Edgar Filing: COCA COLA BOTTLING CO CONSOLIDATED /DE/

coke-10q_20150628.htm

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 June 28, 2015

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)

(704) 557-4400

(Registrant's telephone number, including area code)

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

Large accelerated filer	o		Accelerated filer	x
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 x

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 July 31, 2015
Common Stock, $1.00 Par Value	7,141,447
Class B Common Stock, $1.00 Par Value	2,150,782

COCA-COLA BOTTLING CO. CONSOLIDATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 28, 2015

INDEX

		Page

	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Operations	2

	Consolidated Statements of Comprehensive Income	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	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49

Item 4.	Controls and Procedures	50

	PART II – OTHER INFORMATION

Item 1A.	Risk Factors	51

Item 6.	Exhibits	51

	Signatures	52

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

In Thousands (Except Per Share Data)

	Second Quarter				First Half
	2015		2014		2015		2014
Net sales	$	614,683	$	459,473	$	1,067,936	$	848,055
Cost of sales		377,366		273,953		646,246		506,202
Gross margin		237,317		185,520		421,690		341,853
Selling, delivery and administrative expenses		199,001		154,256		366,472		298,473
Income from operations		38,316		31,264		55,218		43,380
Interest expense, net		6,718		7,343		14,065		14,566
Other income (expense)		6,078		0		989		0
Gain on exchange of franchise territory		8,807		0		8,807		0
Income before income taxes		46,483		23,921		50,949		28,814
Income tax expense		17,562		8,589		19,075		10,381
Net income		28,921		15,332		31,874		18,433
Less: Net income attributable to noncontrolling interest		1,987		1,549		2,716		2,201
Net income attributable to Coca-Cola Bottling Co. Consolidated	$	26,934	$	13,783	$	29,158	$	16,232

Basic net income per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:
Common Stock	$	2.90	$	1.49	$	3.14	$	1.75
Weighted average number of Common Stock shares outstanding		7,141		7,141		7,141		7,141

Class B Common Stock	$	2.90	$	1.49	$	3.14	$	1.75
Weighted average number of Class B Common Stock shares outstanding		2,151		2,130		2,143		2,123

Diluted net income per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:
Common Stock	$	2.89	$	1.48	$	3.13	$	1.74
Weighted average number of Common Stock shares outstanding – assuming dilution		9,332		9,311		9,324		9,304

Class B Common Stock	$	2.88	$	1.48	$	3.12	$	1.74
Weighted average number of Class B Common Stock shares outstanding – assuming dilution		2,191		2,170		2,183		2,163

Cash dividends per share:
Common Stock	$	.25	$	.25	$	.50	$	.50
Class B Common Stock	$	.25	$	.25	$	.50	$	.50

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

In Thousands

	Second Quarter						First Half
	2015			2014			2015			2014
Net income	$	28,921		$	15,332		$	31,874		$	18,433

Other comprehensive income, net of tax:
Foreign currency translation adjustment		0			0			(4	)		0
Defined benefit plans reclassification included in pension costs:
Actuarial loss		488			259			977			518
Prior service costs		6			6			11			11
Postretirement benefits reclassification included in benefits costs:
Actuarial loss		441			345			881			691
Prior service costs		(516	)		(233	)		(1,032	)		(465	)
Other comprehensive income, net of tax		419			377			833			755

Comprehensive income		29,340			15,709			32,707			19,188
Less: Comprehensive income attributable to noncontrolling interest		1,987			1,549			2,716			2,201
Comprehensive income attributable to Coca-Cola Bottling Co. Consolidated	$	27,353		$	14,160		$	29,991		$	16,987

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

In Thousands (Except Share Data)

	June 28,		Dec. 28,		June 29,
	2015		2014		2014
ASSETS

Current Assets:
Cash and cash equivalents	$	43,801	$	9,095	$	22,874
Accounts receivable, trade, less allowance for doubtful accounts of $1,517, $1,330 and $1,550, respectively		192,600		125,726		133,509
Accounts receivable from The Coca-Cola Company		41,324		22,741		30,755
Accounts receivable, other		19,467		14,531		13,873
Inventories		99,641		70,740		83,313
Prepaid expenses and other current assets		41,084		44,168		30,316
Total current assets		437,917		287,001		314,640

Property, plant and equipment, net		419,263		358,232		316,978
Leased property under capital leases, net		43,257		42,971		45,969
Other assets		64,605		60,832		60,344
Franchise rights		527,540		520,672		520,672
Goodwill		111,591		106,220		103,294
Other identifiable intangible assets, net		105,818		57,148		17,283

Total assets	$	1,709,991	$	1,433,076	$	1,379,180

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

In Thousands (Except Share Data)

	June 28,			Dec. 28,			June 29,
	2015			2014			2014
LIABILITIES AND EQUITY

Current Liabilities:
Current portion of debt	$	0		$	0		$	20,000
Current portion of obligations under capital leases		6,859			6,446			6,190
Accounts payable, trade		79,327			58,640			54,281
Accounts payable to The Coca-Cola Company		92,004			51,227			55,316
Other accrued liabilities		97,268			68,775			73,088
Accrued compensation		32,724			38,677			24,544
Accrued interest payable		2,269			3,655			3,942
Total current liabilities		310,451			227,420			237,361

Deferred income taxes		137,402			140,000			146,777
Pension and postretirement benefit obligations		133,548			134,100			89,160
Other liabilities		225,202			177,250			139,926
Obligations under capital leases		52,294			52,604			55,873
Long-term debt		563,860			444,759			433,661
Total liabilities		1,422,757			1,176,133			1,102,758

Commitments and Contingencies (Note 12)

Equity:
Common Stock, $1.00 par value:
Authorized – 30,000,000 shares;
Issued – 10,203,821 shares		10,204			10,204			10,204
Class B Common Stock, $1.00 par value:
Authorized – 10,000,000 shares;
Issued – 2,778,896, 2,757,976 and 2,757,976 shares, respectively		2,777			2,756			2,756
Capital in excess of par value		113,064			110,860			110,860
Retained earnings		235,474			210,957			200,470
Accumulated other comprehensive loss		(89,081	)		(89,914	)		(57,421	)
		272,438			244,863			266,869
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		211,184			183,609			205,615
Noncontrolling interest		76,050			73,334			70,807
Total equity		287,234			256,943			276,422

Total liabilities and equity	$	1,709,991		$	1,433,076		$	1,379,180

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

In Thousands (Except Share Data)

	Common Stock		Class B Common Stock		Capital in Excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total Equity of CCBCC			Noncontrolling Interest		Total Equity
Balance on Dec. 29, 2013	$	10,204	$	2,735	$	108,942	$	188,869		$	(58,176	)	$	(61,254	)	$	191,320		$	68,606	$	259,926
Net income								16,232									16,232			2,201		18,433
Other comprehensive income, net of tax											755						755					755
Cash dividends paid Common ($.50 per share)								(3,571	)								(3,571	)				(3,571	)
Class B Common ($.50 per share)								(1,060	)								(1,060	)				(1,060	)
Stock compensation adjustments						176											176					176
Issuance of 20,900 shares of Class B Common Stock				21		1,742											1,763					1,763
Balance on June 29, 2014	$	10,204	$	2,756	$	110,860	$	200,470		$	(57,421	)	$	(61,254	)	$	205,615		$	70,807	$	276,422

Balance on Dec. 28, 2014	$	10,204	$	2,756	$	110,860	$	210,957		$	(89,914	)	$	(61,254	)	$	183,609		$	73,334	$	256,943
Net income								29,158									29,158			2,716		31,874
Other comprehensive income, net of tax											833						833					833
Cash dividends paid Common ($.50 per share)								(3,571	)								(3,571	)				(3,571	)
Class B Common ($.50 per share)								(1,070	)								(1,070	)				(1,070	)
Issuance of 20,920 shares of Class B Common Stock				21		2,204											2,225					2,225
Balance on June 28, 2015	$	10,204	$	2,777	$	113,064	$	235,474		$	(89,081	)	$	(61,254	)	$	211,184		$	76,050	$	287,234

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

In Thousands

	First Half
	2015			2014
Cash Flows from Operating Activities
Net income	$	31,874		$	18,433
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation expense		35,994			29,245
Amortization of intangibles		1,380			198
Deferred income taxes		(1,454	)		505
(Gain)/loss on sale of property, plant and equipment		449			(38	)
Impairment of property, plant and equipment		148			0
Gain on exchange of franchise territory		(8,807	)		0
Amortization of debt costs		996			958
Amortization of deferred gain related to terminated interest rate agreements		(133	)		(279	)
Stock compensation expense		2,980			1,491
Fair value adjustment of acquisition-related contingent consideration		(989	)		0
Increase in current assets less current liabilities (exclusive of acquisition)		(29,538	)		(30,876	)
Increase in other noncurrent assets (exclusive of acquisition)		(4,106	)		(2,744	)
Increase (decrease) in other noncurrent liabilities (exclusive of acquisition)		4,183			(5,135	)
Other		(9	)		(1	)
Total adjustments		1,094			(6,676	)
Net cash provided by operating activities		32,968			11,757

Cash Flows from Investing Activities
Additions to property, plant and equipment (exclusive of acquisition)		(57,140	)		(37,034	)
Proceeds from the sale of property, plant and equipment		144			1,061
Acquisition of new territories, net of cash acquired		(51,276	)		(12,163	)
Net cash used in investing activities		(108,272	)		(48,136	)

Cash Flows from Financing Activities
Borrowings under revolving credit facility		239,000