years
Machinery and equipment 88,749 89,068 88,933 5-20 years
Transportation equipment 129,821 126,562 99,053 4-10 years
Furniture and fixtures 37,398 37,002 27,978 7-10 years
Vending equipment 291,357 291,844 272,508 6-13 years
Leasehold and land improvements 41,503 41,379 34,203 5-20 years
Construction in progress 9,530 3,389 22,556
- ------------------------------------------------------------------------------------
Total property, plant and equipment, at cost 706,601 697,567 638,578
Less: Accumulated depreciation 250,593 238,768 208,251
- ------------------------------------------------------------------------------------
Property, plant and equipment, net $456,008 $458,799 $430,327
- ------------------------------------------------------------------------------------
5. Leased Property Under Capital Leases
The category and terms of the capital leases were as follows:
Apr. 2, Jan. 2, Apr. 4,
In Thousands 2000 2000 1999 Terms
- ----------------------------------------------------------------------------------------------
Transportation equipment and other equipment $ 14,190 $ 13,434 $ 10,433 1 - 5 years
Less: Accumulated amortization 3,369 2,649 1,127
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Leased property under capital leases, net $ 10,821 $ 10,785 $ 9,306
- ----------------------------------------------------------------------------------------------
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
6. Long-Term Debt
Long-term debt is summarized as follows:
Fixed(F) or
Interest Variable Interest April 2, Jan. 2, April 4,
In Thousands Maturity Rate (V) Rate Paid 2000 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
Lines of Credit 2002 6.31%- V Varies $ 77,300 $ 46,600 $177,014
6.61%
Revolving Credit 2002 V Varies 85,000
Term Loan Agreement 2004 6.58% V Varies 85,000 85,000 85,000
Term Loan Agreement 2005 6.58% V Varies 85,000 85,000 85,000
Medium-Term Notes 2000 F Semi- 25,500 25,500
annually
Medium-Term Notes 2002 8.56% F Semi- 47,000 47,000 47,000
annually
Debentures 2007 6.85% F Semi- 100,000 100,000 100,000
annually
Debentures 2009 7.20% F Semi- 100,000 100,000 100,000
annually
Debentures 2009 6.38% F Semi- 250,000 250,000
annually
Other notes payable 2000 - 5.75%- F Varies 13,496 13,499 12,359
2006 10.00% ------- ------- -------
757,796 752,599 716,873
Less: Portion of long-term
debt payable within one year 3,266 28,635 117,544
- -------------------------------------------------------------------------------------------------------------------------------
Long-term debt $754,530 $723,964 $599,329
- -------------------------------------------------------------------------------------------------------------------------------
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
6. Long-Term Debt (cont.)
It is the Company's intent to renew its lines of credit and borrowings under the
revolving credit facility as they mature. To the extent that these borrowings do
not exceed the amount available under the Company's $170 million revolving
credit facility, they are classified as noncurrent liabilities.
On January 22, 1999, the Company filed a new $800 million shelf registration for
debt and equity securities (which includes $200 million of unused availability
from a prior shelf registration). On April 26, 1999, the Company issued $250
million of 10-year debentures at a fixed rate of 6.375%. The Company
subsequently entered into interest rate swap agreements totaling $100 million
related to these debentures. The net proceeds from this issuance were used
principally for refinancing of short-term debt related to the purchase of leased
assets, with the remainder used to repay other bank debt.
The Company had weighted average interest rates for its debt portfolio of 6.9%,
7.0% and 6.4% as of April 2, 2000, January 2, 2000 and April 4, 1999,
respectively. The Company's overall weighted average interest rate on long-term
debt increased from an average of 6.5% during the first quarter of 1999 to an
average of 7.2% during the first quarter of 2000. After taking into account the
effect of all of the interest rate swap activities, approximately 39%, 35% and
48% of the total debt portfolio was subject to changes in short-term interest
rates as of April 2, 2000, January 2, 2000 and April 4, 1999, respectively.
A rate increase of 1% on the floating rate component of the Company's debt would
have increased interest expense for the first quarter of 2000 by approximately
$0.7 million and the net loss for the first quarter ended April 2, 2000 would
have been increased by approximately $0.5 million.
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
7. Supplemental Disclosures of Cash Flow Information
Changes in current assets and current liabilities affecting cash, net of the
effects of acquisitions, were as follows:
First Quarter
-------------------------------
In Thousands 2000 1999
- --------------------------------------------------------------------------------------
Accounts receivable, trade, net $ 2,714 $ (1,155)
Accounts receivable, The Coca-Cola Company (5,860) (3,188)
Accounts receivable, other 7,442 1,626
Inventories 381 (2,025)
Prepaid expenses and other current assets (1,807) (1,655)
Accounts payable and accrued liabilities (9,830) (3,541)
Accounts payable, The Coca-Cola Company 2,929 2,909
Accrued compensation (903) (4,342)
Accrued interest payable (2,754) (5,610)
Due to (from) Piedmont Coca-Cola Bottling Partnership 374 (1,127)
--------- ---------
Increase in current assets less current liabilities $ (7,314) $(18,108)
======== ========
8. Restructuring
In November 1999, the Company announced a plan to restructure its operations by
consolidating sales divisions and reducing its workforce. Approximately 300
positions were eliminated as a result of the restructuring. The Company recorded
a pre-tax restructuring charge of $2.2 million in the fourth quarter of 1999,
which will be funded by cash flow from operations.
The changes in the restructuring charge liability during the first quarter of
2000 were as follows:
Accrued Liability Amts. Paid in Accrued Liability
In Thousands at Jan. 2, 2000 First Qtr. 2000 at Apr. 2, 2000
- -------------------------------------------------------------------------------------------------------
Employee termination benefit costs $ 284 $ 263 $ 21
Facility lease costs and related expenses 330 22 308
------- -------- -------
$ 614 $ 285 $ 329
====== ====== ======
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
9. Earnings Per Share
The following table sets forth the computation of basic net income per share and
diluted net income per share:
First Quarter
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In Thousands (Except Per Share Data) 2000 1999
- -------------------------------------------------------------------------------
NUMERATOR:
Numerator for basic net income and diluted net income $ (1,957) $ (4,480)
DENOMINATOR:
Denominator for basic net income per share - weighted
average common shares 8,733 8,365
Effect of dilutive securities - Stock options (1) * *
-------- ---------
Denominator for diluted net income per share -
adjusted weighted average common shares 8,733 8,365
======== =========
Basic net income per share $ (.22) $ (.54)
======== =========
Diluted net income per share $ (.22) $ (.54)
======== =========
* Antidilutive
(1) See Note 13 to the Consolidated Financial Statements included in the
Company's 1999 Annual Report on Form 10-K.
10. Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Coca-Cola Bottling Co. Consolidated
Notes to Consolidated Financial Statements (Unaudited)
11. Commitments and Contingencies
The Company has guaranteed a portion of the debt for two cooperatives in which
the Company is a member. The amounts guaranteed were $31.5 million, $35.3
million and $32.8 million as of April 2, 2000, January 2, 2000 and April 4,
1999, respectively.
The Company is involved in various claims and legal proceedings which have
arisen in the ordinary course of business. The Company believes that the
ultimate disposition of these claims will not have a material adverse effect on
the financial condition, cash flows or results of operations of the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
INTRODUCTION:
The following discussion presents management's analysis of the results of
operations for the first three months of 2000 compared to the first three months
of 1999 and changes in financial condition from April 4, 1999 and January 2,
2000 to April 2, 2000. The results for interim periods are not necessarily
indicative of the results to be expected for the year due to seasonal factors.
The Company reported a net loss of $2.0 million or $.22 per share for the first
quarter of 2000 compared with a net loss of $4.5 million or $.54 per share for
the same period in 1999. The improvement in earnings for the first quarter of
2000 over the comparable period in 1999 was primarily due to an increase in net
selling price of approximately 9%. The increase in selling price was partially
offset by a decline in bottle and can volume.
RESULTS OF OPERATIONS:
Net selling price per unit in the first quarter of 2000 increased by
approximately 9%. During the past three years, the Company's unit sales growth
significantly outpaced the soft drink industry average growth rate but its
selling prices did not keep pace with cost increases. As a result, gross margins
narrowed and net income declined. In 2000, the Company increased selling prices
to cover increasing raw material costs, higher fuel costs and to improve
operating margins. The Company entered 2000 facing significantly higher
concentrate and container costs versus the prior year.
In the first quarter of 2000, the increase in selling price impacted unit sales
volume which declined by approximately 5%. Excluding volume from territories
acquired during 1999, unit volume declined by approximately 7.5%. First quarter
2000 unit volume was also negatively impacted by the shift of the Easter holiday
which occurred in the first quarter 1999 but will affect second quarter 2000 and
by severe inclement weather during the first half of February in a significant
portion of the Company's territory. The decline in unit volume in the first
quarter of 2000 was in line with the Company's expectations.
As a result of the increase in selling prices and the decline in unit volume,
net sales in the first quarter of 2000 increased approximately 4% over the first
quarter of 1999. Excluding the effect of territory acquired in 1999, net sales
in the first quarter of 2000 increased by 1% from the same period in 1999.
Noncarbonated beverages unit volume grew during the first quarter of 2000
despite significantly higher selling prices. Noncarbonated beverages, which
include Dasani water, Fruitopia, POWERaDE and Cool from Nestea, accounted for
6.3% of the Company's product mix during the first quarter of 2000, up from 5.7%
in the first quarter of 1999.
Cost of sales on a per unit basis increased approximately 1% in the first
quarter of 2000 over the same period in 1999. The increase in cost of sales is
primarily due to raw material cost increases offset by a significant package mix
shift from bottles to cans. Beginning in April, the Company expects the cost of
plastic bottles to increase by approximately 5%.
Gross margin increased by approximately 15% primarily as a result of the 9%
increase in net selling price as previously discussed. Excluding territory
acquired in 1999, gross margin increased by 12.1% in the first quarter of 2000.
Gross margin as a percentage of net sales increased to 46% in the first quarter
of 2000.
Selling, general and administrative expenses for the first quarter of 2000
increased 9% over the first quarter of 1999. The increase in selling, general
and administrative expenses was due primarily to a reduction in marketing
funding from The Coca-Cola Company, higher fuel costs and an increase in costs
associated with territories acquired in 1999. Total marketing funding from The
Coca-Cola Company in the first quarter of 2000 was $2 million less than in the
same period in 1999. The criteria for a portion of marketing funding from The
Coca-Cola Company has been changed for 2000 and is more closely tied to changes
in unit volume, which was negatively impacted by the volume decline in the first
quarter. In addition, due to higher prices, fuel costs increased by 50% in the
first quarter of 2000 as compared to the same period in 1999, up approximately
$0.7 million. Also, the Company recorded $0.5 million as compensation expense in
the first quarter of 2000 related to a restricted stock award for the Company's
Chairman and Chief Executive Officer. No compensation expense was recorded in
1999 related to this stock award as the performance requirements were not met.
The Company is beginning to realize the benefits associated with the
restructuring which occurred in the fourth quarter of 1999. Excluding the effect
of: territories acquired in 1999, reduced marketing funding from The Coca-Cola
Company, higher fuel costs and the restricted stock award accrual, selling,
general and administrative expenses increased by only 1% in the first quarter of
2000 versus the first quarter of 1999.
The Company relies extensively on advertising and sales promotion in the
marketing of its products. The Coca-Cola Company and other beverage companies
that supply concentrate, syrups and finished products to the Company make
substantial advertising expenditures to promote sales in the local territories
served by the Company. The Company also benefits from national advertising
programs conducted by The Coca-Cola Company and other beverage companies.
Certain of the marketing expenditures by The Coca-Cola Company and other
beverage companies are made pursuant to annual arrangements. Although The
Coca-Cola Company has advised the Company that it intends to provide marketing
funding support in 2000, it is not obligated to do so under the Company's Master
Bottle Contract. Also, The Coca-Cola Company has agreed to provide additional
marketing funding under an amended multi-year program to support the Company's
cold drink infrastructure.
Depreciation expense increased by approximately $1.4 million between the first
quarter of 2000 and the first quarter of 1999. The increase was due to the
significant capital investments the Company made during 1999 which totaled $257
million. Of the total capital expenditures in 1999, approximately $155 million
related to the purchase of vehicles and vending equipment which were previously
leased under various operating lease agreements.
Interest expense of $13.9 million increased by $2.2 million or 19% from the
first quarter of 1999. The increase is due to additional borrowings related to
the acquisition of three Coca-Cola bottlers during 1999 and higher average
interest rates on the Company's floating rate debt. The Company's overall
weighted average interest rate increased from an average of 6.5% during the
first quarter of 1999 to an average of 7.2% during the first quarter of 2000.
Amortization expense of $3.7 million increased by $0.4 million in the first
quarter of 2000 due to the acquisition of three Coca-Cola bottlers during 1999.
In March 2000, at the end of a collective bargaining agreement in Huntington,
West Virginia, the Company and Teamsters Local Union 505 were unable to reach an
agreement on wages and benefits. The union elected to strike and other
Teamster-represented sales centers in West Virginia joined in a sympathy strike.
The Company is using management and supervisory personnel to distribute products
to the Company's customers in the areas affected by the strike. The impacted
branches represent approximately 7% of the Company's net sales. For the first
quarter of 2000, the strike did not have a significant impact on the Company's
results from operations. However, if the strike continues, it could negatively
impact sales and profitability in subsequent periods.
CHANGES IN FINANCIAL CONDITION:
Working capital increased $30 million from January 2, 2000 and increased $96
million from April 4, 1999 to April 2, 2000. The increase from January 2, 2000
is primarily attributable to a decrease in the current portion of long-term debt
of $25 million and a decrease in accounts payable and accrued liabilities of $10
million, partially offset by a decrease in cash and accounts receivable, trade
of $5 million. The decrease in the current portion of long-term debt reflects
the payment of $25.5 million of the Company's Medium-Term Notes that matured in
March 2000. The Company used its informal lines of credit to facilitate this
payment.
Working capital increased by $96 million from April 4, 1999 due to a decrease in
the current portion of long-term debt of $114 million offset by increases in
accounts payable and accrued liabilities of $10 million and accrued interest of
$4 million. The decrease in the current portion of long-term debt was
attributable to the refinancing of short-term debt associated with the purchase
of approximately $155 million of leased equipment in January 1999. The increase
in accrued interest is due to the timing of interest payments on debentures
issued during the second quarter of 1999 which were used to refinance the
purchase of $155 million of equipment that was previously leased.
Capital expenditures in the first quarter of 2000 were $13 million compared to
$186 million in the first quarter of 1999. Expenditures for the first quarter of
1999 included the purchase of approximately $155 million of previously leased
equipment completed during January 1999. The Company expects its capital
spending in 2000 will be less than half of the total spent in 1999.
Long-term debt increased by $41 million from April 4, 1999 and $5 million from
January 2, 2000. The increase from April 4, 1999 was due to acquisitions of
three Coca-Cola bottlers during 1999 and
significant capital spending during 1999. The increase from January 2, 2000 was
due to changes in working capital, primarily a reduction of accounts payable and
accrued liabilities.
As of April 2, 2000, the Company had no amounts outstanding under its revolving
credit facility and $77.3 million outstanding under its informal lines of
credit.
In April 1999, the Company issued $250 million of 10-year debentures at a fixed
rate of 6.375% under a shelf registration statement filed in January 1999. The
Company subsequently entered into interest rate swap agreements totaling $100
million related to these debentures. The net proceeds from the issuance of these
debentures were used to refinance borrowings related to the $155 million
purchase of assets previously leased, refinance certain maturing Medium-Term
Notes and repay other corporate borrowings.
As of April 2, 2000 the debt portfolio had a weighted average interest rate of
approximately 6.9% and approximately 39% of the total portfolio of $758 million
was subject to changes in short-term interest rates.
It is the Company's intent to continue to grow selectively through acquisitions
of other Coca-Cola bottlers. Acquisition related costs including interest
expense and non-cash charges such as amortization of intangible assets may be
incurred. To the extent these expenses are incurred and are not offset by cost
savings or increased sales, the Company's acquisition strategy may depress
short-term earnings. The Company believes that the continued growth through
acquisition will enhance long-term shareholder value.
The Company did not experience any significant malfunctions or errors in its
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, the Company does not expect any significant
impact to its ongoing business operations as a result of the Year 2000 issue.
However, Year 2000 compliance has many elements and potential consequences, some
of which may not be foreseeable or may be realized in future periods.
Consequently, there can be no assurance that unforeseen circumstances may not
arise, or that the Company will not in the future identify equipment or systems
which are not Year 2000 compliant. The Company is currently not aware of any
significant Year 2000 or similar problem that may have arisen with its key
customers, suppliers or other significant third parties.
Sources of capital for the Company primarily include operating cash flows, bank
borrowings, issuance of public or private debt and the issuance of equity
securities. Management believes that the Company, through these sources, has
sufficient financial resources available to maintain its current operations and
provide for its current capital expenditure and working capital requirements,
scheduled debt payments, dividends for stockholders and other cash needs.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, as well as information included in, or
incorporated by reference from, future filings by the Company with the
Securities and Exchange Commission and information contained in written
material, press releases and oral statements issued by or on behalf of the
Company, contains, or may contain, forward-looking management comments and other
statements that reflect management's current outlook for future periods. These
statements include, among others, statements relating to: our growth strategy
increasing long-term shareholder value; the sufficiency of our financial
resources to fund our operations and capital expenditure requirements; our
expectations concerning capital expenditures and our expectations that Year 2000
issues will not have a significant impact on our ongoing business operations.
These statements and expectations are based on the current available
competitive, financial and economic data along with the Company's operating
plans, and are subject to future events and uncertainties. Events or
uncertainties that could adversely affect future periods include, without
limitation: lower than expected net pricing resulting from increased marketplace
competition, an inability to meet performance requirements for expected levels
of marketing support payments from The Coca-Cola Company, material changes from
expectations in the cost of raw materials and ingredients, higher than expected
fuel prices, an inability to meet projections for performance in newly acquired
bottling territories and unfavorable interest rate fluctuations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
4.1 The Registrant, by signing this report, agrees to furnish the
Securities and Exchange Commission, upon its request, a copy
of any instrument which defines the rights of holders of
long-term debt of the Registrant and its subsidiaries for
which consolidated financial statements are required to be
filed, and which authorizes a total amount of securities not
in excess of 10 percent of total assets of the Registrant and
its subsidiaries on a consolidated basis.
10.1 Can Supply Agreement, dated as of February 22, 2000 between
American National Can Company and the Company.*
27 Financial data schedule for period ended April 2, 2000.
(b) Reports on Form 8-K
A current report on Form 8-K was filed on February 22, 2000 related to
the purchase of additional Common Stock of the Company by Coca-Cola
Enterprises Inc.
* Indicates that a portion of the document is confidential and has
been omitted and filed separately with the Securities and Exchange
Commission in connection with a request for confidential treatment
of such omitted material.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COCA-COLA BOTTLING CO. CONSOLIDATED
(REGISTRANT)
Date: May 15, 2000 By: /s/ David V. Singer
--------------------------------
David V. Singer
Principal Financial Officer of the Registrant
and
Vice President - Chief Financial Officer