Edgar Filing: COCA COLA BOTTLING CO CONSOLIDATED /DE/

coke-10q_20150927.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 September 27, 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 October 30, 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 SEPTEMBER 27, 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	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54

Item 4.	Controls and Procedures	55

	PART II – OTHER INFORMATION

Item 1A.	Risk Factors	56

Item 6.	Exhibits	57

	Signatures	58

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

In Thousands (Except Per Share Data)

	Third Quarter					First Nine Months
	2015			2014		2015			2014
Net sales	$	618,806		$	457,676	$	1,686,742		$	1,305,731
Cost of sales		380,270			272,734		1,026,516			778,936
Gross margin		238,536			184,942		660,226			526,795
Selling, delivery and administrative expenses		210,851			156,496		577,323			454,969
Income from operations		27,685			28,446		82,903			71,826
Interest expense, net		6,686			7,333		20,751			21,899
Other income (expense)		(3,992	)		0		(3,003	)		0
Gain on exchange of franchise territory		0			0		8,807			0
Gain on sale of business		22,651			0		22,651			0
Income before income taxes		39,658			21,113		90,607			49,927
Income tax expense		12,099			7,408		31,174			17,789
Net income		27,559			13,705		59,433			32,138
Less: Net income attributable to noncontrolling interest		2,006			1,573		4,722			3,774
Net income attributable to Coca-Cola Bottling Co. Consolidated	$	25,553		$	12,132	$	54,711		$	28,364

Basic net income per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:
Common Stock	$	2.75		$	1.31	$	5.89		$	3.06
Weighted average number of Common Stock shares outstanding		7,141			7,141		7,141			7,141

Class B Common Stock	$	2.75		$	1.31	$	5.89		$	3.06
Weighted average number of Class B Common Stock shares outstanding		2,151			2,130		2,146			2,125

Diluted net income per share based on net income attributable to Coca-Cola Bottling Co. Consolidated:
Common Stock	$	2.74		$	1.30	$	5.87		$	3.05
Weighted average number of Common Stock shares outstanding – assuming dilution		9,332			9,311		9,327			9,306

Class B Common Stock	$	2.73		$	1.30	$	5.85		$	3.04
Weighted average number of Class B Common Stock shares outstanding – assuming dilution		2,191			2,170		2,186			2,165

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

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

In Thousands

	Third Quarter						First Nine Months
	2015			2014			2015			2014
Net income	$	27,559		$	13,705		$	59,433		$	32,138

Other comprehensive income, net of tax:
Foreign currency translation adjustment		1			(4	)		(3	)		(4	)
Defined benefit plans reclassification included in pension costs:
Actuarial loss		490			277			1,467			795
Prior service costs		7			5			18			16
Postretirement benefits reclassification included in benefits costs:
Actuarial loss		442			344			1,323			1,035
Prior service costs		(518	)		(231	)		(1,550	)		(696	)
Other comprehensive income, net of tax		422			391			1,255			1,146

Comprehensive income		27,981			14,096			60,688			33,284
Less: Comprehensive income attributable to noncontrolling interest		2,006			1,573			4,722			3,774
Comprehensive income attributable to Coca-Cola Bottling Co. Consolidated	$	25,975		$	12,523		$	55,966		$	29,510

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

In Thousands (Except Share Data)

	Sept. 27,		Dec. 28,		Sept. 28,
	2015		2014		2014
ASSETS

Current Assets:
Cash and cash equivalents	$	40,491	$	9,095	$	23,067
Accounts receivable, trade, less allowance for doubtful accounts of $1,777, $1,330 and $1,490, respectively		175,930		125,726		121,466
Accounts receivable from The Coca-Cola Company		42,349		22,741		33,074
Accounts receivable, other		22,520		14,531		15,660
Inventories		94,148		70,740		80,123
Prepaid expenses and other current assets		39,972		44,168		30,460
Total current assets		415,410		287,001		303,850

Property, plant and equipment, net		446,783		358,232		327,238
Leased property under capital leases, net		41,682		42,971		44,470
Other assets		63,509		60,832		60,497
Franchise rights		527,540		520,672		520,672
Goodwill		113,835		106,220		103,294
Other identifiable intangible assets, net		102,088		57,148		17,104

Total assets	$	1,710,847	$	1,433,076	$	1,377,125

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

In Thousands (Except Share Data)

	Sept. 27,			Dec. 28,			Sept. 28,
	2015			2014			2014
LIABILITIES AND EQUITY

Current Liabilities:
Current portion of debt	$	164,757		$	0		$	0
Current portion of obligations under capital leases		6,945			6,446			6,325
Accounts payable, trade		78,872			58,640			49,477
Accounts payable to The Coca-Cola Company		85,890			51,227			47,093
Other accrued liabilities		93,098			68,775			73,856
Accrued compensation		40,562			38,677			31,953
Accrued interest payable		6,177			3,655			9,107
Total current liabilities		476,301			227,420			217,811

Deferred income taxes		138,288			140,000			150,543
Pension and postretirement benefit obligations		122,778			134,100			80,993
Other liabilities		225,928			177,250			141,625
Obligations under capital leases		50,505			52,604			54,243
Long-term debt		384,155			444,759			443,709
Total liabilities		1,397,955			1,176,133			1,088,924

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		258,704			210,957			210,285
Accumulated other comprehensive loss		(88,659	)		(89,914	)		(57,030	)
		296,090			244,863			277,075
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		234,836			183,609			215,821
Noncontrolling interest		78,056			73,334			72,380
Total equity		312,892			256,943			288,201

Total liabilities and equity	$	1,710,847		$	1,433,076		$	1,377,125

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								28,364									28,364			3,774		32,138
Other comprehensive income, net of tax											1,146						1,146					1,146
Cash dividends paid Common ($.75 per share)								(5,356	)								(5,356	)				(5,356	)
Class B Common ($.75 per share)								(1,592	)								(1,592	)				(1,592	)
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 Sept. 28, 2014	$	10,204	$	2,756	$	110,860	$	210,285		$	(57,030	)	$	(61,254	)	$	215,821		$	72,380	$	288,201

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								54,711									54,711			4,722		59,433
Other comprehensive income, net of tax											1,255						1,255					1,255
Cash dividends paid Common ($.75 per share)								(5,356	)								(5,356	)				(5,356	)
Class B Common ($.75 per share)								(1,608	)								(1,608	)				(1,608	)
Issuance of 20,920 shares of Class B Common Stock				21		2,204											2,225					2,225
Balance on Sept. 27, 2015	$	10,204	$	2,777	$	113,064	$	258,704		$	(88,659	)	$	(61,254	)	$	234,836		$	78,056	$	312,892

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

In Thousands

	First Nine Months
	2015			2014
Cash Flows from Operating Activities
Net income	$	59,433		$	32,138
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		56,299			44,358
Amortization of intangibles		2,110			377
Deferred income taxes		(3,489	)		655
Loss on sale of property, plant and equipment		679			231
Impairment of property, plant and equipment		148			0
Gain on exchange of franchise territory		(8,807	)		0
Gain on sale of business		(22,651	)		0
Amortization of debt costs		1,491			1,438
Amortization of deferred gain related to terminated interest rate agreements		(125	)		(420	)
Stock compensation expense		5,674			2,272
Fair value adjustment of acquisition-related contingent consideration		3,003			0
Increase in current assets less current liabilities (exclusive of acquisition)		(16,381	)		(20,370	)
Increase in other noncurrent assets (exclusive of acquisition)		(3,447	)		(3,362	)
Decrease in other noncurrent liabilities (exclusive of acquisition)		(1,444	)		(7,343	)
Other		(10	)		(6	)
Total adjustments		13,050			17,830
Net cash provided by operating activities		72,483			49,968

Cash Flows from Investing Activities
Additions to property, plant and equipment (exclusive of acquisition)