Exhibit 99.1
The Pepsi Bottling Group Delivers Strong Results in 2005 Driven by
Outstanding Topline Growth
SOMERS, N.Y.--(BUSINESS WIRE)--Jan. 31, 2006--The Pepsi Bottling
Group, Inc. (NYSE:PBG) today reported full year 2005 net income of
$466 million, or diluted earnings per share (EPS) of $1.86. This
compares to reported net income in 2004 of $457 million, or $1.73 per
diluted share.
John T. Cahill, Chairman and Chief Executive Officer of PBG, said,
"PBG's story in 2005 was about robust topline growth in all of our
major territories and the successful navigation of a challenging cost
environment. Our teams around the world remained focused on our goals
and closed out the year beating many of those objectives. Innovation
in the U.S. and several countries in Europe helped us drive excitement
in the category and volume growth for PBG. Our non-carbonated
portfolio in each of our territories performed well, contributing to
our strong volume growth. The U.S. pricing environment proved to be
favorable throughout the year and this continues into 2006. Finally,
in Mexico, our topline continued to move upward, though profit growth
was below our expectations."
-- PBG's worldwide topline growth surged nine percent in 2005.
Physical case volume and reported net revenue per case both
grew four percent for the full year. The 53rd week contributed
one percentage point of growth to revenue. All volume results
are on a constant territory basis. (See Editor's Note.)
-- Volume growth was strong in each of PBG's geographical
territories. In the U.S., volume improved two percent on a
full-year basis, with a three-percent increase in the
take-home channel and two-percent growth in cold drink. PBG's
European territories delivered eight-percent volume growth for
the full year and, in Mexico, physical case volume was up five
percent, driven by PBG's water business. On an eight-ounce
basis, total volume in Mexico was up seven percent for the
year.
-- PBG's worldwide reported operating income grew five percent
for the year. Reported operating income includes the high
fructose corn syrup litigation settlement proceeds, the 53rd
week and strategic spending initiatives. Excluding these
adjustments, full-year operating income grew four percent. The
tables below provide additional detail.
-- PBG remained focused on delivering strong cash flow in 2005.
The Company generated net cash provided by operations of $1.2
billion with capital expenditures of $715 million. This
resulted in net cash provided by operations less capital
expenditures of $504 million. In 2005, PBG returned more than
$550 million to shareholders, including the repurchase of 17
million shares.
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Diluted Earnings Per Share FY 2005 FY 2004 EPS Growth
------- ------- ----------
vs. Prior Year
--------------
- ----------------------------------------------------------------------
Reported EPS - Diluted $1.86 $1.73 7%
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HFCS Litigation Settlement ($0.07) - -
- ----------------------------------------------------------------------
53rd Week Impact ($0.05) - -
- ----------------------------------------------------------------------
Strategic Spending Initiatives $0.12 - -
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Adjusted EPS - Diluted $1.86 $1.73 7%
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Operating Income Growth Rates FY 2005
----------------------------- -------
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Reported Operating Income 5%
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HFCS Litigation Settlement (3%)
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53rd Week Impact (2%)
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Strategic Spending Initiatives 4%
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Adjusted Operating Income 4%
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Fourth Quarter 2005 Results
PBG finished the year with solid worldwide volume momentum, up
five percent in the fourth quarter on a constant territory basis. In
the U.S., PBG's physical case volume grew four percent for the
quarter. PBG's business in Canada also generated solid volume growth,
up three percent in the quarter, while Europe generated a nine-percent
increase. In Mexico, physical case volume continued to benefit from
the strength of PBG's ePura bottled water and Electropura jug water
businesses. Physical case volume grew three percent in the quarter. On
an eight-ounce basis, total volume was up five percent in the fourth
quarter.
Reported cost of goods sold per case was up five percent in the
fourth quarter. This growth reflects significant increases in the cost
of raw materials, a trend that continued throughout the year. Gross
profit per case increased three percent.
Reported operating income grew five percent. However, the majority
of PBG's strategic spending initiatives were executed in the fourth
quarter. Therefore, excluding the impact of the high fructose corn
syrup litigation settlement, the 53rd week and strategic spending
initiatives, PBG's operating income grew 10 percent in the quarter.
The table below provides additional detail.
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Operating Income Growth Rates Q4 2005
----------------------------- -------
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Reported Operating Income 5%
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HFCS Litigation Settlement (1%)
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53rd Week Impact (12%)
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Strategic Spending Initiatives 18%
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Adjusted Operating Income 10%
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In the fourth quarter 2005, reported net income was $74 million,
or diluted EPS of $0.30. This result includes a net $0.04 reduction,
which reflects the impact of PBG's strategic spending initiatives
partially offset by the proceeds from the high fructose corn syrup
litigation settlement and the 53rd week. Excluding these items, PBG's
adjusted diluted EPS for the fourth quarter were $0.34. The table
below provides additional detail for the fourth quarter and the
attached supplemental data provides the detail for each quarter in
2005. Reported net income in the fourth quarter of 2004 was $74
million, or diluted EPS of $0.29, which included a $0.01 per share
charge for various tax items.
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Diluted Earnings Per Share Q4 2005 Q4 2004 EPS Growth vs.
------- ------- --------------
Prior Year
----------
- ----------------------------------------------------------------------
Reported EPS - Diluted $0.30 $0.29 4%
- ----------------------------------------------------------------------
HFCS Litigation Settlement ($0.01) - -
- ----------------------------------------------------------------------
53rd Week Impact ($0.05) - -
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Strategic Spending Initiatives $0.10 - -
- ----------------------------------------------------------------------
Various Tax Items - $0.01 -
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Adjusted EPS - Diluted $0.34 $0.30 13%
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2006 Guidance
Mr. Cahill continued, "The momentum we generated in the second
half of 2005 is moving us forward in 2006. Our plans are designed to
deliver a strong topline performance once again across our
territories. In the U.S. and Canada, we are launching a new customer
service agenda, which we expect to yield long-term benefits on many
fronts. We also expect the upward pressure in the cost environment to
moderate somewhat as the year progresses. On the accounting side, the
expensing of stock options this year will lower our reported numbers.
The underlying state of our business, however, is very encouraging and
we expect to deliver another year of strong results for PBG
shareholders."
Worldwide physical case volume in 2006 is expected to grow about
three percent on a constant territory basis, while the U.S. business
should deliver a one to two-percent volume improvement. PBG forecasts
continued reported net revenue per case improvements, up two to three
percent on a worldwide basis.
In 2006, PBG will adopt FAS 123(r) Share-Based Payment, which
requires the expensing of stock options. While this move has no impact
on the strength of PBG's business, it will cause the Company's
reported operating income and diluted earnings per share to be lower
year-over-year. Consequently, PBG's reported operating income is
expected to be down two to four percent for the year, which includes a
seven-percentage point decrease due to the adoption of FAS 123(r).
Excluding this impact, PBG's adjusted operating income is expected to
grow three to five percent in 2006.
FAS 123(r) will reduce PBG's diluted earnings per share (EPS) by
$0.18, bringing the full-year forecast to $1.76 to $1.84. Excluding
the impact of FAS 123(r), adjusted EPS are expected to be $1.94 to
$2.02 for the full year.
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 2005 earnings discussion
with financial analysts on January 31st 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 was added to the fiscal year 2005. Fiscal 2004 had
52 weeks. Constant territory calculations assume a 52-week year and
all significant acquisitions made in the prior year were made at the
beginning of that year. These calculations exclude all significant
acquisitions made in the current year.
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.
Non-GAAP Measures
We prepare our consolidated financial statements in conformity
with generally accepted accounting principles (GAAP). In an effort to
provide investors with additional information regarding the Company's
results we sometimes use "non-GAAP" measures as defined by the
Securities and Exchange Commission. Management believes these
"non-GAAP" financial measures provide useful information to investors
and should be considered in addition to, not in lieu of, GAAP reported
measures. Non-GAAP financial measures in this press release and the
attached Supplemental Data are generally referred to as "adjusted"
results.
2005 Results
Our 2005 results included the following: the gain from the
settlement of the High Fructose Corn Syrup ("HFCS") class action
lawsuit, the impact of the 53rd week and the strategic spending
initiatives that were funded by the additional pre-tax income from the
53rd week and the pre-tax gain from the HFCS settlement. Management
believes excluding the impact of these items from our 2005 reported
results provides a meaningful year over year comparison of diluted EPS
and operating income growth.
2004 Results
Our fourth quarter 2004 diluted EPS results included a $0.01
charge for various tax items. Management believes excluding the impact
of these items from our fourth quarter 2004 reported results provides
a meaningful year over year comparison of diluted EPS growth.
Full Year 2006 Outlook
Effective first quarter of 2006, FAS 123(r) Share-Based Payment
requires that all stock-based payments be expensed based on the fair
value of the awards. In accordance with existing accounting
guidelines, the Company did not recognize compensation expense for
stock options during fiscal year 2005. Management believes excluding
the impact of FAS 123(r) from the 2006 outlook provides a meaningful
year over year comparison of diluted EPS and operating income change.
Attachments (4 pages)
The Pepsi Bottling Group, Inc.
Fourth Quarter 2005 Earnings Release
The following table outlines the impact of the HFCS litigation
settlement proceeds, the 53rd week and the strategic spending
initiatives on each line item of PBG's income statement.
Full Year 2005 Supplemental Data
in millions, unaudited
Reported HFCS 53rd Spending Adjusted
Income Week Initiatives Results
Revenue $11,885 $0 ($139) $0 $11,746
Cost of sales 6,253 0 (72) 0 6,181
--------- ------- ------ ------------ ---------
Gross profit 5,632 0 (67) 0 5,565
--------- ------- ------ ------------ ---------
Selling, delivery and
administrative
expenses 4,609 29 (43) (48) 4,547
--------- ------- ------ ------------ ---------
Operating income/(loss) 1,023 (29) (24) 48 1,018
--------- ------- ------ ------------ ---------
Interest expense, net 250 0 (5) 0 245
Other non-operating
(income) expense, net 1 0 0 0 1
Minority interest 59 (2) (1) 3 59
--------- ------- ------ ------------ ---------
Income before income
taxes 713 (27) (18) 45 713
--------- ------- ------ ------------ ---------
Income tax expense 247 (9) (6) 15 247
--------- ------- ------ ------------ ---------
Net income $466 $(18) $(12) $30 $466
========= ======= ====== ============ =========
The following table outlines the impact of the HFCS litigation
settlement proceeds, the 53rd week and the strategic spending
initiatives on a quarterly basis for PBG's operating income and
diluted EPS.
2005 Quarterly Results
in millions, except per share amounts, unaudited
2005 Results
(Income)/Loss
Q1 Q2 Q3 Q4 Full
Year
------- ------ ------ ------ -------
Reported Operating Income $120 $303 $393 $207 $1,023
Net Impact of HFCS/ 53rd Week/
Spending 0 0 (16) 11 (5)
------- ------ ------ ------ -------
Adjusted Operating Income $120 $303 $377 $218 $1,018
======= ====== ====== ====== =======
Reported Diluted EPS $0.15 $0.59 $0.82 $0.30 $1.86
Net Impact of HFCS/53rd
Week/Spending 0.00 0.00 (0.04) 0.04 0.00
------- ------ ------ ------ -------
Adjusted Diluted EPS $0.15 $0.59 $0.78 $0.34 $1.86
======= ====== ====== ====== =======
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
in millions, except per share amounts, unaudited
17 Weeks 16 Weeks 53 Weeks 52 Weeks
Ended Ended Ended Ended
------------------------- -------------------------
December 31, December 25, December 31, December 25,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net revenues $3,662 $3,230 $11,885 $10,906
Cost of sales 1,947 1,705 6,253 5,656
------------ ------------ ------------ ------------
Gross profit 1,715 1,525 5,632 5,250
Selling, delivery
and
administrative
expenses 1,508 1,329 4,609 4,274
------------ ------------ ------------ ------------
Operating income 207 196 1,023 976
Interest expense,
net 81 72 250 230
Other non-
operating
(income) expense,
net 1 (2) 1 1
Minority interest 12 13 59 56
------------ ------------ ------------ ------------
Income before
income taxes 113 113 713 689
Income tax expense 39 39 247 232
------------ ------------ ------------ ------------
Net income $74 $74 $466 $457
============ ============ ============ ============
Basic earnings per
share $0.31 $0.30 $1.91 $1.79
============ ============ ============ ============
Weighted-average
shares
outstanding 240 250 243 255
Diluted earnings
per share $0.30 $0.29 $1.86 $1.73
============ ============ ============ ============
Weighted-average
shares
outstanding 246 257 250 263
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
in millions, unaudited
53 Weeks 52 Weeks
Ended Ended
--------------------------
December 31, December 25,
2005 2004
------------ ------------
Cash Flows - Operations
Net Income $466 $457
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation 615 580
Amortization 15 13
Changes in working capital and other
non-cash charges 332 350
Casualty insurance payments (66) (53)
Pension contributions (77) (83)
Other, net (66) (42)
------------ -------------
Net Cash Provided by Operations 1,219 1,222
------------ -------------
Cash Flows - Investments
Capital expenditures (715) (688)
Acquisitions of bottlers (155) (96)
Proceeds from sale of property, plant and
equipment 29 22
Other investing activities, net (1) -
------------ -------------
Net Cash Used for Investments (842) (762)
------------ -------------
Cash Flows - Financing
Borrowing activities, net 274 (887)
Dividends paid (64) (31)
Treasury stock transactions (381) (464)
Minority interest distribution (12) (13)
------------ -------------
Net Cash Used for Financing (183) (1,395)
------------ -------------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents 3 5
------------ -------------
Net Increase (Decrease) in Cash and Cash
Equivalents 197 (930)
Cash and Cash Equivalents - Beginning of
Period 305 1,235
------------ -------------
Cash and Cash Equivalents - End of Period $502 $305
============ =============
Supplemental Information
- ------------------------
Capital expenditures incurred (709) (717)
(Decrease)/Increase in accounts payable
related to capital expenditures (6) 29
------------ -------------
Cash paid for capital expenditures (715) (688)
Note: Certain reclassifications were made to our 2004 Condensed
Consolidated Financial Statements to conform to the 2005 presentation
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
in millions, except per share amounts, unaudited
December 31, December 25,
2005 2004
------------ ------------
Assets
Current Assets
Cash and cash equivalents $502 $305
Accounts receivable, net 1,186 1,204
Inventories 458 427
Prepaid expenses and other current assets 266 247
------------ ------------
Total Current Assets 2,412 2,183
Property, plant and equipment, net 3,649 3,581
Other intangible assets, net 3,814 3,639
Goodwill 1,516 1,416
Other assets 133 118
------------ ------------
Total Assets $11,524 $10,937
============ ============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and other current
liabilities $1,583 $1,517
Short-term borrowings 426 155
Current maturities of long-term debt 589 53
------------ ------------
Total Current Liabilities 2,598 1,725
Long-term debt 3,939 4,489
Other liabilities 1,027 914
Deferred income taxes 1,421 1,415
Minority interest 496 445
------------ ------------
Total Liabilities 9,481 8,988
------------ ------------
Shareholders' Equity
Common stock, par value $0.01 per share:
Authorized 900 shares, issued 310 shares 3 3
Additional paid-in capital 1,709 1,719
Retained earnings 2,283 1,887
Accumulated other comprehensive loss (262) (315)
Deferred compensation (14) (1)
Treasury stock: 71 shares and 61 shares at
December 31, 2005 and December 25, 2004,
respectively (1,676) (1,344)
------------ ------------
Total Shareholders' Equity 2,043 1,949
------------ ------------
Total Liabilities and Shareholders'
Equity $11,524 $10,937
============ ============
Note: Certain reclassifications were made to our 2004 Condensed
Consolidated Financial Statements to conform to the 2005 presentation
CONTACT: Public Relations:
Kelly McAndrew, 914-767-7690
OR
Investor Relations:
Mary Winn Settino, 914-767-7216