United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
April 14, 2005
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
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written Communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14a-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
The information contained in this Item 2.02 is being furnished in accordance with SEC Release Nos. 33-8216 and 34-47583.
The information in this Item 2.02, including the exhibit attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise expressly stated in such filing.
Attached as Exhibit 99.1 and incorporated by reference into this Item 2.02 is a copy of the press release issued by PepsiCo, Inc., dated April 14, 2005, reporting PepsiCo, Inc.’s financial results for the 12 weeks ended March 19, 2005.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
| 99.1 | Press Release issued by PepsiCo, Inc., dated April 14, 2005. |
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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: April 14, 2005 |
PepsiCo, Inc. | |||
| By: |
/s/ ROBERT E. COX | |||
| Robert E. Cox | ||||
| Vice President, Deputy General Counsel and Assistant Secretary | ||||
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INDEX TO EXHIBITS
| Exhibit Number |
Description | |
| 99.1 | Press Release issued by PepsiCo, Inc., dated April 14, 2005. |
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Exhibit 99.1
PepsiCo Reports 15% First Quarter Earnings per Share Growth, Driven by
Double-Digit Division Operating Profit Performance
PURCHASE, N.Y., April 14, 2005 – PepsiCo reported a 15% increase in first-quarter earnings per share to $0.53, fueled by Division operating profit growth of more than 10%.
Net revenues increased 7%, with each of the Company’s operating Divisions posting solid top line growth.
Chairman and CEO Steve Reinemund said, “I am pleased with our performance for the first quarter. The strength of the portfolio continues to prove itself, with each operating Division performing well, giving me confidence in our outlook for the full year.”
Summary of PepsiCo First Quarter 2005 Results
| % Growth Rate | ||
| Volume (Servings) |
4 | |
| Revenue |
7 | |
| Division Operating Profit |
10 | |
| Net Income |
13 | |
| Earnings Per Share |
15 |
Summary of Division First Quarter 2005 Results
| % Growth Rate | ||||||||||
| FLNA |
PBNA |
PI |
QFNA |
Total PepsiCo | ||||||
| Volume |
3 | 1.5 | 4/9¹ | 6 | 3/4¹ | |||||
| Revenue |
6 | 4 | 12 | 10 | 7 | |||||
| Division Operating Profit |
6 | 8 | 20 | 18 | 10 | |||||
| ¹ | Snacks/beverages |
Frito-Lay North America (FLNA) generated 6% revenue growth behind strong core brand performance.
FLNA’s revenue growth was balanced across its portfolio. The Division’s four largest brands — Lay’s, Doritos, Tostitos and Cheetos — had combined revenue growth of almost 6%, roughly in line with total salty snack revenue growth. Revenues of the Division’s other macro snack products rose in high-single digits, reflecting strong performance from the Grandma’s and Gamesa branded cookie lines, continued strong sales of nuts and premium meat snacks, and double-digit growth in Quaker rice snacks.
Operating profit grew in line with revenue growth. Operating margins were hampered by increased fuel and energy costs in the quarter, which impacted the costs of freight, plant operations and route truck fuel.
PepsiCo Beverages North America (PBNA) posted 1.5% volume growth, lapping 5% growth in 2004
Volume grew 1.5% in the quarter, with the Division’s non-carbonated beverage portfolio increasing 8% and carbonated soft drinks (CSDs) declining 1%. The Division lapped one of its stronger volume growth quarters of 2004, when volumes were up 5%. Favorable Easter holiday timing contributed about 50 basis points to volume growth.
Non-carbonated beverage volume growth was fueled by double-digit growth in Gatorade, Aquafina and Propel fitness water. Tropicana chilled juice volume declined 2% in the quarter, reflecting the impact of increased pricing.
Within carbonated soft drinks, low single-digit volume growth in trademark Sierra Mist was more than offset by a low single-digit decline in trademark Pepsi. Trademark Mountain Dew volume was roughly flat to prior year. Diet CSDs continued to perform well, with volume growth in the mid-single digits.
Solid net revenue growth reflected increased pricing and favorable product mix, offset somewhat by a decline in concentrate shipments, which lagged bottler case sales growth. Operating profit grew 8%, lapping 20% in 2004. Operating profit growth reflected the revenue gains and the favorable resolution of prior year estimated marketing accruals, partly offset by higher energy and raw material costs. The marketing accrual adjustment contributed four points to PBNA’s operating profit growth and one point to total PepsiCo Division operating profit growth in the quarter.
PepsiCo International (PI) profits increased 20% as emerging markets continue strong growth.
Snacks volume growth of 4% was driven by single-digit growth at Gamesa and Sabritas in Mexico, double-digit growth in Egypt and Turkey, and strong double-digit growth in the four major emerging markets (India, China, Russia, and Brazil). Growth was offset somewhat by volume declines at Walker’s in the UK. The dissolution of the Company’s snack joint venture in South Korea and an acquisition in Romania had no net impact on the reported snack volume growth rate.
Beverage growth of 9% was driven by strong performance across the Middle East and double-digit growth in total for the major emerging markets, offset somewhat by a modest volume decline in Mexico. Carbonated soft drinks grew at a high single-digit rate, and non-carbonated beverage volume grew at a double-digit rate.
PI Regional Volume Growth First Quarter 2005 Results
| % Growth Rate | ||||
| Snacks |
Beverages | |||
| Latin America |
5 | 1 | ||
| Europe, Middle East and Africa |
3¹ | 11 | ||
| Asia Pacific |
1² | 17 | ||
| Total PI |
4 | 9 | ||
| ¹ | Growth ex acquisition: 1% |
| ² | Growth ex JV divestiture: 20% |
Net revenue grew 12%, driven by the broad-based volume gains and favorable pricing and mix. Foreign currency translation contributed 2 points of net revenue growth. Operating profit grew 20%, driven by revenue growth and 1 point of foreign exchange benefit. During the quarter, PepsiCo acquired the remaining 40.5% interest in Snack Ventures Europe from General Mills. The combined impact of acquisition activities in the quarter contributed one percentage point to PI operating profit growth.
Quaker Foods North America (QFNA) had exceptional top line and bottom line results in the quarter.
Double-digit volume growth of Quaker oatmeal and Cap’n Crunch cereal and the impact of favorable mix drove 10% revenue growth in the quarter. Operating profit growth was driven by the strong sales growth, and the growth of higher margin products.
PBG share sales, share repurchases, and a reduced tax rate contributed to EPS growth. Earnings per share growth was bolstered by a $28 million pre-tax gain recognized on the sale of shares in The Pepsi Bottling Group, a 1% reduction in the number of weighted average shares outstanding, and a 50 basis point reduction in the Company’s effective tax rate.
2005 earnings guidance increased on favorable tax rate revision. The Company expects earnings per share for 2005 of at least $2.56, excluding the impact of the 53rd week (see note under “Miscellaneous Disclosures”, below). Including the impact of the 53rd week, the Company expects earnings per share of at least $2.60. This guidance is an increase of $0.01 per share from the Company’s previous guidance, reflecting a favorable adjustment to the Company’s expected full-year tax rate. The Company expects the impact of the 53rd week on earnings per share to be $0.04-$0.05.
The Company is evaluating whether to repatriate undistributed international earnings in 2005 under the provisions of the American Jobs Creation Act. The Company believes that the maximum amount that can be repatriated under the Act is $7.5 billion. The Company’s earnings guidance does not include the impact on earnings that would result in the event the Company repatriates cash during the year.
About PepsiCo
PepsiCo is one of the world’s largest food and beverage companies with annual revenues of $29 billion. Its principal businesses include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods. Its portfolio includes 16 brands that each generates $1 billion or more in annual retail sales.
Cautionary Statement
This release contains statements concerning PepsiCo’s expectations for future performance. Any such forward-looking statements are inherently speculative and are based on currently available information, operating plans and projections about future events and trends. As such, they are subject to numerous risks and uncertainties. Actual results and performance may be significantly different from expectations. Please see the Company’s filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K, for a discussion of specific risks that may affect performance.
Miscellaneous Disclosures
Conference Call. At 11 a.m. (Eastern Time) today, the Company will host a conference call with investors to discuss first quarter 2005 results and the outlook for the full year 2005. For details, visit the Company’s site on the Internet at http://www.pepsico.com.
Reconciliation. In discussing financial results and guidance, the Company may refer to certain non-GAAP measures. A reconciliation of any such non-GAAP measures to reported financial statements can be found under “Press Releases” on the Company’s website at http://www.pepsico.com in the “Investors” section.
Bottler Volume. Volume for products sold by PepsiCo’s bottlers is reported by PepsiCo on a monthly basis, with the first quarter comprising January, February and March for North America, and January and February for PepsiCo International.
53rd Week in 2005. PepsiCo’s fiscal year ends on the last Saturday in December. As a result, most fiscal years contain 52 weeks, and a 53rd week is added every five or six years. For purposes of comparability, the Company provides guidance that excludes the 53rd week. The Company provides guidance that excludes the estimated impact of the 53rd week since it is more indicative of our ongoing performance.
PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Income
(in millions except per share amounts)
| 12 Weeks Ended |
||||||||
| 3/19/05 |
3/20/04 |
|||||||
| (unaudited) | ||||||||
| Net Revenue |
$ | 6,585 | $ | 6,131 | ||||
| Cost and Expenses |
||||||||
| Cost of sales |
3,018 | 2,811 | ||||||
| Selling, general and administrative expenses |
2,291 | 2,161 | ||||||
| Amortization of intangible assets |
29 | 32 | ||||||
| Operating Profit |
1,247 | 1,127 | ||||||
| Bottling Equity Income |
65 | 39 | ||||||
| Interest Expense |
(50 | ) | (35 | ) | ||||
| Interest Income |
23 | 10 | ||||||
| Income before Income Taxes |
1,285 | 1,141 | ||||||
| Provision for Income Taxes |
373 | 337 | ||||||
| Net Income |
$ | 912 | $ | 804 | ||||
| Diluted |
||||||||
| Net Income Per Common Share |
$ | 0.53 | $ | 0.46 | ||||
| Average Shares Outstanding |
1,713 | 1,736 | ||||||
A - 1
PepsiCo, Inc. and Subsidiaries
Supplemental Financial Information
(in millions)
| 12 Weeks Ended |
||||||||
| 3/19/05 |
3/20/04 |
|||||||
| (unaudited) | ||||||||
| Net Revenue |
||||||||
| Frito-Lay North America |
$ | 2,263 | $ | 2,144 | ||||
| PepsiCo Beverages North America |
1,784 | 1,718 | ||||||
| PepsiCo International |
2,121 | 1,891 | ||||||
| Quaker Foods North America |
417 | 378 | ||||||
| Total Net Revenue |
$ | 6,585 | $ | 6,131 | ||||
| Operating Profit |
||||||||
| Frito-Lay North America |
$ | 539 | $ | 510 | ||||
| PepsiCo Beverages North America |
415 | 384 | ||||||
| PepsiCo International |
307 | 257 | ||||||
| Quaker Foods North America |
145 | 123 | ||||||
| Division Operating Profit |
1,406 | 1,274 | ||||||
| Corporate unallocated |
(159 | ) | (147 | ) | ||||
| Total Operating Profit |
$ | 1,247 | $ | 1,127 | ||||
A - 2
PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in millions)
| 12 Weeks Ended |
||||||||
| 3/19/05 |
3/20/04 |
|||||||
| (unaudited) | ||||||||
| Operating Activities |
||||||||
| Net income |
$ | 912 | $ | 804 | ||||
| Adjustments |
||||||||
| Depreciation and amortization |
282 | 275 | ||||||
| Stock-based compensation expense |
77 | 91 | ||||||
| Cash payments for merger-related costs and other restructuring charges |
(14 | ) | (26 | ) | ||||
| Bottling equity income, net of dividends |
(51 | ) | (36 | ) | ||||
| Deferred income taxes |
(7 | ) | (34 | ) | ||||
| Other, net |
185 | 164 | ||||||
| Net change in operating working capital |
(635 | ) | (526 | ) | ||||
| Net Cash Provided by Operating Activities |
749 | 712 | ||||||
| Investing Activities |
||||||||
| Snack Ventures Europe (SVE) minority interest acquisition |
(750 | ) | — | |||||
| Capital spending |
(181 | ) | (182 | ) | ||||
| Sales of property, plant and equipment |
25 | 7 | ||||||
| Other acquisitions and investments in noncontrolled affiliates |
(41 | ) | (11 | ) | ||||
| Cash proceeds from sale of PBG stock |
47 | — | ||||||
| Short-term investments, net |
(528 | ) | 52 | |||||
| Net Cash Used for Investing Activities |
(1,428 | ) | (134 | ) | ||||
| Financing Activities |
||||||||
| Proceeds from issuances of long-term debt |
13 | — | ||||||
| Payments of long-term debt |
(3 | ) | (80 | ) | ||||
| Short-term borrowings, net |
733 | (116 | ) | |||||
| Cash dividends paid |
(387 | ) | (274 | ) | ||||
| Share repurchases – common |
(494 | ) | (574 | ) | ||||
| Share repurchases – preferred |
(6 | ) | (10 | ) | ||||
| Proceeds from exercises of stock options |
233 | 431 | ||||||
| Net Cash Provided by (Used for) Financing Activities |
89 | (623 | ) | |||||
| Effect of Exchange Rate Changes on Cash and Cash Equivalents |
(9 | ) | (2 | ) | ||||
| Net Decrease in Cash and Cash Equivalents |
(599 | ) | (47 | ) | ||||
| Cash and Cash Equivalents – Beginning of year |
1,280 | 820 | ||||||
| Cash and Cash Equivalents – End of period |
$ | 681 | $ | 773 | ||||
A - 3
PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(in millions)
| 3/19/05 |
12/25/04 |
|||||||
| (unaudited) | ||||||||
| Assets |
||||||||
| Current Assets |
||||||||
| Cash and cash equivalents |
$ | 681 | $ | 1,280 | ||||
| Short-term investments |
2,692 | 2,165 | ||||||
| 3,373 | 3,445 | |||||||
| Accounts and notes receivable, net |
3,217 | 2,999 | ||||||
| Inventories |
||||||||
| Raw materials |
660 | 665 | ||||||
| Work-in-process |
159 | 156 | ||||||
| Finished goods |
819 | 720 | ||||||
| 1,638 | 1,541 | |||||||
| Prepaid expenses and other current assets |
648 | 654 | ||||||
| Total Current Assets |
8,876 | 8,639 | ||||||
| Property, plant and equipment, net |
8,093 | 8,149 | ||||||
| Amortizable intangible assets, net |
600 | 598 | ||||||
| Goodwill |
3,924 | 3,909 | ||||||
| Other nonamortizable intangible assets |
931 | 933 | ||||||
| 4,855 | 4,842 | |||||||
| Investments in noncontrolled affiliates |
3,294 | 3,284 | ||||||
| Other assets |
2,953 | 2,475 | ||||||
| Total Assets |
$ | 28,671 | $ | 27,987 | ||||
| Liabilities and Shareholders’ Equity |
||||||||
| Current Liabilities |
||||||||
| Short-term borrowings obligations |
$ | 1,804 | $ | 1,054 | ||||
| Accounts payable and other current liabilities |
5,093 | 5,599 | ||||||
| Income taxes payable |
297 | 99 | ||||||
| Total Current Liabilities |
7,194 | 6,752 | ||||||
| Long-term debt obligations |
2,390 | 2,397 | ||||||
| Other liabilities |
3,962 | 4,099 | ||||||
| Deferred income taxes |
1,212 | 1,216 | ||||||
| Total Liabilities |
14,758 | 14,464 | ||||||
| Preferred stock, no par value |
41 | 41 | ||||||
| Repurchased preferred stock |
(96 | ) | (90 | ) | ||||
| Common Shareholders’ Equity |
||||||||
| Common stock |
30 | 30 | ||||||
| Capital in excess of par value |
627 | 618 | ||||||
| Retained earnings |
19,255 | 18,730 | ||||||
| Accumulated other comprehensive loss |
(853 | ) | (886 | ) | ||||
| 19,059 | 18,492 | |||||||
| Less: Repurchased shares |
(5,091 | ) | (4,920 | ) | ||||
| Total Common Shareholders’ Equity |
13,968 | 13,572 | ||||||
| Total Liabilities and Shareholders’ Equity |
$ | 28,671 | $ | 27,987 | ||||
A - 4
Supplemental Share and Option Data
(in millions of shares, except average share and exercise prices)
| 12 Weeks Ended |
||||||||
| 3/19/05 |
3/20/04 |
|||||||
| Beginning Net Shares Outstanding |
1,679 | 1,705 | ||||||
| Options Exercised |
7 | 15 | ||||||
| Shares Repurchased |
(9 | ) | (12 | ) | ||||
| Ending Net Shares Outstanding |
1,677 | 1,708 | ||||||
| Weighted Average Basic |
1,678 | 1,707 | ||||||
| Dilutive securities: |
||||||||
| Options |
31 | 25 | ||||||
| Restricted Stock Units |
2 | 1 | ||||||
| ESOP Convertible Preferred Stock/Other |
2 | 3 | ||||||
| Weighted Average Diluted |
1,713 | 1,736 | ||||||
| Average Share Price for the period |
$ | 53.46 | $ | 49.23 | ||||
| Growth Versus Prior Year |
9 | % | ||||||
| Options Outstanding |
178 | 195 | ||||||
| Options in the Money |
166 | 167 | ||||||
| Dilutive Options |
31 | 25 | ||||||
| Dilutive Options as % of Options in the Money |
19 | % | 15 | % | ||||
| Average Exercise Price of Options in the Money |
$ | 40.31 | $ | 37.67 | ||||
A - 5
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