Risks and Uncertainties

6 Months Ended

Jul. 03, 2011

Risks and Uncertainties [Abstract]

Risks and Uncertainties

22. Risks and Uncertainties

Approximately 88% of the Company’s YTD 2011 bottle/can volume to retail customers are products of The Coca-Cola Company, which is the sole supplier of these products or of the concentrates or syrups required to manufacture these products. The remaining 12% of the Company’s YTD 2011 bottle/can volume to retail customers are products of other beverage companies and the Company. The Company has beverage agreements under which it has various requirements to meet. Failure to meet the requirements of these beverage agreements could result in the loss of distribution rights for the respective product.

The Coca-Cola Company acquired the North American operations of CCE in October of 2010, and the Company’s primary competitors were acquired by their franchisor in the first quarter of 2010. These transactions may cause uncertainty within the Coca-Cola bottler system or adversely impact the Company and its business. At this time, however, it is unknown whether the transactions will have a material impact on the Company’s business and financial results.

The Company’s products are sold and distributed directly by its employees to retail stores and other outlets. During YTD 2011, approximately 69% of the Company’s bottle/can volume to retail customers was sold for future consumption, while the remaining bottle/can volume to retail customers of approximately 31% was sold for immediate consumption. During YTD 2010, approximately 70% of the Company’s bottle/can volume to retail customers was sold for future consumption, while the remaining bottle/can volume to retail customers of approximately 30% was sold for immediate consumption. The Company’s largest customers, Wal-Mart Stores, Inc. and Food Lion, LLC, accounted for approximately 21% and 9%, respectively, of the Company’s total bottle/can volume to retail customers in YTD 2011; and accounted for approximately 26% and 10%, respectively, of the Company’s total bottle/can volume to retail customers in YTD 2010. Wal-Mart Stores, Inc. accounted for 15% and 18% of the Company’s total net sales during YTD 2011 and YTD 2010, respectively.

The Company obtains all of its aluminum cans from two domestic suppliers. The Company currently obtains all of its plastic bottles from two domestic entities. See Note 14 and Note 19 to the consolidated financial statements for additional information.

The Company is exposed to price risk on such commodities as aluminum, corn and resin which affects the cost of raw materials used in the production of finished products. The Company both produces and procures these finished products. Examples of the raw materials affected are aluminum cans and plastic bottles used for packaging and high fructose corn syrup used as a product ingredient. Further, the Company is exposed to commodity price risk on crude oil which impacts the Company’s cost of fuel used in the movement and delivery of the Company’s products. The Company participates in commodity hedging and risk mitigation programs administered both by CCBSS and by the Company. In addition, there is no limit on the price The Coca-Cola Company and other beverage companies can charge for concentrate.

Certain liabilities of the Company are subject to risk due to changes in both long-term and short-term interest rates. These liabilities include floating rate debt, retirement benefit obligations and the Company’s pension liability.

Approximately 7% of the Company’s labor force is covered by collective bargaining agreements. One of these collective bargaining agreements covering approximately 2% of the Company’s employees expired in April 2011 and the Company entered into a new agreement during Q2 2011. One collective bargaining agreement covering approximately 4% of the Company’s employees expired in July 2011 and the Company entered into a new agreement during the third quarter of 2011. No more collective bargaining agreements will expire during the remainder of 2011.