SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission Only (as permitted by Rule 14A-6(e)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to Rule 14a-12 COCA-COLA BOTTLING CO. CONSOLIDATED - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: - -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transactions applies: - -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): - -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: - -------------------------------------------------------------------------------- (5) Total fee paid: - -------------------------------------------------------------------------------- [_] Fee paid previously with preliminary materials. - -------------------------------------------------------------------------------- [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. (1) Amount Previously Paid: - -------------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: - -------------------------------------------------------------------------------- (3) Filing Party: - -------------------------------------------------------------------------------- (4) Date Filed: - --------------------------------------------------------------------------------
COCA-COLA BOTTLING CO. CONSOLIDATED 4100 COCA-COLA PLAZA CHARLOTTE, NORTH CAROLINA 28211 (704) 557-4400 ------------------------------------------------------- NOTICE OF ANNUAL MEETING OF STOCKHOLDERS to be held on May 8, 2002 ------------------------------------------------------- TO THE STOCKHOLDERS OF COCA-COLA BOTTLING CO. CONSOLIDATED: NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Coca-Cola Bottling Co. Consolidated (the "Company") will be held at the Company's Snyder Production Center, 4901 Chesapeake Drive, Charlotte, North Carolina 28216 on Wednesday, May 8, 2002, at 10:00 a.m., local time, for the purpose of considering and acting upon the following: 1. Election of three members to the Board of Directors for a term of three years. 2. Such other business as may properly come before the meeting or any adjournment thereof. The Board of Directors has fixed the close of business on March 22, 2002 as the record date for determining the stockholders entitled to notice of and to vote at the meeting or any adjournment thereof, and only holders of Common Stock and Class B Common Stock of the Company of record on such date will be entitled to notice of or to vote at the meeting. A list of stockholders will be available for inspection at least ten days prior to the meeting at the principal executive offices of the Company at 4100 Coca-Cola Plaza, Charlotte, North Carolina 28211. The Board of Directors will appreciate the prompt return of the enclosed proxy, dated and signed. The proxy may be revoked at any time before it is exercised and will not be exercised if you attend the meeting and vote in person. By Order of the Board of Directors /s/ HENRY W. FLINT Henry W. Flint Secretary April 5, 2002
PROXY STATEMENT ANNUAL MEETING OF STOCKHOLDERS OF COCA-COLA BOTTLING CO. CONSOLIDATED to be held on May 8, 2002 INTRODUCTION This Proxy Statement is being furnished by the Board of Directors of Coca-Cola Bottling Co. Consolidated (the "Company") in connection with the solicitation of proxies by the Board of Directors for use at the Annual Meeting of Stockholders to be held at the Company's Snyder Production Center, 4901 Chesapeake Drive, Charlotte, North Carolina on Wednesday, May 8, 2002, at 10:00 a.m., local time, and at any adjournment thereof. This Proxy Statement and the accompanying form of proxy are first being mailed to stockholders of the Company on or about April 5, 2002. The principal executive offices of the Company are located at 4100 Coca-Cola Plaza, Charlotte, North Carolina 28211. RECORD DATE, VOTE REQUIRED AND RELATED MATTERS The Board of Directors has fixed the close of business on March 22, 2002 as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting of Stockholders. At the close of business on March 22, 2002, the Company had issued and outstanding 6,392,477 shares of Common Stock and 2,380,852 shares of Class B Common Stock. Each share of Common Stock is entitled to one vote per share and each share of Class B Common Stock is entitled to 20 votes per share (or an aggregate of 54,009,517 votes with respect to the Common Stock and the Class B Common Stock voting together as a single class). Each stockholder may exercise his right to vote either in person or by properly executed proxy. The Common Stock and Class B Common Stock will vote together as a single class on the election of directors at the Annual Meeting of Stockholders. Any proxy delivered in the accompanying form may be revoked by the person executing the proxy at any time before the authority thereby granted is exercised by filing an instrument revoking it or a duly executed proxy bearing a later date with the Secretary of the Company or if the person executing the proxy attends the meeting and elects to vote in person. If a choice is specified in the proxy, shares represented thereby will be voted in accordance with such choice. If no choice is specified, the proxy will be voted FOR the three nominees listed herein. The presence, in person or by proxy, of the holders of a majority of the votes eligible to be cast by the holders of Common Stock and Class B Common Stock voting together as a class is necessary to constitute a quorum at the Annual Meeting of Stockholders. Directors are elected by a plurality of the votes cast at a meeting at which a quorum is present. Abstentions and broker "non-votes" are counted as present and entitled to vote for purposes of determining a quorum, but are not taken into account in determining a plurality. A broker "non-vote" occurs when a 1
nominee holding shares for a beneficial owner does not vote on a particular matter because the nominee does not have discretionary voting power for that particular matter and has not received instructions from the beneficial owner. The Board of Directors has been informed that J. Frank Harrison, Jr., J. Frank Harrison, III and Reid M. Henson intend to vote an aggregate of 1,987,288 shares of the Company's Common Stock and 2,379,250 shares of the Company's Class B Common Stock (representing an aggregate of 91.8% of the total voting power as of the record date) FOR electing the Board of Directors' nominees for director. The Board of Directors is not aware of any matters to be brought before the Annual Meeting of Stockholders or any adjournment thereof other than the election of three directors and routine matters incidental to the conduct of the meeting. If, however, other matters are properly presented, it is the intention of the persons named in the accompanying proxy or their substitutes to vote the shares represented by the proxy in accordance with their best judgment on such matters. Principal Stockholders At March 22, 2002, the only persons known to the Company to be beneficial owners of more than 5% of the Common Stock or Class B Common Stock of the Company were as follows: Amount and Nature of Percentage Percentage Beneficial of Total of Total Name and Address Class Ownership Class Votes(1) Votes(1) ---------------- ----- --------- ----- -------- -------- J. Frank Harrison, Jr., Common Stock 4,852,324(2)(5) 53.8% J. Frank Harrison, III, Reid M. Class B Common 2,379,250(3)(5) 99.9% 50,058,074 92.7% Henson, J. Frank Harrison Family, LLC and three Harrison Family Limited Partnerships, as a group 2 Union Square Chattanooga, TN 37402 The Coca-Cola Company Common Stock 1,984,495(4)(5) 31.0% One Coca-Cola Plaza Class B Common 497,670(5) 20.9% 11,937,895 22.1% Atlanta, GA 30313 Coca-Cola Enterprises Inc. Common Stock 696,100(6) 10.9% 696,100 1.3% 2500 Windy Ridge Parkway Atlanta, GA 30339 Wachovia Corporation Common Stock 360,884(7) 5.6% 360,884 0.7% One Wachovia Center Charlotte, NC 28288 2
(1) In calculating the total votes and percentage of total votes, no effect is given to conversion of Class B Common Stock into Common Stock. A total of 6,392,477 shares of Common Stock and 2,380,852 shares of Class B Common Stock was outstanding on March 22, 2002. (2) Consists of (a) 235,786 shares held by a trust for the benefit of certain relatives of Mr. Harrison, Jr. as to which he has sole voting power and no investment power; (b) 1,984,495 shares held by The Coca-Cola Company subject to the terms of the Voting Agreement and Irrevocable Proxy (described in note (5) below) as to which Mr. Harrison, III has shared voting and no investment power; (c) 793 shares held by Mr. Harrison, III as custodian for certain of his children as to which Mr. Harrison, III has sole voting and investment power; (d) 2,000 shares owned by Mr. Henson; (e) 2,379,250 shares of Class B Common Stock beneficially owned by such persons as described in note (3) that are convertible into shares of Common Stock; (f) 100,000 shares of Common Stock that Mr. Harrison, Jr. presently has the right to acquire upon the exercise of options; and (g) 150,000 shares of Common Stock that Mr. Harrison, III presently has the right to acquire upon the exercise of options. (3) Consists of (a) a total of 1,605,534 shares held by the JFH Family Limited Partnership -- FH1, JFH Family Limited Partnership -- SW1 and JFH Family Limited Partnership -- DH1 (collectively, the "Harrison Family Limited Partnerships"), as to which Mr. Harrison, Jr., in his capacity as the manager of J. Frank Harrison Family, LLC (the general partner of each of the Harrison Family Limited Partnerships), exercises sole voting and investment power; (b) 235,786 shares held by a trust for the benefit of Mr. Harrison, Jr. and certain of his relatives as to which Mr. Harrison, III and Mr. Henson share investment power as co-trustees and as to which Mr. Harrison, Jr. possesses sole voting power; (c) 260 shares held by Mr. Harrison, III as custodian for certain of his children as to which Mr. Harrison, III possesses sole voting and investment power; (d) 497,670 shares held by The Coca-Cola Company subject to the terms of the Voting Agreement and Irrevocable Proxy (described in note (5) below) as to which Mr. Harrison, III has shared voting and no investment power; and (e) 40,000 shares of Class B Common Stock held by Mr. Harrison, III. (4) Such information is derived from Amendment No. 23 to Schedule 13D filed by The Coca-Cola Company on January 11, 2002. With respect to the Common Stock ownership information, the amount shown excludes 497,670 shares issuable upon conversion of shares of Class B Common Stock. (5) Messrs. Harrison, Jr., Harrison, III and Henson (as trustee of certain trusts), J. Frank Harrison Family LLC and the Harrison Family Limited Partnerships are parties to a Voting Agreement and Irrevocable Proxy with The Coca-Cola Company pursuant to which, among other things, Mr. Harrison, III has been granted an irrevocable proxy for life concerning the shares of Common Stock and Class B Common Stock owned by The Coca-Cola Company. See "Certain Transactions." 3
(6) Such information is derived from Amendment No. 4 to Schedule 13G filed by Coca-Cola Enterprises Inc. on February 14, 2002. (7) Such information is derived from Schedule 13G filed by Wachovia Corporation on February 13, 2002. Wachovia Corporation has sole voting power with respect to all such shares, sole dispositive power with respect to 342,894 such shares and shared dispositive power with respect to 4,940 shares. All such shares are held by subsidiaries of Wachovia Corporation in a fiduciary capacity for their customers. ELECTION OF DIRECTORS General The Company's Board of Directors consists of between nine and twelve members as fixed from time to time by the stockholders of the Company or the Board of Directors. The Board of Directors currently has 12 members. The Board of Directors is divided into three classes, as nearly equal in number as possible, with staggered three-year terms. The Board of Directors is permitted to appoint individuals as directors to fill vacancies on the Board of Directors. Four of the directors' terms expire in 2002. The Board of Directors proposes to fill three of these positions at the Annual Meeting of Stockholders with nominees to serve until the 2005 Annual Meeting of Stockholders and until their successors are duly elected and qualified. John M. Belk, who has served as a director since 1972, will not be seeking re-election as a director. The Board of Directors has no immediate intention of filling this vacancy. It is the intention of the persons named as proxies in the accompanying form of proxy to vote all proxies solicited for the three nominees listed below, unless the authority to vote is withheld. Each nominee is currently a member of the Board of Directors. If for any reason any nominee shall not become a candidate for election as a director at the meeting, an event not now anticipated, the proxies will be voted for the three nominees including such substitutes as shall be designated by the Board of Directors. The proxies solicited hereby will in no event be voted for more than three persons. NOMINEES FOR ELECTION OF DIRECTORS IN 2002 (Terms Expiring in 2005) SHARON A. DECKER, age 45, is President of Doncaster, a division of the Tanner Companies, a ladies apparel company, a position she has held since 1999. Ms. Decker was President and Chief Executive Officer of the Lynnwood Foundation, which created and manages a conference facility and leadership institute, from 1997 until 1999. From 1980 until 1997, she served Duke Energy Corporation in a number of capacities, including as Corporate Vice President and Executive Director of the Duke Power Foundation. She also serves as a director of Family Dollar Stores, Inc. Ms. Decker has been a director of the Company since May 2001, when she was appointed by the Board of Directors to fill a newly created seat on the Board of Directors. Ms. Decker is a member of the Audit Committee and the Retirement Benefits Committee. 4
REID M. HENSON, age 62, has served as a consultant to the Company since May 2000. Mr. Henson served as a Vice Chairman of the Board of Directors of the Company from 1983 to May 2000. Prior to that time, Mr. Henson served as a consultant to JTL Corporation, a management company, and later as President of JTL Corporation. He has been a director of the Company since 1979 and is Vice Chairman of the Retirement Benefits Committee and is a member of the Executive Committee, the Audit Committee and the Finance Committee. CARL WARE, age 58, is Executive Vice President, Public Affairs and Administration for The Coca-Cola Company, a position he has held since January 2000. Before that time, he served as President of the Africa Group of The Coca-Cola Company from January 1993 to January 2000. Mr. Ware has been a director of the Company since February 2000, when he was appointed by the Board of Directors to fill the position vacated upon the resignation of Charles L. Wallace. Mr. Ware is a director of The Georgia Power Company, ChevronTexaco Corp. and National Life of Vermont Financial Corporation. Mr. Ware is a member of the Finance Committee and the Compensation Committee. CONTINUING DIRECTORS (Terms Expiring in 2003) H. W. MCKAY BELK, age 45, is President, Merchandising and Marketing of Belk, Inc., an operator of retail department stores, a position he has held since May 1998. Mr. Belk served as President and Chief Merchandise Officer of Belk Store Services, Inc., a provider of services to retail department stores, from March 1997 to April 1998. Mr. Belk served as President, Merchandise and Sales Promotion of Belk Stores Services, Inc. from April 1995 through March 1997. He has been a director of the Company since May 1994 and is Chairman of the Audit Committee and a member of the Finance Committee and Compensation Committee. WILLIAM B. ELMORE, age 46, is President and Chief Operating Officer of the Company, positions he has held since January 2001. Prior to that time, he was Vice President, Value Chain from July 1999 to December 2000, Vice President, Business Systems from August 1998 to June 1999, Vice President, Treasurer from June 1996 to July 1998 and Vice President, Regional Manager for the Virginia Division, West Virginia Division and Tennessee Division from August 1991 to May 1996. Mr. Elmore has been a director of the Company since January 2001, when he was appointed by the Executive Committee and the Board of Directors to fill a newly created seat on the Board of Directors. He is a member of the Executive Committee and the Retirement Benefits Committee. 5
JOHN W. MURREY, III, age 59, is of counsel to the law firm of Witt, Gaither & Whitaker, P.C., in Chattanooga, Tennessee, with which he has been associated since 1970. Mr. Murrey is a director of The Dixie Group, Inc. He has been a director of the Company since March 1993 and is a member of the Retirement Benefits Committee. DENNIS A. WICKER, age 49, is a partner in the Raleigh, North Carolina office of the law firm of Helms Mulliss & Wicker, PLLC, a position he has held since 2001. He served as Lt. Governor of North Carolina from 1993 to 2001. Mr. Wicker served as Chairman of North Carolina Community Colleges and as Chairman of North Carolina's Technology Council. Mr. Wicker also serves as a director of First Bancorp. Mr. Wicker has been a director of the Company since May 2001, when he was appointed by the Board of Directors to fill the position vacated upon the resignation of H. Reid Jones. Mr. Wicker is a member of the Audit Committee and the Compensation Committee. CONTINUING DIRECTORS (Terms Expiring in 2004) J. FRANK HARRISON, III, age 47, is Chairman of the Board of Directors and Chief Executive Officer of the Company. Mr. Harrison, III served as Vice Chairman of the Board of Directors from November 1987 through his election as Chairman in December 1996 and was appointed as the Company's Chief Executive Officer in May 1994. He was first employed by the Company in 1977 and has served as a Division Sales Manager and as a Vice President. Mr. Harrison, III is a director of Wachovia Bank & Trust Co., N.A., Southern Region Board. He is Chairman of the Finance Committee and Vice Chairman of the Executive Committee. J. FRANK HARRISON, JR., age 71, is Chairman Emeritus of the Board of Directors of the Company. Mr. Harrison, Jr. served the Company as Chairman of the Board of Directors from 1977 through December 1996 and served as Chief Executive Officer of the Company from August 1980 until April 1983. He had previously served the Company as Vice Chairman of the Board of Directors. He has been a director of the Company since 1973. Mr. Harrison, Jr. is Chairman of the Executive Committee and a member of the Finance Committee. NED R. McWHERTER, age 71, is Chairman of the Board of Directors of Volunteer Distributing Company, Inc., a beverage distributor, and Eagle Distributors, Inc., a snack food distributor. Mr. McWherter served as Governor of the State of Tennessee from January 1987 to January 1995. Mr. McWherter is a director of Piedmont Natural Gas Co. He has been a director of the Company since 1995 and is Chairman of the Compensation Committee and a member of the Finance Committee. JAMES L. MOORE, JR., age 59, has been Vice Chairman of the Board of Directors since January 2001. Previously, he was President of the Company from March 1987 to December 2000. 6
Mr. Moore has been a director of the Company since 1987. He is Chairman of the Retirement Benefits Committee and is a member of the Executive Committee. J. Frank Harrison, III is J. Frank Harrison, Jr.'s son and H. W. McKay Belk is John M. Belk's nephew. Beneficial Ownership of Management The following table presents certain information on March 22, 2002 regarding the beneficial ownership of the Common Stock and Class B Common Stock of the Company by its directors, by the Named Executive Officers in the Summary Compensation Table and by all directors and executive officers as a group. Information concerning beneficial ownership of the Common Stock and Class B Common Stock by Messrs. Harrison, Jr., Harrison, III and Henson is presented above under the caption "Principal Stockholders" and is not included in the following table. Amount and Nature of Beneficial Percentage Name Class(1) Ownership of Class ---- -------- --------- -------- H.W. McKay Belk Common Stock 520(2) * John M. Belk Common Stock 10,475(3) * Sharon A. Decker Common Stock 0 -- William B. Elmore Common Stock 0 -- Ned R. McWherter Common Stock 1,000 * James L. Moore, Jr. Common Stock 1,000 * John W. Murrey, III Common Stock 1,000 * Robert D. Pettus, Jr. Common Stock 0 -- David V. Singer Common Stock 2,000(4) * Carl Ware Common Stock 0 -- Dennis A. Wicker Common Stock 0 -- Directors and executive officers as a group (excluding Messrs. Harrison, Jr., Harrison, III and Henson) (20 persons) Common Stock 16,003 * - ------ * Less than 1% of the outstanding shares of such class. (1) None of such persons beneficially owns any shares of Class B Common Stock. (2) Includes 300 shares held by Mr. Belk as custodian for certain of his children. (3) Consists of (a) 8,975 shares held by a trust of which Mr. Belk serves as trustee and with respect to which he has sole voting and investment power and (b) 1,500 shares held by a trust for the benefit of Mr. Belk's daughter as to which his wife serves as trustee with sole voting and investment power. (4) Held jointly with his wife. 7
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires the Company's executive officers, directors and certain persons who beneficially own more than 10% of the Company's Common Stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of the Common Stock and other equity securities of the Company. Executive officers, directors and such greater than 10% stockholders are required to furnish the Company with copies of all such reports they file. Based solely on its review of the copies of such reports received by it and written representations that no other reports were required for such persons, the Company believes that, during fiscal year 2001, all filing requirements applicable to its executive officers, directors and such greater than 10% stockholders were complied with on a timely basis. The Board of Directors and its Committees Directors who are not employees of the Company are paid $20,000 as an annual retainer, $1,100 for each Board meeting attended and $880 for each Committee meeting attended. The Board of Directors held four meetings during 2001. No director attended fewer than 75% of the total number of meetings of the Board of Directors and the Committees of the Board of Directors on which he or she served during 2001. Under the Company's Director Deferral Plan, directors of the Company who are not also employees of the Company may defer payment of their annual retainer and meeting fees until they no longer serve on the Board of Directors. Fees deferred are deemed to be invested in certain investment vehicles selected by the directors. Upon resignation or retirement, a participating director will be entitled to receive a cash payment based upon the amount of fees deferred and the investment return on the selected investment vehicle. If a director's service terminates prior to age 65, amounts accrued under his or her account are paid out in a single cash payment. If a director's service terminates at or after age 65, amounts accrued under his or her account are paid out, at the election of the director, either in a single cash payment or in ten equal annual installments (with an imputed 8% return on the deferred installments). The Board of Directors has an Audit Committee whose current members are Messrs. H. W. McKay Belk (Chairman), John M. Belk, Henson and Wicker and Ms. Decker. The Audit Committee evaluates audit performance, handles relations with the Company's independent accountants and evaluates policies and procedures relating to internal accounting functions and controls. The Audit Committee recommends to the Board of Directors the appointment of the independent accountants for the Company. The Board of Directors adopted a written charter for the Audit Committee on May 10, 2000, a copy of which is attached to the Company's proxy statement prepared in connection with its 2001 Annual Meeting of Stockholders. The Audit Committee met four times in 2001. All members of the Audit Committee are independent, as defined by NASD Rule 4200(a)(14), except for Mr. Henson. Mr. Henson is not independent because he was an executive officer of the Company until May 31, 2000 and because he received compensation 8
from the Company, other than compensation for board service, in excess of $60,000 during the last fiscal year. Until December 13, 2000, Mr. Henson served as chairman of the Audit Committee. On December 13, 2000, in response to new NASD rules concerning the composition of audit committees, the Board of Directors changed the composition of the Company's Audit Committee. However, the Board of Directors decided to retain Mr. Henson on the Audit Committee to serve the best interests of the Company and its stockholders. The Board of Directors believes his knowledge of the Company and the industry, together with his long tenure as Chairman of the Audit Committee and his familiarity with the Company's internal auditors and independent accountants and their procedures, will enable the Committee to better perform its function of evaluating the integrity of the Company's financial statements and reviewing the Company's external and internal audit processes. The Board of Directors has a Compensation Committee whose current members are Messrs. McWherter (Chairman), H. W. McKay Belk, Ware and Wicker. The Compensation Committee administers the Company's compensation plans, reviews and establishes the compensation of the Company's officers and makes recommendations to the Board of Directors concerning such compensation and related matters. The Compensation Committee met three times in 2001. The Board of Directors does not have a standing Nominating Committee. 9
EXECUTIVE COMPENSATION The table below shows certain compensation information for the three fiscal years ended December 30, 2001 concerning the Company's Chief Executive Officer and its four other most highly compensated executive officers (collectively, the "Named Executive Officers"). Summary Compensation Table Annual Compensation --------------------------------- Name and Other Annual Long-Term All Other Principal Position Year Salary Bonus Compensation(1) Compensation Payouts Compensation(2) ------------------ ---- ------ ----- --------------- -------------------- --------------- J. Frank Harrison, III 2001 $634,927 $680,803 $196,988 $1,427,350(3) $261,370 Chairman of the Board of 2000 607,101 658,705 206,063 1,424,676(3) 257,940 Directors and Chief 1999 604,692 470,935 188,233 -- 258,670 Executive Officer William B. Elmore 2001 406,667 336,420 (4) -- 40,607 President and 2000 243,333 127,488 (4) -- 26,175 Chief Operating Officer 1999 209,210 81,475 (4) -- 24,192 James L. Moore, Jr. 2001 572,797 611,747 (4) -- 117,291 Vice Chairman of the 2000 571,407 621,488 55,138 -- 114,031 Board of Directors 1999 553,491 430,999 (4) -- 114,075 Robert D. Pettus, Jr 2001 298,409 201,853 (4) -- 78,220 Executive Vice President 2000 279,575 152,388 (4) -- 55,170 and Assistant to the 1999 263,750 103,088 (4) -- 52,778 Chairman David V. Singer 2001 375,800 243,504 (4) -- 80,844 Executive Vice President 2000 328,800 178,808 (4) -- 57,770 and Chief Financial 1999 317,637 124,200 (4) -- 54,948 Officer - ------ (1) With respect to Mr. Harrison, III, includes $148,326, $142,453 and $153,265 attributable to the use of corporate transportation for fiscal 2001, 2000 and 1999, respectively. With respect to Mr. Moore, includes $44,061 in country club dues and an associated income tax gross-up for fiscal 2000. (2) The components of the amounts shown in this column consist of (a) Company contributions to the Company Savings Plan for Messrs. Harrison, Elmore, Moore, Pettus and Singer of $5,250 each for fiscal year 2001, $5,250 each for fiscal year 2000 and $5,000 each for fiscal year 1999, (b) Company contributions to the Supplemental Savings Incentive Plan for Messrs. Harrison, Elmore, Moore, Pettus and Singer, respectively, of $25,131, $18,760, $27,288, $31,189 and $17,684 for fiscal year 2001, $21,755, $13,236, $24,028, $24,742 and $14,477 for fiscal year 2000 and $20,711, $11,596, $23,431, $22,876 and $13,472 for fiscal year 1999, (c) split-dollar life insurance premiums paid by 10
the Company for the benefit of Messrs. Harrison, Elmore, Moore, Pettus and Singer, respectively, of $229,931, $15,931, $82,054, $40,486 and $39,616 for fiscal year 2001, $229,931, $7,337, $82,054, $23,986 and $18,839 for fiscal year 2000 and $231,486, $7,337, $82,054, $23,986 and $18,839 for fiscal year 1999, and (d) excess group life insurance premiums paid by the Company for the benefit of Messrs. Harrison, Elmore, Moore, Pettus and Singer, respectively, of $1,058, $666, $2,699, $1,295 and $594 for fiscal year 2001, $1,004, $352, $2,699, $1,192 and $504 for fiscal year 2000 and $1,473, $259, $3,590, $916 and $437 for fiscal year 1999. With respect to Mr. Singer, the amounts shown in this column also include $17,700, $18,700 and $17,200 for fiscal years 2001, 2000 and 1999, respectively, of director compensation received from South Atlantic Canners, a co-operative in which the Company is a member. (3) During 1999, Mr. Harrison, III received a restricted stock award of 200,000 shares of the Company's Class B Common Stock that vests in equal installments over a ten-year period subject to the achievement of certain performance goals by the Company. Because performance goals were exceeded for fiscal 2001 and fiscal 2000, 20,000 shares vested with respect to each of those years. See "Report of the Compensation Committee on Annual Compensation of Executive Officers." The amount with respect to 2000 is based on the value of the Company's Common Stock on December 29, 2000 and includes an income tax gross-up of $667,176. The amount with respect to 2001 is based on the value of the Company's Common Stock on December 28, 2001 and includes an income tax gross-up of $659,150. (4) Such Named Executive Officer did not receive personal benefits during the listed years in excess of the lesser of $50,000 and 10% of his annual salary and bonus. Aggregated Fiscal Year-End Option Information The table below sets forth certain information related to the fiscal year end number and value of stock options held by Mr. Harrison, III, the only Named Executive Officer holding any stock options. Mr. Harrison, III did not exercise any stock options during 2001. Number of Shares Value of Underlying Unexercised Unexercised Options In-the-Money Options at Fiscal Year End(#) at Fiscal Year End($) --------------------- --------------------- Name Exercisable Unexercisable Exercisable Unexercisable ---- ----------- ------------- ----------- ------------- J. Frank Harrison, III 150,000 -- $1,299,000 -- Retirement Plan The Company has in effect a retirement plan for the majority of its non-union employees including the Named Executive Officers (the "Retirement Plan") providing for payments computed on an actuarial basis. The following table sets forth the estimated annual benefits payable upon retirement at age 65 to persons born in 1950 at the compensation and years of service classifications set forth below. 11
ANNUAL BENEFIT UNDER RETIREMENT PLAN Years of Service -------------------------------------------- Five-Year Average Compensation 15 Years 20 Years 25 Years 30 Years 35 Years -------------------- -------- -------- -------- -------- -------- $125,000 $23,974 $31,965 $39,956 $47,947 $47,947 150,000 29,974 39,965 49,956 59,947 59,947 170,000(1) 34,774 46,365 57,956 69,547 69,547 - ------ (1) Prior to 1989, the formula for determining benefits under the Retirement Plan did not limit the amount of compensation that could be considered. Benefits that accrue after December 31, 1988, however, are limited as to the amount of compensation that may be considered. The maximum amount of compensation that could be considered was initially set at $200,000 in 1989 and was reduced to $150,000 in 1994, in each case, however, subject to cost of living adjustments. The maximum amount of compensation that could be considered in determining benefits under the Retirement Plan for employees (including Named Executive Officers) was $170,000 through the end of 2001. Because the annual benefit amount is the same for all compensation levels greater than $170,000, information for compensation levels above $170,000 is not presented. The benefits listed in the table are based on straight life annuity amounts and are not subject to any deduction for social security or other offset amounts, except to the extent that the benefits formula includes average compensation in excess of covered compensation (i.e., the average of the social security taxable wage base during the 35-year period ending in the year that the participant reaches full social security retirement age). At any point, this taxable wage base is assumed to continue without increasing for all years after the year in which it is calculated. As of December 30, 2001, the Named Executive Officers have the following years of service for purposes of the Retirement Plan: Mr. Harrison III, 25 years; Mr. Elmore, 17 years; Mr. Moore, 15 years; Mr. Pettus, 17 years; and Mr. Singer, 16 years. Pursuant to these assumptions, covered compensation for 2001 for the Named Executive Officers was: Mr. Harrison, III, $70,620; Mr. Elmore, $72,756; Mr. Moore, $51,648; Mr. Pettus, $57,312; and Mr. Singer $72,756. Officer Retention Plan Under the Company's Officer Retention Plan (the "Retention Plan"), eligible participants (including Named Executive Officers) normally receive a 20-year annuity payable in equal monthly installments commencing at retirement or, in certain instances, upon termination of employment or after a Change in Control (as defined below). The retirement benefits under the Retention Plan increase with each year of participation as set forth in an agreement between the participant and the Company. Benefits under the Retention Plan are reduced by 50% for participants who terminate employment due to severance that is before age 60 and not due to death or disability. The Retention Plan also contains a lump sum death benefit. If a participant dies before annuity payments have begun, this death benefit equals the retirement benefit accrued as of the 12
date of death, reduced by 50% if before death the participant's employment had terminated by severance rather than retirement. If a participant dies after annuity payments have begun, the present value of the remaining monthly installments (assuming an 8% per annum discount rate) is paid to the participant's beneficiary in a lump sum. Upon a Change in Control (as defined below), any participant actively employed on the Change in Control date is eligible for a Change in Control benefit in lieu of any other benefits to which he may have been entitled under the Retention Plan. The Change in Control benefit is equal to the retirement benefit the participant would have received had he continued to work through normal retirement age (age 60). For purposes of the Retention Plan and Supplemental Savings Plan (as described below), a Change in Control generally occurs in the following circumstances: (a) when a person or group acquires shares of the Company's capital stock having the voting power to designate a majority of the Company's Board of Directors; (b) when a person or group acquires or possesses shares of the Company's capital stock having power to cast (i) more than 20% of the votes regarding the election of the Board of Directors and (ii) a greater percentage of the votes regarding the election of the Board of Directors than the shares owned by the Harrison family; (c) upon the sale or disposition of all or substantially all of the assets of the Company and its subsidiaries outside the ordinary course of business other than to a person or group controlled by the Company or the Harrison family; or (d) upon the merger or consolidation of the Company with another entity where the Company is not the surviving entity. The estimated annual benefits payable upon retirement at age 60 for each of the Named Executive Officers are currently: Mr. Harrison, III, $1,416,638; Mr. Elmore, $491,479; Mr. Moore, $399,604; Mr. Pettus, $410,013; and Mr. Singer, $732,231. Supplemental Savings Incentive Plan Pursuant to the Company's Supplemental Savings Incentive Plan ("Supplemental Savings Plan"), eligible participants 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 also may make discretionary contributions to participants' accounts. These discretionary contributions are intended to offset the reductions in maximum benefits payable under the Retirement Plan or other qualified plans sponsored by the Company. Participants are immediately vested in all contributions they make and become fully vested in Company contributions upon termination of employment due to death, disability or retirement at or after age 55, five years of service (vesting in 20% annual increments) or (for certain participants) a Change 13
in Control (as defined above). Participant deferrals and contributions are deemed invested in either a fixed benefit option or certain investment funds specified by the Company. Balances in the fixed benefit option accrue up to a 13% return (depending upon the participant's age, years of service and other factors). During 2001, Company contributions for the Named Executive Officers under the Supplemental Savings Plan were: Mr. Harrison, III, $25,131; Mr. Elmore, $18,760; Mr. Moore, $27,288; Mr. Pettus, $31,189; and Mr. Singer, $17,684. No Named Executive Officer received a distribution under the Supplemental Savings Plan in 2001. Employment Arrangements In connection with the termination of his prior Employment Agreement, the Company and James L. Moore, Jr. agreed that (a) he would serve as Vice Chairman of the Board of Directors through December 31, 2002, (b) his base salary would continue through December 31, 2002 at the annual rate set forth in the Summary Compensation Table, (c) he would continue to participate in the Company's Annual Bonus Plan for 2001 and 2002 and (d) his salary and bonus will terminate December 31, 2002. The Company has entered into an agreement with J. Frank Harrison, Jr., who previously served as the Company's Chairman of the Board of Directors, pursuant to which Mr. Harrison, Jr. agreed to continue to serve as a director of the Company and as chairman of the Board's Executive Committee. Mr. Harrison, Jr. has agreed to (a) assist the Company with major strategic decisions and special projects, (b) provide the Company with general oversight and guidance and (c) assist the Company in maintaining good relations with The Coca-Cola Company. Mr. Harrison, Jr. receives a fee of $200,000 per year for his consulting services and a retirement benefit of $500,000 per year under this agreement. Mr. Harrison, Jr. is provided with insurance and other fringe benefits comparable with the Company's past practices. The agreement contains confidentiality and non-competition provisions and provides that, in the event of a Change in Control of the Company, Mr. Harrison, Jr. will continue to receive the retirement benefit for the remainder of his lifetime. The agreement is for a one-year term and is renewable for additional one-year terms. The Company has entered into a consulting agreement with Reid M. Henson, who previously served as a Vice Chairman of the Company's Board of Directors, pursuant to which Mr. Henson agreed to continue to serve as a director of the Company through the expiration of his current term in 2002. Mr. Henson has agreed to stand for re-election as a director for a term expiring in 2005. See "Election of Directors." Mr. Henson has also agreed to assist the Company with major projects and provide the Company with general oversight and guidance. Mr. Henson receives a fee of $350,000 per year for his consulting services under this agreement. The agreement does not modify the retiree benefits to which Mr. Henson is otherwise entitled. The agreement extends through May 31, 2005, but is subject to termination by Mr. Henson or upon Mr. Henson's death, disability or failure to perform his duties under the agreement. 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION H.W. McKay Belk, Ned R. McWherter, Carl Ware and Dennis A. Wicker serve on the Compensation Committee. None of such persons has ever been an officer or employee of the Company or any of its subsidiaries. During 2001, no executive officer of the Company served as a director or member of the compensation committee (or other committee performing similar functions) of any other entity of which an executive officer served on the Board of Directors or Compensation Committee of the Company. REPORT OF THE COMPENSATION COMMITTEE ON ANNUAL COMPENSATION OF EXECUTIVE OFFICERS The Board's Compensation Committee, currently composed of Messrs. H.W. McKay Belk, Ned R. McWherter, Carl Ware and Dennis A. Wicker, administers the Company's compensation plans, reviews executive compensation and makes recommendations to the Board concerning such compensation and related matters. This report relates to the Company's compensation policy for its executive officers, including the Named Executive Officers, for fiscal 2001. The Company's executive compensation policy is designed to establish an appropriate relationship between executive pay and the creation of long-term shareholder value, while motivating and retaining key employees. To achieve these goals, the Company's executive compensation policy supplements annual base compensation with an opportunity to earn bonuses based upon corporate performance as well as factors related to each individual's performance. Accordingly, a significant portion of any executive's compensation may consist of performance-based bonuses. Measurement of corporate performance is primarily based on Company objectives, which are set based on industry conditions and industry-wide and Company performance levels and approved by the Board of Directors. The performance of individual executives is evaluated on the basis of both predetermined performance goals for the Company and factors related to the contributions of each individual. Base salaries, including the base salary of J. Frank Harrison, III, the Company's Chairman and Chief Executive Officer, were adjusted from the prior year. The Committee periodically reviews base salary levels for its executives in comparison with those of other companies in the soft drink bottling industry, as well as other industries. For fiscal 2001, the Committee primarily relied upon a study published by Watson Wyatt Data Services that surveyed 1,405 public corporations, including many "Fortune 500" companies but excluding financial services companies and non-profits. The survey provided compensation information by separate categories of employers. Employer categorization factors included those defined by industry, size and geographic location. The Company strives to maintain executive base salaries at a level that will permit it to compete with other major companies for managers with comparable qualifications and abilities. Based on information contained in the Watson Wyatt survey, the Compensation Committee believes that the overall compensation of the Company's executive officers generally 15
places them above the median compensation of similarly situated executives in all industries covered by the survey. The Committee believes that Mr. Harrison, III's overall compensation also places him above the median compensation of similarly situated executives. Other factors considered by the Committee in its periodic review of executive salary levels include (i) the Company's total operating budget for each fiscal year, (ii) the impact of annual changes in the consumer price index and (iii) a comparison of the Company's executive compensation programs to available information concerning those of other public companies in the soft drink bottling industry. Due to wide disparities in levels of executive compensation revealed in the published information regarding the companies included in the Company's peer group index, the Compensation Committee did not believe that such information provided a meaningful basis for evaluating the overall compensation of the Company's executive officers for fiscal 2001, and therefore relied principally upon the information contained in the Watson Wyatt survey for purposes of such evaluation. The Company's Annual Bonus Plan is administered by the Compensation Committee, which annually selects participants who hold key positions with the Company or its subsidiaries. The total cash bonus awardable to a participant is determined by multiplying such participant's base salary by three factors: (i) the participant's approved bonus percentage factor; (ii) the participant's indexed performance factor; and (iii) the Company's overall goal achievement factor. The participant's approved bonus percentage factor is based on the relative responsibility and contribution to the Company's performance attributed to the participant's position with the Company, while the participant's indexed performance factor is determined by such individual's actual performance during the fiscal year (except that, for purposes of Section 162(m) of the Internal Revenue Code, the indexed performance factor for the Named Executive Officers is set at the beginning of the fiscal year). The overall goal achievement factor is determined by the Company's performance in relation to pre-set Company performance goals, as discussed below. Annual goals for selected Company performance indicators under the Annual Bonus Plan are set either in the fourth quarter preceding a fiscal year or the first quarter of a fiscal year. These goals are reviewed by the Compensation Committee and approved by the Board of Directors. The selected performance indicators for fiscal 2001 under the Annual Bonus Plan were operating cash flow, free cash flow, net income, equivalent case volume, market share and a value measure. The Compensation Committee assigns different weights to each of the performance indicators based on the perceived need to focus more or less on any particular objective in a given year. The corporate performance indicators and related weights are established after evaluating industry conditions, available information on the performance of other companies in the soft drink bottling industry, the Company's prior year performance and the Company's specific needs for the current year. For fiscal 2001, the following weights were assigned to the performance indicators: operating cash flow - 30%; free cash flow - 40%; net income - 10%; equivalent case volume - 5%; market share - 5%; and value measure - 10%. The performance indicators, as weighted, make up the Company's overall goal achievement factor, which is calculated on the 16
basis of a graduated scale ranging from a goal achievement of between 89% and 110% of each particular performance indicator. Although the Company believes that it achieved growth in market share in fiscal 2001, the traditional methods by which market share was measured became unavailable during fiscal 2001. As a result, the Compensation Committee eliminated this performance indicator and proportionately increased the weight assigned to each of the five other performance indicators. In fiscal 2001, actual performance exceeded the 100% target for three of the performance indicators (free cash flow, net income and equivalent case volume) and actual performance exceeded the 89% payout threshold but was below the 100% target for the two remaining performance indicators (operating cash flow and value measure). As a result of the Company's performance with respect to the performance indicators, the terms of the Annual Bonus Plan provided for a bonus award to executive officers, including Mr. Harrison, III, in an amount equal to 106.8% of 2001 base salary multiplied by each officer's approved bonus percentage factor and by each officer's indexed performance factor. Although the Company's Annual Bonus Plan enables the Compensation Committee to calculate bonuses derived from the factors described above, the Compensation Committee has absolute discretion to decrease or eliminate awards under the Company's Annual Bonus Plan. The Compensation Committee did not elect to so decrease or eliminate bonus awards with respect to fiscal 2001. The amount of annual bonus awards under the Annual Bonus Plan for each of the Named Executive Officers for the fiscal years 1999, 2000 and 2001 is included in the Summary Compensation Table under the heading "Bonuses." In addition, because of a change in strategic focus resulting from unforeseen changes in market conditions in the first half of fiscal year 2001, the Company adopted a supplemental achievement award plan for fiscal 2001 in order to align the interests of its executive officers with this shift in strategic focus. However, no amounts were paid pursuant to this plan for fiscal year 2001 due to the Company's strong financial performance during the second half of 2001 and the resulting achievement of at least 100% of the target payouts under the Annual Bonus Plan. During 1999, Mr. Harrison, III received a restricted stock award of 200,000 shares of the Company's Class B Common Stock that vests in equal installments over a ten-year period subject to the achievement of at least 80% of the overall goal achievement factor for the selected performance indicators used in determining bonuses under the Company's Annual Bonus Plan. The award also includes cash payments by the Company to Mr. Harrison, III for the reimbursement of income taxes related to the vesting of restricted stock. This restricted stock award is intended to qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue Code. The primary purpose of the award is to make a significant portion of Mr. Harrison, III's compensation dependent on the Company achieving its performance goals. The award was approved by the Company's stockholders at the annual meeting held on May 12, 1999. Pursuant to the terms of the award, 20,000 shares vested, effective January 1, 2002, based on the determination of the Compensation Committee that at least 80% of the overall goal achievement factor had been obtained for fiscal year 2001. 17
The Company's total annual compensation package for its executives also includes the opportunity: (i) to participate, on the same basis as other non-union employees, in the Coca-Cola Bottling Co. Consolidated Savings Plan; (ii) to participate in the Officers' Split-Dollar Life Insurance Plan; (iii) to participate in the Company's Retirement Plan; (iv) to elect to defer a portion of base compensation and receive limited matching contributions from the Company under the Supplemental Savings Incentive Plan; and (v) for certain key executives selected by the Compensation Committee, to receive additional retirement and survivor benefits pursuant to the Officer Retention Plan. This overall package is designed to attract and retain qualified executives and to ensure that such executives have a continuing stake in the long-term success of the Company. The Company believes that all compensation paid or payable to its executive officers covered under Section 162(m) of the Internal Revenue Code will qualify for deductibility under such Section. The Company's compensation policies apply equally to all of its executive officers, including the Chief Executive Officer. Submitted by the Compensation Committee of the Board of Directors. H. W. MCKAY BELK NED R. MCWHERTER CARL WARE DENNIS A. WICKER 18
REPORT OF THE AUDIT COMMITTEE The Board's Audit Committee, currently composed of Messrs. H.W. McKay Belk, John M. Belk, Reid M. Henson, Dennis A. Wicker and Ms. Sharon A. Decker, evaluates audit performance, handles relations with PricewaterhouseCoopers LLP, the Company's independent accountants, evaluates policies and procedures relating to internal accounting functions and controls and monitors the Company's compliance with the Audit Committee Charter. This report relates to the actions taken by the Audit Committee in fulfilling such role. The Audit Committee oversees the Company's financial reporting process on behalf of the Board of Directors. The Company's management has the primary responsibility for the financial statements and reporting process, including the Company's systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 30, 2001. This review included a discussion of the quality and the acceptability of the Company's financial reporting and controls. During the past fiscal year, the Audit Committee has discussed with the Company's independent accountants the matters required to be discussed by Statement on Auditing Standards No. 61. The Audit Committee also received during the past fiscal year the written disclosures and the letter from its independent accountants required by Independence Standards Board Standard No. 1, and has discussed with the independent accountants their independence. The Audit Committee further discussed with the Company's internal auditors and independent accountants the overall scope and plans for their respective audits. The Audit Committee meets periodically with the internal auditors and independent accountants to discuss the results of their examinations, their evaluations of the Company's internal controls and the overall quality of the Company's financial reporting. In reliance on the reviews, discussions and disclosures referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2001. Submitted by the Audit Committee of the Board of Directors. H. W. MCKAY BELK JOHN M. BELK SHARON A. DECKER REID M. HENSON DENNIS A. WICKER 19
COMMON STOCK PERFORMANCE GRAPH Presented below is a line graph comparing the yearly percentage change in the cumulative, total return on the Company's Common Stock against the cumulative total return of the Standard & Poor's 500 Index and a peer group for the period commencing December 31, 1996 and ending December 30, 2001, covering the Company's last five fiscal years. This peer group is comprised of Anheuser-Busch Companies, Inc.; Cadbury Schweppes plc (through September 2000); Coca-Cola Enterprises Inc.; The Coca-Cola Company; Cott Corporation; National Beverage Corp.; PepsiCo, Inc.; The Quaker Oats Company; Triarc Companies, Inc.; PepsiAmericas (formerly known as Whitman Corporation); and The Seagram Company Ltd. (through September 2000). [CHART] CUMULATIVE TOTAL RETURN \1\ Based upon an initial investment of $100 on December 31, 1996 with dividends reinvested Coca-Cola Bottling S&P 500 Peer Group Co. Consolidated 12-96 $100 $100 $100 12-97 $144 $133 $128 12-98 $122 $171 $141 12-99 $103 $208 $127 12-00 $ 84 $189 $153 12-01 $ 86 $166 $136 - ------ (1) Assumes that $100 was invested in the Company's Common Stock, in the Standard & Poor's 500 Index and in the peer group on December 31, 1996 and that all dividends were reinvested on a quarterly basis. Returns for the companies included in the peer group have been weighted on the basis of the total market capitalization for each company. 20
CERTAIN TRANSACTIONS Transactions with The Coca-Cola Company Concentrates and Syrups; Marketing Programs. 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 concentrates or syrups) of its soft drink products are manufactured. Accordingly, the Company purchases a substantial majority of its requirements of concentrates and syrups from The Coca-Cola Company in the ordinary course of its business. The prices of these concentrates and syrups are generally set by The Coca-Cola Company from time to time in its discretion. During fiscal year 2001, the Company paid The Coca-Cola Company approximately $241 million for sweetener, syrup, concentrate and other miscellaneous purchases. Additionally, the Company engages in a variety of marketing programs, local media advertising and similar arrangements to promote the sale of products of The Coca-Cola Company in bottling territories operated by the Company. During fiscal year 2001, direct marketing funding and other support provided to the Company by The Coca-Cola Company was approximately $52 million. In addition, the Company spent approximately $27 million on local media and marketing expenses pursuant to cooperative advertising and cooperative marketing arrangements with The Coca-Cola Company. Piedmont Coca-Cola Bottling Partnership. On July 2, 1993, Piedmont Coca-Cola Bottling Partnership (the "Partnership") was formed by wholly owned subsidiaries of the Company and The Coca-Cola Company to engage in the business of distributing and marketing finished bottle, can and fountain beverage products under trademarks of The Coca-Cola Company and other third party licensors in portions of North Carolina, South Carolina, Virginia and Georgia. Initially, the Company and The Coca-Cola Company each beneficially owned a 50% interest in the Partnership. On January 2, 2002, The Coca-Cola Company sold a 4.651% beneficial interest in the Partnership to the Company for $10 million, so that the Company now beneficially owns a 54.651% interest in the Partnership and The Coca-Cola Company beneficially owns a 45.349% interest in the Partnership. The price for the interest in the Partnership was the result of arms-length negotiations between the Company and The Coca-Cola Company. The Partnership has an initial term of 25 years subject to early termination as a result of certain events. Each partner's interest is subject to certain limitations on transfer, rights of first refusal and other purchase rights upon the occurrence of specified events. The partnership agreement contains a provision that obligated the Company to negotiate in good faith with The Coca-Cola Company between July 2, 1999 and July 2, 2001 to purchase The Coca-Cola Company's interest. Because the Company did not purchase The Coca-Cola Company's entire interest during that time period, The Coca-Cola Company has the option from July 3, 2001 to July 2, 2002 to require the Company to negotiate in good faith to sell its interest to The Coca-Cola Company. The Company manufactures and packages products and manages the Partnership pursuant to a management agreement. In connection with the management agreement, the Company receives a fee based on total case sales, reimbursement for its out-of-pocket expenses and 21
reimbursement for sales branch, divisional and certain other expenses. The term of the management agreement is 25 years, subject to early termination in the event of certain change in control events, a termination of the Partnership or a material default by either party. During 2001, the Company received management fees of $17.8 million from the Partnership. The Company sells product at cost to the Partnership. These sales amounted to $53.0 million in 2001. The Company subleases various fleet and vending equipment to the Partnership at cost. These sublease rentals amounted to $11.2 million in 2001. The Partnership also subleases various fleet and vending equipment to the Company at cost. These sublease rentals amounted to $0.2 million during fiscal year 2001. Stock Rights and Restrictions Agreement. Pursuant to a Stock Rights and Restrictions Agreement dated January 27, 1989 (the "Rights and Restrictions Agreement") between the Company and The Coca-Cola Company, The Coca-Cola Company agreed (a) not to acquire additional shares of Common Stock or Class B Common Stock except in certain circumstances and (b) not to sell or otherwise dispose of shares of Class B Common Stock without first converting them into Common Stock except in certain circumstances. The Coca-Cola Company granted the Company a right of first refusal with respect to any proposed disposition of any shares owned by it, and the Company granted The Coca-Cola Company certain registration rights with respect to such shares. The Coca-Cola Company further agreed that if its equity ownership reaches 30.67% or more of the Company's outstanding common stock of all classes, or its voting interest reaches 23.59% or more of the votes of all outstanding shares of all classes, then it will (i) negotiate in good faith with the Company to sell to the Company the number of shares of Common Stock or Class B Common Stock necessary to reduce its equity ownership to 29.67% of the outstanding common stock of all classes and (ii) convert the number of shares of Class B Common Stock necessary to maintain its ownership of Class B Common Stock to between 20% and 21% of the outstanding shares of Class B Common Stock and to maintain its voting interest at between 22.59% and 23.59% of the votes of all outstanding shares of all classes. Additionally, if the Company issues new shares of Class B Common Stock upon the conversion or exercise of any security, warrant or option of the Company that 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 at least 20% of the outstanding shares of Class B Common Stock and at least 20% of the total votes of all outstanding shares of all classes of the Company. Under the 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 in order for 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. Each of the percentages referenced in this paragraph and the preceding paragraph are subject to downward adjustment if The Coca-Cola Company voluntarily disposes of shares of Common Stock or Class B Common Stock or if the Company exercises its right of redemption referred to below. 22
Pursuant to the Rights and Restrictions Agreement, The Coca-Cola Company has also granted the Company the right, from January 27, 1995 through January 27, 2019, to call for redemption in full or in part that number of shares that would reduce The Coca-Cola Company's ownership of the equity of the Company to 20% at a price (which will not be less than $42.50 per share except with respect to shares acquired pursuant to the rights described in the preceding two paragraphs) and on such terms as set forth in the Rights and Restrictions Agreement. The option will expire prior to the end of its stated term if Messrs. Harrison, III and Harrison, Jr. cease to exercise voting control with respect to the Company. The Coca-Cola Company was also given the right to have its designee proposed by the Company for nomination to the Company's Board of Directors and to have such person nominated at each subsequent election of the Company's directors, subject to certain conditions. Carl Ware's appointment as a director of the Company was made in accordance with the terms of this agreement. Mr. Ware is Executive Vice President, Public Affairs and Administration of The Coca-Cola Company. Voting Agreement and Irrevocable Proxy. The Coca-Cola Company, Mr. Harrison, Jr., Mr.Harrison, III and Mr. Henson, in his capacity as co-trustee of certain trusts, also entered into a Voting Agreement dated January 27, 1989 (the "Voting Agreement"). Pursuant to the Voting Agreement, Messrs. Harrison, Jr., Harrison, III and Henson (as co-trustee) agreed to vote their shares of Common Stock and Class B Common Stock for a nominee of The Coca-Cola Company for election as a director to the Company's Board of Directors, and The Coca-Cola Company granted an irrevocable proxy (the "Irrevocable Proxy") with respect to all shares of Class B Common Stock and Common Stock owned by The Coca-Cola Company to Mr. Harrison, III for life and thereafter to Mr. Harrison, Jr. The Irrevocable Proxy covers all matters on which holders of Class B Common Stock or Common Stock are entitled to vote, other than certain mergers, consolidations, asset sales and other fundamental corporate transactions. Pursuant to the terms of the Voting Agreement, Mr. Harrison, III (or, in the event of his death, Mr. Harrison, Jr.) was granted the option (assignable to the Company or to Mr. Harrison, Jr.) to purchase the shares of Class B Common Stock held by The Coca-Cola Company for $38.50 per share plus an amount sufficient to give The Coca-Cola Company a 25% compounded annual rate of return from May 7, 1987 after taking into account dividends and other distributions previously received thereon. This option may be exercised if the disproportionate voting rights of the Class B Common Stock are terminated for certain reasons. The Voting Agreement and Irrevocable Proxy terminate upon the written agreement of the parties or at such time as The Coca-Cola Company no longer beneficially owns any shares of the Company's Common Stock. The Irrevocable Proxy also terminates at such time as either (a) Mr. Harrison, Jr. or Mr. Harrison, III do not beneficially own the 712,796 shares of Class B Common Stock that are currently part of the holdings of the Harrison Family Limited Partnerships or 23
(b) certain trusts holding shares of Class B Common Stock subject to the Voting Agreement do not beneficially own at least 50% of the Class B Common Stock held by them at the date of the Voting Agreement. Other Transactions The Company has a production arrangement with Coca-Cola Enterprises Inc. to buy and sell finished products at cost. Sales to Coca-Cola Enterprises Inc. under this agreement were $21.0 million in fiscal year 2001. Purchases from Coca-Cola Enterprises Inc. under this agreement were $21.0 million in fiscal year 2001. The Company leases its Snyder Production Center and certain adjacent property from Harrison Limited Partnership One ("HLP") pursuant to a lease that expires in December 2010. HLP's sole general partner is a corporation of which Mr. Harrison, Jr. is the sole shareholder. HLP's sole limited partner is a trust of which Mr. Harrison, III and Mr. Henson are co-trustees and Mr. Harrison, Jr. and his descendants are beneficiaries. Total payments under this lease were $3.3 million in 2001. The Company leases its corporate headquarters and an adjacent office building from Beacon Investment Corporation, of which Mr. Harrison, III is the sole shareholder. Total payments under this lease were $3.3 million in 2001. The Company purchases certain computerized data management products and services from Data Ventures LLC, of which the Company holds a 31.25% equity interest and Mr. Harrison, III owns a 32.5% equity interest. During fiscal year 2001, the Company paid $435,000 to Data Ventures LLC in connection with the purchase of such products and services. Data Ventures LLC has an unsecured line of credit of $4.5 million from the Company. Borrowings of $3.9 million were outstanding on the line of credit on December 30, 2001, which was the maximum outstanding amount during 2002. Prior to July 1, 2001, interest on borrowings was computed at the prime rate as published by The Wall Street Journal, less one percent. Beginning on July 1, 2001, interest on borrowings was computed at the prime rate plus 0.5%. The Company recorded a loan loss provision of $1.6 million in 2001 related to its outstanding loan to Data Ventures LLC. The total loan loss provision on December 30, 2001 was $2.4 million. 24
During fiscal year 2001, the law firm of Witt, Gaither & Whitaker, P.C. rendered legal services to the Company. John W. Murrey, III, a director of the Company, was a stockholder of such law firm and is of counsel to the firm. INDEPENDENT ACCOUNTANTS General PricewaterhouseCoopers LLP, independent public accountants, audited the financial statements of the Company for fiscal year 2001 and for each fiscal year since 1968. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting of Stockholders with an opportunity to make a statement if they desire to do so, and they are expected to be available to respond to appropriate questions. The Board of Directors, consistent with past practice, will defer the annual selection of independent accountants until after the Annual Meeting of Stockholders. The Audit Committee of the Board of Directors will then consider the engagement of independent public accountants to audit the Company's financial statements for the current fiscal year and will make its recommendation to the Board of Directors for final approval. The Audit Committee has considered whether the provision of services by PricewaterhouseCoopers LLP other than the audit of the financial statements of the Company for fiscal year 2001 and the review of the financial statements for the first three quarters of fiscal year 2001 is compatible with maintaining PricewaterhouseCoopers LLP's independence. 25
Audit Fees PricewaterhouseCoopers LLP billed the Company $242,500 for professional services rendered for the audit of the Company's annual financial statements for fiscal year 2001 and the reviews of the financial statements included in the Company's Quarterly Reports on Form 10-Q filed for the first three quarters of 2001. Financial Information Systems Design and Implementation Fees PricewaterhouseCoopers LLP rendered no professional services for the design and implementation of financial information systems to the Company during fiscal year 2001. All Other Fees PricewaterhouseCoopers LLP billed the Company $425,896 for all professional services rendered during fiscal year 2001 other than audits, reviews and financial information systems design and implementation. These services included an enterprise-wide information systems security review and tax-related consulting. The Company anticipates that fees for all professional services rendered during fiscal year 2002 other than for the audit and review of the Company's financial statements will be significantly less than in the fiscal year 2001. 26
STOCKHOLDER PROPOSALS If any stockholder wishes to present a proposal to the stockholders of the Company at the 2003 Annual Meeting of Stockholders, such proposal must be received by the Company for inclusion in the proxy statement and form of proxy relating to such meeting on or before December 6, 2002. In addition, if the Company receives notice of stockholder proposals after February 19, 2003, then the persons named as proxies in such proxy statement and form of proxy will have discretionary authority to vote on such stockholder proposals, without discussion of such matters in the proxy statement and without such proposals appearing as a separate item on the proxy card. ADDITIONAL INFORMATION The entire cost of soliciting proxies will be borne by the Company. In addition to this proxy statement, proxies may be solicited by the Company's directors, officers and other employees by personal contact, telephone, facsimile and e-mail. Such persons will receive no additional compensation for such services. Georgeson & Co., Inc., Wall Street Plaza, New York, New York 10005 has been retained to assist the Company in the solicitation of brokers, banks and other similar entities holding shares for other persons. Georgeson & Co., Inc. will receive a payment of $6,500 (plus out-of-pocket expenses) for these services. All brokers, banks and other similar entities and other custodians, nominees and fiduciaries will be requested to forward solicitation materials to the beneficial owners of the shares of Common Stock held of record by such persons, and the Company will pay such brokers, banks and other fiduciaries all of their reasonable out-of-pocket expenses incurred in connection therewith. 27
FORM 10-K A copy of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission 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. /s/ HENRY W. FLINT HENRY W. FLINT April 5, 2002 Secretary 28
(arrow) FOLD AND DETACH HERE (arrow) - -------------------------------------------------------------------------------- This Proxy is Solicited on Behalf of the Board of Directors of PROXY COCA-COLA BOTTLING CO. CONSOLIDATED Annual Meeting of Stockholders, May 8, 2002 The undersigned hereby appoints J. Frank Harrison, Jr., J. Frank Harrison, III, James L. Moore, Jr. and Ned R. McWherter, and each of them, proxies, with full power of substitution, to act and to vote the shares of Common Stock or Class B Common Stock which the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held on May 8, 2002, and any adjournment thereof, as follows: 1. ELECTION OF DIRECTORS: [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY (Except as marked to the to vote for all nominees contrary below) listed below Sharon A. Decker; Reid M. Henson; Carl Ware (Instruction: To withhold authority to vote for any individual write that nominee's name in the space provided below.) - -------------------------------------------------------------------------------- 2. Acting upon any other business which may be properly brought before said meeting or any adjournment thereof. (continued on other side)
(arrow) FOLD AND DETACH HERE (arrow) - -------------------------------------------------------------------------------- (continued from other side) THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE ELECTION OF ALL NOMINEES AS DIRECTORS AND WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXYHOLDERS IN ACTING UPON ANY OTHER BUSINESS WHICH MAY BE PROPERLY BROUGHT BEFORE SAID MEETING OR ANY ADJOURNMENT OR ADJOURNMENTS THEREOF. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders, dated April 5, 2002, and the Proxy Statement furnished therewith. If you plan to attend the Annual Meeting of Stockholders on May 8, 2002, please check the following box: [ ] Dated this ____ day of _____________, 2002 (Seal) ---------------------------------------- Note: Signature should agree with name on stock certificate as printed thereon. Executors, administrators, trustees and other fiduciaries and persons signing on behalf of corporations or partnerships, should so indicate when signing. Please sign, date and return this Proxy in the accompanying prepaid self-addressed envelope. Thank You.