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Wiki Wiki Summary
Arithmetic Arithmetic (from Ancient Greek ἀριθμός (arithmós) 'number', and τική [τέχνη] (tikḗ [tékhnē]) 'art, craft') is an elementary part of mathematics that consists of the study of the properties of the traditional operations on numbers—addition, subtraction, multiplication, division, exponentiation, and extraction of roots. In the 19th century, Italian mathematician Giuseppe Peano formalized arithmetic with his Peano axioms, which are highly important to the field of mathematical logic today.
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Risk Factors
PEPSI BOTTLING GROUP INC Item 1A Risk Factors Our Business and operations entail a variety of risks and uncertainties, including those described below
We may not be able to respond successfully to consumer trends related to carbonated and non-carbonated beverages
Consumers are seeking increased variety in their beverages, and there is a growing interest among the public regarding health and wellness issues
This interest has resulted in a decline in consumer demand for full calorie carbonated soft drinks and an increase in consumer demand for products associated with health and wellness, such as water, reduced calorie carbonated soft drinks and certain non-carbonated beverages
Because we rely mainly on PepsiCo to provide us with the products that we sell, if PepsiCo fails to develop innovative products that respond to these and other consumer trends this could put us at a competitive disadvantage in the marketplace and adversely affect our business and financial results
We may not be able to respond successfully to the demands of our largest customers
Our retail customers are consolidating, leaving fewer customers with greater overall purchasing power
In addition, two of our customers together comprise approximately 10prca of our annual worldwide sales
Because we do not operate in all markets in which these customers operate, we must rely on PepsiCo and other PepsiCo bottlers to service such customers outside of our markets
Our inability, or the inability of PepsiCo and PepsiCo bottlers as a whole, to meet the product, packaging and service demands of our largest customers could lead to a loss or decrease in business from such customers and have a material adverse effect on our business and financial results
We may not be able to compete successfully within the highly competitive carbonated and non-carbonated beverage markets
The carbonated and non-carbonated beverage markets are both highly competitive
Competitive pressures in our markets could cause us to reduce prices or forego price increases required to off-set increased costs of raw materials and fuel, increase capital and other expenditures, or lose market share, any of which could have a material adverse effect on our business and financial results
Because we depend upon PepsiCo to provide us with concentrate, certain funding and various services, changes in our relationship with PepsiCo could adversely affect our business and financial results
We conduct our business primarily under beverage agreements with PepsiCo
If our beverage agreements with PepsiCo are terminated for any reason, it would have a material adverse effect on our business and financial results
These agreements provide that we must purchase all of the concentrate for such beverages at prices and on other terms which are set by PepsiCo in its sole discretion
Any significant concentrate price increases could materially affect our business and financial results
PepsiCo has also traditionally provided bottler incentives and funding to its bottling operations
PepsiCo does not have to maintain or continue these incentives or funding
Termination or decreases in bottler incentives or funding levels could materially affect our business and financial results
Under our shared services agreement, we obtain various services from PepsiCo, including procurement of raw materials and certain administrative services
If any of the services under the shared services agreement was terminated, we would have to obtain such services on our own
This could result in a disruption of such services, and we might not be able to obtain these services on terms, including cost, that are as favorable as those we receive through PepsiCo
Our business requires a significant supply of raw materials, the limited availability or increased costs of which could adversely affect our business and financial results
The production of our beverage products is highly dependent on certain raw materials
In particular, we require significant amounts of aluminum and plastic bottle components, such as resin
We 9 _________________________________________________________________ [37]Table of Contents also require access to significant amounts of water
Any sustained interruption in the supply of raw materials or any significant increase in their prices could have a material adverse effect on our business and financial results
PepsiCo’s equity ownership of PBG could affect matters concerning us
As of January 27, 2006, PepsiCo owned approximately 46dtta9prca of the combined voting power of our voting stock (with the balance owned by the public)
PepsiCo will be able to significantly affect the outcome of PBG’s stockholder votes, thereby affecting matters concerning us
We may have potential conflicts of interest with PepsiCo, which could result in PepsiCo’s objectives being favored over our objectives
Our past and ongoing relationship with PepsiCo could give rise to conflicts of interests
In addition, two members of our Board of Directors and one of the three Managing Members of Bottling Group LLC, our primary operating subsidiary, are Senior Vice Presidents of PepsiCo, a situation which may create conflicts of interest
These potential conflicts include balancing the objectives of increasing sales volume of PepsiCo beverages and maintaining or increasing our profitability
Other possible conflicts could relate to the nature, quality and pricing of services or products provided to us by PepsiCo or by us to PepsiCo
Conflicts could also arise in the context of our potential acquisition of bottling territories and/or assets from PepsiCo or other independent PepsiCo bottlers
Under our Master Bottling Agreement, we must obtain PepsiCo’s approval to acquire any independent PepsiCo bottler
PepsiCo has agreed not to withhold approval for any acquisition within agreed upon US territories if we have successfully negotiated the acquisition and, in PepsiCo’s reasonable judgment, satisfactorily performed our obligations under the master bottling agreement
We have agreed not to attempt to acquire any independent PepsiCo bottler outside of those agreed-upon territories without PepsiCo’s prior written approval
Our acquisition strategy may be limited by our ability to successfully integrate acquired businesses into ours or our failure to realize our expected return on acquired businesses
We intend to continue to pursue acquisitions of bottling assets and territories from PepsiCo’s independent bottlers
The success of our acquisition strategy may be limited because of unforeseen costs and complexities
We may not be able to acquire, integrate successfully or manage profitably additional businesses without substantial costs, delays or other difficulties
Unforeseen costs and complexities may also prevent us from realizing our expected rate of return on an acquired business
Our success depends on key members of our management, the loss of whom could disrupt our business operations
Our success depends largely on the efforts and abilities of key management employees
Key management employees are not parties to employment agreements with us
The loss of the services of key personnel could have a material adverse effect on our business and financial results
If we are unable to fund our substantial capital requirements, it could cause us to reduce our planned capital expenditures and could result in a material adverse effect on our business and financial results
We require substantial capital expenditures to implement our business plans
If we do not have sufficient funds or if we are unable to obtain financing in the amounts desired or on acceptable terms, we may have to reduce our planned capital expenditures, which could have a material adverse effect on our business and financial results
10 _________________________________________________________________ [38]Table of Contents Our substantial indebtedness could adversely affect our financial health
We have a substantial amount of indebtedness, which requires us to dedicate a substantial portion of our cash flow from operations to payments on our debt
This could limit our flexibility in planning for, or reacting to, changes in our business and place us at a competitive disadvantage compared to competitors that have less debt
Our indebtedness also exposes us to interest rate fluctuations, because the interest on some of our indebtedness is at variable rates, and makes us vulnerable to general adverse economic and industry conditions
All of the above could make it more difficult for us, or make us unable, to satisfy our obligations with respect to all or a portion of such indebtedness and could limit our ability to obtain additional financing for future working capital expenditures, strategic acquisitions and other general corporate requirements
Our foreign operations are subject to social, political and economic risks and may be adversely affected by foreign currency fluctuations
In the fiscal year ended December 31, 2005, approximately 29prca of our net revenues were generated in territories outside the United States
Social, economic and political conditions in our international markets may adversely affect our business and financial results
The overall risks to our international businesses include changes in foreign governmental policies and other political or economic developments
These developments may lead to new product pricing, tax or other policies and monetary fluctuations which may adversely impact our business and financial results
In addition, our results of operations and the value of our foreign assets are affected by fluctuations in foreign currency exchange rates
We may incur material losses and costs as a result of product liability claims that may be brought against us or any product recalls we have to make
We may be liable if the consumption of any of our products causes injury or illness
We also may be required to recall products if they become contaminated or are damaged or mislabeled
A significant product liability or other product related legal judgment against us or a widespread recall of our products could have a material adverse effect on our business and financial results
Newly adopted governmental regulations could increase our costs or liabilities or impact the sale of our products
Our operations and properties are subject to regulation by various federal, state and local government entities and agencies as well as foreign governmental entities
Such regulations relate to, among other things, food and drug laws, environmental laws, competition laws, taxes, and accounting standards
We cannot assure you that we have been or will at all times be in compliance with all regulatory requirements or that we will not incur material costs or liabilities in connection with existing or new regulatory requirements