(Source: Business Wire)The Pepsi Bottling Group, Inc. (NYSE: PBG) today reported third quarter 2009 net income of $254 million, or diluted earnings per share (EPS) of $1.14. This includes a net after-tax gain of $17 million, or $0.08 per share, resulting from the favorable settlement of tax audits, previously announced restructuring charges, advisory fees relating to the pending PepsiCo transaction, and mark-to-market gains relating to our commodity hedges. This compares to net income of $231 million, or $1.06 per diluted share, that the Company reported in the third quarter of 2008.

"Our third quarter results reflect the continued success of our three strategic platforms for growth. The work we've done to strengthen and reposition our brand portfolio, transform our performance through operational excellence and capitalize on geographic growth opportunities drove operating profit and topline growth across all of our reporting segments in the quarter. These factors, combined with easing commodity costs and diminished foreign currency headwinds, are driving sequential improvement in our performance versus the first half of 2009," said PBG Chairman and Chief Executive Officer Eric Foss.

"We remain confident in our full-year earnings outlook and we're on track to deliver a very good year despite the challenging macroeconomic environment," Foss continued.

Financial Highlights

On a currency neutral basis, worldwide revenue increased two percent in the third quarter. Reported worldwide revenue decreased five percent. The Company's revenue performance reflects solid currency neutral net revenue per case growth partially offset by soft volume.

Net revenue per case improved four percent on a currency neutral basis. This included currency neutral growth of three percent in the U.S. and Canada, seven percent in Europe, and six percent in Mexico. On a reported basis, worldwide net revenue per case declined three percent.

Total worldwide physical case volume declined two percent for the third quarter. Volume in the U.S. and Canada segment was down one percent. In Mexico, volume increased one percent, while European volume declined five percent.

On a comparable basis, currency neutral worldwide operating income increased 10 percent in the third quarter. This includes a positive impact of four percentage points from acquisitions. Comparable currency neutral operating income increased in each of the Company's reporting segments, with growth of two percent in the U.S. and Canada and double-digit growth in both Mexico and Europe, which includes the impact of acquisitions.

Reported worldwide operating income declined four percent for the quarter. The net impact of previously announced restructuring charges, advisory fees related to the pending PepsiCo transaction, and mark-to-market gains reduced reported worldwide operating income by five percentage points. In the U.S. and Canada segment, reported operating income declined seven percent.

COGS per case increased six percent on a comparable, currency neutral basis for the quarter, consistent with the Company's expectations. Reported COGS per case declined two percent.

Comparable worldwide SD&A expenses improved four percent on a currency neutral basis in the third quarter, reflecting the success of the Company's global productivity initiatives. On a reported basis, PBG's SD&A expenses declined eight percent, which included a two percentage point increase from advisory fees related to the pending PepsiCo transaction and restructuring charges.

2009 Guidance

For 2009, PBG continues to expect results at the high-end of its full-year comparable diluted EPS guidance of $2.30 to $2.40. This includes a $0.13 per share negative impact from translational foreign currency headwinds. The Company forecasts currency neutral top-line growth in the low-single digits. Currency neutral operating income on a comparable basis is expected to grow in the low to mid-single digits for the year. Operating free cash flow is now expected to be approximately $550 million, an increase of $100 million from the beginning of 2009, including increased pension funding and foreign currency headwinds but excluding advisory fees related to the pending PepsiCo transaction. The Company anticipates capital expenditures of about $550 to $600 million.

PBG will host a conference call at 11:00 a.m. EDT today to discuss its third quarter financial results. The live call and replay can be accessed by visiting the Investor Relations section of the Company's website at http://www.pbg.com.

About PBG

The Pepsi Bottling Group, Inc. (NYSE: PBG) is the world's largest manufacturer, seller and distributor of Pepsi-Cola beverages. With approximately 67,000 employees and 2008 sales of nearly $14 billion, PBG has operations in the U.S., Canada, Greece, Mexico, Russia, Spain and Turkey. For more information, please visit www.pbg.com.

Forward-Looking Statement:

Statements made in this press release that relate to future performance or financial results of the Company are forward-looking statements which involve risks and uncertainties that could cause actual performance or results to materially differ. Such risks and uncertainties include, but are not limited to: risks associated with our pending merger with PepsiCo, including satisfaction of the conditions of the pending merger, contractual restrictions on the conduct of our business included in the merger agreement, and the potential for loss of key personnel, disruption of our sales and operations and any impact on our relationships with third parties as a result of the pending merger; the outcome of, or expenses associated with, any litigation related to our pending merger with PepsiCo; PepsiCo's ability to affect matters concerning us through its equity ownership of PBG, representation on our Board and approval rights under our Master Bottling Agreement; material changes in expected levels of bottler incentive payments from PepsiCo; material changes from expectations in the cost or availability of ingredients, packaging materials, other raw materials or energy; an inability to achieve strategic business plan targets; material changes in capital investment for infrastructure and an inability to achieve the expected timing for returns on cold-drink equipment and related infrastructure expenditures; an inability to successfully integrate acquired businesses or to meet projections for performance in newly acquired territories; loss of key members of management; and changes in laws and regulations governing the manufacture and sale of food and beverages, the environment, transportation, employee safety, labor and government contracts. For additional information on these and other risks and uncertainties that could cause PBG's actual results to materially differ from those set forth herein, please see PBG's Securities and Exchange Commission reports, including PBG's annual report on Form 10-K for the year ended December 27, 2008. PBG undertakes no obligation to update any of the forward-looking statements set forth herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date hereof.

Non-GAAP Measures

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). In an effort to provide investors with additional information regarding the Company's results and to provide a meaningful year-over-year comparison of the Company's financial performance, the Company sometimes uses non-GAAP financial measures as defined by the Securities and Exchange Commission. The differences between the U.S. GAAP and non-GAAP financial measures are reconciled in this attachment. In presenting comparable results, the Company discloses non-GAAP financial measures when it believes such measures will be useful to investors in evaluating the Company's underlying business performance. Management uses the non-GAAP financial measures to evaluate the Company's financial performance against internal budgets and targets (including those associated with the Company's incentive compensation plans). In addition, management internally reviews the results of the Company excluding the impact of certain items as it believes that these non-GAAP financial measures are useful for evaluating the Company's core operating results and facilitating comparison across reporting periods. Importantly, the Company believes non-GAAP financial measures should be considered in addition to, and not in lieu of, U.S. GAAP financial measures. The Company's non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.

Currency neutral results are calculated using prior year's exchange rates.

Items Affecting Comparability

2009 Items

2008 Restructuring Actions

In the fourth quarter of 2008, PBG announced a restructuring program to enhance the Company's operating capabilities in each of its reportable segments. Since the inception of the program, the Company has incurred pre-tax charges of $102million or $0.32 per diluted share. Of this amount, we recorded $5million, or $0.02 per diluted share, in the third quarter of 2009, of which $1million was recorded in our U.S. & Canada segment, and $4million was recorded in our Mexico segment. For the 36 weeks ended September 5, 2009, we recorded $19 million in pre-tax charges, or $0.06 per diluted share, of which $8 million was recorded in our U.S. & Canada segment, $10 million was recorded in our Mexico segment and $1 million was recorded in our Europe segment. These charges are primarily for severance and related benefits, pension and other employee-related costs and other charges, including relocation and asset disposal costs.

Certain of the restructuring actions have been delayed due to the pending transaction with PepsiCo, therefore, the restructuring actions may not be completed by the end of 2009 as originally intended.

Advisory Fees

On August 3, 2009, PBG and PepsiCo entered into a definitive merger agreement, under which PepsiCo will acquire all outstanding shares of PBG common stock it does not already own. The transaction is subject to PBG shareholder approval and certain regulatory approvals and is expected to be finalized in late 2009 or early 2010.

In connection with this transaction, the Company has retained certain external advisors and expects to incur aggregate fees in the range of $40 million to $60 million. For the 12 and 36 weeks ended September 5, 2009, the Company has recorded pre-tax charges of $22 million, or $0.09 per diluted share, and $37 million, or $0.13 per diluted share, respectively, relating to these services.

Mark-to-Market Net Impact

The Company's corporate headquarters centrally manages commodity derivatives on behalf of our segments. During 2009, we expanded our hedging program to mitigate price changes associated with certain commodities utilized in our production process. These derivatives hedge the underlying price risk associated with the commodity and are not entered into for speculative purposes. Certain commodity derivatives do not qualify for hedge accounting treatment. Others receive hedge accounting treatment but may have some element of ineffectiveness based on the accounting standard. These commodity derivatives are marked-to-market each period until settlement, resulting in gains and losses being reflected in corporate headquarters' results. The gains and losses are subsequently reflected in the segment results when the underlying commodity's cost is recognized.