Exhibit 99.1
The Pepsi Bottling Group's Worldwide Topline Growth Surges in 3rd Quarter
SOMERS, N.Y.--(BUSINESS WIRE)--Sept. 27, 2005--The Pepsi Bottling
Group, Inc. (NYSE:PBG) today reported third quarter 2005 net income of
$205 million, or diluted earnings per share (EPS) of $0.82. These
results include a net pretax gain of $16 million from the high
fructose corn syrup litigation settlement, or $0.04 of diluted EPS on
an after-tax basis. The reported results compare to reported net
income in third quarter 2004 of $191 million, or $0.73 per diluted
share, which included a $0.02 gain from the settlement of certain
international tax audits.
-- PBG delivered strong worldwide physical case volume growth of
five percent in the third quarter on a constant territory
basis. The Company's U.S. and Canada operations each delivered
a four-percent volume improvement, outpacing the industry
during the critical summer-selling season. In Europe, PBG's
operations generated eight-percent volume growth and, in
Mexico, physical case volume grew seven percent for the
quarter.
-- Reported net revenue per case grew four percent on a worldwide
basis in the third quarter, including a one percentage point
contribution from foreign currency translation. In the U.S.,
net revenue per case increased two percent.
-- In the third quarter, reported operating income increased 10
percent, reflecting solid operating performance and a four
percentage point contribution from the high fructose corn
syrup litigation settlement, net of strategic spending
initiatives. Foreign currency translation accounted for one
percentage point of the growth.
-- PBG narrowed the range of its full-year EPS expectations to
$1.83 to $1.87.
"This was another great quarter in what is shaping up to be a very
solid year for PBG," said John T. Cahill, PBG Chairman and Chief
Executive Officer. "Our U.S. business was the primary driver of our
operating results in the third quarter with even better volume growth
than we expected, as well as consistent rate improvement. Sales of our
non-carbonated beverages were very strong, up more than 20 percent.
Aquafina, Tropicana, Lipton teas and our energy portfolio all
generated double-digit volume growth. Our diet carbonated soft drink
portfolio continued to perform well, growing four percent in the
quarter. Looking ahead, the pricing environment in the U.S. remains
favorable. We initiated new rate increases in select territories
post-Labor Day, which position us well for a solid finish in 2005.
"In Mexico, our overall volume performance was very good. The
relaunch of our bottled water, Epura, late last year as well as the
introduction of Aguas Frescas, a fruit-flavored still water, have
boosted sales in this area. Competitive challenges remain in the
carbonated soft drink side of the business, though we have seen
promising results in our territories outside of Mexico City. During
the balance of the year, we will be executing several consumer
promotions and some in-and-out product innovation to boost our
performance in the category.
"Our European volume results were led by great growth in Russia
and Turkey. In Russia, trademark Pepsi continues to post impressive
gains, fueled by innovation such as Pepsi Ice Cream. Lipton Iced Tea
has been a terrific addition to our portfolio with strong growth in
every quarter since its introduction last year. In Turkey, our focus
on building greater sales capability continues to pay dividends.
Volume growth was strong in the third quarter with sales of Brand
Pepsi up 14 percent. Innovation has been a driver of our success as
well. Pepsi Blue, which was launched last quarter, helped lift our
share in supermarkets by a full point. In Spain, our business results
were soft amidst an increasingly competitive marketplace and
challenging pricing environment. Overall, Europe is on track to
deliver solid volume results for the full year."
PBG's physical case volume in the U.S. grew four percent in the
third quarter on a constant territory basis. (Constant territory
calculations assume all significant acquisitions made in 2004 were
made at the beginning of 2004 and exclude all significant acquisitions
made in 2005.) The Company's U.S. cold drink volume grew three percent
and its take-home business increased by five percent. Volume in PBG's
Europe territories grew eight percent. In Mexico, physical case volume
grew seven percent for the quarter, led by water sales. Bottled water
volume increased 23 percent and jug water volume grew 14 percent.
Volume of carbonated soft drinks (CSDs) in Mexico was down one percent
on a physical case basis. CSD volume on an eight-ounce basis, however,
grew three percent.
The Company's reported net revenue per case growth in the U.S. was
two percent in the third quarter. Rate improvement was the primary
driver of this growth.
Reported operating income in the third quarter grew 10 percent on
a worldwide basis. Cost of goods sold (COGS) per case was up five
percent in the third quarter, with foreign currency translation
accounting for one percentage point of that growth. PBG's worldwide
reported selling, delivery and administrative expenses (SD&A) grew
seven percent in total dollars. One-and-one-half percentage points of
this growth came from foreign currency translation. Other drivers of
the SD&A growth in the third quarter were higher volume growth in the
U.S. and rising fuel prices. Reported SD&A growth was reduced by the
pretax gain of $26 million from the high fructose corn syrup
litigation settlement. This income was partially offset by $10 million
in strategic spending initiatives. The net result reduced the growth
of third quarter SD&A by about one-and-one-half percentage points.
During the third quarter, PBG repurchased 3.3 million shares of
common stock. Through the end of the third quarter, the Company
repurchased 12.1 million shares.
In fiscal 2005, PBG now expects to achieve diluted EPS of $1.83 to
$1.87. The Company's worldwide constant territory volume expectations
are for growth of three percent for the year, excluding the impact of
the 53rd week. (See Editor's Note.) Reported operating income will
likely increase three to five percent for the year. The operating
profit from the 53rd week will be spent on long-term strategic
initiatives. 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 third quarter 2005 earnings discussion
with financial analysts on September 27th at 11 a.m. (EDT) 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.
Forward-Looking Statement:
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 PBG's annual
report on Form 10-K for the year ended December 25, 2004.
THE PEPSI BOTTLING GROUP, INC.
THIRD QUARTER 2005 RECONCILIATION OF NON-GAAP MEASURES
Diluted Earnings per Share (EPS) Reconciliation
The following non-GAAP financial information is provided to assist
investors in evaluating PBG's ongoing operating performance on a
comparable year over year basis. Management uses measurements to
review our results that exclude certain items that are not indicative
of our ongoing results. Below are diluted EPS measurements that, for
2005, exclude the gain from the settlement of the high fructose corn
syrup class action lawsuit net of strategic spending initiatives that
were implemented from the proceeds and, for 2004, exclude the impact
from the settlement of certain international tax audits.
EPS
Growth
Guidance Actual Actual vs. Prior
Q3, 2005 (1) Q3, 2005 Q3, 2004 Year
Diluted EPS, as reported $0.76 to
$0.78 $0.82 $0.73 13%
Litigation settlement, net $0.01 to
$0.02 $0.04 (2) --
Gain from settlement of
certain international tax
audits -- -- $0.02
------------ -------- --------
EPS excluding settlements $0.75 to
$0.76 $0.78 $0.71 10%
1) Provided during Q2 Earnings Call on July 7, 2005.
2) Gain from high fructose corn syrup litigation settlement of $26
million pretax (EPS of $.06, after tax), net of strategic spending
initiatives of $10 million pretax (EPS of $0.02, after tax).
THE PEPSI BOTTLING GROUP, INC.
IMPACT OF 53RD WEEK
Full-Year 2005
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 volume outlook. The table below provides pro forma
disclosure by excluding the projected impact of the 53rd week in 2005:
Pro Forma
Forecasted 2005 Impact of Forecasted 2005
versus 2004 Growth 53rd Week versus 2004 Growth
Worldwide Volume 3% 1% 4%
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
in millions, except per share amounts, unaudited
12 Weeks Ended 36 Weeks Ended
----------------- -----------------
Sept. 3, Sept. 4, Sept. 3, Sept. 4,
2005 2004 2005 2004
-------- -------- -------- --------
Net revenues $3,214 $2,934 $8,223 $7,676
Cost of sales 1,695 1,522 4,306 3,951
-------- -------- -------- --------
Gross profit 1,519 1,412 3,917 3,725
Selling, delivery and
administrative expenses 1,126 1,055 3,101 2,945
-------- -------- -------- --------
Operating income 393 357 816 780
Interest expense, net 56 50 169 158
Other non-operating (income)
expense, net (1) 1 - 3
Minority interest 24 22 47 43
-------- -------- -------- --------
Income before income taxes 314 284 600 576
Income tax expense 109 93 208 193
-------- -------- -------- --------
Net income $205 $191 $392 $383
======== ======== ======== ========
Basic earnings per share $0.84 $0.75 $1.60 $1.49
======== ======== ======== ========
Weighted-average shares
outstanding 243 254 245 257
Diluted earnings per share $0.82 $0.73 $1.55 $1.44
======== ======== ======== ========
Weighted-average shares
outstanding 250 262 252 266
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
in millions, unaudited
36 Weeks Ended
-----------------
Sept. 3, Sept. 4,
2005 2004
-------- --------
Cash Flows - Operations
Net income $392 $383
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 420 394
Amortization 10 9
Changes in working capital and other non-cash
charges (16) 32
Pension contributions (30) (72)
Other, net (51) (36)
-------- --------
Net Cash Provided by Operations 725 710
-------- --------
Cash Flows - Investments
Capital expenditures (444) (425)
Acquisitions of bottlers (1) (8)
Proceeds from sale of property, plant and
equipment 20 8
Other investing activities, net 1 -
-------- --------
Net Cash Used for Investments (424) (425)
-------- --------
Cash Flows - Financing
Borrowing activities, net (35) (848)
Dividends paid (44) (18)
Treasury stock transactions (259) (394)
-------- --------
Net Cash Used for Financing (338) (1,260)
-------- --------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents (1) (3)
-------- --------
Net Decrease in Cash and Cash Equivalents (38) (978)
Cash and Cash Equivalents - Beginning of Period 305 1,235
-------- --------
Cash and Cash Equivalents - End of Period $267 $257
======== ========
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
in millions, except per share amounts
Sept. 3, Dec. 25,
2005 2004
----------- -----------
Assets (unaudited)
Current Assets
Cash and cash equivalents $267 $305
Accounts receivable, net 1,422 1,054
Inventories 510 427
Prepaid expenses and other current assets 256 253
----------- -----------
Total Current Assets 2,455 2,039
Property, plant and equipment, net 3,576 3,581
Other intangible assets, net 3,659 3,639
Goodwill 1,440 1,416
Other assets 121 118
----------- -----------
Total Assets $11,251 $10,793
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and other current
liabilities $1,644 $1,373
Short-term borrowings 89 155
Current maturities of long-term debt 87 53
----------- -----------
Total Current Liabilities 1,820 1,581
Long-term debt 4,479 4,489
Other liabilities 973 914
Deferred income taxes 1,397 1,415
Minority interest 495 445
----------- -----------
Total Liabilities 9,164 8,844
----------- -----------
Shareholders' Equity
Common stock, par value $0.01 per share:
Authorized 900 shares, issued 310 shares 3 3
Additional paid-in capital 1,701 1,719
Retained earnings 2,228 1,887
Accumulated other comprehensive loss (279) (315)
Deferred compensation - (1)
Treasury stock: 68 shares and 61 shares at
September 3, 2005 and December 25, 2004,
respectively, at cost (1,566) (1,344)
----------- -----------
Total Shareholders' Equity 2,087 1,949
----------- -----------
Total Liabilities and Shareholders'
Equity $11,251 $10,793
=========== ===========
CONTACT: Public Relations:
Kelly McAndrew, 914-767-7690
OR
Investor Relations:
Mary Winn Settino, 914-767-7216