Edgar Filing: COCA COLA BOTTLING CO CONSOLIDATED /DE/

coke-10q_20160403.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 April 3, 2016

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 May 6, 2016
Common Stock, $1.00 Par Value	7,141,447
Class B Common Stock, $1.00 Par Value	2,171,702

COCA-COLA BOTTLING CO. CONSOLIDATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED APRIL 3, 2016

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	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52

Item 4.	Controls and Procedures	54

	PART II – OTHER INFORMATION

Item 1A.	Risk Factors	55

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

Item 6.	Exhibits	55

	Signatures	57

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
	2016			2015
Net sales	$	625,456		$	453,253
Cost of sales		381,558			268,880
Gross margin		243,898			184,373
Selling, delivery and administrative expenses		231,497			167,471
Income from operations		12,401			16,902
Interest expense, net		9,361			7,347
Other income (expense), net		(17,151	)		(5,089	)
Income (loss) before income taxes		(14,111	)		4,466
Income tax expense (benefit)		(5,078	)		1,513
Net income (loss)		(9,033	)		2,953
Less: Net income attributable to noncontrolling interest		1,008			729
Net income (loss) attributable to Coca-Cola Bottling Co. Consolidated	$	(10,041	)	$	2,224

Basic net income (loss) per share based on net income (loss) attributable to Coca-Cola Bottling Co. Consolidated:
Common Stock	$	(1.08	)	$	0.24
Weighted average number of Common Stock shares outstanding		7,141			7,141

Class B Common Stock	$	(1.08	)	$	0.24
Weighted average number of Class B Common Stock shares outstanding		2,157			2,136

Diluted net income (loss) per share based on net income (loss) attributable to Coca-Cola Bottling Co. Consolidated:
Common Stock	$	(1.08	)	$	0.24
Weighted average number of Common Stock shares outstanding – assuming dilution		9,298			9,317

Class B Common Stock	$	(1.08	)	$	0.23
Weighted average number of Class B Common Stock shares outstanding – assuming dilution		2,157			2,176

Cash dividends per share:
Common Stock	$	0.25		$	0.25
Class B Common Stock	$	0.25		$	0.25

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

In Thousands

	First Quarter
	2016			2015
Net income (loss)	$	(9,033	)	$	2,953

Other comprehensive income, net of tax:
Foreign currency translation adjustment		10			(4	)
Defined benefit plans reclassification included in pension costs:
Actuarial loss		455			489
Prior service costs		4			5
Postretirement benefits reclassification included in benefits costs:
Actuarial loss		360			440
Prior service costs		(516	)		(516	)
Other comprehensive income, net of tax		313			414

Comprehensive income (loss)		(8,720	)		3,367
Less: Comprehensive income attributable to noncontrolling interest		1,008			729
Comprehensive income (loss) attributable to Coca-Cola Bottling Co. Consolidated	$	(9,728	)	$	2,638

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

In Thousands (Except Share Data)

	Apr. 3,		Jan. 3,		Mar. 29,
	2016		2016		2015
ASSETS

Current Assets:
Cash and cash equivalents	$	32,600	$	55,498	$	21,163
Accounts receivable, trade, less allowance for doubtful accounts of $2,280, $2,117 and $1,514 respectively		206,292		184,009		144,356
Accounts receivable from The Coca-Cola Company		53,092		28,564		30,639
Accounts receivable, other		26,824		24,047		12,308
Inventories		110,450		89,464		91,129
Prepaid expenses and other current assets		49,428		53,337		39,735
Total current assets		478,686		434,919		339,330

Property, plant and equipment, net		638,896		525,820		391,838
Leased property under capital leases, net		38,406		40,145		41,587
Other assets		68,303		63,739		63,307
Franchise rights		527,540		527,540		520,672
Goodwill		135,311		117,954		109,984
Other identifiable intangible assets, net		136,721		136,448		103,906

Total assets	$	2,023,863	$	1,846,565	$	1,570,624

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

In Thousands (Except Share Data)

	Apr. 3,			Jan. 3,			Mar. 29,
	2016			2016			2015
LIABILITIES AND EQUITY

Current Liabilities:
Current portion of obligations under capital leases	$	7,165		$	7,063		$	6,679
Accounts payable, trade		95,023			82,937			58,458
Accounts payable to The Coca-Cola Company		96,950			79,065			60,211
Other accrued liabilities		111,218			104,168			80,446
Accrued compensation		23,774			49,839			24,650
Accrued interest payable		10,840			3,481			8,768
Total current liabilities		344,970			326,553			239,212

Deferred income taxes		135,095			146,944			131,895
Pension and postretirement benefit obligations		115,000			115,197			133,809
Other liabilities		306,754			267,090			229,889
Obligations under capital leases		46,893			48,721			50,905
Long-term debt		760,036			619,628			524,696
Total liabilities		1,708,748			1,524,133			1,310,406

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 – 2,799,816, 2,778,896 and 2,778,896 shares, respectively		2,798			2,777			2,777
Capital in excess of par value		116,769			113,064			113,064
Retained earnings		248,308			260,672			210,864
Accumulated other comprehensive loss		(82,094	)		(82,407	)		(89,500	)
		295,985			304,310			247,409
Less-Treasury stock, at cost:
Common Stock – 3,062,374 shares		60,845			60,845			60,845
Class B Common Stock – 628,114 shares		409			409			409
Total equity of Coca-Cola Bottling Co. Consolidated		234,731			243,056			186,155
Noncontrolling interest		80,384			79,376			74,063
Total equity		315,115			322,432			260,218

Total liabilities and equity	$	2,023,863		$	1,846,565		$	1,570,624

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. 28, 2014	$	10,204	$	2,756	$	110,860	$	210,957		$	(89,914	)	$	(61,254	)	$	183,609		$	73,334	$	256,943
Net income (loss)								2,224									2,224			729		2,953
Other comprehensive income, net of tax											414						414					414
Cash dividends paid Common ($0.25 per share)								(1,785	)								(1,785	)				(1,785	)
Class B Common ($0.25 per share)								(532	)								(532	)				(532	)
Issuance of 20,920 shares of Class B Common Stock				21		2,204											2,225					2,225
Balance on Mar. 29, 2015	$	10,204	$	2,777	$	113,064	$	210,864		$	(89,500	)	$	(61,254	)	$	186,155		$	74,063	$	260,218

Balance on Jan. 3, 2016	$	10,204	$	2,777	$	113,064	$	260,672		$	(82,407	)	$	(61,254	)	$	243,056		$	79,376	$	322,432
Net income (loss)								(10,041	)								(10,041	)		1,008		(9,033	)
Other comprehensive income, net of tax											313						313					313
Cash dividends paid Common ($0.25 per share)								(1,785	)								(1,785	)				(1,785	)
Class B Common ($0.25 per share)								(538	)								(538	)				(538	)
Issuance of 20,920 shares of Class B Common Stock				21		3,705											3,726					3,726
Balance on Apr. 3, 2016	$	10,204	$	2,798	$	116,769	$	248,308		$	(82,094	)	$	(61,254	)	$	234,731		$	80,384	$	315,115

See Accompanying Notes to Consolidated Financial Statements.

Coca-Cola Bottling Co. Consolidated

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

In Thousands

	First Quarter
	2016			2015
Cash Flows from Operating Activities
Net income (loss)	$	(9,033	)	$	2,953
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation expense		23,363			17,065
Amortization of intangibles		1,026			592
Deferred income taxes		(5,078	)		42
Loss on sale of property, plant and equipment		417			282
Impairment of property, plant and equipment		0			148
Amortization of debt costs		575			504
Stock compensation expense		1,627			1,116
Fair value adjustment of acquisition related contingent consideration		17,151			5,089
Change in current assets less current liabilities (exclusive of acquisition)		(38,926	)		(23,898	)
Change in other noncurrent assets (exclusive of acquisition)		(2,391	)		(3,310	)
Change in other noncurrent liabilities (exclusive of acquisition)		(3,975	)		(2,229	)
Other		27			(149	)
Total adjustments		(6,184	)		(4,748	)
Net cash used in operating activities		(15,217	)		(1,795	)

Cash Flows from Investing Activities
Additions to property, plant and equipment (exclusive of acquisition)		(36,785	)		(30,842	)
Proceeds from the sale of property, plant and equipment		131			118
Investment in CONA Services LLC		(1,204	)	0
Acquisition of new territories, net of cash acquired		(100,907	)		(33,389	)
Net cash used in investing activities		(138,765	)		(64,113	)

Cash Flows from Financing Activities
Borrowings under revolving credit facility		140,000			82,000
Cash dividends paid		(2,323	)		(2,317	)
Payment on acquisition related contingent consideration		(4,959	)		0
Principal payments on capital lease obligations		(1,726	)		(1,619	)
Other		92			(88	)
Net cash provided by financing activities		131,084			77,976

Net increase (decrease) in cash		(22,898	)		12,068
Cash at beginning of period		55,498			9,095
Cash at end of period	$	32,600		$	21,163

Significant noncash investing and financing activities:
Issuance of Class B Common Stock in connection with stock award	$	3,726		$	2,225
Additions to property, plant and equipment accrued and recorded in accounts payable, trade		8,873			4,734

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” and “we”). 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 consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. The preparation of consolidated financial statements 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 fiscal year ended January 3, 2016 filed with the U.S. Securities and Exchange Commission.

2. Acquisitions and Divestitures

Since April 2013, as a part of The Coca-Cola Company’s plans to refranchise its North American bottling territories, the Company has engaged in a series of transactions with The Coca-Cola Company and Coca-Cola Refreshments USA, Inc. (“CCR”), a wholly-owned subsidiary of The Coca-Cola Company, to expand the Company’s distribution operations significantly through the acquisition of rights to serve additional distribution territories previously served by CCR (the “Expansion Territories”) and of related distribution assets (the “Distribution Territory Expansion Transactions”). During 2015, the Company completed Distribution Territory Expansion Transactions announced as part of the April 2013 letter of intent signed with The Coca-Cola Company. These completed acquisitions include Expansion Territories in parts of Tennessee, Kentucky and Indiana previously served by CCR.

On May 12, 2015, the Company and The Coca-Cola Company entered into a non-binding letter of intent (the “May 2015 LOI”) pursuant to which CCR would grant the Company in two phases certain exclusive rights for the distribution, promotion, marketing and sale of The Coca-Cola Company-owned and -licensed products in additional territories then served by CCR. The major markets that would be served as part of the expansion contemplated by the May 2015 LOI include: Baltimore, Alexandria, Norfolk, Richmond, the District of Columbia, Cincinnati, Columbus, Dayton and Indianapolis.

On September 23, 2015, the Company and CCR entered into an asset purchase agreement for the first phase of this additional distribution territory contemplated by the May 2015 LOI including: (i) eastern and northern Virginia, (ii) the entire state of Maryland, (iii) the District of Columbia, and (iv) parts of Delaware, North Carolina, Pennsylvania and West Virginia (the “Next Phase Territories”). The first closing for the series of Next Phase Territories transactions (the “Next Phase Territories Transactions”) occurred on October 30, 2015 for territories served by distribution facilities in Norfolk, Fredericksburg and Staunton, Virginia and Elizabeth City, North Carolina. The second closing for the series of Next Phase Territories Transactions occurred on January 29, 2016 for territories served by distribution facilities in Easton and Salisbury, Maryland and Richmond and Yorktown, Virginia. The third closing for the series of Next Phase Territories Transactions occurred on April 1, 2016 for territories served by distribution facilities in Alexandria, Virginia and Capitol Heights and La Plata, Maryland. The final closing for the series of Next Phase Territories Transactions occurred on April 29, 2016 for territories served by distribution facilities in Baltimore, Hagerstown and Cumberland, Maryland.

At the closings of each of the Distribution Territory Expansion Transactions (excluding the Lexington-for-Jackson exchange described below), the Company signed a Comprehensive Beverage Agreement (“CBA”) for each of the territories which has a term of ten years and is automatically renewed for successive additional terms of ten years unless we give notice to terminate at least one year prior to the expiration of a ten-year term or unless earlier terminated as provided therein. Under the CBAs, the Company will make a quarterly sub-bottling payment to CCR on a continuing basis for the grant of exclusive rights to distribute, promote, market and sell specified covered beverages and related products, as defined in the agreements. The quarterly sub-bottling payment, which is accounted for as contingent consideration, is based on sales of certain beverages and beverage products that are sold under the same trademarks that identify a covered beverage, related product or certain cross-licensed brands (as defined in the CBAs). The CBA imposes certain

Coca-Cola Bottling Co. Consolidated

Notes to Consolidated Financial Statements (Unaudited)

obligations on the Company with respect to serving the expansion territories that failure to meet could result in termination of a CBA if the Company fails to take corrective measures within a specified time frame.

The May 2015 LOI contemplated that The Coca-Cola Company would work collaboratively with the Company and certain other expanding participating bottlers in the U.S. (“EPBs”) to implement a national product supply system. As a result of subsequent discussions among the EPBs and The Coca-Cola Company, on September 23, 2015, the Company and The Coca-Cola Company entered into a non-binding letter of intent (the “Manufacturing LOI”) pursuant to which CCR would sell six manufacturing facilities (“Regional Manufacturing Facilities”) and related manufacturing assets (collectively, “Manufacturing Assets”) to the Company as the Company becomes a regional producing bottler (“Regional Producing Bottler”) in the national product supply system (the “Manufacturing Facility Expansion Transactions”). Similar to, and as an integral part of, the Distribution Territory Expansion Transactions described in the May 2015 LOI, the sale of the Manufacturing Assets by CCR to the Company would be accomplished in two phases. The first phase includes three Regional Manufacturing Facilities located in Sandston, Virginia; Silver Spring, Maryland; and Baltimore, Maryland that serve the Next Phase Territories. The second phase includes three Regional Manufacturing Facilities located in Indianapolis, Indiana; Portland, Indiana; and Cincinnati, Ohio that serve the distribution territories in central and southern Ohio, northern Kentucky and parts of Indiana and Illinois. On October 30, 2015, the Company and CCR entered into a definitive purchase and sale agreement for the Manufacturing Assets that comprise the three Regional Manufacturing Facilities located in Sandston, Virginia; Silver Spring, Maryland; and Baltimore, Maryland (the “Next Phase Manufacturing Transactions”). The first closing for the series of Next Phase Manufacturing Transactions occurred on January 29, 2016 for the Sandston, Virginia facility. The final closing for the series of Next Phase Manufacturing Transactions occurred on April 29, 2016 for the Silver Spring, Maryland facility and the Baltimore, Maryland facility.

On February 8, 2016, the Company and The Coca-Cola Company entered into a non-binding letter of intent (the “February 2016 LOI”) pursuant to which CCR would grant the Company exclusive rights for the distribution, promotion, marketing and sale of The Coca-Cola Company-owned and -licensed products in additional territories then served by CCR. The transactions proposed in the February 2016 LOI would provide exclusive distribution rights for the Company in territories located within northern Ohio and northern West Virginia, including the following major markets: Akron, Elyria, Toledo, Willoughby, and Youngstown County in Ohio. CCR currently serves these territories and owns and operates the Twinsburg manufacturing facility.

2014 Expansion Territories

On May 23, 2014, the Company acquired the Johnson City and Morristown, Tennessee territory, and on October 24, 2014, the Company acquired the Knoxville, Tennessee territory (collectively the “2014 Expansion Territories”) from CCR.

The fair value of acquired assets and assumed liabilities of the 2014 Expansion Territories as of the acquisition dates is summarized as follows:

	Johnson City/
	Morristown		Knoxville
In Thousands	Territory		Territory
Cash	$	46	$	108
Inventories		1,150		2,100
Prepaid expenses and other current assets		315		1,893
Property, plant and equipment		8,495		17,229
Other assets		361		138
Goodwill		914		4,781
Other identifiable intangible assets		13,800		37,400
Total acquired assets	$	25,081	$	63,649

Current liabilities (acquisition related contingent consideration)	$	1,005	$	2,426
Current liabilities		23		2,351
Accounts payable to The Coca-Cola Company	0			105
Other liabilities (including deferred taxes)		334		0
Other liabilities (acquisition related contingent consideration)		11,564		27,834
Total assumed liabilities	$	12,926	$	32,716

Coca-Cola Bottling Co. Consolidated

Notes to Consolidated Financial Statements (Unaudited)

The fair value of the acquired identifiable intangible assets as of the acquisition dates is as follows:

	Johnson City/
	Morristown		Knoxville		Estimated
In Thousands	Territory		Territory		Useful Lives
Distribution agreements	$	13,200	$	36,400	40 years
Customer lists		600		1,000	12 years
Total	$	13,800	$	37,400

The goodwill of $0.9 million and $4.8 million for the Johnson City/Morristown and Knoxville territories, respectively, is primarily attributed to the workforce. Goodwill of $0.4 million and $4.6 million for the Johnson City/Morristown and Knoxville territories, respectively, is expected to be deductible for tax purposes. During the third quarter of 2015, the Company made certain measurement period adjustments as a result of purchase price changes to reflect the revised opening balance sheets for the Johnson City/Morristown and Knoxville, Tennessee territories. The effect on the Company’s consolidated financial statements of these measurement period adjustments was immaterial. These adjustments are included in the opening balance sheets presented above.

2015 Expansion Territories

During 2015, the Company closed on the expansion of the following distribution territories and related assets: Cleveland and Cookeville, Tennessee; Louisville, Kentucky and Evansville, Indiana; Paducah and Pikeville, Kentucky; Norfolk, Fredericksburg and Staunton, Virginia; and Elizabeth City, North Carolina (the “2015 Expansion Territories”). The Company also acquired a make-ready center in Annapolis, Maryland in 2015. During the fourth quarter of 2015, the Company made certain measurement period adjustments as a result of purchase price changes to reflect the revised opening balance sheets for the Cleveland and Cookeville Tennessee and Louisville, Kentucky and Evansville, Indiana territories.

Cleveland and Cookeville, Tennessee Territory Acquisitions

On December 5, 2014, the Company and CCR entered into an asset purchase agreement (the “Initial December 2014 APA”) related to the territory served by CCR through CCR’s facilities and equipment located in Cleveland and Cookeville, Tennessee (the “January 2015 Expansion Territory”). The closing of this transaction occurred on January 30, 2015 for a cash purchase price after final adjustments of $13.2 million.

Louisville, Kentucky and Evansville, Indiana Territory Acquisitions

On December 17, 2014, the Company and CCR entered into an asset purchase agreement (the “Additional December 2014 APA”) related to the territory served by CCR through CCR’s facilities and equipment located in Louisville, Kentucky and Evansville, Indiana (the “February 2015 Expansion Territory”). The closing of this transaction occurred on February 27, 2015, for a cash purchase price after final adjustments of $18.0 million.

Paducah and Pikeville, Kentucky Territory Acquisitions

On February 13, 2015, the Company and CCR entered into an asset purchase agreement (the “February 2015 APA”) related to the territory served by CCR through CCR’s facilities and equipment located in Paducah and Pikeville, Kentucky (the “May 2015 Expansion Territory”). The closing of this transaction occurred on May 1, 2015, for a cash purchase price of $7.5 million, which will remain subject to adjustment in accordance with the terms and conditions of the February 2015 APA.

Norfolk, Fredericksburg and Staunton, Virginia; and Elizabeth City, North Carolina Territory Acquisitions

On September 23, 2015, the Company and CCR entered into an asset purchase agreement (the “September 2015 APA”) related to the territory served by CCR through CCR’s facilities and equipment located in Norfolk, Fredericksburg and Staunton, Virginia, and Elizabeth City, North Carolina (the “October 2015 Expansion Territory”). The closing of this transactions occurred on October 30, 2015, for a cash purchase price of $26.1 million, which will remain subject to adjustment in accordance with the terms and conditions of the September 2015 APA.

Annapolis, Maryland Make-Ready Center Acquisition

As a part of the Expansion Transactions, on October 30, 2015 the Company acquired from CCR a “make-ready center” in Annapolis, Maryland for approximately $5.3 million, subject to a final post-closing adjustment. The Company recorded a bargain purchase gain of approximately $2.0 million on this transaction after applying a deferred tax liability of approximately $1.3 million. The Company uses the make-ready center to deploy and refurbish vending and other sales equipment for use in the marketplace.

Coca-Cola Bottling Co. Consolidated

Notes to Consolidated Financial Statements (Unaudited)

The fair value of acquired assets and assumed liabilities of the 2015 Expansion Territories and the Annapolis, Maryland make-ready center as of the acquisition dates is summarized as follows:

In Thousands