PepsiAmericas Reports First Quarter 2008 Results

Business Wire, April 22, 2008

* Reported EPS increased 19% to $0.19; Adjusted EPS up 12%.

* Volume grew 12.7% with constant territory volume up 1.7%.

* Operating profits increased 18%; up 16% after adjusting for special charges.

MINNEAPOLIS -- PepsiAmericas, Inc. (NYSE:PAS) today reported net income of $24.7 million in the first quarter of 2008, with revenue up 14 percent including acquisitions. Diluted earnings per share (EPS) was $0.19 in the first quarter of 2008. These results compare to first quarter reported net income in 2007 of $20.6 million, or EPS of $0.16, which included a $0.01 reduction related to special charges.

Chairman and Chief Executive Officer Robert C. Pohlad said, "First quarter was a continuation of those things that drove our success in 2007, with good execution across our diverse portfolio of markets.

"Central and Eastern Europe continued to drive our growth, reflecting the significant opportunities in these developing and emerging beverage markets. Strong execution of our brand and channel initiatives drove European volumes up double digits, reflecting growth across all categories. In the U.S., we were able to partially offset lower volume with good execution on our pricing, innovation and productivity initiatives."

Mr. Pohlad continued, "The diversity of our markets, and our ability to manage the challenges and maximize our opportunities continue to position us well for growth."

First Quarter Worldwide Financial Highlights

* Revenue increased 14 percent to $1.1 billion, with acquisitions contributing 8 percentage points along with strong international growth.

* Volume improved by 12.7 percent, with constant territory up 1.7 percent driven by double digit volume growth in Central and Eastern Europe.

* Operating income increased 18 percent to $70.3 million, including acquisitions. Year over year special charges added 2 percentage points to this increase, while currency added 6 percentage points.

* The company repurchased shares totaling $81.2 million during the quarter and increased its dividend.

First Quarter U.S. Operations Highlights

Volume declined 1 percent in the quarter compared to prior year, including an estimated 1 percentage point benefit from the Easter holiday shift. Carbonated soft drink (CSD) volume declined 1 percent, an improvement from past trends due to the holiday benefit and growth in flavored CSDs. The non-carbonated category, excluding Aquafina, was up 8 percent reflecting the successful execution and innovation in hydration and energy, partially offset by a slow down in teas as the company cycled through strong volume and innovation of a year ago. Aquafina volume was down 11 percent in the quarter, cycling strong growth from a year ago and reflecting a softer category.

Net sales in the U.S. grew 2 percent to $780.8 million in the first quarter. Net pricing growth of 3.1 percent primarily reflected rate increases, which covered the higher cost of goods sold. The company's single serve business declined 4 percent, reflecting softness in the convenience and gas and foodservice channels, representative of a challenging economic environment. Take home package case sales were comparable to last year. Domestic cost of goods sold per unit increased 4.1 percent, reflecting increased raw material costs and higher non-carbonated mix related costs, and gross profit increased almost 1 percent to $318.2 million.

Selling, delivery and administrative expenses increased 2 percent to $260.3 million. Favorable compensation and benefit expenses and effective cost management partially offset significantly higher fuel costs in the quarter. First quarter operating income was $57.4 million including special charges of $0.5 million, compared to $60.4 million in the prior year quarter which included special charges of $1.2 million.

First Quarter International Operations Highlights

Central and Eastern European (CEE) volume grew 61.8 percent. Constant territory volume was up 10 percent led by double digit growth in Romania and Poland, reflecting strong brand and channel development. CEE's net sales were $263 million in the first quarter, up 84 percent, with nearly 56 percentage points of the increase attributable to acquisitions. The remainder reflected currency benefits, higher volume and pricing improvements.

Average net pricing increased 17.3 percent, reflecting a 16 percentage point benefit from currency with the remainder due to a 3 percentage point underlying rate increase partially offset by acquisition impact. Cost of goods sold per unit increased 24.2 percent with currency adding 12 percentage points, acquisitions adding 9 percentage points, and the remainder driven by higher raw material costs. Gross profit grew 69 percent to $92.9 million for the quarter, with acquisitions driving 33 percentage points of the increase. Selling, delivery and administrative expenses of $78 million were up 45 percent, which included 23 percentage points from acquisitions. The remaining increase was driven mainly by currency and continued investments in advertising and marketing.