Coca-Cola Consolidated Annual Report 2001

← All annual reports

FY2001 Annual Report · Coca-Cola Consolidated

Loading PDF…

ANNUAL REPORT 2001

○

COCA-COL A BOTTLING CO. CONSOLIDATED (CCBCC)

IS THE SECOND LARGEST COCA-COLA BOTTLER IN THE UNITED

STATES. THE COMPANY IS A LEADER IN THE MANUFACTURING,

MARKETING AND DISTRIBUTION OF SOFT DRINKS. WITH CORPORATE

OFFICES IN CHARLOTTE, N.C., THE COMPANY DOES BUSINESS IN 11

STATES, PRIMARILY IN THE SOUTHEAST. THE COMPANY HAS ONE OF

THE HIGHEST PER CAPITA SOFT DRINK CONSUMPTION RATES IN THE

WORLD AND MANAGES BOTTLING TERRITORIES WITH A CONSUMER

BASE OF CLOSE TO 18 MILLION PEOPLE. COCA-COLA BOTTLING CO.

CONSOLIDATED IS LISTED ON THE NASDAQ NATIONAL

MARKET SYSTEM UNDER THE SYMBOL COKE.

This annual report is printed on recycled paper.

FINANCIAL SUMMARY

○

In Thousands (Except Per Share Data)

Fiscal Year

○

2001 2000 1999

○

Net sales

$1,022,686

$995,134

$972,551

Gross margin

467,116

464,893

429,438

Restructuring expense

Income before income taxes

11,696

Net income

9,470

9,835

6,294

2,232

4,986

3,241

Average Common and Class B
Common shares outstanding

8,753

8,733

8,588

Basic net income per share $ 1.08 $ .72

$ .38

Basic net income plus

amortization expense
per share* $ 2.42 $ 2.02

$ 1.63

* Includes CCBCC’s share of Piedmont Coca-Cola Bottling Partnership’s
amortization expense. Amortization expense has been adjusted for income
taxes at the Company’s marginal tax rate. Certain prior year amounts have
been reclassified to conform to current year classifications.

FUN, ATTENTION-
GETTING DISPLAYS
ENTICE SHOPPERS TO
STOP AND TAKE NOTICE,
ESPECIALLY WHEN THEY
ARE THEMED AROUND
POPULAR, EXCITING
EVENTS SUCH AS THE
SUPER BOWL.

L E T T E R T O S H A R E H O L D E R S

○

e are pleased to report that 2001 was a
good year for Coca-Cola Bottling Co.
Consolidated. Despite significant
challenges and a very competitive

business environment, your Company produced
solid financial results, posted healthy volume
growth and gained momentum for the future.

In last year’s Annual Report, we stated that

our primary objectives for 2001 were to continue
improving the Company’s financial strength and
flexibility while growing the consumer franchise.
Managing the price/volume equation, continuing
to improve our productivity and reducing debt
were the critical elements of achieving this goal.
In 2001, your Company accomplished all this
and more.

The financial results of the Company have

improved, with net income for 2001 of $9.5
million or $1.08 per share, a significant improve-
ment from the prior year. Our financial results and
record free cash flow enabled us to reduce debt and
lease liabilities by $67 million. This free cash flow
enabled the Company to repay $18 million in debt
and purchase $49 million of equipment previously
leased. As a result, interest expense declined by
$9 million or 17 percent from 2000. Stronger
earnings, less debt and lower interest expense are
clear signs that the Company’s financial strength
and flexibility are continuing to improve.

A critical priority for any soft drink bottler
is managing the price/volume equation. In 2001,
we were able to grow physical case volume by
4 percent while realizing a modest improvement
in gross margin.

While we are very pleased by the Company’s

improved financial performance, we are greatly
encouraged by the tangible momentum and the
strong sense of winning that is evident throughout

our organization. Consolidated has an outstand-
ing employee team made up of hard-working,
dedicated and motivated individuals.

In 2001, Consolidated again was an innova-
tive leader in the soft drink industry, introducing
a number of exciting new packages and products.
Working in partnership with one of our key
suppliers and Coca-Cola North America, Con-
solidated was the first bottler to introduce the
Fridge Pack™, the most significant soft drink
packaging innovation since the recyclable plastic
contour bottle. Both retailers and consumers
instantly embraced the Fridge Pack — a
12-pack carton with a sleek, consumer-friendly
design — leading to double-digit growth in
multi-pack can sales.

Building on our system leadership in the
citrus category, Consolidated was also the first
bottler to introduce Mello Yello Cherry and
Mello Yello Melon, generating renewed energy
in a critical flavor category. We also rolled out
diet Coke with lemon, which contributed
to a very successful year for the total diet
Coke trademark.

We continued to focus on accelerating our
incredibly successful Dasani business by expand-
ing our packaging to include 12-ounce and
24-ounce bottles. Since introducing Dasani in
1999, we have experienced outstanding results in
this important growth segment of our business.
We have exciting plans to increase our package
offering on this brand, and we believe we will
continue to post strong results.

In 2002, we will continue to bring “new
news” to the marketplace through package and
product innovation. Revitalizing our convenience
store single drink business is critical to our
success. Already this year, we have introduced

○

CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
FRANK HARRISON, III AND
PRESIDENT AND CHIEF
OPERATING OFFICER BILL
ELMORE JOIN IN THE
CELEBRATION OF THE 2002
WINTER OLYMPIC GAMES.
WORKING THE OLYMPIC
RINGS INTO A DISPLAY
TAKES TIME, BUT IT
GENERATES EXCITEMENT
AND INCREASES SALES.

L E T T E R T O S H A R E H O L D E R S

○

more than two dozen new brand/package
combinations. Because of the rapid growth in
the flavor category — particularly in immediate
consumption locations — CCBCC introduced
Fanta flavors at the first of the year and the
results are exceeding our expectations. Very
shortly we will be leveraging our association
with NASCAR with single-drink activity
using 16-ounce cans featuring members of the
Coca-Cola Racing Family.

Just prior to the summer selling period, we
will roll out other exciting new packages, brands
and promotions to further energize our customers,
our consumers and our organization. All the
above-mentioned activities help keep Consoli-
dated on the offensive in the marketplace.

Our priorities for 2002 remain unchanged.

We are committed to volume growth but at
the same time recognize that we must realize
meaningful margin improvement. While our
noncarbonated beverage business is growing in
its importance, we are first and foremost a carbon-
ated soft drink company and will allocate our
resources accordingly. We continue to strive for
year-over-year improvements in productivity
through process improvement and infrastructure
rationalization.

The Company generated free cash flow of
$64 million in 2000 and $67 million in 2001.
We remain focused on generating free cash flow to
repay debt. This has enabled us to lower interest
expense while making material improvements in
financial health and flexibility.

We believe it is important to note that as a

Coca-Cola bottler, our relationships with The
Coca-Cola Company, major retail customers,
other bottlers and key suppliers are critically
important to our success. We feel very good
about these strategic partnerships.

Consolidated’s sales results improved with

each successive quarter of 2001. More impressive
is the fact that we posted our strongest sales
performance directly on the heels of major
changes in the sales organization in September.
Thanks to thorough planning and hard work,
we continued to build momentum in the face
of significant change.

We are also very proud of the fact that
Consolidated received the 2001 President’s Award
for Quality Excellence from The Coca-Cola
Company in recognition of the superior achieve-
ments in the marketplace and manufacturing.
The quality and freshness of our products have
never been higher. This is a significant accomplish-
ment, particularly given the increased number of
products and packages we are now carrying.

In 2002, your Company will mark its 100th

year of selling the world’s greatest soft drink. We
believe this is an outstanding business to be in
and are very optimistic about Coca-Cola
Consolidated’s long-term future.

J. Frank Harrison, III
Chairman of the Board of Directors and
Chief Executive Officer

William B. Elmore
President and
Chief Operating Officer

○

IF THIS BRIGHT, PATRIOTIC
DISPLAY WEREN’T ENOUGH
TO CAPTURE CONSUMERS’
INTEREST, RICK THE ROBOT
WOULD SURELY ENGAGE
THEM. RICK APPEARS AT
WAL-MART STORES AND
CAN EVEN “TALK!” HE
ALWAYS DRAWS AN ADMIRING
CROWD ... AND HELPS
BOOST DISPLAYS AND SALES!

D I S C U S S I O N O F P R I O R I T I E S A N D S T R A T E G I E S

○

n 2001, your Company produced

generated more than $120 million in free cash

solid financial results, posted

flow which has enabled us to significantly reduce

healthy volume growth and gained

our debt and lease liabilities. This, along with

momentum for the future. President and Chief

very thoughtful interest rate management, led to

Operating Officer Bill Elmore reviews your

an interest expense reduction of $9 million, or

Company’s priorities and strategies below.

17 percent, in 2001. Beyond the interest savings,

Q. What were the major priorities for

Coca-Cola Bottling Co. Consolidated in 2001?

A. In 2001, Coca-Cola Bottling Co.

Consolidated’s most important priorities were to

improve the Company’s financial strength by

a lower debt level creates shareholder value and

increases our financial flexibility to capitalize on

future business opportunities as they arise.

Q. How was the Company able to improve

performance in 2001?

reducing debt and to increase the value of our

A. The short answer is productivity, but a

consumer franchise through volume and share

lot of thought and hard work have gone into

growth. We have been successful in achieving

making that happen. We are now experiencing

both of these priorities.

many of the benefits of our Value Chain initia-

Last year, the Company employed a

balanced approach toward managing the

price/volume equation. By doing this, we

enjoyed solid financial results while leading the

Coke system in volume growth. Going forward,

our charge is to generate profitable growth

that can only come from both volume and

price increases.

Q. What are the Company’s financial

priorities for 2002?

tive. We are selling more cases with fewer people

from fewer vehicles through fewer sales branches

and with lower inventory levels. By improving

sales forecasting, supply planning and production

scheduling, we have significantly lowered our

manufacturing, warehousing and transportation

costs. These improvements, coupled with better

warehouse management processes, have also

allowed us to significantly lower inventory levels

while at the same time significantly reducing out-

of-stock situations. By doing this, we have freed

A. Debt reduction remains our highest

up funds for debt repayment while contributing

priority. Over the past two years, we have

to improvements in product quality. In addition,

○

DASANI HAS PROVEN TO
BE A STRONG FORCE IN
THE MARKETPLACE SINCE
ITS 1999 INTRODUCTION.
THIS DISPLAY SENDS A
STRONG MESSAGE WHEN
SITUATED BY PRODUCE,
REMINDING SHOPPERS
OF THE IRRESISTIBLY
CLEAN TASTE OF THIS
PURIFIED WATER.

D I S C U S S I O N O F P R I O R I T I E S A N D S T R A T E G I E S

○

we continue to realize increased operating

Q. What about new products and packages?

efficiencies as we implement process improve-

ments developed as part of our Technical Services

and Distribution initiatives. We fully expect

these two initiatives to yield benefits similar

to the Value Chain initiative over the next

couple of years.

A. Consolidated continued in a leadership

role in industry innovation in 2001. Not only did

the Company play an upfront role in the intro-

duction of several new products, we pioneered

the development and introduction of the Fridge

Pack, arguably the most significant packaging

Q. What steps have we taken to achieve

innovation in the soft drink industry since the

better asset productivity?

Coca-Cola PET contour bottle.

A. In 2001, we began to streamline our

Working with a key supplier and Coca-Cola

sales branch network. We consolidated the

North America, Consolidated developed and

operations of a number of small sales centers,

became the first bottler to introduce the sleek,

which enables us to operate larger, more efficient

consumer-friendly Fridge Pack. The Fridge Pack

facilities. This was done in a thoughtful manner

is a reconfigured 12-pack that was designed to

to minimize the impact on our employees and

better fit in a refrigerator. It is like having a mini-

customers. Additional consolidation has taken

vending machine in every home. Consumers love

place in the first quarter of 2002.

it, as evidenced by the accelerated volume and

We have also begun a major overhaul of

our sales and distribution systems. In place of

the traditional conventional route sales system,

we are phasing in more pre-sell for both our

take-home and cold drink customers. By doing

this, we will make our entire system, from

manufacturing all the way through to product

delivery, more predictable, more cost-effective

and better equipped to handle our ever

increasing product line-up.

margin growth we experienced in the months

following the package’s introduction. It took a

significant investment in equipment and

reconfiguring manufacturing lines to produce

the Fridge Pack, but there is no question that it

has been a resounding success. Consolidated has

plans to bring additional exciting packaging

innovations to market over the next few months.

○

GLASS-FRONT VENDERS,
LIKE THIS ONE IN A BUSY
HOSPITAL, WERE RECENTLY
INTRODUCED INTO THE
AT-WORK MARKET. THESE
INNOVATIVE VENDERS LET
THIRSTY CONSUMERS SEE
THE PRODUCTS THAT
PROVIDE A REFRESHING
BREAK. CONSUMERS CAN
WATCH AS THE MACHINE
GENTLY DELIVERS THEIR
BEVERAGE OF CHOICE.

D I S C U S S I O N O F P R I O R I T I E S A N D S T R A T E G I E S

○

As for new products, Consolidated worked

in 1999. Dasani has grown by more than

closely with Coca-Cola North America to create

50 percent for both of the last two years and

line extensions for Mello Yello. Already the

has established itself as the market share leader

system leader in Mello Yello sales, the new Mello

in the water category in our territory. Clearly,

Yello Cherry and Mello Yello Melon flavors

Dasani is the strongest entry in our noncarbon-

helped Consolidated achieve solid growth last

ated portfolio, but POWERade also posted a

year in the key carbonated citrus soft drink

strong double-digit gain in volume in 2001.

category. In addition, the Company rolled out

diet Coke with lemon in 2001 and introduced

the 12-ounce POWERade package and 12-ounce

and 24-ounce Dasani bottles.

Having said this, carbonated soft drinks

still represent more than 90 percent of our

business. It is absolutely essential that we

continue to focus on growing sales of core

Already in 2002, we have introduced Fanta

brand carbonated soft drinks in the future just

flavors, 10-ounce bottles for our key brands,

as we did in 2001.

Minute Maid Fruit Punch and additional packag-

ing for our highly successful Minute Maid

Lemonade brand. Just like on the packaging

front, there will be more brand introductions in

the near future.

Q. How important is the water and

noncarbonated beverage segment to the soft

drink industry?

A. There is no question that the fast-

growing water and noncarbonated categories are

extremely important. Recognizing this, Consoli-

dated was the first bottler to introduce Dasani

○

him — gardening and bass fishing. Reid

reports that he spent 277 days bass fishing in

2001 and plans to spend even more time at

this passion in 2002.

His love of the environment led to his

active involvement and leadership in groups

such as the Nags Head Woods Ecological

Preserve and Ducks Unlimited, for which

he was North Carolina state chair and a

national trustee. For his service, Reid was

honored with the State Chairman of the Year

award from Ducks Unlimited.

Reid has three grown children and two

stepchildren. He and his wife, Veda, have been

married for 24 years. They live near Southern

Pines, N.C., where, he proudly points out,

they have a trophy bass pond. The University

of North Carolina at Chapel Hill alumnus is

also a graduate of Sewanee Military Academy.

“I want to thank Reid for his many years

of service to Coca-Cola Consolidated,” said

Frank Harrison, III, chairman and CEO. “We

are grateful for his dedication and wise coun-

sel. He will be missed. The entire board wishes

him well in his retirement.”

REID JONES

or 31 years, Coca-Cola Bottling Co.

Consolidated has benefited from

the wisdom, energy and integrity of H. Reid

Jones. Reid joined the Board of Directors in

1970 and served until 2001.

The Shelby, N.C., native spent most of

his career with the Cameron Brown Co. in

Raleigh. He served Cameron Brown as vice

president and manager of insurance operations

for 20 years.

He retired from business in 1982 — but

continued his service on CCBCC’s board for

another 19 years. Since his retirement, Reid

has pursued two interests that are dear to

○

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table of Contents

Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Report of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . 28

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Summary of Quarterly Stock Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Board of Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

. . .

Management’s
Discussion and Analysis

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTRODUCTION

The Company
Coca-Cola Bottling Co. Consolidated (the
“Company”) produces, markets and distributes
carbonated and noncarbonated beverages, primarily
products of The Coca-Cola Company, which include
some of the most recognized and popular beverage
brands in the world. The Company is currently the
second largest bottler of products of The Coca-Cola
Company in the United States. The Company also dis-
tributes several other beverage brands. The Compa-
ny’s product offerings include carbonated soft drinks,
teas, juices, isotonics and bottled water. Over the past
several years, the Company has expanded its bottling
territory primarily throughout the southeast via
acquisitions and, combined with internally generated
growth, had net sales of over $1 billion in 2001. The
Company is also a partner with The Coca-Cola Com-
pany in Piedmont Coca-Cola Bottling Partnership
(“Piedmont”), a partnership that operates additional
bottling territory with net sales of $297 million in
2001.

Acquisitions and Divestitures
On January 2, 2002, the Company purchased an addi-
tional 4.651% interest in Piedmont for $10.0 million
from The Coca-Cola Company, increasing the
Company’s ownership in Piedmont to 54.651%. As a
result of the increase in ownership, the results of oper-
ations, financial position and cash flows of Piedmont
will be consolidated with those of the Company
beginning in the first quarter of 2002. The Company’s
investment in Piedmont has been accounted for using
the equity method for 2001 and prior years.

Summarized financial information for Piedmont is in-
cluded in the notes to the Company’s financial state-
ments.

During 2000, the Company sold most of its bottling
territory in Kentucky and Ohio to another Coca-Cola
bottler. The territory sold represented approximately
3% of the Company’s annual sales volume. During
1999, the Company expanded its bottling territory by
acquiring three Coca-Cola bottlers as follows:

(cid:127) Carolina Coca-Cola Bottling Company, Inc., a
Coca-Cola bottler with operations in central
South Carolina in May 1999;

(cid:127) The bottling rights and operating assets of a small
Coca-Cola bottler in north central North Caro-
lina in May 1999; and

(cid:127) Lynchburg Coca-Cola Bottling Co., Inc., a

Coca-Cola bottler with operations in central Vir-
ginia in October 1999.

New Accounting Pronouncements
On January 1, 2001, the Company adopted Statement
of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging
Activities,” as amended (“SFAS No. 133”), which
requires that all derivative instruments be recognized in
the financial statements at fair value. The adoption of
SFAS No. 133 did not have a significant impact on the
results of operations, financial position or cash flows
during 2001.

In June 2001, the Financial Accounting Standards
Board (“FASB”) issued Statement of Financial
Accounting Standards No. 141, “Business
Combinations,” (“SFAS No. 141”) and Statement of

. . .

Management’s Discussion and Analysis

Financial Accounting Standards No. 142, “Goodwill
and Other Intangible Assets,” (“SFAS No. 142”).
These standards require that all business combinations
be accounted for using the purchase method and that
goodwill and intangible assets with indefinite useful
lives not be amortized but instead be tested for
impairment at least annually. These standards provide
guidelines for new disclosure requirements and outline
the criteria for initial recognition and measurement of
intangibles, assignment of assets and liabilities
including goodwill to reporting units and goodwill
impairment testing. The provisions of SFAS Nos. 141
and 142 apply to all business combinations
consummated after June 30, 2001. The provisions of
SFAS No. 142 for existing goodwill and other
intangible assets are required to be implemented
effective the first day of fiscal year 2002. The
Company anticipates the adoption of SFAS No. 142
will reduce amortization expense in 2002 by
approximately $12.6 million for the Company and by
approximately $8.4 million for Piedmont.

In October 2001, the FASB issued Statement of
Financial Accounting Standards No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets,”
(“SFAS No. 144”). SFAS No. 144 supersedes
Statement of Financial Accounting Standards No. 121,
“Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of,” but it
retains many of the fundamental provisions of that
Statement. SFAS No. 144 also extends the reporting
requirements to report separately as discontinued
operations, components of an entity that have either
been disposed of or classified as held for sale. The
provisions of SFAS No. 144 are required to be adopted
at the beginning of fiscal year 2002. The Company
believes that such adoption will not have a material
effect on its financial statements.

The Year in Review
The year was highlighted by an increase in constant
territory physical case volume of slightly over 4%, a
significant increase in net income and strong free
cash flow. Total debt and capital lease obligations
decreased from $697.2 million at December 31, 2000
to $679.3 million at December 30, 2001. Strong cash
flow from operations enabled the Company to repay
approximately $18 million in debt and purchase ap-
proximately $49 million of equipment previously
leased. New products, new packaging, growth in
noncarbonated beverages and an emphasis on our
core carbonated brands helped the Company increase
volume by 4% in 2001. This increase in volume for
2001 comes after a volume decline of 5% in 2000.
Net selling price per case was relatively unchanged

for the year. The Company increased its net selling
price per case by approximately 6.5% in 2000.

The Company reported net income of $9.5 million or
$1.08 per share for 2001 compared with net income of
$6.3 million or $.72 per share for 2000. Net income
for 2001 was favorably impacted by an income tax
benefit of approximately $2.9 million, which resulted
from the settlement of certain income tax matters with
the Internal Revenue Service during the year. Operat-
ing results for 2000 included nonrecurring items that
increased net income for the year by approximately
$3.6 million. The nonrecurring income items in 2000
included a $5.6 million gain, net of tax, on the sale of
bottling territory in Kentucky and Ohio offset partially
by a provision for impairment of certain fixed assets of
$2.0 million, net of tax.

The Company benefited from declining interest rates
over the course of the year. The combination of lower
interest rates and reduced long-term debt balances con-
tributed to a decline in interest expense of approx-
imately $9 million from 2000. The Company’s
operations produced record free cash flow during
2001. Total debt and capital lease obligations de-
creased from $697.2 million at December 31, 2000 to
$679.3 million at December 30, 2001. Strong cash
flow from operations enabled the Company to repay
approximately $18 million in debt and purchase ap-
proximately $49 million of equipment previously
leased. The Company reduced its long-term debt and
lease liabilities by approximately $64 million in 2000.

The Company continues to focus on its key long-term
objectives, including increasing per capita con-
sumption, operating cash flow, free cash flow and
stockholder value.

Significant Events of Prior Years
On June 1, 1994, the Company executed a
management agreement with South Atlantic Canners,
Inc. (“SAC”), a manufacturing cooperative located in
Bishopville, South Carolina. SAC produces bottle and
can product for its members. The Company is a
member of the cooperative and receives a fee for
managing the day-to-day operations of SAC pursuant
to this ten-year management agreement.

On July 2, 1993, the Company and The Coca-Cola
Company formed Piedmont to distribute and market
soft drink products of The Coca-Cola Company and
other third party licensors, primarily in certain por-
tions of North Carolina and South Carolina. The
Company provides a portion of the soft drink prod-
ucts to Piedmont and receives a fee for managing the
business of Piedmont pursuant to a management
agreement. The Company and The Coca-Cola

. . .

Management’s Discussion and Analysis

Company, through their respective subsidiaries, each
beneficially owned a 50% interest in Piedmont at De-
cember 30, 2001. The Company has historically ac-
counted for its investment in Piedmont using the
equity method of accounting. As noted above, on Jan-
uary 2, 2002, the Company increased its ownership

interest in Piedmont to 54.651% and The Coca-Cola
Company’s ownership in Piedmont was reduced to
45.349%. The results of operations, financial position
and cash flows of Piedmont will be consolidated with
those of the Company beginning in the first quarter of
2002.

Discussion of Critical Accounting Policies

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
shortened, the Company would depreciate the net book
value in excess of the estimated salvage value over its
revised remaining useful life. Factors such as changes in
the planned use of manufacturing equipment, vending
equipment, transportation equipment or software could
result in shortened useful lives. Long-lived assets are
reviewed by the Company for impairment whenever
events or changes in circumstances indicate that the
carrying amount of any such asset may not be
recoverable. The estimate of future cash flow is based
upon, among other things, certain assumptions about
expected future operating performance. The Company’s
estimates of undiscounted cash flow may differ from
actual cash flow due to, among other things,
technological changes, economic conditions, changes to
its business model or changes in its operating
performance. If the sum of the projected undiscounted
cash flows (excluding interest) is less than the carrying
value of the asset, the asset will be written down to its
estimated fair value.

In the ordinary course of business, the Company has
made a number of estimates and assumptions relating
to the reporting of results of operations and financial
position in the preparation of its financial statements in
conformity with accounting principles generally
accepted in the United States of America. Actual results
could differ significantly from those estimates under
different assumptions and conditions. The Company
believes that the following discussion addresses the
Company’s most critical accounting policies, which are
those that are most important to the portrayal of the
Company’s financial condition and results of
operations and require management’s most difficult,
subjective and complex judgments, often as a result of
the need to make estimates about the effect of matters
that are inherently uncertain.

Allowance for Doubtful Accounts
The Company evaluates the collectibility of its trade
accounts receivable based on a number of factors. In
circumstances where we are aware of a specific
customer’s inability to meet its financial obligations to
the Company, a specific reserve for bad debts is
estimated and recorded which reduces the recognized
receivable to the estimated amount the Company believes
will ultimately be collected. In addition to specific
customer identification of potential bad debts, bad debt
charges are recorded based on the Company’s recent past
loss history and an overall assessment of past due trade
accounts receivable amounts outstanding.

Property, Plant and Equipment
Property, plant and equipment is recorded at cost and is
depreciated on a straight-line basis over the estimated
useful lives of such assets. Changes in circumstances
such as technological advances, changes to the
Company’s business model or changes in the
Company’s capital strategy could result in the actual
useful lives differing from the Company’s estimates. In
those cases where the Company determines that the
useful life of property, plant and equipment should be

. . .

Goodwill and Other Intangible Assets
In the first quarter of 2002, the Company will adopt
the provisions of SFAS No. 142. The Company antici-
pates the adoption of SFAS No. 142 will reduce amor-
tization expense in 2002 by approximately
$12.6 million for the Company and by approximately
$8.4 million for Piedmont. During 2002, the Com-
pany will perform the first of the annual impairment
tests of its goodwill and intangible assets with indef-
inite useful lives. The Company has performed a pre-
liminary impairment test of its goodwill and intangible
assets with indefinite useful lives and anticipates that
this test will have no significant impact on the results
of operations and financial condition of the Company
in 2002.

Deferred Tax Assets
The Company records a valuation allowance to reduce
the carrying value of its deferred tax assets to an
amount that is more likely than not to be realized.
While the Company has considered future taxable
income and prudent and feasible tax planning
. . .

Management’s Discussion and Analysis

strategies in assessing the need for the valuation allow-
ance, should the Company determine that it would not
be able to realize all or part of its net deferred tax as-
sets in the future, an adjustment to the carrying value
of the deferred tax assets would be charged to income
in the period in which such determination was made.

Pension Benefits
The Company sponsors pension plans covering sub-
stantially all nonunion employees who meet eligibility
requirements. Several statistical and other factors which
attempt to anticipate future events are used in calculat-
ing the expense and liability related to the plans.

These factors include assumptions about the discount
rate, expected return on plan assets and rate of future
compensation increases as determined by the Company,
within certain guidelines. In addition, the Company’s
actuarial consultants also use subjective factors such as
withdrawal and mortality rates to estimate the pro-
jected benefit obligation. The actuarial assumptions
used by the Company may differ materially from actual
results due to changing market and economic con-
ditions, higher or lower withdrawal rates or longer or
shorter life spans of participants. These differences may
result in a significant impact to the amount of pension
expense recorded by the Company in future periods.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RESULTS OF OPERATIONS

2001 Compared to 2000
Net Income
The Company reported net income of $9.5 million or
$1.08 per share for the fiscal year 2001 compared
with net income of $6.3 million or $.72 per share for
the fiscal year 2000. Diluted net income per share for
2001 was $1.07 compared to $.71 in 2000. Net in-
come for 2001 was favorably impacted by an income
tax benefit of approximately $2.9 million, which re-
sulted from the settlement of certain income tax mat-
ters with the Internal Revenue Service during the year.
Operating results for 2000 included nonrecurring
items that increased net income for the year by
approximately $3.6 million. The nonrecurring income
items in 2000 included a $5.6 million gain, net of tax,
on the sale of bottling territory in Kentucky and Ohio
offset partially by a provision for impairment of cer-
tain fixed assets of $2.0 million, net of tax.

Net Sales and Gross Margin
The Company’s net sales for 2001 were $1.02 billion,
an increase of 2.8% compared to 2000. On a constant
territory basis, net sales increased by approximately
4% in 2001 due to an increase in physical case volume
of 4% with net selling price relatively unchanged
compared to 2000. The growth in the Company’s con-
stant territory physical case volume was attributable
to several different items. Sales of carbonated soft
drinks were positively impacted by the introduction of
new packaging for twelve-pack cans called Fridge
Pack™ and line extensions for Mello Yello and diet
Coke. Fridge Pack™ has been very popular with both
retailers and consumers. The new Mello Yello flavors
and diet Coke with lemon have helped these brands to
grow at an increased rate. On a constant territory ba-
sis, volume for the Company’s three largest selling
brands, Coca-Cola classic, Sprite and diet Coke,

increased during 2001 after volume declines during
2000.

Sales of the Company’s noncarbonated beverages
comprised 8.5% of the Company’s total sales volume
in 2001 compared to 7% in 2000. The Company con-
tinued to experience strong growth in its bottled wa-
ter, Dasani. New packaging, including twelve-ounce
bottles and multi-packs, contributed to an increase in
volume of 52% for Dasani on a constant territory ba-
sis over 2000. New packages for POWERade, includ-
ing twelve-ounce bottles, helped increase volume by
30% over prior year volume.

The Company’s products are sold and distributed di-
rectly by its employees to retail stores and other out-
lets. During 2001, approximately 78% of the
Company’s physical case volume was sold in the take-
home channel through supermarkets, convenience
stores, drug stores and mass merchandisers. However,
no individual customer accounted for as much as 10%
of the Company’s total sales volume.

While the Company’s gross margin as a percentage of
net sales declined in 2001 compared to 2000, it was
1.5% higher in 2001 than in 1999. Gross margin as a
percentage of net sales increased from 44.2% in 1999
to 46.7% in 2000 and declined to 45.7% in 2001. The
decline in the gross margin percentage in 2001 as
compared to 2000 was attributable to an increase in
cost of sales as a result of higher raw material costs
and brand mix.

Cost of Sales and Operating Expenses
Cost of sales on a per unit basis increased
approximately 0.9% for the year 2001 compared to
2000. Increases in raw material costs were partially
offset by a package mix shift from bottles to cans and
improvements in productivity.

Selling, general and administrative (“S,G&A”)
expenses for 2001 increased by approximately 1.4%

. . .

Management’s Discussion and Analysis

over the prior year on a constant territory basis. The
increase in S,G&A expenses for 2001 was due
primarily to higher employee compensation costs and
an increase in sales development costs, offset by a
reduction in lease expense resulting from the
Company’s purchase of certain assets that were
previously leased and increased productivity. S,G&A
expenses included an increase in the Company’s
allowance for doubtful accounts due to the bankruptcy
filing of a large retail customer shortly after the end of
the fiscal year. The Company produced, sold and
delivered 4% more physical cases with 4% fewer
employees than the prior year.

Based on the performance of the Company’s pension
plan investments and lower interest rates, it is
anticipated that pension expense will increase from
approximately $2 million in 2001 to approximately
$6 million in 2002. The Company anticipates that due
to current market conditions, its costs associated with
nonhealth-related insurance will increase by
approximately $1.5 million in 2002. The Company
anticipates that the cost increases related to its pension
plan and insurance will be offset partially by increased
productivity.

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 concentrates, syrups and finished products
to the Company make substantial marketing and
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 2002, it is not obligated to do so under the
Company’s master bottle contract. Significant
decreases in marketing support from The Coca-Cola
Company or other beverage companies could adversely
impact operating results of the Company. Direct
marketing funding and other support from The
Coca-Cola Company and other beverage companies
were $56.3 million in 2001 compared to $56.8 million
in 2000.

In 2002, The Coca-Cola Company is providing the
Company an opportunity to earn incremental
marketing funding as part of a strategic growth
initiative. The incremental marketing funding, which
could amount to approximately $7 million for the
Company and Piedmont on a combined basis, is
subject to certain volume performance requirements
in 2002.

Depreciation expense in 2001 increased $1.4 million or
2.1% on a reported basis and $1.8 million or 2.7% on
a constant territory basis from 2000. The increase was
due primarily to the purchase during the second
quarter of 2001 of approximately $49 million of cold
drink equipment that had previously been leased. This
purchase was financed with the Company’s lines of
credit. Capital expenditures in 2001 totaled
$96.7 million, which includes approximately
$49 million of previously leased equipment as
discussed above.

Investment in Piedmont
The Company’s share of Piedmont’s net income in
2001 was $.4 million. This compares to the Company’s
share of Piedmont’s net income of $2.5 million in
2000. The decrease in income from Piedmont of
$2.1 million resulted primarily from an increase in
operating expenses. Piedmont’s operating expenses
increased by $10.4 million in 2001 due to higher
employee compensation costs, an increase in sales
development costs and an increase in management fees
paid to the Company.

Interest Expense
Interest expense for 2001 of $44.3 million decreased
by $9.0 million or 17% from 2000. The decrease in
interest expense was attributable to lower average in-
terest rates on the Company’s outstanding debt and
lower debt balances. The Company’s overall weighted
average interest rate decreased from an average of
7.3% during 2000 to an average of 6.5% during
2001. Total debt and capital lease obligations de-
creased from $697.2 million at December 31, 2000 to
$679.3 million at December 30, 2001. Strong cash
flow from operations enabled the Company to repay
approximately $18 million in debt and purchase ap-
proximately $49 million of equipment previously
leased.

Other Income (Expense)
Other expense for 2001 was $6.0 million, compared to
other income of $1.0 million in 2000 and other ex-
pense of $5.4 million in 1999. The change in other
income (expense) from 2000 is primarily due to non-
recurring items in 2000 that included a gain on the sale
of bottling territory of $8.8 million, offset partially by
a provision for impairment of certain fixed assets of
$3.1 million. The Company recorded a provision for
impairment of certain real estate for $.9 million in the
fourth quarter of 2001. The impairment charge reflects
an adjustment to estimated net realizable value of the
real estate which was no longer required for the Com-
pany’s ongoing operations. Also in 2001, the Company
recorded a gain of $1.1 million on the sale of certain

. . .

Management’s Discussion and Analysis

corporate transportation equipment and a loan loss
provision of $1.6 million related to an outstanding
loan to its equity investee, Data Ventures LLC.

Income Taxes
The effective tax rate for federal and state income
taxes was approximately 19% in 2001 versus

approximately 36% in 2000. The Company’s income
tax rate for 2001 was favorably impacted by the
settlement of certain income tax issues with the In-
ternal Revenue Service.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2000 Compared to 1999
Net Income
The Company reported net income of $6.3 million or
basic net income per share of $.72 for fiscal year 2000
compared to $3.2 million or $.38 basic net income per
share for fiscal year 1999. Diluted net income per
share for 2000 was $.71 compared to $.37 in 1999.
Net income in 2000 included the gain on the sale of
bottling territory discussed above, offset partially by a
provision for impairment of certain fixed assets.

costs associated with a strike by employees in certain
branches of the Company’s West Virginia territory
(primarily security costs to protect Company person-
nel and assets) and compensation expense related to a
restricted stock award for the Company’s Chairman
and Chief Executive Officer.

Depreciation expense in 2000 increased $4.2 million
or 7%. The increase for 2000 was due to significant
capital expenditures in 1999 of $264.1 million, of
which approximately $155 million related to the pur-
chase of equipment that was previously leased. Capital
expenditures in 2000 totaled $49.2 million.

Net Sales and Gross Margin
Net sales for 2000 grew by 2.3% to $995 million,
compared to $973 million in 1999. On a constant
territory basis, net sales increased by approximately
1% due to an increase in net selling price for the year
of approximately 6.5% partially offset by a decline in
unit volume of approximately 5% for the year.

Gross margin increased by $35.5 million from 1999 to
2000 representing an 8% increase. The increase in
gross margin was driven by higher selling prices,
which more than offset a decline in unit volume as
discussed above. The Company’s gross margin as a
percentage of sales increased from 44.2% in 1999 to
46.7% in 2000. On a per unit basis, gross margin in-
creased 13% in 2000 over 1999.

Cost of Sales and Operating Expenses
Cost of sales on a per unit basis increased by approx-
imately 2% in 2000. This increase was due to sig-
nificantly higher costs for concentrate and increased
packaging costs, offset partially by decreases in manu-
facturing labor and overhead expenses.

S,G&A expenses increased by $31.3 million or 11%
in 2000 over 1999 levels primarily due to a reduction
in marketing funding received from The Coca-Cola
Company. Direct marketing funding and other
support from The Coca-Cola Company and other
beverage companies declined from $74.7 million in
1999 to $56.8 million in 2000. The balance of the in-
crease in S,G&A expenses was due to enhancements in
employee compensation programs, higher fuel costs,

Investment in Piedmont
The Company’s share of Piedmont’s net income in
2000 was $2.5 million. This compares to the Compa-
ny’s share of Piedmont’s net loss of $2.6 million in
1999. The increase in income from Piedmont of
$5.1 million was due to improved operating results at
Piedmont primarily due to higher gross margin result-
ing from increased net selling prices.

Interest Expense
Interest expense increased by $2.8 million or 5.5% in
2000. The increase was primarily due to higher interest
rates on the Company’s floating rate debt. The
Company’s overall weighted average borrowing rate
for 2000 was 7.3% compared to 6.8% in 1999.

Other Income (Expense)
Other income for 2000 was approximately $1 million,
a change of $6.4 million versus other expense of
$5.4 million in 1999. The change in other income
(expense) in 2000 was primarily due to a gain on the
sale of bottling territory of $8.8 million, before tax,
offset partially by a provision for impairment of certain
fixed assets of $3.1 million, before tax.

Income Taxes
The effective tax rate for federal and state income taxes
was approximately 36% in 2000 versus approximately
35% in 1999.

. . .

Management’s Discussion and Analysis

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL CONDITION

Total assets increased slightly from $1.062 billion at
December 31, 2000 to $1.064 billion at December 30,
2001. An increase in property, plant and equipment,
including the purchase of $49 million of previously
leased equipment, was offset by depreciation of prop-
erty, plant and equipment and amortization of
intangible assets, principally acquired franchise rights.
The adoption of SFAS No. 142, as discussed above,
will significantly reduce amortization of intangible
assets in 2002.

Working capital decreased by $68.5 million to a defi-
cit of $54.2 million at December 30, 2001 from
$14.3 million at December 31, 2000. The change in
working capital was primarily due to increases in the

current portion of long-term debt of $46.8 million,
in accounts payable, trade of $6.9 million and in
amounts due to Piedmont of $8.2 million.

Total debt and capital lease obligations decreased
from $697.2 million at December 31, 2000 to
$679.3 million at December 30, 2001. Strong cash
flow from operations enabled the Company to repay
approximately $18 million in debt and purchase ap-
proximately $49 million of equipment previously
leased.

The Company recorded a minimum pension liability
adjustment of $11.0 million, net of tax, in the fourth
quarter of 2001 to reflect the difference between the
fair market value of the Company’s pension plan as-
sets and the accumulated benefit obligation of the
plan.

Company and Piedmont on a combined basis.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIQUIDITY AND CAPITAL RESOURCES
Capital Resources
Sources of capital for the Company 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 avail-
able to maintain its current operations and provide for
its current capital expenditure and working capital
requirements, scheduled debt payments, interest and
income tax liabilities and dividends for stockholders.
The amount and frequency of future dividends will be
determined by the Company’s Board of Directors in
light of the earnings and financial condition of the
Company at such time, and no assurance can be given
that dividends will be declared in the future.

Financing Activities
In January 1999, the Company filed an $800 million
shelf registration for debt and equity securities. The
Company has used this shelf registration to issue
$250 million of long-term debentures in 1999. The
Company currently has $550 million available for use
under this shelf registration.

The Company borrows periodically under its available
lines of credit. These lines of credit, in the aggregate
amount of $95 million at December 30, 2001, are
made available at the discretion of the three participat-
ing banks and may be withdrawn at any time by such
banks. The Company has a revolving credit facility of
$170 million that can be used in the event the lines of
credit are not available. There were no amounts out-
standing under either the lines of credit or the revolv-
ing credit facility as of December 30, 2001. The
Company intends to refinance its short-term debt
maturities with currently available lines of credit and
to negotiate a new revolving credit facility to replace
the current facility that matures in December 2002.

The Company is a member of two cooperatives and
guarantees a portion of these cooperatives’ debt. The
total of all debt guarantees on December 30, 2001 was
$37.4 million.

The Company currently intends to refinance
$97.5 million of debt that matures at Piedmont in
May 2002 through its available credit facilities, which
include its $170 million revolving credit facility and a
shelf registration, of which approximately $550 mil-
lion is available for use. The Company currently plans
to loan $97.5 million to Piedmont to repay the debt
which matures in May 2002. It is anticipated that

Investing Activities
Additions to property, plant and equipment during
2001 were $96.7 million, which included approx-
imately $49 million of equipment that had previously
been leased. Capital expenditures during 2001 were
funded with cash flow from operations and short-term
borrowings on the Company’s available lines of credit.
Leasing is used for certain capital additions when con-
sidered cost effective relative to other sources of capi-
tal. The Company currently leases two production
facilities and certain distribution and administrative
facilities.

At the end of 2001, the Company had no material
commitments for the purchase of capital assets other
than those related to normal replacement of equipment.
The Company considers the acquisition of bottling
territories on an ongoing basis. The Company anticipates
that additions to property, plant and equipment in 2002
will be in the range of $50 to $60 million for the

. . .

Management’s Discussion and Analysis

Piedmont will pay the Company interest based on a
spread over the Company’s average cost of funds.

With regards to the Company’s $170 million term
loan agreement, the Company must maintain its pub-
lic debt ratings at investment grade as determined by
both Moody’s and Standard & Poor’s. If the Compa-
ny’s public debt ratings fall below investment grade
within 90 days after the public announcement of cer-
tain designated events and such ratings stay below
investment grade for an additional 40 days, a trigger
event resulting in a default occurs. The Company does
not anticipate a trigger event will occur.

In October 2001, the Company terminated two inter-
est rate swaps with a total notional amount of
$100 million. The gain of $6.7 million from the
termination of these swaps is being amortized as an
adjustment to interest expense over 7.5 years, the
remaining term of the initial swap agreements which
corresponds to the life of the debt instrument being
hedged. In 2002, interest expense will be approx-
imately $.7 million lower than in 2001 as a result of
this termination. In December 2001, two interest rate
swap agreements were entered into with a total no-
tional amount of $46 million. These new swap agree-
ments allowed the Company to fix the interest rate on
certain variable rate lease obligations and will be ac-
counted for as cash flow hedges.

Interest Rate Hedging
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 increases 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.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FORWARD-LOOKING STATEMENTS

The weighted average interest rate of the debt portfo-
lio as of December 30, 2001 was 5.7% compared to
7.1% at the end of 2000. The Company’s overall
weighted average borrowing rate on its long-term debt
in 2001 decreased to 6.5% from 7.3% in 2000.
Approximately 34% of the Company’s debt portfolio
of $676.9 million as of December 30, 2001 was main-
tained on a floating rate basis and is subject to
changes in short-term interest rates. An increase in
interest rates of 1% would have resulted in an in-
crease in interest expense of approximately
$2.2 million on a pre-tax basis in 2001.

This Annual Report to Stockholders, as well as in-
formation included in future filings by the Company
with the Securities and Exchange Commission and
information contained in written material, press re-
leases and oral statements issued by or on behalf of
the Company, contains, or may contain, several
forward-looking management comments and other
statements that reflect management’s current outlook
for future periods. These statements include, among
others, statements relating to: the consolidation of
results of operations, financial position and cash flows
of Piedmont with those of the Company, the effects of
the adoption of SFAS No. 142 and SFAS No. 144, the
Company’s focus on key long-term objectives, includ-
ing increasing per capita consumption, operating cash
flow, free cash flow and stockholder value, anticipated
increases in pension expense, anticipated costs asso-
ciated with nonhealth-related insurance, anticipated
increased productivity, potential marketing support
from The Coca-Cola Company, sufficiency of finan-
cial resources, anticipated additions to property, plant
and equipment, the amount and frequency of future

dividends, refinancing of short-term debt maturities,
negotiation of a new revolving credit facility, refinanc-
ing of certain debt at Piedmont, Piedmont’s payment
of interest to the Company and management’s belief
that a trigger event will not occur under the Compa-
ny’s $170 million term loan agreement. These state-
ments 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. Among the
events or uncertainties which could adversely affect
future periods are: lower than expected net pricing
resulting from increased marketplace competition,
changes in how significant customers market our
products, an inability to meet performance require-
ments for expected levels of marketing support pay-
ments from The Coca-Cola Company, an inability to
meet requirements under bottling contracts, the inabil-
ity of our aluminum can or PET bottle suppliers to
meet our demand, material changes from expectations
in the cost of raw materials, higher than expected fuel
prices, an inability to meet projections for perform-
ance in acquired bottling territories and unfavorable
interest rate fluctuations.

. . .

Report of Management

The management of Coca-Cola Bottling Co. Consolidated (the “Company”) is responsible for the preparation and
integrity of the consolidated financial statements of the Company. The financial statements and notes have been
prepared by the Company in accordance with generally accepted accounting principles and, in the judgment of
management, present fairly the Company’s financial position and results of operations. The financial information
contained elsewhere in this annual report is consistent with that in the financial statements. The financial state-
ments and other financial information in this annual report include amounts that are based on management’s best
estimates and judgments and give due consideration to materiality.

The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are
safeguarded and that transactions are executed in accordance with management’s authorization and recorded
properly to permit the preparation of financial statements in accordance with generally accepted accounting princi-
ples.

The Internal Audit Department of the Company reviews, evaluates, monitors and makes recommendations on both
administrative and accounting controls, and acts as an integral, but independent, part of the system of internal
controls.

The Company’s independent accountants were engaged to perform an audit of the consolidated financial state-
ments. This audit provides an objective outside review of management’s responsibility to report operating results
and financial condition. Working with the Company’s internal auditors, the independent accountants review and
perform tests, as appropriate, of the data included in the financial statements.

The Board of Directors discharges its responsibility for the Company’s financial statements primarily through its
Audit Committee. The Audit Committee meets periodically with the independent accountants, internal auditors
and management. Both the independent accountants and internal auditors have direct access to the Audit Commit-
tee to discuss the scope and results of their work, the adequacy of internal accounting controls and the quality of
financial reporting.

William B. Elmore
President and Chief Operating Officer

David V. Singer
Executive Vice President and Chief Financial Officer

. . .

Report of Independent Accountants

To the Board of Directors and Stockholders of Coca-Cola Bottling Co. Consolidated:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of oper-
ations, of cash flows and of changes in stockholders’ equity present fairly, in all material respects, the financial
position of Coca-Cola Bottling Co. Consolidated and its subsidiaries (the “Company”) at December 30, 2001 and
December 31, 2000, and the results of their operations and their cash flows for each of the three years in the period
ended December 30, 2001 in conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company’s management; our responsibility is to
express an opinion on these financial statements based on our audits. We conducted our audits of these statements
in accordance with auditing standards generally accepted in the United States of America, which require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

Charlotte, North Carolina
February 15, 2002

. . .

Consolidated Balance Sheets

In Thousands (Except Share Data)

ASSETS

Current assets:
Cash

Accounts receivable, trade, less allowance for doubtful accounts of $1,863 and $918
Accounts receivable from The Coca-Cola Company

Accounts receivable, other
Inventories

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Investment in Piedmont Coca-Cola Bottling Partnership
Other assets

Franchise rights and goodwill, net

Other identifiable intangible assets, net

Total

Dec. 30,
2001

Dec. 31,
2000

16,912

8,425

63,974
3,935

5,253
39,916

13,379

143,369

462,689

60,203
52,140

335,662

10,396

62,661
5,380

8,247
40,502

14,026

139,241

437,926

62,730
60,846

347,207

14,147

$1,064,459

$1,062,097

See Accompanying Notes to Consolidated Financial Statements.

. . .

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Portion of long-term debt payable within one year
Current portion of obligations under capital leases
Accounts payable, trade
Accounts payable to The Coca-Cola Company
Other accrued liabilities
Due to Piedmont Coca-Cola Bottling Partnership
Accrued compensation
Accrued interest payable

Total current liabilities

Deferred income taxes
Other liabilities
Obligations under capital leases
Long-term debt

Total liabilities

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-9,454,651 shares

Class B Common Stock, $1.00 par value:

Dec. 30,
2001

Dec. 31,
2000

56,708
1,489
28,370
7,925
49,169
24,682
17,350
11,878

197,571

133,743
94,973
935
620,156

9,904
3,325
21,477
3,802
45,321
16,436
14,201
10,483

124,949

148,655
76,061
1,774
682,246

1,047,378

1,033,685

9,454

Authorized-10,000,000 shares; Issued-2,989,166 and 2,969,166 shares

2,989

2,969

Class C Common Stock, $1.00 par value:

Authorized-20,000,000 shares; Issued-None

Capital in excess of par value
Accumulated deficit
Accumulated other comprehensive loss

Less-Treasury stock, at cost:
Common-3,062,374 shares
Class B Common-628,114 shares

Total stockholders’ equity

Total

91,004
(12,307)
(12,805)

78,335

60,845
409

17,081

99,020
(21,777)

89,666

60,845
409

28,412

$1,064,459

$1,062,097

See Accompanying Notes to Consolidated Financial Statements.

. . .

Consolidated Statements of Operations

In Thousands (Except Per Share Data)

Net sales (includes sales to Piedmont of $71,170, $69,539 and $68,046)
Cost of sales, excluding depreciation shown below (includes $53,033, $53,463 and

$56,439 related to sales to Piedmont)

Gross margin

Selling, general and administrative expenses, excluding depreciation shown below
Depreciation expense

Amortization of goodwill and intangibles
Restructuring expense

Income from operations

Interest expense
Other income (expense), net

Income before income taxes

Income taxes

Net income

Basic net income per share

Diluted net income per share

Weighted average number of common shares outstanding

Weighted average number of common shares outstanding—assuming dilution

2001

Fiscal Year
2000

1999

$1,022,686

$995,134

$972,551

555,570

530,241

543,113

467,116

464,893

429,438

323,668
66,134

15,296

323,223
64,751

14,712

62,018

44,322
(6,000)

11,696

2,226

9,470

1.08

1.07

8,753

8,821

62,207

53,346
974

9,835

3,541

6,294

.72

.71

8,733

8,822

291,907
60,567

13,734
2,232

60,998

50,581
(5,431)

4,986

1,745

3,241

.38

.37

8,588

8,708

See Accompanying Notes to Consolidated Financial Statements.

. . .

Consolidated Statements of Cash Flows

In Thousands

Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense
Amortization of goodwill and intangibles
Deferred income taxes
Gain on sale of bottling territory
Provision for impairment of property, plant and equipment
Losses on sale of property, plant and equipment
Amortization of debt costs
Amortization of deferred gain related to terminated interest rate swaps
Undistributed (earnings) losses of Piedmont
(Increase) decrease in current assets less current liabilities
(Increase) decrease in other noncurrent assets
Increase (decrease) in other noncurrent liabilities
Other

Total adjustments

Net cash provided by operating activities

Cash Flows from Financing Activities
Proceeds from the issuance of long-term debt
Repayment of current portion of long-term debt
Proceeds from (repayment of) lines of credit, net
Cash dividends paid
Payments on capital lease obligations
Termination of interest rate swap agreements
Debt fees paid
Other

Net cash provided by (used in) financing activities

Cash Flows from Investing Activities
Additions to property, plant and equipment
Proceeds from the sale of property, plant and equipment
Acquisitions of companies, net of cash acquired
Proceeds from sale of bottling territory

Net cash used in investing activities

Net increase (decrease) in cash

Cash at beginning of year

Cash at end of year

Significant non-cash investing and financing activities

Capital lease obligations incurred
Issuance of Class B Common Stock in connection with stock award
Issuance of Common Stock in connection with acquisition

Fiscal Year
2000

1999

2001

9,470

$ 6,294

3,241

66,134
15,296
2,226

947
1,297
830
(1,183)
(417)
32,770
501
(6,010)
82

112,473

121,943

64,751
14,712
3,541
(8,829)
3,066
2,284
938
(819)
(2,514)
(2,554)
(506)
3,868
58

77,996

84,290

(2,385)
(12,900)
(8,753)
(2,868)
6,704

(26,750)
(33,700)
(8,733)
(4,528)
(292)

(230)

(387)

60,567
13,734
1,745

2,755
836
(563)
2,631
9,639
(8,451)
9,702
334

92,929

96,170

251,165
(30,115)
10,200
(8,549)
(4,938)

(3,266)
(468)

(20,432)

(74,390)

214,029

(96,684)
3,660

(49,168)
16,366
(723)
23,000

(264,139)
753
(44,454)

(93,024)

(10,525)

(307,840)

8,487

8,425

(625)

9,050

2,359

6,691

$ 16,912

$ 8,425

9,050

456
757

$ 1,313

$ 14,225

21,961

See Accompanying Notes to Consolidated Financial Statements.

. . .

Consolidated Statements of Changes in
Stockholders’ Equity

In Thousands

Common
Stock

Class B
Common
Stock

Capital in
Excess of
Par Value

Accum.
Deficit

Accumulated
Other
Comprehensive
Loss

Treasury
Stock

Total

Balance on January 3, 1999

$9,086

$2,969

$ 94,709

$(31,312)

$ —

$(61,254) $14,198

Net income
Cash dividends paid

Issuance of Common Stock in connection

with acquisition

368

3,241

(8,549)

21,593

3,241
(8,549)

21,961

Balance on January 2, 2000
Net income

Cash dividends paid

Balance on December 31, 2000
Comprehensive income (loss):

Net income
Change in fair market value of cash flow

hedges, net of tax

Proportionate share of Piedmont’s accum.
other comprehensive loss at adoption of
SFAS No. 133, net of tax

Change in proportionate share of Piedmont’s
accum. other comprehensive loss, net of
tax

Minimum pension liability adjustment, net of

tax

Total comprehensive income (loss)

Cash dividends paid

Issuance of Class B Common Stock

$9,454

$2,969

$107,753

$(28,071)
6,294

$ —

$(61,254) $30,851
6,294

(8,733)

$9,454

$2,969

$ 99,020

$(21,777)

$ —

$(61,254) $28,412

9,470

(947)

(878)

(10,984)

9,470

(947)

(878)

(10,984)

(3,335)

(8,753)

757

(8,753)

737

Balance on December 30, 2001

$9,454

$2,989

$ 91,004

$(12,307)

$(12,805)

$(61,254) $17,081

See Accompanying Notes to Consolidated Financial Statements.

. . .

Notes to Consolidated Financial Statements

1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SIGNIFICANT ACCOUNTING POLICIES

Coca-Cola Bottling Co. Consolidated (the
“Company”) is engaged in the production, marketing
and distribution of carbonated and noncarbonated
beverages, primarily products of The Coca-Cola
Company. The Company operates in portions of
11 states, principally in the southeastern region of the
United States.

The consolidated financial statements include the ac-
counts of the Company and its majority owned sub-
sidiaries. All significant intercompany accounts and
transactions have been eliminated. Acquisitions re-
corded as purchases are included in the statement of
operations from the date of acquisition.

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 report-
ing period. Actual results could differ from those
estimates.

The fiscal years presented are the 52-week periods
ended December 30, 2001, December 31, 2000 and
January 2, 2000. The Company’s fiscal year ends on
the Sunday closest to December 31.

Certain prior year amounts have been reclassified to
conform to current year classifications.

The Company’s significant accounting policies are as
follows:

Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash
in banks and cash equivalents, which are highly liquid
debt instruments with maturities of less than 90 days.

Credit Risk of Trade Accounts Receivable
The Company sells its products to large chain stores
and other customers and extends credit, generally
without requiring collateral, based on an ongoing
evaluation of the customer’s business prospects and
financial condition. The Company monitors its ex-
posure to losses on trade accounts receivable and
maintains an allowance for potential losses or adjust-
ments. The Company’s trade accounts receivable are
typically collected within approximately 30 days from
the date of sale.

Inventories
Inventories are stated at the lower of cost, determined
on the first-in, first-out method (“FIFO”) or market.

Property, Plant and Equipment
Property, plant and equipment are recorded at cost
and depreciated using the straight-line method over
the estimated useful lives of the assets. Additions and
major replacements or betterments are added to the
assets at cost. Maintenance and repair costs and minor
replacements are charged to expense when incurred.
When assets are replaced or otherwise disposed of, the
cost and accumulated depreciation are removed from
the accounts and the gains or losses, if any, are re-
flected in income.

Software
The Company adopted the provisions of the American
Institute of Certified Public Accountants’ Statement of
Position 98-1, “Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use” in
the first quarter of 1999. This statement requires capi-
talization of certain costs incurred in the development
of internal-use software. Software is amortized using
the straight-line method over its estimated useful life.

Investment in Piedmont Coca-Cola Bottling
Partnership
Prior to January 2, 2002, the Company beneficially
owned a 50% interest in Piedmont Coca-Cola Bottling
Partnership (“Piedmont”). The Company accounted
for its interest in Piedmont using the equity method of
accounting. With respect to Piedmont, sales of soft
drink products at cost, management fee revenue and
the Company’s share of Piedmont’s results from oper-
ations are included in “Net sales” for all periods pre-
sented. See Note 3 and Note 15 for additional
information.

On January 2, 2002, the Company purchased an addi-
tional 4.651% interest in Piedmont from The
Coca-Cola Company, increasing the Company’s own-
ership to 54.651%. As a result of the increase in own-
ership, the results of operations, financial position and
cash flows of Piedmont will be consolidated with
those of the Company beginning in the first quarter of
2002. See Note 3 for additional information.

Revenue Recognition
Revenues are recognized when finished products are
delivered to customers and both title and the risks and
rewards of ownership are transferred. Appropriate
provision is made for uncollectible accounts.

. . .

Notes to Consolidated Financial Statements

Income Taxes
The Company provides deferred income taxes for the
tax effects of temporary differences between the finan-
cial reporting and income tax bases of the Company’s
assets and liabilities.

Benefit Plans
The Company has a noncontributory pension plan
covering substantially all nonunion employees and one
noncontributory pension plan covering certain union
employees. Costs of the plans are charged to current
operations and consist of several components of net
periodic pension cost based on various actuarial
assumptions regarding future experience of the plans.
In addition, certain other union employees are covered
by plans provided by their respective union organ-
izations. The Company expenses amounts as paid in
accordance with union agreements. The Company
recognizes the cost of postretirement benefits, which
consist principally of medical benefits, during employ-
ees’ periods of active service.

Amounts recorded for benefit plans reflect estimates
related to future interest rates, investment returns,
employee turnover, wage increases and health care
costs. The Company reviews all assumptions and
estimates on an ongoing basis.

Intangible Assets and Goodwill
Identifiable intangible assets resulting from the acquis-
ition of Coca-Cola bottling franchises accounted for
by the purchase method are recorded based upon fair
market value at the date of acquisition and are being
amortized on a straight-line basis over periods ranging
from 17 to 40 years. Goodwill is being amortized on a
straight-line basis over 40 years.

Impairment of Long-lived Assets
The Company continually monitors conditions that
may affect the carrying value of its intangible or other
long-lived assets. When conditions indicate potential
impairment of an intangible or other long-lived asset,
the Company will undertake necessary market studies
and reevaluate projected future cash flows associated
with the asset. When projected future cash flows, not
discounted for the time value of money, are less than
the carrying value of the asset, the asset will be written
down to its estimated net realizable value.

Net Income Per Share
Basic earnings per share (“EPS”) excludes dilution and
is computed by dividing net income available for
common stockholders by the weighted average num-

ber of Common and Class B Common shares out-
standing. Diluted EPS gives effect to all securities
representing potential common shares that were dilu-
tive and outstanding during the period.

Derivative Financial Instruments
On January 1, 2001, the Company adopted Statement
of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging
Activities,” as amended (“SFAS No. 133”), which
requires that all derivative instruments be recognized
in the financial statements at fair value. The adoption
of SFAS No. 133 did not have a significant impact on
the results of operations, financial position or cash
flows during 2001.

The Company uses derivative financial instruments to
manage its exposure to movements in interest rates.
The use of these financial instruments modifies the
exposure of these risks with the intent to reduce the
risk to the Company. The Company does not use fi-
nancial instruments for trading purposes, nor does it
use leveraged financial instruments. The Company has
determined that its derivative financial instruments
qualify as either fair value or cash flow hedges, having
values that highly correlate with the underlying
hedged exposures and have designated such instru-
ments as hedging transactions. Credit risk related to
the derivative financial instruments is considered
minimal and is managed by requiring high credit
standards for its counterparties and periodic
settlements.

Changes in fair value of derivative financial instru-
ments are recorded as adjustments to the assets or li-
abilities being hedged in the statement of operations or
in accumulated other comprehensive income (loss),
depending on whether the derivative is designated and
qualifies for hedge accounting, the type of hedge
transaction represented and the effectiveness of the
hedge.

Insurance Programs
In general, the Company is self-insured for costs of
casualty claims and medical claims. The Company
uses commercial insurance for casualty claims and
medical claims as a risk reduction strategy to minimize
catastrophic losses. Casualty losses are provided for
using actuarial assumptions and procedures followed
in the insurance industry, adjusted for company-
specific history and expectations.

. . .

Notes to Consolidated Financial Statements

Marketing Costs and Support
Arrangements
The Company directs various advertising and market-
ing programs supported by The Coca-Cola Company
or other franchisers. Under these programs, certain

costs incurred by the Company are reimbursed by the
applicable franchiser. Franchiser funding is recognized
when performance measures are met or as funded
costs are incurred.

2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ACQUISITIONS AND DIVESTITURES

On May 28, 1999, the Company acquired all of the
outstanding capital stock of Carolina Coca-Cola Bot-
tling Company, Inc. (“Carolina”) in exchange for
368,482 shares of the Company’s Common Stock, in-
stallment notes and cash. The total purchase price was
approximately $37 million. Carolina was a Coca-Cola
bottler with operations in central South Carolina.

On October 29, 1999, the Company acquired sub-
stantially all of the outstanding capital stock of Lynch-
burg Coca-Cola Bottling Company, Inc. (“Lynchburg”)
for approximately $24 million, in cash. Lynchburg was
a Coca-Cola bottler with operations in central Virginia.

The Company used its lines of credit for the cash por-
tion of the acquisitions described above. These acquis-
itions have been accounted for under the purchase
method of accounting.

On September 29, 2000, the Company sold sub-
stantially all of its bottling territory in the states of
Kentucky and Ohio to Coca-Cola Enterprises Inc.
The Company received cash proceeds of $23.0 million
related to the sale of this territory and certain other
operating assets. The Company recorded a pre-tax
gain of $8.8 million as a result of this sale. The bot-
tling territory sold represented approximately 3% of
the Company’s annual sales volume.

3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INVESTMENT IN PIEDMONT COCA-COLA BOTTLING PARTNERSHIP

On July 2, 1993, the Company and The Coca-Cola
Company formed Piedmont to distribute and market
carbonated and noncarbonated beverages primarily in
certain portions of North Carolina and South Caro-
lina. Prior to January 2, 2002, the Company and The
Coca-Cola Company, through their respective sub-

sidiaries, each beneficially owned a 50% interest in
Piedmont. The Company provides a portion of the
soft drink products for Piedmont at cost and receives a
fee for managing the operations of Piedmont pursuant
to a management agreement.

Summarized financial information for Piedmont was as follows:

In Thousands

Current assets

Noncurrent assets

Total assets

Current liabilities

Noncurrent liabilities

Total liabilities

Partners’ equity

Accumulated other comprehensive loss

Total liabilities and partners’ equity

Company’s equity investment

. . .

Dec. 30,
2001

Dec. 31,
2000

$ 55,848

$ 48,068

309,664

319,788

$365,512

$367,856

$114,132

$ 17,342

130,974

225,054

245,106

126,294

(5,888)

242,396

125,460

$365,512

$367,856

$ 60,203

$ 62,730

Notes to Consolidated Financial Statements

3 INVESTMENT IN PIEDMONT COCA-COLA BOTTLING PARTNERSHIP (continued)

In Thousands

Net sales
Cost of sales

Gross margin
Income from operations

Net income (loss)

Company’s equity in net income (loss)

The Company currently intends to refinance $97.5
million of debt that matures at Piedmont in May 2002
through its available credit facilities, which include its
$170 million revolving credit facility and a shelf regis-
tration, of which approximately $550 million is avail-
able for use. The Company currently plans to loan
$97.5 million to Piedmont to repay the debt which
matures in May 2002. It is anticipated that Piedmont
will pay the Company interest based on a spread over
the Company’s average cost of funds.

2001

$296,900
153,643

143,257
13,330

834

417

Fiscal Year
2000

$286,781
147,671

139,110
18,948

5,028

2,514

1999

$278,202
152,042

126,160
7,803

$ (5,262)

$ (2,631)

On January 2, 2002, the Company purchased an
additional 4.651% interest in Piedmont from The
Coca-Cola Company, increasing the Company’s
ownership in Piedmont to 54.651%. As a result of the
increase in ownership, the results of operations,
financial position and cash flows of Piedmont will be
consolidated with those of the Company beginning in
the first quarter of 2002.

The following unaudited proforma condensed financial information reflects the consolidation of Piedmont’s finan-
cial position and results of operations with those of the Company as if the additional purchase had occurred at the
beginning of 2001.

In Thousands

Current assets
Noncurrent assets

Total assets

Current liabilities
Noncurrent liabilities

Total liabilities
Minority interest
Stockholders’ equity

Total liabilities, minority interest and stockholders’ equity

In Thousands

Net sales
Cost of sales

Gross margin
Income from operations
Minority interest
Net income

. . .

Dec. 30,
2001

$ 174,535
1,172,271

$1,346,806

$ 287,671
988,057

1,275,728
54,603
16,475

$1,346,806

Fiscal Year
2001

$1,237,018
656,180

580,838
74,827
378
9,034

Notes to Consolidated Financial Statements

Piedmont has several interest rate swap agreements
that have been designated as cash flow hedges. The
Company’s proportionate share of Piedmont’s
accumulated other comprehensive loss, net of tax,

resulting from the effect of adoption of SFAS No. 133
and the impact during 2001 related to Piedmont were
as follows:

In Thousands

Impact of adoption, net of tax

Change in fair market value of cash flow hedges during 2001, net of tax

Company’s proportionate share of Piedmont’s accumulated other comprehensive loss, net of tax

Fiscal Year
2001

$ 947

878

$1,825

4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INVENTORIES

Inventories were summarized as follows:

In Thousands

Finished products

Manufacturing materials

Plastic pallets and other

Total inventories

Dec. 30,
2001

Dec. 31,
2000

$23,637

$22,907

11,893

4,386

13,330

4,265

$39,916

$40,502

5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PROPERTY, PLANT AND EQUIPMENT

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

In Thousands

Land

Buildings

Machinery and equipment

Transportation equipment
Furniture and fixtures

Vending equipment

Leasehold and land improvements

Software for internal use

Construction in progress

Total property, plant and equipment, at cost

Less: Accumulated depreciation and amortization

Property, plant and equipment, net

Estimated
Useful
Lives

10-50 years

5-20 years

4-13 years
4-10 years

6-13 years

5-20 years

3-7 years

Dec. 30,
2001

Dec. 31,
2000

$ 11,158

$ 11,311

95,338

93,658

140,512
38,119

334,975

40,969

21,850

1,908

778,487

315,798

97,012

94,652

133,886
36,519

285,714

39,597

17,207

1,162

717,060

279,134

$462,689

$437,926

In the fourth quarter of 2001, the Company recorded
a provision for impairment of certain real estate for
$.9 million, which was classified in “Other income
(expense), net.” The impairment charge reflects an
adjustment to estimated net realizable value of the real

estate which was no longer required for the Company’s
ongoing operations. In the third quarter of 2000, the
Company recorded a provision for impairment of
certain fixed assets for $3.1 million, which was
classified in “Other income (expense), net.”

. . .

Notes to Consolidated Financial Statements

6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FRANCHISE RIGHTS AND GOODWILL

In Thousands

Franchise rights
Goodwill

Franchise rights and goodwill

Less: Accumulated amortization

Franchise rights and goodwill, net

Estimated
Useful
Lives

40 years
40 years

Dec. 30,
2001

$353,388
112,097

465,485

129,823

Dec. 31,
2000

$353,388
112,097

465,485

118,278

$335,662

$347,207

7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OTHER IDENTIFIABLE INTANGIBLE ASSETS

In Thousands

Customer lists

Other

Other identifiable intangible assets

Less: Accumulated amortization

Other identifiable intangible assets, net

Dec. 30,
2001

Dec. 31,
2000

Estimated
Useful
Life

$54,864

20 years

16,316

17-23 years

71,180

60,784

71,180

57,033

$10,396

$14,147

8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LONG-TERM DEBT

Long-term debt was summarized as follows:

In Thousands

Lines of Credit

Term Loan Agreement

Medium-Term Notes

Debentures

Debentures
Other notes payable

Less: Portion of long-term debt payable within one year

Long-term debt

Maturity

Interest
Rate

2002

2004

2005

2002

2007

2009

2009
2002-
2006

2.64%

8.56%

6.85%

7.20%

6.38%
5.75%-
10.00%

Interest
Paid

Varies

Semi-annually

Semi-annually
Varies

Dec. 30,
2001

Dec. 31,
2000

$ —

$ 12,900

85,000

47,000

100,000

250,000
9,864

85,000

47,000

100,000

250,000
12,250

676,864
56,708

692,150
9,904

$620,156

$682,246

. . .

Notes to Consolidated Financial Statements

The principal maturities of long-term debt outstanding
on December 30, 2001 were as follows:
In Thousands

2002
2003
2004
2005
2006
Thereafter

Total long-term debt

$ 56,708
31
85,025
85,020
80
450,000

$676,864

The Company has a revolving credit facility for bor-
rowings of up to $170 million that matures in
December 2002. The Company intends to negotiate a
new revolving credit facility to replace the current fa-
cility. The agreement contains covenants which estab-
lish ratio requirements related to debt, interest expense
and cash flow. A facility fee of 1⁄ 8% per year on the
banks’ commitment is payable quarterly. There was
no outstanding balance under this facility as of
December 30, 2001.

In January 1999, the Company filed an $800 million
shelf registration for debt and equity securities. The

Company used this shelf registration to issue
$250 million of long-term debentures in 1999. The
Company currently has $550 million available for use
under this shelf registration.

After taking into account all of the interest rate hedg-
ing activities, the Company had a weighted average
interest rate of 5.7% for the debt portfolio as of
December 30, 2001 compared to 7.1% at December
31, 2000. The Company’s overall weighted average
borrowing rate on its long-term debt was 6.5%, 7.3%
and 6.8% for 2001, 2000 and 1999, respectively.

As of December 30, 2001, approximately $230 mil-
lion or 34% of the total debt portfolio was subject to
changes in short-term interest rates. The Company
considers all floating rate debt and fixed rate debt
with a maturity of less than one year to be subject to
changes in short-term interest rates.

If average interest rates for the floating rate compo-
nent of the Company’s debt portfolio increased by
1%, annual interest expense for the year ended De-
cember 30, 2001 would have increased by approx-
imately $2.2 million and net income would have been
reduced by approximately $1.4 million.

9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses interest rate hedging products to
modify risk from interest rate fluctuations. The Com-
pany has historically used derivative financial instru-
ments from time to time to achieve a targeted fixed/
floating interest rate mix. This target is based upon
anticipated cash flows from operations relative to the
Company’s debt level and the potential impact of in-

creases in interest rates on the Company’s overall fi-
nancial condition.

The Company does not use derivative financial instru-
ments for trading or other speculative purposes nor
does it use leveraged financial instruments. All of the
Company’s outstanding interest rate swap agreements
are LIBOR-based.

Derivative financial instruments were summarized as follows:

In Thousands

Interest rate swap-fixed
Interest rate swap-fixed
Interest rate swaps-floating

December 30, 2001

December 31, 2000

Notional
Amount

Remaining
Term

Notional
Amount

Remaining
Term

$27,000
19,000

.95 years
.95 years

$100,000

8.25 years

. . .

Notes to Consolidated Financial Statements

In December 2001, interest rate swap agreements were
entered into with a total notional amount of $46 mil-
lion. These new swap agreements are accounted for

as cash flow hedges. These agreements allowed the
Company to fix the interest rate on certain variable
rate lease obligations.

The counterparties to these contractual arrangements
are major financial institutions with which the Com-
pany also has other financial relationships. The Com-
pany is exposed to credit loss in the event of
nonperformance by these counterparties. However, the
Company does not anticipate nonperformance by the
other parties.

10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by
the Company in estimating the fair values of its finan-
cial instruments:

Cash, Accounts Receivable and Accounts Pay-
able: The fair values of cash, accounts receivable and
accounts payable approximate carrying values due to
the short maturity of these financial instruments.

Public Debt: The fair values of the Company’s public
debt are based on estimated market prices.

Non-Public Variable Rate Long-Term Debt: The
carrying amounts of the Company’s variable rate bor-
rowings approximate their fair values.

Non-Public Fixed Rate Long-Term Debt: The fair
values of the Company’s fixed rate long-term borrow-
ings are estimated using discounted cash flow analyses
based on the Company’s current incremental borrow-
ing rates for similar types of borrowing arrangements.

Derivative Financial Instruments: Fair values for
the Company’s interest rate swaps are based on cur-
rent settlement values.

The carrying amounts and fair values of the Company’s long-term debt and derivative financial instruments were
as follows:

In Thousands

Public debt

Non-public variable rate long-term debt

Non-public fixed rate long-term debt

Interest rate swaps

December 30, 2001
Carrying
Amount

Fair
Value

December 31, 2000
Fair
Value

Carrying
Amount

$497,000

$493,993

$497,000

$480,687

170,000

9,864

(7)

9,868

(7)

182,900

12,250

182,900

12,433

1,669

The fair values of the interest rate swaps at December 30, 2001 represent the estimated amount the Company
would have received upon termination of these agreements. The fair values of the interest rate swaps at
December 31, 2000 represent the estimated amount the Company would have had to pay to terminate these
agreements.

. . .

Notes to Consolidated Financial Statements

11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

COMMITMENTS AND CONTINGENCIES

Operating lease payments are charged to expense as
incurred. Such rental expenses included in the con-
solidated statements of operations were

$12.4 million, $15.7 million and $13.7 million for
2001, 2000 and 1999, respectively.

The following is a summary of future minimum lease payments for all capital leases and operating leases as of
December 30, 2001.

In Thousands

2002

2003

2004

2005

2006

Thereafter

Total minimum lease payments

Less: Amounts representing interest

Present value of minimum lease payments

Less: Current portion of obligations under capital leases

Long-term portion of obligations under capital leases

The Company is a member of South Atlantic Canners,
Inc. (“SAC”), a manufacturing cooperative, from
which it is obligated to purchase a specified number of
cases of finished product on an annual basis. The con-
tractual minimum annual purchases required from
SAC are approximately $40 million. See Note 15 to
the consolidated financial statements for additional
information concerning SAC.

The Company guarantees a portion of the debt for one
cooperative from which the Company purchases plas-
tic bottles. The Company also guarantees a portion of
debt for SAC. See Note 15 to the consolidated finan-
cial statements for additional information concerning
these financial guarantees. The total of all debt
guarantees on December 30, 2001 was $37.4 million.

The Company entered into a purchase agreement for
aluminum cans on an annual basis through 2003. The
estimated annual purchases under this agreement are
approximately $100 million for 2002 and 2003.

On August 3, 1999, North American Container, Inc.
filed a complaint in the United States District Court
for the Northern District of Texas against the Com-

Operating
Leases

$ 9,905

9,144

8,818

8,149

7,980

24,493

$68,489

Total

$11,394

9,942

9,131

8,149

7,980

24,493

$71,089

Capital
Leases

$1,489

798

313

$2,600

176

2,424

1,489

$ 935

pany and 44 other defendants. By its First Amended
Complaint filed in April 2000, the plaintiff seeks to
enforce United States Reissue Patent No. RIE 36,639
and alleges that the plastic containers used by the
Company in connection with the distribution of soft
drinks and other products infringe the patent. The
Company has notified its suppliers of the lawsuit and
has asserted indemnification claims against them. The
Company’s suppliers have assumed the defense of the
claim pursuant to a written agreement providing for
indemnification. The Company’s suppliers are vigo-
rously defending the claim and the Company believes
it has meritorious defenses against the imposition of
any liability in this action.

The Company is involved in other various claims and
legal proceedings which have arisen in the ordinary
course of its business. The Company believes that the
ultimate disposition of the above noted litigation and
its other claims and legal proceedings will not have a
material adverse effect on the financial condition, cash
flows or results of operations of the Company.

. . .

Notes to Consolidated Financial Statements

12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INCOME TAXES

The provision for income taxes consisted of the following:

In Thousands

Current:

Federal

Total current provision

Deferred:

Federal
State

Total deferred provision

Income tax expense

Fiscal Year

2001

2000

1999

$ — $ —

$ —

—

891
1,335

2,226

865
2,676

3,541

206
1,539

1,745

$2,226

$3,541

$1,745

Deferred income taxes are recorded based upon differences between the financial statement and tax bases of assets
and liabilities and available tax credit carryforwards. Temporary differences and carryforwards that comprised
deferred income tax assets and liabilities were as follows:

In Thousands

Intangible assets

Depreciation
Investment in Piedmont

Lease obligations

Other

Gross deferred income tax liabilities

Net operating loss carryforwards

Leased assets
AMT credits

Deferred compensation

Postretirement benefits

Interest rate swap terminations

Gross deferred income tax assets

Valuation allowance for deferred tax assets

Net deferred income tax liabilities

Tax benefit of minimum pension liability adjustment

Tax benefit related to Piedmont’s accumulated other comprehensive loss

Current deferred tax assets

Deferred income tax liability

Dec. 30, 2001

Dec. 31, 2000

$ 80,506

$ 105,746

94,955
25,202

18,543

219,206

(60,334)

(17,562)

(7,082)

(12,101)

(4,748)

83,943
27,428

19,775

13,315

250,207

(80,446)

(15,820)
(12,030)

(4,152)

(11,858)

(2,624)

(101,827)

(126,930)

34,526

151,905

(6,732)

(1,119)

(10,311)

35,048

158,325

(9,670)

$ 133,743

$ 148,655

Except for amounts for which a valuation allowance has been provided, the Company believes the other deferred
tax assets will be realized primarily through the reversal of existing temporary differences. The valuation allowance
of $34.5 million and $35.0 million as of December 30, 2001 and December 31, 2000, respectively, relates
primarily to state net operating loss carryforwards.

. . .

Notes to Consolidated Financial Statements

Reported income tax expense is reconciled to the amount computed on the basis of income before income taxes at
the statutory rate as follows:

In Thousands

Statutory expense

Amortization of franchise and goodwill assets

State income taxes, net of federal benefit

Valuation allowance change

Favorable tax settlement

Other

Income tax expense

Fiscal Year
2000

2001

1999

$ 4,094

$3,442

$1,745

486

307

418

548

(522)

(539)

373

257

(538)

(2,850)

711

(328)

(92)

$ 2,226

$3,541

$1,745

On December 30, 2001, the Company had $58 million and $87 million of federal and state net operating losses,
respectively, available to reduce future income taxes. The net operating loss carryforwards expire in varying
amounts through 2021.

13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CAPITAL TRANSACTIONS

On March 8, 1989, the Company granted J. Frank
Harrison, Jr. an option for the purchase of 100,000
shares of Common Stock exercisable at the closing
market price of the stock on the day of grant. The
closing market price of the stock on March 8, 1989
was $27.00 per share. The option is exercisable, in
whole or in part, at any time at the election of
Mr. Harrison, Jr. over a period of 15 years from the
date of grant. This option has not been exercised with
respect to any such shares.

On August 9, 1989, the Company granted J. Frank
Harrison, III an option for the purchase of 150,000
shares of Common Stock exercisable at the closing
market price of the stock on the day of grant. The
closing market price of the stock on August 9, 1989
was $29.75 per share. The option may be exercised, in
whole or in part, during a period of 15 years begin-
ning on the date of grant. This option has not been
exercised with respect to any such shares.

Effective November 23, 1998, J. Frank Harrison, Jr.
exchanged 792,796 shares of the Company’s Common
Stock for 792,796 shares of Class B Common Stock in
a transaction previously approved by the Company’s
Board of Directors (the “Harrison Exchange”). Mr.
Harrison, Jr. already owned the shares of Common
Stock used to make this exchange. This exchange took
place in connection with a series of simultaneous
transactions related to Mr. Harrison, Jr.’s personal
estate planning.

Pursuant to a Stock Rights and Restriction Agreement
dated January 27, 1989, between the Company and

The Coca-Cola Company, in the event that the
Company issues new shares of Class B Common Stock
upon the exchange or exercise of any security, warrant
or option of the Company which results in The
Coca-Cola Company owning less than 20% of the
outstanding shares of Class B Common Stock and less
than 20% of the total votes of all outstanding shares of
all classes of the Company, The Coca-Cola Company
has the right to exchange shares of Common Stock for
shares of Class B Common Stock in order to maintain
its ownership of 20% of the outstanding shares of
Class B Common Stock and 20% of the total votes of
all outstanding shares of all classes of the Company.
Under the Stock Rights and Restrictions Agreement,
The Coca-Cola Company also has a preemptive right
to purchase a percentage of any newly issued shares of
any class as necessary to allow it to maintain
ownership of both 29.67% of the outstanding shares
of Common Stock of all classes and 22.59% of the
total votes of all outstanding shares of all classes.
Effective November 23, 1998, in connection with the
Harrison Exchange and the related Harrison family
limited partnership transactions, The Coca-Cola
Company, in the exercise of its rights under the Stock
Rights and Restrictions Agreement, exchanged
228,512 shares of the Company’s Common Stock
which it held for 228,512 shares of the Company’s
Class B Common Stock.

On May 12, 1999, the stockholders of the Company
approved a restricted stock award for J. Frank Harri-
son, III, the Company’s Chairman of the Board of

. . .

Notes to Consolidated Financial Statements

Directors and Chief Executive Officer, consisting of
200,000 shares of the Company’s Class B Common
Stock. The award provides that the shares of restricted
stock vest at the rate of 20,000 shares per year over a
ten-year period. The vesting of each annual install-
ment is contingent upon the Company achieving at
least 80% of the Overall Goal Achievement Factor for
the six selected performance indicators used in de-
termining bonuses for all officers under the Compa-
ny’s Annual Bonus Plan. In 2001, the Company
achieved more than 80% of the Overall Goal
Achievement Factor which resulted in the vesting of
20,000 shares, effective as of January 1, 2002. Com-
pensation expense in 2001 related to the restricted

stock award was $1.4 million. In 2000, the Company
achieved more than 80% of the Overall Goal
Achievement Factor which resulted in the vesting of
20,000 shares, effective as of January 1, 2001. Com-
pensation expense in 2000 related to the restricted
stock award was $1.4 million. In 1999, the Company
did not achieve at least 80% of the Overall Goal
Achievement Factor and thus, the 20,000 shares of
restricted stock for 1999 did not vest.

Shares of Class B Common Stock are convertible on a
share-for-share basis into shares of Common Stock.
There is no trading market for the Company’s Class B
Common Stock.

14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BENEFIT PLANS

Retirement benefits under the Company’s principal
pension plan are based on the employee’s length of
service, average compensation over the five consec-
utive years which gives the highest average compensa-
tion and the average of the Social Security taxable
wage base during the 35-year period before a partic-
ipant reaches Social Security retirement age. Con-
tributions to the plan are based on the projected unit
credit actuarial funding method and are limited to the
amounts that are currently deductible for income tax
purposes.

The following tables set forth a reconciliation of the
beginning and ending balances of the projected benefit
obligation, a reconciliation of beginning and ending
balances of the fair value of plan assets and funded
status of the two Company-sponsored pension plans:

In Thousands

Projected benefit obligation at beginning of

year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Other

Fiscal Year

2001

2000

$ 86,353
3,290
6,578
8,894
(2,999)
211

$81,121
3,606
6,180
(1,732)
(2,855)
33

Projected benefit obligation at end of year

$102,327

$86,353

Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid

$ 87,723
(4,461)
309
(2,999)

$88,609
(1,100)
3,069
(2,855)

Fair value of plan assets at end of year

$ 80,572

$87,723

In Thousands

Dec. 30, 2001

Dec. 31, 2000

Funded status of the plans
Unrecognized prior service cost
Unrecognized net loss

Net amount recognized

Accrued benefit liability
Prepaid pension cost
Accumulated other comprehensive

income

Net amount recognized in the

balance sheet

$1,370
(324)
8,012

$9,058

$(21,755)
21
29,116

$ 7,382

$(10,334)

17,716

$ 7,382

$9,058

Net periodic pension cost for the Company-sponsored
pension plans included the following:

In Thousands

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized net actuarial loss

2001

$ 3,290
6,578
(7,763)
(135)
15

Fiscal Year
2000

$ 3,606
6,180
(7,963)
(133)

1999

$ 3,375
5,508
(6,659)
(135)
965

Net periodic pension cost

$ 1,985

$ 1,690

$ 3,054

The weighted average rate assumptions used in
determining net periodic pension cost and the
projected benefit obligation were:

Weighted average discount rate used in

determining the actuarial present value of
the projected benefit obligation

Weighted average expected long-term rate

2001

2000

7.75%

of return on plan assets

9.00%

Weighted average rate of compensation

increase

4.00%

. . .

Notes to Consolidated Financial Statements

In Thousands

Funded status of the plan
Unrecognized net loss
Unrecognized prior service cost
Contributions between measurement

date and fiscal year-end

Accrued liability

Dec. 30,
2001

Dec. 31,
2000

$(46,060) $(47,960)
21,414
(271)

20,559
(2,962)

738

864

$(27,725) $(25,953)

The components of net periodic postretirement benefit
cost were as follows:

In Thousands

Service cost
Interest cost
Amortization of unrecognized

transitional assets

Recognized net actuarial loss
Amortization of prior service cost

Net periodic postretirement benefit

2001

$ 331
3,253

(25)
1,106
(271)

Fiscal Year
2000

$ 852
2,816

1999

$ 954
2,608

(25)
493

(25)
745

cost

$4,394

$4,136

$4,282

The weighted average discount rate used to estimate
the postretirement benefit obligation was 7.75% as of
December 30, 2001 and December 31, 2000,
respectively.

The weighted average health care cost trend used in
measuring the postretirement benefit expense was
12% in 2001 graded down 1% per year to an ultimate
rate of 5%. A 1% increase or decrease in this annual
cost trend would have impacted the postretirement
benefit obligation and net periodic postretirement
benefit cost as follows:
In Thousands
Impact on

1% Decrease

1% Increase

Postretirement benefit obligation at

December 30, 2001

$9,719

$(8,104)

Net periodic postretirement benefit

cost in 2001

790

(658)

The Company also participates in various multi-
employer pension plans covering certain employees
who are part of collective bargaining agreements.
Total pension expense for multi-employer plans was
$1.2 million, $1.1 million and $1.2 million in 2001,
2000 and 1999, respectively.

The Company provides a 401(k) Savings Plan for sub-
stantially all of its employees who are not part of col-
lective bargaining agreements. Under provisions of the
Savings Plan, an employee is vested with respect to
Company contributions upon the completion of two
years of service with the Company. The total cost for
this benefit in 2001, 2000 and 1999 was $2.8 million,
$3.1 million and $3.2 million, respectively.

The Company currently provides employee leasing
and management services to Piedmont and SAC.
Piedmont and SAC employees participate in the
Company’s employee benefit plans.

The Company provides postretirement benefits for
substantially all of its employees. The Company
recognizes the cost of postretirement benefits, which
consist principally of medical benefits, during employ-
ees’ 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
Company amended certain provisions of this post-
retirement benefit plan in 2001. Under the amended
plan, qualifying active employees will be eligible for
coverage upon retirement until they become eligible
for Medicare (normally age 65), at which time cover-
age under the plan will cease.

The following tables set forth a reconciliation of the
beginning and ending balances of the benefit obliga-
tion, a reconciliation of the beginning and ending bal-
ances of fair value of plan assets and funded status of
the Company’s postretirement plan:

In Thousands

Benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Actuarial loss
Benefits paid
Change in plan provisions

Fiscal Year
2001

2000

$47,960
331
3,253
675
252
(3,423)
(2,988)

$36,501
852
2,816
607
10,251
(3,067)

Benefit obligation at end of year

$46,060

$47,960

Fair value of plan assets at beginning

of year

Employer contributions
Plan participants’ contributions
Benefits paid

$ — $ —
2,460
607
(3,067)

2,748
675
(3,423)

Fair value of plan assets at end of year

$ — $ —

. . .

Notes to Consolidated Financial Statements

15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

RELATED PARTY TRANSACTIONS

The Company’s business consists primarily of the pro-
duction, marketing and distribution of soft drink
products of The Coca-Cola Company, which is the
sole owner of the secret formulas under which the
primary components (either concentrates or syrups) of
its soft drink products are manufactured. Accordingly,
the Company purchases a substantial majority of its
requirements of concentrates and syrups from The
Coca-Cola Company in the ordinary course of its
business. The Company paid The Coca-Cola Com-
pany approximately $241 million, $237 million and
$258 million in 2001, 2000 and 1999, respectively,
for sweetener, syrup, concentrate and other miscella-
neous purchases. The Company engages in a variety of
marketing programs, local media advertising and sim-
ilar arrangements to promote the sale of products of
The Coca-Cola Company in bottling territories oper-
ated by the Company. Direct marketing funding and
other support provided to the Company by The
Coca-Cola Company was approximately $52 million,
$52 million and $70 million in 2001, 2000 and 1999,
respectively. The Company paid approximately
$27 million, $26 million and $29 million in 2001,
2000 and 1999, respectively, for local media and
marketing program expense pursuant to cooperative
advertising and cooperative marketing arrangements
with The Coca-Cola Company.

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
agreement were $21.0 million, $20.0 million and
$21.0 million in 2001, 2000 and 1999, respectively.
Purchases from CCE under this arrangement were
$21.0 million, $15.0 million and $15.3 million in
2001, 2000 and 1999, respectively. The Coca-Cola
Company has significant equity interests in the Com-
pany and CCE. As of December 30, 2001, CCE had a
7.95% equity interest in the Company’s total out-
standing Common Stock and Class B Common Stock.

The Company entered into an agreement for consult-
ing services with J. Frank Harrison, Jr. beginning in
1997. Payments in 2001, 2000 and 1999 related to the
consulting services agreement totaled $200,000 each
year.

On July 2, 1993, the Company and The Coca-Cola
Company formed Piedmont. Prior to January 2, 2002,
the Company and The Coca-Cola Company, through
their respective subsidiaries, each beneficially owned a
50% interest in Piedmont. On January 2, 2002, the
Company purchased an additional 4.651% interest in

Piedmont from The Coca-Cola Company, increasing
the Company’s ownership in Piedmont to 54.651%.
The Company provides a portion of the soft drink
products for Piedmont at cost and receives a fee for
managing the operations of Piedmont pursuant to a
management agreement. The Company sold product
at cost to Piedmont during 2001, 2000 and 1999
totaling $53.0 million, $53.5 million and $56.4 mil-
lion, respectively. The Company received $17.8 mil-
lion, $13.6 million and $14.2 million for management
services pursuant to its management agreement with
Piedmont for 2001, 2000 and 1999, respectively.

The Company also subleases various fleet and vending
equipment to Piedmont at cost. These sublease rentals
amounted to $11.2 million, $11.0 million and
$10.0 million in 2001, 2000 and 1999, respectively. In
addition, Piedmont subleases various fleet and vending
equipment to the Company at cost. These sublease
rentals amounted to $.2 million, each year for all
periods presented.

On November 30, 1992, the Company and the pre-
vious owner of the Company’s Snyder Production
Center in Charlotte, North Carolina, who was un-
affiliated with the Company, agreed to the early
termination of the Company’s lease. Harrison Limited
Partnership One (“HLP”) purchased the property con-
temporaneously with the termination of the lease, and
the Company leased its Snyder Production Center
from HLP pursuant to a ten-year lease that was to
expire on November 30, 2002. HLP’s sole general
partner is a corporation of which J. Frank Harrison,
Jr. is the sole shareholder. HLP’s sole limited partner
is a trust of which J. Frank Harrison, III, Chairman of
the Board of Directors and Chief Executive Officer of
the Company, and Reid M. Henson, Director of the
Company, are co-trustees. On August 9, 2000, a Spe-
cial Committee of the Board of Directors approved the
sale by the Company of property and improvements
adjacent to the Snyder Production Center to HLP and
a new lease of both the conveyed property and the
Snyder Production Center from HLP, which expires
on December 31, 2010. The sale closed on December
15, 2000 at a price of $10.5 million. The annual base
rent the Company is obligated to pay for its lease of
this property is subject to adjustment for an inflation
factor and for increases or decreases in interest rates,
using LIBOR as the measurement device. Rent expense
for these properties totaled $3.3 million, $2.9 million
and $2.6 million in 2001, 2000 and 1999,
respectively.

. . .

Notes to Consolidated Financial Statements

In May 2000, the Company entered into a five-year
consulting agreement with Reid M. Henson.
Mr. Henson served as a Vice Chairman of the Board
of Directors from 1983 to May 2000. Payments in
2001 and 2000 related to the consulting agreement
totaled $350,000 and $204,000, respectively.

On June 1, 1993, the Company entered into a lease
agreement with Beacon Investment Corporation re-
lated to the Company’s headquarters office building.
Beacon Investment Corporation’s sole shareholder is
J. Frank Harrison, III. On January 5, 1999, the Com-
pany entered into a new ten-year lease agreement with
Beacon Investment Corporation which includes the
Company’s headquarters office building and an ad-
jacent office facility. The annual base rent the Com-
pany is obligated to pay under this lease is subject to
adjustment for increases in the Consumer Price Index
and for increases or decreases in interest rates using
the Adjusted Eurodollar Rate as the measurement de-
vice. Rent expense under this lease totaled $3.3 mil-
lion, $3.6 million and $3.1 million in 2001, 2000 and
1999, respectively.

The Company is a shareholder in two cooperatives
from which it purchases substantially all its require-
ments for plastic bottles. Net purchases from these
entities were approximately $50 million, $49 million
and $45 million in 2001, 2000 and 1999, respectively.
In connection with its participation in one of these
cooperatives, the Company has guaranteed a portion
of the cooperative’s debt. Such guarantee amounted to
$20.4 million as of December 30, 2001.

The Company is a member of SAC, a manufacturing
cooperative. SAC sells finished products to the Com-

pany and Piedmont at cost. Purchases from SAC by
the Company and Piedmont for finished products
were $110 million, $110 million and $109 million in
2001, 2000 and 1999, respectively. The Company also
manages the operations of SAC pursuant to a
management agreement. Management fees from SAC
were $1.2 million, $1.0 million and $1.3 million in
2001, 2000 and 1999, respectively. Also, the
Company has guaranteed a portion of debt for SAC.
Such guarantee was $16.8 million as of December 30,
2001.

The Company purchases certain computerized data
management products and services related to in-
ventory control and marketing program support from
Data Ventures LLC (“Data Ventures”), a Delaware
limited liability company in which the Company holds
a 31.25% equity interest. J. Frank Harrison, III,
Chairman of the Board of Directors and Chief Execu-
tive Officer of the Company, holds a 32.5% equity
interest in Data Ventures. On September 30, 1997,
Data Ventures obtained a $1.9 million unsecured line
of credit from the Company. In December 1999, this
line of credit was increased to $3.0 million. In July
2001, this line of credit was increased to $4.5 million.
Data Ventures was indebted to the Company for
$3.9 million and $2.8 million as of December 30,
2001 and December 31, 2000, respectively. The Com-
pany recorded a loan loss provision of $1.6 million,
$.2 million and $.6 million in 2001, 2000 and 1999,
respectively, related to its outstanding loan to Data
Ventures. The Company purchased products and serv-
ices from Data Ventures for $435,000, $414,000 and
$154,000 in 2001, 2000 and 1999, respectively.

. . .

Notes to Consolidated Financial Statements

16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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 re-
structuring. The Company recorded a pre-tax re-

structuring charge of $2.2 million in the fourth quar-
ter of 1999, which was funded by cash flow from
operations. The restructuring has been completed and
substantially all amounts have been paid.

17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EARNINGS PER SHARE

The following table sets forth the computation of basic net income per share and diluted net income per share:

In Thousands (Except Per Share Data)

Numerator:

Fiscal Year
2000

1999

2001

Numerator for basic net income and diluted net income

$9,470

$6,294

$3,241

Denominator:

Denominator for basic net income per share—weighted

average common shares

Effect of dilutive securities—Stock options

Denominator for diluted net income per share—adjusted

weighted average common shares

Basic net income per share

Diluted net income per share

8,753

8,733

8,588

120

8,821

8,822

8,708

$ 1.08

$ 1.07

.72

.71

.38

.37

. . .

Notes to Consolidated Financial Statements

18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

RISKS AND UNCERTAINTIES

Approximately 90% of the Company’s sales are prod-
ucts of The Coca-Cola Company, which is the sole
supplier of the concentrate required to manufacture
these products. The remaining 10% of the Company’s
sales are products of various other beverage compa-
nies. The Company has bottling contracts under which
it has various requirements to meet. Failure to meet
the requirements of these bottling contracts could re-
sult in the loss of distribution rights for the respective
product.

The Company currently obtains all of its aluminum
cans from one domestic supplier. The Company cur-
rently obtains all of its PET bottles from two domestic
cooperatives. The inability of either of these aluminum
can or PET bottle suppliers to meet the Company’s
requirement for containers could result in short-term
shortages until alternative sources of supply could be
located. The Company attempts to mitigate these risks
by working closely with key suppliers and by purchas-
ing business interruption insurance where appropriate.

The Company makes significant expenditures each
year on fuel for product delivery. Material increases in
the cost of fuel may result in a reduction in earnings to
the extent the Company is not able to increase its sell-
ing prices to offset the increase in fuel costs.

Certain liabilities of the Company are subject to risk
of changes in both long-term and short-term interest
rates. These liabilities include floating rate debt, leases

with payments determined on floating interest rates,
postretirement benefit obligations and the Company’s
nonunion pension liability.

Less than 10% of the Company’s labor force is cur-
rently covered by collective bargaining agreements.
Two collective bargaining contracts covering approx-
imately 6% of the Company’s employees expire dur-
ing 2002.

In March 2000, at the end of a collective bargaining
agreement in Huntington, West Virginia, the Com-
pany and Teamsters Local Union 505 were unable to
reach agreement on wages and benefits. The union
elected to strike and other Teamster-represented sales
centers in West Virginia joined in a sympathy strike.
In August 2000, the Company and the respective local
unions settled all outstanding issues.

Material changes in the performance requirements or
decreases in levels of marketing funding historically
provided under marketing programs with The
Coca-Cola Company and other franchisers, or the
Company’s inability to meet the performance require-
ments for the anticipated levels of such marketing
funding support payments, would adversely affect fu-
ture earnings. The Coca-Cola Company is under no
obligation to continue marketing funding at past
levels.

Changes in the market value of assets in the Compa-
ny’s pension plan as well as material changes in inter-
est rates, may result in significant changes in net peri-
odic pension cost and Company contributions to the
plan.

Changes in the insurance markets may significantly
impact insurance premiums, or in certain situations,
may impact the Company’s ability to secure insurance
coverages.

. . .

Notes to Consolidated Financial Statements

19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Changes in current assets and current liabilities affecting cash, net of effects of acquisitions and divestitures, were
as follows:

In Thousands

Accounts receivable, trade, net

Accounts receivable from The Coca-Cola Company
Accounts receivable, other

Inventories
Prepaid expenses and other assets

Accounts payable, trade
Accounts payable to The Coca-Cola Company
Other accrued liabilities

Accrued compensation

Accrued interest payable

Due to Piedmont

2001

Fiscal Year
2000

1999

$ (1,313)

$ (2,294)

$ (1,017)

1,445
2,994

586
647

6,893
4,123
3,848

3,906

1,395

8,246

638
5,691

712
(757)

(249)
1,456
(22,145)

7,041

(6,347)

13,700

4,073
(5,419)

(2,487)
2,542

22
(2,848)
14,046

(3,079)

1,505

2,301

(Increase) decrease in current assets less current liabilities

$32,770

$ (2,554)

$ 9,639

Cash payments for interest and income taxes were as follows:

In Thousands

Interest

Income taxes (net of refunds)

2001

Fiscal Year
2000

1999

$42,084

$58,736

$48,221

2,673

2,830

1,939

. . .

Notes to Consolidated Financial Statements

20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Account-
ing Standards No. 141, “Business Combinations,”
(“SFAS No. 141”) and Statement of Financial
Accounting Standards No. 142, “Goodwill and Other
Intangible Assets,” (“SFAS No. 142”). These standards
require that all business combinations be accounted for
using the purchase method and that goodwill and in-
tangible assets with indefinite useful lives not be amor-
tized but instead be tested for impairment at least
annually. These standards provide guidelines for new
disclosure requirements and outline the criteria for ini-
tial recognition and measurement of intangibles,
assignment of assets and liabilities including goodwill
to reporting units and goodwill impairment testing.
The provisions of SFAS Nos. 141 and 142 apply to all
business combinations consummated after June 30,
2001. The provisions of SFAS No. 142 for existing
goodwill and other intangible assets are required to be
implemented effective the first day of fiscal year 2002.
The Company anticipates the adoption of SFAS No.
142 will reduce amortization expense in 2002 by ap-
proximately $12.6 million for the Company and by
approximately $8.4 million for Piedmont.

In October 2001, the FASB issued Statement of Finan-
cial Accounting Standards No. 144, “Accounting for
the Impairment or Disposal of Long-Lived Assets,”
(“SFAS No. 144”). SFAS No. 144 supersedes State-

ment of Financial Accounting Standards No. 121,
“Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of,” but it
retains many of the fundamental provisions of that
Statement. SFAS No. 144 also extends the reporting
requirements to report separately as discontinued
operations, components of an entity that have either
been disposed of or classified as held for sale. The
provisions of SFAS No. 144 are required to be
adopted at the beginning of fiscal year 2002. The
Company believes that such adoption will not have a
material effect on its financial statements.

EITF No. 01-09 “Accounting for Consideration Given
by a Vendor to a Customer or Reseller of Vendor’s
Products” is effective for the Company at the begin-
ning of fiscal year 2002 and will require certain ex-
penses currently classified as selling, general and
administrative expenses to be reclassified as de-
ductions from net sales. This change will occur begin-
ning in the first quarter of 2002 and all comparable
periods will be reclassified. The Company estimates
that approximately $28.6 million of net expense asso-
ciated with payments to customers in 2001 which
were previously classified as selling, general and
administrative expenses will be reclassified as a reduc-
tion in net sales in accordance with the EITF
consensus.

. . .

Notes to Consolidated Financial Statements

21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

QUARTERLY FINANCIAL DATA (UNAUDITED)

Set forth below are unaudited quarterly financial data for the fiscal years ended December 30, 2001 and
December 31, 2000.

In Thousands (Except Per Share Data)
Year Ended December 30, 2001

Net sales
Gross margin

Net income (loss)
Basic net income (loss) per share

Diluted net income (loss) per share

In Thousands (Except Per Share Data)
Year Ended December 31, 2000

Net sales

Gross margin

Net income (loss)

Basic net income (loss) per share

Diluted net income (loss) per share

Quarter

$230,057
106,467

$271,678
124,708

$266,604
121,108

$254,347
114,833

(1,782)
(.20)

(.20)

5,009
.57

.57

7,915
.90

.90

(1,672)
(.19)

(.19)

Quarter

$228,184

$270,933

$258,565

$237,452

105,941

127,931

121,006

110,015

(1,957)

6,317

6,398

(4,464)

(.22)

.72

.71

.73

(.51)

. . .

Selected Financial Data *
Selected Financial Data *

In Thousands (Except Per Share Data)

2001

2000***

Fiscal Year **
1999

1998

1997

Summary of Operations

Net sales

Cost of sales

Selling, general and administrative expenses

Depreciation expense

Amortization of goodwill and intangibles

Restructuring expense

Total costs and expenses

Income from operations
Interest expense

Other income (expense), net

Income before income taxes

Income taxes

Net income

Basic net income per share

Diluted net income per share

Cash dividends per share:

Common

Class B Common

Other Information

$1,022,686

$ 995,134

$ 972,551

$928,502

$802,141

555,570

323,668

66,134

15,296

530,241

323,223

64,751

14,712

543,113

291,907

60,567

13,734

2,232

534,919

276,245

37,076

12,972

452,893

239,901

33,783

12,221

960,668

932,927

911,553

861,212

738,798

62,018
44,322

(6,000)

11,696

2,226

9,470

1.08

1.07

1.00

62,207
53,346

974

9,835

3,541

6,294

.72

.71

1.00

60,998
50,581

(5,431)

4,986

1,745

3,241

.38

.37

1.00

67,290
39,947

(4,098)

23,245

8,367

63,343
37,479

(1,594)

24,270

9,004

$ 14,878

$ 15,266

1.78

1.75

1.00

1.82

1.79

1.00

Weighted average number of common

shares outstanding

Weighted average number of common

shares outstanding—assuming dilution

Year-End Financial Position

Total assets

8,753

8,733

8,588

8,365

8,407

8,821

8,822

8,708

8,495

8,509

$1,064,459

$1,062,097

$1,108,392

$822,702

$775,507

Portion of long-term debt payable within one year

Current portion of obligations under capital leases

56,708

1,489

9,904

3,325

28,635

4,483

30,115

12,000

Long-term debt

Obligations under capital leases

Stockholders’ equity

620,156

682,246

723,964

491,234

493,789

935

17,081

1,774

28,412

4,468

30,851

14,198

7,685

See Management’s Discussion and Analysis for additional information.

** All years presented are 52-week years except 1998 which is a 53-week year. See Note 3 and Note 15 to the

consolidated financial statements for additional information about Piedmont Coca-Cola Bottling Partnership.

*** In September 2000, the Company sold bottling territory which represented approximately 3% of the Company’s

annual sales volume.

. . .
. . .
. . .

49
49
49

Summary of Quarterly Stock Prices

Fiscal Year

2001
Sales Price

2000
Sales Price

High

Low

Period
End

High

Low

Period
End

$45.13

$36.50

$40.44

$53.00

$46.50

$52.94

41.00
42.24

40.95

38.06
36.17

36.09

39.35
37.75

38.41

52.75
47.75

45.00

41.38
36.50

32.05

45.50
41.94

37.88

The amount and frequency of future dividends will be
determined by the Company’s Board of Directors in
light of the earnings and financial condition of the
Company at such time, and no assurance can be given
that dividends will be declared in the future.

The number of stockholders of record of Common
Stock and Class B Common Stock, as of February 15,
2002, was 3,311 and 13, respectively.

First quarter

Second quarter
Third quarter

Fourth quarter

The Company’s Common Stock trades on the Nasdaq
National Market tier of The Nasdaq Stock Market®
under the symbol COKE. The table above sets forth
for the periods indicated the high, low and period end
reported sales prices per share of Common Stock.
There is no trading market for the Company’s Class B
Common Stock. Shares of Class B Common Stock are
convertible on a share-for-share basis into shares of
Common Stock.

The quarterly dividend rate of $.25 per share on both
Common Stock and Class B Common Stock shares
was maintained throughout 1999, 2000 and 2001.

. . .
. . .

50
50

Board of Directors

J. Frank Harrison, III
Chairman of the Board of Directors

and Chief Executive Officer

Coca-Cola Bottling Co. Consolidated

Sharon A. Decker
President
Doncaster, a division of the

Tanner Companies

J. Frank Harrison, Jr.
Chairman — Emeritus
Coca-Cola Bottling Co. Consolidated

William B. Elmore
President and Chief Operating Officer
Coca-Cola Bottling Co. Consolidated

James L. Moore, Jr.
Vice Chairman of the Board of Directors
Coca-Cola Bottling Co. Consolidated

John W. Murrey, III
Of Counsel
Witt, Gaither & Whitaker, P.C.
Attorneys at Law

H. W. McKay Belk
President, Merchandising and Marketing
Belk, Inc.

John M. Belk
Chairman and Chief Executive Officer
Belk, Inc. and Belk Stores Services, Inc.

Reid M. Henson
Retired Vice Chairman of the Board

of Directors

Coca-Cola Bottling Co. Consolidated

Carl Ware
Executive Vice President
Public Affairs and Administration
The Coca-Cola Company

Ned R. McWherter
Chairman of the Board of Directors
Volunteer Distributing Company, Inc. and

Eagle Distributors, Inc.

Former Governor of the State of Tennessee

Dennis A. Wicker
Partner
Helms Mulliss and Wicker, PLLC
Attorneys at Law
Former Lieutenant Governor of the State

of North Carolina

Executive Officers

J. Frank Harrison, III
Chairman of the Board of Directors and

Clifford M. Deal, III
Vice President, Treasurer

C. Ray Mayhall, Jr.
Senior Vice President, Sales

Chief Executive Officer

William B. Elmore
President and Chief Operating Officer

Norman C. George
Senior Vice President, Chief Marketing

Lauren C. Steele
Vice President, Corporate Affairs

and Customer Officer

James L. Moore, Jr.
Vice Chairman of the Board of Directors

Ronald J. Hammond
Vice President, Value Chain

Robert D. Pettus, Jr.
Executive Vice President and
Assistant to the Chairman

David V. Singer
Executive Vice President and
Chief Financial Officer

Kevin A. Henry
Vice President, Human Resources

Umesh M. Kasbekar
Vice President, Planning and

Administration

Steven D. Westphal
Vice President, Controller

Jolanta T. Zwirek
Vice President, Chief Information Officer

. . .
. . .
. . .

51
51
51

Corporate Information

Transfer Agent and Dividend
Disbursing Agent
The Company’s transfer agent is responsible for
stockholder records, issuance of stock certificates and
distribution of dividend payments and IRS Form
1099s. The transfer agent also administers plans for
dividend reinvestment and direct deposit. Stockholder
requests and inquiries concerning these matters are
most efficiently answered by corresponding directly
with First Union National Bank, Attention: Corporate
Trust Client Services NC-1153, 1525 West W.T.
Harris Blvd. 3C3, Charlotte, North Carolina 28288-
1153. Communication may also be made by calling
Toll Free (800) 829-8432, Local (704) 590-7375 or
Fax (704) 590-7598.

Stock Listing
Nasdaq National Market System
Nasdaq Symbol—COKE

Corporate Office
The corporate office is located at 4100 Coca-Cola
Plaza, Charlotte, North Carolina 28211. The mailing
address is Coca-Cola Bottling Co. Consolidated,
P.O. Box 31487, Charlotte, North Carolina 28231.

Form 10-K
A copy of the Company’s annual report to the Securities
and Exchange Commission (Form 10-K) is available to
stockholders without charge upon written request to
David V. Singer, Executive Vice President and Chief
Financial Officer, Coca-Cola Bottling Co. Consolidated,
P.O. Box 31487, Charlotte, North Carolina 28231.

Annual Meeting
The Annual Meeting of Stockholders of Coca-Cola Bot-
tling Co. Consolidated will be held at Snyder Pro-
duction Center, 4901 Chesapeake Drive, Charlotte,
North Carolina 28216, at 10:00 a.m., on May 8, 2002.

. . .

B O A R D O F D I R E C T O R S

○

C O C A - C O L A B O T T L I N G C O. C O N S O L I D A T E D

J. Frank Harrison, III, Chairman of the Board, CEO, CCBCC; (from front right, moving right to left

around table); J. Frank Harrison, Jr., Chairman Emeritus of the Board, CCBCC; Dennis A. Wicker,

Partner, Helms Mulliss & Wicker, PLLC and former Lieutenant Governor of the state of North Carolina;

Carl Ware, Executive Vice President, Public Affairs and Administration, The Coca-Cola Company; Ned

R. McWherter, Chairman, Board of Directors, Volunteer Distributing Company, Inc. and former

Governor of the state of Tennessee; H.W. McKay Belk, President, Merchandising and Marketing, Belk,

Inc.; John W. Murrey, III, Of counsel, Witt, Gaither & Whitaker, P.C.; James L. Moore, Jr., Vice

Chairman, Board of Directors, CCBCC; Sharon A. Decker, President, Doncaster, a division of the Tanner

Companies; John M. Belk, Chairman and CEO, Belk, Inc.; William B. Elmore, President and COO,

CCBCC; and Reid M. Henson, Past President, JTL Corporation; Past Vice Chairman of the Board of

Directors, CCBCC.

Produced by Crown Communications • Art Direction by Johnston Design
Photography by Donna Bise • Printing by Classic Graphics

4100 Coca-Cola Plaza • Charlotte, North Carolina 28211

Mailing Address: Post Office Box 31487 • Charlotte, NC 28231 • 704.557.4400