SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
February 7, 1996 (February 6, 1996)
--------------------------------------
Date of Report (Date of earliest event reported)
PEPSICO, INC.
----------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina
---------------------------------
(State or other jurisdiction of incorporation)
1-1183 13-1584302
(Commission File Number) (IRS Employer Identification No.)
700 Anderson Hill Road, Purchase, New York, 10577
-------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (914) 253-2000
<PAGE>
Item 5. Other Events
The information contained in Exhibit 20 hereto is incorporated herein
by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits
20 Press release dated February 6, 1996 from PepsiCo, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 6, 1996 PepsiCo, Inc.
By: /s/ LAWRENCE F. DICKIE
------------------------
Lawrence F. Dickie
Vice President,
Associate General Counsel
and Assistant Secretary
EXHIBIT 20
PURCHASE, NEW YORK (February 6, 1996) -- PepsiCo, Inc. today announced results
for the fourth quarter and full year ended December 30, 1995. Excluding the
previously announced initial, noncash charge from the adoption of SFAS 121, a
required accounting change, earnings per share were $0.70 for the fourth quarter
and $2.48 for the full year. SFAS 121 is described at the end of the release.
The following explanation of fourth quarter and full year results is based on
ongoing earnings as shown below:
<TABLE>
<CAPTION>
Summary of 1995 Operating Performance
($MM except per share data)
Q4 FY
------------------------------- ------------------------------
------------ ------------ ------- ------------ ------------- ------
1995 1994 1995 1994
$ $ % $ $ %
- - - - - -
------------ ------------ ------- ------------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
Net Sales 9,251 9,122 1 30,421 28,472 7
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
Net Income 181 513 (65) 1,606 1,752 (8)
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
Reported EPS 0.22 0.64 (66) 2.00 2.18 (8)
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
BAESA Gain N/A N/A N/A N/A (0.02) N/A
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
Accounting Changes 0.48 N/A N/A 0.48 0.04 N/A
---- --- ---- ----
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
Ongoing EPS 0.70 0.64 9 2.48 2.20 13
- ---------------------------------- ------------ ------------ ------- ------------ ------------- ------
[Note: The impact of one less week in 1995 on sales and earnings is
described more fully at the end of this release and is detailed in the
attachments. Volume trends are reported on a comparable basis and are not
affected by the shorter reporting period.]
</TABLE>
<PAGE>
Wayne Calloway, PepsiCo Chairman and Chief Executive Officer, said, "We had a
terrific year in 1995 and that has set the stage for an even better 1996. Our
businesses showed remarkable strength, generating a healthy 13 percent increase
in ongoing earnings per share, despite some big challenges - including a huge
currency devaluation in Mexico, our largest international market, and the fact
that, for reporting comparisons, we had one less week this year. In fact,
looking at a comparable number of weeks, we would have posted 15 percent growth
in earnings per share for the year due, in large part, to earnings growth of
more than 20 percent by our businesses outside of Mexico.
"These solid operating results helped our overall cash picture, but the big cash
story was in restaurants where we generated a favorable increase of about $500
million in cash compared to last year.
"With this kind of financial strength, we're very optimistic about 1996 and
remain committed to using some of our excess cash to buy at least one to two
percent of our outstanding stock each year over the next several years."
<TABLE>
BEVERAGES
<CAPTION>
Summary of 1995 Ongoing Beverage Results
($MM)
Q4 FY
-------------------------------------- -------------------------------------------
Sales Profits Vol Sales Profits Vol
- ---------------- -------- ------ -------- ------ --------- ---------- ------ ---------- ------ -----------
$ % $ % % $ % $ % %
- ---------------- -------- ------ -------- ------ --------- ---------- ------ ---------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------- -------- ------ -------- ------ --------- ---------- ------ ---------- ------ -----------
U.S. 2,042 5 269 1 3 6,977 7 1,145 12 4
- ---------------- -------- ------ -------- ------ --------- ---------- ------ ---------- ------ -----------
- ---------------- -------- ------ -------- ------ --------- ---------- ------ ---------- ------ -----------
Int'l 1,056 7 34 100 5 3,571 14 226 16 8
----- -- ----- ---
- ---------------- -------- ------ -------- ------ --------- ---------- ------ ---------- ------ -----------
- ---------------- -------- ------ -------- ------ --------- ---------- ------ ---------- ------ -----------
Total 3,098 5 303 7 N/A 10,548 9 1,371 13 N/A
- ---------------- -------- ------ -------- ------ --------- ---------- ------ ---------- ------ -----------
[Note: Volume is measured by systemwide bottler case sales (BCS) of Pepsi
Corporate brands. The quarter includes the months of September, October,
November and December, a practice consistent with prior years.]
-2-
</TABLE>
<PAGE>
"Our beverage segment had an excellent year," said Mr. Calloway. "In the United
States, despite the highest annual increase in retail prices in the soft drink
industry since the late `80's, we were able to grow volume by a very solid four
percent - on top of a six percent gain last year. We achieved this, in part, by
offering the consumer exciting packaging options like 20 oz. plastic bottles and
"The Cube", a 24-can package.
"Our international beverage business also showed great strength. Our
international volume grew eight percent despite the weak economy in Mexico, a
country which accounted for almost 20 percent of our international volume last
year. We also began to see the results of our investments in high-potential
emerging markets. For example, we regained cola share leadership in key Eastern
European markets, like Hungary and Poland. We also jumped to a 40 percent market
share in India and almost doubled our volume in Brazil. In summary, our global
beverage business is well positioned for continued strong growth, in both the
U.S. and international markets."
Fourth Quarter
The five percent increase in U.S. sales was primarily driven by price increases
initiated in the first quarter and volume gains partially offset by the impact
of the shorter reporting period. The three percent increase in bottler case
sales, on top of an eight percent gain last year, reflected solid growth in both
our core brands and alternative beverages. However, the key driver of the growth
was packaging news led by the 20 oz. plastic bottle and the 24-can Cube package.
As a result, we achieved market share gains in our major bottle and can
channels. Alternative beverages grew 18 percent, primarily due to double-digit
growth in our single-serve Lipton Tea products and in All Sport. For the second
consecutive year, Lipton was the market share leader, with a 40 percent share in
single-serve teas in supermarkets.
Despite the robust growth in sales, U.S. beverage profits increased only one
percent due, in part, to the shorter reporting period. Included in the quarter
was spending on strategic volume-building initiatives, like preparing to take
our Mug Root Beer brand national, as well as investments made to add new
accounts like Circle K, Jack-In-the-Box and Toys "R" Us.
-3-
<PAGE>
International sales growth in the fourth quarter primarily was driven by volume.
Systemwide, the gain in bottler case sales was particularly impressive on top of
the 11 percent growth achieved in the fourth quarter of last year. Nearly 40
percent of the BCS growth this quarter comes from emerging markets in Eastern
Europe, Central Asia, and India. In addition, Brazil, Venezuela and Thailand had
particularly strong volume growth.
International beverage profits doubled in the quarter. Although this performance
is very strong, profits would have increased 162 percent if not for the shorter
reporting period. These excellent results come from lower advertising and
marketing expenses and a gain on the sale of assets in Greece, as well as
improved performances in Poland, Saudi Arabia, and Brazil. This performance was
particularly powerful since Mexico, our largest profit contributor in 1994,
continued to post lower volume and profits due to the adverse economic
environment.
<TABLE>
SNACK FOODS
<CAPTION>
Summary of 1995 Ongoing Snack Food Results
($MM)
Q4 FY
------------------------------------------------ --------------------------------------------
Sales Profits Vol Sales Profits Vol
- ------------------ -------- ------ -------- ------ ------------------- -------- ----- -------- ------ ------------------
$ % $ % % $ % $ % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------ -------- ------ -------- ------ ------------------- -------- ----- -------- ------ ------------------
U.S. 1,669 4 347 6 9 5,495 10 1,132 10 11
- ------------------ -------- ------ -------- ------ ------------------- -------- ----- -------- ------ ------------------
<CAPTION>
Sweet Salty Sweet Salty
- ------------------ -------- ------ -------- ------ --------- --------- -------- ----- -------- ------ --------- --------
Int'l. 988 (13) 103 (9) 9 7 3,050 (6) 304 (14) 12 10
--- --- ----- ---
- ------------------ -------- ------ -------- ------ --------- --------- -------- ----- -------- ------ --------- --------
Total 2,657 (3) 450 3 N/A N/A 8,545 3 1,436 4 N/A N/A
- ------------------ -------- ------ -------- ------ --------- --------- -------- ----- -------- ------ --------- --------
[Note: U.S. volume is measured in pounds; international volume in kilos.]
</TABLE>
"Our snack business also had a terrific year," said Mr. Calloway. "In the
U.S. we achieved our second consecutive year of double-digit volume growth. We
also posted double-digit profit gains while investing aggressively in several
strategic initiatives - like the re-engineering of our distribution process and
our joint venture with Sara Lee focused on single-serve baked goods.
-4-
<PAGE>
"Outside the United States, our snack business showed great resilience despite
the dramatic effect of the Mexican peso devaluation. In 1994, Mexico accounted
for over 60 percent of our international snack profits, so overcoming a peso
devaluation of about 50 percent was a major challenge. However, our snack
businesses outside of Mexico grew profits more than 50 percent, led by strong
gains in the U.K. and Brazil. This enabled us to end the year with international
snack profits down only 14 percent - quite a remarkable feat."
Fourth Quarter
The growth in U.S. sales was led by volume gains, moderated by the impact of the
shorter reporting period, and by increased pricing. Pound growth came from
double-digit gains in Tostitos brand salsas and tortilla chips as well as in
Rold Gold brand pretzels. The "Better For You" line of lowfat and no-fat
products contributed about 70 percent of the growth in sales and nearly 40
percent of the growth in overall pound volume. Baked Lay's, which was rolled out
nationally but was still unadvertised in the fourth quarter, contributed almost
25 percent of the total growth in "Better for You" volume. Margins were
relatively consistent with prior year, as volume gains and lower marketplace
investment spending in 1995 were largely offset by investments in distribution
and system improvements.
International snack sales declined because of the adverse translation impact of
the devalued Mexican peso, volume declines at Sabritas, our salty snack business
in Mexico and the shorter reporting period. All of our other major businesses
posted volume gains. The increase in salty snack volume was led by an almost 60
percent increase in Korea and a 34 percent increase in the Netherlands, both
driven by successful in-bag promotions. Brazil grew volume almost 30 percent on
top of an exceptional gain last year, capturing more than 50 percent of the
market. Volume declines at Sabritas were significantly less than in the previous
quarter. The growth in sweet snack volume reflected continued double-digit gains
from our Mexican cookie business, Gamesa, and from Poland and France.
International margins improved modestly in the quarter as improved profitability
in the U.K., Gamesa and Poland were partially offset by profit declines at
Sabritas and global brand marketing investments.
-5-
<PAGE>
<TABLE>
RESTAURANTS
<CAPTION>
Summary of 1995 Ongoing Restaurant Results
($MM)
Q4 FY
---------------------------------------- -----------------------------------------
Sales Profits Vol Sales Profits Vol
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
$ % $ % % $ % $ % %
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
PH 1,174 (1) 123 35 3 3,977 7 376 32 4
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
TB 1,091 (2) 116 20 (5) 3,503 5 274 - (4)
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
KFC 555 8 32 - 14 1,722 5 103 2 7
--- -- ----- ---
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
Total U.S. 2,820 - 271 23 N/A 9,202 6 753 14 N/A
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- -----
Int'l 676 5 27 50 N/A 2,126 16 114 61 N/A
--- -- ----- ---
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
Total 3,496 1 298 25 N/A 11,328 8 867 19 N/A
- ------------------- -------- ------ --------- ------ ---------- --------- ------- -------- ----- ----------
[Note: U.S. volume growth is measured by same store sales.]
</TABLE>
"In 1995, we made tremendous progress in reinvigorating our restaurants, a fact
reflected very clearly in a 19 percent gain in ongoing profits and about a $500
million improvement in free cash," said Mr. Calloway.
"Early in the year we set out a new restaurant strategy focused on several major
efforts, including leveraging our scale, relying more heavily on franchisees for
system unit growth and upgrading our overall restaurant portfolio. Our goal was
to return the business to solid double-digit profit growth.
"We've already made great strides. In international markets, we consolidated our
concepts under one management team and, as a result, we will now report
international restaurant financial results as one unit. We also took advantage
of our scale in the U.S. and began the consolidation of the purchasing and
accounting functions for our three major U.S. businesses. For the first time in
many years, we offered franchisees the opportunity to take a greater role in our
system development and significantly expand their existing markets, particularly
in the U.S. As a result, we refranchised or licensed some 300 company-owned
stores worldwide in 1995. We also upgraded our company-owned restaurant
portfolio by closing about 300 stores we considered underperformers. These
actions helped us reduce the proportion of company-owned stores worldwide by
almost three percent in 1995. In addition, we provided for the cost of closing
nearly 200 additional stores in 1996.
-6-
<PAGE>
When you add it all up, we had a great year in restaurants and are clearly
well on our way to achieving the goals we set for ourselves last year."
Fourth Quarter
Worldwide restaurant sales advanced only one percent largely because of the
impact of having one less week in the reporting period. For example, in the U.S.
sales would have been up about six percent for a comparable 16 week quarter.
This increase reflects same store sales gains at KFC (U.S.) and Pizza Hut (U.S.)
and the impact of new units at Taco Bell. The same store sales increase at KFC
(U.S.) was driven by the extraordinary success of new products like Crispy
Strips and Chicken Pot Pie. The same store sales gains at Pizza Hut (U.S.)
reflected the continued benefits of the success of Stuffed Crust Pizza and
Chicken Wings. International dollar sales growth was driven by new units,
primarily Pizza Huts.
Worldwide profit growth primarily reflected the $56 million increase in
refranchising gains net of store closures somewhat moderated by the effect of
the shorter reporting period. The refranchising gains came primarily in the U.S.
from Taco Bell and Pizza Hut and therefore, was a key factor in the U.S. profit
growth in the quarter. The store closures occurred at all four business units,
KFC, Pizza Hut, Taco Bell and PepsiCo Restaurants International. International
profit growth was favorably affected by the lapping of a 1994 charge to
consolidate our international restaurant concepts into one unit and by new
stores. Excluding the impact of the shorter reporting period and the net
refranchising activity, worldwide restaurant profits achieved a 12 percent
growth rate.
OTHER ITEMS
1995
53rd Week
PepsiCo's fiscal year ends on the last Saturday in December and, as a result, a
week is added to the fourth quarter and full year every five or six years. The
extra week in 1994 is estimated to have increased 1994 full year and fourth
quarter sales by $434 million and earnings by $0.04 per share. The attachments
titled "Supplemental Schedule of Ongoing Operating Profit" indicate the impact
this had on profit growth by segment for the quarter and full year.
-7-
<PAGE>
Acquisition Dilution
Dilution from acquisitions in their first year of ownership reduced earnings per
share by $0.03 and $0.04 in the quarter and full year, respectively.
Share Repurchases
During 1995, PepsiCo repurchased 12 million shares of its capital stock which
represented one and one-half percent of the shares outstanding at the beginning
of fiscal 1995. PepsiCo has continued to repurchase shares in 1996.
Capital Spending
Capital spending for the year was approximately $2.1 billion. This was slightly
less than 1994 and reflects a reduction of approximately $300 million in
restaurants and an increase of $200 million in snack foods.
1995 Accounting Change
As announced on January 9, 1996, PepsiCo adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121), as of the
beginning of the fourth quarter of 1995.
SFAS 121 was issued in March of 1995 and is required to be adopted by 1996.
SFAS 121, which had no cash impact, is a required accounting change in the
method of determining and measuring impairment for long-lived assets used in the
business. The new standard resulted in an initial, noncash charge in the fourth
quarter of $384 million after-tax ($0.48 per share). The charge results from a
change in the grouping of long-lived assets and is primarily related to our
restaurant business. During the quarter, a decision was made to close some of
the restaurants included in the charge. Of the $0.48 charge, approximately $0.06
is related to these stores. An additional $0.02 was recorded in the quarter for
other costs to close these stores, primarily future lease obligations.
The SFAS 121 charge resulted in a noncash benefit to fourth quarter earnings of
approximately $0.02 per share from reduced depreciation and amortization
expense. There will also be a benefit from reduced depreciation and amortization
in future years.
-8-
<PAGE>
1994
BAESA Gain
PepsiCo recorded a one-time, noncash gain of $18 million ($17 million after-tax
or $0.02 per share) resulting from a public offering of shares by BAESA, a
franchised bottling affiliate in South America.
Accounting for Pension Assets
PepsiCo changed to a preferred method of accounting for pension plan assets in
the determination of annual pension expense. The cumulative effect of this
noncash item relating to years prior to 1994 was a credit of $38 million ($23
million after-tax or $0.03 per share).
Accounting for Postemployment Benefits
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 million noncash charge ($55
million after-tax or $0.07 per share), principally represented estimated future
severance costs related to services provided by employees prior to 1994.
-9-
<PAGE>
PepsiCo, Inc. and Subsidiaries
Consolidated Statement of Income
(in millions except per share amounts, unaudited)
16 Weeks 17 Weeks % Change
Ended Ended As On-
12/30/95 12/31/94 Rept'd going
(a) (b)
Net Sales $9,251 $9,122 1 1
Costs and Expenses, net:
Cost of sales 4,562 4,413 3 3
Selling, general and
administrative expenses 3,609 (c) 3,707 (3) (3)
Amortization of intangible
assets 102 98 4 4
Impairment of long-lived
assets 520 (d) - NM NM
----- -----
Operating Profit 458 (e) 904 (49) 8
Interest expense (200) (211) (5) (5)
Interest income 42 31 35 35
----- -----
Income Before Income Taxes 300 724 (59) 13
Provision for Income Taxes(f) 119 211 (44) 2
----- -----
Net Income $ 181 $ 513 (65) 10
Net Income Per Share $ 0.22 $ 0.64 (66) 9
Average shares outstanding 807 801 1 1
NM = Not Meaningful.
NOTES:
(a) PepsiCo's fiscal year ends on the last Saturday in December and, as a
result, a week is added every 5 or 6 years. The 17th week increased fourth
quarter 1994 net sales by approximately $434 and earnings by approximately
$54 ($35 after-tax or $0.04 per share). See Supplemental Schedules of Net
Sales and Operating Profit and Ongoing Operating Profit.
(b) Excludes the initial, noncash charge upon adoption of SFAS 121. See Note
(d).
(c) Includes a net gain of $51 ($28 after-tax or $0.03 per share) in 1995 from
sales of restaurants in excess of the costs of closing other restaurants.
(d) Represents the initial, noncash charge ($384 after-tax or $0.48 per share)
upon adoption of SFAS 121 as of the beginning of the fourth quarter which
included $68 ($49 after-tax or $0.06 per share) related to restaurants for
which closure decisions were made during the fourth quarter.
(e) As a result of the reduced carrying amount of certain long-lived assets to
be held and used in the business, due to the SFAS 121 initial, noncash
charge, depreciation and amortization expense was reduced by $21 ($15
after-tax or $0.02 per share).
(f) The effective tax rates were 39.7% (31.1% Ongoing - see Note (b)) in 1995
and 29.1% in 1994.
-10-
<PAGE>
PepsiCo, Inc. and Subsidiaries
Supplemental Schedule of Net Sales and Operating Profit
(in millions, unaudited)
Net Sales Operating Profit/(Loss)
16 Weeks 17 Weeks 16 Weeks 17 Weeks
Ended Ended % Ended Ended %
12/30/95 12/31/94 Change 12/30/95 12/31/94 Change
(a) (b) (a)
Beverages
- -U.S. $2,042 $1,951 5 $ 269 $266 1
- -Int'l 1,056 988 7 (28) 17 NM
----- ----- --- ---
3,098 2,939 5 241 283 (15)
Snack Foods
- -U.S. 1,669 1,599 4 347 326 6
- -Int'l 988 1,131 (13) 99 113 (12)
----- --- --- ---
2,657 2,730 (3) 446 439 2
Restaurants (c)
- -U.S. 2,820 2,808 - (31) 220 NM
- -Int'l 676 645 5 (108) 18 NM
----- ----- --- ---
3,496 3,453 1 (139) 238 NM
Total
- -U.S. 6,531 6,358 3 585 812 (28)
- -Int'l 2,720 2,764 (2) (37) 148 NM
----- ----- --- ---
$9,251 $9,122 1 548 960 (43)
Equity (Loss)/Income (22) 3 NM
Other Unallocated Expenses,
net (d) (68) (59) 15
--- ---
Operating Profit $ 458 $904 (49)
Results by U.S. Restaurant Chain (e):
Pizza Hut $1,174 $1,184 (1) $ 55 $ 91 (40)
Taco Bell 1,091 1,109 (2) (53) 97 NM
KFC 555 515 8 (33) 32 NM
----- ----- --- ---
Total U.S. $2,820 $2,808 - $ (31) $220 NM
NM = Not Meaningful.
-11-
<PAGE>
NOTES:
(a) PepsiCo's fiscal year ends on the last Saturday in December and, as a
result, a week is added every 5 or 6 years. The additional week in 1994
adversely affected the 1995 fourth quarter growth rate of each business
segment's net sales by approximately five or six points. On a consolidated
basis, net sales growth was adversely affected by approximately five
points, although U.S. and international operations were adversely affected
by six and four points, respectively. See Supplemental Schedule of Ongoing
Operating Profit for the effect of the additional week on the growth rates
of ongoing operating profit.
(b) Includes the initial, noncash charge upon adoption of SFAS 121. See
Supplemental Schedule of Ongoing Operating Profit for the effect of the
charge on each business segment and equity income and the growth rates for
ongoing operating profit.
(c) Includes a net gain of $51 (Pizza Hut-$20, Taco Bell-$39, KFC-($5) and
International-($3)) in 1995 from sales of restaurants in excess of the
costs of closing other restaurants.
(d) Includes corporate headquarters expenses, minority interests, foreign
exchange translation and transaction gains and losses and other items not
allocated to the business segments.
(e) PepsiCo has historically provided results for each of its three major
restaurant concepts (which included the results of other U.S. concepts
managed by Taco Bell and Pizza Hut) on a worldwide basis. Beginning with
the fourth quarter of 1995, PepsiCo has changed the presentation of the
restaurant results to more closely reflect how we currently manage the
business. Net sales and operating profit are now provided for each of
PepsiCo's three major U.S. concepts (including the results of the other
concepts managed by Taco Bell and Pizza Hut) and in total for the
international restaurant operations. Previously reported amounts have been
restated to conform to the current presentation.
-12-
<PAGE>
PepsiCo, Inc. and Subsidiaries
Supplemental Schedule of Ongoing Operating Profit
For the 16 Weeks Ended December 30, 1995
($ in millions, unaudited)
Operating Profit/(Loss) Growth Rates vs. 1994
SFAS Ongoing
As 121 On- As On- Ex 17th
Rpt'd Chrg going Rpt'd going Week
(a) (b)
Beverages
- -U.S. $ 269 $ - $ 269 1 1 6
- -Int'l (28) 62 34 NM 100 162
--- -- ---
241 62 303 (15) 7 14
Snack Foods
- -U.S. 347 - 347 6 6 15
- -Int'l 99 4 103 (12) (9) (6)
--- -- ---
446 4 450 2 3 9
Restaurants
- -U.S. (31) 302 271 NM 23 36
- -Int'l (108) 135 27 NM 50 80
---- --- ---
(139) 437 298 NM 25 39
Total
- -U.S. 585 302 887 (28) 9 17
- -Int'l (37) 201 164 NM 11 19
--- --- -----
548 503 1,051 (43) 9 18
Equity (Loss)/
Income (22) 17 (5) NM NM NM
Other Unallocated
Expenses, net (68) - (68) 15 15 17
--- --- -----
Operating
Profit $ 458 $520 $ 978 (49) 8 17
Results by U.S. Restaurant Chain (c):
Pizza Hut $ 55 $ 68 $ 123 (40) 35 46
Taco Bell (53) 169(d) 116 NM 20 32
KFC (33) 65 32 NM - 14
----- --- ---
Total U.S. $ (31) $302 $ 271 NM 23 36
NM = Not Meaningful.
-13-
<PAGE>
NOTES:
(a) Represents the initial, noncash charge upon adoption of SFAS 121.
(b) PepsiCo's fiscal year ends on the last Saturday in December and, as a
result, a week is added every 5 or 6 years. The estimated operating profit
for the additional week in 1994 has been excluded in determining the growth
rates.
(c) PepsiCo has historically provided results for each of its three major
restaurant concepts (which included the results of other U.S. concepts
managed by Taco Bell and Pizza Hut) on a worldwide basis. Beginning with
the fourth quarter of 1995, PepsiCo has changed the presentation of the
restaurant results to more closely reflect how we currently manage the
business. Net sales and operating profit are now provided for each of
PepsiCo's three major U.S. concepts (including the results of the other
concepts managed by Taco Bell and Pizza Hut) and in total for the
international restaurant operations. Previously reported amounts have been
restated to conform to the current presentation.
(d) More than half of the Taco Bell charge is attributable to Hot 'n Now and
Chevys.
-14-
<PAGE>
PepsiCo, Inc. and Subsidiaries
Consolidated Statement of Income
(in millions except per share amounts, unaudited)
52 Weeks 53 Weeks % Change
Ended Ended As On-
12/30/95 12/31/94 Rept'd going
(a) (b)
Net Sales $30,421 $28,472 7 7
Costs and Expenses, net:
Cost of sales 14,886 13,715 9 9
Selling, general and
administrative expenses 11,712(c) 11,244 4 4
Amortization of intangible
assets 316 312 1 1
Impairment of long-lived
assets 520(d) - NM NM
------- ------
Operating Profit 2,987(e) 3,201 (7) 10
Gain on stock offering
by an affiliate - 18(f) NM NM
Interest expense (682) (645) 6 6
Interest income 127 90 41 41
------ ------
Income Before Income Taxes and
Cumulative Effect of Accounting
Changes 2,432 2,664 (9) 12
Provision for Income Taxes (g) 826 880 (6) 9
------ ------
Income Before Cumulative Effect
of Accounting Changes 1,606 1,784 (10) 13
Cumulative Effect of Accounting
Changes:
Postemployment benefits (net
of tax benefit of $29) - (55)(h) NM NM
Pension assets (net of
tax expense of $15) - 23 (h) NM NM
------ ------
Net Income $ 1,606 $ 1,752 (8) 15
Income (Charge) Per Share:
Before cumulative effect of
accounting changes 2.00 2.22 (10) 13
Cumulative effect of accounting
changes:
Postemployment benefits - (0.07)(h) NM NM
Pension assets - 0.03 (h) NM NM
------ ------
Net Income Per Share $ 2.00 $ 2.18 (8) 15
Average shares outstanding 804 804 - -
NM = Not Meaningful.
-15-
<PAGE>
NOTES:
(a) PepsiCo's fiscal year ends on the last Saturday in December and, as a
result, a week is added every 5 or 6 years. The 53rd week increased 1994
net sales by approximately $434 and earnings by approximately $54 ($35
after-tax or $0.04 per share). See Supplemental Schedules of Net Sales and
Operating Profit and Ongoing Operating Profit.
(b) Excludes the initial, noncash charge upon adoption of SFAS 121 (see Note
(d)) and the one-time, noncash BAESA gain (see Note (f)).
(c) Includes a net gain of $51 ($27 after-tax or $0.03 per share) in 1995 from
sales of restaurants in excess of the costs of closing other restaurants.
(d) Represents the initial, noncash charge ($384 after-tax or $0.48 per share)
upon adoption of SFAS 121 as of the beginning of the fourth quarter which
included $68 ($49 after-tax or $0.06 per share) related to restaurants for
which closure decisions were made during the fourth quarter.
(e) As a result of the reduced carrying amount of certain long-lived assets to
be held and used in the business, due to the SFAS 121 initial, noncash
charge, depreciation and amortization expense for the fourth quarter was
reduced by $21 ($15 after-tax or $0.02 per share)
(f) Represents a one-time, noncash gain ($17 after-tax or $0.02 per share)
arising from a public share offering by BAESA, a franchised bottling
affiliate in South America.
(g) The effective tax rates were 34.0% (32.6% Ongoing - see Note (b)) in 1995
and 33.0% in 1994.
(h) Represents the cumulative effect of the required adoption of Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," and a change to a preferable method of accounting
for pension plan assets in the determination of pension expense. The
cumulative effect of accounting changes represents the effect on years
prior to 1994.
-16-
<PAGE>
PepsiCo, Inc. and Subsidiaries
Supplemental Schedule of Net Sales and Operating Profit
(in millions, unaudited)
Net Sales Operating Profit/(Loss)
52 Weeks 53 Weeks 52 Weeks 53 Weeks
Ended Ended % Ended Ended %
12/30/95 12/31/94 Change 12/30/95 12/31/94 Change
(a) (b) (a)
Beverages
- -U.S. $ 6,977 $ 6,541 7 $1,145 $1,022 12
- -Int'l 3,571 3,146 14 164 195 (16
------ ------ ----- -----
10,548 9,687 9 1,309 1,217 8
Snack Foods
- -U.S. 5,495 5,011 10 1,132 1,025 10
- -Int'l 3,050 3,253 (6) 300 352 (15)
------ ------ ----- -----
8,545 8,264 3 1,432 1,377 4
Restaurants (c)
- -U.S. 9,202 8,694 6 451 659 (32)
- -Int'l 2,126 1,827 16 (21) 71 NM
------ ------ ----- -----
11,328 10,521 8 430 730 (41)
Total
- -U.S. 21,674 20,246 7 2,728 2,706 1
- -Int'l 8,747 8,226 6 443 618 (28)
------ ------ ----- -----
$30,421 $28,472 7 3,171 3,324 (5)
Equity (Loss)/Income (3) 38 NM
Other Unallocated Expenses,
net (d) (181) (161) 12
----- -----
Operating Profit $2,987 $3,201 (7)
Results by U.S. Restaurant Chain (e):
Pizza Hut $ 3,977 $ 3,712 7 $ 308 $ 285 8
Taco Bell 3,503 3,340 5 105 273 (62)
KFC 1,722 1,642 5 38 101 (62)
------ ------ ----- -----
Total
U.S. $ 9,202 $ 8,694 6 $ 451 $ 659 (32)
NM = Not Meaningful.
-17-
<PAGE>
NOTES:
(a) PepsiCo's fiscal year ends on the last Saturday in December and, as a
result, a week is added every 5 or 6 years. The additional week in 1994
adversely affected the 1995 growth rate of each business segment's net
sales by approximately one or two points. Consolidated net sales growth was
adversely affected by approximately two points, as were U.S. and
international operations. See Supplemental Schedule of Ongoing Operating
Profit for the effect of the additional week on the growth rates of ongoing
operating profit.
(b) Includes the initial, noncash charge upon adoption of SFAS 121. See
Supplemental Schedule of Ongoing Operating Profit for the effect of the
charge on each business segment and equity income and the growth rates for
ongoing profit.
(c) Includes a net gain of $51 (Pizza Hut-$24, Taco Bell-$38, KFC-($7) and
International-($4)) in 1995 from sales of restaurants in excess of the
costs of closing other restaurants.
(d) Includes corporate headquarters expenses, minority interests, foreign
exchange translation and transaction gains and losses and other items not
allocated to the business segments.
(e) PepsiCo has historically provided results for each of its three major
restaurant concepts (which included the results of other U.S. concepts
managed by Taco Bell and Pizza Hut) on a worldwide basis. Beginning with
the fourth quarter of 1995, PepsiCo has changed the presentation of the
restaurant results to more closely reflect how we currently manage the
business. Net sales and operating profit are now provided for each of
PepsiCo's three major U.S. concepts (including the results of the other
concepts managed by Taco Bell and Pizza Hut) and in total for the
international restaurant operations. Previously reported amounts have been
restated to conform to the current presentation.
-18-
<PAGE>
PepsiCo, Inc. and Subsidiaries
Supplemental Schedule of Ongoing Operating Profit
For the 52 Weeks Ended December 30, 1995
($ in millions, unaudited)
Operating Profit/(Loss) Growth Rates vs. 1994
SFAS Ongoing
As 121 On- As On- Ex 53rd
Rpt'd Chrg going Rpt'd going Week
(a) (b)
Beverages
- -U.S. $1,145 - $1,145 12 12 13
- -Int'l 164 62 226 (16) 16 18
----- ----- -----
1,309 62 1,371 8 13 14
Snack Foods
- -U.S. 1,132 - 1,132 10 10 13
- -Int'l 300 4 304 (15) (14) (13)
----- ----- -----
1,432 4 1,436 4 4 6
Restaurants
- -U.S. 451 302 753 (32) 14 18
- -Int'l (21) 135 114 NM 61 6
----- ----- -----
430 437 867 (41) 19 23
Total
- -U.S. 2,728 302 3,030 1 12 14
- -Int'l 443 201 644 (28) 4 6
----- ----- -----
3,171 503 3,674 (5) 11 13
Equity (Loss)/
Income (3) 17 14 NM (63) (63)
Other Unallocated
Expenses, net (181) - (181) 12 12 13
----- ----- -----
Operating
Profit $2,987 $ 520 $3,507 (7) 10 11
Results by U.S. Restaurant Chain (c):
Pizza Hut $ 308 $ 68 $ 376 8 32 35
Taco Bell 105 169(d) 274 (62) - 4
KFC 38 65 103 (62) 2 6
----- ----- -----
Total U.S. $ 451 $ 302 $ 753 (32) 14 18
NM = Not Meaningful.
-19-
<PAGE>
NOTES:
(a) Represents the initial, noncash charge upon adoption of SFAS 121.
(b) PepsiCo's fiscal year ends on the last Saturday in December and, as a
result, a week is added every 5 or 6 years. The estimated operating profit
for the additional week in 1994 has been excluded in determining the growth
rates.
(c) PepsiCo has historically provided results for each of its three major
restaurant concepts (which included the results of other U.S. concepts
managed by Taco Bell and Pizza Hut) on a worldwide basis. Beginning with
the fourth quarter of 1995, PepsiCo has changed the presentation of the
restaurant results to more closely reflect how we currently manage the
business. Net sales and operating profit are now provided for each of
PepsiCo's three major U.S. concepts (including the results of the other
concepts managed by Taco Bell and Pizza Hut) and in total for the
international restaurant operations. Previously reported amounts have been
restated to conform to the current presentation.
(d) More than half of the Taco Bell charge is attributable to Hot 'n Now and
Chevys.
-20-
