Annual Report 2008 Coca‑Cola Bottling Co
Total Page:16
File Type:pdf, Size:1020Kb
Coca-Cola Bottling Co. Consolidated 4100 Coca-Cola Plaza Charlotte, North Carolina 28211 Mailing Address: Post Office Box 31487 Charlotte, NC 28231 704.557.4400 www.cokeconsolidated.com Annual Report 2008 Coca-Cola Bottling Co. Consolidated is the second largest Coca-Cola bottler in the United States. We are a leader in manufacturing, marketing and distribution of soft drinks. With corporate offices in Charlotte, N.C., we have operations in 11 states, primarily in the Southeast. The Company has one of the highest per capita soft drink consumption rates in the world and manages bottling territories with a consumer base of approximately 19 million people. Coca-Cola Bottling Co. Con- BOARD OF DIRECTORS EXECUTIVE OFFICERS solidated is listed on the NASDAQ Stock Market (Global Select Market) under the symbol COKE. J. Frank Harrison, III J. Frank Harrison, III Chairman of the Board of Directors and Chairman of the Board of Directors and Chief Executive Officer Chief Executive Officer Coca-Cola Bottling Co. Consolidated William B. Elmore H.W. McKay Belk President and Chief Operating Officer President and Chief Merchandising Officer Belk, Inc. Henry W. Flint Vice Chairman of the Board of Directors Sharon A. Decker Chief Executive Officer Steven D. Westphal The Tapestry Group Executive Vice President of Operations and Systems William B. Elmore President and Chief Operating Officer William J. Billiard Coca-Cola Bottling Co. Consolidated Vice President, Controller and Chief Accounting Officer Deborah H. Everhart Robert G. Chambless Affiliate Broker Senior Vice President, Sales Fletcher Bright Company Clifford M. Deal, III Henry W. Flint Vice President and Treasurer Vice Chairman of the Board of Directors Coca-Cola Bottling Co. Consolidated Norman C. George President, BYB Brands, Inc. Ned R. McWherter Former Director of Piedmont Natural Gas Co., Inc. James E. Harris Former Governor of the State of Tennessee Senior Vice President and Chief Financial Officer James H. Morgan Kevin A. Henry President and Chief Executive Officer Senior Vice President and Krispy Kreme Doughnuts, Inc. Chief Human Resources Officer John W. Murrey, III Umesh M. Kasbekar Assistant Professor Senior Vice President, Planning and Administration Appalachian School of Law Melvin F. Landis, III Carl Ware Senior Vice President and Chief Marketing and Customer Officer Retired Executive Vice President, Public Affairs and Administration Lauren C. Steele The Coca-Cola Company Vice President, Corporate Affairs Dennis A. Wicker Partner SZD Wicker, LPA Former Lieutenant Governor of the Our new billboard graphics highlight State of North Carolina our connection with the community. This annual report is printed on recycled paper. s we look back on 2008, many factors to weather the severe economic downturn affected our Company and its per- of the third and fourth quarters. We pro- formance, but none greater than the duced a much improved second-half result dramatic decline in the U.S. economy. that has positioned us well as we pursue AHowever, we are not in unfamiliar territory. For more new packaging and product opportunities in than a century, our Company has endured trials, faced 2009 and beyond. adversity and emerged a stronger organization. The current environment presents unique challenges, but For 2008, Coca-Cola Bottling Co. Consoli- with great challenges come great opportunities. By dated reported a net income of $9.1 million, exercising decisive leadership early in 2008, we were or basic net income per share of $0.99, able to make profound and strategic decisions that compared to net income of $19.9 million, directly affected how we finished the year. or basic net income per share of $2.18, in 2007. The 2008 results included three In 2008, our nation began to experience the worst unusual items totaling $20.6 million ($10.7 economic downturn since the Great Depression, with million after-tax, or net loss per share of unemployment rising, consumer confidence falling and $1.17) that reduced our financial results, but also financial institutions in upheaval. As we enter 2009, this helped reduce our financial risk and positioned us to period of financial turmoil continues and has worsened. have a leaner, more efficient overhead structure. First, The beverage industry has not escaped this downturn, the 2008 results included a $14.0 million pre-tax charge and in fact felt the impact of the volatile economy ($7.3 million after-tax, or basic net loss per share of much earlier than most. We saw fuel prices and other $0.80) to freeze the Company’s liability to the Central key commodities, including corn, aluminum and PET States, Southeast and Southwest Areas Pension Fund, resin, rapidly increase to record levels in the summer a multi-employer pension fund, and to settle a strike of 2008 before subsiding in late fall. When combined by employees covered by this pension fund. The 2008 with the continued decline in consumer demand for results also included a $4.6 million pre-tax charge ($2.4 sparkling beverages, 2008 marked one of the most million after-tax, or basic net loss per share of $0.26) challenging years in our Company’s long history. for the actions taken under a restructuring plan. In addition, the 2008 results included a $2.0 million mark- Fortunately, we reacted to these business pressures to-market pre-tax loss ($1.0 million after-tax, or basic early in the downturn. After posting very weak first net loss per share of $0.11) on our 2009 fuel hedg- quarter results, we made fundamental changes in our ing program. Without the pension, strike settlement, business operations. We reviewed and redesigned all restructuring and fuel hedging mark-to-market charges aspects of our Company’s business model – sales and in 2008, our net income totaled $19.8 million, which gross margin growth strategies, expense and overhead equates to basic net income per share of $2.16. infrastructure rationalization and capital structure – and formed a multidimensional work stream to capture We were very focused on managing our capital during opportunities arising from the challenging environment. this turbulent year in the financial markets, while many companies found access to capital very difficult. As We have dealt with adversity before, and those experi- has been the case for several years, we continued our ences have strengthened us both operationally and intense focus on debt reduction. At the end of fiscal culturally. In 2008, we restructured the Company into 2008, our total net debt and capital lease obligations a leaner, more efficient operation while maintaining totaled $624 million, a reduction of $46 million from our high standards for product quality and customer the end of fiscal 2007. During a year of such financial service. We took steps to right-size the workforce to instability, we are proud of this accomplishment and reflect the realities we face, and as we move into 2009, believe it will help position us to take advantage of we are operating with 500 fewer positions than we market opportunities that arise during this difficult eco- started with in 2008. nomic time. In addition, we have reduced our total net debt and capital lease obligations over the past nine Right-sizing the business, along with thoughtful exami- years by more than $400 million. nation of all capital and operating expenses, allowed us Our Business • 1Letter to Shareholders • 1 2 • Letter to Shareholders The challenges we face create unique opportunities aggressive ad-feature pric- to differentiate our Company from our competition. ing. This makes our products Our fellow employees at Coca-Cola Consolidated have consistently more attractive demonstrated the resilience, innovative spirit, determi- to consumers, while improv- nation and flexibility to deal with the issues facing our ing our margins and those of industry and the economy. our retail customers. To help facilitate this new strategy, we We have long been an innovative company. Moves are offering different packaging made in 2008 and plans for 2009 show our continued configurations to promote certain commitment to innovative leadership, not only in the brands. These will include 15-pack or Coca-Cola system, but in the total beverage industry. 18-pack can configurations, as well as a new half-liter Some examples include new packaging configurations; bottle multipack option. This allows us to promote value pricing and packaging in the convenience store certain brands with these packaging alternatives, channel; intelligent vending; new sales ordering tools; while pricing other brands in the traditional 12-can the Vertique manufacturing and order-fulfillment sys- FridgePack™ at an everyday low price. tem; and a new approach to grassroots marketing. A few years ago, we addressed the continued prolif- To address the long-term trend in declining sales of eration of SKUs (stock keeping units or product and 20-ounce beverages in the convenience store channel, package combinations) by developing the CooLift™ we sought to redefine value through packaging innova- delivery system. This system has added efficiencies in tion. Our research showed that many consumers found the delivery system, but the complexity of more than the 20-ounce package too large, while others thought 500 SKUs created increased manufacturing and order- it was too small. In large-scale tests in 2008, we building problems. In 2008, we installed Vertique, an replaced the 20-ounce bottle with two package offer- automated manufacturing and order-fulfillment system, ings – 16-ounce and 24-ounce bottles. At a suggested at our production center in Charlotte, N.C. This highly retail price of $0.99 for the 16-ounce package, sophisticated system is the first ever used in the non- we offered our consumers a lower price point alcoholic beverage industry and, when coupled with for a package most thought was just the CooLift™, represents a groundbreaking manufacturing right size.