PepsiAmericas Reports Second Quarter Results

Business Wire, July 25, 2007

MINNEAPOLIS -- PepsiAmericas, Inc. (NYSE:PAS) today reported net income of $78.0 million in the second quarter of 2007, with revenue up 12.6 percent and worldwide volume up 6.2 percent including acquisitions.

Diluted earnings per share (EPS) was $0.61 in the second quarter of 2007, including a net $0.03 increase related to a gain on the sale of non-core property partially offset by special charges and a write-down of a legacy investment as further explained in the financial schedules attached to this release. The results also included a $0.02 reduction related to discontinued operations. These results compare to second quarter reported net income in 2006 of $65.0 million, or EPS of $0.50.

Chairman and Chief Executive Officer Robert C. Pohlad said, "We're very pleased with our second quarter performance. Continued business momentum in Central Europe and good U.S. performance delivered an EPS improvement of over 20 percent in the quarter."

"By executing our key initiatives in the U.S., we successfully cycled through strong volume growth of a year ago and expanded our gross margins. Our revenue strategy is working, with our new sales organization, Customer Alignment, playing a key role. We continue to build scale in our non-carbonated beverage portfolio, now 22 percent of our volume sold in the U.S."

"Central Europe delivered strong revenue growth, all markets showed double digit operating profit improvements, and operating margins doubled. The business fundamentals are strong. We continue to pursue both growth and expansion, like we have done in Romania and Ukraine."

Mr. Pohlad continued, "As a result of the strong first half performance and the confidence we have in the balance of the year, we are raising our full year adjusted EPS guidance to a range of $1.55 to $1.60."

During the third quarter of 2006, the company completed the acquisition of bottling operations in Romania and distribution rights in Moldova. These geographies are referred to as the acquisition territories in this release.

Second Quarter Worldwide Financial Highlights

* Reported worldwide revenue increased 12.6 percent to $1.2 billion, with over 5 percentage points contributed by the acquisition territories and the remainder driven by worldwide net pricing gains and strong Central European volume.

* Worldwide volume improved by 6.2 percent over the same period last year with constant territory volume down 1.1 percent on domestic volume declines of 3.3 percent. Volume in existing Central European markets increased 10.7 percent.

* Reported worldwide average net selling price increased 6 percent with constant territory pricing improvements of 7.4 percent.

* Reported worldwide cost of goods sold per unit increased 3.1 percent. On a constant territory basis, worldwide cost of goods sold per unit increased 5.1 percent, driven mainly by higher ingredient costs in all geographies and in line with the company's expectations.

* Gross profit grew 15.7 percent to $497.1 million, with nearly 7 percentage points of growth from the acquisition territories and the remainder driven by organic growth as worldwide pricing improvements offset the higher cost of goods sold.

* Reported operating income increased 15.8 percent to $144.2 million, including acquisition territories. This compared to $124.5 million in the second quarter of 2006.

* The results also included a $0.02 per share benefit from a reduction in the company's effective tax rate.

Second Quarter U.S. Operations Highlights

Volume was down 3.3 percent in the quarter compared to prior year as carbonated soft drinks (CSD) declined by 6 percent. The company estimates that a shift in the Easter and Fourth of July holiday weeks had a 2 percentage point unfavorable impact on volume this quarter. This is evident by a decline in CSD can volume of 8 percent. The company continued to build scale in its non-carbonated beverage business, up 23 percent excluding water, behind the strength of our Lipton tea business. Aquafina was down 4 percent as we lapped significant distribution and promotional activity from a year ago.

Net sales in the U.S. grew 4.2 percent to $929.9 million in the second quarter, driven by net pricing growth of 7.3 percent. Net pricing improvements reflected roughly 1.5 percentage points due to the shift in holiday weeks, as the company compared against promotional pricing of a year ago. Mix contributed over 1 percentage point to net pricing, driven by improved single serve CSD trends and lower take-home water volume. The remaining approximately 4.5 percent reflected rate increases consistent with the company's expectations. Gross profit increased 5.7 percent to $388.8 million, as pricing covered cost of goods sold per unit increases of 5.4 percent and resulted in margin expansion of 50 basis points.

Selling, delivery and administrative expenses increased to $273.6 million, up 8.5 percent and consistent with the company's expectations. This increase reflected the comparison to lower compensation and healthcare costs from a year ago. Second quarter operating income was $113.8 million, including special charges of $1.4 million, compared to $115.9 million in the prior year quarter.