-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KfT8jgjGAEz8zGZs8y+TY0AFN5VUkP9kc5ASYcMuCUT48cvgAB191sQ9g69UjSFo As41VpmY8yeRyxX2rjdv0Q== 0001076405-03-000013.txt : 20030422 0001076405-03-000013.hdr.sgml : 20030422 20030422143323 ACCESSION NUMBER: 0001076405-03-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030422 ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEPSI BOTTLING GROUP INC CENTRAL INDEX KEY: 0001076405 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 134038356 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14893 FILM NUMBER: 03658179 BUSINESS ADDRESS: STREET 1: ONE PEPSI WAY CITY: SOMERS STATE: NY ZIP: 10589-2201 BUSINESS PHONE: 9147676000 MAIL ADDRESS: STREET 1: ONE PEPSI WAY CITY: SOMERS STATE: NY ZIP: 10589-2201 8-K 1 pgb8k2003.txt PEPSI BOTTLING GROUP, INC. 8-K 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ___________ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 22, 2003 THE PEPSI BOTTLING GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 1-14893 13-4038356 (State or other jurisdiction (Commission (IRS Employer of incorporation File Number) Identification No.) One Pepsi Way, Somers, NY 10589 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (914) 767-6000 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Not Applicable. (b) Not Applicable. (c) Exhibit 99.1 Press release dated April 22, 2003. Item 9. Information Furnished Pursuant to Item 12 of Form 8-K - Results of Operations and Financial Condition. On April 22, 2003, The Pepsi Bottling Group, Inc. announced its financial results for its first quarter ended March 22, 2003. The press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE PEPSI BOTTLING GROUP, INC. (Registrant) Date April 22, 2003 /s/ Pamela C. McGuire ------------------------------ (Signature) Pamela C. McGuire, Senior Vice President, General Counsel and Secretary Exhibit 99.1 Contact: Kelly McAndrew Mary Winn Settino Public Relations Investor Relations (914) 767-7690 (914) 767-7216 FOR IMMEDIATE RELEASE THE PEPSI BOTTLING GROUP REPORTS 1st QUARTER RESULTS SOMERS, N.Y., April 22, 2003 - The Pepsi Bottling Group, Inc. (NYSE: PBG) today announced first quarter 2003 income of $39 million, or $0.14 per diluted share, before the cumulative effect of the adoption of a new accounting principle. This compares to reported first quarter 2002 net income of $54 million, or $0.19 per diluted share. o On a constant territory basis, worldwide physical case volume was down three percent for the quarter. Constant territory volume in PBG's territories in Mexico grew one percent, while volume in the U.S. was down five percent, consistent with the Company's previous guidance. o Constant territory net revenue per case in the U.S. grew two percent in the first quarter, all of which came from rate increases. The impact of adopting the FASB's Emerging Issues Task Force (EITF) Issue No. 02-16 reduced U.S. net revenue per case by three percentage points, which resulted in a one percent decline in PBG's reported net revenue per case in the U.S. Worldwide net revenue per case on a reported basis declined nine percent, reflecting the impact of country mix, primarily from our acquisition territories in Mexico and Turkey, and the impact of EITF Issue No. 02-16. o Reported operating income declined 10 percent in the quarter, driven by the weakness in PBG's U.S. territories. "As we announced in March, our results this past quarter reflect the impact of a number of challenging conditions," said John T. Cahill, Chairman and Chief Executive Officer of PBG. "The shortfall in our volume growth, particularly in the U.S., was the principal driver behind the decline in our earnings. However, the discipline of our organization in the areas of marketplace execution and pricing continues to yield positive results. We remain very focused - more - PBG REPORTS 1st QUARTER RESULTS/ 2 or 3 on reinvigorating our U.S. business and are confident that the recently announced innovations from Pepsi-Cola in products, packages and promotions will be our ticket to volume growth in the second half of the year." Cahill continued, "Next month, we will launch the latest extension of the Mountain Dew trademark, LiveWire, in both single serve and take home packages. At the same time, the Pepsi Play for a Billion promotion will kick off and continue throughout the summer. Near the latter part of the second quarter we'll launch a terrific promotion tied in with Universal Pictures' The Hulk. These programs, along with others to be introduced during the third quarter, will generate consumer excitement as we approach the important summer selling season. We expect all of these new ideas to bring excitement to the category, consumers to the stores and volume growth to PBG. "We've made solid progress in Mexico. To date, we have strengthened our local management team, improved our partnership with Pepsi-Cola Mexico and made measurable gains in expanding our distribution. In the coming months, we will introduce exciting new product and package innovation designed specifically for the Mexico marketplace." On a constant territory basis, worldwide physical case volume was down three percent for the quarter, driven by a volume decline of five percent in the U.S. (Constant territory calculations assume all significant acquisitions made in 2002 were made at the beginning of 2002 and exclude all significant acquisitions made in 2003. Constant territory calculations have also been adjusted to reflect the impact of EITF 02-16 as if it had been adopted at the beginning of 2002.) In Mexico, PBG's constant territory volume grew one percent, a solid performance as it overlaps double-digit volume growth during the same quarter in 2002. Constant territory worldwide net revenue per case was flat in the first quarter. In the U.S., constant territory net revenue per case increased two percent in the first quarter, all of which came from rate increases. Net revenue per case in Mexico was flat in local currency, with solid price improvements offset by a higher jug water mix. Beginning in 2003, the Company adopted FASB's EITF Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor." Under this new accounting principle, the majority of the bottler incentives we receive from PepsiCo and other brand owners will be reclassified from net revenues and selling, delivery and administrative (SD&A) expenses to cost of sales. The adoption of EITF Issue No. 02-16 - more - PBG REPORTS 1st QUARTER RESULTS/ 3 of 3 has resulted in a cumulative, non-cash, one-time charge of $6 million, net of tax and minority interest, or $0.02 per diluted share for the first quarter 2003. The following table details the impact of this new accounting change on PBG's net revenue per case growth: U.S. Worldwide Q1 2003 Net Revenue per Case Growth 2% (6%) excluding the impact of EITF 02-16 Impact of EITF 02-16 (3%) (3%) Q1 2003 Reported Net Revenue per (1%) (9%) Case Growth During the first quarter of 2003, PBG repurchased 4.8 million shares of common stock. Since the inception of the Company's share repurchase program in October 1999, 45.2 million shares of PBG common stock have been repurchased. The Company stated that in fiscal 2003 it expects to achieve EPS of $1.61 to $1.67 excluding the cumulative effect of the adoption of EITF Issue No. 02-16, with worldwide constant territory volume growth of one to two percent and an increase in reported operating income in the mid teens. 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 first quarter 2003 earnings discussion with financial analysts on April 22nd at 11 a.m. (EDT) at http://www.pbg.com. In response to the U.S. Securities and Exchange Commission's rules on the use of non-GAAP measures, attached is a Reconciliation of Non-GAAP Measures to Comparable U.S. GAAP Measures. # # # 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 its annual report on Form 10-K for the year ended December 28, 2002. Attachments (7 pages) THE PEPSI BOTTLING GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS in millions except per share amounts, unaudited 12 Weeks Ended ------------------ March March 22, 2003 23, 2002 -------- -------- Net revenues............................................ $1,874 $1,772 Cost of sales........................................... 927 942 ----- ----- Gross profit............................................ 947 830 Selling, delivery and administrative expenses........... 827 695 ----- ----- Operating income........................................ 120 135 Interest expense, net................................... 53 45 Other non-operating expenses, net....................... 3 - Minority interest....................................... 5 8 ----- ----- Income before income taxes.............................. 59 82 Income tax expense...................................... 20 28 ----- ----- Income before cumulative effect of change in accounting principle .......................... 39 54 Cumulative effect of change in accounting principle, net of tax and minority interest............................ 6 - ----- ----- Net income.............................................. $ 33 $ 54 ===== ===== Basic earnings per share before cumulative effect of change in accounting principle ......................... $ 0.14 $ 0.19 Cumulative effect of change in accounting principle .... (0.02) - ----- ----- Basic earnings per share................................ $ 0.12 $ 0.19 ===== ===== Weighted-average shares outstanding..................... 279 280 Diluted earnings per share before cumulative effect of change in accounting principle ......................... $ 0.14 $ 0.19 Cumulative effect of change in accounting principle .... (0.02) - ----- ----- Diluted earnings per share.............................. $ 0.12 $ 0.19 ===== ===== Weighted-average shares outstanding..................... 287 291 THE PEPSI BOTTLING GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS in millions, unaudited 12 Weeks Ended -------------- March March 22, 2003 23, 2002 ------- -------- Cash Flows - Operations Net Income.................................................. $ 33 $ 54 Adjustments to reconcile net income to net cash provided by operations: Depreciation............................................ 117 91 Amortization............................................ 2 2 Changes in working capital and other non-cash charges... (82) (53) Other, net.................................................. (3) (6) ---- ---- Net Cash Provided by Operations................................ 67 88 ---- ---- Cash Flows - Investments Capital expenditures........................................ (112) (110) Acquisitions of bottlers.................................... (82) (24) Sale of property, plant and equipment....................... 1 1 ---- ----- Net Cash Used for Investments.................................. (193) (133) ---- ---- Cash Flows - Financing Borrowing activities, net................................... 120 15 Dividends paid.............................................. (3) (3) Treasury stock transactions................................. (98) (31) ---- ---- Net Cash Provided by (Used for) Financing...................... 19 (19) ---- ---- Effect of Exchange Rate Changes on Cash and Cash Equivalents.................................................... (1) - ---- ----- Net Decrease in Cash and Cash Equivalents...................... (108) (64) Cash and Cash Equivalents - Beginning of Period................ 222 277 ---- ----- Cash and Cash Equivalents - End of Period...................... $ 114 $ 213 ==== ==== THE PEPSI BOTTLING GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS in millions, except per share amounts (Unaudited) March December 22, 2003 28, 2002 -------- -------- Assets Current Assets Cash and cash equivalents................................. $ 114 $ 222 Accounts receivable, net.................................. 882 922 Inventories............................................... 397 378 Prepaid expenses and other current assets................. 207 215 ------ ------ Total Current Assets................................... 1,600 1,737 Property, plant and equipment, net........................... 3,300 3,308 Intangible assets, net....................................... 4,727 4,687 Investment in debt defeasance trust.......................... 171 170 Other assets................................................. 120 125 ------ ------ Total Assets........................................... $ 9,918 $10,027 ====== ====== Liabilities and Shareholders' Equity Current Liabilities Accounts payable and other current liabilities............ $ 997 $ 1,179 Short-term borrowings..................................... 170 51 Current maturities of long-term debt...................... 1,016 18 ------ ------ Total Current Liabilities.............................. 2,183 1,248 Long-term debt............................................... 3,519 4,523 Other liabilities............................................ 847 819 Deferred income taxes........................................ 1,274 1,265 Minority interest............................................ 352 348 ------ ------ Total Liabilities...................................... 8,175 8,203 Shareholders' Equity Common stock, par value $0.01 per share: Authorized 900 shares, issued 310 shares................ 3 3 Additional paid-in capital................................ 1,750 1,750 Retained earnings......................................... 1,096 1,066 Accumulated other comprehensive loss...................... (485) (468) Treasury stock: 34 shares and 30 shares at March 22, 2003 and December 28, 2002, respectively..................... (621) (527) ------ ------ Total Shareholders' Equity.............................. 1,743 1,824 ------ ------ Total Liabilities and Shareholders' Equity............. $ 9,918 10,027 ====== ====== The Pepsi Bottling Group, Inc. Reconciliation of Non-GAAP Measures to Comparable U.S. GAAP Measures in millions, except for percentages In response to the U.S. Securities and Exchange Commission's rules on the use of non-GAAP measures, below is a reconciliation of non-GAAP measures to measurements required by accounting principles generally accepted in the United States of America ("U.S. GAAP"). We utilize certain non-GAAP measures to evaluate our performance. We consider these measures important indicators of our success. These measures should not be considered an alternative to measurements required by U.S. GAAP and should not be considered measures of our liquidity. In addition, our non-GAAP measures may not be comparable to similar measures reported by other companies and could be misleading unless all companies and analysts calculate them in the same manner. We believe that constant territory performance results are the most appropriate indicators of operating trends and performance, particularly in light of our stated intention of acquiring additional bottling territories, and are consistent with industry practice. Constant territory operating results are derived by adjusting current year results to exclude significant current year acquisitions and adjusting prior year results to include the results of significant prior year acquisitions as if they had occurred on the first day of the prior fiscal year. In addition, constant territory calculations have been adjusted to reflect the impact of EITF No. 02-16 as if it had been adopted at the beginning of 2002. Our constant territory results exclude the operating results of the following acquisitions made during 2003: - Pepsi-Cola Buffalo Bottling Corp. of Buffalo, New York in February. - Cassidy's Beverage Limited of New Brunswick, Canada in February. We adjusted our prior year results to include the operating results of the following prior year acquisitions as if they had occurred on the first day of the prior fiscal year: - Fruko Mesrubat Sanayii A.S. of Turkey in March 2002. - Pepsi-Cola Bottling Company of Macon, Inc. of Georgia in March 2002. - Pepsi-Cola Bottling Company of Aroostook, Inc., of Presque Isle, Maine in June 2002. - Seaman's Beverages Limited of the Canadian province of Prince Edward Island in July 2002. - Pepsi-Gemex, S.A. de. C.V. of Mexico in November 2002. - Kitchener Beverages Limited of Ontario, Canada in December 2002. The tables below reconcile our U.S. GAAP reported net revenue per case results to our constant territory net revenue per case results for the twelve weeks ended March 22, 2003 versus the twelve weeks ended March 23, 2002: Net Revenue per Case 2003 vs. 2002 ------------- Impact from Impact from As Impact from 2002 Pro 2002 EITF Constant Reported 2003 Forma No.02-16 Territory Change Acquisitions Adjustments Adjustment Change -------- ------------ ----------- ---------- --------- Worldwide..... -9% 0% 6% 3% 0% U.S........... -1% 0% 0% 3% 2% Net Revenue per Case in local currency 2003 vs. 2002 ------------- Impact from Impact from As 2002 Pro 2002 EITF Constant Reported Forma No. 02-16 Territory Change Adjustments Adjustment Change -------- ----------- ----------- --------- Mexico........ 100% -100% 0% 0% The Pepsi Bottling Group, Inc. (in millions, except per share data) EITF Issue No. 02-16, "Accounting by a Reseller for Cash Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)" In January 2003, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 02-16, "Accounting by a Reseller for Cash Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)," addressing the recognition and income statement classification of various cash considerations given by a vendor to a customer. The consensus requires that certain cash considerations received by a customer from a vendor are presumed to be a reduction of the price of the vendor's products, and therefore should be characterized as a reduction of cost of sales when recognized in the customer's income statement, unless certain criteria are met. EITF Issue No. 02-16 became effective beginning in our fiscal year 2003. In the prior year we classified worldwide bottler incentives received from PepsiCo and other brand owners as adjustments to net revenues and selling, delivery and administrative expenses depending on the objective of the program. In accordance with EITF Issue No. 02-16, we have classified certain bottler incentives as a reduction of cost of sales beginning in 2003. We have recorded a transition adjustment of $6 million, net of taxes and minority interest of $1 million, for the cumulative effect on prior years. This adjustment reflects the amount of bottler incentives that can be attributed to our 2003 beginning inventory balances. This accounting change did not have a material effect on our income before cumulative effect of change in accounting principle in the first twelve weeks of 2003 and is not expected to have a material effect on such amounts for the balance of fiscal 2003. Assuming that EITF Issue No. 02-16 had been in place for all periods presented, the following pro forma adjustments would have been made to our 2002 reported results: Net Revenues Q1 Q2 Q3 Q4 FY 2002 ------------ ------ ------ ------ ------ ------- As Reported.................. $1,772 $2,209 $2,455 $2,780 $9,216 EITF 02-16 Adjustment........ (59) (71) (72) (88) (290) ----- ----- ----- ----- ------ Pro Forma.................... $1,713 $2,138 $2,383 $2,692 $8,926 ===== ===== ===== ===== ====== Cost of Sales Q1 Q2 Q3 Q4 FY 2002 ------------- ------ ------ ------ ------ ------ As Reported.................. $942 $1,185 $1,337 $1,537 $5,001 EITF 02-16 Adjustment........ (95) (119) (125) (151) (490) ----- ----- ----- ----- ----- Pro Forma.................... $847 $1,066 $1,212 $1,386 $4,511 ===== ===== ===== ===== ===== Selling, Delivery and --------------------- Administrative Expenses Q1 Q2 Q3 Q4 FY 2002 ----------------------- ------ ------ ------ ------ ------- As Reported.................. $695 $753 $780 $1,089 $3,317 EITF 02-16 Adjustment........ 37 49 53 62 201 ----- ----- ----- ----- ------ Pro Forma.................... $732 $802 $833 $1,151 $3,518 ===== ===== ===== ===== ====== Assuming EITF Issue No. 02-16 had been adopted for all periods presented, pro forma net income and earnings per share for the twelve weeks ended March 22, 2003 and March 23, 2002, would have been as follows: 12-Weeks Ended -------------- March March 22, 2003 23, 2002 -------- -------- Net income As reported............................... $ 33 $ 54 Pro forma................................. $ 39 $ 53 Earnings per share Basic - as reported....................... $ 0.12 $ 0.19 Basic - pro forma......................... $ 0.14 $ 0.19 Diluted - as reported..................... $ 0.12 $ 0.19 Diluted - pro forma....................... $ 0.14 $ 0.18 -----END PRIVACY-ENHANCED MESSAGE-----