FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ---
ACT OF 1934 For the quarterly period ended March 18, 2000 (12 weeks)
-------------------------
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
-------
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 incorporate 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
--- ---
Number of shares of Capital Stock outstanding as of April 14, 2000:
148,006,266
The Pepsi Bottling Group, Inc.
Index
<TABLE>
<CAPTION>
Page No.
--------
Part I Financial Information
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
12 weeks ended March 18, 2000 and March 20, 1999 2
Condensed Consolidated Statements of Cash Flows -
12 weeks ended March 18, 2000 and March 20, 1999 3
Condensed Consolidated Balance Sheets -
March 18, 2000 and December 25, 1999 4
Notes to Condensed Consolidated Financial Statements 5-8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 9-13
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
Independent Accountants' Review Report 14
Part II Other Information and Signatures
Item 6. Exhibits 15
</TABLE>
-1-
PART I - FINANCIAL INFORMATION
Item 1.
The Pepsi Bottling Group, Inc.
Condensed Consolidated Statements of Operations
(in millions except per share amounts, unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended
--------------
March 18, March 20,
2000 1999
---- ----
<S> <C> <C>
Net Revenues ............................................... $ 1,545 $ 1,452
Cost of sales .............................................. 845 835
------- -------
Gross Profit ............................................... 700 617
Selling, delivery and administrative expenses .............. 625 575
------- -------
Operating Income ........................................... 75 42
Interest expense, net ...................................... 45 46
Foreign currency loss ...................................... - 1
Minority interest .......................................... 3 -
------ ------
Income (loss) before income taxes .......................... 27 (5)
Income tax expense (benefit) ............................... 10 (2)
------- -------
Net Income (Loss) .......................................... $ 17 $ (3)
======= =======
Basic and Diluted Earnings (Loss) per Share ................ $ 0.11 $ (0.06)
Weighted-Average Basic and Diluted Shares Outstanding ...... 149 55
Pro Forma Basic and Diluted Earnings (Loss) per Share ...... $ 0.11 $ (0.02)
Pro Forma Basic and Diluted Shares Outstanding (see note 6). 149 155
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
-2-
The Pepsi Bottling Group, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions, unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended
--------------
March 18, March 20,
2000 1999
---- ----
Cash Flows - Operations
<S> <C> <C>
Net income (loss).............................................................. $ 17 $ (3)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation.............................................................. 76 79
Amortization.............................................................. 30 29
Deferred income taxes..................................................... (11) (1)
Other non-cash charges and credits, net................................... 33 25
Changes in operating working capital, excluding effects of
acquisitions;
Trade accounts receivable............................................... (8) (17)
Inventories............................................................. (7) (15)
Prepaid expenses, deferred income taxes and other current assets........ (13) (12)
Accounts payable and other current liabilities.......................... (115) (11)
----- -----
Net change in operating working capital .................................. (143) (55)
----- -----
Net Cash Provided by Operations................................................... 2 74
----- -----
Cash Flows - Investments
Capital expenditures........................................................... (85) (82)
Acquisitions of bottlers....................................................... - (104)
Other, net..................................................................... (4) (8)
----- -----
Net Cash Used by Investments...................................................... (89) (194)
----- -----
Cash Flows - Financing
Short-term borrowings - three months or less................................... 19 -
Proceeds from third-party debt................................................. - 3,300
Replacement of PepsiCo allocated debt.......................................... - (3,300)
Payments of third-party debt................................................... (8) (45)
Dividend paid.................................................................. (3) -
Treasury stock transactions.................................................... (29) -
Increase in advances from PepsiCo.............................................. - 144
----- -----
Net Cash (Used) Provided by Financing............................................. (21) 99
----- -----
Effect of Exchange Rate Changes on Cash and Cash Equivalents...................... (1) (1)
----- -----
Net Decrease in Cash and Cash Equivalents......................................... (109) (22)
Cash and Cash Equivalents - Beginning of Period................................... 190 36
----- -----
Cash and Cash Equivalents - End of Period......................................... $ 81 $ 14
===== =====
Supplemental Cash Flow Information
Third-party interest and income taxes paid........................................ $ 139 $ 2
===== =====
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
-3-
The Pepsi Bottling Group, Inc.
Condensed Consolidated Balance Sheets
(in millions, except per share amounts)
<TABLE>
<CAPTION>
(Unaudited)
March December
18, 2000 25, 1999
-------- --------
Assets
- ------
Current Assets
<S> <C> <C>
Cash and cash equivalents................................................ $ 81 $ 190
Trade accounts receivable, less allowance of $48 at
March 18, 2000 and December 25, 1999, respectively................ 834 827
Inventories.............................................................. 298 293
Prepaid expenses, deferred income taxes and other current assets......... 182 183
------ ------
Total Current Assets............................................. 1,395 1,493
Property, plant and equipment, net......................................... 2,224 2,218
Intangible assets, net..................................................... 3,784 3,819
Other assets............................................................... 80 89
------ ------
Total Assets..................................................... $7,483 $7,619
====== ======
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities
Accounts payable and other current liabilities........................... $ 835 $ 924
Short-term borrowings.................................................... 33 23
------ ------
Total Current Liabilities........................................ 868 947
Long-term debt due to third parties........................................ 3,268 3,268
Other liabilities.......................................................... 406 385
Deferred income taxes...................................................... 1,124 1,178
Minority interest.......................................................... 281 278
------ ------
Total Liabilities................................................ 5,947 6,056
Shareholders' Equity
Common stock, par value $.01 per share:
Authorized 300 shares, issued 155 shares............................ 2 2
Additional paid-in capital.............................................. 1,736 1,736
Retained earnings....................................................... 152 138
Accumulated other comprehensive loss.................................... (236) (223)
Treasury stock: 7 shares and 5 shares at March 18, 2000 and December 25,
1999, respectively................................................... (118) (90)
------ ------
Total Shareholders' Equity....................................... 1,536 1,563
------ ------
Total Liabilities and Shareholders' Equity...................... $7,483 $7,619
====== ======
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
-4-
The Pepsi Bottling Group, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Tabular dollars in millions
- --------------------------------------------------------------------------------
Note 1 - Basis of Presentation
The Pepsi Bottling Group, Inc. ("PBG") consists of bottling operations
located in the United States, Canada, Spain, Greece and Russia. These bottling
operations manufacture, sell and distribute Pepsi-Cola beverages including
Pepsi-Cola, Diet Pepsi, Mountain Dew and other brands of carbonated soft drinks
and other ready-to-drink beverages. Approximately 90% of PBG's net revenues were
derived from the sale of Pepsi-Cola beverages. References to PBG throughout
these Condensed Consolidated Financial Statements are made using the
first-person notations of "we," "our" and "us."
Prior to our formation, we were an operating unit of PepsiCo, Inc.
("PepsiCo"). On March 31, 1999, we offered 100,000,000 shares of PBG common
stock for sale at $23 per share in an initial public offering generating $2,208
million in net proceeds. These proceeds were used to repay obligations to
PepsiCo and fund acquisitions. Subsequent to the offering, PepsiCo owned and
continues to own 55,005,679 shares of common stock, consisting of 54,917,329
shares of common stock and 88,350 shares of Class B common stock. PepsiCo's
ownership has increased to 37.1% of the outstanding common stock at March 18,
2000 as a result of net repurchases of 6.8 million shares under our share
repurchase program, which began in October 1999. PepsiCo also owns 100% of the
outstanding Class B common stock, together representing 45.2% of the voting
power of all classes of our voting stock. Subsequent to the offering, PepsiCo
also owns 7.1% of the equity of Bottling Group, LLC, our principal operating
subsidiary, giving PepsiCo economic ownership of 41.6% of our combined
operations at March 18, 2000.
The accompanying Condensed Consolidated Financial Statements include
information that has been presented on a "carve-out" basis for the periods prior
to our initial public offering. This information includes the historical results
of operations and assets and liabilities directly related to PBG, and has been
prepared from PepsiCo's historical accounting records. Certain estimates,
assumptions and allocations were made in determining such financial statement
information. Therefore, these Condensed Consolidated Financial Statements may
not necessarily be indicative of the results of operations, financial position
or cash flows that would have existed had we been a separate, independent
company from the first day of all periods presented.
The accompanying Condensed Consolidated Balance Sheet at March 18, 2000 and
the Condensed Consolidated Statements of Operations and Cash Flows for the 12
weeks ended March 18, 2000 and March 20, 1999 have not been audited, but have
been prepared in conformity with generally accepted accounting principles 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 year ended December 25, 1999 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.
-5-
Note 2 - Seasonality of Business
The results for the first 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, amortization and interest,
which are not significantly impacted by business seasonality.
Note 3 - Inventories
March December
18, 2000 25, 1999
-------- --------
Raw materials and supplies......................... $ 106 $ 110
Finished goods..................................... 192 183
------ ------
$ 298 $ 293
====== ======
Note 4 - Property, Plant and Equipment, net
March December
18, 2000 25, 1999
-------- --------
Land............................................... $ 144 $ 145
Buildings and improvements......................... 853 852
Production and distribution equipment.............. 2,118 2,112
Marketing equipment................................ 1,639 1,596
Other.............................................. 83 84
------ ------
4,837 4,789
Accumulated depreciation........................... (2,613) (2,571)
------ ------
$2,224 $2,218
====== ======
Note 5 - Comprehensive Income
12 Weeks Ended
--------------
March March
18, 2000 20, 1999
-------- --------
Net income (loss).................................. $ 17 $ (3)
Currency translation adjustment.................... (13) 11
----- -----
Comprehensive Income............................... $ 4 $ 8
===== =====
-6-
Note 6 - Comparability of Results
Asset Lives
- -----------
At the beginning of fiscal year 2000, we changed the estimated useful lives
of certain categories of assets to reflect the success of our preventive
maintenance programs in extending the useful lives of these assets. The changes,
which are detailed in the table below, lowered total depreciation cost for the
quarter by $14 million ($8 million after tax and minority interest, or $0.05 per
share) reducing cost of sales by $8 million and selling, delivery and
administrative expenses by $6 million.
Estimated Useful Lives
----------------------
2000 1999
---- ----
Manufacturing equipment................................... 15 10
Heavy fleet............................................... 10 8
Fountain dispensing equipment............................. 7 5
Small specialty coolers and marketing equipment........... 3 5 to 7
Initial Public Offering
- -----------------------
The 1999 financial information for the period prior to our initial public
offering has been carved out from the financial statements of PepsiCo using the
historical results of operations and assets and liabilities of our business. The
Condensed Consolidated Financial Statements reflect certain costs that may not
necessarily be indicative of the costs we would have incurred had we operated as
an independent, stand-alone entity from the beginning of 1999. These costs
include an allocation of PepsiCo corporate overhead and interest expense, and
income taxes.
o We included corporate overhead related to PepsiCo's corporate
administrative functions based on a specific identification of PepsiCo's
administrative costs relating to the bottling operations and, to the extent
that such identification was not practicable, based upon the percentage of
our revenues to PepsiCo's consolidated net revenues. These costs are
included in selling, delivery and administrative expenses in our Condensed
Consolidated Statements of Operations.
o We allocated $3.3 billion of PepsiCo debt to our business. We charged
interest expense on this debt using PepsiCo's weighted-average interest
rate. Once we issued $3.3 billion of third-party debt in the first quarter
of 1999, our actual interest rates were used to determine interest expense
for the remainder of the year. Allocated interest expense was deemed to
have been paid to PepsiCo, in cash, in the period in which the cost was
incurred.
o We reflected income tax expense in our Condensed Consolidated Financial
Statements as if we had actually filed a separate income tax return. Our
allocable share of income taxes was deemed to have been paid to PepsiCo, in
cash, in the period in which the cost was incurred.
-7-
The amounts of the historical allocations described above are as follows:
1999
----
Corporate overhead expense.................................... $ 3
Interest expense.............................................. $ 28
PepsiCo weighted-average interest rate........................ 5.8%
In addition, our historical capital structure is not representative of our
current structure due to our initial public offering. In 1999, immediately
preceding the offering, we had 55,000,000 shares of common stock outstanding. In
connection with the offering, we sold 100,000,000 shares to the public. Pro
forma 1999 average shares outstanding reflect our initial public offering as if
it occurred on the first day of fiscal year 1999.
-8-
Item 2.
Management's Discussion and Analysis of Results of Operations and Financial
- --------------------------------------------------------------------------------
Condition
- ---------
Overview
The Pepsi Bottling Group, Inc. (collectively referred to as "PBG," "we,"
"our" and "us") became a public company through an initial public offering of
100,000,000 shares on March 31, 1999, marking our separation from PepsiCo, Inc.
and our beginning as a company focused solely on the bottling business. We began
2000 building on the momentum gained in 1999 as we continued to make substantial
progress against our three key objectives - fixing the economics of our
take-home business, aggressively growing our high-margin cold drink volume and
sharply improving our international business. As a result we have generated
outstanding operating performance in the first quarter of 2000:
o We delivered 21% constant territory EBITDA growth in the first quarter.
o We delivered $0.11 in earnings per share, an increase of $0.13 over 1999
after adjusting for the number of shares outstanding.
o We increased net revenues over 6%.
The following management's discussion and analysis should be read in
conjunction with our Condensed Consolidated Financial Statements and
accompanying footnotes along with the cautionary statements at the end of this
section.
Constant Territory
We believe that constant territory performance results are the most
appropriate indicators of operating trends and performance, particularly in
light of our stated intention of acquiring additional bottling territories, and
are consistent with industry practice. Constant territory operating results are
achieved by adjusting current year results to exclude current year acquisitions
and adjusting prior year results to include the results of significant prior
year acquisitions as if they had occurred on the first day of the prior fiscal
year. Constant territory results also exclude any unusual impairment and other
charges and credits.
Use of EBITDA
EBITDA, which is computed as operating income plus the sum of depreciation
and amortization, is a key indicator management and the industry use to evaluate
operating performance. It is not, however, required under generally accepted
accounting principles and should not be considered an alternative to
measurements required by GAAP such as net income or cash flows.
Comparability of Results
Asset Lives
- -----------
At the beginning of fiscal year 2000, we changed the estimated useful lives
of certain categories of assets to reflect the success of our preventive
maintenance programs in extending the useful lives of these assets. The changes,
which are detailed in Note 6 to the Condensed Consolidated Financial Statements,
lowered total depreciation cost for the quarter by $14 million ($8 million after
tax and minority interest, or $0.05 per share) reducing cost of sales by $8
million and selling, delivery and administrative expenses by $6 million. We
anticipate that this change will reduce full year 2000 depreciation expense by
approximately $58 million ($33 million after tax and minority interest, or $0.22
per share).
-9-
Initial Public Offeing
- ----------------------
The 1999 financial information for the period prior to our initial public
offering has been carved out from the financial statements of PepsiCo using the
historical results of operations and assets and liabilities of our business. The
Condensed Consolidated Financial Statements reflect certain costs that may not
necessarily be indicative of the costs we would have incurred had we operated as
an independent, stand-alone entity from the beginning of 1999. These costs
include an allocation of PepsiCo corporate overhead and interest expense, and
income taxes as follows:
1999
----
Corporate overhead expense......................................... $ 3
Interest expense................................................... $ 28
PepsiCo weighted-average interest rate............................. 5.8%
In addition, our historical capital structure is not representative of our
current structure due to our initial public offering. In 1999, immediately
preceding the offering, we had 55,000,000 shares of common stock outstanding. In
connection with the offering, we sold 100,000,000 shares to the public.
Results of Operations
- ---------------------
Constant
Reported Territory
Change Change
------ ------
EBITDA.............................................. 21% 21%
Volume.............................................. 0% 0%
Net Revenue per Case................................ 6% 6%
EBITDA
Reported EBITDA was $181 million in the first quarter of 2000, representing
a 21% increase over the same period of 1999. On a constant territory basis,
EBITDA growth was also 21% reflecting strong pricing in U.S. foodstores, an
increased mix of higher margin cold drink volume and continued growth in our
operations outside North America.
Volume
Our worldwide physical case volume was flat on both a reported and constant
territory basis in the first quarter of 2000. In North America, which includes
the U.S. and Canada, constant territory volume decreased 1% driven by declines
in the take-home segment as we increased wholesale prices in the first quarter
of 2000. This volume decrease was partially offset by increases in our cold
drink segment as we continued to invest in this high-margin segment. Outside
North America, our constant territory volumes increased 9% reflecting continued
improvements in Russia and solid growth in Spain. Russia volumes continued to
rebound from the August 1998 devaluation of the ruble as we have aggressively
reestablished brand Pepsi, introduced our own line of value brand beverage
products (Fiesta) and increased distribution of our water products.
-10-
Net Revenues
Net revenues for the quarter were $1,545 million, a 6% increase over the
prior year. On a constant territory basis, worldwide net revenues grew 6% as
well, driven by a 6% increase in net revenue per case. This increase was driven
by strong pricing, particularly in U.S. foodstores, and an increased mix of
higher-revenue cold drink volume.
Cost of Sales
Cost of sales increased $10 million, or 1%, driven by a 1% increase in cost
of sales per case reflecting higher U.S. concentrate costs, which took effect in
February. Current year costs also include an $8 million favorable impact from
the change in our estimated useful lives of manufacturing assets.
Selling, delivery and administrative expenses
Selling, delivery and administrative expenses grew $50 million, or 9%. This
primarily reflects increased selling and delivery costs resulting from our
continued heavy investment in our North American cold drink infrastructure
driven by additional headcount, delivery routes and depreciation. In addition,
although 1999 expenses included a $6 million one-time cash cost for shell
deposits, these expenses were offset in 2000 in large part by the expense
resulting from our new company matching 401K plan. Current year costs also
include a $6 million favorable impact from the change in our estimated useful
lives of certain selling and delivery assets.
Interest expense, net
Interest expense decreased by $1 million reflecting lower external debt
outside North America partially offset by an increase in weighted-average
interest rates in the U.S. from 5.9% in the prior year, when we used PepsiCo's
average interest rate until we issued our own debt, to 6.0% in the current year.
Minority Interest
PBG and PepsiCo contributed bottling businesses and assets used in the
bottling businesses to Bottling Group, LLC, our principal operating subsidiary,
in connection with the formation of Bottling Group, LLC. As a result of the
contribution of these assets, we own 92.9% of Bottling Group, LLC and PepsiCo
owns the remaining 7.1%. Accordingly, starting from our initial public offering
on March 31, 1999, our Condensed Consolidated Financial Statements reflect
PepsiCo's share of consolidated net income of Bottling Group, LLC as minority
interest in our Condensed Consolidated Statements of Operations.
Provision for Income Taxes
PBG's full year forecasted tax rate for 2000 is 37% and this rate has been
applied to first quarter results. This rate corresponds to an effective tax
rate, excluding any unusual impairment and other charges and credits, of 38% in
1999. The one point decrease is primarily due to the reduced impact of fixed
non-deductible permanent expenses on higher anticipated pretax income in 2000.
Earnings Per Share
2000 1999
---- ----
Earnings (loss) per share on reported net income (loss).. $0.11 $(0.06)
Average shares outstanding (millions).................... 149 55
-11-
Our historical capital structure is not representative of our current
structure due to our initial public offering. In 1999, immediately preceding the
offering, we had 55 million shares of common stock outstanding. In connection
with the offering, we sold 100,000,000 shares of common stock to the public and
used the $2.2 billion of proceeds to repay obligations to PepsiCo and to fund
acquisitions.
The table below sets forth 1999 earnings per share adjusted for the initial
public offering assuming 155 million shares had been outstanding for the entire
period presented. Shares outstanding at the end of the first quarter of 2000
reflect our share repurchase program which began in October 1999 when our Board
of Directors authorized the repurchase of up to 10 million shares of our common
stock. Approximately 1.5 million shares were repurchased in the first quarter of
2000 with a total of almost 7 million shares repurchased since last October.
2000 1999
---- ----
Earnings (loss) per share on reported net income (loss). $0.11 $(0.02)
Pro forma average shares outstanding (millions)......... 149 155
Liquidity and Capital Resources
- -------------------------------
Cash Flows
Net cash provided by operating activities decreased $72 million to $2
million as strong EBITDA growth was more than offset by unfavorable working
capital cash flows driven by the timing of cash payments on current liabilities,
particularly third-party interest and income taxes, which were $137 million
higher in the first quarter of 2000.
Net cash used by investments decreased by $105 million from $194 million in
the first quarter of 1999 to $89 million over the same period in 2000, primarily
due to acquisition spending, which was $104 million lower in the first quarter
of 2000. However, capital expenditures increased by $3 million, or 4%, as we
continue to invest heavily in cold drink equipment in the U.S. First quarter
2000 net placements were made at a rate which should allow us to meet our 2000
target of over 150,000 net placements.
Net cash (used) provided by financing decreased by $120 million to a use of
$21 million in 2000. This decrease reflects $144 million of advances from
PepsiCo in 1999, which were used to fund acquisitions and pay down debt, and $29
million of share repurchases in 2000.
Euro
- ----
On January 1, 1999, eleven member countries of the European Union
established fixed conversion rates between existing currencies and one common
currency, the Euro. Beginning in January 2002, new Euro-denominated bills and
coins will be issued, and existing currencies will be withdrawn from
circulation. Spain is one of the member countries that instituted the Euro and
we have established plans to address the issues raised by the Euro currency
conversion. These issues include, among others, the need to adapt computer and
financial systems, business processes and equipment, such as vending machines,
to accommodate Euro-denominated transactions and the impact of one common
currency on cross-border pricing. Since financial systems and processes
currently accommodate multiple currencies, we do not expect the system and
equipment conversion costs to be material. Due to numerous uncertainties, we
cannot reasonably estimate the long-term effects one common currency may have on
pricing, costs and the resulting impact, if any, on the financial condition or
results of operations.
-12-
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 lower-than-expected net pricing resulting
from marketplace competition, material changes from expectations in the cost of
raw materials and ingredients, an inability to achieve the expected timing for
returns on cold drink equipment and employee infrastructure expenditures,
material changes in expected levels of marketing support payments from PepsiCo,
Inc., an inability to meet projections for performance in newly acquired
territories, unexpected costs associated with conversion to the common European
currency and unfavorable interest rate and currency fluctuations.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have no material changes to the disclosures made on this matter in our
1999 Annual Report on Form 10-K.
-13-
Independent Accountants' Review Report
--------------------------------------
The Board of Directors
The Pepsi Bottling Group, Inc.
We have reviewed the accompanying Condensed Consolidated Balance Sheet of The
Pepsi Bottling Group, Inc. as of March 18, 2000, and the related Condensed
Consolidated Statements of Operations and Cash Flows for the twelve weeks ended
March 18, 2000 and March 20, 1999. These Condensed Consolidated Financial
Statements are the responsibility of The Pepsi Bottling Group, Inc.'s
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, 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 review, 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 generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the Consolidated Balance Sheets of The Pepsi Bottling Group, Inc. as
of December 25, 1999, and the related Consolidated Statements of Operations,
Cash Flows and Changes in Shareholders' Equity for the fifty-two week period
then ended not presented herein; and in our report dated January 25, 2000, 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 25, 1999, is fairly presented, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ KPMG LLP
New York, New York
April 5, 2000
-14-
PART II - OTHER INFORMATION AND SIGNATAURES
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
See Index to Exhibits on page 17.
-15-
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned.
THE PEPSI BOTTLING GROUP, INC.
------------------------------
(Registrant)
Date: April 21, 2000 Peter A. Bridgman
- ----- -------------- -----------------
Senior Vice President and
Controller
Date: April 21, 2000 John T. Cahill
- ----- -------------- --------------
Executive Vice President and
Chief Financial Officer
-16-
INDEX TO EXHIBITS
-----------------
ITEM 6 (a)
----------
EXHIBITS
- --------
Exhibit 11 Computation of Basic and Diluted Earnings Per Share
Exhibit 27.1 Financial Data Schedule 12 weeks ended March 18, 2000
-17-
EXHIBIT 11
The Pepsi Bottling Group, Inc.
Computation of Basic and Diluted Earnings Per Share
(in millions, except per share data)
<TABLE>
<CAPTION>
12 Weeks Ended
3/18/00 3/20/99
------- -------
Number of shares on which basic earnings (loss) per share is based:
<S> <C> <C>
Average outstanding during period ......... 149 55
Add - Incremental shares under stock
compensation plans ...................... - -
----- ------
Number of shares in which diluted
earnings per share is based ............... 149 55
Net earnings (loss) applicable to common
shareholders ............................. $ 17 $ (3)
Net earnings (loss) on which diluted earnings
per share is based ....................... $ 17 $ (3)
Basic earnings (loss) per share ............. $0.11 $(0.06)
Diluted earnings (loss) per share ........... $0.11 $(0.06)
</TABLE>
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted from The
Pepsi Bottling Group, Inc. Condensed Consolidated Financial Statements for the
12 Weeks Ended March 18, 2000 and is Qualified in its Entirety by Reference to
such Financial Statements.
</LEGEND>
<CIK> 0001076405
<NAME> The Pepsi Bottling Group, Inc.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> MAR-18-2000
<CASH> 81
<SECURITIES> 0
<RECEIVABLES> 882
<ALLOWANCES> 48
<INVENTORY> 298
<CURRENT-ASSETS> 1,395
<PP&E> 4,837
<DEPRECIATION> 2,613
<TOTAL-ASSETS> 7,483
<CURRENT-LIABILITIES> 868
<BONDS> 3,268
0
0
<COMMON> 2
<OTHER-SE> 1,534
<TOTAL-LIABILITY-AND-EQUITY> 7,483
<SALES> 1,545
<TOTAL-REVENUES> 1,545
<CGS> 845
<TOTAL-COSTS> 845
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> 27
<INCOME-TAX> 10
<INCOME-CONTINUING> 17
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17
<EPS-BASIC> 0.11
<EPS-DILUTED> 0.11
</TABLE>