The Pepsi Bottling Group Reports Fourth Quarter and Full Year 2003 Results

The Pepsi Bottling Group, Inc. (NYSE: PBG) today reported fourth quarter 2003 net income of $69 million, or diluted earnings per share (EPS) of $0.26, which includes a one-time, non-cash charge of $0.04 per share related to a Canadian tax law change. For the full year 2003, income before the cumulative effect of the adoption of a new accounting principle was $422 million, or $1.52 per share. This also includes the impact of the tax law change in Canada. These results compare to reported fourth quarter 2002 net income of $57 million, or EPS of $0.20, and full year 2002 net income of $428 million, or $1.46 per share.

— PBG’s physical case worldwide volume grew one percent during the fourth quarter on a constant territory basis. In the U.S., volume was flat for the quarter. PBG’s European territories delivered strong volume growth, up 14 percent in the quarter, while volume in Mexico declined three percent during the same period.

— The pricing environment in the U.S. remained positive during the fourth quarter. PBG achieved a two percent increase in U.S. marketplace pricing and a positive mix benefit of one percent. These gains were offset by the Company’s adoption of FASB’s Emerging Issues Task Force (EITF) Issue No. 02-16, resulting in flat reported net revenue per case results in PBG’s U.S. business.

— PBG generated strong cash flow throughout 2003. The Company delivered cash provided by operations of $1.1 billion with capital expenditures of $644 million. This resulted in net cash provided by operations less capital expenditures of $440 million, a 13 percent increase over prior year.

— Reported operating income for the Company grew 35 percent in the fourth quarter and seven percent for the full year.

“We concluded 2003 with momentum returning to our U.S. business,” said John T. Cahill, Chairman and Chief Executive Officer of PBG. “Outstanding execution in the marketplace helped us to bring our cold drink volume back into positive territory during the fourth quarter and gain market share on our PepsiCo brands in foodstores. We were very pleased with the results of Pepsi Vanilla, the ongoing strength of Sierra Mist and the performance of our entire diet soft drink portfolio. On the pricing front in our U.S. business, we successfully implemented our 2004 price increases in nearly all of our markets during the fourth quarter of 2003.”

Cahill continued, “Each of our European businesses generated strong volume growth in the fourth quarter, resulting in eight percent volume growth for the year. Innovation continued to drive growth in Russia, while Spain’s focus on execution generated solid results. In Mexico, the new pricing architecture that we introduced mid-quarter had a positive impact on our volume trends and share position though, overall, physical case volume remained soft. Driving consumer value remains one of our key priorities in 2004.”

On a constant territory basis, PBG’s worldwide volume was flat for the full year 2003. (Constant territory calculations assume all significant acquisitions made in 2002 were made at the beginning of 2002 and exclude all significant acquisitions made in 2003.) In the U.S., physical case volume was down two percent for the year. PBG’s cold drink volume in the U.S. improved sequentially throughout the year. Competitive pressures continued in Mexico where sales of water and carbonated soft drinks remained soft as the year ended. On a constant territory basis, physical case volume in Mexico declined two percent for the year.

Rate increases and a positive mix benefit drove PBG’s U.S. net revenue per case results up three percent during the fourth quarter. On a reported basis, however, those gains were offset by the impact of PBG’s adoption of FASB’s EITF Issue No. 02-16 (an accounting principle that reclassifies the majority of the bottler incentives PBG receives from PepsiCo and other brand owners from net revenues and selling, delivery and administrative expenses to cost of sales). For the full year, reported net revenue per case was down one percent in the U.S. and down seven percent worldwide.

During 2003, PBG repurchased 22.7 million shares of common stock. Since the inception of the Company’s share repurchase program in October 1999, 63 million shares have been repurchased.

The Company stated that in fiscal 2004 it expects to achieve EPS of $1.62 to $1.70. The Company also stated that it expects worldwide constant territory volume for the full year to be up in the low single-digit range and reported operating income to grow mid-single digits. The Company affirmed its expectation for continued growth in cash flow, with net cash provided by operations less capital expenditures growth of about 10 percent. PBG expects return on invested capital to grow 30 to 50 basis points to 7.8 to 8 percent.

The Pepsi Bottling Group, Inc. ( is the world’s largest manufacturer, seller and distributor of Pepsi-Cola beverages with operations in the U.S., Canada, Greece, Mexico, Russia, Spain and Turkey. To receive company news releases by e-mail, please visit

Listen in live to PBG’s fourth quarter 2003 earnings discussion with financial analysts on January 27th at 11 a.m. (EST) at Accompanying slides can be found at PBG’s website.

Statements made in this press release that relate to future performance or financial results of the Company are forward-looking statements which involve uncertainties that could cause actual performance or results to materially differ. PBG undertakes no obligation to update any of these statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date hereof. Accordingly, any forward-looking statement should be read in conjunction with the additional information about risks and uncertainties set forth in PBG’s Securities and Exchange Commission reports, including its annual report on Form 10-K for the year ended December 28, 2002.

The Pepsi Bottling Group, Inc.
Public Relations:
Kelly McAndrew, 914-767-7690
Investor Relations:
Mary Winn Settino, 914-767-7216