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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
January 26, 1999 (January 25, 1999)
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Date of Report (Date of earliest event reported)
PepsiCo, Inc.
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(Exact name of registrant as specified in its charter)
North Carolina
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(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
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (914) 253-2000
Item 5. Other Events.
The information contained in Exhibit 20 hereto is incorporated herein by
reference.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits.
20 Press Release dated January 25, 1999 from PepsiCo, Inc.
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: January 26, 1999 PepsiCo, Inc.
By: /s/ LAWRENCE F. DICKIE
Lawrence F. Dickie
Vice President,
Associate General Counsel
and Assistant Secretary
PEPSICO REACHES AGREEMENT WITH WHITMAN
CORPORATION TO FORM MASTER PEPSI BOTTLER;
PEPSICO COMMENTS ON FOURTH QUARTER RESULTS
PURCHASE, N.Y., Jan. 25, 1999 - PepsiCo, Inc. today made several
announcements regarding a major bottling transaction and fourth-quarter
financial results.
AGREEMENT REACHED WITH WHITMAN
PepsiCo announced that it has reached an agreement with Whitman Corporation, the
world's largest independent Pepsi bottler, to realign bottling territories in
order to create a new master Pepsi-Cola bottler.
Under the terms of the agreement:
PepsiCo will consolidate certain of its bottling territories and other
assets with Whitman's existing bottling business to create a new and very
powerful bottling company to be called Whitman Corporation.
PepsiCo will transfer to the new company a number of bottling operations,
including territories in Illinois, Indiana, Missouri and Ohio in the
United States as well as in the Czech Republic, the Slovak Republic,
Hungary and Poland. Those businesses generated 1998 revenue of
approximately $540 million in the U.S. and approximately $180 million
outside the U.S. PepsiCo also will transfer to the new company the 20%
stake it currently holds in Whitman's Pepsi-Cola General Bottlers
subsidiary.
Whitman will transfer to PepsiCo operations in: Marion, Virginia;
Princeton, West Virginia and St. Petersburg, Russia. They will become
part of The Pepsi Bottling Group. In 1998 those businesses generated
revenue of $54 million in the U.S. and $23 million in Russia.
Whitman will assume liabilities associated with PepsiCo's U.S. operations and
will acquire PepsiCo's international operations for cash, resulting in net
proceeds to PepsiCo of $300 million.
PepsiCo will receive 54 million shares of common stock in the newly created
Whitman Corporation, giving PepsiCo immediate ownership of approximately 35%
of the company. Whitman will undertake a share repurchase program that is
anticipated to raise PepsiCo's stake in the company to nearly 40%.
"Whitman is an excellent bottler with tremendous capabilities," said PepsiCo
Chairman and Chief Executive Officer Roger Enrico. "This greatly expanded
partnership will dramatically strengthen the Pepsi-Cola bottling system and
provide better and more efficient service to our customers."
The transaction, which is subject to approval by regulators and Whitman
shareholders, will increase Whitman's share of Pepsi-Cola's bottle-and-can
volume in the United States from 12% to 17%. It will increase Whitman's bottling
volume outside the United States more than four-fold.
As a result of the transaction, PepsiCo expects to record a one-time gain
sometime after the first quarter of 1999. A proxy statement/prospectus will be
filed with the Securities and Exchange Commission containing details on the
Whitman transaction.
It is anticipated that the Whitman transaction will not delay PepsiCo's planned
public offering of a majority interest in The Pepsi Bottling Group. The
registration statement filed earlier this month in connection with the offering
took the Whitman transaction into account.
FOURTH QUARTER 1998
PepsiCo said it expects to report fourth-quarter 1998 earnings per share of
approximately 24 cents next week and made several additional announcements
regarding the quarter:
Settlement with Internal Revenue Service
In November 1998 PepsiCo reached final agreement with the IRS to settle
substantially all remaining aspects of a tax case relating to PepsiCo's
concentrate operations in Puerto Rico. As a result, PepsiCo will recognize a tax
benefit totaling $494 million for 1998. Of that $494 million, $200 million was
recorded in the third quarter, based on settlement of part of the case, and $294
million or 19 cents per share will be recorded in the fourth quarter.
Frito-Lay North America
Frito-Lay North America (FLNA) has initiated a major program to improve
productivity in its U.S. manufacturing operations by consolidating production in
its most modern and efficient plants, eliminating production redundancies
throughout the system and streamlining logistics and transportation systems.
Under the program FLNA will close four of its oldest plants, located in:
Chamblee, Ga.; Salisbury, N.C.; Jackson, Miss. and Marlborough, Mass. In
addition, FLNA will expand three of its most technologically advanced plants, in
Lynchburg, Va., Jonesboro, Ark., and Fayetteville, Tenn., and two of its
top-performing facilities, in Perry, Ga., and Killingly, Conn.
FLNA will incur one-time charges estimated to total approximately $120 million
for costs associated with the program. That total includes $54 million (pre-tax)
or two cents per share relating to elimination of production redundancies to be
recorded for the fourth quarter of 1998 and approximately $65 million relating
to plant consolidation and expansions to be recorded for the first quarter of
1999. Any near-term savings resulting from the efforts will be reinvested in the
business.
Pepsi-Cola International
In recognition of the severe impact of the economic crisis on its operations in
Russia, Pepsi-Cola International (PCI) will record an unusual charge of $218
million or 14 cents per share for the fourth quarter of 1998 to reflect asset
impairment and the cost of restructuring of its operations there.
Pepsi-Cola North America
For the fourth quarter of 1998 Pepsi-Cola North America (PCNA) will record a
restructuring charge of $16 million (pretax) or one cent per share to reflect
the costs of separating its concentrate and bottling organizations. The
separation was intended to enable the bottling business to more effectively
serve retail customers, which have been consolidating very rapidly in recent
years. PepsiCo is proceeding with the conversion of a majority stake in its
Pepsi Bottling Group unit to public ownership through an initial public
offering.
Also, after a very positive consumer response to the October launch of its Pepsi
One one-calorie cola, PCNA chose to invest additional advertising and marketing
funds to drive continued trial of the brand late in the fourth quarter of 1998.
The decision reflects PCNA's strong commitment to this innovative and
high-potential new product.
As a result of the additional funding of Pepsi One and highly competitive
pricing, PCNA ongoing operating profit for the fourth quarter is expected to be
$206 million. Including the $16 million restructuring charge, reported PCNA
operating profit for the fourth quarter is expected to be $190 million.
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