Exhibit 99.1
The Pepsi Bottling Group Reports Outstanding First Quarter Results
SOMERS, N.Y.--(BUSINESS WIRE)--April 18, 2006--The Pepsi Bottling
Group, Inc. (NYSE:PBG) today reported first quarter 2006 revenue of
$2.4 billion, a 10-percent jump over prior year. Net income was $34
million, or diluted earnings per share (EPS) of $0.14, including a
$0.04 expense due to the 2006 adoption of FAS 123(r) Share-Based
Payment. Excluding this expense, PBG delivered diluted EPS of $0.18
for the first quarter. In the first quarter of 2005, PBG reported net
income of $39 million, or $0.15 per diluted share.
-- PBG's worldwide double-digit topline growth reflects solid
volume trends in each geographic segment. Worldwide physical
case volume jumped six percent in the quarter. PBG's business
in the U.S. and Canada reported a six-percent increase. In
Mexico and Europe, physical case volume grew five and four
percent, respectively. All volume results are on a constant
territory basis. (See Editor's Note.)
-- The Company extended its unmatched track record in reported
net revenue per case growth, up four percent on a worldwide
basis. In the U.S., PBG successfully implemented the majority
of its 2006 rate increases, boosting reported net revenue per
case by three percent in the quarter.
-- Reported operating income for the first quarter was flat
versus the first quarter of 2005 due to the 13-percent
negative impact of the Company's adoption of FAS 123(r)
Share-Based Payment. Excluding this expense, PBG's operating
income increased 13 percent.
John T. Cahill, Chairman and Chief Executive Officer of PBG, said,
"The momentum we built over the second half of last year accelerated
during the first quarter 2006, driving excellent results. Our
U.S./Canada business closed the quarter with topline growth that
exceeded our own expectations. Solid innovation, strong execution in
the marketplace and the implementation of our customer service agenda
helped fuel this growth, particularly in the U.S. The strength of our
broad portfolio of brands was evident as volume increased across
carbonated soft drinks (CSDs), non-carbonated beverages and bottled
water."
Mr. Cahill continued, "In Mexico, our volume trends for our CSD
portfolio improved this quarter and our water business continued to
grow at impressive rates. In Europe, we saw softer results in January
when parts of Russia and Turkey were hit with record-breaking cold
temperatures. In February, however, we were pleased to see volumes
rebound, helping our European segment to close the quarter with
positive volume results."
In the U.S., PBG's six-percent volume increase was balanced across
the cold drink and take-home channels. The Company's CSD portfolio
grew one percent, driven by volume momentum among its flavored brands.
Its non-carbonated beverages, excluding water, grew more than 20
percent in the quarter. Trademark Aquafina increased about 35 percent.
Canada's strong volume performance was driven by double-digit growth
in its cold drink channel. In Mexico, PBG generated growth across each
category of its portfolio. Physical case CSD volume grew one percent,
bottled water increased 20 percent and the Company's jug water volume
improved five percent. On an eight-ounce basis, PBG's CSD volume in
Mexico increased five percent. PBG's volume in its European segment
grew four percent for the quarter.
Reported cost of goods sold per case was up six percent in the
first quarter. As stated previously, PBG expects the increased cost of
raw materials to moderate in the second half of the year. Gross profit
grew eight percent for the quarter and two percent on a per case
basis.
PBG's reported selling, delivery and administrative (SD&A)
expenses grew nine percent in the first quarter, including a
two-percent increase due to the impact of FAS 123(r). Excluding this
additional expense, SD&A was up seven percent. The Company's SD&A
expenses were driven by higher than expected volume growth, planned
investments in high growth European markets, and increases in fuel and
pension expenses.
2006 Guidance
PBG's full-year 2006 outlook is unchanged from its previous
guidance. Worldwide physical case volume in 2006 is expected to grow
about three percent on a constant territory basis, while the
U.S./Canada segment 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 has adopted 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 reduce the Company's
reported operating income and diluted earnings per share.
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) is expected to reduce PBG's diluted earnings per share
(EPS) by about $0.18, bringing the full-year forecast to $1.76 to
$1.84. Excluding the impact of FAS 123(r), diluted EPS are expected to
be $1.94 to $2.02 for the full year. PBG continues to expect its
operating free cash flow to be $500 to $520 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, Mexico, Russia, Spain, Turkey and
Greece. To receive company news releases by e-mail, please visit
www.pbg.com.
Listen in live to PBG's first quarter 2006 earnings discussion
with financial analysts on April 18th at 11 a.m. (EDT) at
http://www.pbg.com.
Editor's Note:
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. 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 2006 has 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 31, 2005.
Non-GAAP Measures
We prepare our consolidated financial statements in conformity
with accounting principles generally accepted in the United States of
America (U.S. 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. Non-GAAP financial measures in this press release are
generally accompanied by the most directly comparable GAAP financial
measure. The differences between the GAAP and non-GAAP measures are
reconciled either in the text of the press release or in the
attachments. The Company presents "non-GAAP" financial measures when
it believes such measures will be useful to investors in evaluating
the Company's financial performance. Importantly, the Company believes
non-GAAP measures should be considered in addition to, and not in lieu
of, GAAP measures. These non-GAAP measures may be different from
non-GAAP measures used by other companies.
FAS 123(r)
Effective in 2006, the Company adopted FAS 123(r) Share-Based
Payment, which requires that all stock-based payments (including stock
options) be expensed based on the fair value of the awards at the time
of grant. Prior to 2006, in accordance with existing accounting
guidelines, the Company was not required to recognize this expense,
and the Company's financial results during fiscal year 2005 do not
reflect this expense. As a result, in order to provide investors with
a meaningful year-over-year comparison of the Company's financial
performance, the Company has presented its first quarter actual
results and its 2006 outlook relating to diluted EPS and operating
income change in two ways - on a reported basis, which includes the
impact of FAS 123(r) and on an adjusted basis, which excludes the
impact of FAS 123(r). Management uses the latter, non-GAAP measure, to
evaluate the Company's financial performance against internal budgets
and targets (including under the Company's incentive compensation
plans). In addition, management internally reviews the results of the
Company excluding the impact of FAS 123(r) as we believe that these
non-GAAP measures are useful for evaluating the Company's core
operating results and facilitating comparison across reporting
periods.
Operating Free Cash Flow (OFCF)
Under FAS 123(r), excess tax benefits from the exercise of stock
options are now required to be included in Cash Provided by Financing
activities instead of Cash Provided by Operations. Therefore,
effective first quarter of 2006, the Company has revised its
definition of Operating Free Cash Flow (OFCF) to add back excess tax
benefits from the exercise of stock options. We now define OFCF as
Cash Provided by Operations, less capital expenditures, plus excess
tax benefits from the exercise of stock options.
The Company uses OFCF to evaluate the performance of its
businesses, and management considers OFCF an important indicator of
the Company's liquidity, including its ability to satisfy debt
obligations, fund future acquisitions, pay dividends to common
shareholders and repurchase Company stock.
OFCF is a non-GAAP measurement and should be considered in
addition to, not as a substitute for, the Cash Provided by Operations,
as well as other measures of financial performance and liquidity
reported in accordance with U.S. GAAP. The Company's OFCF may not be
comparable to similarly titled measures reported by other companies.
PBG expects its full-year 2006 OFCF to be in the range of $500 to
$520 million. We anticipate capital expenditures of approximately $735
million and Cash Provided by Operations plus the excess tax benefits
from the exercise of stock options to be over $1.2 billion. We are
unable to separately estimate the excess tax benefits from the
exercise of stock options.
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
in millions, except per share amounts, unaudited
12 Weeks Ended
-------------------
March 25, March 19,
2006 2005
--------- ---------
Net revenues $2,367 $2,147
Cost of sales 1,253 1,116
--------- ---------
Gross profit 1,114 1,031
Selling, delivery and administrative expenses 993 911
--------- ---------
Operating income 121 120
Interest expense, net 61 55
Minority interest 6 6
--------- ---------
Income before income taxes 54 59
Income tax expense 20 20
--------- ---------
Net income $34 $39
========= =========
Basic earnings per share $0.14 $0.16
========= =========
Weighted-average shares outstanding 237 248
Diluted earnings per share $0.14 $0.15
========= =========
Weighted-average shares outstanding 243 254
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
in millions, unaudited
12 Weeks Ended
-------------------
March 25, March 19,
2006 2005
--------- ---------
Cash Flows - Operations
Net income $34 $39
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 136 130
Amortization 3 3
Stock based compensation 16 -
Changes in working capital and other non-cash
charges (78) (85)
Casualty insurance payments (14) (17)
Pension contributions - (20)
Other, net (16) (15)
--------- ---------
Net Cash Provided by Operations 81 35
--------- ---------
Cash Flows - Investments
Capital expenditures (175) (138)
Acquisitions of bottlers, net of cash acquired - (1)
Proceeds from sale of property, plant and
equipment 3 1
Other investing activities, net 4 -
--------- ---------
Net Cash Used for Investments (168) (138)
--------- ---------
Cash Flows - Financing
Borrowing activities, net 45 166
Dividends paid (19) (13)
Excess tax benefit from exercise of stock options 3 -
Treasury stock transactions (110) (105)
--------- ---------
Net Cash (Used for) Provided by Financing (81) 48
--------- ---------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents 2 -
--------- ---------
Net Decrease in Cash and Cash Equivalents (166) (55)
Cash and Cash Equivalents - Beginning of Period 502 305
--------- ---------
Cash and Cash Equivalents - End of Period $336 $250
========= =========
Supplemental Information
- ------------------------
Capital expenditures incurred (140) (93)
Change in accounts payable related to capital
expenditures (35) (45)
--------- ---------
Cash paid for capital expenditures (175) (138)
Note: Certain reclassifications were made to our 2005 Condensed
Consolidated Statement of Cash Flows to conform to the 2006
presentation.
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
in millions, except per share amounts
March 25, December 31,
2006 2005
------------ ------------
Assets (unaudited)
Current Assets
Cash and cash equivalents $336 $502
Accounts receivable, net 1,196 1,186
Inventories 555 458
Prepaid expenses and other current assets 294 266
------------ ------------
Total Current Assets 2,381 2,412
Property, plant and equipment, net 3,667 3,649
Other intangible assets, net 3,822 3,814
Goodwill 1,519 1,516
Other assets 132 133
------------ ------------
Total Assets $11,521 $11,524
============ ============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and other current
liabilities $1,524 $1,583
Short-term borrowings 533 426
Current maturities of long-term debt 534 589
------------ ------------
Total Current Liabilities 2,591 2,598
Long-term debt 3,939 3,939
Other liabilities 1,072 1,027
Deferred income taxes 1,415 1,421
Minority interest 504 496
------------ ------------
Total Liabilities 9,521 9,481
------------ ------------
Shareholders' Equity
Common stock, par value $0.01 per share:
Authorized 900 shares, issued 310 shares 3 3
Additional paid-in capital 1,705 1,709
Retained earnings 2,298 2,283
Accumulated other comprehensive loss (230) (262)
Deferred compensation - (14)
Treasury stock: 74 shares and 71 shares at
March 25, 2006 and December 31, 2005,
respectively, at cost (1,776) (1,676)
------------ ------------
Total Shareholders' Equity 2,000 2,043
------------ ------------
Total Liabilities and Shareholders'
Equity $11,521 $11,524
============ ============
The Pepsi Bottling Group, Inc.
First Quarter 2006 Earnings Release
Segment Data by Quarter (unaudited)
(in millions)
12 Weeks Ended
--------------
March 25, March 19, Growth vs.
2006 2005 Prior Year*
--------------------------------
Net Revenues
- ------------
U.S./Canada $2,036 $1,849 10%
Europe 148 145 2%
Mexico 183 153 19%
--------------------------------
Total net revenues $2,367 $2,147 10%
================================
Operating Income
- ----------------
U.S./Canada $141 $142 -1%
Europe (22) (16) NM
Mexico 2 (6) NM
--------------------------------
Total operating income 121 120 0%
Interest Expense, net 61 55 10%
Minority Interest 6 6 4%
--------------------------------
Income before income taxes $54 $59 -9%
================================
* Percentage change calculated using whole dollar amounts
NM - Calculation not meaningful
CONTACT: Public Relations:
Kelly McAndrew, 914-767-7690
OR
Investor Relations:
Mary Winn Settino, 914-767-7216