Pepsi Bottling Company (PBG) reported earnings of $1.06 per share in the third quarter of 2009. This was 2 cents below the Zacks Consensus Estimate of $1.08 and was even year-over-year.
Net revenues for the quarter declined 4.7% year-over-year to $3.6 billion, primarily due to weak operating results across two of its three geographic segments: Revenue in Europe declined 13% and in Mexico by 18%, which was partially offset by a 2% growth in the U.S./Canada segment. Foreign currency translation negatively impacted revenues by 7%.
Total worldwide physical case volume declined 2% for the quarter. Volume in the U.S. and Canada segment declined 1%, while in Mexico, volume increased 1%. However, volume declined 5% in Europe.
In addition, net revenue per case declined 3%, primarily due to weak economic conditions globally, which was partially offset by strong pricing actions.
Gross margins for the quarter contracted 92 basis points (bps) to 44.6% versus 45.5% in the comparable prior-year quarter. The decline was primarily attributable to the volume declines and the adverse impact of foreign currency translations.
However, the operating margin for the quarter grew marginally by 7 bps to 12.0% versus 11.9% in the prior-year quarter. The improvement was due to lower selling, general and administrative expenses.
The company ended the quarter with cash and cash equivalents of $706 million, representing a 42% increase year over year. The company has a debt-to-capitalization ratio of 62%.
Although third quarter results were weak compared to the first half of 2009, management continues to expect annual earnings at the high-end of its $2.30 to $2.40 range. The guidance includes a 13-cent adverse impact from foreign currency translation.
Net revenues for the year on a constant currency basis are expected to grow in the low single-digit range. Similarly, on a constant currency basis, operating income is expected to grow in the low to mid single-digit range for the year.
Management reiterated its capital expenditures budget, which is expected to be in the range of $550 million to $600 million.
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