FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended March 18, 2000 (12 weeks)
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to
Commission file number 1-1183
[GRAPHIC OMITTED]
PEPSICO, INC.
(Exact name of registrant as specified in its charter)
North Carolina 13-1584302
(State or other jurisdiction of (I.R.S.
Employer incorporate or organization) Identification No.)
700 Anderson Hill Road, Purchase, New York 10577
(Address of principal executive offices) (Zip Code)
914-253-2000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report.)
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
Number of shares of Capital Stock outstanding as of April 14, 2000:
1,441,018,225
<PAGE>
<TABLE>
<CAPTION>
PEPSICO, INC. AND SUBSIDIARIES
INDEX
Page No.
<S> <C>
Part I Financial Information
Condensed Consolidated Statement of Income -
12 Weeks Ended March 18, 2000 and March 20, 1999 2
Condensed Consolidated Statement of Cash Flows -
12 Weeks Ended March 18, 2000 and March 20, 1999 3
Condensed Consolidated Balance Sheet -
March 18, 2000 and December 25, 1999 4-5
Condensed Consolidated Statement of Comprehensive Income -
12 Weeks Ended March 18, 2000 and March 20, 1999 6
Notes to Condensed Consolidated Financial Statements 7-9
Management's Discussion and Analysis of Operations,
Cash Flows, Liquidity and Capital Resources and EURO 10-16
Independent Accountants' Review Report 17
Part II Other Information and Signatures 18
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
PEPSICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in millions except per share amounts, unaudited)
12 Weeks Ended
--------------------
3/18/00 3/20/99
-------- --------
<S> <C> <C>
Net Sales
New PepsiCo............................................. $4,191 $3,545
Bottling operations..................................... - 1,569
-------- --------
Total Net Sales........................................ 4,191 5,114
Costs and Expenses
Cost of sales........................................... 1,677 2,140
Selling, general and administrative expenses............ 1,827 2,250
Amortization of intangible assets....................... 32 64
Impairment and restructuring charge..................... - 65
-------- --------
Total Costs and Expenses............................... 3,536 4,519
Operating Profit
New PepsiCo............................................. 655 566
Bottling operations and equity investments.............. - 29
-------- --------
Total Operating Profit................................. 655 595
Bottling equity income, net.............................. 5 -
Interest expense......................................... (47) (124)
Interest income.......................................... 7 20
-------- --------
Income Before Income Taxes............................... 620 491
Provision for Income Taxes............................... 198 158
-------- --------
Net Income............................................... $ 422 $ 333
======== ========
Income Per Share - Basic................................. $ 0.29 $ 0.23
======== ========
Average Shares Outstanding - Basic....................... 1,450 1,474
Income Per Share - Assuming Dilution..................... $ 0.29 $ 0.22
======== ========
Average Shares Outstanding - Assuming Dilution........... 1,472 1,510
Cash Dividends Declared Per Share........................ $0.135 $ 0.13
</TABLE>
See accompanying notes
-2-
<PAGE>
<TABLE>
<CAPTION>
PEPSICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions, unaudited)
12 Weeks Ended
-------------------
3/18/00 3/20/99
------- --------
<S> <C> <C>
Cash Flows - Operating Activities
Net income................................................... $ 422 $ 333
Adjustments to reconcile net income to net cash
provided by operating activities
Bottling equity income, net.............................. (5) -
Depreciation and amortization............................ 202 301
Deferred income taxes.................................... 2 (9)
Other noncash charges and credits, net .................. 63 70
Net change in operating working capital..................... (477) (394)
------- --------
Net Cash Provided by Operating Activities...................... 207 301
------- --------
Cash Flows - Investing Activities
Capital spending............................................. (142) (210)
Acquisitions and investments in unconsolidated affiliates.... (8) (168)
Short-term investments, by original maturity
More than three months - purchases......................... (173) (1,519)
More than three months - maturities........................ 169 181
Three months or less, net.................................. - (1,277)
Other, net................................................... 49 117
------- --------
Net Cash Used for Investing Activities......................... (105) (2,876)
------- --------
Cash Flows - Financing Activities
Proceeds from issuances of long-term debt.................... 100 3,265
Payments of long-term debt................................... (240) (135)
Short-term borrowings, by original maturity
More than three months - proceeds.......................... 19 3,304
More than three months - payments.......................... (18) (182)
Three months or less, net.................................. 271 (1,756)
Cash dividends paid.......................................... (197) (191)
Share repurchases............................................ (666) -
Proceeds from exercises of stock options..................... 91 82
------- --------
Net Cash (Used for)/Provided by Financing Activities........... (640) 4,387
------- --------
Effect of Exchange Rate Changes on Cash and Cash Equivalents... (2) 1
------- --------
Net (Decrease)/Increase in Cash and Cash Equivalents........... (540) 1,813
Cash and Cash Equivalents - Beginning of year.................. 964 311
------- --------
Cash and Cash Equivalents - End of period...................... $ 424 $ 2,124
======= ========
</TABLE>
See accompanying notes.
-3-
<PAGE>
<TABLE>
<CAPTION>
PEPSICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions except per share amounts)
ASSETS
(Unaudited)
3/18/00 12/25/99
-------- ---------
<S> <C> <C>
Current Assets
Cash and cash equivalents................................... $ 424 $ 964
Short-term investments, at cost............................. 96 92
-------- ---------
520 1,056
Accounts and notes receivable, less
allowance: 3/00 - $101, 12/99 - $85...................... 1,734 1,704
Inventories
Raw materials............................................. 435 464
Work-in-process........................................... 174 89
Finished goods............................................ 320 346
-------- ---------
929 899
Prepaid expenses and other current assets................... 594 514
-------- ---------
Total Current Assets..................................... 3,777 4,173
Property, Plant and Equipment................................ 8,895 8,816
Accumulated Depreciation..................................... (3,665) (3,550)
-------- ---------
5,230 5,266
Intangible Assets, net
Goodwill.................................................. 3,761 3,808
Reacquired franchise rights............................... 70 78
Trademarks and other identifiable intangibles............. 835 849
-------- ---------
4,666 4,735
Investments in Unconsolidated Affiliates..................... 2,842 2,846
Other Assets................................................. 502 531
-------- ---------
Total Assets........................................... $17,017 $17,551
======== =========
</TABLE>
Continued on next page.
-4-
<PAGE>
<TABLE>
<CAPTION>
PEPSICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (continued)
(in millions except per share amount)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Unaudited)
3/18/00 12/25/99
--------- ---------
<S> <C> <C>
Current Liabilities
Short-term borrowings........................................ $ 278 $ 233
Accounts payable and other current liabilities............... 3,007 3,399
Income taxes payable......................................... 189 156
--------- ---------
Total Current Liabilities.................................. 3,474 3,788
Long-term Debt................................................. 2,901 2,812
Other Liabilities.............................................. 2,913 2,861
Deferred Income Taxes.......................................... 1,222 1,209
Shareholders' Equity
Capital stock, par value 1 2/3 cents per share:
authorized 3,600 shares, issued 3/00 and 12/99 -1,726
shares.................................................... 29 29
Capital in excess of par value............................... 1,040 1,081
Retained earnings............................................ 14,294 14,066
Accumulated other comprehensive loss......................... (1,047) (989)
--------- ---------
14,316 14,187
Less: Repurchased shares, at cost:
3/00 - 285 shares, 12/99 - 271 shares....................... (7,809) (7,306)
--------- ---------
Total Shareholders' Equity................................. 6,507 6,881
--------- ---------
Total Liabilities and Shareholders' Equity............... $17,017 $17,551
========= =========
</TABLE>
See accompanying notes.
-5-
<PAGE>
<TABLE>
<CAPTION>
PEPSICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
(in millions, unaudited)
12 Weeks Ended
-------------------
3/18/00 3/20/99
------- --------
<S> <C> <C>
Net Income..................................................... $422 $ 333
Other Comprehensive (Loss)/Income
Currency translation adjustment, net of related taxes........ (62) (108)
Reclassification adjustment for items realized in net income. - 6
Other........................................................ 4 -
------- --------
(58) (102)
------- --------
Comprehensive Income........................................... $364 $ 231
======= ========
</TABLE>
See accompanying notes.
-6-
<PAGE>
PEPSICO, INC. AND SUBSIDIARIES
(unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular dollars in millions; all per share amounts assume dilution)
(1) Our Condensed Consolidated Balance Sheet at March 18, 2000 and the Condensed
Consolidated Statements of Income, Comprehensive Income and Cash Flows for the
12 weeks ended March 18, 2000 and March 20, 1999 have not been audited and have
been prepared substantially consistent with the accounting principles applied in
our 1999 Annual Report on Form 10-K for the year ended December 25, 1999. In our
opinion, this information includes normal and recurring adjustments necessary
for a fair presentation. The results for the 12 weeks are not necessarily
indicative of the results expected for the year.
(2) We repurchased 19.8 million shares at a cost of $666 million during the 12
weeks ended March 18, 2000. From March 19, 2000 through April 26, 2000, we
repurchased 1.4 million shares at a cost of $46 million.
(3) Reconciliation of shares outstanding at the beginning of the year to average
shares outstanding:
<TABLE>
<CAPTION>
12 Weeks Ended
--------------------
3/18/00 3/20/99
-------- --------
<S> <C> <C>
Shares outstanding at beginning of period....................... 1,455 1,471
Weighted average number of shares issued during the period for
exercise of stock options..................................... 3 3
Weighted average shares repurchased............................. (8) -
-------- --------
Average shares outstanding - Basic.............................. 1,450 1,474
Effect of dilutive securities
Dilutive shares issuable upon the exercise of stock options.. 131 161
Shares assumed to have been repurchased with assumed
proceeds from the exercise of stock options............... (109) (125)
-------- --------
Average shares outstanding - Assuming Dilution.................. 1,472 1,510
======== ========
Net Income...................................................... $ 422 $ 333
======== ========
Net Income Per Share - Basic.................................... $ 0.29 $ 0.23
======== ========
Net Income Per Share - Assuming Dilution........................ $ 0.29 $ 0.22
======== ========
</TABLE>
-7-
<PAGE>
(4) Business Segments
The 1999 results of previously consolidated bottling operations in which we now
own an equity interest and the 1999 equity income or loss of unconsolidated
bottling affiliates are presented as Bottling Operations/Investments. Pepsi-Cola
North America results include the North American concentrate and fountain
businesses. Pepsi-Cola International results include the international
concentrate business and other consolidated international bottling operations
for January and February only.
<TABLE>
<CAPTION>
Net Sales Operating Profit
------------------- -------------------
12 Weeks Ended 12 Weeks Ended
------------------- -------------------
3/18/00 3/20/99 3/18/00 3/20/99
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Frito-Lay
- - North America (a) $1,843 $1,742 $379 $280
- - International 918 787 99 78
-------- -------- ------- --------
2,761 2,529 478 358
Pepsi-Cola
- - North America 639 613 158 172
- - International 259 243 21 16
-------- -------- ------- --------
898 856 179 188
Intercompany elimination - (339)
-------- --------
898 517
Tropicana 532 499 60 35
-------- -------- ------- --------
Combined segments 4,191 3,545 717 581
Bottling Operations - 1,569
-------- --------
Total Net Sales $4,191 $5,114
======== ========
Corporate unallocated (62) (15)
------- --------
New PepsiCo Operating Profit 655 566
Bottling Operations/Investments - 29
------- --------
Total Operating Profit $655 $595
======= ========
</TABLE>
(a) Operating profit includes an asset impairment and restructuring charge of
$65 million in 1999.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total Assets
---------------------
3/18/00 12/25/99
-------- ---------
<S> <C> <C>
Frito-Lay
- - North America $ 4,019 $ 4,013
- - International 4,059 4,170
Pepsi-Cola
- - North America 661 729
- - International 1,507 1,454
Tropicana 3,767 3,708
-------- ---------
Combined segments 14,013 14,074
Corporate 525 1,008
Bottling Operations/Investments 2,479 2,469
-------- ---------
Total Assets $17,017 $17,551
======== =========
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
(5) Supplemental Cash Flow Information 12 Weeks Ended
--------------------
3/18/00 3/20/99
-------- --------
<S> <C> <C>
Interest paid.......................................... $ 40 $ 83
Income taxes paid...................................... $118 $ 101
Supplemental Schedule of Noncash Investing and Financing
Activities
Fair value of assets acquired.......................... $ 9 $ 192
Cash paid.............................................. (8) (168)
-------- --------
Liabilities assumed.................................... $ 1 $ 24
======== ========
</TABLE>
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS, CASH FLOWS, LIQUIDITY AND
CAPITAL RESOURCES AND EURO
General
Tabular dollars are presented in millions. All per share amounts assume
dilution, are computed using average shares outstanding and are based on
unrounded amounts. Percentage changes are based on unrounded amounts.
Cautionary Statements
From time to time, in written reports and in oral statements, we discuss
expectations regarding our future performance, the impact of the Euro conversion
and the impact of global macro-economic issues. These "forward-looking
statements" are based on currently available competitive, financial and economic
data and our operating plans. They are inherently uncertain, and investors must
recognize that events could turn out to be significantly different from
expectations.
Analysis of Consolidated Operations
<TABLE>
<CAPTION>
Net Sales
%
12 Weeks Ended Change
--------------------
3/18/00 3/20/99 B/(W)
-------- -------- --------
<S> <C> <C> <C>
Reported $4,191 $5,114 (18)
======== ========
New PepsiCo $4,191 $3,545 18
Intercompany elimination* - 339 NM
-------- --------
New PepsiCo before elimination $4,191 $3,884 8
======== ========
</TABLE>
* Reflects intercompany concentrate sales between Pepsi-Cola North America and
Pepsi-Cola International, and those previously consolidated bottling
operations in which we now own an equity interest.
NM - Not meaningful
- --------------------------------------------------------------------------------
Reported net sales declined $923 million. New PepsiCo net sales, before the
intercompany elimination, increased $307 million. This increase primarily
reflects volume gains at Frito-Lay, Tropicana and Pepsi-Cola International and
higher effective net pricing at Frito-Lay and Pepsi-Cola.
-10-
<PAGE>
<TABLE>
<CAPTION>
Operating Profit and Margin
12 Weeks Ended
----------------------- Change
3/18/00 3/20/99 B/(W)
---------- --------- --------
<S> <C> <C> <C>
Reported
Total Operating Profit $655 $595 10%
Total Operating Profit Margin 15.6% 11.6% 4.0
Ongoing
New PepsiCo Operating Profit $655 $631 4%
New PepsiCo Operating Profit Margin* 15.6% 16.2% (0.6)
</TABLE>
Ongoing new PepsiCo excludes the effect of an impairment and restructuring
charge of $65 in 1999. * Based on new PepsiCo net sales before intercompany
elimination.
- --------------------------------------------------------------------------------
Reported operating profit margin increased 4 percentage points. Ongoing
operating profit margin decreased 0.6 percentage point primarily reflecting the
margin impact of increased G&A expenses and the absence of the 1999 gain on the
sale of a chocolate business in Poland. These were partially offset by the
favorable margin impact of higher effective net pricing, increased volume and
reduced commodity costs at Tropicana and Frito-Lay North America. The
unfavorable margin impact of increased G&A reflects increased corporate
unallocated departmental overhead and a contribution to the PepsiCo Foundation.
Interest Expense, net
Interest expense, net of interest income, declined $64 million or 62%. Interest
expense declined $77 million or 62% primarily reflecting significantly lower
average debt levels slightly offset by higher average interest rates. Higher
average debt levels in 1999 resulted from the financing in 1998 of the Tropicana
acquisition and the financings in 1999 in preparation for the initial public
offering by the Pepsi Bottling Group. Interest income decreased $13 million or
63% primarily due to lower average investment balances.
<TABLE>
<CAPTION>
Provision for Income Taxes
12 Weeks Ended
----------------------
3/18/00 3/20/99
------- --------
<S> <C> <C>
Reported
Provision for Income Taxes $198 $158
Effective tax rate 32.0% 32.2%
Ongoing
Provision for Income Taxes $198 $183
Effective tax rate 32.0% 33.0%
</TABLE>
Ongoing excludes the tax effect of an impairment and restructuring charge of $25
in 1999.
- --------------------------------------------------------------------------------
The reported effective tax rate decreased .2 percentage point. The ongoing
effective tax rate decreased 1 percentage point primarily due to proportionately
lower bottling income and the lower effective tax rate on bottling equity
income.
-11-
<PAGE>
<TABLE>
<CAPTION>
Net Income and Net Income Per Share
12 Weeks Ended %
-------------------- Change
3/18/00 3/20/99 B/(W)
-------- -------- --------
<S> <C> <C> <C>
Net Income
Reported $ 422 $ 333 27
Ongoing $ 422 $ 373 13
Net Income Per Share
Reported $0.29 $0.22 30
Ongoing $0.29 $0.25 16
</TABLE>
Ongoing excludes the effect of an impairment and restructuring charge of $65
($40 after-tax) in 1999.
- --------------------------------------------------------------------------------
Reported net income increased $89 million and the related net income per share
increased $0.07. Ongoing net income increased $49 million and the related net
income per share increased $0.04. The ongoing increases primarily reflect the
decrease in net interest expense and increased new PepsiCo operating profit
partially offset by the impact of the deconsolidation of certain bottling
operations. The increase in ongoing net income per share also reflects the
benefit of a 2.5% reduction in average shares outstanding assuming dilution.
Segments of the Business
In the discussions below, the year-over-year dollar change:
o in concentrate shipments to franchisees, including bottling operations in
which we now own an equity interest, for Pepsi-Cola,
o in bottler case sales by company-owned bottling operations for Pepsi-Cola
International,
o in pound or kilo sales of salty and sweet snacks for Frito-Lay and
o in four gallon equivalent cases for Tropicana is referred to as volume.
Price changes over the prior year and the impact of product, package and country
sales mix changes are referred to as effective net pricing.
Additional information concerning our operating segments is presented in Note 4.
Frito-Lay
The standard volume measure is pounds for North America and kilos for
International. Pound and kilo growth are reported on a systemwide basis.
-12-
<PAGE>
<TABLE>
<CAPTION>
Frito-Lay North America
12 Weeks Ended %
-------------------- Change
3/18/00 3/20/99 B/(W)
-------- -------- --------
<S> <C> <C> <C>
Net Sales $1,843 $1,742 6
Operating Profit
Reported $ 379 $ 280 36
Ongoing $ 379 $ 345 10
</TABLE>
Ongoing excludes an impairment and restructuring charge of $65 in 1999.
- --------------------------------------------------------------------------------
Net sales grew $101 million due to increased volume and higher effective net
pricing.
Pound volume advanced 4% primarily driven by growth across our core brands,
excluding the low-fat and no-fat versions, and by our new Snack Kit products.
The growth in core brands was led by double-digit growth in Cheetos brand cheese
puffs and Ruffles brand potato chips. These gains were partially offset by
declines in "WOW!" and "Baked" brand products.
Reported operating profit increased $99 million. Ongoing operating profit
increased $34 million primarily reflecting the higher volume and reduced
commodity costs. The margin impact of these favorable factors contributed to the
ongoing operating profit margin improvement.
<TABLE>
<CAPTION>
Frito-Lay International
12 Weeks Ended %
--------------------- Change
3/18/00 3/20/99 B/(W)
--------- -------- --------
<S> <C> <C> <C>
Net Sales $918 $787 17
Operating Profit $ 99 $ 78 27
</TABLE>
- --------------------------------------------------------------------------------
Net sales increased $131 million. The increase was primarily driven by volume
growth at Sabritas in Mexico, largely due to a promotional program, and
effective net pricing at Gamesa in Mexico and at Walkers in the U.K. The net
impact of stronger foreign currencies, primarily in Mexico, increased net sales
by 3 percentage points.
Salty snack kilos increased 12%, led by double-digit growth at Sabritas and at
our Latin American joint ventures. Sweet snack kilos decreased 5% primarily as a
result of the sale of our chocolate business in Poland in 1999.
-13-
<PAGE>
Reported operating profit increased $21 million. Strong operating performances
at Sabritas and Gamesa drove the growth. The net impact of foreign currencies
increased operating profit by 5% largely reflecting the strength of the Mexican
peso.
Pepsi-Cola
To facilitate comparisons, net sales are presented prior to the elimination in
1999 of intercompany concentrate sales between Pepsi-Cola North America and
Pepsi-Cola International and those previously consolidated bottling operations
in which we now own an equity interest.
System bottler case sales (BCS) represent PepsiCo-owned brands as well as brands
that we have been granted the right to produce, distribute and market nationally
and are sold by system bottlers. First quarter BCS include the months of
January, February and March. The net sales and operating profit of Pepsi-Cola
International include the operating results for January and February.
<TABLE>
<CAPTION>
Pepsi-Cola North America
12 Weeks Ended %
-------------------- Change
3/18/00 3/20/99 B/(W)
-------- -------- --------
<S> <C> <C> <C>
Net Sales $639 $ 613 4
Intercompany elimination - (328) NM
-------- --------
Reported $639 $ 285 NM
======== ========
Operating Profit $158 $ 172 (8)
</TABLE>
NM - Not meaningful
- --------------------------------------------------------------------------------
Reported net sales increased $354 million primarily due to the absence of the
intercompany elimination in 2000. Before the 1999 elimination of intercompany
concentrate sales, net sales increased $26 million due largely to increased
concentrate pricing. The higher pricing was partially offset by increased
fountain customer support and lower concentrate volume.
BCS volume remained flat despite strong double-digit growth of Aquafina bottled
water, the introduction of the juice-based FruitWorks brand and low single-digit
growth of brands Mountain Dew and Diet Pepsi. These increases were offset by a
single-digit decline in brand Pepsi and a double-digit decline in Pepsi One.
Concentrate shipments decreased 2.0%.
Operating profit decreased $14 million primarily due to a charge related to a
customer bankruptcy. Excluding this charge, operating profit decreased 2% as a
result of the increased customer support, the lower volume and higher G&A. These
unfavorabilities were partially offset by the increased pricing. G&A grew at a
significantly faster rate than sales driven by costs associated with building
the concentrate company infrastructure.
-14-
<PAGE>
<TABLE>
<CAPTION>
Pepsi-Cola International
12 Weeks Ended %
-------------------- Change
3/18/00 3/20/99 B/(W)
-------- -------- --------
<S> <C> <C> <C>
Net Sales $259 $243 6
Intercompany elimination - (11) NM
-------- --------
Reported $259 $232 12
======== ========
Operating Profit $ 21 $ 16 30
</TABLE>
NM - Not meaningful
- --------------------------------------------------------------------------------
Reported net sales increased $27 million. Before the elimination of intercompany
concentrate sales, net sales increased $16 million. This increase was primarily
due to volume gains, contributions from acquisitions and higher effective net
pricing, partially offset by a net unfavorable foreign currency impact. The net
unfavorable foreign currency impact, primarily in Germany, reduced net sales by
3 percentage points.
BCS increased 5%. This increase reflects solid growth in Mexico and Saudi Arabia
and strong double-digit growth in Germany, Peru, the United Kingdom, the
Philippines and Russia. These advances were partially offset by lower BCS in
Brazil. Through February, total concentrate shipments to franchisees, including
those previously wholly-owned bottlers in which we now own an equity interest,
grew 3% while their BCS grew at a higher rate.
Operating profit increased $5 million primarily reflecting the volume gains and
higher effective net pricing, slightly offset by losses from acquisitions.
Tropicana
The standard measure of volume is four-gallon equivalent cases.
<TABLE>
<CAPTION>
12 Weeks Ended %
-------------------- Change
3/18/00 3/20/99 B/(W)
-------- -------- --------
<S> <C> <C> <C>
Net Sales $532 $499 7
Operating Profit $ 60 $ 35 70
</TABLE>
- --------------------------------------------------------------------------------
Net sales increased $33 million due to volume gains in the U.S. and in Europe.
Equivalent case volume grew 6%, led by double-digit worldwide growth in Pure
Premium reflecting strong double-digit growth in Pure Premium nutritionals and
blends. Operating profit increased $25 million primarily due to the volume gains
and lower orange juice costs.
-15-
<PAGE>
Cash Flows
Our 2000 consolidated cash and cash equivalents decreased $540 million compared
to a $1.8 billion increase in 1999. The change in cash flow primarily reflects
the decrease resulting from the decline in net proceeds from the issuance of
debt and from share repurchase activity in 2000. This comparative decrease was
partially offset by the increase resulting from the use in 1999 of debt proceeds
to purchase short-term investments.
Liquidity and Capital Resources
As of year-end 1999, we maintained $1.5 billion of revolving credit facilities.
Of the $1.5 billion, $600 million expires in June of 2000 with the balance
expiring in June of 2004. The credit facilities exist largely to support
issuances of short-term debt. Annually, these facilities can be extended an
additional year upon the mutual consent of PepsiCo and the lending institutions.
Our strong cash-generating capability and financial condition give us ready
access to capital markets throughout the world.
EURO
During 1999, 11 of 15 member countries of the European Union fixed conversion
rates between their existing currencies (legacy currencies) and one common
currency-the EURO. The euro trades on currency exchanges and may be used in
business transactions. Conversion to the euro eliminated currency exchange rate
risk between the member countries. Beginning in January 2002, new
EURO-denominated bills and coins will be issued, and legacy currencies will be
withdrawn from circulation. Our operating subsidiaries affected by the euro
conversion have established plans to address the issues raised by the euro
currency conversion. These issues include, among others, the need to adapt
computer and financial systems, business processes and equipment, such as
vending machines, to accommodate EURO-denominated transactions and the impact of
one common currency on pricing. Since financial systems and processes currently
accommodate multiple currencies, the plans contemplate conversion by the middle
of 2001 if not already addressed in conjunction with other system or process
initiatives. We do not expect the system and equipment conversion costs to be
material. Due to numerous uncertainties, we cannot reasonably estimate the
long-term effects one common currency will have on pricing and the resulting
impact, if any, on financial condition or results of operations.
-16-
<PAGE>
<audit-report>
Independent Accountants' Review Report
The Board of Directors
PepsiCo, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
PepsiCo, Inc. and Subsidiaries as of March 18, 2000 and the related condensed
consolidated statements of income, comprehensive income and cash flows for the
twelve weeks ended March 18, 2000 and March 20, 1999. These financial statements
are the responsibility of PepsiCo, Inc.'s management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of PepsiCo, Inc. and Subsidiaries as
of December 25, 1999, and the related consolidated statements of income,
shareholders' equity and cash flows for the year then ended not presented
herein; and in our report dated February 9, 2000, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 25, 1999, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG LLP
New York, New York
April 19, 2000
-17-
<PAGE>
</audit-report>
<PAGE>
<PAGE>
PART II - OTHER INFORMATION AND SIGNATAURES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits on page 20.
(b) Reports on Form 8-K
None
-18-
<PAGE>
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned.
PepsiCo, Inc.
(Registrant)
Date: April 26, 2000 Indra K. Nooyi
Senior Vice President and
Chief Financial Officer
Date: April 26, 2000 Lawrence F. Dickie
Vice President, Associate General
Counsel and Assistant Secretary
-19-
<PAGE>
INDEX TO EXHIBITS
ITEM 6 (a)
EXHIBITS
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
Exhibit 15 Accountants' Acknowledgment
Exhibit 27.1 Financial Data Schedule
-20-
EXHIBIT 12
<TABLE>
<CAPTION>
PEPSICO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges (c)
(in millions except ratio amounts, unaudited)
12 Weeks Ended
--------------------
3/18/00 3/20/99
-------- --------
<S> <C> <C>
Earnings: (b)
Income before income taxes............................ $620 $491
Joint ventures and minority interests, net............ (4) 2
Amortization of capitalized interest.................. 2 6
Interest expense...................................... 47 124
Interest portion of rent expense (a).................. 7 11
-------- --------
Earnings available for fixed charges................ $672 $634
======== ========
Fixed Charges:
Interest expense...................................... $ 47 $124
Capitalized interest.................................. 1 2
Interest portion of rent expense (a).................. 7 11
-------- --------
Total fixed charges................................. $ 55 $137
======== ========
Ratio of Earnings to Fixed Charges.................... 12.18 4.63
======== ========
</TABLE>
(a) One-third of net rent expense is the portion deemed representative of the
interest factor.
(b) Includes the impact of an asset impairment and restructuring charge of
$65. Excluding the charge, the ratio of earnings to fixed charges would
have been 5.10.
(c) Based on unrounded amounts.
-21-
<PAGE>
EXHIBIT 15
Accountants' Acknowledgment
The Board of Directors
PepsiCo, Inc.
We hereby acknowledge our awareness of the use of our report dated April 19,
2000 included within the Quarterly Report on Form 10-Q of PepsiCo, Inc. for the
twelve weeks ended March 18, 2000, and incorporated by reference in the
following Registration Statements and in the related Prospectuses:
<TABLE>
<CAPTION>
Registration
Description Statement Number
Form S-3
<S> <C>
PepsiCo SharePower Stock Option Plan for PCDC
Employees 33-42121
$32,500,000 Puerto Rico Industrial, Medical and
Environmental Pollution Control Facilities
Financing Authority Adjustable Rate Industrial
Revenue Bonds 33-53232
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. 33-50685
$4,587,000,000 Debt Securities and Warrants 33-64243
Form S-8
PepsiCo SharePower Stock Option Plan 33-35602, 33-29037,
33-42058, 33-51496,
33-54731 & 33-66150
1988 Director Stock Plan 33-22970
1979 Incentive Plan and the 1987 Incentive Plan 33-19539
1994 Long-Term Incentive Plan 33-54733
1995 Stock Option Incentive Plan 33-61731 & 333-09363
1979 Incentive Plan 2-65410
PepsiCo, Inc. Long Term Savings Program 2-82645, 33-51514 &
33-60965
PepsiCo 401(K) Plan 333-89265
</TABLE>
Pursuant to Rule 436(c) of the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Act.
KPMG LLP
New York, New York
April 26, 2000
-22-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This Schedule Contains Summary Financial Information Extracted from
PepsiCo, Inc. and Subsidiaries Condensed Consolidated Financial
Statements for the 12 Weeks Ended March 18, 2000 and is Qualified in
its Entirety by Reference to such Financial Statements.
</LEGEND>
<CIK> 0000077476
<NAME> PepsiCo, Inc.
<MULTIPLIER> 1,000,000
<S> <C>
<FISCAL-YEAR-END> Dec-30-2000
<PERIOD-END> Mar-18-2000
<PERIOD-TYPE> 3-MOS
<CASH> 424
<SECURITIES> 96
<RECEIVABLES> 1,835
<ALLOWANCES> 101
<INVENTORY> 929
<CURRENT-ASSETS> 3,777
<PP&E> 8,895
<DEPRECIATION> 3,665
<TOTAL-ASSETS> 17,017
<CURRENT-LIABILITIES> 3,474
<BONDS> 2,901
<COMMON> 29
0
0
<OTHER-SE> 6,478
<TOTAL-LIABILITY-AND-EQUITY> 17,017
<SALES> 4,191
<TOTAL-REVENUES> 4,191
<CGS> 1,677
<TOTAL-COSTS> 1,677
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> 620
<INCOME-TAX> 198
<INCOME-CONTINUING> 422
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 422
<EPS-BASIC> 0.29
<EPS-DILUTED> 0.29
</TABLE>
