#The Pepsi Bottling Group Reports First Quarter 2008 Results
- Comparable Diluted EPS of $0.13; Reported Diluted EPS of $0.12
- Strong Worldwide Net Revenue Growth of 7%
- Company Confirms Full-Year Earnings Guidance
SOMERS, N.Y.--(BUSINESS WIRE)--April 23, 2008--The Pepsi Bottling
Group, Inc. (NYSE: PBG) today reported first quarter 2008 revenue of
$2.7 billion, a seven percent increase over prior year. Net income was
$28 million, or diluted earnings per share (EPS) of $0.12. This
includes a net charge of $2.5 million or $0.01 per share from
restructuring charges and an asset disposal charge, all of which were
initiated in 2007. This compares to net income of $29 million, or
$0.12 per diluted share, that the Company reported in the first
quarter of 2007.
"The first quarter marked a solid start to the year, as we
exceeded both our worldwide profit and earnings per share objectives.
The diversity and strength of our geographic portfolio, combined with
significant cost productivity gains, helped offset a challenging
macroeconomic environment in the U.S.," said Eric Foss, PBG President
and Chief Executive Officer. "We also remained committed to investing
for future growth, announcing two acquisitions that will enhance our
competitive position in Russia and unlock new opportunities to expand
our international business.
"Our focus in the second quarter and beyond is on improving our
profitability in the U.S. and Canada, capturing the growth potential
in Europe, and building upon our encouraging progress in Mexico," Foss
continued. "I believe we have the right plans in place to continue to
deliver long-term growth and create shareholder value."
Executive Summary
- Worldwide revenue increased seven percent in the quarter,
driven by growth across each of the Company's geographic
segments. The U.S. and Canada segment reported a five percent
revenue increase.
- Total worldwide physical case volume was up two percent, as
every country had positive volume growth. Worldwide volume
benefited in total by two percentage points due primarily to
the shift of the Easter holiday into the first quarter of 2008
in the U.S. and Canada. Volume in the U.S. and Canada segment
increased two percent. European volume grew a strong seven
percent, driven by double-digit growth in Russia and positive
performance in the balance of the countries. In Mexico, volume
improved two percent.
- PBG reported net revenue per case growth of five percent,
which was led by robust growth in Europe and Mexico. Net
revenue per case improved three percent in the U.S. and Canada
segment, with pricing gains and foreign currency translation
offset by a negative mix impact due to declines in the cold
drink channel and shifts into take-home volume due to Easter
occurring in the first quarter of 2008 as compared to the
second quarter of 2007. In the U.S., net revenue per case was
up one percent for the quarter.
- Reported worldwide operating income for the first quarter
declined 10 percent versus the first quarter of 2007,
reflecting a three percentage point decline from foreign
exchange, a four percentage point negative impact from
consolidation of the Russian joint venture and a two
percentage point reduction from the restructuring charge and
asset disposal charge.
- The Company repurchased approximately five million shares of
its stock in the first quarter. In March, the Company approved
a 21 percent increase in its annual dividend, representing its
fifth consecutive annual dividend increase.
In the U.S. and Canada segment, physical case volume increased two
percent as the Company benefited from the shift of the Easter holiday.
Total volume growth was driven by take-home growth of four percent
with cold drink down two percent. U.S. volume growth was one percent.
In Mexico, volume improved two percent, as positive CSD and bottled
water volume growth was offset by non-carbonated and jug water
declines. Volume grew seven percent for the quarter in Europe. This
was again led by Russia, which delivered double-digit growth in both
CSDs and non-carbonated beverages.
Foreign currency translation contributed about three percentage
points of growth to net revenue, cost of goods sold (COGS) and
selling, delivery and administrative (SD&A) expenses. The net effect
was a decrease of three percentage points on operating income.
Reported COGS per case was up eight percent in the first quarter.
COGS performance was impacted by increases in input costs, as well as
foreign currency translation.
PBG's reported SD&A expenses grew six percent in the first
quarter, with the U.S. flat due to the continued success of cost and
productivity initiatives.
2008 Guidance
In 2008, PBG expects to achieve top-line growth of about six to
seven percent. PBG's comparable operating profit is expected to grow
four to six percent for the year. Comparable diluted EPS are
forecasted to be $2.30 to $2.38. Operating free cash flow is expected
to be at least $620 million.
PBG will host a conference call at 11:00 a.m. EDT today to discuss
its first quarter financial results. The live call and replay can be
accessed by visiting the Investor Relations section of the Company's
website at http://www.pbg.com.
About PBG
The Pepsi Bottling Group, Inc. (www.pbg.com) is the world's
largest manufacturer, seller and distributor of Pepsi-Cola beverages.
With approximately 70,000 employees and annual sales of nearly $14
billion, PBG has operations in the U.S., Canada, Greece, Mexico,
Russia, Spain and Turkey. For more information, please visit
www.pbg.com.
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 29, 2007.
Non-GAAP Measures
The Company prepares its 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, the Company sometimes uses 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 this attachment. 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.
Items Affecting Comparability in 2008 Results
Restructuring Charges
In the third and fourth quarters of 2007, PBG announced
realignments in the Company's organization. The total pre-tax charge
for the realignments is expected to be approximately $35 million.
Since the inception of the program and through March 22, 2008, the
Company incurred a pre-tax charge of approximately $32 million, with a
pre-tax cash charge of approximately $2 million being recorded in the
first quarter of 2008.
Asset Disposal Charge
During the fourth quarter of 2007, PBG adopted a Full Service
Vending Rationalization plan to dispose of older underperforming
assets and to redeploy assets to higher return accounts. The total
pre-tax charge for this plan is expected to be about $30 to $35
million and will be completed by the end of the second quarter. Since
the inception of the program and through March 22, 2008, the Company
incurred a pre-tax charge of approximately $24 million with a pre-tax
cash charge of $1 million being recorded in the first quarter of 2008.
2008 First Quarter Results
Diluted Earnings Per
Share
--------------------------------------------- ------------------------
Comparable Results $0.13
--------------------------------------------- ------------------------
Restructuring Charges & Asset Disposal Charge (0.01)
--------------------------------------------- ------------------------
Reported Results $0.12
--------------------------------------------- ------------------------
2008 Full-Year Guidance
Full-Year 2008
Full-Year 2007 Growth Rate
---------------------------- -------------------- --------------------
Comparable Operating Income $1,124 4% - 6%
---------------------------- -------------------- --------------------
Restructuring Charges (30)
---------------------------- -------------------- --------------------
Asset Disposal Charge (23)
---------------------------- -------------------- --------------------
Reported Operating Income $1,071 8% - 10%
---------------------------- -------------------- --------------------
Diluted Earnings Per Share
------------------------------------- --------------------------------
Comparable Results $2.30 to $2.38
------------------------------------- --------------------------------
Restructuring Charges ($0.01)
------------------------------------- --------------------------------
Asset Disposal Charge ($0.02) to ($0.03)
------------------------------------- --------------------------------
Reported Results $2.26 to $2.35
------------------------------------- --------------------------------
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.
2008 Full-Year OFCF Guidance
PBG expects its full-year 2008 OFCF to be at least $620 million.
The Company anticipates capital expenditures to exceed $800 million
and Cash Provided by Operations plus the excess tax benefits from the
exercise of stock options to be over $1.4 billion.
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
in millions, except per share amounts, unaudited
12 Weeks Ended
-------------------
March 22, March 24,
2008 2007
--------- ---------
Net revenues $ 2,651 $ 2,466
Cost of sales 1,482 1,343
--------- ---------
Gross profit 1,169 1,123
Selling, delivery and administrative expenses 1,061 1,003
--------- ---------
Operating income 108 120
Interest expense, net 59 66
Other non-operating (income) expenses, net (3) 1
Minority interest 3 8
--------- ---------
Income before income taxes 49 45
Income tax expense 21 16
--------- ---------
Net income $ 28 $ 29
========= =========
Basic earnings per share $ 0.13 $ 0.13
========= =========
Weighted-average shares outstanding 222 227
Diluted earnings per share $ 0.12 $ 0.12
========= =========
Weighted-average shares outstanding 229 233
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
in millions, unaudited
12 Weeks Ended
-------------------
March 22, March 24,
2008 2007
--------- ---------
Cash Flows - Operations
Net income $ 28 $ 29
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 144 144
Share-based compensation 12 14
Changes in working capital and other non-cash
charges (108) (131)
Casualty insurance payments (16) (15)
Other, net (40) (20)
--------- ---------
Net Cash Provided by Operations 20 21
--------- ---------
Cash Flows - Investments
Capital expenditures (185) (174)
Acquisitions, net of cash acquired (27) (49)
Proceeds from sale of property, plant and
equipment 2 4
Other investing activities, net -- 6
--------- ---------
Net Cash Used for Investments (210) (213)
--------- ---------
Cash Flows - Financing
Borrowing activities, net 339 257
Dividends paid (31) (26)
Excess tax benefit from exercise of stock options 1 1
Treasury stock transactions (173) (125)
--------- ---------
Net Cash Provided by Financing 136 107
--------- ---------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents (3) (4)
--------- ---------
Net Decrease in Cash and Cash Equivalents (57) (89)
Cash and Cash Equivalents - Beginning of Period 647 629
--------- ---------
Cash and Cash Equivalents - End of Period $ 590 $ 540
========= =========
Supplemental Information
--------------------------------------------------
Capital expenditures incurred (136) (144)
Change in accounts payable and other accrued
liabilities related to capital expenditures (49) (30)
--------- ---------
Cash paid for capital expenditures (185) (174)
Note: Certain reclassifications were made to our 2007 Condensed
Consolidated Statement of Cash Flows to conform to the 2008
presentation.
THE PEPSI BOTTLING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
in millions, except per share amounts
March 22, December 29,
2008 2007
----------- ------------
Assets (unaudited)
Current Assets
Cash and cash equivalents $ 590 $ 647
Accounts receivable, net 1,536 1,520
Inventories 666 577
Prepaid expenses and other current assets 377 342
----------- ------------
Total Current Assets 3,169 3,086
Property, plant and equipment, net 4,072 4,080
Other intangible assets, net 4,178 4,181
Goodwill 1,542 1,533
Other assets 231 235
----------- ------------
Total Assets $ 13,192 $ 13,115
=========== ============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and other current
liabilities $ 1,857 $ 1,968
Short-term borrowings 577 240
Current maturities of long-term debt 1,305 7
----------- ------------
Total Current Liabilities 3,739 2,215
Long-term debt 3,479 4,770
Other liabilities 1,206 1,186
Deferred income taxes 1,335 1,356
Minority interest 989 973
----------- ------------
Total Liabilities 10,748 10,500
----------- ------------
Shareholders' Equity
Common stock, par value $0.01 per share:
Authorized 900 shares, issued 310 shares 3 3
Additional paid-in capital 1,817 1,805
Retained earnings (includes impact from
adopting FIN 48 in fiscal year 2007 of $5) 3,105 3,124
Accumulated other comprehensive loss (42) (48)
Treasury stock: 90 shares and 86 shares at
March 22, 2008
and December 29, 2007, respectively (2,439) (2,269)
----------- ------------
Total Shareholders' Equity 2,444 2,615
----------- ------------
Total Liabilities and Shareholders'
Equity $ 13,192 $ 13,115
=========== ============
THE PEPSI BOTTLING GROUP, INC.
SEGMENT DATA BY QUARTER
in millions, unaudited
12 Weeks Ended
-------------------
March 22, March 24,
2008 2007
--------- ---------
Net Revenues
--------------------------------------------------
U.S. & Canada $ 2,207 $ 2,102
Europe 236 176
Mexico 208 188
--------- ---------
Worldwide net revenues $ 2,651 $ 2,466
========= =========
Operating Income (Loss)
--------------------------------------------------
U.S. & Canada $ 136 $ 143
Europe (31) (25)
Mexico 3 2
--------- ---------
Worldwide operating income 108 120
Interest expense, net 59 66
Other non-operating (income) expenses, net (3) 1
Minority interest 3 8
--------- ---------
Income before income taxes $ 49 $ 45
========= =========
CONTACT: The Pepsi Bottling Group, Inc.
Public Relations
Jeff Dahncke, 914-767-7690
jeff.dahncke@pepsi.com
or
Investor Relations
Mary Winn Settino, 914-767-7216
marywinn.settino@pepsi.com
SOURCE: The Pepsi Bottling Group, Inc.
