EXHIBIT 99.1
The Pepsi Bottling Group Reports Solid Earnings Growth in
Third Quarter;
Volume Growth Achieved in All Key Markets
SOMERS, N.Y.--(BUSINESS WIRE)--Sept. 28, 2004--The Pepsi Bottling
Group, Inc. (NYSE:PBG) today reported third quarter 2004 net income of
$191 million, or diluted earnings per share (EPS) of $0.73, which
includes a $0.02 gain from the settlement of certain international tax
audits. These results compare to reported third quarter 2003 net
income of $183 million, or EPS of $0.67. Reported year-to-date net
income was $383 million, or EPS of $1.44, which includes the $0.02 tax
gain. These results compare to reported year-to-date 2003 net income
of $353 million, or $1.26 per share, before accounting for the
cumulative effect of the adoption of a new accounting principle, which
reduced EPS by $0.02.
-- Worldwide physical case volume grew two percent on a constant
territory basis in the third quarter. PBG's U.S. business
delivered one-percent volume growth and the Company's European
business generated a five-percent increase in volume. In
Mexico, strong marketplace execution led to a three-percent
improvement in physical case volume.
-- In the U.S., PBG delivered another consecutive quarter of net
revenue per case growth, up three percent for the third
quarter. Worldwide, net revenue per case improved two percent.
-- Given three quarters of strong earnings performance, PBG
adjusted its full-year earnings expectations to a range of
$1.71 to $1.74, excluding the previously mentioned tax gain.
"Outstanding execution in the marketplace drove our results in the
third quarter," said John T. Cahill, Chairman and Chief Executive
Officer of PBG. "In the U.S., we were faced with a soft retail
environment this past quarter, as well as a challenging year-over-year
volume lap. Our field organization rose to the challenge and delivered
one-percent volume improvement, with growth in both the cold drink and
take home channels of our business. Brand Mountain Dew performance was
strong, benefiting from the introduction of the latest line extension,
Mountain Dew Pitch Black, near the end of the quarter. Tropicana juice
drinks continued to perform well, achieving three points of share
since the introduction earlier this year. Our net revenue per case
results were very good, growing for the 20th consecutive quarter
excluding the impact of last year's accounting change."
Cahill continued, "We were very pleased with our positive volume
results in Mexico. This volume improvement was consistent across our
portfolio with growth generated from our carbonated soft drinks,
bottled water and jug water. These results reflect the ongoing
progress we're making on a number of fronts. While there remains a lot
of work ahead of us in Mexico, we believe we're on the right track to
sustained improvement."
On a constant territory basis, physical case volume worldwide grew
two percent in the third quarter. (Constant territory calculations
assume all significant acquisitions made in 2003 were made at the
beginning of 2003 and exclude all significant acquisitions made in
2004.) In the U.S., volume in PBG's cold drink business grew one
percent, while its take home volume was positive. PBG's business in
Canada also increased its volume one percent in the quarter. The
Company's businesses in Europe collectively generated five percent
growth in volume, with its Russian and Turkey territories each
delivering double-digit volume improvement. Physical case volume of
carbonated soft drinks in Mexico grew three percent for the quarter.
Sales of bottled water and jug water in Mexico also improved, up 18
and two percent respectively.
Worldwide operating income was flat in the third quarter. This was
due primarily to rising raw materials costs and higher benefit and
compensation expenses. Year-to-date, worldwide operating income grew
four percent.
During the third quarter of 2004, PBG repurchased 6.8 million
shares of common stock. Since the inception of the Company's share
repurchase program in October 1999, more than 80 million shares have
been repurchased.
The Company revised upward the lower end of the range of its
estimate for full year 2004 earnings per share. The current forecast
is for EPS of $1.71 to $1.74 excluding the previously mentioned tax
gain. PBG reiterated its expectations for worldwide physical case
volume growth for the full year 2004 of two to three percent with net
revenue per case improvement of two to three percent. The Company's
operating income outlook for 2004 remains unchanged, with growth
expected to come in at the mid-single digit range. PBG expects cash
from operations less capital expenditures to be approximately $530
million, a 20 percent increase over 2003 results. The Company expects
capital expenditures for the year to be in the range of $675 to $700
million.
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.
Listen in live to PBG's third quarter 2004 earnings discussion
with financial analysts on Sept. 28th at 11 a.m. (EDT) at
http://www.pbg.com.
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 27, 2003.
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
in millions, except per share amounts, unaudited
12 Weeks Ended 36 Weeks Ended
------------------- -------------------
Sept. 4, Sept. 6, Sept. 4, Sept. 6,
2004 2003 2004 2003
--------- --------- --------- ---------
Net revenues $ 2,934 $ 2,810 $ 7,676 $ 7,216
Cost of sales 1,522 1,438 3,951 3,655
--------- --------- --------- ---------
Gross profit 1,412 1,372 3,725 3,561
Selling, delivery and
administrative expenses 1,055 1,014 2,945 2,812
--------- --------- --------- ---------
Operating income 357 358 780 749
Interest expense, net 50 56 158 166
Other non-operating expenses,
net 1 2 3 5
Minority interest 22 21 43 41
--------- --------- --------- ---------
Income before income taxes 284 279 576 537
Income tax expense 93 96 193 184
--------- --------- --------- ---------
Income before cumulative
effect of change in
accounting principle 191 183 383 353
Cumulative effect of change in
accounting principle, net of
tax and minority interest - - - 6
--------- --------- --------- ---------
Net income $ 191 $ 183 $ 383 $ 347
========= ========= ========= =========
Basic earnings per share
before cumulative effect of
change in accounting
principle $ 0.75 $ 0.68 $ 1.49 $ 1.29
Cumulative effect of change
in accounting principle - - - (0.02)
--------- --------- --------- ---------
Basic earnings per share $ 0.75 $ 0.68 $ 1.49 $ 1.27
========= ========= ========= =========
Weighted-average shares
outstanding 254 268 257 273
Diluted earnings per share
before cumulative effect of
change in accounting
principle $ 0.73 $ 0.67 $ 1.44 $ 1.26
Cumulative effect of change
in accounting principle - - - (0.02)
--------- --------- --------- ---------
Diluted earnings per share $ 0.73 $ 0.67 $ 1.44 $ 1.24
========= ========= ========= =========
Weighted-average shares
outstanding 262 274 266 280
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
in millions, unaudited
36 Weeks Ended
---------------------------
Sept. 4, Sept. 6,
2004 2003
------------ ------------
Cash Flows - Operations
Net Income $ 383 $ 347
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation 394 380
Amortization 9 6
Changes in working capital and
other non-cash charges 32 (52)
Pension contributions (72) (15)
Other, net (36) (34)
------------ ------------
Net Cash Provided by Operations 710 632
------------ ------------
Cash Flows - Investments
Capital expenditures (425) (428)
Acquisitions of bottlers (8) (97)
Sale of property, plant and equipment 8 5
------------ ------------
Net Cash Used for Investments (425) (520)
------------ ------------
Cash Flows - Financing
Borrowing activities, net (848) 264
Dividends paid (18) (8)
Treasury stock transactions (394) (335)
------------ ------------
Net Cash Used for Financing (1,260) (79)
------------ ------------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (3) 1
------------ ------------
Net (Decrease)/Increase in Cash and Cash
Equivalents (978) 34
Cash and Cash Equivalents - Beginning of
Period 1,235 222
------------ ------------
Cash and Cash Equivalents - End of Period $ 257 $ 256
============ ============
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
in millions, except per share amounts
(Unaudited)
Sept. 4, Dec. 27,
2004 2003
------------ ------------
Assets
Current Assets
Cash and cash equivalents $ 257 $ 1,235
Accounts receivable, net 1,295 994
Inventories 464 374
Prepaid expenses and other current
assets 261 268
Investment in debt defeasance trust - 168
------------ ------------
Total Current Assets 2,277 3,039
Property, plant and equipment, net 3,424 3,423
Other intangible assets, net 3,543 3,562
Goodwill 1,396 1,386
Other assets 121 134
------------ ------------
Total Assets $ 10,761 $ 11,544
============ ============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and other current
liabilities $ 1,431 $ 1,231
Short-term borrowings 184 67
Current maturities of long-term debt 53 1,180
------------ ------------
Total Current Liabilities 1,668 2,478
Long-term debt 4,483 4,493
Other liabilities 850 875
Deferred income taxes 1,462 1,421
Minority interest 436 396
------------ ------------
Total Liabilities 8,899 9,663
------------ ------------
Shareholders' Equity
Common stock, par value $0.01 per share:
Authorized 900 shares, issued 310
shares 3 3
Additional paid-in capital 1,730 1,743
Retained earnings 1,826 1,471
Accumulated other comprehensive loss (406) (380)
Deferred compensation (4) (4)
Treasury stock: 59 shares and 49 shares
at September 4, 2004 and December 27,
2003, respectively (1,287) (952)
------------ ------------
Total Shareholders' Equity 1,862 1,881
------------ ------------
Total Liabilities and
Shareholders' Equity $ 10,761 $ 11,544
============ ============
CONTACT: The Pepsi Bottling Group, Inc., Somers
Kelly McAndrew (public relations), 914-767-7690
or
Mary Winn Settino (investor relations), 914-767-7216