Exhibit 99.1
Contact: Kelly McAndrew Mary Winn Settino
Public Relations Investor Relations
(914) 767-7690 (914) 767-7216
FOR IMMEDIATE RELEASE
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THE PEPSI BOTTLING GROUP REPORTS FOURTH QUARTER
AND FULL YEAR 2003 RESULTS
SOMERS, N.Y., January 27, 2004 - The Pepsi Bottling Group, Inc. (NYSE: PBG)
today reported fourth quarter 2003 net income of $69 million, or diluted
earnings per share (EPS) of $0.26, which includes a one-time, non-cash charge of
$0.04 per share related to a Canadian tax law change. For the full year 2003,
income before the cumulative effect of the adoption of a new accounting
principle was $422 million, or $1.52 per share. This also includes the impact of
the tax law change in Canada. These results compare to reported fourth quarter
2002 net income of $57 million, or EPS of $0.20, and full year 2002 net income
of $428 million, or $1.46 per share.
o PBG's physical case worldwide volume grew one percent during the
fourth quarter on a constant territory basis. In the U.S., volume was
flat for the quarter. PBG's European territories delivered strong
volume growth, up 14 percent in the quarter, while volume in Mexico
declined three percent during the same period.
o The pricing environment in the U.S. remained positive during the
fourth quarter. PBG achieved a two percent increase in U.S.
marketplace pricing and a positive mix benefit of one percent. These
gains were offset by the Company's adoption of FASB's Emerging Issues
Task Force (EITF) Issue No. 02-16, resulting in flat reported net
revenue per case results in PBG's U.S. business.
o PBG generated strong cash flow throughout 2003. The Company delivered
cash provided by operations of $1.1 billion with capital expenditures
of $644 million. This resulted in net cash provided by operations less
capital expenditures of $440 million, a 13 percent increase over prior
year.
PBG REPORTS FOURTH QUARTER AND FULL YEAR 2003 RESULTS/ 2 of 3
o Reported operating income for the Company grew 35 percent in the
fourth quarter and seven percent for the full year.
"We concluded 2003 with momentum returning to our U.S. business," said John
T. Cahill, Chairman and Chief Executive Officer of PBG. "Outstanding execution
in the marketplace helped us to bring our cold drink volume back into positive
territory during the fourth quarter and gain market share on our PepsiCo brands
in foodstores. We were very pleased with the results of Pepsi Vanilla, the
ongoing strength of Sierra Mist and the performance of our entire diet soft
drink portfolio. On the pricing front in our U.S. business, we successfully
implemented our 2004 price increases in nearly all of our markets during the
fourth quarter of 2003."
Cahill continued, "Each of our European businesses generated strong volume
growth in the fourth quarter, resulting in eight percent volume growth for the
year. Innovation continued to drive growth in Russia, while Spain's focus on
execution generated solid results. In Mexico, the new pricing architecture that
we introduced mid-quarter had a positive impact on our volume trends and share
position though, overall, physical case volume remained soft. Driving consumer
value remains one of our key priorities in 2004."
On a constant territory basis, PBG's worldwide volume was flat for the full
year 2003. (Constant territory calculations assume all significant acquisitions
made in 2002 were made at the beginning of 2002 and exclude all significant
acquisitions made in 2003.) In the U.S., physical case volume was down two
percent for the year. PBG's cold drink volume in the U.S. improved sequentially
throughout the year. Competitive pressures continued in Mexico where sales of
water and carbonated soft drinks remained soft as the year ended. On a constant
territory basis, physical case volume in Mexico declined two percent for the
year.
Rate increases and a positive mix benefit drove PBG's U.S. net revenue per
case results up three percent during the fourth quarter. On a reported basis,
however, those gains were offset by the impact of PBG's adoption of FASB's EITF
Issue No. 02-16 (an accounting principle that reclassifies the majority of the
bottler incentives PBG receives from PepsiCo and other brand owners from net
revenues and selling, delivery and administrative expenses to cost of sales).
For the full year, reported net revenue per case was down one percent in the
U.S.
PBG REPORTS FOURTH QUARTER AND FULL YEAR 2003 RESULTS/ 3 of 3
and down seven percent worldwide.
During 2003, PBG repurchased 22.7 million shares of common stock. Since the
inception of the Company's share repurchase program in October 1999, 63 million
shares have been repurchased.
The Company stated that in fiscal 2004 it expects to achieve EPS of $1.62
to $1.70. The Company also stated that it expects worldwide constant territory
volume for the full year to be up in the low single-digit range and reported
operating income to grow mid-single digits. The Company affirmed its expectation
for continued growth in cash flow, with net cash provided by operations less
capital expenditures growth of about 10 percent. PBG expects return on invested
capital to grow 30 to 50 basis points to 7.8 to 8 percent.
The Pepsi Bottling Group, Inc. (www.pbg.com) is the world's largest
manufacturer, seller and distributor of Pepsi-Cola beverages with operations in
the U.S., Canada, Greece, Mexico, Russia, Spain and Turkey. To receive company
news releases by e-mail, please visit www.pbg.com.
Listen in live to PBG's fourth quarter 2003 earnings discussion with
financial analysts on January 27th at 11 a.m. (EST) at http://www.pbg.com.
Accompanying slides can be found at PBG's website.
# # #
Statements made in this press release that relate to future performance or
financial results of the Company are forward-looking statements which involve
uncertainties that could cause actual performance or results to materially
differ. PBG undertakes no obligation to update any of these statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as to the date hereof. Accordingly, any forward-looking
statement should be read in conjunction with the additional information about
risks and uncertainties set forth in PBG's Securities and Exchange Commission
reports, including its annual report on Form 10-K for the year ended December
28, 2002.
Attachments (3 pages)
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
in millions, except per share amounts
16-Weeks Ended 52-Weeks Ended
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December December December December
27, 2003 28, 2002 27, 2003 28, 2002
-------- -------- -------- --------
(unaudited) (unaudited)
Net revenues......................................................... $ 3,049 $ 2,780 $ 10,265 $ 9,216
Cost of sales........................................................ 1,560 1,537 5,215 5,001
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Gross profit......................................................... 1,489 1,243 5,050 4,215
Selling, delivery and administrative expenses........................ 1,282 1,089 4,094 3,317
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Operating income..................................................... 207 154 956 898
Interest expense, net................................................ 73 58 239 191
Other non-operating expenses, net.................................... 2 1 7 7
Minority interest.................................................... 9 6 50 51
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Income before income taxes........................................... 123 89 660 649
Income tax expense before rate change................................ 43 32 227 221
Income tax rate change expense (1)................................... 11 - 11 -
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Income before cumulative effect of change in accounting
principle............................................................ 69 57 422 428
Cumulative effect of change in accounting principle, net of tax
and minority interest................................................ - - 6 -
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Net Income........................................................... $ 69 $ 57 $ 416 $ 428
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Basic earnings per share before cumulative effect of
change in accounting principle....................................... $ 0.26 $ 0.20 $ 1.56 $ 1.52
Cumulative effect of change in accounting principle.................. - - (0.02) -
------- ------- -------- -------
Basic earnings per share............................................. $ 0.26 $ 0.20 $ 1.54 $ 1.52
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Weighted-average shares outstanding.................................. 262 281 270 282
Diluted earning per share before cumulative effect of
change in accounting principle....................................... $ 0.26 $ 0.20 $ 1.52 $ 1.46
Cumulative effect of change in accounting principle.................. - - (0.02) -
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Diluted earnings per share........................................... $ 0.26 $ 0.20 $ 1.50 $ 1.46
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Weighted-average shares outstanding.................................. 269 291 277 293
(1) In December 2003, legislation was enacted changing certain Canadian
provincial income tax rates. These rate changes increased deferred tax
liabilities by $11 million and resulted in a one-time, non-cash charge on a
quarter and year-to-date basis.
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
in millions
52-Weeks Ended
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December December
27, 2003 28, 2002
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Cash Flows - Operations
Net Income................................................................. $ 416 $ 428
Adjustments to reconcile net income to net cash provided
by operations:.............................................................
Depreciation........................................................... 556 443
Amortization........................................................... 12 8
Changes in working capital and other non-cash charges.................. 307 336
Pension contributions...................................................... (162) (151)
Other, net................................................................. (45) (50)
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Net Cash Provided by Operations................................................. 1,084 1,014
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Cash Flows - Investments
Capital expenditures....................................................... (644) (623)
Acquisitions of bottlers................................................... (100) (936)
Investment in debt defeasance trust........................................ - (181)
Sale of property, plant and equipment...................................... 10 6
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Net Cash Used for Investments................................................... (734) (1,734)
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Cash Flows - Financing
Borrowing activities, net.................................................. 1,119 833
Dividends paid............................................................. (11) (11)
Treasury stock transactions................................................ (448) (138)
Minority interest distribution............................................. (7) (11)
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Net Cash Provided by Financing.................................................. 653 673
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Effect of Exchange Rate Changes on Cash and Cash Equivalents................... 10 (8)
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Net Increase (Decrease) in Cash and Cash Equivalents............................ 1,013 (55)
Cash and Cash Equivalents - Beginning of Period................................. 222 277
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Cash and Cash Equivalents - End of Period....................................... $1,235 $ 222
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THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
in millions, except per share amounts
December December
27, 2003 28, 2002
-------- --------
Assets
Current Assets
Cash and cash equivalents.................................................. $ 1,235 $ 222
Accounts receivable, net................................................... 994 922
Inventories................................................................ 374 378
Prepaid expenses and other current assets.................................. 268 203
Investment in debt defeasance trust........................................ 168 12
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Total Current Assets................................................... 3,039 1,737
Property, plant and equipment, net.............................................. 3,423 3,308
Other intangible assets, net.................................................... 3,562 3,495
Goodwill........................................................................ 1,386 1,192
Investment in debt defeasance trust............................................. - 170
Other assets.................................................................... 134 141
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Total Assets........................................................... $11,544 $10,043
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and other current liabilities............................. $ 1,231 $ 1,179
Short-term borrowings...................................................... 67 51
Current maturities of long-term debt....................................... 1,180 18
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Total Current Liabilities.............................................. 2,478 1,248
Long-term debt.................................................................. 4,493 4,539
Other liabilities............................................................... 875 819
Deferred income taxes........................................................... 1,421 1,265
Minority interest............................................................... 396 348
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Total Liabilities...................................................... 9,663 8,219
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Shareholders' Equity
Common stock, par value $0.01 per share:
Authorized 900 shares, issued 310 shares............................... 3 3
Additional paid-in capital................................................. 1,743 1,750
Retained earnings.......................................................... 1,471 1,066
Accumulated other comprehensive loss....................................... (380) (468)
Deferred compensation...................................................... (4) -
Treasury stock: 49 shares and 30 shares at December 27, 2003
and December 28, 2002, respectively.................................... (952) (527)
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Total Shareholders' Equity............................................. 1,881 1,824
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Total Liabilities and Shareholders' Equity........................... $11,544 $10,043
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Certain reclassifications were made in our Condensed Consolidated Financial
Statements to 2002 amounts to conform to the 2003 presentation.