UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the quarterly period ended June 12, 2004
-------------
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 1-14893
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THE PEPSI BOTTLING GROUP, INC.
------------------------------
(Exact name of registrant as specified in its charter)
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)
914-767-6000
------------
(Registrant's telephone number, including area code)
N/A
-----
(Former name, former address and former fiscal year, if changed since last
report.)
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No
--- ---
Number of shares of Common Stock outstanding as of July 10, 2004:
254,345,509
The Pepsi Bottling Group, Inc.
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Index
Page No.
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Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
12 and 24 weeks ended June 12, 2004 and June 14, 2003 2
Condensed Consolidated Statements of Cash Flows -
24 weeks ended June 12, 2004 and June 14, 2003 3
Condensed Consolidated Balance Sheets -
June 12, 2004 and December 27, 2003 4
Notes to Condensed Consolidated Financial Statements 5-11
Report of Independent Registered Public Accounting Firm 12
Item 2. Management's Financial Review 13-19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
Part II Other Information
Item 1. Legal Proceedings 21
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases
of Equity Securities 21-22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
PART I - FINANCIAL INFORMATION
Item 1.
The Pepsi Bottling Group, Inc.
Condensed Consolidated Statements of Operations
in millions, except per share amounts, unaudited
12 Weeks Ended 24 Weeks Ended
-------------- --------------
June 12, June 14, June 12, June 14,
2004 2003 2004 2003
------ ------ ------ ------
Net revenues............................................................... $2,675 $2,532 $4,742 $4,406
Cost of sales.............................................................. 1,378 1,290 2,429 2,217
------ ------ ------ ------
Gross profit............................................................... 1,297 1,242 2,313 2,189
Selling, delivery and administrative expenses.............................. 1,011 971 1,890 1,798
------ ------ ------ ------
Operating income........................................................... 286 271 423 391
Interest expense, net...................................................... 53 57 108 110
Other non-operating expenses, net.......................................... 2 - 2 3
Minority interest.......................................................... 15 15 21 20
------ ------ ------ ------
Income before income taxes................................................. 216 199 292 258
Income tax expense......................................................... 74 68 100 88
------ ------ ------ ------
Income before cumulative effect of change in accounting
principle.................................................................. 142 131 192 170
Cumulative effect of change in accounting principle, net of
tax and minority interest.................................................. - - - 6
------ ------ ------ ------
Net income................................................................. $ 142 $ 131 $ 192 $ 164
====== ====== ====== ======
Basic earnings per share before cumulative effect of change
in accounting principle.................................................... $ 0.55 $ 0.48 $ 0.74 $ 0.61
Cumulative effect of change in accounting principle........................ - - - (0.02)
------ ------ ------ ------
Basic earnings per share................................................... $ 0.55 $ 0.48 $ 0.74 $ 0.59
====== ====== ====== ======
Weighted-average shares outstanding........................................ 258 273 259 276
Diluted earnings per share before cumulative effect of change
in accounting principle.................................................... $ 0.53 $ 0.47 $ 0.72 $ 0.60
Cumulative effect of change in accounting principle........................ - - - (0.02)
------ ------ ------ ------
Diluted earnings per share................................................. $ 0.53 $ 0.47 $ 0.72 $ 0.58
====== ====== ====== ======
Weighted-average shares outstanding........................................ 267 279 268 283
See accompanying notes to Condensed Consolidated Financial Statements.
-2-
The Pepsi Bottling Group, Inc.
Condensed Consolidated Statements of Cash Flows
in millions, unaudited
24 Weeks Ended
--------------
June 12, June 14,
2004 2003
------ ------
Cash Flows - Operations
Net income................................................................ $ 192 $ 164
Adjustments to reconcile net income to net cash provided by operations:
Depreciation............................................................ 258 244
Amortization............................................................ 6 4
Deferred income taxes................................................... 31 34
Cumulative effect of change in accounting principle..................... - 6
Other non-cash charges and credits, net................................. 122 142
Changes in operating working capital, excluding effects of acquisitions:
Accounts receivable, net............................................... (242) (256)
Inventories, net....................................................... (126) (68)
Prepaid expenses and other current assets.............................. (8) (18)
Accounts payable and other current liabilities......................... 121 (41)
Income taxes payable................................................... 30 20
------ ------
Net change in operating working capital ................................ (225) (363)
------ ------
Pension contributions.................................................. (51) -
Other, net............................................................. (20) (16)
------ ------
Net Cash Provided by Operations............................................. 313 215
------ ------
Cash Flows - Investments
Capital expenditures...................................................... (270) (282)
Acquisitions of bottlers.................................................. (7) (83)
Sale of property, plant and equipment..................................... 5 2
------ ------
Net Cash Used for Investments............................................... (272) (363)
------ ------
Cash Flows - Financing
Short-term borrowings - three months or less.............................. 200 84
Proceeds from issuance of long-term debt.................................. 17 248
Repayments of long-term debt.............................................. (1,008) (3)
Dividends paid............................................................ (5) (6)
Proceeds from exercise of stock options................................... 65 21
Purchases of treasury stock............................................... (298) (228)
------ ------
Net Cash (Used for) Provided by Financing................................... (1,029) 116
------ ------
Effect of Exchange Rate Changes on Cash and Cash Equivalents................ (2) 3
------ ------
Net Decrease in Cash and Cash Equivalents................................... (990) (29)
Cash and Cash Equivalents - Beginning of Period............................. 1,235 222
------ ------
Cash and Cash Equivalents - End of Period................................... $ 245 $ 193
====== ======
Supplemental Cash Flow Information
Net third-party interest paid............................................... $ 130 $ 120
====== ======
Income taxes paid........................................................... $ 39 $ 39
====== ======
See accompanying notes to Condensed Consolidated Financial Statements.
-3-
The Pepsi Bottling Group, Inc.
Condensed Consolidated Balance Sheets
in millions, except per share amounts
(Unaudited)
June 12, December 27,
2004 2003
------- -------
Assets
Current Assets
Cash and cash equivalents.................................................. $ 245 $ 1,235
Accounts receivable, less allowance of $67 at
June 12, 2004 and $72 at December 27, 2003.............................. 1,202 994
Inventories................................................................ 497 374
Prepaid expenses and other current assets.................................. 254 268
Investment in debt defeasance trust........................................ - 168
------- -------
Total Current Assets.................................................... 2,198 3,039
Property, plant and equipment, net......................................... 3,399 3,423
Other intangible assets, net............................................... 3,525 3,562
Goodwill................................................................... 1,389 1,386
Other assets............................................................... 130 134
------- -------
Total Assets............................................................ $10,641 $11,544
======= =======
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and other current liabilities............................. $ 1,346 $ 1,231
Short-term borrowings...................................................... 265 67
Current maturities of long-term debt....................................... 28 1,180
------- -------
Total Current Liabilities............................................... 1,639 2,478
Long-term debt............................................................. 4,467 4,493
Other liabilities.......................................................... 906 875
Deferred income taxes...................................................... 1,420 1,421
Minority interest.......................................................... 413 396
------- -------
Total Liabilities....................................................... 8,845 9,663
------- -------
Shareholders' Equity
Common stock, par value $0.01 per share:
authorized 900 shares, issued 310 shares................................. 3 3
Additional paid-in capital................................................. 1,735 1,743
Retained earnings.......................................................... 1,648 1,471
Accumulated other comprehensive loss....................................... (440) (380)
Deferred compensation...................................................... (4) (4)
Treasury stock: 55 shares and 49 shares at June 12, 2004 and December 27,
2003, respectively....................................................... (1,146) (952)
------- -------
Total Shareholders' Equity.............................................. 1,796 1,881
------- -------
Total Liabilities and Shareholders' Equity.............................. $10,641 $11,544
======= =======
See accompanying notes to Condensed Consolidated Financial Statements.
-4-
Notes to Condensed Consolidated Financial Statements
Tabular dollars in millions, except per share data
- --------------------------------------------------------------------------------
Note 1 - Basis of Presentation
The Pepsi Bottling Group, Inc. ("PBG" or the "Company") is the world's
largest manufacturer, seller and distributor of Pepsi-Cola beverages, consisting
of bottling operations located in the United States, Mexico, Canada, Spain,
Greece, Russia and Turkey. When used in these Condensed Consolidated Financial
Statements, "PBG," "we," "our" and "us" each refers to The Pepsi Bottling Group,
Inc. and, where appropriate, to Bottling Group, LLC ("Bottling LLC"), our
principal operating subsidiary.
As of June 12, 2004, PepsiCo Inc.'s ("PepsiCo") ownership consisted of
41.5% of our outstanding common stock and 100% of our outstanding Class B common
stock, together representing 46.7% of the voting power of all classes of our
voting stock. PepsiCo also owns approximately 6.8% of the equity of Bottling
Group, LLC, our principal operating subsidiary.
The accompanying Condensed Consolidated Balance Sheet at June 12, 2004, the
Condensed Consolidated Statements of Operations for the twelve and twenty-four
weeks ended June 12, 2004 and June 14, 2003 and the Condensed Consolidated
Statements of Cash Flows for the twenty-four weeks ended June 12, 2004 and June
14, 2003 have not been audited, but have been prepared in conformity with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. These Condensed Consolidated Financial Statements should
be read in conjunction with the audited consolidated financial statements for
the fiscal year ended December 27, 2003 as presented in our Annual Report on
Form 10-K. In the opinion of management, this interim information includes all
material adjustments, which are of a normal and recurring nature, necessary for
a fair presentation.
Our U.S. and Canadian operations report using a fiscal year that consists
of 52 weeks, ending on the last Saturday in December. Every five or six years a
53rd week is added. Our remaining countries report using a calendar-year basis.
Accordingly, we recognize our quarterly business results as outlined below:
Quarter U.S. & Canada Mexico & Europe
------- ------------- ---------------
First Quarter 12 weeks January and February
Second Quarter 12 weeks March, April and May
Third Quarter 12 weeks June, July and August
Fourth Quarter 16 weeks September, October,
November and December
Certain reclassifications were made in our Condensed Consolidated Financial
Statements to 2003 amounts to conform to the 2004 presentation.
Note 2 - Seasonality of Business
The results for the second quarter are not necessarily indicative of the
results that may be expected for the full year because of business seasonality.
The seasonality of our operating results arises from higher sales in the second
and third quarters versus the first and fourth quarters of the year, combined
with the impact of fixed costs, such as depreciation and interest, which are not
significantly impacted by business seasonality.
-5-
Note 3 - New Accounting Standards
EITF 02-16
In January 2003, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 02-16, "Accounting by a Customer (Including a Reseller)
for Certain Consideration Received from a Vendor," addressing the recognition
and income statement classification of various cash consideration given by a
vendor to a customer. The consensus requires that certain cash consideration
received by a customer from a vendor is 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. Prior to 2003, 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. During
2003, we 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.
FASB Staff Position FAS 106-2
During the second quarter, the Financial Accounting Standards Board
("FASB") issued FASB Staff Position FAS 106-2, "Accounting and Disclosure
Requirements Relating to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003". See Note 8 - Pension and Postretirement Benefit
Plans for further details regarding the impact of FASB Staff Position FAS 106-2.
Share-Based Payments
The FASB has issued an exposure draft proposing to expense the fair value
of share-based payments to employees beginning in 2005. We are currently
evaluating the impact of this proposed standard on our financial statements.
Note 4 - Stock-Based Compensation
We measure stock-based compensation expense using the intrinsic value
method in accordance with Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and its related interpretations.
Accordingly, compensation expense for stock option grants to our employees is
measured as the excess of the quoted market price of common stock at the grant
date over the amount the employee must pay for the stock. Our policy is to grant
stock options at fair value on the date of grant. As allowed by Statement of
Financial Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure," we have elected to continue to apply
the intrinsic value-based method of accounting described above, and have adopted
the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation." If we had measured compensation cost for the stock awards granted
to our employees under the fair-value based method prescribed by SFAS No. 123,
net income would have been changed to the pro forma amounts set forth below:
-6-
12 Weeks Ended 24 Weeks Ended
-------------- --------------
June 12, June 14, June 12, June 14,
2004 2003 2004 2003
----- ----- ----- -----
Net income:
As reported..................................................... $ 142 $ 131 $ 192 $ 164
Add: Total stock-based employee compensation expense
included in reported net income, net of taxes and
minority interest......................................... 0 1 1 2
Less: Total stock-based employee compensation expense
determined under fair-value based method for all
awards, net of taxes and minority interest................ (9) (10) (19) (20)
----- ----- ----- -----
Pro forma....................................................... $ 133 $ 122 $ 174 $ 146
===== ===== ===== =====
Earnings per share:
Basic - as reported.......................................... $0.55 $0.48 $0.74 $0.59
Basic - pro forma............................................ 0.52 0.44 0.67 0.53
Diluted - as reported........................................ $0.53 $0.47 $0.72 $0.58
Diluted - pro forma.......................................... 0.50 0.44 0.64 0.52
Pro forma compensation cost measured for stock options granted to employees
is amortized using a straight-line basis over the vesting period, which is
typically three years.
The fair value of PBG stock options used to compute pro forma net income
disclosures was estimated on the date of grant using the Black-Scholes
option-pricing model based on the following weighted-average assumptions:
12 Weeks Ended 24 Weeks Ended
-------------- --------------
June 12, June 14, June 12, June 14,
2004 2003 2004 2003
----- ----- ----- -----
Risk-free interest rate......................................... 3.1% 3.0% 3.2% 2.8%
Expected life................................................... 6 years 6 years 6 years 6 years
Expected volatility............................................. 35% 37% 35% 37%
Expected dividend yield......................................... 0.66% 0.22% 0.68% 0.17%
Note 5 - Inventories
June 12, December 27,
2004 2003
----- -----
Raw materials and supplies...................................... $ 178 $ 140
Finished goods.................................................. 319 234
----- -----
$ 497 $ 374
===== =====
-7-
Note 6 - Property, plant and equipment, net
June 12, December 27,
2004 2003
------- -------
Land............................................................ $ 253 $ 241
Buildings and improvements...................................... 1,211 1,185
Manufacturing and distribution equipment........................ 3,033 3,028
Marketing equipment............................................. 2,172 2,131
Other........................................................... 174 176
------- -------
6,843 6,761
Accumulated depreciation........................................ (3,444) (3,338)
------- -------
$ 3,399 $ 3,423
======= =======
Note 7 - Other intangible assets, net and Goodwill
June 12, December 27,
2004 2003
------- -------
Intangibles subject to amortization:
Gross carrying amount:
Customer relationships and lists ...................... $ 45 $ 42
Franchise rights....................................... 24 23
Other identified intangibles........................... 28 27
------- -------
97 92
------- -------
Accumulated amortization:
Customer relationships and lists ...................... (4) (3)
Franchise rights....................................... (12) (10)
Other identified intangibles........................... (15) (12)
------- -------
(31) (25)
------- -------
Intangibles subject to amortization, net........................ 66 67
------- -------
Intangibles not subject to amortization:
Carrying amount:
Franchise rights....................................... 2,883 2,908
Distribution rights.................................... 280 286
Trademarks............................................. 203 207
Other identified intangibles........................... 93 94
------- -------
Intangibles not subject to amortization.................... 3,459 3,495
------- -------
Total other intangible assets, net.............................. $ 3,525 $ 3,562
======= =======
Goodwill........................................................ $ 1,389 $ 1,386
======= =======
-8-
For intangible assets subject to amortization, we calculate amortization
expense on a straight-line basis over the period we expect to receive economic
benefit. Total amortization expense was $6 million and $4 million for the
twenty-four weeks ended June 12, 2004 and June 14, 2003, respectively. The
weighted-average amortization period for each category of intangible assets and
their estimated aggregate amortization expense expected to be recognized over
the next five years are as follows:
Weighted-Average Estimated Aggregate Amortization Expense to be Incurred
---------------- -------------------------------------------------------
Amortization
------------
Period
-------
Balance of Fiscal Year Ending
---------- ------------------
2004 2005 2006 2007 2008
---- ---- ---- ---- ----
Customer relationships and lists.......... 17-20 years $1 $3 $3 $3 $3
Franchise rights.......................... 5 years $2 $5 $2 $1 $-
Other identified intangibles.............. 6 years $3 $4 $3 $2 $1
Note 8 - Pension and Postretirement Benefit Plans
Pension Benefits
Our U.S. employees participate in noncontributory defined benefit pension
plans, which cover substantially all full-time salaried employees, as well as
most hourly employees. Benefits generally are based on years of service and
compensation, or stated amounts for each year of service. All of our qualified
plans are funded and contributions are made in amounts not less than minimum
statutory funding requirements and not more than the maximum amount that can be
deducted for U.S. income tax purposes. Our net pension expense for the defined
benefit plans for our operations outside the U.S. was not significant and is not
included in the tables presented below.
Our U.S. employees are also eligible to participate in our 401(k) savings
plans, which are voluntary defined contribution plans. We make matching
contributions to the 401(k) savings plans on behalf of participants eligible to
receive such contributions. If a participant has one or more but less than 10
years of eligible service, our match will equal $0.50 for each dollar the
participant elects to defer up to 4% of the participant's pay. If the
participant has 10 or more years of eligible service, our match will equal $1.00
for each dollar the participant elects to defer up to 4% of the participant's
pay.
-9-
Components of our pension expense for the twelve and twenty-four weeks
ended June 12, 2004 and June 14, 2003 are as follows:
12 Weeks Ended 24 Weeks Ended
-------------- --------------
June 12, June 14, June 12, June 14,
2004 2003 2004 2003
----- ----- ------ ------
Service cost................................................. $ 10 $ 9 $ 20 $ 17
Interest cost................................................ 16 14 32 29
Expected return on plan assets............................... (19) (16) (38) (31)
Amortization of prior service cost........................... 2 2 3 3
Amortization of net loss..................................... 5 3 11 6
---- ---- ---- ----
Net pension expense for the defined benefit plans............ 14 12 28 24
---- ---- ---- ----
Defined contribution plans expense........................... 5 4 10 9
---- ---- ---- ----
Total pension expense recognized in the Condensed
Consolidated Statements of Operations........................ $ 19 $ 16 $ 38 $ 33
==== ==== ==== ====
We expect to contribute $100 million to our pension plans in 2004. As of
June 12, 2004, $51 million of contributions to our pension plans have been made.
Postretirement Benefits
Our postretirement plans provide medical and life insurance benefits
principally to U.S. retirees and their dependents. Employees are eligible for
benefits if they meet age and service requirements and qualify for retirement
benefits. The plans are not funded and since 1993 have included retiree cost
sharing.
Components of our postretirement benefits expense for the twelve and
twenty-four weeks ended June 12, 2004 and June 14, 2003 are as follows:
12 Weeks Ended 24 Weeks Ended
-------------- --------------
June 12, June 14, June 12, June 14,
2004 2003 2004 2003
----- ----- ----- ------
Service cost................................................. $ 1 $ 1 $ 2 $ 2
Interest cost................................................ 4 4 9 9
Amortization of net loss..................................... 1 1 2 1
--- --- ---- ----
Net postretirement benefits expense recognized in the
Condensed Consolidated Statements of Operations.............. $ 6 $ 6 $ 13 $ 12
=== === ==== ====
On May 19, 2004, FASB Staff Position No. FAS 106-2 ("FSP") was issued by
FASB to provide guidance relating to the prescription drug subsidy provided by
the Medicare Prescription Drug, Improvement and Modernization Act of 2003
("Act"). We currently provide postretirement benefits to a group of retirees
(employees who retired prior to 1993) with little or no cost sharing. For these
retirees, the prescription drug benefit provided by us would be considered to be
actuarially equivalent to the benefit provided under the Act. Therefore, we have
retroactively applied the FSP to the date of enactment. As a result:
o The obligation (Accumulated Projected Benefit Obligation) decreased by
$11.7 million, and
-10-
o The net periodic postretirement benefits cost decreased by $0.3 million
for twelve and twenty-four weeks ended June 12, 2004
We also provide postretirement benefits to another group of retirees
(employees who retired after 1992) with cost sharing. At present, due to the
lack of clarifying regulations related to the Act, we cannot determine if the
benefit provided by us would be considered actuarially equivalent to the benefit
provided under the Act.
Note 9 - Geographic Data
We operate in one industry, carbonated soft drinks and other ready-to-drink
beverages. We conduct business in all or a portion of the United States, Mexico,
Canada, Spain, Russia, Greece and Turkey.
Net Revenues 12 Weeks Ended 24 Weeks Ended
- ------------ -------------- --------------
June 12, June 14, June 12, June 14,
2004 2003 2004 2003
-------- -------- -------- --------
U.S.......................................................... $ 1,909 $ 1,797 $ 3,535 $ 3,293
Mexico....................................................... 276 308 434 465
Other countries.............................................. 490 427 773 648
------- ------- ------- -------
$ 2,675 $ 2,532 $ 4,742 $ 4,406
======= ======= ======= =======
Long-Lived Assets June 12, December 27,
- ----------------- 2004 2003
-------- --------
U.S.......................................................... $ 5,715 $ 5,723
Mexico....................................................... 1,422 1,432
Other countries.............................................. 1,306 1,350
------- -------
$ 8,443 $ 8,505
======= =======
Note 10 - Comprehensive Income
12 Weeks Ended 24 Weeks Ended
-------------- --------------
June 12, June 14, June 12, June 14,
2004 2003 2004 2003
------ ------ ------- ------
Net income................................................... $ 142 $ 131 $ 192 $ 164
Currency translation adjustment.............................. (59) 166 (57) 142
Cash flow hedge adjustment (a) (b)........................... (4) - (3) 7
----- ----- ----- -----
Comprehensive income......................................... $ 79 $ 297 $ 132 $ 313
===== ===== ===== =====
(a) Net of minority interest and taxes of $4 and $0 for the 12 weeks ended June
12, 2004 and June 14, 2003, respectively.
(b) Net of minority interest and taxes of $3 and $6 for the twenty-four weeks
ended June 12, 2004 and June 14, 2003, respectively.
Note 11 - Contingencies
We are subject to various claims and contingencies related to lawsuits,
taxes and environmental and other matters arising out of the normal course of
business. We believe that the ultimate liability arising from such claims or
contingencies, if any, in excess of amounts already recognized is not likely to
have a material adverse effect on our results of operations, financial condition
or liquidity.
-11-
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
The Board of Directors & Shareholders of
The Pepsi Bottling Group, Inc:
We have reviewed the accompanying condensed consolidated balance sheet of The
Pepsi Bottling Group, Inc. and subsidiaries as of June 12, 2004, the related
condensed consolidated statements of operations for the twelve week and
twenty-four week periods ended June 12, 2004 and June 14, 2003, respectively,
and the related condensed consolidated statements of cash flows for the twenty-
four week periods ended June 12, 2004 and June 14, 2003. These condensed
consolidated financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the Public
Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with accounting principles generally accepted in the
United States of America.
We have previously audited, in accordance with standards established by the
Public Company Accounting Oversight Board (United States), the consolidated
balance sheet of The Pepsi Bottling Group, Inc. and subsidiaries as of December
27, 2003, and the related consolidated statements of operations, cash flows and
changes in shareholders' equity, for the fiscal year then ended not presented
herein; and in our report dated January 27, 2004, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 27, 2003, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
/s/ KPMG LLP
New York, New York
July 8, 2004
-12-
Item 2.
Management's Financial Review
Tabular dollars in millions, except per share data
OVERVIEW
- --------
The Pepsi Bottling Group, Inc. ("PBG" or the "Company") is the world's
largest manufacturer, seller and distributor of Pepsi-Cola beverages. We have
the exclusive right to manufacture, sell and distribute Pepsi-Cola beverages in
all or a portion of the United States, Mexico, Canada, Spain, Greece, Russia and
Turkey. When used in these Condensed Consolidated Financial Statements, "PBG,"
"we," "our" and "us" each refers to The Pepsi Bottling Group, Inc. and, where
appropriate, to Bottling Group, LLC ("Bottling LLC"), our principal operating
subsidiary .
Management's Financial Review should be read in conjunction with the
accompanying unaudited financial statements and our Annual Report on Form 10-K
for the fiscal year ended December 27, 2003, which include additional
information about our accounting policies, practices and the transactions that
underlie our financial results.
Financial Performance Summary
- -----------------------------
12 Weeks Ended 24 Weeks Ended
-------------- --------------
June 12, June 14, % June 12, June 14, %
2004 2003 Change 2004 2003 Change
------- ------- ------ ------- ------- ------
Net revenues....................... $2,675 $2,532 6% $4,742 $4,406 8%
Operating income................... 286 271 6% 423 391 8%
Income before cumulative effect
of change in accounting
principle 1........................ 142 131 9% 192 170 13%
Net income......................... 142 131 9% 192 164 17%
Diluted earnings per share
before cumulative effect of
change in accounting
principle 1, 2..................... $ 0.53 $ 0.47 14% $ 0.72 $ 0.60 20%
Diluted earnings per share 2....... $ 0.53 $ 0.47 14% $ 0.72 $ 0.58 24%
1 - Cumulative effect of change in accounting principle for the twenty-four
weeks ended June 14, 2003, reflects the impact of adoption of EITF Issue No.
02-16. See Note 3 - New Accounting Standards in the Notes to Condensed
Consolidated Financial Statements for more information.
2 - Percentage change for diluted earnings per share and diluted earnings per
share before cumulative effect of change in accounting principle is calculated
by using earnings per share data that is expanded to the fourth decimal place.
For the second quarter, diluted earnings per share increased 14% to $0.53
and operating income grew 6% to $286 million, reflecting strong topline results
in the United States. This growth was driven by both volume and net revenue per
case improvements. Worldwide volume increased 2% in the second quarter
reflecting solid volume growth in the U.S. and Europe, partially offset by
-13-
volume declines in Mexico. Worldwide net revenue per case growth increased 4% in
the second quarter, exceeding our expectations. We have remained committed to
our pricing principles, and continue to seek opportunities for net revenue per
case gains by leveraging both rate and mix strategies.
Due to the solid earnings growth in the first half of the year, we have
raised our full-year earnings expectations for 2004 to a range of $1.68 to
$1.74. For the full year of 2004, operating income is expected to grow in the
mid-single digits driven by volume growth of 2% to 3% and net revenue per case
growth of 2% to 3%. Our cost of goods sold per case is expected to grow 3% to 5%
for the full year of 2004. We expect our full year outlook of operating profits
for Mexico to be at the lower end of our guidance of $75 million to $85 million.
Volume
12 Weeks Ended 24 Weeks Ended
June 12, 2004 vs. June 12, 2004 vs.
June 14, 2003 June 14, 2003
----------------- -----------------
World- Outside World- Outside
wide U.S. the U.S. wide U.S. the U.S
------ ------ -------- ------ ------ -------
Volume change ..... 2 % 3 % 1 % 3 % 4 % 2 %
Our reported worldwide physical case volume increased 2% in the second
quarter and 3% in the first twenty-four weeks of 2004, when compared with
similar periods of 2003. The increase in reported worldwide volume was driven by
strong growth in the U.S. and Europe, partially offset by volume declines in
Mexico.
In the U.S., our reported volume increased by 3% in the second quarter and
4% on a year-to-date basis due to growth in both the cold-drink and take-home
channels of our business. As consumers continue to seek a greater variety of
beverages, we have seen corresponding growth in our non-carbonated beverage
portfolios, driven by AQUAFINA and TROPICANA juice drinks. Additionally,
Trademark PEPSI has continued to show positive results reflecting solid
contributions from our diet portfolio as well as the addition of PEPSI VANILLA.
In Europe, volume grew 10% in the second quarter and 12% on a year-to-date
basis, driven by strong performances in Russia and Turkey. In Russia, we had
solid growth in our core brands, coupled with contributions from new product
introductions, including TROPICANA juice drinks and LIPTON ICED TEAS. In Turkey,
there was continued improved execution in the marketplace, particularly with our
large format customers, resulting primarily from an improvement in our selling
and distribution capabilities.
Excluding the impact of acquisitions, Mexico's volume declined 7% in the
second quarter and 5% on a year-to-date basis, which was below our expectations.
Mexico's volume declines were driven primarily by softness in our jug water
business. As jug water comprises 40% of Mexico's volume, one of our priorities
is to develop this key component our business. There were also declines in our
carbonated soft drink volume in Mexico, however, we saw continued positive
trends in our eight-ounce equivalent case volume (one eight-ounce case is equal
to 192 U.S. fluid ounces of finished beverages), resulting from the upsizing
initiatives of the 2.5-liter carbonated soft drink package.
Our worldwide volume in the second half of 2004 is expected to grow 2%,
reflecting growth in the United States of 1% and a continued strong performance
in Europe. In Mexico, for the second half of 2004, we expect physical case
volume declines in the low single digits.
-14-
Net Revenues
12 Weeks Ended 24 Weeks Ended
June 12, 2004 vs. June 12, 2004 vs.
June 14, 2003 June 14, 2003
----------------- -----------------
World- Outside World- Outside
wide U.S. the U.S. wide U.S. the U.S.
----- ---- -------- ----- ----- --------
Volume impact......................... 2 % 3 % 1 % 3 % 4 % 2 %
Net price per case impact (rate/mix).. 4 % 3 % 2 % 4 % 3 % 3 %
Effect of currency translations....... 0 % 0 % 1 % 1 % 0 % 3 %
----- ----- ----- ----- ----- -----
Total Net Revenues change......... 6 % 6 % 4 % 8 % 7 % 8 %
===== ===== ===== ===== ===== =====
Net revenues were $2.7 billion for the second quarter and $4.7 billion for
the first twenty-four weeks in 2004, a 6% and 8% respective increase over
similar periods in 2003. The increases in net revenues for the quarter and on a
year-to-date basis were driven by improvements in volume and growth in net
revenue per case of 4%.
In the U.S., net revenues increased 6% in the second quarter and 7% for the
first twenty-four weeks of 2004, when compared with the similar periods of 2003.
The increases in net revenues in the U.S. were driven by growth in both volume
and net price per case. The 3% increase in net price per case in the U.S. for
the quarter and on a year-to-date basis was due to a combination of rate
increases and mix benefits. Net price per case in the U.S. continues to benefit
from the strong cold drink growth, which is our most profitable business. This
growth was driven by the additional space we allocated to our core soft drinks,
as well as the introduction of new products including the launch of TROPICANA
juice drinks and PEPSI VANILLA.
Net revenues outside the U.S. grew approximately 4% in the second quarter
and 8% for the first twenty-four weeks of 2004. The increases in net revenues
outside the U.S. for the quarter and on a year-to-date basis were driven by
volume and net price per case growth in Europe and Canada coupled with the
favorable impact of foreign exchange. This growth was partially offset by a 10%
and 7% decline in net revenues in Mexico for the quarter and the first
twenty-four weeks of 2004, respectively, due primarily to decreases in volume
and the devaluation of the Mexican peso.
In the second quarter, approximately 71% of our net revenues was generated
in the U.S., 10% of our net revenues was generated in Mexico and the remaining
19% was generated outside the U.S. and Mexico. On a year-to-date basis,
approximately 75% of our net revenues was generated in the U.S., 9% of our net
revenues was generated in Mexico and the remaining 16% was generated outside the
U.S. and Mexico.
We expect our worldwide net revenue per case to grow about 2% in the second
half of the year in 2004, driven by 2% to 3% net revenue per case growth in the
United States as we leverage both our rate and mix strategies.
-15-
Cost of Sales
12 Weeks Ended 24 Weeks Ended
June 12, 2004 vs. June 12, 2004 vs.
June 14, 2003 June 14, 2003
----------------- -----------------
World- Outside World- Outside
wide U.S. the U.S. wide U.S. the U.S.
------ ----- --------- ------ ----- ---------
Volume impact......................... 2 % 3 % 1 % 3 % 4 % 2 %
Costs per case impact................. 4 % 4 % 5 % 5 % 5 % 5 %
Currency translation.................. 1 % 0 % 1 % 2 % 0 % 4 %
----- ----- ----- ----- ---- ----
Total Cost of Sales change....... 7 % 7 % 7 % 10 % 9 % 11 %
===== ===== ===== ===== ===== ====
Cost of sales was $1.4 billion in the second quarter and $2.4 billion for
the first twenty-four weeks of 2004, a 7% and 10% respective increase over
similar periods in 2003. The growth in cost of sales on a quarter and
year-to-date basis was driven primarily by volume and costs per case increases,
coupled with the negative impact of foreign currency translation.
In the U.S., cost of sales grew 7% in the second quarter and 9% for the
first twenty-four weeks of 2004, due to volume growth and increases in costs per
case. The increases in costs per case resulted from the impact of higher priced
products, including our non-carbonated products, coupled with higher commodity
costs.
Cost of sales outside the U.S. grew approximately 7% in the second quarter
and 11% for the first twenty-four weeks of 2004, reflecting increases in costs
per case in Europe and Mexico, coupled with volume growth in Europe and the
negative impact from foreign currency translation. Costs per case increases
outside the U.S. were driven by a mix shift into higher priced products and
packages, coupled with increases in certain commodity costs.
For the full year of 2004, we expect our worldwide cost of sales per case
to grow 3% to 5% as we continue to sell higher cost products.
Selling, Delivery and Administrative Expenses
12 Weeks Ended 24 Weeks Ended
June 12, 2004 vs. June 12, 2004 vs.
June 14, 2003 June 14, 2003
----------------- ------------------
World- Outside World- Outside
wide U.S. the U.S. wide U.S. the U.S.
------ ----- -------- ------ ----- ---------
Cost impact........................... 4 % 3 % 6 % 4 % 3 % 6 %
Currency translation.................. 0 % 0 % 2 % 1 % 0 % 4 %
---- ---- ---- ---- ---- ----
Total SD&A change................ 4 % 3 % 8 % 5 % 3 % 10 %
==== ==== ==== ==== ==== ====
Selling, delivery and administrative expenses were $1.0 billion in the
second quarter and $1.9 billion for the first twenty-four weeks of 2004, a 4%
and 5% respective increase over similar periods in 2003. The increase in
selling, delivery and administrative expenses in the U.S. resulted from
additional variable costs associated with volume growth, partially offset by
lower casualty insurance expenses. The increases in selling, delivery and
administrative expenses outside the U.S.
-16-
were driven primarily by higher operating costs in Mexico, Russia and Turkey,
coupled with the negative impact of foreign currency translation.
Selling, delivery and administrative expenses for the full year is expected
to grow in the low-single digits.
Operating Income
Operating income was $286 million in the second quarter and $423 million
for the first twenty-four weeks of 2004, a 6% and 8% respective increase over
similar periods in 2003. Growth in operating income was driven by a 16% and 15%
increase in the U.S. for the quarter and the first twenty-four weeks of 2004,
respectively. Operating income increases in the U.S. were due to strong topline
growth, partially offset by higher cost of sales and selling, delivery and
administrative expenses. This growth was partially offset by operating income
declines in Mexico due primarily to decreases in volume for both the quarter and
on a year-to-date basis.
Operating profit for the full year in 2004 is expected to increase in the
mid-single digits driven by the continued strong topline growth in the U.S.,
Europe and Canada.
Interest Expense, net
Interest expense, net decreased by $4 million in the second quarter and $2
million for the first twenty-four weeks of 2004, when compared with similar
periods of 2003, largely due to lower effective interest rates achieved on our
long-term debt.
For the full year of 2004, we expect interest expense, net to be between
$240 million to $245 million.
Income Tax Expense
Our effective tax rate for the twenty-four weeks ended 2004 and 2003 was
34.3% and 34.25%, respectively.
Liquidity and Financial Condition
- ---------------------------------
Cash Flows
Net operating cash provided by operations grew by $98 million to $313
million in the first half of 2004 due to higher profits, lapping of payments
related to the settlement of our New Jersey wage and hour litigation in 2003 and
working capital improvements. These upsides were partially offset by the timing
of pension contributions during 2004.
Net cash used for investments decreased by $91 million to $272 million,
principally reflecting lower acquisition spending.
Net cash used for financing increased by $1,145 million to $1,029 million
driven primarily by the repayment of our $1.0 billion note in February 2004 and
lower proceeds from long-term borrowings, coupled with higher share repurchases.
For the full year in 2004, we expect to achieve net cash provided by
operations of more than $1.2 billion. In addition, we expect capital
expenditures to be between $675 million and $700 million.
Liquidity and Capital Resources
We believe that our future cash flows from operations and borrowing
capacity will be sufficient to fund capital expenditures, acquisitions,
dividends and working capital requirements for the foreseeable future.
Additionally, we are currently in compliance with all debt covenants in our
indenture agreements and credit facilities.
-17-
During the first quarter we repaid our $1 billion 5.38% senior notes with
the proceeds we received from debt issued in the prior year.
We have a $500 million commercial paper program that is supported by a
credit facility, which is guaranteed by Bottling Group, LLC. During the second
quarter, we have renegotiated our two $250 million credit facilities into one
$500 million credit facility, which expires in April 2009. At June 12, 2004, we
had $115 million outstanding in commercial paper.
Due to the nature of our business, we require insurance coverage for
certain casualty risks. Given the rapidly increasing costs associated with
obtaining third-party insurance coverage for our casualty risks in the U.S., we
moved to a self-insurance program in 2002. In 2004, we are self-insured for
workers' compensation and automobile risks for occurrences up to $10 million,
and product and general liability risks for occurrences up to $5 million. For
losses exceeding these self-insurance thresholds, we purchase casualty insurance
from a third-party provider.
During the second quarter, we repaid our $160 million 9.75% senior notes by
liquidating our investments in our debt defeasance trust.
On June 22, 2004, we signed a letter of intent to purchase the Auburn,
Maine-based Pepsi bottling operation of Seltzer and Rydholm, Inc. We expect to
close in the fall of 2004.
Contractual Obligations
As of June 12, 2004, there have been no material changes outside the normal
course of business in the contractual obligations disclosed in Exhibit 13 to our
Annual Report on Form 10-K for the fiscal year ended December 27, 2003, under
the caption "Contractual Obligations," other than the repayment of our long-term
debt as discussed above.
-18-
Cautionary Statements
- ---------------------
Except for the historical information and discussions contained herein,
statements contained in this Form 10-Q may constitute forward-looking statements
as defined by the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on currently available competitive,
financial and economic data and our operating plans. These statements involve a
number of risks, uncertainties and other factors that could cause actual results
to be materially different. Among the events and uncertainties that could
adversely affect future periods are:
o changes in our relationship with PepsiCo that could have a material adverse
effect on our business and financial results;
o restrictions imposed by PepsiCo on our raw material suppliers that could
increase our costs;
o decreased demand for our product resulting from changes in consumers'
preferences;
o an inability to achieve volume growth through product and packaging
initiatives;
o lower-than-expected net pricing resulting from marketplace competition and
competitive pressures that may cause channel and product mix to shift from
more profitable cold drink channels and packages;
o material changes from expectations in the cost of raw materials and
ingredients;
o an inability to achieve cost savings;
o an inability to achieve the expected timing for returns on cold drink
equipment and related infrastructure expenditures;
o material changes in expected levels of bottler incentive payments from
PepsiCo;
o changes in product category consumption;
o unfavorable weather conditions in our markets;
o unforeseen economic and political changes;
o possible recalls of our products;
o an inability to meet projections for performance in newly acquired
territories;
o changes in laws and regulations, including restrictions on the sale of
carbonated soft drinks in schools, changes in food and drug laws,
transportation regulations, employee safety rules, labor laws, accounting
standards, taxation requirements (including unfavorable outcomes from
audits performed by various tax authorities) and environmental laws;
o changes in our debt ratings; and
o material changes in expected interest and currency exchange rates and
unfavorable market performance of our pension plan assets.
-19-
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
The overall risks to our international businesses include changes in
foreign governmental policies, and other political or economic developments.
These developments may lead to new product pricing, tax or other policies and
monetary fluctuations, which may adversely impact our business. In addition, our
results of operations and the value of the foreign assets are affected by
fluctuations in foreign currency exchange rates. Foreign currency gains and
losses reflect transaction gains and losses as well as translation gains and
losses arising from the re-measurement into U.S. dollars of the net monetary
assets of businesses in highly inflationary countries.
Item 4.
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 report on Form 10-Q. 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.
-20-
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings
- -----------------
On July 14, 2004, Bottling LLC accepted three criminal misdemeanor pleas
from the Onondaga District Attorney's Office and from the State of New York
Attorney General's Office relating to allegations that certain of Bottling LLC's
warehouses and distribution centers improperly discharged certain substances
into either storm drain systems or into publicly owned treatment works without
the requisite permits. The substances consisted of fountain syrup, outdated
beverage products, water used to wash vehicles, waste water from cleaning floors
or spills from vehicle maintenance activities. The pleas provided for a $200,000
penalty and the funding of an existing environmental program to remediate Lake
Onondaga for the benefit of that community in the amount of $2.78 million.
Item 2.
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
- --------------------------------------------------------------------------------
PBG Purchases of Equity Securities
- -----------------------------------
In the second quarter of 2004, we repurchased approximately 7.3 million
shares. Since the inception of our share repurchase program in October 1999,
73.4 million shares of PBG common stock have been repurchased. Our share
repurchases for the second quarter of, 2004, are as follows:
Maximum Number (or
Total Number of Total Number of Shares (or Approximate Dollar Value)
Shares (or Average Price Units) Purchased as Part of of Shares (or Units) that
Units) Paid per Share Publicly Announced Plans or May Yet Be Purchased
Period Purchased 1 (or Unit)2 Programs 3 Under the Plans or Programs 3
- --------------------------------------------------------------------------------------------------------------------
Period 4 1,925,000 $29.56 1,925,000 31,897,400
- --------
03/21/04-
04/17/04
- --------------------------------------------------------------------------------------------------------------------
Period 5 2,450,900 $29.34 2,450,900 29,446,500
- --------
04/18/04-
05/15/04
- --------------------------------------------------------------------------------------------------------------------
Period 6 2,887,500 $28.97 2,887,500 26,559,000
- --------
05/16/04-
06/12/04
- --------------------------------------------------------------------------------------------------------------------
Total 7,263,400 $29.25 7,263,400 26,559,000
1 Shares have only been repurchased through publicly announced programs.
-21-
2 Average share price excludes brokerage fees.
3 The PBG Board has authorized the repurchase of shares of common stock on
the open market and through negotiated transactions as follows:
Date Share Repurchase Program was Publicly Announced Number of Shares
Authorized to be
Repurchased
October 14, 1999....................................................... 20,000,000
July 13, 2000.......................................................... 10,000,000
July 11, 2001.......................................................... 20,000,000
May 28, 2003........................................................... 25,000,000
March 25, 2004......................................................... 25,000,000
----------
Total shares authorized to be repurchased as of June 12, 2004.......... 100,000,000
===========
Unless terminated by resolution of the PBG Board, each share repurchase
program expires when we have repurchased all shares authorized for
repurchase thereunder.
Item 4.
Submission of Matters to a Vote of Security Holders
- ----------------------------------------------------
(a) Annual Meeting of Shareholders of PBG was held on May 26, 2004.
(b) The names of all directors are set forth below. The proxies for the meeting
were solicited pursuant to Regulation 14A under the Securities Exchange Act of
1934. There were no solicitations in opposition to the nominees as listed in the
proxy and all such nominees were elected.
(c) A brief description of each matter voted on and the approximate number of
votes cast are as follows:
Number of Votes (millions)
--------------------------
Withheld/ Broker
Description of Proposals For Against Abstain Non-votes
- ------------------------ --- ------- -------- ---------
1) Election of Directors:
Linda G. Alvarado 252 N/A 10 N/A
Barry H. Beracha 253 N/A 9 N/A
John T. Cahill 258 N/A 3 N/A
Ira D. Hall 253 N/A 9 N/A
Thomas H. Kean 254 N/A 8 N/A
Susan D. Kronick 253 N/A 9 N/A
Blythe J. McGarvie 253 N/A 9 N/A
Margaret D. Moore 259 N/A 3 N/A
Rogelio Rebolledo 256 N/A 6 N/A
Clay G. Small 259 N/A 3 N/A
2) 2004 Long-Term Incentive Plan 175 75 1 10
3) Approval of the appointment of
KPMG LLP as independent auditors 258 3 1 N/A
-22-
Item 5.
Other Information
- ------------------
The financial statements of Bottling LLC, included in Bottling LLC's
Quarterly Report on Form 10-Q and filed with the SEC on July 21, 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 6.
Exhibits and Reports on Form 8-K
- --------------------------------
ITEM 6 (a). EXHIBITS
- --------------------
Exhibit No.
- -----------
4.1 U.S. $500,000,000 5-Year Credit Agreement dated as of April 28, 2004
among The Pepsi Bottling Group Inc., Bottling Group, LLC, JP Morgan
Chase Bank as Agent, Banc of America Securities LLC and Citigroup
Global Markets Inc., as Joint Lead Arrangers and Book Managers and
Bank of America, N.A., Citicorp USA, Inc., Credit Suisse First Boston
and Deutsche Bank Securities Inc., as Syndication Agents
10.1 PBG 2004 Long-Term Incentive Plan which is incorporated herein by
reference to Appendix B to PBG's Proxy Statement for the 2004 Annual
Meeting of Shareholders
11.1 Computation of Basic and Diluted Earnings Per Share
15.1 Accountants' Acknowledgement
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
ITEM 6 (b). REPORTS ON FORM 8-K
- -------------------------------
On March 30, 2004, we announced our preliminary results for the first
quarter ended March 20, 2004, and also affirmed our full year 2004 forecast.
On April 13, 2004, we announced our results for the first quarter ended
March 20, 2004, our second quarter 2004 forecast and also affirmed our full year
2004 forecast.
-23-
SIGNATURES
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 thereunto duly authorized.
THE PEPSI BOTTLING GROUP, INC.
-----------------------------
(Registrant)
Date: July 21, 2004 /s/ Andrea L. Forster
------------- ---------------------
Andrea L. Forster
Vice President and Controller
Date: July 21, 2004 /s/ Alfred H. Drewes
------------- --------------------
Alfred H. Drewes
Senior Vice President and
Chief Financial Officer