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
April 21, 1999 (April 6, 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 2. Acquisition or Disposition of Assets.
On April 6, 1999, The Pepsi Bottling Group, Inc. ("PBG") completed the sale
to the public of 100,000,000 shares, or 64.6% of its outstanding Common Stock.
The proceeds to PBG, before expenses, were $2,208,230,000. Prior to completion
of the sale, PBG, which is the world's largest manufacturer, seller and
distributor of carbonated and non-carbonated Pepsi-Cola beverages, was a
wholly-owned subsidiary of PepsiCo, Inc. ("PepsiCo").
Item 7. Financial Statements, PRO FORMA Financial Information and Exhibits.
(b) PRO FORMA FINANCIAL INFORMATION OF PEPSICO.
PepsiCo, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Income
Fiscal Year Ended December 26, 1998
($ in millions except per share amounts)
Other
Transactions As
PBG Pro Forma As Pro Forma Further
Historical Adjustments Adjusted Adjustments Adjusted
Net Sales $22,348 (7,041) (a) $16,993 (867) (e) $16,300
1,686 (c) 174 (c)
Cost and Expenses, net
Cost of sales 9,330 (4,181) (a) 6,826 (517) (e) 6,483
1,677 (c) 174 (c)
Selling, general and
administrative expenses 9,924 (2,488) (a) 7,552 (312) (e) 7,236
48 (b) (31) (f)
68 (c) 27 (g)
Amortization of intangible
assets 222 (121) (a) 101 101
Unusual impairment and
other items 288 (222) (a) 66 66
------ ------- ------- ------ -------
Operating Profit 2,584 (136) 2,448 (34) 2,414
Interest expense (395) 123 (d) (272) (h) (272)
Interest income 74 74 74
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Income Before Income Taxes 2,263 (13) 2,250 (34) 2,216
Provision for Income Taxes 270 (48) (a)(b) 222 (5) (e)(f) 217
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(c)(d) (g)
Net Income $ 1,993 35 $ 2,028 (29) $ 1,999
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Net Income Per Share Basic $ 1.35 $ 1.35
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Average Shares Outstanding 1,480 1,480
Net Income Per Share -
$
Assuming Dilution $ 1.31 1.32
======== ====
Average Shares Outstanding 1,519 1,519
See accompanying Notes to Unaudited Pro Forma Financial Statements
PepsiCo, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
December 26, 1998
(in millions)
(Page 1 of 2)
Other
Transactions As
PBG Pro Forma As Pro Forma Further
Historical Adjustments Adjusted Adjustments Adjusted
Assets
Current Assets
Cash and cash equivalents $311 $ (36) (a) $ 3,675 $ (6) (d) $ 3,969
3,400 (c) 300 (c)
Short-term investments, at cost 83 83 83
Accounts and notes receivable,
less
allowance: $127 2,453 (808) (a) 1,661 (90) (d) 1,571
16 (b)
Inventories 1,016 (296) (a) 812 (33) (d) 788
92 (b) 9 (e)
Prepaid expenses, deferred
income
taxes and other current assets 499 (178) (a) 446 (7) (d) 439
125 (b)
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Total Current Assets 4,362 2,315 6,677 173 6,850
Property, plant and
equipment, net 7,318 (2,055) (a) 5,263 (303) (d) 4,960
Intangible assets, net 8,996 (3,806) (a) 5,190 (505) (d) 4,685
Other assets 1,984 (143) (a) 2,411 (43) (d) 3,201
(37) (b) 836 (e)
607 (b) (3) (e)
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Total Assets $22,660 $(3,119) $19,541 $ 155 $19,696
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Continued on next page.
PepsiCo, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
December 26, 1998
(in millions)
(Page 2 of 2)
Other
Transactions As
PBG Pro Forma As Pro Forma Further
Historical Adjustments Adjusted Adjustments Adjusted
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 3,921 $ (112) (a) $ 1,709 $ (23) (d) $ 1,686
(2,100) (c)
Accounts Payable and other
current liabilities 3,870 (881) (a) 3,033 (103) (d) 2,930
44 (b)
Income Taxes Payable 123 9 (a) 132 132
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Total Current liabilities 7,914 (3,040) 4,874 (126) 4,748
Long-Term Debt 4,028 (61) (a) 3,967 3,967
Other Liabilities 2,314 (367) (a)
125 (b) 2,072 (16) (d) 2,056
Deferred Income Taxes 2,003 (1,202) (a) 821 (41) (d) 782
20 (b) 2 (e)
Shareholders' Equity 6,401 1,406 7,807 336 8,143
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Total Liabilities and
22,660 $ (3,119) $19,541 $ 155 19,696
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Shareholders' Equity
See accompanying Notes to Unaudited Pro Forma Financial Statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
In April of 1999, The Pepsi Bottling Group completed an initial public offering
of 100,000,000 shares of its common stock. Prior to the offering, PBG was a
subsidiary of PepsiCo, Inc. operating wholly-owned bottling businesses located
in the United States, Canada, Spain, Greece and Russia. Subsequent to the
offering, PepsiCo retained a 35.4% equity interest in PBG and a 7% direct equity
interest in Bottling LLC, the operating subsidiary of PBG. The following
unaudited Pro Forma Condensed Consolidated Financial Information gives effect to
the initial public offering of PBG as if it occurred on December 28, 1997 for
the Unaudited Pro Forma Condensed Consolidated Income Statement and at December
26, 1998 for the Unaudited Pro Forma Condensed Consolidated Balance Sheet.
Additionally, the following Unaudited Pro Forma Condensed Consolidated
Financial Information also gives effect to two other transactions which are
expected to be consummated in the second quarter involving the contribution of
certain other wholly-owned bottling businesses of PepsiCo to other Pepsi
franchise bottlers in exchange for equity interests in those franchise bottlers.
The following unaudited Pro Forma Condensed Consolidated Financial Information
gives effect to these transactions as if they occurred on December 28, 1997 for
the Unaudited Pro Forma Condensed Consolidated Income Statement and at December
26, 1998 for the Unaudited Pro Forma Condensed Consolidated Balance Sheet.
The unaudited Pro Forma Condensed Consolidated Financial Information does not
purport to represent what PepsiCo's results of operations or financial position
would have been had such transactions been completed as of the dates indicated
nor does it give effect to any events other than those discussed above.
The proforma adjustments to the accompanying historical consolidated statement
of income for the 52 weeks ended December 26, 1998 were:
(a)Represents adjustments to eliminate the results of operations of PBG from
PepsiCo's consolidated statement of income. PepsiCo will account for its
investment in PBG using the equity method of accounting.
(b)Represents PepsiCo's interest in the income (loss) of PBG based upon the
proforma results of PBG.
(c)Reflects adjustments to reverse elimination of concentrate sales to PBG and
the other franchise bottlers, related profit in inventory, allocation of
overhead and other adjustments, net of the related tax effects.
(d)Reflects reduction of interest expense on $2.1 billion debt repayment
resulting from the application of the $5.5 billion cash proceeds to PepsiCo.
Interest income at 4.8% on the remaining $3.4 billion of cash proceeds has
been excluded from this presentation.
(e)Represents adjustments to eliminate the results of operations to be
contributed in other transactions from PepsiCo's consolidated statement of
income. PepsiCo will account for its investment in such franchise bottlers
using the equity method of accounting.
(f) Represents equity in income of other franchise bottlers.
(g)Reflects reversal of 20% equity income from existing investment in franchise
bottler eliminated due to an expected transaction and the related recognition
of concentrate sales and related profit in inventory adjustment.
(h)Interest income at 4.8% on the estimated $300MM cash proceeds from the
expected other franchise bottler transaction has been excluded from this
presentation.
(i) Does not include Tropicana's results from December 28, 1997 to
August 24, 1998 as follows:
($ in millions)
Revenues $1,326
Operating Profit $ 70
Interest $ 125
Net Loss $ 55
The pro forma adjustments to the accompanying historical condensed consolidated
balance sheet at December 26, 1998 were:
(a)Reflects adjustments to eliminate the assets and liabilities of PBG from
PepsiCo's consolidated balance sheet and to record PepsiCo's investment in
PBG using the equity method of accounting.
(b)Reflects PepsiCo's pro forma equity interest in PBG, the reversal of the
profit related in inventory elimination and various reclasses.
(c)Reflects the reduction of debt and the increase in cash equivalents
resulting from the application of cash proceeds from the PBG and other
franchise bottling transaction.
(d)Reflects adjustments to eliminate the assets and liabilities of other
franchise bottlers from PepsiCo's consolidated balance sheet and to record
PepsiCo's investments in other franchise bottlers using the equity method of
accounting.
(e)Reflects PepsiCo's pro forma equity interest in other franchise bottlers and
the related reversal of proportional profit in intercompany elimination.
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 21, 1999 PepsiCo, Inc.
By: LAWRENCE F. DICKIE
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Lawrence F. Dickie
Vice President,
Associate General Counsel
and Assistant Secretary