Exhibit 99.1
The Pepsi Bottling Group Reports Second Quarter 2007 Results
-- Diluted Earnings Per Share of $0.70, up 13%
-- Strong Worldwide Revenue Growth of 7%
-- Operating Income Increase of 7%
-- Company Raises Full-Year EPS Guidance
SOMERS, N.Y.--(BUSINESS WIRE)--July 10, 2007--The Pepsi Bottling
Group, Inc. (NYSE: PBG) today reported second quarter 2007 revenue of
$3.4 billion, a seven percent increase over prior year. Net income was
$162 million, or diluted earnings per share (EPS) of $0.70. This
compares to net income of $148 million, or diluted EPS of $0.61, that
the Company reported in the second quarter of 2006.
Eric J. Foss, President and Chief Executive Officer of PBG, said,
"PBG turned in an exceptional quarter. This performance demonstrates
again our ability to balance opportunities and challenges to
consistently deliver great results. Highlights of the quarter included
10 percent growth in operating income in the U.S. and Canada as well
as outstanding top-line growth in Russia."
Mr. Foss continued, "By executing our key strategic initiatives,
we were able to deliver double-digit growth in earnings per share for
the quarter. As a result, we are increasing our full-year 2007 EPS
guidance range to $2.02 to $2.07. Our focus continues to be on
creating long-term value and growth for our shareholders."
Executive Summary
-- PBG's worldwide revenue increased seven percent in the quarter
driven by solid growth across each of the Company's geographic
segments.
-- Total worldwide physical case volume was up one percent.
Volume in the U.S. was flat, compared to five percent growth
in the prior year. European volume grew six percent, led by a
more than 20 percent improvement in Russia. In Mexico, volume
declined two percent. All volume results are on a constant
territory basis. (See Editor's Note.)
-- The Company had net revenue per case growth across all of its
geographic segments highlighted by a four percent gain in the
U.S.
-- Reported worldwide operating income for the second quarter
increased seven percent, with strong growth of 10 percent in
the U.S. and Canada segment. The consolidation of the PR
Beverages venture in Russia added less than one percentage
point of growth to the Company's operating income.
-- PBG raised its full year diluted EPS guidance from a range of
$1.90 to $1.98 to $2.02 to $2.07. This does not reflect a
non-cash tax benefit to be recorded in the third quarter of
2007 as discussed below.
Financial Highlights
In the U.S., physical case volume was flat. Take-home volume was
up two percent and cold drink was down three percent. Volume improved
three percent in Canada due to strong take-home growth. In Mexico,
volume declined two percent, with declines in CSD and jug water volume
mitigated by strong non-carbonated beverage growth. In Europe, volume
grew six percent for the quarter led by Russia, which delivered
double-digit growth in both CSDs and non-carbonated beverages.
Foreign currency translation contributed about one percentage
point of growth to net revenue, cost of goods sold (COGS) and selling,
delivery and administrative (SD&A) expenses. The net effect on
operating income was minimal.
Worldwide net revenue per case improved five percent, driven by
solid rate improvements across all segments.
Reported COGS per case increased six percent in the second
quarter. COGS performance reflected increases in concentrate and
sweetener costs. Gross profit per case grew four percent as pricing
gains more than offset the COGS increase.
PBG's reported SD&A expenses grew five percent in the second
quarter. This increase was mainly driven by the impact of acquisitions
and increased marketplace investments in international markets,
specifically Russia. In the U.S., SD&A expenses were flat reflecting a
continued focus on delivering against the Company's cost productivity
initiatives.
During the second quarter, PBG repurchased 1.8 million shares of
common stock. Year to date, the Company has repurchased 6.3 million
shares. About 25 million shares remain for repurchase under the
Company's current share repurchase plan.
2007 Guidance
The Company raised its full-year adjusted diluted EPS guidance
range to $2.02 to $2.07 from $1.90 to $1.98. Worldwide physical case
volume in 2007 is expected to grow about one to two percent on a
constant territory basis, while the U.S. and Canada segment volume
should be flat to up one percent. PBG is forecasting net revenue per
case improvement of four percent on a worldwide basis.
PBG's reported operating income is now expected to grow seven to
nine percent, as compared to previous guidance of five to seven
percent. Consistent with the Company's prior guidance, the outlook
includes the three percentage point positive impact of consolidating
PR Beverages Limited, the venture comprising PepsiCo, Inc.'s
concentrate and PBG's bottling businesses in Russia. The venture has
no impact on reported diluted EPS or cash flow.
PBG also raised the low end of its operating free cash flow
guidance by $10 million to $540 to $550 million. The Company expects
capital expenditures for the year to be approximately $780 million.
In the third quarter of 2007, the statute of limitations for the
IRS audit of our 2001 and 2002 tax returns expired. PBG will record a
non-cash benefit of approximately $45 million due to the reversal of
net tax contingencies in the third quarter. The impact is not included
in the Company's financial outlook.
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 second quarter 2007 earnings discussion
with financial analysts on July 10th 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.
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 30, 2006.
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 and to provide a
meaningful year-over-year comparison of the Company's financial
performance, we sometimes use non-GAAP financial measures as defined
by the Securities and Exchange Commission. The differences between the
U.S. GAAP and non-GAAP financial measures are reconciled in the text
of the press release or in the attachments. In presenting comparable
results, the Company discloses non-GAAP financial measures when it
believes such measures will be useful to investors in evaluating the
Company's underlying business performance. Management uses the
non-GAAP financial measures 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
certain items as it believes that these non-GAAP financial measures
are useful for evaluating the Company's core operating results and
facilitating comparison across reporting periods. Importantly, the
Company believes non-GAAP financial measures should be considered in
addition to, and not in lieu of U.S. GAAP financial measures. The
Company's non-GAAP financial measures may be different from non-GAAP
financial measures used by other companies.
Operating Free Cash Flow
The Company defines Operating Free Cash Flow (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 business
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 financial measure and should be considered in
addition to, not as a substitute for 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 2007 OFCF to be in the range of $540 to
$550 million. We anticipate capital expenditures of approximately $780
million and Cash Provided by Operations plus the excess tax benefits
from the exercise of stock options to be over $1.3 billion. We are
unable to separately estimate the excess tax benefits from the
exercise of stock options.
Reversal of Tax Contingencies
During the third quarter of 2007, PBG will record a non-cash
benefit of approximately $45 million or $0.19 of diluted earnings per
share due to the reversal of net tax contingencies associated with the
expiration of the statute of limitations on the IRS audit of our 2001
and 2002 tax returns. The Company has presented its 2007 guidance
relating to diluted EPS on an adjusted basis, which excludes the
impact of the reversal of these net tax contingencies.
Full Year 2007 Guidance
Impact of
Full Year Reversal of Full Year
2007 Net 2007
Guidance Tax Guidance
"As Reported" Contingencies "As Adjusted"
------------- ---------------- -------------
Diluted EPS $2.21 - $2.26 $(0.19) $2.02 - $2.07
- ----------------------------------------------------------------------
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
in millions, except per share amounts, unaudited
12 Weeks 24 Weeks
Ended Ended
------------- -------------
June June June June
16, 17, 16, 17,
2007 2006 2007 2006
------ ------ ------ ------
Net revenues $3,360 $3,138 $5,826 $5,505
Cost of sales 1,825 1,685 3,168 2,956
------ ------ ------ ------
Gross profit 1,535 1,453 2,658 2,549
Selling, delivery and administrative
expenses 1,197 1,138 2,200 2,113
------ ------ ------ ------
Operating income 338 315 458 436
Interest expense, net 68 63 134 124
Other non-operating (income) expenses, net (3) 10 (2) 10
Minority interest 23 18 31 24
------ ------ ------ ------
Income before income taxes 250 224 295 278
Income tax expense 88 76 104 96
------ ------ ------ ------
Net income $ 162 $ 148 $ 191 $ 182
====== ====== ====== ======
Basic earnings per share $ 0.71 $ 0.63 $ 0.84 $ 0.77
====== ====== ====== ======
Weighted-average shares outstanding 227 235 227 236
Diluted earnings per share $ 0.70 $ 0.61 $ 0.82 $ 0.75
====== ====== ====== ======
Weighted-average shares outstanding 233 241 233 242
Note: Certain reclassifications were made to our 2006 Condensed
Consolidated Statements of Operations to conform to the 2007
presentation.
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
in millions, unaudited
24 Weeks
Ended
-------------
June June
16, 17,
2007 2006
------ ------
Cash Flows - Operations
Net income $ 191 $ 182
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 300 291
Stock-based compensation 30 32
Changes in working capital and other non-cash charges (299) (178)
Casualty insurance payments (32) (31)
Pension contributions (1) (1)
Other, net (31) (26)
------ ------
Net Cash Provided by Operations 158 269
------ ------
Cash Flows - Investments
Capital expenditures (374) (359)
Acquisitions, (49) -
Proceeds from sale of property, plant and equipment 6 4
Other investing activities, net 6 4
------ ------
Net Cash Used for Investments (411) (351)
------ ------
Cash Flows - Financing
Borrowing activities, net 311 510
Dividends paid (51) (38)
Excess tax benefit from exercise of stock options 3 10
Treasury stock transactions, net (144) (172)
------ ------
Net Cash Provided by Financing 119 310
------ ------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents 4 (5)
------ ------
Net (Decrease)/Increase in Cash and Cash Equivalents (130) 223
Cash and Cash Equivalents - Beginning of Period 629 502
------ ------
Cash and Cash Equivalents - End of Period $ 499 $ 725
====== ======
Supplemental Information
- --------------------------------------------------------
Capital expenditures incurred (342) (337)
Change in accounts payable and other accrued liabilities
related to capital expenditures (32) (22)
------ ------
Cash paid for capital expenditures (374) (359)
Note: Certain reclassifications were made to our 2006 Condensed
Consolidated Statement of Cash Flows to conform to the 2007
presentation.
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
in millions, except per share amounts
June 16, December 30,
2007 2006
----------- -------------
Assets (unaudited)
Current Assets
Cash and cash equivalents $ 499 $ 629
Accounts receivable, net 1,792 1,332
Inventories 738 533
Prepaid expenses and other current assets 278 255
----------- -------------
Total Current Assets 3,307 2,749
Property, plant and equipment, net 3,883 3,785
Other intangible assets, net 4,149 3,768
Goodwill 1,517 1,490
Other assets 177 135
----------- -------------
Total Assets $ 13,033 $ 11,927
=========== =============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and other current
liabilities $ 1,891 $ 1,677
Short-term borrowings 692 357
Current maturities of long-term debt 11 17
----------- -------------
Total Current Liabilities 2,594 2,051
Long-term debt 4,754 4,754
Other liabilities 1,326 1,205
Deferred income taxes 1,245 1,293
Minority interest 891 540
----------- -------------
Total Liabilities 10,810 9,843
----------- -------------
Shareholders' Equity
Common stock, par value $0.01 per share:
Authorized 900 shares, issued 310 shares 3 3
Additional paid-in capital 1,774 1,751
Retained earnings (including $5 from the
impact of FIN 48 in 2007) 2,847 2,708
Accumulated other comprehensive loss (251) (361)
Treasury stock: 84 shares and 80 shares at
June 16, 2007
and December 30, 2006, respectively (2,150) (2,017)
----------- -------------
Total Shareholders' Equity 2,223 2,084
----------- -------------
Total Liabilities and Shareholders'
Equity $ 13,033 $ 11,927
=========== =============
THE PEPSI BOTTLING GROUP, INC.
Second Quarter 2007 Earnings Release
Segment Data (unaudited)
(in millions)
12 Weeks Ended
------------------------------
June 16, June 17,
2007 2006
-------------- ---------------
Net Revenues
- -----------------------------
U.S. & Canada $2,527 $2,422
Europe 468 386
Mexico 365 330
-------------- ---------------
Worldwide net revenues $3,360 $3,138
============== ===============
Operating Income
- -----------------------------
U.S.& Canada $ 302 $ 275
Europe 14 12
Mexico 22 28
-------------- ---------------
Worldwide operating income 338 315
Interest expense, net 68 63
Other non-operating (income)
expenses, net (3) 10
Minority interest 23 18
-------------- ---------------
Income before income taxes $ 250 $ 224
============== ===============
24 Weeks Ended
------------------------------
June 16, June 17,
2007 2006
-------------- ---------------
Net Revenues
- -----------------------------
U.S. & Canada $4,629 $4,458
Europe 644 534
Mexico 553 513
-------------- ---------------
Total net revenues $5,826 $5,505
============== ===============
Operating Income (Loss)
- -----------------------------
U.S. & Canada $ 445 $ 416
Europe (11) (10)
Mexico 24 30
-------------- ---------------
Total operating income 458 436
Interest expense, net 134 124
Other non-operating (income)
expenses, net (2) 10
Minority interest 31 24
-------------- ---------------
Income before income taxes $ 295 $ 278
============== ===============
CONTACT: The Pepsi Bottling Group, Inc.
Mary Winn Settino, 914-767-7216