Document and Company Informatio
Document and Company Information (USD $) | |||
9 Months Ended
Sep. 05, 2009 | Oct. 03, 2009
| Jun. 13, 2008
| |
Entity Registrant Name | PEPSI BOTTLING GROUP INC | ||
Entity Central Index Key | 0001076405 | ||
Document Type | 10-Q | ||
Document Period End Date | 2009-09-05 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-26 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $4,301,872,063 | ||
Entity Common Stock, Shares Outstanding | 217,935,841 | ||
Class B Common Stock | |||
Entity Common Stock, Shares Outstanding | 100,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Sep. 05, 2009 | 3 Months Ended
Sep. 06, 2008 | 9 Months Ended
Sep. 05, 2009 | 9 Months Ended
Sep. 06, 2008 |
Net revenues | $3,633 | $3,814 | $9,414 | $9,987 |
Cost of sales | 2,012 | 2,077 | 5,245 | 5,475 |
Gross profit | 1,621 | 1,737 | 4,169 | 4,512 |
Selling, delivery and administrative expenses | 1,185 | 1,282 | 3,307 | 3,599 |
Operating income | 436 | 455 | 862 | 913 |
Interest Expense, Net | 67 | 65 | 215 | 187 |
Other non-operating expenses (income), net | 0 | 5 | (4) | (1) |
Income before income taxes | 369 | 385 | 651 | 727 |
Income tax expense | 59 | 111 | 45 | 218 |
Net income | 310 | 274 | 606 | 509 |
Less: Net income attributable to noncontrolling interests | 56 | 43 | 84 | 76 |
Net income attributable to PBG | $254 | $231 | $522 | $433 |
Earnings per share attributable to PBG's common shareholders | ||||
Basic earnings per share | 1.18 | 1.09 | 2.44 | 1.99 |
Weighted-average shares outstanding | 216 | 212 | 214 | 217 |
Diluted earnings per share | 1.14 | 1.06 | 2.39 | 1.94 |
Weighted-average shares outstanding | 223 | 217 | 219 | 223 |
Dividends declared per common share | 0.18 | 0.17 | 0.53 | 0.48 |
1_Condensed Consolidated Statem
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
In Millions | 9 Months Ended
Sep. 05, 2009 | 9 Months Ended
Sep. 06, 2008 |
Cash Flows - Operations | ||
Net income | $606 | $509 |
Adjustments to reconcile net income to net cash provided by operations: | ||
Depreciation and amortization | 437 | 468 |
Deferred income taxes | 14 | 35 |
Share-based compensation | 40 | 41 |
Net other non-cash charges and credits | 145 | 183 |
Changes in operating working capital, excluding effects of acquisitions: | ||
Accounts receivable, net | (580) | (469) |
Inventories | (120) | (104) |
Prepaid expenses and other current assets | (12) | (6) |
Accounts payable and other current liabilities | 418 | 98 |
Income taxes payable | (14) | 121 |
Net change in operating working capital | (308) | (360) |
Casualty insurance payments | (49) | (55) |
Pension Contributions | (106) | 0 |
Other operating activities, net | (52) | (104) |
Net Cash Provided by Operations | 727 | 717 |
Cash Flows - Investments | ||
Capital expenditures | (357) | (579) |
Acquisitions, net of cash acquired | (112) | (44) |
Proceeds from sale of property, plant and equipment | 8 | 15 |
Investments in noncontrolled affiliates | (2) | (608) |
Issuance of note receivable from noncontrolled affiliate | (92) | 0 |
Repayments of note receivable from noncontrolled affiliate | 19 | 0 |
Other investing activities, net | (2) | (139) |
Net Cash Used for Investments | (538) | (1,355) |
Cash Flows - Financing | ||
Short-term borrowings, net | 109 | 751 |
Proceeds from long-term debt | 741 | 0 |
Payments of long-term debt | (1,326) | (7) |
Dividends paid | (111) | (99) |
Excess tax benefit from the exercise of equity awards | 6 | 2 |
Proceeds from the exercise of stock options | 103 | 36 |
Share repurchases | 0 | (489) |
Contributions from noncontrolling interest holder | 33 | 308 |
Other financing activities | (9) | (4) |
Net Cash (Used for) Provided by Financing | (454) | 498 |
Effect of Exchange Rate Changes on Cash and Cash Equivalents | 5 | (10) |
Net Decrease in Cash and Cash Equivalents | (260) | (150) |
Cash and Cash Equivalents - Beginning of Period | 966 | 647 |
Cash and Cash Equivalents - End of Period | $706 | $497 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) (USD $) | ||
In Millions | Sep. 05, 2009
| Dec. 27, 2008
|
Current Assets | ||
Cash and cash equivalents | $706 | $966 |
Accounts receivable, net | 1,989 | 1,371 |
Inventories | 667 | 528 |
Prepaid expenses and other current assets | 310 | 276 |
Total Current Assets | 3,672 | 3,141 |
Property, plant and equipment, net | 3,854 | 3,882 |
Other intangible assets, net | 3,923 | 3,751 |
Goodwill | 1,480 | 1,434 |
Investments in noncontrolled affiliates | 597 | 619 |
Other assets | 185 | 155 |
Total Assets | 13,711 | 12,982 |
Current Liabilities | ||
Accounts payable and other current liabilities | 2,210 | 1,675 |
Short-term borrowings | 223 | 103 |
Current maturities of long-term debt | 11 | 1,305 |
Total Current Liabilities | 2,444 | 3,083 |
Long-term debt | 5,472 | 4,784 |
Other liabilities | 1,429 | 1,658 |
Deferred income taxes | 1,074 | 966 |
Total Liabilities | 10,419 | 10,491 |
Equity | ||
Common stock, par value $0.01 per share: authorized 900 shares, issued 310 shares | 3 | 3 |
Additional paid-in capital | 1,842 | 1,851 |
Retained earnings | 3,537 | 3,130 |
Accumulated other comprehensive loss | (812) | (938) |
Treasury stock: 93 shares and 99 shares at September 5, 2009 and December 27, 2008, respectively, at cost | (2,543) | (2,703) |
Total PBG Shareholders' Equity | 2,027 | 1,343 |
Noncontrolling interests | 1,265 | 1,148 |
Total Equity | 3,292 | 2,491 |
Total Liabilities and Equity | $13,711 | $12,982 |
2_Condensed Consolidated Balanc
Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $) | ||
Share data in Millions | Sep. 05, 2009
| Dec. 27, 2008
|
Common stock, par value | 0.01 | 0.01 |
Common stock, authorized shares | 900 | 900 |
Common stock, issued shares | 310 | 310 |
Treasury stock, shares | 93 | 99 |
3_Condensed Consolidated Statem
Condensed Consolidated Statements of Changes in Shareholders Equity (Unaudited) (USD $) | ||||||||
In Millions | Total PBG Shareholders' Equity
| Additional Paid-In Capital
| Treasury Stock
| Retained Earnings
| Accumulated other Comprehensive Loss
| Noncontrolling Interests
| Common Stock
| Total
|
Beginning Balance at Dec. 29, 2007 | $2,615 | $1,805 | ($2,269) | $3,124 | ($48) | $973 | $3 | $3,588 |
Comprehensive income: | ||||||||
Net income | 433 | 433 | 76 | 509 | ||||
Net currency translation adjustment | (27) | (27) | 4 | (23) | ||||
Cash flow hedge adjustment, net of tax of $11 and $(22) for 2008 and 2009, respectively | (15) | (15) | (2) | (17) | ||||
Pension and postretirement medical benefit plans adjustment, net of tax of $(7) and $(11) for 2008 and 2009, respectively | 11 | 11 | 1 | 12 | ||||
Total comprehensive income | 481 | |||||||
SFAS 158 - measurement date adjustment, net of tax of $(5) for 2008 | 3 | (16) | 19 | 3 | ||||
Equity awards exercises: 2 shares and 6 shares for 2008 and 2009, respectively | 36 | (7) | 43 | 36 | ||||
Tax benefit and withholding tax - equity awards | 3 | 3 | 3 | |||||
Share repurchases: 15 shares for 2008 | (489) | (489) | (489) | |||||
Share-based compensation | 40 | 40 | 40 | |||||
Dividends declared on common stock (per share: $0.48) and (per share: $0.53) for year 2008 and 2009, respectively | (103) | (103) | (103) | |||||
Contributions from noncontrolling interest holder | 332 | 332 | ||||||
Ending Balance at Sep. 06, 2008 | 2,507 | 1,841 | (2,715) | 3,438 | (60) | 1,384 | 3 | 3,891 |
Beginning Balance at Jun. 14, 2008 | 3 | |||||||
Comprehensive income: | ||||||||
Ending Balance at Sep. 06, 2008 | 3 | |||||||
Beginning Balance at Dec. 27, 2008 | 1,343 | 1,851 | (2,703) | 3,130 | (938) | 1,148 | 3 | 2,491 |
Comprehensive income: | ||||||||
Net income | 522 | 522 | 84 | 606 | ||||
Net currency translation adjustment | 79 | 79 | (22) | 57 | ||||
Cash flow hedge adjustment, net of tax of $11 and $(22) for 2008 and 2009, respectively | 30 | 30 | 4 | 34 | ||||
Pension and postretirement medical benefit plans adjustment, net of tax of $(7) and $(11) for 2008 and 2009, respectively | 17 | 17 | 2 | 19 | ||||
Total comprehensive income | 716 | |||||||
Equity awards exercises: 2 shares and 6 shares for 2008 and 2009, respectively | 103 | (57) | 160 | 103 | ||||
Tax benefit - equity awards | 12 | 12 | 12 | |||||
Withholding tax - equity awards | (7) | (7) | (7) | |||||
Share-based compensation | 39 | 39 | 39 | |||||
Dividends declared on common stock (per share: $0.48) and (per share: $0.53) for year 2008 and 2009, respectively | (111) | 4 | (115) | (111) | ||||
Contributions from noncontrolling interest holder | 49 | 49 | ||||||
Ending Balance at Sep. 05, 2009 | 2,027 | 1,842 | (2,543) | 3,537 | (812) | 1,265 | 3 | 3,292 |
Beginning Balance at Jun. 13, 2009 | 3 | |||||||
Comprehensive income: | ||||||||
Ending Balance at Sep. 05, 2009 | $3 |
4_Condensed Consolidated Statem
Condensed Consolidated Statements of Changes in Equity (Parenthetical) (Unaudited) (USD $) | ||
In Millions, except Per Share data | 9 Months Ended
Sep. 05, 2009 | 9 Months Ended
Sep. 06, 2008 |
Cash flow hedge adjustment, tax effect | ($22) | $11 |
Pension and postretirement medical benefit plans, tax effect | (11) | (7) |
SFAS 158 - measurement date adjustment, tax effect | (5) | |
Equity awards exercises, Shares | 6 | 2 |
Share repurchases, Shares | 15 | |
Dividends declared per common share | 0.53 | 0.48 |
Total PBG Shareholders' Equity | ||
Cash flow hedge adjustment, tax effect | (22) | 11 |
Pension and postretirement medical benefit plans, tax effect | (11) | (7) |
SFAS 158 - measurement date adjustment, tax effect | (5) | |
Equity awards exercises, Shares | 6 | 2 |
Share repurchases, Shares | 15 | |
Dividends declared per common share | 0.53 | 0.48 |
Additional Paid-In Capital | ||
Equity awards exercises, Shares | 6 | 2 |
Dividends declared per common share | 0.53 | |
Treasury Stock | ||
Equity awards exercises, Shares | 6 | 2 |
Share repurchases, Shares | 15 | |
Retained Earnings | ||
SFAS 158 - measurement date adjustment, tax effect | (5) | |
Dividends declared per common share | 0.53 | 0.48 |
Accumulated other Comprehensive Loss | ||
Cash flow hedge adjustment, tax effect | (22) | 11 |
Pension and postretirement medical benefit plans, tax effect | (11) | (7) |
SFAS 158 - measurement date adjustment, tax effect | (5) | |
Comprehensive Income | ||
Cash flow hedge adjustment, tax effect | (22) | 11 |
Pension and postretirement medical benefit plans, tax effect | ($11) | ($7) |
5_Condensed Consolidated Statem
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) | ||||
In Millions | 3 Months Ended
Sep. 05, 2009 | 3 Months Ended
Sep. 06, 2008 | 9 Months Ended
Sep. 05, 2009 | 9 Months Ended
Sep. 06, 2008 |
Net income | $310 | $274 | $606 | $509 |
Net currency translation adjustment | 9 | (55) | 57 | (23) |
Cash flow hedge adjustment, net of tax | 13 | (25) | 34 | (17) |
Pension and postretirement medical benefit plans adjustment, net of tax | 6 | 4 | 19 | 12 |
Comprehensive income | 338 | 198 | 716 | 481 |
Less: Comprehensive income attributable to noncontrolling interests | 54 | 32 | 68 | 79 |
Comprehensive income attributable to PBG | $284 | $166 | $648 | $402 |
Basis of Presentation
Basis of Presentation | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Basis of Presentation [Abstract] | |
Basis of Presentation | Note 1Basis of Presentation When used in these Condensed Consolidated Financial Statements, PBG, we, our, us and the Company each refers to The Pepsi Bottling Group, Inc. and, where appropriate, to Bottling Group, LLC (Bottling LLC), our principal operating subsidiary. We have the exclusive right to manufacture, sell and distribute Pepsi-Cola beverages in all or a portion of the United States, Mexico, Canada, Spain, Russia, Greece and Turkey. We prepare our unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America, which requires us to make judgments, estimates and assumptions that affect the results of operations, financial position and cash flows, as well as the related footnote disclosures. We evaluate our estimates on an ongoing basis using our historical experience as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effect cannot be determined with precision, actual results may differ from these estimates. These interim financial statements have been prepared in conformity with the instructions to Form 10-Q and Article10 of U.S. Securities and Exchange Commission RegulationS-X. Accordingly, they do not include certain information and disclosures required for comprehensive annual financial statements. Therefore, the Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 27, 2008 as presented in our Current Report on Form 8-K dated September16, 2009. In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation. Our U.S. and Canadian operations report using a fiscal year that consists of 52weeks, ending on the last Saturday in December. Every five or six years a 53rd week is added. Fiscal years 2009 and 2008 consist of 52weeks. Our remaining countries report on a calendar-year basis. Accordingly, we recognize our quarterly business results as outlined below: Quarter U.S. Canada Mexico Europe First Quarter 12weeks January and February Second Quarter 12weeks March, April and May Third Quarter 12weeks June, July and August Fourth Quarter 16weeks September, October, November and December In preparation of these financial statements, we have evaluated and assessed all events occurring subsequent to the third quarter end and through October9, 2009, which is the date our financial statements were issued. At September5, 2009, PepsiCo, Inc. (PepsiCo) owned 70,166,458 shares of our stock, consisting of 70,066,458 shares of common stock and all 100,000 authorized shares of ClassB common stock. This represents approximately 32.3percent of our outstanding common stock and 100percent of our outstanding ClassB common stock, together representing 39.2percent of the voting power of all classes of our voting stock. In addition, PepsiC |
Seasonality of Business
Seasonality of Business | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Seasonality of Business [Abstract] | |
Seasonality of Business | Note 2Seasonality of Business The results for the third quarter are not necessarily indicative of the results that may be expected for the full year because sales of our products are seasonal. The seasonality of our operating results arises from higher sales in the second and third quarters versus the first and fourth quarters of the year, combined with the impact of fixed costs, such as depreciation and interest, which are not significantly impacted by business seasonality. From a cash flow perspective, the majority of our cash flow from operations is generated in the third and fourth quarters. |
New Accounting Standards
New Accounting Standards | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
New Accounting Standards [Abstract] | |
New Accounting Standards | Note 3New Accounting Standards SFAS No.141(R) as amended In December2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No.141(revised 2007), Business Combinations (SFAS 141(R)), which addresses the accounting and disclosure for identifiable assets acquired, liabilities assumed, and noncontrolling interests in a business combination. In April2009, the FASB issued FASB Staff Position No.FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (FSP FAS 141(R)-1), which amended certain provisions of SFAS 141(R) related to the recognition, measurement, and disclosure of assets acquired and liabilities assumed in a business combination that arise from contingencies. SFAS 141(R) and FSP FAS 141(R)-1 became effective in 2009, and did not have a material impact on our Condensed Consolidated Financial Statements, but will continue to be evaluated on the outcome of future matters. SFAS No.160 In December2007, the FASB issued SFAS No.160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No.51 (SFAS 160), which addresses the accounting and reporting framework for noncontrolling interests by a parent company. SFAS 160 also addresses disclosure requirements to distinguish between interests of the parent and interests of the noncontrolling owners of a subsidiary. SFAS 160 became effective in the first quarter of 2009. The provisions of SFAS 160 require that minority interest be renamed noncontrolling interests and that a company present a consolidated net income measure that includes the amount attributable to such noncontrolling interests for all periods presented. In addition, SFAS 160 requires reporting noncontrolling interests as a component of equity in our Condensed Consolidated Balance Sheets and below income tax expense in our Condensed Consolidated Statements of Operations. As required by SFAS 160, we have retrospectively applied the presentation to our prior year balances in our Condensed Consolidated Financial Statements. SFAS No.161 In March2008, the FASB issued SFAS No.161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No.133 (SFAS 161), which requires enhanced disclosures for derivative and hedging activities. SFAS 161 became effective in the first quarter of 2009. See Note 9 for required disclosure. FSP FAS 132(R)-1 In December2008, the FASB issued FASB Staff Position No.SFAS 132(revised 2003)-1, Employers Disclosures about Postretirement Benefit Plan Assets (FSP FAS 132(R)-1), which requires employers to disclose information about fair value measurements of plan assets that are similar to the disclosures about fair value measurements required by SFAS No.157, Fair Value Measurements (SFAS 157). FSP FAS 132(R)-1 will become effective for our annual financial statements for 2009. We are currently evaluating the impact of this standard on our Consolidated Financial Statements. FSP FAS 107-1 and APB 28-1 In April2009, the FASB issued FASB Staff Position No.SFAS 107-1 and APB No.28-1, Interim Disclosures |
Earnings per Share
Earnings per Share | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Earnings per share attributable to PBG's common shareholders [Abstract] | |
Earnings per Share | Note 4Earnings per Share The following table reconciles the shares outstanding and net income attributable to PBG used in the computations of both basic and diluted earnings per share attributable to PBGs common shareholders: 12 Weeks Ended 36 Weeks Ended September September September September Shares in millions 5, 2009 6, 2008 5, 2009 6, 2008 Net income attributable to PBG $ 254 $ 231 $ 522 $ 433 Weighted-average shares outstanding during period on which basic earnings per share is calculated 216 212 214 217 Effect of dilutive shares: Incremental shares under share-based compensation plans 7 5 5 6 Weighted-average shares outstanding during period on which diluted earnings per share is calculated 223 217 219 223 Earnings per share attributable to PBGs common shareholders Basic earnings per share $ 1.18 $ 1.09 $ 2.44 $ 1.99 Diluted earnings per share $ 1.14 $ 1.06 $ 2.39 $ 1.94 Basic and diluted earnings per share are calculated by dividing net income attributable to PBG by the weighted-average number of shares outstanding during each period. Diluted earnings per share reflects the potential dilution that could occur if outstanding stock options or other equity awards from our share-based compensation plans were exercised and converted into common stock that would then participate in net income. The following shares were excluded from the diluted earnings per share computation because the exercise price of the options was greater than the average market price of the Companys common shares during the related periods and the effect of including the options in the computation would be antidilutive: For the 12weeks ended September5, 2009 and September6, 2008, options to purchase 81 thousand shares and 13million shares, respectively. For the 36weeks ended September5, 2009 and September6, 2008, options to purchase 12 million shares and 6.5million shares, respectively. |
Share Based Compensation
Share Based Compensation | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Share Based Compensation [Abstract] | |
Share-Based Compensation | Note 5Share-Based Compensation The total impact of share-based compensation recognized in the Condensed Consolidated Statements of Operations is as follows: 12 Weeks Ended 36 Weeks Ended September September September September 5, 2009 6, 2008 5, 2009 6, 2008 Total share-based compensation expense $ 14 $ 13 $ 40 $ 41 Income tax benefit (4 ) (3 ) (11 ) (12 ) Noncontrolling interests (1 ) (1 ) (3 ) (2 ) Net income attributable to PBG impact $ 9 $ 9 $ 26 $ 27 During the 36weeks ended September5, 2009 and September6, 2008, we granted 6million and 3 million stock option awards at a weighted-average fair value of $4.55 and $7.12, respectively. During the 36weeks ended September5, 2009 and September6, 2008, we granted 2million and 1 million restricted stock unit awards at a weighted-average fair value of $18.82 and $35.32, respectively. Unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the incentive plans amounted to $88million as of September5, 2009. That cost is expected to be recognized over a weighted-average period of 2.0years. |
Balance Sheet Details
Balance Sheet Details | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Balance Sheet Details [Abstract] | |
Balance Sheet Details | Note 6Balance Sheet Details September December 5, 2009 27, 2008 Accounts Receivable, net Trade accounts receivable $ 1,758 $ 1,208 Allowance for doubtful accounts (70 ) (71 ) Accounts receivable from PepsiCo 237 154 Other receivables 64 80 $ 1,989 $ 1,371 Inventories Raw materials and supplies $ 227 $ 185 Finished goods 440 343 $ 667 $ 528 Prepaid Expenses and Other Current Assets Prepaid expenses $ 248 $ 244 Other current assets 62 32 $ 310 $ 276 Property, Plant and Equipment, net Land $ 305 $ 300 Buildings and improvements 1,663 1,542 Manufacturing and distribution equipment 4,060 3,999 Marketing equipment 2,208 2,246 Capital leases 45 23 Other 156 154 8,437 8,264 Accumulated depreciation (4,583 ) (4,382 ) $ 3,854 $ 3,882 Other Assets Note receivable from noncontrolled affiliate $ 79 $ Other assets 106 155 $ 185 $ 155 Note Receivable from Noncontrolled Affiliate During the first quarter of 2009, we issued a ruble-denominated three-year note with an interest rate of 10.0percent (Note receivable from noncontrolled affiliate) to JSC Lebedyansky (Lebedyansky), a consolidated subsidiary of PepsiCo and a noncontrolled affiliate of PBG, valued at $79million on September5, 2009. This funding was contemplated as part of the initial capitalization of the purchase of Lebedyansky between PepsiCo and us. This note receivable is recorded in other assets in our Condensed Consolidated Balance Sheets. September December 5, 2009 27, 2008 Accounts Payable and Other Current Liabilities Accounts payable $ 613 $ 444 Accounts payable to PepsiCo 324 217 Trade incentives 253 189 Accrued compensation and benefits 254 240 Other accrued taxes 130 128 Accrued interest 92 85 Other current liabilities 544 372 $ 2,210 $ 1,675 |
Other Intangible Assets, net an
Other Intangible Assets, net and Goodwill | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Other Intangible Assets, net and Goodwill [Abstract] | |
Other Intangible Assets, net and Goodwill | Note 7Other Intangible Assets, net and Goodwill The components of other intangible assets are as follows: September December 5, 2009 27, 2008 Intangibles subject to amortization Gross carrying amount Customer relationships and lists $ 47 $ 45 Franchise and distribution rights 79 41 Other identified intangibles 29 34 155 120 Accumulated amortization Customer relationships and lists (17 ) (15 ) Franchise and distribution rights (34 ) (31 ) Other identified intangibles (10 ) (21 ) (61 ) (67 ) Intangibles subject to amortization, net 94 53 Intangibles not subject to amortization Carrying amount Franchise rights 3,371 3,244 Licensing rights 315 315 Distribution rights 51 49 Brands 40 39 Other identified intangibles 52 51 Intangibles not subject to amortization 3,829 3,698 Total other intangible assets, net $ 3,923 $ 3,751 During the first quarter of 2009, we acquired distribution rights for certain energy drinks in the United States and Canada and protein-enhanced functional beverages in the United States. As a result of these acquisitions, we recorded approximately $36million of amortizable distribution rights, with a weighted-average amortization period of 10years. During the second quarter, we acquired a Pepsi-Cola and Dr Pepper franchise bottler serving portions of central Texas. As a result of this acquisition we recorded approximately $56million of non-amortizable franchise rights and $8million of non-compete agreements, with a weighted-average amortization period of 10years. During the third quarter, we acquired a Pepsi-Cola franchise bottler serving northeastern Massachusetts. As a result of this acquisition we recorded approximately $24million of non-amortizable franchise rights and $1million of non-compete agreements, with a weighted-average amortization period of 10years. Intangible asset amortization Intangible asset amortization expense was $3million for both the 12weeks ended September5, 2009 and September6, 2008. Intangible asset amortization expense was $7million for both the 36 weeks ended September5, 2009 and September6, 2008. Amortization expense for each of the next five years is estimated to be approximately $11million. Goodwill The changes in the carrying value of goodwill by reportable segment for the 36weeks ended September5, 2009 are as follows: U.S. Total Canada Europe Mexico Balance at December27, 2008 $ 1,434 $ 1,235 $ 26 $ 173 Purchase price allocations relating to acquisitions 6 4 2 Impact of foreign currency translation 40 34 (1 ) 7 Balance at September5, 2009 $ 1,480 $ 1,273 $ 27 $ 180 |
Fair Value Measurements
Fair Value Measurements | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Fair Value Measurements [Abstract] | |
Fair Value Measurements | Note 8Fair Value Measurements We adopted SFAS 157 at the beginning of the 2008 fiscal year for all financial instruments valued on a recurring basis, at least annually. Additionally, beginning in the first quarter of 2009, in accordance with the provisions of FASB Staff Position No.157-2, Effective Date of FASB Statement No.157 (FSP 157-2) we now apply SFAS 157 to financial and nonfinancial assets and liabilities. FSP 157-2 delayed the effective date of SFAS 157 for nonfinancial assets and liabilities, except for certain items that are recognized or disclosed at fair value in the financial statements on a recurring basis. In accordance with SFAS 157, we have categorized our assets and liabilities that are measured at fair value into a three-level fair value hierarchy as set forth below. If the inputs used to measure fair value fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement. The three levels of the hierarchy are defined as follows: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Observable inputs other than quoted prices included in Level 1, such as quoted prices for identical assets and liabilities in non-active markets, quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for substantially the full term of the asset or liability. Level 3 Unobservable inputs reflecting managements own assumptions about the input used in pricing the asset or liability. The following table summarizes the financial assets and liabilities we measure at fair value on a recurring basis as of September5, 2009 and December27, 2008: Level 2 September December 5, 2009 27, 2008 Financial Assets Commodity (1) $ 34 $ Foreign currency contracts(1) 13 Prepaid forward contract (2) 21 13 Interest rate swaps (3) 8 Total $ 55 $ 34 Financial Liabilities Commodity (1) $ 18 $ 57 Foreign currency contracts (1) 9 6 Interest rate swaps (3) 48 1 Total $ 75 $ 64 (1) Based primarily on the forward rates of the specific indices upon which the contract settlement is based. (2) Based primarily on the value of our stock price. (3) Based primarily on the London Inter-Bank Offer Rate (LIBOR) index. Other Financial Assets and Liabilities Financial assets with carrying values approximating fair value include cash and cash equivalents and accounts receivable. Financial liabilities with carrying values approximating fair value include accounts payable and other accrued liabilities and short-term debt. The carrying value of these financial assets and liabilities approximates fair value due to their short maturities and due to their interest rates approximating current market rates for short-term debt. Long-term debt, which includes the current maturities of long-term debt, at |
Financial Instruments and Risk
Financial Instruments and Risk Management | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Financial Instruments and Risk Management [Abstract] | |
Financial Instruments and Risk Management | Note 9Financial Instruments and Risk Management We are subject to the risk of loss arising from adverse changes in commodity prices, foreign currency exchange rates, interest rates and our stock price. In the normal course of business, we manage these risks through a variety of strategies, including the use of derivatives. Our corporate policy prohibits the use of derivative instruments for trading or speculative purposes, and we have procedures in place to monitor and control their use. All derivative instruments are recorded at fair value as either assets or liabilities in our Condensed Consolidated Balance Sheets. Derivative instruments are generally designated and accounted for under SFAS No.133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133) as either a hedge of a recognized asset or liability (fair value hedge) or a hedge of a forecasted transaction (cash flow hedge). Certain of these derivatives are not designated as hedging instruments under SFAS 133 and are used as economic hedges to manage certain risks in our business. We are exposed to counterparty credit risk on all of our derivative financial instruments. We have established and maintained counterparty credit guidelines and enter into transactions only with financial institutions of investment grade or better. We monitor our counterparty credit risk and utilize numerous counterparties to minimize our exposure to potential defaults. We do not require collateral under these agreements. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the change in the fair value of a derivative instrument is deferred in accumulated other comprehensive loss (AOCL) until the underlying hedged item is recognized in earnings. The derivative gain or loss recognized in earnings is recorded consistent with the expense classification of the underlying hedged item. The ineffective portion of a fair value change on a qualifying cash flow hedge is recognized in earnings immediately. Derivative instruments that are not designated as hedging instruments under SFAS 133, but are used as economic hedges to manage certain risks in our business, are marked to market on a periodic basis and recognized currently in earnings consistent with the expense classification of the underlying hedged item. Commodity We use forward and option contracts to hedge the risk of adverse movements in commodity prices related primarily to anticipated purchases of raw materials and energy used in our operations. These contracts generally range from one to 24months in duration. Our open commodity derivative contracts that qualify for cash flow hedge accounting have a notional value, based on the contract price, of $336million as of September5, 2009. Our open commodity derivative contracts that act as economic hedges but do not qualify for hedge accounting have a notional value, based on the contract price, of $8million as of September5, 2009. Foreign Currency We are subject to foreign currency transactional risks in certain of our international territories primarily for the purchase of commodities that are denominated in currenc |
Pension and Postretirement Medi
Pension and Postretirement Medical Benefit Plans | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Pension and Postretirement Medical Benefit Plans [Abstract] | |
Pension and Postretirement Medical Benefit Plans | Note 10Pension and Postretirement Medical Benefit Plans We sponsor both pension and other postretirement medical benefit plans in various forms in the United States and other similar pension plans in our international locations, covering employees who meet specified eligibility requirements. The assets, liabilities and expense associated with our international plans were not significant to our results of operations and our financial position and are not included in the tables and discussion presented below. Components of Net Pension Expense 12 Weeks Ended 36 Weeks Ended September September September September 5, 2009 6, 2008 5, 2009 6, 2008 Service cost $ 9 $ 12 $ 32 $ 35 Interest cost 24 23 73 69 Expected return on plan assets (income) (28 ) (27 ) (82 ) (80 ) Amortization of net loss 8 4 24 11 Amortization of prior service costs 2 1 5 5 Net pension expense for the defined benefit plans $ 15 $ 13 $ 52 $ 40 For the 36weeks ended September5, 2009, we made $106million of contributions to the U.S. defined benefit pension trust. On September15, 2009, we made an additional $105million of contributions to the U.S. defined benefit pension trust. Components of Postretirement Medical Expense 12 Weeks Ended 36 Weeks Ended September September September September 5, 2009 6, 2008 5, 2009 6, 2008 Service cost $ 1 $ 1 $ 4 $ 3 Interest cost 5 5 14 15 Amortization of net loss 1 1 2 Total postretirement medical expense $ 6 $ 7 $ 19 $ 20 Defined Contribution Benefits Defined contribution expense was $9million and $6million for the 12weeks ended September5, 2009 and September6, 2008, respectively, and $30million and $21million for the 36weeks ended September5, 2009 and September6, 2008, respectively. |
Income Taxes
Income Taxes | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Income Taxes [Abstract] | |
Income Taxes | Note 11Income Taxes During the first quarter of 2009, we settled our audits with the IRS for our 2003-2005 tax years. As a result, our gross reserves for uncertain tax benefits, excluding interest, decreased by $71million. Of this amount, $25million was reflected as a benefit in income tax expense in our Condensed Consolidated Statements of Operations, $43million was reclassified to deferred income taxes and other assets in our Condensed Consolidated Balance Sheets and $3million was paid. In addition, we decreased our related reserves for interest by approximately $14million, for a total net provision benefit of $39million as a result of the settlement. During the second quarter of 2009, the statute of limitations closed for our IRS audit in the U.S. for the 2003 and 2004 tax returns, and we reached a settlement with the Canadian tax authorities on an issue related to the 1999-2005 tax years. As a result, our gross reserves for uncertain tax benefits, excluding interest, decreased by $44million of which $43million was reflected as a benefit in income tax expense in our Condensed Consolidated Statements of Operations and $1million was offset against other assets in our Condensed Consolidated Balance Sheets. In addition, we decreased our related reserves for interest by approximately $11million and recognized a tax benefit from interest refunds of approximately $2million. The total impact of these items was a net provision benefit of $56million. During the third quarter of 2009, we settled various audits in our international jurisdictions. As a result, our gross reserves for uncertain tax benefits, excluding interest, decreased by $36million. In addition, we decreased our related reserves for interest by approximately $30million. Of these amounts, $46million was reflected as a benefit in income tax expense in our Condensed Consolidated Statements of Operations and $20million was paid. We currently have on-going income tax audits in our major tax jurisdictions. We believe that it is reasonably possible that our reserves for uncertain tax benefits could further decrease in the range of $15million to $20million within the next 12months as a result of the completion of audits in various jurisdictions or the expiration of statute of limitations. |
Segment Information
Segment Information | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Segment Information [Abstract] | |
Segment Information | Note 12Segment Information We operate in one industry, carbonated soft drinks and other ready-to-drink beverages, and all of our segments derive revenue from these products. We conduct business in all or a portion of the United States, Mexico, Canada, Spain, Russia, Greece and Turkey. PBG manages and reports operating results through three reportable segments U.S. Canada, Europe (which includes Spain, Russia, Greece and Turkey) and Mexico. Operationally, the Company is organized along geographic lines with specific regional management teams having responsibility for the financial results in each reportable segment. We evaluate the performance of these segments based on operating income or loss. Operating income or loss is exclusive of net interest expense, noncontrolling interests, foreign exchange gains and losses and income taxes. The Companys corporate headquarters centrally manages commodity derivatives on behalf of our segments. During 2009, we expanded our hedging program to mitigate price changes associated with certain commodities utilized in our production process. These derivatives hedge the underlying price risk associated with the commodity and are not entered into for speculative purposes. Certain commodity derivatives do not qualify for hedge accounting treatment. Others receive hedge accounting treatment but may have some element of ineffectiveness based on the accounting standard. These commodity derivatives are marked-to-market each period until settlement, resulting in gains and losses being reflected in corporate headquarters results. The gains and losses are subsequently reflected in the segment results when the underlying commoditys cost is recognized. Therefore, segment results reflect the contract purchase price of these commodities. The Company did not have any comparable activity in the prior year periods. The following tables summarize select financial information related to our reportable segments: 12 Weeks Ended 36 Weeks Ended September September September September 5, 2009 6, 2008 5, 2009 6, 2008 Net Revenues U.S. Canada $ 2,665 $ 2,652 $ 7,393 $ 7,395 Europe 641 770 1,239 1,598 Mexico 327 392 782 994 Worldwide net revenues $ 3,633 $ 3,814 $ 9,414 $ 9,987 Operating Income U.S. Canada $ 279 $ 300 $ 696 $ 712 Europe 123 123 117 137 Mexico 30 32 45 64 Total segments 432 455 858 913 Corporate net impact of mark-to-market on commodity hedges 4 4 Worldwide operating income 436 455 862 913 Interest expense, net 67 65 215 187 Other non-operating expenses (income), net 5 (4 ) (1 ) Income before income taxes $ 369 $ 385 $ 651 $ 727 |
Restructuring Charges
Restructuring Charges | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Restructuring Charges [Abstract] | |
Restructuring Charges | Note 13Restructuring Charges In the fourth quarter of 2008, we announced a restructuring program to enhance the Companys operating capabilities in each of our reporting segments with the objective to strengthen customer service and selling effectiveness; simplify decision making and streamline the organization; drive greater cost productivity to adapt to current macroeconomic challenges; and rationalize the Companys supply chain infrastructure. As part of the restructuring program, approximately 3,600 positions will be eliminated across all reporting segments, four facilities will be closed in the United States, three plants and about 30 distribution centers will be closed in Mexico and about 700 routes will be eliminated in Mexico. In addition, the Company modified its U.S. defined benefit pension plans, which will generate long-term savings and significantly reduce future financial obligations. The Company expects to record pre-tax charges of $140million to $170million in selling, delivery and administrative expenses over the course of the restructuring program, which are primarily for severance and related benefits, pension and other employee-related costs and other charges, including employee relocation and asset disposal costs. Certain of the restructuring actions have been delayed due to the pending merger with PepsiCo, therefore, the restructuring actions may not be completed by the end of 2009, as originally intended. Since the inception of the program and through September5, 2009, we eliminated approximately 2,650 positions across all reporting segments and closed four facilities in the United States, three plants and 15 distribution centers in Mexico and eliminated 470 routes in Mexico. The Company expects to incur approximately $130million in pre-tax cash expenditures from these restructuring actions, of which $60million was paid since the inception of the program, with the balance expected to occur in 2009 and 2010. This includes $6million of employee benefit payments pursuant to existing unfunded termination indemnity plans. These benefit payments have been accrued for in previous periods, and therefore, are not included in our estimated cost for this program or the tables below. The following tables summarize the pre-tax costs associated with the restructuring program. By Reportable Segment U.S. Worldwide Canada Mexico Europe Costs incurred through December27, 2008 $ 83 $ 53 $ 3 $ 27 Costs incurred through the 24weeks ended June13, 2009 14 7 6 1 Costs incurred during the third quarter ended September5, 2009 5 1 4 Costs expected to be incurred through December25, 2010 38-68 28-39 10-25 0-4 Total costs expected to be incurred $ 140-$170 $ 89-$100 $ 23-$38 $ 28-$32 By Activity Asset Pension Disposal, Severance Other Employee Related Related Relocation Total Bene |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Supplemental Cash Flow Information Disclosure [Abstract] | |
Supplemental Cash Flow Information | Note 14Supplemental Cash Flow Information The table below presents the Companys supplemental cash flow information: 36 Weeks Ended September September 5, 2009 6, 2008 Interest paid $ 217 $ 218 Income taxes paid $ 40 $ 60 |
Contingencies
Contingencies | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Contingencies [Abstract] | |
Contingencies | Note 15Contingencies We are subject to various claims and contingencies related to lawsuits, environmental and other matters arising from the normal course of business. We believe that the ultimate liability arising from such claims or contingencies, if any, in excess of amounts already recognized is not likely to have a material adverse effect on our results of operations, financial condition or liquidity. On April19, 2009, PBG received an unsolicited proposal from PepsiCo to acquire all of the outstanding shares of the Companys common stock not already owned by PepsiCo for $29.50 per share. The proposal consisted of $14.75 in cash plus 0.283 shares of PepsiCo common stock for each share of PBG common stock. Immediately following receipt of the proposal, PBGs Board of Directors formed a special committee to review the adequacy of the proposal. On May4, 2009, our Board of Directors rejected the proposal. On August3, 2009, PBG and PepsiCo entered into a definitive merger agreement, under which PepsiCo will acquire all outstanding shares of PBG common stock it does not already own for the price of $36.50 in cash or 0.6432 shares of PepsiCo common stock, subject to proration such that the aggregate consideration to be paid to PBG shareholders shall be 50percent in cash and 50 percent in PepsiCo common stock. The transaction is subject to PBG shareholder approval and certain regulatory approvals and is expected to be finalized in late 2009 or early 2010. As discussed below, we and members of our Board of Directors have been named in a number of lawsuits relating to the PepsiCo proposal. It is not presently possible to accurately forecast the outcome or the ultimate cost of these lawsuits. In the event of prolonged proceedings or a determination adverse to the Company or its directors or officers, the Company may incur substantial monetary liability and expense, which could have a material adverse effect on our business and financial results. Beginning on April22, 2009, seven putative stockholder class action complaints challenging the April19 proposal were filed against the Company and the individual members of the Board of Directors of the Company in the Court of Chancery of the State of Delaware (the Delaware Lawsuits). The complaints alleged, among other things, that the defendants had breached or would breach their fiduciary duties owed to the public stockholders of the Company in connection with the April19 proposal. The Delaware Lawsuits were consolidated on June5, 2009, and an amended complaint was filed on June19, 2009. The amended complaint seeks, among other things, damages and declaratory, injunctive, and other equitable relief alleging, among other things, that the defendants have breached or will breach their fiduciary duties owed to the public stockholders of the Company, that the April19 proposal and the transactions contemplated thereunder were not entirely fair to the public stockholders, that PepsiCo had retaliated or would retaliate against the Company for rejecting the April19 proposal, and that certain provisions of the Companys certificate of incorporation are invalid and/or inapplicable to the April19 p |
Stockholders Rights Agreement
Stockholders Rights Agreement | |
9 Months Ended
Sep. 05, 2009 USD / shares | |
Stockholders Rights Agreement [Abstract] | |
Stockholders Rights Agreement | Note 16 Stockholders Rights Agreement During the second quarter of 2009, the Company declared a dividend payable to stockholders of record on May28, 2009, of one right (a Right) per each share of outstanding Common Stock and ClassB Common Stock to purchase 1/1,000th of a share of SeriesA Preferred Stock of the Company (the Preferred Stock), at a price of $100 per share (the Purchase Price). In connection with the declaration of the dividend, the Company entered into a Rights Agreement, dated May18, 2009 (the Rights Agreement), with Mellon Shareholder Services LLC, as the Rights Agent (Mellon). On August3, 2009, the Company and PepsiCo entered into a Merger Agreement, under which PepsiCo will acquire all of the outstanding shares of Company Common Stock that it does not already own (the Pending Merger). On the same date, the Company and Mellon entered into Amendment 1 to the Rights Agreement (the Rights Amendment), which provides that none of the actions taken by PepsiCo in connection with the Pending Merger shall trigger the exercisability of the Rights. Additionally, the Rights Amendment provides that the Rights will expire if and when the Pending Merger is finalized. Under the Rights Agreement, as amended, the Rights will become exercisable upon the earliest of (i)the date that a person or group other than PepsiCo has obtained beneficial ownership of more than 15percent of the outstanding shares of Common Stock, or (ii)a date determined by the PBG Board of Directors after a person or group commences (or publicly discloses an intent to commence) a tender or exchange offer that would result in such person or group becoming the beneficial owner of more than 15percent of the outstanding shares of Common Stock. Except as provided under the Rights Amendment, the Rights will expire on May18, 2010, unless earlier redeemed or canceled by the Company. Each right, if and when it becomes exercisable, will entitle the holder (other than the person or group whose action triggered the exercisability of the Rights (the Acquiring Person)) to receive, upon exercise of the Right and the payment of the Purchase Price, that number of 1/1,000ths of a share of Preferred Stock equal to the number of shares of Common Stock which at the time of the applicable triggering transaction would have a market value of twice the Purchase Price. In the event the Company is acquired in a merger or other business combination that triggers the exercisability of the Rights, or 50percent or more of the Companys assets are sold in a transaction that triggers the exercisability of the Rights, each Right will entitle its holder (other than an Acquiring Person) to purchase common shares in the surviving entity at 50percent of market price. |