Coca-Cola Bottling Co has seen its earnings in the first quarter drop drastically to US$0.7m or US$0.08 per share for the first quarter of 2005, as costs rose. The results compare to net income of US$2.8m or US$.31 per share in the first quarter of 2004.

The company's net sales grew more than 8% in the first quarter of 2005. Approximately half of the first quarter's revenue growth was driven by franchise bottle/can revenues and half reflected higher contract sales to other Coca-Cola bottlers.

The increase in franchise bottle/can sales reflected a 2% increase in volume and a 2% increase in average revenue per case.

The growth in sales to other Coca-Cola bottlers was driven by a 56% increase in volume.

Income from operations was down US$2.3m or 15% compared to the first quarter of 2004. Income from operations in the first quarter of 2004 included favorable nonrecurring items of approximately US$2m for certain customer related marketing programs between the company and The Coca-Cola Company.

J. Frank Harrison, III, chairman and CEO, said: "The company's business results in the first quarter of 2005 were much stronger than indicated by the decrease in income from operations. Our franchise bottle/can revenue growth was healthy, reflecting a balance between growth in volume and average revenue per case. Additionally, we benefited from a significant increase in sales to other bottlers, continuing a multi-year trend. We experienced a significant increase in certain costs, with packaging costs up more than 10% and fuel costs up more than 20%. We believe that some of these cost increases will subside over the next year or so, and we strive to offer our products at prices appropriate to encourage consumer demand; therefore we have targeted lower increases in net selling prices than would be required to fully cover our cost increases. We believe our long-term business will benefit from these actions despite the short-term effect on gross margins."

William B. Elmore, president and COO, said: "The company drove solid volume growth despite a reasonably large increase in average revenue per case. In a more normalised cost environment, the quarter's combination of volume growth and price growth would have produced the strongest gross margin performance in a number of years. Volume growth was strong across all major product categories. Our sugar carbonated soft drink business grew slightly above 1%, its first increase in a number of years. Diet carbonated soft drink volume increased by 2% on top of almost 8% growth a year ago. Volume for our noncarbonated beverages grew more than 8% with Powerade leading the way with a 23% increase. Our new energy drink offerings of Full Throttle and RockStar represented less than 0.5% of total volume in the first quarter of 2005. However, our energy drink business appears be on a solid growth trajectory and this category delivers profit margins that are more than twice the margins of our core CSD business."