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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 6, 1997 (12 and 36 Weeks Ended)
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
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 October 3, 1997:
1,517,085,909
PEPSICO, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I Financial Information
Condensed Consolidated Statement of
Income - 12 and 36 weeks ended
September 6, 1997 and September 7, 1996 2
Condensed Consolidated Statement of
Cash Flows - 36 weeks ended
September 6, 1997 and September 7, 1996 3
Condensed Consolidated Balance Sheet -
September 6, 1997 and December 28, 1996 4-5
Notes to Condensed Consolidated 6-8
Financial Statements
Pro Forma Financial Statements
- Condensed Consolidated Statement of
Income - 36 weeks ended September
6, 1997 and 52 weeks ended December
28, 1996 9-10
- Condensed Consolidated Balance Sheet 11
- Notes to Pro Forma Financial Statements 12
Management's Analysis of Operations,
Cash Flows and Financial Condition 13-25
Independent Accountants' Review Report 26
Part II Other Information and Signatures 27-29
- -1-
PART I - FINANCIAL INFORMATION
PEPSICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in millions except per share amounts, unaudited)
12 Weeks Ended 36 Weeks Ended
9/6/97 9/7/96 9/6/97 9/7/96
Net Sales $5,362 $5,159 $14,661 $14,287
Costs and Expenses, net
Cost of sales 2,179 2,158 5,969 5,936
Selling, general and
administrative expenses 2,209 2,230 6,303 6,180
Amortization of intangible
assets 45 48 139 142
Unusual items - 390 304 390
Operating Profit 929 333 1,946 1,639
Interest expense (123) (134) (358) (399)
Interest income 31 22 54 67
Income from Continuing Operations
Before Income Taxes 837 221 1,642 1,307
Provision for Income Taxes 286 211 597 563
Income from Continuing
Operations 551 10 1,045 744
Income from Discontinued
Operations, net of tax 107 134 696 377
Net Income $ 658 $ 144 $ 1,741 $ 1,121
Income per share
Continuing Operations $ 0.35 $ 0.01 $ 0.66 $ 0.46
Discontinued Operations 0.07 0.08 0.45 0.23
Net Income Per Share $ 0.42 $ 0.09 $ 1.11 $ 0.69
Cash Dividends Declared
Per Share $0.125 $0.115 $ 0.365 $ 0.33
Average Shares Outstanding
Used To Calculate
Income Per Share 1,566 1,607 1,575 1,613
See accompanying notes.
- -2-
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,
excluding effects of acquisitions and
dispositions
Accounts and notes receivable (360) (415)
Inventories 11 (119)
Prepaid expenses, deferred income taxes and
other current assets (96) (28)
Accounts payable and other current
liabilities - (46)
Income taxes payable 208 174
Net change 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, by original maturity
More than three months - purchases (162) (103)
More than three months - maturities 141 179
Three months or less, net (1,649) (94)
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, by original maturity
More than three months - proceeds 127 651
More than three months - payments (159) (1,536)
Three months or less, net 2,358 600
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
See accompanying notes.
- -3-
PEPSICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
ASSETS
(Unaudited)
9/6/97 12/28/96
Current Assets
Cash and cash equivalents $ 502 $ 307
Short-term investments, at cost............ 1,975 289
2,477 596
Accounts and notes receivable, less
allowance: 9/97 - $138, 12/96 - $166 2,331 2,276
Inventories
Raw materials and supplies 404 484
Finished goods 371 369
775 853
Prepaid expenses, deferred income taxes and
other current assets 638 225
Total Current Assets 6,221 3,950
Property, Plant and Equipment 10,892 10,908
Accumulated Depreciation (4,885) (4,822)
6,007 6,086
Intangible Assets, net 5,799 6,036
Investments in Unconsolidated Affiliates 1,195 1,147
Other Assets 469 491
Net Assets of Discontinued Operations 3,350 4,450
Total Assets $23,041 $22,160
Continued on next page.
- -4-
PEPSICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (continued)
(in millions except per share amount)
LIABILITIES AND SHAREHOLDERS' EQUITY
Unaudited
9/6/97 12/28/96
Current Liabilities
Short-term borrowings $ 5,350 $ -
Accounts payable and other current
liabilities 3,503 3,378
Income taxes payable 490 413
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
Shareholders' Equity
Capital stock, par value 1 2/3 cents
per share:
authorized 3,600 shares, issued 9/97
and 12/96 - 1,726 shares 29 29
Capital in excess of par value 1,305 1,201
Retained earnings 10,366 9,184
Currency translation adjustment (1,035) (768)
10,665 9,646
Less: Treasury Stock, at Cost:
9/97 - 209 shares, 12/96 - 181 shares (4,320) (3,023)
Total Shareholders' Equity 6,345 6,623
Total Liabilities and
Shareholders' Equity $23,041 $22,160
See accompanying notes.
- -5-
PEPSICO, INC. AND SUBSIDIARIES
(unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Our Condensed Consolidated Balance Sheet at September 6, 1997 and the
Condensed Consolidated Statement of Income for the 12 and 36 weeks ended
September 6, 1997 and September 7, 1996 and the Condensed Consolidated
Statement of Cash Flows for the 36 weeks ended September 6, 1997 and
September 7, 1996 have not been audited, but have been prepared in
conformity with the accounting principles applied in our 1996 Annual Report
on Form 10-K (Annual Report) for the year ended December 28, 1996. In our
opinion, this information includes all material adjustments, which are of a
normal and recurring nature, necessary for a fair presentation. The
results for the 12 and 36 weeks are not necessarily indicative of the
results expected for the year. Certain reclassifications were made to
prior year amounts to conform with the current presentation, including
classifying our Restaurants segment as a discontinued operation. See Note
5.
(2) Unusual items included in continuing operations were composed of the
following:
($ in millions) 36 Weeks Ended 12 and 36 Weeks Ended
9/6/97 9/7/96
Beverages
-North America $ 52 $ -
-International 180 390
Snack Foods
-North America 10 -
-International 62 -
Net loss $ 304 $ 390
After-tax loss* $ 240 $ 376
Per share* $ 0.15 $0.23
*Reflected the full-year after-tax impact.
The 1997 unusual items related to decisions to dispose of assets, improve
productivity and strengthen the international bottler structure. The 1996
unusual items primarily related to the impairment of assets.
(3) Through the 36 weeks ended September 6, 1997, we repurchased 46.6
million shares of our capital stock at a cost of $1.6 billion. From
September 7, 1997 through October 17, 1997, we repurchased 2.2 million
shares at a cost of $85 million.
(4) Supplemental Cash Flow Information
($ in millions) 36 Weeks Ended
9/6/97 9/7/96
Interest paid $357 $403
Income taxes paid $352 $324
- -6-
(5) Discontinued Operations - Our Restaurants segment was composed of our
core restaurant businesses of Pizza Hut, Taco Bell and KFC, PepsiCo Foods
Systems (PFS), our restaurant distribution operation, and several non-core
U.S. restaurant businesses. On January 23, 1997, we announced our
intention to pursue a plan to spin off our restaurant businesses to our
shareholders as an independent publicly-traded company (Distribution) and
explore selling PFS separately. We sold PFS in the second quarter of this
year. On August 14, 1997, our Board of Directors approved a formal plan to
spin off the restaurant businesses to our shareholders and announced the
receipt of all necessary regulatory approvals, including the ruling from
the Internal Revenue Service that the spin-off would be tax free to us and
our shareholders. The spin-off was effective October 6, 1997 (Distribution
Date). Owners of PepsiCo capital stock as of September 19, 1997 received
one share of common stock of TRICON Global Restaurants, Inc. (TRICON), the
new company, for every ten shares of PepsiCo capital stock. The condensed
consolidated financial statements of PepsiCo have been restated to reflect
our Restaurants segment as a discontinued operation.
Income from discontinued restaurant operations was as follows:
12 weeks ended 36 weeks ended
9/6/97 9/7/96 9/6/97 9/7/96
Net Sales $ 2,317 $ 2,738 $ 7,482 $ 7,920
Costs and expenses (2,106) (2,512) (6,772) (7,281)
Unusual items (37) - 408 (26)
Interest expense (4) (6) (17) (20)
Provision for income taxes (63) (86) (405) (216)
Income from discontinued
operations $ 107 $ 134 $ 696 $ 377
Interest expense included amounts directly related to the Restaurants
segment; it did not include an allocation of PepsiCo interest or G&A
expense.
Unusual items included in discontinued operations were composed of:
12 Weeks Ended 36 Weeks Ended
9/6/97 9/6/97 9/7/96
PFS gain $ 500
Non-core impairment charges $ (15) (54) $ (26)
Spin-related costs (22) (38)
Net (loss)/gain $ (37) $ 408 $ (26)
After-tax* $ (34) $ 220 $ (17)
Per share* $(0.02) $ 0.14 $(0.01)
*Reflected the full-year after-tax impact.
- -7-
The net assets of the discontinued restaurant operations are carried in
"Net Assets of Discontinued Operations" in the Condensed Consolidated
Balance Sheet. The components are as follows:
9/6/97 12/28/96
Current assets $ 897 $ 1,190
Current liabilities (1,604) (1,381)
Net current liabilities (707) (191)
Property, plant and equipment 3,600 4,105
Other non-current assets 1,330 1,507
Non-current liabilities (873) (971)
Net non-current assets 4,057 4,641
Net Assets of Discontinued
Operations $ 3,350 $ 4,450
As of September 6, 1997 we received $91 million in cash and a $14 million
note from the sale of three of our non-core restaurant businesses: Chevys
Mexican Restaurants, East Side Mario's, and Hot'n Now. The remaining
carrying amount of the assets held for disposal (and classified in current
assets above) was $123 million. D'Angelo Sandwich Shops and California
Pizza Kitchen were sold early in the fourth quarter of 1997 for $96 million
in cash, which equaled their carrying amount on September 6,1997.
On October 6, 1997, we received from TRICON $4.5 billion in cash as
repayment of certain amounts due and a dividend just prior to the
Distribution. We used $3.7 billion to pay down short-term borrowings.
- -8-
PEPSICO, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in millions except per share amounts, unaudited)
36 Weeks Ended
Historical Pro Forma Pro Forma
9/6/97 Adjustments 9/6/97
Net Sales $14,661 $14,661
Costs and Expenses, net
Cost of sales 5,969 5,969
Selling, general and
administrative expenses 6,303 6,303
Amortization of intangible
assets 139 139
Unusual items 304 304
Operating Profit 1,946 1,946
Interest expense (358) $ 138(a) (220)
Interest income 54 - 54
Income from Continuing Operations
Before Income Taxes 1,642 138(a) 1,780
Provision for Income Taxes 597 51(b) 648
Income from Continuing
Operations 1,045 87 1,132
Income from Discontinued
Operations, net of tax 696 (696)(c) -
Net Income $ 1,741 $(609) $ 1,132
Income per share
Continuing Operations $ 0.66 $ 0.72
Discontinued Operations 0.45 -
Net Income Per Share $ 1.11 $ 0.72
Average Shares Outstanding
Used To Calculate
Income Per Share 1,575 1,575
See accompanying Notes to Unaudited Pro Forma Financial Statements.
- -9-
PEPSICO, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in millions except per share amounts, unaudited)
52 Weeks Ended
Historical Pro Forma Pro Forma
12/28/96 Adjustments 12/28/96
Net Sales $20,364 $20,364
Costs and Expenses, net
Cost of sales 8,479 8,479
Selling, general and
administrative expenses 9,063 9,063
Amortization of intangible
assets 206 206
Unusual items 576 576
Operating Profit 2,040 2,040
Interest expense (565) $ 200(a) (365)
Interest income 91 - 91
Income from Continuing Operations
Before Income Taxes 1,566 200(a) 1,766
Provision for Income Taxes 728 74(b) 802
Income from Continuing
Operations 838 126 964
Income from Discontinued
Operations, net of tax 311 (311)(c) -
Net Income $ 1,149 $(185) $ 964
Income per share
Continuing Operations $ 0.52 $ 0.60
Discontinued Operations 0.20 -
Net Income Per Share $ 0.72 $ 0.60
Average Shares Outstanding
Used To Calculate
Income Per Share 1,606 1,606
See accompanying Notes to Unaudited Pro Forma Financial Statements.
- -10-
PEPSICO, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
Historical Pro Forma Pro Forma
9/6/97 Adjustments 9/6/97
Assets
Cash and cash equivalents $ 502 $ - $ 502
Short-term investments, at cost 1,975 800(a) 2,775
Other current assets 3,744 - 3,744
Total Current Assets 6,221 800 7,021
Investments in unconsolidated
affiliates 1,195 - 1,195
Property, plant and
equipment, net 6,007 - 6,007
Intangible assets, net 5,799 - 5,799
Other assets 469 - 469
Net assets of discontinued
operations 3,350 (4,500)(a) -
1,150 (b)
Total Assets $23,041 $(2,550) $20,491
Liabilities and Shareholders'
Equity
Short-term borrowings $ 5,350 $(3,700)(a) $ 1,650
Other current liabilities 3,993 3,993
Total Current Liabilities 9,343 (3,700) 5,643
Long-term debt 3,584 - 3,584
Other liabilities 2,120 - 2,120
Deferred income taxes 1,649 - 1,649
Total Liabilities 16,696 (3,700) 12,996
Shareholders' Equity 6,345 1,150 (b) 7,495
Total Liabilities and
Shareholders' Equity $23,041 $(2,550) $20,491
See accompanying Notes to Unaudited Pro Forma Financial Statements.
- -11-
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The historical condensed consolidated financial statements have been
restated to reflect our Restaurants segment as discontinued operations.
See Note 5 to the Condensed Consolidated Financial Statements. The Pro
Forma Condensed Consolidated Financial Statements should be read in
conjunction with the historical financial statements contained in this Form
10-Q. The pro forma condensed consolidated financial information is
presented for informational purposes only.
Note 1 - The pro forma adjustments to the accompanying historical condensed
consolidated statement of income for the 36 weeks ended September 6, 1997
and the 52 weeks ended December 28, 1996 were:
(a) To reduce net interest expense to reflect the effect of reducing short-
term borrowings by $3.7 billion with an average interest rate of 5.4%
as of the beginning of each respective year. We received a $4.5
billion cash distribution from TRICON just prior to the spin-off and
used $3.7 billion of it to repay short-term debt. The 5.4%, reflected
an average interest rate we paid on our commercial paper debt for the
respective periods.
(b) To reflect the estimated tax impact for the pro forma adjustment in
Note 1(a) above.
(c) To eliminate discontinued operations.
Note 2 - The pro forma adjustments to the accompanying historical condensed
consolidated balance sheet at September 6, 1997 were:
(a) To reduce debt and increase short-term investments as a result of the
cash distribution of $4.5 billion received from TRICON.
(b) To eliminate net assets of discontinued operations net of the $4.5
billion cash distribution against retained earnings.
- -12-
MANAGEMENT'S ANALYSIS OF OPERATIONS, CASH FLOWS AND FINANCIAL CONDITION
Overview
In the second quarter of 1997, we sold our investment in PepsiCo Foods
Systems (PFS), our restaurant distribution operation, for $830 million in
cash resulting in a pre-tax gain of $500 million. All of our non-core
restaurant businesses, with the exception of D'Angelo Sandwich Shops
(D'Angelo) and California Pizza Kitchen (CPK), were sold by the end of the
third quarter. These last two non-core restaurant businesses were sold
early in the fourth quarter.
On August 14, 1997 we announced that our Board of Directors approved a
formal plan to spin off our restaurant businesses to our shareholders.
Under the plan, owners of PepsiCo capital stock as of September 19, 1997
received one share of common stock of the new restaurant company, TRICON
Global Restaurants, Inc. (TRICON), for every ten shares of PepsiCo capital
stock. The spin-off was completed on October 6,1997. As a result, the
sales, costs and expenses, assets and liabilities, and cash flows of our
Restaurants segment have been classified as discontinued operations in our
financial statements. Accordingly, the discussions that follow have been
restated to reflect the continuing operations of our packaged goods
businesses.
In the following discussion, volume is the estimated dollar effect of the
year-over-year change in case sales by company-owned bottling operations
and concentrate unit sales to franchisees in Beverages, and pound or kilo
sales of salty and sweet snacks in Snack Foods. Effective net pricing
includes price changes and the effect of product, package and country mix.
Analysis of Consolidated Operations
Net sales rose $203 million or 4% in the quarter and $374 million or 3%
year-to-date. The increases reflected net volume gains partially offset by
the impact of unfavorable currency translation.
Cost of sales as a percent of net sales decreased 1.2 points to 40.6% for
the quarter and .8 points to 40.7% year-to-date. The declines were
primarily due to higher pricing by North American Snack Foods, as well as
higher effective net pricing in International Snack Foods, year-to-date.
Selling, general and administrative expenses (SG&A) declined slightly in
the quarter and grew at a slower rate than sales year-to-date. SG&A
includes selling and distribution expenses (S&D), advertising and marketing
expenses (A&M), general and administrative expenses (G&A), other income and
expense and equity income or loss from investments in unconsolidated
affiliates. G&A grew significantly faster than sales for the quarter and
year-to-date, driven by information systems-related spending and customer
focus leadership training partially offset by savings from a prior year
- -13-
restructuring and the consolidation of certain administrative functions.
A&M grew at a slower rate than sales for both the quarter and year-to-date,
while S&D grew at a slower rate than sales in the quarter but slightly
higher year-to-date.
Equity income from our investments in unconsolidated affiliates,
compared to losses a year ago, primarily reflected the absence of losses
from our Latin American bottler, Buenos Aires Embotelladora S.A. (BAESA).
Other income and expense reflected increased foreign exchange losses
of $3 million and $11 million for the quarter and year-to-date,
respectively.
Amortization of intangible assets declined 6% and 2% to $45 million and
$139 million in the quarter and year-to-date, respectively. The decline
accelerated in the quarter, primarily reflecting the impact of writing-off
intangible assets as part of the unusual charges recorded at the end of the
third quarter of 1996.
Unusual items produced a net charge of $304 million year-to-date compared
to a $390 million charge taken in the third quarter of 1996. See Note 2.
Operating Profit
($ in millions)
12 Weeks Ended 36 Weeks Ended
% %
9/6/97 9/7/96 Change 9/6/97 9/7/96 Change
Reported $929 $333 NM $1,946 $1,639 19
Ongoing* $929 $723 28 $2,250 $2,029 11
* Excluded the effect of the unusual items described in Note 2.
___________________________________________________________________________
Reported operating profit increased $596 million and $307 million for the
quarter and year-to-date, respectively. Ongoing operating profit increased
$206 million for the quarter and $221 million year-to-date. The increase
reflected the volume gains.
Interest Expense, net declined $20 million or 18% in the quarter and $28
million or 8% year-to-date. Interest expense declined for both the quarter
and year-to-date reflecting lower average debt levels, partially offset by
increased interest rates. Interest income increased in the quarter,
primarily reflecting higher average investment levels due to the cash
proceeds received from the sale of PFS. However, year-to-date interest
income declined due to lower average investment levels. This decline
resulted from a 1996 change in the tax law which eliminated a tax exemption
on investment income in Puerto Rico, effective for us December 1, 1996.
Accordingly, as our investments matured in Puerto Rico, the proceeds were
repatriated and used to reduce debt.
- -14-
Provision for Income Taxes
($ in millions)
12 Weeks Ended 36 Weeks Ended
9/6/97 9/7/96 9/6/97 9/7/96
Provision for
Income Taxes $ 286 $ 211 $ 597 $ 563
Effective tax rate
Reported 34.2% 95.5% 36.4% 43.1%
Ongoing* 34.4% 38.8% 34.0% 34.7%
* Excluded the effect of the unusual items.
___________________________________________________________________________
The 1997 reported effective tax rate decreased 61.3 points in the quarter
and 6.7% year-to-date, primarily reflecting the effect of the unusual
items.
Income from Continuing Operations and Income Per Share
($ in millions except per share amounts)
12 Weeks Ended 36 Weeks Ended
% %
9/6/97 9/7/96 Change 9/6/97 9/7/96 Change
Income from con-
tinuing operations
Reported $ 551 $ 10 NM $1,045 $ 744 40
Ongoing* $ 551 $ 374 47 $1,280 $1,108 16
Income per share
from continuing
operations
Reported $0.35 $0.01 NM** $ 0.66 $0.46 44**
Ongoing* $0.35 $0.23 51** $ 0.81 $0.69 18**
* Excluded the effect of unusual items.
**The percentage change in Income Per Share was calculated by using Income
Per Share calculated to four decimal places to eliminate the effects of
rounding.
___________________________________________________________________________
Income from Discontinued Operations and Income Per Share
($ in millions except per share amounts)
12 Weeks Ended 36 Weeks Ended
% %
9/6/97 9/7/96 Change 9/6/97 9/7/96 Change
Income from dis-
continued opera-
tions $ 107 $ 134 (20) $696 $377 85
Income per share
from discontinued
operations $0.07 $0.08 (18)* $0.45 $0.23 89*
* The percentage change in Income Per Share was calculated by using Income
Per Share calculated to four decimal places to eliminate the effects of
rounding.
___________________________________________________________________________
- -15-
Income from Discontinued Operations reflected the operating results of
TRICON's core restaurant businesses of Pizza Hut, KFC and Taco Bell, as
well as PFS, its restaurant distribution operation sold in the second
quarter, and several non-core U.S. restaurant businesses through their
respective disposal dates. Operating results included expenses associated
with the spin-off and interest expense directly related to the Restaurants
segment; it did not include an allocation of PepsiCo interest expense or
G&A. It also included the 1997 gain from the sale of PFS as well as
charges associated with the disposal of non-core businesses. Chevys Mexican
Restaurants (Chevys), East Side Mario's (ESM), and Hot 'n Now (HNN) were
sold in the first half of 1997. Subsequent to the quarter, D'Angelo
Sandwich Shops (D'Angelo) and California Pizza Kitchen (CPK) were sold.
Net Income
($ in millions except per
share amounts)
12 Weeks Ended 36 Weeks Ended
% %
9/6/97 9/7/96 Change 9/6/97 9/7/96 Change
Net Income $ 658 $ 144 NM $1,741 $1,121 55
Net Income Per Share $0.42 $0.09 NM $ 1.11 $ 0.69 59*
Average Shares Outstanding
Used to Calculate Net
Income Per Share 1,566 1,607 (3) 1,575 1,613 (2)
* The percentage change in Net Income Per Share was calculated by using
Net Income per share calculated to four decimal places to eliminate the
effects of rounding.
___________________________________________________________________________
- -16-
PEPSICO, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE OF NET SALES AND OPERATING PROFIT (a)
MANAGEMENT BASIS
($ in millions, unaudited)
Net Sales Operating Profit
% % Change B/(W)
12 Weeks Ended Change 12 Weeks Ended As On-
9/6/97 9/7/96 B/(W) 9/6/97 9/7/96 Rept'd going
(b) (b) (c)
Beverages
- -N.A. $2,071 $2,032 2 $ 425 $ 435 (2) (2)
- -Int'l 799 791 1 75 (468) NM NM
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
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) This schedule should be read in conjunction with Management's Analysis
beginning on page 19 and reflects the continuing operations of our
Beverages and Snack Foods segments. Prior year amounts have been
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
$390 million.
(c) Excluded the effects of International Beverages' 1996 unusual
impairment charges.
-17-
PEPSICO, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE OF NET SALES AND OPERATING PROFIT (a)
MANAGEMENT BASIS
($ in millions, unaudited)
Net Sales Operating Profit
% % Change B/(W)
36 Weeks Ended Change 36 Weeks Ended As On-
9/6/97 9/7/96 B/(W) 9/6/97 9/7/96 Rept'd going
(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
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
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) This schedule should be read in conjunction with Management's Analysis
beginning on page 19 and reflects the continuing operations of our
Beverages and Snack Foods segments. Prior year amounts have been
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 -
$304 $390
(c) Excluded the effects of the unusual items described in note (b) above.
- -18-
Segments of The Business
Beverages
($ in millions)
12 Weeks Ended 36 Weeks Ended
% %
9/6/97 9/7/96 Change 9/6/97 9/7/96 Change
Net Sales
N.A. $2 071 $2,032 2 $5,557 $5,502 1
Int'l 799 791 1 1,903 2,053 (7)
$2 870 $2,823 2 $7 460 $7,555 (1)
Operating Profit
Reported
N.A. $ 425 $ 435 (2) $1 029 $1,084 (5)
Int'l 75 (468) NM (121) (433) 72
$ 500 $ (33) NM $ 908 $ 651 39
Ongoing*
N.A. $ 425 $ 435 (2) $1,081 $1,084 -
Int'l 75 (78) NM 59 (43) NM
$ 500 $ 357 40 $1,140 $1,041 10
NM - Not Meaningful
* Excluded unusual net charges of $232 ($52-North America, $180-Int'l)
year-to-date in 1997 and $390 (Int'l) in both the 1996 quarter and year-
to-date. See Note 2.
_________________________________________________________________________
System bottler case sales (BCS) is our standard volume measure. It
represents Pepsi Corporate brands as well as brands we have the right to
produce, distribute and market nationally. Third quarter BCS included the
months of June, July and August, consistent with prior years.
North America
Sales increased $39 million and $55 million in the quarter and year-to-
date, respectively. The increases reflected volume growth, led by packaged
goods, partially offset by lower effective net pricing. The decrease in
effective net pricing, primarily in take-home packaged products, reflected
an intensely competitive environment.
BCS increased 4% for both the quarter and year-to-date, reflecting
double-digit growth by Mountain Dew. Non-carbonated soft drink products,
led by Aquafina bottled water and Lipton Brisk, grew at a double-digit rate
for both the quarter and year-to-date. Our concentrate shipments to
franchisees grew faster than their BCS growth in the quarter but were
slightly slower year-to-date.
Reported operating profit declined $10 million for the quarter and $55
million year-to-date. Ongoing operating profit declined $10 million in the
quarter and $3 million year-to-date. Both periods reflected the lower
- -19-
effective net pricing, higher S&D and increased A&M. S&D grew
significantly faster than sales, but at the same rate as volume for both
the quarter and year-to-date. A&M grew faster than sales in the quarter
but grew significantly slower than volume year-to-date. These unfavorable
items were partially offset in the quarter and year-to-date by volume
gains, lower packaging and commodity costs and reduced G&A expenses. The
lower G&A expenses primarily reflected savings from centralizing certain
accounting functions. The change in profit for both the quarter and year-
to-date was hampered by lapping a 1996 gain on the sale of an investment in
a bottling cooperative.
International
Sales increased $8 million in the quarter and declined $150 million year-to-
date. Increased volume, led by concentrate, was substantially offset by
unfavorable currency translation effects in the quarter. The year-to-date
decline was due to unfavorable currency translation effects, primarily
driven by Spain and Japan.
BCS increased 4% in the quarter but year-to-date was even with the
prior year. Excluding the impact of the loss of our Venezuelan bottler in
August 1996, BCS increased 5% in the quarter and 2% year-to-date. These
increases reflected double-digit growth by our China and India Business
Units and, solid single-digit growth by our Middle East Business Unit in
the quarter and by our Asia Business Unit year-to-date. These advances
were partially offset year-to-date by a decline in our Russia Business
Unit. Our concentrate shipments to franchisees increased significantly
faster than their BCS growth in the quarter because of low concentrate
shipments last year. Year-to-date, both concentrate shipments to
franchisees and their BCS remained about even with the prior year.
Reported operating results increased $543 million for the quarter and
$312 million year-to-date. Ongoing operating results increased $153
million and $102 million in the quarter and year-to-date, respectively.
The increase in ongoing operating results in the quarter reflected the
higher volume, equity income from our investments in unconsolidated
affiliates compared to equity losses a year ago, primarily due to the
absence of losses from BAESA and lower G&A expenses. The increase year-to-
date was driven by equity income compared to equity losses a year ago and
lower G&A expenses, partially offset by lower effective net pricing for
packaged products. The lower G&A expenses reflected our fourth quarter
1996 restructuring and is consistent with the $50 million of savings
expected this year. See Cautionary Statements on page 25.
- -20-
Snack Foods
($ in millions)
12 Weeks Ended 36 Weeks Ended
% %
9/6/97 9/7/96 Change 9/6/97 9/7/96 Change
Net Sales
N.A. $1,714 $1,622 6 $4,905 $4,652 5
Int'l 778 714 9 2,296 2,080 10
$2,492 $2,336 7 $7,201 $6,732 7
Operating Profit
Reported
N.A. $ 378 $ 333 14 $ 985 $ 881 12
Int'l 90 72 25 196 226 (13)
$ 468 $ 405 16 $1,181 $1,107 7
Ongoing*
N.A. $ 378 $ 333 14 $ 995 $ 881 13
Int'l 90 72 25 258 226 14
$ 468 $ 405 16 $1,253 $1,107 13
* Excluded unusual net charges of $72 (N.A.-$10, Int'l-$62) year-to-date
for worldwide productivity initiatives and the disposal of assets. See
Note 2.
___________________________________________________________________________
North America
Sales grew $92 million for the quarter and $253 million year-to-date
reflecting increased volume and higher pricing taken on most major brands
in the fourth quarter of 1996.
Pound volume advanced 4% and 3% for the quarter and year-to-date,
respectively. Excluding their low-fat and no-fat versions, core brand
growth was led by strong double-digit growth in Doritos brand tortilla
chips for the quarter, which drove its year-to-date high single-digit
growth and, for both the quarter and year-to-date, high single-digit growth
in Lay's brand potato chips and double-digit growth by Tostitos brand
tortilla chips. Although low-fat and no-fat snacks depressed the growth
rate slightly for the quarter and year-to-date, Baked Lay's brand potato
chips and Tostitos brand salsa continued to enjoy double-digit growth for
both periods.
Reported operating profit grew $45 million for the quarter and $104
million year-to-date. Ongoing operating profit rose $45 million and $114
million for the quarter and year-to-date, respectively. The ongoing profit
increase reflected the higher pricing and volume growth partially offset by
increased manufacturing costs and G&A expenses.
- -21-
International
Sales increased $64 million for the quarter and $216 million year-to-date.
The sales increase reflected volume gains and, year-to-date, higher
effective net pricing.
Kilo growth is reported on a systemwide basis, which includes both
consolidated businesses and unconsolidated affiliates operating for at
least one year. Salty snack kilos rose 11% for the quarter and year-to-
date, led by strong double-digit growth by Sabritas and Brazil, while sweet
snack kilos declined 2% and 9%, respectively.
Reported operating profit increased $18 million for the quarter, while
decreasing $30 million year-to-date. Ongoing operating profit for the same
periods increased $18 million and $32 million, respectively. The increase
in the quarter primarily reflected volume gains and lower manufacturing
costs partially offset by increased S&D expenses. Year-to-date, inflation-
driven higher effective net pricing and volume gains were partially offset
by increased operating, manufacturing and G&A costs, primarily in Mexico.
Ongoing operating profit also benefited from a gain on a sale of a flour
mill.
- -22-
Cash Flows and Financial Condition
Please refer to our 1996 Annual Report on Form 10-K for information
regarding our liquidity.
Net cash provided by operating activities increased $378 million or 23% to
$2.1 billion. The increase reflected a $181 million increase in income
before all noncash charges and credits, driven by a $301 million increase
in income from continuing operations, and a decrease in operating working
capital cash outflows of $197 million. The reduced cash use for operating
working capital primarily reflected a small reduction in inventories
compared to an increase last year and no change in accounts payable and
accrued liabilities compared to a decline in the prior year. The change in
inventories primarily reflected lapping unusually high inventory balances
last year and lower purchases this year. The change in accounts payable
and accrued liabilities was primarily due to timing of payments.
Net cash used for investing activities more than doubled to $2.6 billion.
The increase primarily reflected a $1.7 billion increase in our investment
portfolio partially offset by a $134 million or 12% decline in capital
spending by Snack Foods. As discussed in Consolidated Financial Condition
on page 24, the increase in the investment portfolio reflected our decision
to use a portion of the cash distribution we anticipated receiving from our
restaurant businesses prior to their spin-off in the fourth quarter to
repay short-term debt. Accordingly, excess cash was invested.
Net cash used for financing activities increased $75 million or 8% to $1
billion. The increase was primarily due to increased share repurchases of
$592 million offset by $520 million of increased net debt proceeds.
Our share repurchase activity was as follows:
36 Weeks Ended
($ and shares in millions) 9/6/97 9/7/96
Cost $1,643 $1,051
Number of shares repurchased 46.6 33.9
% of shares outstanding at
beginning of year 3.0% 2.2%
Net cash provided by discontinued operations almost tripled to $1.8
billion. The significant increase reflected the cash proceeds associated
with the sale of PFS and the non-core businesses, the effects of
refranchising restaurants (including the New Zealand IPO) and other
operating increases. In addition, subsequent to the end of the quarter,
but prior to the TRICON spin-off, we received a $4.5 billion cash payment
from our restaurant companies.
- -23-
Free cash flow is the primary measure we use internally to evaluate our
cash flow performance.
36 Weeks Ended
($ in millions) 9/6/97 9/7/96
Net cash provided by operating
activities $2,052 $ 1,674
Cash dividends paid (545) (496)
Investing activities
Capital spending (957) (1,091)
Sales of businesses 85 -
Sales of property, plant and
equipment - 27
Other, net (5) (170)
Free cash flow:
Continuing operations 630 (56)
Discontinued operations 1,791 605
$2,421 $ 549
Free cash flow increased $1.9 billion primarily reflecting $1.2
billion of increased cash provided by discontinued operations. The $686
million increase from continuing operations primarily reflected increased
cash from operating activities and reduced capital spending.
Consolidated Financial Condition
Operating working capital, which excludes short-term investments and short-
term borrowing, was $253 million at the end of the third quarter 1997,
compared to a negative $130 million at year-end 1996. The $383 million
swing in operating working capital was primarily the effects of
reclassifying the reduced carrying amount of the International Beverages
assets held for disposal to prepaid expenses, deferred income taxes and
other current assets. Increased cash and cash equivalents and Notes and
Accounts Receivable were partially offset by increased accounts payable and
other current liabilities and income taxes payable.
Subsequent to the end of the quarter but prior to the spin-off, we received
the $4.5 billion cash distribution from TRICON and used $3.7 billion to
repay a portion of our short-term debt. Because it was not cost effective
to prepay any of our other outstanding debt, the balance of the TRICON
payment, along with the cash proceeds from the sale of PFS and the non-core
businesses, the New Zealand IPO and other excess cash, were invested in a
short-term investment portfolio and will be used to fund our future
operating and other investment opportunities, including the repurchase of
PepsiCo shares.
- -24-
Cautionary Statements
From time to time, in written reports and oral statements, we discuss our
expectations regarding future performance of the Company. These "forward-
looking statements" are based on currently available competitive, financial
and economic data and our operating plans. They are also inherently
uncertain, and investors must recognize that events could turn out to be
significantly different from what we had expected. In addition, as
disclosed on page 20, the forecasted annual savings of $50 million in 1997
related to the 1996 International Beverages restructuring charge assumes
that the facilities are vacated and employees are terminated within the
time frames used to develop the estimate.
- -25-
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 September 6, 1997 and the related
condensed consolidated statement of income for the twelve and thirty-six
weeks ended September 6, 1997 and September 7, 1996, and the condensed
consolidated statement of cash flows for the thirty-six weeks ended
September 6, 1997 and September 7, 1996. 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 28, 1996, 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 4, 1997, 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 28, 1996, is fairly presented, in
all material respects, in relation to the consolidated balance sheet from
which it has been derived.
Our report, referred to above, contains an explanatory paragraph that
states that PepsiCo, Inc. in 1995 adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," and in 1994 adopted the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits" and
changed its method for calculating the market-related value of pension plan
assets used in the determination of pension expense.
KPMG Peat Marwick LLP
New York, New York
October 21, 1997
- -26-
PART II - OTHER INFORMATION AND SIGNATAURES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits on page 29.
(b) Reports on Form 8-K
None
- -27-
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: October 21, 1997 Sean F. Orr
Senior Vice President and
Controller
Date: October 21, 1997 Lawrence F. Dickie
Vice President, Associate General
Counsel and Assistant Secretary
- -28-
INDEX TO EXHIBITS
ITEM 6 (a)
EXHIBITS
Exhibit 11 Computation of Net Income Per Share of
Capital Stock - Primary and Fully
Diluted
Exhibit 12 Computation of Ratio of Earnings to
Fixed Charges
Exhibit 15 Letter from KPMG Peat Marwick LLP
regarding Unaudited Interim Financial
Information (Accountants' Acknowledgment)
Exhibit 27 Financial Data Schedule
- -29-
EXHIBIT 11
PEPSICO, INC. AND SUBSIDIARIES
Computation of Net Income Per Share of Capital Stock - Primary
(page 1 of 2)
(in millions except per share amounts, unaudited)
12 Weeks Ended 36 Weeks Ended
9/6/97 9/7/96 9/6/97 9/7/96
Shares outstanding at beginning
of period 1,531 1,565 1,545 1,576
Weighted average of shares issued
during the period for exercise of
stock options, conversion of
debentures and payment of
compensation awards 3 3 9 10
Shares repurchased (weighted) (10) (4) (20) (17)
Dilutive shares contingently issuable
upon exercise of stock options,
conversion of debentures and payment
of compensation awards, net of shares
assumed to have been purchased for
treasury (at the average price) with
assumed proceeds from exercise of
stock options and compensation
awards 42 43 41 44
Total shares - primary 1,566 1,607 1,575 1,613
Income from Continuing Operations $ 551 $ 10 $1,045 $ 744
Income from Discontinued Operations 107 134 696 377
Net Income $ 658 $ 144 $1,741 $1,121
Income per share - primary
Continuing Operations $ 0.35 $ 0.01 $ 0.66 $ 0.46
Discontinued Operations 0.07 0.08 0.45 0.23
Net Income Per Share $ 0.42 $ 0.09 $ 1.11 $ 0.69
- -30-
PEPSICO, INC. AND SUBSIDIARIES
Computation of Net Income Per Share of Capital Stock - Fully Diluted
(page 2 of 2)
(in millions except per share amounts, unaudited)
12 Weeks Ended 36 Weeks Ended
9/6/97 9/7/96 9/6/97 9/7/96
Shares outstanding at beginning
of period 1,531 1,565 1,545 1,576
Shares issued during the period for
exercise of stock options,
conversion of debentures and
payment of compensation awards 6 5 19 17
Shares repurchased (weighted) (10) (4) (20) (17)
Dilutive shares contingently issuable
upon exercise of stock options,
conversion of debentures and payment
of compensation awards, net of shares
assumed to have been purchased for
treasury (at the higher of average or
quarter-end price) with assumed
proceeds from exercise of stock
options and compensation awards 41 43 39 42
Total shares - fully diluted 1,568 1,609 1,583 1,618
Income from Continuing Operations $ 551 $ 10 $1,045 $ 744
Income from Discontinued Operations 107 134 696 377
Net Income $ 658 $ 144 $1,741 $1,121
Income per share - fully diluted
Continuing Operations $ 0.35 $ 0.01 $ 0.66 $ 0.46
Discontinued Operations 0.07 0.08 0.44 0.23
Net Income Per Share $ 0.42 $ 0.09 $ 1.10 $ 0.69
- -31-
EXHIBIT 12
PEPSICO, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(in millions except ratio amounts, unaudited)
36 Weeks Ended
9/6/97 9/7/96
Earnings: (b)
Income from continuing operations
before income taxes....... $1,642 $1,307
Joint ventures and minority
interests, net.................. (34) 214
Amortization of capitalized
interest........................ 3 3
Interest expense................. 358 399
Interest portion of rent
expense (a)..................... 35 30
Earnings available for fixed
charges......................... $2,004 $1,953
Fixed Charges:
Interest expense................. $ 358 399
Capitalized interest............. 8 9
Interest portion of rent
expense (a).................... 35 30
Total fixed charges............ $ 401 $ 438
Ratio of Earnings
to Fixed Charges ............ 5.00 4.46
(a) One-third of net rent expense is the portion deemed representative of
the interest factor.
(b) Included unusual charges of $304 and $390 in the 36 weeks ended
September 6, 1997 and September 7, 1996, respectively, (see Note 2).
Excluding these items, the ratio of earnings to fixed charges for the
36 weeks ended September 6, 1997 and September 7, 1996 would have been
5.76 and 5.35, respectively.
- -32-
EXHIBIT 15
Accountants' Acknowledgment
The Board of Directors
PepsiCo, Inc.
We hereby acknowledge our awareness of the use of our report dated October
21, 1997 included within the Quarterly Report on Form 10-Q of PepsiCo, Inc.
for the twelve and thirty-six weeks ended September 6, 1997, and
incorporated by reference in the following Registration Statements and in
the related Prospectuses:
Registration
Description Statement Number
Form S-3
PepsiCo SharePower Stock Option Plan for PCDC
Employees 33-42121
$500,000,000 Euro-Medium-Term Notes 33-8677
$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
Restaurant Deferred Compensation Plan 333-01377
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 Peat Marwick LLP
New York, New York
October 21, 1997
- -33-