PURCHASE, N.Y., Oct. 22 /PRNewswire/ -- PepsiCo, Inc. (NYSE:PEP) reported net income per share of $0.42 for the quarter
ended September 6, 1997 including $0.35 per share from continuing operations (packaged goods) and $0.07 per share for discontinued
operations (restaurants). Excluding one-time items in both years, net income per share increased 40 percent.
PepsiCo's Chairman and Chief Executive Officer, Roger Enrico, remarked: ''The collective energy of nearly half a million employees
can be seen not only in our solid operating performance this quarter but also in the successful spin-off of Tricon Global Restaurants
two weeks ago. Tricon is the second largest restaurant company in the world and has an excellent management team in Andy
Pearson, David Novak and Bob Lowes. We're very pleased that Tricon's reception by investors has been favorable as reflected in
their market capitalization of about $5 billion. We're grateful for the contribution Tricon has made to PepsiCo's performance
year-to-date and are convinced they have an excellent future ahead.
''Before the spin-off, our three businesses had generated $2.4 billion in free cash during the first three quarters. If we add to that the
$4.5 billion of cash received from Tricon at the time of the spin-off, it's easy to see that PepsiCo is beginning this new era with a
very strong balance sheet and a lot of flexibility.
''In fact, in this first period of reporting packaged goods on a stand- alone basis, they posted an operating profit advance of 28
percent while investing aggressively for the long-term, a very solid beginning.''
CONTINUING OPERATIONS (Packaged Goods)
[Note: All percents have been calculated excluding the one-time charges taken in the third quarter last year. There were no unusual
items in Q3 1997 for continuing operations.]
Snack Foods
Worldwide snack food sales grew seven percent and operating profits grew 16 percent with both the North American and
International sides of the business posting strong advances.
At Frito-Lay North America, sales grew six percent due to a four percent increase in pound volume and the carry-over impact of
last year's pricing actions. The volume growth reflected particularly strong advances for Doritos, Lays and Tostitos. Profit growth
also accelerated as a result of better controls on distribution costs. Year-to-date, volume growth was three percent.
International snack foods results primarily reflect a strong 11 percent increase in salty kilos in the quarter bringing year-to-date
volume growth to 11 percent. For the quarter, this volume increase was driven by continued strength in Mexico and Brazil as well as
gains in the U.K. Sales and profit gains largely reflect volume growth but profits also received an additional lift from a gain on the sale
of a flour mill in Mexico this year.
Beverages
Worldwide beverage sales grew two percent and profits grew 40 percent driven by a sharp increase in the international side of the
business.
In International we continue to make solid progress against our strategic goals. For example, we realigned our bottling infrastructure
in several sub- scale markets like the Philippines (to Guoco) and Monterrey, Mexico (to GEMEX). In the last few weeks, we also
announced the refranchising of Japan to Suntory. In our emerging markets we continue to show very strong volume growth,
particularly in China and India. In our critical mass markets we have also seen steady progress demonstrated by the volume and
profit growth in Europe and Asia this quarter. Finally, we continue to stabilize our share in key leadership markets.
This new strategic focus began to pay off this quarter. System-wide volume for PCI advanced four percent, the first positive advance
in a year. Year-to-date this brings system-wide volume even with prior year. In addition, the division posted an operating profit of
$75 million, an increase of more than $150 million over the prior year. The dramatic profit improvement was largely due to a strong
year-over-year increase in concentrate shipments as well as the fact that the third quarter of 1996 had losses in certain joint
venture operations which, because of our realignment efforts, are no longer depressing our earnings.
The North American business also continued to make good strategic progress. Almost all of our bottlers have signed our new
contract which gives us the support we need to aggressively pursue new fountain accounts. At the same time, we have continued to
staff our new fountain account group to meet this challenge. So far this year, we have also placed approximately 80,000 new
vendors/coolers in the market and expect to reach 100,000 by year end.
On the tactical front, the business continued to be very competitive throughout the summer with aggressive pricing in the take-home
channels over both big holiday weekends and for most of June and July. This put considerable pressure on profits during the quarter.
Nevertheless, PCNA continued to invest in its fountain infrastructure and to aggressively place new vendors. The lower pricing
helped stimulate volume growth in the bottle and can side of the business although volume performance by our existing fountain
accounts was slow. As a result, system-wide bottler case sales grew four percent in the quarter and year-to-date.
DISCONTINUED OPERATIONS (Restaurants)
Due to the completion of the spin-off on October 6, 1997, restaurant results are reflected as discontinued operations. These results
reflect not only the after-tax earnings of Tricon but also some one-time costs related to the spin-off, the gain on the sale of PFS
and the earnings of PFS prior to its sale. The sale of the last two non-core businesses, D'Angelo's and California Pizza Kitchen
occurred early in the fourth quarter. The cash proceeds from these sales will therefore be included in fourth quarter results. [Note: for
more information on the operating results of the restaurant business see the Tricon earnings release issued on October 21, 1997.]
Cash Flow
Free cash flow year-to-date was $2.4 billion, a very strong performance relative to the prior year driven primarily by the receipt of
cash from the sale of PFS and improvements in income from continuing operations. In addition, cash grew due to lower capital
spending, lower working capital and cash from the New Zealand IPO. Approximately $750 million of this cash was used to
repurchase 20 million shares during the quarter. As of October 21, 48.8 million shares have been repurchased for $1.7 billion.
PEPSICO, INC. AND SUBSIDIARIES
Consolidated Statement of Income (a)
($ in millions except per share amounts, unaudited)
% Change B/(W)
12 Weeks Ended As
9/6/97 9/7/96 Rept'd Adjusted
(b)
Net Sales $5,362 $5,159 4 4
Costs and Expenses, net
Cost of sales 2,179 2,158 (1) (1)
Selling, general and
administrative expenses 2,209 2,230 1 1
Amortization of intangible
assets 45 48 6 6
Unusual items (c) -- 390 NM --
Operating Profit 929 333 NM 28
Interest expense (123) (134) 8 8
Interest income 31 22 41 41
Income From Continuing Operations
Before Income Taxes 837 221 NM 37
Provision for Income Taxes (d) 286 211 (36) (21)
Income From Continuing
Operations 551 10 NM 47
Income From Discontinued
Operations, net of taxes (c) 107 134 (20) NM
Net Income $ 658 $ 144 NM 36
Income Per Share
Continuing Operations $ 0.35 $ 0.01 NM (e) 51 (e)
Discontinued Operations 0.07 0.08 (18)(e) NM (e)
Net Income Per Share $ 0.42 $ 0.09 NM (e) 40 (e)
Average Shares Outstanding 1,566 1,607 3 3
NM - Not Meaningful
See accompanying notes.
Notes to 12 Weeks Ended 9/6/97 and 9/7/96:
(a) Prior year amounts have been restated to classify the operating
results of our Restaurants segment as discontinued operations.
(b) Excluded the effects of the unusual items described in Note (c)
below.
(c) The unusual items were composed of:
1997 1996
Discontinued Continuing
Operations Operations
Int'l Beverage Impairment
charges $ -- $ 390
Non-core concept
impairment charges 15 --
Spin-off related costs 22 --
Net loss $ 37 $ 390
After-tax loss $ 34 $ 376
Per share $0.02 $0.23
(d) The effective tax rates on income from continuing operations
were 34.2% in 1997 and 95.5% in 1996. Excluding the effects of
the unusual items, the effective tax rates were 34.4% and 38.8%
in 1997 and 1996, respectively.
(e) The percentage change in Income Per Share was calculated by
using Income Per Share calculated to four decimal places to
eliminate the effects of rounding.
PEPSICO, INC. AND SUBSIDIARIES
Consolidated Statement of Income (a)
($ in millions except per share amounts, unaudited)
% Change B/(W)
36 Weeks Ended As
9/6/97 9/7/96 Rept'd Adjusted
(b)
Net Sales $14,661 $14,287 3 3
Costs and Expenses, net
Cost of sales 5,969 5,936 (1) (1)
Selling, general and
administrative expenses 6,303 6,180 (2) (2)
Amortization of intangible
assets 139 142 2 2
Unusual items (c) 304 390 22 -
Operating Profit 1,946 1,639 19 11
Interest expense (358) (399) 10 10
Interest income 54 67 (19) (19)
Income From Continuing Operations
Before Income Taxes 1,642 1,307 26 15
Provision for Income Taxes (d) 597 563 (6) (13)
Income From Continuing
Operations 1,045 744 40 16
Income From Discontinued
Operations, net of taxes (c) 696 377 85 NM
Net Income $ 1,741 $ 1,121 55 17
Income Per Share
Continuing Operations $ 0.66 $ 0.46 44 (e) 18 (e)
Discontinued Operations 0.45 0.23 89 (e) NM (e)
Net Income Per Share $ 1.11 $ 0.69 59 (e) 19 (e)
Average Shares Outstanding 1,575 1,613 2 2
NM - Not Meaningful
See accompanying notes.
Notes to 36 Weeks Ended 9/6/97 and 9/7/96:
(a) Prior year amounts have been restated to classify the operating
results of our Restaurants segment as discontinued operations.
(b) Excluded the effects of the unusual items described in Note (c)
below.
(c) The unusual items related to:
Continuing Operations: 1997 1996
Beverages
- N.A. $ 52 $ --
- Int'l 180 390
Snack Foods
- N.A. 10 --
- Int'l 62 -
Net loss $ 304 $ 390
After-tax loss $ 240 $ 376
Per share $0.15 $0.23
Discontinued Operations: 1997 1996
PFS gain $ (500)
Non-core concept
impairment charges 54 $ 26
Spin-off related costs 38
Net (gain)/loss $ (408) $ 26
After-tax $ (220) $ 17
Per share $(0.14) $0.01
(d) The effective tax rates on income from continuing operations
were 36.4% in 1997 and 43.1% in 1996. Excluding the effects of
the unusual items, the effective tax rates were 34.0% and 34.7%
in 1997 and 1996, respectively.
(e) The percentage change in Income Per Share was calculated by
using Income Per Share calculated to four decimal places to
eliminate the effects rounding.
PEPSICO, INC. AND SUBSIDIARIES
Management Basis
Supplemental Schedule of Net Sales and Operating Profit (a)
12 Weeks Ended September 6, 1997 and September 7, 1996
($ in millions, unaudited)
Net Sales Operating Profit
% % Change B/(W)
12 Weeks Ended Change 12 Weeks Ended As
9/6/97 9/7/96 B/(W) 9/6/97 9/7/96 Rept'd Adjusted
(b) (b) (c)
Beverages
-N.A. $2,071 $2,032 2 $425 $ 435 (2) (2)
-Int'l 799 791 1 75 (468) NM NM
Total 2,870 2,823 2 500 (33) NM 40
Snack Foods
-N.A. 1,714 1,622 6 378 333 14 14
-Int'l 778 714 9 90 72 25 25
Total 2,492 2,336 7 468 405 16 16
Combined
Segments $5,362 $5,159 4 968 372 NM 27
Unallocated expenses (39) (39) -- --
Operating Profit $929 $ 333 NM 28
NM - Not Meaningful
Notes:
(a) Restated to reflect the effects of classifying the operating
results of our Restaurants segment as discontinued operations.
(b) Included International Beverages' 1996 unusual impairment
charges of $390 million.
(c) Excluded the effects of International Beverages' 1996 unusual
impairment charges.
PEPSICO, INC. AND SUBSIDIARIES
Management Basis
Supplemental Schedule of Net Sales and Operating Profit (a)
36 Weeks Ended September 6, 1997 and September 7, 1996
($ in millions, unaudited)
Net Sales Operating Profit
% % Change B/(W)
36 Weeks Ended Change 36 Weeks Ended As
9/6/97 9/7/96 B/(W) 9/6/97 9/7/96 Rept'd Adjusted
(b) (b) (b) (c)
Beverages
-N.A. $ 5,557 $ 5,502 1 $1,029 $1,084 (5) -
-Int'l 1,903 2,053 (7) (121) (433) 72 NM
Total 7,460 7,555 (1) 908 651 39 10
Snack Foods
-N.A. 4,905 4,652 5 985 881 12 13
-Int'l 2,296 2,080 10 196 226 (13) 14
Total 7,201 6,732 7 1,181 1,107 7 13
Combined
Segments $14,661 $14,287 3 2,089 1,758 19 11
Unallocated expenses (143) (119) (20) (20)
Operating Profit $1,946 $1,639 19 11
NM - Not Meaningful
Notes:
(a) Restated to reflect the effects of classifying the operating
results of our Restaurants segment as discontinued operations.
(b) Included the following unusual charges:
1997 1996
Beverages
- N.A. $ 52 $ --
- Int'l 180 390
Snack Foods
- N.A. 10 --
- Int'l 62 --
Total $304 $390
(c) Excluded the effects of the unusual items described in note (b)
above.
PEPSICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions, unaudited)
36 Weeks Ended
9/6/97 9/7/96
Cash Flows - Operating Activities
Income From Continuing Operations $ 1,045 $ 744
Adjustments to reconcile income from con-
tinuing operations to net cash provided by
operating activities
Depreciation and amortization 746 730
Noncash portion of unusual charges 220 390
Deferred income taxes 112 13
Other noncash charges and credits, net 166 231
Changes in operating working capital (237) (434)
Net Cash Provided by Operating Activities 2,052 1,674
Cash Flows - Investing Activities
Capital spending (957) (1,091)
Acquisitions and investments in unconsolidated
affiliates (58) (33)
Sales of businesses 85 --
Sales of property, plant and equipment -- 27
Short-term investments (1,670) (18)
Other, net (5) (170)
Net Cash Used for Investing Activities (2,605) (1,285)
Cash Flows - Financing Activities
Proceeds from issuances of long-term debt 2 1,679
Payments of long-term debt (1,457) (1,043)
Short-term borrowings 2,326 (285)
Cash dividends paid (545) (496)
Share repurchases (1,643) (1,051)
Proceeds from exercises of stock options 279 239
Other, net -- (6)
Net Cash Used for Financing Activities (1,038) (963)
Net Cash Provided by Discontinued Operations 1,791 605
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (5) (1)
Net Increase in Cash and
Cash Equivalents 195 30
Cash and Cash Equivalents - Beginning of year 307 284
Cash and Cash Equivalents - End of period $ 502 $ 314
PEPSICO, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(in millions)
(Unaudited)
9/6/97 12/28/96
Assets
Cash and cash equivalents $ 502 $ 307
Short-term investments, at cost 1,975 289
Other current assets 3,744 3,354
Total Current Assets 6,221 3,950
Investments in unconsolidated
affiliates 1,195 1,147
Property, plant and
equipment, net 6,007 6,086
Intangible assets, net 5,799 6,036
Other assets 469 491
Net assets of discontinued
operations 3,350 4,450
Total Assets $23,041 $22,160
Liabilities and Shareholders' Equity
Short-term borrowings $ 5,350 $ --
Other current liabilities 3,993 3,791
Total Current Liabilities 9,343 3,791
Long-term debt 3,584 8,174
Other liabilities 2,120 1,997
Deferred income taxes 1,649 1,575
Total Liabilities 16,696 15,537
Shareholders' Equity 6,345 6,623
Total Liabilities and
Shareholders' Equity $23,041 $22,160 |
