Coca-Cola Consolidated Annual Report 2003

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FY2003 Annual Report · Coca-Cola Consolidated

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Annual Report
2003

(cid:1)

oca-Cola 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 dis-

tribution 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 consump-

tion rates in the world and manages bottling territories with a

consumer base of 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.

F i n a n c i a l S u m m a r y

In Thousands (Except Per Share Data)

2003

2002

2001

Fiscal Year*

Net sales

Gross margin

$1,210,765

$1,198,335

$958,859

585,317

579,198

444,501

Income before income taxes

38,060

38,070

11,696

Income taxes

Net income

Basic net income per share

Diluted net income per share

7,357

30,703

$3.40

15,247

22,823

$2.58

$2.56

2,226

9,470

$1.08

$1.07

* On January 2, 2002, the Company purchased an additional interest in Piedmont Coca-Cola
Bottling Partnership (“Piedmont”) from The Coca-Cola Company, increasing the Company’s
ownership in Piedmont to more than 50 percent. Due to the increase in ownership, the results
of operations, financial position and cash flows of Piedmont have been consolidated with
those of the Company beginning in the first quarter of 2002. The Company’s investment in
Piedmont had been accounted for using the equity method for 2001 and prior years.

L e t t e r t o S h a r e h o l d e r s

Innovative employees bring to life sales-boosting
ideas such as this attention-grabbing 360-degree
vending area in Opry Mills Mall
in Nashville.

(cid:2)

espite facing significant obstacles in 2003, Coca-Cola Bottling Co. Consolidated continued to make

steady progress toward our long-term goals. While sales for the year were soft, in large measure due to a

struggling economy and unprecedented cool and wet weather, the Company produced solid cash flow and finished

the year with a strong fourth quarter. Highlights of 2003 include the introduction of several new innovative

packages, recognition for our longstanding commitment to quality and the redefining of the Company’s

Mission Statement.

The Company had net income of $30.7 million or $3.40 per share in 2003 compared to

$22.8 million or $2.58 per share in 2002. Our earnings for both 2003 and 2002

include certain significant items, including favorable adjustments for income tax

expense of approximately $8.6 million in 2003 and favorable adjustments

related to the termination of certain executive benefit plans in 2003 of

$.9 million and in 2002 of $2.3 million, net of tax in both years.

Unseasonably cool and wet weather had a significant impact on

sales during the spring and summer, our key selling seasons.

Sales were also hurt in our important at-work channel due to

a struggling economy in the Southeast and the loss of large

numbers of manufacturing jobs. In addition, during 2003,

several key customers opted for less aggressive promotion-

al activities with soft drinks, which led to lower sales.

However, sales during the fourth quarter rebounded

strongly as both the weather and the economy

improved, up more than 5 percent for the period.

Results for the fourth quarter were significant because

with more normal weather, we were able to reverse the

spring and summer sales slump while increasing net

revenue per case.

There were fewer product introductions in 2003 than in

the previous year. While the introduction of Sprite Remix

resulted in jumpstarting the lemon-lime category and led to an

increase in overall Sprite sales, last year we didn’t have some of the

blockbuster product launches — such as Vanilla Coke, diet Vanilla

Coke, Minute Maid Lemonade and Fanta flavors — that we had in 2002.

Your Company is gaining a reputation for innovation in the Coca-Cola

system. The Fridge Pack™, the innovative new packaging for 12-pack cans, is

quickly becoming the industry standard. Coca-Cola Consolidated first introduced this

package in late 2001 and followed up in 2003 with the 12-ounce PET bottle Dasani Fridge

Pack, which has helped fuel significant growth in the important water category.

L e t t e r t o S h a r e h o l d e r s

We continued to innovate during 2003, introducing in several markets noteworthy new packages, including the

390-milliliter bottle for convenience store sales, the double Fridge Pack for cans and the 12-ounce PET bottle Fridge

Pack for core brand carbonated soft drinks. Customers and consumers are receiving these new packages very favor-

ably, and we expect even more success as we expand these innovations throughout Coca-Cola Consolidated selling

territories during 2004.

Our ability to provide new products and packages for our customers is part of our strong relationship with The

Coca-Cola Company. Product innovation from The Coca-Cola Company continues to provide our customers with

new and exciting beverage choices. We are introducing diet Coke with Lime early in 2004 and anticipate other prod-

uct introductions later in the year. The introduction of diet Coke with Lime is just the beginning of a stronger

emphasis on the fast growing diet segment of the soft drink industry, a category where the

Coca-Cola portfolio of diet brands is the clear industry leader.

Coca-Cola Consolidated’s commitment to quality was rec-

ognized again in 2003 when we were presented with the

President’s Award for Quality Excellence for our work in

2002. This is the third year in a row a CCBCC sales

center has received this prestigious award — and the

first time in history that one company’s operations

have won first, second and third places for quality

excellence among all Coca-Cola bottlers. In addi-

tion, Coca-Cola Consolidated was named

Distributor of the Year by Beverage Industry maga-

zine and Vendor of the Quarter by Sam’s

Warehouse Club, a division of Wal-Mart. These

awards were given in recognition of outstanding per-

formance in our manufacturing, selling and delivery func-

tions and reflect our ongoing commitment to providing

the highest quality products to our customers.

During 2003, the Company acquired an additional

interest in Piedmont Coca-Cola Bottling Partnership from

The Coca-Cola Company, increasing our ownership to

slightly more than 77 percent. Despite modest growth in

overall revenues over the past several years, the Company

has strengthened its financial position through a reduction

in debt while at the same time acquiring an additional

interest in Piedmont Coca-Cola Bottling Partnership.

Innovative new packaging, including smaller packages such as the
12-ounce PET bottle Fridge Pack and the 390-milliliter PET bottle, keeps
Coca-Cola Consolidated one step ahead of our competitors.

A Clear and Ambitious Mission
“To make, sell and deliver soft drinks better than anyone else.”

We would like to take this opportunity to share with you some of the

changes to the Company’s Mission Statement. The mission is ambitious

and straightforward: “To make, sell and deliver soft

drinks better than anyone else.” We believe that

who we are, what we do and how we do it are

determined by our values and that our val-

ues should honor God. We believe that by

adhering to these values, among them

accountability, honesty, integrity,

respectfulness and supportiveness, we

will succeed.

In our Mission Statement we

have set forth specific goals for the

Company:

• To be a great company with

great jobs and great rewards.

• To be a company known for

building great relationships.

• To be leaders in the Coca-Cola system.

• To generate long-term growth in shareholder value.

Our mission and our values guide the actions we take each day. A com-

pany can only be great if it has great people, and we believe our culture and rewards system

create a work environment where we can attract, motivate and retain the highest caliber employees. We

believe that building strong relationships with our own employees, customers, The Coca-Cola Company and others

with whom we do business makes us a better company.

As we look forward, we are very optimistic. We are establishing a reputation for innovation within the Coca-Cola

system, leading the industry in quality, providing great jobs for more than 5,500 outstanding employees and growing

long-term shareholder value. We are excited about the momentum we have built over the last several years and look

forward to success in 2004 and beyond.

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

William B. Elmore
President and Chief Operating Officer

O u r B u s i n e s s

(cid:3)

hile Coca-Cola Bottling Co. Consolidated faced numerous obstacles in 2003, the year ended

on a decidedly optimistic note with strong sales and improved pricing in the fourth quarter. Sales

volume was affected by unusually bad weather in 2003, with the spring and summer the coolest and

wettest on record for the Southeast. That, coupled with a struggling economy that saw job losses soar

throughout our selling territories, led to an environment not conducive to sales growth.

The ‘New News’ is Still Packaging.

In 2003, The Coca-Cola Company continued to introduce new products, including Sprite Remix,

but the ‘new news’ continued to be packaging. Last year, Coca-Cola Consolidated introduced several

new innovative packages in parts of our selling territories, including the 390-

milliliter plastic recyclable bottle, the double Fridge Pack in 12-ounce cans

and the 12-ounce PET bottle Fridge Pack for carbonated soft drinks.

The 390-milliliter (13.2-ounce) bottle is part of our strategy for con-

venience stores and gives the purchaser a resealable package alternative to

the 20-ounce bottle. This sleek contour bottle meets the consumer’s desire

for a distinctive Coca-Cola package. This package is being offered in

the convenience store channel as an alternative to cans with the

added benefits of resealability and better portability, while also

offering us an opportunity to improve our profit margins.

Your Company continues to lead the industry in package

innovation by being the first to offer the double Fridge

Pack and the Fridge Pack for 12-ounce plastic bottles.

The double Fridge Pack is being manufactured by robotic

machinery designed by the Company. It is a consumer-

friendly package that easily breaks apart into two

refrigerator-ready Fridge Packs.

Innovative marketing efforts – as illustrated by this Speed Street
event in Charlotte with Dale Jarrett that leveraged our powerful
partnership with NASCAR – generate excitement about our
products and encourage customer loyalty.

The new 12-

ounce PET bot-

tle Fridge Pack

for carbonated

soft drinks

gives consumers a

resealable alternative

to the aluminum can. This

distinctive smaller contour bottle is gen-

erating significant consumer approval, especially from those looking for smaller packages.

From Conventional to Predictive

The Company is continuing to modify its distribution system. Over the last two years we have converted

a large percentage of our sales in small grocery stores, convenience stores and drug stores from the conven-

tional route sales model to a pre-sell or predictive selling method. Under the conventional system, a route

salesperson was responsible for determining a customer’s needs at each stop and filling that order from

inventory on the truck. But, with the pre-sell method, sales personnel either visit or call a customer to deter-

mine exactly what the customer needs, so that each order can be custom-built and loaded on the delivery

truck. This predictive sales method has been widely used by other bottlers for years, but given the rural

nature of much of our selling territories we deemed it inappropriate for our business in the past. However, as

our product line expands and the technology to predict sales patterns improves, we believe this will be a

more effective method for our business. Over the last several years we have added significant numbers of

new product and package combina-

tions. The predictive nature of pre-sell

has enabled us to add these new prod-

ucts while also reducing sales center

inventories.

We have also made our sales and

distribution centers more efficient by

consolidating operations. In the last

three years, we have reduced the

number of distribution centers from

71 to 56, creating a more streamlined

and efficient distribution network.

Innovative brands such as Sprite
Remix, which has been one of our most
successful product launches this year,
help drive our success and illustrate the
importance of our strong partnership
with The Coca-Cola Company.

Key Relationships

Our most important rela-

tionship is with our employees.

Our newly articulated Mission

Statement sets the ambitious

goal to make, sell and deliver

soft drinks better than

anyone else. We could not

attempt to achieve that

goal without the best

employees in the business.

The Company’s relation-

ship with The Coca-Cola

Company and other Coca-Cola

bottlers is critical to our success.

Those relationships are strong,

with a renewed sense of partner-

ship and cooperation. The Coca-

Cola Company has embraced

innovation in products and packag-

ing and is taking significant steps to

help its bottler system meet new con-

sumer demands.

Over the last several years we have

been working more closely with other

Coca-Cola bottlers to coordinate produc-

tion, purchasing and customer manage-

ment. Last year was the first full year for

O u r B u s i n e s s

the Coca-Cola Bottlers’ Sales and Services Company (CCBSS),

a purchasing cooperative that should enable us to achieve signifi-

cant savings in the procurement of packaging and raw materials.

Challenges and Opportunities

Several years ago we reached some key conclusions that

we believe are fundamental to our future. These include:

that dramatic productivity gains were imperative, that cap-

ital spending levels needed to be significantly reduced and

made more strategic, that we needed to decrease leverage

to improve the financial health of the Company and,

because we are in the demand fulfillment business, we

must focus on making, selling and delivering soft drinks.

Through process change and streamlining our opera-

tions, we improved our supply chain productivity by

25 percent. After a period of accelerated growth and accom-

panying high levels of capital spending, volume growth in

the soft drink industry has been relatively flat for the last

three years. At the same time, we have added more than

200 product and package combinations, requiring us to

make significant productivity gains. By consolidating

sales centers and adjusting our selling functions, we

have been able to introduce these large numbers of

packages and products while reducing sales center

In 2003, for the third year in a row, we were
presented with The Coca-Cola Company’s
President’s Award for Quality Excellence in
recognition of our commitment to quality
during the previous year.

O u r B u s i n e s s

inventories. Our capital expenditures have been reduced by approximately 50 percent from two

years ago and we have repaid more than $200 million in debt over the last four years. These

strategic steps have prepared us to meet the challenges of an evolving refreshment beverage

environment.

While carbonated soft drinks still comprise the largest segment of our business, water,

juices, sports drinks and other noncarbonated refreshment beverages are becoming

increasingly important categories. Dasani continues to be an important brand for us

in the growing water category. However, it is not growing at the skyrocketing levels

of the previous two to three years. With strong support

from The Coca-Cola Company, POWERade is

leading the sports drink category in growth.

Minute Maid lemonade and juice drinks

continue to show solid growth rates.

The soft drink industry has

been unfairly criticized by activist

groups and some in the media as

a cause of the increasing problem

of obesity, with our presence in

schools receiving the most atten-

tion. Obesity is indeed an issue,

but a complex one with many

causes, including overeating,

increased television viewing,

lack of physical activity and a gen-

erally sedentary lifestyle. Singling out

any one food or beverage for blame is sim-

plistic and defies common sense. To address the

school issue, Coca-Cola Consolidated and the

One of our latest packaging
innovations is the Double Fridge
Pack, just one of the new packages
developed since we introduced the
hugely successful Fridge Pack.

entire Coca-Cola system have embraced a set of model guidelines to ensure that schools provide a wide

variety of refreshment beverages, including juices and water, in compliance with all state, federal and local

laws and regulations.

With this national focus on diet and exercise, we are very optimistic about the diet category. Without

question, the Coca-Cola brand portfolio in the diet segment is vastly superior to all competitors. Diet Coke

had solid growth in 2003, and we believe the addition of diet Coke with Lime to the already strong brand

line-up of diet Cherry Coke, diet Vanilla Coke, Tab, Fresca and diet Sprite will produce solid sales growth

in 2004 and beyond.

O u r M i s s i o n

To make, sell and deliver soft drinks
To make, sell and deliver soft drinks
better than anyone else.
better than anyone else.

Our Values honor God:

• Accountability
• Consistency
• Courage and Conviction
• Discipline
• Honesty and Integrity

• Morality
• Optimism
• Respectfulness
• Supportiveness
• Trustworthiness

Our Actions reflect our Values and support our Mission:

We will …
• Be open and honest in everything we do.
• Do what we say we are going to do.
• Be committed to teamwork.
• Be focused on quality, service and excellence in all we do.
• Have clear objectives, measure results and celebrate success.
• Ensure that fellow employees always receive support, encouragement and respect.
• Be committed to continual development of ourselves and others.
• Compete vigorously and fairly in the marketplace.
• Not tolerate politically motivated behavior.
• Make decisions based on facts in the long-term best interest of the business.
• Strive for win/win solutions in all our dealings with others.
• Have a bias for action.
• Relentlessly focus on timely execution.
• Exhibit a positive attitude.

Our Goals:

We will strive to…
• Be a great company with great jobs and great rewards.
• Be a company known for building great relationships.
• Be leaders in the Coca-Cola system.
• Generate long-term growth in shareholder value.

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Table of Contents

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

Report of Management

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

Report of Independent Auditors

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

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

Consolidated Balance Sheets

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

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

Consolidated Statements of Changes in Stockholders’

Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements

. . . . . . . . .

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

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

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

Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . .

Inside Cover

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Management’s Discussion and Analysis of Financial Condition
and Results of Operations

The following Management’s Discussion and
Analysis of Financial Condition and Results of
Operations (“M,D&A”) should be read in
conjunction with the Company’s financial
statements and the accompanying footnotes.
M,D&A includes the following sections:

(cid:127) Our Business—a general description of the

Company’s business.

(cid:127) Overview—a summary of key information
concerning the financial results for 2003
and changes from 2002.

(cid:127) Discussion of Critical Accounting

Policies—a discussion of accounting policies
that are most important to the portrayal of
the Company’s financial condition and
results of operations and require critical
judgments and estimates.

(cid:127) Results of Operations—an analysis of the
Company’s results of operations for the
three years presented in the financial
statements.

(cid:127) Financial Condition—an analysis of the

Company’s financial condition as of the end
of the last two years presented in the
financial statements.

(cid:127) Liquidity and Capital Resources—an

analysis of capital resources, sources and
uses of cash, investing and financing
activities, off-balance sheet arrangements,
contractual obligations and interest rate
hedging.

(cid:127) Cautionary Information Regarding

Forward-Looking Statements—cautionary
information about forward-looking
statements and a description of certain risks

and uncertainties that could cause the
Company’s actual results to differ materially
from the Company’s historical results or the
Company’s current expectations about future
periods.

Our Business

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,
operating in eleven states primarily in the Southeast.
The Company also distributes several other beverage
brands. The Company’s product offerings include
carbonated soft drinks, bottled water, teas, juices,
isotonics and energy drinks. The Company had net
sales of over $1.2 billion in 2003.

Overview

The following overview provides a summary of key
information concerning the Company’s financial
results for fiscal year 2003 and changes from fiscal
year 2002.

Net Income

The Company reported net income of $30.7 million
or $3.40 per basic share in 2003 compared with net
income of $22.8 million or $2.58 per basic share in
2002. Lower interest expense and minority interest
expense in 2003 offset a $9.9 million decline in
income from operations, resulting in income before
income taxes in 2003 of $38.1 million, unchanged
from 2002. Significant favorable income tax expense

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

adjustments in 2003 led to an effective tax rate of
19% in 2003 versus 40% in 2002.

(cid:1) Certain large customers promoting the
Company’s products less aggressively;

Significant Items Which Impacted Net Income

2003

Net income in 2003 was favorably impacted by
$.9 million as a result of changes in certain benefit
programs. The Company also recorded several
adjustments, primarily resulting from a reduction in
the valuation allowance for the Company’s deferred
tax assets as a result of the completion of a state tax
audit and a reorganization of the Company’s
subsidiaries, which reduced income tax expense by
$8.6 million.

2002

Net income in 2002 was favorably impacted by the
reversal of an accrual of $2.3 million related to a
retirement benefit payable to J. Frank Harrison, Jr.,
the former Chairman of the Board of Directors of
the Company, who passed away in November 2002.
As a partial offset, net income was reduced by
approximately $1.3 million due to the termination
of two interest rate hedging agreements in the fourth
quarter.

Operations

Net sales and gross margin increased by
approximately 1% in 2003 compared to the prior
year. Bottle/can volume decreased by approximately
2% while average revenue per case increased by
2.1%. The decline in bottle/can volume resulted
primarily from:

(cid:1) The introduction of fewer new brands and

packages in 2003 than in 2002;

(cid:1) Difficult economic conditions in certain

portions of the Company’s territories; and

(cid:1) Unusually cool and wet weather during key
holiday periods and summer months.

The soft drink industry has seen a rapid increase in
the number of brand and package combinations
over the past few years as a result of changing
consumer tastes combined with slowing industry-
wide volume growth rates.

Average revenue per case increased in 2003 as the
Company focused on maintaining gross margins
while offsetting increases in raw material costs. The
Company anticipates further selling price increases
in 2004 in order to offset a significant projected
increase in the cost of aluminum cans and to
maintain its gross margins.

Selling, general and administrative (“S,G&A”)
expenses increased only 3.8% in 2003 compared to
the prior year despite significant increases in pension
expense, fuel costs and property and casualty
insurance costs. Over the last two years, the
Company has converted the majority of its
distribution system from a conventional sales
method to a pre-sell method in which sales
personnel either visit or call a customer to determine
the customer’s requirements for their order. This
pre-sell method has enabled the Company to add a
significant number of new product and package
combinations and provides the capacity to add
additional product offerings in the future. In
addition, the Company closed four sales distribution
centers in 2003 as part of a multi-year effort to
reduce overall costs and improve productivity. The
combination of fewer sales distribution centers and

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

the use of the pre-sell sales method will enable the
Company to make its distribution network more
efficient over time.

Income from operations in 2003 declined by
$9.9 million or 10.6% compared to 2002 as modest
increases in net sales and gross margin were not
sufficient to offset higher S,G&A expenses.

Interest expense decreased by $7.2 million or 14.7%
in 2003 primarily due to lower average interest rates.
Minority interest expense declined by $2.7 million
in 2003 due to the purchase by the Company of an
additional interest in Piedmont Coca-Cola Bottling
Partnership (“Piedmont”) in March 2003.

Financial Condition

Over the past several years, the Company has been
focused on decreasing financial leverage primarily by
reducing its outstanding debt and capital lease
obligations. During 2003, debt and capital lease
obligations declined by $5.5 million despite the
purchase of an additional interest in Piedmont in
March 2003 for $53.5 million.

Another key performance indicator the Company
uses to monitor its financial health is the ratio of
income from operations divided by interest expense,
which improved from 1.90 in 2002 to 1.99 in 2003.
The improvement in this ratio resulted primarily
from lower debt balances and a reduction in interest
rates. The Company anticipates further reduction in
debt and capital lease obligations in 2004.

Basis of Presentation

The statements of operations, statements of cash
flows and the consolidated balance sheets for the
years ending December 28, 2003 and December 29,
2002 include the consolidated operations of the

Company and its majority owned subsidiaries
including Piedmont. Minority interest consists of
The Coca-Cola Company’s interest in Piedmont,
which was 22.674% for the last three quarters of
2003, 45.349% for the first quarter of 2003 and all
of 2002 and 50% in 2001 and prior years. Due to
the increase in the Company’s ownership in
Piedmont resulting from the additional interest
purchased on January 2, 2002, the results of
operations, financial position and cash flows of
Piedmont have been consolidated with those of the
Company beginning in the first quarter of 2002.
The Company’s investment in Piedmont had been
accounted for using the equity method for 2001 and
prior years. Generally accepted accounting principles
require that results for 2001 be presented on an
historical basis with the Company’s investment in
Piedmont accounted for under the equity method of
accounting. Management’s discussion and analysis
for 2002 compared to 2001 compares actual 2002
results to pro forma 2001 results assuming that
Piedmont had been consolidated in 2001.

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. The
cooperative consists solely of Coca-Cola bottlers.
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 a ten-year
management agreement. This management
agreement expires in May 2004. The Company
anticipates negotiating a new agreement with SAC
on terms substantially comparable to the current
arrangement.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

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 portions of North Carolina and South
Carolina. The Company provides a portion of the
soft drink products to Piedmont and receives a fee
for managing the business of Piedmont pursuant to
a management agreement. The Company and The
Coca-Cola Company, through their respective
subsidiaries, each beneficially owned a 50% interest
in Piedmont at December 30, 2001. As discussed
below, the Company has increased its ownership
interest in Piedmont since December 30, 2001 to
77.326% and The Coca-Cola Company’s ownership
in Piedmont has been reduced to 22.674%.

Acquisitions

On January 2, 2002, the Company purchased an
additional 4.651% interest in Piedmont from The
Coca-Cola Company for $10.0 million, increasing
the Company’s ownership in Piedmont to 54.651%.
On March 28, 2003, the Company purchased an
additional 22.675% interest in Piedmont from
The Coca-Cola Company for $53.5 million. This
transaction in 2003 increased the Company’s
ownership interest in Piedmont to 77.326%. The
Company recorded $19.7 million of franchise rights
and $5.2 million related to customer relationships in
connection with these acquisitions of additional
interests in Piedmont.

As of December 28, 2003, The Coca-Cola
Company owned 27.4% of the Company’s
outstanding Common Stock and Class B Common
Stock on a combined basis and had a 22.674%
interest in Piedmont.

New Accounting Pronouncements

In November 2002, the Emerging Issues Task Force
(“EITF”) reached a consensus on Issue No. 02-16,
“Accounting by a Customer (Including a Reseller)
for Certain Consideration Received from a Vendor”
(“EITF 02-16”), addressing the recognition and
income statement classification of various
considerations given by a vendor to a customer.
Among its requirements, the consensus requires that
certain cash consideration received by a customer
from a vendor is presumed to be a reduction of the
price of the vendor’s products, and therefore should
be characterized as a reduction of cost of sales when
recognized in the customer’s income statement,
unless certain criteria are met. EITF 02-16 was
effective for the first quarter of 2003. Previously, the
Company classified marketing funding support
received from The Coca-Cola Company and other
beverage companies as an adjustment to net sales. In
accordance with EITF 02-16, the Company began
classifying marketing funding support as a reduction
of cost of sales in the first quarter 2003. The
application of EITF 02-16 did not have a significant
impact on results of operations. Prior year amounts
have been reclassified to conform to the current year
presentation.

In January 2003, the Financial Accounting
Standards Board (“FASB”) issued Financial
Interpretation No. 46 (revised December 2003),
“Consolidation of Variable Interest Entities”
(“FIN 46”). This interpretation addresses
consolidation by business enterprises of variable
interest entities with certain defined characteristics.
Application of FIN 46 is required in the Company’s
financial statements for interests in variable interest
entities that are considered to be special-purpose
entities for the year ended December 28, 2003. The

COCA-COLA BOTTLING C

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CHMFBU-2KP-PF03

8.2.15

CHMmoosk0cm

17-Mar-2004 13:08 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7P6ZJM=C7Š

1DMR3JX7P6ZJM=C

CLN

g25u99-6.0

46546 TX 18

PMT

12*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Company has determined that it does not have any
arrangements or relationships with special-purpose
entities. Application of FIN 46 for all other types of
variable interest entities is required for the Company
effective March 28, 2004. The Company anticipates
that application of FIN 46 will not have a significant
impact on its financial statements at this time.

In December 2003, the FASB issued Statement
No. 132 (revised 2003), “Employers’ Disclosures
About Pensions and Other Postretirement Benefits,”
that requires additional financial statement
disclosures for defined benefit plans. This revised
statement replaces existing FASB disclosure
requirements for defined benefit plans. The revised
standard requires more disclosure about plan assets,
benefit obligations, cash flows, benefit costs and
other relevant information. The Company has
adopted these disclosure provisions beginning with
its 2003 year-end financial reporting.

Discussion of Critical Accounting Policies

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.

The Company has not made changes in any critical
accounting policies during 2003. The Company
changed its estimate relating to the realizability of
certain income tax assets during the second quarter
and third quarter of 2003 as discussed below. Any
significant changes in critical accounting policies
and estimates are discussed with the Audit
Committee of the Board of Directors of the
Company during the quarter in which a change is
contemplated and prior to making any change.

Allowance for Doubtful Accounts

The Company evaluates the collectibility of its trade
accounts receivable based on a number of factors. In
circumstances where the Company becomes 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 outstanding.

The Company’s review of potential bad debts
considers the specific industry a particular customer
operates in, such as supermarket retailers,
convenience stores and mass merchandise retailers,
and the general economic conditions that currently
exist in that specific industry. The Company then
considers the effects of concentration of credit risk
in a specific industry and for specific customers
within that industry.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF03

8.2.15

CHMmoosk0cm

17-Mar-2004 13:08 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7P6=5=LChŠ

1DMR3JX7P6=5=LC

CLN

g01x31-11.0

46546 TX 19

PMT

10*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

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 current estimates. Factors such as
changes in the planned use of manufacturing
equipment, vending equipment, transportation
equipment, warehouse facilities or software could
also result in shortened useful lives. In those cases
where the Company determines that the useful life
of property, plant and equipment should be
shortened, the Company would depreciate the net
book value in excess of the estimated salvage value
over its revised remaining useful life.

Franchise Rights

The Company considers franchise rights with The
Coca-Cola Company and other franchisers to be
indefinite lived because the agreements are perpetual
or, in situations where agreements are not perpetual,
the Company anticipates the agreements will
continue to be renewed upon expiration. The cost of
renewals is minimal and the Company has not had
any renewals denied. The Company considers
franchise rights as indefinite lived intangible assets

under Statement of Financial Accounting Standards
No. 142, “Goodwill and Other Intangible Assets,”
(“SFAS No. 142”) and therefore, does not amortize
the value of such assets. Instead, franchise rights are
tested at least annually for impairment.

Impairment Testing of Franchise Rights and
Goodwill

The only intangible assets the Company classifies as
indefinite lived are franchise rights and goodwill.
SFAS No. 142 requires testing of intangible assets
with indefinite lives and goodwill for impairment at
least annually. The Company completed its annual
impairment test for 2003 in the third quarter.

For the annual impairment analysis of franchise
rights, the fair value for the Company’s acquired
franchise rights is estimated using a multi-period
excess earnings approach. This approach involves
projecting future earnings, discounting those
estimated earnings using an appropriate discount
rate and subtracting a contributory charge for net
working capital, property, plant and equipment,
assembled workforce and customer relationships to
arrive at excess earnings attributable to franchise
rights. The present value of the excess earnings
attributable to franchise rights is their estimated fair
value and is compared to the carrying value on an
aggregate basis. Based on this analysis, there was no
impairment of our recorded franchise rights in 2003.
The projection of earnings includes a number of
assumptions such as projected net sales, cost of sales,
operating expenses and income taxes. Changes in the
assumptions required to estimate the present value
of the excess earnings attributable to franchise rights
could materially impact the fair value estimate.

For the annual impairment analysis of goodwill, the
Company develops an estimated fair value for the

COCA-COLA BOTTLING C

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CHMFBU-2KP-PF03

8.2.15

CHMmoosk0cm

17-Mar-2004 13:08 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7P6=H4KCbŠ

1DMR3JX7P6=H4KC

CLN

g25u99-6.0

46546 TX 20

PMT

11*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

enterprise using an average of three different
approaches:

(cid:1) Market value, using the Company’s stock
price plus outstanding debt and minority
interest;

(cid:1) Discounted cash flow analysis; and

(cid:1) Multiple of earnings before interest, taxes,
depreciation and amortization based upon
relevant industry data.

The estimated fair value of the enterprise is then
compared to the Company’s carrying amount
including goodwill. If the estimated fair value of the
Company exceeds its carrying amount, goodwill will
be considered not impaired and the second step of
the SFAS No. 142 impairment test will not be
necessary. If the carrying amount including goodwill
exceeds its estimated fair value, the second step of
the impairment test will be performed to measure
the amount of the impairment, if any. Based on this
analysis, there was no impairment of our recorded
goodwill in 2003. The discounted cash flow analysis
includes a number of assumptions such as projected
sales volume, net sales, cost of sales and operating
expenses. Changes in these assumptions could
materially impact the fair value estimate of the
enterprise.

Deferred Tax Assets

that it would not be able to realize all or part of its
net deferred tax assets in the future, an adjustment
to the valuation allowance would be charged to
income in the period in which such determination
was made. A reduction in the valuation allowance
and corresponding adjustment to income may be
required if the likelihood of realizing existing
deferred tax assets were to increase. The Company
regularly reviews the realizability of deferred tax
assets and initiates a review when significant changes
in the Company’s business occur.

The Company’s valuation allowance of
$16.8 million at December 28, 2003 relates
principally to state net operating loss carryforwards.
During the second and third quarters of 2003, the
Company adjusted its valuation allowance related to
certain deferred tax assets. During the second
quarter of 2003, the Company reduced its valuation
allowance upon the completion of a state income tax
audit which resulted in a favorable adjustment to
income tax expense of $3.1 million. During the
third quarter of 2003, in conjunction with a
reorganization of certain of the Company’s
subsidiaries and corresponding assessment of the
Company’s ability to utilize certain state net
operating loss carryforwards, the Company reduced
its valuation allowance related to such carryforwards.
This reduction in the valuation allowance reduced
income tax expense by $6.5 million in the third
quarter.

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 strategies in assessing the need for the
valuation allowance, should the Company determine

Pension and Postretirement Benefits Obligations

The Company sponsors pension plans covering
substantially all full-time nonunion employees who
meet eligibility requirements. Several statistical and
other factors, which attempt to anticipate future
events, are used in calculating the expense and

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:20 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7P9PDSVC}Š

1DMR3JX7P9PDSVC

CLN

g01x31-11.0

46546 TX 21

PMT

14*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

liability related to the plans. These factors include
assumptions about the discount rate, expected
return on plan assets, employee turnover, age at
retirement 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
projected benefit obligation. The actuarial
assumptions used by the Company may differ
materially from actual results due to changing
market and economic conditions, 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 net periodic
pension cost recorded by the Company in future
periods. In 2003, the discount rate used in
determining the actuarial present value of the
projected benefit obligation for the Company’s
nonunion pension plans decreased to 6.25% from
7.00% in 2002 due to declining interest rates for
long-term corporate bonds, which serve as the
benchmark for determination of the discount rate.
The discount rate assumption is generally the
estimate which can have the most significant impact
on net periodic pension cost and the projected
benefit obligation for these nonunion pension plans.
The Company determines an appropriate discount
rate annually based on the annual yield on long-term
corporate bonds as of the measurement date.

A .25% increase or decrease in the discount rate
assumption at the beginning of 2003 would have
impacted the projected benefit obligation and net
periodic pension cost as follows:

In Thousands

Impact on

Projected benefit
obligation at
December 28, 2003
Net periodic
pension cost in 2003

.25%
Increase

.25%
Decrease

$(6,371)

$6,797

(930)

989

The weighted average expected long-term rate of
return of plan assets was reduced from 9.0% for
2002 to 8.0% for determination of 2003 pension
expense. This rate reflects an estimate of long-term
future returns for the pension plan assets. This
estimate is primarily a function of the asset classes
(equities versus fixed income) in which the pension
plan assets are invested and the analysis of past
performance of these asset classes over a long period
of time. This analysis includes expected long-term
inflation and the risk premiums associated with
equity and fixed income investments.

The Company sponsors a postretirement health care
plan for employees meeting specified qualifying
criteria. Several statistical and other factors, which
attempt to anticipate future events, are used in
calculating the net periodic postretirement benefit
cost and postretirement benefit obligation for this
plan. These factors include assumptions about the
discount rate and the expected growth rate for the
cost of health care benefits. In addition, the
Company’s actuarial consultants also use subjective
factors such as withdrawal and mortality rates to
estimate the projected liability under this plan. The
actuarial assumptions used by the Company may
differ materially from actual results due to changing
market and economic conditions, higher or lower
withdrawal rates or longer or shorter life spans of

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:20 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7P9X8J2CBŠ

1DMR3JX7P9X8J2C

CLN

g25u99-6.0

46546 TX 22

PMT

15*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

participants. In 2003, the discount rate used in the
actuarial estimates for the Company’s postretirement
health care plan decreased to 6.00% from 6.75% in
2002 due to declining interest rates for long-term
corporate bonds.

The discount rate assumption, the annual health
care cost trend and the ultimate trend rate for health
care costs are key estimates which can have a
significant impact on the net periodic postretirement
benefit cost and postretirement obligation in future
periods. The Company annually determines the
health care cost trend based on recent actual medical
trend experience and projected experience for the
following year.

A .25% increase or decrease in the discount rate
assumption at the beginning of 2003 would have
impacted the projected benefit obligation and net
periodic postretirement benefit cost as follows:

.25%
Increase

.25%
Decrease

In Thousands

Impact on

Postretirement
benefit obligation at
December 28, 2003
Net periodic
postretirement
benefit cost in 2003

In Thousands

Impact on

Postretirement
benefit obligation at
December 28, 2003
Net periodic
postretirement
benefit cost in 2003

1%
Increase

1%
Decrease

$5,857

$(5,122)

523

(456)

On December 8, 2003, the Medicare Prescription
Drug, Improvement and Modernization Act of 2003
(the “Act”) was enacted. The Act introduces a
prescription drug benefit under Medicare as well as a
federal subsidy to sponsors of retiree health care
benefit plans. The postretirement benefit obligation
as of December 28, 2003 and the net periodic
postretirement benefit cost in 2003 do not reflect
the effects of the Act since enactment occurred after
the Company’s postretirement plan measurement
date of September 30, 2003. The Company has not
determined what, if any, impact the Act will have on
the Company’s costs for future postretirement
benefits.

$(1,246)

$1,306

Results of Operations

2003 COMPARED TO 2002

(113)

119

Net Income

A 1% increase or decrease in the annual health care
cost trend for 2003 would have impacted the
postretirement benefit obligation and net periodic
postretirement benefit cost as follows:

The Company reported net income of $30.7 million
or $3.40 per basic share for fiscal year 2003
compared with net income of $22.8 million or
$2.58 per basic share for fiscal year 2002. Significant
items which impacted net income during 2003 and
2002 are discussed in the “Overview” section.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:20 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PB5BFFCwŠ

1DMR3JX7PB5BFFC

CLN

g01x31-11.0

46546 TX 23

PMT

14*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Net Sales and Gross Margin

The Company’s net sales increased approximately
1% in 2003 compared to 2002. This increase in net
sales reflected growth in average revenue per case
and contract sales, which more than offset an
approximate 2% decline in bottle/can volume. For
2003, average revenue per case increased by 2.1%
compared to 2002. Some of the factors contributing
to the decline in bottle/can volume in 2003 are
discussed below:

(cid:1) While 2002 saw the introduction of

numerous new brands and packages, there
were not as many new product
introductions during 2003. Brand and
package introductions during 2003
included Sprite Remix, 12-ounce PET
bottles in Fridge Pack™ for future
consumption channels and a 390 ml PET
bottle package for immediate consumption
channels. New brands and packages in 2002
included Vanilla Coke, diet Vanilla Coke,
diet Cherry Coke, Fanta flavors, the Dasani
Fridge Pack™, Minute Maid Lemonade,
Minute Maid Pink Lemonade and the full
rollout of Fridge Pack™ cans in all of the
Company’s territories. New brands and
packages usually stimulate consumer
demand resulting in increased sales. The
short-term increase in sales from new
brands and packages generally exceeds
sustained growth as evidenced during 2003.

(cid:1) Some of the Company’s largest customers
are chain grocery stores. During 2003,
certain chain grocery store customers were
less aggressive in their promotion of the
Company’s products resulting in volume
declines for those customers. The Company

believes that some of the volume declines in
these chains are offset by higher volume in
other retail outlets that more aggressively
promoted the Company’s products.

(cid:1) General economic conditions also impacted
the Company’s results during 2003. Higher
unemployment levels, particularly in certain
areas of North Carolina, negatively
impacted the Company’s sales channel that
includes manufacturing plants, where
volume for the year declined.

(cid:1) Operating results for 2003 were also

adversely affected by unusually cool and
wet weather throughout much of the
Company’s territory during the key
Memorial Day holiday period, the early
weeks of June and most of July and August.

(cid:1) Noncarbonated beverages, which include

bottled water, juices and isotonics, grew at a
much slower rate in 2003 than in the past
several years and comprised 10.5% of the
Company’s total sales volume in 2003
compared to 10.0% in 2002.

Contract sales to other Coca-Cola bottlers, which
totaled $69.2 million in 2003, increased by 13%
during 2003 compared to 2002. Sales to other
bottlers allowed the Company to achieve a higher
utilization of its production facilities, thus
improving overall efficiency of operations.

As previously discussed, the Company adopted the
provisions of EITF 02-16 at the beginning of 2003.
As a result, the Company has recorded marketing
funding support from The Coca-Cola Company and
other beverage companies as a reduction in cost of
sales. Prior year marketing funding support was
reclassified from net sales to cost of sales to conform
to the current year presentation.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:21 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PB7=WTCVŠ

1DMR3JX7PB7=WTC

CLN

g25u99-6.0

46546 TX 24

PMT

11*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The Company’s products are sold and distributed
directly by its employees to retail stores and other
outlets. During 2003 and 2002, approximately 70%
and 69%, respectively, of the Company’s physical
case volume was sold for future consumption. The
remaining 30% and 31% in 2003 and 2002,
respectively, of the Company’s volume was sold for
immediate consumption through various cold drink
outlets. The Company’s largest customer (Wal-Mart
Stores, Inc.) accounted for approximately 11% of
the Company’s total sales volume in 2003.

Gross margin increased by 1% in 2003 compared to
2002 as the increase in average revenue per case
more than offset both a 2% decline in bottle/can
volume and a modest 1% increase in cost of sales on
a per unit basis. Gross margin on contract sales to
other Coca-Cola bottlers was flat compared to the
prior year. The Company’s gross margin percentage
of 48.3% in 2003 was unchanged compared to
2002. The Company’s gross margins may not be
comparable to other companies, since some entities
include all costs related to their distribution network
in cost of sales and the Company excludes a portion
of these costs from gross margin, including them
instead in S,G&A expenses.

Cost of Sales and Operating Expenses

Cost of sales on a per unit basis increased 1% for
2003 compared to 2002. The increase in cost of
sales on a per unit basis resulted primarily from
modest increases in raw material costs. Cost of sales
includes the following: raw material costs,
manufacturing labor, manufacturing overhead,
inbound freight charges related to raw materials,
receiving costs, inspection costs, manufacturing
warehousing costs and freight charges related to the
movement of finished goods from manufacturing
locations to sales distribution centers.

The Company anticipates that the cost of aluminum
cans will increase significantly in 2004 as compared
to prior years. As a result, the Company is focused
on managing its selling prices in 2004 in order to
offset higher raw material costs and to maintain its
gross margins.

During 2003, the Company and all other Coca-Cola
bottlers in the U.S. formed Coca-Cola Bottling Sales
and Services Company (“CCBSS”) for the purpose
of facilitating various procurement functions and
distributing certain specified beverage products of
The Coca-Cola Company. CCBSS is responsible for
negotiating contracts for most of the significant raw
materials (other than concentrates and syrups)
purchased by the Company. The Company
anticipates that in future years CCBSS will increase
purchasing efficiency for Coca-Cola bottlers and
help reduce future increases in cost of sales.

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
2004, it is not obligated to do so under the
Company’s Bottle Contracts. Significant decreases
in marketing funding support from The Coca-Cola
Company or other beverage companies could

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:21 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PB8L5RCtŠ

1DMR3JX7PB8L5RC

CLN

g01x31-11.0

46546 TX 25

PMT

15*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

adversely impact operating results of the Company.
Total marketing funding support from The
Coca-Cola Company and other beverage companies,
which includes direct payments to the Company,
payments to customers for marketing programs and
the Strategic Growth Initiative (“SGI”) payments,
was $60.8 million in 2003 versus $64.1 million in
2002 and was recorded as a reduction in cost of
sales. In 2003 and 2002, The Coca-Cola Company
offered through SGI an opportunity for the
Company to receive marketing funding support,
subject to the Company’s achievement of certain
volume performance requirements. The Company
recorded $3.2 million and $2.3 million as a
reduction in cost of sales related to SGI during 2003
and 2002, respectively. In 2002, the Company could
have received a total of $6.3 million in cash in
incremental marketing funding support under SGI
as a result of its volume performance. Instead, the
Company requested The Coca-Cola Company
reinvest $4.0 million of this funding in additional
local media and the balance of the funding, or
$2.3 million, was received by the Company in cash.

S,G&A expenses for 2003 increased by 3.8%
compared to the prior year. The increase was
attributable primarily to increases in employee
compensation and employee benefit plans (including
costs related to the Company’s pension plans),
property and casualty insurance costs and fuel costs.
Based on the performance of the Company’s
pension plan investments prior to 2003 and a lower
discount rate, pension expense increased from $6.2
million in 2002 to $9.7 million in 2003. Based
upon interest rates at the measurement date on
November 30, 2003, the Company anticipates that
pension expense will further increase by
approximately $1 million in 2004. Property and
casualty insurance costs increased by $3.0 million
or 20.7% during 2003 compared to 2002.

Management believes that while its property and
casualty insurance costs will increase in 2004, it will
be at a lower rate than the Company experienced in
2002 and 2003. Fuel costs increased by $1.5 million
or 16.1% during 2003 over 2002 partially due to an
increase in vehicles related to a change in the
Company’s distribution system and also due to
higher rates for fuel. Costs related to the restricted
stock award for the Company’s Chairman of the
Board of Directors were $1.8 million in 2003
compared to $2.3 million in 2002. Changes in
certain benefit programs for officers of the Company
reduced expenses by $1.4 million in 2003.

The Company closed four sales distribution centers
during 2003 in addition to the eight centers closed
in 2002. The Company believes that these sales
distribution center closings along with changes in its
methods of distribution will reduce overall costs and
improve productivity in the future. The Company
will continue to evaluate its distribution system in
an effort to improve the process of distributing
products to customers. Shipping and handling costs
related to the movement of finished goods from
manufacturing locations to sales distribution centers
are included in cost of sales. Shipping and handling
costs related to the movement of finished goods
from sales distribution centers to customers
locations are included in S,G&A expenses and
totaled $168.1 million and $165.8 million in 2003
and 2002, respectively. Customers do not pay the
Company separately for shipping and handling
costs.

The S,G&A expense line item includes the
following: sales management labor costs, costs of
distribution from sales distribution centers to
customer locations, sales distribution center

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:22 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PB9QTMClŠ

1DMR3JX7PB9QTMC

CLN

g25u99-6.0

46546 TX 26

PMT

13*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

warehouse costs, point-of-sale expenses, advertising
and marketing expenses, vending equipment repair
costs, and administrative support labor and
operating costs such as treasury, legal, information
services, accounting, internal audit and executive
management costs.

Depreciation Expense

Depreciation expense increased $.4 million or less
than 1% for 2003 compared to 2002. Capital
expenditures during 2003 amounted to
$57.8 million compared to $57.3 million in 2002.
The Company is in the process of implementing an
upgrade of its Enterprise Resource Planning (ERP)
computer software systems, which is anticipated to
take several years to complete. In 2003, the
Company capitalized $6.5 million related to the new
ERP software. The Company anticipates using a
portion of the new ERP software beginning in 2004.

Income from Operations

Income from operations for 2003 declined by $9.9
million from 2002. The decrease in income from
operations was primarily attributable to higher
operating expenses and relatively flat net sales.

Interest Expense

Interest expense for 2003 of $41.9 million decreased
by $7.2 million or 14.7% from $49.1 million in
2002. The decrease in interest expense was primarily
attributable to lower average interest rates on the
Company’s outstanding debt. Interest expense
during the fourth quarter of 2002 included
$2.2 million due to the termination of interest rate
swap agreements related to the Company’s long-
term debt that was retired early. The Company’s
overall weighted average interest rate decreased from
an average of 5.6% during 2002 to an average of
4.9% during 2003.

Debt and capital lease obligations decreased from
$853.8 million at December 29, 2002 to $848.3
million at December 28, 2003. Debt and capital
lease obligations at December 28, 2003 and
December 29, 2002 included $45.6 million and
$46.0 million, respectively, attributable to capital
leases. Cash flow was sufficient to allow the
Company to purchase the additional interest in
Piedmont for $53.5 million and repay $5.5 million
in debt and capital lease obligations.

Minority Interest

The Company recorded minority interest expense of
$3.3 million in 2003 compared to $6.0 million in
2002 related to the portion of Piedmont owned by
The Coca-Cola Company. The decreased amount in
2003 was primarily due to the purchase by the
Company of an additional interest in Piedmont as
previously discussed.

Income Taxes

The Company’s effective income tax rates for 2003
and 2002 were approximately 19% and 40%,
respectively.

During 2003, the Company recorded several
adjustments to income tax expense. During the
second quarter of 2003, the Company reduced its
valuation allowance upon the completion of a state
income tax audit which resulted in a favorable
adjustment to income tax expense of $3.1 million.
During the third quarter of 2003, in conjunction
with a reorganization of certain of the Company’s
subsidiaries and a corresponding assessment of the
Company’s ability to utilize certain state net
operating loss carryforwards, the Company reduced
its valuation allowance related to such carryforwards.
This reduction in the valuation allowance reduced

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:23 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PBBH6WC7Š

1DMR3JX7PBBH6WC

CLN

g01x31-11.0

46546 TX 27

PMT

12*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

income tax expense by $6.5 million in the third
quarter. An income tax benefit of approximately
$1.6 million was recorded in the fourth quarter
related to the return of certain insurance premiums
primarily in conjunction with the elimination of a
split-dollar life insurance program for officers of the
Company. As a partial offset to these favorable
adjustments, the Company decided to terminate
certain Company-owned life insurance policies and
recorded additional income tax expense of
$2.6 million in the third and fourth quarters of
2003 related to the taxable value of these policies.

2002 COMPARED TO PRO FORMA 2001

Net Income

The Company reported net income of $22.8 million
or $2.58 per basic share for fiscal year 2002
compared with net income of $9.0 million or $1.03
per basic share for fiscal year 2001. Net income for
2002 was favorably impacted by a $21.0 million pre-
tax reduction in amortization expense associated
with the adoption of SFAS No. 142 and the reversal
of an accrual of $2.3 million, net of tax, related to a
retirement benefit payable to J. Frank Harrison, Jr.,
the former Chairman of the Company, who passed
away in November 2002. Net income for 2002 was
reduced during the fourth quarter by a $1.3 million
expense, net of tax, related to the termination of two
interest rate hedging agreements. Net income for
2001 was favorably impacted by an income tax
benefit of $2.9 million, which resulted from the
settlement of certain income tax matters with the
Internal Revenue Service.

Net Sales and Gross Margin

The Company’s net sales for 2002 were $1.2 billion,
an increase of 4.3% compared to 2001. The increase
in net sales was due to an increase in physical case

volume of 3.4%, higher sales to other Coca-Cola
bottlers and an increase of slightly less than 1% in
average revenue per case compared to 2001. Sales
volume of carbonated beverages increased by 2.1%
for 2002 over 2001. In addition, the Company
continued to experience strong volume growth for
its bottled water, Dasani. New packaging, including
the Dasani Fridge Pack™, and increased availability
in retail outlets contributed to an increase in volume
of more than 40% for Dasani during 2002. The
Company introduced Vanilla Coke during the
second quarter of 2002 and introduced diet Vanilla
Coke and diet Cherry Coke during the fourth
quarter of 2002. The introduction of these
additional options in the cola category led to an
increase in total cola volume of approximately 1% in
2002 compared to approximately 3% in 2001. Fanta
flavors and Minute Maid Lemonade, introduced in
2002, favorably impacted volume growth. The
Company introduced Minute Maid Pink Lemonade
during the third quarter of 2002. POWERade
continued to show solid growth with volume
increasing by approximately 22% over 2001.
Noncarbonated beverages, which include bottled
water, juices and isotonics, comprised approximately
10% of the Company’s total sales volume in 2002
compared to approximately 8% in 2001.

Gross margin increased by 5.7% for 2002. Gross
margin as a percentage of net sales increased from
47.7% in 2001 to 48.3% in 2002. The
improvement in gross margin as a percentage of net
sales reflected modest increases in selling prices in
future consumption packages offset by planned
decreases in selling prices in immediate consumption
packages in certain channels. These changes in
selling prices resulted in growth in average revenue
per case of slightly less than 1% for the year and
have led to favorable shifts in channel mix, which

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:43 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PD7MDJCuŠ

1DMR3JX7PD7MDJC

CLN

g25u99-6.0

46546 TX 28

PMT

15*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

combined with lower cost of sales on a per unit
basis, have driven the increase in gross margin.

During 2002 and 2001, approximately 69% of the
Company’s physical case volume was sold for future
consumption. The remaining 31% of the
Company’s volume was sold for immediate
consumption in 2002 and 2001.

Cost of Sales and Operating Expenses

Cost of sales on a per unit basis decreased by less
than 1% in 2002 compared to 2001. Packaging
costs decreased slightly compared to the prior year.
Increases in other raw material costs have been offset
largely by productivity improvements.

Total marketing funding support from The
Coca-Cola Company and other beverage companies,
which included direct payments to the Company
(including SGI discussed below) combined with
payments to customers for marketing programs were
$64.1 million in 2002 versus $65.3 million in 2001.
In 2002, The Coca-Cola Company offered through
its SGI an opportunity for the Company to receive
additional marketing funding support subject to
meeting certain volume performance requirements.
Under this program, the Company could have
received a total of $6.3 million in cash in
incremental marketing funding support in 2002 as a
result of its volume performance. Instead, the
Company requested The Coca-Cola Company
reinvest $4.0 million of this funding in additional
local media and the balance of the funding, or
$2.3 million, was received by the Company in cash.

S,G&A expenses for 2002 increased 6.4% from
2001. The increase in S,G&A expenses was
primarily attributable to increases in employee
compensation and employee benefit plans (including
costs related to the Company’s pension plans),

increases in insurance costs, increases in marketing
expenses and certain expenses related to the closing
of sales distribution facilities. Property and casualty
insurance costs increased by $4.0 million or 37%
during 2002. Costs related to the restricted stock
award for the Company’s Chairman of the Board of
Directors increased from $1.4 million in 2001 to
$2.3 million in 2002, due to the increased market
price of the Company’s stock during 2002. Shipping
and handling costs related to the movement of
finished goods from sales distribution centers to
customer locations are included in S,G&A expenses
and totaled $165.8 million and $150.7 million in
2002 and 2001, respectively. The Company reversed
an accrual of $3.8 million related to a retirement
benefit payable to J. Frank Harrison, Jr., the former
Chairman of the Company, who passed away in
November 2002.

Based on the performance of the overall equity
markets in 2001 and a lower discount rate, pension
expense increased from $2.0 million in 2001 to
$6.2 million in 2002. Claim costs related to the
Company’s health care insurance program increased
by $3.1 million or 14.1% during 2002.

Depreciation Expense

Depreciation expense in 2002 increased $4.5 million
or 6.3% from 2001. The increase was due to the
amortization of a capital lease for the Company’s
Charlotte, North Carolina production/distribution
center and the purchase during the second quarter of
2001 of approximately $49 million of cold drink
equipment that had previously been leased. The
production/distribution center lease obligation was
capitalized at the end of the first quarter of 2002 as
the Company received a renewal option to extend
the term of the lease, which it expects to exercise.
The production/distribution lease was previously

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:43 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PD915CCÄŠ

1DMR3JX7PD915CC

CLN

g01x31-11.0

46546 TX 29

PMT

14*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

accounted for as an operating lease. Capital
expenditures during 2002 amounted to
$57.3 million compared to $101.6 million in 2001.
Capital expenditures during 2001 included the
purchase of approximately $49 million of leased
equipment as previously discussed.

Provision for Impairment of Property, Plant and
Equipment

The Company recorded a provision for impairment
of certain real estate of $.9 million in the fourth
quarter of 2001. The impairment charge reflected an
adjustment to estimated net realizable value of real
estate which was no longer required for the
Company’s ongoing operations.

Interest Expense

Interest expense for 2002 of $49.1 million decreased
by $8.7 million or 15.0% from 2001. The decrease
in interest expense was primarily attributable to
lower average interest rates on the Company’s
outstanding debt and lower debt balances. Interest
expense during the fourth quarter of 2002 included
$2.2 million due to the termination of interest rate
hedging agreements related to the Company’s long-
term debt that was retired early. The Company’s
overall weighted average interest rate decreased from
an average of 6.5% during 2001 to an average of
5.6% during 2002. Debt and capital lease
obligations decreased from $878.4 million at
December 30, 2001 to $853.8 million at December
29, 2002. Debt and capital lease obligations at
December 29, 2002 included $41.6 million
attributable to a lease that was capitalized during the
first quarter of 2002.

Minority Interest

The Company recorded minority interest expense of
$6.0 million in 2002 compared to $.4 million in
2001 related to the portion of Piedmont owned by
The Coca-Cola Company. The increased amount in
2002 was due to improved operating results at
Piedmont. Piedmont’s operating results were
favorably impacted by the reduction in amortization
expense associated with the adoption of SFAS No.
142. Amortization expense decreased at Piedmont
by $8.4 million in 2002 compared to 2001.

Income Taxes

The effective tax rate for federal and state income
taxes was approximately 40% in 2002 versus
approximately 18% in 2001. The Company’s
income tax rate for 2001 was favorably impacted by
the $2.9 million settlement of certain income tax
issues with the Internal Revenue Service.

Financial Condition

Total assets decreased slightly from $1.354 billion
at December 29, 2002 to $1.350 billion at
December 28, 2003.

Net working capital, defined as current assets less
current liabilities, increased by $40.2 million to
$66.4 million at December 28, 2003 from
$26.2 million at December 29, 2002.

The most significant change in net working capital
resulted from the reclassification of cash surrender
value on certain Company-owned life insurance
policies of $27.8 million from other noncurrent
assets resulting from the Company’s decision to
terminate certain life insurance policies. The
Company anticipates it will receive the proceeds
from the surrender of these policies during 2004.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:44 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PDB5T7CbŠ

1DMR3JX7PDB5T7C

CLN

g25u99-6.0

46546 TX 30

PMT

14*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The proceeds will be used to fund contributions to
the Company’s nonunion pension plans and repay
debt. Other changes in net working capital include a
decline in accounts receivable, other of $6.3 million,
an increase in accounts receivable from The
Coca-Cola Company of $5.1 million and a decrease
in accounts payable to The Coca-Cola Company of
$9.7 million. The decline in accounts receivable,
other was primarily due to the receipt of life
insurance proceeds of $6.8 million. The life
insurance proceeds related to certain policies
covering J. Frank Harrison, Jr., the former
Chairman of the Board of Directors of the
Company, who passed away in November 2002.
The receipt of these proceeds had no impact on the
results of operations for 2003. The increase in
accounts receivable from The Coca-Cola Company
was due to the timing of customer marketing
reimbursements to the Company. The decrease in
accounts payable to The Coca-Cola Company was
due to the timing of payments by the Company.

Debt and capital lease obligations decreased from
$853.8 million at December 29, 2002 to
$848.3 million at December 28, 2003. The balance
at December 28, 2003 includes $53.5 million of
debt incurred to purchase an additional interest in
Piedmont.

The Company had recorded a minimum pension
liability adjustment of $20.6 million, net of tax, as
of December 29, 2002 to reflect the difference
between the fair market value of the Company’s
nonunion pension plan assets and the accumulated
benefit obligation of the plans. The Company
recorded an additional minimum pension liability
adjustment of $3.2 million, net of tax, as of
December 28, 2003. Contributions to the
Company’s pension plans were $12.4 million in

2003 and $13.5 million in 2002. The Company
anticipates the contribution to its nonunion plans in
2004 will approximate $23 million to $24 million.
The majority of the funds for the contributions in
2004 will be provided from the proceeds related to
the termination and surrender of certain Company-
owned life insurance policies. Due to the significant
contributions made to the pension plans during
2002 and 2003 and the projected contribution to be
made in 2004, the Company anticipates that
contributions in the three years after 2004 will be
lower than those during 2002 through 2004. The
expectation of lower contributions in future years is
contingent on certain plan variables including actual
investment returns and the plan discount rate.
Unfavorable trends in plan investment returns or the
discount rate could result in higher than expected
contributions to the pension plans in years after
2004.

The Company’s pension expense and pension
liability are affected by certain valuation assumptions
including the expected rate of return on plan assets,
the discount rate used to measure plan liabilities,
participant service and wage rates, mortality and
actual investment returns. Management of the
Company, in conjunction with its consultants,
evaluates all of these variables on an annual basis.
Based upon its review of overall financial market
conditions and anticipated future returns on pension
plan investments, the Company reduced its expected
long-term rate of return on plan assets from 9% in
2002 to 8% in 2003. The discount rate used to
determine pension plan liabilities is a market based
rate at the measurement date for the pension plan
which is November 30 of each year. The discount
rates as of November 30, 2003 and 2002 were
6.25% and 7.0%, respectively. The reductions in the
expected rate of return on plan investments and the

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:45 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PDC=SQC)Š

1DMR3JX7PDC=SQC

CLN

g01x31-11.0

46546 TX 31

PMT

15*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

lower discount rate combined with lower than
expected returns on plan investments during 2002
were responsible for the significant increase in
pension expense as previously discussed.

Liquidity and Capital Resources

Capital Resources

Sources of capital for the Company include cash
flows from operating activities, bank borrowings,
issuance of public or private debt and the issuance of
equity securities. Management believes that the
Company, through these sources, has sufficient
financial resources available to maintain its current
operations and provide for its current capital
expenditure and working capital requirements,
scheduled debt payments, interest and income tax
payments 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.

The Company primarily uses cash flow from
operations and available debt facilities to meet its
cash requirements. As of December 28, 2003, the
Company had $125 million available under its
revolving credit facility to meet its cash
requirements. The Company anticipates that cash
provided by operating activities and its existing
credit facilities will be sufficient to meet all of its
cash requirements, including debt maturities,
through 2008.

The Company has obtained the majority of its long-
term financing from public markets. As of
December 28, 2003, $700 million of the Company’s
total outstanding balance of debt and capital lease
obligations of $848.3 million was financed through
publicly offered debentures. The remainder of the
Company’s debt is provided by several financial
institutions. The Company mitigates its financing
risk by using multiple financial institutions and
carefully evaluating the credit worthiness of those
institutions. The Company enters into credit
arrangements only with institutions with investment
grade credit ratings. The Company monitors
counterparty credit ratings on an ongoing basis. The
Company’s interest rate derivative contracts are with
several different financial institutions to minimize
the concentration of credit risk. The Company has
master agreements with the counterparties to its
derivative financial agreements that provide for net
settlement of derivative transactions.

Cash Sources and Uses

The primary sources of cash for the Company are
cash provided by operating activities and proceeds
from the issuance of long-term debt. The primary
uses of cash are for capital expenditures, the
repayment of long-term debt maturities, acquisitions
and dividends.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:46 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PDGZD1CcŠ

1DMR3JX7PDGZD1C

CLN

g25u99-6.0

46546 TX 32

PMT

11*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

A summary of activity for 2003 and 2002 follows:

In Millions

Cash sources
Cash provided by

operating activities

Proceeds from the

issuance of long-term
debt
Other

Total cash sources

Cash uses
Capital expenditures
Repayment of debt

maturities and capital
lease obligations

Acquisitions (net of cash

acquired)

Dividends
Other

2003

2002

$121.3

$132.0

100.0
6.0

$227.3

150.0
15.9

$297.9

$ 57.8

$ 57.3

106.4

215.9

52.6
9.0
1.6

8.7
8.9
5.8

Total cash uses

$227.4

$296.6

Due primarily to net operating loss carryforwards,
contributions to its pension plan and accelerated
depreciation, the Company did not have any cash
income tax payments during 2003. Based on current
projections, the Company anticipates that beginning
in 2005, the cash requirements for income taxes will
increase significantly.

Investing Activities

Additions to property, plant and equipment during
2003 were $57.8 million compared to $57.3 million
in 2002. Capital expenditures during 2003 were
funded with cash flows from operations and from
borrowings under the Company’s available lines of
credit. Leasing is used for certain capital additions
when considered cost effective relative to other
sources of capital. The Company currently leases

two production facilities and several sales
distribution and administrative facilities.

At the end of 2003, 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 2004 will be in the range of
$60 million to $70 million and plans to fund such
additions through cash flows from operations and its
available lines of credit. The Company is in the
process of implementing an upgrade of its Enterprise
Resource Planning (ERP) computer software
systems, which is anticipated to take several years to
complete. During 2003, the Company capitalized
$6.5 million related to the new ERP software. The
Company anticipates using a portion of the new
ERP software beginning in 2004.

Financing Activities

In December 2002, the Company entered into a
three-year, $125 million revolving credit facility.
This facility includes an option to extend the term
for an additional year at the discretion of the
participating banks. The revolving credit facility
bears interest at a floating rate of LIBOR plus an
interest rate spread of .60%. In addition, there is a
facility fee of .15% required for this revolving credit
facility. Both the interest rate spread and the facility
fee are determined from a commonly used pricing
grid based on the Company’s long-term senior
unsecured noncredit-enhanced debt rating. The
facility contains covenants which establish ratio
requirements related to interest coverage, and long-
term debt to cash flow. On December 28, 2003,
there were no amounts outstanding under this
facility.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:47 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PDK4L4CÁŠ

1DMR3JX7PDK4L4C

CLN

g01x31-11.0

46546 TX 33

PMT

13*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

In January 1999, the Company filed a shelf
registration relating to up to $800 million of debt
and equity securities. The Company has used this
shelf registration to issue long-term debt of
$250 million in 1999, $150 million in 2002 and
$100 million in 2003. The Company currently has
up to $300 million available for use under this shelf
registration which, subject to the Company’s ability
to consummate a transaction on acceptable terms,
could be used for long-term financing or refinancing
of long-term debt maturities.

In November 2002, the Company issued
$150 million of ten-year senior notes at a coupon
rate of 5.00%. The proceeds from this issuance were
used to repay borrowings under the Company’s
revolving credit facility and lines of credit, and to
loan amounts to Piedmont to enable it to repay a
$97.5 million term loan. In March 2003, the
Company issued $100 million of twelve-year senior
notes at a coupon rate of 5.30%. The proceeds from
this issuance were used to purchase an additional
interest in Piedmont for $53.5 million and repay a
portion of the Company’s $170 million term loan.

The Company also borrows periodically under its
available lines of credit. These lines of credit, in the
aggregate amount of $60.0 million at December 28,
2003, are made available at the discretion of the two
participating banks at rates negotiated at the time of
borrowing and may be withdrawn at any time by
such banks. The Company can utilize its $125
million revolving credit facility in the event the lines
of credit are not available. The Company had
borrowed $17.6 million under its lines of credit as of
December 28, 2003. The lines of credit as of
December 28, 2003 bore an interest rate of 1.52%.
To the extent that these borrowings do not exceed
the amount available under the Company’s

$125 million revolving credit facility, they are
classified as noncurrent liabilities.

During 2002, Piedmont refinanced a $195 million
term loan using the proceeds from a loan from the
Company. The Company’s source of funds for this
loan to Piedmont included the issuance of
$150 million of senior notes, its lines of credit, its
revolving credit facility and available cash flow.
Piedmont pays the Company interest on the loan at
the Company’s average cost of funds plus .50%. The
loan matures on December 31, 2005. The Company
plans to provide for Piedmont’s future financing
requirements under these terms.

All of the outstanding long-term debt has been
issued by the Company with none having been
issued by any of the Company’s subsidiaries. There
are no guarantees of the Company’s debt.

With regard to the Company’s $85 million term
loan, the Company must maintain its public debt
ratings at investment grade as determined by both
Moody’s and Standard and Poor’s. If the Company’s
public debt ratings fall below investment grade
within 90 days after the public announcement of
certain 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 the
foreseeable future.

At December 28, 2003, the Company’s debt ratings
were as follows:

Standard and Poor’s
Moody’s

Long-Term
Debt

BBB
Baa

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 13:48 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PDLWHZC~Š

1DMR3JX7PDLWHZC

CLN

g25u99-6.0

46546 TX 34

PMT

14*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The Company’s credit ratings are reviewed
periodically by the respective rating agencies.
Changes in the Company’s operating results or
financial position could result in changes in the
Company’s credit ratings. Lower credit ratings could
result in higher borrowing costs for the Company or
in the event of a reduction below investment grade
level, a potential default on one of its credit
agreements as discussed above. There were no
changes in these debt ratings from the prior year. It
is the Company’s intent to operate in a manner that
will allow it to maintain its investment grade ratings.

The Company’s revolving credit facility contains
two financial covenants related to ratio requirements
for interest coverage, and long-term debt to cash
flow, as defined in the credit agreement. These
covenants do not currently, and the Company does
not anticipate that they will, restrict its liquidity or
capital resources. The Company’s public debt is not
subject to financial covenants but does limit the
incurrence of certain liens and encumbrances.

The Company issued 20,000 shares of Class B
Common Stock to J. Frank Harrison, III, Chairman
of the Board of Directors and Chief Executive
Officer, with respect to fiscal year 2003, effective
January 1, 2004, under a restricted stock award plan

that provides for annual awards of such shares
subject to the Company meeting certain
performance criteria.

During 2002, two of the Company’s directors,
J. Frank Harrison, Jr., Chairman Emeritus, and
J. Frank Harrison, III, Chairman of the Board of
Directors and Chief Executive Officer, entered into
plans providing for sales of up to an aggregate total
of 250,000 shares of the Company’s Common Stock
in accordance with Securities and Exchange
Commission Rule 10b5-1. Shares sold under the
plans were issuable to Mr. Harrison, Jr. and
Mr. Harrison, III under stock option agreements
that were granted in 1989 as long-term incentives.
All 250,000 shares of Common Stock exercisable
under the options were sold under the plans and the
Company received proceeds of $7.2 million.

Off-Balance Sheet Arrangements

See Note 13 to the consolidated financial statements
for details of the Company’s off-balance sheet
arrangements, including its operating lease
commitments, debt guarantees, standby letters of
credit and long-term contractual arrangements for
certain prestige properties, athletic venues and other
locations.

COCA-COLA BOTTLING C

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CHMFBU-2KP-PF03

8.2.15

CHMmoosk0cm

17-Mar-2004 13:27 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PBX=85CÃŠ

1DMR3JX7PBX=85C

CLN

g01x31-11.0

46546 TX 35

PMT

14*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Aggregate Contractual Obligations

The following table summarizes the Company’s contractual obligations and commercial commitments as of
December 28, 2003:

In Thousands

Contractual obligations:

Long-term debt
Capital lease obligations (1)
Purchase obligations (1)
Other long-term liabilities (2)
Operating leases (1)
Long-term contractual
arrangements (1)

Payments Due by Period

Total

2004

2005-2006

2007-2008

2009 and
Thereafter

$ 802,717
45,563
40,000
58,584
31,671

78
1,337
40,000
3,487
6,639

$102,639
2,049

$100,000
1,603

$600,000
40,574

6,829
11,807

6,769
9,414

6,814

41,499
3,811

5,119

26,348

5,342

9,073

Total contractual obligations

$1,004,883

$56,883

$132,397

$124,600

$691,003

(1) See Note 13 to the consolidated financial statements for additional information.
(2) Includes obligations under executive benefit plans and non-compete liabilities.

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
changes 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.

During November 2002, the Company entered into
three interest rate swap agreements in conjunction
with the issuance of $150 million of senior notes
and the refinancing of other Company debt as

previously discussed. These interest rate swap
agreements effectively converted $150 million of the
Company’s debt from a fixed rate to a floating rate
and are accounted for as fair value hedges.

During the fourth quarter of 2002, the Company
terminated two interest rate swap agreements
classified as cash flow hedges. These two interest rate
swaps hedged the cash flows on part of a variable
rate term loan agreement the Company had
outstanding. In conjunction with the issuance of
$150 million of senior notes in November 2002, the
variable rate term loan was repaid early. The term
loan had a maturity of May 2003. Upon the
repayment of the term loan, the cash flow hedges no
longer qualified as hedges due to the fact that the
variability of cash flows being hedged was eliminated
with the repayment of the variable rate term loan,
and thus the forecasted schedule of payments did
not occur. Accordingly, the interest rate swap

COCA-COLA BOTTLING C

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17-Mar-2004 14:00 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PGFB77C6Š

1DMR3JX7PGFB77C

CLN

g25u99-6.0

46546 TX 36

PMT

18*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

agreements were terminated and the resulting
interest expense of $2.2 million was reflected in the
2002 statement of operations.

The Company has four forward interest rate
agreements with twelve-month terms which fix
short-term rates on certain components of the
Company’s floating rate debt. One of these forward
interest rate agreements has been accounted for as a
cash flow hedge. The other three forward interest
rate agreements do not meet the criteria set forth in
Statement of Financial Accounting Standards
No. 133, “Accounting for Derivative Instruments
and Hedging Activities,” as amended, for hedge
accounting and have been accounted for on a mark-
to-market basis. The mark-to-market adjustment for
these three forward interest rate agreements was an
increase to interest expense of $0.1 million during
2003.

In conjunction with the issuance of $100 million
of twelve-year senior notes in March 2003, the
Company entered into two forward interest rate
agreements to hedge the issuance price. These
forward interest rate agreements were accounted for
as cash flow hedges. The Company received
$3.1 million from these cash flow hedges upon
settlement, which has been recorded in other
liabilities, and will be amortized as a reduction of
interest expense over the life of the related senior
notes.

In July 2003, the Company entered into three
interest rate swap agreements in conjunction with
the $100 million of twelve-year senior notes
previously mentioned. These interest rate swap
agreements effectively converted $100 million of
the Company’s debt from a fixed rate to a floating
rate and are accounted for as fair value hedges.

During 2003, 2002 and 2001, interest expense was
reduced by $2.1 million, $1.9 million and
$1.2 million, respectively, due to amortization of the
deferred gains on previously terminated interest rate
swap agreements and forward interest rate
agreements. Interest expense will be reduced by the
amortization of these deferred gains in 2004 through
2009 as follows: $1.9 million, $1.7 million,
$1.7 million, $1.7 million, $1.7 million and
$.9 million, respectively.

The weighted average interest rate of the Company’s
debt and capital lease obligations after taking into
account the interest rate hedging activities was 4.9%
as of December 28, 2003 compared to 5.0% at the
end of 2002. The Company’s overall weighted
average interest rate on its debt and capital lease
obligations in 2003 decreased to 4.9% from 5.6% in
2002. Before giving effect to forward rate
agreements discussed below, approximately 46% of
the Company’s debt and capital lease obligations of
$848.3 million as of December 28, 2003 was
maintained on a floating rate basis and was subject
to changes in short-term interest rates. The
Company currently has three forward interest rate
agreements that fix the interest rate through April
2004 on $150 million of floating rate debt. After
giving effect to the forward interest rate agreements,
approximately 29% of the Company’s debt and
capital lease obligations is subject to changes in
short-term interest rates through April 2004.

If average interest rates for the floating rate
component of the Company’s debt and capital lease
obligations increased by 1.0%, annual interest
expense for the year ended December 28, 2003
would have increased by $2.5 million. This amount
is determined by calculating the effect of a
hypothetical interest rate change on our floating rate

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF04

8.2.15

CHMmorea0cm

17-Mar-2004 14:00 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PGHBB0CyŠ

1DMR3JX7PGHBB0C

CLN

g01x31-11.0

46546 TX 37

PMT

14*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

debt, including the effects of our interest rate swap
agreements.

Cautionary Information Regarding Forward-
Looking Statements

This Annual Report to Stockholders, as well as
information included in future filings by the
Company with the Securities and Exchange
Commission and information contained in written
material, press releases and oral statements issued by
or on behalf of the Company, contains, or may
contain, 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:

(cid:127)

increases in pension expense;

anticipated return on pension plan
investments;

anticipated costs associated with property
and casualty insurance;

the Company’s ability to utilize net
operating loss carryforwards;

the Company’s belief that other parties to
certain contractual arrangements will
perform their obligations;

potential marketing funding support from
The Coca-Cola Company;

the Company’s belief that the risk of loss
with respect to funds deposited with banks
is minimal;

anticipated additions to property, plant and
equipment;

(cid:127)

expectations regarding future income tax
payments;

the Company’s belief that disposition of
certain litigation and claims will not have a
material adverse effect;

the Company’s expectation of exercising its
option to extend certain lease obligations;

the effects of the closings of sales
distribution centers;

the Company’s intention to continue to
evaluate its distribution system in an effort
to optimize the process of distributing
products;

(cid:127)

the effects of the upgrade of ERP systems;

(cid:127) management’s belief that the Company has
sufficient financial resources to maintain
current operations and provide for its
current capital expenditures and working
capital requirements, scheduled debt
payments, interest and income tax payments
and dividends for stockholders;

(cid:127)

the Company’s intention to operate in a
manner to maintain its investment grade
ratings;

the Company’s belief that the cooperatives
whose debt the Company guarantees have
sufficient assets and the ability to adjust
selling prices of their products to adequately
mitigate the risk of material loss and that
the cooperatives will perform their
obligations under the agreements;

the Company’s belief that FIN 46 will not
have any significant impact on the
Company’s financial statements at this time;

COCA-COLA BOTTLING C

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17-Mar-2004 13:53 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PF2H=LC>Š

1DMR3JX7PF2H=LC

CLN

g25u99-6.0

46546 TX 38

PMT

16*

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

(cid:127)

the Company’s ability to issue $300 million
of securities under acceptable terms under
its shelf registration statement;

the Company’s belief that CCBSS will
increase future purchasing efficiencies;

the Company’s belief that certain franchise
rights are perpetual or will be renewed upon
expiration;

the Company’s ability to extend its
management agreement with SAC on terms
comparable to the current agreement;

the Company’s ability to offset increases in
raw material costs with selling price
increases to maintain gross margins in 2004;

the Company’s intention to provide for
Piedmont’s future financing requirements;
and

(cid:127) management’s belief that a trigger event will
not occur under the Company’s $85 million
term loan.

These statements and expectations are based on the
currently 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:

(cid:127)

lower than expected selling prices resulting
from increased marketplace competition;

an inability to meet performance
requirements for expected levels of
marketing funding support payments from
The Coca-Cola Company or other beverage
companies;

(cid:127)

changes in how significant customers
market or promote our products;

reduced advertising and marketing spending
by The Coca-Cola Company or other
beverage companies;

an inability to meet requirements under
bottling contracts;

the inability of our aluminum can or PET
bottle suppliers to meet our sales demand;

significant changes from expectations in the
cost of raw materials;

higher than expected insurance premiums
and fuel costs;

lower than anticipated returns on pension
plan assets;

higher than anticipated health care costs;

unfavorable interest rate fluctuations;

higher than anticipated cash payments for
income taxes;

unfavorable weather conditions;

inability to increase selling prices to offset
higher raw material costs;

significant changes in debt ratings
impacting the Company’s ability to borrow;

terrorist attacks, war or other civil
disturbances;

changes in financial markets; and

an inability to meet projections in acquired
bottling territories.

COCA-COLA BOTTLING C

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CHMFBU-2KP-PF03

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17-Mar-2004 13:29 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PC20=ZC+Š

1DMR3JX7PC20=ZC

CLN

g01x31-11.0

46546 TX 39

PMT

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 statements 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 principles.

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 auditors were engaged to perform an audit of the consolidated financial
statements. 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 auditors
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 auditors, internal
auditors and management. Both the independent auditors and internal auditors have direct access to the
Audit Committee 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

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17-Mar-2004 12:28 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7NZC66DCsŠ

1DMR3JX7NZC66DC

CLN

g77t32-7.0

g36c86-1.0

46546 TX 40

PMT

18*

Report of Independent Auditors

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
operations, 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 28, 2003 and December 29, 2002, and the results of their operations and their cash flows for each
of the three years in the period ended December 28, 2003 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 material 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.

As discussed in Note 6 to the consolidated financial statements, the Company changed its accounting for
goodwill and other intangible assets in 2002.

Charlotte, North Carolina
February 18, 2004

COCA-COLA BOTTLING C

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17-Mar-2004 13:35 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PC=6VSC3Š

1DMR3JX7PC=6VSC

CLN

g01x31-11.0

46546 TX 41

PMT

13*

Consolidated Statements of Operations

In Thousands (Except Per Share Data)

2003

Net sales (includes sales to Piedmont of $71,170 in

Fiscal Year

2002

2001

2001)

$1,210,765

$1,198,335

$958,859

Cost of sales, excluding depreciation expense shown

below (includes $53,033 in 2001 related to sales to
Piedmont)

Gross margin
Selling, general and administrative expenses, excluding

depreciation expense shown below

Depreciation expense
Provision for impairment of property, plant and

equipment

Amortization of intangibles

Income from operations

Interest expense
Minority interest

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

625,448

585,317

422,456
76,485

3,105

83,271

41,914
3,297

38,060
7,357

30,703

3.40

9,043

619,137

579,198

407,145
76,075

2,796

93,182

49,120
5,992

38,070
15,247

22,823

2.58

2.56

8,861

8,921

514,358

444,501

306,106
66,134

947
15,296

56,018

44,322

11,696
2,226

9,470

1.08

1.07

8,753

8,821

See Accompanying Notes to Consolidated Financial Statements.

ˆ1DMR3JX7WQVPXDCÁŠ

1DMR3JX7WQVPXDC

Consolidated Balance Sheets

In Thousands (Except Share Data)
ASSETS

Current assets:
Cash
Accounts receivable, trade, less allowance for doubtful accounts

of $1,723 and $1,676

Accounts receivable from The Coca-Cola Company
Accounts receivable, other
Inventories
Cash surrender value of life insurance, net
Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net
Leased property under capital leases, net
Other assets
Franchise rights, net
Goodwill, net
Other identifiable intangible assets, net

Total

Dec. 28,
2003

Dec. 29,
2002

18,044

18,193

82,222
18,112
10,663
36,891
27,765
6,981

200,678

446,708
43,109
27,653
520,672
102,049
9,051

79,548
12,992
17,001
38,648

4,588

170,970

466,840
44,623
58,167
504,374
101,754
6,797

$1,349,920

$1,353,525

See Accompanying Notes to Consolidated Financial Statements.

COCA-COLA BOTTLING C

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CHMFBU-2KP-PF03

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17-Mar-2004 13:48 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PDM4NYCZŠ

1DMR3JX7PDM4NYC

CLN

g01x31-11.0

46546 TX 43

PMT

15*

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
Accrued compensation
Accrued interest payable

Total current liabilities

Deferred income taxes
Pension and postretirement benefit obligations
Other liabilities
Obligations under capital leases
Long-term debt

Total liabilities

Commitments and Contingencies (Note 13)
Minority interest
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—9,704,951 and 9,704,851 shares

Class B Common Stock, $1.00 par value:

Authorized—10,000,000 shares; Issued—3,028,866 and 3,008,966 shares

Class C Common Stock, $1.00 par value:

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

Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss

Less-Treasury stock, at cost:

Common—3,062,374 shares
Class B Common—628,114 shares

Total stockholders’ equity

Total

Dec. 28,
2003

Dec. 29,
2002

78
1,337
39,493
10,996
52,492
18,999
10,924

134,319

156,094
50,842
74,457
44,226
802,639

31
1,120
38,303
20,649
53,536
20,462
10,649

144,750

148,297
47,040
64,400
44,906
807,725

1,262,577

1,257,118

34,871

63,540

9,704

3,029

97,220
27,703
(23,930)

113,726

60,845
409

52,472

9,704

3,009

95,986
6,043
(20,621)

94,121

60,845
409

32,867

$1,349,920

$1,353,525

See Accompanying Notes to Consolidated Financial Statements.

ˆ1DMR3JX7WQJSJ4C4Š

1DMR3JX7WQJSJ4C

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 intangibles
Deferred income taxes
Provision for impairment of property, plant and equipment
Losses on sale of property, plant and equipment
Amortization of debt costs
Amortization of deferred gains related to terminated

interest rate agreements
Undistributed earnings of Piedmont
Minority interest
(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
Payment of long-term debt
Repayment of current portion of long-term debt
Proceeds from (repayment of) lines of credit, net
Cash dividends paid
Principal payments on capital lease obligations
Termination of interest rate swap agreements
Proceeds from settlement of forward interest rate agreements
Debt issuance costs paid
Proceeds from exercise of stock options
Other

Net cash 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

Net cash used in investing activities

Net increase (decrease) in cash

Cash at beginning of year

Cash at end of year

Fiscal Year

2003

2002

2001

$ 30,703

$ 22,823

9,470

76,485
3,105
7,357

1,182
1,082

76,075
2,796
14,953

3,381
809

(2,082)

(1,927)

3,297
(41,519)
29,221
12,685
(182)

90,631

121,334

100,000
(50,000)
(35,039)
(20,000)
(9,043)
(1,340)

3,135
(1,039)

(644)

(13,970)

(57,795)
2,845
(52,563)

(107,513)

(149)

18,193

5,992
(15,645)
12,700
10,358
(357)

109,135

131,958

150,000

(251,708)
37,600
(8,861)
(1,748)
(2,229)

(3,617)
7,162
1,214

(72,187)

(57,317)
7,506
(8,679)

(58,490)

1,281

16,912

66,134
15,296
888
947
1,297
830

(1,183)
(417)

44,418
(9,809)
(6,010)
82

112,473

121,943

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

(230)

(20,432)

(96,684)
3,660

(93,024)

8,487

8,425

$ 18,044

$ 18,193

$ 16,912

Significant non-cash investing and financing activities

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

877
1,254

$ 42,180
768

456
757

See Accompanying Notes to Consolidated Financial Statements.

COCA-COLA BOTTLING C

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CHMFBU-2KP-PF03

8.2.15

CHMmoosk0cm

17-Mar-2004 14:45 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PNXVW7C3Š

1DMR3JX7PNXVW7C

CLN

g01x31-11.0

46546 TX 45

PMT

17*

Consolidated Statements of Changes in
Stockholders’ Equity

In Thousands

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

net of tax

Net change in minimum pension
liability adjustment, net of tax

Total comprehensive income (loss)
Cash dividends paid

Common ($1.00 per share)
Class B Common ($1.00 per share)

Issuance of Class B Common Stock
Balance on December 30, 2001

Comprehensive income (loss):
Net income
Net gain (loss) on derivatives,

net of tax

Net change in minimum pension
liability adjustment, net of tax
Total comprehensive income (loss)
Cash dividends paid

Common ($1.00 per share)
Class B Common ($1.00 per share)

Issuance of Class B Common Stock
Exercise of stock options
Tax adjustment related to stock

options

Common
Stock

Class B
Common
Stock

Capital in
Excess of
Par Value

Retained
Earnings
(Accumulated
Deficit)

Accumulated
Other
Comprehensive
Loss

Treasury
Stock

Total

$ 9,454

$ 2,969

$ 99,020

$(21,777)

— $ (61,254) $ 28,412

9,470

(1,821)

(10,984)

9,470

(1,821)

(10,984)

(3,335)

20
$ 2,989

$ 9,454

(6,392)
(2,361)
737
$ 91,004

$(12,307)

$ (12,805)

(6,392)
(2,361)
757
$ (61,254) $ 17,081

1,821

(9,637)

22,823

(3,282)
(1,191)

22,823

1,821

(9,637)
15,007

(6,479)
(2,382)
768
7,162

$ 6,043

$ (20,621)

1,710
$ (61,254) $ 32,867

(3,197)
(1,191)
748
6,912

1,710
$ 95,986

250

Balance on December 29, 2002

$ 9,704

$ 3,009

Comprehensive income (loss):
Net income
Net gain (loss) on derivatives,

net of tax

Net change in minimum pension
liability adjustment, net of tax
Total comprehensive income (loss)
Cash dividends paid

Common ($1.00 per share)
Class B Common ($1.00 per share)

Issuance of Class B Common Stock
Balance on December 28, 2003

(62)

(3,247)

30,703

(6,642)
(2,401)

20
$3,029

1,234
$97,220

$9,704

$ 27,703

$(23,930)

See Accompanying Notes to Consolidated Financial Statements.

30,703

(62)

(3,247)
27,394

(6,642)
(2,401)
1,254
$(61,254) $52,472

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF03

8.2.15

CHMmoosk0cm

17-Mar-2004 13:59 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PG2VK1C,Š

1DMR3JX7PG2VK1C

CLN

g25u99-6.0

46546 TX 46

PMT

12*

Notes to Consolidated Financial Statements

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 accounts of the Company and its majority owned
subsidiaries. All significant intercompany accounts and transactions have been eliminated.

The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The fiscal years presented are the 52-week periods ended December 28, 2003, December 29, 2002 and
December 30, 2001. The Company’s fiscal year ends on the Sunday closest to December 31.

On January 2, 2002, the Company purchased an additional interest in Piedmont Coca-Cola Bottling
Partnership (“Piedmont”) from The Coca-Cola Company, increasing the Company’s ownership in Piedmont
to more than 50%. Due to the increase in ownership, the results of operations, financial position and cash
flows of Piedmont have been consolidated with those of the Company beginning in the first quarter of 2002.
The Company’s investment in Piedmont had been accounted for using the equity method for 2001 and prior
years.

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. The Company maintains cash deposits with major
banks which from time to time may exceed federally insured limits. The Company periodically assesses the
financial condition of the institutions and believes that the risk of any loss is minimal.

Credit Risk of Trade Accounts Receivable

The Company sells its products to large retail 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 exposure to losses on trade accounts receivable and maintains
an allowance for potential losses or adjustments. 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, or market.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF03

8.2.15

CHMmoosk0cm

17-Mar-2004 13:14 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7P7Y799CÄŠ

1DMR3JX7P7Y799C

CLN

g01x31-11.0

46546 TX 47

PMT

11*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 reflected in the statement of operations. Gains or losses on the
disposal of manufacturing equipment and manufacturing facilities are included in cost of sales. Gains or losses
on the disposal of all other property, plant and equipment are included in selling, general and administrative
(“S,G&A”) expenses. Disposals of property, plant and equipment generally occur when it is not cost effective
to repair an asset.

Impairment of Long-lived Assets

The Company evaluates long-lived assets and certain identifiable intangibles for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When
undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written
down to its fair value. Long-lived assets to be disposed of other than by sale are classified as held and used
until they are disposed of. Long-lived assets to be disposed of by sale are classified as held for sale and are
reported at the lower of carrying amount or fair value less cost to sell, and depreciation is ceased.

Software

Certain costs incurred in the development of internal-use software are capitalized. Software is amortized using
the straight-line method over its estimated useful life.

Piedmont Coca-Cola Bottling Partnership

Prior to January 2, 2002, the Company beneficially owned a 50% interest in 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 operations were included in “Net sales” for 2001. See Note 2 and Note 18 to the consolidated financial
statements for additional information.

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

Franchise Rights and Goodwill

The Company adopted the provisions of Statement of Financial Accounting Standards No. 141, “Business
Combinations,” and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF03

8.2.15

CHMmoosk0cm

17-Mar-2004 13:14 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7P7Z5TWC>Š

1DMR3JX7P7Z5TWC

CLN

g25u99-6.0

46546 TX 48

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Assets,” (“SFAS No. 142”) at the beginning of 2002. 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 annually, or more frequently if facts and
circumstances indicate they may be impaired. The only intangible assets the Company classifies as indefinite
lived are franchise rights and goodwill. SFAS No. 142 requires testing of intangible assets with indefinite lives
and goodwill for impairment at least annually. The Company performs its annual impairment test in the
third quarter of each year.

For the annual impairment analysis of goodwill, the Company develops an estimated fair value for the
enterprise using an average of three different approaches:

(cid:1) Market value, using the Company’s stock price plus outstanding debt and minority interest;

(cid:1) Discounted cash flow analysis; and

(cid:1) Multiple of earnings before interest, taxes, depreciation and amortization based upon relevant

industry data.

Other Identifiable Intangible Assets

Other identifiable intangible assets primarily represents customer relationships and are amortized on a
straight-line basis over their estimated useful lives.

Pension and Postretirement 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 organizations. The Company expenses amounts as paid in

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:01 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PGJ8VLC9Š

1DMR3JX7PGJ8VLC

CLN

g01x31-11.0

46546 TX 49

PMT

13*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

accordance with union agreements. The Company recognizes the cost of postretirement benefits, which
consist principally of medical benefits, during employees’ 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.

The Company records an additional minimum pension liability adjustment, when necessary, for the amount
of underfunded accumulated pension obligations in excess of accrued pension costs.

Income Taxes

The Company provides deferred income taxes for the tax effects of temporary differences between the
financial reporting and income tax bases of the Company’s assets and liabilities. 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.

Revenue Recognition

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

The Company also recognized as revenue the management fees earned in 2001 and prior years from
Piedmont. Beginning in 2002, these management fees were eliminated in consolidation.

Marketing Programs and Sales Incentives

Payments to customers for cooperative marketing programs and sales incentives are classified as a reduction of
net sales. Price discounts, rebates and free products to customers and coupons are also classified as a reduction
of net sales.

Marketing Funding Support

The Company receives marketing funding support payments in cash from The Coca-Cola Company and
other franchisers. Payments to the Company for marketing programs to promote the sale of bottle/can
volume and fountain syrup volume are recognized in earnings primarily on a per unit basis over the year as
product is sold. Payments for periodic programs are recognized in the periods for which they are earned.

Under the provisions of EITF 02-16 “Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor,” cash consideration received by a customer from a vendor is
presumed to be a reduction of the prices of the vendor’s products or services and are, therefore, to be
accounted for as a reduction of cost of sales in the statements of operations unless those payments are specific
reimbursements of costs or payments for services. Payments the Company receives from The Coca-Cola
Company and other franchisers for marketing funding support are classified as reductions of cost of sales.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:01 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PGK7C4C[Š

1DMR3JX7PGK7C4C

CLN

g25u99-6.0

46546 TX 50

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative Financial Instruments

The Company records all derivative instruments in the financial statements at fair value.

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 financial instruments for trading purposes, nor does it use
leveraged financial instruments. 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.

The Company periodically enters into interest rate agreements. The Company has standardized procedures
for evaluating the accounting for financial instruments. These procedures include:

(cid:1) Identifying and matching of the hedging instrument and the hedged item to ensure that significant

features, such as maturity dates and interest reset dates, coincide;

(cid:1) Identifying the nature of the risk being hedged and the Company’s intent for undertaking the hedge;

(cid:1) Assessing the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged

item’s fair value or variability to cash flows attributable to the hedged risk;

(cid:1) Assessing evidence that, at the hedge’s inception and on an ongoing basis, it is expected that the

hedging relationship will be highly effective in achieving an offsetting change in the fair value or cash
flows that are attributable to the hedged risk; and

(cid:1) Maintaining a process for assessment of ongoing hedge effectiveness.

To the extent the interest rate agreements meet the specified criteria, they are accounted for as either fair value
or cash flow hedges. Changes in the fair values of designated and qualifying fair value hedges are recognized in
earnings as offsets to changes in the fair value of the related hedged liabilities. Changes in the fair value of cash
flow hedging instruments are recognized in accumulated other comprehensive income and are then
subsequently reclassified to earnings as an adjustment to interest expense in the same periods the forecasted
payments affect earnings. Ineffectiveness of cash flow hedges, defined as the amount by which the change in
the value of the hedge does not exactly offset the change in the value of the hedged item, is reflected in
current results of operations.

The Company evaluates its mix of fixed and floating rate debt on an ongoing basis. Periodically, the
Company may terminate an interest rate derivative when the underlying debt remains outstanding in order to
achieve its desired mix of fixed and floating rate debt. Upon termination of an interest rate derivative
accounted for as a cash flow hedge, amounts reflected in other comprehensive income are reclassified to
earnings consistent with the variability of the cash flows previously hedged, which is generally over the life of
the related debt that was hedged. Upon termination of an interest rate derivative accounted for as a fair value
hedge, the value of the hedge as recorded on the Company’s balance sheet is eliminated against either the cash
received or cash paid for settlement and the fair value adjustment of the related debt is amortized to earnings
over the remaining life of the debt instrument as an adjustment to interest expense.

Interest rate derivatives designated as cash flow hedges are used to hedge the variability of cash flows related to
a specific component of the Company’s long-term debt. Interest rate derivatives designated as fair value
hedges are used to hedge the fair value of a specific component of the Company’s long-term debt. If the

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:02 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PGLS5NCiŠ

1DMR3JX7PGLS5NC

CLN

g01x31-11.0

46546 TX 51

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

hedged component of long-term debt is repaid or refinanced, the Company generally terminates the related
hedge due to the fact that the forecasted schedule of payments will not occur or the changes in fair value of
the hedged debt will not occur and the derivative will no longer qualify as a hedge. Any gain or loss on the
termination of an interest rate derivative related to the repayment or refinancing of long-term debt is
recognized currently in the Company’s statement of operations as an adjustment to interest expense. In the
event that a derivative previously accounted for as a hedge was retained and did not qualify for hedge
accounting, changes in the fair value would be recognized in income currently as an adjustment to interest
expense.

Insurance Programs

In general, the Company is self-insured for costs of casualty and medical claims. The Company uses
commercial insurance for casualty 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.

Cost of Sales

The following expenses are included in cost of sales: raw material costs, manufacturing labor, manufacturing
overhead, inbound freight charges related to raw material costs, receiving costs, inspection costs,
manufacturing warehousing costs and freight charges related to the movement of finished goods from
manufacturing locations to sales distribution centers.

Selling, General and Administrative Expenses

The following expenses are included in the S,G&A expenses line item: sales management labor costs, costs of
distribution from sales distribution centers to customer locations, sales distribution center warehouse costs,
point-of-sale expenses, advertising and marketing expenses, vending equipment repair costs, and
administrative support labor and operating costs such as treasury, legal, information services, accounting,
internal audit and executive management costs.

The Company receives fees from The Coca-Cola Company related to the delivery of fountain syrup products
to The Coca-Cola Company’s national or regional fountain customers. In addition, the Company receives
fees from The Coca-Cola Company related to the repair of fountain equipment owned by The Coca-Cola
Company. The fees received from The Coca-Cola Company for the delivery of fountain syrup products to
their customers and the repair of their fountain equipment represent a reimbursement of costs incurred by the
Company to provide these services. Accordingly, these fees are classified as reductions of S,G&A expenses.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:03 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PGMJLXC#Š

1DMR3JX7PGMJLXC

CLN

g25u99-6.0

46546 TX 52

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Shipping and Handling Costs

Shipping and handling costs related to the movement of finished goods from manufacturing locations to sales
distribution centers are included in cost of sales. Shipping and handling costs related to the movement of
finished goods from sales distribution centers to customer locations are included in S,G&A expenses and were
$168.1 million, $165.8 million and $112.7 million in 2003, 2002 and 2001, respectively.

Customers do not pay the Company separately for shipping and handling costs.

Compensation Cost for Unvested/Restricted Stock with Contingent Vesting

The Company has a restricted stock plan for the Company’s Chairman of the Board of Directors and Chief
Executive Officer. The plan initially included 200,000 shares of the Company’s Class B Common Stock,
which are issued in the amount of 20,000 shares per year, contingent upon the achievement of 80% of the
overall goal achievement factor in the Annual Bonus Plan.

The Company recognizes compensation expense for this plan during a fiscal year based on the quoted market
price of the Company’s Common Stock at each measurement date multiplied by the number of shares which
would vest if the performance requirements are met, unless the achievement of the performance requirements
for that fiscal year are considered unlikely.

Net Income Per Share

Basic earnings per share (“EPS”) excludes potential common shares that were dilutive and is computed by
dividing net income available for common stockholders by the weighted average number of Common and
Class B Common shares outstanding. Diluted EPS gives effect to all securities representing potential common
shares that were dilutive and outstanding during the period.

2. 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 Carolina.
Prior to January 2, 2002, the Company and The Coca-Cola Company, through their respective subsidiaries,
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.

On January 2, 2002, the Company purchased, for $10.0 million, an additional 4.651% interest in Piedmont
from The Coca-Cola Company, increasing the Company’s ownership in Piedmont to 54.651%. Due to the
increase in ownership, the results of operations, financial position and cash flows of Piedmont have been
consolidated with those of the Company beginning in the first quarter of 2002. The Company recorded
$3.4 million of franchise rights and $.9 million related to customer relationships in connection with its
2002 acquisition of a controlling interest in Piedmont. The Company’s investment in Piedmont had been
accounted for using the equity method in 2001 and prior years.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:03 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PGN5ZHC=Š

1DMR3JX7PGN5ZHC

CLN

g01x31-11.0

46546 TX 53

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company paid $53.5 million in March 2003 for an additional 22.675% interest in Piedmont. The
Company recorded $16.3 million of franchise rights and $4.3 million related to customer relationships in
connection with this acquisition. This additional acquisition was recorded using purchase accounting.

Minority interest as of December 28, 2003 and December 29, 2002 represents the portion of Piedmont
which is owned by The Coca-Cola Company.

Summarized financial information for Piedmont was as follows:

In Thousands

Net sales
Cost of sales

Gross margin
Amortization of intangibles

Income from operations
Net income

Company’s equity in net income

Fiscal Year

2003

2002

2001

$291,753 $288,902 $272,722
139,764
143,813

147,010

144,743

145,089

23,008

23,805

$ 14,286 $ 13,214 $

132,958
8,410

13,150
834

417

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:03 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PGPTVNCKŠ

1DMR3JX7PGPTVNC

CLN

g25u99-6.0

46546 TX 54

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. PIEDMONT COCA-COLA BOTTLING PARTNERSHIP (continued)

The following financial information includes the 2003 and 2002 results of operations of the Company and
includes the comparable 2001 results of operations. The comparable 2001 financial information reflects the
consolidation of Piedmont’s financial position and results of operations with those of the Company as if the
purchase of the additional 4.651% interest in Piedmont in January 2002 had occurred at the beginning of
2001.

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal Year

In Thousands (Except Per Share Data)

2003

2002

Unaudited
Pro forma
2001

Net sales
Cost of sales, excluding depreciation expense shown

$1,210,765

$1,198,335

$1,149,013

below

Gross margin

Selling, general and administrative expenses,

excluding depreciation expense shown below

Depreciation expense
Provision for impairment of property, plant and

equipment

Amortization of intangibles

Income from operations
Interest expense
Minority interest

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

625,448

585,317

422,456
76,485

3,105

83,271
41,914
3,297

38,060
7,357

30,703

3.40

9,043

619,137

579,198

407,145
76,075

2,796

93,182
49,120
5,992

38,070
15,247

22,823

2.58

2.56

8,861

8,921

600,930

548,083

382,623
71,542

947
23,810

69,161
57,802
378

10,981
1,947

9,034

1.03

1.02

8,753

8,821

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:04 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PGSLBPCYŠ

1DMR3JX7PGSLBPC

CLN

g01x31-11.0

46546 TX 55

PMT

11*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INVENTORIES

Inventories were summarized as follows:

In Thousands

Finished products
Manufacturing materials
Plastic pallets and other

Total inventories

Dec. 28,
2003

$25,669
6,637
4,585

$36,891

Dec. 29,
2002

$23,207
10,609
4,832

$38,648

4. 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

Dec. 28,
2003

$ 12,857
113,820
97,933
150,421
38,683
366,266
53,425
26,780
7,057

867,242
420,534

Dec. 29,
2002

$ 12,670
113,234
96,080
143,932
39,222
362,689
47,312
24,439
3,416

842,994
376,154

Estimated
Useful Lives

10-50 years
5-20 years
4-13 years
4-10 years
6-13 years
5-20 years
3-7 years

Property, plant and equipment, net

$446,708

$466,840

5. LEASED PROPERTY UNDER CAPITAL LEASES

In Thousands

Leased property under capital leases
Less: Accumulated amortization

Leased property under capital leases, net

Dec. 28,
2003

$48,497
5,388

$43,109

Dec. 29,
2002

$47,618
2,995

$44,623

Estimated
Useful Lives

1-29 years

The Company recorded a capital lease of $41.6 million at the end of the first quarter of 2002 related to its
production/distribution center located in Charlotte, North Carolina. As disclosed in Note 18 to the
consolidated financial statements, this facility is leased from a related party. The lease obligation was
capitalized as the Company received a renewal option to extend the term of the lease, which it expects to
exercise.

The majority of the leased property under capital leases is real estate.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:05 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PH0WVSC-Š

1DMR3JX7PH0WVSC

CLN

g25u99-6.0

46546 TX 56

PMT

15*

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

Dec. 28,
2003

$677,769
155,487

833,256
210,535

Dec. 29,
2002

$661,471
155,192

816,663
210,535

$622,721

$606,128

The Company adopted the provisions of SFAS No. 142 at the beginning of 2002, which resulted in goodwill
and intangible assets with indefinite useful lives no longer being amortized. If SFAS No. 142 had been in
effect at the beginning of 2001, pro forma net income, pro forma basic earnings per share and pro forma
diluted earnings per share for the fiscal year ended December 30, 2001 would have been as follows:

In Thousands (except Per Share Data)

Reported net income

Add: goodwill amortization, net of tax
Add: franchise rights amortization, net of tax

Adjusted net income

Basic earning per share:

Reported net income
Goodwill amortization, net of tax
Franchise rights amortization, net of tax

Adjusted basic net income per share

Diluted earnings per share:
Reported net income
Goodwill amortization, net of tax
Franchise rights amortization, net of tax

Adjusted diluted net income per share

For the fiscal
year ended
Dec. 28, 2003

For the fiscal
year ended
Dec. 29, 2002

Pro forma
For the fiscal
year ended
Dec. 30, 2001

$30,703
—
—

$30,703

$ 3.40
—
—

$ 3.40

$ 3.40
—
—

$ 3.40

$22,823
—
—

$22,823

2.58
—
—

2.58

2.56
—
—

2.56

$ 9,470
1,596
4,939

$16,005

1.08
.18
.56

1.82

1.07
.18
.56

1.81

In January 2002, the Company’s ownership interest in Piedmont increased from 50% to 54.651%. As a
result of acquiring a controlling interest in Piedmont, the Company consolidated the results of operations,
financial position and cash flows of Piedmont beginning in the first quarter of 2002. The Company’s
investment in Piedmont had been accounted for using the equity method in 2001 and prior years. The
Company’s interest in Piedmont increased from 54.651% in 2002 to 77.326% in 2003.

ˆ1DMR3JX7WQ7JHHC\Š

1DMR3JX7WQ7JHHC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded $16.3 million of franchise rights and $4.3 million related to customer relationships
in connection with its 2003 acquisition of an additional interest in Piedmont. The Company recorded
$3.4 million of franchise rights and $.9 million related to customer relationships in connection with its 2002
acquisition of a controlling interest in Piedmont.

A rollforward of activity for franchise rights, net and goodwill, net from December 30, 2001 to December 28,
2003 follows:

In Thousands

Balance on December 30, 2001

Consolidation of Piedmont
Acquisitions

Balance on December 29, 2002

Acquisitions

Balance on December 28, 2003

7. OTHER IDENTIFIABLE INTANGIBLE ASSETS

Other identifiable intangible assets were summarized as follows:

In Thousands

Other identifiable intangible assets
Less: Accumulated amortization

Other identifiable intangible assets, net

Franchise
Rights,
net

Goodwill,
net

$ 260,969

$ 74,693

239,908
3,497

25,019
2,042

$ 504,374

$ 101,754

16,298

295

$520,672

$102,049

Estimated
Useful
Lives

3-20 years

Dec. 28,
2003

Dec. 29,
2002

$61,102 $55,743
48,946

52,051

$ 9,051 $ 6,797

Amortization expense related to other identifiable intangible assets was $3.1 million, $2.8 million and
$3.0 million in 2003, 2002 and 2001, respectively. Amortization expense of other identifiable intangible
assets in future years based upon recorded amounts as of December 28, 2003 will be $3.1 million,
$.9 million, $.5 million, $.4 million and $.4 million for 2004 through 2008, respectively. Other identifiable
intangible assets primarily represents customer relationships.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:06 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PH7NJCC.Š

1DMR3JX7PH7NJCC

CLN

g25u99-6.0

46546 TX 58

PMT

13*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. OTHER ACCRUED LIABILITIES

Other accrued liabilities were summarized as follows:

In Thousands

Accrued marketing costs
Accrued insurance costs
Accrued taxes (other than income taxes)
Employee benefit plan accruals
All other accrued expenses

Total

9. LONG-TERM DEBT

Long-term debt was summarized as follows:

Dec. 28,
2003

$ 8,753
11,351
1,738
9,084
21,566

Dec. 29,
2002

$ 7,146
9,424
7,518
7,307
22,141

$52,492

$53,536

In Thousands

Term Loan
Lines of Credit
Term Loan
Debentures
Debentures
Debentures
Senior Notes
Senior Notes
Other notes payable

Maturity

2004
2005
2005
2007
2009
2009
2012
2015
2004-2006

Interest
Rate

1.52%
1.70%
6.85%
7.20%
6.38%
5.00%
5.30%
5.75%

Interest Paid

Varies
Varies
Varies
Semi-annually
Semi-annually
Semi-annually
Semi-annually
Semi-annually
Quarterly

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

Dec. 28,
2003

$ 17,600
85,000
100,000
100,000
250,000
150,000
100,000
117

802,717
78

Dec. 29,
2002

$ 85,000
37,600
85,000
100,000
100,000
250,000
150,000

156

807,756
31

Long-term debt

$802,639

$807,725

The principal maturities of long-term debt outstanding on December 28, 2003 were as follows:

In Thousands

2004
2005
2006
2007
2008
Thereafter

Total long-term debt

$
78
102,600
39
100,000
—
600,000

$802,717

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:07 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PHD=F3CyŠ

1DMR3JX7PHD=F3C

CLN

g01x31-11.0

46546 TX 59

PMT

13*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company borrows periodically under its available lines of credit. These lines of credit, in the aggregate
amount of $60.0 million at December 28, 2003, are made available at the discretion of the two participating
banks at rates negotiated at the time of borrowing and may be withdrawn at any time by such banks. The
Company intends to renew such borrowings as they mature. To the extent these borrowings and borrowings
under the revolving credit facility do not exceed the amount available under the Company’s $125 million
revolving credit facility, they are classified as noncurrent liabilities. On December 28, 2003, $17.6 million
was outstanding under these lines of credit. The Company intends to either refinance short-term debt
maturities with currently available lines of credit or repay them with cash flow from operations.

In December 2002, the Company entered into a three-year $125 million revolving credit facility. This facility
includes an option to extend the term for an additional year at the discretion of the participating banks. The
revolving credit facility bears interest at a floating rate of LIBOR plus an interest rate spread of .60%. In
addition, there is a facility fee of .15% required for this revolving credit facility. Both the interest rate spread
and the facility fee are determined from a commonly used pricing grid based on the Company’s long-term
senior unsecured noncredit-enhanced debt rating. The facility contains covenants which establish ratio
requirements related to interest coverage, and long-term debt to cash flow. On December 28, 2003, there
were no amounts outstanding under this facility.

On November 21, 2002, the Company issued $150 million of senior notes maturing November 15, 2012 at
a coupon rate of 5.00%. The Company used the proceeds from this issuance to repay borrowings outstanding
under its lines of credit and the Company’s $170 million revolving credit facility, as well as to repay a
$97.5 million term loan on behalf of Piedmont.

On March 27, 2003, the Company issued $100 million of senior notes maturing on April 1, 2015 at a
coupon rate of 5.30%. The Company used the proceeds from this issuance to purchase an additional interest
in Piedmont from The Coca-Cola Company for $53.5 million and to repay a portion of the Company’s
$170 million term loan.

During 2002, Piedmont refinanced a $195 million term loan using the proceeds from a loan from the
Company. The Company’s source of funds for this loan to Piedmont included the issuance of $150 million
of senior notes, its lines of credit, the revolving credit facility and available cash flow. Piedmont pays the
Company interest on the loan at the Company’s average cost of funds plus 0.50%. The loan matures on
December 31, 2005. The Company plans to provide for Piedmont’s future financing requirements under
these terms.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:08 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PHMCX2CdŠ

1DMR3JX7PHMCX2C

CLN

g25u99-6.0

46546 TX 60

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company filed an $800 million shelf registration for debt and equity securities in January 1999. The
Company used this shelf registration to issue long-term debt of $250 million in 1999, $150 million in 2002
and $100 million in 2003, as previously discussed. The Company currently has up to $300 million available
for use under this shelf registration which, subject to the Company’s ability to consummate a transaction on
acceptable terms, could be used for long-term financing or refinancing of long-term debt maturities.

After taking into account all of the interest rate hedging activities, the Company had a weighted average
interest rate of 4.9% for its debt and capital lease obligations as of December 28, 2003 compared to 5.0% at
December 29, 2002. The Company’s overall weighted average interest rate on its debt and capital lease
obligations was 4.9%, 5.6% and 6.5% for 2003, 2002 and 2001, respectively.

As of December 28, 2003, before giving effect to forward interest rate agreements, approximately 46% of its
debt and capital lease obligations was subject to changes in short-term interest rates. As a result of the forward
interest rate agreements discussed in Note 10 to the consolidated financial statements, the Company’s
exposure to interest rate movements has been significantly reduced through April 2004. The forward interest
rate agreements expire in May 2004. 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 component of the Company’s debt and capital lease obligations
increased by 1%, annual interest expense for the year ended December 28, 2003 would have increased by
approximately $2.5 million and net income would have been reduced by approximately $1.5 million.

With regard to the Company’s $85 million term loan, the Company must maintain its public debt ratings at
investment grade as determined by both Moody’s and Standard & Poor’s. If the Company’s public debt
ratings fall below investment grade within 90 days after the public announcement of certain 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 the foreseeable future.

The Company’s credit ratings are reviewed by the respective rating agencies. Changes in the Company’s
operating results or financial position could result in changes in the Company’s credit ratings. Lower credit
ratings could result in higher borrowing costs for the Company or in the event of a reduction below
investment grade level, a potential default on one if its credit agreements as discussed above. There were no
changes in these debt ratings from the prior year. It is the Company’s intent to operate in a manner that will
allow it to maintain its investment grade ratings.

The Company’s revolving credit facility contains two financial covenants related to ratio requirements for
interest coverage, and long-term debt to cash flow, as defined in the credit agreement. These covenants do not
currently, and the Company does not anticipate that they will, restrict its liquidity or capital resources. The
Company’s public debt is not subject to financial covenants but does limit the incurrence of certain liens and
encumbrances.

All of the outstanding long-term debt has been issued by the Company with none being issued by any of the
Company’s subsidiaries. There are no guarantees of the Company’s debt.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:09 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PHSXX4C"Š

1DMR3JX7PHSXX4C

CLN

g01x31-11.0

46546 TX 61

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. DERIVATIVE FINANCIAL INSTRUMENTS

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 changes 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. All of the
Company’s outstanding interest rate swap agreements and forward rate agreements are LIBOR-based.

Derivative financial instruments were summarized as follows:

In Thousands

Interest rate swap agreement—floating
Interest rate swap agreement—floating
Interest rate swap agreement—floating
Interest rate swap agreement—floating
Interest rate swap agreement—floating
Interest rate swap agreement—floating

In Thousands

Forward interest rate agreement—fixed
Forward interest rate agreement—fixed
Forward interest rate agreement—fixed
Forward interest rate agreement—fixed

December 28, 2003

December 29, 2002

Notional
Amount

$25,000
25,000
50,000
50,000
50,000
50,000

Remaining
Term

3.92 years
3.92 years
5.42 years
3.92 years
5.58 years
8.92 years

Notional
Amount

Remaining
Term

$50,000
50,000
50,000

4.92 years
6.58 years
9.92 years

December 28, 2003

Notional
Amount

$50,000
50,000
50,000
50,000

Start
Date

1/02/03
5/01/03
5/15/03
5/30/03

Length
of Term

1 year
1 year
1 year
1 year

In November 2002, the Company entered into three interest rate swap agreements in conjunction with the
issuance of $150 million of senior notes and the refinancing of other Company debt as previously discussed.
These interest rate swap agreements effectively converted $150 million of the Company’s debt from a fixed
rate to a floating rate and are accounted for as fair value hedges.

In December 2002, the Company entered into three one-year forward interest rate agreements that fixed
short-term rates on certain components of the Company’s floating rate debt for periods of twelve months.
These forward interest rate agreements did not meet the criteria set forth in Statement of Financial
Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as
amended, for hedge accounting and were accounted for on a mark-to-market basis. The mark-to-market
adjustment for these forward interest rate agreements was an increase to interest expense of $0.1 million in
2003.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:09 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PHW327CmŠ

1DMR3JX7PHW327C

CLN

g25u99-6.0

46546 TX 62

PMT

14*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the fourth quarter of 2002, the Company terminated two interest rate swap agreements classified as
cash flow hedges. These two interest rate swap agreements hedged the cash flows on part of a variable rate
term loan the Company had outstanding. In conjunction with the issuance of $150 million of senior notes in
November 2002, the variable rate term loan was repaid early. The term loan had a maturity of May 2003.
Upon the repayment of the term loan, the cash flow hedges no longer qualified as hedges due to the fact that
the variability of cash flows being hedged was eliminated with the repayment of the variable rate term loan,
and thus the forecasted schedule of payments did not occur. Accordingly, the interest rate swap agreements
were terminated and the resulting expense of $2.2 million was reflected in the 2002 statement of operations.

In January 2003, the Company entered into an additional $50 million, one-year forward interest rate
agreement. This agreement was accounted for as a cash flow hedge.

In March 2003, the Company entered into two forward interest rate agreements in conjunction with the
issuance of $100 million of twelve-year senior notes. These forward interest rate agreements were accounted
for as cash flow hedges. The hedges were terminated at the time the senior notes were priced, with the
Company receiving proceeds of $3.1 million. The proceeds were recorded in other liabilities and are being
amortized as a reduction of interest expense over the life of the related senior notes.

In July 2003, the Company entered into three interest rate swap agreements in conjunction with the $100
million of senior notes previously mentioned. These interest rate swap agreements effectively converted $100
million of the Company’s debt from a fixed rate to a floating rate and are accounted for as fair value hedges.

During 2003, 2002 and 2001, the Company amortized deferred gains related to previously terminated
interest rate swap agreements and forward interest rate agreements which reduced interest expense by
$2.1 million, $1.9 million and $1.2 million, respectively. Interest expense will be reduced by the amortization
of these deferred gains in 2004 through 2009 as follows: $1.9 million, $1.7 million, $1.7 million,
$1.7 million, $1.7 million, and $.9 million, respectively.

The counterparties to these contractual arrangements are major financial institutions with which the
Company also has other financial relationships. The Company uses several different financial institutions for
interest rate derivative contracts to minimize the concentration of credit risk. While the Company is exposed
to credit loss in the event of nonperformance by these counterparties, the Company does not anticipate
nonperformance by these parties. The Company has master agreements with the counterparties to its
derivative financial agreements that provide for net settlement of derivative transactions.

11. FAIR VALUES OF FINANCIAL INSTRUMENTS

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

Cash, Accounts Receivable and Accounts Payable

The fair values of cash, accounts receivable and accounts payable approximate carrying values due to the short
maturity of these financial instruments.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

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17-Mar-2004 14:10 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PHY03CCFŠ

1DMR3JX7PHY03CC

CLN

g01x31-11.0

46546 TX 63

PMT

13*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 borrowings approximate their fair values.

Non-Public Fixed Rate Long-Term Debt

The fair values of the Company’s fixed rate long-term borrowings are estimated using discounted cash flow
analyses based on the Company’s current incremental borrowing rates for similar types of borrowing
arrangements.

Derivative Financial Instruments

Fair values for the Company’s interest rate swap agreements and forward interest rate agreements are based
on current settlement values.

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

In Thousands

Public debt
Non-public variable rate long-term debt
Non-public fixed rate long-term debt
Interest rate swap agreements and forward

interest rate agreements

Letters of credit

December 28, 2003

December 29, 2002

Carrying
Amount

$700,000
102,600
117

1,613
—

Fair
Value

$747,359
102,600
120

1,613
11,888

Carrying
Amount

$600,000
207,600
156

Fair
Value

$634,150
207,600
156

(2,023)
—

(2,023)
8,910

The fair values of the interest rate swap agreements and forward interest rate agreements at December 28,
2003 represent the estimated amounts the Company would have paid upon termination of these agreements.
The fair values of the interest rate swap agreements and forward interest rate agreements at December 29,
2002 represent the estimated amount the Company would have received upon termination of these
agreements.

12. OTHER LIABILITIES

Other liabilities were summarized as follows:

In Thousands

Accruals for executive benefit plans
Deferred gains on terminated interest rate agreements
Other

Total

Dec. 28,
2003

$52,645
9,490
12,322

$74,457

Dec. 29,
2002

$46,274
8,141
9,985

$64,400

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:10 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PHYLF9CeŠ

1DMR3JX7PHYLF9C

CLN

g25u99-6.0

46546 TX 64

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accruals for executive benefit plans relate to three benefit programs for eligible executives of the
Company. These benefit programs are the Supplemental Savings Incentive Plan (“Supplemental Savings
Plan”), the Officer Retention Plan (“Retention Plan”) and a supplemental benefit plan.

Eligible participants in the Supplemental Savings Plan may elect to defer a portion of their annual salary and
bonus. The Company matches 30% of the first 6% of salary (excluding bonuses) deferred by the participant.
The Company can also make discretionary contributions to participants’ accounts. Participants are
immediately vested for their contributions and after five years of service the participants are vested for
Company contributions. Participant deferrals and Company contributions are deemed invested in either a
fixed benefit option or certain investment funds specified by the Company. Participant balances in the fixed
benefit option accrue a return depending upon the participant’s age, years of service and other factors. The
long-term liability under this plan was $31.3 million and $29.0 million as of December 28, 2003 and
December 29, 2002, respectively.

The benefits under the Retention Plan increase with each year of participation as set forth in an agreement
between the participant and the Company. Eligible participants receive a 20-year annuity payable in equal
monthly installments commencing at retirement or under other certain conditions. Benefits under the
Retention Plan are reduced by 50% for participants who terminate employment due to severance before age
60 and not due to death or disability. The long-term liability under this plan was $19.1 million and
$17.2 million as of December 28, 2003 and December 29, 2002, respectively.

In conjunction with the elimination in 2003 of a split-dollar life insurance benefit for officers of the
Company, a replacement benefit plan was established. The replacement benefit plan provides a supplemental
benefit to eligible participants that increases with each additional year of service and is comparable to benefits
provided to eligible participants through certain split-dollar life insurance agreements. Upon separation from
the Company, participants receive an annuity payable in up to ten annual installments or a lump sum. The
long-term liability was $2.3 million under this plan as of December 28, 2003.

13. COMMITMENTS AND CONTINGENCIES

Rental expenses incurred for operating leases during 2003, 2002 and 2001 were as follows:

In Thousands

Minimum rentals
Contingent rentals

Total

2003

2002

2001

$6,307 $7,438 $11,889
480

—

$6,307 $7,438 $12,369

Contingent rentals are based on factors other than the passage of time, principally inflation factors and
interest rate factors.

The Company leases office and warehouse space, machinery and other equipment under operating lease
agreements which expire at various dates through 2016. These leases generally contain scheduled rent
increases or escalation clauses, renewal options or, in some cases, purchase options. The Company leases
certain warehouse space and other equipment under capital lease agreements which expire at various dates

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:12 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PHZ7SXC3Š

1DMR3JX7PHZ7SXC

CLN

g01x31-11.0

46546 TX 65

PMT

10*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

through 2030. These leases contain scheduled rent increases or escalation clauses. Amortization of assets
recorded under capital leases is included in depreciation expense.

Leasing is used for certain capital additions when considered cost effective relative to other sources of capital.

The following is a summary of future minimum lease payments for all capital leases and operating leases as of
December 28, 2003.

In Thousands

2004
2005
2006
2007
2008
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

Operating
Leases

$ 6,639
6,061
5,746
4,783
4,631
3,811

$31,671

Total

$ 12,303
11,518
11,071
9,983
9,983
150,090

$204,948

Capital
Leases

5,664
5,457
5,325
5,200
5,352
146,279

$173,277

127,714
45,563
1,337

$ 44,226

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
contractual minimum annual purchases required from SAC are approximately $40 million. See Note 18 to
the consolidated financial statements for additional information concerning SAC.

The Company is also a member of Southeastern Container (“SEC”), a plastic bottle manufacturing
cooperative, from which it is obligated to purchase at least 80% of its requirements of plastic bottles for
certain designated territories. See Note 18 to the consolidated financial statements for additional information
concerning SEC.

The Company guarantees a portion of SAC’s and SEC’s debt and lease obligations. On December 28, 2003,
these debt and lease guarantees were $39.4 million. The Company has not recorded any liability associated
with these guarantees. The guarantees relate to debt and lease obligations, resulting primarily from the
purchase of production equipment and facilities. Both cooperatives consist solely of Coca-Cola bottlers. In
the event either of these cooperatives fail to fulfill their commitments under the related debt and lease
obligations, the Company would be responsible for payments to the lenders up to the level of the guarantees.
If these cooperatives had borrowed up to their maximum borrowing capacity, the Company’s maximum
potential amount of payments under these guarantees on December 28, 2003 would have been $58.9 million.
The Company does not anticipate that either of these cooperatives will fail to fulfill their commitments under
these agreements. The Company believes that each of these cooperatives has sufficient assets, including
production equipment, facilities and working capital, to adequately mitigate the risk of material loss.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:12 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PH=37TCXŠ

1DMR3JX7PH=37TC

CLN

g25u99-6.0

46546 TX 66

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has standby letters of credit, primarily related to its property and casualty insurance program.
On December 28, 2003, these letters of credit totaled $11.9 million.

The Company participates in long-term contractual arrangements with certain prestige properties, athletic
venues and other locations. The future payments related to these contractual arrangements as of December
28, 2003 amount to $26.3 million and expire at various dates through 2016.

The Company is involved in various claims and legal proceedings which have arisen in the ordinary course of
its business. The Company believes that the ultimate disposition of its claims and legal proceedings will not
have a material adverse effect on the financial condition, cash flows or results of operations of the Company.
No material amount of loss in excess of recorded amounts is believed to be reasonably possible at this time.

14.

INCOME TAXES

The provision for income taxes consisted of the following:

In Thousands

Current:
Federal
State

Total current provision

Deferred:
Federal
State

Total deferred provision

Income tax expense

Fiscal Year

2003

2002

2001

—
—

—

19,443
(12,086)

7,357

294
—

294

13,829
1,124

14,953

$1,338
—

1,338

(447)
1,335

888

$ 7,357

$15,247

$2,226

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:12 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PH=DDSC#Š

1DMR3JX7PH=DDSC

CLN

g01x31-11.0

46546 TX 67

PMT

10*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Current tax expense for 2002 and 2001 represents alternative minimum tax (“AMT”). Deferred income taxes
are recorded based upon differences between the financial statement and tax bases of assets and liabilities and
available net operating loss and 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
Pension

Gross deferred income tax liabilities

Net operating loss carryforwards
AMT credits
Deferred compensation
Postretirement benefits
Termination of interest rate agreements
Other

Gross deferred income tax assets

Valuation allowance for deferred tax assets
Net current deferred income tax liability

Net deferred income tax liability

Accumulated other comprehensive income adjustments

Dec. 28,
2003

$ 97,965
100,960
40,995
11,886

251,806

(41,275)
(12,565)
(21,715)
(12,929)
(4,290)
(3,004)

(95,778)

16,770
918

171,880

(15,786)

Dec. 29,
2002

$103,877
100,030
25,006
3,440

232,353

(39,209)
(15,844)
(18,550)
(12,171)
(3,884)
(5,126)

(94,784)

25,964
1,528

162,005

(13,708)

Net deferred income tax liability

$156,094

$148,297

Except for amounts for which a valuation allowance has been provided, the Company believes the deferred
tax assets will be realized primarily through the reversal of existing temporary differences. The reduction in
the valuation allowance from December 29, 2002 to December 28, 2003 relates to the completion of a state
income tax audit, a reorganization of certain of the Company’s subsidiaries and a corresponding assessment of
the Company’s ability to utilize certain state net operating loss carryforwards. The valuation allowance of
$16.8 million and $26.0 million as of December 28, 2003 and December 29, 2002, respectively, relates
primarily to state net operating loss carryforwards which expire in varying amounts through 2023.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:13 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PJ04V0CRŠ

1DMR3JX7PJ04V0C

CLN

g25u99-6.0

46546 TX 68

PMT

13*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INCOME TAXES (continued)

14.
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
State income taxes, net of federal benefit
Valuation allowance change
Amortization of franchise rights and goodwill
Favorable tax settlement
Officers’ life insurance premiums
Cash surrender value
Termination of certain company-owned life insurance policies
Termination of split-dollar life insurance program
Other

2003

$13,321
1,338
(9,194)

2,589
(1,676)
979

Fiscal Year

2002

$13,300
735
3,522

992
(1,102)

2001

$ 4,094
307
(522)
486
(2,850)
1,135
(1,195)

(2,200)

771

Income tax expense

$ 7,357

$15,247

$ 2,226

On December 28, 2003, the Company had $16.0 million of federal net operating losses and $12.6 million of
AMT credit carryforwards available to reduce future income taxes. The federal net operating loss
carryforwards expire in varying amounts through 2022 while the AMT credit carryforwards have no
expiration date.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:13 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PJ0K0NCNŠ

1DMR3JX7PJ0K0NC

CLN

g01x31-11.0

46546 TX 69

PMT

11*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The reconciliation of the components of accumulated other comprehensive income (loss) was as follows:

In Thousands

Balance at December 31, 2000
Change in fair market value of cash flow hedges, net of

tax

Change in proportionate share of Piedmont’s

accumulated other comprehensive loss, net of tax
Additional minimum pension liability adjustment, net

of tax

Balance as of December 30, 2001

Change in fair market value of cash flow hedges, net of

tax

Termination of cash flow hedges, reclassified into

earnings

Additional minimum pension liability adjustment, net

of tax

Derivatives
Gain/
(Loss)

$ —

(1,825)

$(1,821)

(408)

2,229

Minimum
Pension
Liability
Adjustment

—

Total

—

(10,984)

$(10,984)

(1,825)

(10,984)

$(12,805)

(408)

2,229

(9,637)

Balance as of December 29, 2002

$ —

$(20,621)

Change in fair market value of cash flow hedges, net of

tax

Additional minimum pension liability adjustment, net

of tax

(62)

(3,247)

Balance as of December 28, 2003

(62)

$(23,868)

$(23,930)

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:14 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PJ27ZGCfŠ

1DMR3JX7PJ27ZGC

CLN

g25u99-6.0

46546 TX 70

PMT

11*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the components of other accumulated comprehensive income (loss) was as follows:

In Thousands

2003
Change in fair market value of cash flow hedges
Minimum pension liability adjustment

Other comprehensive income (loss)

2002
Minimum pension liability adjustment

Other comprehensive income (loss)

2001
Change in fair market value of cash flow hedges
Change in proportionate share of
Piedmont’s accumulated other comprehensive loss
Minimum pension liability adjustment

Other comprehensive income (loss)

16. CAPITAL TRANSACTIONS

Before-
Tax
Amount

(101)
(39,615)

$(39,716)

Income
Tax
Effect

39
15,747

$15,786

After-
Tax
Amount

(62)
(23,868)

$(23,930)

$(34,329)

$13,708

$(20,621)

(3)

(2,944)
(17,717)

1,119
6,733

(1,825)
(10,984)

$(20,654)

$ 7,849

$(12,805)

During 2002, two of the Company’s directors, J. Frank Harrison, Jr., Chairman Emeritus, and J. Frank
Harrison, III, Chairman of the Board of Directors and Chief Executive Officer, entered into plans providing
for sales of up to an aggregate total of 250,000 shares of the Company’s Common Stock in accordance with
Securities and Exchange Commission Rule 10b5-1. Shares sold under the plans were issuable to
Mr. Harrison, Jr. and Mr. Harrison, III under stock option agreements that were granted in 1989 as long-
term incentives. During 2002, all 250,000 shares of Common Stock exercisable under the options were sold
under the plans. Total proceeds to the Company from the exercise of the stock options under the plans were
$7.2 million.

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.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:15 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PJ4K66CFŠ

1DMR3JX7PJ4K66C

CLN

g01x31-11.0

46546 TX 71

PMT

11*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 12, 1999, the stockholders of the Company approved a restricted stock award for J. Frank Harrison,
III, the Company’s Chairman of the Board of Directors and Chief Executive Officer, consisting of 200,000
shares of the Company’s Class B Common Stock. The fair value of the restricted stock award, when
approved, was approximately $11.7 million based on the market price of the Common Stock on the effective
date of the award. 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 installment is contingent upon the Company
achieving at least 80% of the overall goal achievement factor in the Company’s Annual Bonus Plan. The
Company achieved more than 80% of the overall goal achievement factor in 2003, 2002 and 2001, resulting
in compensation expense of $1.8 million, $2.3 million and $1.4 million, respectively. As of December 28,
2003, the fair market value of the potentially issuable shares (120,000 shares) in the future under this award
approximated $6.3 million.

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.

17. 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 consecutive years which gives the highest average compensation
and the average of the Social Security taxable wage base during the 35-year period before a participant reaches
Social Security retirement age. Contributions 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 pertinent information for the two nonunion Company-sponsored pension
plans:

Changes in Projected Benefit Obligation

In Thousands

Projected benefit obligation at beginning of year
Service cost
Interest cost
Actuarial loss
Benefits paid

Projected benefit obligation at end of year

Fiscal Year

2003

2002

$117,841 $102,327
4,006
7,305
7,485
(3,282)

4,363
8,129
20,306
(3,837)

$146,802 $117,841

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:15 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PJ5SWRCGŠ

1DMR3JX7PJ5SWRC

CLN

g25u99-6.0

46546 TX 72

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Change in Plan Assets

In Thousands

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

Fair value of plan assets at end of year

Funded Status

In Thousands

Funded status of the plans
Unrecognized prior service cost
Unrecognized net loss
Contributions from measurement date to fiscal year-end

Net amount recognized

Amounts Recognized in the Balance Sheet

In Thousands

Accrued benefit liability
Intangible asset
Accumulated other comprehensive income
Contributions from measurement date to fiscal year-end

Net amount recognized

Net Periodic Pension Cost

In Thousands

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

Net periodic pension cost

Fiscal Year

2003

2002

$ 84,086 $80,572
(6,697)
13,493
(3,282)

13,244
7,800
(3,837)

$101,293 $84,086

Dec. 28,
2003

Dec. 29,
2002

$(45,509) $(33,755)
109
48,339

90
58,236
4,600

$ 17,417 $ 14,693

Dec. 28,
2003

Dec. 29,
2002

$(26,888) $(19,745)
109
34,329

90
39,615
4,600

$ 17,417 $ 14,693

Fiscal Year

2003

2002

2001

$ 4,363 $ 4,006 $ 3,290
7,305
6,578
(7,763)
(7,139)
(135)
(88)
15
2,098

8,129
(6,898)
21
4,062

$ 9,677 $ 6,182 $ 1,985

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:16 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PJFT6WCuŠ

1DMR3JX7PJFT6WC

CLN

g01x31-11.0

46546 TX 73

PMT

13*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant Assumptions Used

Weighted average discount rate used in determining net periodic pension

cost

Weighted average discount rate used in determining the actuarial present

value of the projected benefit obligation

Weighted average expected long-term rate of return on plan assets
Weighted average rate of compensation increase
Measurement date

2003

2002

2001

7.00%

7.25%

7.75%

6.25%
8.00%
4.00%

7.25%
7.00%
9.00%
9.00%
4.00%
4.00%
Nov. 30 Nov. 30 Nov. 30

A .25% increase or decrease in the discount rate assumption at the beginning of 2003 would have impacted
the projected benefit obligation and net periodic pension cost as follows:

In Thousands

Impact on

Projected benefit obligation at December 28, 2003
Net periodic pension cost in 2003

Cash Flows

In Thousands

Expected employer contributions for 2004

Anticipated future benefit payments reflecting expected future service for the fiscal years:

2004
2005
2006
2007
2008
2009–2013

.25%
Increase

.25%
Decrease

$(6,371)
(930)

$6,797
989

$23,400

$ 3,611
4,011
4,325
4,706
5,035
32,964

COCA-COLA BOTTLING C
ANNUAL REPORT

RR Donnelley ProFile

CHMFBU-2KP-PF03
8.2.15

CHMmoosk0cm
CHM

ˆ1DMR3JX7V5D827CÉŠ
13*
2C

46546 TX 74
PMT
PS

1DMR3JX7V5D827C

g25u99-6.0

CLN

18-Mar-2004 13:56 EST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Plan Assets

The Company’s pension plan allocation at December 28, 2003 and December 29, 2002, the target allocation
for 2004 and the expected weighted average long-term rate of return by asset category were as follows:

Target
Allocation
2004

Percentage of Plan Assets
at Fiscal Year End

12/28/03

12/29/02

Weighted Average
Expected
Long-Term Rate
of Return—2003

U.S. large capitalization

equity securities

U.S. small/mid capitalization

equity securities

International equity securities
Debt securities

Total

40%

10%
15%
35%

100%

40%

11%
15%
34%

100%

39%

11%
15%
35%

100%

3.4%

1.0%
1.6%
2.0%

8.0%

The investments in the Company’s pension plan include U.S. equities, international equities and fixed
income instruments. All of the plan assets are invested in institutional investment funds managed by
professional investment advisors. The objective of the Company’s investment philosophy is to earn the plan’s
targeted rate of return over longer periods without assuming excess investment risk. The general guidelines for
plan investments include 30%–45% in large capitalization U.S. equities, 0%–20% in small and mid-
capitalization U.S. equities, 0%–20% in non-U.S. equities and 10%–50% in fixed income instruments. The
Company currently has 66% of its plan investments in equities and 34% in fixed income instruments.

U.S. large capitalization equities include domestic based companies that are generally included in common
market indices such as the S&P 500™ and the Russell 1000™. Small and mid-capitalization equity securities
include small domestic equities as represented by the Russell 2000™ index. International equity securities
include companies from developed markets outside of the U.S. Debt securities at December 28, 2003 are
comprised of investments in two institutional bond funds with a weighted average duration of approximately
3 years.

The weighted average expected long-term rate of return of plan assets was reduced from 9.0% in 2002 to
8.0% for determination of 2003 net periodic pension cost. This rate reflects an estimate of long-term future
returns for the pension plan assets. This estimate is primarily a function of the asset classes (equities versus
fixed income) in which the pension plan assets are invested and the analysis of past performance of these asset
classes over a long period of time. This analysis includes expected long-term inflation and the risk premiums
associated with equity investments and fixed income investments.

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 $1.3 million,
$1.3 million and $1.2 million in 2003, 2002 and 2001, respectively.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:17 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PJJGP7CeŠ

1DMR3JX7PJJGP7C

CLN

g01x31-11.0

46546 TX 75

PMT

10*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company provides a 401(k) Savings Plan for substantially all of its employees who are not part of
collective 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 2003, 2002 and 2001 was $4.0 million, $3.8 million and $2.8 million, respectively.

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

The Company provides postretirement benefits for a portion of its current employees. The Company
recognizes the cost of postretirement benefits, which consist principally of medical benefits, during employees’
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
postretirement benefit plan in 2001 and 2002. 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 coverage under the plan will cease.

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the
“Act”) was enacted. The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy
to sponsors of retiree health care benefit plans. The postretirement benefit obligation as of December 28,
2003 and the net periodic postretirement benefit cost in 2003 do not reflect the effects of the Act since
enactment occurred after the Company’s postretirement plan measurement date of September 30, 2003.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:18 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PJJVWWCcŠ

1DMR3JX7PJJVWWC

CLN

g25u99-6.0

46546 TX 76

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables set forth a reconciliation of the beginning and ending balances of the benefit obligation,
a reconciliation of the beginning and ending balances of the 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 (gain)
Benefits paid

Benefit obligation at end of year

Fair value of plan assets at beginning of year
Employer contributions
Plan participants’ contributions
Benefits paid

Fair value of plan assets at end of year

In Thousands

Funded status of the plan
Unrecognized net loss
Unrecognized prior service cost
Contributions between measurement date and fiscal year-end

Accrued liability

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 cost

Fiscal Year

2003

$48,271
512
3,159
674
(2,826)
(2,916)

$46,874

$ —
2,242
674
(2,916)

$ —

Dec. 28,
2003

$(46,874)
16,427
(2,370)
814

$(32,003)

2002

$46,060
403
3,238
575
779
(2,784)

$48,271

$ —
2,209
575
(2,784)

$ —

Dec. 29,
2002

$(48,271)
20,183
(2,666)
663

$(30,091)

Fiscal Year

2003

2002

2001

$ 512 $ 403 $ 331
3,253
3,238
(25)
(25)
1,106
1,155
(271)
(271)

3,159
(25)
931
(272)

$4,305 $4,500 $4,394

The weighted average discount rate used to estimate the postretirement benefit obligation was 6.00%, 6.75%
and 7.25% as of December 28, 2003, December 29, 2002 and December 30, 2001, respectively. The
measurement dates were September 30 of each year 2003, 2002 and 2001, respectively.

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:19 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PJMQFKC_Š

1DMR3JX7PJMQFKC

CLN

g01x31-11.0

46546 TX 77

PMT

13*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The weighted average health care cost trend used in measuring the postretirement benefit expense in 2003
was 10% graded down 1% per year to an ultimate rate of 5%. The weighted average health care cost trend
used in measuring the postretirement benefit expense in 2002 was 11% graded down 1% per year to an
ultimate rate of 5%. The weighted average health care cost trend used in measuring the postretirement benefit
expense in 2001 was 12% graded down 1% per year to an ultimate rate of 5%.

A 1% increase or decrease in this annual health care cost trend for 2003 would have impacted the
postretirement benefit obligation and net periodic postretirement benefit cost as follows:

In Thousands

Impact on

Postretirement benefit obligation at December 28, 2003
Net periodic postretirement benefit cost in 2003

18. RELATED PARTY TRANSACTIONS

1%
Increase

$5,857
523

1%
Decrease

$(5,122)
(456)

The Company’s business consists primarily of the production, 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 concentrate or syrup) of its soft drink products are manufactured. As of
December 28, 2003, The Coca-Cola Company had a 27.4% interest in the Company’s total outstanding
Common Stock and Class B Common Stock on a combined basis.

The following table summarizes the significant transactions between the Company and The Coca-Cola
Company:

In Millions

2003

2002

2001

Payments by the Company for concentrate, syrup, sweetener and

other miscellaneous purchases

Payments by the Company for customer marketing programs
Payments by the Company for cold drink equipment parts
Payments by the Company for local media
Marketing funding support payments to the Company
Fountain delivery and equipment repair fees paid to the Company
Local media and presence marketing support provided by The

$284.3
50.5
4.4
.2
53.4
7.2

$287.5
50.2
4.6
—
56.0
6.6

$241.1
22.8
4.8
4.4
22.3
5.0

Coca-Cola Company on the Company’s behalf

13.0

17.7

6.9

The significant changes in payments to and from The Coca-Cola Company relate primarily to the
consolidation of Piedmont in 2002 and changes in the administration of customer marketing programs, local
media and marketing funding support by The Coca-Cola Company at the beginning of 2002.

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 $24.5 million, $23.6 million and
$21.0 million in 2003, 2002 and 2001, respectively. Purchases from CCE under this arrangement were

COCA-COLA BOTTLING C

RR Donnelley ProFile

CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

17-Mar-2004 14:19 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PJPB9QCEŠ

1DMR3JX7PJPB9QC

CLN

g25u99-6.0

46546 TX 78

PMT

12*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$20.9 million, $20.3 million and $21.0 million in 2003, 2002 and 2001, respectively. The Coca-Cola
Company has significant equity interests in the Company and CCE. As of December 28, 2003, CCE held
10.5% of the Company’s outstanding Common Stock but held no shares of the Company’s Class B
Common Stock, giving CCE a 7.7% equity interest in the Company’s total outstanding Common Stock and
Class B Common Stock on a combined basis.

Along with all other Coca-Cola bottlers, the Company has become a member in Coca-Cola Bottlers’ Sales &
Services Company LLC, (“CCBSS”), which was formed in 2003 for the purposes of facilitating various
procurement functions and distributing certain specified beverage products of The Coca-Cola Company with
the intention of enhancing the efficiency and competitiveness of the Coca-Cola bottling system in the United
States. The Company paid $.2 million in 2003 to CCBSS for its share of CCBSS’ administrative costs. CCE
is also a member of CCBSS.

The Company entered into an agreement for consulting services with J. Frank Harrison, Jr., the former
Chairman of the Board of Directors of the Company, beginning in 1997. Payments related to the consulting
services agreement totaled $183,333 and $200,000 in 2002 and 2001, respectively. Mr. Harrison, Jr. passed
away in November 2002. An accrual of $3.8 million related to a retirement benefit payable to Mr. Harrison,
Jr. was reversed in the fourth quarter of 2002.

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 for $10.0 million an additional
4.651% interest in Piedmont from The Coca-Cola Company, increasing the Company’s ownership in
Piedmont to 54.651%. In March 2003, the Company purchased an additional 22.675% interest in Piedmont
from The Coca-Cola Company for $53.5 million, increasing its ownership interest in Piedmont to 77.326%.

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 2003, 2002 and 2001 totaling $67.6 million, $55.4 million and $53.0 million,
respectively. The Company received $17.6 million, $17.9 million and $17.8 million for management services
pursuant to its management agreement with Piedmont for 2003, 2002 and 2001, respectively. Beginning in
2002, sales of product at cost to Piedmont and management fees earned pursuant to its management
agreement were eliminated in consolidation.

During 2002, Piedmont refinanced a $195 million term loan using the proceeds from a loan from the
Company. The Company’s source of funds for this loan to Piedmont included the issuance of $150 million
of senior notes, its lines of credit, the revolving credit facility and available cash flow. Piedmont pays the
Company interest on the loan at the Company’s average cost of funds plus 0.50%. As of December 28, 2003,
the Company had loaned $140.2 million to Piedmont. All amounts outstanding under this loan will become
due and payable on December 31, 2005. The Company plans to provide for Piedmont’s future financing
requirements under these terms.

COCA-COLA BOTTLING C
ANNUAL REPORT

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CHMFBU-2KP-PF03
8.2.15

CHMmoosk0cm
CHM

ˆ1DMR3JX7V66ZK=CUŠ
13*
2C

46546 TX 79
PMT
PS

1DMR3JX7V66ZK=C

g01x31-11.0

CLN

18-Mar-2004 14:02 EST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company also subleases various fleet and vending equipment to Piedmont at cost. These sublease rentals
amounted to $8.4 million, $8.7 million and $11.2 million in 2003, 2002 and 2001, 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 previous owner of the Company’s Snyder Production Center
(“SPC”) in Charlotte, North Carolina, who was unaffiliated with the Company, agreed to the early
termination of the SPC lease. Harrison Limited Partnership One (“HLP”) purchased the property
contemporaneously with the termination of the lease, and the Company leased SPC 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
the estate of 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, a former Director of the Company, are co-trustees. On August 9, 2000, a Special Committee
of the Board of Directors approved the sale by the Company of property and improvements adjacent to SPC to
HLP and a new lease of both the conveyed property and SPC 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
was 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. Rental payments for these
properties totaled $2.7 million, $2.9 million and $3.3 million in 2003, 2002 and 2001, respectively.

As disclosed in Note 5 to the consolidated financial statements, the Company recorded a capital lease of
$41.6 million at the end of the first quarter of 2002 related to this lease as the Company received a renewal
option to extend the term of the lease, which it expects to exercise. The minimum rentals and contingent
rentals that relate to these properties were as follows:

In Millions

Minimum rentals
Contingent rentals

Total rental payments

2003

$ 4.2
(1.5)

$ 2.7

2002

$ 4.1
(1.2)

$ 2.9

2001

$ 4.0
(0.7)

$ 3.3

The contingent rentals in 2003, 2002 and 2001 reduce the minimum rentals as a result of decreases in
interest rates, using LIBOR as the measurement device. Increases or decreases in lease payments that result
from changes in the inflation factor or changes in the interest rate factor are recorded as adjustments to
interest expense.

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
2003, 2002 and 2001 related to the consulting agreement totaled $350,000 in each year.

On June 1, 1993, the Company entered into a lease agreement with Beacon Investment Corporation related
to the Company’s headquarters office building. Beacon Investment Corporation’s sole shareholder is J. Frank
Harrison, III. On January 5, 1999, the Company entered into a new ten-year lease agreement with Beacon

COCA-COLA BOTTLING C

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8.2.15

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ANNUAL REPORT

CHM

ˆ1DMR3JX7PK1M=CC#Š

1DMR3JX7PK1M=CC

CLN

g25u99-6.0

46546 TX 80

PMT

11*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investment Corporation which includes the Company’s headquarters office building and an adjacent office
facility. The annual base rent the Company 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 device. Rental payments under this lease totaled $2.8 million,
$2.8 million and $3.3 million in 2003, 2002 and 2001, respectively.

The following table summarizes the minimum rentals and contingent rentals associated with this lease:

In Millions

Minimum rentals
Contingent rentals

Total rental expense

2003 2002 2001

$2.8

$2.8
— —

$2.8

$2.8
.5

$3.3

Increases or decreases in lease payments that result from changes in the Consumer Price Index or changes in
the interest rate factor are recorded as adjustments to rent expense in S,G&A expenses.

The Company is a shareholder in two cooperatives from which it purchases substantially all its requirements
for plastic bottles. Net purchases from these entities were $51.1 million, $45.6 million and $49.7 million in
2003, 2002 and 2001, 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 $18.8 million as of
December 28, 2003.

The Company is a member of SAC, a manufacturing cooperative. SAC sells finished products to the
Company and Piedmont at cost. Purchases from SAC by the Company and Piedmont for finished products
were $105 million, $110 million and $110 million in 2003, 2002 and 2001, respectively. The Company also
manages the operations of SAC pursuant to a management agreement. Management fees earned from SAC
were $1.3 million, $1.3 million and $1.2 million in 2003, 2002 and 2001, respectively. Also, the Company
has guaranteed a portion of debt for SAC. Such guarantee was $20.6 million as of December 28, 2003.

COCA-COLA BOTTLING C

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CHMFBU-2KP-PF16

8.2.15

CHMausbt0cm

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ANNUAL REPORT

CHM

ˆ1DMR3JX7PK3BY5C]Š

1DMR3JX7PK3BY5C

CLN

g01x31-11.0

46546 TX 81

PMT

10*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. 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)

2003

2002

2001

Fiscal Year

Numerator:
Numerator for basic net income and diluted net income

per share

Denominator:
Denominator for basic net income per share—weighted

average common shares
Effect of dilutive securities

Denominator for diluted net income per share—adjusted

weighted average common shares

Basic net income per share

Diluted net income per share

20. RISKS AND UNCERTAINTIES

$30,703

$22,823

$9,470

9,043
—

9,043

$ 3.40

8,861
60

8,921

2.58

2.56

8,753
68

8,821

$ 1.08

$ 1.07

Approximately 91% of the Company’s sales are products of The Coca-Cola Company, which is the sole
supplier of the concentrates or syrups required to manufacture these products. The remaining 9% of the
Company’s sales are products of other beverage companies. The Company has bottling contracts under which
it has various requirements to meet. Failure to meet the requirements of these bottling contracts could result
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
currently 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 purchasing business interruption insurance where
appropriate. In addition, the cost of aluminum cans and PET bottle containers are subject to change. Material
increases in the cost of these containers may result in a reduction in earnings to the extent the Company is
not able to increase its selling prices to offset an increase in container costs.

The Company’s products are sold and distributed directly by its employees to retail stores and other outlets.
During 2003, approximately 70% of the Company’s physical case volume was sold for future consumption.
The remaining 30% of the Company’s volume was sold for immediate consumption through various cold
drink channels. The Company’s largest customer (Wal-Mart Stores, Inc.) accounted for approximately 11%
of the Company’s total sales volume during 2003.

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ANNUAL REPORT

CHM

ˆ1DMR3JX7PK46D2C9Š

1DMR3JX7PK46D2C

CLN

g25u99-6.0

46546 TX 82

PMT

11*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 selling
prices to offset an 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 currently covered by collective bargaining agreements. Two
collective bargaining contracts covering less than 1% of the Company’s employees expire during 2004.

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

Changes in the market value of assets in the Company’s pension plan as well as changes in the discount rate
may result in significant changes in net periodic pension cost and the Company contributions to the plan.

Changes in the health care cost trend as well as changes in the discount rate may result in significant changes
in postretirement benefit cost.

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

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ANNUAL REPORT

CHM

ˆ1DMR3JX7PK4WRPCÄŠ

1DMR3JX7PK4WRPC

CLN

g01x31-11.0

46546 TX 83

PMT

10*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21.

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Changes in current assets and current liabilities affecting cash 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

2003

$ (2,674)
(5,120)
6,338
1,757
(28,978)
1,190
(9,653)
(4,445)
(209)
275

Fiscal Year

2002

$ 4,836
(7,988)
(9,398)
7,164
(1,377)
4,089
6,483
(20,987)
3,880
(2,347)

(Increase) decrease in current assets less current liabilities

$(41,519)

$(15,645)

Cash payments for interest and income taxes were as follows:

2001

$ (1,313)
1,445
2,994
586
10,958
6,893
5,058
4,250
3,906
1,395
8,246

$44,418

In Thousands

Interest
Income taxes (net of refunds)

Fiscal Year

2003

2002

2001

$42,722 $52,572 $42,084
2,673

(7,172)

3,138

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ANNUAL REPORT

CHM

ˆ1DMR3JX7PK5N4YCLŠ

1DMR3JX7PK5N4YC

CLN

g25u99-6.0

46546 TX 84

PMT

11*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. NEW ACCOUNTING PRONOUNCEMENTS

In November 2002, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 02-16,
“Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor”
(“EITF 02-16”), addressing the recognition and income statement classification of various considerations
given by a vendor to a customer. Among its requirements, the consensus requires that certain cash
consideration received by a customer from a vendor is presumed to be a reduction of the price of the vendor’s
products, and therefore should be characterized as a reduction of cost of sales when recognized in the
customer’s income statement, unless certain criteria are met. EITF 02-16 was effective for the first quarter of
2003. Previously, the Company classified marketing funding support received from The Coca-Cola Company
and other beverage companies as an adjustment to net sales. In accordance with EITF 02-16, the Company
classified marketing funding support as a reduction of cost of sales beginning the first quarter of 2003. The
application of EITF 02-16 did not have a significant impact on results of operations. Prior year amounts have
been reclassified to conform to the current year presentation.

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation No. 46,
“Consolidation of Variable Interest Entities” (“FIN 46”). This interpretation addresses consolidation by
business enterprises of variable interest entities with certain defined characteristics. Application of FIN 46 is
required in the Company’s financial statements for interests in variable interest entities that are considered to
be special-purpose entities for the year ended December 28, 2003. The Company has determined that it does
not have any arrangements or relationships with special-purpose entities. Application of FIN 46 for all other
types of variable interest entities is required for the Company effective March 28, 2004. The Company
anticipates that application of FIN 46 will not have a significant impact on its financial statements at this
time.

In December 2003, the FASB issued Statement No. 132 (revised 2003), “Employers’ Disclosures About
Pensions and Other Postretirement Benefits,” that requires additional financial statement disclosures for
defined benefit plans. This revised standard requires more disclosure about plan assets, benefit obligations,
cash flows, benefit costs and other relevant information. The Company has adopted these disclosure
provisions beginning with its 2003 year-end financial reporting.

COCA-COLA BOTTLING C

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ANNUAL REPORT

CHM

ˆ1DMR3JX7PK69JJCuŠ

1DMR3JX7PK69JJC

CLN

g01x31-11.0

46546 TX 85

PMT

11*

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. QUARTERLY FINANCIAL DATA (UNAUDITED)

Set forth below are unaudited quarterly financial data for the fiscal years ended December 28, 2003 and
December 29, 2002.

In Thousands (Except Per Share Data)

Year Ended December 28, 2003

Net sales
Gross margin
Net income
Basic net income per share
Diluted net income per share

In Thousands (Except Per Share Data)

Year Ended December 29, 2002

Net sales
Gross margin
Net income (loss)
Basic net income (loss) per share
Diluted net income (loss) per share

$275,200
134,869
1,407
.16
.16

$ 271,618
134,407
3,378
.39
.38

Quarter

$318,165
153,656
11,900
1.32
1.32

$325,637
156,759
13,846
1.53
1.53

Quarter

$ 329,512
159,380
10,783
1.23
1.21

$ 319,725
153,823
9,539
1.08
1.07

$291,763
140,033
3,550
.39
.39

$ 277,480
131,588
(877)
(.10)
(.10)

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CHMFBU-2KP-PF03

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17-Mar-2004 14:08 EST

ANNUAL REPORT

CHM

ˆ1DMR3JX7PHNJHZCÀŠ

1DMR3JX7PHNJHZC

CLN

g25u99-6.0

46546 TX 86

PMT

12*

Selected Financial Data *

Fiscal Year

In Thousands (Except Per Share Data)

2003

2002**

2001

2000***

1999

Summary of Operations
Net sales
Cost of sales
Selling, general and administrative expenses
Depreciation expense
Provision for impairment of property, plant

and equipment

Amortization of intangibles
Restructuring expense
Total costs and expenses
Income from operations
Interest expense
Gain on sale of bottling territory
Minority interest
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
Weighted average number of common shares

outstanding

Weighted average number of common shares

outstanding—assuming dilution

Year-End Financial Position
Total assets

Portion of long-term debt payable within one

year

Current portion of obligations under capital

leases

Obligations under capital leases
Long-term debt
Stockholders’ equity

$1,210,765 $1,198,335
619,137
407,145
76,075

625,448
422,456
76,485

$ 958,859
514,358
306,106
66,134

$ 938,684 $ 916,544
505,889
278,555
60,567

489,524
312,279
64,751

3,105

2,796

947
15,296

3,066
14,712

1,127,494
83,271
41,914

1,105,153
93,182
49,120

902,841
56,018
44,322

884,332
54,352
53,346
8,829

13,734
2,232
860,977
55,567
50,581

$
$

3,297
38,060
7,357
30,703 $

3.40 $

1.00 $
1.00 $

9,043

5,992
38,070
15,247
22,823

2.58

2.56

1.00
1.00

8,861

8,921

$
$

11,696
2,226
9,470

1.08

1.07

1.00
1.00

8,753

8,821

9,835
3,541
6,294 $

.72 $

.71 $

4,986
1,745
3,241

.38

.37

1.00 $
$
1.00

1.00
1.00

8,733

8,822

8,588

8,708

$1,349,920 $1,353,525

$1,064,459

$1,062,097

$1,108,392

56,708

9,904

28,635

1,337
44,226
802,639
52,472

1,120
44,906
807,725
32,867

1,364
1,060
620,156
17,081

3,325
1,774
682,246
28,412

4,483
4,468
723,964
30,851

*
See Management’s Discussion and Analysis and accompanying notes to consolidated financial statements for additional information.
** On January 2, 2002, the Company purchased an additional interest in Piedmont Coca-Cola Bottling Partnership (“Piedmont”) from The

Coca-Cola Company, increasing the Company’s ownership in Piedmont to more than 50%. Due to the increase in ownership, the results of
operations, financial position and cash flows of Piedmont have been consolidated with those of the Company beginning in the first quarter of
2002. The Company’s investment in Piedmont had been accounted for using the equity method for 2001 and prior years. In addition, the
Company adopted the provisions of SFAS No. 142 at the beginning of 2002, which resulted in goodwill and intangible assets with indefinite
useful lives no longer being amortized.
In September 2000, the Company sold a bottling territory which represented approximately 3% of the Company’s 2000 sales volume.

***

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ANNUAL REPORT

CHM

ˆ1DMR3JX7PHTSC1CRŠ

1DMR3JX7PHTSC1C

CLN

g01x31-11.0

46546 TX 87

PMT

12*

Summary of Quarterly Stock Prices

Fiscal Year

2003 Sales Price

2002 Sales Price

High

$70.45
66.80
58.92
55.85

Low

$46.80
48.55
49.25
49.75

Period
End

$51.88
55.50
51.11
52.72

High

$50.10
52.09
52.05
63.06

Low

$37.24
42.30
41.30
46.02

Period
End

$49.00
43.00
47.50
62.71

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 2003, 2002 and 2001.

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 March 3, 2004,
was 3,573 and 12, respectively.

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CHM

ˆ1DMR3JX7PHY98BC~Š

1DMR3JX7PHY98BC

CLN

g25u99-6.0

46546 TX 88

PMT

10*

Board of Directors

Executive Officers

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

Chief Executive Officer

Coca-Cola Bottling Co. Consolidated

H. W. McKay Belk
President and Chief Merchandising Officer
Belk, Inc.

Sharon A. Decker
President
The Tanner Companies

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

James E. Harris
Executive Vice President and
Chief Financial Officer

MedCath Corporation

Deborah S. Harrison
Affiliate Broker
Fletcher Bright Companies

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

Chief Executive Officer

William B. Elmore
President and Chief Operating Officer

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

the Chairman

David V. Singer
Executive Vice President and Chief Financial Officer

Norman C. George
Senior Vice President, Chief Marketing and

Customer Officer

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

Clifford M. Deal, III
Vice President, Treasurer

Ronald J. Hammond
Vice President, Supply Chain

Ned R. McWherter
Former Director of Piedmont Natural Gas Co., Inc.,

Kevin A. Henry
Vice President, Human Resources

Umesh M. Kasbekar
Vice President, Planning and Administration

Lauren C. Steele
Vice President, Corporate Affairs

Steven D. Westphal
Vice President, Controller

Jolanta T. Zwirek
Vice President, Chief Information Officer

Volunteer Distributing Co., Inc. and
Former Governor of the State of Tennessee

John W. Murrey, III
Private Attorney

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

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

State of North Carolina

C o r p o r a t e I n f o r m a t i o n

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 Wachovia Bank, N.A., 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

Company Website
www.cokeconsolidated.com

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.

Annual Meeting
The Annual Meeting of Stockholders of Coca-Cola Bottling Co. Consolidated will be held at Snyder
Production Center, 4901 Chesapeake Drive, Charlotte, North Carolina 28216, on April 28, 2004 at
10:00 a.m. local time.

Form 10-K and Code of Ethics for Senior Financial Officers
A copy of the Company’s annual report to the Securities and Exchange Commission (Form 10-K) and its
Code of Ethics for Senior Financial Officers 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. This information may also be obtained
from the Company’s website.

Produced by Crown Communications
Color photography by Donna Bise and Mitchell Kearney
Production by Donnelley Financial and Belk Printing Technologies

Make.
Make.

Sell.
Sell.

Deliver.
Deliver.

4100 Coca-Cola Plaza • Charlotte, North Carolina 28211

Mailing Address: Post Office Box 31487 • Charlotte, NC 28231 • 704.557.4400
www.cokeconsolidated.com