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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended December 27, 2003
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from ________ to ________
Commission file number 1-14893
THE PEPSI BOTTLING GROUP, INC.
(Exact name of Registrant as Specified in its Charter)
INCORPORATED IN DELAWARE 13-4038356
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE PEPSI WAY
SOMERS, NEW YORK 10589
(Address of Principal Executive Offices) (Zip code)
Registrant's telephone number, including area code: (914) 767-6000
-------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, par value $.01 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ ]
INDICATE BY CHECKMARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER
(AS DEFINED IN EXCHANGE ACT RULE 12b-2). YES [X] NO [ ]
THE NUMBER OF SHARES OF CAPITAL STOCK OF THE PEPSI BOTTLING
GROUP, INC. OUTSTANDING AS OF MARCH 1, 2004 WAS 259,681,616. THE AGGREGATE
MARKET VALUE OF THE PEPSI BOTTLING GROUP, INC. CAPITAL STOCK HELD BY
NON-AFFILIATES OF THE PEPSI BOTTLING GROUP, INC. AS OF JUNE 14, 2003 WAS
$3,452,998,757.
DOCUMENTS OF WHICH PORTIONS PARTS OF FORM 10-K INTO WHICH PORTION
ARE INCORPORATED BY REFERENCE OF DOCUMENTS ARE INCORPORATED
- ----------------------------------- -------------------------------------
2003 ANNUAL REPORT TO SHAREHOLDERS I, II
PROXY STATEMENT FOR THE PEPSI BOTTLING
GROUP, INC. MAY 26, 2004 ANNUAL III
MEETING OF SHAREHOLDERS
PART I
ITEM 1. BUSINESS
INTRODUCTION
The Pepsi Bottling Group, Inc. ("PBG") was incorporated in Delaware in
January, 1999, as a wholly owned subsidiary of PepsiCo, Inc. ("PepsiCo") to
effect the separation of most of PepsiCo's company-owned bottling businesses.
PBG became a publicly traded company on March 31, 1999. As of February 20, 2004,
PepsiCo's ownership represented 40.8% of the outstanding common stock and 100%
of the outstanding Class B common stock, together representing 46.0% of the
voting power of all classes of PBG's voting stock. PepsiCo also owned
approximately 6.8% of the equity interest of Bottling Group, LLC, PBG's
principal operating subsidiary, as of February 20, 2004. We refer to our
publicly traded common stock as "Common Stock" and, together with our Class B
common stock, as our "Capital Stock." When used in this Report, "PBG," "we,"
"us" and "our" each refers to The Pepsi Bottling Group, Inc. and, where
appropriate, to Bottling Group, LLC, which we also refer to as "Bottling LLC."
We maintain a website at http://www.pbg.com. We make available, free of
charge, through the Investor Relations section of our website, our annual report
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
any amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably
practicable after such reports are electronically filed with, or furnished to,
the Securities and Exchange Commission (the "SEC"). Additionally, we have made
available, free of charge, the following governance materials on our website at
http://www.pbg.com under Corporate Governance: Corporate Governance Principles
and Practices, Worldwide Code of Conduct, the Audit and Affiliated Transactions
Committee Charter, the Compensation and Management Development Committee Charter
and the Nominating and Corporate Governance Committee Charter. These governance
materials are available in print, free of charge, to any shareholder upon
request.
PRINCIPAL PRODUCTS
PBG is the world's largest manufacturer, seller and distributor of
Pepsi-Cola beverages. The beverages sold by us include PEPSI-COLA, DIET PEPSI,
MOUNTAIN DEW, AQUAFINA, SIERRA MIST, LIPTON BRISK, DIET MOUNTAIN DEW, SOBE,
DOLE, and PEPSI VANILLA, and, outside the U.S., PEPSI-COLA, KAS, AQUA MINERALE,
MANZANITA SOL, and MIRINDA. In some of our territories, we have the right to
manufacture, sell and distribute soft drink products of companies other than
PepsiCo, including DR PEPPER, SQUIRT and through October 2003, ALL SPORT. We
also have the right in some of our territories to manufacture, sell and
distribute beverages under trademarks that we own, including ELECTROPURA and
GARCI CRESPO.
We have the exclusive right to manufacture, sell and distribute
Pepsi-Cola beverages in all or a portion of 41 states and the District of
Columbia in the U.S., nine Canadian provinces, Spain, Greece, Russia, Turkey and
all or a portion of 21 states in Mexico. In 2003, approximately 72% of our net
revenues were generated in the United States, 11% of our net revenues were
generated in Mexico and the remaining 17% was generated in Canada, Spain,
Greece, Russia and Turkey. We have an extensive direct store distribution system
in the United States, Mexico and Canada. In Russia, Spain, Greece and Turkey, we
use a combination of direct store distribution and distribution through
wholesalers, depending on local marketplace considerations.
RAW MATERIALS AND OTHER SUPPLIES
We purchase the concentrates to manufacture Pepsi-Cola beverages and
other beverage products from PepsiCo and other beverage companies.
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In addition to concentrates, we purchase sweeteners, glass and plastic
bottles, cans, closures, syrup containers, other packaging materials, carbon
dioxide and some finished goods. We generally purchase our raw materials, other
than concentrates, from multiple suppliers. PepsiCo acts as our agent for the
purchase of such raw materials in the United States and Canada and, with respect
to some of our raw materials, in certain of our international markets. The Pepsi
beverage agreements, as defined below, provide that, with respect to the
beverage products of PepsiCo, all authorized containers, closures, cases,
cartons and other packages and labels may be purchased only from manufacturers
approved by PepsiCo. There are no materials or supplies used by PBG that are
currently in short supply. The supply or cost of specific materials could be
adversely affected by various factors, including price changes, strikes, weather
conditions and governmental controls.
PATENTS, TRADEMARKS, LICENSES AND FRANCHISES
Our portfolio of beverage products includes some of the best recognized
trademarks in the world and includes PEPSI-COLA, DIET PEPSI, MOUNTAIN DEW,
AQUAFINA, SIERRA MIST, LIPTON BRISK, DIET MOUNTAIN DEW, SOBE, DOLE, and PEPSI
VANILLA, and, outside the U.S., PEPSI-COLA, KAS, AQUA MINERALE, MANZANITA SOL,
and MIRINDA. In some of our territories, we have the right to manufacture, sell
and distribute beverage products of companies other than PepsiCo, including DR
PEPPER, SQUIRT and through October 2003, ALL SPORT. We also have the right in
some of our territories to manufacture, sell and distribute beverages under
trademarks that we own, including ELECTROPURA and GARCI CRESPO. The majority of
our volume is derived from brands licensed from PepsiCo or PepsiCo joint
ventures.
We conduct our business primarily under agreements with PepsiCo. These
agreements give us the exclusive right to market, distribute, and produce
beverage products of PepsiCo in authorized containers in specified territories.
Set forth below is a description of the Pepsi beverage agreements and
other bottling agreements to which we are a party.
Terms of the Master Bottling Agreement. The Master Bottling Agreement
under which we manufacture, package, sell and distribute the cola beverages
bearing the PEPSI-COLA and PEPSI trademarks in the U.S. was entered into in
March of 1999. The Master Bottling Agreement gives us the exclusive and
perpetual right to distribute cola beverages for sale in specified territories
in authorized containers of the nature currently used by us. The Master Bottling
Agreement provides that we will purchase our entire requirements of concentrates
for the cola beverages from PepsiCo at prices, and on terms and conditions,
determined from time to time by PepsiCo. PepsiCo may determine from time to time
what types of containers to authorize for use by us. PepsiCo has no rights under
the Master Bottling Agreement with respect to the prices at which we sell our
products.
Under the Master Bottling Agreement we are obligated to:
(1) maintain such plant and equipment, staff, and distribution and
vending facilities that are capable of manufacturing,
packaging and distributing the cola beverages in sufficient
quantities to fully meet the demand for these beverages in our
territories;
(2) undertake adequate quality control measures prescribed by
PepsiCo;
(3) push vigorously the sale of the cola beverages in our
territories;
(4) increase and fully meet the demand for the cola beverages in
our territories;
(5) use all approved means and spend such funds on advertising and
other forms of marketing beverages as may be reasonably
required to push vigorously the sale of cola beverages in our
territories; and
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(6) maintain such financial capacity as may be reasonably
necessary to assure performance under the Master Bottling
Agreement by us.
The Master Bottling Agreement requires us to meet annually with PepsiCo to
discuss plans for the ensuing year and the following two years. At such
meetings, we are obligated to present plans that set out in reasonable detail
our marketing plan, our management plan and advertising plan with respect to the
cola beverages for the year. We must also present a financial plan showing that
we have the financial capacity to perform our duties and obligations under the
Master Bottling Agreement for that year, as well as sales, marketing,
advertising and capital expenditure plans for the two years following such year.
PepsiCo has the right to approve such plans, which approval shall not be
unreasonably withheld. In 2003, PepsiCo approved our plans.
If we carry out our annual plan in all material respects, we will be deemed
to have satisfied our obligations to push vigorously the sale of the cola
beverages, increase and fully meet the demand for the cola beverages in our
territories and maintain the financial capacity required under the Master
Bottling Agreement. Failure to present a plan or carry out approved plans in all
material respects would constitute an event of default that, if not cured within
120 days of notice of the failure, would give PepsiCo the right to terminate the
Master Bottling Agreement.
If we present a plan that PepsiCo does not approve, such failure shall
constitute a primary consideration for determining whether we have satisfied our
obligations to maintain our financial capacity, push vigorously the sale of the
cola beverages and increase and fully meet the demand for the cola beverages in
our territories.
If we fail to carry out our annual plan in all material respects in any
segment of our territory, whether defined geographically or by type of market or
outlet, and if such failure is not cured within six months of notice of the
failure, PepsiCo may reduce the territory covered by the Master Bottling
Agreement by eliminating the territory, market or outlet with respect to which
such failure has occurred.
PepsiCo has no obligation to participate with us in advertising and
marketing spending, but it may contribute to such expenditures and undertake
independent advertising and marketing activities, as well as cooperative
advertising and sales promotion programs that would require our cooperation and
support. Although PepsiCo has advised us that it intends to continue to provide
cooperative advertising funds, it is not obligated to do so under the Master
Bottling Agreement.
The Master Bottling Agreement provides that PepsiCo may in its sole
discretion reformulate any of the cola beverages or discontinue them, with some
limitations, so long as all cola beverages are not discontinued. PepsiCo may
also introduce new beverages under the PEPSI-COLA trademarks or any modification
thereof. When that occurs, we are obligated to manufacture, package, distribute
and sell such new beverages with the same obligations as then exist with respect
to other cola beverages. We are prohibited from producing or handling cola
products, other than those of PepsiCo, or products or packages that imitate,
infringe or cause confusion with the products, containers or trademarks of
PepsiCo. The Master Bottling Agreement also imposes requirements with respect to
the use of PepsiCo's trademarks, authorized containers, packaging and labeling.
If we acquire control, directly or indirectly, of any bottler of cola
beverages, we must cause the acquired bottler to amend its bottling appointments
for the cola beverages to conform to the terms of the Master Bottling Agreement.
Under the Master Bottling Agreement, PepsiCo has agreed not to withhold
approval for any acquisition of rights to manufacture and sell PEPSI trademarked
cola beverages within a specific area - currently representing approximately
12.6% of PepsiCo's U.S. bottling system in terms of volume - if we have
successfully negotiated the acquisition and, in PepsiCo's reasonable judgment,
satisfactorily performed our obligations under the Master Bottling Agreement. We
have agreed not
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to acquire or attempt to acquire any rights to manufacture and sell PEPSI
trademarked cola beverages outside of that specific area without PepsiCo's prior
written approval.
The Master Bottling Agreement is perpetual, but may be terminated by
PepsiCo in the event of our default. Events of default include:
(1) our insolvency, bankruptcy, dissolution, receivership or the
like;
(2) any disposition of any voting securities of one of our
bottling subsidiaries or substantially all of our bottling
assets without the consent of PepsiCo;
(3) our entry into any business other than the business of
manufacturing, selling or distributing non-alcoholic beverages
or any business which is directly related and incidental to
such beverage business; and
(4) any material breach under the contract that remains uncured
for 120 days after notice by PepsiCo.
An event of default will also occur if any person or affiliated group
acquires any contract, option, conversion privilege, or other right to acquire,
directly or indirectly, beneficial ownership of more than 15% of any class or
series of our voting securities without the consent of PepsiCo. As of February
20, 2004, to our knowledge, no shareholder of PBG, other than PepsiCo, held more
than 10.6% of our Common Stock.
We are prohibited from assigning, transferring or pledging the Master
Bottling Agreement, or any interest therein, whether voluntarily, or by
operation of law, including by merger or liquidation, without the prior consent
of PepsiCo.
The Master Bottling Agreement was entered into by us in the context of
our separation from PepsiCo and, therefore, its provisions were not the result
of arm's-length negotiations. Consequently, the agreement contains provisions
that are less favorable to us than the exclusive bottling appointments for cola
beverages currently in effect for independent bottlers in the United States.
Terms of the Non-Cola Bottling Agreements. The beverage products
covered by the non-cola bottling agreements are beverages licensed to us by
PepsiCo, consisting of MOUNTAIN DEW, AQUAFINA, DIET MOUNTAIN DEW, MOUNTAIN DEW
CODE RED, SLICE, SIERRA MIST, FRUITWORKS, and MUG root beer and cream soda. The
non-cola bottling agreements contain provisions that are similar to those
contained in the Master Bottling Agreement with respect to pricing, territorial
restrictions, authorized containers, planning, quality control, transfer
restrictions, term, and related matters. Our non-cola bottling agreements will
terminate if PepsiCo terminates our Master Bottling Agreement. The exclusivity
provisions contained in the non-cola bottling agreements would prevent us from
manufacturing, selling or distributing beverage products which imitate, infringe
upon, or cause confusion with, the beverage products covered by the non-cola
bottling agreements. PepsiCo may also elect to discontinue the manufacture, sale
or distribution of a non-cola beverage and terminate the applicable non-cola
bottling agreement upon six months notice to us.
Terms of Certain Distribution Agreements. We also have agreements with
PepsiCo granting us exclusive rights to distribute AMP and DOLE in all of our
territories and SOBE in certain specified territories. The distribution
agreements contain provisions generally similar to those in the Master Bottling
Agreement as to use of trademarks, trade names, approved containers and labels
and causes for termination. We also have the right to sell and distribute
GATORADE in Spain, Greece and Russia and in certain limited channels of
distribution in the U.S. Some of these beverage agreements have limited terms
and, in most instances, prohibit us from dealing in similar beverage products.
4
Terms of the Master Syrup Agreement. The Master Syrup Agreement grants
us the exclusive right to manufacture, sell and distribute fountain syrup to
local customers in our territories. The Master Syrup Agreement also grants us
the right to act as a manufacturing and delivery agent for national accounts
within our territories that specifically request direct delivery without using a
middleman. In addition, PepsiCo may appoint us to manufacture and deliver
fountain syrup to national accounts that elect delivery through independent
distributors. Under the Master Syrup Agreement, we have the exclusive right to
service fountain equipment for all of the national account customers within our
territories. The Master Syrup Agreement provides that the determination of
whether an account is local or national is at the sole discretion of PepsiCo.
The Master Syrup Agreement contains provisions that are similar to
those contained in the Master Bottling Agreement with respect to pricing,
territorial restrictions with respect to local customers and national customers
electing direct-to-store delivery only, planning, quality control, transfer
restrictions and related matters. The Master Syrup Agreement has an initial term
of five years which will expire in 2004, however, the Master Syrup Agreement
will automatically renew for additional five-year periods unless PepsiCo
terminates it for cause. PepsiCo has the right to terminate the Master Syrup
Agreement without cause at any time during a renewal term upon twenty-four
months notice. In the event PepsiCo terminates the Master Syrup Agreement
without cause, PepsiCo is required to pay us the fair market value of our rights
thereunder.
Our Master Syrup Agreement will terminate if PepsiCo terminates our
Master Bottling Agreement.
Terms of Other U.S. Bottling Agreements. The bottling agreements
between us and other licensors of beverage products, including Cadbury Schweppes
plc for DR PEPPER, SCHWEPPES, CANADA DRY AND HAWAIIAN PUNCH, the Pepsi/Lipton
Tea Partnership for LIPTON BRISK and LIPTON'S ICED TEA, the North American
Coffee Partnership for STARBUCKS FRAPPUCCINO and The Monarch Beverage Company,
Inc. for ALL SPORT (which agreement terminated in October 2003), contain
provisions generally similar to those in the Master Bottling Agreement as to use
of trademarks, trade names, approved containers and labels, sales of imitations,
and causes for termination. Some of these beverage agreements have limited terms
and, in most instances, prohibit us from dealing in similar beverage products.
Terms of the Country Specific Bottling Agreements. The country specific
bottling agreements contain provisions generally similar to those contained in
the Master Bottling Agreement and the non-cola bottling agreements and, in
Canada, the Master Syrup Agreement with respect to authorized containers,
planning, quality control, transfer restrictions, term, causes for termination
and related matters. These bottling agreements differ from the Master Bottling
Agreement because, except for Canada, they include both fountain syrup and
non-fountain beverages. Certain of these bottling agreements contain provisions
that have been modified to reflect the laws and regulations of the applicable
country. For example, the bottling agreements in Spain do not contain a
restriction on the sale and shipment of Pepsi-Cola beverages into our territory
by others in response to unsolicited orders. In addition, the bottling
agreements for Mexico and Turkey contain provisions which restrict our ability
to manufacture, sell and distribute beverages sold under non-PepsiCo trademarks.
SEASONALITY
Our peak season is the warm summer months beginning with Memorial Day
and ending with Labor Day. Approximately 66% of our operating income is
typically earned during the second and third quarters. Approximately 80% of cash
flow from operations is typically generated in the third and fourth quarters.
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COMPETITION
The carbonated soft drink market and the non-carbonated beverage market
are highly competitive. Our competitors in these markets include bottlers and
distributors of nationally advertised and marketed products, bottlers and
distributors of regionally advertised and marketed products, as well as bottlers
of private label soft drinks sold in chain stores. Among our major competitors
are bottlers that distribute products from The Coca-Cola Company including
Coca-Cola Enterprises Inc., Coca-Cola Hellenic Bottling Company S.A., Coca-Cola
FEMSA S.A. de C.V. and Coca-Cola Bottling Co. Consolidated. Our market share for
carbonated soft drinks sold under trademarks owned by PepsiCo in our U.S.
territories ranges from approximately 15.4% to approximately 38.8%. Our market
share for carbonated soft drinks sold under trademarks owned by PepsiCo for each
country, outside the U.S., in which we do business is as follows: Canada 40.9%;
Russia 24.7%; Turkey 21.5%; Spain 12.8% and Greece 11.3% (including market share
for our IVI brand). In addition, market share for our territories and the
territories of other bottlers in Mexico is 14.5% for carbonated soft drinks sold
under trademarks owned by PepsiCo and carbonated water sold under the GARCI
CRESPO trademark. Actions by our major competitors and others in the beverage
industry, as well as the general economic environment could have an impact on
our future market share.
We compete primarily on the basis of advertising and marketing programs
to create brand awareness, price and promotions, retail space management,
customer service, consumer points of access, new products, packaging innovations
and distribution methods. We believe that brand recognition, availability and
consumer and customer goodwill are primary factors affecting our competitive
position.
GOVERNMENTAL REGULATION APPLICABLE TO PBG
Our operations and properties are subject to regulation by various
federal, state and local governmental entities and agencies in the United States
as well as foreign government entities and agencies in Canada, Spain, Greece,
Russia, Turkey and Mexico. As a producer of food products, we are subject to
production, packaging, quality, labeling and distribution standards in each of
the countries where we have operations, including, in the United States, those
of the federal Food, Drug and Cosmetic Act. The operations of our production and
distribution facilities are subject to laws and regulations relating to the
protection of the environment in the countries in which we do business. In the
United States, we are subject to the laws and regulations of the Department of
Transportation, and various federal, state and local occupational and
environmental laws. These laws and regulations include the Occupational Safety
and Health Act, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act and laws relating to the operation, maintenance of
and financial responsibility for fuel storage tanks.
We believe that our current legal, operational and environmental
compliance programs are adequate and that we are in substantial compliance with
applicable laws and regulations of the countries in which we do business. We do
not anticipate making any material expenditures in connection with environmental
remediation and compliance. However, compliance with, or any violation of,
future laws or regulations could require material expenditures by us or
otherwise have a material adverse effect on our business, financial condition
and results of operations.
Bottle and Can Legislation
In all but a few of our United States and Canadian markets, we offer
our bottle and can beverage products in non-refillable containers. Legislation
has been enacted in certain states and Canadian provinces where we operate that
generally prohibits the sale of certain beverages unless a deposit or levy is
charged for the container. These include Connecticut, Delaware, Hawaii, Maine,
Massachusetts, Michigan, New York, Oregon, California, British Columbia,
Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward
Island and Quebec.
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Massachusetts and Michigan have statutes that require us to pay all or
a portion of unclaimed container deposits to the state and California imposes a
levy on beverage containers to fund a waste recovery system.
In addition to the Canadian deposit legislation described above,
Ontario, Canada, currently has a regulation requiring that 30% of all soft
drinks sold in Ontario be bottled in refillable containers. This regulation is
currently being reviewed by the Ontario Ministry of the Environment.
The European Commission issued a packaging and packing waste directive
that was incorporated into the national legislation of most member states. This
has resulted in targets being set for the recovery and recycling of household,
commercial and industrial packaging waste and imposes substantial
responsibilities upon bottlers and retailers for implementation. Similar
legislation has been enacted in Turkey.
In 2003, Mexico adopted legislation regulating the disposal of solid
waste products. In response to this new legislation, PBG Mexico entered into
agreements with local and federal Mexican governmental authorities which require
PBG Mexico, and other participating bottlers, to provide for collection and
recycling of certain minimum amounts of plastic bottles.
We are not aware of similar material legislation being proposed or
enacted in any other areas served by us. We are unable to predict, however,
whether such legislation will be enacted or what impact its enactment would have
on our business, financial condition or results of operations.
Soft Drink Excise Tax Legislation
Specific soft drink excise taxes have been in place in certain states
for several years. The states in which we operate that currently impose such a
tax are West Virginia, Arkansas and Tennessee and, with respect to fountain
syrup only, Washington. In Mexico, there are excise taxes on any sweetened
beverage products produced without sugar, including our diet soft drinks.
Value-added taxes on soft drinks vary in our territories located in
Canada, Spain, Greece, Russia, Turkey and Mexico, but are consistent with the
value-added tax rate for other consumer products. In addition, there is a
special consumption tax applicable to cola products in Turkey.
We are not aware of any material soft drink taxes that have been
enacted in any other market served by us. We are unable to predict, however,
whether such legislation will be enacted or what impact its enactment would have
on our business, financial condition or results of operations.
Trade Regulation
As a manufacturer, seller and distributor of bottled and canned soft
drink products of PepsiCo and other soft drink manufacturers in exclusive
territories in the United States and internationally, we are subject to
antitrust and competition laws. Under the Soft Drink Interbrand Competition Act,
soft drink bottlers operating in the United States, such as us, may have an
exclusive right to manufacture, distribute and sell a soft drink product in a
geographic territory if the soft drink product is in substantial and effective
competition with other products of the same class in the same market or markets.
We believe that there is such substantial and effective competition in each of
the exclusive geographic territories in which we operate.
California Carcinogen and Reproductive Toxin Legislation
A California law requires that any person who exposes another to a
carcinogen or a reproductive toxin must provide a warning to that effect.
Because the law does not define quantitative thresholds below which a warning is
not required, virtually all manufacturers of food products are confronted with
the possibility of having to provide warnings due to the presence of trace
amounts of defined substances. Regulations implementing the law exempt
manufacturers from providing the required warning if it can be demonstrated that
the defined substances occur
7
naturally in the product or are present in municipal water used to manufacture
the product. We have assessed the impact of the law and its implementing
regulations on our beverage products and have concluded that none of our
products currently require a warning under the law. We cannot predict whether or
to what extent food industry efforts to minimize the law's impact on food
products will succeed. We also cannot predict what impact, either in terms of
direct costs or diminished sales, imposition of the law may have.
Mexican Water Regulation
In Mexico, we pump water from our own wells and we purchase water
directly from municipal water companies pursuant to concessions obtained from
the Mexican government on a plant-by-plant basis. The concessions are generally
for 10-year terms and can generally be renewed by us prior to expiration with
minimal cost and effort. Our concessions may be terminated if, among other
things, (a) we use materially more water than permitted by the concession, (b)
we use materially less water than required by the concession, or (c) we fail to
complete agreed-upon construction or improvements. Our concessions generally
satisfy our current water requirements and we believe that we are generally in
compliance in all material respects with the terms of our existing concessions.
EMPLOYEES
As of December 27, 2003, we employed approximately 66,000 full-time
workers, of whom approximately 33,300 were employed in the United States and
approximately 23,200 were employed in Mexico. Approximately 10,900 of our
full-time workers in the United States are union members and approximately
17,000 of our workers outside the United States are union members. We consider
relations with our employees to be good and have not experienced significant
interruptions of operations due to labor disagreements with the exception of a
labor dispute in our Mississauga facility in Ontario, Canada, which was
successfully resolved in August 2003.
FINANCIAL INFORMATION ON INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
For financial information on industry segments and operations in
geographic areas, see Note 13 to PBG's Consolidated Financial Statements, found
on page 55 of our Annual Report to Shareholders for the fiscal year ended
December 27, 2003, which page is incorporated herein by reference and is
included as Exhibit 13 hereto.
ITEM 2. PROPERTIES
As of December 27, 2003, we operated 98 soft drink production
facilities worldwide, of which 91 were owned and 7 were leased. In addition, one
facility used for the manufacture of soft drink packaging materials was operated
by a PBG joint venture in Turkey. Of our 514 distribution facilities, 323 are
owned and 191 are leased. We believe that our bottling, canning and syrup
filling lines and our distribution facilities are sufficient to meet present
needs. We also lease headquarters office space in Somers, New York.
We also own or lease and operate approximately 40,900 vehicles,
including delivery trucks, delivery and transport tractors and trailers and
other trucks and vans used in the sale and distribution of our soft drink
products. We also own more than 1.8 million soft drink dispensing and vending
machines.
With a few exceptions, leases of plants in the United States and Canada
are on a long-term basis, expiring at various times, with options to renew for
additional periods. Most international plants are leased for varying and usually
shorter periods, with or without renewal options. We
8
believe that our properties are in good operating condition and are adequate to
serve our current operational needs.
ITEM 3. LEGAL PROCEEDINGS
From time to time we are a party to various litigation proceedings
arising in the ordinary course of our business, none of which, in the opinion of
management, is likely to have a material adverse effect on our financial
condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers are elected by our Board of Directors, and their
terms of office continue until the next annual meeting of the Board or until
their successors are elected and have been qualified. There are no family
relationships among our executive officers.
Set forth below is information pertaining to our executive officers who
held office as of March 1, 2004
JOHN T. CAHILL, 46, is our Chairman of the Board and Chief Executive Officer. He
had been our Chief Executive Officer since September 2001. Previously, Mr.
Cahill served as our President and Chief Operating Officer from August 2000 to
September 2001. Mr. Cahill has been a member of our Board of Directors since
January 1999 and served as our Executive Vice President and Chief Financial
Officer prior to becoming President and Chief Operating Officer in August 2000.
He was Executive Vice President and Chief Financial Officer of the Pepsi-Cola
Company from April 1998 until November 1998. Prior to that, Mr. Cahill was
Senior Vice President and Treasurer of PepsiCo, having been appointed to that
position in April 1997. In 1996, he became Senior Vice President and Chief
Financial Officer of Pepsi-Cola North America. Mr. Cahill joined PepsiCo in 1989
where he held several other senior financial positions through 1996.
ALFRED H. DREWES, 48, is our Senior Vice President and Chief Financial Officer.
Appointed to this position in June 2001, Mr. Drewes previously served as Senior
Vice President and Chief Financial Officer of Pepsi Beverages International
("PBI"). Mr. Drewes joined PepsiCo in 1982 as a financial analyst in New Jersey.
During the next nine years, he rose through increasingly responsible finance
positions within Pepsi-Cola North America in field operations and headquarters.
In 1991, Mr. Drewes joined PBI as Vice President of Manufacturing Operations,
with responsibility for the global concentrate supply organization.
ERIC J. FOSS, 45, is the President of PBG North America. Previously, Mr. Foss
was our Executive Vice President and General Manager of PBG North America from
August 2000 to September 2001. From October 1999 until August 2000, he served as
our Senior Vice President, U.S. Sales and Field Operations, and prior to that,
he was our Senior Vice President, Sales and Field Marketing, since March 1999.
Mr. Foss joined Pepsi-Cola Company in 1982 and has held a variety of other field
and headquarters-based sales, marketing and general management positions. From
1994 to 1996, Mr. Foss was General Manager of Pepsi-Cola North America's Great
West Business Unit. In 1996, Mr. Foss was named General Manager for the Central
Europe Region for Pepsi-Cola International, a position he held until joining PBG
in March 1999. In addition, Mr. Foss is a director of United Dominion Realty
Trust, Inc.
SHAUN P. HOLLIDAY, 46, was appointed President of PBG Business Operations in
January 2004. Previously, he had been President of PBG International since
September 2003 with responsibilities
9
for PBG's operations in Europe and Mexico. Mr. Holliday was Chief Executive
Officer of eMac from 2000 to September 2003. He was Chief Executive Officer of
Living.com from 1999 to 2000. Living.com filed for Chapter 11 bankruptcy
protection in August 2000. From 1997 to 1999, Mr. Holliday was Chief Executive
Officer for Guinness Ireland Group and he was President of the Americas and
Caribbean Region of Guinness from 1994 to 1997. From 1990 to 1994, Mr. Holliday
held several senior positions at Frito-Lay, Inc.
PAMELA C. MCGUIRE, 56, is our Senior Vice President, General Counsel and
Secretary. She was appointed to this position in November 1998. Ms. McGuire
joined PepsiCo in 1977 and served as Vice President and Division Counsel of
Pepsi-Cola Company from 1989 to March 1998, when she was named Vice President
and Associate General Counsel of the Pepsi-Cola Company.
YIANNIS PETRIDES, 46, is the President of PBG Europe. He was appointed to this
position in June 2000, with responsibilities for our operations in Spain,
Greece, Turkey and Russia. Most recently, he served as Business Unit General
Manager for PBG in Spain and Greece. Mr. Petrides joined PepsiCo in 1987 in the
international beverage division. In 1993, he was named General Manager of Frito
Lay's Greek operation with additional responsibility for the Balkan countries.
Two years later, he was appointed Business Unit General Manager for Pepsi
Beverages International's bottling operation in Spain.
ROGELIO REBOLLEDO, 59, was appointed President and Chief Executive Officer of
PBG Mexico in January 2004. From 2000 to 2003, Mr. Rebolledo was President and
Chief Executive Officer of Frito-Lay International ("FLI"), a subsidiary of
PepsiCo, Inc., operating in Latin America, Asia Pacific, Australia, Europe,
Middle East and Africa. From 1997 to 2000, Mr. Rebolledo was the President of
the Latin America/Asia Pacific region for FLI. Mr. Rebolledo joined PepsiCo,
Inc. in 1976 and held several senior positions including serving as President
and Chief Executive Officer of the Latin America Region of PepsiCo Foods
International ("PFI") and President of the Sabritas, Gamesa, Brazil and Spain
PFI operations.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Stock Trading Symbol - PBG.
Stock Exchange Listings - PBG's Common Stock is listed on the New York
Stock Exchange. Our Class B common stock is not publicly traded.
Shareholders - As of February 20, 2004, there were approximately 55,540
registered and beneficial shareholders of Common Stock. PepsiCo is the holder of
all of the outstanding shares of Class B common stock.
Stock Prices - The high and low sales prices for a share of PBG Common
Stock on the New York Stock Exchange, as reported by Bloomberg Service, for each
fiscal quarter of 2003 and 2002 were as follows (in dollars):
2003 High Low
----- ---- ---
First Quarter 27.620 17.000
Second Quarter 21.450 17.750
Third Quarter 24.650 19.540
Fourth Quarter 24.000 20.390
10
2002 High Low
---- ---- ---
First Quarter 26.230 21.650
Second Quarter 34.800 24.820
Third Quarter 33.850 23.000
Fourth Quarter 29.500 23.000
Dividend Policy - Quarterly cash dividends are usually declared in
January, March, July and November and paid at the end of March, June, September
and at the beginning of January. The dividend record dates for 2004 are expected
to be March 12, June 11, September 10 and December 10.
Cash Dividends Declared Per Share on Capital Stock:
Quarter 2003 2002
- ------- ---- ----
1 $.01 $.01
2 $.01 $.01
3 $.01 $.01
4 $.01 $.01
Total $.04 $.04
ITEM 6. SELECTED FINANCIAL DATA
"Selected Financial and Operating Data" for the years 1999 through 2003, on page
63 of our Annual Report to Shareholders for the fiscal year ended December 27,
2003 is incorporated into this report by reference and is included as part of
Exhibit 13 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Financial Review" on pages 18 through 33 of our Annual
Report to Shareholders for the fiscal year ended December 27, 2003 is
incorporated into this report by reference and is included as part of Exhibit 13
hereto.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
"Management's Financial Review -- Market Risks and Cautionary
Statements" on pages 31 through 33 of our Annual Report to Shareholders for the
fiscal year ended December 27, 2003 is incorporated herein by reference and is
included as part of Exhibit 13 hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of PBG and our
subsidiaries are incorporated herein by reference to our Annual Report to
Shareholders for the fiscal year ended December 27, 2003, included as part of
Exhibit 13 hereto, at the pages indicated:
Consolidated Statements of Operations - Fiscal years ended December 27,
2003, December 28, 2002 and December 29, 2001 (page 34).
Consolidated Statements of Cash Flows - Fiscal years ended December 27,
2003, December 28, 2002 and December 29, 2001 (page 35).
Consolidated Balance Sheets - December 27, 2003 and December 28, 2002
(page 36).
11
Consolidated Statements of Changes in Shareholders' Equity - Fiscal
years ended December 27, 2003, December 28, 2002 and December 29, 2001
(page 37).
Notes to Consolidated Financial Statements (pages 38 through 60).
Independent Auditors' Report (page 62).
The financial statements of Bottling LLC, included in Bottling LLC's
Annual Report on Form 10-K and filed with the SEC on March 11, 2004, are hereby
incorporated by reference as required by the SEC as a result of Bottling LLC's
guarantee of up to $1,000,000,000 aggregate principal amount of our 7% Senior
Notes due in 2029.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
PBG's management carried out an evaluation (the "Evaluation"), as
required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange
Act"), with the participation of our Chief Executive Officer and our Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures, as of the end of the period covered by this Annual Report on Form
10-K. Based upon the Evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information relating to PBG and
its consolidated subsidiaries required to be included in our Exchange Act
reports filed with the SEC. In addition, there were no changes in our internal
control over financial reporting identified in connection with the Evaluation
that occurred during our last fiscal quarter that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PBG
The name, age and background of each of our directors nominated for
election are contained under the caption "Election of Directors" in our Proxy
Statement for our 2004 Annual Meeting of Shareholders. The identification of our
Audit Committee and our Audit Committee financial expert is contained in PBG's
Proxy Statement for our 2004 Annual Meeting of Shareholders under the captions
"CORPORATE GOVERNANCE - Committees of the Board of Directors - The Audit and
Affiliated Transactions Committee." Information regarding the adoption of our
Worldwide Code of Conduct, any material amendments thereto and any related
waivers are contained in our Proxy Statement for our 2004 Annual Meeting of
Shareholders under the captions "CORPORATE GOVERNANCE - Worldwide Code of
Conduct." All of the foregoing information is incorporated herein by reference.
The Worldwide Code of Conduct is posted on the PBG Website at
http://www.pbg.com under Corporate Governance. Pursuant to Item 401(b) of
Regulation S-K, the requisite information pertaining to our executive officers
is reported in Part I of this Report.
Information on compliance with Section 16(a) of the Exchange Act is
contained in our Proxy Statement for our 2004 Annual Meeting of Shareholders
under the captions "OWNERSHIP OF PBG COMMON STOCK-- Section 16 Beneficial
Ownership Reporting Compliance" and is incorporated herein by reference.
12
ITEM 11. EXECUTIVE COMPENSATION
Information on compensation of our directors and certain named
executive officers is contained in our Proxy Statement for our 2004 Annual
Meeting of Shareholders under the captions "Directors' Compensation" and
"EXECUTIVE COMPENSATION," respectively, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information relating to securities authorized for issuance under PBG's
equity compensation plans is contained in PBG's Proxy Statement for our 2004
Annual Meeting of Shareholders under the captions "EXECUTIVE COMPENSATION --
Equity Compensation Plan Information" and is incorporated herein by reference.
Information on the number of shares of PBG Common Stock beneficially
owned by each director, each named executive officer and by all directors and
all executive officers as a group is contained under the captions "OWNERSHIP OF
PBG COMMON STOCK -- Ownership of Common Stock by Directors and Executive
Officers" and information on each beneficial owner of more that 5% of PBG Common
Stock is contained under the captions "OWNERSHIP OF PBG COMMON STOCK-Stock
Ownership of Certain Beneficial Owners" in our Proxy Statement for our 2004
Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain transactions between PBG, PepsiCo and
their affiliates and certain other persons is set forth under the caption
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in our Proxy Statement for our
2004 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information relating to audit fees, audit-related fees, tax fees and
all other fees billed in fiscal 2002 and 2003 by KPMG, LLP for services rendered
to PBG is set forth under the caption "INDEPENDENT AUDITORS" in the Proxy
Statement for our 2004 Annual Meeting of Shareholders and is incorporated herein
by reference. In addition, information relating to the pre-approval policies and
procedures of the Audit and Affiliated Transactions Committee is set forth under
the caption "INDEPENDENT AUDITORS - Pre-Approval Policies and Procedures" in the
Proxy Statement for our 2004 Annual Meeting of Shareholders and is incorporated
herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. The following consolidated financial
statements of PBG and its subsidiaries, included in our Annual Report to
Shareholders for the year ended December 27, 2003, are incorporated by reference
into Part II, Item 8 of this Report:
Consolidated Statements of Operations - Fiscal years ended December 27, 2003,
December 28, 2002 and December 29, 2001 (page 34).
13
Consolidated Statements of Cash Flows - Fiscal years ended December 27, 2003,
December 28, 2002 and December 29, 2001 (page 35).
Consolidated Balance Sheets - December 27, 2003 and December 28, 2002 (page 36).
Consolidated Statements of Changes in Shareholders' Equity - Fiscal years ended
December 27, 2003, December 28, 2002 and December 29, 2001 (page 37).
Notes to Consolidated Financial Statements (pages 38 through 60).
Independent Auditors' Report (page 62).
The financial statements of Bottling LLC, included in Bottling LLC's
Annual Report on Form 10-K and filed with the SEC on March 11, 2004, are
hereby incorporated by reference as required by the SEC as a result of Bottling
LLC's guarantee of up to $1,000,000,000 aggregate principal amount of our 7%
Senior Notes due in 2029.
2. Financial Statement Schedules. The following
financial statement schedules of PBG and its subsidiaries are included in this
Report on the page indicated:
Page
----
Independent Auditors' Report on Schedule and Consent............................ F-2
Schedule II - Valuation and Qualifying Accounts for the fiscal years ended
December 27, 2003, December 28, 2002 and December 29,2001........ F-3
3. Exhibits
See Index to Exhibits on pages E-1 - E-5.
(b) Reports on Form 8-K
On September 30, 2003, we furnished a Current Report on Form 8-K
announcing our financial results for our third quarter ended September 6, 2003.
14
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, The Pepsi Bottling Group, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 9, 2004
The Pepsi Bottling Group, Inc.
By: /s/ John T. Cahill
--------------------------
John T. Cahill
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of The
Pepsi Bottling Group, Inc. and in the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ John T. Cahill Chairman of the Board and Chief March 9, 2004
- --------------------- Executive Officer
John T. Cahill
/s/Alfred H. Drewes Senior Vice President and Chief March 9, 2004
- --------------------- Financial Officer (Principal
Alfred H. Drewes Financial Officer)
/s/ Andrea L. Forster Vice President and Controller March 9, 2004
- --------------------- (Principal Accounting Officer)
Andrea L. Forster
/s/ Linda G. Alvarado Director March 9, 2004
- ---------------------
Linda G. Alvarado
/s/ Barry H. Beracha Director March 9, 2004
- ---------------------
Barry H. Beracha
/s/ Ira D. Hall Director March 9, 2004
- ---------------------
Ira D. Hall
/s/ Thomas H. Kean Director March 9, 2004
- ---------------------
Thomas H. Kean
/s/ Susan D. Kronick Director March 9, 2004
- ---------------------
Susan D. Kronick
/s/ Blythe J. McGarvie Director March 9, 2004
- ----------------------
Blythe J. McGarvie
/s/ Margaret D. Moore Director March 9, 2004
- ---------------------
Margaret D. Moore
/s/ Clay G. Small Director March 9, 2004
- ---------------------
Clay G. Small
/s/ Craig E. Weatherup Director March 9, 2004
- ----------------------
Craig E. Weatherup
S-1
INDEX TO FINANCIAL STATEMENT SCHEDULES
PAGE
----
Independent Auditors' Report on Schedule and Consent............................................................ F-2
Schedule II - Valuation and Qualifying Accounts for the fiscal years ended December 27, 2003, December 28, 2002
and December 29, 2001....................................................................................... F-3
F-1
INDEPENDENT AUDITORS' REPORT AND CONSENT
The Board of Directors
The Pepsi Bottling Group, Inc.:
The audits referred to in our report dated January 27, 2004, included the
related financial statement schedule as of December 27, 2003, and for each of
the fiscal years in the three-year period ended December 27, 2003, included in
this Form 10-K. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
We consent to the incorporation by reference in the registration statements
(Nos. 333-79357, 333-79369, 333-79375, 333-79365, 333-80647, 333-69622,
333-60428, 333-73302, 333-100786) on Form S-8 of The Pepsi Bottling Group, Inc.
of our report (incorporated by reference in the December 27, 2003, annual report
on Form 10-K of The Pepsi Bottling Group, Inc.) dated January 27, 2004 with
respect to the consolidated balance sheets of The Pepsi Bottling Group, Inc. as
of December 27, 2003 and December 28, 2002, and the related consolidated
statements of operations, cash flows and changes in shareholders' equity for
each of the fiscal years in the three-year period ended December 27, 2003 and of
our report on the related financial statement schedule dated March 10, 2004
(which report appears above). Our report on the consolidated financial
statements refers to the adoption of FASB 142, "Goodwill and Other Intangible
Assets," as of December 30, 2001 and Emerging Issues Task Force Issue No. 02-16,
"Accounting by a Customer (Including a Reseller) for Certain Consideration
Received from a Vendor," as of December 29, 2002.
/s/ KPMG LLP
New York, New York
March 10, 2004
F-2
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE PEPSI BOTTLING GROUP, INC.
IN MILLIONS
Balance
At Charged to Accounts Foreign Balance At
Beginning Cost and Written Currency End Of
Of Period Expenses Acquisitions Off Translation Period
--------- -------- ------------ --- ----------- ------
DESCRIPTION
FISCAL YEAR ENDED
DECEMBER 27, 2003
Allowance
for losses
on trade
accounts
receivable .. $67 $12 $-- $(8) $1 $72
FISCAL YEAR ENDED
DECEMBER 28, 2002
Allowance
for losses
on trade
accounts
receivable .. $42 $32 $14 $(22) $1 $67
FISCAL YEAR
ENDED
DECEMBER 29, 2001
Allowance
for losses
on trade
accounts
receivable .. $42 $9 $-- $(9) $-- $42
F-3
INDEX TO EXHIBITS
EXHIBIT
3.1 Articles of Incorporation of The Pepsi Bottling Group, Inc. ("PBG"), which are incorporated
herein by reference to Exhibit 3.1 to PBG's Registration Statement on Form S-1 (Registration
No. 333-70291).
3.2 By-Laws of PBG, which are incorporated herein by reference to Exhibit 3.2 to PBG's Registration
Statement on Form S-1 (Registration No. 333-70291).
3.3 Amendment to Articles of Incorporation of PBG, which is incorporated herein by reference to
Exhibit 3.3 to PBG's Registration Statement on Form S-1 (Registration No. 333-70291).
3.4 Amendment to Articles of Incorporation of PBG dated as of November 27, 2001, which is
incorporated herein by reference to Exhibit 3.4 to PBG's Annual Report on Form 10-K for the
year ended December 29, 2001.
4.1 Form of common stock certificate, which is incorporated herein by reference to Exhibit 4 to
PBG's Registration Statement on Form S-1 (Registration No. 333-70291).
4.2 Indenture dated as of February 8, 1999 among Pepsi Bottling Holdings, Inc., PepsiCo, Inc. and
The Chase Manhattan Bank, as trustee, relating to $1,000,000,000 5 3/8% Senior Notes due 2004
and $1,300,000,000 5 5/8% Senior Notes due 2009, which is incorporated herein by reference to
Exhibit 10.9 to PBG's Registration Statement on Form S-1 (Registration No. 333-70291).
4.3 First Supplemental Indenture dated as of February 8, 1999 among Pepsi Bottling Holdings, Inc.,
Bottling Group, LLC, PepsiCo, Inc. and The Chase Manhattan Bank, as trustee, supplementing the
Indenture dated as of February 8, 1999 among Pepsi Bottling Holdings, Inc., PepsiCo, Inc. and
The Chase Manhattan Bank, as trustee, which is incorporated herein by reference to Exhibit
10.10 to PBG's Registration Statement on Form S-1 (Registration No. 333-70291).
4.4 Indenture, dated as of March 8, 1999, by and among PBG, as obligor, Bottling Group, LLC, as
guarantor, and The Chase Manhattan Bank, as trustee, relating to $1,000,000,000 7% Series B
Senior Notes due 2029, which is incorporated herein by reference to Exhibit 10.14 to PBG's
Registration Statement on Form S-1 (Registration No. 333-70291).
4.5 U.S. $250,000,000 364-Day Second Amended and Restated Credit Agreement, dated as of May 1, 2002
among PBG, Bottling Group, LLC, JPMorgan Chase Bank, Citibank, N.A., Bank of America, N.A.,
Deutsche Bank AG New York Branch and/or Cayman Islands Branch, Credit Suisse First Boston, The
Northern Trust Company, Lehman Commercial Paper Inc., Royal Bank of Canada, Banco Bilbao
Vizcaya, The Bank of New York, Fleet National Bank, State Street Bank and Trust Company,
JPMorgan Chase Bank, as Agent, Banc of America Securities LLC and J.P. Morgan Securities Inc.
as Co-Lead Arrangers and Joint Book Managers and Bank of America, N.A. and Citibank, N.A., as
Co-Syndication Agents, which is incorporated herein by reference to Exhibit 4.7 to PBG's Annual
Report on Form 10-K for the year ended December 28, 2002.
E-1
4.6 U.S. $250,000,000 5-Year Credit Agreement, dated as of April 30, 2003 among The Pepsi Bottling
Group, Inc., Bottling Group, LLC, Citibank, N.A., Bank of America, N.A., Credit Suisse First
Boston, Cayman Islands Branch, Deutsche Bank AG New York Branch, JPMorgan Chase Bank, The
Northern Trust Company, Lehman Brothers Bank, FSB, Banco Bilbao Vizcaya Argentaria, HSBC Bank
USA, Fleet National Bank, The Bank of New York, State Street Bank and Trust Company, Comerica
Bank, Wells Fargo Bank, N.A., JPMorgan Chase Bank, as Agent, Citigroup Global Markets Inc. and
Banc of America Securities LLC, as Joint Lead Arrangers and Book Managers and Citibank, N.A.,
Bank of America, N.A., Credit Suisse First Boston, and Deutsche Bank Securities Inc. as
Syndication Agents, which is incorporated herein by reference to Exhibit 4.7 to Bottling Group,
LLC's registration statement on Form S-4/A (Registration No. 333-102035).
4.7 U.S. $250,000,000 364-Day Credit Agreement, dated as of April 30, 2003 among The Pepsi Bottling
Group, Inc., Bottling Group, LLC, Citibank, N.A., Bank of America, N.A., Credit Suisse First
Boston, Cayman Islands Branch, Deutsche Bank AG New York Branch, JPMorgan Chase Bank, The
Northern Trust Company, Lehman Brothers Bank, FSB, Banco Bilbao Vizcaya Argentaria, HSBC Bank
USA, Fleet National Bank, The Bank of New York, State Street Bank and Trust Company, Comerica
Bank, Wells Fargo Bank, N.A., JPMorgan Chase Bank, as Agent, Citigroup Global Markets Inc. and
Banc of America Securities LLC, as Joint Lead Arrangers and Book Managers and Citibank, N.A.,
Bank of America, N.A., Credit Suisse First Boston, and Deutsche Bank Securities Inc. as
Syndication Agents, which is incorporated herein by reference to Exhibit 4.8 to Bottling Group,
LLC's registration statement on Form S-4/A (Registration No. 333-102035).
4.8 Indenture, dated as of November 15, 2002, among Bottling Group, LLC, PepsiCo, Inc., as
Guarantor, and JPMorgan Chase Bank, as Trustee, relating to $1 Billion 4-5/8% Senior Notes due
November 15, 2012, which is incorporated herein by reference to Exhibit 4.8 to PBG's Annual
Report on Form 10-K for the year ended December 28, 2002.
4.9 Registration Rights Agreement, dated as of November 7, 2002 relating to the $1 Billion 4-5/8%
Senior Notes due November 15, 2012, which is incorporated herein by reference to Exhibit 4.9 to
PBG's Annual Report on Form 10-K for the year ended December 28, 2002.
4.10 Indenture, dated as of June 10, 2003 by and between Bottling Group, LLC, as Obligor, and
JPMorgan Chase Bank, as Trustee, relating to $250,000,000 4-1/8 % Senior Notes due June 15, 2015,
which is incorporated herein by reference to Exhibit 4.1 to Bottling Group, LLC's registration
statement on Form S-4 (Registration No. 333-106285).
4.11 Registration Rights Agreement dated June 10, 2003 by and among Bottling Group, LLC, J.P. Morgan
Securities Inc., Lehman Brothers Inc., Banc of America Securities LLC, Citigroup Global Markets
Inc, Credit Suisse First Boston LLC, Deutsche Bank Securities Inc., Blaylock & Partners, L.P.
and Fleet Securities, Inc, relating to $250,000,000 4-1/8 % Senior Notes due June 15, 2015, which
is incorporated herein by reference to Exhibit 4.3 to Bottling Group, LLC's registration
statement on Form S-4 (Registration No. 333-106285).
E-2
4.12 Indenture, dated as of October 1, 2003, by and between Bottling Group, LLC, as Obligor, and
JPMorgan Chase Bank, as Trustee, which is incorporated herein by reference to Exhibit 4.1 to
Bottling Group, LLC's Form 8-K dated October 3, 2003.
4.13 Form of Note for the $500,000,000 2.45% Senior Notes due October 16, 2006, which is incorporated
herein by reference to Exhibit 4.2 to Bottling Group, LLC's Form 8-K dated October 3, 2003.
4.14 Form of Note for the $400,000,000 5.00% Senior Notes due November 15, 2013, which is incorporated
herein by reference to Exhibit 4.1 to Bottling Group, LLC's Form 8-K dated November 13, 2003.
10.1 Form of Master Bottling Agreement, which is incorporated herein by reference to Exhibit 10.1 to
PBG's Registration Statement on Form S-1 (Registration No. 333-70291).
10.2 Form of Master Syrup Agreement, which is incorporated herein by reference to Exhibit 10.2 to
PBG's Registration Statement on Form S-1 (Registration No. 333-70291).
10.3 Form of Non-Cola Bottling Agreement, which is incorporated herein by reference to Exhibit 10.3
to PBG's Registration Statement on Form S-1 (Registration No. 333-70291).
10.4 Form of Separation Agreement, which is incorporated herein by reference to Exhibit 10.4 to
PBG's Registration Statement on Form S-1 (Registration No. 333-70291).
10.5 Form of Shared Services Agreement, which is incorporated herein by reference to Exhibit 10.5 to
PBG's Registration Statement on Form S-1 (Registration No. 333-70291).
10.6 Form of Tax Separation Agreement, which is incorporated herein by reference to Exhibit 10.6 to
PBG's Registration Statement on Form S-1 (Registration No. 333-70291).
10.7 Form of Employee Programs Agreement, which is incorporated herein by reference to Exhibit 10.7
to PBG's Registration Statement on Form S-1 (Registration No. 333-70291).
10.8 PBG Executive Income Deferral Plan, which is incorporated herein by reference to Exhibit 10.8
to PBG's Annual Report on Form 10-K for the year ended December 25, 1999.
10.9 PBG 1999 Long-Term Incentive Plan, which is incorporated herein by reference to Exhibit 10.9 to
PBG's Annual Report on Form 10-K for the year ended December 25, 1999.
10.10 PBG Directors' Stock Plan, which is incorporated herein by reference to Exhibit 10.10 to PBG's
Annual Report on Form 10-K for the year ended December 25, 1999.
10.11 PBG Stock Incentive Plan, which is incorporated herein by reference to Exhibit 10.11 to PBG's
Annual Report on Form 10-K for the year ended December 25, 1999.
E-3
10.12 Amended PBG Executive Income Deferral Program, which is incorporated herein by reference to
Exhibit 10.12 to PBG's Annual Report on Form 10-K for the year ended December 30, 2000.
10.13 PBG Long Term Incentive Plan, which is incorporated herein by reference to Exhibit 10.13 to
PBG's Annual Report on Form 10-K for the year ended December 30, 2000.
10.14 PBG Directors' Stock Plan, which is incorporated by reference to Exhibit 10.14. to PBG's Annual
Report on Form 10-K for the year ended December 29, 2001.
10.15 Amendment No. 1 to the PBG Directors' Stock Plan, which is incorporated herein by reference to
Exhibit 10 to PBG's Quarterly Report on Form 10-Q for the quarter ended June 14, 2003.
10.16 2002 PBG Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.15. to PBG's Annual
Report on Form 10-K for the year ended December 28, 2002.
10.17 Form of Mexican Master Bottling Agreement, which is incorporated by reference to Exhibit 10.16.
to PBG's Annual Report on Form 10-K for the year ended December 28, 2002.
12* Statement re Computation of Ratios.
13* PBG 2003 Annual Report to Shareholders.
(Pages 18 through 63)
21* Subsidiaries of PBG.
23* Report and Consent of KPMG LLP.
24* Copy of Power of Attorney.
31.1* Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2* Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1* Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
32.2* Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
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* Filed herewith
E-4