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 3, 1999 (February 1, 1999)
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Date of Report (Date of earliest event reported)
PepsiCo, Inc.
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(Exact name of registrant as specified in its charter)
North Carolina
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(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
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(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, Pro Forma Financial Information and
Exhibits.
(c) Exhibits.
20 Press Release dated February 1, 1999 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 3, 1999 PepsiCo, Inc.
By: /s/ LAWRENCE F. DICKIE
----------------------
Lawrence F. Dickie
Vice President,
Associate General Counsel
and Assistant Secretary
EXHIBIT 20
PEPSICO REPORTS FOURTH QUARTER EARNINGS
PURCHASE, N.Y., Feb. 1, 1999 - PepsiCo, Inc. today reported earnings per share
(assuming dilution) from continuing operations of $0.24 for the fourth quarter
ended December 26, 1998. Earnings per share for the full year were $1.31, a 38
percent increase over the prior year.
PepsiCo Chairman and Chief Executive Officer Roger Enrico said: "In 1998, we
made very solid progress in our strategy to position PepsiCo for healthy,
sustainable long-term growth. In the fourth quarter we made particularly good
progress in three key areas:
"We reignited volume momentum in Pepsi-Cola. North American volume was
strong, growing ten percent in the quarter and six percent for the year.
Pepsi One, our new one-calorie cola, led the growth in the fourth quarter,
while Mountain Dew posted its second straight year of strong bottler case
sales. And in its second year of national distribution, our Aquafina brand
became the top-selling bottled water in convenience stores and gas stations.
"We continued strengthening our Frito-Lay International snack business.
Frito-Lay International announced the formation of a nine-country joint
venture with Empresas Polar SA of Venezuela (Polar). With our recent
acquisitions in Argentina and Chile, the partnership with Polar's business
raised our share of the Central and South American salty snack market to more
than fifty percent.
"Return on invested capital was 17 percent from our core operations (before
acquisitions) and 16 percent including acquisitions. As we integrate our
recent acquisitions into the PepsiCo portfolio, I expect our return on
invested capital will improve."
[All discussions exclude the impact of items affecting comparability which are
detailed in the financial schedules attached]
Pepsi-Cola
- ----------
Worldwide Pepsi-Cola volume, as measured by bottler case sales (BCS), grew more
than seven percent in the quarter, driven by a strong ten percent advance in
North America. As expected, the international improvement of four percent
reflected economic weakness in certain markets. The ten percent advance in North
America during the quarter was the result of strong Pepsi One sales combined
with strong growth in Mountain Dew, Brand Pepsi, Aquafina and Lipton Brisk. The
four percent international advance reflected strong performance in China, India
and the Middle East that was partially offset by lower volume in Asia and
Russia. On a full year basis, both North American and international BCS volume
grew six percent.
North American beverage sales grew five percent in the quarter while
international sales declined twelve percent versus the prior year. North
American growth was driven by strong volume performance partially offset by
lower pricing. International sales were lower, largely due to the impact of the
sale of our Japanese bottler to Suntory late in 1997.
Worldwide operating profits were down 33 percent from the year earlier quarter
due to the difficult global pricing environment, higher advertising and
marketing expenses and higher losses in Russia.
Consistent with the first three quarters of 1998, Pepsi-Cola North America
invested heavily in advertising and marketing, vending equipment and new
fountain business. This spending is consistent with our stated strategy and
drove market share growth that outpaced our primary competitor. Additionally,
our U.S. fountain volume in the fourth quarter and full year grew seven and four
percent, respectively, driven by innovations we brought to large fountain
customers.
Frito-Lay
- ---------
Worldwide salty snack pound volume grew four percent in the fourth quarter and
five percent for the full year on a constant territory basis. Including the
impact of acquisitions, salty snack volume grew nine percent and eight percent
in the fourth quarter and the full year, respectively. North American pound
volume growth was four percent for the quarter and five percent for the full
year. International salty snack kilo volume before acquisitions improved three
percent in the fourth quarter and six percent for the full year. Including
acquisitions, international volume grew 16 percent and 14 percent in the fourth
quarter and full year, respectively.
Worldwide sales improved six percent in the quarter. North American sales were
driven by volume growth and a favorable price mix to our WOW! fat-free products.
International sales were higher by four percent, driven by acquisitions,
primarily the Smith's Snackfood Company in Australia. Excluding acquisitions,
sales declined three percent largely due to continued weakness in Brazil.
PepsiCo's contribution of several previously consolidated businesses to the
Empresas Polar joint venture reduced our international sales by about one
percentage point during the fourth quarter.
Worldwide operating profits were up one percent during the fourth quarter driven
by three percent growth from North America. International profits in the fourth
quarter and the full year declined six percent and three percent, respectively,
primarily as a result of the weak macroeconomic environment in Brazil.
Tropicana
- ---------
Tropicana posted solid five percent growth in volume (as measured in four gallon
equivalent cases) driven by a continuing favorable trend toward Tropicana Pure
Premium. Revenues were $722 million, reflecting this volume growth. Operating
profits of $40 million were somewhat dampened by increases in the cost of
oranges early in the quarter that were in advance of related selling price
increases.
<PAGE>
ITEMS AFFECTING COMPARABILITY
- -----------------------------
Tax Benefit
-----------
In November 1998, PepsiCo reached final agreement with the IRS to settle
substantially all remaining aspects of a tax case relating to PepsiCo's
concentrate operations in Puerto Rico. As a result, PepsiCo recognized a tax
benefit totaling $494 million for 1998. Of the $494 million, $200 million was
recorded in the third quarter, based on settlement of part of the case, and $294
million or 19 cents per share was recorded in the fourth quarter.
Impairment and Restructuring
----------------------------
In recognition of the severe impact of the economic crisis on its operations in
Russia, Pepsi-Cola International has recorded an unusual charge of $218 million
or 14 cents per share for the fourth quarter of 1998 to reflect asset impairment
and the cost of restructuring its operations there.
Frito-Lay North America incurred one-time charges of $54 million (pre-tax) or
two cents per share in the fourth quarter relating to the elimination of
production redundancies in its U.S. manufacturing operations.
Pepsi-Cola North America recorded a $16 million (pretax) or one cent per share
charge to reflect the costs of separating its concentrate and bottling
organizations. The separation is intended to enable PepsiCo's bottling business
to more effectively serve retail customers, which have been consolidating very
rapidly in recent years. PepsiCo is proceeding with the conversion of a majority
stake in its Pepsi Bottling Group unit to public ownership through an initial
public offering.
Cautionary Statement
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This release discusses expectations regarding PepsiCo's future performance and
the impact of global economic conditions. These forward-looking statements are
based on our current expectations and projections about future events. The
statements are subject to risks, uncertainties and assumptions. As a result, the
forward-looking events discussed in this release could turn out to be
significantly different from expectations or may not occur.
<PAGE>
PepsiCo, Inc. and Subsidiaries
Consolidated Statement of Income
($ in millions except per share amounts)
% Change B/(W)
----------------
16 Weeks Ended As
--------------------
12/26/98 12/27/97 Rept'd Adjusted
-------- -------- ------ --------
(a)
Net Sales $7,193 $6,256 15 15
Costs and Expenses, net
Cost of sales 3,149 2,556 (23) (23)
Selling, general and
administrative expenses 3,343 2,938 (14) (14)
Amortization of intangible
assets 86 60 (43) (43)
Unusual items (b) 288 (14) NM -
------ ------
Operating Profit 327 716 (54) (12)
Interest expense (154) (120) (28) (28)
Interest income 15 71 (79) (79)
------ -----
Income From Continuing Operations
Before Income Taxes 188 667 (72) (27)
Provision for Income Taxes (c) (173) 221 NM 29
------ ------
Income From Continuing
Operations 361 446 (19) (26)
Loss From Discontinued
Operations, net of taxes ($95) - (45) NM NM
Net Income $ 361 $ 401 (10)
====== ======
Income/(Loss)Per Share-Basic
Continuing Operations $ 0.25 $ 0.30 (17) (24)(d)
Discontinued Operations - (0.03)
------ ------
Net Income Per Share $ 0.25 $ 0.27 (7)
====== ======
Average Shares Outstanding 1,469 1,514 3
Income/(Loss) Per Share-
Assuming Dilution
Continuing Operations $ 0.24 $ 0.29 (16)(d) (23)(d)
Discontinued Operations - (0.04)
------ ------
Net Income Per Share $ 0.24 $ 0.25 (6)(d)
====== ======
Average Shares Outstanding 1,501 1,559 4
NM - Not Meaningful
See accompanying notes.
<PAGE>
Notes to 16 Weeks Ended 12/26/98 and 12/27/97:
(a) Excludes the effects of the unusual items described in Note (b) below and
the 1998 tax benefit in Note (c) below.
(b) The 1998 unusual items included in continuing operations relate to asset
impairment and restructuring charges reflecting the severe impact of the
economic crisis in Russia on Pepsi-Cola International's operations,
impairment charges related to the elimination of production redundancies at
Frito-Lay North America and a Pepsi-Cola North America restructuring charge
reflecting the costs of separating its concentrate and bottling
organization. The 1997 unusual items included in continuing operations
relate to decisions to dispose of and write down assets, improve
productivity and strengthen the international bottler structure. The 1997
amount also includes $87 million of proceeds associated with a settlement
related to a previous Venezuelan bottler agreement, which was partially
offset by related costs.
1998 1997
----- -----
Net loss/(gain) $ 288 $ (14)
===== =====
After tax loss/(gain) $ 261 $ (1)
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Per share-assuming dilution $0.17 $ -
===== =====
(c) The provision for income taxes in 1998 reflects a tax benefit of $294
million (or $0.19 per share - assuming dilution) as a result of a final
agreement with the Internal Revenue Service to settle a tax case relating
to our concentrate operations in Puerto Rico. Excluding the effects of the
1998 tax benefit and 1998 and 1997 unusual items, the effective tax rates
are 31.1% in 1998 and 31.9% in 1997.
(d) Based on unrounded amounts.
PepsiCo, Inc. and Subsidiaries
Consolidated Statement of Income
($ in millions except per share amounts)
% Change B/(W)
---------------
52 Weeks Ended As
--------------------
12/26/98 12/27/97 Rept'd Adjusted
-------- -------- ------ --------
(a)
Net Sales $22,348 $20,917 7 7
Costs and Expenses, net
Cost of sales 9,330 8,525 (9) (9)
Selling, general and
administrative expenses 9,924 9,241 (7) (7)
Amortization of intangible
assets 222 199 (12) (12)
Unusual items (b) 288 290 1 -
------- -------
Operating Profit 2,584 2,662 (3) (3)
Interest expense (395) (478) 17 17
Interest income 74 125 (41) (41)
------- -------
Income From Continuing Operations
Before Income Taxes 2,263 2,309 (2) (2)
Provision for Income Taxes (c) 270 818 67 9
------- -------
Income From Continuing
Operations 1,993 1,491 34 2
Income From Discontinued
Operations, net of taxes ($500) - 651 NM NM
------- -------
Net Income $ 1,993 $ 2,142 (7)
======= =======
Income Per Share-Basic
Continuing Operations $ 1.35 $ 0.98 38 5
Discontinued Operations - 0.42
------- -------
Net Income Per Share $ 1.35 $ 1.40 (4)
======= =======
Average Shares Outstanding 1,480 1,528 3
Income Per Share-Assuming Dilution
Continuing Operations $ 1.31 $ 0.95 38 5
Discontinued Operations - 0.41
------- -------
Net Income Per Share $ 1.31 $ 1.36 (4)
======= =======
Average Shares Outstanding 1,519 1,570 3
NM - Not Meaningful
See accompanying notes.
<PAGE>
Notes to 52 Weeks Ended 12/26/98 and 12/27/97:
(a) Excludes the effects of the unusual items described in Note (b) below and
the 1998 tax benefit in Note (c) below.
(b) The 1998 unusual items included in continuing operations relate to asset
impairment and restructuring charges reflecting the severe impact of the
economic crisis in Russia on Pepsi-Cola International's operations,
impairment charges related to the elimination of production redundancies at
Frito-Lay North America and a Pepsi-Cola North America restructuring charge
reflecting the costs of separating its concentrate and bottling
organization. The 1997 unusual items included in continuing operations
relate to decisions to dispose of and write down assets, improve
productivity and strengthen the international bottler structure. The 1997
amount also includes $87 million of proceeds associated with a settlement
related to a previous Venezuelan bottler agreement, which was partially
offset by related costs.
1998 1997
---- ----
Net loss $ 288 $ 290
===== =====
After tax loss $ 261 $ 239
===== =====
Per share-assuming dilution $0.17 $0.15
===== =====
(c) The provision for income taxes in 1998 reflects a tax benefit of $494
million (or $0.32 per share - assuming dilution) as a result of a final
agreement with the Internal Revenue Service to settle a tax case relating
to our concentrate operations in Puerto Rico. Excluding the effects of the
1998 tax benefit and 1998 and 1997 unusual items, the effective tax rates
are 31.0% in 1998 and 33.4% in 1997.
<PAGE>
PepsiCo, Inc. and Subsidiaries
Supplemental Schedule of Net Sales and Operating Profit
16 Weeks Ended December 26, 1998 and December 27, 1997
($ in millions)
Net Sales Operating Profit
----------------------------- ------------------------------------
% % Change B/(W)
--------------
16 Weeks Ended Change 16 Weeks Ended As
------------------- ------------------
12/26/98 12/27/97 B/(W) 12/26/98 12/27/97 Rept'd Adjusted
-------- -------- ----- -------- -------- ------ --------
(a) (a) (a) (b)
Pepsi-Cola
- -N.A. $2,416 $2,308 5 $ 190 $ 262 (27) (21)
- -Int'l 683 773 (12) (279) (19) NM (36)
------ ------ ----- -----
3,099 3,081 1 (89) 243 NM (33)
Frito-Lay
- -N.A. 2,220 2,062 8 392 420 (7) 3
- -Int'l 1,152 1,113 4 115 122 (6) (6)
------ ------ ----- -----
3,372 3,175 6 507 542 (6) 1
Tropicana 722 - NM 40 - NM NM
------ ------ ----- -----
Combined
Segments $7,193 $6,256 15 458 785 (42) (3)
====== ======
Unallocated expenses (131) (69) (90) (90)
----- -----
Operating Profit $ 327 $ 716 (54) (12)
===== =====
NM - Not Meaningful
Notes:
(a) Includes the following net unusual items - losses / (gains):
1998 1997
---- ----
Pepsi-Cola
- N.A. $ 16 $ -
- Int'l 218 (26)
Frito-Lay
- N.A. 54 12
---- ----
Net loss/(gain) $288 $(14)
==== ====
(b) Excludes the effects of unusual items described in note (a) above.
<PAGE>
PepsiCo, Inc. and Subsidiaries
Supplemental Schedule of Net Sales and Operating Profit
52 Weeks Ended December 26, 1998 and December 27, 1997
($ in millions)
Net Sales Operating Profit
---------------------------- ----------------------------------
% % Change B/(W)
--------------
52 Weeks Ended Change 52 Weeks Ended As
------------------- -----------------
12/26/98 12/27/97 B/(W) 12/26/98 12/27/97 Rept'd Adjusted
-------- -------- ----- -------- -------- ---------------
(a) (a) (a) (b)
Pepsi-Cola
- -N.A. $ 8,266 $ 7,899 5 $1,211 $1,274 (5) (7)
- -Int'l 2,385 2,642 (10) (219) (144) (52) NM
------- ------- ------ ------
10,651 10,541 1 992 1,130 (12) (8)
Frito-Lay
- -N.A. 7,474 6,967 7 1,424 1,388 3 5
- -Int'l 3,501 3,409 3 367 318 15 (3)
------- ------- ------ ------
10,975 10,376 6 1,791 1,706 5 3
Tropicana 722 - NM 40 - NM NM
------- ------- ------ ------
Combined
Segments $22,348 $20,917 7 2,823 2,836 - -
======= =======
Unallocated expenses (239) (174) (37) (37)
----- -----
Operating Profit $2,584 $2,662 (3) (3)
====== ======
NM - Not Meaningful
Notes:
(a) Includes the following net unusual items - losses:
1998 1997
---- ----
Pepsi-Cola
- N.A. $ 16 $ 52
- Int'l 218 154
Frito-Lay
- N.A. 54 22
- Int'l - 62
---- ----
Net loss $288 $290
==== ====
(b) Excludes the effects of the unusual items described in note (a) above.
