UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.     )

 

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Filed by a Party other than the Registrant o

 

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o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-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)

 

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COCA-COLA BOTTLING CO. CONSOLIDATED

 

 

 

 

Notice of Annual Meeting
and
Proxy Statement

 

 

 

 

Annual Meeting of Stockholders

 

May 11, 2010

 

 

Coca-Cola Bottling Co. Consolidated

4100 Coca-Cola Plaza

Charlotte, North Carolina 28211

 

March 30, 2010

 

Dear Stockholder:

 

We are pleased to invite you to the 2010 annual meeting of stockholders of Coca-Cola Bottling Co. Consolidated to be held on May 11, 2010 at our offices at 4100 Coca-Cola Plaza in Charlotte, North Carolina.

 

Details regarding the meeting and the business to be conducted are described in the accompanying notice of annual meeting and proxy statement. In addition to considering the matters described in the proxy statement, we will report on matters of interest to our stockholders.

 

Whether or not you plan to attend the meeting, we encourage you to vote as soon as possible to ensure that your shares are represented at the meeting. The proxy statement explains more about proxy voting, so please read it carefully.

 

We look forward to your continued support.

 

Sincerely,

 

 

J. Frank Harrison, III

 

Chairman and Chief Executive Officer

 

COCA-COLA BOTTLING CO. CONSOLIDATED
4100 Coca-Cola Plaza
Charlotte, North Carolina 28211
(704) 557-4400

Notice of 2010 Annual Meeting of Stockholders

 

 

 

By Order of the Board of Directors,

 

 

Henry W. Flint

Vice Chairman and Secretary

 

March 30, 2010

 

Table of Contents

 

PROXY STATEMENT

 

 

 

The board of directors of Coca-Cola Bottling Co. Consolidated (“Coke Consolidated”) is providing these materials to you in connection with Coke Consolidated’s annual meeting of stockholders. The annual meeting will take place on Tuesday, May 11, 2010, at 9:00 a.m. Eastern Daylight Time. The annual meeting will be held at our Corporate Center, 4100 Coca-Cola Plaza, Charlotte, North Carolina.

 

Why am I receiving these materials?

 

You have received these proxy materials because our board of directors is soliciting your proxy to vote your shares at the annual meeting. The proxy statement includes information that we are required to provide you under SEC rules and is designed to assist you in voting your shares.

 

What is a proxy?

 

Our board of directors is asking for your proxy. This means you authorize persons selected by us to vote your shares at the annual meeting in the way that you instruct. All shares represented by valid proxies received before the annual meeting will be voted in accordance with the stockholder’s specific voting instructions.

 

Why did I receive a one-page notice regarding Internet availability of proxy materials instead of a full set of proxy materials?

 

SEC rules allow companies to choose the method for delivery of proxy materials to stockholders. For most stockholders, we have elected to mail a notice regarding the availability of proxy materials on the Internet rather than sending a full set of these materials in the mail. The notice was mailed to stockholders beginning March 30, 2010, and our proxy materials were posted on the website referenced in the notice on the same day. Utilizing this method of delivery expedites receipt of proxy materials by our stockholders and lowers the cost of our annual meeting. If you would like to receive a paper or email copy of the proxy materials, you should follow the instructions for requesting copies in the notice.

 

What is included in these materials?

 

These materials include:

 

 

If you requested printed copies of these materials by mail, these materials also include the proxy card for the annual meeting.

What items will be voted on at the annual meeting?

 

There are two proposals scheduled to be voted on at the annual meeting:

 

 

The board of directors is not aware of any other matters to be brought before the meeting. If other matters are properly raised at the meeting, the proxy holders may vote any shares represented by proxy in their discretion.

 

What are the board’s voting recommendations?

 

Our board of directors recommends that you vote your shares:

 

 

Who can attend the annual meeting?

 

Admission to the annual meeting is limited to:

 

 

Admission to the meeting will be on a first-come, first-served basis. Each stockholder may be asked to present valid picture identification such as a driver’s license or passport and proof of stock ownership as of the record date.

 

When is the record date and who is entitled to vote?

 

The board of directors set March 15, 2010 as the record date. All holders of Coke Consolidated common stock or class B common stock as of the close of business on that date are entitled to vote. Each share of common stock is entitled to one vote and each share of class B common stock is entitled to twenty votes. As of the record date, there were 7,141,447 shares of common stock outstanding and 2,044,202 shares of class B common stock outstanding.

 

What is a stockholder of record?

 

A stockholder of record or registered stockholder is a stockholder whose ownership of Coke Consolidated stock is reflected directly on the books and records of our transfer agent, American Stock Transfer & Trust Company. If you hold stock through an account with a bank, broker or similar organization, you are considered the beneficial owner of shares held in “street name” and are not a stockholder of record. For shares held in street name, the stockholder of record is your bank, broker or similar organization. We only have access to ownership records for the registered shares. If you are not a stockholder of record, we will require additional documentation to evidence your stock ownership as of the record date, such as a copy of your brokerage account statement, a letter from your broker, bank or other nominee or a copy of your notice or voting instruction card.

How do I vote?

 

You may vote by any of the following methods:

 

 

If you vote by phone or the Internet, please have your notice or proxy card available. The control number appearing on your notice or card is necessary to process your vote. A phone or Internet vote authorizes the named proxies in the same manner as if you marked, signed and returned a proxy card by mail.

 

How can I change or revoke my vote?

 

You may change or revoke your vote as follows:

 

 

What happens if I do not give specific voting instructions?

 

Stockholders of record. If you are a stockholder of record and you:

 

 

then the proxy holders will vote your shares in the manner recommended by the board of directors on all matters presented in this proxy statement and as the proxy holders may determine in their discretion for any other matters properly presented for a vote at the meeting.

 

Beneficial owners of shares held in “street name.” If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is referred to as a “broker non-vote.”

Which ballot measures are considered “routine” or “non-routine”?

 

The election of directors (“Proposal 1”) is a matter considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on Proposal 1.

 

The ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2010 (“Proposal 2”) is a matter considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal 2.

 

What is the quorum for the annual meeting?

 

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 for the transaction of business at the annual meeting. This is called a quorum.

 

What is the voting requirement to approve each of the proposals?

 

The following are the voting requirements for each proposal:

 

 

How are withhold authority votes, abstentions and broker non-votes treated?

 

Broker non-votes and abstentions are counted for purposes of determining whether a quorum is present. Only “for” and “against” votes are counted for purposes of determining the votes received in connection with each proposal, and therefore broker non-votes and abstentions have no effect on the proposal relating to the election of directors. In the case of the ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2010, an abstention will be counted as a vote present or represented on the proposal and will have the same effect as a vote against the proposal.

 

Who pays for solicitation of proxies?

 

We are paying the cost of soliciting proxies. We have retained Broadridge Financial Solutions for a cost of $1,000, plus out-of-pocket expenses, to assist in the solicitation. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to stockholders and obtaining their votes. In addition to soliciting the proxies by mail and the Internet, certain of our directors, officers and regular employees, without compensation, may solicit proxies personally or by telephone, facsimile and email.

What are the expected voting results?

 

We expect each of the proposals of the board of directors to be approved by the stockholders. The board of directors has been informed that J. Frank Harrison, III intends to vote an aggregate of 2,043,900 shares of our class B common stock (representing 40,878,000 votes and an aggregate of 85.1% of the total voting power of common stock and class B common stock together as of the record date) “FOR” electing the board of directors’ nominees for director and “FOR” the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2010.

 

Where can I find the voting results of the annual meeting?

 

Coke Consolidated will announce preliminary or final voting results at the annual meeting and publish final results in a Form 8-K filed with the SEC within four business days of the completion of the meeting.

 

As of March 15, 2010, the only persons known to us to be beneficial owners of more than 5% of our common stock or class B common stock were as follows:

 

 

 

 

Our board of directors has nominated eleven directors for election at this annual meeting to hold office until the next annual meeting and the election of their successors. All of the nominees are currently directors. Each has agreed to be named in this proxy statement and to serve if elected.

 

Although we know of no reason why any of the nominees would not be able to serve, if any nominee is unavailable for election, the proxies intend to vote your shares for any substitute nominee proposed by the board of directors. At the annual meeting, proxies cannot be voted for a greater number of individuals than the eleven nominees named in this proxy statement.

 

The board of directors recommends a vote “FOR” each of the eleven nominees listed below.

 

Listed below are the eleven persons nominated for election to the board of directors. The following paragraphs include information about each director nominee’s business background, as furnished to us by the nominee, and additional experience, qualifications, attributes or skills that led the board of directors to conclude that the nominee should serve on the board of directors.

 

 

J. Frank Harrison, III

 

Mr. Harrison is the Chairman of the board of directors and Chief Executive Officer. Mr. Harrison served as Vice Chairman of the board of directors from November 1987 through his election as Chairman in December 1996 and was appointed as our Chief Executive Officer in May 1994. He was first employed by us in 1977 and has served as a Division Sales Manager and as a Vice President.

 

Mr. Harrison brings extensive business, managerial and leadership experience to the board of directors. With over 30 years of experience with Coke Consolidated, Mr. Harrison provides the board of directors with a vital understanding and appreciation of our business. His strong leadership skills have been demonstrated through his service as CEO since 1994 and as the Chairman of the board since 1996. He is also the controlling stockholder of Coke Consolidated and, as a member of the founding family of Coke Consolidated, maintains a unique position within the Coca-Cola system.

H.W. McKay Belk

 

Mr. Belk was appointed President and Chief Merchandising Officer of Belk, Inc., an operator of retail department stores, in March 2004. Prior to such appointment, Mr. Belk had served as President, Merchandising and Marketing of Belk, Inc. since May 1998. Mr. Belk served as President and Chief Merchandise Officer of Belk Stores 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. Mr. Belk is also a director of Belk, Inc.

 

Mr. Belk’s significant business experience, including executive, operational and marketing roles with Belk, Inc. and Belk Stores Services, Inc. and service as a director and executive committee member of Belk, Inc. qualify him for service as a member of the board of directors. Mr. Belk has been a valuable member and contributor to our board of directors since 1994.

 

Alexander B. Cummings, Jr.

 

Mr. Cummings is Executive Vice President and Chief Administrative Officer of The Coca-Cola Company. Mr. Cummings joined The Coca-Cola Company in 1997 as Deputy Region Manager, Nigeria. In 2000, he was named President of the North & West Africa Division. In March 2001, he became President of the Africa Group, responsible for The Coca-Cola Company’s operations in Africa, and served in this capacity until June 2008. Mr. Cummings was appointed Chief Administrative Officer of The Coca-Cola Company effective July 2008, and was elected Executive Vice President effective October 2008. Mr. Cummings serves on the Boards of Africare and Clark Atlanta University, and he has served on the Advisory Board of The African Presidential Archives & Research Center, The Corporate Council on Africa, The African-America Institute, and The Center for Global Development’s Commission on U.S. Policy toward Low-Income Poorly Performing States. Mr. Cummings also serves on the Board of Coca-Cola Hellenic Bottling Co., a publicly traded (Athens and NYSE) bottler of The Coca-Cola Company.

 

Mr. Cummings experience and position with The Coca-Cola Company, deep knowledge of the beverage industry and extensive international background in business and community affairs uniquely qualify him to serve as a member of our board of directors.

 

Sharon A. Decker

 

Ms. Decker has been the Chief Executive Officer of The Tapestry Group, a faith based non-profit organization, since September 2004, and the Chief Executive Officer of North Washington Street Properties, a community redevelopment company, since October 2004. Ms. Decker served as the President of The Tanner Companies, a direct seller of women’s apparel, from August 2002 to September 2004. From August 1999 to July 2002, she was President of Doncaster, a division of The Tanner Companies. 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., a discount retailer, and SCANA Corporation, a diversified utility company.

 

Ms. Decker brings to the board of directors a unique and valuable perspective from the numerous executive and leadership positions she has held across a broad range of fields, including non-profit organizations and large public companies. Ms. Decker’s diverse executive experience and extensive experience serving on multiple boards qualifies her to serve as a member of our board of directors.

William B. Elmore

 

Mr. Elmore is our President and Chief Operating Officer, positions he has held since January 2001. 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, West Virginia and Tennessee Divisions from August 1991 to May 1996.

 

Mr. Elmore has served Coke Consolidated in numerous capacities, including high-level leadership roles, for almost twenty years, providing him with an essential understanding of our business and history as well as significant knowledge of the beverage industry. Mr. Elmore’s industry expertise and his years of business, financial, managerial, executive and board experience with Coke Consolidated make him a valuable member of our board of directors.

 

Deborah H. Everhart

 

Ms. Everhart has been an affiliate broker with Assist2Sell, a real estate brokerage firm located in Chattanooga, Tennessee, since September 2009. Ms. Everhart was an affiliate broker with Fletcher Bright Company, a real estate brokerage firm located in Chattanooga, Tennessee, from February 1997 until September 2009.

 

Ms. Everhart has provided the board of directors with dedicated service for seven years. Her business acumen and board experience make her a valuable addition to our board of directors. Ms. Everhart is also a member of the founding family of Coke Consolidated and holds a significant pecuniary interest in the stock of Coke Consolidated.

 

Henry W. Flint

 

Mr. Flint is the Vice Chairman of the board of directors, a position he has held since April 2007. Mr. Flint served as Executive Vice President and Assistant to the Chairman from July 2004 to April 2007. Mr. Flint was Co-Managing Partner of the law firm of Kennedy Covington Lobdell & Hickman, L.L.P. from January 2000 to July 2004, a firm with which he was associated since 1980. Mr. Flint has also served as our Secretary since 2000.

 

Mr. Flint’s long-standing service to Coke Consolidated and his managerial expertise make him a valuable member of our board of directors and qualify him for service on the board. Mr. Flint’s legal background provides the board of directors a valuable perspective on many of the issues that face our company and makes him a valuable addition to a well-rounded board of directors.

 

Ned R. McWherter

 

Mr. McWherter is retired. He served as the 46th Governor of the State of Tennessee from January 1987 to January 1995. He was a member of the Tennessee House of Representatives from 1969 to 1987, serving as Speaker for fourteen of those years. Mr. McWherter is the Chairman of the Board of Volunteer Distributing Company, Inc., Eagle Distributors, Inc. and Chairman Emeritus of The Weakley County Bank, Dresden, Tennessee. He serves on the Board of Trustees of Lambuth University, Jackson, Tennessee; The University of Tennessee Foundation, Knoxville, Tennessee; and The Baker Center for Public Policy, The University of Tennessee at Knoxville. He is a former director of Piedmont Natural Gas Company, Inc., Charlotte, North Carolina; The Centennial Medical Center, Nashville, Tennessee; SunTrust Banks, Inc., Nashville, Tennessee; First State Bank, Union City, Tennessee; and Volunteer Express, Inc., Nashville, Tennessee. He is also a former member of The United States Postal Service Board of Governors, Washington, D.C., and was a Commissioner of The American Battle Monuments Commission, Arlington, Virginia.

Mr. McWherter is uniquely qualified for membership on our board of directors because of his extensive leadership experience, including as the Governor of Tennessee and the Speaker of the Tennessee House of Representatives. Mr. McWherter’s extensive board service experience gained through his 15 years of quality service as a member of our board of directors as well as his service on the boards of various other public companies positions him well to serve as a member of our board of directors.

 

James H. Morgan

 

Mr. Morgan has served as President and Chief Executive Officer of Krispy Kreme Doughnuts, Inc. since January 2008. Since January 2002, Mr. Morgan has served as Chairman and Chief Investment Officer of Covenant Capital, LLC (formerly Morgan Semones Associates, LLC), an investment management firm, which is the General Partner of The Morgan Crossroads Fund. Previously, Mr. Morgan served as a consultant for Wachovia Securities, Inc., a securities and investment banking firm, from January 2000 to May 2001. From April 1999 to December 1999, Mr. Morgan was Chairman and Chief Executive Officer of Wachovia Securities, Inc. Mr. Morgan was employed by Interstate/Johnson Lane, an investment banking and brokerage firm, from 1990 to 1999 in various capacities, including as Chairman and Chief Executive Officer. Mr. Morgan is the Chairman of the Board of Directors of Krispy Kreme Doughnuts, Inc.

 

As the current President and CEO of Krispy Kreme Doughnuts, Inc. and a former executive at several major public and private companies, Mr. Morgan provides the board of directors with significant leadership and executive experience. Mr. Morgan’s proven leadership capability and his extensive knowledge of the complex financial and operational issues facing large companies qualifies him to serve as a member of our board of directors.

 

John W. Murrey, III

 

Mr. Murrey has been an Assistant Professor at Appalachian School of Law in Grundy, Virginia since August 2003. Mr. Murrey was of counsel to the law firm of Shumacker Witt Gaither & Whitaker, P.C., in Chattanooga, Tennessee until December 2002, a firm with which he was associated since 1970. Mr. Murrey is a director of The Dixie Group, Inc., a carpet manufacturer, and previously was a director of U.S. Xpress Enterprises, Inc. from 2003 until 2007.

 

Mr. Murrey’s longstanding quality service as a member of our board of directors as well as his significant experience serving on the boards of directors of other companies gives him an understanding of the role of the board and qualifies him to serve on our board of directors. Mr. Murrey’s legal background also adds to the diversity of the board of directors. Mr. Murrey has been a valuable member and contributor to our board of directors since 1993.

 

Dennis A. Wicker

 

Mr. Wicker has been a partner in the law firm of Nelson, Mullins, Riley & Scarborough LLP in its Raleigh, North Carolina office since November 2009. From April 2008 until November 2009, he was a partner in the law firm of SZD Wicker, LPA. From 2001 until 2008, Mr. Wicker was a partner in the Raleigh, North Carolina office of the law firm of Helms Mulliss & Wicker, PLLC. He served as Lt. Governor of the State of North Carolina from 1993 to 2001. Mr. Wicker served as Chairman of the State Board of Community Colleges and as Chairman of North Carolina’s Technology Council. Mr. Wicker also serves as a director of First Bancorp, a bank holding company, and Air T, Inc., an air transportation services company.

 

Mr. Wicker’s leadership skills, years of high quality service on the Coke Consolidated’s board of directors, service on the boards of directors of First Bancorp and Air T, Inc. and experience in public service qualify him for service on our board of directors.

Coke Consolidated is party to an Amended and Restated Stock Rights and Restrictions Agreement, dated February 19, 2009, with The Coca-Cola Company and J. Frank Harrison, III. Under the agreement, The Coca-Cola Company has the right to designate one person for nomination to our board of directors, and Mr. Harrison and trustees of certain trusts established for the benefit of J. Frank Harrison, Jr. have agreed to vote shares of our stock that they control for the election of such designee. Carl Ware was The Coca-Cola Company’s designee on our board of directors from 2000 until his retirement from the board in March 2010. The Coca-Cola Company designated Mr. Cummings to fill Mr. Ware’s vacancy on our board, and Mr. Cummings was appointed to the board of directors in March 2010.

 

J. Frank Harrison, III and Deborah H. Everhart are brother and sister. In accordance with the operating agreement of the J. Frank Harrison Family, LLC and certain trusts for the benefit of certain relatives of the late J. Frank Harrison, Jr., Mr. Harrison intends to vote the shares of our stock owned or controlled by such entities for the election of Ms. Everhart to the board of directors.

 

Coke Consolidated is governed by a board of directors and various committees of the board that meet throughout the year. The board of directors and its committees have general oversight responsibility for the affairs of Coke Consolidated. In exercising its fiduciary duties, the board of directors represents and acts on behalf of our stockholders.

 

The board of directors determines the independence of its members based on the standards specified by The NASDAQ Stock Market, LLC (“Nasdaq”). The board of directors has reviewed the relationships between Coke Consolidated and each director to determine compliance with the Nasdaq standards. Based on its review, the board of directors has determined that the following directors and director nominees are independent: H.W. McKay Belk, Sharon A. Decker, Ned R. McWherter, James H. Morgan, John W. Murrey, III and Dennis A. Wicker. A majority of the current members of the board of directors are independent. The board of directors has also determined that each member of the Audit and Compensation Committees (see membership information below) is independent.

 

In conducting its review of director independence, the board of directors reviewed the following transactions, relationships or arrangements. All matters described below are within the Nasdaq independence standards.

 

 

The board did not consider transactions with entities in which a director or immediate family member served only as a trustee or director.

 

The independent directors of the board meet at least twice each year in executive session without the other directors.

 

Mr. Harrison serves as both the Chairman of the board of directors and the CEO of Coke Consolidated, and Mr. Wicker serves as the Lead Independent Director.

The board of directors does not have a general policy regarding the separation of the roles of Chairman and CEO. Our bylaws permit these positions to be held by the same person, and the board of directors believes that it is in the best interests of Coke Consolidated to retain flexibility in determining whether to separate or combine the roles of Chairman and CEO based on our circumstances.

 

The board has determined that it is appropriate for Mr. Harrison to serve as both Chairman and CEO (1) in recognition of Mr. Harrison’s ownership of a controlling equity interest in Coke Consolidated and unique position within our company and the Coca-Cola system and (2) because it provides an efficient structure that permits us to present a unified vision to our constituencies.

 

The board of directors has elected Mr. Wicker to serve as its Lead Independent Director. The Lead Independent Director (1) presides over all meetings of the independent directors in executive session, (2) serves as a liaison between the Chairman of the Board and the independent directors, (3) has authority to call meetings of the independent directors and (4) serves as a contact person to facilitate communications between employees, stockholders and others with the independent directors.

 

The board of directors has a standing Audit Committee, Compensation Committee, Executive Committee, Finance Committee and Employee Benefits Committee. The board of directors may also establish other committees from time to time as it deems necessary. Committee members and committee chairs are appointed by the board of directors.

 

The members of the board’s committees are identified in the following table:

 

 

Each committee of the board of directors functions pursuant to a written charter adopted by the board of directors. We do not include the committee charters on our corporate website. Copies of the Compensation Committee Charter and Executive Committee Charter were attached to our proxy statement for our 2009 annual meeting of stockholders. A copy of the Audit Committee Charter is attached to this proxy statement as Appendix A.

The following table provides information about the operation and key functions of each board committee:

 

 

 

The board of directors held 4 meetings during fiscal year 2009. Each incumbent director attended 100 percent of board and applicable committee meetings during fiscal year 2009. Absent extenuating circumstances, each director is required to attend the annual meeting of stockholders in person. All incumbent directors attended the 2009 annual meeting of stockholders. The independent directors held 2 executive sessions in 2009.

 

The board of directors does not have a standing Nominating Committee comprised solely of independent directors. The board of directors is not required to have such a committee because Coke Consolidated qualifies as a “controlled company” under Nasdaq standards. We qualify as a controlled company because more than 50% of our voting power is controlled by the Chairman and CEO (the “Controlling Stockholder”). Nasdaq adopted its “controlled company” rule in recognition of the fact that a majority stockholder may control the selection of directors and certain key decisions of a company through his or her ownership rights.

 

The board of directors has delegated to its Executive Committee the responsibility for identifying, evaluating and recommending director candidates to the board of directors, subject to the final approval of the Controlling Stockholder who is also a member of the Executive Committee. Because we are a controlled company and all director candidates must be acceptable to the Controlling Stockholder, the board of directors has approved the following nomination and appointment process to provide our constituencies with a voice in the identification of candidates for nomination and appointment.

 

In identifying potential director candidates, the Executive Committee may seek input from other directors, executive officers, employees, community leaders, business contacts, third-party search firms and any other sources deemed appropriate by the Executive Committee. The Executive Committee will also consider director candidates appropriately recommended by stockholders.

 

In evaluating director candidates, the Executive Committee does not set specific, minimum qualifications that must be met by a director candidate. Rather, the Executive Committee considers the following factors in addition to any other factors deemed appropriate by the Executive Committee:

 

 

 

Diversity is one of the various factors the Executive Committee may consider in identifying director nominees, but the Executive Committee does not have a formal policy regarding board diversity.

 

All director candidates, including candidates appropriately recommended by stockholders, are evaluated in accordance with the process described above. The Executive Committee will not recommend any potential director candidate that is not acceptable to the Controlling Stockholder.

 

Stockholders who wish to recommend director candidates for consideration by the Executive Committee may do so by submitting a written recommendation to the Chairman of the Executive Committee c/o our Secretary at 4100 Coca-Cola Plaza, Charlotte, North Carolina 28211. Such recommendation must include sufficient biographical information concerning the director candidate, including a statement regarding the director candidate’s qualifications. The Executive Committee may require further information and obtain further assurances concerning the director candidate as it deems reasonably necessary for considering the candidate.

 

Recommendations by stockholders for director candidates to be considered for the 2011 annual meeting of stockholders must be submitted by November 30, 2010. Appropriate submission of a recommendation by a stockholder does not guarantee the selection of the stockholder’s candidate or the inclusion of the candidate in our proxy statement; however, the Executive Committee will consider any such candidate in accordance with the director nomination process described above.

 

Our Code of Business Conduct includes our policy regarding the review and approval of certain related person transactions. In accordance with the Code of Business Conduct, all material transactions or conflicts of interest involving members of the board of directors or our executive officers must be reported to and approved by the Audit Committee.

 

For purposes of our Code of Business Conduct, any related person transaction that is required to be reported in our proxy statements under SEC rules is deemed to be a “material transaction” and must be reported to and approved by the Audit Committee. Management determines whether a transaction is a material transaction that requires approval by the Audit Committee. The Audit Committee has approved each of the related person transactions described beginning on page 41.

 

The board of directors also forms special committees from time to time for the purpose of approving certain related person transactions.

 

Management is responsible for managing the risks that Coke Consolidated faces. The board of directors is responsible for overseeing management’s approach to risk management. The involvement of the full board of directors in reviewing our strategic objectives and plans is a key part of the board’s assessment of management’s approach and tolerance to risk. While the board of directors has ultimate oversight responsibility for overseeing management’s risk management process, various committees of the board assist it in fulfilling that responsibility.

 

The audit committee assists the board in its oversight of risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements. The finance committee assists the board in its oversight of the management of material financial risks, including risks related to borrowing and hedging transactions. The compensation committee assists the board in its oversight of the evaluation and management of risks related to Coke Consolidated’s compensation policies and practices.

 

Stockholders may communicate with any of our directors by sending a written communication to a director c/o our Secretary at 4100 Coca-Cola Plaza, Charlotte, North Carolina 28211. All communications received in accordance with these procedures will be reviewed by the Secretary and forwarded to the appropriate director or directors unless such communications are considered, in the reasonable judgment of the Secretary, to be improper for submission to the intended recipient, such as communications unrelated to our business, advertisements or frivolous communications.

 

The following table shows the compensation paid to each non-employee director who served on our board of directors in 2009:

 

2009 Director Compensation Table

 

 

 

The elements of compensation for our non-employee directors are as follows:

 

 

Under our Director Deferral Plan, non-employee directors may defer payment of all or a portion of their annual retainer and meeting fees until they no longer serve on the board of directors. Deferred fees are deemed to be invested in mutual funds selected by the directors from a predetermined list of funds. When a director retires or resigns, the director is entitled to receive a cash payment based upon the amount of fees deferred and the investment return on the selected investment.

 

Employee directors (currently Mr. Harrison, Mr. Flint and Mr. Elmore) receive no compensation for their service as directors.

 

The Compensation Committee reviews and approves compensation of the members of the board of directors. In approving annual director compensation, the Compensation Committee considers recommendations of management and approves the recommendations with such modifications as the Committee deems appropriate. There were no changes to director compensation for 2009. Management recommended and the Committee approved increases to director compensation for 2010 based on advice from Hewitt Associates.

 

This section explains our executive compensation program as it relates to the following “named executive officers” of Coke Consolidated:

 

 

This discussion includes statements regarding financial and operating performance targets in the limited context of our executive compensation program. Investors should not evaluate these statements in any other context. These are not statements of management’s expectations of future results or guidance.

 

Executive Summary

 

The goals for our executive compensation program are to provide compensation that is:

 

 

We seek to accomplish these goals in a way that is consistent with the purpose and core values of Coke Consolidated and the long-term interests of its stockholders and employees.

 

In making decisions about executive compensation, we rely primarily on our general experience and subjective considerations of various factors, including individual and corporate performance, our strategic business goals and compensation survey data. We do not set specific benchmarks for overall compensation or for allocations between different elements and types of compensation.

 

The Compensation Committee of the Board of Directors (the “Committee”) oversees the compensation program for our executive officers with the assistance of senior management. The Committee reviews, approves and determines all elements of compensation for each executive officer.

The following table lists the key elements of our 2009 executive compensation program:

 

Key Elements of Executive Compensation

 

 

Determining Executive Compensation

 

Discretion and Subjective Judgment of Committee

 

The Committee reviews and determines all compensation for the executive officers.

 

In determining base salaries, annual and long-term incentive targets and all other matters related to executive compensation, the Committee relies on its general experience and subjective considerations of various factors, including our strategic business goals, compensation survey data and each executive officer’s position, experience, level of responsibility, individual job performance, contributions to our corporate performance, job tenure and future potential.

 

The Committee does not set specific targets or benchmarks for overall compensation or for allocations between fixed and at-risk compensation, cash and non-cash compensation or short-term and long-term compensation.

 

The Committee has not engaged its own compensation consultant in the past.

 

Annual Compensation Reviews

 

The Committee conducts an annual review of executive officer compensation to determine if changes are appropriate. As part of this review, management submits recommendations to the Committee.

 

Management’s recommendations are determined based on an annual compensation review process conducted by senior management, including the named executive officers. This process includes reviewing self-assessments completed by each executive officer, job performance reviews completed by each executive officer’s supervising manager and comparative compensation data provided by management’s compensation consultant. Based on this process, the Vice Chairman and the President make specific recommendations to the CEO. The CEO reviews and approves compensation recommendations for all executive officers, including the named executive officers, before they are submitted to the Compensation Committee.

Following a review of management’s recommendations, the Committee approves the compensation recommendations for the executive officers with any modifications the Committee deems appropriate. The Committee may also adjust compensation for specific individuals at other times during the year.

 

Role of Compensation Consultants and Benchmarking

 

In connection with its compensation reviews, management retains Hewitt Associates to conduct comparative studies of our executive compensation relative to peer companies. These studies are conducted every two or three years with periodic updates as requested by management.

 

The following factors are used for selecting peer companies:

 

 

Based on these factors, 30 peer companies have been selected with median revenues of $2 billion. Because we compete for executive talent from a variety of industries, the 30 companies represent a cross section of industries.

The current peer group consists of the following companies:

 

 

The compensation data is adjusted for differences in revenues and sizes of peer companies through regression analysis. Changes are made to the peer group from time to time to align the peer group more closely with our current business circumstances.

 

Management and the Compensation Committee use the studies by Hewitt Associates and other publicly available compensation surveys and data as a point of reference to assess whether the compensation for each of the executive officers is within a reasonably competitive range. We do not, however, rely exclusively on the compensation studies or set compensation components to meet specific benchmarks, such as targeting salaries or total compensation “above the median” or “at the 75th percentile.”

 

Neither Hewitt Associates nor any of its affiliates provide any services to Coke Consolidated except for services related solely to executive officer and director compensation.

Base Salaries

 

Base salaries are the foundation of our compensation program. They provide a fixed, baseline level of cash compensation based on each executive officer’s position, responsibilities, individual performance, job tenure and future potential. Base salary levels also impact amounts paid under other elements of our executive compensation program, including annual bonuses, long-term performance awards and retirement benefits.

 

The Committee determined that it was appropriate to increase the named executive officers’ base salaries for 2009. Each named executive officer’s base salary was increased by 3.0%, except Mr. Flint’s base salary was increased by 5.0% and Mr. Westphal’s base salary was increased by 8.7%. Base salaries were increased by 3.0% based on subjective consideration of various factors, including compensation survey data available to management and the Committee at the time of the increases and general increases in the scope of officer responsibilities due to a reduction in the total number of officers employed by Coke Consolidated during 2007 and 2008. The 3.0% increases were reflective of the increases provided generally to other employees of the company. Mr. Flint’s and Mr. Westphal’s increases in base salary were attributable primarily to the level of responsibility and related compensation deemed appropriate for their jobs by the Committee. Both Mr. Flint and Mr. Westphal were promoted within the prior two years and it has generally been the Committee’s practice to increase base salaries of promoted officers commensurate with level of responsibility over a more gradual, multi-year period of time as such officers season in their jobs.

 

The Committee believes the named executive officers’ base salaries for 2009 were within a reasonable range of base salaries for comparable executive talent.

 

The following table reflects the base salaries paid to the named executive officers for 2009:

 

 

Annual Bonus Plan

 

The Annual Bonus Plan provides each executive officer the opportunity to receive an annual cash award based on the achievement of corporate performance goals and individual performance.

 

The formula for computing annual bonus payouts is as follows:

 

 

Annual Bonus Calculation

 

Based on the Committee’s determinations as described below, the bonus amounts paid to the named executive officers for 2009 were calculated as follows:

 

Target Bonus Awards

 

In the first quarter of each year, the Committee approves a target bonus award for each executive officer, expressed as a percentage of base salary. Target bonus awards are determined based on each executive officer’s position and level of responsibility.

 

The target bonus awards for the named executive officers for 2009 were as follows:

 

 

Mr. Flint’s target bonus award was increased to 85% of base salary for 2009 from 75% of base salary for 2008 due to the level of responsibility and related compensation deemed appropriate for his job by the Committee. Target bonus awards for the other named executive officers remained unchanged from 2008 as a percent of base salary.

 

Overall Goal Achievement Factor

 

The overall goal achievement factor is calculated based on our achievement of annual corporate performance goals. The following table summarizes the corporate performance goals approved by the Committee for 2009:

 

 

The Committee selected Revenue, Earnings Before Interest and Taxes and Net Debt Reduction as the performance measures for 2009 because they each support a key annual goal under our long-range strategic plan. The Committee also believes the achievement of these goals is consistent with the long-term interests of our stockholders.

 

The performance measures are defined as follows:

 

 

The Committee also approves the threshold, target and maximum performance goals under the Annual Bonus Plan. If the threshold goal is not achieved for a given measure, there is no payout on that measure. Increasingly larger payouts are awarded for levels of achievement between the threshold and maximum performance goals.

The following table summarizes the payout range for each performance measure.

 

 

In determining the overall goal achievement factor, the Committee makes adjustments to the actual levels of achievement to ensure that each corporate performance measure reflects our normalized operating performance in the ordinary course of business.

 

The following table reflects the calculation of the overall goal achievement factor for 2009:

 

 

Individual Performance Factor

 

The Committee sets the individual performance factor for each named executive officer based on its subjective judgment of the executive officer’s performance for the year, including consideration of the executive officer’s annual performance evaluation and management’s recommendations. The maximum individual performance factor is 1.5.

 

In the first quarter of 2010, each named executive officer’s individual performance factor was set at 1.0 based on 2009 performance (which had no impact on the executives’ annual bonus calculations).

 

Long-Term Performance Plan

 

The Long-Term Performance Plan delivers a targeted percentage of base salary to each participant based on the achievement of long-term goals of the company. The Long-Term Performance Plan is offered to the executive officers and other key employees. A three-year performance cycle is generally established each year for determining compensation under the Long-Term Performance Plan.

 

The Committee approved the Long-Term Performance Plan to encourage retention of executive officers and key employees, increase the proportion of their total “at risk” compensation, and provide an incentive to achieve our long-term strategic goals.

 

Long-Term Plan for 2009

 

In the first quarter of 2009, the Committee established the long-term performance plan for the 2009-2011 three-year period (the “2009 Long-Term Plan”). The general formula for computing awards under the 2009 Long-Term Plan is as follows:

 

 

Target Awards

 

The Committee approved target awards under the 2009 Long-Term Plan based on each executive officer’s base salary, position and level of responsibility, and its subjective consideration of 2008 comparative survey data

from Hewitt Associates. Payouts with respect to the target awards will be made in early 2012 depending on our achievement of specified average performance goals during the three-year performance period.

 

The following table reflects the target awards granted to the named executive officers under the 2009 Long-Term Plan:

 

 

Mr. Harrison does not participate in the Long-Term Plan due to his long-term performance stock units described below.

 

Long-Term Performance Factor

 

The long-term performance factor is calculated based on our achievement of average annual corporate performance goals during the three-year performance period. The following table summarizes the average corporate performance goals approved by the Committee for the 2009 Long-Term Plan:

 

 

The Committee selected Revenue, Earnings Per Share, Return on Total Assets and Debt/Operating Cash Flow as the performance measures under the 2009 Long-Term Plan because they each support key, long-term strategic goals within our long-term plan. The Committee also believes the achievement of these goals is consistent with the interests of our long-term stockholders.

 

Each of the performance measures is defined as follows:

 

 

The Committee approved the threshold, target and maximum performance goals under the 2009 Long-Term Plan. If the threshold goal is not achieved for a given measure, there will be no payout on that measure. Increasingly larger payouts will be awarded for the achievement of target and maximum performance goals.

The following table summarizes the payout range for each performance measure.

 

 

In determining the long-term performance factor, the Committee will make adjustments to actual levels of achievement to ensure that each corporate performance measure reflects our normalized operating performance in the ordinary course of business.

 

Payments, if any, under the 2009 Long-Term Plan will be made in early 2012 based on our audited financial statements for fiscal years 2009 through 2011. Consistent with our historical practices of compensating executive officers (other than the CEO) in cash, the awards will be paid in cash instead of equity due to the limited number of shares of Coke Consolidated stock held by stockholders who are not affiliates of Coke Consolidated and the limited trading volume of our common stock.

 

CEO Performance Units

 

The Committee awarded 400,000 performance units to Mr. Harrison, our Chairman and CEO, in 2008. The award was made to maintain Mr. Harrison’s total compensation and at-risk compensation at competitive levels and provide a retention incentive though 2019.

 

The Committee designed the award to be payable in class B common stock:

 

 

Each performance unit represents the right to receive one share of our class B common stock based on the achievement of specified corporate performance goals under the Annual Bonus Plan. For each of our fiscal years 2009 through 2018, up to 40,000 performance units may vest in accordance with the following formula:

 

 

The following reflects the calculation of vested performance units for 2009.

 

 

The value realized by Mr. Harrison upon vesting of the 40,000 performance units was $2,356,800 based on the closing price of our common stock on March 9, 2010.

 

The overall goal achievement factor under the Annual Bonus Plan for 2009 was 133.8% (see page 22 above for a discussion of the overall goal achievement factor, including the corporate performance measures and

goals used for determining the overall goal achievement factor); however, for purposes of calculating the number of performance units that vest in a given year, the overall goal achievement factor is limited to 100%.

 

If fewer than 40,000 performance units vest for any annual performance period, Mr. Harrison will automatically forfeit the unvested portion of the units for that performance period. No performance units were forfeited for 2009.

 

The award agreement does not provide for income tax reimbursements. Mr. Harrison, however, may require us to settle a portion of the performance units in cash as necessary to satisfy maximum statutory tax withholding requirements.

 

Officer Retention Plan

 

The Officer Retention Plan (“ORP”) provides the executive officers and certain key employees with a supplemental retirement benefit that increases each year until age 60 pursuant to a pre-determined schedule. The amount of the benefit is based on each participants’ position and level of responsibility, performance, and job tenure.

 

Historically, the Committee has emphasized retention as a key objective of our compensation program, and the ORP was implemented for the purpose of attracting and retaining officer talent until retirement and promoting a long-term perspective. The ORP is provided in light of our historical practice of not using equity as a significant component of compensation (except for the CEO), and provides a significant benefit to the named executive officers. The material terms of the ORP are described beginning on page 34.

 

Supplemental Savings Incentive Plan

 

The Supplemental Savings Incentive Plan (“SSIP”) allows the executive officers to defer a portion of their annual salary and bonus. We may match up to 50% of the first 6% of salary deferred. We may also make additional discretionary contributions to the participants’ accounts.

 

Prior to 2006, participants could elect to receive a fixed annual return of up to 13% on their account balances. This provided participants with an above market rate of return and resulted in a long-term fixed liability for us that was not contingent on our corporate performance. The Committee eliminated the option to receive a fixed rate of return for all deferrals and company contributions made on or after January 1, 2006. The fixed rate of return option was not eliminated for deferrals and company contributions made before January 1, 2006. The material terms of the SSIP are described beginning on page 35.

 

Other Benefits and Executive Compensation Policies

 

Pension Plan

 

We maintain a traditional pension plan. Effective June 30, 2006, no new participants may become eligible to participate in the plan and the benefits under the plan for existing participants, including the named executive officers, were frozen.

 

401(k) Savings Plan

 

We maintain a tax qualified defined contribution plan with a cash or deferred arrangement under Section 401(k) of the tax code for substantially all of our employees who are not part of collective bargaining agreements, including the named executive officers. Employee elective deferral contributions to the 401(k) plan are made on a pre-tax basis. Contributions by the named executive officers are limited by the tax code.

 

Severance and Change of Control

 

Our senior executive officers, including the named executive officers, do not have employment agreements, but they are entitled to certain payments under the various plans described in this section in connection with a termination of employment or a change of control of our company. With respect to termination of

employment, each executive officer is entitled to certain payments upon termination without cause, voluntary resignation or termination due to death or disability. The terms of the severance provisions are described beginning on page 37.

 

Change of control benefits are provided to ensure that in the event of a friendly or hostile change of control, our executive officers will be able to advise our Board of Directors about the potential transaction, without being unduly influenced by personal considerations, such as fear of losing their jobs as a result of a change of control. The Committee does not consider the change of control provisions in determining the forms or amounts of other compensation. The terms of the change of control provisions are described beginning on page 37.

 

The Committee does not review the termination and change of control provisions every year.

 

Personal Benefits

 

We provide personal benefits to the named executive officers that management and the Committee believe are reasonable, competitive and consistent with our overall objective of attracting and retaining officer talent. The Committee believes the value of providing these benefits to our executive officers outweighs the cost of the benefits. The cost of these benefits to Coke Consolidated is reflected in the All Other Compensation Table on page 30.

 

Beginning in 2009, we replaced many of our historical personal benefits with an annual flexible benefit allowance. Each executive officer has the flexibility to keep or spend the allowance and is not required to report to us how the allowance is spent. The Committee made this change to:

 

 

Each of the named executive officers received an annual flexible benefit allowance of $25,000 for 2009, except for Mr. Harrison and Mr. Elmore who each received $45,000. These amounts were determined based on our annual average costs of providing the replaced benefits, including the costs of prior income tax reimbursements paid in connection with the benefits.

 

We continue to pay long-term disability and life insurance premiums for the named executive officers, including life insurance premiums on some policies that were purchased to replace terminated split-dollar life insurance arrangements. For certain elements of compensation, we also pay income tax gross-ups to provide the full benefit of the compensation.

 

Our Board of Directors requires the CEO to use our corporate aircraft whenever reasonable for both business and personal travel. This benefit increases the level of safety and security for Mr. Harrison and his family. Making the aircraft available to Mr. Harrison also allows him to efficiently and securely conduct business during both business and personal flights and eliminates the inefficiencies of commercial travel. Coke Consolidated believes that the value of making the aircraft available to Mr. Harrison and his family, in terms of convenience, security and saving time, is greater than the incremental cost that Coke Consolidated incurs to make the aircraft available, and therefore is an efficient form of compensation for Mr. Harrison.

 

Other named executive officers may use our corporate aircraft for personal purposes with Mr. Harrison’s permission and subject to the oversight of the Committee and Board of Directors. Depending on availability, family members of executive officers may travel on the corporate aircraft to accompany executives on business. There is no incremental cost to Coke Consolidated for these passengers.

Tax and Accounting Considerations

 

The Committee considers the tax and accounting effects of compensation elements when designing our incentive and equity compensation plans. Under Section 162(m) of the tax code, a public company is generally not permitted to deduct non-performance-based compensation paid to a named executive officer to the extent the compensation exceeds $1 million in any year. Special rules apply for “performance-based” compensation. The Committee has designed our Annual Bonus Plan, the Long-Term Performance Plan, and the CEO’s performance unit award to maximize the deductibility of compensation paid to our named executive officers. In order to maintain flexibility in compensating executive officers, however, the Committee has not adopted a policy that all compensation must be deductible for federal income tax purposes.

Executive Compensation Tables

 

The following tables and related narratives present the compensation for our named executive officers in the format specified by the SEC.

 

 

 

 

 

Salary (Column (c))

 

The amounts shown in the “Salary” column include amounts deferred by the executive officers under our 401(k) Savings Plan and Supplemental Savings Incentive Plan.

 

Stock Awards (Column (d))

 

The amount shown in the “Stock Awards” column for 2009 represents the grant-date fair value of 40,000 performance units awarded to our CEO and subject to vesting in 2009. The amounts shown for 2008 and 2007 represent the grant-date fair values of restricted stock awards granted to our CEO and subject to vesting in those years. The grant-date fair values of the awards are computed in accordance with FASB ASC Topic 718 based on our expectations as of the grant dates regarding the probable level of achievement under the awards. We assumed the maximum level of achievement under each of the awards. The assumptions made in

determining the fair value of the 2009 performance units are described beginning on page 82 of our Form 10-K for the fiscal year ended January 3, 2010.

 

Non-Equity Incentive Plan Compensation (Column (e))

 

The amounts shown in the “Non-Equity Incentive Plan Compensation” column represent the performance-based cash awards earned under our Annual Bonus Plan. The Annual Bonus Plan is described beginning on page 22.

 

Change in Pension Value and Nonqualified Deferred Compensation Earnings (Column (f))

 

The following table breaks out the amounts shown in the “Change in Pension Value and Nonqualified Deferred Compensation” column for 2009.

 

 

 

 

All Other Compensation (Column (g))

 

The following table describes each component of the “All Other Compensation” column for 2009. The amounts shown reflect the incremental cost to Coke Consolidated for each of the benefits.

 

 

The following describes each of the personal benefits reflected in the above table:

 

Supplemental Savings Incentive Plan

 

We make matching and discretionary contributions to the executives’ accounts under the Supplemental Savings Incentive Plan.

401(k) Savings Plan

 

We make matching contributions to the executives’ accounts under the 401(k) Savings Plan of up to 5% of each executive’s eligible compensation.

 

Disability and Life Insurance

 

We pay long-term disability, excess group life insurance and individual life insurance premiums for certain named executive officers, including life insurance premiums on some policies that were purchased to replace terminated split-dollar life insurance arrangements. Of the amount shown for Mr. Harrison, $222,704 was for premiums paid on an individual whole-life policy that we agreed to provide to Mr. Harrison in 2003 in connection with the termination of a split-dollar life insurance arrangement.

 

Income Tax Gross-Ups

 

We pay income tax gross-ups with respect to certain individual life insurance premiums and personal use of corporate aircraft.

 

Flexible Benefit Allowance

 

Beginning in 2009, we replaced many of our historical personal benefits with an annual flexible benefit allowance. Each executive officer has the flexibility to keep or spend the allowance and is not required to report to us how the allowance is spent.

 

Aircraft Usage

 

Coke Consolidated owns and operates one corporate aircraft to allow employees to safely and efficiently travel for business purposes. The corporate-owned aircraft allows employees to be more productive than if commercial flights were utilized, as the aircraft provides a confidential and productive environment for conducting business without the scheduling constraints imposed by commercial airline service.

 

Mr. Harrison is also required to use our corporate aircraft whenever reasonable for both business and personal travel. This policy increases the level of safety and security for Mr. Harrison and his family. Making the aircraft available to Mr. Harrison for personal use allows him to efficiently and securely conduct business during personal flights. Consistent with past practices, we reimburse Mr. Harrison for taxes incurred because of his personal use of the corporate aircraft.

 

Other named executive officers may also use the corporate aircraft for personal purposes with Mr. Harrison’s permission and subject to the oversight of the Compensation Committee and board of directors. Depending on availability, family members of executive officers are also permitted to ride along on the corporate aircraft when it is already going to a specific destination for a business purpose. This use has no incremental cost to Coke Consolidated.

 

The incremental cost of personal use of company aircraft is calculated based on the average cost of fuel, crew travel, on board catering, trip-related maintenance, landing fees and trip-related hanger and parking costs and other similar variable costs. Fixed costs that do not change based on usage, such as pilot salaries, home hanger expenses and general taxes and insurance are excluded from the incremental cost calculation. If an aircraft flies empty before picking up or dropping off a passenger flying for personal reasons, this “deadhead” segment is included in the incremental cost of the personal use.

 

Professional Fees

 

We historically paid professional fees for financial planning and tax services. Professional fees were paid for Mr. Harris in 2009 for 2008 expenditures, but have been replaced with the flexible benefit allowance and discontinued for all of the named executive officers for 2010.

 

The following table shows grants of plan-based awards made to our named executive officers in March 2009.

 

 

 

The following table shows the outstanding equity awards held by our named executive officers at the end of fiscal year 2009.

 

 

 

 

The following table shows stock vested during the fiscal year ended January 3, 2010 for our named executive officers. None of our named executive officers hold stock options.

 

 

 

 

We maintain a traditional, tax-qualified pension plan (the “Pension Plan”) for the majority of our non-union employees, including the named executive officers. On June 20, 2006, the Pension Plan stopped accepting new participants and the benefits under the plan for existing participants were frozen. We also maintain the Officer Retention Plan, a supplemental nonqualified retirement plan (the “ORP”), for key executives, including the named executive officers. The following table provides information regarding the Pension Plan and ORP for fiscal year 2009.

 

 

Pension Plan

 

The Pension Plan is a traditional, tax-qualified defined benefit plan. The benefits under the plan were frozen on June 30, 2006, and since that date no additional employees have become participants in the plan and no additional benefits have accrued. On June 30, 2006, all participants in the plan became fully vested in their accrued benefits under the plan.

 

Each participant’s accrued benefit is determined based on the participant’s “average compensation” as defined in the plan as of December 31, 2005 and “years of service” as defined in the plan as of June 30, 2006. As a tax-qualified pension plan, the maximum amount of compensation taken into account for each year under the terms of the plan is limited by the Internal Revenue Code. In 2005, this limit was $210,000. On January 3, 2010, the plan benefit of each of the named executive officers, except for Mr. Harris, was based on the maximum average compensation permitted by the plan and provides an accrued benefit equal to the amount shown in the above table under the “Present Value of Accumulated Benefit” column. Mr. Harris was hired in January 2008 after the plan was frozen, so he is not a participant in the plan.

 

Participants may retire at or after age 65 and receive their full benefit under the plan. Participants who have not reached age 65 but who have reached age 55 and have at least 10 years of service may retire and receive a reduced retirement benefit. Payments made before participants reach 65 are reduced 7.75% for participants between the ages of 55 and 59 and 4.0% for participants between the ages of 60 and 64. Mr. Harrison is currently eligible for early retirement under the plan.

 

Benefits are payable as a single life annuity for participants who are single when payment of their plan benefit commences or as a 50% joint and survivor annuity over the life of the participant and spouse for participants who are married when payment of their plan benefit commences unless an optional form of payment is elected. Available optional forms of payment are an annuity payable in equal monthly payments for 10 years and thereafter for life, or a 75% or 100% joint and survivor annuity over the lives of the participant and spouse or other beneficiary. Benefits of $5,000 or less may be distributed in a lump sum. If a participant dies before the participant begins to receive retirement benefits, the participant’s accrued benefit will be payable to the participant’s surviving spouse.

 

Officer Retention Plan

 

The Internal Revenue Code limits the amounts of compensation that may be considered and the annual benefits that may be provided under the Pension Plan. As such, we maintain the ORP, which is a supplemental nonqualified defined benefit plan, to provide some of our key executives, including the named executive officers, with retirement benefits in excess of IRS limitations as well as additional supplemental benefits.

 

Under the ORP the named executive officers are entitled to the full amount of their accrued benefit under the plan upon reaching age 60, the normal retirement age under the plan. The amount of each participant’s normal retirement benefit is determined based on the participant’s position and level of responsibility, performance, and job tenure, and is specified in the participant’s individual agreement under the ORP.

 

Plan benefits are paid in the form of equal monthly installments over 10, 15 or 20 years, as elected by the participant upon joining the plan. The monthly installment amounts are computed using an 8% discount rate using simple interest compounded monthly.

The plan does not provide an early retirement benefit, but participants are eligible under certain circumstances to receive a benefit based on their vested accrued benefit upon death, total disability or severance. Participants are also eligible to receive a benefit upon a change of control occurring before age 60. The benefits payable upon death, total disability, severance or a change of control are described beginning on page 37.

 

As of January 3, 2010, the estimated annual retirement benefit payable at age 60 for each of the named executive officers was as follows:

 

 

 

We maintain the Supplemental Savings Incentive Plan, a nonqualified deferred compensation plan (the “SSIP”), for our key executives, including the named executive officers. The following table provides information regarding the named executive officers’ accounts and benefits under the SSIP for 2009.

 

 

 

Participants in the SSIP may elect to defer up to 50% of their annual base salary and 100% of their annual bonus and awards under the Long-Term Performance Plan.

 

Prior to 2006, we matched 30% of the first 6% of base salary deferred. We currently match up to 50% of the first 6% of base salary deferred. We may also make discretionary contributions to participants’ accounts. For 2006 through 2008, we made “transition contributions” as described in our proxy statement for the 2009 annual meeting of stockholders.

 

Participants are immediately vested in all amounts of salary and bonus deferred by them. Our contributions to participants’ accounts, other than transition contributions, vest in 20% annual increments and become fully vested upon the completion of five years of service. The transition contributions vest in 20% annual increments from December 31, 2006 to December 31, 2010. All contributions made by us become fully vested upon retirement, death or a change of control.

Amounts deferred by participants and contributions made by us before January 1, 2006 are deemed invested in either a “fixed benefit account” or a “pre-2006 supplemental account,” at the election of the participant. Balances in the fixed benefit accounts earn interest at an annual rate of up to 13% (depending on the event requiring distribution and the participant’s age, years of service and initial year of participation in the plan). For named executive officers with fixed benefit accounts, the amounts reported in the above table under “Aggregate Earnings in Fiscal Year 2009” and “Aggregate Balance at January 3, 2010” were calculated assuming the maximum annual return of 13%.

 

Amounts deferred by participants and contributions made by us on or after January 1, 2006 are deemed invested in a “post-2005 supplemental account.” Balances in pre-2006 supplemental accounts and post-2005 supplemental accounts are deemed invested by participants in investment choices that are made available by us, which are similar to the choices available under our 401(k) Savings Plan.

 

Balances in the fixed benefit accounts and pre-2006 supplemental accounts become payable, as elected by a participant, either upon “termination of employment” or on a date designated by the participant between the year the participant turns 55 and the year the participant turns 70. Amounts in the post-2005 supplemental accounts may be distributed, as elected by a participant, upon “termination of employment” or at a date designated by the participant that is at least 2 years after the year that a salary deferral or other contribution was made and not later than the year the participant turns 70. A “termination of employment” occurs upon the later of (1) a participant’s severance, retirement or attainment of age 55 while totally disabled and, (2) at the election of the plan administrator, the date when the participant is no longer receiving severance benefits.

 

Balances in the fixed benefit accounts and pre-2006 supplemental accounts are payable in equal monthly installments over 10 or 15 years, at the election of the participant. The monthly payment amount for a fixed benefit account is calculated using a discount rate that is equal to the applicable rate of interest on the account, as described above. The monthly payment amount for a pre-2006 supplemental account is calculated by dividing the vested account balance by the number of remaining monthly payments. Balances in the post-2005 supplemental accounts are payable in either a lump sum or in monthly installments over a period of 5, 10 or 15 years, at the election of the participant. The monthly payment for a post-2005 supplemental account is calculated by dividing the vested account balance by the number of remaining monthly payments.

 

In the event of death or a change of control, all account balances become payable in either a single lump sum or in equal monthly installments over a period of 5, 10 or 15 years, at the election of the participant. In each case, the account balances and monthly payments are generally computed in the same manner as described above, except participants are deemed fully vested in their account balances, and, in the case of a change of control, balances and monthly payments for fixed benefit accounts are computed using the maximum 13% rate of return and 13% discount rate, respectively. Additional information regarding amounts payable to each of the named executive officers upon a termination of employment, death or change of control is provided in the following section.