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pepsi bottling Q108_NonGAAPReconciliation

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  • 1. THE PEPSI BOTTLING GROUP, INC. FIRST QUARTER 2008 EARNINGS CONFERENCE CALL RECONCILIATION OF NON-GAAP MEASURES April 23, 2008 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 under 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 in 2008 Results Restructuring Charges In the third and fourth quarters of 2007, PBG announced realignments in the Company’s organization. The total pre-tax charge for the realignments is expected to be approximately $35 million. Since the inception of the program and through March 22, 2008, the Company incurred a pre-tax charge of approximately $32 million, with a pre-tax cash charge of approximately $2 million being recorded in the first quarter of 2008. Asset Disposal Charge During the fourth quarter of 2007, PBG adopted a Full Service Vending Rationalization plan to dispose of older underperforming assets and redeploying assets to higher return accounts. The total pre-tax charge for this plan is expected to be about $30 to $35 million and will be completed by the end of the second quarter. Since the inception of the program and through March 22, 2008, the Company incurred a pre-tax charge of approximately $24 million with a pre-tax cash charge of $1 million being recorded in the first quarter of 2008. 2008 First Quarter Results Operating Income Growth Rate Comparable Results (8%) Restructuring Charges & Asset Disposal Charge (2%) Reported Results (10%)
  • 2. Diluted Earnings Per Share Comparable Results $0.13 Restructuring Charges & Asset Disposal Charge (0.01) Reported Results $0.12 Impact of Foreign Q1 2008 Currency Q1 2008 Comparable Translation As Reported Net Revenues – Russia 33% 11 44% Net Revenues – Europe 19% 15 34% Net Revenues – Mexico 9% 1 10% Net Revenue per case – U.S. & Canada 1% 2 3% Net Revenue per case – Russia 18% 9 27% Net Revenue per case – Mexico 7% 2 9% Cost of sales per case – Worldwide 5% 3 8% Gross profit per case – Mexico 4% 1 5% 2008 Full Year Guidance Full Year 2008 Full Year 2007 Growth Rate Comparable Operating Income $1,124 4% to 6% Restructuring Charges (30) Asset Disposal Charge (23) Reported Operating Income $1,071 8% to 10% Diluted Earnings Per Share Comparable Results $2.30 to $2.38 Restructuring Charges ($0.01) Asset Disposal Charge ($0.02) to ($0.03) Reported Results $2.26 to $2.35
  • 3. 2008 Second Quarter Guidance Second Quarter 2008 Growth Rate Comparable Operating Income Low single digits Restructuring Charges and Asset Disposal Charge (2%) to (4%) Down low single digits Reported Operating Income to up low single digits Diluted Earnings Per Share Comparable Results $0.74 to $0.78 Restructuring Charges and Asset Disposal Charge ($0.02) to ($0.03) Reported Results $0.71 to $0.76 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 stock options. 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. 2008 Full Year OFCF Guidance PBG expects its full-year 2008 OFCF to be at least $620 million. The Company anticipates capital expenditures to exceed $800 million and Cash Provided by Operations plus the excess tax benefits from the exercise of stock options to be over $1.4 billion.

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