<PAGE>
No. 1-1183
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1994
PepsiCo, Inc.
Incorporated in North Carolina
Purchase, New York 10577-1444
(914) 253-2000
13-1584302
(I.R.S. Employer Identification No.)
_________________________
Securities registered pursuant to Section 12(b) of the Securities
Exchange Act of 1934:
Title of Each Name of Each Exchange
Class on Which Registered
________________ _____________________
Capital Stock, par value 1-2/3 cents New York and Chicago Stock
per share Exchanges
7-5/8% Notes due 1998 New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of PepsiCo Capital Stock held by
nonaffiliates of PepsiCo as of March 10, 1995 was
$31,315,121,153.
The number of shares of PepsiCo Capital Stock
outstanding as of March 10, 1995 was 787,801,790.
Documents of Which Portions Parts of Form 10-K into
Are Incorporated by Reference Which Portion of Documents
_____________________________ __________________________
Proxy Statement for PepsiCo's
May 3, 1995
Annual Meeting of Shareholders III
<PAGE> 1
PART I
Item 1. Business
PepsiCo, Inc. (the "Company") was incorporated in Delaware
in 1919 and was reincorporated in North Carolina in 1986. Unless
the context indicates otherwise, when used herein the term
"PepsiCo" shall mean the Company and its various divisions and
subsidiaries. PepsiCo is engaged in the following domestic and
international businesses: beverages, snack foods and
restaurants.
Beverages
PepsiCo's beverage business consists of Pepsi-Cola North
America ("PCNA") and Pepsi-Cola International ("PCI").
PCNA manufactures and sells beverages, primarily soft drinks
and soft drink concentrates, in the United States and Canada.
PCNA sells its concentrates to licensed independent and company-
owned bottlers ("Pepsi-Cola bottlers") and to joint ventures in
which PepsiCo participates. Under appointments from PepsiCo,
bottlers manufacture, sell and distribute, within defined
territories, carbonated soft drinks and syrups bearing trademarks
owned by PepsiCo, including PEPSI-COLA, DIET PEPSI, MOUNTAIN DEW,
SLICE, MUG and, within Canada, 7UP and DIET 7UP (the foregoing
are sometimes referred to as "Pepsi-Cola beverages"). The
Pepsi/Lipton Tea Partnership, a joint venture of PCNA and Thomas
J. Lipton Co., develops and sells tea concentrate to Pepsi-Cola
bottlers and develops and markets ready-to-drink tea products
under the LIPTON trademark. Such products are distributed by
Pepsi-Cola bottlers throughout the United States. A joint
venture between PCNA and Ocean Spray Cranberries, Inc. develops
new juice products under the OCEAN SPRAY trademark. Pursuant to
a separate distribution agreement, Pepsi-Cola bottlers distribute
single-serve sizes of OCEAN SPRAY juice products throughout the
United States.
Pepsi-Cola beverages are manufactured in approximately 200
plants located throughout the United States and Canada. PCNA
operates approximately 65 plants and manufactures, sells and
distributes beverages throughout approximately 160 licensed
territories, accounting for approximately 56% of the Pepsi-Cola
beverages sold in the United States and Canada. Approximately
135 plants are operated by independent licensees or joint
ventures in which PCNA participates, which manufacture, sell and
distribute approximately 44% of the Pepsi-Cola beverages sold in
the United States and Canada. PCNA has a minority interest in 6
of these licensees, comprising approximately 70 licensed
territories.
PCI manufactures and sells soft drinks and soft drink
concentrates outside the United States and Canada. PCI sells its
concentrates to Pepsi-Cola bottlers and to joint ventures in
which PepsiCo participates. Under appointments from PepsiCo,
bottlers manufacture, sell and distribute, within defined
territories, Pepsi-Cola beverages bearing PEPSI-COLA, DIET PEPSI,
MIRINDA, PEPSI MAX, 7UP, DIET 7UP and other trademarks. There
are approximately 530 plants outside the United States and Canada
bottling PepsiCo's beverage products. These products are
available in 195 foreign countries and territories. Principal
international markets include Mexico, Saudi Arabia, Argentina,
Spain, the United Kingdom, Thailand, Venezuela, Brazil and China.
PCNA and PCI make programs available to assist licensed
bottlers in servicing markets, expanding operations and improving
production methods and facilities. PCNA and PCI also offer
assistance to bottlers in the distribution, advertising and
marketing of their products and offer sales assistance through
special merchandising and promotional programs and by training
bottler personnel. PCNA and PCI maintain control over the
composition and quality of beverages sold under PepsiCo
trademarks.
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Snack Foods
PepsiCo's snack food business consists of Frito-Lay North
America ("Frito-Lay") and PepsiCo Foods International ("PFI").
Frito-Lay manufactures and sells a varied line of snack
foods throughout the United States and Canada, including FRITOS
brand corn chips, LAY'S (in the United States) and RUFFLES brand
potato chips, DORITOS and TOSTITOS brands tortilla chips,
CHEE.TOS brand cheese flavored snacks, ROLD GOLD brand pretzels,
SMARTFOOD brand cheese flavored popcorn and SUNCHIPS brand
multigrain snacks.
Frito-Lay's products are transported from its manufacturing
plants to major distribution centers throughout the United States
and Canada, principally by company-owned trucks. Frito-Lay
utilizes a "store-door-delivery" system, whereby its 14,600
person sales force delivers the snacks directly to the store
shelf. This system permits Frito-Lay to work closely with
approximately 466,000 retail trade customers weekly and to be
responsive to their needs. Frito-Lay believes this form of
distribution is a valuable marketing tool and is essential for
the proper distribution of products with a short shelf life.
PFI manufactures and markets snack foods outside the United
States and Canada through company-owned facilities and joint
ventures. On most of the European continent, PepsiCo's snack
food business consists of Snack Ventures Europe, a joint venture
between PepsiCo and General Mills, Inc., in which PepsiCo owns a
60% interest. Many of PFI's snack food products, such as
SABRITAS brand potato chips in Mexico, are similar in taste to
Frito-Lay snacks sold in the United States and Canada. PFI also
sells a variety of snack food products which appeal to local
tastes including, for example WALKERS CRISPS, which are sold in
the United Kingdom, and GAMESA cookies and SONRIC'S candies,
which are sold in Mexico. In addition, RUFFLES, CHEE.TOS,
DORITOS, FRITOS and SUNCHIPS brand snack foods have been
introduced to international markets. Principal international
markets include Mexico, the United Kingdom, Spain, Brazil,
Poland, the Netherlands, France, and Australia.
Restaurants
PepsiCo's worldwide restaurant business principally consists
of Pizza Hut, Inc. ("Pizza Hut"), Taco Bell Corp. ("Taco Bell"),
KFC Corporation ("KFC") and PepsiCo Restaurants International
("PRI").
Pizza Hut is engaged principally in the operation,
development and franchising of a system of casual full service
family restaurants, delivery/carryout units and kiosks operating
under the name PIZZA HUT. The full service restaurants serve
several varieties of pizza as well as pasta, salads and
sandwiches. Pizza Hut (through its subsidiaries and affiliates)
operates approximately 5,100 PIZZA HUT restaurants,
delivery/carryout units and other outlets in the United States
and approximately 240 in Canada. Franchisees operate
approximately 2,650 additional domestic restaurants,
delivery/carryout units and other outlets in the United States
and 225 in Canada. Licensees operate approximately 650 kiosk
outlets in the United States. These restaurants and units are
located in all 50 states and throughout Canada.
Taco Bell is engaged principally in the operation,
development and franchising of a system of fast-service
restaurants serving carryout and dine-in moderately priced
Mexican-style food, including tacos, burritos, taco salads and
nachos and operating under the name TACO BELL. Taco Bell
(through its subsidiaries and affiliates) operates approximately
3,200 TACO BELL outlets in the United States and 70 in Canada.
Franchisees operate approximately 1,500 additional restaurants in
the United States. Licensees operate approximately 930 special
concept outlets in the United States and 30 in Canada.
KFC is engaged principally in the operation, development and
franchising of a system of carryout and dine-in restaurants
featuring chicken and operating under the names KENTUCKY FRIED
CHICKEN and/or KFC. KFC (through its subsidiaries and/or
affiliates) operates approximately 2,000 restaurants in the
United States and 250 in Canada. Franchisees operate
approximately 3,000 additional restaurants in the United States
and 600 in Canada. Licensees operate approximately 100 outlets
in the United States. KFC restaurants are located in 48 states
and throughout Canada.
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PRI is engaged principally in the operation and development
of casual dining and fast-service restaurants, delivery units and
kiosks which sell PIZZA HUT, KFC and, to a lesser extent, TACO
BELL products outside the United States and Canada. PRI operates
approximately 800 PIZZA HUT restaurants, delivery/carryout units
and kiosks, franchisees operate approximately 1,200 units, and
joint ventures in which PRI participates operate approximately
460 units. PIZZA HUT units are located in a total of 83 foreign
countries and territories (exclusive of Canada), and principal
markets include Australia, the United Kingdom, Spain, Brazil,
Mexico and South Korea. PRI also operates approximately 850 KFC
restaurants and kiosks, franchisees operate approximately 2,150
restaurants and kiosks, and joint ventures in which PRI
participates operate approximately 400 restaurants and kiosks.
KFC units are located in 71 foreign countries and territories
(exclusive of Canada), and principal markets include Japan,
Australia, the United Kingdom, South Africa, Mexico and Malaysia.
PRI also operates approximately 20 TACO BELL outlets, and
franchisees operate approximately 35 outlets, in a total of 15
foreign countries and territories (exclusive of Canada).
PepsiCo also owns, operates, or participates as a joint
venturer in a number of other restaurant concepts in the United
States. Pizza Hut operates approximately 150 D'ANGELO SANDWICH
SHOPS, and franchisees operate approximately 50 additional units.
Pizza Hut or franchisees also operate approximately 25 EAST SIDE
MARIO'S restaurants. Taco Bell operates approximately 135 HOT 'N
NOW units, and franchisees operate approximately 40 units. Taco
Bell also operates approximately 50 CHEVYS Mexican restaurants.
PepsiCo participates in a joint venture which operates
approximately 70 CALIFORNIA PIZZA KITCHEN restaurants.
PFS, a division of PepsiCo, is engaged in the distribution
of food, supplies and equipment to company-owned, franchised and
licensed PIZZA HUT, TACO BELL and KFC restaurants in the United States,
Australia, Canada, Mexico, Puerto Rico and Poland.
Competition
All of PepsiCo's businesses are highly competitive.
PepsiCo's beverages and snack foods compete domestically and
internationally with widely distributed products of a number of
major companies that have plants in many of the areas PepsiCo
serves, as well as with private label soft drinks and snack foods
and with the products of local and regional manufacturers.
PepsiCo's restaurants compete domestically and internationally
with other restaurants, restaurant chains, food outlets and home
delivery operations. PFS competes domestically and
internationally with other food distribution companies. For all
of PepsiCo's industry segments, the main areas of competition are
price, quality and variety of products, and customer service.
Employees
At December 31, 1994, PepsiCo employed, subject to seasonal
variations, approximately 471,000 persons (including 282,000 part-
time employees), of whom approximately 340,000 (including 228,000
part-time employees) were employed within the United States.
PepsiCo believes that its relations with employees are generally
good.
Raw Materials and Other Supplies
The principal materials used by PepsiCo in its beverage,
snack food and restaurant businesses are corn sweeteners, sugar,
aspartame, flavorings, vegetable and essential oils, potatoes,
corn, flour, tomato products, pinto beans, lettuce, cheese,
butter, beef, pork and chicken products, seasonings and packaging
materials. Since PepsiCo relies on trucks to move and distribute
many of its products, fuel is also an important commodity.
PepsiCo employs specialists to secure adequate supplies of many
of these items and has not experienced any significant continuous
shortages. Prices paid by PepsiCo for such items are subject to
fluctuation. When prices increase, PepsiCo may or may not pass
on such increases to its customers. Generally, when PepsiCo has
decided to pass along price increases, it has done so
successfully. There is no assurance that PepsiCo will be able to
do so in the future.
Governmental Regulations
The conduct of PepsiCo's businesses, and the production,
distribution and use of many of its products, are subject to
various federal laws, such as the Food, Drug and Cosmetic Act,
the Occupational Safety and Health Act
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and the Americans with Disabilities Act. The conduct of PepsiCo's
businesses is also subject to local, state and foreign laws.
Patents, Trademarks, Licenses and Franchises
PepsiCo owns numerous valuable trademarks which are
essential to PepsiCo's worldwide businesses, including PEPSI-
COLA, PEPSI, DIET PEPSI, PEPSI MAX, MOUNTAIN DEW, SLICE, MUG, 7UP
and DIET 7UP (outside the United States), MIRINDA, FRITO-LAY,
DORITOS, RUFFLES, LAY'S, FRITOS, CHEE.TOS, SANTITAS, SUNCHIPS,
TOSTITOS, ROLD GOLD, GRANDMA'S, SMARTFOOD, SABRITAS, WALKERS,
PIZZA HUT, TACO BELL, KENTUCKY FRIED CHICKEN and KFC. Trademarks
remain valid so long as they are used properly for identification
purposes, and PepsiCo emphasizes correct use of its trademarks.
PepsiCo has authorized (through licensing or franchise
arrangements) the use of some of its trademarks in such contexts
as Pepsi-Cola bottling appointments, snack food joint ventures
and wholly licensed operations and Pizza Hut, Taco Bell and KFC
franchise agreements. In addition, PepsiCo licenses the use of
its trademarks on collateral products for the primary purpose of
enhancing brand awareness.
PepsiCo either owns or has licenses to use a number of
patents which relate to certain of its products and the processes
for their production and to the design and operation of various
equipment used in its businesses. Some of these patents are
licensed to others.
Research and Development
PepsiCo spent approximately $152 million, $113 million and
$102 million on research and development activities during the
years 1994, 1993 and 1992, respectively.
Environmental Matters
PepsiCo continues to make expenditures in order to comply
with federal, state, local and foreign environmental laws and
regulations, which expenditures have not been material with
respect to PepsiCo's capital expenditures, net income or
competitive position.
Business Segments
Information as to net sales, operating profits and
identifiable assets for each of PepsiCo's industry segments,
restaurant chains and major geographic areas of operations, as
well as capital spending, acquisitions and investments in
affiliates, amortization of intangible assets and depreciation
expense for each industry segment and restaurant chain, for 1994,
1993 and 1992 is contained in Item 8 "Financial Statements and
Supplementary Data" in Note 2 on page F-9.
Item 2. Properties
Beverages
PepsiCo operates approximately 105 plants throughout the
world in which beverage concentrates and syrups are manufactured,
or beverages are bottled, or both, of which approximately 95 are
owned and 10 are leased. Joint ventures in which PepsiCo
participates operate approximately 85 plants and distribution
operations. In addition, PepsiCo operates approximately 370
warehouses or offices for its beverage business in the United
States and Canada, of which approximately 285 are owned and
approximately 85 are leased.
The concentrate or syrup manufacturing facilities owned by
PepsiCo are located in Argentina, Canada, China, India, Ireland,
Japan, Mexico, Pakistan, the Philippines, Puerto Rico, Thailand,
Turkey, the United States, Uruguay and Venezuela. PepsiCo owns
bottling plants in Canada, the Czech Republic, Germany, Greece,
Hungary, India, Japan, Mexico, Spain and the United States and
leases bottling plants in the United States. Company-owned
distribution operations are located in the Czech Republic,
France, Hungary, Poland, Russia and Slovakia. Joint
<PAGE> 5
ventures in which PepsiCo participates operate plants located in
Argentina, Australia, The Bahamas, Brazil, Chile, China, Hong
Kong, Indonesia, Japan, Kampuchea, Mexico, Myanmar, Nepal, New Zealand,
the Philippines, Poland, Russia, Slovenia, South Africa,
Thailand, the United Kingdom, Uruguay and Vietnam.
PepsiCo owns a research and technical facility in Valhalla,
New York, for its beverage businesses. PepsiCo also owns the
headquarters facilities for its beverage and international snack
food, businesses in Somers, New York.
Snack Foods
Frito-Lay operates 43 food manufacturing and processing
plants in the United States and Canada, of which 41 are owned and
2 are leased. PepsiCo also operates plants located in Argentina,
Australia, Brazil, Chile, China, the Dominican Republic, Ecuador,
Estonia, India, Japan, Mexico, Poland, Puerto Rico, Turkey, the
United Kingdom, Uruguay and Venezuela while joint ventures in
which PepsiCo participates operate plants located in Belgium,
China, Cyprus, Egypt, France, Greece, Indonesia, Italy, Korea,
the Netherlands, Poland, Portugal, Spain, Taiwan and Thailand.
In addition, Frito-Lay owns approximately 185 warehouses and
distribution centers and leases approximately 30 warehouses and
distribution centers for storage of food products in the United
States and Canada. Approximately 1,600 smaller warehouses and
storage spaces located throughout the United States and Canada
are leased or owned. Frito-Lay owns its headquarters building
and a research facility in Plano, Texas. Frito-Lay also leases
offices in Dallas, Texas and leases or owns sales/regional
offices throughout the United States.
Restaurants
Through Pizza Hut, Taco Bell, KFC and PRI, PepsiCo owns
approximately 3,800 and leases approximately 6,700 restaurants,
delivery/carryout units and other outlets in the United States,
and owns or leases approximately 2,220 additional units outside
the United States. Joint ventures in which PepsiCo participates
operate approximately 860 units outside the United States. Pizza
Hut owns manufacturing facilities in Wichita, Kansas and owns its
corporate headquarters and leases certain additions to the
building in Wichita, Kansas. Taco Bell leases its corporate
headquarters and certain additions to the building in Irvine,
California. KFC owns a research facility and its corporate
headquarters building in Louisville, Kentucky. PFS owns 1 and
leases 22 distribution centers, 2 manufacturing plants and 4
offices in the United States. PFS owns 1 and leases 4
distribution centers outside of the United States.
General
The Company owns its corporate headquarters buildings in
Purchase, New York.
With a few exceptions, leases of plants in the United States
and Canada are on a long-term basis, expiring at various times to
the year 2088, with options to renew for additional periods.
Most international plants are leased for varying and usually
shorter periods, with or without renewal options. PIZZA HUT,
TACO BELL and KFC restaurants which are not owned are generally
leased for initial terms of 15 or 20 years, and generally have
renewal options, while PIZZA HUT delivery/carryout units
generally are leased for significantly shorter initial terms with
shorter renewal options.
The Company believes that its properties and those of its
subsidiaries and divisions are in good operating condition and
are suitable for the purposes for which they are being used.
Item 3. Legal Proceedings
PepsiCo is subject to various claims and contingencies
related to lawsuits, taxes, environmental and other matters
arising out of the normal course of business. Management
believes that the ultimate liability, if any, in excess of
amounts already provided arising from such claims or
contingencies is not likely to have a material adverse effect on
PepsiCo's annual results of operations or financial condition.
Item 4. Submission of Matters to a Vote of Stockholders
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Stock Trading Symbol - PEP
Stock Exchange Listings - The New York Stock Exchange is the
principal market for PepsiCo Capital Stock, which is also listed
on the Chicago, Basel, Geneva, Zurich, Amsterdam and Tokyo Stock
Exchanges.
Shareholders - At year-end 1994, there were approximately
168,000 shareholders of record.
Dividend Policy - Quarterly cash dividends are usually
declared in November, February, May and July and paid at the
beginning of January and the end of March, June and September.
The dividend record dates for 1995 will be March 10, June 9, September 8
and December 8. Quarterly cash dividends have been paid since PepsiCo
was formed in 1965, and dividends per share have increased for 22
consecutive years.
Consistent with PepsiCo's current payout target of
approximately one-third of the prior year's income from ongoing
operations, the 1994 dividends declared represented 34% of 1993
income from ongoing operations.
Dividends Declared Per Share (in cents)
Quarter 1994 1993
1 16 13
2 18 16
3 18 16
4 18 16
Total 70 61
Stock Prices - The high, low and closing prices for a share
of PepsiCo Capital Stock on the New York Stock Exchange, as
reported by The Dow Jones News/Retrieval Service, for each fiscal
quarter of 1994 and 1993 were as follows (in dollars):
1994 High Low Close
Fourth Quarter 37 3/8 32 1/4 36 1/4
Third Quarter 34 5/8 29 1/4 33 3/4
Second Quarter 37 5/8 29 7/8 31 1/8
First Quarter 42 1/2 35 3/4 37 5/8
1993 High Low Close
Fourth Quarter 42 1/8 37 5/8 41 7/8
Third Quarter 40 1/8 34 5/8 39
Second Quarter 43 5/8 34 1/2 36 1/2
First Quarter 43 3/8 38 1/2 42
Item 6. Selected Financial Data
Included on pages F-42 through F-48.
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's Analysis - Overview
To enhance understanding of PepsiCo's financial performance,
the various components of Management's Analysis are presented
near the pertinent financial statements. Accordingly, in
addition to this overview, separate analyses of the results of
operations, financial condition and cash flows appear on pages
11, 12 and 14. respectively. Also, the analysis of each industry
segment's net sales and operating profit performance begins on
pages 15, 19 and 22.
Marketplace Actions
PepsiCo's domestic and international businesses operate
in markets that are highly competitive and subject to global and
local economic conditions including inflation, commodity price
and currency fluctuations and governmental actions. In Mexico,
for example, our businesses have benefited in past years from
improving conditions. Conversely, the significant devaluation of
the Mexican peso at the end of 1994 and continuing into 1995 will
not only negatively impact reported earnings from Mexico due to
translation, but is expected to create a much less favorable
economic climate in the country. Other examples include risks
associated with political instability and its related
dislocations in countries where PepsiCo operates and possible
employee benefit or minimum wage legislation in the U.S. and
elsewhere, increasing the cost of providing benefits and
compensation to employees. PepsiCo's operating and investing
strategies are designed, where possible, to mitigate these
factors through aggressive actions on several fronts including:
(a) enhancing the appeal and value of its products through brand
promotion, product innovation, quality improvement and prudent
pricing actions; (b) providing better service to customers; (c)
increasing worldwide availability of its products; (d) acquiring
businesses and forming alliances to increase market presence and
utilize resources more efficiently; and (e) containing costs
through efficient and effective purchasing, manufacturing,
distribution and administrative processes.
Restructurings
Restructuring actions realign resources for more
efficient and effective execution of operating strategies. As a
result, PepsiCo continually considers and executes restructuring
actions that vary in size and impact, for example, from a minor
sales force reorganization at a local facility to a significant
organizational and process redesign affecting an entire operating
division. The resulting cost savings or profits from increased
sales are reinvested in the business to increase PepsiCo's
shareholder value. Major restructuring actions announced in 1992
and now underway or completed in the beverage and international
snack food segments resulted in charges totaling $193.5 million
($128.5 million after-tax or $0.16 per share). In 1994, $28.3
million ($17.4 million after-tax or $0.02 per share) of the 1992
restructuring accruals were reversed into income, primarily
reflecting refinements of the original domestic beverage accrual
estimate and management's decision to reduce the scope of the
domestic beverage restructuring. The majority of the amount
reversed into income was offset by additional charges in 1994 for
new actions. The remaining accruals for the 1992 restructuring
actions of $39 million outstanding at year-end 1994 represent
expected cash payments of which $25 million, $11 million and $3
million are expected to be paid in 1995, 1996 and 1997,
respectively.
Annual cost savings from the 1992 restructuring
actions, when fully implemented, are expected to be approximately
$75 million primarily from reduced employee and facility costs.
In addition, while difficult to measure, the domestic beverage
segment is also expected to benefit by an estimated $90 million
annually from centralization of purchasing activities and
incremental volume and pricing from improvements in
administrative and business processes. The combined gross
benefits realized in 1994 from the 1992 restructuring actions are
estimated to be approximately $50 million. These benefits are
expected to increase annually until fully realized in 1998. See
Notes 2 and 16 for additional detail related to the 1992
restructuring charges. See Management's Analysis of beverage and
snack food performance on pages 15 and 19, respectively, for a
discussion of the 1992 restructuring charges and related
anticipated benefits.
<PAGE> 8
Derivatives
PepsiCo uses derivative instruments primarily to reduce
borrowing costs and hedge future purchases of certain
commodities. PepsiCo's policy is to not use derivative
instruments for speculative purposes and has procedures in place
to monitor and control their use. PepsiCo's credit risk related
to derivatives is considered low. Financing-related derivative
contracts are only entered into with strong creditworthy
counterparties and are generally of relatively short duration.
Purchases of commodities are hedged with commodity futures
contracts traded on national exchanges.
Reduce Borrowing Costs: PepsiCo enters into interest
rate and foreign currency swaps to effectively change the
interest rate and currency of specific debt issuances with the
objective of reducing borrowing costs. These swaps are generally
entered into concurrently with the issuance of the debt they are
intended to modify. The notional value, payment and maturity
dates of the swaps match the principal, interest payment dates
and maturity dates of the related debt. Accordingly, any market
impact (risk or opportunity) associated with these swaps is fully
offset by the opposite market impact on the related debt. See
Notes 9 and 10 for additional details regarding interest rate and
currency swaps.
Hedge Commodity Costs: PepsiCo hedges future commodity
purchases when we believe it will result in lower net costs. The
futures contracts entered into do not exceed expected usage nor
do they generally extend beyond one year. While PepsiCo expects
to generate lower commodity costs over time by entering into
these futures contracts, it is possible that the commodity costs
will be higher than if futures contracts were not entered into.
we believe it has the ability to raise prices if commodity
prices increase; however, it expects to do so only if the
increase is other than temporary and it would not place PepsiCo
at a competitive disadvantage. Open contracts at year-end 1994
and gains and losses realized in 1994 or deferred at year-end
were not significant.
Currency Exchange Effects
In 1994, 1993 and 1992, international businesses
represented 18.6%, 18.0% and 17.7%, respectively, of PepsiCo's
total segment operating profits. Operating in international
markets sometimes involves volatile movements in currency
exchange rates. The economic impact of currency exchange rate
movements on PepsiCo is complex because such changes are often
linked to variability in real growth, inflation, interest rates,
governmental actions and other factors. In addition, these
changes, if material, can cause PepsiCo to adjust its financing
and operating strategies, for example, pricing, promotion and
product strategies and decisions concerning sourcing of raw
materials and packaging. Because PepsiCo operates in a mix of
businesses and numerous countries, management believes currency
exposures are fairly well diversified. Moreover, management
believes that currency exposures are not a significant factor in
competition at the local market operating level. When
economically appropriate, however, PepsiCo enters into foreign
currency hedges to minimize specific cash flow transaction
exposures. The following paragraphs describe the effects of
currency exchange rate movements on PepsiCo's reported results.
See Other Factors Expected to Impact 1995 Results on page 10.
As currency exchange rates change, translation of the
income statements of international businesses into U.S. dollars
affects year-over-year comparability of operating results. In
1994 and 1993, sales and operating profit growth rates for our
consolidated international businesses were not materially
impacted by the translation effects of changes in currency
exchange rates. The effects on comparability of sales and
operating profits arising from translation of the income
statements of international businesses are identified, where
material, in Management's Analysis of segment operating results.
These translation effects exclude the impact of businesses in
highly inflationary countries, where the functional currency is
the U.S. dollar.
Changes in currency exchange rates also result in
reported foreign exchange gains and losses which are included as
a component of unallocated expenses, net (see pages F-12 and F-
13). PepsiCo reported a net foreign exchange gain of $4.5
million in 1994 compared to net foreign exchange losses of $41.2
million and $17.4
<PAGE> 9
million in 1993 and 1992, respectively. These reported amounts include
translation gains and losses arising from remeasurement into U.S.
dollars of the net monetary assets of businesses in highly
inflationary countries as well as transaction gains and losses.
Transaction gains and losses arise from monetary assets such as
receivables and short-term investments as well as payables (including
debt) denominated in currencies other than a business unit's functional
currency. In implementing strategies to minimize after-tax financing
costs, the effects of expected currency exchange rate movements on debt
and short-term investments are considered along with related
interest rates in measuring effective net financing costs.
Beginning in 1993, Mexico was no longer categorized as
highly inflationary. PepsiCo did not calculate the net foreign
exchange gain or loss that would have been reported in 1993 had
businesses in Mexico been accounted for as highly inflationary;
however, translation gains and losses for businesses in Mexico
were not a significant component of the above 1992 amount.
Certain Factors Affecting Comparability
Accounting Changes
PepsiCo's financial statements reflect the noncash
impact of accounting changes adopted in 1994 and 1992. In 1994,
PepsiCo was required to adopt Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (SFAS 112). The cumulative effect of adopting SFAS
112, an $84.6 million charge ($55.3 million after-tax or $0.07
per share), principally represented estimated future severance
costs related to services provided by employees prior to 1994.
As compared to the previous accounting method, the current year
impact of adopting SFAS 112 was immaterial to 1994 operating
profits. See Note 14 for additional details.
Also in 1994, PepsiCo adopted a preferred method for
calculating the market-related value of plan assets used in
determining the return-on-asset component of annual pension
expense and the cumulative net unrecognized gain or loss subject
to amortization. The cumulative effect of adopting this change,
which related to years prior to 1994, was a benefit of $37.8
million ($23.3 million after-tax or $0.03 per share). As
compared to the previous accounting method, the change reduced
1994 pension expense by $35.1 million ($21.6 million after-tax or
$0.03 per share). See Note 13 for additional details.
Effective the beginning of 1992, PepsiCo early adopted
Statements of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" (SFAS
106), and No. 109, "Accounting for Income Taxes" (SFAS 109). The
cumulative effect of adopting SFAS 106, a $575.3 million charge
($356.7 million after-tax or $0.44 per share), represented
estimated future retiree health benefit costs related to services
provided by employees prior to 1992. The cumulative effect of
adopting SFAS 109, a $570.7 million tax charge ($0.71 per share),
primarily represented the recognition of additional deferred tax
liabilities related to acquired identifiable intangible assets as
of the beginning of 1992. See Notes 12 and 17 for additional
details regarding the adoption of SFAS 106 and SFAS 109,
respectively.
Other Factors
Comparisons of 1994 to 1993 are affected by an
additional week of results in the 1994 reporting period. Because
PepsiCo's fiscal year ends on the last Saturday in December, a
fifty-third week is added every 5 or 6 years. The fifty-third
week increased 1994 earnings by an estimated $54.0 million ($34.9
million after-tax or $0.04 per share). See Items Affecting
Comparability, Fiscal Year, on page F-9 for the impact on
PepsiCo's business segments.
PepsiCo recorded a one-time, noncash gain of $17.8
million ($16.8 million after-tax or $0.02 per share) resulting
from a public share offering by BAESA, a bottling joint venture
in South America. See Note 4 for additional details.
<PAGE> 10
Significant U.S. Tax Changes Affecting Historical and Future
Results
U.S. federal income tax legislation enacted in August
1993 included a provision for a 1% statutory income tax rate
increase effective for the full year. As required under SFAS
109, the increase in the tax rate resulted in a noncash charge of
$29.9 million ($0.04 per share) for the adjustment of net
deferred tax liabilities as of the beginning of 1993.
The 1993 tax legislation also included a provision to
reduce the tax credit associated with beverage concentrate
operations in Puerto Rico. This change limited the tax credit on
income earned in Puerto Rico in the first year to 60% of the
amount allowed under the previous tax law, with the limit further
reduced ratably over the following four years to 40%. The
provision, which became effective for PepsiCo's operations on
December 1, 1994, had an immaterial impact on 1994 earnings. Had
the provision become effective at the beginning of 1994, earnings
for the year would have been reduced by approximately $60 million
or $0.07 per share. Similarly, had the 40% credit limit been
effective in 1994, earnings would have been reduced by an
additional $30 million or $0.04 per share over the 60% credit
limit.
In 1994, the U.S. Department of the Treasury proposed a
change to a current regulation (known as Q&A 12), which would
further reduce the tax incentives associated with the beverage
concentrate operations in Puerto Rico. This proposal applies to
PepsiCo's sales of concentrate from its operations in Puerto Rico
to its related bottlers in the U.S. If it had been adopted as
proposed in 1994, the change would have become effective for
PepsiCo on December 1, 1994 with an immaterial impact on 1994
earnings. However, had the 60% credit limit (discussed above)
and the currently proposed Q&A 12 been in effect at the beginning
of 1994, earnings for the year would have been reduced by an
estimated $112 million or $0.14 per share. Had the 40% credit
limit and proposed Q&A 12 both been effective in 1994, the impact
would have reduced 1994 earnings for the year by an additional
$30 million or $0.04 per share over the 60% credit limit. The
estimated impacts are subject to change depending upon the final
provisions of Q&A 12, if enacted. PepsiCo and others are
vigorously opposing the proposed change.
PepsiCo's full year 1995 tax rate is not expected to
exceed 35%. The expected tax rate reflects PepsiCo's forecasted
1995 mix of U.S. and generally lower taxed foreign earnings, the
reduction in the tax credit on income earned in Puerto Rico
resulting from the 1993 U.S. tax legislation and the assumed
enactment in 1995 of Q&A 12, as currently proposed, partially
offset by significant adjustments reflecting the anticipated
resolution in 1995 of audit issues related to prior years.
The unfavorable effect of Q&A 12 will not be included
in the 1995 effective tax rate unless it is enacted. The
benefits due to the adjustments will be included in the 1995 tax
rate when the audit issues related to prior years have been
resolved. Accordingly, the potential exists for volatility in
PepsiCo's 1995 quarterly effective tax rates depending on the
timing of these events, as well as other factors.
Other Factors Expected to Impact 1995 Results
In late 1994 and early 1995, the Mexican peso devalued
significantly relative to the U.S. dollar. The primary impact of
the devaluation on 1994 financial results was an estimated $275
million unfavorable change in the currency translation adjustment
account in Shareholders' Equity, representing the reduced book
value of PepsiCo's Mexican peso-denominated net assets. The
impact on 1994 earnings was immaterial. Quantifying the adverse
impact of the devaluation on 1995 operating results, financial
condition and cash flows is difficult because, in addition to the
translation impact, the devaluation is likely to result in many
changes to the business environment including government actions,
accelerated inflation and its impact on prices and costs, reduced
consumer demand and the impact of higher interest rates on our
trade customers and bottlers. Although PepsiCo expects to report
lower earnings in 1995 from its operations in Mexico than it
otherwise would have because of the devaluation and its related
effects, PepsiCo has begun to take actions in Mexico and in other
parts of the world to mitigate the effects of the devaluation.
PepsiCo's operations in Mexico, primarily related to snack foods,
constituted about 5% and 7% of PepsiCo's 1994 consolidated net
assets and cash flows from operations, respectively, and
contributed 7% and 8% of PepsiCo's 1994 net sales and segment
operating profits, respectively. See Management's Analysis of
each industry
<PAGE> 11
segment for additional discussion regarding the impact of the
devaluation of the Mexican peso. In addition, PepsiCo anticipates that
earnings from its affiliates in Mexico accounted for by the equity
method, primarily related to beverages, will also be unfavorably
impacted. Equity results reported in 1994 from affiliates in Mexico were
not material.
As quantified in Other Factors on page 9, comparisons of
1995 to 1994 will be adversely affected by the additional week's
results in the 1994 fiscal year.
Management's Analysis - Results of Operations
(See Management's Analysis - Overview on page 7 for background
information and Business Segments on page F-9 for detail of segment
results.)
To improve comparability, Management's Analysis includes
analytical data to indicate the impact of beverage and snack food
acquisitions, net of operations sold or contributed to joint
ventures (collectively, "net acquisitions"). Acquisition impacts
represent the results of the acquired businesses for periods in
the current year corresponding to the prior year periods that did
not include the results of the businesses. Restaurant units
acquired, principally from franchisees, and constructed units are
treated the same for purposes of this analysis and are
collectively referred to as "additional restaurant units." Also,
the analysis indicates, as applicable, the impact of the ongoing
effects of the 1994 accounting changes (see Notes 13 and 14), the
1994 BAESA gain (see Note 4), the 1993 deferred tax charge due to
U.S. tax legislation (see Note 17) and the 1992 restructuring
charges (see Note 16), collectively referred to as "the Unusual
Items."
Comparisons of 1994 to 1993 were impacted by an additional
week's results in 1994 which contributed about $433.5 million or
2 points to growth in Net Sales and increased earnings by about
$54.0 million ($34.9 million after-tax or $0.04 per share).
Net Sales rose $3.5 billion or 14% in 1994 of which $215
million or 1 point was contributed by net acquisitions. The
balance of the increase reflected volume gains of $2.2 billion
and $934 million due to additional restaurant units. Sales grew
$3.1 billion or 14% in 1993. Net acquisitions contributed $1.1
billion or 5 points to sales growth. The balance of the increase
reflected $913 million from additional restaurant units, volume
gains that contributed $850 million and higher pricing.
International sales grew 23% in 1994 and 24% in 1993 with net
acquisitions contributing 1 point and 16 points, respectively.
International sales represented 29%, 27% and 25% of total sales
in 1994, 1993 and 1992, respectively. The long-term trend of an
increasing international component of sales may be interrupted in
the near term as a result of the unfavorable impact of the
devaluation of the Mexican peso in late 1994 and early 1995 and
its related effects.
Cost of sales as a percentage of Net Sales was 48.2%, 47.7%
and 48.3% in 1994, 1993 and 1992, respectively. The decline in
the 1994 gross margin reflected a mix shift to lower-margin
businesses in international beverages and worldwide restaurants
and lower net pricing in domestic beverages, partially offset by
a mix shift to higher-margin packages and products in
international snack foods and manufacturing efficiencies in
domestic snack foods. The 1993 gross margin improvement was
driven by lower product costs (packaging and ingredients) in
domestic beverages.
Selling, general and administrative expenses rose 14% in
1994 and 13% in 1993, reflecting base business growth. Excluding
the Unusual Items, Selling, general and administrative expenses
rose 14% in 1994 and 16% in 1993, and as a percentage of Net
Sales were 39.6%, 39.4% and 38.8% in 1994, 1993 and 1992,
respectively. In 1994, Selling, general and administrative
expenses grew at the same rate as sales. In 1993, selling and
distribution expenses grew at a faster rate than sales, but
marketing expenditures grew at a slower rate. These changes
reflect the impact of worldwide bottling acquisitions and flat
marketing expenditures in domestic beverages.
Amortization of intangible assets rose 3% in 1994 and 14% in
1993. This noncash expense reduced Net Income Per Share by
$0.29, $0.28 and $0.24 in 1994, 1993 and 1992, respectively.
<PAGE> 12
Operating Profit increased 10% in 1994 and 23% in 1993.
Excluding the Unusual Items, operating profit increased $262
million or 9% in 1994 and $342 million or 13% in 1993, driven by
combined segment operating profit growth of 7% in 1994 and 14% in
1993. The 1994 increase reflected $850 million from higher
volumes and $73 million from additional restaurant units,
partially offset by higher operating expenses. Growth in 1993
reflected $425 million from higher volumes and $89 million from
additional restaurant units, partially offset by increased
operating expenses. International segment profits grew 12% in
1994 and 8% in 1993, reflecting double-digit increases in snack
foods and beverages, partially offset by a double-digit decline
in restaurants. International profits represented 19%, 18% and
19% of combined segment operating profits in 1994, 1993 and 1992,
respectively. This percentage may be affected in the near term
due to the devaluation of the Mexican peso and its related
effects. Small foreign exchange gains in 1994 compared to 1993's
foreign exchange losses, and increased equity in net income of
affiliates, which are not included in segment profits, aided 1994
total operating profit growth.
Gain on Joint Venture Stock Offering of $17.8 million ($16.8
million after-tax or $0.02 per share) related to the public
offering of shares by the BAESA joint venture. See Note 4.
Interest expense, net of Interest income, increased 15% in
1994 and 2% in 1993. The 1994 increase reflected higher average
borrowings partially offset by higher interest rates on
investment balances. The change in 1993 reflected higher average
borrowings and lower average short-term investment balances
partially offset by lower interest rates. Excluding the impact
of net acquisitions, net interest expense increased 10% in 1994
and declined 9% in 1993.
Provision for Income Taxes as a percentage of pretax income
was 33.0%, 34.5% and 31.4% in 1994, 1993 and 1992, respectively.
The 1993 effective tax rate, excluding the Unusual Item, was
33.3%. The slight decline in 1994 reflected reversal of
valuation allowances related to deferred tax assets and an
increase in the proportion of income taxed at lower foreign rates
offset by the absence of 1993's favorable adjustment of certain
prior year foreign accruals. The 1993 increase of 1.9 points
reflected higher U.S. and foreign effective tax rates, an
increase in the proportion of income taxed at the higher U.S. tax
rate and higher state taxes, partially offset by the favorable
adjustment of prior year accruals.
Income and Income Per Share Before Cumulative Effect of
Accounting Changes ("income" and "income per share") in 1994
increased 12% to $1.8 billion and 13% to $2.22, respectively, and
in 1993 increased 22% to $1.6 billion and 22% to $1.96,
respectively. Excluding the Unusual Items, income and income per
share rose 8% and 9%, respectively, in 1994 and 13% and 12%,
respectively, in 1993. Growth in income per share was depressed
by estimated dilution from acquisitions of $0.03 or 1 point in
1994 and $0.05 or 3 points in 1993, primarily due to
international beverage acquisitions in both years.
The Mexican peso devaluation may unfavorably impact Net
Sales and Net Income in 1995; however, due to many uncertainties
in Mexico, we are unable to quantify the impacts. See
Management's Analysis - Overview on page 7 and pages 15 , 19 and
22 for each industry segment for discussion regarding the
impacts.
Management's Analysis - Financial Condition
(See Management's Analysis - Overview on page 7 for background
information.)
Assets increased $1.1 billion or 5% over 1993. Short-term
investments largely represent high-grade marketable securities
portfolios held outside the U.S. The portfolio in Puerto Rico,
which totaled $853 million at year-end 1994 and $1.3 billion at
year-end 1993, arises from the operating cash flows of the
centralized concentrate manufacturing facility that operates
under a tax incentive grant. The grant provides that the
portfolio funds may be remitted to the U.S. without any
additional tax. PepsiCo remitted $380 million of the portfolio
to the U.S. in 1994 and $564 million in 1993. PepsiCo
continually reassesses its alternatives to redeploy its maturing
investments in this and other portfolios held outside the U.S.,
considering other investment opportunities and risks, tax
consequences and overall financing strategies.
<PAGE> 13
Liabilities rose $569 million or 3% over 1993. Income taxes
payable decreased $152 million or 18%, reflecting the prepayment
of taxes in 1994 related to a federal tax audit. Other
liabilities increased $510 million or 38%, reflecting a
reclassification of amounts from Other current liabilities,
normal growth in long-term liabilities and recognition of a
liability for postemployment benefits under SFAS 112.
At year-end 1994 and 1993, $4.5 billion and $3.5 billion,
respectively, of short-term borrowings were classified as long-
term, reflecting PepsiCo's intent and ability, through the
existence of its unused revolving credit facilities, to refinance
these borrowings. PepsiCo's unused credit facilities with
lending institutions, which exist largely to support the
issuances of short-term borrowings, were $3.5 billion at year-end
1994 and 1993. Effective January 3, 1995, PepsiCo replaced its
existing credit facilities with new credit facilities aggregating
$4.5 billion, of which $1.0 billion expire in 1996 and $3.5
billion expire in 2000. Annually, these facilities can be
extended an additional year upon the mutual consent of PepsiCo
and the lending institutions.
Financial Leverage is measured by PepsiCo on both a market
value and historical cost basis. PepsiCo believes that the most
meaningful measure of debt is on a net basis, which takes into
account its large investment portfolios held outside the U.S.
These portfolios are managed as part of PepsiCo's overall
financing strategy and are not required to support day-to-day
operations. Net debt reflects the pro forma remittance of the
portfolios (net of related taxes) as a reduction of total debt.
Total debt includes the present value of operating lease
commitments.
PepsiCo believes that market leverage (defined as net debt
as a percent of net debt plus the market value of equity, based
on the year-end stock price) is an appropriate measure of
PepsiCo's financial leverage. Unlike historical cost measures,
the market value of equity primarily reflects the estimated net
present value of expected future cash flows that will both
support debt and provide returns to shareholders. The market net
debt ratio was 26% at year-end 1994 and 22% at year-end 1993.
The increase was due to a 13% decrease in PepsiCo's stock price
as well as an 8% increase in net debt. PepsiCo has established a
long-term target range of 20-25% for its market net debt ratio to
optimize its cost of capital.
As measured on an historical cost basis, the ratio of net
debt to net capital employed (defined as net debt, other
liabilities, deferred income taxes and shareholders' equity) was
49% at year-end 1994 and 50% at year-end 1993. The decline was
due to a 9% increase in net capital employed, partially offset by
the increase in net debt.
Because of PepsiCo's strong cash generating capability and
its strong financial condition, PepsiCo has continued access to
capital markets throughout the world.
At year-end 1994, about 60% of PepsiCo's net debt portfolio
was exposed to variable interest rates, up from about 55% in
1993. In addition to variable rate debt, all net debt with
maturities of less than one year is categorized as variable.
PepsiCo prefers funding its operations with variable rate debt
because it believes that, over the long-term, variable rate debt
provides more cost effective financing than fixed rate debt.
PepsiCo will issue fixed rate debt if advantageous market
opportunities arise. A 1 point change in interest rates on
variable rate net debt would impact annual interest expense, net
of interest income, by approximately $38 million ($21 million
after-tax or $0.03 per share) assuming the level and mix of the
December 31, 1994 net debt portfolio was maintained.
PepsiCo's negative operating working capital position, which
principally reflects the cash sales nature of its restaurant
operations, effectively provides additional capital for
investment. Operating working capital, which excludes short-term
investments and short-term borrowings, was a negative $677
million and $849 million at year-end 1994 and 1993, respectively.
The $172 million decline in negative working capital primarily
reflected reclassification of amounts from Other current
liabilities to Other Liabilities and base business growth in the
more working capital intensive bottling and snack food operations
exceeding the growth in restaurant operations.
Shareholders' Equity increased $517 million or 8% from 1993.
This change reflected an 18% increase in retained earnings due
to $1.8 billion in net income less dividends declared of $555
million. This growth was offset by a $448 million increase in
treasury stock that reflected share repurchases, net of shares
used for stock option exercises and acquisitions, and a $287
million unfavorable change in the currency translation
adjustment account
<PAGE> 14
(CTA). The CTA change primarily reflected the impact of the
devaluation of the Mexican peso in late 1994 on the translation of our
peso denominated net assets.
Based on income before cumulative effect of accounting
changes, PepsiCo's return on average shareholders' equity (ROAE)
was 27.0% in 1994 and 27.2% in 1993. The ROAE was 26.5% in 1994
and 25.3% in 1993, excluding from both income and shareholders'
equity the effect of the accounting changes and BAESA gain in
1994 as well as the $29.9 million charge in 1993 due to 1993
U.S. tax legislation.
Management's Analysis - Cash Flows
(See Management's Analysis - Overview on page 7 for background
information.)
Cash flow activity in 1994 reflected strong cash flows from
operations of $3.7 billion and $421 million in net proceeds from
short-term investment activities. These amounts were used to
fund capital spending of $2.3 billion, purchases of treasury
stock totaling $549 million, dividend payments of $540 million,
acquisition activity of $316 million and net debt repayments of
$204 million.
One of PepsiCo's most significant financial strengths is its
internal cash generation capability. In fact, after capital
spending and acquisitions, each industry segment generated
positive cash flows in 1994, with particularly strong results
from beverages and snack foods. Net cash flows from PepsiCo's
domestic businesses were partially offset by international uses
of cash, reflecting strategies to accelerate growth of
international operations.
The significant devaluation of the Mexican peso in late 1994
and early 1995 did not materially impact 1994 consolidated cash
flows. However, because PepsiCo's operations in Mexico
represented approximately 7% of consolidated cash flows from
operations in 1994, the devaluation and its related effects are
expected to have an unfavorable impact on 1995 cash flows from
operations. In addition to the actions taken to mitigate the
unfavorable impact on operating profits, the operations in Mexico
will defer a portion of their capital spending. Nonetheless,
significant uncertainties remain in Mexico and, as a result, it
is not possible to quantify the impact on 1995 cash flows. In
addition, actions are being taken in other parts of the world
intended to mitigate the impact. See Management's Analysis -
Overview on page 7 for additional discussion.
Net Cash Provided by Operating Activities in 1994 rose $582
million or 19% over 1993, and in 1993 grew $423 million or 16%
over 1992. Income before noncash charges and credits rose 6% in
1994 and 24% in 1993. The increases in depreciation and
amortization noncash charges of $132 million in 1994 and $229
million in 1993 reflected capital spending and in 1993,
acquisitions. The 1994 decrease of $150 million in the deferred
income tax provision was primarily due to the effect in 1994 of
converting from premium based casualty insurance to self-
insurance for most of these risks and adopting SFAS 112 for
accounting for postemployment benefits. The 1993 increase of
$135 million in the deferred income tax provision was primarily
due to the lapping of 1992 effects related to restructuring
accruals and prefunded employee benefit expenses and the impact
of 1993 U.S. tax legislation. The cash provided in 1994 from
working capital was $357 million better than 1993, reflecting
normal increases in accrued liabilities across all of our
businesses, lapping the effect of higher income tax payments and
a lower provision in 1993 and improved trade receivable
collections, partially offset by the impact on accounts payable
of the timing of a large year-end payment to prefund employee
benefits. The 1993 over 1992 net increase of $257 million in
cash used for operating working capital reflected slower
collections of domestic accounts receivable, advance domestic
purchases of product ingredients, the higher payments of income
taxes and the lapping of 1992 and 1991 effects related to
restructuring accruals, partially offset by the payment to
prefund employee benefits.
Investing Activities over the past three years reflected
strategic spending in all three industry segments through capital
spending, acquisitions and investments in affiliates. PepsiCo
seeks investments that generate cash returns in excess of its
long-term cost of capital, which is estimated to be approximately
11% at year-end 1994. See Note 5 for a discussion of acquisition
activity. About 75% of the total acquisition activity in 1994
represented international transactions, compared to 45% in 1993
and 60% in 1992. PepsiCo continues to seek opportunities to
strengthen its position in its domestic and international
industry segments through such strategic acquisitions.
<PAGE> 15
Increased capital spending in 1994 was driven by beverages
reflecting investments in equipment for new packaging and new
products in the U.S. and emerging international markets,
primarily Eastern Europe. Capital spending increases in 1993 and
1992 were driven by restaurants, primarily for new units.
Restaurants represented about half of the total capital spending
in all three years. Restaurants, beverages and snack foods
represent 40%, 30% and 30%, respectively, of the estimated $2.4
billion spending in 1995. This reflects a shift primarily from
restaurants to snack foods. Beverages and snack foods 1995
capital spending reflects production capacity expansion and
equipment replacements, while restaurants is primarily for new
units. Restaurant capital spending in 1995 may be further
reduced depending upon future decisions as described beginning on
page 23. Approximately one-third of the planned 1995 capital
spending relates to international businesses, about the same as
the prior three years. Cash provided by operations is expected
to be sufficient to fund the expected capital spending.
Investment activity in PepsiCo's short-term portfolios,
primarily held outside the U.S., provided $421 million in 1994
and $259 million in 1993, respectively, compared to the increased
net investment of $52 million in 1992.
Financing Activities. The 1994 over 1993 change in cash
flows from net financing activities was a use of $937 million,
primarily reflecting net repayments of short and long-term debt
of $204 million compared to net proceeds of $590 million in 1993.
The 1993 over 1992 change in cash flows from financing activities
was a use of $328 million, primarily due to increased purchases
of treasury stock.
At year-end 1994, PepsiCo had authority to issue $3.4
billion of long-term debt and had facilities in place in the
U.S., Europe and Japan to take advantage of marketplace
opportunities. The principal purposes of these shelf
registrations are for financing growth activities and refinancing
borrowings.
Cash dividends declared were $555 million in 1994 and $486
million in 1993. PepsiCo targets a dividend payout of about one-
third of the prior year's income from ongoing operations, thus
retaining sufficient earnings to provide financial resources for
growth opportunities.
Share repurchase decisions are evaluated considering
management's target capital structure and other investment
opportunities. In 1994, PepsiCo repurchased 15.0 million shares
at a cost of $549 million. Subsequent to year-end, PepsiCo
repurchased 3.4 million shares through February 7, 1995 at a cost
of $121 million. Including these repurchases, 18.8 million
shares have been repurchased under the 50 million share
repurchase authority granted by PepsiCo's Board of Directors on
July 22, 1993.
Beverages
Management's Analysis
See Management's Analysis - Overview on page 7 for background
information and discussion of the fifty-third week in 1994 and
Business Segments on page F-9 for detailed results. Net sales
and operating profits within this discussion include the impact
of the fifty-third week. System bottler case sales of Pepsi
Corporate brands (case sales) were not impacted by the fifty-
third week because they are measured on a calendar year basis.
1994 vs. 1993
Worldwide net sales increased $1.0 billion or 12% to $9.7
billion. The fifty-third week contributed approximately 1 point
to the sales growth with domestic and international operations
benefiting by about 2 points and 1 point, respectively.
Comparisons are affected by acquisitions, consisting primarily of
franchised bottling operations in the U.S. and Asia, as well as
the absence of certain small bottling operations sold or
contributed to joint ventures (collectively, "net acquisitions").
Net acquisitions, principally domestic, contributed $161 million
or 2 points to worldwide sales growth.
<PAGE> 16
Domestic sales rose $623 million or 11% to $6.5 billion.
Net acquisitions contributed $158 million or 3 points to sales
growth. Volume growth contributed $510 million, driven by
carbonated soft drink (CSD) packaged products. This benefit,
combined with a mix shift to the higher-priced alternative
beverage packaged products and higher concentrate and fountain
syrup pricing, was partially offset by lower net pricing to
retailers and a mix shift to The Cube, our value-priced 24-pack.
The lower net pricing reflected increased price discounts and
promotional allowances for CSD in response to private label
competition and Lipton brand tea. See Note 1 for discussion
concerning classification of promotional price allowances.
Domestic alternative beverages comprise primarily Lipton brand
tea, All Sport and Ocean Spray Lemonade products. CSD comprises
the balance of the Pepsi Corporate beverage portfolio.
Case sales volume consists of sales of packaged products to
retailers and through vending machines and fountain syrup by
company-owned and franchised bottlers. Previously existing Ocean
Spray products sold to retailers under a distribution agreement
are not included in reported case sales growth. Domestic case
sales increased 6%, reflecting strong double-digit growth in the
Mountain Dew brand and solid gains in Brand Pepsi. Case sales
growth also benefited by strong double-digit growth in Lipton
brand tea and gains in the Diet Pepsi brand. These advances,
combined with the national distribution of All Sport and Ocean
Spray Lemonade in 1994 and gains in the Slice brands, were
partially offset by significant declines in the Crystal Pepsi
brands. Alternative beverages contributed 2 points to the case
sales growth. Case sales of fountain syrup grew at a slower rate
than packaged products.
International sales rose $426 million or 16% to $3.2
billion. This growth reflected higher volume of $300 million,
the start-up of company-owned bottling and distribution
operations, principally in Eastern Europe, and the first year of
sales of Stolichnaya vodka under the 1994 appointment of an
affiliate of Grand Metropolitan as the exclusive U.S. and
Canadian distributor. Higher concentrate pricing was offset by
an unfavorable currency translation impact and lower net pricing
on packaged products. The unfavorable currency translation
impact reflected a weaker Canadian dollar, Spanish peseta and
Mexican peso, partially offset by a stronger Japanese yen.
International case sales increased 9%, reflecting strong
double-digit growth in Asia, led by China and India, and solid
advances in Latin America, as growth in Mexico more than offset
declines in Venezuela. Latin America and Mexico represent our
largest international case sales region and country,
respectively. Double-digit advances in Eastern Europe and the
Middle East, combined with single-digit growth in Western Europe
and Canada, were partially offset by declines in Africa. Pepsi
Max, a new low-calorie cola, aided case sales growth.
Worldwide operating profits increased $108 million or 10% to
$1.2 billion. The fifty-third week enhanced profit growth by
approximately 2 points with domestic and international operations
benefiting by about 1 point and 2 points, respectively.
Domestic profits increased $85 million or 9% to $1.0
billion. Volume gains, driven by packaged products, contributed
$305 million to profit growth. This benefit, combined with the
higher concentrate and fountain syrup pricing, was partially
offset by higher operating expenses, the lower net pricing to
retailers, the mix shift to The Cube and increased product costs.
Selling and distribution expenses grew at a faster rate than
sales, driven by higher volume-driven labor costs. Advertising
and marketing costs grew at a slower rate than sales.
Administrative expenses declined modestly reflecting savings from
a 1994 consolidation of headquarters and field operations and a
reduction in the scope of the 1992 restructuring actions, both
discussed below. These benefits were largely offset by normal
increases in administrative expenses. The increased product
costs reflected the mix shift to the higher cost alternative
beverages and higher ingredient costs, partially offset by lower
packaging costs. Alternative beverages, driven by Lipton brand
tea, aided the profit growth. The domestic profit margin
declined slightly to 15.6%.
In the third quarter of 1994, Pepsi-Cola reversed into
income $24.2 million of the $115.4 million restructuring accrual
established in 1992 and, in the third and fourth quarters,
recorded additional charges totaling $22.3 million, primarily
reflecting management's decision to further consolidate
headquarters and field operations. The 1994 charges cover
severance costs associated with employee terminations and
relocation costs for employees
<PAGE> 17
who, in 1994, have accepted offers to relocate. See 1993 vs. 1992
discussion for a description of the 1992 restructuring charge.
The $24.2 million reversal reflects both refinements of the
estimates originally used to establish the accrual, principally
for costs associated with displaced employees, and management's
decision to reduce the scope of the restructuring. The
nationwide implementation of several of the anticipated
administrative and business process redesigns has been completed,
with the balance of the redesigns projected to be completed over
the next three years.
The benefits of the restructuring activities when fully
implemented were originally projected to be approximately $105
million annually, based on reduced employee and facility costs.
The current projection of annual benefits from these sources has
decreased to approximately $40 million reflecting, in part, the
reduced scope of the restructuring. While difficult to measure,
in 1994 Pepsi-Cola estimated other sources of benefits from the
restructuring of approximately $90 million annually, based on
centralization of purchasing activities and incremental volume
and pricing from improvements in administrative and business
processes. These additional sources of benefits, although
identified when the 1992 restructuring accrual was established,
were not included in the projected annual benefits due to
significant uncertainties and difficulties in quantifying the
amounts, if any, of such benefits. Due to delays in implementing
some of the restructuring actions, full realization of the
expected benefits also has been delayed. Benefits in 1994 were
offset by incremental costs associated with the continued
development and implementation of the restructuring actions.
This offset is expected to continue into 1995. Net benefits are
expected to begin in 1996 and to increase annually until fully
realized in 1998. All benefits derived from the restructuring
actions will be reinvested in the business to strengthen our
competitive position.
International profits increased $23 million or 13% to $195
million. Net acquisitions reduced profits by $9 million or 5
points. The increased profits reflected volume growth of $75
million, led by concentrate shipments. This benefit, combined
with a decline in advertising and marketing expenses not
attributed to volume growth, was partially offset by increased
field and headquarters administrative expenses, start-up losses,
principally in Eastern Europe, and an unfavorable currency
translation impact, primarily from the Mexican peso and the
Canadian dollar. The increased administrative expenses reflected
costs to support expansion in developing markets. The higher
concentrate pricing was partially offset by a decline in finished
product sales to franchised bottlers, principally in Japan, and
the lower net pricing on packaged products. Increased profits
from the first year of sales of Stolichnaya, under the 1994
appointment of an affiliate of Grand Metropolitan as the
exclusive U.S. and Canadian distributor, aided profit growth.
The new Pepsi Max product significantly contributed to profit
growth. Profits increased in Latin America, led by Mexico, and
in Western Europe, reflecting significantly reduced losses in
Germany. Profits also grew in Asia, reflecting advances in
Japan. The profit growth was restrained by start-up losses in
Eastern Europe and declines in Canada, reflecting private label
competition. The international profit margin remained relatively
unchanged at 6.2%.
The 1992 restructuring actions to streamline the acquired
Spanish franchised bottling operation were substantially
completed in 1994. These actions have resulted in total savings
approximating $15 million in 1994, with total annual savings
expected to grow to about $20 million in 1995, consistent with
our original projection. These savings will continue to be
reinvested in our businesses to strengthen our competitive
position.
The significant devaluation of the Mexican peso in late 1994
and early 1995 did not materially impact 1994 international
beverage operating profits. However, because Mexico, our largest
profit country, represented approximately 22% of international
beverage operating profits in 1994, the devaluation and its
related effects are expected to have an unfavorable impact on
1995 operating profits. The operations in Mexico have begun to
take actions to increase volume, enhance net pricing and reduce
costs, including evaluating alternative sourcing of raw
materials. Nonetheless, significant uncertainties remain in
Mexico and, as a result, it is not possible to quantify the
impact. International beverages has also begun to take actions
in several other countries in 1995 to help mitigate the impact.
<PAGE> 18
1993 vs. 1992
Worldwide net sales increased $1.0 billion or 14% to $8.6
billion. Comparisons are affected by net acquisitions,
consisting primarily of acquisitions of franchised bottling
operations in Spain and the U.S., as well as the absence of
results of certain small international bottling and distribution
operations sold or contributed to a joint venture. Net
acquisitions contributed $697 million or 10 points to worldwide
sales growth.
Domestic sales grew $433 million or 8% to $5.9 billion.
Acquisitions contributed $222 million or 4 points of domestic
sales growth. Volume growth, driven by new products, contributed
approximately $170 million. The balance of the sales growth
reflected a mix shift to new products with higher net prices,
principally the new Lipton Original brand ready-to-drink tea
products and certain Ocean Spray brand juice products.
Domestic case sales increased 3%, reflecting the impact of
the late 1992 introduction of Crystal Pepsi and Diet Crystal
Pepsi brands, the growth in Mountain Dew brands and the expanded
distribution of new Lipton brand tea products. Case sales of
fountain syrup grew at the same rate as packaged products.
Excluding the Lipton products, case sales volume grew 2%, driven
by a double-digit increase in Mountain Dew. Case sales of the
Crystal Pepsi brands offset a decline in brands Pepsi and Diet
Pepsi.
International sales rose $600 million or 28% to $2.7
billion. Net acquisitions contributed $476 million or 22 points
of sales growth. The balance of the sales growth reflected
higher concentrate pricing, led by Latin America as well as the
start-up of company-owned distribution operations in France and
Eastern Europe. Sales growth was depressed by the unfavorable
currency translation impact of a stronger U.S. dollar in both
concentrate and bottling operations. A small decline in existing
bottling operations reflected lower pricing in Germany, largely
offset by higher prices and volumes in Greece.
International case sales rose 7%. Excluding the newly
acquired KAS flavor brands in Spain, international case sales
grew 5%. This performance reflected solid advances in Latin
America as well as double-digit growth in Asia, led by China and
Pakistan, and in Eastern Europe, led by Turkey and Hungary. The
Middle East, particularly Saudi Arabia, also contributed to case
sales growth.
Worldwide operating profits increased $310 million or 39% to
$1.1 billion. Excluding the 1992 restructuring charges totaling
$145 million ($115.4 million for domestic and $29.6 million for
international), profits were up 18%.
The 1992 domestic charge arose from an organizational
restructuring designed to improve customer focus by realigning
resources consistent with Pepsi-Cola's "Right Side Up" operating
philosophy, as well as a redesign of key administrative and
business processes. The organizational restructuring was
completed in 1992. The redesign of core processes is ongoing.
The charge included provisions for costs associated with
redeployed and displaced employees, the redesign of core
processes and office closures.
The international restructuring charge, which related
primarily to displaced employees, included $18.5 million to
streamline the acquired Spanish franchised bottling operation.
This amount represented 30% (PepsiCo's ownership interest prior
to the acquisition of the remaining interest) of the total cost
of the streamlining. The remaining $11.1 million of the charge
represented costs associated with streamlining the worldwide
field management organization which was substantially completed
in 1993.
The costs provided for in these domestic and international
restructuring actions and the related savings are principally of
a cash nature. The benefits of the completed international
worldwide actions resulted in annual savings of $7 million, as
originally projected. The savings will continue to be reinvested
in the business to strengthen our competitive position.
Domestic profits increased $250 million or 37% to $937
million. Excluding the 1992 restructuring charge, profits grew
$135 million or 17%. Volume gains, led by new products,
contributed about $90 million to profits.
<PAGE> 19
The combined benefit of lower packaging and ingredient costs and the
favorable product mix shift was largely offset by higher operating
expenses. Profit growth also benefited from a $12 million reduction in
retiree health care expense due to 1993 plan amendments described
in Note 12, as well as a $9 million credit arising from a net
adjustment of accruals related to prior years' acquisitions.
Promotional costs were about even with last year; however,
selling and administrative expenses grew at a faster rate than
sales due to transitional costs to support the organizational and
process redesign initiatives discussed above. This higher level
of selling and administrative costs as a percentage of sales is
expected to continue until the benefits of these initiatives are
realized. Sales of the new higher-margin Lipton Original brand
tea products resulted in a significant contribution to profit
growth. The Crystal Pepsi products particularly aided first
quarter results, but did not significantly impact full year
profits. The domestic profit margin, excluding the 1992
restructuring charge, grew over 1 point to 15.8%.
International profits increased $60 million or 53% to $172
million. Excluding the 1992 restructuring charge, profits grew
$30 million or 21%. The profit advance, led by Latin America,
reflected higher concentrate pricing in excess of increased
operating expenses, and concentrate shipment growth that
contributed about $15 million. These benefits were partially
offset by increased losses in company-owned bottling and
distribution operations, led by Germany. Start-ups of
distribution operations also contributed to the increased losses.
Unfavorable currency translation impacts, principally in
concentrate operations, also negatively affected profit growth.
A profit decline in bottling operations in Japan, due to
increased operating expenses, was offset by growth in Canada,
reflecting administrative cost reductions through consolidation
of support functions in recently acquired operations. The
Canadian improvement was achieved despite a $12.2 million fourth
quarter 1993 charge to further streamline operations and
strengthen its competitive position. Offsetting this effect was
an $11.9 million credit in the second quarter of 1993 related to
a settlement of litigation with a former franchised bottler in
Europe. The international profit margin, excluding the 1992
restructuring charge, declined almost one-half point to 6.3%.
Excluding the impact of the lower margin net acquisitions, the
profit margin grew 1 point.
Snack Foods
Management's Analysis
See Management's Analysis - Overview on page 7 for background
information and discussion of the fifty-third week in 1994 and
Business Segments on page F-9 for detailed results. Net sales
and operating profits within this discussion include the impact
of the fifty-third week while pound and kilo growth have been
adjusted to exclude its impact.
1994 vs. 1993
Worldwide net sales rose $1.2 billion or 18% to $8.3
billion. The fifty-third week contributed approximately 2 points
to the sales growth with domestic and international operations
benefiting by about 2 points and 1 point, respectively.
Domestic sales grew $646 million or 15% to $5.0 billion,
reflecting volume growth of $660 million. Volume gains reflected
growth in most major brands and line extensions of existing
products. Sales growth was further aided by increased
promotional price allowances and marketing programs to retailers,
which are reported as marketing expenses and therefore do not
reduce reported sales. See Note 1 for further discussion
concerning classification of promotional allowances. Higher
gross pricing was offset by a sales mix shift to larger, value-
oriented packages and products with lower gross prices.
Total domestic pound volume advanced 13%. This performance
was led by strong double-digit growth in Lay's brand potato
chips, reflecting the successful promotion of Wavy Lay's brand
potato chips and growth of Lay's KC Masterpiece Barbecue Flavor
brand potato chips, Rold Gold and Rold Gold Fat Free Thins brand
pretzels and Tostitos brand tortilla chips, driven by Restaurant
Style Tostitos brand and the expanded distribution of Baked
Tostitos brand. Doritos brand tortilla chips had solid single-
digit volume growth while Fritos brand corn chips and
<PAGE> 20
Chee.tos brand cheese flavored snacks reflected low double-digit
growth. Ruffles brand potato chips showed modest growth.
International sales rose $592 million or 22% to $3.3
billion. Confectioneries (primarily candy and cookies) account
for approximately 30% of international snack food sales.
Acquisitions contributed $67 million or 2 points to sales growth.
The balance of the sales growth was driven by higher volumes,
which contributed $590 million, led by successful promotions by
the Sabritas snack chip and candy business in Mexico. A
favorable brand mix shift to higher-priced products, primarily in
Latin America and the U.K., and higher pricing were largely
offset by the unfavorable currency translation impact of a
stronger U.S. dollar, principally against the Mexican peso.
International kilo growth is reported on a systemwide basis,
which includes both consolidated businesses and joint ventures
operating for at least one year. Systemwide snack chip kilos
rose 16%, led by strong double-digit growth at Sabritas, in Spain
and Brazil and solid gains in the U.K. Systemwide confectionary
kilos also grew 16%, reflecting double-digit advances at Gamesa
and Sabritas and gains in Egypt and Poland.
Worldwide operating profits increased $187 million or 16% to
$1.4 billion. The fifty-third week enhanced profits by
approximately 2 points with domestic and international operations
benefiting by about 3 points and 1 point, respectively.
Domestic profits grew $124 million or 14% to $1.0 billion.
This performance reflected strong volume growth, which
contributed $340 million. This growth was partially offset by
the impact of increased operating and manufacturing costs and an
unfavorable sales mix shift to lower-margin packages and
products. Increased operating costs were driven by higher
selling, distribution and new system costs in addition to
increased investment in marketing costs to maintain strong
momentum in 1995. Increased capacity costs were partially offset
by manufacturing efficiencies. Higher vegetable oil costs were
substantially offset by lower packaging and potato costs.
Increased promotional price allowances and merchandising support
largely offset higher pricing on certain brands. The domestic
profit margin remained relatively unchanged at 20.5%.
Though difficult to forecast, there are no material changes
expected in potato costs for 1995. However, potato prices have
been less predictable in recent years due to weather conditions.
Vegetable oil prices are expected to decline slightly from the
high 1994 levels while the cost of packaging is expected to
increase.
International profits increased $63 million or 22% to $352
million. Higher volumes contributed $95 million to international
profit growth, led by Sabritas. The combined impact of the
favorable product and package mix shifts, primarily in the U.K.
and Latin America, and modestly higher pricing were more than
offset by higher direct and administrative costs and an
unfavorable currency translation impact from the Mexican peso.
Higher direct costs resulted primarily from investment
initiatives to build brand equity and enhance distribution
channels in Mexico. Profit growth was also dampened by the
lapping of last year's noncash credit of $6.1 million resulting
from the decision to retain a small snack chip business in Japan
previously held for sale. The international profit margin
remained relatively unchanged at 10.8%.
The international restructuring charge in 1992 related
primarily to actions to consolidate and streamline the Walkers
business in the U.K. that were substantially completed during
1994. These actions are estimated to result in annual savings of
about $32 million, which continue to be reinvested in the
business to strengthen our competitive position. See 1993 vs.
1992 discussion for a further explanation of the 1992
restructuring charge.
Strong double-digit profit growth at Sabritas was driven by
higher snack chip and candy volumes. This benefit, combined with
a favorable product mix shift to higher-margin snacks and lower
manufacturing overhead and administrative costs, more than offset
increased potato costs, higher promotional spending and an
unfavorable currency translation impact.
Walkers profits advanced at a strong double-digit rate,
driven by a favorable product mix shift, reflecting increased
sales of higher-margin branded products and the elimination of
most lower-margin private label products,
<PAGE> 21
increased volumes, lower raw material and packaging costs and lower
manufacturing expenses resulting from the 1992 restructuring actions.
These benefits offset start-up costs related to the launch of Doritos
brand tortilla chips which exceeded incremental profits
generated.
Gamesa posted strong profit growth on a relatively small
base, reflecting a favorable package mix shift to higher-margin
single serve products and lower manufacturing overhead and
administrative costs resulting from cost reduction initiatives.
These benefits were partially offset by higher product costs,
selling and distribution costs associated with the expansion of a
direct delivery system and an unfavorable currency translation
impact.
The significant devaluation of the Mexican peso in late 1994
and early 1995 did not materially impact 1994 international snack
food operating profits. However, because Sabritas and Gamesa
combined represented approximately 63% of international snack
food operating profits in 1994, the devaluation and its related
effects are expected to have an unfavorable impact on 1995
operating profits. Sabritas and Gamesa have begun to increase
pricing and reduce costs, including evaluating alternative
sourcing of raw materials. Nonetheless, significant
uncertainties remain in Mexico and, as a result, it is not
possible to quantify the impact. International snack foods has
also begun to take actions in several of its other countries in
1995 to help mitigate the impact.
1993 vs. 1992
Worldwide net sales rose $895 million or 15% to $7.0
billion. Comparisons are affected by international acquisitions,
consisting principally of the securing of a controlling interest
in the Gamesa (Mexico) cookie business and the buyout of the
joint venture partner at Hostess Frito-Lay (Canada), both in
1992, as well as the 1993 reconsolidation of a small snack chip
business in Japan previously held for sale (collectively,
"acquisition activity"). Acquisition activity added $383 million
or 7 points to the worldwide sales growth.
Domestic sales grew $415 million or 11% to $4.4 billion.
Volume growth contributed $320 million to the domestic increase.
Sales growth also reflected higher effective pricing through
lower package weights, partially offset by a sales mix shift to
larger, value-oriented packages and products with lower gross
prices. The higher effective pricing was mitigated by increased
promotional price allowances to retailers, which are reported as
marketing expenses and therefore do not reduce reported sales.
Total domestic pound sales advanced 8%, reflecting double-
digit growth in Lay's brand potato chips, Doritos and Tostitos
brand tortilla chips and Rold Gold brand pretzels.
International sales rose $480 million or 22% to $2.6
billion. Acquisition activity contributed $383 million or 18
points to the increase. The balance of the sales growth, led by
the Sabritas snack chip and candy business in Mexico, reflected
higher volumes, which contributed $150 million, and higher
pricing. This growth was partially offset by the unfavorable
currency translation impact of a stronger U.S. dollar,
principally against the British pound.
International systemwide snack chip volume rose 5%,led by
double-digit growth in Canada and Turkey and gains at Sabritas
and in the U.K. Confectioneries (primarily candy and cookies)
account for about 30% of reported international snack food sales.
Systemwide confectionery volume grew 7% reflecting gains at
Gamesa and double-digit advances at Sabritas.
Worldwide operating profits increased $205 million or 21% to
$1.2 billion. Excluding a 1992 international restructuring
charge of $40.3 million, profits increased 16%.
The largest component of the 1992 restructuring charge
related to actions, many of which were completed in 1993, to
consolidate and streamline the Walkers business in the U.K. The
costs provided for in these restructuring actions and related
savings are principally of a cash nature. As originally
projected, these actions, when fully implemented, are currently
expected to result in annual savings of about $35 million,
providing additional resources for reinvestment in the business
to strengthen our competitive position.
<PAGE> 22
Domestic profits rose $125 million or 16% to $901 million.
This performance reflected volume growth, which contributed $165
million to domestic profits, and a $24 million reduction in
retiree health care expense due to 1993 plan amendments described
in Note 12. These benefits were partially offset by increased
manufacturing costs and other operating expenses that exceeded
the higher effective pricing. The unfavorable sales mix shift
also depressed profit growth. The higher manufacturing costs
reflected a temporary increase in potato costs of approximately
$25 million resulting from the effects of extreme weather
conditions in March on the potato crop in the Southern U.S. The
domestic profit margin rose 1 point to 20.6%.
Though difficult to forecast, higher prices in 1994 for
vegetable oil, resulting from the past summer's flooding in the
Midwestern U.S., were expected to be partially offset by a
decline in potato prices from 1993 levels.
International profits grew $80 million or 38% to $289
million. Excluding the 1992 restructuring charge, profits rose
$39 million or 16%. The profit performance was driven by
Sabritas and reflected higher volumes, which contributed $85
million to profit growth, and a $6.1 million credit resulting
from the decision to retain the business in Japan. This growth
was partially offset by operating cost increases, net of savings
from the restructuring actions announced in 1992, that exceeded
higher pricing, and unfavorable currency translation impacts.
The international profit margin, excluding the 1992 restructuring
charge, declined one-half point to 10.9%. Excluding the impact
of lower margin acquisitions, the profit margin increased over 1
point.
Double-digit profit growth at Sabritas was driven by higher
snack chip and candy volumes. Increased manufacturing and other
operating expenses were partially offset by higher pricing.
Profits in the U.K. declined due to an unfavorable currency
translation impact. Double-digit profit growth on a local
currency basis reflected the cost savings from the 1992
restructuring actions, volume gains and a sales mix shift to
higher margin products, partially offset by increased
manufacturing costs. Profit growth was also depressed by the
effect of a 1992 credit arising from the final settlement of
pension assets related to the 1989 acquisition of the U.K.
operations. A decline in profits for Poland reflected increased
manufacturing costs and lower pricing.
Gamesa and Hostess Frito-Lay, both acquired midyear 1992,
posted volume-driven profit growth for the comparable period
since acquisition; i.e., the second half of 1993 vs. 1992.
Acquisition activity, which includes only the results for the
first half of 1993 for Gamesa and Hostess Frito-Lay, did not,
however, significantly affect the full year international profit
comparison, as losses at Gamesa offset profits contributed by
Hostess Frito-Lay and other smaller acquisitions. Gamesa posted
a profit for the full year despite the first half loss.
Restaurants
Management's Analysis
See Management's Analysis - Overview on page 7 for background
information and discussion of the fifty-third week in 1994 and
Business Segments on page F-9 for detailed results. Net sales
and operating profits within this discussion include the impact
of the fifty-third week while same store sales growth has been
adjusted to exclude its impact. Also, for purposes of this
analysis, the net sales and operating profits of the franchisee
operations of PFS, PepsiCo's restaurant distribution operation,
have been allocated to each restaurant chain.
1994 vs. 1993
Worldwide net sales increased $1.2 billion or 12% to $10.5
billion. The fifty-third week contributed approximately 1 point
to the sales growth with domestic and international operations
benefiting by about 1 point and 2 points, respectively. The
sales growth was primarily due to $934 million from additional
units (units constructed and acquired, principally from
franchisees, net of units closed and sold) and volume growth of
$185 million. Domestic sales increased $668 million or 8% to
$8.7 billion and international sales rose $497 million or 37% to
$1.8 billion.
<PAGE> 23
Worldwide operating profits declined $48 million or 6% to
$730 million. The fifty-third week mitigated the profit decline
by approximately 3 points with domestic and international
operations benefiting at the same rate. The decline reflected
increased administrative and support costs, including spending
for strategic initiatives and aggressive international unit
development, higher store operating costs and a sales mix shift
to lower-margin products. These were partially offset by
additional units that contributed $73 million, lower raw material
costs and higher franchise royalty revenues. Volume growth of
$30 million was offset by lower net prices. Domestic profits
declined $26 million or 4% to $659 million. International
profits fell $22 million or 23% to $71 million, which included a
$7 million charge to consolidate the headquarters operations for
the three international restaurant businesses into one.
The significant devaluation of the Mexican peso in late 1994
and early 1995 did not materially impact 1994 international
restaurant operating profits. Results from Mexico constitute an
immaterial portion of international restaurant profits. However,
the devaluation and its related effects are expected to have an
unfavorable impact on 1995 results. The operations in Mexico
have begun to increase pricing and reduce costs, including
evaluating alternative sourcing of raw materials. In addition,
further expansion of company-owned units has been temporarily
halted pending stabilization of the economy. Nonetheless,
significant uncertainties remain in Mexico and, as a result, it
is not possible to quantify the impact.
Late in 1994, Roger Enrico was named Chairman, PepsiCo
Worldwide Restaurants. He is currently evaluating several
options to improve their operating results and returns on our
total restaurant investments. Examples of options under
consideration to improve investment returns include a reduced
company share of future new restaurant development and sale of
some existing company restaurants to franchisees. The cash
generated from these options would most likely be reinvested in
our nonrestaurant businesses or used to repurchase PepsiCo stock.
We expect to begin making decisions on these and other
options during 1995 as we continue to refine our restaurant
operating strategies.
Pizza Hut
Worldwide sales increased $346 million or 8% to $4.5 billion
driven by international operations. However, the domestic
operations continue to represent the major portion of worldwide
Pizza Hut. The worldwide sales increase was driven by additional
units that contributed $460 million, including $80 million from
the domestic acquisition of D'Angelo Sandwich Shops late in 1993.
This benefit was partially offset by lower volumes of $60
million, reflecting domestic volume declines that exceeded
international volume gains, and lower net pricing. The domestic
volume declines primarily reflected lapping the successful
national roll-out of Bigfoot Pizza in 1993.
Same store sales for domestic company-owned units declined
6%, though volume decreased at a slightly slower rate. The
decline was primarily in the delivery and carryout channels,
reflecting the lapping of the national roll-out of Bigfoot Pizza
in 1993.
Worldwide profits decreased $77 million or 21% to $295
million. This decline reflected the lower net pricing due to
value-oriented promotions, increased administrative and support
spending, primarily to develop international markets, lower
volumes of $35 million, reflecting the domestic volume declines
partially offset by the international volume advances, and higher
store operating costs. These were partially offset by additional
units that contributed $27 million, increased franchise royalty
revenues and favorable food costs, as slightly higher cheese
prices were more than offset by favorable meat costs. Though
difficult to forecast, these food costs are expected to decrease
in 1995. The profit decline was also mitigated by a favorable
impact of $14 million from extending depreciable lives on certain
domestic delivery assets and the absence of last year's start-up
costs associated with Bigfoot Pizza. The worldwide profit margin
declined more than 2 points to 6.6%.
International sales posted strong double-digit growth driven
by additional units, particularly in Korea, Brazil, Canada,
Mexico and Spain. Volume gains were partially offset by lower
net pricing. International profits declined sharply, reflecting
increased start-up and administrative costs to support aggressive
development strategies,
<PAGE> 24
partially offset by additional units and increased franchise royalty
revenues. International profits also reflected Pizza Hut's share of
the international restaurants'consolidation charge.
Strong gains in Korea, the largest profit market, primarily
reflected additional units and strong volume growth. Profits
declined in the largest sales markets, Australia and Canada.
Additionally, significant start-up losses were experienced in the
new Poland operations.
Taco Bell
Worldwide sales increased $500 million or 17% to $3.4
billion. The domestic operations represent substantially all of
worldwide Taco Bell. The worldwide sales growth was led by
additional Taco Bell units which contributed $281 million and
volume gains that provided $125 million, half of which was the
result of food and paper sales to additional franchisees. The
sales growth also reflected $84 million due to the acquisition of
Chevys in the third quarter of 1993 and new Chevys units. Same
store sales for domestic company-owned Taco Bell units grew 2%,
though volume grew at a slower rate.
Worldwide profits rose $17 million or 7% to $270 million.
The profit growth reflected lower food costs, additional units
which contributed $24 million, volume gains of $20 million,
higher soft drink prices and increased franchise royalty
revenues. These benefits were partially offset by higher store
operating costs, driven by increased labor costs, an unfavorable
mix shift to lower-margin products and higher headquarters
administrative expenses. Profit growth was restrained by
increased losses posted by Hot 'n Now. Taco Bell plans to
transition Hot 'n Now during 1995 from primarily a company-
operated to a licensee/franchisee-operated business. This is
expected to significantly reduce Hot 'n Now's operating losses in
1995. Taco Bell worldwide profit margin fell almost 1 point to
7.9%.
International operations posted strong double-digit sales
growth, principally due to additional units. Volume gains were
largely offset by an unfavorable currency translation impact of a
weaker Canadian dollar. International operating results improved
slightly, although still resulting in a modest loss in 1994, as
volume gains were partially offset by start-up losses of new
units.
KFC
Worldwide sales rose $319 million or 14% to $2.6 billion.
The sales growth reflected additional units that contributed $193
million and volume gains of $120 million.
Worldwide profits increased $12 million or 8% to $165
million, reflecting the absence of last year's start-up costs
associated with the Colonel's Rotisserie Gold roasted chicken
product and accompanying side items (collectively, "CRG").
Higher volumes of $40 million, additional units that contributed
$22 million and increased franchise royalty revenues were largely
offset by a sales mix shift to lower-margin products, higher
field and headquarters administrative and support costs and lower
net pricing. The worldwide profit margin declined almost one-
half point to 6.2% due to international operations.
The improvement in KFC's domestic sales reflected an
increase in volume, as gains from CRG and the value-oriented Mega
Meal were partially offset by lower volumes of existing products,
and higher net pricing. Same store sales advanced 2% from last
year, though volumes grew at a slightly slower rate.
Domestic profits grew at a double-digit rate in 1994.
Operating profit benefited from the absence of last year's start-
up costs associated with CRG. Higher net pricing and volume
gains were offset by a mix shift to the lower-margin CRG and Mega
Meal offerings. Reduced store operating costs, including lower
product costs, primarily due to reformulation of side items late
in the second quarter, and the 1994 impact of favorable actuarial
adjustments to prior year workers' compensation claim accruals,
were partially offset by increased administrative costs. Profit
growth was depressed by lapping last year's $3.3 million
favorable adjustment to a 1991 reorganization accrual.
<PAGE> 25
Double-digit international sales growth was led by the
combined impact of acquired units in the U.K. and new units in
Mexico, Australia and Canada. The balance of the sales growth
reflected volume gains due, in part, to new value-priced
offerings, partially offset by the related lower net pricing.
International profit growth was modest. Excluding KFC's
share of the international restaurants' consolidation charge,
strong single-digit international operating profit growth
reflected gains from additional units and higher franchise
royalty revenues, partially offset by increased store operating
costs and higher field administrative and support costs. The
volume gains were offset by the lower net pricing.
Profits increased in Australia, the largest market, and New
Zealand. Mexico's profits declined sharply and Canada reported
significantly lower results.
International sales represented about 40% of worldwide sales
in 1994 and 30% in 1993. International profits represented about
40% of worldwide profits in 1994 and 1993.
1993 vs. 1992
Worldwide net sales rose $1.1 billion or 14% to $9.4
billion. This advance was driven by additional units, which
contributed $913 million. Volume growth, led by domestic Pizza
Hut, provided $175 million of the sales advance. Domestic sales
grew $910 million or 13% to $8.0 billion and international sales
rose $213 million or 19% to $1.4 billion. The unfavorable
currency translation impact of a stronger U.S. dollar depressed
international sales growth.
Worldwide operating profits grew $60 million or 8% to $778
million. Additional units provided $89 million and volume growth
contributed $75 million to the profit increase. Increased
operating costs were partially offset by modestly higher net
pricing (principally at domestic KFC) and increased franchise
royalty revenues. Domestic profits rose $87 million or 15% to
$685 million, while international profits declined $27 million or
23% to $93 million reflecting weakness in Australia.
Pizza Hut
Worldwide sales increased $525 million or 15% to $4.2
billion. The domestic operations represent the major portion of
worldwide Pizza Hut. Additional units contributed $392 million
to the worldwide sales increase. Volume growth provided $140
million, driven by strong domestic gains resulting from the
national roll-out of the new value-priced Bigfoot Pizza in the
second quarter.
Same store sales advanced 5% though volume growth was
slightly higher. This performance reflected growth in all three
distribution channels: delivery, carryout and dine-in. Improved
sales in both delivery and carryout were driven by the success of
Bigfoot. The growth in dine-in reflected the impact of the third
quarter 1992 roll-out of the all-you-can-eat pizza and salad
lunch buffet. Results late in 1993 indicated a softening of same
store sales trends in dine-in due primarily to lapping last
year's roll-out of the lunch buffet.
Worldwide profits advanced $37 million or 11% to $372
million. This profit performance reflected $55 million from
volume growth, $41 million from additional units, increased
franchise royalty revenues and higher international net pricing.
These benefits were partially offset by increased store operating
costs as well as administrative and support expenses, which
included the start-up costs associated with Bigfoot. Bigfoot
contributed significantly to U.S. profit growth as incremental
volume, net of estimated cannibalization of other products, more
than offset the effect of the product's lower margin and the
start-up costs. Prices for cheese have fluctuated significantly
in recent years. Lower cheese costs in 1993 were offset by
higher meat and produce costs. The effect of these increasing
costs was exacerbated by a sales mix shift to more heavily-topped
pizzas and the lunch buffet. Though difficult to forecast,
commodity costs (led by cheese) were expected to increase. The
worldwide profit margin declined almost one-half point to 9.0%
due to lower international profits.
<PAGE> 26
International sales posted double-digit growth driven by
additional units in several markets, including Canada, Belgium,
Australia, Spain and Puerto Rico. This benefit, combined with
higher net pricing and increased franchise royalty revenues, was
partially offset by an unfavorable currency translation impact,
principally in Australia and Canada. International profits
declined slightly, primarily reflecting an unfavorable currency
translation impact. The contributions of the additional units,
higher net pricing and increased franchise royalty revenues were
largely offset by higher operating expenses, principally
development and support costs.
In the largest sales markets, profits declined in Australia,
but rose in Canada. Australia's performance reflected lower
volumes, despite introduction of Bigfoot Pizza in the third
quarter, and intense competitive pricing activity. To provide
even greater value and stimulate volume growth in 1994, a more
heavily-topped Bigfoot was relaunched late in 1993 and a new
value-oriented menu was introduced. Canada's profit growth
reflected higher net pricing, additional units and volume growth.
A product similar to Bigfoot, launched in the third quarter,
contributed to improved results.
Taco Bell
Worldwide sales grew $441 million or 18% to $2.9 billion.
The domestic operations represent substantially all of worldwide
Taco Bell. The worldwide sales increase was driven by additional
units, which contributed $364 million, including $78 million from
additional Hot 'n Now units and the acquired Chevys units. The
balance of the sales growth reflected the impact of higher store
volumes, partially offset by lower distribution sales by PFS
caused by the late 1992/early 1993 switch to another supplier by
certain franchisees. Same store sales for Taco Bell units rose
6% due to volume growth.
Worldwide profits increased $39 million or 18% to $253
million. Additional units contributed $35 million and volume
growth provided $25 million. These benefits, combined with
higher franchise royalty revenues and a small decline in food and
promotional costs, were partially offset by increased
headquarters administrative and support expenses. Profit growth
was depressed by increased losses at Hot 'n Now, reflecting costs
associated with a decision to not develop certain sites as well
as losses at new units. The worldwide profit margin was even at
8.7%. Profits in 1994 were expected to be aided by a late 1993
price increase for certain soft drink sizes.
International operations posted double-digit sales growth
and a small loss compared to a small profit in 1992, reflecting
increased development and support costs, as well as costs
associated with a store closure in the U.K.
KFC
Worldwide sales rose $157 million or 7% to $2.3 billion.
Additional units, principally in international markets,
contributed $158 million to sales growth. Higher domestic net
pricing and increased franchise royalty revenues also aided sales
growth. Sales growth was depressed by an unfavorable currency
translation impact as well as lower store volumes.
Worldwide profits decreased $16 million or 9% to $153
million as lower international profits were partially offset by
an increase domestically. The worldwide profit decline reflected
higher store operating costs, which included start-up costs
associated with the roll-out of the new roasted chicken products
in the U.S. and Australia, and increased international
administrative and support expenses, partially offset by the
higher net pricing and increased franchise royalty revenues. The
contribution from additional units of $13 million was partially
offset by the impact of lower volumes. The worldwide profit
margin fell over 1 point to 6.6% due to lower international
profits.
Improvement in domestic sales reflected additional units and
higher net pricing, principally from a lower level of price
discounting, partially offset by lower store volumes. Same store
sales were about even with last year. The introduction of CRG
late in the year contributed significantly to strong same store
sales growth in the fourth quarter of 1993.
<PAGE> 27
Domestic profits grew at a high single-digit rate reflecting
the higher net pricing that exceeded increased store operating
costs. This benefit, combined with the impact of additional units
and higher franchise royalty revenues, was partially offset by
the effect of lower volumes. The profit performance also
reflected a favorable adjustment of the 1991 restructuring
accrual. For the year, the benefits from incremental volume of
CRG, net of estimated cannibalization of other products, were
more than offset by the effect of CRG's lower margin and the
start-up expenses for the roll-out. However, CRG contributed
significantly to profit growth in the fourth quarter of 1993.
International sales posted double-digit growth, driven by
additional units in Singapore, Canada and Mexico, partially
offset by an unfavorable currency translation impact. A double-
digit decline in profits was caused principally by Australia, the
largest sales market. Increased administrative and support costs
also contributed to the profit decline.
Australia's performance was depressed by the start-up
expenses associated with its new value-priced TenderRoast chicken
product, the combined impact of the product's lower margin and
its greater than expected cannibalization of other higher-margin
products and an overall decline in volumes. Initiatives were
underway to drive incremental sales of TenderRoast. Canada, the
next largest sales market, posted a relatively modest decline in
profits reflecting lower volumes and competitive pricing
activity. To improve results in 1994 for both Australia and
Canada, KFC introduced new value-oriented menus and rolled out
delivery in certain markets.
International sales represented about 30% of worldwide sales
in 1993 and 1992. International profits represented about 40% of
worldwide profits in 1993 and 50% in 1992.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Information on page F-1.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The name, age and background of each of the Company's
directors nominated for reelection are contained under the
caption "Election of Directors" in the Company's Proxy Statement
for its 1995 Annual Meeting of Shareholders and are incorporated
herein by reference.
The executive officers of the Company and their current
positions and ages are as follows:
NAME POSITION AGE
D. Wayne Calloway Chairman of the Board and Chief 59
Executive Officer
Roger A. Enrico Vice Chairman of the Board and
Chairman and Chief Executive 50
Officer, PepsiCo Worldwide
Restaurants
Robert G. Dettmer Executive Vice President and Chief 63
Financial Officer
Randall C. Barnes Senior Vice President and Treasurer 43
Robert L. Carleton Senior Vice President and 54
Controller
<PAGE> 28
Edward V. Lahey, Senior Vice President, General 56
Jr. Counsel and Secretary
Indra K. Nooyi Senior Vice President, Strategic 39
Planning
Executive officers are elected by the Company's Board of
Directors, and their terms of office continue until the next
annual meeting of the Board or until their successors are elected
and have qualified. There are no family relationships among the
Company's executive officers.
Item 11. Executive Compensation
Information on compensation of the Company's directors and
executive officers is contained in the Company's Proxy Statement
for its 1995 Annual Meeting of Shareholders under the caption
"Executive Compensation" and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information on the number of shares of PepsiCo Capital Stock
beneficially owned by each director and by all directors and
officers as a group is contained under the caption "Ownership of
Capital Stock by Directors and Officers" in the Company's Proxy
Statement for its 1995 Annual Meeting of Shareholders and is
incorporated herein by reference. As far as is known to the
Company, no person owns beneficially more than 5% of the
outstanding shares of PepsiCo Capital Stock.
Item 13. Certain Relationships and Related Transactions
Not applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) 1. Financial Statements
See Index to Financial Information on page F-1.
2. Financial Statement Schedules
See Index to Financial Information on page F-1.
3. Exhibits
See Index to Exhibits on page E-1.
(b) Reports on Form 8-K
None.
<PAGE> S-1
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, PepsiCo has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: March 28, 1995
PEPSICO, INC.
By: /s/ EDWARD V. LAHEY, JR.
Edward V. Lahey, Jr.
Attorney-in-Fact
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of PepsiCo and in the capacities and on the
date indicated.
SIGNATURE TITLE DATE
/s/ D. WAYNE CALLOWAY Chairman of the Board and March 28, 1995
D. Wayne Calloway Chief Executive Officer
/s/ ROBERT G. DETTMER Executive Vice President March 28, 1995
Robert G. Dettmer and Chief Financial
Officer
/s/ ROBERT L. CARLETON Senior Vice President and March 28, 1995
Robert L. Carleton Controller (Chief
Accounting Officer)
/s/ ROGER A. ENRICO Vice Chairman of the March 28, 1995
Roger A. Enrico Board, Chairman and Chief
Executive Officer, PepsiCo
Worldwide Restaurants, and
Director
/s/ JOHN F. AKERS Director March 28, 1995
John F. Akers
/s/ ROBERT E. ALLEN Director March 28, 1995
Robert E. Allen
/s/ JOHN J. MURPHY Director March 28, 1995
John J. Murphy
/s/ ANDRALL E. PEARSON Director March 28, 1995
Andrall E. Pearson
<PAGE> S-2
/s/ SHARON PERCY Director March 28, 1995
ROCKEFELLER
Sharon Percy Rockefeller
/s/ ROGER B. SMITH Director March 28, 1995
Roger B. Smith
/s/ ROBERT H. STEWART, III Director March 28, 1995
Robert H. Stewart, III
/s/ FRANKLIN A. THOMAS Director March 28, 1995
Franklin A. Thomas
/s/ P. ROY VAGELOS Director March 28, 1995
P. Roy Vagelos
/s/ ARNOLD WEBER Director March 28, 1995
Arnold R. Weber
<PAGE>
PepsiCo, Inc. and Subsidiaries
FINANCIAL INFORMATION
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1994
<PAGE> F-1
PEPSICO, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL INFORMATION
Item 14(a)(1)-(2)
Page
Reference
Item 14(a)(1) Financial Statements
Consolidated Statement of Income for
the fiscal years December 31, 1994,
December 25, 1993 and December 26, 1992 F-2
Consolidated Balance Sheet at December 31, 1994
and December 25, 1993 F-3
Consolidated Statement of Cash Flows for
the fiscal years ended December 31, 1994,
December 25, 1993 and December 26, 1992 F-4
Consolidated Statement of Shareholders' Equity
for the fiscal years ended December 31, 1994,
December 25, 1993 and December 26, 1992 F-6
Notes to Consolidated Financial
Statements F-8
Management's Responsibility for Financial Statements F-37
Report of Independent Auditors, KPMG Peat Marwick LLP F-38
Selected Quarterly Financial Data F-39
Selected Financial Data F-42
Item 14(a)(2) Financial Statement Schedules
II Valuation and Qualifying Accounts and Reserves
for the fiscal years ended December 31, 1994,
December 25, 1993 and December 26, 1992 F-49
All other financial statements and schedules have been omitted since the
required information is not present or not present in amounts sufficient to
require submission of the schedule, or because the information required is
included in the above listed financial statements or the notes thereto.
<PAGE> F-2
_______________________________________________________________________________
Consolidated Statement of Income
(in millions except per share amounts)
PepsiCo, Inc. and Subsidiaries
Fifty-three weeks ended December 31, 1994 and fifty-two weeks ended
December 25, 1993 and December 26, 1992
1994 1993 1992
_______________________________________________________________________________
Net Sales $28,472.4 $25,020.7 $21,970.0
Costs and Expenses, net
Cost of sales 13,715.4 11,946.1 10,611.7
Selling, general and
administrative expenses 11,243.6 9,864.4 8,721.2
Amortization of intangible assets 312.2 303.7 265.9
Operating Profit 3,201.2 2,906.5 2,371.2
Gain on joint venture stock offering 17.8 - -
Interest expense (645.0) (572.7) (586.1)
Interest income 90.4 88.7 113.7
Income Before Income Taxes and Cumulative
Effect of Accounting Changes 2,664.4 2,422.5 1,898.8
Provision for Income Taxes 880.4 834.6 597.1
Income Before Cumulative Effect of
Accounting Changes 1,784.0 1,587.9 1,301.7
Cumulative Effect of Accounting Changes
Postemployment benefits (net of income
tax benefit of $29.3) (55.3) - -
Pension assets (net of income tax
expense of $14.5) 23.3 - -
Postretirement benefits other than
pensions (net of income tax benefit
of $218.6) - - (356.7)
Income taxes - - (570.7)
Net Income $ 1,752.0 $ 1,587.9 $ 374.3
Income (Charge) Per Share
Before cumulative effect of accounting
changes $ 2.22 $ 1.96 $ 1.61
Cumulative effect of accounting changes
Postemployment benefits (0.07) - -
Pension assets 0.03 - -
Postretirement benefits other
than pensions - - (0.44)
Income taxes - - (0.71)
Net Income Per Share $ 2.18 $ 1.96 $ 0.46
Average shares outstanding used to calculate
income (charge) per share 803.6 810.1 806.7
_______________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
_______________________________________________________________________________
<PAGE> F-3
_____________________________________________________________________________
Consolidated Balance Sheet
(in millions except per share amount)
PepsiCo, Inc. and Subsidiaries
December 31, 1994 and December 25, 1993
1994 1993
_____________________________________________________________________________
ASSETS
Current Assets
Cash and cash equivalents $ 330.7 $ 226.9
Short-term investments, at cost 1,157.4 1,573.8
1,488.1 1,800.7
Accounts and notes receivable, less allowance:
$150.6 in 1994 and $128.3 in 1993 2,050.9 1,883.4
Inventories 970.0 924.7
Prepaid expenses, taxes and
other current assets 563.2 499.8
Total Current Assets 5,072.2 5,108.6
Investments in Affiliates 1,295.2 1,090.5
Property, Plant and Equipment, net 9,882.8 8,855.6
Intangible Assets, net 7,842.1 7,929.5
Other Assets 699.7 721.6
Total Assets $24,792.0 $23,705.8
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,451.6 $ 1,390.0
Accrued compensation and benefits 753.5 726.0
Short-term borrowings 678.5 2,191.2
Income taxes payable 671.7 823.7
Accrued marketing 546.2 400.9
Other current liabilities 1,168.9 1,043.1
Total Current Liabilities 5,270.4 6,574.9
Long-term Debt 8,840.5 7,442.6
Other Liabilities 1,852.1 1,342.0
Deferred Income Taxes 1,972.9 2,007.6
Shareholders' Equity
Capital stock, par value 1 2/3 cents per share:
authorized 1,800.0 shares, issued 863.1 shares 14.4 14.4
Capital in excess of par value 934.4 879.5
Retained earnings 7,739.1 6,541.9
Currency translation adjustment and other (470.6) (183.9)
8,217.3 7,251.9
Less: Treasury stock, at cost:
73.2 shares and 64.3 shares in 1994 and
1993, respectively (1,361.2) (913.2)
Total Shareholders' Equity 6,856.1 6,338.7
Total Liabilities and
Shareholders' Equity $24,792.0 $23,705.8
____________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
_____________________________________________________________________________
<PAGE> F-4
___________________________________________________________________________
Consolidated Statement of Cash Flows (page 1 of 2)
(in millions)
PepsiCo, Inc. and Subsidiaries
Fifty-three weeks ended December 31, 1994 and fifty-two weeks
ended December 25, 1993 and December 26, 1992
1994 1993 1992
___________________________________________________________________________
Cash Flows - Operating Activities
Income before cumulative effect of
accounting changes $ 1,784.0 $ 1,587.9 $ 1,301.7
Adjustments to reconcile income
before cumulative effect of
accounting changes to net cash
provided by operating activities:
Depreciation and amortization 1,576.5 1,444.2 1,214.9
Deferred income taxes (66.9) 83.3 (52.0)
Other noncash charges and
credits, net 391.1 344.8 315.6
Changes in operating working capital,
excluding effects of acquisitions:
Accounts and notes receivable (111.8) (161.0) (45.7)
Inventories (101.6) (89.5) (11.8)
Prepaid expenses, taxes and other
current assets 1.2 3.3 (27.4)
Accounts payable 30.4 143.2 (102.0)
Income taxes payable 54.4 (125.1) (16.9)
Other current liabilities 158.7 (96.7) 135.2
Net change in operating
working capital 31.3 (325.8) (68.6)
Net Cash Provided by Operating
Activities 3,716.0 3,134.4 2,711.6
Cash Flows - Investing Activities
Acquisitions and investments
in affiliates (315.8) (1,011.2) (1,209.7)
Capital spending (2,253.2) (1,981.6) (1,549.6)
Proceeds from sales of property,
plant and equipment 55.3 72.5 89.0
Short-term investments, by original
maturity:
More than three months-purchases (218.6) (578.7) (1,174.8)
More than three months-maturities 649.5 846.0 1,371.8
Three months or less, net (9.9) (8.3) (249.4)
Other, net (268.3) (109.4) (30.8)
Net Cash Used for Investing
Activities $(2,361.0) $(2,770.7) $(2,753.5)
____________________________________________________________________________
(Continued on following page)
<PAGE> F-5
___________________________________________________________________________
Consolidated Statement of Cash Flows (page 2 of 2)
(in millions)
PepsiCo, Inc. and Subsidiaries
Fifty-three weeks ended December 31, 1994 and fifty-two weeks
ended December 25, 1993 and December 26, 1992
1994 1993 1992
___________________________________________________________________________
Cash Flows - Financing Activities
Proceeds from issuances of
long-term debt $ 1,285.2 $ 710.8 $ 1,092.7
Payments of long-term debt (1,179.5) (1,201.9) (616.3)
Short-term borrowings, by original
maturity:
More than three months-proceeds 1,303.8 3,033.6 911.2
More than three months-payments (1,727.7) (2,791.6) (2,062.6)
Three months or less, net 113.8 839.0 1,075.3
Cash dividends paid (540.2) (461.6) (395.5)
Purchases of treasury stock (549.1) (463.5) (32.0)
Proceeds from exercises of
stock options 97.4 68.6 82.8
Other, net (43.5) (36.7) (30.9)
Net Cash (Used for) Provided by
Financing Activities (1,239.8) (303.3) 24.7
Effect of Exchange Rate Changes on
Cash and Cash Equivalents (11.4) (3.4) 0.4
Net Increase (Decrease) in Cash
and Cash Equivalents 103.8 57.0 (16.8)
Cash and Cash Equivalents
- Beginning of Year 226.9 169.9 186.7
Cash and Cash Equivalents
- End of Year $ 330.7 $ 226.9 $ 169.9
___________________________________________________________________________
Supplemental Cash Flow Information
Cash Flow Data
Interest paid $ 591.1 549.5 574.7
Income taxes paid $ 663.1 675.6 519.7
Schedule of Noncash Investing
and Financing Activities
Liabilities assumed in
connection with acquisitions $ 223.5 897.0 383.8
Issuance of treasury stock and
debt for acquisitions $ 38.8 364.5 189.5
Book value of net assets exchanged
for investment in affiliates $ - 60.8 86.7
___________________________________________________________________________
See accompanying Notes to Consolidated Financial Statements.
<PAGE> F-6
___________________________________________________________________________
Consolidated Statement of Shareholders' Equity (page 1 of 2)
(in millions except per share amounts)
PepsiCo, Inc. and Subsidiaries
Fifty-three weeks ended December 31, 1994 and fifty-two weeks ended
December 25, 1993 and December 26, 1992
Capital Stock
Issued Treasury
Shares Amount Shares Amount
Shareholders' Equity,
December 28, 1991 863.1 $14.4 (74.0) $ (745.9)
1992 Net income - - - -
Cash dividends declared
(per share-$0.51) - - - -
Currency translation adjustment - - - -
Shares issued in connection with
acquisitions - - 4.3 44.2
Stock option exercises, including
tax benefits of $57.5 - - 6.3 65.3
Purchases of treasury stock - - (1.0) (32.0)
Other - - 0.1 1.4
Shareholders' Equity,
December 26, 1992 863.1 $14.4 (64.3) $ (667.0)
1993 Net income - - - -
Cash dividends declared
(per share-$0.61) - - - -
Currency translation adjustment - - - -
Purchases of treasury stock - - (12.4) (463.5)
Shares issued in connection with
acquisitions - - 8.9 170.2
Stock option exercises, including
tax benefits of $23.4 - - 3.4 46.0
Pension liability adjustment, net
of deferred taxes of $5.1 - - - -
Other - - 0.1 1.1
Shareholders' Equity,
December 25, 1993 863.1 $14.4 (64.3) $ (913.2)
1994 Net income - - - -
Cash dividends declared
(per share-$0.70) - - - -
Currency translation adjustment - - - -
Purchases of treasury stock - - (15.0) (549.1)
Stock option exercises, including
tax benefits of $27.1 - - 4.9 80.8
Shares issued in connection with
acquisitions - - 0.9 15.1
Pension liability adjustment, net
of deferred taxes of $5.1 - - - -
Other - - 0.3 5.2
Shareholders' Equity,
December 31, 1994 863.1 $14.4 (73.2) $(1,361.2)
(Continued on following page)
<PAGE> F-7
Consolidated Statement of Shareholders' Equity (page 2 of 2)
(in millions except per share amounts)
PepsiCo, Inc. and Subsidiaries
Fifty-three weeks ended December 31, 1994 and fifty-two weeks ended
December 25, 1993 and December 26, 1992
Capital Currency
in Translation
Excess of Retained Adjustment
Par Value Earnings and Other Total
Shareholders' Equity,
December 28, 1991 $476.6 $5,470.0 $ 330.3 $5,545.4
1992 Net income - 374.3 - 374.3
Cash dividends declared
(per share-$0.51) - (404.6) - (404.6)
Currency translation adjustment - - (429.3) (429.3)
Shares issued in connection with
acquisitions 115.3 - - 159.5
Stock option exercises, including
tax benefits of $57.5 74.9 - - 140.2
Purchases of treasury stock - - - (32.0)
Other 0.8 - - 2.2
Shareholders' Equity,
December 26, 1992 $667.6 $5,439.7 $ (99.0) $5,355.7
1993 Net income - 1,587.9 - 1,587.9
Cash dividends declared
(per share-$0.61) - (485.7) - (485.7)
Currency translation adjustment - - (77.0) (77.0)
Purchases of treasury stock - - - (463.5)
Shares issued in connection with
acquisitions 164.6 - - 334.8
Stock option exercises, including
tax benefits of $23.4 46.1 - - 92.1
Pension liability adjustment, net
of deferred taxes of $5.1 - - (7.9) (7.9)
Other 1.2 - - 2.3
Shareholders' Equity,
December 25, 1993 $879.5 $6,541.9 $(183.9) $6,338.7
1994 Net income - 1,752.0 - 1,752.0
Cash dividends declared
(per share-$0.70) - (554.8) - (554.8)
Currency translation adjustment - - (294.6) (294.6)
Purchases of treasury stock - - - (549.1)
Stock option exercises, including
tax benefits of $27.1 44.5 - - 125.3
Shares issued in connection with
acquisitions 13.7 - - 28.8
Pension liability adjustment, net
of deferred taxes of $5.1 - - 7.9 7.9
Other (3.3) - - 1.9
Shareholders' Equity,
December 31, 1994 $934.4 $7,739.1 $(470.6) $6,856.1
See accompanying Notes to Consolidated Financial Statements.
<PAGE> F-8
Notes to Consolidated Financial Statements
(tabular dollars in millions except per share amounts)
Note 1 - Summary of Significant Accounting Policies
The preparation of the Consolidated Financial Statements requires estimates
and assumptions that affect amounts reported and disclosed in the financial
statements and related notes. Actual results could differ from those
estimates. Certain reclassifications were made to prior year amounts to
conform with the 1994 presentation. Significant accounting policies are
discussed below, or where applicable, in the Notes that follow.
Principles of Consolidation. The financial statements reflect the
consolidated accounts of PepsiCo, Inc. and its controlled affiliates.
Intercompany accounts and transactions have been eliminated. Investments
in affiliates in which PepsiCo exercises significant influence but not
control are accounted for by the equity method and the equity in net income
is included in Selling, general and administrative expenses.
Marketing Costs. Marketing costs are reported in Selling, general and
administrative expenses and include costs of advertising, marketing and
promotional programs. Promotional discounts are expensed as incurred and
other marketing costs not deferred at year-end are charged to expense
ratably in relation to sales over the year in which incurred. Marketing
costs deferred at year-end consist of media and personal service
advertising prepayments, promotional materials in inventory and production
costs of future media advertising; these assets are expensed in the year
first used.
Promotional discounts to retailers in the beverage segment are
classified as a reduction of sales; in the snack food segment, such
discounts are generally classified as marketing costs. The difference in
classification reflects our historical view that promotional discounts had
become so pervasive in the beverage industry, compared to the snack food
industry, that they were effectively price discounts and should be
classified accordingly. This differing accounting classification was also
supported by a survey of the accounting practice of others in the beverage
and snack foods industries. PepsiCo plans to review its accounting policy
in 1995 to determine whether the different accounting classification for
beverages and snack foods still reflects the substance of the activity and
whether it continues to be consistent with others in our industries.
Depending on the outcome of the review, PepsiCo may change its accounting
classification of beverage or snack food promotional discounts. Any change
will not impact reported earnings as it would only result in a
reclassification of the cost of promotional discounts between Net Sales and
Selling, general and administrative expenses.
Cash Equivalents. Cash equivalents represent funds temporarily
invested (with original maturities not exceeding three months) as part of
PepsiCo's management of day-to-day operating cash receipts and
disbursements. All other investment portfolios, largely held outside the
U.S., are primarily classified as short-term investments.
Net Income Per Share. Net income per share is computed by dividing
net income by the weighted average number of shares and share equivalents
outstanding during each year.
Research and Development Expenses. Research and development expenses,
which are expensed as incurred, were $152 million, $113 million and $102
million in 1994, 1993 and 1992, respectively.
Fiscal Year. PepsiCo's fiscal year ends on the last Saturday in
December and, as a result, a fifty-third week is added every 5 or 6 years.
The fiscal year ending December 31, 1994 consisted of 53 weeks.
<PAGE> F-9
Note 2 - Business Segments
Business Segments
PepsiCo operates on a worldwide basis within three industry segments:
beverages, snack foods and restaurants. The beverage segment primarily
markets its Pepsi, Diet Pepsi, Mountain Dew and other brands worldwide and
7UP internationally, and manufactures concentrates for its brands for sale
to franchised bottlers worldwide. The segment also operates bottling
plants and distribution facilities located in the U.S. and in various
international markets, and manufactures and distributes ready-to-drink
Lipton tea products in North America. In addition, under separate
distribution and joint venture agreements, the segment distributes certain
previously existing, as well as manufactures and distributes new jointly-
developed, Ocean Spray juice products in the U.S. and Canada. The snack
food segment manufactures, distributes and markets chips and other snacks
worldwide, with Frito-Lay representing the domestic business. The
international snack food business includes major operations in Mexico, the
U.K. and Canada. The restaurant segment consists primarily of the
operations of the worldwide Pizza Hut, Taco Bell and KFC chains. PFS,
PepsiCo's restaurant distribution operation, supplies company-owned and
franchised restaurants, principally in the U.S. Net sales and operating
profits of PFS' franchisee operations have been allocated to each
restaurant chain.
Unallocated Expenses, net includes corporate headquarters expenses,
minority interests, primarily in the Gamesa (Mexico) and Wedel (Poland)
snack food businesses, foreign exchange translation and transaction gains
and losses and other corporate items not allocated to the business
segments. Corporate Identifiable Assets consist principally of short-term
investments held outside the U.S. and investments in affiliates.
PepsiCo has invested in about 75 joint ventures, principally
international and all within PepsiCo's three industry segments, in which it
exercises significant influence but not control. Equity in net income of
these affiliates was $37.8, $30.1, and $40.1 in 1994, 1993 and 1992,
respectively. The increase in 1994 primarily reflected increased profits
at Snack Ventures Europe (SVE). The decline in 1993 primarily reflected
the expansion costs in a beverage affiliate in India and lower profits at
SVE. International snack food affiliates, which represented the largest
component of equity in net income of affiliates, contributed $34.3, $24.1
and $23.2 in 1994, 1993 and 1992, respectively. Dividends received from
affiliates totaled $33.1, $16.4 and $29.6 in 1994, 1993 and 1992,
respectively.
PepsiCo's year-end investments in affiliates totaled $1.3 billion in
1994, $1.1 billion in 1993 and $904.9 in 1992. The increase in 1994
reflected advances to California Pizza Kitchen (CPK), a domestic casual
dining restaurant chain, and investments in international franchised
bottling operations in Thailand and China, partially offset by the
translation impact of the late 1994 devaluation of the Mexican peso.
Significant investments in affiliates at year-end 1994 included $234.3 in
General Bottlers, a U.S. franchised bottler, $162.9 in CPK, $160.2 in a KFC
Japan joint venture, $123.2 in BAESA, a franchised bottler with operations
in South America, and $80.9 in SVE.
Items Affecting Comparability
Fiscal Year
1994 consisted of 53 weeks and the years 1989 through 1993 consisted of 52
weeks. The estimated favorable impact on net sales of the fifty-third week
<PAGE> F-10
was $433.5, increasing beverage, snack food and restaurant net sales by
$118.9, $142.6 and $172.0, respectively. The estimated favorable impact on
operating profits of the fifty-third week was $64.5, increasing beverage,
snack food and restaurant operating profits by $16.8, $26.0 and $22.9,
respectively, and increasing unallocated expenses, net by $1.2.
Unusual Items
Unusual charges totaled $193.5 in 1992, $170.0 in 1991 and $83.0 in 1990.
These unusual items were as follows:
Beverages - 1992 included $145.0 in charges consisting of $115.4 and
$29.6 to reorganize and streamline domestic and international operations,
respectively. 1990 included a $10.5 domestic charge for trade receivables
exposures.
Snack Foods - 1992 included a $40.3 charge principally to consolidate
the Walkers businesses in the U.K. 1991 included $127.0 in charges
consisting of $91.4 and $23.6 to streamline domestic and U.K. operations,
respectively, and $12.0 to dispose of all or part of a small unprofitable
business in Japan. 1990 included a $10.6 domestic charge for trade
receivables exposures.
Restaurants - 1991 included $43.0 in charges at KFC consisting of
$34.0 to streamline operations and $9.0 related to a delay in the U.S. roll-
out of a new product. 1990 included $28.0 in charges consisting of $17.6
for closure of certain underperforming restaurants (Pizza Hut - $9.0, Taco
Bell - $4.0 and KFC - $4.6) and $10.4 for reorganization charges for Pizza
Hut.
Unallocated Expenses, net - 1992 included an $8.2 charge to streamline
operations of the SVE joint venture. 1990 included $33.9 in charges
consisting of $18.0 for accelerated contributions to the PepsiCo Foundation
and $15.9 to reduce the carrying amount of an international Pizza Hut
affiliate.
See Note 16 and Management's Analysis of beverage and snack food
performance on pages 15 and 19, respectively, for additional information on
restructurings.
Accounting Changes
In 1994, PepsiCo adopted a preferred method for calculating the market-
related value of plan assets used in determining annual pension expense
(see Note 13) and extended the depreciable lives on certain domestic Pizza
Hut delivery assets. As compared to the previous accounting methods, these
changes increased 1994 operating profit by $49.1, increasing beverage,
snack food and restaurant profits by $12.4, $15.5 and $19.6 (almost all
domestic), respectively, and decreasing 1994 unallocated expenses, net by
$1.6.
In 1992, PepsiCo adopted Statements of Financial Accounting Standards
No. 106 and 109, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" and "Accounting for Income Taxes," respectively. As
compared to the previous accounting methods, these changes reduced 1992
operating profit by $72.8, decreasing beverage, snack food and restaurant
profits by $22.4, $30.8 and $15.4, respectively, and increasing 1992
unallocated expenses, net by $4.2. See Notes 12 and 17, respectively.
<PAGE> F-11
_______________________________________________________________________
INDUSTRY SEGMENTS - NET SALES (page 1 of 7)
(dollars in millions)
_______________________________________________________________________
5-Year Compounded
Growth Rate
1989 - 1994 1994 1993 1992
_______________________________________________________________________
Beverages:
Domestic 7.2% $ 6,541.2 $ 5,918.1 $ 5,485.2
International 22.2% 3,146.3 2,720.1 2,120.4
10.9% 9,687.5 8,638.2 7,605.6
Snack Foods:
Domestic 9.3% 5,011.3 4,365.3 3,950.4
International 32.0% 3,253.1 2,661.5 2,181.7
15.5% 8,264.4 7,026.8 6,132.1
Restaurants:
Domestic 13.2% 8,693.9 8,025.7 7,115.4
International 26.4% 1,826.6 1,330.0 1,116.9
14.9% 10,520.5 9,355.7 8,232.3
Combined Segments:
Domestic 10.1% 20,246.4 18,309.1 16,551.0
International 26.6% 8,226.0 6,711.6 5,419.0
13.6% $28,472.4 $25,020.7 $21,970.0
_______________________________________________________________________
1991 1990
_______________________________________________________________________
Beverages:
Domestic $ 5,171.5 $ 5,034.5
International 1,743.7 1,488.5
6,915.2 6,523.0
Snack Foods:
Domestic 3,737.9 3,471.5
International 1,512.2 1,295.3
5,250.1 4,766.8
Restaurants:
Domestic 6,258.4 5,540.9
International 868.5 684.8
7,126.9 6,225.7
Combined Segments:
Domestic 15,167.8 14,046.9
International 4,124.4 3,468.6
$19,292.2 $17,515.5
_______________________________________________________________________
<PAGE> F-12
______________________________________________________________________
INDUSTRY SEGMENTS - OPERATING PROFITS (page 2 of 7)
(dollars in millions)
_______________________________________________________________________
5-Year Compounded
Growth Rate
1989 - 1994(a) 1994 1993 1992
_______________________________________________________________________
Beverages:
Domestic 12.1% $ 1,022.3 $ 936.9 $ 686.3
International 20.0% 194.7 172.1 112.3
13.2% 1,217.0 1,109.0 798.6
Snack Foods:
Domestic 8.9% 1,025.1 900.7 775.5
International 27.1% 351.8 288.9 209.2
12.2% 1,376.9 1,189.6 984.7
Restaurants:
Domestic 12.2% 658.8 685.1 597.8
International 4.3% 71.5 92.9 120.7
11.3% 730.3 778.0 718.5
Combined Segments:
Domestic 11.1% 2,706.2 2,522.7 2,059.6
International 20.6% 618.0 553.9 442.2
12.3% 3,324.2 3,076.6 2,501.8
Equity Income 37.8 30.1 40.1
Unallocated Expenses,
net (160.8) (200.2) (170.7)
Operating Profit 12.6% $ 3,201.2 $ 2,906.5 $ 2,371.2
_______________________________________________________________________
(a) Growth rates exclude the impact of previously disclosed 1989
unusual items affecting international beverages and domestic
Taco Bell and KFC. There were no unusual items in 1994.
<PAGE> F-13
_______________________________________________________________________
INDUSTRY SEGMENTS - OPERATING PROFITS (page 3 of 7)
(dollars in millions)
_______________________________________________________________________
1991 1990
_______________________________________________________________________
Beverages:
Domestic $ 746.2 $ 673.8
International 117.1 93.8
863.3 767.6
Snack Foods:
Domestic 616.6 732.3
International 140.1 160.3
756.7 892.6
Restaurants:
Domestic 479.4 447.2
International 96.2 75.2
575.6 522.4
Combined Segments:
Domestic 1,842.2 1,853.3
International 353.4 329.3
2,195.6 2,182.6
Equity Income 32.2 30.1
Unallocated Expenses,
net (116.0) (170.6)
Operating Profit $ 2,111.8 $ 2,042.1
_______________________________________________________________________
<PAGE> F-14
_______________________________________________________________________
NET SALES BY RESTAURANT CHAIN (page 4 of 7)
(dollars in millions)
_______________________________________________________________________
5-Year Compounded
Growth Rate
1989 - 1994 1994 1993 1992
_______________________________________________________________________
Pizza Hut 12.8% $ 4,474.4 $4,128.7 $3,603.5
Taco Bell 18.3% 3,401.4 2,901.3 2,460.0
KFC 14.7% 2,644.7 2,325.7 2,168.8
14.9% $10,520.5 $9,355.7 $8,232.3
_______________________________________________________________________
1991 1990
_______________________________________________________________________
Pizza Hut $3,258.3 $2,949.9
Taco Bell 2,038.1 1,745.5
KFC 1,830.5 1,530.3
$7,126.9 $6,225.7
_______________________________________________________________________
OPERATING PROFITS BY RESTAURANT CHAIN
_______________________________________________________________________
5 Year Compounded
Growth Rate
1989 - 1994(a) 1994 1993 1992
_______________________________________________________________________
Pizza Hut 7.5% $ 294.8 $ 372.1 $ 335.4
Taco Bell 18.7% 270.3 253.1 214.3
KFC 9.0% 165.2 152.8 168.8
11.3% $ 730.3 $ 778.0 $ 718.5
_______________________________________________________________________
1991 1990
_______________________________________________________________________
Pizza Hut $ 314.5 $ 245.9
Taco Bell 180.6 149.6
KFC 80.5 126.9
$ 575.6 $ 522.4
_______________________________________________________________________
(a) Growth rates exclude the impact of previously disclosed 1989
unusual items affecting international beverages and domestic
Taco Bell and KFC. There were no unusual items in 1994.
<PAGE> F-15
_______________________________________________________________________
GEOGRAPHIC AREAS(b) (page 5 of 7)
(dollars in millions)
_______________________________________________________________________
Net Sales
1994 1993 1992
_______________________________________________________________________
United States $20,246.4 $18,309.1 $16,551.0
Europe 2,177.1 1,819.0 1,349.0
Mexico 2,022.8 1,613.4 1,234.6
Canada 1,244.3 1,206.1 979.6
Other 2,781.8 2,073.1 1,855.8
$28,472.4 $25,020.7 $21,970.0
_______________________________________________________________________
Segment Operating Profits
1994 1993 1992
_______________________________________________________________________
United States $ 2,706.2 $ 2,522.7 $ 2,059.6
Europe 16.7 47.4 52.6
Mexico 261.4 223.1 172.1
Canada 81.6 101.7 78.9
Other 258.3 181.7 138.6
$ 3,324.2 $ 3,076.6 $ 2,501.8
_______________________________________________________________________
Identifiable Assets
1994 1993 1992
_______________________________________________________________________
United States $14,218.4 $13,589.5 $11,957.0
Europe 3,062.0 2,666.1 1,948.4
Mexico 994.7 1,217.1 1,054.6
Canada 1,342.1 1,364.0 1,340.6
Other 2,195.6 1,675.1 1,282.0
Combined Segments 21,812.8 20,511.8 17,582.6
Corporate 2,979.2 3,194.0 3,368.6
$24,792.0 $23,705.8 $20,951.2
______________________________________________________________________
(b) The results of centralized concentrate manufacturing
operations in Puerto Rico and Ireland have been allocated
based upon sales to the respective areas.
<PAGE> F-16
_______________________________________________________________________
INDUSTRY SEGMENTS (page 6 of 7)
(dollars in millions)
_______________________________________________________________________
5-Year Compounded
Growth Rate Amortization of Intangible Assets
1989 - 1994 1994 1993 1992
_______________________________________________________________________
Beverages 7.6% $ 164.8 $ 157.4 $ 137.6
Snack Foods 17.8% 42.0 40.9 40.5
Restaurants 28.9% 105.4 105.4 87.8
14.0% $ 312.2 $ 303.7 $ 265.9
By Restaurant Chain:
Pizza Hut 31.6% $ 41.5 $ 44.7 $ 33.3
Taco Bell 22.9% 26.9 23.0 16.4
KFC 31.2% 37.0 37.7 38.1
28.9% $ 105.4 $ 105.4 $ 87.8
_______________________________________________________________________
_______________________________________________________________________
5 Year Compounded
Growth Rate Depreciation Expense
1989 - 1994 1994 1993 1992
_______________________________________________________________________
Beverages 14.9% $ 385.4 $ 358.5 $ 290.6
Snack Foods 11.7% 297.0 279.2 251.2
Restaurants 17.5% 538.8 457.2 374.3
Corporate 7.0 6.6 6.9
15.0% $1,228.2 $1,101.5 $ 923.0
By Restaurant Chain:
Pizza Hut 17.8% $ 218.6 $ 193.4 $ 150.5
Taco Bell 18.1% 156.0 124.6 101.5
KFC 16.7% 164.2 139.2 122.3
17.5% $ 538.8 $ 457.2 $ 374.3
_______________________________________________________________________
5 Year Compounded
Growth Rate Identifiable Assets
1989 - 1994 1994 1993 1992
_______________________________________________________________________
Beverages 9.1% $ 9,566.0 $ 9,105.2 $ 7,857.5
Snack Foods 8.8% 5,043.9 4,994.5 4,628.0
Restaurants 18.6% 7,202.9 6,412.1 5,097.1
Corporate 2,979.2 3,194.0 3,368.6
10.4% $24,792.0 $23,705.8 $20,951.2
By Restaurant Chain:
Pizza Hut 20.9% $ 2,536.4 $ 2,232.9 $ 1,676.8
Taco Bell 21.1% 2,390.7 2,075.9 1,523.7
KFC 14.2% 2,275.8 2,103.3 1,896.6
18.6% $ 7,202.9 $ 6,412.1 $ 5,097.1
_______________________________________________________________________
<PAGE> F-17
_______________________________________________________________________
INDUSTRY SEGMENTS (page 7 of 7)
(dollars in millions)
_______________________________________________________________________
5-Year Compounded
Growth Rate Capital Spending (c)
1989 - 1994 1994 1993 1992
_______________________________________________________________________
Beverages 20.4% $ 677.1 $ 491.3 $ 343.7
Snack Foods 15.6% 532.1 491.4 446.2
Restaurants 20.3% 1,072.0 1,004.4 757.2
Corporate 7.2 20.8 18.0
19.0% $2,288.4 $2,007.9 $1,565.1
Domestic 13.7% $1,492.6 $1,388.0 $1,069.0
International 35.7% 795.8 619.9 496.1
19.0% $2,288.4 $2,007.9 $1,565.1
By Restaurant Chain:
Pizza Hut 19.3% $ 389.0 $ 295.0 $ 212.8
Taco Bell 35.4% 473.4 459.4 339.0
KFC 5.6% 209.6 250.0 205.4
20.3% $1,072.0 $1,004.4 $ 757.2
_______________________________________________________________________
Acquisitions and
Investments in Affiliates (d)
1994 1993 1992
_______________________________________________________________________
Beverages $ 195.0 $ 711.5 $ 717.5
Snack Foods 11.8 75.5 201.3
Restaurants 147.8 588.7 480.4
$ 354.6 $1,375.7 $1,399.2
Domestic $ 87.8 $ 757.3 $ 549.5
International 266.8 618.4 849.7
$ 354.6 $1,375.7 $1,399.2
By Restaurant Chain:
Pizza Hut $ 94.6 $ 312.9 $ 247.7
Taco Bell 32.3 186.8 72.4
KFC 20.9 89.0 160.3
$ 147.8 $ 588.7 $ 480.4
______________________________________________________________________
(c) Included noncash amounts related to capital leases, largely in
the restaurant segment, of $35.2 in 1994, $26.3 in 1993 and
$15.5 in 1992.
(d) Included noncash amounts related to treasury stock and debt
issued in domestic transactions of $38.8 in 1994, $364.5 in
1993 and $189.5 in 1992. Of these noncash amounts, 14%, 65%
and 58%, respectively, related to the beverage segment and the
balance related to the restaurant segment.
<PAGE> F-18
Note 3 - Items Affecting Comparability
The fifty-third week, as described in Note 1, increased earnings in 1994 by
approximately $54.0 million ($34.9 million after-tax or $0.04 per share).
See Items Affecting Comparability on page F-9 for the estimated impact of
the fifty-third week on comparability of net sales and operating profits.
The effects of unusual items, primarily restructuring charges, and
accounting changes on comparability of operating profits are provided in
Items Affecting Comparability on page F-10.
Information regarding the 1994 gain from a public share offering by
PepsiCo's BAESA joint venture and a 1993 charge to increase net deferred
tax liabilities as of the beginning of 1993 for a 1% statutory income tax
rate increase due to 1993 U.S. tax legislation are provided in Notes 4 and
17, respectively.
Note 4 - Joint Venture Stock Offering
In 1993, PepsiCo entered into an arrangement with the principal
shareholders of Buenos Aires Embotelladora S.A. (BAESA), a franchised
bottler with operations in Argentina and Costa Rica. PepsiCo contributed
certain assets, primarily bottling operations in Chile and Uruguay, while
the shareholders contributed all of their outstanding shares in BAESA,
representing 72.8% of the voting control and 42.5% of the ownership
interest. Through this arrangement, PepsiCo's ownership in BAESA, which is
accounted for by the equity method, was 25.9%.
On March 24, 1994, BAESA completed a public offering of 2.9 million
American Depositary Shares (ADS) at $34.50 per ADS, which are traded on the
New York Stock Exchange. In conjunction with the offering, PepsiCo and
certain other shareholders exercised options for the equivalent of 1.6
million ADS. As a result of these transactions, PepsiCo's ownership in
BAESA declined to 23.8%. The transactions generated cash proceeds for
BAESA of $136.4 million. The resulting one-time, noncash gain to PepsiCo
was $17.8 million ($16.8 million after-tax or $0.02 per share).
Note 5 - Acquisitions and Investments in Affiliates
During 1994, PepsiCo completed acquisitions and affiliate investments
aggregating $355 million, principally for cash. In addition, approximately
$41 million of debt was assumed in these transactions, most of which was
subsequently retired. This activity included equity investments in
international franchised bottling operations, primarily in Thailand and
China, and acquisitions of international and domestic franchised restaurant
operations and franchised and independent bottling operations, primarily in
India and Mexico.
During 1993, PepsiCo completed acquisitions and affiliate investments
aggregating $1.4 billion, principally comprised of $1.0 billion in cash and
$335 million in PepsiCo Capital Stock. Approximately $307 million of debt
was assumed in these transactions, more than half of which was subsequently
retired. This activity included acquisitions of domestic and international
franchised restaurant operations, the buyout of PepsiCo's joint venture
partners in a franchised bottling operation in Spain and the related
acquisition of their fruit-flavored beverage concentrate operation, the
acquisition of the remaining 85% interest in a large franchised bottling
operation in the Northwestern U.S., the acquisition of a regional Mexican-
style casual dining restaurant chain in the U.S. and equity investments in
certain franchised bottling operations in Argentina and Mexico.
<PAGE> F-19
During 1992, acquisitions and affiliate investment activity aggregated
$1.4 billion, principally for cash. In addition, approximately $218
million of debt was assumed in these transactions, most of which was
subsequently retired. This activity included acquisitions of international
(primarily Canada) and domestic franchised bottling operations and a number
of domestic and international franchised restaurant operations, the buyout
of PepsiCo's joint venture partner in a Canadian snack food business and an
equity investment in a domestic casual dining restaurant chain featuring
gourmet pizza. In addition, PepsiCo exchanged certain previously
consolidated snack food operations in Europe with a net book value of $87
million for a 60% equity interest in an international snack food joint
venture with General Mills, Inc. PepsiCo secured a controlling interest in
its Mexican cookie affiliate, Gamesa, through an exchange of certain non-
cookie operations of Gamesa for its joint venture partner's interest.
The acquisitions have been accounted for by the purchase method;
accordingly, their results are included in the Consolidated Financial
Statements from their respective dates of acquisition. The aggregate
impact of acquisitions was not material to PepsiCo's net sales, net income
or net income per share; accordingly, no related pro forma information is
provided.
Note 6 - Inventories
Inventories are valued at the lower of cost (computed on the average, first-
in, first-out or last-in, first-out [LIFO] method) or net realizable value.
The cost of 38% of 1994 inventories and 41% of 1993 inventories was
computed using the LIFO method. Use of the LIFO method increased the total
1994 and 1993 year-end inventory amounts below by $5.5 million and $8.9
million, respectively.
1994 1993
Raw materials and supplies $454.8 $463.9
Finished goods 515.2 460.8
$970.0 $924.7
See page 8 of Management's Analysis - Overview, for a discussion of
PepsiCo's use of futures contracts to hedge its exposure to market price
fluctuations for certain raw materials. Gains and losses on these
contracts are deferred and included in the related cost of raw materials
when purchased. Gains and losses realized in 1994 or deferred at year-end
were not significant. As of December 31, 1994, PepsiCo had various open
contracts, generally expiring by December 1995, which were not material.
Note 7 - Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
calculated principally on a straight-line basis over the estimated useful
lives of the assets. Depreciation expense in 1994, 1993 and 1992 was $1.2
billion, $1.1 billion and $923 million, respectively.
<PAGE> F-20
1994 1993
Land $ 1,321.6 $ 1,186.4
Buildings and improvements 5,664.1 5,017.6
Capital leases, primarily
buildings 451.2 402.6
Machinery and equipment 8,208.1 7,175.0
Construction in progress 485.1 468.4
16,130.1 14,250.0
Accumulated depreciation (6,247.3) (5,394.4)
$ 9,882.8 $ 8,855.6
Note 8 - Intangible Assets
Identifiable intangible assets arose from the allocation of purchase prices
of businesses acquired and consist principally of reacquired franchise
rights and trademarks. Reacquired franchise rights relate to acquisitions
of franchised bottling and restaurant operations and trademarks principally
relate to acquisitions of international snack food and beverage
trademarks. Amounts assigned to such identifiable intangibles were based
on independent appraisals or internal estimates. Goodwill represents the
residual purchase price after allocation to all identifiable net assets.
Intangible assets are amortized on a straight-line basis over
appropriate periods generally ranging from 20 to 40 years. Accumulated
amortization, included in the amounts below, was $1.6 billion and $1.3
billion at year-end 1994 and 1993, respectively.
1994 1993
Reacquired franchise rights $3,974.0 $3,959.7
Trademarks 768.5 849.1
Other identifiable
intangibles 249.7 204.1
Goodwill 2,849.9 2,916.6
$7,842.1 $7,929.5
The recoverability of carrying amounts of intangible assets is
evaluated on a recurring basis. The primary indicators of recoverability
are current or forecasted profitability over the estimated remaining life
of the intangible assets, measured as the combined operating profit of the
acquired business (including amortization of the intangible assets) and
existing businesses that are directly related to the acquired business.
Consideration is also given to the estimated disposal values of certain
identifiable intangible assets compared to their carrying amounts. If
recoverability of an intangible asset is unlikely based on the evaluation,
the carrying amount is reduced by the amount it exceeds the forecasted
operating profits and any disposal value. For the three-year period ended
December 31, 1994, there were no significant adjustments to the carrying
amounts of the intangible assets resulting from these evaluations.
<PAGE> F-21
Note 9 - Short-term Borrowings and Long-term Debt
______________________________________________________________________________
1994 1993
______________________________________________________________________________
Short-term Borrowings
Commercial paper (5.4% and 3.3%) (A) $ 2,254.4 $ 3,535.0
Current maturities of long-term
debt issuances (A) 987.5 1,183.1
Notes (5.4% and 3.5%) (A) 1,492.4 394.0
Other borrowings (6.5% and 6.3%) 444.2 529.1
Amount reclassified
to long-term debt (B) (4,500.0) (3,450.0)
$ 678.5 $ 2,191.2
Long-term Debt
Short-term borrowings, reclassified (B) $ 4,500.0 $ 3,450.0
Notes due 1995 through 2008 (6.6% and
6.5%) (A) 3,724.7 3,873.8
Euro notes, 8% due 1997 250.0 -
Zero coupon notes, $795 million due 1995-2012
(14.6% and 14.4% annual yield to
maturity) 219.2 327.2
Japanese yen 3.3% bonds due 1997 (D) 200.8 -
Swiss franc perpetual Foreign Interest
Payment bonds (C) 213.0 212.2
Swiss franc 5 1/4% bearer bonds
due 1995 (D) 99.7 90.1
Swiss franc 7 1/8% notes due 1994 (D) - 69.8
Capital lease obligations
(See Note 11) 298.2 291.4
Other, due 1995-2015 (8.1% and 6.6%) 322.4 311.2
9,828.0 8,625.7
Less current maturities of long-term
debt issuances (987.5) (1,183.1)
$ 8,840.5 $ 7,442.6
______________________________________________________________________________
The interest rates in the above table indicate, where applicable, the
weighted average rates at year-end 1994 and 1993, respectively.
The carrying amount of long-term debt includes any related discount or
premium and unamortized debt issuance costs. The debt agreements include
various restrictions, none of which are presently significant to PepsiCo.
Subsequent to year-end 1994, PepsiCo issued $150 million of Notes through
February 7, 1995.
The annual maturities of long-term debt through 1999, excluding
capital lease obligations and the reclassified short-term borrowings, are:
1995-$1.0 billion, 1996-$1.1 billion, 1997-$1.0 billion, 1998-$1.2 billion
and 1999-$280 million.
See Management's Analysis - Overview on page 8 for a discussion of
PepsiCo's use of interest rate swaps and currency exchange agreements and
its management of the inherent credit risk and Note 10.
<PAGE> F-22
(A) The following table indicates the notional amount and weighted
average interest rates, by category, of interest rate swaps outstanding at
year-end 1994 and 1993, respectively. The weighted average variable
interest rates that PepsiCo pays, which are indexed primarily to either
commercial paper or LIBOR rates, are based on rates as of the respective
balance sheet date and are subject to change. Terms of interest rate swap
agreements match the debt they modify and terminate in 1995 through 2008.
The differential to be paid or received on interest rate swaps is accrued
as interest rates change and is charged or credited to interest expense
over the life of the agreements. The carrying amount of each interest rate
swap is reflected in the Consolidated Balance Sheet as a receivable or
payable under the appropriate current asset or liability caption.
______________________________________________________________________________
1994 1993
______________________________________________________________________________
Receive fixed-pay variable:
Notional amount $1,557.0 $570.0
Weighted average receive rate 5.89% 5.96%
Weighted average pay rate 6.12% 3.28%
Receive variable-pay variable:
Notional amount $1,008.5 $465.0
Weighted average receive rate 4.90% 3.81%
Weighted average pay rate 5.99% 3.17%
Receive variable-pay fixed:
Notional amount $ 215.0 $265.0
Weighted average receive rate 6.56% 3.84%
Weighted average pay rate 8.22% 7.46%
______________________________________________________________________________
The following table identifies the composition of total debt
(excluding capital lease obligations and the effect of the reclassified
amounts from short-term borrowings) after giving effect to the impact of
interest rate swaps. All short-term borrowings are considered variable
interest rate debt for purposes of this table.
______________________________________________________________________________
1994 1993
Weighted Weighted
Average Average
Carrying Interest Carrying Interest
Amount Rate Amount Rate
Variable interest
rate debt:
Short-term
borrowings $5,178.5 6.19% $5,641.2 4.11%
Long-term debt 1,102.5 6.25% 567.6 4.75%
6,281.0 6.20% 6,208.8 4.17%
Fixed interest rate
debt 2,939.8 6.96% 3,133.6 6.95%
$9,220.8 6.44% $9,342.4 5.10%
______________________________________________________________________________
<PAGE> F-23
(B) At year-end 1994 and 1993, PepsiCo had unused revolving credit
facilities covering potential borrowings aggregating $3.5 billion.
Effective January 3, 1995, PepsiCo replaced its existing credit facilities
with new revolving credit facilities aggregating $4.5 billion, of which
$1.0 billion expire in 1996 and $3.5 billion expire in 2000. At year-end
1994 and 1993, $4.5 billion and $3.5 billion, respectively, of short-term
borrowings were classified as long-term debt, reflecting PepsiCo's intent
and ability, through the existence of the unused credit facilities, to
refinance these borrowings. These credit facilities exist largely to
support the issuances of short-term borrowings and are available for
acquisitions and other general corporate purposes.
(C) The coupon rate of the Swiss franc 400 million perpetual Foreign
Interest Payment bonds issued in 1986 is 7 1/2% through 1996. The bonds
have no stated maturity date. At the end of each 10-year period after the
issuance of the bonds, PepsiCo and the bondholders each have the right to
cause redemption of the bonds. If not redeemed, the coupon rate will be
adjusted based on the prevailing yield of 10-year U.S. Treasury Securities.
The principal of the bonds is denominated in Swiss francs. PepsiCo can,
and intends to, limit the ultimate redemption amount to the U.S. dollar
proceeds at issuance, which is the basis of the carrying amount. Interest
payments are made in U.S. dollars and are calculated by applying the coupon
rate to the original U.S. dollar principal proceeds of $214 million.
(D) PepsiCo has entered into currency exchange agreements to hedge
its foreign currency exposure on these issues of non-U.S. dollar
denominated debt. At year-end 1994, the carrying amount of this debt
aggregated $301 million and the receivables and payables under related
currency exchange agreements aggregated $50 million and $2 million,
respectively, resulting in a net effective U.S. dollar liability of $253
million with a weighted average interest rate of 6.6%. At year-end 1993,
the aggregate carrying amount of the debt and the receivables under related
currency exchange agreements were $160 million and $41 million,
respectively, resulting in a net effective U.S. dollar liability of $119
million with a weighted average fixed interest rate of 6.5%. The carrying
amount of each currency exchange agreement is reflected in the Consolidated
Balance Sheet as a receivable or payable under the appropriate current and
noncurrent asset and liability captions. Changes in the carrying amount of
a currency exchange agreement resulting from exchange rate movements are
offset by changes in the carrying amount of the related non-U.S. dollar
denominated debt, as both amounts are based on current exchange rates.
Note 10 - Fair Value of Financial Instruments
The carrying amounts in the following table are included in the
Consolidated Balance Sheet under the indicated captions, except for debt-
related derivative instruments (interest rate swaps and currency exchange
agreements), which are included in the appropriate current or noncurrent
asset or liability caption. Investments consist primarily of debt
securities and have been classified as held-to-maturity. Noncurrent
investments mature at various dates through 2000.
Because of the short maturity of cash equivalents and short-term
investments, the carrying amount approximates fair value. The fair value
of noncurrent investments is based upon market quotes. The fair value of
debt, debt-related derivative instruments and guarantees is estimated using
market quotes, valuation models and calculations based on market rates.
See Management's Analysis - Overview on page 8 and Note 9 for more
information regarding PepsiCo's use of interest rate swaps and currency
exchange agreements and its management of the inherent credit risk.
<PAGE> F-24
______________________________________________________________________________
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets
Cash and
cash equivalents $ 330.7 $ 330.7 $ 226.9 $ 226.9
Short-term
investments $1,157.4 $1,157.4 $1,573.8 $1,573.8
Other assets (noncurrent
investments) $ 48.0 $ 47.5 $ 55.5 $ 55.4
Liabilities
Debt:
Short-term borrowings
and long-term debt,
net of capital
leases $9,220.8 $9,265.4 $9,342.4 $9,626.0
Debt-related derivative
instruments:
Open contracts in asset
position (51.3) (51.4) (42.4) (72.7)
Open contracts in liability
position 7.9 54.1 1.2 32.8
Net debt $9,177.4 $9,268.1 $9,301.2 $9,586.1
Guarantees - $ 2.7 - $ 1.7
______________________________________________________________________________
Note 11 - Leases
PepsiCo has noncancelable commitments under both capital and long-term
operating leases, primarily for restaurant units. Certain of these units
have been subleased to restaurant franchisees. In addition, PepsiCo is
lessee under noncancelable leases covering vehicles, equipment and
nonrestaurant real estate. Capital and operating lease commitments expire
at various dates through 2088 and, in many cases, provide for rent
escalations and renewal options. Most leases require payment of related
executory costs which include property taxes, maintenance and insurance.
Future minimum commitments and sublease receivables under
noncancelable leases are as follows:
______________________________________________________________________________
Commitments Sublease Receivables
Direct
Capital Operating Financing Operating
______________________________________________________________________________
1995 $ 58.9 $ 313.0 $ 3.2 $ 9.6
1996 53.9 276.4 3.0 8.8
1997 46.7 247.3 2.7 7.7
1998 65.2 228.7 2.3 6.7
1999 34.4 203.3 2.0 6.0
Later years 279.0 1,072.1 7.1 24.2
$538.1 $2,340.8 $20.3 $63.0
______________________________________________________________________________
<PAGE> F-25
At year-end 1994, the present value of minimum payments under capital
leases was $298 million, after deducting $1 million for estimated executory
costs and $239 million representing imputed interest. The present value of
minimum receivables under direct financing subleases was $13 million after
deducting $7 million of unearned interest income.
Rental expense and income were as follows:
______________________________________________________________________________
1994 1993 1992
Rental expense
Minimum $433.5 $392.3 $351.5
Contingent 31.7 27.5 27.5
$465.2 $419.8 $379.0
Rental income
Minimum $ 11.7 $ 12.2 $ 10.2
Contingent 3.5 4.4 4.5
$ 15.2 $ 16.6 $ 14.7
___________________________________________________________________________
Contingent rentals are based on sales by restaurants in excess of
levels stipulated in the lease agreements.
Note 12 - Postretirement Benefits Other Than Pensions
PepsiCo provides postretirement health care benefits to eligible retired
employees and their dependents, principally in the U.S. Retirees who have
10 years of service and attain age 55 while in service with PepsiCo are
eligible to participate in the postretirement benefit plans. The plans are
not funded and were largely noncontributory through 1993.
In 1992, PepsiCo adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The cumulative effect of this change in accounting for years
prior to 1992 resulted in a noncash charge of $575.3 million pretax ($356.7
million after-tax or $0.44 per share).
Effective in 1993 and 1994, PepsiCo implemented programs intended to
stem rising costs and introduced retiree cost-sharing, including adopting a
provision which limits its future obligation to absorb health care cost
inflation. These amendments resulted in an unrecognized prior service gain
of $191 million, which is being amortized on a straight-line basis over the
average remaining employee service period of 10 years as a reduction in
postretirement benefit expense beginning in 1993.
The postretirement benefit expense for 1994, 1993 and 1992 included
the following components:
______________________________________________________________________________
1994 1993 1992
______________________________________________________________________________
Service cost of benefits earned $ 18.6 $ 14.7 $25.5
Interest cost on accumulated
postretirement benefit obligation 41.4 40.6 50.8
Amortization of prior service (gain) cost (19.6) (19.6) 0.1
Amortization of net loss 5.6 0.5 -
$ 46.0 $ 36.2 $76.4
______________________________________________________________________________
<PAGE> F-26
The decline in the 1993 expense was primarily due to the plan
amendments, reflecting reductions in service and interest costs as well as
the amortization of the unrecognized prior service gain.
The 1994 and 1993 postretirement benefit liability included the
following components:
______________________________________________________________________________
1994 1993
______________________________________________________________________________
Actuarial present value of postretirement
benefit obligation:
Retirees $(288.6) $(313.8)
Fully eligible active plan participants (88.1) (107.3)
Other active plan participants (148.0) (206.9)
Accumulated postretirement benefit obligation (524.7) (628.0)
Unrecognized prior service gain (151.9) (171.5)
Unrecognized net loss 11.5 148.6
$(665.1) $(650.9)
______________________________________________________________________________
The discount rate assumptions used in computing the information above
were as follows:
1994 1993 1992
Postretirement benefit expense 6.8% 8.2 8.9
Accumulated postretirement
benefit obligation 9.1% 6.8 8.2
The year-to-year fluctuations in the discount rate assumptions
primarily reflect changes in U.S. interest rates. The discount rate
represents the expected yield on a portfolio of high-grade (AA rated or
equivalent) fixed-income investments with cash flow streams sufficient to
satisfy benefit obligations under the plans when due.
As a result of the plan amendments discussed above, separate assumed
health care cost trend rates are used for employees who retire before and
after the effective date of the amendments. The assumed health care cost
trend rate for employees who retired before the effective date is 9.5% for
1995, declining gradually to 5.5% in 2005 and thereafter. For employees
retiring after the effective date, the trend rate is 8.0% for 1995,
declining gradually to 0% in 2005 and thereafter. A 1 point increase in
the assumed health care cost trend rate would have increased the 1994
postretirement benefit expense by $2.0 million and would have increased the
1994 accumulated postretirement benefit obligation by $20.6 million.
Note 13 - Pension Plans
PepsiCo sponsors noncontributory defined benefit pension plans covering
substantially all full-time domestic employees as well as contributory and
noncontributory defined benefit pension plans covering certain
international employees. Benefits generally are based on years of service
and compensation or stated amounts for each year of service. PepsiCo funds
the domestic plans in amounts not less than minimum statutory funding
requirements nor more than the maximum amount that can be deducted for
federal income tax purposes. International plans are funded in amounts
<PAGE> F-27
sufficient to comply with local statutory requirements. The plans' assets
consist principally of equity securities, government and corporate debt
securities and other fixed income obligations. For 1994 and 1993, the
domestic plan assets included 6.9 million shares of PepsiCo Capital Stock,
with a market value of $227.2 million and $265.7 million, respectively.
Dividends on PepsiCo Capital Stock of $4.7 million and $4.0 million were
received by the domestic plans in 1994 and 1993, respectively.
The international plans presented below are primarily comprised of
those in the U.K. and Canada for all three years as well as those in Mexico
and Japan for 1994 and 1993. Information for 1992 has not been restated,
since complete information for plans in Mexico and Japan was not available.
The net pension expense for domestic company-sponsored plans included
the following components:
______________________________________________________________________________
1994 1993 1992
______________________________________________________________________________
Service cost of benefits earned $ 69.8 $ 57.1 $ 52.3
Interest cost on projected benefit
obligation 84.0 75.6 72.0
Return on plan assets:
Actual loss (gain) 19.7 (161.5) (61.3)
Deferred (loss) gain (130.5) 70.9 (26.2)
(110.8) (90.6) (87.5)
Amortization of net transition gain (19.0) (19.0) (19.0)
Net other amortization 9.1 8.8 8.2
$ 33.1 $ 31.9 $ 26.0
_____________________________________________________________________
The net pension expense (income) for international company-sponsored
plans included the following components:
______________________________________________________________________________
1994 1993 1992
______________________________________________________________________________
Service cost of benefits earned $ 15.0 $ 12.4 $ 8.6
Interest cost on projected benefit
obligation 15.4 15.0 10.9
Return on plan assets:
Actual loss (gain) 8.1 (40.8) (36.0)
Deferred (loss) gain (32.5) 20.4 18.6
(24.4) (20.4) (17.4)
Amortization of net transition (gain)
loss (0.2) 0.3 -
Net other amortization 1.7 1.7 (6.5)
$ 7.5 $ 9.0 $ (4.4)
______________________________________________________________________________
Inclusion of the plans in Mexico and Japan increased the 1994 and 1993
pension expense by $7.9 million and $5.5 million, respectively.
<PAGE> F-28
Reconciliations of the funded status of the domestic plans to the
pension liability are as follows:
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
1994 1993 1994 1993
______________________________________________________________________________
Actuarial present value of
benefit obligation:
Vested benefits $ (774.0) $ (726.0) $(21.6) $(192.8)
Nonvested benefits (97.4) (99.0) (1.6) (28.3)
Accumulated benefit
obligation (871.4) (825.0) (23.2) (221.1)
Effect of projected
compensation increases (111.1) (131.6) (47.6) (41.7)
Projected benefit obligation (982.5) (956.6) (70.8) (262.8)
Plan assets at fair value 1,133.0 1,018.7 2.8 185.2
Plan assets in excess of
(less than) projected
benefit obligation 150.5 62.1 (68.0) (77.6)
Unrecognized prior
service cost 30.6 11.7 30.0 49.9
Unrecognized net
(gain) loss (71.3) 16.0 3.7 26.1
Unrecognized net
transition (gain) loss (73.1) (89.0) 0.3 (2.8)
Adjustment required to
recognize minimum liability - - - (33.0)
Prepaid (accrued) pension
liability $ 36.7 $ 0.8 $(34.0) $ (37.4)
_____________________________________________________________________________
<PAGE> F-29
Reconciliations of the funded status of the international plans to the
pension liability are as follows:
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
1994 1993 1994 1993
___________________________________________________________________________
Actuarial present value of
benefit obligation:
Vested benefits $(124.4) $(138.8) $(22.8) $(28.0)
Nonvested benefits (2.3) (3.4) (7.4) (5.4)
Accumulated benefit
obligation (126.7) (142.2) (30.2) (33.4)
Effect of projected
compensation increases (24.1) (22.9) (10.1) (18.4)
Projected benefit obligation (150.8) (165.1) (40.3) (51.8)
Plan assets at fair value 213.4 221.7 15.5 17.3
Plan assets in excess of
(less than) projected
benefit obligation 62.6 56.6 (24.8) (34.5)
Unrecognized prior
service cost 3.5 3.2 0.3 0.5
Unrecognized net
loss (gain) 14.0 11.9 (3.1) 7.7
Unrecognized net
transition (gain) loss (1.8) (2.6) 4.9 8.1
Adjustment required to
recognize minimum liability - - - (4.3)
Prepaid (accrued) pension
liability $ 78.3 $ 69.1 $(22.7) $(22.5)
___________________________________________________________________________
The assumptions used to compute the domestic information above were as
follows:
1994 1993 1992
______________________________________________________________________________
Discount rate - pension expense 7.0% 8.2 8.4
Expected long-term rate of return
on plan assets 10.0% 10.0 10.0
Discount rate - projected benefit
obligation 9.0% 7.0 8.2
Future compensation growth rate 3.3%-7.0% 3.3-7.0 3.3-7.0
______________________________________________________________________________
<PAGE> F-30
The assumptions used to compute the international information above
were as follows:
1994 1993 1992
______________________________________________________________________________
Discount rate - pension expense 7.3% 9.0 9.5
Expected long-term rate of return
on plan assets 11.3% 10.8 10.8
Discount rate - projected benefit
obligation 9.3% 7.4 9.0
Future compensation growth rate 3.0%-8.5% 3.5-8.5 5.0-7.0
______________________________________________________________________________
The discount rates and rates of return for the international plans
represent weighted averages.
The year-to-year fluctuations in the discount rate assumptions
primarily reflect changes in interest rates. The discount rates represent
the expected yield on a portfolio of high-grade (AA rated or equivalent)
fixed-income investments with cash flow streams sufficient to satisfy
benefit obligations under the plans when due. The higher assumed discount
rates used to measure the 1994 projected benefit obligation compared to the
assumed discount rate used to measure the 1993 projected benefit obligation
changed the funded status of certain plans from underfunded to overfunded.
In 1994, PepsiCo changed the method for calculating the market-related
value of plan assets used in determining the return-on-asset component of
annual pension expense and the cumulative net unrecognized gain or loss
subject to amortization. Under the previous accounting method, the
calculation of the market-related value of assets reflected amortization of
the actual capital return on assets on a straight-line basis over a five-
year period. Under the new method, the calculation of the market-related
value of assets reflects the long-term rate of return expected by PepsiCo
and amortization of the difference between the actual return (including
capital, dividends and interest) and the expected return over a five-year
period. PepsiCo believes the new method is widely used in practice and
preferable because it results in calculated plan asset values that more
closely approximate fair value, while still mitigating the effect of annual
market-value fluctuations. Under both methods, only the cumulative net
unrecognized gain or loss which exceeds 10% of the greater of the projected
benefit obligation or the market-related value of plan assets is subject to
amortization. This change resulted in a noncash benefit in 1994 of $37.8
million ($23.3 million after-tax or $0.03 per share) representing the
cumulative effect of the change related to years prior to 1994 and $35.1
million in lower pension expense ($21.6 million after-tax or $0.03 per
share) related to 1994 as compared to the previous accounting method. Had
this change been applied retroactively, pension expense would have been
reduced by $16.4 million ($10.7 million after-tax or $0.01 per share) and
$9.5 million ($6.5 million after-tax or $0.01 per share) in 1993 and 1992,
respectively.
<PAGE> F-31
Note 14 - Postemployment Benefits Other Than to Retirees
Effective the beginning of 1994, PepsiCo adopted Statement of Financial
Accounting Standards No. 112 (SFAS 112), "Employers' Accounting for
Postemployment Benefits." SFAS 112 requires PepsiCo to accrue the cost of
certain postemployment benefits to be paid to terminated or inactive
employees other than retirees. The principal effect to PepsiCo results
from accruing severance benefits to be provided to employees of certain
business units who are terminated in the ordinary course of business over
the expected service lives of the employees. Previously, these benefits
were accrued upon the occurrence of an event. Severance benefits resulting
from actions not in the ordinary course of business will continue to be
accrued when those actions occur. The cumulative effect charge upon
adoption of SFAS 112, which relates to years prior to 1994, was $84.6
million ($55.3 million after-tax or $0.07 per share). As compared to the
previous accounting method, the current year impact of adopting SFAS 112
was immaterial to 1994 operating profits. PepsiCo's cash flows have been
unaffected by this accounting change as PepsiCo continues to largely fund
postemployment benefit costs as incurred.
Note 15 - Franchise Arrangements
Franchise arrangements with restaurant franchisees generally provide for
initial fees and continuing royalty payments to PepsiCo based upon a
percentage of sales. The arrangements are intended to assist franchisees
through, among other things, product development and marketing programs
initiated by PepsiCo for both its company-owned and franchised operations.
On a limited basis, franchisees have also entered into leases of restaurant
properties leased or owned by PepsiCo (see Note 11). Royalty revenues,
initial fees and rental payments from franchisees, which are included in
Net Sales, aggregated $407 million, $357 million and $344 million in 1994,
1993 and 1992, respectively. Franchise royalty revenues, which represent
the majority of these amounts, are recognized when earned. PepsiCo also
has franchise arrangements with beverage bottlers, which do not provide for
royalty payments.
Note 16 - Restructurings
PepsiCo recorded restructuring charges of $193.5 million in 1992 ($128.5
million after-tax or $0.16 per share) and $149.0 million in 1991 ($102.3
million after-tax or $0.13 per share). The 1992 charge related principally
to streamlining and reorganizing the domestic beverage business,
consolidating the snack food businesses in the U.K. and streamlining an
acquired beverage bottling business in Spain. The 1991 charge related to
streamlining snack food operations in the U.S. and U.K. and operations at
KFC. These charges were classified in Selling, general and administrative
expenses and were primarily for costs requiring future cash outlays. The
annual accrual activity, including asset valuation allowances, and the
related components were as follows:
<PAGE> F-32
______________________________________________________________________________
1994 1993 1992
______________________________________________________________________________
Annual Accrual Activity
Balance - Beginning of year $121.7 $ 253.2 $112.6
New restructuring charges - - 193.5
New restructuring accruals -
purchase price adjustments (A) - - 41.5
Accretion of interest on net
present value of severance 2.8 6.9 -
Cash payments (50.6) (122.8) (83.5)
Asset write-offs (4.0) (9.1) (10.3)
Change in estimates (28.7) (6.5) (0.6)
Balance - End of year $ 41.2 $ 121.7 $253.2
Accrual Components
Facility closings/fixed asset
disposals $ 3.0 $ 13.9 $ 35.3
Employee terminations (A) 36.1 103.2 153.9
Relocation of employees
and equipment 0.7 2.2 29.1
Nonrecurring costs of
redesigning core business
processes (B) - 0.7 25.3
Other 1.4 1.7 9.6
Balance - End of year (C) $ 41.2 $ 121.7 $253.2
______________________________________________________________________________
(A) Included amounts for termination of employees of an acquired
beverage bottling business in Spain accounted for as a purchase. The
acquired business was formerly accounted for as a 30% owned equity
investment. Upon acquisition of the remaining 70%, 30% of the
restructuring charge was included in income and 70% was a purchase price
adjustment.
(B) Included only specific nonrecurring incremental and direct costs
for activities clearly identifiable with the redesign of the domestic
beverages' core business processes.
(C) The 1994 year-end balance of $41 million, which was primarily
included in Other current liabilities, represented estimated future cash
payments of $26 million, $12 million and $3 million in 1995, 1996 and 1997,
respectively.
<PAGE> F-33
Note 17 - Income Taxes
In 1992, PepsiCo adopted Statement of Financial Accounting Standards No.
109 (SFAS 109), "Accounting for Income Taxes." PepsiCo elected to adopt
SFAS 109 on a prospective basis, resulting in a noncash tax charge in 1992
of $570.7 million ($0.71 per share) for the cumulative effect of the change
related to years prior to 1992. The cumulative effect primarily
represented the recording of additional deferred tax liabilities related to
identifiable intangible assets, principally acquired trademarks and
reacquired franchise rights, that have no tax bases. These deferred tax
liabilities would be paid only in the unlikely event the related intangible
assets were sold in taxable transactions.
Detail of the provision for income taxes on income before cumulative
effect of accounting changes was as follows:
______________________________________________________________________________
1994 1993 1992
______________________________________________________________________________
Current- Federal $642.0 $466.8 $413.0
Foreign 174.1 195.5 170.4
State 131.2 89.0 65.7
947.3 751.3 649.1
Deferred- Federal (63.9) 78.2 (18.8)
Foreign (1.8) (12.5) (33.5)
State (1.2) 17.6 0.3
(66.9) 83.3 (52.0)
$880.4 $834.6 $597.1
____________________________________________________________________________
In 1993, a charge of $29.9 million ($0.04 per share) was recorded to
increase net deferred tax liabilities as of the beginning of 1993 for a 1%
statutory income tax rate increase under 1993 U.S. tax legislation. The
effect of the higher rate on the 1993 increase in net deferred tax
liabilities through the enactment date of the legislation was immaterial.
U.S. and foreign income before income taxes and cumulative effect of
accounting changes were as follows:
______________________________________________________________________________
1994 1993 1992
______________________________________________________________________________
U.S. $1,762.4 $1,633.0 $1,196.8
Foreign 902.0 789.5 702.0
$2,664.4 $2,422.5 $1,898.8
______________________________________________________________________________
PepsiCo operates centralized concentrate manufacturing facilities in
Puerto Rico and Ireland under long-term tax incentives. The foreign amount
in the above table includes approximately 50% (consistent with the
allocation for tax purposes) of the income from U.S. sales of concentrate
manufactured in Puerto Rico. See Management's Analysis - Overview on page
10 for a discussion of the reduction of the U.S. tax credit associated with
beverage concentrate operations in Puerto Rico.
<PAGE> F-34
Reconciliation of the U.S. federal statutory tax rate to PepsiCo's
effective tax rate on pretax income, based on the dollar impact of these
major components on the provision for income taxes, was as follows:
_______________________________________________________________________________
1994 1993 1992
_______________________________________________________________________________
U.S. federal statutory tax rate 35.0% 35.0% 34.0%
State income tax, net of federal
tax benefit 3.2 2.9 2.3
Effect of lower taxes on foreign
income (including Puerto Rico
and Ireland) (5.4) (3.3) (5.0)
Adjustment to the beginning-of-
the-year deferred tax assets
valuation allowance (1.3) - -
Reduction of prior year
foreign accruals - (2.0) -
Effect of 1993 tax legislation on
deferred income taxes - 1.1 -
Nondeductible amortization of
domestic goodwill 0.8 0.8 0.9
Other, net 0.7 - (0.8)
Effective tax rate 33.0% 34.5% 31.4%
_____________________________________________________________________________
Detail of the 1994 and 1993 deferred tax liabilities (assets) was as
follows:
______________________________________________________________________________
1994 1993
______________________________________________________________________________
Intangible assets other than
nondeductible goodwill $ 1,627.8 $ 1,551.0
Property, plant and equipment 506.4 552.3
Safe harbor leases 171.2 177.5
Zero coupon notes 110.6 103.5
Other 336.7 549.0
Gross deferred tax liabilities 2,752.7 2,933.3
Net operating loss carryforwards (306.0) (241.5)
Postretirement benefits (248.3) (268.0)
Self-insurance reserves (71.2) (10.8)
Deferred state income taxes (69.1) (39.9)
Restructuring accruals (15.8) (42.0)
Various accrued liabilities
and other (551.2) (686.8)
Gross deferred tax assets (1,261.6) (1,289.0)
Deferred tax assets
valuation allowance 319.3 249.0
Net deferred tax liability $ 1,810.4 $ 1,893.3
Included in:
Prepaid expenses, taxes and
other current assets $ (166.9) $ (138.2)
Other current liabilities 4.4 23.9
Deferred income taxes 1,972.9 2,007.6
$ 1,810.4 $ 1,893.3
<PAGE> F-35
______________________________________________________________________________
The valuation allowance related to deferred tax assets increased by
$70.3 million in 1994 primarily resulting from additions related to current
year net operating losses, partially offset by reversals related to prior
year net operating losses. The net operating loss carryforwards largely
related to a number of state and foreign jurisdictions and generally expire
over a range of dates.
Deferred tax liabilities have not been recognized for bases
differences related to investments in foreign subsidiaries and joint
ventures. These differences, which consist primarily of unremitted
earnings intended to be indefinitely reinvested, aggregated approximately
$3.8 billion at year-end 1994 and $3.2 billion at year-end 1993, exclusive
of amounts that if remitted in the future would result in little or no tax
under current tax laws and the Puerto Rico tax incentive grant.
Determination of the amount of unrecognized deferred tax liabilities is not
practicable.
Tax benefits associated with exercises of stock options of $27.1
million in 1994, $23.4 million in 1993 and $57.5 million in 1992 were
credited to shareholders' equity. A change in the functional currency of
operations in Mexico from the U.S. dollar to local currency in 1993
resulted in a $19.3 million decrease in the net deferred foreign tax
liability that was credited to shareholders' equity.
Note 18 - Employee Incentive Plans
PepsiCo has established certain employee incentive plans under which
stock options are granted. A stock option allows an employee to
purchase a share of PepsiCo Capital Stock (Stock) in the future at a
price equal to the fair market value on the date of the grant.
Under the PepsiCo SharePower Stock Option Plan, approved by the
Board of Directors and effective in 1989, essentially all employees
other than executive officers, part-time and short-service employees
may be granted stock options annually. The number of options granted
is based on each employee's annual earnings. The options generally
become exercisable ratably over five years from the grant date and must
be exercised within 10 years of the grant date. SharePower options
were granted to approximately 128,000 employees in 1994, 118,000
employees in 1993 and 114,000 employees in 1992.
The shareholder-approved 1987 Long-Term Incentive Plan (the 1987
Plan), which has provisions similar to prior plans, provides incentives
to eligible senior and middle management employees. In addition to
grants of stock options, which are generally exercisable between 1 and
15 years from the grant date, the 1987 Plan allows for grants of
performance share units (PSUs) to eligible senior management employees.
A PSU is equivalent in value to a share of Stock at the grant date and
vests for payment four years from the grant date, contingent upon
attainment of prescribed Corporate performance goals. PSUs are not
directly granted, as certain stock options granted may be surrendered
by employees for a specified number of PSUs within 60 days of the
option grant date. During 1994, 1,541,187 stock options were
surrendered for 513,729 PSUs. At year-end 1994, 1993 and 1992, there
were 629,202, 491,200 and 484,698 outstanding PSUs, respectively.
Grants under the 1987 Plan are approved by the Compensation
Committee of the Board of Directors (the Committee), which is composed
of outside directors. Payment of awards other than stock options is
made in cash and/or Stock as approved by the Committee, and amounts
expensed for such awards were $7 million, $5 million and $11 million in
1994, 1993 and 1992, respectively. Under the 1987 Plan, a maximum of
54 million shares of Stock can be purchased or paid pursuant to grants.
<PAGE> F-36
There were 7 million, 20 million, 22 million and 32 million shares
available for future grants at year-end 1994, 1993, 1992 and 1991,
respectively. The Committee does not intend to grant future awards
under the 1987 Plan.
On May 4, 1994, PepsiCo's shareholders approved the 1994 Long-Term
Incentive Plan (the 1994 Plan). The 1994 Plan continues the principal
features of the 1987 Plan and authorizes a maximum of 75 million shares
of Stock which may be purchased or paid pursuant to grants by the
Committee. The first awards under the 1994 Plan were made as of
January 1, 1995.
1994, 1993 and 1992 activity for the stock option plans included:
______________________________________________________________________________
(options in thousands) Long-Term
______________________________________________________________________________
Outstanding at December 28, 1991 23,801 27,834
Granted 8,477 12,653
Exercised (1,155) (5,155)
Surrendered for PSUs - (503)
Canceled (2,327) (1,839)
Outstanding at December 26, 1992 28,796 32,990
Granted 9,121 2,834
Exercised (1,958) (1,412)
Surrendered for PSUs - (96)
Canceled (2,524) (966)
Outstanding at December 25, 1993 33,435 33,350
Granted 11,633 16,237
Exercised (1,820) (3,052)
Surrendered for PSUs - (1,541)
Canceled (3,443) (2,218)
Outstanding at December 31, 1994 39,805 42,776
Exercisable at December 31, 1994 16,115 18,439
Option prices per share:
Exercised during 1994 $17.58 to $36.75 $4.11 to $38.75
Exercised during 1993 $17.58 to $36.75 $4.11 to $36.31
Exercised during 1992 $17.58 to $35.25 $4.11 to $29.88
Outstanding at
year-end 1994 $17.58 to $36.75 $7.69 to $42.81
______________________________________________________________________________
Note 19 - Contingencies
PepsiCo is subject to various claims and contingencies related to lawsuits,
taxes, environmental and other matters arising out of the normal course of
business. Management believes that the ultimate liability, if any, in
excess of amounts already provided arising from such claims or
contingencies is not likely to have a material adverse effect on PepsiCo's
annual results of operations or financial condition. At year-end 1994 and
1993, PepsiCo was contingently liable under guarantees aggregating $187
million and $276 million, respectively. The guarantees are primarily
issued to support financial arrangements of certain PepsiCo joint ventures,
and bottling and restaurant franchisees. PepsiCo manages the risk
associated with these guarantees by performing appropriate credit reviews
in addition to retaining certain rights as a joint venture partner or
franchisor. See Note 10 for information related to the fair value of the
guarantees.
<PAGE> F-37
Management's Responsibility for Financial Statements
To Our Shareholders:
Management is responsible for the reliability of the consolidated financial
statements and related notes, which have been prepared in conformity with
generally accepted accounting principles and include amounts based upon our
estimates and judgments, as required. The financial statements have been
audited and reported on by our independent auditors, KPMG Peat Marwick LLP,
who were given free access to all financial records and related data,
including minutes of the meetings of the Board of Directors and Committees
of the Board. We believe that the representations made to the independent
auditors were valid and appropriate.
PepsiCo maintains a system of internal control over financial
reporting designed to provide reasonable assurance as to the reliability of
the financial statements. The system is supported by formal policies and
procedures, including an active Code of Conduct program intended to ensure
employees adhere to the highest standards of personal and professional
integrity. PepsiCo's internal audit function monitors and reports on the
adequacy of and compliance with the internal control system, and
appropriate actions are taken to address significant control deficiencies
and other opportunities for improving the system as they are identified.
The Audit Committee of the Board of Directors, which is composed solely of
outside directors, provides oversight to the financial reporting process
through periodic meetings with our independent auditors, internal auditors
and management. Both our independent auditors and internal auditors have
free access to the Audit Committee.
Although no cost effective internal control system will preclude all
errors and irregularities, we believe our controls as of December 31, 1994
provide reasonable assurance that the financial statements are reliable.
/s/ WAYNE CALLOWAY
Wayne Calloway
Chairman of the Board
and Chief Executive Officer
/s/ ROBERT G. DETTMER
Robert G. Dettmer
Executive Vice President
and Chief Financial Officer
/s/ ROBERT L. CARLETON
Robert L. Carleton
Senior Vice President
and Controller
February 7, 1995
<PAGE> F-38
Report of Independent Auditors
Board of Directors and Shareholders
PepsiCo, Inc.
We have audited the accompanying consolidated balance sheet of PepsiCo,
Inc. and Subsidiaries as of December 31, 1994 and December 25, 1993, and
the related consolidated statements of income, cash flows and shareholders'
equity for each of the years in the three-year period ended December 31,
1994. These consolidated financial statements are the responsibility of
PepsiCo, Inc.'s management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
PepsiCo, Inc. and Subsidiaries as of December 31, 1994 and December 25,
1993, and the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Notes 14 and 13 to the consolidated financial
statements, PepsiCo, Inc. in 1994 adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits," and changed
its method for calculating the market-related value of pension plan assets
used in the determination of pension expense, respectively. As discussed
in Notes 12 and 17 to the consolidated financial statements, PepsiCo, Inc.
in 1992 adopted the provisions of the Financial Accounting Standards
Board's Statements of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and No. 109,
"Accounting for Income Taxes," respectively.
KPMG Peat Marwick LLP
New York, New York
February 7, 1995
<PAGE> F-39
______________________________________________________________________________
Selected Quarterly Financial Data (page 1 of 3)
(in millions except per share amounts, unaudited)
PepsiCo, Inc. and Subsidiaries First Quarter
(12 Weeks)
1994 (a) 1993
______________________________________________________________________________
Net sales $5,728.9 5,091.6
Gross profit $2,944.4 2,641.4
Operating profit $ 550.5 506.0
Income before income taxes and cumulative
effect of accounting changes $ 438.4 391.6
Provision for income taxes $ 155.6 131.2
Income before cumulative effect of
accounting changes $ 282.8 260.4
Cumulative effect of accounting changes (b) $ (32.0) -
Net income $ 250.8 260.4
Income (charge) per share:
Income before cumulative effect of
accounting changes $ 0.35 0.32
Cumulative effect of accounting
changes (b) $ (0.04) -
Net income per share $ 0.31 0.32
______________________________________________________________________________
Second Quarter
(12 Weeks)
1994 (a)(c) 1993
______________________________________________________________________________
Net sales $6,557.0 5,890.3
Gross profit $3,419.5 3,102.8
Operating profit $ 785.0 750.4
Income before income taxes $ 672.2 635.7
Provision for income taxes $ 225.7 208.9
Net income $ 446.5 426.8
Net income per share $ 0.55 0.53
______________________________________________________________________________
(a) Included the current year benefit of changing the method for
calculating the market-related value of plan assets used in
determining the return-on-asset component of annual pension expense
and the cumulative net unrecognized gain or loss subject to
amortization, which reduced full-year pension expense by $35.1 ($21.6
after-tax or $0.03 per share). This benefit was prorated over each of
the four quarters. See Note 13.
(b) Represented the cumulative net effect related to years prior to 1994
of adopting SFAS 112, "Employers' Accounting for Postemployment
Benefits," and the change in the method for calculating the market-
related value of pension plan assets. See Notes 14 and 13,
respectively.
(c) Included a $17.8 gain ($16.8 after-tax or $0.02 per share) arising
from a public share offering by PepsiCo's BAESA joint venture in South
America. See Note 4.
<PAGE> F-40
______________________________________________________________________________
Selected Quarterly Financial Data (page 2 of 3)
(in millions except per share amounts, unaudited)
PepsiCo, Inc. and Subsidiaries Third Quarter
(12 Weeks)
1994 (a) 1993 (d)
______________________________________________________________________________
Net sales $ 7,064.0 6,316.4
Gross profit $ 3,684.0 3,322.1
Operating profit $ 961.7 851.6
Income before income taxes $ 830.3 736.5
Provision for income taxes $ 288.9 278.3
Net income $ 541.4 458.2
Net income per share $ 0.68 0.56
______________________________________________________________________________
Fourth Quarter
(17/16 Weeks) (e)
1994 (a) 1993
______________________________________________________________________________
Net sales $ 9,122.5 7,722.4
Gross profit $ 4,709.1 4,008.3
Operating profit $ 904.0 798.5
Income before income taxes $ 723.5 658.7
Provision for income taxes $ 210.2 216.2
Net income $ 513.3 442.5
Net income per share $ 0.64 0.55
______________________________________________________________________________
(a) Included the current year benefit of changing the method for
calculating the market-related value of plan assets used in
determining the return-on-asset component of annual pension expense
and the cumulative net unrecognized gain or loss subject to
amortization, which reduced full-year pension expense by $35.1 ($21.6
after-tax or $0.03 per share). This benefit was prorated over each of
the four quarters. See Note 13.
(d) Included a $29.9 charge ($0.04 per share) to increase net deferred tax
liabilities as of the beginning of 1993 for a 1% statutory income tax
rate increase due to 1993 U.S. tax legislation. See Note 17.
(e) Fiscal years 1994 and 1993 consisted of 53 and 52 weeks, respectively.
The estimated favorable impact of the 53rd week on 1994 fourth quarter
and full-year earnings was $54.0 ($34.9 after-tax or $0.04 per share).
<PAGE> F-41
______________________________________________________________________________
Selected Quarterly Financial Data (page 3 of 3)
(in millions except per share amounts, unaudited)
PepsiCo, Inc. and Subsidiaries Full Year
(53/52 Weeks) (e)
1994 (a)(c) 1993 (d)
______________________________________________________________________________
Net sales $28,472.4 25,020.7
Gross profit $14,757.0 13,074.6
Operating profit $ 3,201.2 2,906.5
Income before income taxes and cumulative
effect of accounting changes $ 2,664.4 2,422.5
Provision for income taxes $ 880.4 834.6
Income before cumulative effect of
accounting changes $ 1,784.0 1,587.9
Cumulative effect of accounting changes (b) $ (32.0) -
Net income $ 1,752.0 1,587.9
Income (charge) per share:
Income before cumulative effect of
accounting changes $ 2.22 1.96
Cumulative effect of accounting
changes (b) $ (0.04) -
Net income per share $ 2.18 1.96
______________________________________________________________________________
(a) Included the current year benefit of changing the method for
calculating the market-related value of plan assets used in
determining the return-on-asset component of annual pension expense
and the cumulative net unrecognized gain or loss subject to
amortization, which reduced full-year pension expense by $35.1 ($21.6
after-tax or $0.03 per share). This benefit was prorated over each of
the four quarters. See Note 13.
(b) Represented the cumulative net effect related to years prior to 1994
of adopting SFAS 112, "Employers' Accounting for Postemployment
Benefits," and the change in the method for calculating the market-
related value of pension plan assets. See Notes 14 and 13,
respectively.
(c) Included a $17.8 gain ($16.8 after-tax or $0.02 per share) arising
from a public share offering by PepsiCo's BAESA joint venture in South
America. See Note 4.
(d) Included a $29.9 charge ($0.04 per share) to increase net deferred tax
liabilities as of the beginning of 1993 for a 1% statutory income tax
rate increase due to 1993 U.S. tax legislation. See Note 17.
(e) Fiscal years 1994 and 1993 consisted of 53 and 52 weeks, respectively.
The estimated favorable impact of the 53rd week on 1994 fourth quarter
and full-year earnings was $54.0 ($34.9 after-tax or $0.04 per share).
<PAGE> F-42
____________________________________________________________________________
Selected Financial Data (Page 1 of 7)
(in millions except per share and employee amounts, unaudited)
PepsiCo, Inc. and Subsidiaries
____________________________________________________________________________
Growth Rates
Compounded Annual
10-Year 5-Year 1-Year
1984-94 1989-94 1993-94
Summary of Operations
Net sales 15.0% 13.6% 13.8%
Cost of sales and operating expenses - - -
Operating profit 18.6% 12.5% 10.1%
Gain on joint venture stock offering(h) - - -
Interest expense - - -
Interest income - - -
Income from continuing operations before
income taxes and cumulative effect of
accounting changes 19.2% 14.7% 10.0%
Provision for income taxes - - -
Income from continuing operations before
cumulative effect of accounting changes 20.3% 14.6% 12.3%
Cumulative effect of accounting
changes (i) - - -
Net income (j) 23.5% 14.2% 10.3%
Per Share Data
Income from continuing operations before
cumulative effect of accounting
changes 21.0% 14.5% 13.3%
Cumulative effect of accounting
changes (i) - - -
Net income (j) 24.2% 14.0% 11.2%
Cash dividends declared 14.2% 16.9% 14.8%
Average shares and equivalents
outstanding - - -
Cash Flow Data (k)
Net cash provided by continuing
operations 14.2% 14.5% 18.6%
Cash acquisitions and investments in
affiliates - - -
Cash capital spending 15.0% 19.0% 13.7%
Cash dividends paid 13.3% 17.4% 17.0%
Year-End Position
Total assets 17.7% 10.4% 4.6%
Long-term debt 29.5% 7.8% 18.8%
Total debt (l) 25.9% 6.5% (1.2)%
Shareholders' equity - - -
Per share 14.8% 12.0% 9.3%
Market price per share 22.9% 11.1% (13.4)%
Shares outstanding - - -
Employees 12.1% 12.1% 11.3%
Statistics
Return on average shareholders'
equity (m)
Market net debt ratio (n)
Historical cost net debt ratio (o)
<PAGE> F-43
____________________________________________________________________________
Selected Financial Data (Page 2 of 7)
(in millions except per share and employee amounts, unaudited)
PepsiCo, Inc. and Subsidiaries
____________________________________________________________________________
1994(a)(b) 1993(c) 1992(d)
____________________________________________________________________________
Summary of Operations
Net sales $28,472.4 25,020.7 21,970.0
Cost of sales and operating expenses 25,271.2 22,114.2 19,598.8
Operating profit 3,201.2 2,906.5 2,371.2
Gain on joint venture stock offering(h) 17.8 - -
Interest expense (645.0) (572.7) (586.1)
Interest income 90.4 88.7 113.7
Income from continuing operations before
income taxes and cumulative effect of
accounting changes 2,664.4 2,422.5 1,898.8
Provision for income taxes 880.4 834.6 597.1
Income from continuing operations before
cumulative effect of accounting changes $ 1,784.0 1,587.9 1,301.7
Cumulative effect of accounting
changes (i) $ (32.0) - (927.4)
Net income (j) $ 1,752.0 1,587.9 374.3
Per Share Data
Income from continuing operations before
cumulative effect of accounting
changes $ 2.22 1.96 1.61
Cumulative effect of accounting
changes (i) $ (0.04) - (1.15)
Net income (j) $ 2.18 1.96 0.46
Cash dividends declared $ 0.700 0.610 0.510
Average shares and equivalents
outstanding 803.6 810.1 806.7
Cash Flow Data (k)
Net cash provided by continuing
operations $ 3,716.0 3,134.4 2,711.6
Cash acquisitions and investments in
affiliates $ 315.8 1,011.2 1,209.7
Cash capital spending $ 2,253.2 1,981.6 1,549.6
Cash dividends paid $ 540.2 461.6 395.5
Year-End Position
Total assets $24,792.0 23,705.8 20,951.2
Long-term debt $ 8,840.5 7,442.6 7,964.8
Total debt (l) $ 9,519.0 9,633.8 8,671.6
Shareholders' equity $ 6,856.1 6,338.7 5,355.7
Per share $ 8.68 7.94 6.70
Market price per share $ 36 1/4 41 7/8 42 1/4
Shares outstanding 789.9 798.8 798.8
Employees 471,000 423,000 372,000
Statistics
Return on average shareholders'
equity (m) 27.0% 27.2 23.9
Market net debt ratio (n) 26% 22 19
Historical cost net debt ratio (o) 49% 50 49
<PAGE> F-44
_____________________________________________________________________________
Selected Financial Data (Page 3 of 7)
(in millions except per share and employee amounts, unaudited)
PepsiCo, Inc. and Subsidiaries
_____________________________________________________________________________
1991(e) 1990(f) 1989
_____________________________________________________________________________
Summary of Operations
Net sales $19,292.2 17,515.5 15,049.2
Cost of sales and operating expenses 17,180.4 15,473.4 13,276.6
Operating profit 2,111.8 2,042.1 1,772.6
Gain on joint venture stock offering(h) - 118.2 -
Interest expense (613.7) (686.0) (607.9)
Interest income 161.6 179.5 175.3
Income from continuing operations before
income taxes and cumulative effect of
accounting changes 1,659.7 1,653.8 1,340.0
Provision for income taxes 579.5 563.2 438.6
Income from continuing operations before
cumulative effect of accounting
changes $ 1,080.2 1,090.6 901.4
Cumulative effect of accounting
changes (i) $ - - -
Net income (j) $ 1,080.2 1,076.9 901.4
Per Share Data
Income from continuing operations before
cumulative effect of accounting
changes $ 1.35 1.37 1.13
Cumulative effect of accounting
changes (i) $ - - -
Net income (j) $ 1.35 1.35 1.13
Cash dividends declared $ 0.460 0.383 0.320
Average shares and equivalents
outstanding 802.5 798.7 796.0
Cash Flow Data (k)
Net cash provided by continuing
operations $ 2,430.3 2,110.0 1,885.9
Cash acquisitions and investments in
affiliates $ 640.9 630.6 3,296.6
Cash capital spending $ 1,457.8 1,180.1 943.8
Cash dividends paid $ 343.2 293.9 241.9
Year-End Position
Total assets $18,775.1 17,143.4 15,126.7
Long-term debt $ 7,806.2 5,899.6 6,076.5
Total debt (l) $ 8,034.4 7,526.1 6,942.8
Shareholders' equity $ 5,545.4 4,904.2 3,891.1
Per share $ 7.03 6.22 4.92
Market price per share $ 33 3/4 25 3/4 21 3/8
Shares outstanding 789.1 788.4 791.1
Employees 338,000 308,000 266,000
Statistics
Return on average shareholders'
equity (m) 20.7% 24.8 25.6
Market net debt ratio (n) 21% 24 26
Historical cost net debt ratio (o) 51% 51 54
<PAGE> F-45
____________________________________________________________________________
Selected Financial Data (Page 4 of 7)
(in millions except per share and employee amounts, unaudited)
PepsiCo, Inc. and Subsidiaries
____________________________________________________________________________
1988(b) 1987 1986
____________________________________________________________________________
Summary of Operations
Net sales $12,381.4 11,018.1 9,017.1
Cost of sales and operating expenses 11,039.6 9,890.5 8,187.9
Operating profit 1,341.8 1,127.6 829.2
Gain on joint venture stock offering(h) - - -
Interest expense (342.4) (294.6) (261.4)
Interest income 120.5 112.6 122.7
Income from continuing operations before
income taxes and cumulative effect of
accounting changes 1,119.9 945.6 690.5
Provision for income taxes 357.7 340.5 226.7
Income from continuing operations before
cumulative effect of accounting
changes $ 762.2 605.1 463.8
Cumulative effect of accounting
changes (i) $ - - -
Net income (j) $ 762.2 594.8 457.8
Per Share Data
Income from continuing operations before
cumulative effect of accounting
changes $ 0.97 0.77 0.59
Cumulative effect of accounting
changes (i) $ - - -
Net income (j) $ 0.97 0.76 0.58
Cash dividends declared $ 0.267 0.223 0.209
Average shares and equivalents
outstanding 790.4 789.3 786.5
Cash Flow Data (k)
Net cash provided by continuing
operations $ 1,894.5 1,334.5 1,212.2
Cash acquisitions and investments in
affiliates $ 1,415.5 371.5 1,679.9
Cash capital spending $ 725.8 770.5 858.5
Cash dividends paid $ 199.0 172.0 160.4
Year-End Position
Total assets $11,135.3 9,022.7 8,027.1
Long-term debt $ 2,656.0 2,579.2 2,632.6
Total debt (l) $ 4,107.0 3,225.1 2,865.3
Shareholders' equity $ 3,161.0 2,508.6 2,059.1
Per share $ 4.01 3.21 2.64
Market price per share $ 13 1/8 11 1/4 8 3/4
Shares outstanding 788.4 781.2 781.0
Employees 235,000 225,000 214,000
Statistics
Return on average shareholders'
equity(m) 26.9% 26.5 23.8
Market net debt ratio (n) 24% 22 28
Historical cost net debt ratio (o) 43% 41 46
<PAGE> F-46
____________________________________________________________________________
Selected Financial Data (Page 5 of 7)
(in millions except per share and employee amounts, unaudited)
PepsiCo, Inc. and Subsidiaries
____________________________________________________________________________
1985 1984(g)
____________________________________________________________________________
Summary of Operations
Net sales $7,584.5 7,058.6
Cost of sales and operating expenses 6,802.4 6,479.3
Operating profit 782.1 579.3
Gain on joint venture stock offering(h) - -
Interest expense (195.2) (204.9)
Interest income 96.4 86.1
Income from continuing operations before
income taxes and cumulative effect of
accounting changes 683.3 460.5
Provision for income taxes 256.7 180.5
Income from continuing operations before
cumulative effect of accounting
changes $ 426.6 280.0
Cumulative effect of accounting
changes (i) $ - -
Net income (j) $ 543.7 212.5
Per Share Data
Income from continuing operations before
cumulative effect of accounting
changes $ 0.51 0.33
Cumulative effect of accounting
changes (i) $ - -
Net income (j) $ 0.65 0.25
Cash dividends declared $ 0.195 0.185
Average shares and equivalents
outstanding 842.1 862.4
Cash Flow Data (k)
Net cash provided by continuing
operations $ 817.3 981.5
Cash acquisitions and investments in
affiliates $ 160.0 -
Cash capital spending $ 770.3 555.8
Cash dividends paid $ 161.1 154.6
Year-End Position
Total assets $5,889.3 4,876.9
Long-term debt $1,162.0 668.1
Total debt (l) $1,506.1 948.9
Shareholders' equity $1,837.7 1,853.4
Per share $ 2.33 2.19
Market price per share $ 7 7/8 4 5/8
Shares outstanding 789.4 845.2
Employees 150,000 150,000
Statistics
Return on average shareholders'
equity(m) 23.1% 15.4
Market net net debt ratio (n) 15% 12
Historical cost net debt ratio (o) 30% 17
<PAGE> F-47
___________________________________________________________________________
Selected Financial Data (Page 6 of 7)
(in millions except per share and employee amounts, unaudited)
PepsiCo, Inc. and Subsidiaries
___________________________________________________________________________
All share and per share amounts reflect three-for-one stock splits in 1990
and 1986. Additionally, PepsiCo made numerous acquisitions in most years
presented and a few divestitures in certain years. Such transactions did
not materially affect the comparability of PepsiCo's operating results for
the periods presented, except for certain large acquisitions made in 1986,
1988 and 1989, and the divestitures discussed in Notes (g) and (j).
(a) Included the current year benefit of changing the method for
calculating the market-related value of plan assets, which reduced
full-year pension expense by $35.1 ($21.6 after-tax or $0.03 per
share). See Note 13.
(b) Fiscal years 1994 and 1988 each consisted of 53 weeks. Normally,
fiscal years consist of 52 weeks; however, because the fiscal year
ends on the last Saturday in December, a week is added every 5 or 6
years. The 53rd week increased 1994 earnings by approximately $54.0
($34.9 after-tax or $0.04 per share) and 1988 earnings by
approximately $23.2 ($15.7 after-tax or $0.02 per share).
(c) Included a $29.9 charge ($0.04 per share) to increase net deferred tax
liabilities as of the beginning of 1993 for a 1% statutory income tax
rate increase due to 1993 U.S. tax legislation. See Note 17.
(d) Included $193.5 in unusual charges for restructuring ($128.5 after-tax
or $0.16 per share). See Note 2 on page F-9 and Note 16.
(e) Included $170.0 in unusual charges ($119.8 after-tax or $0.15 per
share). See Note 2 on page F-9.
(f) Included $83.0 in unusual charges ($48.8 after-tax or $0.06 per
share). See Note 2 on page F-9.
(g) Included a $156.0 unusual charge ($62.0 after-tax or $0.07 per share)
related to a program to sell several international bottling
operations.
(h) The $17.8 gain ($16.8 after-tax or $0.02 per share) in 1994 arose from
a public share offering by PepsiCo's BAESA joint venture in South
America. See Note 4. The $118.2 gain ($53.0 after-tax or $0.07 per
share) in 1990 arose from an initial public offering of new shares by
a KFC joint venture in Japan and a sale by PepsiCo of a portion of its
shares.
(i) Represents the cumulative effect of adopting in 1994 SFAS 112,
"Employers' Accounting for Postemployment Benefits," and changing the
method for calculating the market-related value of plan assets used in
determining the return-on-asset component of annual pension expense
and the cumulative net unrecognized gain or loss subject to
amortization (see Notes 14 and 13, respectively) and adopting in 1992
SFAS 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," and SFAS 109, "Accounting for Income Taxes" (see Notes
12 and 17, respectively). Prior years were not restated for these
changes in accounting.
(j) Included impacts of discontinued operations, the most significant of
which were in 1985 and 1984. 1985 included income of $123.6 after-tax
($0.15 per share) and 1984 included charges of $62.5 after-tax ($0.07
per share) resulting from PepsiCo disposing of its sporting goods and
transportation segments.
<PAGE> F-48
____________________________________________________________________________
Selected Financial Data (Page 7 of 7)
(in millions except per share and employee amounts, unaudited)
PepsiCo, Inc. and Subsidiaries
_____________________________________________________________________________
(k) Cash flows from other investing and financing activities, which are
not presented, are an integral part of total cash flow activity.
(l) Total debt includes short-term borrowings and long-term debt, which
for 1987 through 1990 included a nonrecourse obligation.
(m) The return on average shareholders' equity is calculated using income
from continuing operations before cumulative effect of accounting
changes.
(n) The market net debt ratio represents net debt as a percent of net debt
plus the market value of equity, based on the year-end stock price.
Net debt is total debt, which for this purpose includes the present
value of long-term operating lease commitments, reduced by the pro
forma remittance of investment portfolios held outside the U.S. For
1987 through 1990, total debt was also reduced by the nonrecourse
obligation in the calculation of net debt.
(o) The historical cost net debt ratio represents net debt (see Note n) as
a percent of capital employed (net debt, other liabilities, deferred
income taxes and shareholders' equity).
<PAGE> F-49
PEPSICO, INC. AND SUBSIDIARIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended December 31, 1994, December 25, 1993 and December 26, 1992
(in millions)
Additions
Balance Charged Deduct- Balance
at to ions at
beginning costs and Other from end
of year expenses additions reserves of year
(1) (2)
Deductions from assets:
1994
Allowance for
doubtful accounts $128.3 $ 59.4 $ 7.6 $ 44.7 $150.6
Valuation allowance for
deferred tax assets $249.0 $ 69.4 $ 0.9 $ - $319.3
1993
Allowance for
doubtful accounts $112.0 $ 43.9 $ 16.7 $ 44.3 $128.3
Valuation allowance for
deferred tax assets $181.3 $ 67.7 $ - $ - $249.0
1992
Allowance for
doubtful accounts $ 97.5 $ 46.3 $ 14.1 $ 45.9 $112.0
Valuation allowance for
deferred tax assets $142.8 $ 38.5 $ - $ - $181.3
(1) Other additions to the allowance for doubtful accounts principally
related to acquisitions and reclassifications.
(2) Principally accounts written off.
<PAGE> E-1
INDEX TO EXHIBITS
ITEM 14(a)(3)
EXHIBIT
(3)(a) Restated Articles of Incorporation of PepsiCo, Inc., which is
incorporated herein by reference from Exhibit 4(a) to PepsiCo's
Registration Statement on Form S-3 (Registration No. 33-57181).
(3)(b) Copy of By-Laws of PepsiCo, Inc., as amended, which is
incorporated by reference from Exhibit 3(ii) to PepsiCo's Annual
Report on Form 10-K for the fiscal year ended December 26, 1992.
(4) PepsiCo, Inc. agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of any instrument defining the
rights of holders of long-term debt of PepsiCo, Inc. and all of
its subsidiaries for which consolidated or unconsolidated
financial statements are required to be filed with the Securities
and Exchange Commission.
(10)(a) Description of PepsiCo, Inc. 1988 Director Stock Plan, which is
incorporated herein by reference from Post-Effective Amendment
No. 2 to PepsiCo's Registration Statement on Form S-8
(Registration No. 33-22970).
(10)(b) Copy of PepsiCo, Inc. 1987 Incentive Plan (the "1987 Plan"),
which is incorporated by reference from Exhibit 10(b) to
PepsiCo's Annual Form 10-K for the Fiscal Year ended December 26,
1992.
(10)(c) Copy of PepsiCo, Inc. 1979 Incentive Plan (the "Plan"), which is
incorporated by reference from Exhibit 10(c) to PepsiCo's Annual
Report on Form 10-K for the Fiscal year ended December 28, 1991.
(10)(d) Copy of Operating Guideline No. 1 under the 1987 Plan, as amended
through July 25, 1991, which is incorporated by reference from
Exhibit 10(d) to PepsiCo's Annual Report on Form 10-K for the
fiscal year ended December 28, 1991.
(10)(e) Copy of Operating Guideline No. 2 under the 1987 Plan and the
Plan, as amended through January 22, 1987, which is incorporated
herein by reference from Exhibit 28(b) to PepsiCo's Registration
Statement on Form S-8 (Registration No. 33-19539).
(10)(f) Amended and Restated PepsiCo Long Term Savings Program, dated
June 29, 1994
(10)(g) Amendment to Amended and Restated PepsiCo Long Term Savings
Program, dated September 14, 1994.
(10)(h) Copy of PepsiCo, Inc. 1994 Long-Term Incentive Plan, which is
incorporated herein by reference from Exhibit A to PepsiCo's
Proxy Statement for its 1994 Annual Meeting of Shareholders.
(10)(i) Copy of PepsiCo, Inc. Executive Incentive Compensation Plan,
which is incorporated herein by reference from Exhibit B to
PepsiCo's Proxy Statement for its 1994 Annual Meeting of
Shareholders.
(11) Computation of Net Income Per Share of Capital Stock ---- Primary
and Fully Diluted.
(12) Computation of Ratio of Earnings to Fixed Charges.
(21) Active Subsidiaries of PepsiCo, Inc.
(23) Report and Consent of KPMG Peat Marwick LLP.
(24) Copy of Power of Attorney.
(27) Financial Data Schedule
<PAGE>
PEPSICO LONG TERM SAVINGS PROGRAM
As Amended and Restated
Effective July 1, 1992, Except as Otherwise Noted
[Subject to Approval by the Internal Revenue Service]
<PAGE>
PEPSICO LONG TERM SAVINGS PROGRAM
Table of Contents
Page
ARTICLE I Foreword I-1
ARTICLE II Definitions and Construction
2.1 Definitions II-1
2.2 Construction II-18
ARTICLE III Eligibility and Participation
3.1 Eligibility III-1
3.2 Participation III-1
ARTICLE IV Contributions and Deferral Amounts
4.1 Deferral Amount IV-1
4.2 Dollar Limits on Elective
Deferrals IV-2
4.3 Limitation on Deferral Percentage IV-4
4.4 Rollover Contributions IV-8
4.5 Maximum Allocations IV-8
4.6 Excess Allocations IV-15
4.7 Fund for Exclusive Benefit
of Participants IV-16
ARTICLE V Interests of Participants
5.1 Accounts of Participants V-1
5.2 Investment of Participant Accounts V-1
5.3 Adjusting Account Balances V-11
ARTICLE VI Distributions to Participants
6.1 Termination of Employment VI-1
6.2 Death VI-1
6.3 Withdrawals VI-1
6.4 Form of Distributions VI-4
6.5 Errors in Participant's Accounts VI-5
6.6 Commencement of Payments VI-5
6.7 Payment for Benefit of Disabled
or Incapacitated Person VI-8
6.8 No Other Benefits or Withdrawals VI-8
ARTICLE VII Plan Loans
7.1 Eligibility for Plan Loans VII-1
7.2 Application Procedure VII-1
7.3 Loan Amount VII-2
7.4 Maximum Number of Outstanding Loans
and Refinancing VII-3
7.5 Effect on Participant's Investment VII-3
</ PAGE>
<PAGE>
7.6 Fees VII-4
7.7 Interest Rate VII-4
7.8 Term and Repayment VII-5
7.9 Loan Default VII-6
7.10 Nondiscrimination VII-6
7.11 Collins Food International, Inc. VII-6
7.12 Miscellaneous VII-7
ARTICLE VIII Determination of Beneficiary
8.1 Certain Married Participants VIII-1
8.2 Other Participants VIII-3
ARTICLE IX Administration
9.1 Allocation of Responsibility Among
Fiduciaries for Plan and Trust
Administration IX-1
9.2 Administration IX-1
9.3 Claims Procedure IX-2
9.4 Records and Reports IX-3
9.5 Other Administrative Powers
and Duties IX-3
9.6 Rules and Decisions IX-4
9.7 Procedures IX-4
9.8 Authorization of Benefit
Distributions IX-4
9.9 Application and Forms for
Distributions IX-4
ARTICLE X Trust Fund X-1
ARTICLE XI Amendment of the Plan XI-1
ARTICLE XII Termination of the Plan XII-1
ARTICLE XIII Miscellaneous
13.1 Participants' Rights; Acquittance XIII-1
13.2 Nonalienation of Benefits XIII-1
13.3 Actions Involving the Trust XIII-2
13.4 Qualification of Plan as a Condition XIII-3
13.5 Successor to the Company XIII-3
13.6 Transfer of Plan Assets XIII-4
13.7 Indemnification XIII-4
13.8 Action by the Company XIII-4
13.9 Applicable Law XIII-5
13.10 Interpreting the Plan XIII-5
ARTICLE XIV Top-Heavy Plan Provisions
14.1 Application XIV-1
<PAGE>
14.2 Definitions XIV-1
14.3 Allocation of Minimum Contribution XIV-2
ARTICLE XV Signature XV-1
APPENDIX Appendix
Article A KFC-Collins A-1
Article B KFC Hourly Employees B-1
Article C Pizza Hut Hourly Employees C-1
Article D Prior Definitions of Eligible Pay D-1
SCHEDULE 1 Designated Employers for Nonrestaurant
Salaried Employees 1-1
SCHEDULE 2 Designated Employers for Nonrestaurant
Hourly and Commissioned Employees 2-1
SCHEDULE 3 Designated Employers for Restaurant
Employees 3-1
SCHEDULE 4 Designated Employers for Transportation
Employees 4-1
SCHEDULE 5 Designated Hourly Employees of the
Company 5-1
<PAGE> I-1
ARTICLE I
Foreword
The PepsiCo Long Term Savings Program permits eligible
employees to defer receipt of a portion of their Eligible Pay in
order to promote savings on a tax-favored basis. The Plan
provides for distributions in the event of termination of
employment, death, or attainment of age 59-1/2. In addition, in
certain circumstances, withdrawals are permitted in the event of
hardship.
The Plan has been established by PepsiCo, Inc. for the
benefit of its salaried Employees and certain union employees and
certain salaried, commissioned sales and hourly Employees of each
subsidiary designated by PepsiCo, Inc. which adopts this Plan as
an Employer.
The PepsiCo Long Term Savings Program was initially
established effective July 1, 1983, and was subsequently
amended. Effective December 31, 1991, the Kentucky Fried Chicken
Corporation Long Term Savings Program, the Pizza Hut Long Term
Savings Program, the Pepsi-Cola Operating Company Long Term
Savings Program and the Taco Bell Long Term Savings Program (the
"Merged Plans") were merged into the PepsiCo Long Term Savings
Program (the "Plan"). The Plan was amended and restated
effective July 1, 1992. Except as otherwise provided herein,
this amendment and restatement is effective as of July 1, 1992
and applies to persons who are Participants in the Plan on or
after that date. Except as so provided, the rights and benefits
with respect to persons who terminated participation in the Plan
or the Merged Plans prior to that date shall be governed by the
prior provisions of the Plan and the Merged Plans. The
provisions set forth in the following Articles apply to all
Participants except to the extent otherwise provided. To provide
for the investment of contributions to this Plan and other tax-
favored savings plans maintained by it and its subsidiaries and
affiliates, PepsiCo, Inc. has established the Master Trust
described in Article X.
<PAGE> II-1
ARTICLE II
Definitions and Construction
2.1 Definitions: This section provides definitions
for certain words and phrases listed below. These definitions
can be found on the pages indicated.
Page
(a) Account II-2
(b) Authorized Leaves of Absence II-2
(c) Annuity Starting Date II-2
(d) Beneficiary II-2
(e) Board II-2
(f) Code II-2
(g) Company II-2
(h) Company Stock II-2
(i) Effective Date II-3
(j) Elective Deferral II-3
(k) Eligible Pay II-3
(l) Employee II-10
(m) Employer II-10
(n) Employment II-11
(o) Employment Commencement Date II-11
(p) ERISA II-11
(q) Excess Contributions II-11
(r) Excess Elective Deferrals II-11
(s) Fiduciaries II-11
(t) Highly Compensated Employee II-12
(u) Hour of Service II-14
(v) Investment Expense II-14
(w) Limitation Year II-14
(x) Merged Plans II-14
(y) Non-Highly Compensated Employee II-15
(z) Participant II-15
(1) Active Participant II-15
(2) Inactive Participant II-15
(aa) PepsiCo Organization II-15
(bb) Plan II-15
(cc) Plan Administrator II-15
(dd) Plan Year II-15
(ee) Recordkeeper II-15
(ff) Retired Employee II-16
(gg) Rollover Account II-16
(hh) Rollover Contributions II-16
<PAGE> II-2
(ii) Salary Deferral Account II-16
(jj) Salary Deferral Contributions II-16
(kk) Severance from Service Date II-16
(ll) Termination of Employment II-17
(mm) Trust (or Trust Fund) II-17
(nn) Trustee II-17
(oo) Valuation Date II-17
(pp) Year of Service II-17
Where the following words and phrases in bold face and underlined
appear in this Plan with initial capitals they shall have the
meaning set forth below, unless a different meaning is plainly
required by context.
(a) ACCOUNT: A Participant's total interest in the
Plan, the aggregate of the Participant's Salary Deferral Account
and Rollover Account (and any other accounts that may be provided
for in the Appendix).
(b) AUTHORIZED LEAVES OF ABSENCE: Any absence: (i)
that is authorized by an Employer under its standard personnel
practices; and (ii) during which the individual's base pay is
continued by the Employer. It is intended that all persons under
similar circumstances shall be treated alike in the granting of
such Authorized Leaves of Absence.
(c) ANNUITY STARTING DATE: The first day on which all
events have occurred that entitle the Participant to payment of a
benefit.
(d) BENEFICIARY: Any person or persons (natural or
otherwise) determined under Article VIII to be entitled to
receive benefits hereunder upon the death of a Participant.
(e) BOARD: The Board of Directors of the Company.
(f) CODE: The Internal Revenue Code of 1986, as
amended from time to time.
(g) COMPANY: PepsiCo, Inc., a corporation organized
and existing under the laws of the State of North Carolina, or
its successor or successors.
(h) COMPANY STOCK: The capital stock issued by the
Company.
<PAGE> II-3
(i) EFFECTIVE DATE: The date upon which this
amendment and restatement is generally effective, July 1, 1992.
Certain identified provisions are effective on different dates as
noted herein. Provisions made effective prior to July 1, 1992
amend the corresponding terms of both the Plan and the Merged
Plans as of the date indicated, and any reference in such
provisions to the Plan shall be taken as a reference to both the
Plan and the Merged Plans (unless the context clearly indicates
to the contrary).
(j) ELECTIVE DEFERRAL: With respect to any taxable
year, a Participant's Elective Deferral is the sum of all
employer contributions made on his behalf pursuant to an election
to defer under any (i) qualified cash or deferred arrangement (as
defined in Code section 401(k), (ii) simplified employee pension
cash or deferred arrangement (as defined in Code section 408(k)),
(iii) eligible deferred compensation plan under Code section 457,
(iv) plan described in Code section 501(c)(18), and (v) any
employer contribution made on the behalf of a Participant for the
purchase of an annuity contract under Code section 403(b)
pursuant to a salary reduction agreement.
(k) ELIGIBLE PAY: Effective January 1, 1993, for each
Plan Year, a Participant's Eligible Pay shall be determined as
follows:
(1) Participants Other Than Those Employed by the KFC
Division: With respect to all Participants other than those
employed by the KFC division, Eligible Pay shall be determined as
follows:
(i) In the case of a Participant who is a salaried
Employee considered exempt from the minimum wage and overtime
pay provisions of the Fair Labor Standards Act, Eligible Pay shall mean:
(A) If the Participant was an Employee on
the Eligible Pay determination date (or dates), (hereinafter
referred to as the determination date), designated by the Plan
Administrator, with respect to Employees employed by the Frito
division,
<PAGE> II-4
(I) the Participant's annual base salary
in effect on the Eligible Pay determination date in the preceding
Plan Year, plus
(II) any lump sum amount received by
the Participant prior to the Salary Determination Date and during
such preceding Plan Year under the PepsiCo Executive Incentive or
PepsiCo's or subsidiary's Middle Management Incentive Plan,
including any trimester Frito-Lay Management Incentive Plan
payments received by the Participant.
(B) If the Participant was not an Employee on the
Eligible Pay determination date in the preceding Plan Year, the
Participant's annual base salary on his Employment Commencement
Date.
(ii) In the case of a Participant who is a salaried
Employee not considered exempt from the minimum wage and overtime pay
provisions of the Fair Labor Standards Act, and in the case of a Participant
who is an hourly Employee, Eligible Pay shall mean:
(A) If the Participant was an Employee on or before
the Eligible Pay determination date in the Preceding Plan Year,
the greater of:
(I) the Participant's W-2 earnings, plus any
amounts designated as "Choice Pay" ("Flexible Pay" in the case of
Frito-Lay and its subsidiaries, collectively "Flexible Pay") and
contributed by salary reduction agreement to the Employer's
Benefits Plus program or this Plan, in each case through the
Eligible Pay determination date during such preceding Plan Year,
annualized in accordance with rules adopted by the Plan
Administrator, or
<PAGE> II-5
(II) the Participant's W-2 earnings plus
Flexible Pay during the calendar year immediately prior to such
preceding Plan Year.
(B) If the Participant was not an Employee on or
before the Eligible Pay determination date, the Participant's annual
base salary or hourly wage rate on his Employment Commencement Date,
annualized in accordance with rules adopted by the Plan Administrator.
(iii) In the case of a Participant who is classified as
a commissioned ("route sales") Employee, Eligible Pay shall mean:
(A) If the Participant was an Employee on or before the
Eligible Pay determination date, the greater of:
(I) the Participant's W-2 earnings, plus any
amounts of Flexible Pay through the Eligible Pay determination date during
the preceding Plan Year, annualized in accordance eith rules adopted by
the Plan Administrator, or
(II) the Participant's W-2 earnings plus Flexible
Pay during the Calendar year immediately prior to such preceding Plan Year.
(B) If the Participant was not an Employee on or before
the Eligible Pay determination date for the preceding Plan Year, the
Participant's weekly guarantee on his Employment Commencement Date,
annualized in accordance with rules adopted by the Plan Administrator.
(iv) In the case of a Participant who is an hourly
Employee of the Pizza Hut division, Eligible Pay shall mean:
<PAGE> II-6
(A) If the Participant was an Employee on the Eligible
Pay determination date designated by the Plan Administrator with
respect to Pizza Hut division Employees, the sum of:
(I) the Participant's annualized hourly wage
rate in effect on the Eligible Pay determination date, plus
(II) any overtime paid prior to the
Eligible Pay determination date but within the same calendar
year, annualized in accordance with rules adopted by the Plan
Administrator.
(B) If the Participant was not an Employee
on the Eligible Pay determination date with respect to Pizza Hut
division Employees, the sum of the amounts under (I) and (II)
above but determined as of the Participant's Employment
Commencement Date.
(2) Participants Employed by the KFC Division: With
respect to a Participant employed by the KFC division of the
Company, his Eligible Pay shall be determined as follows:
(i) The Participant's salary or wages, including
forms of pay delivered in alternative manners such as piecework
and payment by mileage for drivers, overtime, shift
differentials, commissions, bonuses received under the PepsiCo
Executive Incentive Plan or the Company's or a subsidiary's
Middle Management Incentive Plan, and
(ii) Any amount not included in (i) above which
is contributed by the Employer on behalf of the Participant
pursuant to a salary reduction agreement and which is not
includable in gross income under Code sections 125, 402(e)(4), or
402(g).
<PAGE> II-7
The amounts under subparagraphs (i) and (ii) shall be
taken from payroll records for the full calendar year that
precedes the Plan Year by 2 years. For example, for the 1993
Plan Year, "Eligible Pay" shall be determined from amounts earned
for the full calendar year ending December 31, 1990. For a
Participant who has only a partial year's earnings during the
full calendar year 2 years prior to the Plan Year, the partial
year's earnings shall be annualized. For a Participant with no
earnings during the full calendar year 2 years prior to the Plan
Year, Eligible Pay shall equal the Participant's base salary or
wages, not including alternative forms of base pay, overtime,
shift differentials, commissions or bonuses on the later of: (A)
the "Eligible Pay determination date" designated by the Plan
Administrator with respect to Employees other than those employed
by a restaurant division or a Frito division, or (B) the
Participant's Employment Commencement Date.
(iii) In the case of a Participant who is an
hourly Employee of the KFC division, Eligible Pay shall mean:
(A) If the Participant was an Employee on
the Eligible Pay determination date designated by the Plan
Administrator with respect to KFC division Employees, the sum of:
(II) any overtime paid prior to the
Eligible Pay determination date but within the same calendar
year, annualized in accordance with rules adopted by the Plan
Administrator.
(B) If the Participant was not an Employee
on the Eligible Pay determination date with respect to KFC
division Employees, the sum of the amounts under (I) and (II)
above but
<PAGE> II-8
determined as of the Participant's Employment
Commencement Date.
(3) Special Rules for Determining Eligible Pay:
(i) For purposes of paragraphs (1) through (3)
above and except for salary reduction amounts designated as
Flexible Pay under an Employer's Benefits Plus program that are
used to buy benefits and amounts contributed under the Plan,
salary or wages shall not include amounts or the value of
benefits received, or deemed received, under any performance
share plan, stock option plan or similar plan or under any
pension or welfare benefit plan maintained by the Employer,
whether such plan is qualified or non-qualified and whether such
amounts are deferred or not deferred.
(ii) In the case of Employees who transfer from
one Employer to another during the year, Eligible Pay of such
Employees shall be the amount of annualized base salary or hourly
wage rate on the transfer date plus annualized overtime,
commission pay received prior to the transfer date and prior to
the determination date and the amount of any lump sum bonus paid
from an Employer's Incentive Compensation program.
(iii) Notwithstanding the foregoing provisions
of this subsection, in the case of an Employee who elects to make
nonqualified deferrals under the PepsiCo Executive Income
Deferral Program for an upcoming Plan Year, the Employee's
Eligible Pay for such Plan Year shall not be greater than his
current base pay and the prior year's bonus under the Employer's
Incentive Compensation Program, decreased by any nonqualified
deferrals elected for the upcoming Plan Year, and increased by
amounts that will be received as distributions from the PepsiCo
Executive Income Deferral Program for such Plan Year.
<PAGE> II-9
(iv) For any Plan Year beginning on or after
January 1, 1989, the Eligible Pay of each Participant taken into
account under the Plan shall not be less than $10,000 and shall
not exceed $200,000, the latter as adjusted by the Secretary of
the Treasury. In determining the Eligible Pay of a Participant
for purposes of the $200,000 limitation set forth in the
preceding sentence, the rules of section 414(q)(6) of the Code
shall apply, except in applying such rules, the term "family"
shall include only the spouse of the Participant and any lineal
descendants of the Participant who have not attained age 19
before the close of the Plan Year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is
exceeded, then the limitation shall be prorated among the
affected individuals in proportion to each such individual's
Eligible Pay as determined under this Section prior to the
application of this limitation.
(v) For any Plan Year beginning on or after
January 1, 1994, the Eligible Pay of each Participant taken into
account under the Plan shall not be less than $10,000 and shall
not exceed $150,000, the latter as adjusted by the Secretary of
the Treasury. In determining the Eligible Pay of a Participant
for purposes of the $150,000 limitation set forth in the
preceding sentence, the rules of section 414(q)(6) of the Code
shall apply, except in applying such rules, the term "family"
shall include only the spouse of the Participant and any lineal
descendants of the Participant who have not attained age 19
before the close of the Plan Year. If, as a result of the
application of such rules, the adjusted $150,000 limitation is
exceeded, then the limitation shall be prorated among the
affected individuals in proportion to each such individual's
Eligible Pay as determined under this Section prior to the
application of this limitation.
<PAGE> II-10
References in the Plan to deferrals of Eligible Pay, or Salary
Deferral Contributions from Eligible Pay, shall be read as
referring to deferrals of a Participant's current Employee
compensation not in excess of Eligible Pay, determined as above.
(l) EMPLOYEE: Any person who is: receiving
remuneration for personal services currently rendered in the
employment of an Employer (or who would be receiving such
remuneration except for an Authorized Leave of Absence), and who
is described in one of the following paragraphs:
(1) A United States citizen whose primary place of
employment is within the United States and its possessions
(collectively referred to in this subsection as "the U.S.");
(2) An alien who has been lawfully admitted for
permanent residence in the U.S. (referred to in this subsections
a "resident alien") and whose primary place of employment is
within the U.S., but excluding any person working as a designate
or in a U.S. assignment that the Employer classifies as primarily
for training or temporary;
(3) A United States citizen or resident alien
relocated by the Employer as an Unites States expatriate;
(4) Effective January 1, 1994, a resident alien
who is classified by the Employer as a globalist; and
(5) Effective September 1, 1994, a third-
country national (as defined below) who is a resident alien or
whose primary place of employment is within the U.S.
For purposes of this subsection, a "third-country national" shall
mean an alien who works for an Employer outside of his home
country, and who previously worked for an Employer in another
country that was not his home country.
(m) EMPLOYER: The Company, any foreign subsidiary
which has Employees described in subsection (l)(2) above, and any
other subsidiary which is authorized by the Company to
participate herein and which adopts the Plan for its
<PAGE> II-11
Employees, in accordance with any conditions required by the Company.
Any such other subsidiary shall be designated on the attached
Schedules 1, 2, 3, 4, and 5.
(n) EMPLOYMENT: Service with an Employer.
(o) EMPLOYMENT COMMENCEMENT DATE: The date on which
an Employee first performs an Hour of Service for a member of the
PepsiCo Organization.
(p) ERISA: Public Law 93-406, the Employee Retirement
Income Security Act of 1974, as amended from time to time.
(q) EXCESS CONTRIBUTIONS: With respect to any Plan
Year, the excess of:
(1) The aggregate amount of Employer contributions
paid to the Plan as Salary Deferral Contributions on behalf of
Highly Compensated Employees for such Plan Year, over
(2) The maximum amount of such contributions permitted
by the limitations contained in Section 4.3(a) (determined by
reducing such contributions made on behalf of such Highly
Compensated Employees in order of their Average Deferral
Percentages, beginning with the Highly Compensated Employee(s)
with the highest Average Deferral Percentage).
(r) EXCESS ELECTIVE DEFERRALS: Those Elective
Deferrals that are includable in an individual's gross income
under Code section 402(g) because they exceed the dollar
limitation in effect for the year under such Code section.
Excess Elective Deferrals shall be treated as annual additions
under the Plan for purposes of Section 4.5.
(s) FIDUCIARIES: The named fiduciaries, as defined in
section 402 of ERISA, who shall be the Plan Administrator and the
Trustee, and other parties designated as fiduciaries, as defined
in section 3(21) of ERISA, by such named fiduciaries in
accordance with the terms of the Plan and the Trust (but only
with respect to the specific responsibilities of each in
connection with the Plan and Trust).
<PAGE> II-12
(t) HIGHLY COMPENSATED EMPLOYEE:
(1) General Definition: Effective for Plan years
beginning on or after January 1, 1987, any Employee who during
the relevant Plan Year or the preceding Plan Year:
(i) Was, at any time, a 5 percent owner (as defined in
Code section 416(i)(1));
(ii) Received compensation from an Employer in excess
of $75,000 (as adjusted pursuant to Code section 415(d));
(iii) Received compensation from an Employer in
excess of $50,000 (as adjusted pursuant to Code section 415(d))
and was a member of the group consisting of the top 20 percent of
the employees when ranked on the basis of compensation paid
during the relevant year (i.e., the top-paid group), or
(iv) Was an officer of an Employer and received
compensation greater than 50 percent of the dollar limitation in
effect under Code section 415(b)(1)(A) for such Plan Year.
(2) Certain Current Year Exclusions: In applying
paragraph (1) with respect to the current Plan Year, any Employee
not described in subparagraphs (ii), (iii) or (iv) above for the
preceding Plan Year (without regard to this sentence) shall not
be treated as described in subparagraphs (ii), (iii) or (iv) for
the current Plan Year unless such Employee is among the 100
Employees receiving the greatest compensation from the Employer
for the current Plan Year.
(3) Determination of Officers: For purposes of
applying subparagraph (iv) of paragraph (1) above, no more than
50 Employees, or, if less, the greater of 3 Employees or 10
percent of all Employees, shall be treated as officers. In
addition, if, for any year, no officer of the Employer is de
scribed in subparagraph (a)(iv) above, the officer of the
Employer with the greatest
<PAGE> II-13
compensation shall be treated as an officer described in subparagraph
(a)(iv) above.
(4) Former Employees: A former Employee shall be
treated as a Highly Compensated Employee if:
(i) Such Employee was a Highly Compensated Employee
when such Employee separated from service, or
(ii) Such Employee was a Highly Compensated Employee
at any time after attaining age 55.
(5) Treatment of Certain Family Members: Any family
member of a 5 percent owner or one of the 10 Highly Compensated
Employees receiving the greatest compensation from the Employer
during the relevant year shall be aggregated with such 5 percent
owner or top-ten Highly Compensated Employee for purposes of
Section 4.3 of the Plan. In such case, the family member and 5
percent owner or top 10 Highly Compensated Employee shall be
treated as a single Employee having compensation and Plan
contributions equal to the sum of such compensation and
contributions of the family member and 5 percent owner or top 10
Highly Compensated Employee. For purposes of this subsection,
family member includes the spouse, lineal ascendants and
descendants of the Employee and the spouses of such lineal
ascendants and descendants.
(6) Compensation: For purposes of this subsection,
compensation means an Employee's compensation as determined under
Code section 415(c)(3), increased by elective contributions that
are: (i) made on behalf of the Employee under this Plan, a Merged
Plan, another section 401(k) plan or a cafeteria plan of his
Employer, and (ii) that are excludable from income under Code
sections 125 or 402(a)(8).
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of
Employees in the top-paid group, the top 100
<PAGE> II-14
employees, the number of employees treated as officers
and the compensation that is considered, will be made in
accordance with Code section 414(q) and the regulations thereunder.
(u) HOUR OF SERVICE: Each hour for which an Employee
is:
(1) Paid, or entitled to payment, by the Employer
for the performance of duties.
(2) Directly or indirectly compensated or
entitled to compensation by the Employer for reasons other than
the performance of duties (such as vacation, holidays, sickness,
jury duty, disability, lay-off, military duty or leave of
absence) irrespective of whether the employment relationship has
terminated unless such compensation is solely for the purposes of
complying with applicable workers' compensation or disability
insurance laws; or
(3) Awarded back-pay or back-pay is agreed to by
the Employer without regard to mitigation of damages, except that
no Hour of Service shall be credited under this paragraph for any
period for which the Employee is credited with an Hour of Service
under paragraph (1) or (2) above.
In addition, each hour for which a leased employee, within the
meaning of Code section 414(n), is paid or entitled to payment by
the Employer for the performance of duties shall be considered an
Hour of Service.
(v) INVESTMENT EXPENSES: All expenses related to the
management and maintenance, on a separate basis, of the
individual investment options under the Plan. The term
"Investment Expenses" shall not include general fees for
management and maintenance of the Trust as a whole.
(w) LIMITATION YEAR: The 12-month period commencing
on January 1 and ending on December 31.
(x) MERGED PLANS: The Kentucky Fried Chicken
Corporation Long Term Savings Program, the Pizza Hut Long Term
Savings Program, the Taco Bell Long Term Savings Program and the
Pepsi-Cola Operating Company Long Term
<PAGE> II-15
Savings Program, as in effect prior to their merger into this
Plan on December 31, 1991.
(y) NON-HIGHLY COMPENSATED EMPLOYEE: Effective for
Plan Years beginning on or after January 1, 1987, any Employee
who is not a Highly Compensated Employee.
(z) PARTICIPANT: Any individual who is either an
Active Participant or an Inactive Participant.
(1) Active Participant: Any eligible Employee,
as defined in Section 3.1, who has a current election in effect
to make Salary Deferral Contributions in accordance with Article
IV.
(2) Inactive Participant: Any individual (other
than an Active Participant) who has an Account under the Plan.
(aa) PEPSICO ORGANIZATION: The controlled group of
corporations of which the Company is a member, as defined in Code
Section 414(b) and regulations issued thereunder.
(bb) PLAN: The PepsiCo Long Term Savings Program, the
Plan set forth herein, as it may be amended from time to time.
The Plan Administrator may also designate certain informal names
for the Plan, such as "Save-Up", for use in communications
regarding the Plan.
(cc) PLAN ADMINISTRATOR: The Company, or its successor
or successors, which shall have authority to administer the Plan
as provided in Article VIII.
(dd) PLAN YEAR: The 12-month period commencing on
January 1 and ending on December 31. From December 1, 1988 to
December 31, 1991, the Plan Year commenced on December 1.
(ee) RECORDKEEPER: The party designated by the Plan
Administrator to maintain records of Participants' Accounts in
accordance with procedures established by the Plan Administrator.
<PAGE> II-16
(ff) RETIRED EMPLOYEE: Any person: (i) who has
received, while age 55 or over, a qualifying lump sum
distribution from a defined benefit pension plan sponsored by an
Employer, and (ii) who was an Employee eligible to participate in
this Plan immediately prior to his retirement from the Employer.
For purposes of this subsection, a qualifying lump sum
distribution shall refer to lump sums other than single sum
distributions with a value of $3,500 or less, determined in
accordance with Code section 417(e).
(gg) ROLLOVER ACCOUNT: The account maintained to
record any rollover contributions pursuant to Section 4.4, and
any adjustments relating thereto. A Participant's Rollover
Account shall at all times be fully vested.
(hh) ROLLOVER CONTRIBUTIONS: Contributions to the Plan
that are made pursuant to Section 4.4.
(ii) SALARY DEFERRAL ACCOUNT: The account maintained
for a Participant to record amounts deferred pursuant to the
election described in Section 4.1, as well as any adjustments
relating to such amount. A Participant's Salary Deferral Account
shall at all times be fully vested.
(jj) SALARY DEFERRAL CONTRIBUTIONS: Any Employer
contributions made to the Plan at the election of a Participant,
in lieu of cash compensation, pursuant to Section 4.1.
(kk) SEVERANCE FROM SERVICE DATE: An Employee's
Severance from Service Date shall occur on the earlier of:
(1) The date the Employee quits, retires, is
discharged or dies; or
(2) The first anniversary of the date the
Employee is absent from service with an Employer (with or without
pay) for any reason other than a quit, retirement, discharge or
death, such as vacation, holiday, sickness, disability, leave of
absence or layoff.
<PAGE> II-17
(ll) TERMINATION OF EMPLOYMENT: The cessation of an
Employee's employment with an Employer or other member of the
PepsiCo Organization, whether by quit, resignation, discharge,
retirement, disability or indefinite layoff. However, such term
shall not include an Authorized Leave of Absence or the transfer
from the Employment of one Employer that maintains this Plan to
another such Employer, or to employment with any other member of
the PepsiCo Organization.
(mm) TRUST (OR TRUST FUND): The fund established
pursuant to the Trust instrument to receive and to invest amounts
credited to Participants' Accounts and from which distributions
will be made.
(nn) TRUSTEE: The individual or corporation appointed
by the Company pursuant to the Trust instrument to hold the Trust
Fund.
(oo) VALUATION DATE: Each business day, except that
the Trustee may temporarily suspend valuations when it deems it
to be necessary in accordance with Section 5.2(b). In all cases,
however, there shall be a Valuation Date on the last business day
of the Plan Year.
(pp) YEAR OF SERVICE: A 12-month period of service
generally commencing on an Employee's Employment Commencement
Date and ending on the first anniversary thereof. However, if an
Employee has a Severance from Service Date prior to this first
anniversary and then later returns to service, the following
periods shall be counted in determining whether the Employee has
completed 12 months of service:
(1) If an Employee terminates employment
because of a quit, discharge or retirement and then returns to
the employment of the PepsiCo Organization within 12 months from
his Severance from Service Date, the Employee's period of
severance shall be taken into account.
(2) If an Employee terminates employment
because of a quit, discharge or retirement (during any other
absence from service of 12 months or less) and then returns to
the employment of the PepsiCo Organization within 12 months
<PAGE> II-18
from the date on which he was first absent, the Employee's
period of severance shall be taken into account.
(3) If an Employee who terminates employment
because of a quit, discharge or retirement returns to the
employment of the PepsiCo Organization following a 12-month
period of severance, the Employee's prior period of employment
shall be taken into account provided his period of severance is
less than the greater of (i) 5 years or (ii) his prior period of
employment.
2.2 Construction: The terms of this Plan shall be
construed in accordance with this section.
(a) Gender and Number: The masculine gender,
where appearing in the Plan, shall be deemed to include the
feminine gender and the singular shall include the plural, unless
the context clearly indicates to the contrary.
(b) Headings: The headings of sections and
subsections are for ease of reference only and shall not be
construed to limit or modify the detailed provisions thereof.
<PAGE> III-1
ARTICLE III
Eligibility and Participation
3.1 Eligibility: The following Employees shall be
eligible to participate in the Plan: all full-time salaried
Employees of the Company, all full-time salaried, hourly,
commissioned sales or transportation Employees of the Employers
designated on the attached Schedules 1, 2, 3 and 4; all full-time
hourly Employees of the Company designated on the attached
Schedule 5, all salaried part-time Employees who are currently
eligible to enroll in his Employee's Benefits Plus Program of the
Employer, all full-time hourly Employees designated in Article B,
all hourly Employees designated in Article C, and any Employee
described in Section 2.1(1)(2); provided, however, that to be
eligible such Employee must be currently eligible to enroll in
his Employer's Benefits Plus program. Except as provided in this
section 3.1, the following Employees or classes of Employees or
classes of Employees shall not be eligible to participate in this
Plan:
(a) Any Employee whose terms and conditions of
employment are determined by collective bargaining with a union
representing such persons and with respect to whom inclusion in
this Plan has not been specifically provided for in such
collective bargaining agreement;
(b) Any Employee who is classified by an Employer
in accordance with its usual practices as associate, casual,
temporary or part-time (determined considering only the
Employee's service with each individual Employer);
(c) Any Employee who is a leased employee within
the meaning of Code section 414(n); and
(d) Effective December 1, 1989, any Highly
Compensated Employee who has not attained age 21 and completed a
Year of Service.
3.2 Participation:
(a) Commencement of Active Participation: An
Employee who is eligible for the Plan under Section 3.1 or the
Appendix (an eligible Employee) shall become an Active
Participant upon enrolling in the Plan. The Participant's enrollment in
<PAGE> III-2
the Plan shall be made by electing to defer a portion of his Eligible
Pay, in accordance with Section 4.1(b). An eligible Employee's election
to participate actively in the Plan shall be effective as soon as
practicable for his Employer.
(b) Termination of Participation: An Active
Participant shall continue to participate actively in the Plan
until he revokes his enrollment or his enrollment ends as a
result of his Termination of Employment or transfer to a position
that is ineligible for participation. When active participation
ceases, an individual with a balance in his Plan Account shall
continue as an Inactive Participant until his Account has been
distributed.
(c) Recommencement of Active Participation: Any
individual whose active participation has terminated pursuant to
subsection (b) may return to active participation by reinstating
his enrollment (following his return to service as an eligible
Employee, if applicable).
<PAGE> IV-1
ARTICLE IV
Contributions and Deferral Amounts
4.1 Elective Deferrals: An Employee who is eligible
under Section 3.1 and who has Eligible Pay may elect to defer a
portion of his Eligible Pay in accordance with the following
subsections.
(a) Deferral Amount: Subject to the limitations
established by this Article, each Active Participant may defer in
any Plan Year up to 10 percent of his Eligible Pay in accordance
with this section. In the event a Participant elects to defer a
portion of his Eligible Pay under the Plan, it will be designated
for contribution by the Employer to the Trust on behalf of the
Participant, and for deposit in his Salary Deferral Account. All
amounts deposited to a Participant's Salary Deferral Account
shall at all times be fully vested.
(b) Election to Defer: Each Employee who
qualifies as an eligible Employee under Section 3.1 may elect to
defer a portion of his Eligible Pay in accordance with subsection
(d). An eligible Employee shall make this election by:
(1) Completing and returning the enrollment form,
or utilizing the telephone enrollment system, provided by the
Plan Administrator,
(2) Designating a portion of his Eligible Pay to
be contributed by his Employer to the Plan, and
(3) Indicating how such amounts are to be
invested under Section 5.2.
An eligible Employee's election under this subsection shall
be effective as soon as practicable for his Employer and shall
remain in effect until it is modified or terminated under
subsection (c) below, or until his active participation
terminates in accordance with Section 3.2(b).
(c) Changes in Deferral Election: Subject to
subsection (d), an Active Participant may elect to increase,
decrease or terminate the amount of his deferral at any time by
completing and returning a change of election form, or using the
telephone
<PAGE> IV-2
enrollment system to designate the revised deferral rate
to be contributed to the Plan. A Participant's election
under this subsection shall be effective as soon as practicable
for his Employer.
(d) Election Procedures: To be effective, an
election made pursuant to subsection (b) or (c) above must be
made in the manner specified by the Plan Administrator. In
addition, any election shall specify the amount of the deferral
desired for each Plan Year as a whole dollar amount, subject to
the limitation in subsection (a) above. Any election purporting
to defer more than 10 percent of Eligible Pay shall be treated as
an election to defer 10 percent of Eligible Pay. Notwithstanding
the preceding sentence, the Plan Administrator shall not give
effect to elections that do not meet the minimum standards for
completeness and accuracy the Plan Administrator establishes from
time to time.
(e) Payroll Deductions: A Participant's Salary
Deferral Contributions shall be withheld from his Eligible Pay
through automatic payroll deductions. The amount to be withheld
in any pay period shall be a ratable share of the Participant's
currently effective salary deferral election for the entire Plan
Year. Salary Deferral Contributions may not be withheld after
they have been actually or constructively received by the
Participant.
4.2 Dollar Limits on Elective Deferrals:
Notwithstanding Section 4.1, a Participant's Elective Deferrals
shall be limited as provided in this section.
(a) Initial Limit: Effective for calendar years
beginning on and after January 1, 1987, a Participant's Elective
Deferrals under the Plan shall be limited to $7,000 or, if
greater, the adjusted amount in effect under Code section 402(g)
for the preceding calendar year.
(b) Additional Limit: Effective for Plan Years
beginning after 1987, a Participant's Elective Deferrals, which
are made in any calendar year to the Plan or any other
arrangement maintained by the Employer, shall be limited to the
amount permissible under Code section 402(g) for taxable years
beginning in such calendar year.
<PAGE> IV-3
(c) Distribution of Excess Elective Deferral:
(1) Assignment: If the Elective Deferral
made on behalf of a Participant under all plans in which such
individual is a participant, whether or not maintained by the
Employer, exceeds the dollar limitation contained in Code section
402(g), such Participant may assign to this Plan any Excess
Elective Deferral made during a taxable year of the Participant
no later than March 1 following the close of, and with respect
to, the taxable year in which such Excess Elective Deferral was
made by:
(i) Notifying the Plan Administrator in
writing of the Elective Deferral made under any plan other than
this Plan,
(ii) Allocating in writing such Excess
Elective Deferral between or among such other plans and this
Plan, and
(iii) Stating in writing that if
such Excess Elective Deferral allocable to the Plan is not
distributed, the deferral limitations of Code section 402(g) will
be exceeded for the Participant's taxable year with respect to
which such Elective Deferral occurred.
(2) Distribution: Upon notification in
accordance with paragraph (1), the Plan Administrator shall
distribute any Excess Elective Deferral allocated to the Plan
(plus any income and minus any loss allocable thereto) to the
relevant Participant no later than April 15 of the calendar year
following the close of the taxable year of the Participant with
respect to which such Excess Elective Deferral was made.
(3) Determination of Income or Loss: Excess
Elective Deferrals shall be adjusted for any income or loss
through the end of the taxable year of the Participant with
respect to which such Excess Elective Deferral was made. The
income or loss allocable to a Participant's Excess Elective
Deferral is the income or loss allocable to the Participant's
Salary Deferral Account for such taxable year, multiplied by a
fraction, the numerator of which is the Participant's
<PAGE> IV-4
Excess Elective Deferrals for such taxable year and the denominator of
which is the Participant's account balance attributable to Salary
Deferral Contributions as of the end of the taxable year without
regard to any income or loss occurring during such taxable year.
To the extent necessary to ensure compliance with subsection (b)
above, the Plan Administrator shall distribute Excess Elective
Deferrals to a Participant, notwithstanding the fact that the
Participant has not assigned such Excess Elective Deferrals to
this Plan by the deadline specified in subsection (c)(1). Such
distribution shall be accomplished as contemplated in subsection
(c)(2) above.
4.3 Limitation on Deferral Percentage:
(a) Limitation: Notwithstanding anything herein to
the contrary, in any Plan Year beginning on or after January 1,
1987, the Average Deferral Percentage of the eligible Employees
who are Highly Compensated Employees for such Plan Year shall not
exceed the greater of (1) or (2) below:
(1) The Average Deferral Percentage of the eligible
Employees who are Non-Highly Compensated Employees for such Plan
Year multiplied by 1.25, or
(2) The Average Deferral Percentage of the eligible
Employees who are Non-Highly Compensated Employees for such Plan
Year multiplied by 2.0, provided, however, that in this case the
Average Deferral Percentage of the eligible Employees who are
Highly Compensated Employees shall not exceed the Average
Deferral Percentage of the eligible Employees who are Non-Highly
Compensated Employees by more than 2 percentage points.
(b) Average Deferral Percentage: For purposes of
subsection (a) above, the Average Deferral Percentage for a
specified group of Employees for a Plan Year shall mean the
average of the ratios (calculated separately for each Participant
in such group) of:
<PAGE> IV-5
(1) The amount of the Salary Deferrals made on behalf
of the Employee for the Plan Year (including Excess Elective
Deferrals of Highly Compensated Employees), to
(2) The Employee's compensation for the Plan Year
(whether or not the Employee was a Participant for the entire
Plan Year).
For Plan Years beginning on or after January 1, 1989, the Average
Deferral Percentage shall be computed to the nearest one
hundredth of one percent.
(c) Special Rules: In applying the limits set forth in
subsection (a) above, the following rules shall apply:
(1) For purposes of this subsection, compensation
means compensation as defined in Code section 414(s) and, for
Plan Years beginning on or after January 1, 1989, limited to
$200,000 (adjusted at the same time and in such manner as
permitted under Code section 415(d)) provided that for Plan Years
beginning on or after January 1, 1994, compensation is limited to
$150,000 (adjusted at the same time and in such manner as
permitted under Code section 415(d)).
(2) If a Highly Compensated Employee is eligible to
participate under more than one cash or deferred arrangement
described in Code section 401(k) maintained by the Employer, all
such cash or deferred arrangements shall be treated as one for
purposes of calculating such Employee's Average Deferral
Percentage.
(3) For purposes of determining the Deferral
Percentage of a Highly Compensated Employee who is a 5 percent
owner or one of the 10 most highly-paid Highly Compensated
Employees, as described in Section 2.1(t)(5), the Salary Deferral
Contributions and compensation of such Employee shall include the
Salary Deferral Contributions and compensation for the Plan Year
of such Highly Compensated Employee's Family Members, as
described in Code section 414(q)(6). Family Members, with
respect to such Highly
<PAGE> IV-6
Compensated Employees, shall be disregarded as separate Employees
in determining the Average Deferral Percentage both for eligible
Employees who are Non-Highly Compensated Employees and for eligible
Employees who are Highly Compensated Employees.
(d) Adjustment of Salary Deferrals: If during a Plan
Year the Plan Administrator determines that there is a likelihood
that the Average Deferral Percentage of the Highly Compensated
Employees will exceed the limitation specified in subsection (a),
then the Plan Administrator may prospectively reduce or limit the
deferrals of the Highly Compensated Employees to such amount and
beginning as of such pay period during the Plan Year as is deemed
necessary by the Plan Administrator in its sole discretion to
prevent the limitation in subsection (a) from being exceeded for
the Plan Year. The Plan Administrator may terminate (in whole or
in part) any reduction or limitation on deferrals under this
subsection which is no longer necessary to prevent the limitation
specified in subsection (a) from being exceeded for the Plan
Year. Whenever necessary during the Plan Year, the Plan
Administrator may institute further reductions or limitations on
deferrals, or reinstate reductions or limitations on deferrals,
to the extent required to prevent the limitation in subsection
(a) from being exceeded.
(e) Distribution of Excess Contributions and Income:
If the Average Deferral Percentage of the eligible Employees who
are Highly Compensated Employees exceeds the limitations of
subsection (a) for any Plan Year, then notwithstanding any other
provision of the Plan, any Excess Contributions for such Plan
Year (plus any income and minus any loss allocable thereto) shall
be distributed to the appropriate Highly Compensated Employees
and, where applicable, family members, not later than two and one-
half months following the Plan Year with respect to which such
Excess Contributions were made.
(1) Determination of Income or Loss: Excess
Contributions shall be adjusted for any income or loss through
the end of the Plan Year for which
<PAGE> IV-7
the Excess Contributions occurred. The income or loss allocable to a
Participant's Excess Elective Deferral shall be as follows:
(i) For the Plan Year beginning in 1987, the Employer
may use any reasonable and consistently applied method for
computing the income allocable to any Excess Contributions for
such Plan Year.
(ii) For Plan Years beginning on or after January 1,
1988, the income or loss allocable to Excess Contributions is the
income or loss allocable to the Participant's Salary Deferral
Account for the Plan Year for which the Excess Contributions
occurred multiplied by a fraction, the numerator of which is the
Participant's Excess Contributions for such Plan Year and the
denominator of which is the Participant's account balance
attributable to Salary Deferral Contributions as of the end of
the Plan Year without regard to any income or loss occurring
during such Plan Year.
(2) Special Rules:
(i) In the event family members are aggregated for pur
poses of this section, distributions to such family members of
any Excess Contributions shall be made in the manner prescribed
by the regulations under Code section 401(k).
(ii) Any distribution of Excess Contributions and
income thereon shall be made to Highly Compensated Employees on
the basis of the respective portions of the total Excess
Contributions attributable to each such Employee.
(iii) Any distribution of Excess Contributions and
income thereon may and shall be made without regard to any other
provision of this Plan restricting distributions.
(f) Determination By Plan Administrator:
Notwithstanding the foregoing provisions of this section, any
determination required by this section shall be made by
<PAGE> IV-8
the Plan Administrator, and the determination by such Plan Administrator
of the method of compliance with subsection (a) and reduction of
deferrals in excess of that permitted by subsection (a), in
accordance with subsection (d), and the determination of any
Excess Contribution to be distributed pursuant to subsection (e),
shall be final, binding, and conclusive as to all Participants,
former Participants, Beneficiaries, and any other person or
entity associated with or benefiting from this Plan.
(g) Priority of Application of Sections: Section 4.2
shall be applied before this section.
4.4 Rollover Contributions: At the request of a
Participant, a Retired Employee or an Employee who is eligible
under section 3.1 (or could be upon the completion of any
requirements with respect to age or service), the Plan may accept
a rollover of cash amounts from another qualified plan described
in section 401(a) of the Code, including an individual retirement
account or annuity whose assets came solely from a qualified
plan. Any such rollover amount will be held for the Participant,
Employee, or Retired Employee, as the case may be, in a Rollover
Account established for his benefit. A person who makes such a
rollover contribution to the Plan, but who is not otherwise
eligible to make (or who chooses not to make) a deferral election
under Section 4.1(b), shall be considered an Inactive
Participant. The Plan Administrator and the Trustee may request
such information from the Participant, Employee, or Retired
Employee, as the case may be, any documents or opinion of counsel
which it, in its discretion, deems necessary to determine that a
proper rollover contribution will be made. Amounts in a Rollover
Account shall be invested as designated by the Participant
pursuant to Section 5.2(c). The amounts in the Rollover Account
shall be distributed at the same time and in the same manner as
amounts in the Salary Deferral Account.
4.5 Maximum Allocations:
(a) The amount of Annual Additions (as defined in
subsection (d) below) which may be credited to the Participant
under this Plan during any Limitation Year shall not exceed the
lesser of $30,000 (or, if greater, one fourth of the defined
benefits dollar limitation set forth in Code section 415(b)(1) as
in effect for the Limi-
<PAGE> IV-9
tation Year) or 25% of the Participant's Annual Compensation
(as defined in subsection (e) below) for the applicable Limitation Year.
(b) For any Participant in the Plan who is also a
participant in one or more defined benefit plans (as defined in
section 414(j) of the Code) maintained by the Company or by the
Employer, the sum of the fractions in (1) and (2) below, computed
as of the close of the Limitation Year, may not exceed 1.0, where
the fractions are determined as follows:
(1) The Projected Annual Benefit (as defined in
subsection (d) below) of the Participant under such defined
benefit plans, divided by the lesser of:
(i) the product of the dollar limitation determined
for the Limitation Year under Code sections 415(b) and (d)
multiplied by 1.25 (or 1.0, if the Plan is a Top-Heavy Plan, as
defined by Section 14.2(c)), or
(ii) 140 percent of the Participant's Average
Compensation (as defined in subsection (d) below), including any
adjustments under Code section 415(b) plus
(2) The sum of the Annual Addition to such
Participant's accounts under this Plan and all other defined
contribution plans maintained by the Employer for such Limitation
Year and for all Prior Years (as defined in subsection (d) below)
divided by the sum of the lesser of the following amounts
determined for such Plan Year and all Prior Years:
(i) the product of the Dollar Limitation (as defined
in subsection (d) below) in effect for the year multiplied by
1.25 (or 1.0, if the Plan is a Top-Heavy Plan, as defined by
Section 14.2(c)), or
(ii) 35 percent of the Participant's Annual
Compensation for the year.
<PAGE> IV-10
(c) In the event that a Participant's Annual Addition
under this Plan, when added to the Annual Addition under any
other defined contribution plan (as defined in section 414(i) of
the Code) or the Projected Annual Benefit under any defined
benefit plan maintained by the Employer, exceeds the limitations
specified in Section 4.5(a) or (b), appropriate reductions in
such Annual Addition or Projected Annual Benefit shall be made in
the following order:
(1) First, under any defined benefit plan(s)
maintained by the Employer,
(2) To the extent that additional reductions are still
necessary, under this Plan, and
(3) To the extent that any additional reductions are
still necessary, under a PepsiCo employee stock ownership plan.
(d) For purposes of this Section 4.5, the following
definitions and rules of interpretation shall apply:
(1) Effective for years beginning after December 31,
1986, the "Annual Addition" of a Participant means the sum
credited to a Participant's account for any year of (i) employer
contributions; (ii) employee contributions; (iii) forfeitures and
(iv) amounts described in Code sections 415(l)(2) and 419A(d)(2).
Notwithstanding the foregoing, for years beginning prior to
January 1, 1987, only that portion of the employee's
contributions equal to the lesser of: (A) the portion of his
employee contributions (if any) during such year in excess of 6
percent of his annual compensation, or (B) one-half of his
employee contributions during such plan year shall be considered
an "Annual Addition." The Annual Addition for any year beginning
prior to January 1, 1987, shall not be recomputed to treat all
employee contributions as an Annual Addition.
(2) "Projected Annual Benefit" means the Annual
Benefit (as defined in paragraph (3) below) to which a
Participant would be entitled under
<PAGE> IV-11
a defined benefit plan (after giving effect to any limitation on such
benefit contained in such plan that may be applicable to the Participant)
on the as sumptions that he continues employment until his Normal
Retirement Date thereunder, that his compensation continues at
the same rate as in effect for the Limitation Year under
consideration until such Normal Retirement Date, and that all
other relevant factors used to determine benefits under such plan
remain constant for all future Limitation Years.
(3) The "Annual Benefit" of a Participant means the
annual amount payable under a defined benefit plan computed in
accordance with the following rules:
(i) Where the Annual Benefit payable under a defined
benefit plan is other than in the form of either a single life
annuity or a qualified joint and survivor annuity within the
meaning of Code section 417(b) it shall be adjusted to an
actuarial equivalent benefit in the form of a single life
annuity.
(ii) In the case of a benefit under a defined benefit
plan which begins prior to the Participant's Social Security
Retirement Age (as defined below), such benefit shall be adjusted
so that it is the actuarial equivalent of a benefit commencing at
the Participant's Social Security Retirement Age for purposes of
applying the Code section 415(b) dollar maximum.
(iii) In the case of a benefit under a defined benefit
plan which begins after the Participant's Social Security
Retirement Age, such benefit shall be adjusted to the actuarial
equivalent of a benefit commencing at the Participant's Social
Security Retirement Age for purposes of applying the Code section
415(b) dollar maximum.
(iv) For years beginning prior to January 1, 1987, sub
paragraph (B) shall be applied by substituting "age 62" for "the
Participant's Social Security Retirement Age," and subparagraph
(C) shall be applied by substituting "age 65" for "the
<PAGE> IV-12
Participant's Social Security Age."
(4) "Average Compensation" means a Participant's
average compensation for the period of 3 consecutive Plan Years
(or the actual number of consecutive years of employment for
Participants employed by an Employer less than 3 consecutive
years) during which the Participant had the greatest aggregate
Annual Compensation.
(5) "Prior Year" means a year, preceding the current
Limitation Year, in which the Participant was in the service of
the Employer. For purposes of the preceding sentence, "year"
shall mean (in the event the Plan was in existence during such
year) a Limitation Year, or (in the event the Plan was not in
existence during such year) a 12- month period which begins and
ends on the same dates as the Limitation Year.
(6) "Dollar Limitation" means the limitation provided
in Code section 415(c)(1)(A) (adjusted in accordance with
Internal Revenue Service Regulations) as in effect for the
particular Plan Year.
(7) "Social Security Retirement Age" means age 65 in
the case of a Participant who attains age 62 before January 1,
2000; age 66 in the case of a Participant who attains age 62
after December 31, 1999 but before January 1, 2017; and age 67 in
the case of a Participant who attains age 62 after December 31,
2016.
(8) For purposes of Section 4.5(b)(1)(i) above, if as
of the last Plan Year ending before January 1, 1983, a
Participant's accrued benefit (within the meaning of Section
235(g)(4) of the Tax Equity and Fiscal Responsibility Act of
1982) under the Employer's defined benefit plans is greater than
$90,000 (and also such other amount as may apply pursuant to
automatic adjustments of the $90,000 figure), then Section
4.5(b)(1)(i) shall be
<PAGE> IV-13
applied by substituting such accrued benefit for $90,000 where it
appears therein.
(9) For purposes of computing the maximum allocation
under either subsection (a) or (b), all defined benefit plans
(whether or not terminated) of the Employer shall be treated as
one defined benefit plan, and all defined contribution plans
(whether or not terminated) of the Employer shall be treated as
one defined contribution plan.
(10) When the term "Employer" is used in this section,
it shall mean the Employer and any other corporation or division
which is a member of a controlled group of corporations (within
the meaning of Code Section 414(b), as modified by Code section
415(h)) of which the Employer is also a member.
(e) Annual Compensation: A Participant's annual
compensation as determined solely for purposes of this section
and Article IX of the Plan.
(1) A Participant's Annual Compensation shall include:
(i) the Participant's earned income, wages, salaries,
and fees for professional services, and other amounts received
for personal services actually rendered in the course of
employment with the Employer maintaining the plan to the extent
that the amounts are includable in gross income (including, but
not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on
insurance premiums, tips and bonuses, fringe benefits,
reimbursements, and expense allowances);
(ii) Amounts described in Code sections 104(a)(3),
105(a) and 105(h), but only to the extent that such amounts are
includable in the gross income of the Participant;
(iii) Amounts paid or reimbursed by the Employer for
moving expenses incurred by a Participant, but only to the extent that
<PAGE> IV-14
such amounts are not deductible by the Participant under Code section 217;
(iv) The value of a non-qualified stock option granted
to a Participant, but only to the extent that the value of the
option is includable in the gross income of the Participant for
the taxable year in which granted; and
(v) The amount includable in the gross income of a
Participant upon making the election described in Code section
83(b).
(2) A Participant's Annual Compensation shall not
include:
(i) Employer contributions to a plan of deferred com
pensation which are not included in the Participant's gross
income for the taxable year in which contributed or Employer
contributions under a simplified employee pension plan to the
extent such contributions are deductible by the Participant, or
any distributions from a plan of deferred compensation;
(ii) Amounts realized from the exercise of a non-
qualified stock option, or when restricted stock (or property)
held by the Participant either becomes freely transferable or is
no longer subject to a substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified stock
option; and
(iv) Other amounts which received special tax
benefits, or contributions made by the Employer (whether or not
under a salary reduction agreement) towards the purchase of an
annuity described in section 403(b) of the Code (whether or not
the amounts are actually excludable from the gross income of the
Participant).
Compensation for any limitation year is the compensation actually
paid or includable in gross income during such year.
<PAGE> IV-15
4.6 Excess Allocations: If, pursuant to Section 4.5
immediately above, there is an excess allocation with respect to
a Participant for a Limitation Year, such excess amount shall be
disposed of as follows:
(a) In the event that the Participant is in the
service of the Employer in succeeding Limitation Years, then such
excess amounts shall not be distributed to the Participant, but
shall be carried over for the Participant's benefit and allocated
to the Participant's Salary Account for such succeeding
Limitation Years to the extent consistent with the limits in
Section 4.5.
(b) In the event that the Participant is not in the
service of the Employer in a succeeding Limitation Year for which
an allocation is to be made hereunder, then such excess amount
shall not be distributed to the Participant, but shall be
reapplied for the benefit of all remaining Participants subject
to the limits in Section 4.5.
4.7 Fund for Exclusive Benefit of Participants: Except
as otherwise provided hereinafter (i) all assets of the Trust
Fund, including investment income, shall be retained for the
exclusive benefit of Participants and Beneficiaries, and shall be
used to pay benefits to such persons or to pay administrative
expenses of the Plan and Trust to the extent not paid by the
Employer, and (ii) contributions made by the Employer may not
under any circumstances revert to or inure to the benefit of the
Employer; except that, and notwithstanding anything contained
herein to the contrary, contributions (a) made by the Employer by
mistake of fact, or (b) conditioned upon the deductibility of the
contribution under Code section 404, shall be returned to the
Employer within 1 year of the mistaken payment or the
disallowance of the deduction (to the extent disallowed),
whichever is applicable. Each contribution by the Employer is
expressly made contingent on the deductibility of such con
tribution for the year with respect to which the contribution is
made.
<PAGE> V-1
ARTICLE V
Interests of Participants
5.1 Accounts of Participants: The Plan Administrator,
or its agent, shall maintain separate accounts on its books, for
recordkeeping purposes only, for each Participant. A given
Participant may have two accounts if he has: (i) deferred a
percentage of his Eligible Pay pursuant to Section 4.1, and (ii)
made a rollover contribution pursuant to Section 4.4, i.e., a
Salary Deferral Account, and a Rollover Account. The maintenance
of individual accounts is only for accounting purposes, and a
segregation of the assets of the Trust Fund to each account shall
not be required (except as the Trustee deems necessary under the
Brokerage Option). Distributions and withdrawals from a
Participant's Account shall be charged to the appropriate account
at the time the transaction is processed.
5.2 Investment of Participant Accounts: The
investment options under the Plan are described in subsection
(a), subject to the limitations set forth in subsection (b) and
other provisions of the Plan.
(a) Investment Options: In accordance with the rules
provided in subsection (c) below, a Participant shall direct the
investment of the amounts credited to his Account to any of the
following separate investment options within the Trust Fund for
which he is eligible at the time:
(1) The Security Plus Fund: This investment option,
available effective January 1, 1992, is an investment portfolio
comprised of investment funds and contracts issued by highly
rated banks and insurance companies and short-term securities.
The objective of the Fund is to provide, over a period of time, a
higher rate of return than average money market funds, while
preserving principal and providing liquidity. The Fund's rate of
return will fluctuate and is not intended to provide a guaranteed
rate of return. The Participant's interest in the fund will be
denominated as "units". The value of a unit in this Fund will be
$1.00. The number of units credited to a Participant will
fluctuate based upon the performance of the Fund. As of January
1, 1992, two 1991 Guaranteed Income
<PAGE> V-2
Fund contracts, both issued by Metropolitan Life, were transferred to
the Security Plus Fund. In addition to the transferred investment contracts,
the Fund is expected to invest primarily in: (A) short-term investment funds
(including government short-term investment funds) that invest in
certificates of deposit, time deposits, bankers' acceptances,
commercial paper, U.S. Treasury and agency securities, and
mortgage and asset-backed securities; and (B) new investment
contracts issued by highly-rated insurance companies, banks, and
other financial institutions. The transfer of funds invested in
the Security Plus Fund to other separate investment options
within the Trust Fund shall be subject to the following
restrictions:
(i) No amounts invested in the Security Plus Fund may
be transferred by a Participant directly to the Brokerage Option.
No amounts invested in the Security Plus Fund may be transferred
by a Participant indirectly to the Brokerage Option, i.e., by
first transferring the amounts to some other investment option
(or options) under the Plan, unless such amounts remain invested
in the intervening investment option (or options) for at least 3
months;
(ii) A Participant can transfer amounts from the
Security Plus Fund into some other investment option (or options)
under the Plan no more than 12 times during the Plan Year; and
(iii) Withdrawals of amounts invested in the
Security Plus Fund are subject to the limitations specified in
Section 6.3(c).
(2) The Equity Index Fund: This investment option is
a diversified stock fund, invested primarily in the Vanguard
Institutional Index Fund. It is a passively managed fund
designed to mirror the performance of Standard and Poor's 500
Index, a broadly-based average of stock market performance.
Investments in this investment option are subject to
fluctuations, and there is no guarantee of future performance.
The Participant's interest in
<PAGE> V-3
the fund will be denominated as "units". The value of a unit in this
Fund will be $1.00. The number of units credited to a Participant will
fluctuate based upon the performance of the Fund.
(3) The Equity-Income Fund: This fund is primarily
invested in the Fidelity Equity-Income Fund, which invests
primarily in income-producing stocks. The fund's chief objective
is to provide reasonable income, although some consideration is
given to capital appreciation. Amounts invested in this
investment option are subject to fluctuations, and there is no
guarantee of future performance. The Participant's interest in
the fund will be denominated as "units". The value of a unit in
this Fund will be $1.00. The number of units credited to a
Participant will fluctuate based upon the performance of the
Fund. Effective January 1, 1993, the Equity-Income Fund will no
longer accept future contributions. The Equity-Income fund,
however, is currently scheduled to be available under the
Brokerage Option.
(4) The PepsiCo Capital Stock Fund: This investment
option is invested primarily in Company Stock. Earnings will be
applied primarily to the purchase of additional shares of Company
Stock. Shares of Company Stock held by the Trustee, which have
been allocated to Participants' accounts, will be voted by the
Trustee as the Participant to whom such shares are allocated
directs in writing from time to time. Any such shares with
respect to which the Participant does not give directions for
voting in a timely manner will not be voted by the Trustee. For
voting purposes, allocated fractional shares of Company Stock
will be aggregated into whole shares of stock and voted by the
Trustee to the extent possible to reflect the voting directions
of the Participants with respect to the whole shares of Company
Stock. Any shares of Company Stock held by the Trustee which
have not yet been allocated to Participants' accounts will be
voted by the Trustee to the extent possible to reflect the voting
directions of Participants with respect to allocated shares of
<PAGE> V-4
stock. The Participant's interest in the fund will be
denominated as "units". The initial value of a unit (as of July
1, 1992) in this Fund is $10.00 and thereafter the value of a
unit will fluctuate in response to various factors including, but
not limited to, the price of and dividends paid on Company Stock,
earnings and losses on other investments in the fund and the mix
of assets in the fund. The number of units credited to a
Participant's account will not fluctuate based upon the
performance of the Fund. Each Participant's investment in the
PepsiCo Capital Stock Fund will be based on the proportion of his
investment in the fund to the total investment in the fund of all
Plan Participants.
The Company shall assist the Trustee in furnishing
Participants investing in the PepsiCo Capital Stock Fund with
proxy materials, notices and information statements at the time
voting rights are to be exercised. In general, the materials to
be furnished Participants shall be the same as those provided to
security holders.
Shares of Company Stock will be purchased for
Participant Accounts in the open market or in privately
negotiated transactions, at prices not in excess of the fair
market value of the Company Stock on the date of purchase. Sales
of shares will also be made in the open market or in privately
negotiated transactions at prices not lower than the fair market
value of Company Stock on the date of sale. The Trustee, or its
designated agent, may limit the daily volume of purchases and
sales to the extent it believes it will be in the interest of
Participants to do so.
<PAGE> V-5
(5) The Brokerage Option:
(i) Description of Funds: This investment option
will be administered by State Street Bank and the agents it
employs as securities brokers to execute Participants' trades.
This option permits certain Participants and Beneficiaries to
invest all or a portion of their interest in the Plan in
additional choices for self-directed investment. The Plan
Administrator shall publish written rules and procedures for the
election of these additional choices by Participants and
Beneficiaries, and may revise such rules and procedures at any
time and for any reason. The investments expected to be
available under the Brokerage Option are generally as follows:
securities traded on the New York Stock Exchange, the American
Stock Exchange, and the NASDAQ National Market, and certain
Fidelity Mutual Funds as specified by the Plan Administrator.
(A) The following investments will not be
available through the Brokerage Option: Non-taxable bonds;
options; futures; commodities; limited partnerships which are
unlisted on the New York or American Stock Exchange or NASDAQ
National Market; foreign securities which are unlisted on the New
York or American Stock Exchange or NASDAQ National Market;
commercial paper; bank investments (such as certificates of
deposits and bank investment contracts); physical assets (such as
coins, art, jewelry, and real estate); insurance investment or
insurance investment funds; mutual funds not sponsored by
Fidelity; and securities of the Company or its subsidiaries (even
if listed on the New York or American Stock Exchange or NASDAQ
National Exchange).
(B) The following trading practices are
prohibited under the Brokerage Option: Short sales, margin
trades, third party trades, direct
<PAGE> V-6
trades, and any trades occurring outside the procedures established
by the Plan Administrator.
(ii) Restrictions: Each Participant who participates
in the Brokerage Option shall have his interest in the Plan
reduced by any brokerage and fees (including fees charged by
Fidelity on account of one or more investments in a Fidelity
mutual fund) payable on their individual transactions and shall
also have his interest in the Plan reduced by a fee (initially
$4.20) for each month or part thereof that the Participant
participates in the Brokerage Option. The fee will be taken from
the Plan in the following order: Security Plus Fund, Equity-Index
Fund, Equity Income Fund, PepsiCo Capital Stock Fund and the
Brokerage Option. The Plan Administrator, and its agent, is
authorized to sell securities or other assets held within a
Participant's Account for the purpose of paying the fee described
in this subsection. Investment in the Brokerage Option is
subject to the following restrictions:
(A) To commence investing under this program, the
Participant must first be eligible to enroll in the Brokerage
Option. A Participant is eligible to enroll if he has at least
$1,000.00 in his Participant Account; completes and returns the
application as required by the Plan Administrator or its agent;
and his initial transfer election into the Brokerage Option is at
least $1,000. Subsequent transfers to and from the Brokerage
Option must be at least $250 unless such transfer is to close the
Participant's account under the Brokerage Option. All transfers
to the Brokerage Option must be from prior savings.
(B) No amounts invested either in the Security
Plus Fund or in the Guaranteed Income Fund may be directly
transferred to the Brokerage Option, and no amounts invested
either in the Security Plus Fund or in the Guaranteed Income Fund
may be indirectly transferred to the Brokerage Option, i.e., by
first transferring the amounts to some other
<PAGE> V-7
investment fund (or funds) under the Plan, unless such amounts
remain invested in the intervening fund (or funds) for at least 3 months.
(C) Except as provided in the last sentence of
this clause (C), no security or investment held by a
Participant's account within the Brokerage Option may be
transferred or distributed directly to the Participant. The
Participant must initially sell the security or investment. The
Trustee will place the proceeds of such sale in a short-term
investment fund, designed to generate a money market rate of
return, within the Brokerage Option. The proceeds will remain in
such account until the Participant instructs the Plan
Administrator or its agent to transfer all or a portion of such
proceeds into one or more of the other separate investment
options within the Trust Fund provided that the investment option
chosen by the Participant permits contributions. The crediting
of earnings within the short-term investment fund and the
transfer of funds to other investment funds within the Trust Fund
may be delayed until after the settlement period for the class of
security sold by the Participant, ranging from one to five
business days. In-kind distributions are permitted in the event
of a complete distribution of a Participant's interest as
specified under Section 6.1 or 6.2.
(6) The Guaranteed Income Fund: This fund is
established through contractual arrangements with one or more
insurance companies or other financial institutions. Effective
January 1, 1992, the Guaranteed Income Fund no longer accepts
additional deposits. As of January 1, 1992, two 1991 Guaranteed
Income Fund contracts, both issued by Metropolitan Life, were
transferred to the Security Plus Fund. The return on amounts
that remain invested in the Guaranteed Income Fund is determined
in accordance with the contract (or contracts) applicable to the
year in which the amounts were invested. Guarantees of principal
and interest are provided solely by the
<PAGE> V-8
insurance company or other financial institution issuing the contract.
The transfer of funds invested in the Guaranteed Income Fund to other
separate investment funds within the Trust Fund will be restricted in the
following manner:
(i) No amounts invested in the Guaranteed Income Fund
for any Plan Year may be transferred by a Participant directly
into the Security Plus Fund or the Brokerage Option. No amounts
invested in the Guaranteed Income Fund for any Plan Year may be
transferred by a Participant indirectly to the Security Plus Fund
or the Brokerage Option, i.e., by first transferring the amounts
to some other investment fund (or funds) under the Plan, unless
such amounts remain invested in the intervening fund (or funds)
for at least 3 months; and
(ii) A Participant can transfer amounts from the
Guaranteed Income Fund into some other investment fund (or funds)
under the Plan no more than 12 times during the Plan Year.
(b) Maintaining Liquidity: Notwithstanding
subsection (a) above, for the purpose of providing liquidity in
each of the separate investment options (other than the Brokerage
Option) under the Plan, the Trustee may invest a portion of each
fund or investment option under the Plan in cash or short-term
securities. The percentage of assets held for this purpose is
normally expected to range from 2-10 percent, but under
extraordinary circumstances the percentages may be substantially
higher. Consequently, the mix of cash, securities and other
investments in each of the investment funds could vary
significantly at any given time and the performance of any
particular fund may not match the performance of the fund or
stock, as the case may be, outside the Plan. In the unlikely
event that the amount of liquid assets held by these funds is
insufficient to satisfy the immediate demand for liquidity under
the Plan, the Trustee, in consultation with the Plan
Administrator, may temporarily limit or suspend transfers of any
type (including withdrawals and distributions) to or from the
<PAGE> V-9
investment options specified in subsection (a). In any such
case, the Plan Administrator shall temporarily change the Plan's
Valuation Date or, in its discretion, the Valuation Date for a
specific option. During this period, contributions to any
affected option may be redirected to substitute investments
chosen by the Trustee.
(c) Procedures for Investment Directions: A
Participant may direct the investment of the amounts credited to
him under the Plan into the investment options described in
subsection (a) only in accordance with this subsection. A
Participant shall direct the investment, or change the direction
of the investment, of his future or existing investment by
directing the Plan Administrator through the telephone enrollment
system provided by the Plan Administrator for such purpose (or
through any other method made available by the Plan
Administrator) and by specifying whether the Participant's
investment instructions apply to existing savings, future
contributions or both.
(1) The Participant will have sole responsibility for
the investment of his savings and for transfers among the
available investment funds, and no named fiduciary or other
person will have any liability for any loss or diminution in
value resulting from the Participant's exercise of such
investment responsibility. It is intended that section 404(c) of
ERISA will apply to a Participant's exercise of investment
responsibilities under this Article.
(2) In the case of an option other than the Brokerage
Option, a Participant's investment instruction or change in
investment instruction shall take effect as of the end of the day
on which the Participant gives such instruction or change to the
Plan Administrator (or its agent), provided the Participant
executes such instruction or change by 3:00 p.m. (Eastern time)
on a business day. If the Participant executes his instruction
or change on a Saturday, Sunday, holiday or after 3:00 p.m.
(Eastern time) on a business day, such instruction or change will
become effective on the next following business day.
<PAGE> V-10
(3) In the case of the Brokerage Option, a
Participant's investment instruction or change within the
Brokerage Option or fund transfers into the Brokerage Option
shall be effective in accordance with rules set forth by the Plan
Administrator consistent with the rules that govern the exchange
or fund in which Participants invest.
Any investment direction submitted by a Participant must specify,
in whole percentages (1 to 100), the percentage of his accounts
to be invested in any or all of the separate investment funds
maintained under the Plan. If a Participant fails to submit a
statement of direction properly directing the investment of 100
percent of his accounts, and such failure is not corrected, the
Participant shall not be eligible to participate actively, or to
continue to participate actively, in the Plan; provided, however,
that amounts previously invested pursuant to a properly executed
statement of investment direction shall continue to remain
invested in the Fund or Funds so elected. The rules for
transfers set forth in paragraphs (2) and (3) above are subject
to the last 3 sentences of subsection (b) above.
(d) Miscellaneous:
(1) It is expressly permissible under this Plan for
Trust assets to be invested in qualifying employer securities, as
that term is defined in section 407(d)(5) of ERISA, up to and
including 100 percent of the total Trust assets. If Company
Stock is purchased other than on the open market, the Company
Stock shall be valued in good faith and based on all relevant
factors, including the sales prices of such stock, as reported on
the New York Stock Exchange, on the date of purchase.
(2) The separate investment funds made available
under the Trust Fund and their rules of operation and valuation
may be changed from time to time by agreement between the Company
and the Trustee.
(3) As of each Valuation Date, the Trustee will
determine the fair market value of the assets in each separate
investment fund of the Trust Fund, relying upon such evidence of
valuation as the Trustee deems appropriate.
<PAGE> V-11
5.3 Adjusting Account Balances: As of the close of
business on each Valuation Date (before adjusting for
contributions, distributions and investment transfers),
Participants' Accounts shall be charged or credited with:
(a) Investment Expenses,
(b) Investment income, and
(c) Gains and losses in asset values,
which have occurred with respect to each separate option (and
each separate investment within the Brokerage Option) since the
preceding Valuation Date. Thereafter, the final Account balances
as of the Valuation Date will be determined by adjusting the
amounts determined under the preceding sentence for
contributions, distributions and investment transfers. The
allocation of Investment Expenses and investment results as of a
Valuation Date shall be in proportion to the final Account
balances in the fund or investment as of the preceding Valuation
Date. Gains and losses in assets values as of a Valuation Date
shall be determined in accordance with rules of the Plan
Administrator and may not reflect the closing values of the
assets on such Valuation Date.
<PAGE> VI-1
ARTICLE VI
Distributions To Participants
6.1 Termination of Employment: Subject to Section
6.2, a Participant who incurs a Termination of Employment under
the Plan shall be entitled to receive the entire amount of his
interest in the Plan computed as of: (i) the Valuation Date on
which the final distribution form for the Participant is
processed by the Recordkeeper, or (ii) if the Participant's
interest in the Plan is $3,500 or less, the Valuation Date on
which the Recordkeeper processes the distribution of the
Participant's Account (such distribution to be processed as soon
as practicable after the 90 days specified in section 6.6(d)).
Subject to Section 6.6(a), the Participant's interest at
Termination of Employment shall be payable to the Participant as
a lump sum distribution as soon as practicable.
6.2 Death: Subject to Section 7.1(b), in the event of
the death of a Participant, the entire amount, if any, of the
interest of such Participant in the Plan shall be paid as
provided in Section 6.1, except that it shall be payable to such
Participant's Beneficiary or Beneficiaries determined in
accordance with Article VIII.
6.3 Withdrawals: Subject to the restriction on direct
withdrawals from the Brokerage Option specified in Subsection
(c), below, a Participant who has made a Salary Deferral
Contribution or a Rollover Contribution may withdraw certain
amounts credited to his Salary Deferral Account and Rollover
Account to the extent permitted by this section.
(a) Hardship Withdrawals: In the case of a
Participant who has not yet attained the age of 59-1/2,
withdrawals shall only be permitted on account of the
Participant's hardship. For this purpose, a withdrawal is made
on account of hardship only if the Plan Administrator (or its
delegate) determines the withdrawal is: (A) made on account of an
immediate and heavy financial need of the Participant, and (B)
necessary to satisfy this financial need. Such determinations
are intended to follow applicable regulations and rulings issued
by the Internal Revenue Service.
<PAGE> VI-2
(1) Immediate and Heavy Financial Need: The
determination of whether a Participant has an immediate and heavy
financial need shall be based on all of the relevant facts and
circumstances. In addition, a distribution shall be deemed to be
made on account of an immediate and heavy financial need of the
Participant if the distribution is on account of:
(i) Expenses for medical care (within the meaning of
Code section 213(d)) incurred by the Employee, the Employee's
spouse or dependents;
(ii) A cost directly related to the purchase
(excluding mortgage payments) of a principal residence for the
Employee;
(iii) Payment of tuition and related educational fees
for the next 12 months of post-secondary education for the
Employee, the Employee's spouse, children or dependents; or
(iv) The need to prevent the eviction of the Employee
from, or a foreclosure on the mortgage of, the Employee's
principal residence.
For purposes of this paragraph, "dependent" means an Employee's
dependent within the meaning of Code section 152.
(2) Necessary for the Need: A withdrawal shall be
considered necessary to satisfy a need described in paragraph (1)
only to the extent: (A) the amount of the withdrawal is not in
excess of the amount required to relieve such need, and (B) the
need cannot be satisfied from other resources that are reasonably
available to the Participant. Determinations under this
paragraph shall be based on all of the relevant facts and
circumstances. A distribution generally may be treated as
necessary to satisfy a financial need if the Plan Administrator
(or its delegate) relies upon the Participant's written
representation (unless the Plan Administrator has actual
knowledge to the contrary) that the need cannot reasonably be
relieved:
<PAGE> VI-3
(i) Through reimbursement or compensation by
insurance or otherwise;
(ii) By liquidation of the Participant's assets;
(iii) By cessation of Salary Deferral
Contributions;
(iv) By other distributions or nontaxable loans
from plans maintained by an employer, or by borrowing from
commercial sources on reasonable commercial terms, in an amount
sufficient to satisfy the need.
For this purpose, a need cannot be treated as reasonably relieved
from the sources listed above if the effect would be to increase
the amount of the need.
(3) Maximum Withdrawal: The amount that may be made
available to a Participant for hardship withdrawal may not
exceed:
(i) The sum of:
(A) the Participant's total Salary Deferral
Contributions,
(B) any earnings on the Participant's Salary
Deferral Contributions credited to the Participant's Account on
December 31. 1988, and
(C) the Participant's total Rollover
Contributions (and contributions on behalf of the Participant to
any other accounts that may be provided for in the Appendix) plus
any earnings thereon; reduced by
(ii) The amount of any prior withdrawals and
distributions to or on behalf of the Participant.
The amounts specified in this paragraph (except that specified in
subparagraph (i)(B)) are to be determined as of the Valuation
Date on which the withdrawal is processed.
<PAGE> VI-4
(4) Administrative Procedures: A withdrawal request under
this subsection shall be made on the form specified for this
purpose by the Plan Administrator. For a withdrawal to be
approved, this form must be fully completed and the Participant
must provide such additional information as the Plan
Administrator (or its delegate) shall request. The hardship
withdrawal shall be paid to the Participant as promptly as
practicable after its approval and shall not exceed the value of
the Participant's distributable interest.
(b) Post-Age 59-1/2 Withdrawals: In the case of a
Participant who has attained age 59-1/2, such Participant shall
be eligible to withdraw amounts from his Account by submitting to
the Plan Administrator a request in such form and manner as the
Plan Administrator may provide, specifying the amount to be
withdrawn; provided, however, that a Participant shall be
ineligible to make a withdrawal under this subsection more than 2
times within the same calendar year. Distribution shall be made
to the Participant as soon as practicable after the withdrawal
request is received by the Plan Administrator, based upon the
Participant's balance in his Account as of the Valuation Date the
withdrawal is processed.
(c) Order of Asset Liquidation for all Withdrawals: In the
event the Participant's Account is invested in more than one
investment option, a partial withdrawal will be distributed pro-
rata from each of the investment options from which withdrawals
are available subject to the following requirements: amounts
invested in the Security Plus Fund must be withdrawn before
amounts invested in the Guaranteed Income Fund can be withdrawn,
and amounts invested in the Guaranteed Income Fund shall be
withdrawn in reverse order of the Participant's investment in the
underlying contracts, i.e., the most recent contract shall be
liquidated first. In addition, withdrawals directly from the
Brokerage Account are not permitted.
6.4 Form of Distributions: Distributions under the
Plan on account of Termination of Employment or death shall be
made in cash, except to the extent that a Participant elects to
receive: (i) his interest in the PepsiCo Capital Stock Fund in
whole shares
<PAGE> VI-5
of Company Stock; or (ii) securities held in his
Brokerage Option as permitted in Section 5.2(a)(5)(ii)(C). An
election to receive an in-kind distribution shall not apply to
fractional shares, uninvested cash or amounts invested for
liquidity purposes, and shall not be available with respect to
hardship withdrawals under section 6.3(a).
6.5 Errors in Participant's Accounts: When an error
or omission is discovered in an account of a Participant, the
Plan Administrator and the Trustee shall be authorized to make
such equitable adjustments as may be appropriate as of the Plan
Year in which the error or omission is discovered.
6.6 Commencement of Payments: Notwithstanding
anything in the Plan to the contrary, the distribution of a
Participant's benefits hereunder shall be determined in ac
cordance with the provisions of this section and shall otherwise
comply with Code section 401(a)(9) and the regulations under
section 401(a)(9) including section 1.401(a)(9)-2. In addition,
any provisions of the Plan that reflect Code section 401(a)(9)
(including subsection (b) below) override any other distribution
options in the Plan that are inconsistent with Code section
401(a)(9).
(a) Consent Requirements: Effective as of January 1,
1985, if the value of a Participant's total interest in the Plan
exceeds $3,500 at the time a distribution is to be made, then
such interest shall not be distributed hereunder prior to the
Participant's attainment of age 65 or death unless the
Participant consents in writing, on a form prescribed by the Plan
Administrator, to the earlier distribution of his interest in the
Plan. However, upon termination of the Plan, the Participant's
interest may, without the Participant's consent, be distributed
to him or transferred to another defined contribution plan (other
than an employee stock ownership plan as defined in Code section
4975(e)(7)) maintained by the Employer.
(b) Code Section 401(a)(14) Provisions: Subject to
subsection (c) below, distribution of a Participant's interest in
the Plan shall not commence later than the 60th day after the
close of the latest of the following:
(1) The Plan Year in which the Participant attains age
65,
<PAGE> VI-6
(2) The Plan Year in which occurs the tenth
anniversary of the date his participation commenced,
(3) The Plan Year in which occurs the Participant's
Termination of Employment, or
(4) The Plan Year containing the date to which the
Participant has elected in writing to defer commencement of
his Plan distribution.
If a distribution otherwise payable to a Participant or his
Beneficiary hereunder remains unpaid because the Plan
Administrator (after making reasonable efforts) cannot locate the
Participant or Beneficiary, the amount so distributable shall be
treated as a forfeiture under the Plan. Following its
forfeiture, such amount shall be used to pay any expense of Plan
administration which may be charged to the Plan in accordance
with ERISA. In the event the Participant or his Beneficiary is
located subsequent to the forfeiture of his Account, such Account
shall be restored, without adjustment for earnings or losses, and
payment to the Participant or Beneficiary shall be made no later
than 60 days after the date on which the Plan Administrator
locates the Participant or Beneficiary.
(c) Code Section 401(a)(9) Provisions:
(1) A Participant's total interest in the Plan must be
distributed to him no later than the Participant's required
beginning date.
(i) In the case of a Participant who is not a 5
percent owner after 1979, the "required beginning date" shall be
determined as follows:
(A) If the Participant attains age 70-1/2 after 1987,
the required beginning date is the April 1 following the calendar
year in which the Participant attains age 70-1/2 (but not before
April 1, 1990).
(B) If the Participant attains age 70-1/2 before 1988,
the required beginning date is the April 1 following the
<PAGE> V1-7
calendar year in which occurs the later of his Termination of Employment
or attainment of age 70-1/2.
(ii) In the case of a Participant who is a 5
percent owner after 1979, the required beginning date is the
April 1 following the later of:
(A) the calendar year in which the Participant attains
age 70-1/2, or
(B) the first calendar year in which the Participant
either becomes a 5 percent owner or terminates employment.
For purposes of this paragraph, a 5-percent owner is any
Participant who is a 5-percent owner as defined in section 416(i)
of the Code (determined in accordance with section 416 but
without regard to whether the Plan is top-heavy) at any time
during the Plan Year ending with or within the calendar year in
which such owner attains age 66-1/2 or any subsequent Plan Year.
(2) In the event a Participant dies on or after
his Annuity Starting Date but before actual payment has
commenced, the Participant's total interest in the Plan (if any)
shall be distributed by December 31 of the calendar year
containing the fifth anniversary of the Participant's date of
death occurs. Notwithstanding the preceding sentence, if the
Participant's designated beneficiary is his surviving spouse and
the surviving spouse dies after the Participant, but before
payments to such spouse begin, the provisions of this subsection
6.6(c)(2) shall be applied as if the surviving spouse were the
Participant.
(d) Cashout Distributions: Subject to the last
sentence of this subsection, upon a Participant's death or other
Termination of Employment, the value of the Participant's total
interest in the Plan shall be automatically distributed to him in
a lump-sum cash distribution as soon as practicable following the
earlier of (i) the date the Participant reaches age 65 (or such
later date as permitted by the Plan
<PAGE> VI-8
Administrator in accordance with Code section 401(a)(14)); or
(ii) 90 days after the Participant's Termination of Employment.
However, such a Participant (or where the Participant has died,
his Beneficiary as determined under Article VIII) can effect an earlier
distribution by submitting a properly completed final
distribution form in the manner specified by the Plan
Administrator. By submitting a properly completed final
distribution form, the Participant may elect to receive an in-
kind distribution as provided in Section 6.4. Notwithstanding
any provision of this Section 6.6(d) to the contrary, if such
Participant is disabled (within the meaning of the PepsiCo Long
Term Disability Plan) or has a total interest in the Plan in
excess of $3,500 and has not died, a distribution of his total
interest in the Plan will not occur until the earlier of: (i) the
date the Participant attains age 65 (or such later date as
permitted by the Plan Administrator in accordance with Code
section 401(a)(14)); or (ii) the date the Participant submits a
properly completed final distribution form in the manner
specified by the Plan Administrator.
6.7 Payment for Benefit of Disabled or Incapacitated
Person: Whenever, in the opinion of the Plan Administrator or
its agent, a person entitled to receive any payment of a benefit
hereunder is under a legal disability or is incapacitated in any
way so as to be unable to manage his financial affairs, the Plan
Administrator or its agent may direct the Trustee to make
payments to such person or to his legal representative or to a
relative or friend of such person for his benefit, or the Plan
Administrator or its agent may direct the Trustee to apply the
payment for the benefit of such person in such manner as the Plan
Administrator or its agent considers advisable. Any payment of a
benefit or installment thereof in accordance with the provisions
of this section shall be a complete discharge of any liability
for the making of such payment under the provisions of the Plan.
6.8 No Other Benefits or Withdrawals: Except as
expressly provided for in this Article VI or the Appendix, no
individual, whether a Participant, former Participant,
Beneficiary or otherwise, shall be entitled to any distribution
or withdrawal of funds from the Trust Fund.
<PAGE> VII-1
ARTICLE VII
Plan Loans
7.1 Eligibility for Plan loans: Subject to the
restrictions set forth in this Article VII, the opportunity to
take a Plan loan shall be made available to any Participant who,
at the time such loan is to be made:
(a) is actively employed by an Employer who has
agreed to participate in the loan program;
(b) has a minimum account balance of $2,000 in
the Plan;
(c) has not defaulted on a Plan loan within the
prior two years;
and
(d) consents to and authorizes repayment of the
loan through payroll deductions.
Employers that are not participating in the loan program may be
designated by the Plan Administrator from time to time. The
requirement of subsection (a) above shall be deemed satisfied in
the case of a Participant who is not currently employed if the
Participant is a party in interest within the meaning of ERISA
section 3(14). For purposes of subsection (c) above, the time of
default shall be determined under Section 7.9.
7.2 Application Procedure: A participant shall apply
for a loan by calling into the telephone system established by
the Plan Administrator and providing the requested information
("Telephone Application"). As soon as practicable after the
Participant's Telephone Application, the Plan Administrator shall
send such Participants a promissory note, an authorization form
for withholding loan payments from the Participant's pay, a
document granting the Plan a security interest in the
Participant's Plan account, and any other documents the Plan
Administrator deems appropriate ("Application Forms"). The
promissory note shall state the amount and term of the loan, the
applicable interest rate and repayment schedule, and other
information as determined by the Plan Administrator. To complete
the application, the Participant must properly fill out, sign and
return the Application
<PAGE> VII-2
Forms so that they are received by the Plan Administrator within 30
days of the date the Application Forms are prepared by the Plan.
The Plan Administrator shall approve a Participant's loan application
if the Participant:
(a) is eligible for a loan pursuant to Article
7.1.
(b) has properly completed and timely returned
the Application Forms, and
(c) is requesting a loan that meets the terms of
the Article VII and the summary plan description
for this Plan.
7.3 Loan Amount: A Plan loan shall not be less than
$1,000 nor, when aggregated with all other outstanding loans to
such borrowing Participant from qualified retirement plans of the
Company and any affiliated companies, exceed the least of
(rounded down to the nearest hundred):
(a) $50,000 (reduced by the excess of (i) the
Participant's highest outstanding loan balance during the
preceding one-year period ending on the day before the date the
loan was made over (ii) the outstanding balance of loans from the
Plan on the date the loan is made);
(b) 50% of the Participant's account balance
under the Plan;
(c) 100% of the value of the Participant's
investments in the following "Core" Funds: PepsiCo Capital
Stock, Security Plus, Vanguard Equity Index and Fidelity Equity
Income; or
(d) the maximum loan amount that can be
amortized by the Participant's net pay (determined under Section
7.8)
<PAGE> VII-3
The value of the Participant's account balance and investment in
the Core Funds shall be based on the market values of such items
at the time of the Participant's Telephone Application or the
issuance of the loan, whichever is less.
7.4 Maximum Number of Outstanding Loans and
Refinancing:
(a) A Participant shall not have more than one
loan outstanding from the Plan at any time. Subject to
subsection (b), no loan may be made to a Participant until the
repayment of any previous loan to such Participant.
(b) A Participant with an outstanding loan from
the Plan is eligible to apply for a refinanced loan, provided the
refinanced loan is issued at least two years after issuance of
the outstanding loan. A refinanced loan shall meet all the
requirements for a loan set forth in this Article VII. Its
proceeds shall first be applied to repay the balance of the
outstanding loan,, with any remainder payable to the Participant
as cash. The interest rate, fees, term and repayment schedule
applicable to a refinanced loan shall be determined without
reference to the original loan.
7.5 Effect on Participant's Investment: A loan shall
constitute a segregated investment solely of the Account of the
borrowing Participant.
(a) When initially made, a loan shall be funded
from the borrowing Participant's core Fund investments, prorated
based on the Participant's balance in each Core Fund.
(b) All repayments of principal and related
interest and any gains and losses on a loan shall be credited to
the borrowing Participant's account. Loan repayments shall be
invested in accordance with the Participant's current investment
direction for Salary Deferral Contributions. If the Participant
does not have an investment direction in effect on the date of
the Participant's Loan Application, the Participant must provide
an investment direction as part of his loan application. When a
selected investment is no longer available, or
<PAGE> VII-4
when otherwise necessary, loan repayments shall be invested in the
manner specified by the Plan Administrator from time to time.
(c) A loan shall be adequately secured at all
times. All loans are secured by the portion of the borrowing
Participant's Account that is invested in the Participant's loan.
If the principal amount of a loan immediately after its issuance
does not exceed 50 percent of the Participant's Account as of
such time, the loan shall be deemed adequately secured at all
times hereunder.
7.6 Fees: Following the issuance of a loan, the
borrowing Participant shall pay a one-time origination fee. For
each month or part thereof the loan remains outstanding the
borrowing Participant shall pay a monthly administration fee.
Such fees shall be deducted from the Participant's Account at the
end of the applicable month. They shall be charged against the
position of the Account that is not invested in the loan, in
accordance with rules adopted by the Plan Administrator. The
fees applicable to a Participant's loan shall be determined on
the date of the Participant's Telephone Application and shall not
change while such loan is outstanding.
7.7 Interest Rate: Plan loans shall bear a reasonable
rate of interest that provides the Plan with a return
commensurate with the interest rates charged by persons in the
business of lending money for loans which would be made under
similar circumstances as part of a similar nationwide loan
program. To this end, the Plan Administrator shall adopt rules
and procedures for redetermining on a monthly basis the interest
rate applicable to new Plan loans. The interest rate for any
loan shall be fixed for the period of the loan and shall be
determined as of the date of the related Telephone Application.
No interest rate shall be less than the applicable federal rate
in effect under Section 1274(d) of the Code, as of the day on
which the loan was initialed, compounded annually.
<PAGE> VII-5
7.8 Term and Repayment:
(a) Term: Subject to subsections (c) through
(e), the term of a loan shall be not less than 1 year nor greater
than 4 years, measuring form the date of issuance, and shall be
an even multiple of six months.
(b) Repayment: Subject to subsections (c)
through (e), a borrowing Participant shall repay his outstanding
loan by making substantially level amortization payments at the
interval determined by the Plan Administrator. When a
Participant is receiving net pay to the extent possible. For
this purpose, "net pay" shall mean a Participant's pay from an
Employer, reduced by applicable taxes and such other payroll
deductions that are accorded priority by payment to the Plan
Administrator shall be required in the case of a Participant who
is on an authorized leave of absence or long term disability, or
a Participant who becomes a foreign service employee. For
purposes of this subsection, a loan is not considered outstanding
following its default.
(c) Prepayment: A Participant may prepay his
entire outstanding loan balance without penalty after first
notifying the Plan Administrator. Upon notification, the Plan
Administrator shall make the necessary administrative
arrangements to permit repayment and shall advise the Participant
of the payment-in-full amount and its due date. No partial
prepayments are permitted, and no payment-in-full amount will be
accepted after its due date.
(d) Terminating Employees: Notwithstanding
subsections (a) and (b), an outstanding loan shall become
immediately due and payable in full if the borrowing Participant
retires, dies or otherwise terminates employment. For purposes
of this subsection, a Participant's employment shall be deemed to
continue: (1) while he is receiving long term disability
benefits and making loan repayment directly to the Plan
Administrator, or (2) while he is repaying his loan through
payroll deduction from salary continuation or other similar
payments.
<PAGE> VII-6
(e) Termination of Loan Program: In the event
the Plan terminates or the portion of the Plan applicable to a
Participant terminates, the Participant's loan shall become due
and payable in full immediately.
7.9 Loan Default: A loan shall be in default if:
(a) the borrowing Participant is delinquent on
more than 12 weeks of scheduled loan repayment
amounts;
(b) the loan becomes due and payable and the
Participant fails to pay the outstanding
principal amount plus accrued interest within 60 days;
(c) the term of the loan has been extended to
more than 56 months as a result of the Participant's
failure or inability to make timely loan payments; or
(d) there occurs such other circumstances as the
Plan Administrator considers to be a default in order
to protect the interests of the Plan.
A default on a Plan loan occurs on the date the first of the
preceding conditions is met. If a default on a Participant's
Plan loan occurs, the Plan shall have the right to foreclose on
the Participant's security interest in his Account, and shall do
so on or after the first distributable event for such Participant
described in Article VI (other than a hardship distribution event
pursuant to Section 6.3(a)).
7.10 Nondiscrimination: Loans shall be made available
to all Participants who meet the requirements set forth in
section 7.1 on a reasonable equivalent basis, except that the
Plan Administrator may make reasonable distinctions based on
other obligations of the Participant, state law requirements
affecting payroll deductions and other factors that may adversely
affect the ability to assure repayment through payroll deduction.
The Plan Administrator may refuse a requested loan where it
determines that timely repayment of the loan through payroll
deduction is not assured.
7.11 Collins Food International, Inc. With respect to
a borrowing Participant: (i) who is employed by Colllins Food
International, Inc. before becoming employed by Kentucky Fried
Corporation and (ii) who has a loan outstanding under the Plan,
the provisions
<PAGE> VII-7
of this Article VII shall apply. In addition, the
terms of the promissory note for such outstanding loan shall
govern to the extent not in conflict with this Plan or applicable
federal law.
7.12 Miscellaneous:
(a) Additional Documentation: A Participant
shall execute any additional documents as required by the Plan
Administrator that correct ministerial errors in the Application
Forms, or that are required for proper administration of the
loan.
(b) Agent of Plan Administrator: The Plan
Administrator may designate an exclusive agent for purposes of
administration of some or al of the loan program, and to such
extent any references in the Article VII to the Plan
Administrator shall mean the designated agent.
(c) Power to Amend Outstanding Loans: It is
specifically intended that the Company's power to amend the Plan
set forth in Article XI applies to loans from this Plan that are
outstanding (including loans in default) at the time of the
amendment.
<PAGE> VIII-1
ARTICLE VIII
Determination of Beneficiary
A Participant's Beneficiary under the Plan shall be
determined in accordance with this Article. In the event of a
Participant's death, any interest of the Participant in the Plan
shall be payable to such Beneficiary in accordance with Section
6.2.
8.1 Certain Married Participants: A Participant's
Beneficiary shall be determined in accordance with this Section
if: (i) the Participant is married on the date of his death, and
(ii) the Participant is credited with at least one Hour of
Service after August 22, 1984.
(a) Deaths After November 13, 1984:
(1) Qualified Designations: If a Participant covered
by this section dies after November 13, 1984, and has a Qualified
Designation (as hereinafter defined) in effect on the date of his
death, then such Participant's Beneficiary shall be the person or
persons designated by the Participant in the most recent
Qualified Designation on file with the Plan Administrator. For
purposes of this subsection, a "Qualified Designation" is any
Designation of Beneficiary form filed by a Participant which
names someone other than the Participant's spouse as a primary
beneficiary, and which meets the requirements of subparagraphs
(i) or (ii) below:
(i) A Participant's Designation of Beneficiary form
meets the requirements of this subparagraph if:
(A) such designation is consented to in writing by the
spouse to whom the Participant is married on the date
of his death,
(B) the spouse's consent acknowledges the effect of
the designation,
<PAGE> VIII-2
(C) the spouse's consent is witnessed by a notary
public or an official designated by the Plan Administrator,
and
(D) the designation is signed by the Participant and
satisfies any other requirements which are prescribed by
the Plan Administrator.
(ii) A Participant's Designation of Beneficiary form
meets the requirements of this subparagraph if:
(A) at the time such form is filed, it is established
to the satisfaction of the Plan Administrator (or its
authorized representative) that the consent required under
subparagraph (i) may not be obtained because the
Participant's spouse cannot be located or because of such
other circumstances as may be specified by Internal Revenue
Service Regulations,
(B) the Participant is legally separated or the Participant has
been abandoned (within the meaning of local law) and (I)
the Participant has a court order to such effect, and
(II) there is no qualified domestic relations order (within
the meaning of Code section 414(p)) which requires spousal
consent to the Participant's elections covered by this
section, and
(C) the designation is signed by the Participant and
satisfies any other requirements which are prescribed
by the Plan Administrator.
Consent by a spouse, or establishment that a spouse's consent
cannot be obtained, shall be effective only with respect to such
individual spouse. If the spouse is legally incompetent to give
consent, consent may be given by the spouse's legal guardian
(even if the guardian is the Participant). Once a spouse has
given consent to an election of the Participant, such consent
shall be irrevocable.
<PAGE> VIII-3
(2) No Qualified Designation: If a Participant
covered by this Section dies after November 13, 1984, and does
not have a Qualified Designation in effect on the date of his
death, then notwithstanding any Designation of Beneficiary form
the Participant may have completed, such Participant's sole
Beneficiary shall be his spouse. A Participant's Qualified
Designation shall not be considered to be in effect hereunder if
all the Participant's designated Beneficiaries have predeceased
the Participant.
(b) Deaths Before November 14, 1984: If a Participant
described in this Section dies before November 14, 1984, then
notwithstanding any Designation of Beneficiary form the
Participant may have completed, such Participant's Beneficiary
for one-half of his interest in the Plan shall be such
Participant's spouse. If the amount payable to the Participant's
spouse pursuant to the preceding sentence would exceed $3,500,
then notwithstanding any other provision contained herein, such
one-half of the Participant's interest shall be payable to the
spouse as a life annuity unless the spouse consents in writing to
the distribution of such amount as a lump sum. The remaining one-
half of the Participant's interest in the Plan shall be payable
to the Participant's Beneficiary determined in accordance with
Section 8.2 (as if such Section applied with respect to the
Participant).
8.2 Other Participants: A Participant's Beneficiary
shall be determined in accordance with this Section if: (i) the
Participant is not married on the date of his death, or (ii) the
Participant is not credited with an Hour of Service after August
22, 1984.
(a) Except as provided in subsections (b) and (c)
below, the Beneficiary of a Participant covered by this Section
shall be the person or persons designated by the Participant on
the most recent Designation of Beneficiary form on file with the
Plan Administrator. A Designation of Beneficiary form shall not
be taken into account under this section unless it has been
signed by the Participant.
<PAGE> VIII-4
(b) In the case of a Participant covered by this
Section who is married at death, any Designation of Beneficiary
form executed by such Participant after December 31, 1984 shall
not be effective hereunder unless such form meets the
requirements of Section 8.1(a)(1)(i) or (ii).
(c) In the event benefits became payable upon the
death of a Participant described in this Section and no
Beneficiary has been properly designated as provided in
subsections (a) and (b), or if all such designated Beneficiaries
shall have predeceased the Participant, then the Participant's
sole Beneficiary hereunder shall be his estate.
<PAGE> IX-1
ARTICLE IX
Administration
9.1 Allocation of Responsibility Among Fiduciaries for
Plan and Trust Administration: The Fiduciaries shall have only
those specific powers, duties, responsibilities, and obligations
as are specifically given them under this Plan or the Trust
instrument. The Plan Administrator shall have the sole
responsibility for the administration of the Plan, which
responsibility is specifically described in this Plan and the
Trust instrument, except where an agent is appointed to perform
administrative duties as specifically agreed to by the Plan
Administrator and the agent. The Trustee shall have the sole
responsibility for the administration of the Trust and the
management of the assets held under the Trust, except where an
investment manager has been appointed, all as specifically
provided in the Trust instrument. Each Fiduciary warrants that
any directions given, information furnished, or action taken by
it shall be in accordance with the provisions of the Plan or the
Trust instrument, as the case may be, authorizing or providing
for such direction, information or action. Furthermore, each
Fiduciary may rely upon any direction, information or action of
another Fiduciary as being proper under this Plan or the Trust,
and is not required under this Plan or the Trust instrument to
inquire into the propriety of any direction, information or
action. It is intended under this Plan and the Trust instrument
that each Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under
this Plan and the Trust instrument and shall not be responsible
for any act or failure to act of another Fiduciary. No Fiduciary
guarantees the Trust in any manner against investment loss or
depreciation in asset value.
9.2 Administration: The Plan shall be administered by
the Plan Administrator which may appoint or employ individuals to
assist in the administration of the Plan and which may appoint or
employ any other agents it deems advisable, including legal
counsel, actuaries and auditors to serve at the Plan
Administrator's direction. All usual and reasonable expenses of
the Plan Administrator in administering the Plan may be paid in
whole or in part by the
<PAGE> IX-2
Company, and any expenses not paid by the Company shall be paid by
the Trustee out of the principal or income of the Trust.
9.3 Claims Procedure: The Plan Administrator, or a
party designated by the Plan Administrator, shall have the
exclusive discretionary authority to construe and to interpret
the Plan, to decide all questions of eligibility for benefits and
to determine the amount of such benefits, and its decision on
such matters are final and conclusive. Any exercise of this
discretionary authority shall be reviewed by a court under the
arbitrary and capricious standard, (i.e., the abuse of discretion
standard). If, pursuant to this discretionary authority, an
assertion of any right to a benefit by a Participant or
beneficiary is wholly or partially denied, the Plan
Administrator, or a party designated by the Plan Administrator,
will provide such claimant a comprehensible written notice
setting forth:
(a) The specific reason or reasons for such denial;
(b) Specific reference to pertinent Plan provisions on
which the denial is based;
(c) A description of any additional material or
information necessary for the claimant to submit to
perfect the claim and an explanation of why such material
or information is necessary; and
(d) A description of the Plan's claim review
procedure. The claim review procedure is available upon
written request by the claimant to the Plan Administrator,
or the designated party, within 60 days after receipt by the
claimant of written notice of the denial of the claim, and
includes the right to examine pertinent documents and submit
issues and comments in writing to the Plan Administrator,
or the designated party. The decision on review will be
made within 60 days after receipt of the request for review,
unless circumstances warrant an extension of time not to
exceed an additional 60 days, and shall be in writing and
drafted in a manner calculated to be understood by
the claimant, and include specific reasons for the decision
with references to the specific Plan provisions on which the
decision is based.
<PAGE> IX-3
If circumstances warrant, the Plan Administrator shall provide
the claimant a written notice, prior to the end of the 90-day
period for processing the claim, extending such period by up to
an additional 90 days and indicating the circumstances requiring
the extension and the date by which the Plan Administrator
expects to render its decision. If the Plan Administrator fails
to provide a comprehensible written notice stating that the claim
is wholly or partially denied and setting forth the information
described in (a) through (d) above within the 90-day processing
period and if no extension of such 90-day period is made, the
claim shall be deemed denied. Once the claim is deemed denied,
the Participant shall be entitled to the claims review procedure
described in subsection (d) above. Such review procedure shall
be available upon written request by the claimant to the Plan
Administrator within 60 days after the claim is deemed denied.
Any claim referenced in this section that is reviewed by a court,
arbitrator, or any other tribunal shall be reviewed solely on the
basis of the record before the Plan Administrator. In addition,
any such review shall be conditioned on the claimants having
fully exhausted all rights under this section.
9.4 Records and Reports: The Plan Administrator shall
exercise such authority and responsibility as it deems
appropriate in order to comply with ERISA and government
regulations issued thereunder relating to records of
Participants' service and benefits; notifications to
Participants; reports to, or registration with, the Internal
Revenue Service; reports to the Department of Labor; and such
other documents and reports as may be required by ERISA.
9.5 Other Administrative Powers and Duties: The Plan
Administrator shall have such powers and duties as may be
necessary or desirable to discharge its functions hereunder,
including:
(a) To exercise its discretionary authority to
construe and interpret the Plan, decide all questions of
eligibility and determine the amount, manner and time of payment
of any benefits hereunder;
(b) To prescribe procedures to be followed by
Participants or Beneficiaries filing applications for benefits;
<PAGE> IX-4
(c) To prepare and distribute, in such manner as the
Plan Administrator determines to be appropriate, information
explaining the Plan;
(d) To receive from employees and agents and from
Participants such information as shall be necessary for the
proper administration of the Plan;
(e) To receive, review and keep on file (as it deems
convenient or proper) reports of the financial condition, and of
the receipts and disbursements, of the Trust from the Trustee;
(f) To appoint or employ individuals or other parties
to assist in the administration of the Plan and any other agents
it deems advisable, including accountants, actuaries and legal
counsel; and
(g) To delegate to other persons or entities, or to
designate or employ persons to carry out any of the Plan
Administrator's fiduciary duties or responsibilities or other
functions under the Plan.
9.6 Rules and Decisions: The Plan Administrator may
adopt such rules and procedures as it deems necessary, desirable,
or appropriate. To the extent practicable, all rules and
decisions of the Plan Administrator shall be uniformly and
consistently applied to all Participants in similar
circumstances. When making a determination or calculation, the
Plan Administrator shall be entitled to rely upon information
furnished by a Participant or beneficiary, the legal counsel of
the Plan Administrator, or the Trustee.
9.7 Procedures: The Plan Administrator shall keep all
necessary records and forward all necessary communications to the
Trustee. The Plan Administrator may adopt such regulations as it
deems desirable for the administration of the Plan.
9.8 Authorization of Benefit Distributions: The Plan
Administrator shall issue directions to the Trustee concerning
all benefits which are to be paid from the Trust pursuant to the
provisions of the Plan, and shall warrant that all such
directions are in accordance with this Plan.
9.9 Application and Forms for Distributions: The Plan
Administrator may require a Participant to complete and file with
the Plan Administrator an application for a
<PAGE> IX-5
distribution and all other forms approved by the Plan Administrator,
and to furnish all pertinent information requested by the Plan
Administrator. The Plan Administrator may rely upon all such information
so furnished it, including the Participant's current mailing
address, age and marital status.
<PAGE> X-1
ARTICLE X
Trust Fund
All contributions made by the Employers, or the Company
on behalf of the Employers, under this Plan shall be paid to the
Trustee and deposited in the Trust Fund or with an insurance
company or a financial institution pursuant to a contract to be
held and invested in accordance with the Trust instrument. Assets
of other plans maintained by the PepsiCo Organization, which meet
the requirements of Code section 401, may be commingled, for
investment purposes only, through one or more master trust
arrangements with the assets of this Plan. The Company shall
have the right to appoint an investment manager or investment
managers (as defined in section 3(38) of ERISA) to manage all or
any part of the assets of the Trust Fund.
<PAGE> XI-1
ARTICLE IX
Amendment of the Plan
The Company shall have the right at any time by
instrument in writing, duly executed and acknowledged and
delivered to the Trustee, to modify, alter or amend this Plan in
whole or in part. However, except as permissible under the Code
and ERISA, no amendment shall:
(a) Reduce the amounts in any Participant's
Account because of forfeiture or reduce the vested right or
interest to which any Participant or Beneficiary is then entitled
under this Plan;
(b) Eliminate an optional form of benefit with
respect to a Participant's Account as of the date of the
amendment;
(c) Cause or authorize any part of the Trust Fund
to revert or be refunded to the Employer; or
(d) Cause any assets of the Trust to be used for,
or diverted to, purposes other than for the exclusive benefit of
Participants and their Beneficiaries (other than such part as is
required to pay taxes and expenses of administration).
To the extent permitted under the Code, the Company shall have
the right to amend the Plan at any time, retroactively or
otherwise, in such respects and to such extent as may be
necessary to qualify it under existing and applicable laws and
regulations in order to make available to the Employers the tax
benefits associated with qualified plans, including the full
deduction for tax purposes of the Employer contributions made
hereunder. A participating Employer shall not have the right to
amend the Plan. Notwithstanding any provision herein to the
contrary, the Company may by such amendment decrease or otherwise
affect the rights of Participants hereunder if, and to the
extent, necessary to accomplish such purpose.
<PAGE> XII-1
ARTICLE XII
Termination of the Plan
The Plan herein provided for has been established by
the Company with the bona fide intention that it shall be
continued in operation indefinitely. However, the Company re
serves the right at any time to terminate or to partially
terminate the Plan. In addition, a participating Employer may
cease participation in the Plan with respect to its Employees.
Should the Company decide to terminate the Plan, the
Trustee shall be notified of such event in writing and shall
proceed at the direction of the Plan Administrator to handle the
assets of the Trust Fund, as follows:
First, to the extent determined by the Plan
Administrator, to pay any due and accrued expenses and
liabilities of the Trust and any expenses involved in the
termination.
Second, to pay to Participants in the Plan who are
active Employees affected by such termination the amount of their
interest in the Trust Fund, as soon as permitted by applicable
law, as determined by the Plan Administrator. If some or all of
the Participants may not receive distributions of their interest
at the time of such termination or cessation, the Plan
Administrator may in its sole discretion direct the Trustee to
segregate each such Participant's interest to a savings account,
certificate of deposit, or other suitable investment for
distribution at the appropriate future time.
Notwithstanding the foregoing, the Trustee shall not be
required to make any distribution from the Trust in the event the
Plan is terminated until such time as the Internal Revenue
Service shall have determined in writing that such termination
will not adversely affect the prior qualification of the Plan.
<PAGE> XIII-1
ARTICLE XIII
Miscellaneous
13.1 Participants' Rights; Acquittance: Except to the
extent required or provided for by a mandatory law as in effect
and applicable hereto from time to time, neither the
establishment of the Trust hereby created, nor any modification
thereof, nor the creation of any fund or account, nor the payment
of any distributions, shall be construed as giving to any
Participant or other person any legal or equitable right against
the Employer, or any officer or employee thereof, or the Trustee
or the Plan Administrator except as herein provided; nor shall
any Participant have any legal right, title or interest in this
Trust or any of its assets, except in the event and to the extent
that amounts may actually be distributable to him hereunder, and
the same limitations shall be applicable with respect to
distributions upon death which may be payable to the
Beneficiaries of a Participant. Under no circumstances shall the
terms of employment of any Participant be modified or in any way
affected hereby. This Plan and Trust shall not constitute a
contract of employment nor afford any individual any right to be
retained in the employ of the Employer.
13.2 Nonalienation of Benefits:
(a) In General: Except as provided in subsection (b)
below, benefits payable under this Plan shall not be subject in
any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution,
or levy of any kind, either voluntary or involuntary, and any
attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge or otherwise dispose of any right to benefits
payable hereunder, shall be void. The Trust Fund shall not in
any manner be liable for, or subject to, the debts, contracts,
liabilities, engagements or torts of any person entitled to
benefits hereunder.
(b) Qualified Domestic Relations Orders: To the extent
mandated by law, the Plan Administrator shall comply with a
qualified domestic relations order, as defined by Code section
414(p)(1)(A), which requires that all or part of a Participant's
<PAGE> XIII-2
interest in the Plan be paid to an alternate payee, i.e., the
spouse, former spouse, child or other dependent of such
Participant. If the Plan Administrator receives an order which
purports to be a qualified domestic relations order, the Plan
Administrator shall in accordance with such procedures and rules
as it may establish: (i) determine the qualified status of such
qualified domestic relations order under Code section 414(p)(6),
and (ii) if satisfied that the qualified domestic relations order
meets the requirements of Code section 414(p), direct the Trustee
to comply with the qualified domestic relations order and pay
amounts from the Trust Fund in accordance therewith. A qualified
domestic relations order may not require the Plan to make a
distribution to an alternate payee prior to the date the
Participant terminates employment or, if earlier, the date the
Participant attains age 50. However, the Plan may make a
distribution to an alternate payee prior to such date in
accordance with permissive terms of a qualified domestic
relations order. Except as otherwise expressly provided in a
qualified domestic relations order, no consent by a Participant
or alternate payee shall be required in applying the provisions
of Section 6.6 to an alternate payee's interest in the Plan. For
purposes of the investment options under Article V and the
determination of the amount of a distribution under Article VI,
an alternate payee, with respect to his interest in the Plan,
shall be treated as a Participant would with respect to his
Account.
Neither the Plan, the Company, the Employer, the Plan
Administrator nor the Trustee shall be liable in any manner to
any person, including any Participant or Beneficiary, for
complying with a domestic relations order that is considered a
qualified domestic relations order in accordance with the
provisions of Code section 414(p).
13.3 Actions Involving the Trust: In any action or
proceeding involving the Trust Fund, or any property constituting
part or all thereof, or the administration thereof, the Company,
the Employer the Plan Administrator, and the Trustee shall be the
only necessary parties and no employees or former employees of
the Employer or their Beneficiaries or any
<PAGE> XIII-3
other person having or claiming to have an interest in the Trust
Fund or under the Plan shall be entitled to any notice or service of
process.
Any final judgment which is not appealed or appealable
that may be entered in any such action or proceeding shall be
binding and conclusive on the parties hereto, the Plan
Administrator, the Trustee and all persons having or claiming to
have any interest in the Trust Fund or under the Plan.
13.4 Qualification of Plan as a Condition: This
amendment and restatement of the Plan is based upon the condition
subsequent that it shall be approved and qualified by the
Internal Revenue Service as meeting the requirements of the
Internal Revenue Code and regulations issued thereunder with
respect to employees' plans and trusts, including a salary
reduction arrangement, so as to permit, among other incidents to
such qualified plans, the Employer to deduct for income tax
purposes the amount of its contributions to the Plan as set forth
herein, and so that such contributions will not be taxable at the
time of contribution to the Participants as income. Therefore,
if when this Plan is submitted for qualification and approval by
the Internal Revenue Service, the Internal Revenue Service
determines that the Plan does not meet the qualification
requirements of the Internal Revenue Code for the purposes
specified in the preceding sentence, and the deficiencies
precluding qualification may not be corrected by amendment
effective as of the Effective Date, then regardless of any other
provision herein contained, this Plan shall be and become null
and void ab initio, and any contributions under the Plan for any
fiscal year of an Employer commencing on or after the Effective
Date shall be returned to the Employers for the benefit of the
Employees on whose behalf the contribution was made to the Trust.
13.5 Successor to the Company: In the event of the
dissolution, merger, consolidation or reorganization of the
Company, provision may be made by which the Plan and Trust will
be continued by the successor; and, in that event, such successor
shall be substituted for the Company under the Plan. The
substitution of the successor shall constitute an assumption of
Plan liabilities by the successor and the successor shall have
all the powers, duties and responsibilities of the Company under
the Plan.
<PAGE> XIII-4
13.6 Transfer of Plan Assets: In the event of any
merger or consolidation of the Plan with, or transfer in whole or
in part of the assets and liabilities of the Trust Fund to
another trust fund, held under any other plan of deferred
compensation maintained or to be established for the benefit of
all or some of the Participants of this Plan, the assets of the
Trust Fund applicable to such Participants shall be transferred
to the other trust fund only if:
(a) Each Participant would, if either this Plan or the
other plan then terminated, receive a benefit immediately after
the merger, consolidation or transfer which is equal to or
greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation or transfer, if the
Plan had then terminated;
(b) Resolutions of the Board of Directors of the
Employer of the affected Participants, shall authorize such
transfer of assets; and, in the case of the new or successor
employer of the affected Participants, its resolutions shall
include an assumption of liabilities with respect to such
Participant's inclusion in the new employer's plan, and
(c) Such other plan and trust are qualified under
sections 401(a) and 501(a) of the Code.
13.7 Indemnification: Unless the Board of Directors of
the Company shall determine otherwise, the company shall
indemnify, to the full extent permitted by law, any employee
acting in good faith within the scope of his employment in
carrying out the administration of the Plan.
13.8 Action by the Company: Any action by the Company,
including any amendment authorized to be made under Article XI,
shall be made by a resolution adopted by the Company's Board of
Directors. In addition, any person or persons authorized by the
Board may take action on behalf of the Company. Any such
resolution of the Board of Directors shall be effective provided
it is adopted in accordance with the bylaws (or other governing
authority) of the Company. Any action taken by any other person
or persons shall be effective provided it is executed in
accordance with the authorization of the Board.
<PAGE> XIII-5
13.9 Applicable Law: The provisions of the Plan shall
be construed and administered according to, and its validity and
enforceability shall be determined under, ERISA. In the event
ERISA does not preempt state law in a particular circumstance,
the laws of the State of New York shall govern.
13.10 Interpreting the Plan: This Plan shall be
interpreted in accordance with the rules of this section and
Section 2.2.
(a) Compounds of the Word "Here": The words
"hereof", "hereunder" and other similar compounds of the word
"here" shall mean and refer to the entire Plan, not to any
particular provision or section.
(b) Examples: Whenever an example is provided or
the text uses the term "including" followed by a specific item or
items, or there is a passage having similar effect, such passages
of the Plan shall be construed as if the phrase "without
limitation" followed such example or term (or otherwise applied
to such passage in a manner that avoids limits on its breadth of
application).
(c) Fiduciary Discretion: With respect to the
powers, duties and responsibilities allocated to the named
Fiduciaries under the Plan, the Plan Administrator and the
Trustee shall have full discretionary authority to implement and
perform such powers, duties and responsibilities. Specific
references in the Plan to the Plan Administrator's or the
Trustee's discretion in a particular context shall create no
inference that the Plan Administrator's or Trustee's discretion
in any other respect, or in connection with any other provisions,
is less complete or broad.
(d) Invalid Provisions: If any provision of this
Plan is, or is hereafter declared to be void, voidable, invalid
or otherwise unlawful, the remainder of the Plan shall not be
affected thereby.
<PAGE> XIV-1
ARTICLE XIV
Top-Heavy Plan Provisions
14.1 Application: In the event that the Plan is
determined to be a Top-Heavy Plan (as hereinafter defined), this
Article XIV shall become effective as of the first day of the
Plan Year in which the Plan is a Top-Heavy Plan.
14.2 Definitions:
(a) Key Employee: During any year that the Plan is a
Top-Heavy Plan, an Employee (including any Beneficiary of an
Employee) is a Key Employee if, at any time during the Plan Year
or any of the 4 preceding Plan Years, he is (or was):
(1) An officer of the Employer whose Annual
Compensation (as hereinafter defined) exceeds 50 percent of the
dollar limitation in effect for such year under Code section
415(b)(1)(A);
(2) One of the 10 employees having Annual Compensation
of more than the dollar limitation in effect for such year under
Code section 415(c)(1)(A), having individual ownership interests
in the Employer of more than 1/2 of 1 percent, and owning the
largest interests in the Employer;
(3) A 1 percent owner of the Employer having Annual
Compensation from the Employer of more than $150,000; or
(4) A 5 percent owner of the Employer.
Ownership shall be determined according to Code section
416(i)(1)(B). For purposes of paragraph (1) above, no more than
50 Employees (or if less, the greater of 3 or 10 percent of the
Employees) shall be treated as officers. For purposes of
paragraph (2) above, if 2 Employees have the same ownership
interest, the Employee with the higher Annual Compensation shall
be treated as having the larger interest. For purposes of
Paragraph (1), (2) and (3), annual compensation means
compensation as defined in Code section 415(c)(3), but including
amounts contributed by the Employer pursuant
<PAGE> XIV-2
to a salary reduction agreement which are excludable from the employee's
gross income under Code section 125 or 402(a)(8).
(b) Minimum Contribution - For a Plan Year, the lesser
of 3 percent of a Participant's Annual Compensation or, if this
Plan does not enable a defined benefit in the Required
Aggregation Group (as determined below) to satisfy the
requirements of Code section 401(a)(4) or 410, a percentage of a
Participant's Annual Compensation equal to the percentage at
which contributions are made (or required to be made) under the
Plan and all other plans in the Required Aggregation Group (as
defined below) for the Key Employee for whom such percentage is
highest.
(c) Top-Heavy Plan: For any Plan Year beginning after
December 31, 1983, a plan that is required in such year to
satisfy the requirements of Code section 416 because the
aggregate of the account balances of all Key Employees in the
Plan exceeds 60 percent of the aggregate of the account balances
of all Participants in the Plan, such determination to be made in
accordance with the procedures described in Code section 416(g)
and the regulations thereunder as of the last day of the
preceding Plan Year (or in the case of the first Plan Year, as of
the last day of such Plan Year) (the "determination date"). For
purposes of determining whether the Plan is a Top-Heavy Plan, the
Plan must be aggregated with all other plans maintained by the
Employer which are required to be aggregated with the Plan in
order for the Plan to meet the requirements of Code sections
401(a)(4) or 410, and all other plans maintained by the Employer
in which a Key Employee is a Participant (the "Required
Aggregation Group"). In addition, the Plan may also be
aggregated with any other plans maintained by the Employer so
long as such aggregation would not prevent the aggregated group
from satisfying the requirements of Code sections 401(a)(4) or
410 (the "Permissive Aggregation Group").
14.3 Allocation of Minimum Contribution: For any year
in which the Plan is a Top-Heavy Plan, the Minimum Contribution
as defined in Section 14.2(c) hereof shall be made to the account
of each Participant who is a non-Key Employee, unless the Minimum
<PAGE> XIV-3
Contribution for the Participant is made under another defined
contribution plan maintained by the Employer. Such Minimum
Contribution shall be made to the Employer Contribution Account
of each non-Key Employee Participant who is employed on the last
day of such Plan Year without regard to such Participant's Hours
of Service during such Plan Year. The Employer and the Plan
Administrator shall determine under which plan a Participant
shall receive the Minimum Contribution if the Employee is a
Participant in more than one plan maintained by the Employer.
<PAGE> XV-1
ARTICLE XV
Signature
The above amended and restated Plan is hereby adopted
and approved, to be effective as of July 1, 1992 (except as
otherwise indicated), this 29th day of June, 1994.
PEPSICO, INC.
By: /s/ J. ROGER KING
--------------------------------
J. Roger King
Senior Vice President,
Personnel
Approved:
/s/ ALAN ROCKOFF
_____________________
Law Department
/s/ SYLVESTER HOLMES
________________________
Tax Department
<PAGE> APPENDIX
APPENDIX
The following Appendix Articles modify particular terms of the
Plan as it applies to certain Employee groups. Except as
specifically modified in this Appendix, the foregoing provisions
of the Plan shall fully apply. In the event of a conflict
between this Appendix and the foregoing provisions of the Plan,
the Appendix shall govern with respect to the conflict.
<PAGE> A-1
Article A
KFC - Collins
The terms of this Article apply to certain Plan
Participants who were employees of Collins Foods International,
Inc. and who were Participants in the Collins Food International,
Inc. Employee Savings Plan on March 17, 1991. The effective date
of this amendment is March 17, 1991, the date Collins Foods
International, Inc. was merged into Kentucky Fried Chicken
Corporation. As of the merger, Participants were entitled to
make investment directions into the Kentucky Fried Chicken
Corporation Long Term Savings Program. If no investment election
was received, the Participant's account was transferred to the
Security Plus Fund. The Kentucky Fried Chicken Corporation Long
Term Savings Program was merged into the PepsiCo Long Term
Savings Program effective December 31, 1991.
A.1 Definitions: The following words and phrases as
used herein, have the respective meanings set forth in this
Article, unless the context clearly indicates to the contrary.
(a) Collins: Collins Food International, Inc.
(b) Savings Plan: Collins Food International, Inc.
Employee Savings Plan.
(c) Closing Date: March 17, 1991
(d) Account Balance: The amount in the account of
each Participant in the Savings Plan as of the
Closing Date.
(e) Voluntary Contribution: The amount voluntarily
contributed to the Savings Plan by a Participant prior
to January 1, 1987.
(f) Voluntary Contribution Account The account of a
Participant to which his Voluntary Contributions and
the gains and losses thereon are credited.
<PAGE> A-2
A.2 Participants Covered by this Appendix: As of the
Closing Date, Employees of Collins who participated in the
Savings Plan became Participants in the Kentucky Fried Chicken
Corporation Long Term Savings Program if the Participant had an
Account Balance in the Savings Plan as of the Closing Date. In
addition, individuals described in the preceding sentence became
Participants in this Plan as of December 31, 1991 if they had an
account balance in the Kentucky Fried Chicken Corporation Long
Term Savings Program as of December 31, 1991. Each Participant
in the Savings Plan as of the Closing Date became fully vested in
his Account Balance.
A.3 Voluntary Contributions: A Participant may make
withdrawals from his Voluntary Contribution Account from time to
time, subject to reasonable procedures as the Plan Administrator
may establish. Withdrawals of Voluntary Contributions shall
consist only of the principal amount credited to the
Participant's Voluntary Contribution Account.
A.4 Plan Loans: Effective as of the Closing Date, no
new plan loans shall be available under the Kentucky Fried
Chicken Corporation Long Term Savings Program and this Plan and
no existing loans may be renewed or extended. Plan loans that
were made under the Savings Plan, and are outstanding as of the
Closing Date, are expressly authorized as a permissible
investment under the Kentucky Fried Chicken Corporation Long Term
Savings Program and this Plan in accordance with (and subject to)
the following provisions of this section.
(a) The program of Plan loans authorized by this
section shall be administered by the Plan Administrator (or its
delegate).
(b) Plan loans shall bear a reasonable rate of
interest, the amount to be determined from time to time in
accordance with the rules and procedures in effect under the
Savings Plan on the Closing Date. The term of any loan shall be
that in effect for the loan on the Closing Date.
(c) A loan shall continue to be repaid in the manner
in effect on the Closing Date, provided that interest and
principal on the loan must be repaid through payroll deduction
installments (not less frequently than quarterly) over a total
period not
<PAGE> A-3
to exceed 4-1/2 years (including renewals and extensions). Loan
repayments shall be invested in accordance with the Participant's
current investment direction for Salary Deferral Contributions.
If no such election is in effect, repayments shall be invested in the
manner specified by the Plan Administrator from time to time.
(d) A loan shall be documented by such notes,
evidences of indebtedness, security agreements and other
instruments executed by the Participant as the Plan Administrator
may require.
(e) A loan shall constitute an investment of only
amounts credited to the Account of the borrowing Participant.
All gains and losses on a loan shall be credited to the borrowing
Participant's Account.
(f) A loan shall be adequately secured at all times.
All loans are secured by a portion of a borrowing Participant's
Account (but not more than the lesser of: (1) 50 percent of the
Account, or (2) the amount of the loan). To the extent the
principal amount of the loan (immediately after its origination,
extension or renewal) does not exceed 50 percent of the
Participant's Account at such time, the loan will be deemed to be
adequately secured. Any additional loan amount must at all times
be secured by other security of a type and value that would be
accepted by commercial lenders for such purpose.
(g) A loan shall be in default if the Participant
fails to make any payment when due or if there occurs such other
circumstances as may be prescribed by the Plan
Administrator. If a loan is in default, execution on the
defaulting Participant's Account shall be accomplished when and
to the extent the Account is distributed to the Participant
hereunder. Execution on any other security of the Participant
shall be accomplished at the time deemed necessary by the Plan
Administrator to prevent a loss to the Plan.
(h) If a Participant has a Termination of Employment
or dies, any loan outstanding to the Participant shall become
immediately due. If the portion of a Participant's Account
securing his loan otherwise becomes payable to the Participant
hereunder, such loan shall become due to the extent this portion
of the Account is to be
<PAGE> A-4
distributed. In either case, the amount of the loan that is due
shall be satisfied by applying against it the portion of the Participant's
Account that secures the loan. In turn, such Account shall be
correspondingly reduced prior to making the distribution to or on behalf
of the Participant.
<PAGE> B-1
ARTICLE B
KFC Hourly Employees
The terms of this Article apply to any Employee who is employed
on or after December 1, 1989 on an hourly basis by KFC
Corporation; KFC Enterprises, Inc.; KFC National Management
Company; Kentucky Fried Chicken International Holdings, Inc.;
Kentucky Fried Chicken Corporate Holdings, Ltd or the Company
(only with respect to those Employees of the Company who are (i)
providing services in Illinois to Kentucky Fried Chicken
Corporation and (ii) working under the supervision of Kentucky
Fried Chicken Corporation) (collectively referred to as "KFC").
B.1 Modifications to Section 3.1: For purposes of
determining the eligibility to participate in the Plan of an
Employee who is covered by this Article, the introductory
language of Section 3.1 (the portion preceding subsection (a))
shall read as follows:
"3.1 Eligibility: Any full-time hourly Employee of
KFC whose Employment Commencement Date is before January 1, 1992
shall be eligible to participate in the Plan once he has enrolled
in his Employer's One Plus program. Any full-time hourly
Employee of KFC who is coded as a shift-supervisor and whose
Employment Commencement Date is on or after January 1, 1992,
shall be eligible to participate in the Plan after the attainment
of age 21 and the completion of one Year of Service. The
following Employees or classes of Employees shall not be eligible
to participate in this Plan:"
B.2 Modifications to Section 4.1(d): For purposes of
determining the deferral amount in the case of an Active
Participant who is covered by this Article, subsections (a), (d)
and (e) of Section 4.1 shall read as follows:
"(a) Deferral Amount: Subject to the limitations
established by this Article IV, each active Participant may defer
in any Plan Year up to $60 of his Eligible Pay per pay period, in
accordance with such rules and regulations as may be established
by the Plan Administrator. In the event that a Participant
elects to defer a portion of his Eligible Pay
under the Plan, it will be designated for contribution by the
Employer to the
<PAGE> B-2
Trust on behalf of the Participant, and for
deposit in his Salary Deferral Account. All amounts deposited to
a Participant's Salary Deferral Account shall at all times be
fully vested."
"(d) Election Procedures: An election made pursuant
to subsection (b) or (c) above shall be in the manner specified
by the Plan Administrator. Any election shall specify the amount
of the deferral desired as a whole dollar amount, subject to the
limitation in subsection (a) above. The Plan Administrator, in
its discretion, may give no effect to an election that does not
meet minimum standards for completeness and accuracy as the Plan
Administrator may establish."
"(e) Payroll Deductions: A Participant's Salary
Deferral Contributions shall be withheld from his Eligible Pay
through automatic payroll deductions. Salary Deferral
Contributions may not be withheld after they have been actually
or constructively received by the Participant."
<PAGE> C-1
ARTICLE C
Pizza Hut Hourly Employees
The terms of this Article apply to any Employee who is
employed on an hourly basis by the Southern, Western, or Florida
divisions of Pizza Hut of America or its domestic locations and
subsidiaries (collectively referred to as "Pizza Hut").
B.1. Modifications to Section 3.1. For purposes of
determining the eligibility to participate in the Plan of an
Employee who is covered by this Article, the introductory
language of Section 3.1 (the portion preceding subsection (a))
shall read as follows:
"3.1 Eligibility: Effective, January 1, 1993,
any hourly Employee of Pizza Hut shall be eligible to participate
in the Plan once he becomes a participant in the Pizza Hut Hourly
Employees Retirement Plan, i.e., attains age 21 and completes
1,000 hours of service. The following Employees or classes of
Employees shall not be eligible to participate in this Plan:"
<PAGE> D-1
ARTICLE D
Prior Definitions of Eligible Pay
The terms of this article apply to prior definitions of
Eligible Pay.
Effective January 1, 1989, excepted where otherwise noted,
Eligible Pay was defined as follows:
2.1(k) Eligible Pay. For each Plan Year, a
Participant's Eligible Pay shall be determined as follows:
(1) With respect to all Employees other than
those employed by Frito-Lay, Inc. or its subsidiaries:
(i) In the case of salaried Employees
who are considered exempt from the minimum wage and overtime pay
provisions of the Fair Labor Standards Act:
(I) for such Employees who were
Employees on or before July 15 of the preceding Plan Year, or
such other date during the preceding Plan Year as the Plan
Administrator may select (July 15 or such other date being
hereinafter referred to as the "Salary Determination Date" with
respect to all Employees other than those employed by Frito-Lay,
Inc. or its subsidiaries), Annual Compensation shall be the
Participant's annual base salary in effect on the Salary
Determination Date plus any lump sum amount received by the
Participant prior to the Salary Determination Date and during
such preceding Plan Year under the PepsiCo Executive Incentive
Plan or Pepsico's or a subsidiary's Middle Management Incentive
Plan; or
(II) for such Employees who were
not Employees on or before the Salary Determination Date, Annual
Compensation shall be the Participant's annual base salary on his
date of hire;
(ii) In the case of any salaried
Employees who are not considered exempt from the minimum wage and
overtime pay provisions
<PAGE> D-2
of the Fair Labor Standards Act, and in the case of eligible hourly
Employees:
(I) for such Employees who were
Employees on or before the Salary Determination Date, Eligible
Pay shall be the Participant's base salary or hourly wage rate on
the Salary Determination Date, plus any overtime pay earned by
the Participant prior to the Salary Determination Date during
such preceding Plan Year, annualized in accordance with rules
adopted by the Plan Administrator;
(II) for such Employees who were
not Employees on or before the Salary Determination Date, Annual
Compensation shall be the Participant's annual base salary or
hourly wage rate on his date of hire, annualized in accordance
with rules adopted by the Plan Administrator;
(iii) In the case of Employees whose
remuneration is based, in whole or in part, on sales-related
commission payments:
(I) for such Employees who were
Employees on or before the salary Determination Date, Eligible
Pay shall be the Participant's base annual salary in effect on
the Salary Determination Date, plus any commissions earned by the
Participant prior to the Salary Determination Date during such
preceding Plan Year, annualized in accordance with rules adopted
by the Plan Administrator;
(II) for such Employees who were
not Employees on or before the Salary Determination Date,
Eligible Pay shall be the Participant's annual base salary on his
date of hire.
(2) With respect to Employees employed by
Frito-Lay, Inc. or its subsidiaries:
<PAGE> D-3
(i) In the case of salaried Employees
who are considered exempt from the minimum wage and overtime pay
provisions of the Fair Labor Standards Act:
(I) for such Employees who were
Employees on or before July 13 of the preceding Plan Year, or
such other date during the preceding Plan Year as the Plan
Administrator may select (July 13 or such other date being
hereafter referred to as the "Salary Determination Date" with
respect to Employees employed by Frito-Lay, Inc. or its
subsidiaries), Eligible Pay shall be the Participant's annual
base salary in effect on the Salary Determination Date plus any
lump sum amount under the PepsiCo Executive Incentive Plan
received by the Participant prior to the Salary Determination
Date and during such preceding Plan Year, or any quarterly Frito-
Lay Management Incentive Plan payments received by the
Participant prior to the Salary Determination Date and during
such preceding Plan Year annualized; or
(II) for such Employees who were
not Employees on or before the Salary Determination Date,
Eligible Pay shall be the Participant's annual base salary on his
date of hire;
(ii) In the case of any salaried
Employees who are not considered exempt from the minimum wage and
overtime pay provisions of the Fair Labor Standards Act, and in
the case of eligible hourly Employees:
(I) for such Employees who were
Employees on or before the Salary Determination Date, Eligible
Pay shall be the Participant's W-2 earnings plus any amounts
designated as "Choice Pay" or "Flexible Pay" under an Employer's
Benefits Plus program that are used to pay for benefits or are
contributed under the Plan
<PAGE> D-4
(such amounts being hereafter referred to as "Flexible Pay") prior to
the Salary Determination Date during such preceding Plan Year, annualized
in accordance with rules adopted by the Plan Administrator or, if greater,
the Participant's W-2 earnings plus Flexible Pay during the calendar
year prior to such preceding Plan Year; or
(II) for such Employees who were
not Employees on or before the Salary Determination Date, Annual
compensation shall be the Participant's annual base salary on his
date of hire, annualized in accordance with rules adopted by the
Plan Administrator;
(iii) In the case of a Participant who
is classified as commissioned ("route sales") Employees:
(I) for such Employees who were
Employees on or before the Salary Determination Date, Eligible Pay
shall be the Participant's W-2 earnings, plus Flexible Pay prior
to the Salary Determination Date during such preceding Plan Year,
annualized in accordance with rules adopted by the Plan Administrator or,
if greater, the Participant's W-2 earnings plus Flexible Pay during
the Calendar Year prior to such preceding Plan Year, or
(II) for such Employees who
were not Employees on or before the Salary Determination Date,
Eligible Pay shall be the Participant's monthly guaranty on his
date of hire, annualized.
(3) With respect to Employees employed by Wilson
Sporting Goods, Co. or its subsidiaries:
(i) In the case of salaried Employees who
are considered exempt from the minimum wage and overtime pay pro-
visions of the Fair Labor Standards Act:
<PAGE> D-5
(I) for such Employees who were
Employees on or before the Salary Detrmination Date, Eligible Pay
shall be the Participant's annual base salary in effect on the
Salary Determination Date plus any lump sum amount received
by the Participant prior to the Salary Determination Date and during
such preceding Plan Year under the PepsiCo Executive Incentive Plan
or PepsiCo's or a subsidiary's Middle Management Incentive Plan; or
(II) for such Employees who were not
Employees on or before the Salary Determination Date, Eligible Pay shall
be the Participant's annual base salary on his date of hire;
(ii) In the case of any salaried Employees who
are not considered exempt from the minimum wage and overtime pay
provisions of the Fair Labor Standards Act, and in the case of eligible
commissioned Employees:
(I) for such Employees who were Employees
on or before the Salary Determination Date, Eligible Pay shall be the
Participant's W-2 earnings plus Flexible Pay prior to the Salary
Determination Date during such preceding Plan Year, annualized
in accordance with rules adopted in the Plan Administrator; or
(II) for such Employees who were not
Employees on or before the Salary Determination Date, Eligible Pay shall
be the Participant's annual base salary on his date of hire;
(iii) In the case of eligible hourly Employees:
(I) for such Employees who were
Employees on or before the Salary Determination Date, Eligible Pay
shall be the Participant's base salary or hourly wage rate on the
Salary Determination Date, plus any overtime pay earned by the
<PAGE> D- 6
Participant prior to the Salary Determination Date during such preceding
Plan Year, annualized in accordance with rules adopted by the Plan Admin-
istrator; or
(II) for such Empolyees who were not
Employees on or before the Salary Determination Date, Eligible Pay
shall be the Participant's hourly wage rate on his date of hire,
annualized in accordance with rules adopted by the Plan Administrator;
(iv) In the case of Employees who are classified
as piecework-paid Employees:
(I) for such Employees who were Employees
on or before the Salary Determination Date, Eligible Pay shall be
Participant's average hourly rate of pay during the first six months of
the preceding Plan Year, plus any overtime pay earned by the Participant
prior to the Salary Determination Date during said preceding Plan Year,
annualized in accordance with rules adopted by the Plan Administrator; or
(II) for such Employees who were not
Employees on or before the Salary Determination Date, Eligible Pay shall
be the greater of the Participant's labor guarantee on his date of hire or
his piecework guarantee on his date of hire, annualized in accordance with
rules adopted by the Plan Administrator.
(4) Effective as of January 1, 1985, in the case of an
Employee that is transferred from one Employer to another after the Salary
Determination Date for any year, such Employee's Eligible Pay for the year
shall be the Employee's annual base salary, annualized hourly wage rate,
annualized weekly guarantee, annualized labor guarantee or annualized
piecework guarantee (whichever is applicable based on the Employee's
classification) as of the transfer date, plus certain additional
compensation received by the Employee prior to the
<PAGE> D-7
Salary Determination Date but in the same Plan Year as such date. The
additional compensation included pursuant to the preceding sentence is
any overtime, commissions or unit pay (annualized), any lump sum paid
under the PepsiCo Executive Incentive Plan or PepsiCo's or a subsidiary's
Middle Management Incentive Plan, and any quarterly payments under a Frito-
Lay Management Incentive Plan (annualized).
(5) For purposes of paragraphs (1), (2), (3), and (4) above
and except for amounts designated as "Choice Pay" under an Employer's
Benefits Plus program that are used to buy benefits and amounts contributed
under the Plan, salary or wages shall not include amounts or the value of
benefits received, or deemed received, under any performance share plan,
stock option plan or similar plan or under any pension or welfare benefit
plan maintened by the Employer, whether such plan is qualified or non-
qualified and whether such amounts are deferred or not deferred.
(6) In the case of Employees who are not covered by the
provisions of paragraphs (1), (2), (3), or (4) above, the Plan
Administrator shall establish a method for determining Eligible Pay based
upon the method of compensation of such Employees and such method shall
be applied in a nondiscriminatory manner for such group of Employees.
(7) No more than $200,000 in Eligible Pay shall be taken
into account under the Plan in any Plan Year on or after the Effective
Date. This $200,000 limit shall be adjusted automatically a the time and
in such manner as permitted under Code section 415(d).
Effective January 1, 1992, Eligible Pay was defined as follows:
(k) Eligible Pay: Effective January 1, 1992, for each Plan Year,
a Participant's Eligible Pay shall be determined as follows:
(1) Participants Other Than Those Employed by Restaurants
or Frito Division: With respect to all Participants other than those
employed by a
<PAGE> D-8
restaurant division or by Frito-Lay, Inc., Frito-Lay of Texas, Inc.,
Recot, Inc., or Smartfoods, Inc. (a "Frito division"), a Participant's
Eligible Pay shall be the sum of:
(i) The Participant's salary or wages, including forms of
pay delivered in alternative manners such as piecework and payment by
mileage for drivers, overtime, shift differentials, commissions, bonuses
received under the PepsiCo Executive Incentive Plan or the Company's or
a subsidiary's Middle Management Incentive Plan, and payment by mileage
for drivers, overtime, shift differentials, commissions, bonuses received
under the PepsiCo Executive Incentive Plan or the Company's or a subsid-
iary's Middle Management Incentive Plan, and
(ii) Any amount not included in (i) above which is
contributed by the Employer on behalf of the Participant pursuant to
a salary reduction agreement and which is not includable in gross income
under Code sections 125, 402(a)(8), or 402(h).
The amounts under subparagraphs (i) and (ii) shall be taken from payroll
records for the full calendar year that precedes the Plan Year by 2 years.
For example, for the 1993 Plan Year, "Eligible Pay" shall be determined
from amounts earned for the full calendar year ending December 31, 1990.
For a Participant who has only a partial year's earnings during the full
calendar year 2 years prior to the Plan Year, the partial year's
earnings shall be annualized. For a Participant with no earnings
during the full calendar year 2 years prior to the Plan Year, Eligible
Pay shall equal the Participant's base salary or wages, not including
alternative forms of base pay, overtime, shift differentials, commissions
or bonuses on the later of: (A) the "Eligible Pay determination date"
designated by the Plan Administrator with respect to Employees other than
those employed by a restaurant division or a Frito division, or (B) the
Participant's Employment Commencement Date.
<PAGE> D-9
(2) Participants Employed by Frito Division: With
respect to a Participant employed by a Frito division, Eligible Pay
shall be determined as follows:
(i) in the case of a Participant who is a salaried Employee
considered exempt from the minimum wage and overtime pay
provisions of the Fair Labor Standards Act, Eligible Pay shall mean:
(A) If the Participant was an Employee on the Eligible Pay
Determination Date designated by the Plan Administrator
with respect to Employees employed by the Frito division,
(I) the Participant's annual base salary in effect on the
Eligible Pay determination date in the preceding Plan Year, plus
(II) any trimester Frito-Lay Management Incentive Plan
payments received by the Participant prior to the Eligible Pay determination
date and during such preceding Plan Year.
(B) If the Participant was not an Employee on the Eligible Pay
determination date in the preceding Plan Year, the Participant's annual
base salary on his Employment Commencement Date.
(ii) In the case of a Participant who is a salaried Employee not
considered exempt from the minimum wage and overtime pay provisions of the
Fair Labor Standards Act, and in the case of a Participant who is an hourly
Employee, Eligible Pay shall mean:
<PAGE> D-10
(A) If the Participant was an Employee on or before the Eligible
Pay determination date in the preceding Plan Year, the greater of:
(I) the Participant's W-2 earnings, plus any amounts
designated as "Flexible Pay" and contributed by salary reduction agreement
to the Employer's Benefits Plus program or this Plan, in each case through
the Eligible Pay determination date during such preceding Plan Year,
annualized in accordance with rules adopted by the Plan Administrator, or
(II) the Participant's W-2 earnings plus Flexible Pay
during the calendar year immediately prior to such preceding Plan Year.
(B) If the Participant was not an Employee on or before the Eligible
Pay determination date, the Participant's annual base salary or hourly
wage rate on his Employment Commencement Date, annualized in accordance
with rules adopted by the Plan Administrator.
(iii) In the case of a Participant who is classified as a commissioned
("route sales") Employee, Eligible Pay shall mean:
(A) If the Participant was an Employee on or before the
Eligible Pay determination date, the greater of:
(I) the Participant's W-2 earnings, plus any amounts
of Flexible Pay through the Eligible Pay determination date during the
preceding Plan Year, annualized in accordance with rules adopted by the Plan
Administrator, or
<PAGE> D-11
(II) the Participant's W-2 earnings plus Flexible Pay
during the calendar year immediately prior to such preceding Plan Year.
(B) If the Participant was not an Employee on or before the
Eligible Pay determination date for the preceding Plan Year, the
Participant's weekly guarantee on his Employment Commencement Date,
annualized in accordance with rules adopted by the Plan Administrator.
(3) Participants Employed by Restaurant Division: With respect to a
Participant employed by a restaurant division of the Company, his
Eligible Pay shall be determined as follows:
(i) In the case of a Participant who is a salaried Employee of
a restaurant division, Eligible Pay shall mean:
(A) If the Participant was an Employee on the Eligible
Pay determination date designated by the Plan Administrator with respect
to the Employees of his Employer, the sum of:
(I) the Participant's annual base salary in effect
on the Eligible Pay determination date,
(II) any target or lump sum bonus for the calendar
year, annualized in accordance with rules adopted by the Plan Adminstrator.
(B) If the Participant was not an Employee on the Eligible
Pay determination date with respect to the Employees of his Employer, the
sum of the amounts under (I) and (II) above but
<PAGE> D-12
determined as of the Participant's Employment Commencement Date.
(ii) In the case of a Participant who is an hourly Employee of
the KFC division, Eligible Pay shall mean:
(A) If the Participant was an Employee on the Eligible
Pay determination date designated by the Plan Administrator with respect
to KFC division Employees, the sum of:
(I) the Participant's annualized hourly wage rate
rate in effect on the Eligible Pay determination date, plus
(II) any overtime pair prior to the Eligibility
Pay determination date but within the same calendar year, annualized in
accordance with rules adopted by the Plan Administrator.
(B) If the Participant was not an Employee on the Eligible
Pay determination date with respect to KFC division Employees, the sum
of the amounts under (I) and (II) above but determined as of the
Participant's Employement Commencement Date.
(4) Special Rules for Determining Eligible Pay:
(i) For purposes of paragraphs (1) through (3) above and
except for salary reduction amounts designated as Flexible Pay under an
Employer's Benefits Plus program that are used to buy benefits and amounts
contributed under the Plan, salary or wages shall not include amounts or
value of benefits received, or deemed received, under any performance share
plan, stock option plan or similar plan or under any pension or welfare
benefit plan maintained by the Employer, whether such
<PAGE> D-13
plan is qualified or non-qualified and whether such amounts are deferred or
not deferred.
(ii) In the case of Employees who transfer from one Employer to
another during the year, Eligible Pay of such Employees shall be the
amount of annualized base salary or hourly wage rate on the transfer date
plus annualized overtime, commission pay received prior to the transfer date
and prior to the determination date and the amount of any lump sum bonus
paid from an Employer's Incentive Compensation program.
(iii) Notwithstanding the foregoing provisions of this subsection,
in the case of an Employee who elects to make nonqualified deferrals under
the PepsiCo Executive Income Deferral Program for an upcoming Plan Year,
the Employee's Eligible Pay for such Plan Year shall not
be greater than his current base pay and the prior year's bonus under
the Employer's incentive compensation program, decreased by any non-
qualified deferrals elected for the upcoming Plan Year, and increased
by amounts that will be received as distributions from the PepsiCo
Executive Income Deferral Program for such Plan Year.
(iv) For any Plan Year beginning on or after January 1, 1989, the
Eligible Pay of each Participant taken into account under the Plan shall
not be less than $10,000 and shall not exceed $200,000, the latter as
adjusted by the Secretary of the Treasury. In determining the Eligible
Pay of a Participant for purposes of the $200,000 limitation set forth
in the preceding sentence, the rules of section 414(q)(6) of the Code
shall apply, except in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal descendants of
the Participant who have not attained age 19 before the close of the
Plan Year. If, as a result of the application of such rules, the adjusted
$200,000
<PAGE> D-14
limitation is exceeded, then the limitation shall be prorated amoung the
affected individuals in proportion to each such individual's Eligible
Pay as determined under this Section prior to the application of this
limitation.
References in the Plan to deferrals of Eligible Pay, or Salary Deferral
Contributions from Eligible Pay, shall be read as referring to deferrals
of a Participant's current Employee compensation not in excess of Eligible
Pay, determined as above.
<PAGE> 1-1
SCHEDULE 1
PEPSICO
LONG TERM SAVINGS PROGRAM
Designated Employers for Nonrestaurant Salaried Employees
(As of 7/1/92)
Amarillo Pepsi-Cola, Inc.
Atlantic Soft Drink Company, Inc.
Atlantic Soft Drink Company of Knoxville
Belfast Bottling Co. of Reno
Beverage Products Corporation
Beverages, Foods & Service Industries, Inc.
Brainerd-Wadena Beverage Company
Central Valley Beverage Company, Inc.
Claremont Pepsi-Cola Bottling Co., Inc.
Dr Pepper Bottling Co., of San Francisco
East Kentucky Beverage Company, Inc.
Elko Bottling Co.
Frito-Lay, Inc.
Frito-Lay, Texas, Inc.
General Cinema Beverages, Inc.
General Cinema Beverages of Akron, Inc.
General Cinema Beverages of California, Inc.
General Cinema Beverage of Dayton, Inc.
General Cinema Beverages of Ft. Myers, Inc.
General Cinema Beverages of Georgia, Inc.
General Cinema Beverages of Indiana, Inc.
General Cinema Beverages of Miami, Inc.
General Cinema Beverages of North Carolina, Inc.
General Cinema Beverages of North Florida, Inc.
General Cinema Beverages of Ohio, Inc.
General Cinema Beverages of Springfield, Inc.
General Cinema Beverages of Virginia, Inc.
General Cinema Beverages of Washington, D.C., Inc.
General Cinema Beverages of West Virginia, Inc.
General Cinema Beverages of Youngstown, Inc.
Haffenreffer Beverage, Inc.
Iron Range Bottling Co., Inc.
Jackson David Bottling Co.
Laurel Group, Limited
Lovers Leap Company
Mesa Beverage Company
National Beverages, Inc.
New Century Beverage Company
Pepsi-Cola Alton Bottling Inc.
<PAGE> 1-2
Pepsi-Cola Bottling Company of Dodge City, Inc.
Pepsi-Cola Bottling Company of Grand Island
Pepsi-Cola Bottling Company of Los Angeles
Pepsi-Cola Bottling Company of Lyons, Inc.
Pepsi-Cola Bottling Company of Minneapolis &
St. Paul
Pepsi-Cola Bottling Company of Oklahoma City, Inc.
Pepsi-Cola Bottling Company of Omaha, Inc.
Pepsi-Cola Bottling Company of Reading
Pepsi-Cola Bottling Company of Salt Lake City, Inc.
Pepsi-Cola Bottling Company of St. Louis, Inc.
Pepsi-Cola Bottling Company of St. Mary's Inc.
Pepsi-Cola Bottling Company of Tampa
Pepsi-Cola Bottling Company of Waterloo, Iowa
Pepsi-Cola Bottling Company of Wichita, Inc.
Pepsi-Cola Metropolitan Bottling Company, Inc.
(only at certain locations as designated
by the Plan Administrator)
Pepsi-Cola Personnel, Inc. (only at certain
locations as designated by the Plan Administrator)
Pepsi-Cola San Joaquin Bottling Company
Pepsi-Cola Sweeteners, Inc.
Recot, Inc.
Rice Bottling Enterprises, Inc.
Smartfoods, Inc.
Southwest Beverage Corporation
Supreme Beverages, Inc.
Waycross Pepsi-Cola Bottling Company
<PAGE> 2-1
SCHEDULE 2
PEPSICO
LONG TERM SAVINGS PROGRAM
Designated Employers for Nonrestaurant Hourly and Commissioned Employees
(As of 7/1/92)
Amarillo Pepsi-Cola, Inc.
Atlantic Soft Drink Company, Inc.
Atlantic Soft Drink Company of Knoxville
Belfast Bottling Co. of Reno
Beverage Products Corporation
Beverages, Foods & Service Industries, Inc.
Brainerd-Wadena Beverage Company
Central Valley Beverage Company, Inc.
Claremont Pepsi-Cola Bottling Co., Inc.
Dr Pepper Bottling Co., of San Francisco
East Kentucky Beverage Company, Inc.
Elko Bottling Co.
Frito-Lay, Inc.
Frito-Lay, Texas, Inc.
General Cinema Beverages, Inc.
General Cinema Beverages of Akron, Inc.
General Cinema Beverages of California, Inc.
General Cinema Beverage of Dayton, Inc.
General Cinema Beverages of Ft. Myers, Inc.
General Cinema Beverages of Georgia, Inc.
General Cinema Beverages of Indiana, Inc.
General Cinema Beverages of Miami, Inc.
General Cinema Beverages of North Carolina, Inc.
General Cinema Beverages of North Florida, Inc.
General Cinema Beverages of Ohio, Inc.
General Cinema Beverages of Springfield, Inc.
General Cinema Beverages of Virginia, Inc.
General Cinema Beverages of Washington, D.C., Inc.
General Cinema Beverages of West Virginia, Inc.
General Cinema Beverages of Youngstown, Inc.
Haffenreffer Beverage, Inc.
Iron Range Bottling Co., Inc.
Jackson David Bottling Co.
Laurel Group, Limited
Lovers Leap Company
Mesa Beverage Company
National Beverages, Inc.
New Century Beverage Company
<PAGE> 2-2
Pepsi-Cola Alton Bottling Inc.
Pepsi-Cola Bottling Company of Dodge City, Inc.
Pepsi-Cola Bottling Company of Grand Island
Pepsi-Cola Bottling Company of Los Angeles
Pepsi-Cola Bottling Company of Lyons, Inc.
Pepsi-Cola Bottling Company of Minneapolis & St. Paul
Pepsi-Cola Bottling Company of Omaha, Inc.
Pepsi-Cola Bottling Company of Petersburg, Inc.
Pepsi-Cola Bottling Company of Reading
Pepsi-Cola Bottling Company of Salt Lake City, Inc.
Pepsi-Cola Bottling Company of St. Louis, Inc.
Pepsi-Cola Bottling Company of Tampa
Pepsi-Cola Bottling Company of Waterloo, Iowa
Pepsi-Cola Bottling Company of Wichita, Inc.
Pepsi-Cola Metropolitan Bottling Company, Inc.
(only at certain locations as designated
by the Plan Administrator)
Pepsi-Cola Personnel, Inc. (only at certain
locations as designated by the Plan Administrator)
Pepsi-Cola San Joaquin Bottling Company
Pepsi-Cola Sweeteners, Inc.
Recot, Inc.
Rice Bottling Enterprises, Inc.
Smartfoods, Inc.
Supreme Beverages, Inc.
Waycross Pepsi-Cola Bottling Company
<PAGE> 3-1
SCHEDULE 3
PEPSICO
LONG TERM SAVINGS PROGRAM
Designated Employers for Restaurant Employees
(As of 7/1/92)
Pizza Hut, Inc. (and its domestic locations and subsidiaries
except for locations formerly owned by the Herb Blankenship
Franchise; Middleton Enterprises, Inc. and its subsidiaries;
and Employees who work for Pizza Hut of Cincinnati)
PepsiCo Food Systems, a division of PepsiCo, Inc.
Kentucky Fried Chicken Corporation
KFC Corporation
KFC Enterprises, Inc.
KFC National Management Company
KFC of California
Kentucky Fried Chicken International Management Company
Kentucky Fried Chicken International Holdings, Inc.
Kentucky Fried Chicken Corporate Holdings, Ltd.
Taco Bell Corp. (and its domestic subsidiaries)
Taco Bell Enterprises, Inc.
PepsiCo, Inc. (only with respect to those Employees of PepsiCo,
Inc. who are (i) providing services in Illinois to another
Employer and (ii) working under the supervision of such other
Employer)
<PAGE> 4-1
SCHEDULE 4
PEPSICO
LONG TERM SAVINGS PROGRAM
Designated Employers for Transportation Employees
(As of 7/1/92)
Frito-Lay, Inc.
Frito-Lay of Texas, Inc.
Smartfoods, Inc.
Recot, Inc.
<PAGE> 5-1
SCHEDULE 5
PEPSICO
LONG TERM SAVINGS PROGRAM
Designated Hourly Employees of the Company
(As of 7/1/92)
Employees represented by Local 30 of the International Union
of Operating Engineers/A.F.L.-C.I.O.
Security Guards based in Purchase, New York
EXHIBIT 10(g)
AMENDMENT
TO
PEPSICO LONG TERM SAVINGS PLAN
The PepsiCo Long Term Savings Plan is amended as
follows:
(a) As of January 1, 1993 (the "Transfer Date"), the
assets and liabilities of the PepsiCo Employee Stock Ownership
Plan ("ESOP") attributable to the Employer Contribution Accounts
(including the Regular Accounts and the Tax Credit Accounts) of
(i) all Participants in the ESOP who are in the classes of
employees eligible to participate (even if they are not then
participating) in this Plan on the Transfer Date, and (ii) all
former Participants (and their Beneficiaries) in the ESOP who
cannot be located and whose accounts are subject to forfeiture
under the provisions of the ESOP on the Transfer Date, shall be
transferred to this Plan. The Plan shall establish Accounts (or
add amounts to Participants' existing Plan Accounts) for such
Participants equal to the fair market value of their Employer
Contribution Accounts under the ESOP immediately prior to the
Transfer Date. The Accounts established (or added to) for the
Participants shall be administered and managed in accordance with
the provisions of the Plan (including the investment and
distribution of such amounts), subject to any restrictions
mandated by law that continue to apply to amounts previously held
in a Participant's Employer Contribution Account under the ESOP.
The Plan Administrator may establish such subaccounts as it
deems necessary for recordkeeping purposes to reflect the
transfer of assets and liabilities to the Plan.
(b) The amounts transferred to the Plan pursuant to
subparagraph (a) above shall initially be invested (or held for
investment) in the PepsiCo Capital Stock Fund, and thereafter,
shall be subject to investment direction in the same manner as
other amounts held in the Plan.
(c) Of a Participant in the ESOP who has an amount
transferred to the Plan is also a Participant in this Plan, his
Beneficiary of his Account (including the amount transferred
pursuant to subparagraph (a)) shall be determined pursuant to
Article VII of the Plan. For other Participants and former
Participants in the ESOP who have amounts transferred to the
Plan, their Beneficiary shall be determined pursuant to Section
5.15 of the ESOP (which is incorporated herein by reference),
until such time as the Participant is eligible to and executes a
Designation of Beneficiary form under the Plan.
(d) The transfer of assets and liabilities provided for in
this Amendment shall be made in a manner that does not violate
sections 401(a) or 414(1) of the Code or Section 208 of ERISA.
The Plan Administrator and the Trustee shall take such actions
and execute such other documents as may be necessary or desirable
to effectuate fully the transfer provided for herein.
(e) The transfer of assets and liabilities provided for in
the Amendment shall be subject to the Internal Revenue Service's
not taking any adverse action regarding the validity of the
transfer or the tax-qualified status of the Plan or the ESOP with
respect to the transfer, and, if the Internal Revenue Service
takes such adverse action and the deficiencies may not be
corrected to the satisfaction of the Company, then regardless of
the provisions contained herein, this Amendment shall become null
and void ab initio and the transferred amounts shall be returned
to the ESOP.
PEPSICO LONG TERM SAVINGS PROGRAM
AMENDMENT APPROVAL
Effective as of January 1, 1993, the PepsiCo Long Term
Savings Program is hereby amended in accordance with the
Amendment attached hereto.
This 14th day of September, 1994.
PEPSICO, INC.
By: /s/ J. ROGER KING
J. Roger King
APPROVED:
By: /s/ ALAN ROCKOFF
Law Department
By: /s/ Sylvester Holmes
Tax Department
EXHIBIT 11
<PAGE> 1 OF 2
PEPSICO, INC. AND SUBSIDIARIES
Computation of Net Income Per Share of Capital Stock - Primary
Years Ended December 31, 1994, December 25, 1993 and December 26, 1992
(in millions except per share amounts)
1994 1993 1992
Shares outstanding at beginning
of year 798.8 798.8 789.1
Weighted average of shares issued
during the year for exercise of
stock options, acquisitions,
conversion of debentures and
payment of compensation awards 2.9 5.0 4.2
Shares repurchased (weighted) (8.2) (7.5) (0.8)
Dilutive shares contingently issuable
upon exercise of stock options,
conversion of debentures and payment
of compensation awards, net of
shares assumed to have been purchased for
treasury (at the average price) with
assumed proceeds from exercise of
stock options and compensation
awards 10.1 13.8 14.2
Total shares - primary 803.6 810.1 806.7
Income before cumulative effect of
accounting changes $1,784.0 $1,587.9 $1,301.7
Decrease in interest and amortiza-
tion of debt expense relating
to convertible debentures, net
of income tax benefit - 0.1 0.1
Income before cumulative effect of
accounting changes as adjusted 1,784.0 1,588.0 1,301.8
Cumulative effect of accounting
changes:
Postemployment benefits (55.3) - -
Pension assets 23.3 - -
Postretirement benefits
other than pensions - - (356.7)
Income taxes - - (570.7)
Net income as adjusted $1,752.0 $1,588.0 $ 374.4
Income (charge) per share:
Before cumulative effect of
accounting changes $ 2.22 $ 1.96 $ 1.61
Cumulative effect of
accounting changes:
Postemployment benefits (0.07) - -
Pension assets 0.03 - -
Postretirement benefits
other than pensions - - (0.44)
Income taxes - - (0.71)
Net income per share - primary $ 2.18 $ 1.96 $ 0.46
<PAGE> 2 OF 2
PEPSICO, INC. AND SUBSIDIARIES
Computation of Net Income Per Share of Capital Stock - Fully Diluted
Years Ended December 31, 1994, December 25, 1993 and December 26, 1992
(in millions except per share amounts)
1994 1993 1992
Shares outstanding at beginning
of year 798.8 798.8 789.1
Weighted average of shares issued
during the year for exercise of
stock options, acquisitions,
conversion of debentures and
payment of compensation awards 6.0 12.3 10.7
Shares repurchased (weighted) (8.2) (7.5) (0.8)
Dilutive shares contingently issuable
upon exercise of stock options,
conversion of debentures and payment
of compensation awards, net of
shares assumed to have been purchased for
treasury (at the higher of average or
quarter-end price) with assumed
proceeds from exercise of stock
options and compensation awards 9.5 13.9 14.2
Total shares - fully diluted 806.1 817.5 813.2
Income before cumulative effect of
accounting changes $1,784.0 $1,587.9 $1,301.7
Decrease in interest and amortiza-
tion of debt expense relating
to convertible debentures, net
of income tax benefit - 0.1 0.1
Income before cumulative effect of
accounting changes as adjusted 1,784.0 1,588.0 1,301.8
Cumulative effect accounting
changes:
Postemployment benefits (55.3) - -
Pension assets 23.3 - -
Postretirement benefits
other than pensions - - (356.7)
Income taxes - - (570.7)
Net income as adjusted $1,752.0 $1,588.0 $ 374.4
Income (charge) per share:
Before cumulative effect of
accounting changes $ 2.21 $ 1.94 $ 1.60
Cumulative effect of accounting
changes:
Postemployment benefits (0.07) - -
Pension assets 0.03 - -
Postretirement benefits
other than pensions - - (0.44)
Income taxes - - (0.70)
Net income per share -
fully diluted $ 2.17 $ 1.94 $ 0.46
EXHIBIT 12
PEPSICO, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Years Ended December 31, 1994, December 25, 1993, December 26, 1992,
December 28, 1991 and December 29, 1990
(in millions except ratio amounts)
1994 1993 1992 1991 1990
Earnings:
Income from continuing
operations before income
taxes and cumulative
effect of accounting
changes (a) $2,664.4 $2,422.5 $1,898.8 $1,659.7 $1,653.8
Amortization of
capitalized interest 5.2 5.0 5.0 4.5 5.3
Interest expense (a) 645.0 572.7 586.1 613.7 686.0
Amortization of
debt discount 0.3 0.2 0.3 0.3 0.3
Interest portion of net
rent expense (b) 150.0 134.4 121.4 103.4 87.4
Earnings available for
fixed charges $3,464.9 $3,134.8 $2,611.6 $2,381.6 $2,432.8
Fixed Charges:
Interest expense (a) $ 645.0 $ 572.7 $ 586.1 $ 613.7 $ 686.0
Capitalized interest 4.7 6.5 6.6 10.0 8.6
Amortization of
debt discount 0.3 0.2 0.3 0.3 0.3
Interest portion of net
rent expense (b) 150.0 134.4 121.4 103.4 87.4
Total fixed charges $ 800.0 $ 713.8 $ 714.4 $ 727.4 $ 782.3
Ratio of Earnings
to Fixed Charges 4.33 4.39 3.66 3.27 3.11
(a) To improve comparability, the 1991 and 1990 amounts have
been restated to report under the equity method of
accounting the results of previously consolidated snack food
businesses in Spain, Portugal and Greece, which were contributed to
the new Snack Ventures Europe joint venture with General Mills, Inc.
in late 1992.
(b) One-third of net rent expense is the portion deemed representative
of the interest factor.
EXHIBIT 21
ACTIVE SUBSIDIARIES OF PEPSICO, INC.
DECEMBER 31, 1994
State or
Country of
Subsidiary Incorporation
A & M Food Services, Inc. Nevada
El KrAm, Inc. Iowa
Pizza Huts of the Northwest, Inc. Minnesota
Ainwick Corporation Oregon
Anderson Hill Insurance Limited Bermuda
Atlantic Soft Drink Company, Inc. South Carolina
Atlantic Soft Drink Company of Knoxville Tennessee
Waycross Pepsi-Cola Bottling Co., Inc. Georgia
Beaman Bottling Company Tennessee
Beverages, Foods & Service Industries, Inc. Delaware
Chevys, Inc. California
Chevys, Inc. Delaware
Chevys Inc., Las Vegas Nevada
CPK Acquisition Corp. California
California Pizza Kitchen, Inc. California
California Pizza Kitchen of Delaware, Inc. Delaware
California Pizza Kitchen of Illinois Illinois
California Pizza Kitchen of Scottsdale, Inc. Arizona
California Pizza Kitchen of Tyson's Corner Virginia
Davlyn Realty Corporation Delaware
East Kentucky Beverage Company, Inc. Kentucky
Equity Beverage, Inc. Delaware
Hostess-FL NRO Ltd. Canada
Hot 'n Now, Inc. Michigan
Burger One Inc. Michigan
HNN, Inc. Delaware
Japan Frito-Lay Ltd. Japan
Kentucky Fried Chicken of California, Inc. Delaware
Kentucky Fried Chicken of Southern California, Inc. California
National Beverages, Inc. Florida
North Pacific Territories Holding Company Washington
Alpac Corporation Washington
Gamble, Inc. Oregon
MBA Western Co. Delaware
Western Bottling Company, Inc. Washington
Mann Bottling Company, Inc. Idaho
Pepsi Cola Bottling Company of
Everett, Inc. Washington
Pepsi-Cola Bottling Company of Alaska, Inc. Alaska
PepsiCo Capital Corporation N.V. Neth. Antilles
Kentucky Fried Chicken Corporate Holdings, Ltd. Delaware
Kentucky Fried Chicken International
Holdings, Inc. Delaware
PepsiCo Puerto Rico, Inc. Delaware
PRS, Inc. Delaware
PEI N.V. Neth. Antilles
Seven-Up Nederland B.V. Netherlands
PepsiCo IVI S.A. Greece
Pepsi-Cola International (PVT) Limited Pakistan
Pepsi-Cola Mamulleri Limited Sirketi Turkey
Pizza Gida Isletmeleri Turkey
KFC Canada (NRO) Ltd. Canada
PepsiCo Finance (Antilles A) N.V. Neth. Antilles
Pepsi-Cola Canada (NRO) Ltd. Canada
Pepsi-Cola Canada, Ltd. Canada
PepsiCo Finance (Antilles B) N.V. Neth. Antilles
Pepsi-Cola France SNC France
Pepsi-Cola G.m.b.H. Germany
Florida Int'l. Fruchtsaftgetraenke G.m.b.H. Germany
Pizza Hut Restauration G.m.b.H. & Co. K.G. Germany
Pepsi-Cola Argentina, S.A.C.I. Argentina
Inversiones PFI Chile Limitada Chile
Evercrisp Snack Products de Chile S.A. Chile
Pepsi Snacks Argentina S.A. Argentina
PepsiCo China, Ltd. China
PepsiCo Holdings Ltd. England
Kentucky Fried Chicken (Great Britain) Limited England
PepsiCo International Ltd. England
PepsiCo Property Management Limited England
PepsiCo World Trading Company (UK) Ltd. England
Pizza Hut International (England) Ltd. England
Pizza Hut (UK) Ltd. England
Smiths Crisps Limited England
Walkers Smiths Snack Foods Limited England
Crispflow Limited England
Frito-Lay Holdings Limited England
PFI Agriculture Europe Ltd. England
PepsiCo Overseas Corp. Delaware
PepsiCo Overseas Finance N.V. Neth. Antilles
PepsiCo Services Corp. Delaware
PepsiCo World Trading Company, Inc. Delaware
Pepsi-Cola (Bermuda) Limited Bermuda
The Concentrate Manufacturing Company of Ireland Ireland
Seven-Up Ireland Limited Ireland
Pepsi-Cola Manufacturing (Ireland) Ireland
PARCO N.V. Neth. Antilles
Paine Corporation N.V. Neth. Antilles
Paige N.V. Neth. Antilles
PepsiCo Finance (U.K.) Limited England
Pizza Belgium S.A. Belgium
E Wedel S.A. Poland
PepsiCo (Ireland) Limited Ireland
Pepsi-Cola Bottling Company of Los Angeles California
Channel Island Beverage Co., Inc. California
Pepsi-Cola Commodities, Inc. Delaware
Pepsi-Cola de Espana, S.A. Spain
Compania de Bebides PepsiCo, S.A. Spain
Kas S.A. Spain
Pizza Hut de Espana S.A. Spain
Snack Vendures Europe S.C.A. Europe
Pepsi-Cola de France S.A.R.L. France
Pepsi-Cola Equipment Corp. New York
Pepsi-Cola Far East Trade Development Co., Inc.
Philippines
Pepsi-Cola Interamericana de Guatemala S.A. Guatemala
Pepsi-Cola International Limited Bermuda
Pepsi-Cola International Limited (U.S.A.) Delaware
Pepsi-Cola Metropolitan Bottling Company, Inc. New Jersey
General Cinema Beverages, Inc. Delaware
Laurel Group Limited Pennsylvania
New Century Beverage Company California
Belfast Bottling Co. of Reno Nevada
Pepsi-Cola Alton Bottling, Inc. Illinois
Pepsi-Cola Mediterranean, Ltd. Delaware
Seven-Up International, Inc. Delaware
Seven-Up Southern Hemisphere, Inc. Missouri
Pepsi-Cola Mexicana S.A. de C.V. Mexico
Pepsi-Cola Panamericana, S.A. Delaware
Pepsi-Cola Personnel, Inc. Delaware
Pepsi Cola San Joaquin Bottling Company Delaware
Pizza Hut, Inc. Delaware
PepsiCo Australia Pty., Ltd. Australia
Pizza Hut Properties Pty. Ltd. Australia
Pizza Hut of America, Inc. Delaware
Bell Taco Funding Syndicate Australia
PGCC, Inc. Delaware
General Cinema Beverages of Akron, Inc. Delaware
General Cinema Beverages of Dayton, Inc. Delaware
General Cinema Beverages of Ohio, Inc. Delaware
General Cinema Beverages of
Springfield, Inc. Delaware
General Cinema Beverages of
Youngstown, Inc. Delaware
Pizza Management, Inc. Texas
Pizza Management de Espana, S.A. Spain
Restaurant Associates, S.A. Spain
Recot, Inc. Delaware
Frito-Lay, Inc. Delaware
FL Holding, Inc. Delaware
Opco Holding Inc. Delaware
Pepsi-Cola Operating Company of Chesapeake
and Indianapolis Delaware
TGCC, Inc. Delaware
General Cinema Beverages of
Ft. Myers, Inc. Delaware
General Cinema Beverages of Georgia, Inc. Delaware
General Cinema Beverages of Indiana, Inc. Delaware
General Cinema Beverages of Miami, Inc. Delaware
General Cinema Beverages of
North Florida, Inc. Delaware
General Cinema Beverages of Virginia, Inc. Delaware
General Cinema Beverages of
Washington, D.C., Inc. Delaware
General Cinema Beverages of
West Virginia, Inc. Delaware
Midland Bottling Co. Delaware
MBA Brainerd Co. Delaware
Brainerd-Wadena Beverage Company Minnesota
MBA Dodge City Co. Delaware
Pepsi-Cola Bottling Company of
Dodge City, Inc. Minnesota
MBA Elko Co. Delaware
Elko Bottling Co. Nevada
MBA Grand Island Co. Delaware
Pepsi-Cola Bottling Company of
Grand Island Nebraska
MBA Grand Rapids Co. Delaware
Iron Range Bottling Co., Inc. Minnesota
MBA Jackson Co. Delaware
Jackson David Bottling Co. Colorado
MBA Lyons Co. Delaware
Pepsi-Cola Bottling Company of
Lyons, Inc. Minnesota
MBA Mesa Co. Delaware
Mesa Beverage Company Colorado
MBA Omaha Co. Delaware
Pepsi-Cola Bottling Company of
Omaha, Inc. Nebraska
MBA Recyclers Co. Delaware
Contract Recyclers, Inc. Minnesota
MBA Salt Lake Co. Delaware
Pepsi-Cola Bottling Company of
Salt Lake City, Inc. Minnesota
MBA St. Louis Co. Delaware
Pepsi-Cola Bottling Company of
St. Louis, Inc. Missouri
Edmund Industrial Redevelopment
Corporation Missouri
MBA St. Paul Co. Delaware
Pepsi-Cola Bottling Company of
Minneapolis and St. Paul Minnesota
Contract Beverages, Inc. Minnesota
MBA Tulsa Beverage Co. Delaware
Beverage Products Corporation Oklahoma
MBA Wichita Co. Delaware
Pepsi-Cola Bottling Company of
Wichita, Inc. Minnesota
Pepsi-Cola Bottling Company of Tampa Florida
NKFC, Inc. Delaware
QSR, Inc. Delaware
KFC Enterprises, Inc. Delaware
Kentucky Fried Chicken Corporation Delaware
KFC Corporation Delaware
General Cinema Beverages of
California, Inc. Delaware
General Cinema Beverages of
North Carolina, Inc. Delaware
KFC National Management Company Delaware
Smartfoods, Inc. Delaware
Redux Realty, Inc. Delaware
Rice Bottling Enterprises, Inc. Tennessee
Sabritas, S.A. de C.V. Mexico
Empresas Gamesa, S.A. de C.V. Mexico
Groupo Gamesa, S.A. de C.V. Mexico
Shelbyville Bottling Company, Inc. Tennessee
Taco Bell Corp. California
Calny, Inc. Delaware
Taco Bell of California, Inc. California
Taco Bell Royalty Company California
Taco Del Sur, Inc. Georgia
Tenga Taco, Inc. Florida
Taco Enterprises, Inc. Michigan
TBLD Corp. California
TFL Holdings, Inc. Delaware
Upper Midwest Pizza Hut, Inc. Delaware
Von Karman Leasing Corp. Delaware
Wilson International Sales Corporation Delaware
Omitted from the above list are approximately 340 insignificant or
inactive subsidiaries which, if considered in the aggregate as a
single subsidiary, would not constitute a significant subsidiary. The
list also excludes approximately 100 subsidiaries of Pizza Hut, Inc.,
of which 80 operate restaurants in the U.S., and approximately 40
subsidiaries of Kentucky Fried Chicken Corporation and Kentucky Fried
Chicken Corporate Holdings, Ltd., which operate restaurants outside of
the U.S.
Report and Consent of Independent Auditors EXHIBIT 23
The Board of Directors
PepsiCo, Inc.
The audits referred to in our report dated February 7, 1995
included the related financial statement schedule as of December
31, 1994 and December 25, 1993, and for each of the years in the
three-year period ended December 31, 1994 listed in the
accompanying index at Item 14(a)2. The financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial
statement schedule based on our audits. In our opinion, such
financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set
forth therein.
We consent to the use of our reports included herein (or
incorporated herein by reference) in the Registration Statements
on Form S-8 (No. 33-35602, No. 33-29037, No. 33-42058, No. 33-
51496, No. 33-54731 and No. 33-66150, pertaining to the PepsiCo
SharePower Stock Option Plan; No. 33-43189, pertaining to the
PepsiCo SharePower Stock Option Plan for Opco Employees; No. 33-
22970, pertaining to the 1988 Director Stock Plan; No. 33-19539,
pertaining to the 1979 Incentive Plan and the 1987 Incentive
Plan; No. 33-54733, pertaining to the 1994 Long-Term Incentive
Plan; No. 2-65410, pertaining to the 1979 Incentive Plan; No. 2-
82645 and No. 33-51514, pertaining to the PepsiCo, Inc. Long Term
Savings Program; No. 2-93163, No. 2-99532 and No. 33-10488,
pertaining to the Long Term Savings Programs of Taco Bell Corp.,
Pizza Hut, Inc. and Kentucky Fried Chicken Corporation,
respectively) and the Registration Statements on Form S-3 (No. 33-
37271, pertaining to the Pizza Hut Cincinnati, Inc. and Tri-L
Pizza Huts, Inc. acquisitions; No. 33-35601, No. 33-42122, No. 33-
56666 and No. 33-66146, pertaining to the PepsiCo SharePower
Stock Option Plan for Employees of Monsieur Henri Wines, Ltd.;
No. 33-30658 and No. 33-38014, pertaining to the PepsiCo
SharePower Stock Option Plan for Opco Employees; No. 33-42121,
pertaining to the PepsiCo SharePower Stock Option Plan for PCDC
Employees; No. 33-66144 pertaining to the PepsiCo SharePower
Stock Option Plan for Employees of Chevys, Inc.; No. 33-66148
pertaining to the PepsiCo SharePower Stock Option Plan for
Employees of Southern Tier Pizza Hut, Inc. and STPH Delco, Inc.;
No. 33-30372, pertaining to the Pepsi-Cola Bottling Company
Annapolis acquisition; No. 33-8677, pertaining to the
$500,000,000 Euro-Medium-Term Notes; No. 33-39283, pertaining to
the $2,500,000,000 Debt Securities and Warrants; No. 33-47527,
pertaining to the Semoran Management Corporation acquisition; No.
33-53232, pertaining to the $32,500,000 Puerto Rico Industrial,
Medical and Environmental Pollution Control Facilities Financing
Authority Adjustable Rate Industrial Revenue Bonds; No. 33-57181,
pertaining to the $3,322,000,000 Debt Securities and Warrants;
No. 33-51389, pertaining to the $2,500,000,000 Debt Securities
and Warrants; No. 33-50685, pertaining to the extension of the
PepsiCo SharePower Stock Option Plan to Employees of Snack
Ventures Europe, a joint venture between PepsiCo Foods
International and General Mills, Inc.) and the Registration
Statements on Form S-4 (No. 33-31844, pertaining to the Erin
Investment Corp. acquisition; No. 33-4635, pertaining to the A&M
Food Services, Inc. acquisition; No. 33-21607, pertaining to the
Pizza Hut Titusville, Inc. acquisition; No. 33-37978, pertaining
to the domestic Kentucky Fried Chicken operations of Collins
Foods International, Inc. acquisition; No. 33-47314, pertaining
to the Pizza Management, Inc. acquisition) and in the related
Prospectuses.
KPMG Peat Marwick LLP
New York, New York
March 28, 1995
EXHIBIT 24
POWER OF ATTORNEY
PepsiCo, Inc. ("PepsiCo") and each of the undersigned, an officer
or director, or both, of PepsiCo, do hereby appoint Edward V.
Lahey, Jr. and Lawrence F. Dickie, and each of them severally,
its, his or her true and lawful attorney-in-fact to execute on
behalf of PepsiCo and the undersigned the following documents and
any and all amendments thereto (including post-effective
amendments):
(i) Registration Statements No. 33-8677, 33-39283, 33-53232, 33-
51389 and 33-57181 relating to the offer and sale of PepsiCo's
Debt Securities and Warrants, and any registration statements
deemed by any such attorney-in-fact to be necessary or
appropriate to register the offer and sale of debt securities or
warrants by PepsiCo or guarantees by PepsiCo of any of its
subsidiaries' debt securities or warrants;
(ii) Registration Statements No. 33-4635, 33-21607, 33-30372, 33-
31844, 33-37271, 33-37978, 33-47314 and 33-47527 all relating to
the primary and/or secondary offer and sale of PepsiCo Capital
Stock issued or exchanged in connection with acquisition
transactions, and any registration statements deemed by any such
attorney-in-fact to be necessary or appropriate to register the
primary and/or secondary offer and sale of PepsiCo Capital Stock
issued or exchanged in acquisition transactions;
(iii) Registration Statements No. 33-29037, 33-35602, 33-42058,
33-51496, 33-54731 and 33-66150 relating to the offer and sale of
shares of PepsiCo Capital Stock under the PepsiCo SharePower
Stock Option Plan; Registration Statements No. 33-38014, 33-30658
and 33-43189 relating to the extension of the PepsiCo SharePower
Stock Option Plan to employees of Pepsi-Cola Operating Company of
Chesapeake and Indianapolis; Registration Statements No. 33-
35601, 33-42122, 33-56666 and 33-66146 relating to the extension
of the PepsiCo SharePower Stock Option Plan to employees of
Monsieur Henri; Registration Statement No. 33-42121 relating to
the extension of the PepsiCo SharePower Stock Option Plan to
employees of Pepsi-Cola of Washington D.C., L.P.; Registration
Statement No. 33-66144 relating to the extension of the PepsiCo
SharePower Stock Option Plan to employees of Chevys, Inc.;
Registration No. 33-66148 relating to the extension of the
PepsiCo SharePower Stock Option Plan to employees of Southern
Tier Pizza Hut, Inc.; Registration Statement No. 33-50685
relating to the extension of the PepsiCo SharePower Stock Option
Plan to employees of Snack Ventures Europe, a joint venture
between PepsiCo Foods International and General Mills, Inc., and
any registration statements deemed by any such attorney-in-fact
to be necessary or appropriate to register the offer and sale of
shares of PepsiCo Capital Stock under the PepsiCo SharePower
Stock Option Plan to employees of PepsiCo or otherwise;
(iv) Registration Statements No. 2-82645, 2-99532, 2-93163, 33-
10488 and 33-51514 covering the offer and sale of shares of
PepsiCo Capital Stock under the Long Term Savings Programs of
PepsiCo, Pizza Hut, Inc., Taco Bell Corp. and Kentucky Fried
Chicken Corporation, and any registration statements deemed by
any such attorney-in-fact to be necessary or appropriate to
register the offer and sale of shares of PepsiCo Capital Stock
under the long term savings programs of any other subsidiary of
PepsiCo;
(v) Registration Statement No. 33-54733, relating to the offer
and sale of shares of PepsiCo Capital Stock under PepsiCo's 1994
Long-Term Incentive Plan, Registration Statement No. 33-19539
relating to the offer and sale of shares of PepsiCo Capital Stock
under PepsiCo's 1987 Incentive Plan and resales of such shares by
officers of PepsiCo, and Registration Statement No. 2-65410
relating to the offer and sale of shares of PepsiCo Capital Stock
under PepsiCo's 1979 Incentive Plan, 1972 Performance Share Plan,
as amended, and various option plans, and resales of such shares
by officers of PepsiCo;
(vi) Registration Statement No. 33-22970 relating to the offer
and sale of shares of PepsiCo Capital Stock under PepsiCo's 1988
Director Stock Plan; and
(vii) all other applications, reports, registrations,
information, documents and instruments filed or required to be
filed by PepsiCo with the Securities and Exchange Commission, any
stock exchanges or any state official or agency in connection
with the listing, registration or approval of PepsiCo Capital
Stock, PepsiCo debt securities or warrants or PepsiCo guarantees
of its subsidiaries' debt securities or warrants, or the offer
and sale thereof, or in order to meet PepsiCo's reporting
requirements to such entities or persons;
and to file the same, with all exhibits thereto and other
documents in connection therewith, and each of such attorneys
shall have the power to act hereunder with or without the other.
IN WITNESS WHEREOF, the undersigned has executed this instrument
on February 23, 1995.
PepsiCo, Inc.
By: /s/ EDWARD V. LAHEY, JR.
---------------------------
Edward V. Lahey, Jr.
Senior Vice President, General
Counsel and Secretary
/s/ D.WAYNE CALLOWAY /s/ ROBERT G. DETTMER
- -------------------------- -----------------------
D. Wayne Calloway Robert G. Dettmer
Chairman of the Board, Chief Executive Vice President and
Executive Officer and Director Chief Financial Officer
/s/ ROBERT L. CARLETON /s/ ROGER A. ENRICO
- ----------------------------- ------------------------
Robert L. Carleton Roger A. Enrico
Senior Vice President and Vice Chairman of the Board,
Controller Chairman,
(Chief Accounting Officer) PepsiCo Worldwide Restaurants
and Director
/s/ JOHN F. AKERS /s/ ROBERT E. ALLEN
- ------------------- ---------------------
John F. Akers Robert E. Allen
Director Director
/s/ JOHN J. MURPHY /s/ ANDRALL E. PEARSON
- --------------------- --------------------------
John J. Murphy Andrall E. Pearson
Director Director
/s/ SHARON PERCY ROCKEFELLER /s/ ROGER B. SMITH
- ----------------------------- --------------------------
Sharon Percy Rockefeller Roger B. Smith
Director Director
/s/ ROBERT H. STEWART, III /s/ FRANKLIN A. THOMAS
- --------------------------- ----------------------
Robert H. Stewart, III Franklin A. Thomas
Director Director
/s/ P.ROY VAGELOS /s/ ARNOLD R. WEBER
- --------------------- -----------------------
P. Roy Vagelos Arnold R. Weber
Director Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM PEPSICO, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE 53 WEEK
PERIOD ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<CIK> 0000077476
<NAME> PepsiCo, Inc.
<MULTIPLIER> 1,000,000
<S> <C>
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<PERIOD-TYPE> Year
<CASH> 331
<SECURITIES> 1,157
<RECEIVABLES> 2,202
<ALLOWANCES> 151
<INVENTORY> 970
<CURRENT-ASSETS> 5,072
<PP&E> 16,130
<DEPRECIATION> 6,247
<TOTAL-ASSETS> 24,792
<CURRENT-LIABILITIES> 5,270
<BONDS> 8,841
<COMMON> 14
0
0
<OTHER-SE> 6,842
<TOTAL-LIABILITY-AND-EQUITY> 24,792
<SALES> 28,472
<TOTAL-REVENUES> 28,472
<CGS> 13,715
<TOTAL-COSTS> 13,715
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 59
<INTEREST-EXPENSE> 645
<INCOME-PRETAX> 2,664
<INCOME-TAX> 880
<INCOME-CONTINUING> 1,784
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 32
<NET-INCOME> 1,752
<EPS-PRIMARY> 2.18
<EPS-DILUTED> 2.17
</TABLE>
