FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 For the quarterly period ended March 18, 2000 (12 weeks) ------------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-14893 ------- THE PEPSI BOTTLING GROUP, INC. ------------------------------ (Exact name of registrant as specified in its charter) Delaware 13-4038356 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporate or organization) Identification No.) One Pepsi Way, Somers, New York 10589 ------------------------------- ----- (Address of principal executive offices) (Zip Code) 914-767-6000 ------------ (Registrant's telephone number, including area code) N/A --- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Number of shares of Capital Stock outstanding as of April 14, 2000: 148,006,266 The Pepsi Bottling Group, Inc. Index Page No. -------- Part I Financial Information Item 1. Financial Statements Condensed Consolidated Statements of Operations - 12 weeks ended March 18, 2000 and March 20, 1999 2 Condensed Consolidated Statements of Cash Flows - 12 weeks ended March 18, 2000 and March 20, 1999 3 Condensed Consolidated Balance Sheets - March 18, 2000 and December 25, 1999 4 Notes to Condensed Consolidated Financial Statements 5-8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 9-13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 Independent Accountants' Review Report 14 Part II Other Information and Signatures Item 6. Exhibits 15 -1- PART I - FINANCIAL INFORMATION Item 1. The Pepsi Bottling Group, Inc. Condensed Consolidated Statements of Operations (in millions except per share amounts, unaudited) 12 Weeks Ended -------------- March 18, March 20, 2000 1999 ---- ---- Net Revenues ............................................... $ 1,545 $ 1,452 Cost of sales .............................................. 845 835 ------- ------- Gross Profit ............................................... 700 617 Selling, delivery and administrative expenses .............. 625 575 ------- ------- Operating Income ........................................... 75 42 Interest expense, net ...................................... 45 46 Foreign currency loss ...................................... - 1 Minority interest .......................................... 3 - ------ ------ Income (loss) before income taxes .......................... 27 (5) Income tax expense (benefit) ............................... 10 (2) ------- ------- Net Income (Loss) .......................................... $ 17 $ (3) ======= ======= Basic and Diluted Earnings (Loss) per Share ................ $ 0.11 $ (0.06) Weighted-Average Basic and Diluted Shares Outstanding ...... 149 55 Pro Forma Basic and Diluted Earnings (Loss) per Share ...... $ 0.11 $ (0.02) Pro Forma Basic and Diluted Shares Outstanding (see note 6). 149 155 See accompanying notes to Condensed Consolidated Financial Statements. -2- The Pepsi Bottling Group, Inc. Condensed Consolidated Statements of Cash Flows (in millions, unaudited) 12 Weeks Ended -------------- March 18, March 20, 2000 1999 ---- ---- Cash Flows - Operations Net income (loss).............................................................. $ 17 $ (3) Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation.............................................................. 76 79 Amortization.............................................................. 30 29 Deferred income taxes..................................................... (11) (1) Other non-cash charges and credits, net................................... 33 25 Changes in operating working capital, excluding effects of acquisitions; Trade accounts receivable............................................... (8) (17) Inventories............................................................. (7) (15) Prepaid expenses, deferred income taxes and other current assets........ (13) (12) Accounts payable and other current liabilities.......................... (115) (11) ----- ----- Net change in operating working capital .................................. (143) (55) ----- ----- Net Cash Provided by Operations................................................... 2 74 ----- ----- Cash Flows - Investments Capital expenditures........................................................... (85) (82) Acquisitions of bottlers....................................................... - (104) Other, net..................................................................... (4) (8) ----- ----- Net Cash Used by Investments...................................................... (89) (194) ----- ----- Cash Flows - Financing Short-term borrowings - three months or less................................... 19 - Proceeds from third-party debt................................................. - 3,300 Replacement of PepsiCo allocated debt.......................................... - (3,300) Payments of third-party debt................................................... (8) (45) Dividend paid.................................................................. (3) - Treasury stock transactions.................................................... (29) - Increase in advances from PepsiCo.............................................. - 144 ----- ----- Net Cash (Used) Provided by Financing............................................. (21) 99 ----- ----- Effect of Exchange Rate Changes on Cash and Cash Equivalents...................... (1) (1) ----- ----- Net Decrease in Cash and Cash Equivalents......................................... (109) (22) Cash and Cash Equivalents - Beginning of Period................................... 190 36 ----- ----- Cash and Cash Equivalents - End of Period......................................... $ 81 $ 14 ===== ===== Supplemental Cash Flow Information Third-party interest and income taxes paid........................................ $ 139 $ 2 ===== ===== See accompanying notes to Condensed Consolidated Financial Statements. -3- The Pepsi Bottling Group, Inc. Condensed Consolidated Balance Sheets (in millions, except per share amounts) (Unaudited) March December 18, 2000 25, 1999 -------- -------- Assets - ------ Current Assets Cash and cash equivalents................................................ $ 81 $ 190 Trade accounts receivable, less allowance of $48 at March 18, 2000 and December 25, 1999, respectively................ 834 827 Inventories.............................................................. 298 293 Prepaid expenses, deferred income taxes and other current assets......... 182 183 ------ ------ Total Current Assets............................................. 1,395 1,493 Property, plant and equipment, net......................................... 2,224 2,218 Intangible assets, net..................................................... 3,784 3,819 Other assets............................................................... 80 89 ------ ------ Total Assets..................................................... $7,483 $7,619 ====== ====== Liabilities and Shareholders' Equity - ------------------------------------ Current Liabilities Accounts payable and other current liabilities........................... $ 835 $ 924 Short-term borrowings.................................................... 33 23 ------ ------ Total Current Liabilities........................................ 868 947 Long-term debt due to third parties........................................ 3,268 3,268 Other liabilities.......................................................... 406 385 Deferred income taxes...................................................... 1,124 1,178 Minority interest.......................................................... 281 278 ------ ------ Total Liabilities................................................ 5,947 6,056 Shareholders' Equity Common stock, par value $.01 per share: Authorized 300 shares, issued 155 shares............................ 2 2 Additional paid-in capital.............................................. 1,736 1,736 Retained earnings....................................................... 152 138 Accumulated other comprehensive loss.................................... (236) (223) Treasury stock: 7 shares and 5 shares at March 18, 2000 and December 25, 1999, respectively................................................... (118) (90) ------ ------ Total Shareholders' Equity....................................... 1,536 1,563 ------ ------ Total Liabilities and Shareholders' Equity...................... $7,483 $7,619 ====== ====== See accompanying notes to Condensed Consolidated Financial Statements. -4- The Pepsi Bottling Group, Inc. Notes to Condensed Consolidated Financial Statements (unaudited) Tabular dollars in millions - -------------------------------------------------------------------------------- Note 1 - Basis of Presentation The Pepsi Bottling Group, Inc. ("PBG") consists of bottling operations located in the United States, Canada, Spain, Greece and Russia. These bottling operations manufacture, sell and distribute Pepsi-Cola beverages including Pepsi-Cola, Diet Pepsi, Mountain Dew and other brands of carbonated soft drinks and other ready-to-drink beverages. Approximately 90% of PBG's net revenues were derived from the sale of Pepsi-Cola beverages. References to PBG throughout these Condensed Consolidated Financial Statements are made using the first-person notations of "we," "our" and "us." Prior to our formation, we were an operating unit of PepsiCo, Inc. ("PepsiCo"). On March 31, 1999, we offered 100,000,000 shares of PBG common stock for sale at $23 per share in an initial public offering generating $2,208 million in net proceeds. These proceeds were used to repay obligations to PepsiCo and fund acquisitions. Subsequent to the offering, PepsiCo owned and continues to own 55,005,679 shares of common stock, consisting of 54,917,329 shares of common stock and 88,350 shares of Class B common stock. PepsiCo's ownership has increased to 37.1% of the outstanding common stock at March 18, 2000 as a result of net repurchases of 6.8 million shares under our share repurchase program, which began in October 1999. PepsiCo also owns 100% of the outstanding Class B common stock, together representing 45.2% of the voting power of all classes of our voting stock. Subsequent to the offering, PepsiCo also owns 7.1% of the equity of Bottling Group, LLC, our principal operating subsidiary, giving PepsiCo economic ownership of 41.6% of our combined operations at March 18, 2000. The accompanying Condensed Consolidated Financial Statements include information that has been presented on a "carve-out" basis for the periods prior to our initial public offering. This information includes the historical results of operations and assets and liabilities directly related to PBG, and has been prepared from PepsiCo's historical accounting records. Certain estimates, assumptions and allocations were made in determining such financial statement information. Therefore, these Condensed Consolidated Financial Statements may not necessarily be indicative of the results of operations, financial position or cash flows that would have existed had we been a separate, independent company from the first day of all periods presented. The accompanying Condensed Consolidated Balance Sheet at March 18, 2000 and the Condensed Consolidated Statements of Operations and Cash Flows for the 12 weeks ended March 18, 2000 and March 20, 1999 have not been audited, but have been prepared in conformity with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements for the year ended December 25, 1999 as presented in our Annual Report on Form 10-K. 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. -5- Note 2 - Seasonality of Business The results for the first quarter are not necessarily indicative of the results that may be expected for the full year because of business seasonality. 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, amortization and interest, which are not significantly impacted by business seasonality. Note 3 - Inventories March December 18, 2000 25, 1999 -------- -------- Raw materials and supplies......................... $ 106 $ 110 Finished goods..................................... 192 183 ------ ------ $ 298 $ 293 ====== ====== Note 4 - Property, Plant and Equipment, net March December 18, 2000 25, 1999 -------- -------- Land............................................... $ 144 $ 145 Buildings and improvements......................... 853 852 Production and distribution equipment.............. 2,118 2,112 Marketing equipment................................ 1,639 1,596 Other.............................................. 83 84 ------ ------ 4,837 4,789 Accumulated depreciation........................... (2,613) (2,571) ------ ------ $2,224 $2,218 ====== ====== Note 5 - Comprehensive Income 12 Weeks Ended -------------- March March 18, 2000 20, 1999 -------- -------- Net income (loss).................................. $ 17 $ (3) Currency translation adjustment.................... (13) 11 ----- ----- Comprehensive Income............................... $ 4 $ 8 ===== ===== -6- Note 6 - Comparability of Results Asset Lives - ----------- At the beginning of fiscal year 2000, we changed the estimated useful lives of certain categories of assets to reflect the success of our preventive maintenance programs in extending the useful lives of these assets. The changes, which are detailed in the table below, lowered total depreciation cost for the quarter by $14 million ($8 million after tax and minority interest, or $0.05 per share) reducing cost of sales by $8 million and selling, delivery and administrative expenses by $6 million. Estimated Useful Lives ---------------------- 2000 1999 ---- ---- Manufacturing equipment................................... 15 10 Heavy fleet............................................... 10 8 Fountain dispensing equipment............................. 7 5 Small specialty coolers and marketing equipment........... 3 5 to 7 Initial Public Offering - ----------------------- The 1999 financial information for the period prior to our initial public offering has been carved out from the financial statements of PepsiCo using the historical results of operations and assets and liabilities of our business. The Condensed Consolidated Financial Statements reflect certain costs that may not necessarily be indicative of the costs we would have incurred had we operated as an independent, stand-alone entity from the beginning of 1999. These costs include an allocation of PepsiCo corporate overhead and interest expense, and income taxes. o We included corporate overhead related to PepsiCo's corporate administrative functions based on a specific identification of PepsiCo's administrative costs relating to the bottling operations and, to the extent that such identification was not practicable, based upon the percentage of our revenues to PepsiCo's consolidated net revenues. These costs are included in selling, delivery and administrative expenses in our Condensed Consolidated Statements of Operations. o We allocated $3.3 billion of PepsiCo debt to our business. We charged interest expense on this debt using PepsiCo's weighted-average interest rate. Once we issued $3.3 billion of third-party debt in the first quarter of 1999, our actual interest rates were used to determine interest expense for the remainder of the year. Allocated interest expense was deemed to have been paid to PepsiCo, in cash, in the period in which the cost was incurred. o We reflected income tax expense in our Condensed Consolidated Financial Statements as if we had actually filed a separate income tax return. Our allocable share of income taxes was deemed to have been paid to PepsiCo, in cash, in the period in which the cost was incurred. -7- The amounts of the historical allocations described above are as follows: 1999 ---- Corporate overhead expense.................................... $ 3 Interest expense.............................................. $ 28 PepsiCo weighted-average interest rate........................ 5.8% In addition, our historical capital structure is not representative of our current structure due to our initial public offering. In 1999, immediately preceding the offering, we had 55,000,000 shares of common stock outstanding. In connection with the offering, we sold 100,000,000 shares to the public. Pro forma 1999 average shares outstanding reflect our initial public offering as if it occurred on the first day of fiscal year 1999. -8- Item 2. Management's Discussion and Analysis of Results of Operations and Financial - -------------------------------------------------------------------------------- Condition - --------- Overview The Pepsi Bottling Group, Inc. (collectively referred to as "PBG," "we," "our" and "us") became a public company through an initial public offering of 100,000,000 shares on March 31, 1999, marking our separation from PepsiCo, Inc. and our beginning as a company focused solely on the bottling business. We began 2000 building on the momentum gained in 1999 as we continued to make substantial progress against our three key objectives - fixing the economics of our take-home business, aggressively growing our high-margin cold drink volume and sharply improving our international business. As a result we have generated outstanding operating performance in the first quarter of 2000: o We delivered 21% constant territory EBITDA growth in the first quarter. o We delivered $0.11 in earnings per share, an increase of $0.13 over 1999 after adjusting for the number of shares outstanding. o We increased net revenues over 6%. The following management's discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying footnotes along with the cautionary statements at the end of this section. Constant Territory We believe that constant territory performance results are the most appropriate indicators of operating trends and performance, particularly in light of our stated intention of acquiring additional bottling territories, and are consistent with industry practice. Constant territory operating results are achieved by adjusting current year results to exclude current year acquisitions and adjusting prior year results to include the results of significant prior year acquisitions as if they had occurred on the first day of the prior fiscal year. Constant territory results also exclude any unusual impairment and other charges and credits. Use of EBITDA EBITDA, which is computed as operating income plus the sum of depreciation and amortization, is a key indicator management and the industry use to evaluate operating performance. It is not, however, required under generally accepted accounting principles and should not be considered an alternative to measurements required by GAAP such as net income or cash flows. Comparability of Results Asset Lives - ----------- At the beginning of fiscal year 2000, we changed the estimated useful lives of certain categories of assets to reflect the success of our preventive maintenance programs in extending the useful lives of these assets. The changes, which are detailed in Note 6 to the Condensed Consolidated Financial Statements, lowered total depreciation cost for the quarter by $14 million ($8 million after tax and minority interest, or $0.05 per share) reducing cost of sales by $8 million and selling, delivery and administrative expenses by $6 million. We anticipate that this change will reduce full year 2000 depreciation expense by approximately $58 million ($33 million after tax and minority interest, or $0.22 per share). -9- Initial Public Offeing - ---------------------- The 1999 financial information for the period prior to our initial public offering has been carved out from the financial statements of PepsiCo using the historical results of operations and assets and liabilities of our business. The Condensed Consolidated Financial Statements reflect certain costs that may not necessarily be indicative of the costs we would have incurred had we operated as an independent, stand-alone entity from the beginning of 1999. These costs include an allocation of PepsiCo corporate overhead and interest expense, and income taxes as follows: 1999 ---- Corporate overhead expense......................................... $ 3 Interest expense................................................... $ 28 PepsiCo weighted-average interest rate............................. 5.8% In addition, our historical capital structure is not representative of our current structure due to our initial public offering. In 1999, immediately preceding the offering, we had 55,000,000 shares of common stock outstanding. In connection with the offering, we sold 100,000,000 shares to the public. Results of Operations - --------------------- Constant Reported Territory Change Change ------ ------ EBITDA.............................................. 21% 21% Volume.............................................. 0% 0% Net Revenue per Case................................ 6% 6% EBITDA Reported EBITDA was $181 million in the first quarter of 2000, representing a 21% increase over the same period of 1999. On a constant territory basis, EBITDA growth was also 21% reflecting strong pricing in U.S. foodstores, an increased mix of higher margin cold drink volume and continued growth in our operations outside North America. Volume Our worldwide physical case volume was flat on both a reported and constant territory basis in the first quarter of 2000. In North America, which includes the U.S. and Canada, constant territory volume decreased 1% driven by declines in the take-home segment as we increased wholesale prices in the first quarter of 2000. This volume decrease was partially offset by increases in our cold drink segment as we continued to invest in this high-margin segment. Outside North America, our constant territory volumes increased 9% reflecting continued improvements in Russia and solid growth in Spain. Russia volumes continued to rebound from the August 1998 devaluation of the ruble as we have aggressively reestablished brand Pepsi, introduced our own line of value brand beverage products (Fiesta) and increased distribution of our water products. -10- Net Revenues Net revenues for the quarter were $1,545 million, a 6% increase over the prior year. On a constant territory basis, worldwide net revenues grew 6% as well, driven by a 6% increase in net revenue per case. This increase was driven by strong pricing, particularly in U.S. foodstores, and an increased mix of higher-revenue cold drink volume. Cost of Sales Cost of sales increased $10 million, or 1%, driven by a 1% increase in cost of sales per case reflecting higher U.S. concentrate costs, which took effect in February. Current year costs also include an $8 million favorable impact from the change in our estimated useful lives of manufacturing assets. Selling, delivery and administrative expenses Selling, delivery and administrative expenses grew $50 million, or 9%. This primarily reflects increased selling and delivery costs resulting from our continued heavy investment in our North American cold drink infrastructure driven by additional headcount, delivery routes and depreciation. In addition, although 1999 expenses included a $6 million one-time cash cost for shell deposits, these expenses were offset in 2000 in large part by the expense resulting from our new company matching 401K plan. Current year costs also include a $6 million favorable impact from the change in our estimated useful lives of certain selling and delivery assets. Interest expense, net Interest expense decreased by $1 million reflecting lower external debt outside North America partially offset by an increase in weighted-average interest rates in the U.S. from 5.9% in the prior year, when we used PepsiCo's average interest rate until we issued our own debt, to 6.0% in the current year. Minority Interest PBG and PepsiCo contributed bottling businesses and assets used in the bottling businesses to Bottling Group, LLC, our principal operating subsidiary, in connection with the formation of Bottling Group, LLC. As a result of the contribution of these assets, we own 92.9% of Bottling Group, LLC and PepsiCo owns the remaining 7.1%. Accordingly, starting from our initial public offering on March 31, 1999, our Condensed Consolidated Financial Statements reflect PepsiCo's share of consolidated net income of Bottling Group, LLC as minority interest in our Condensed Consolidated Statements of Operations. Provision for Income Taxes PBG's full year forecasted tax rate for 2000 is 37% and this rate has been applied to first quarter results. This rate corresponds to an effective tax rate, excluding any unusual impairment and other charges and credits, of 38% in 1999. The one point decrease is primarily due to the reduced impact of fixed non-deductible permanent expenses on higher anticipated pretax income in 2000. Earnings Per Share 2000 1999 ---- ---- Earnings (loss) per share on reported net income (loss).. $0.11 $(0.06) Average shares outstanding (millions).................... 149 55 -11- Our historical capital structure is not representative of our current structure due to our initial public offering. In 1999, immediately preceding the offering, we had 55 million shares of common stock outstanding. In connection with the offering, we sold 100,000,000 shares of common stock to the public and used the $2.2 billion of proceeds to repay obligations to PepsiCo and to fund acquisitions. The table below sets forth 1999 earnings per share adjusted for the initial public offering assuming 155 million shares had been outstanding for the entire period presented. Shares outstanding at the end of the first quarter of 2000 reflect our share repurchase program which began in October 1999 when our Board of Directors authorized the repurchase of up to 10 million shares of our common stock. Approximately 1.5 million shares were repurchased in the first quarter of 2000 with a total of almost 7 million shares repurchased since last October. 2000 1999 ---- ---- Earnings (loss) per share on reported net income (loss). $0.11 $(0.02) Pro forma average shares outstanding (millions)......... 149 155 Liquidity and Capital Resources - ------------------------------- Cash Flows Net cash provided by operating activities decreased $72 million to $2 million as strong EBITDA growth was more than offset by unfavorable working capital cash flows driven by the timing of cash payments on current liabilities, particularly third-party interest and income taxes, which were $137 million higher in the first quarter of 2000. Net cash used by investments decreased by $105 million from $194 million in the first quarter of 1999 to $89 million over the same period in 2000, primarily due to acquisition spending, which was $104 million lower in the first quarter of 2000. However, capital expenditures increased by $3 million, or 4%, as we continue to invest heavily in cold drink equipment in the U.S. First quarter 2000 net placements were made at a rate which should allow us to meet our 2000 target of over 150,000 net placements. Net cash (used) provided by financing decreased by $120 million to a use of $21 million in 2000. This decrease reflects $144 million of advances from PepsiCo in 1999, which were used to fund acquisitions and pay down debt, and $29 million of share repurchases in 2000. Euro - ---- On January 1, 1999, eleven member countries of the European Union established fixed conversion rates between existing currencies and one common currency, the Euro. Beginning in January 2002, new Euro-denominated bills and coins will be issued, and existing currencies will be withdrawn from circulation. Spain is one of the member countries that instituted the Euro and we have established plans to address the issues raised by the Euro currency conversion. These issues include, among others, the need to adapt computer and financial systems, business processes and equipment, such as vending machines, to accommodate Euro-denominated transactions and the impact of one common currency on cross-border pricing. Since financial systems and processes currently accommodate multiple currencies, we do not expect the system and equipment conversion costs to be material. Due to numerous uncertainties, we cannot reasonably estimate the long-term effects one common currency may have on pricing, costs and the resulting impact, if any, on the financial condition or results of operations. -12- Cautionary Statements - --------------------- Except for the historical information and discussions contained herein, statements contained in this Form 10-Q may constitute forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on currently available competitive, financial and economic data and our operating plans. These statements involve a number of risks, uncertainties and other factors that could cause actual results to be materially different. Among the events and uncertainties that could adversely affect future periods are lower-than-expected net pricing resulting from marketplace competition, material changes from expectations in the cost of raw materials and ingredients, an inability to achieve the expected timing for returns on cold drink equipment and employee infrastructure expenditures, material changes in expected levels of marketing support payments from PepsiCo, Inc., an inability to meet projections for performance in newly acquired territories, unexpected costs associated with conversion to the common European currency and unfavorable interest rate and currency fluctuations. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have no material changes to the disclosures made on this matter in our 1999 Annual Report on Form 10-K. -13- Independent Accountants' Review Report -------------------------------------- The Board of Directors The Pepsi Bottling Group, Inc. We have reviewed the accompanying Condensed Consolidated Balance Sheet of The Pepsi Bottling Group, Inc. as of March 18, 2000, and the related Condensed Consolidated Statements of Operations and Cash Flows for the twelve weeks ended March 18, 2000 and March 20, 1999. These Condensed Consolidated Financial Statements are the responsibility of The Pepsi Bottling Group, Inc.'s management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the Condensed Consolidated Financial Statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the Consolidated Balance Sheets of The Pepsi Bottling Group, Inc. as of December 25, 1999, and the related Consolidated Statements of Operations, Cash Flows and Changes in Shareholders' Equity for the fifty-two week period then ended not presented herein; and in our report dated January 25, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 25, 1999, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ KPMG LLP New York, New York April 5, 2000 -14- PART II - OTHER INFORMATION AND SIGNATAURES Item 6. Exhibits and Reports on Form 8-K - ------- -------------------------------- (a) Exhibits See Index to Exhibits on page 17. -15- Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned. THE PEPSI BOTTLING GROUP, INC. ------------------------------ (Registrant) Date: April 21, 2000 Peter A. Bridgman - ----- -------------- ----------------- Senior Vice President and Controller Date: April 21, 2000 John T. Cahill - ----- -------------- -------------- Executive Vice President and Chief Financial Officer -16- INDEX TO EXHIBITS ----------------- ITEM 6 (a) ---------- EXHIBITS - -------- Exhibit 11 Computation of Basic and Diluted Earnings Per Share Exhibit 27.1 Financial Data Schedule 12 weeks ended March 18, 2000 -17-