EXHIBIT 99.1
The Pepsi Bottling Group Delivers Full Year 2004 Double-Digit Earnings Growth;
Balanced Topline Growth in the U.S., Outstanding European Performance Drive
Full Year Results
SOMERS, N.Y.--(BUSINESS WIRE)--Jan. 25, 2005--The Pepsi Bottling
Group, Inc. (NYSE:PBG) today reported full year 2004 net income of
$457 million, or diluted earnings per share (EPS) of $1.73. This
compares to reported net income in 2003 of $416 million, or $1.50 per
diluted share, which included a combined $0.06 negative impact from a
tax law change in Canada and the cumulative effect of the adoption of
a new accounting principle. In the fourth quarter 2004, reported net
income was $74 million, or diluted EPS of $0.29, which includes a
$0.01 per share charge for various tax items. Reported net income in
the fourth quarter of 2003 was $69 million, or diluted EPS of $0.26,
which included a one-time, non-cash charge of $0.04 per share related
to the Canadian tax law change.
-- PBG's worldwide physical case volume grew two percent during
the fourth quarter and the full year on a constant territory
basis. In the U.S., volume was down one percent for the
quarter, but grew two percent for the full year. PBG's
European territories closed out the year with strong volume
growth, up 13 percent in the quarter and 10 percent for the
year. The Company's business in Mexico delivered a
four-percent physical case volume improvement in the fourth
quarter, which resulted in flat volume on a year-over-year
basis.
-- PBG again delivered impressive net revenue per case
improvement in the U.S. and worldwide. The Company's U.S.
business grew net revenue per case by four percent for the
quarter and three percent for the full year. PBG's worldwide
net revenue per case was up three percent in both the fourth
quarter and the year.
-- PBG continued to deliver strong cash flow throughout 2004. The
Company generated net cash provided by operations of $1.3
billion with capital expenditures of $717 million. This
resulted in net cash provided by operations less capital
expenditures of $534 million, a 21-percent increase over prior
year.
"New products and packages as well as outstanding execution helped
us to manage some challenging conditions this year and ultimately
deliver a solid performance in 2004," said John T. Cahill, Chairman
and Chief Executive Officer of PBG. "In the U.S., we achieved very
balanced topline growth for the year, driven by a double-digit
increase in our non-carbonated portfolio and fairly balanced
contributions of rate and mix to our net revenue per case improvement.
Aquafina volume finished another year with double-digit volume growth
and Tropicana fruit drinks outperformed the competition. Additionally,
the excitement created by limited-time offers, such as Mountain Dew
LiveWire and Pitch Black, gave a boost to our trademark Mountain Dew
business. We began executing our 2005 rate increases early in the
fourth quarter, positioning us for a strong start to the new year.
This, along with strong innovation and unmatched marketplace
execution, will drive our results in 2005."
Cahill continued, "Our European business had a terrific year in
2004, with Russia and Turkey delivering strong double-digit volume
growth. Innovation fueled our growth in each of our territories, while
our core brands performed equally well. In Mexico, the volume momentum
we built in the third quarter extended through the close of the year.
Our volume trends were positive in the fourth quarter and the relaunch
of ePura, our newly branded bottled water, outperformed our initial
expectations. We made significant strides in Mexico last year and
believe that 2005 will prove to be a turnaround year for our Mexican
business."
In the U.S., PBG generated solid physical case volume growth for
the year on a constant territory basis, up two percent. (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.) The Company's cold drink volume was
particularly strong, with a three-percent improvement in the fourth
quarter and four-percent growth for the full year. Take-home volume
was down two percent in the quarter, but for the full year, it grew
one percent. The Company's business in Canada generated one percent
volume improvement for the full year. In Mexico, physical case volume
was positive in the fourth quarter across each business segment,
including carbonated soft drinks (CSDs), bottled water and jug water.
For the year, physical case volume of CSDs was flat, bottled water
grew 11 percent and jug water volume was down one percent.
PBG's proficiency in net revenue management resulted in the 24th
consecutive quarter of net revenue growth in the U.S., excluding the
impact of an accounting change. Rate and mix contributed nearly
equally to the four-percent improvement in the fourth quarter. For the
full year, rate increases accounted for roughly 60 percent of the
three-percent gain.
Cost of goods sold per case was up six percent in the fourth
quarter and five percent for the full year. This growth was driven by
significant increases in the costs of raw materials during the year.
Reported operating income in the fourth quarter was down five
percent on a worldwide basis. For the full year, worldwide reported
operating income grew two percent. These results include a $9 million
non-cash charge in the fourth quarter that is related to PBG's
re-evaluation of the accounting life of its franchise licensing
agreement for Squirt in Mexico, which depressed operating income in
the quarter by four points and the full year by one point.
During 2004, PBG repurchased 20.4 million shares of common stock.
Since the inception of the Company's share repurchase program in
October 1999, 83.5 million shares have been repurchased.
The Company stated that in fiscal 2005 it expects to achieve
diluted EPS of $1.76 to $1.84, excluding the impact of the 53rd week.
(See Editor's Note.) The Company is considering reinvestment of the
additional profit from the 53rd week in long-term strategic
initiatives. Worldwide constant territory volume is expected to grow
two to three percent for the year, while reported operating income
will likely be flat to up three percent. These projections also
exclude the impact of the 53rd week. PBG expects net cash provided by
operations less capital expenditures to be approximately $500 million,
with capital expenditures in the range of $675 to $725 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. To receive company news releases by e-mail, please visit
www.pbg.com.
Listen in live to PBG's fourth quarter 2004 earnings discussion
with financial analysts on January 25th at 11 a.m. (EST) at
http://www.pbg.com.
Editor's Note: PBG's fiscal year ends on the last Saturday in
December and, as a result, a 53rd week will be added to the fiscal
year 2005. Fiscal 2004 had 52 weeks.
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.
RECONCILIATION OF NON-GAAP MEASURES
Impact of 53rd Week
- -------------------
In 2005, our fiscal year will include a 53rd week, while fiscal
year 2004 consisted of 52 weeks. Our U.S. and Canadian operations
report on a fiscal year that consists of 52 weeks, ending on the last
Saturday in December. Every five or six years a 53rd week is added.
Our other countries report on a calendar-year basis. In order to
provide comparable guidance for 2005, we have excluded the impact of
the 53rd week from our outlook. The table below provides pro forma
disclosure by excluding the projected impact of the 53rd week in 2005:
Pro Forma Forecasted
Forecasted 2005 Impact of 2005 Versus
Versus 2004 Growth 53rd Week 2004 Growth
Worldwide Constant
Territory Volume 2% to 3% 1% 3% to 4%
Worldwide Operating
Profit Flat to 3% 1% 1% to 4%
Pro Forma Full-Year Full-Year
Forecasted 2005 Impact of Forecasted
Results 53rd Week 2005 Results
Diluted Earnings Per
Share $1.76 to $1.84 $.02 to $.03 $1.78 to $1.87
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
in millions, except per share amounts
16 Weeks Ended 52 Weeks Ended
--------------------------------------------
December December December December
25, 27, 25, 27,
2004 2003 2004 2003
--------- --------- --------- ---------
(unaudited)(unaudited)(unaudited)
Net revenues $ 3,230 $ 3,049 $ 10,906 $ 10,265
Cost of sales 1,705 1,560 5,656 5,215
--------- --------- --------- ---------
Gross profit 1,525 1,489 5,250 5,050
Selling, delivery and
administrative expenses 1,329 1,282 4,274 4,094
--------- --------- --------- ---------
Operating income 196 207 976 956
Interest expense, net 72 73 230 239
Other non-operating
(income) expense, net (2) 2 1 7
Minority interest 13 9 56 50
--------- --------- --------- ---------
Income before income taxes 113 123 689 660
Income tax expense (1) 39 54 232 238
--------- --------- --------- ---------
Income before cumulative
effect of change in
accounting principle 74 69 457 422
Cumulative effect of
change in accounting
principle, net of tax and
minority interest - - - 6
--------- --------- --------- ---------
Net income $ 74 $ 69 $ 457 $ 416
========= ========= ========= =========
Basic earnings per share
before cumulative effect
of change in accounting
principle $ 0.30 $ 0.26 $ 1.79 $ 1.56
Cumulative effect of
change in accounting
principle - - - (0.02)
--------- --------- --------- ---------
Basic earnings per share $ 0.30 $ 0.26 $ 1.79 $ 1.54
========= ========= ========= =========
Weighted-average shares
outstanding 250 262 255 270
Diluted earnings per share
before cumulative effect
of change in accounting
principle $ 0.29 $ 0.26 $ 1.73 $ 1.52
Cumulative effect of
change in accounting
principle - - - (0.02)
--------- --------- --------- ---------
Diluted earnings per share $ 0.29 $ 0.26 $ 1.73 $ 1.50
========= ========= ========= =========
Weighted-average shares
outstanding 257 269 263 277
(1) During 2004 and 2003, we had the following significant tax
items:
- - In December 2004, we initiated a reorganization of our international
tax structure to allow for more efficient cash mobilization and to
reduce future tax costs. This reorganization triggered a $30 million
tax charge ($0.11 per diluted share) in the fourth quarter and on a
year-to-date basis.
- - In December 2004, legislation was enacted changing the Mexican
statutory income tax rate. This rate change decreased our deferred
tax liabilities and resulted in a $26 million ($0.09 per diluted
share) tax benefit on a quarter and year-to-date basis.
- - During 2004, we reversed previously established liabilities for tax
exposures due largely to the settlement of certain international tax
audits. The reversal of these liabilities triggered an $8 million
($0.02 per diluted share) tax benefit for the year and a $3 million
($0.01 per diluted share) tax benefit in the fourth quarter.
- - In December 2003, legislation was enacted changing certain Canadian
provincial income tax rates. These rate changes increased deferred
tax liabilities by $11 million ($0.04 per diluted share) and resulted
in a tax 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
----------------------
December December
25, 27,
2004 2003
---------- ----------
Cash Flows - Operations (unaudited)
Net Income $ 457 $ 416
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 580 556
Amortization 13 12
Changes in working capital and other non-cash
charges 326 307
Pension contributions (83) (162)
Other, net (42) (45)
---------- ----------
Net Cash Provided by Operations 1,251 1,084
---------- ----------
Cash Flows - Investments
Capital expenditures (717) (644)
Acquisitions of bottlers (96) (100)
Sale of property, plant and equipment 22 10
---------- ----------
Net Cash Used for Investments (791) (734)
---------- ----------
Cash Flows - Financing
Borrowing activities, net (887) 1,119
Dividends paid (31) (11)
Treasury stock transactions (464) (448)
Minority interest distribution (13) (7)
---------- ----------
Net Cash (Used for) Provided by Financing (1,395) 653
---------- ----------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents 5 10
---------- ----------
Net (Decrease) Increase in Cash and Cash
Equivalents (930) 1,013
Cash and Cash Equivalents - Beginning of Period 1,235 222
---------- ----------
Cash and Cash Equivalents - End of Period $ 305 $ 1,235
========== ==========
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
in millions, except per share amounts
December December
25, 27,
2004 2003
----------------------
Assets (unaudited)
Current Assets
Cash and cash equivalents $ 305 $ 1,235
Accounts receivable, net 1,054 994
Inventories 427 374
Prepaid expenses and other current assets 253 268
Investment in debt defeasance trust - 168
---------- ----------
Total Current Assets 2,039 3,039
Property, plant and equipment, net 3,581 3,423
Other intangible assets, net 3,639 3,562
Goodwill 1,416 1,386
Other assets 118 134
---------- ----------
Total Assets $ 10,793 $ 11,544
========== ==========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and other current liabilities $ 1,373 $ 1,231
Short-term borrowings 155 67
Current maturities of long-term debt 53 1,180
---------- ----------
Total Current Liabilities 1,581 2,478
Long-term debt 4,489 4,493
Other liabilities 914 875
Deferred income taxes 1,415 1,421
Minority interest 445 396
---------- ----------
Total Liabilities 8,844 9,663
---------- ----------
Shareholders' Equity
Common stock, par value $0.01 per share:
Authorized 900 shares, issued 310 shares 3 3
Additional paid-in capital 1,719 1,743
Retained earnings 1,887 1,471
Accumulated other comprehensive loss (315) (380)
Deferred compensation (1) (4)
Treasury stock: 61 shares and 49 shares at
December 25, 2004 and December 27, 2003,
respectively (1,344) (952)
---------- ----------
Total Shareholders' Equity 1,949 1,881
---------- ----------
Total Liabilities and Shareholders' Equity $ 10,793 $ 11,544
========== ==========
CONTACT: The Pepsi Bottling Group, Inc.
Public Relations:
Kelly McAndrew, 914-767-7690
or
Investor Relations:
Mary Winn Settino, 914-767-7216