THE PEPSI BOTTLING GROUP, INC.
                           CAGNY INVESTOR CONFERENCE
                       RECONCILIATION ...
Asset Disposal Charge
During the fourth quarter of 2007, PBG adopted a Full Service Vending (FSV) Rationalization plan
to ...
53rd Week
Our U.S. and Canadian operations report financial results using a fiscal year that consists of 52
weeks, ending ...
$ in million
                              Full Year Net Revenues
                                                        ...
$ in million
                             Full Year Operating Profit
                                                     ...
Full Year EPS
                                                                          2007 – 2003
                      ...
2009 Guidance

                                            Growth Rates – Full Year 2009
                                 ...
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pepsi bottling library.corporate

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pepsi bottling library.corporate

  1. 1. THE PEPSI BOTTLING GROUP, INC. CAGNY INVESTOR CONFERENCE RECONCILIATION OF NON-GAAP MEASURES February 19, 2009 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. Items Affecting Comparability 2008 Items Impairment Charge As a result of the 2008 impairment test for goodwill and other intangible assets, in the fourth quarter, the Company recorded pre-tax charges of $412 million or $1.26 per diluted share, relating primarily to distribution rights and brands for the Electropura water products in Mexico. Restructuring Charges In the fourth quarter of 2008, PBG announced a multi-year restructuring program (“Structure to Succeed”) to enhance the Company’s operating capabilities in each of its reportable segments. In the quarter, the Company incurred pre-tax charges of $83 million or $0.26 per diluted share, primarily relating to severance and related benefits, pension and other employee-related costs and other charges, including relocation and asset disposal costs. 2007 Items Restructuring Charges In the third and fourth quarters of 2007, PBG announced realignments in the Company’s organization to adapt to changes in the marketplace and improve operating efficiencies. Since the inception and through June 14, 2008, the Company incurred pre-tax charges of $33 million or $0.10 per diluted share. Of this amount, we recorded pre-tax charges of $3 million in the first half of 2008, primarily relating to relocation expenses in our U.S. & Canada segment.
  2. 2. Asset Disposal Charge During the fourth quarter of 2007, PBG adopted a Full Service Vending (FSV) Rationalization plan to dispose of older underperforming assets and to redeploy assets to higher return accounts. Over the course of the FSV Rationalization plan, we incurred pre-tax charges of $25 million or $0.06 per diluted share, the majority of which was non-cash, including costs associated with the removal of these assets from service, disposal costs and redeployment expenses. Of this amount we incurred pre-tax charges of $2 million in the first half of 2008 associated with the FSV Rationalization plan. Tax Audit Settlement During the third quarter 2007, PBG recorded a net non-cash tax benefit of $46 million or $0.20 per diluted share to income tax expense related to the reversal of reserves for uncertain tax benefits resulting from the expiration of the statute of limitations on the IRS audit of our U.S. 2001 and 2002 tax returns. Tax Law Changes During the fourth quarter of 2007, tax law changes were enacted in Canada and Mexico, which required us to re-measure our deferred tax assets and liabilities. The impact of the reduction in tax rates in Canada was partially offset by the tax law changes in Mexico and various states of the U.S., which decreased our income tax expense on a net basis. After the impact of minority interest, net income increased approximately $10 million or $0.04 per diluted share, as a result of these tax law changes. Russia JV On March 1, 2007, together with PepsiCo, we formed PR Beverages Limited (“PR Beverages”), a consolidated venture for our Russian operations. This venture enables us to strategically invest in Russia to accelerate our growth. PBG contributed its business in Russia to PR Beverages, and PepsiCo entered into bottling agreements with PR Beverages for PepsiCo beverage products sold in Russia on the same terms as in effect for PBG immediately prior to the venture. PR Beverages has an exclusive license to manufacture and sell PepsiCo concentrate for such products. Increases in gross profit and operating income resulting from the consolidation of the venture are offset by minority interest expense related to PepsiCo’s share. Minority interest expense is recorded below operating income. The increase in operating income from the creation of PR Beverages has been excluded from 2007 operating income results for comparability to 2003 operating income results. 2005 / 2003 Items SFAS 123R Effective January 1, 2006, the Company adopted SFAS 123(Revised 2004), Shared-Based Payment (SFAS 123R), requiring the Company to recognize compensation expense for equity awards over the vesting period based on each award’s grant-date fair value. Prior to 2006, the Company did not recognize this expense. Pro forma amounts relating to the expense have been included for comparability for the 2005 and 2003 fiscal years as if FAS 123R was adopted in those years.
  3. 3. 53rd Week Our U.S. and Canadian operations report financial results 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. Fiscal year 2005 consisted of 53 weeks. Fiscal years 2008, 2007 and 2003 consisted of 52 weeks. The 53rd week did not have any material impact to operating income or EPS growth as the additional income generated from the 53rd week was spent back into long-term strategic spending initiatives designed primarily to enhance our customer service agenda, drive productivity and improve our management information systems. The 53rd week in 2005 did generate $139 million in incremental revenue, which was excluded for comparability to fiscal years with 52 week periods. Tax Law Changes In December 2003, legislation was enacted changing certain Canadian provincial income tax rates. These rate changes resulted in a non-cash charge of $11 million ($0.04 per diluted share). EITF Issue No. 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. We have excluded the after tax charge of $6 million (or $0.02 per diluted share) from the 2003 diluted earnings per share results relating to the cumulative effect in adopting EITF 02-16. Items Affecting Comparability $ in million Full Year 2008 Operating Full Year 2008 Operating Income Profit Mix U.S. International U.S. International Comparable Results $831 $318 72% 28% Asset Impairment Charge _ (412) 2008 Restructuring Charges (49) (34) 2007 Restructuring Charges (3) _ 2007 Asset Disposal Charge (2) _ Reported Results $777 $(128) 120% (20%)
  4. 4. $ in million Full Year Net Revenues 2008 – 2005 CAGR* 2008 2005 Comparable Results $13,796 $11,746 6% 53rd Week _ 139 Reported Results $13,796 $11,885 5% *CAGR – Cumulative Average Growth Rate $ in million Full Year Operating Profit 2008 – 2005 CAGR 2008 2005 Comparable Results $1,149 $958 6% Asset Impairment Charge (412) _ 2008 Restructuring Charges (83) _ 2007 Restructuring Charges (3) _ 2007 Asset Disposal Charge (2) _ FAS 123R _ 65 Reported Results $649 $1,023 (14%) $ in million Full Year Operating Profit 2008 – 2007 Growth 2008 2007 Comparable Results $1,149 $1,124 2% Asset Impairment Charge (412) _ 2008 Restructuring Charges (83) _ 2007 Restructuring Charges (3) (30) 2007 Asset Disposal Charge (2) (23) Reported Results $649 $1,071 (39%)
  5. 5. $ in million Full Year Operating Profit 2007 – 2003 CAGR 2007 2003 Comparable Results $1,095 $888 5% 2007 Restructuring Charges (30) _ 2007 Asset Disposal Charge (23) _ PR Beverages 29 _ FAS 123R _ 68 Reported Results $1,071 $956 3% Full Year Diluted EPS 2008 – 2005 CAGR 2008 2005 Comparable Results $2.27 $1.68 11% Asset Impairment Charge (1.26) _ 2008 Restructuring Charges (0.26) _ 2007 Restructuring Charges (0.01) _ 2007 Asset Disposal Charge _ _ FAS 123R _ 0.18 Reported Results $0.74 $1.86 (26%) Full Year EPS 2008 – 2007 Growth 2008 2007 Comparable Results $2.27 $2.20 3% Asset Impairment Charge (1.26) _ 2008 Restructuring Charges (0.26) _ 2007 Restructuring Charges (0.01) (0.09) 2007 Asset Disposal Charge _ (0.06) Tax Audit Settlement _ 0.20 Tax Law Changes _ 0.04 Reported Results $0.74 $2.29 (68%)
  6. 6. Full Year EPS 2007 – 2003 CAGR 2007 2003 Comparable Results $2.20 $1.41 12% 2007 Restructuring Charges (0.09) _ 2007 Asset Disposal Charge (0.06) _ Tax Audit Settlement 0.20 _ Tax Law Changes 0.04 (0.04) EITF 02-16 _ (0.02) FAS 123R _ 0.15 Reported Results $2.29 $1.50 11% Operating Free Cash Flow The Company defines Operating Free Cash Flow (OFCF) as Cash Provided by Operations, less capital expenditures, plus excess tax benefits from the exercise of equity awards. The Company uses OFCF to evaluate the performance of its business and management considers OFCF an important indicator of the Company’s liquidity, including its ability to satisfy debt obligations, fund future acquisitions, pay dividends to common shareholders and repurchase Company stock. OFCF is a non-GAAP financial measure and should be considered in addition to, not as a substitute for Cash Provided by Operations as well as other measures of financial performance and liquidity reported in accordance with U.S. GAAP. The Company’s OFCF may not be comparable to similarly titled measures reported by other companies. $ in million 2003 2005 2006 2007 2008 Net Cash Provided by $1,084 $1,219 $1,228 $1,437 $1,284 Operations Capital Expenditures (644) (715) (725) (854) (760) Excess Tax Benefit from the _ _ 19 14 2 Exercise of Equity Awards Operating Free Cash Flow $440 $504 $522 $597 $526
  7. 7. 2009 Guidance Growth Rates – Full Year 2009 Guidance vs. Full Year 2008 Net Revenues Comparable Guidance – Currency Neutral Low-Single Digits Reported Guidance (Includes foreign Low-Mid Single Digit Decline currency translation impact) Growth Rates – Full-Year 2009 Guidance vs. Full-Year 2008 Operating Income Comparable Guidance – Currency Neutral Low-Single Digits Comparable Guidance in U.S. Dollars (Includes foreign currency translation Low-Mid Single Digit Decline impact) 2008 Restructuring Charges (1)% – 4% 2007 Restructuring/Asset Disposal Charges 1% Impairment Charges 58% – 61% Reported Guidance 51% – 61% 2009 Diluted EPS Comparable Guidance $2.15 to $2.25 Restructuring Charges (0.17) – (0.27) Reported Guidance $1.88 – $2.08 2009 Full-Year OFCF Guidance PBG expects its full-year 2009 OFCF to be approximately $450 million. The Company anticipates capital expenditures to be in the range of $550 to $600 million and cash provided by operations plus the excess tax benefits from the exercise of equity awards to be approximately $1 billion.

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