PR NewsWire
PepsiCo Announces Earnings
PURCHASE, N.Y., Feb. 3 /PRNewswire/ -- Today PepsiCo, Inc. reported
earnings per share from continuing operations of $0.29 for the fourth quarter
(+129%) and $0.95 for the full year (+62%). Excluding unusual items in 1997
and 1996, earnings per share from continuing operations were $0.29 for the
fourth quarter (+30%) and $1.10 for the full year (+20%).
Roger Enrico, Chairman and CEO commented: "1997 was a critical strategic
year for PepsiCo as we exited the restaurant business to focus on the packaged
goods products that are both our strength and our heritage. The spin-off of
the core restaurant operations and the sale of related assets along with
normal restaurant activity provided us with over $6 billion in cash. Our
remaining packaged goods businesses grew operating profits 30 percent for the
year and generated over $1 billion in free cash flow. When combined with the
cash from restaurants, this allowed us to make significant strategic consumer
investments and investments in our own shares.
"We paid down about $3 billion in debt and repurchased $2.5 billion in
stock. But more importantly, we made investments to strengthen the quality of
our business:
-- committing over $1 billion to packaged goods capital projects;
-- preparing for the launch of the Pepsi Globe blue packaging;
-- preparing for the launch of our line of fat-free snacks early in
1998.
"As we look forward to 1998, we're very excited about our first full year
as a pure packaged goods company. We have the potential for another year of
solid EPS growth while continuing to invest aggressively to drive the top line
well into the future."
Beverages
Worldwide beverage profits advanced 18 percent for the year excluding
unusual items. This increase was driven by the turnaround in our
international beverage business which began to execute its new strategies,
refranchising five major bottling operations, regaining positive volume
momentum and posting significantly better operating results.
For Pepsi-Cola North America (PCNA), 1997 was a year of investment. For
example, PCNA dramatically expanded its sales team to go after new fountain
opportunities. These opportunities arose because of a change PCNA made in its
bottler contract in early 1997. In addition, PCNA placed more than 150,000
vendors and coolers in the market during the year, almost double the pace of
the prior year. PCNA also decided to launch Pepsi Globe, a new "look" for the
Pepsi brands including new blue packaging. This, along with other marketing
investments which will impact 1998, drove above average levels of expenditure
late in 1997.
Volume performance for beverages for the year was mixed. International
volume rose one percent for the year. This reflected declines in the first
half followed by a four percent increase in the last half of the year. The
rebound reflects our successful re-entry into Venezuela, positive volume
momentum in Mexico and strong growth in the Philippines and in emerging
markets like China and India. Volume for PCNA advanced four percent for the
year and three percent for the quarter. North American volume reflected
strong flavor growth due to Mountain Dew. All major channels posted good
volume growth but the overall results were driven by the supermarket channel
because of its size and the fact that there were industry-wide price declines.
In addition, the vending channel made a significant contribution to volume
growth as a result of new equipment in the marketplace.
Snacks
In the fourth quarter, Frito-Lay announced three snack acquisitions. The
first involved the Cracker Jack brand in the U.S. The second included
several of United Biscuits' operations in Australia and Europe; and the third
was the acquisition of a leading snack business in Argentina. Two of these
acquisitions were completed in 1997, and the United Biscuits transactions are
expected to be completed in 1998.
Worldwide snack profits for the year advanced 11 percent excluding unusual
items driven by both the North American and international businesses. Profits
for the quarter advanced seven percent primarily due to the business in North
America.
The international snack business had a solid fourth quarter in salty
snacks, delivering volume growth of ten percent despite the impact of a
difficult economy in Brazil, a major contributor to our international snack
growth for the last two years. Salty volume growth for the full year was
eleven percent, a strong performance given that it follows an eight percent
increase in volume last year. In the fourth quarter, sweet snack volume
advanced for the first time this year. International profit levels in the
quarter reflected an election to spend against several long term volume
building initiatives including initiatives in Brazil.
Frito-Lay North America also had a solid year. Volume grew four percent
for the quarter. This brought full year growth to three percent despite a
difficult comparison to a nine percent growth rate in 1996. Margin
improvement was a key factor in profit growth for both the quarter and the
year. It is particularly noteworthy that Frito-Lay expanded margins in the
fourth quarter despite a significant increase in spending for new plant
capacity to support product introductions beginning in early 1998.
Cash Flow
Free cash flow exceeded $5 billion dollars in the quarter reflecting the
proceeds from the spin-off as well as solid operating cash flow from the
packaged goods divisions. Share repurchases continued during the quarter.
Unusual Items
In the fourth quarter, Pepsi-Cola International received $87 million (plus
interest) from the Coca Cola Company as a settlement in the case regarding
their takeover of our bottler in Venezuela in 1996. These funds have been
committed to cover the costs of our aggressive re-entry into the market with
our partner, Empresas Polar, as well as various initiatives in our other
businesses intended to re-invigorate the business and accelerate sales growth.
Unusual items had no net impact on earnings per share for the quarter in
total.
PepsiCo, Inc. and Subsidiaries
Consolidated Statement of Income (a)
($ in millions except per share amounts)
% Change B/(W)
16 Weeks Ended As
12/27/97 12/28/96 Rept'd Adjusted
(b)
Net Sales $6,256 $6,050 3 3
Costs and Expenses, net
Cost of sales 2,556 2,516 (2) (2)
Selling, general and
administrative expenses 2,938 2,883 (2) (2)
Amortization of intangible
assets 60 64 6 6
Unusual items (c) (14) 186 NM --
Operating Profit 716 401 79 20
Interest expense (120) (166) 28 28
Interest income 71 24 196 196
Income From Continuing
Operations Before Income
Taxes 667 259 158 47
Provision for Income
Taxes (d) 221 61 NM 117
Income From Continuing
Operations 446 198 125 28
Loss From Discontinued
Operations, net of taxes (45) (170) 74
Net Income $401 $28 NM
Income/(Loss)Per Share-Basic
Continuing Operations $ 0.30 $ 0.13 131(e) 31 (e)
Discontinued Operations(0.03) (0.11) 73 (e)
Net Income Per Share $ 0.27 $ 0.02 NM (e)
Average Shares
Outstanding 1,514 1,552 2 2
Income/(Loss) Per Share-
Assuming Dilution
Continuing Operations $ 0.29 $ 0.13 129(e) 30 (e)
Discontinued Operations (0.04) (0.10) 73 (e)
Net Income Per Share $ 0.25 $ 0.03 NM (e)
Average Shares Outstanding 1,559 1,588 2 2
NM - Not Meaningful
See accompanying notes.
Notes to 16 Weeks Ended 12/27/97 and 12/28/96:
(a) Prior year amounts have been restated to classify the operating
results of the Restaurants segment as discontinued operations.
(b) Excludes the effects of the unusual items described in Note (c)
below.
(c) The 1997 and 1996 unusual items included in continuing
operations relate to decisions to dispose 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.
Continuing
Operations
1997 1996
Net loss/(gain) $(14) $ 186
After tax loss/(gain) $ (1) $ 151
Per share-assuming dilution $ -- $0.10
(d) The effective tax rates on income from continuing operations
were 33.1% in 1997 and 23.6% in 1996. Excluding the effects of
the unusual items, the effective tax rates were 31.9% and 19.0%
in 1997 and 1996, respectively.
(e) The percentage change in Income Per Share was calculated by
using Income Per Share calculated to four decimal places to
eliminate the effects of rounding.
PepsiCo, Inc. and Subsidiaries
Consolidated Statement of Income (a)
($ in millions except per share amounts)
% Change B/(W)
52 Weeks Ended As
12/27/97 12/28/96 Rept'd Adjusted
(b)
Net Sales $20,917 $20,337 3 3
Costs and Expenses, net
Cost of sales 8,525 8,452 (1) (1)
Selling, general and
administrative expenses 9,241 9,063 (2) (2)
Amortization of intangible
assets 199 206 3 3
Unusual items (c) 290 576 50 -
Operating Profit 2,662 2,040 30 13
I (478) (565) 15 15
Interest income 125 91 37 37
Income From Continuing Operations
Before Income Taxes 2,309 1,566 47 21
Provision for Income Taxes (d) 818 624 (31) (29)
Income From Continuing
Operations 1,491 942 58 18
Income From Discontinued
Operations, net of taxes 651 207 NM
Net Income $ 2,142 $ 1,149 86
Income Per Share-Basic
Continuing Operations $ 0.98 $ 0.60 62 (e) 21 (e)
Discontinued Operations 0.42 0.13 NM (e)
Net Income Per Share $ 1.40 $ 0.73 91 (e)
Average Shares Outstanding 1,528 1,564 2 2
Income Per Share-Assuming Dilution
Continuing Operations $ 0.95 $ 0.59 62 (e) 20 (e)
Discontinued Operations 0.41 0.13 NM (e)
Net Income Per Share $ 1.36 $ 0.72 91 (e)
Average Shares Outstanding 1,570 1,606 2 2
NM - Not Meaningful
See accompanying notes.
Notes to 52 Weeks Ended 12/27/97 and 12/28/96:
(a) Prior year amounts have been restated to classify the operating
results of the Restaurants segment as discontinued operations.
(b) Excludes the effects of the unusual items described in Note (c)
below.
(c) The 1997 and 1996 unusual items included in continuing
operations relate to decisions to dispose 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.
Continuing
Operations
1997 1996
Net loss/(gain) $ 290 $ 576
After tax loss/(gain) $ 239 $ 527
Per share-assuming dilution $0.15 $0.33
(d) The effective tax rates on income from continuing operations
were 35.4% in 1997 and 39.8% in 1996. Excluding the effects of
the unusual items, the effective tax rates were 33.4% and 31.4%
in 1997 and 1996, respectively.
(e) The percentage change in Income Per Share was calculated by
using Income Per Share calculated to four decimal places to
eliminate the effects of rounding.
PepsiCo, Inc. and Subsidiaries
Management Basis
Supplemental Schedule of Net Sales and Operating Profit (a)
16 Weeks Ended December 27, 1997 and December 28, 1996
($ in millions)
Net Sales Operating Profit
% % Change B/(W)
16 Weeks Ended Change 16 Weeks Ended As
12/27/97 12/28/96 B/(W) 12/27/97 12/28/96 Rept'd Adjusted
(b) (b) (c)
Beverages
-N.A. $2,295 $2,232 3 $268 $ 328 (18) (18)
-Int'l 786 800 (2) (16) (397) 96 80
3,081 3,032 2 252 (69) NM 93
Snack Foods
-N.A. 2,062 1,976 4 429 405 6 9
-Int'l 1,113 1,042 7 122 120 2 2
3,175 3,018 5 551 525 5 7
Combined
Segments $6,256 $6,050 3 803 456 76 23
Unallocated expenses (87) (55) (58) (58)
Operating Profit $716 $ 401 79 20
NM - Not Meaningful
Notes:
(a) Restated to reflect the effects of classifying the operating
results of the Restaurants segment as discontinued operations.
(b) Includes the following net unusual items - (gains)/losses:
1997 1996
Beverages - Int'l $(26) $186
Snack Foods - N.A. 12 --
Net (gain)/loss $(14) $186
(c) Excludes the effects of unusual items described in note (b)
above.
PepsiCo, Inc. and Subsidiaries
Management Basis
Supplemental Schedule of Net Sales and Operating Profit (a)
52 Weeks Ended December 27, 1997 and December 28, 1996
($ in millions)
Net Sales Operating Profit
% % Change B/(W)
52 Weeks Ended Change 52 Weeks Ended As
12/27/97 12/28/96 B/(W) 12/27/97 12/28/96 Rept'd Adjusted
(b) (b) (c)
Beverages
-N.A. $ 7,852 $ 7,734 2 $1,297 $1,412 (8) (4)
-Int'l 2,689 2,853 (6) (137) (830) 83 NM
10,541 10,587 - 1,160 582 99 18
Snack Foods
-N.A. 6,967 6,628 5 1,414 1,286 10 12
-Int'l 3,409 3,122 9 318 346 (8) 10
10,376 9,750 6 1,732 1,632 6 11
Combined
Segments $20,917 $20,337 3 2,892 2,214 31 14
Unallocated expenses (230) (174) (32) (32)
Operating Profit $2,662 $2,040 30 13
NM - Not Meaningful
Notes:
(a) Restated to reflect the effects of classifying the operating
results of the Restaurants segment as discontinued operations.
(b) Includes the following net unusual items - (gains)/losses:
1997 1996
Beverages
- N.A. $ 52 $ -
- Int'l 154 576
Snack Foods
- N.A. 22 -
- Int'l 62 -
Net loss $290 $576
(c) Excludes the effects of the unusual items described in note (b)
above.
PepsiCo, Inc. and Subsidiaries
Pro Forma Consolidated Statement of Income
(in millions except per share amounts, unaudited)
52 Weeks Ended
Historical Pro Forma Pro Forma
12/27/97 Adjustments 12/27/97
Net Sales $20,917 $20,917
Costs and Expenses, net
Cost of sales 8,525 8,525
Selling, general and
administrative expenses 9,241 9,241
Amortization of intangible
assets 199 199
Unusual items 290 290
Operating Profit 2,662 2,662
Interest expense (478) $157(a) (321)
Interest income 125 - 125
Income from Continuing Operations
Before Income Taxes 2,309 157(a) 2,466
Provision for Income Taxes 818 58(b) 876
Income from Continuing
Operations $ 1,491 $ 99 $ 1,590
Income per share -
Assuming dilution $ 0.95 $ 1.01
Ongoing income per share -
Assuming dilution (c) $ 1.10 $ 1.16
Average Shares Outstanding -
Assuming dilution 1,570 1,570
See accompanying Notes to Pro Forma Consolidated Statement of Income.
Notes to Pro Forma Consolidated Statement of Income:
(a) To reflect the effect of reducing short-term borrowings by $3.7
billion with an average interest rate of 5.5% as of the
beginning of the year through the date of the Tricon spin-off.
The $3.7 billion reflects a portion of the $4.5 billion cash
distribution received from Tricon just prior to the spin-off
which was used to repay short-term debt. The 5.5% reflects the
average interest rate paid on commercial paper debt.
(b) To reflect the estimated
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