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 September 2, 2000
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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
BOTTLING GROUP, LLC
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(Exact name of registrant as specified in its charter)
Delaware 13-4042452
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(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
--- ---
Bottling Group, LLC
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Index
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
12 and 36-weeks ended September 2, 2000 and September 4, 1999 2
Condensed Consolidated Statements of Cash Flows -
36-weeks ended September 2, 2000 and September 4, 1999 3
Condensed Consolidated Balance Sheets -
September 2, 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 9-12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 12
Independent Accountants' Review Report 13
Part II Other Information and Signatures
Item 6. Exhibits 14
</TABLE>
-1-
PART I - FINANCIAL INFORMATION
Item 1.
Bottling Group, LLC
Condensed Consolidated Statements of Operations
in millions, unaudited
<TABLE>
<CAPTION>
12-weeks Ended 36-weeks Ended
-------------- --------------
September September September September
2, 2000 4, 1999 2, 2000 4, 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Revenues .......................................................... $2,125 $2,036 $5,583 $5,319
Cost of sales ......................................................... 1,163 1,162 3,041 3,043
------ ------ ------ ------
Gross Profit .......................................................... 962 874 2,542 2,276
Selling, delivery and administrative expenses ......................... 705 669 2,019 1,892
Non-cash compensation charge .......................................... - - - 45
------ ------ ------ ------
Operating Income ...................................................... 257 205 523 339
Interest expense....................................................... 31 31 91 98
Interest income........................................................ 11 2 26 4
Foreign currency loss ................................................. 1 1 1 1
Minority interest ..................................................... 4 3 7 4
------ ------ ------ ------
Income before income taxes............................................. 232 172 450 240
Income tax expense..................................................... 5 1 14 2
------ ------ ------ ------
Net Income............................................................. $ 227 $ 171 $ 436 $ 238
====== ====== ====== ======
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
-2-
Bottling Group, LLC
Condensed Consolidated Statements of Cash Flows
in millions, unaudited
<TABLE>
<CAPTION>
36-weeks Ended
--------------
September September
2, 2000 4, 1999
------- -------
Cash Flows - Operations
<S> <C> <C>
Net income...................................................................... $ 436 $ 238
Adjustments to reconcile net income to net cash provided by operations:
Depreciation.............................................................. 232 252
Amortization.............................................................. 91 90
Non-cash compensation charge.............................................. - 45
Other non-cash charges and credits, net................................... 109 76
Changes in operating working capital, excluding effects of
acquisitions:
Trade accounts receivable............................................... (208) (258)
Inventories............................................................. (23) (11)
Prepaid expenses, deferred income taxes and other current assets........ - 3
Accounts payable and other current liabilities.......................... 61 85
------ ------
Net change in operating working capital .................................. (170) (181)
------ ------
Net Cash Provided by Operations................................................... 698 520
------ ------
Cash Flows - Investments
Capital expenditures........................................................... (342) (371)
Acquisitions of bottlers....................................................... (2) (166)
Notes receivable from PBG, Inc................................................. (254) (65)
Sale of property, plant and equipment.......................................... 4 21
Other, net..................................................................... (6) 29
------ ------
Net Cash Used by Investments...................................................... (600) (552)
------ ------
Cash Flows - Financing
Short-term borrowings - three months or less................................... 12 (81)
Proceeds from third-party debt................................................. - 2,276
Replacement of PepsiCo allocated debt.......................................... - (2,300)
Payments of third-party debt................................................... (9) (49)
Increase in owners' net investment............................................. - 316
------ ------
Net Cash Provided by Financing.................................................... 3 162
------ ------
Effect of Exchange Rate Changes on Cash and Cash Equivalents...................... (6) (2)
------ ------
Net Increase in Cash and Cash Equivalents......................................... 95 128
Cash and Cash Equivalents - Beginning of Period................................... 190 36
------ ------
Cash and Cash Equivalents - End of Period......................................... $ 285 $ 164
====== ======
Supplemental Cash Flow Information
Liabilities incurred and/or assumed in connection with acquisitions of bottlers... $ - $ 48
====== ======
Third-party interest and income taxes paid........................................ $ 151 $ 68
====== ======
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
-3-
Bottling Group, LLC
Condensed Consolidated Balance Sheets
in millions
<TABLE>
<CAPTION>
(Unaudited)
September December
2, 2000 25, 1999
------- --------
Assets
Current Assets
<S> <C> <C>
Cash and cash equivalents................................................ $ 285 $ 190
Trade accounts receivable, less allowance of $48 at
September 2, 2000 and December 25, 1999............................ 1,000 827
Inventories.............................................................. 311 293
Prepaid expenses, deferred income taxes and other current assets......... 85 100
------ ------
Total Current Assets............................................. 1,681 1,410
Property, plant and equipment, net......................................... 2,296 2,218
Intangible assets, net..................................................... 3,726 3,819
Notes receivable from PBG, Inc............................................. 514 259
Other assets............................................................... 78 89
------ ------
Total Assets.................................................... $8,295 $7,795
====== ======
Liabilities and Owners' Equity
Current Liabilities
Accounts payable and other current liabilities........................... $ 972 $ 904
Short-term borrowings.................................................... 24 23
------ ------
Total Current Liabilities........................................ 996 927
Long-term debt............................................................. 2,286 2,284
Other liabilities.......................................................... 337 315
Deferred income taxes...................................................... 196 200
Minority interest.......................................................... 148 141
------ ------
Total Liabilities................................................ 3,963 3,867
Owners' Equity
Owners' net investment.................................................. 4,590 4,150
Accumulated other comprehensive loss.................................... (258) (222)
------ ------
Total Owners' Equity............................................. 4,332 3,928
------ ------
Total Liabilities and Owners' Equity............................ $8,295 $7,795
====== ======
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
-4-
Bottling Group, LLC
Notes to Condensed Consolidated Financial Statements (unaudited)
Tabular dollars in millions
--------------------------------------------------------------------------------
Note 1 - Basis of Presentation
Bottling Group, LLC (collectively referred to as "Bottling LLC," "we,"
"our" and "us") is the principal operating subsidiary of The Pepsi Bottling
Group, Inc. ("PBG") and consists of substantially all of the operations and
assets of PBG. Bottling LLC, which is consolidated by PBG, consists of bottling
operations located in the United States, Canada, Spain, Greece and Russia. For
the periods presented prior to our formation, we were an operating unit of
PepsiCo, Inc. ("PepsiCo").
PBG was incorporated in Delaware in January 1999 and, prior to its
formation, PBG was an operating unit of PepsiCo. PBG's initial public offering
consisted of 100,000,000 shares of common stock sold to the public on March 31,
1999, equivalent to 65% of its outstanding common stock, leaving PepsiCo the
owner of the remaining 35% of outstanding common stock. PepsiCo's ownership has
increased to 37.8% at September 2, 2000, as a result of net repurchases of 9.3
million shares under PBG's share repurchase program.
In addition, in conjunction with its initial public offering, PBG and
PepsiCo contributed bottling businesses and assets used in the bottling
businesses to Bottling LLC. As a result of the contribution of these assets, PBG
owns 92.9% of Bottling LLC and PepsiCo owns the remaining 7.1%, giving PepsiCo
economic ownership of 42.2% of PBG's combined operations.
The accompanying Condensed Consolidated Financial Statements include
information that has been presented on a "carve-out" basis for the periods prior
to PBG's initial public offering and our formation. This information includes
the historical results of operations and assets and liabilities directly related
to Bottling LLC, 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.
On March 8, 1999, PBG issued $1 billion of 7% senior notes due 2029, which
are guaranteed by us. We also guarantee that to the extent there is available
cash, we will distribute pro rata to all owners sufficient cash such that
aggregate cash distributed to PBG will enable PBG to pay its taxes and make
interest payments on the $1 billion 7% senior notes due 2029.
The accompanying Condensed Consolidated Balance Sheet at September 2,
2000, the Condensed Consolidated Statements of Operations for the 12 and
36-weeks ended September 2, 2000 and September 4, 1999 and the Condensed
Consolidated Statements of Cash Flows for the 36-weeks ended September 2, 2000
and September 4, 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 - New Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard 133 "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for hedging activities and derivative instruments, including
certain derivative instruments embedded in other contracts, which are
collectively referred to as derivatives. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value.
In July 1999, the FASB issued Statement of Financial Accounting Standard
137, delaying the implementation of SFAS 133 for one year. SFAS 133 will now be
effective for our first quarter of fiscal year 2001. In June 2000, the FASB
issued Statement of Financial Accounting Standard 138, amending the accounting
and reporting standards of SFAS 133.
While the impact of the adoption of these pronouncements is dependent on
the fair value of our derivatives and related financial instruments on the date
of adoption, it is not expected to have a material impact on our results of
operations.
Note 3 - Seasonality of Business
The results for the third quarter and first 36-weeks 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 4 - Inventories
September December
2, 2000 25, 1999
------- --------
Raw materials and supplies................... $ 119 $ 110
Finished goods............................... 192 183
------ ------
$ 311 $ 293
====== ======
Note 5 - Property, Plant and Equipment, net
September December
2, 2000 25, 1999
------- --------
Land......................................... $ 144 $ 145
Buildings and improvements................... 870 852
Production and distribution equipment........ 2,146 2,112
Marketing equipment.......................... 1,713 1,596
Other........................................ 89 84
------ ------
4,962 4,789
Accumulated depreciation..................... (2,666) (2,571)
------ ------
$2,296 $2,218
====== ======
-6-
Note 6 - Comprehensive Income
<TABLE>
<CAPTION>
12-weeks Ended 36-weeks Ended
-------------- --------------
September September September September
2, 2000 4, 1999 2, 2000 4, 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income.................................... $ 227 $ 171 $ 436 $ 238
Currency translation adjustment............... (13) (6) (36) (2)
Minimum pension liability adjustment.......... - - - 19
------ ------ ------ ------
Comprehensive Income.......................... $ 214 $ 165 $ 400 $ 255
====== ====== ====== ======
Note 7 - Comparability of Results
Asset Lives
-----------
At the beginning of fiscal year 2000, we changed the estimated useful
lives of certain categories of assets primarily 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 by $16 million and $48 million for the 12 and 36-weeks ended September 2,
2000, respectively.
Estimated Useful Lives
----------------------
(in years)
----------
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 PBG's initial
public offering and our formation 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:
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.
-7-
o We allocated $2.3 billion of PepsiCo debt to our business. We charged
interest expense on this debt using PepsiCo's weighted-average
interest rate. Once we issued $2.3 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.
The amounts of the historical allocations described above are as follows:
1999
----
Corporate overhead expense................................ $ 3
Interest expense.......................................... $ 16
PepsiCo weighted-average interest rate.................... 5.8%
Note 8 - Non-cash Compensation Charge
In connection with the consummation of PBG's initial public offering and
our formation, substantially all non-vested PepsiCo stock options held by our
employees vested. As a result, we incurred a $45 million non-cash compensation
charge in the second quarter of 1999, equal to the difference between the market
price of the PepsiCo capital stock and the exercise price of these options at
the vesting date.
-8-
Item 2.
Management's Discussion and Analysis of Results of Operations and Financial
--------------------------------------------------------------------------------
Condition
---------
Overview
Bottling Group, LLC (collectively referred to as "Bottling LLC," "we,"
"our" and "us") is the principal operating subsidiary of The Pepsi Bottling
Group, Inc. ("PBG") and consists of substantially all of the operations and
assets of PBG. Bottling LLC, which is 92.9% owned by PBG and is fully
consolidated, consists of bottling operations located in the United States,
Canada, Spain, Greece and Russia. Prior to our formation, we were an operating
unit of PepsiCo, Inc ("PepsiCo").
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 significant current year
acquisitions and adjusting prior year results to include the results of
significant prior year acquisitions as if they had occurred on the first day of
the prior fiscal year. 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, amortization and any unusual non-cash charges and credits, 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 primarily to reflect the success of our
preventive maintenance programs in extending the useful lives of these assets.
The changes, which are detailed in Note 7 to the Condensed Consolidated
Financial Statements, lowered total depreciation cost by $16 million and $48
million for the 12 and 36-weeks ended September 2, 2000, respectively.
PBG's Initial Public Offering
-----------------------------
The 1999 financial information for the period prior to PBG's initial
public offering and our formation 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, as follows:
1999
----
Corporate overhead expense............................ $ 3
Interest expense...................................... $ 16
PepsiCo weighted-average interest rate................ 5.8%
-9-
Results of Operations
---------------------
Reported and Constant
Territory Change
----------------
September 2, 2000
-----------------
12-weeks 36-weeks
-------- --------
<S> <C> <C>
EBITDA.............................. 13% 16%
Volume.............................. 2% 1%
Net Revenue per Case................ 3% 4%
</TABLE>
EBITDA
Reported EBITDA was $366 million and $846 million in the third quarter and
first 36-weeks of 2000, respectively, representing a 13% and 16% increase over
the same periods of 1999. This growth was a reflection of strong pricing in U.S.
foodstores, an increased mix of higher margin cold drink volume, favorable cost
of sales trends and continued growth in our operations outside the U.S.,
particularly in Russia.
Volume
Our worldwide physical case volume grew nearly 2% in the quarter and 1%
year-to-date on both a reported and constant territory basis. In the U.S.,
reported volume turned positive in the quarter and was flat year-to-date. On a
constant territory basis, U.S. volume was positive in the quarter with
year-to-date volume down 1% as growth in our cold drink segment was offset by
declines in our take-home business. Our cold drink trends reflect our successful
placement of cold drink equipment as our net placements have continued at a rate
which should allow us to meet our 2000 North American target of 150,000 net
placements. While take-home volume remained lower in the quarter and first
36-weeks of 2000 reflecting the effect of our price increases in that segment,
volume growth began to improve towards the end of the third quarter.
Outside the U.S., our constant territory volumes remained strong, growing
6% in both the quarter and year-to-date, led by Russia where we have
aggressively reestablished brand Pepsi, introduced our own line of value brand
beverage products (Fiesta) and continued to increase distribution of our water
products. Partially offsetting the growth in Russia were volume declines in
Canada resulting from significant price increases in foodstores in that country.
Net Revenues
Third quarter net revenues were $2,125 million, a more than 4% increase
over the prior year. Year-to-date net revenues grew by 5% to $5,583 million. On
a constant territory basis, worldwide net revenue per case grew 3% and 4% in the
quarter and for the first 36-weeks of 2000, respectively. These increases were
driven by strong pricing, particularly in U.S. foodstores, and an increased mix
of higher-revenue cold drink volume. Reported net revenues and net revenue per
case were lowered by approximately 1 percentage point due to currency
translations in both the quarter and 36-weeks ended September 2, 2000.
Cost of Sales
Cost of sales was essentially flat for both the quarter and year-to-date
when compared to the same periods of 1999. On a per case basis, cost of sales
was more than 1% better in the quarter and 1% year-to-date. Included in the
current year costs is the favorable impact from the change in our estimated
useful lives of manufacturing assets, which totaled $8 million and $25 million
in the third quarter and first 36-weeks of 2000, respectively. Currency
translations had an approximately 1 percentage point favorable impact on the
third quarter and year-to-date results. Excluding the effects of the change in
depreciation lives and currency translations, cost of sales on a per case basis
were almost 2% higher in the quarter and year-to-date, as higher U.S.
concentrate costs were partially offset by favorable packaging and sweetener
costs.
-10-
Selling, delivery and administrative expenses
Selling, delivery and administrative expenses grew $36 million, or 5%, in
the third quarter, bringing year-to-date growth to $127 million, or 7%, over the
comparable periods in 1999. Current year costs include the favorable impact from
the change in our estimated useful lives of selling and delivery assets and
currency translations. Depreciation expense was lower by $8 million and $23
million in the third quarter and first 36-weeks of 2000, respectively, as a
result of the changes in estimated useful lives. Currency translations had a 1
percentage point favorable impact on the third quarter and year-to-date results.
Excluding the effects of the change in depreciation lives and currency
translations, selling, delivery and administrative expenses were 7% higher in
the quarter and 9% higher year-to-date, primarily reflecting our continued heavy
investment in our North American cold drink infrastructure resulting in
additional headcount, delivery routes and depreciation. In addition, higher
marketing and advertising costs to promote our products and higher performance
based compensation costs including costs associated with our previously
announced 401(k) plan contributed to the cost growth.
Interest expense
Interest expense was flat in the third quarter and decreased $7 million in
the first 36 weeks of 2000 driven by lower external debt outside the U.S. in the
first half of 2000.
Interest Income
Interest income was higher in 2000 mainly reflecting higher loans to PBG,
which were used by PBG to pay for interest, dividends and share repurchases.
Non-cash Compensation Charge
In connection with the consummation of PBG's initial public offering and
our formation, substantially all non-vested PepsiCo stock options held by our
employees vested. As a result, we incurred a $45 million non-cash compensation
charge in the second quarter of 1999, equal to the difference between the market
price of the PepsiCo capital stock and the exercise price of these options at
the vesting date.
Minority Interest
PBG has direct minority ownership in one of our subsidiaries. Accordingly,
our Consolidated Financial Statements reflect PBG's share of consolidated net
income as minority interest in our Condensed Consolidated Statements of
Operations.
Provision for Income Taxes
Bottling LLC is a limited liability company, taxable as a partnership for
U.S. tax purposes and, as such, generally pays no U.S. federal or state income
taxes. The federal and state distributable share of income, deductions and
credits of Bottling LLC are allocated to Bottling LLC's owners based on
percentage ownership. However, certain domestic and foreign affiliates pay taxes
in their respective jurisdictions. The current year increase in income tax
expense reflects higher pre-tax income in those jurisdictions.
Liquidity and Capital Resources
-------------------------------
Cash Flows
Net cash provided by operating activities increased $178 million to $698
million in the first 36-weeks of 2000 driven by strong EBITDA growth combined
with improved working capital trends.
Net cash used by investments increased from $552 million in 1999 to $600
million in 2000 reflecting loans to PBG, which were used by PBG to pay for
interest, taxes, dividends and share repurchases, and lower acquisition
spending. Capital expenditures decreased by $29 million, or 8%, as increases in
the U.S. associated with our cold drink strategy were offset by decreases
outside the U.S.
-11-
Net cash provided by financing decreased from $162 million to $3 million in
2000 reflecting owner contributions of $316 million in 1999, which were used to
fund acquisitions and pay down debt.
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.
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.
-12-
Independent Accountants' Review Report
Owners of
Bottling Group, LLC
We have reviewed the accompanying Condensed Consolidated Balance Sheet of
Bottling Group, LLC as of September 2, 2000, the related Condensed Consolidated
Statements of Operations for the twelve and thirty-six weeks ended September 2,
2000 and September 4, 1999 and the Condensed Consolidated Statements of Cash
Flows for the thirty-six weeks ended September 2, 2000 and September 4, 1999.
These Condensed Consolidated Financial Statements are the responsibility of
Bottling Group, LLC'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 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 Bottling Group, LLC as of December
25, 1999, and the related Consolidated Statements of Operations, Cash Flows and
Changes in Owners' 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
October 4, 2000
-13-
PART II - OTHER INFORMATION AND SIGNATAURES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits on page 16.
-14-
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.
BOTTLING GROUP, LLC
-------------------
(Registrant)
Date: October 16, 2000 Andrea L. Forster
---------------- -----------------
Controller and Principal
Accounting Officer
Date: October 16, 2000 Lionel L. Nowell III
---------------- --------------------
Principal Financial Officer
and Managing Director
-15-
INDEX TO EXHIBITS
ITEM 6 (a)
EXHIBITS
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Exhibit 27.1 Financial Data Schedule 36-weeks ended September 2, 2000
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