Earnings per share for PepsiCo, Inc. surged 24% to $.38 cents in the second quarter ended June 10, from $.31 in the prior year on a pro forma basis. Revenues jumped 9% to $4.9 billion as every operating division posted higher volume.

Roger Enrico, chairman and CEO, said: "PepsiCo continues to generate broad-based growth, healthy cash flow and improving returns on capital. Our volume gains in the second quarter reflect the strength of our businesses and our excellent position in the vast convenient food and beverage market. Our second quarter performance also confirms that we can sustain 12-13% EPS growth, with occasional upsides."

"Looking ahead, we believe that changing lifestyles will continue to create enormous opportunities for PepsiCo. We believe our commitment to innovation and our unparalleled distribution capability can drive consistent double-digit EPS growth in the second half of 2000, and beyond."


Some highlights from the quarter include:

  • Line of business profits grew 14%.

  • Frito-Lay International volume soared 16%, driven by a successful "Pokemon" promotion in Latin America.

  • Frito-Lay North America's successful new products complemented strong results of core brands, driving volume 5% higher.

  • Pepsi-Cola International posted its fourth successive quarterly improvement with a 9% gain in bottler case sales.

  • Pepsi-Cola North America's concentrate shipments turned positive, gaining nearly 1%.

  • Tropicana Pure Premium, the leading not-from-concentrate orange juice, grew another 10% in the quarter, fueled by its nutritionals line.


  • Net income advanced 21% in the quarter to $563 million from $467 million on a pro forma basis in 1999, as each of PepsiCo's five divisions reported profit gains. Revenue growth accelerated to 9%, reflecting continuing gains in the U.S. and improving economic fundamentals in international markets. Revenues were $4,928 million in 2000, compared to pro forma operating revenues of $4,523 million in 1999's quarter.

    Results for 1999 are presented on a pro forma basis to facilitate comparisons. Pro forma comparisons assume that the transactions involving The Pepsi Bottling Group, Whitman Corporation and PepCom occurred on the first day of fiscal 1998 and exclude unusual items.

    FRITO-LAY NORTH AMERICA

    (in millions)

                                      Twelve Weeks              Twenty-Four Weeks
    2000 1999 2000 1999
    Revenues $2,011 $1,875 $3,854 $3,617
    Operating Profit 433 393 812 738

    Fueled by double-digit volume growth in Cheetos, Tostitos and Ruffles, revenues grew 7% to $2 billion in the second quarter. Volume was 5% higher, reflecting solid growth in potato chips and variety packs, and the success of new products, especially Ruffles Flavor Rush and Frito-Lay Snack Kits. During the quarter, Frito-Lay gained two share points in U.S. measured retail channels, compared to the year earlier.

    Once again, Frito-Lay North America achieved double-digit growth as operating income advanced 10% to $433 million. The unit's operating profit margin expanded nearly 60 basis points in the quarter, reflecting higher volume and favorable ingredient costs. Fuel expenses were higher, and the company made additional investments in innovation.

    New product innovation continues to fuel sales growth. In the second quarter, Frito Lay introduced Cracker Jack "Nothing but Nuts," Oberto's meat snacks, and extended Lay's flavor portfolio to include Cracker Barrel Cheddar. A promotional tie-in with the Walt Disney film "Dinosaur" that contributed to a strong Memorial Day has been succeeded by a program that offers cash prizes totaling $1 million inside specially-marked bags of Lay's, Ruffles, Cheetos and Fritos.

    FRITO-LAY INTERNATIONAL

    (in millions)

                                      Twelve Weeks             Twenty-Four Weeks
    2000 1999 2000 1999
    Revenues $1,025 $867 $1,943 $1,654
    Operating Profit 115 91 214 169

    At Frito-Lay International, profit soared 27% led by strong performances in Mexico and the United Kingdom and a phenomenally successful "Pokemon" promotion across Latin America. Salty kilos grew 18% in the quarter and revenues advanced 18% to $1,025 million. Sweet kilos grew 9%.

    In Mexico, Sabritas' kilo volume and revenues jumped a spectacular 27% in the quarter. At Gamesa, product introductions continued to enhance net revenue per pound, and sales grew 22%. Double-digit volume gains in Australia and Asia also helped fuel sharp profit improvements in the quarter.

    In the United Kingdom, Walkers' kilo volume climbed 12% in response to a successful promotion and revenues in local currency grew 10%. Unfavorable foreign currency translation limited Walkers' reported revenue growth to 5%. In Europe, volume was strong across the continent, and especially so in Russia, where macroeconomic conditions have improved.

    PEPSI-COLA NORTH AMERICA

    (in millions)

                                      Twelve Weeks            Twenty-Four Weeks
    2000 1999 2000 1999
    Revenues $798 $751 $1,437 $1,364
    Operating Profit 224 205 382 377


    Concentrate shipments resumed their growth in the second quarter, increasing nearly 1%, despite a difficult year-over-year comparison driven by last year's Star Wars promotion. Revenues were 6% higher, reflecting the benefit of higher prices for concentrate and larger royalties for Aquafina.

    Operating profit advanced 9% to $224 million.

    Bottler case sales were flat in the April-May reporting period, reflecting a modest decline in concentrate brands and a strong gain by non-carbonated brands, especially Aquafina. Now the #1 water in take home channels, Aquafina volume jumped 44% in the quarter. Aquafina launched its first-ever ad campaign in May.

    In the second quarter, Pepsi-Cola launched its "Choose Your Music" promotion that allows consumers to order custom CDs. In August, the company will introduce PepsiStuff.com, which offers a variety of prizes redeemable online at a website co-branded with Yahoo! Finally, the Pepsi Challenge, which invites consumers to compare the taste of Pepsi with Coke, or Pepsi One with Diet Coke, is being expanded nationwide this summer.

    PEPSI-COLA INTERNATIONAL

    (in millions)

                                      Twelve Weeks              Twenty-Four Weeks
    2000 1999 2000 1999
    Revenues $541 $497 $800 $740
    Operating Profit 61 44 82 60

    Double-digit volume gains in China, India, Thailand, Germany, and Japan, coupled with solid gains in Mexico and Russia, drove bottler case sales up 9% in the April and May reporting period. Revenues also grew 9% in the quarter, as the impact of higher pricing was tempered by unfavorable foreign currency translation, particularly in Europe.

    Operating profit soared 37% to $61 million, compared to $44 million last year.

    On June 30, Pepsi-Cola International signed a multi-year renewal of its exclusive supply agreement with Tricon Restaurants International. On May 3, Pepsi-Cola North America entered a similar arrangement with Tricon's domestic restaurants. Tricon operates nearly 10,000 restaurants in 100 countries.

    TROPICANA

    (in millions)

                                      Twelve Weeks            Twenty-Four Weeks
    2000 1999 2000 1999
    Revenues $553 $533 $1,085 $1,032
    Operating Profit 51 44 111 79


    Tropicana Pure Premium again achieved double-digit volume growth as nutritionally-enhanced products continued to expand the market for not-from-concentrate orange juice. Ambient brands grew at lesser rates and from-concentrate brands declined, which tempered the total volume increase to 5%.

    Revenues grew just 4% in the quarter to $553 million, reflecting an increase in trade spending that impacted net pricing and unfavorable foreign currency translation. The higher spending successfully preserved much of the retail price increase that occurred after last year's orange crop shortage -- despite the intensified competition that has followed this year's abundant crop.

    Operating profit gained 17% to $51 million. Tropicana benefited from lower ingredient costs in the quarter, while higher volume improved manufacturing efficiency.

    EQUITY INCOME

    Equity income from bottling interests grew 80% in the quarter to $54 million, driven by strong operating results. Additionally, in the first quarter of 2000, PBG extended the useful life of certain fixed assets, which lowered depreciation expense and resulted in a positive impact on income compared to pro forma 1999 results. The Pepsi Bottling Group is approximately 40%-owned by PepsiCo.

    CORPORATE EXPENSES

    Corporate expenses declined slightly in the second quarter to $75 million. In addition to department operating costs, corporate expenses include Power of One selling initiatives, discretionary project spending and the impact of a higher PepsiCo stock price on deferred compensation expense. The impact of deferred compensation costs is reduced by a gain on equity derivative contracts, which is included in net interest expense.

    Net interest expense declined to $35 million from 1999's pro forma $42 million, largely reflecting the inclusion of the gain on derivative contracts.

    In April 1999, PepsiCo announced that it planned to spend $3 billion to repurchase its capital stock between 1999 and 2001. In the second quarter, the company purchased approximately 4 million shares for a cost of $148 million. In the current fiscal year through July 7, the company has purchased 29.8 million shares for a total cost of $1 billion. From the inception of the program, 65.6 million shares have been purchased at a total cost of $2.35 billion.

    CASH EPS

    Cash earnings per share, computed using net income before amortization of intangibles and shares outstanding assuming dilution, grew 22% to $.41 in the second quarter of 2000, compared to $.33 in the year-earlier quarter. Cash EPS for the full year 1999 was $1.34.

    REPORTED RESULTS

    PepsiCo reported earnings per share of $.38 in the second quarter of 2000, compared to $.49 in the second quarter of 1999. In 1999, the company owned 100% of certain bottling operations for a portion of the quarter, compared to approximately 40% in 2000. In addition, PepsiCo recognized a pretax gain of $1 billion on the sale of its bottling interests in the 1999 quarter.

    CAUTIONARY STATEMENT

    This release discusses expectations regarding PepsiCo's future performance. These forward-looking statements are based on current expectations and projections about future events. The statements are subject to risks, uncertainties and assumptions. As a result, the forward-looking events discussed in this release could turn out to be significantly different from expectations or may not occur. In addition, the pro forma condensed consolidated information does not purport to represent what PepsiCo's results would have been had the transactions referred to in this release been completed as of the beginning of 1998, nor does it give effect to any other events.

    PepsiCo, Inc. and Subsidiaries

    PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (a)

    ($ in millions except per share amounts, unaudited)


                                      12 Weeks Ended               24 Weeks Ended
    6/10/00 6/12/99(b) 6/10/00 6/12/99(b)
    NET SALES
    Frito-Lay
    -North America $2,011 $1,875 $3,854 $3,617
    -International 1,025 867 1,943 1,654
    3,036 2,742 5,797 5,271
    Pepsi-Cola
    -North America 798 751 1,437 1,364
    -International 541 497 800 740
    1,339 1,248 2,237 2,104

    Tropicana 553 533 1,085 1,032

    Total Net Sales $4,928 $4,523 $9,119 $8,407

    OPERATING PROFIT
    Frito-Lay
    -North America $ 433 $ 393 $ 812 $ 738
    -International 115 91 214 169
    548 484 1,026 907
    Pepsi-Cola
    -North America 224 205 382 377
    -International 61 44 82 60
    285 249 464 437

    Tropicana 51 44 111 79

    Combined Segments 884 777 1,601 1,423

    Corporate Unallocated (75) (79) (137) (122)

    Pro Forma Operating
    Profit 809 698 1,464 1,301

    Bottling equity
    income (c) 54 30 59 30

    Interest expense, net (35) (42) (75) (82)

    Income Before
    Income Taxes 828 686 1,448 1,249

    Provision for
    Income Taxes 265 219 463 400

    Net Income $ 563 $ 467 $ 985 $ 849

    Income Per Share -
    Assuming Dilution $ 0.38 $ 0.31 $ 0.67 $ 0.56

    Average Shares
    Outstanding 1,468 1,505 1,470 1,507

    See accompanying notes.

    Notes to the Pro Forma Information for the 12 and 24 Weeks Ended 6/10/00 and 6/12/99:

    (a) Percentage changes in text are based on unrounded amounts.

    (b) The pro forma condensed consolidated financial information gives effect to the initial public offering of The Pepsi Bottling Group(PBG), the merger of PepsiCo Bottling Operations with the Whitman Corporation and the contribution of PepsiCo bottling franchises to a business venture with PepCom Industries, Inc. (PepCom) as if the transactions occurred at the beginning of PepsiCo's 1998 fiscal year.
    In addition, the pro forma results exclude the Frito-Lay first quarter 1999 impairment and restructuring charge, the first quarter 1999 gain on the sale of a chocolate business in Poland and the second quarter 1999 net gain on the PBG and Whitman bottling transactions. The pro forma condensed consolidated financial information does not purport to represent what PepsiCo's results of operations would have been had such transactions been completed as of the dates indicated nor does it give effect to any other events.

    (c) Represents PepsiCo's interest in the pro forma income of PBG, Whitman and PepCom as well as the equity income or loss of other unconsolidated bottling affiliates.

    PepsiCo, Inc. and Subsidiaries

    Consolidated Statement of Income

    ($ in millions except per share amounts, unaudited)


                                      12 Weeks Ended              24 Weeks Ended
    6/10/00 6/12/99 6/10/00 6/12/99
    Net Sales
    New PepsiCo $4,928 $4,440 $9,119 $7,985
    Bottling
    operations (a) -- 542 -- 2,111

    Total Net Sales 4,928 4,982 9,119 10,096


    Cost and Expenses
    Cost of sales 1,891 2,012 3,568 4,152
    Selling, general and
    administrative
    expenses 2,196 2,208 4,023 4,458
    Amortization of
    intangible assets 32 41 64 105
    Impairment and
    restructuring
    charge (b) -- -- -- 65

    Total Costs and
    Expenses 4,119 4,261 7,655 8,780


    Operating Profit
    New PepsiCo 809 698 1,464 1,264
    Bottling operations
    and equity
    investments (a) -- 23 -- 52

    Total Operating
    Profit 809 721 1,464 1,316

    Bottling equity
    income, net (c) 54 25 59 25
    Gain on bottling
    transactions(d) -- 1,000 -- 1,000
    Interest expense (56) (104) (103) (228)
    Interest income 21 50 28 70

    Income Before
    Income Taxes 828 1,692 1,448 2,183

    Provision for
    Income Taxes (e) 265 949 463 1,107

    Net Income $563 $743 $985 $ 1,076

    Income Per Share
    - Basic $ 0.39 $ 0.50 $ 0.68 $0.73

    Average Shares
    Outstanding - Basic 1,443 1,474 1,446 1,474

    Income Per Share
    - Assuming Dilution $ 0.38 $ 0.49 $ 0.67 $ 0.71

    Average Shares
    Outstanding -
    Assuming Dilution 1,468 1,505 1,470 1,507

    See accompanying notes.

    Notes to 12 and 24 Weeks Ended 6/10/00 and 6/12/99:

    (a) Through the applicable transaction closing dates in 1999, includes the results of those previously wholly-owned bottling operations in which we now own an equity interest. In addition, the equity income or loss of unconsolidated bottling affiliates for the first quarter of 1999 is presented in operating profit.

    (b) For the 24 weeks in 1999, includes an asset impairment and restructuring charge of $65 million ($40 million after tax or $0.03 per share assuming dilution) for Frito-Lay North America related to the consolidation of U.S. production in our most modern and efficient plants and streamlining logistics and transportation systems.

    (c) From the applicable transaction closing dates in 1999, includes the equity income of those previously wholly-owned bottling operations in which we now own an equity interest. Also includes equity income or loss of other unconsolidated bottling affiliates for the 24 weeks ended June 10, 2000 and the 12 weeks ended June 12, 1999.

    (d) In 1999, reflects the gain of $1.0 billion ($270 million after-tax or $0.18 per share assuming dilution) on the PBG and Whitman bottling transactions.

    (e) For the 12 weeks, the effective tax rates are 32.0% in 2000 and 56.1% in 1999. For the 24 weeks, the effective tax rates are 32.0% in 2000 and 50.7% in 1999. Excluding the effects of the gain on bottling transactions and the asset impairment and restructuring charge in 1999, the effective tax rates are 31.6% and 32.2% for the 12 and 24 weeks in 1999, respectively.

    PepsiCo, Inc. and Subsidiaries

    Condensed Consolidated Statement Of Cash Flows

    (in millions, unaudited)



                                                               24 Weeks Ended
    6/10/00 6/12/99
    Cash Flows - Operating Activities
    Net income $ 985 $ 1,076
    Adjustments to reconcile net income
    to net cash provided by operating activities
    Gain on bottling transactions -- (1,000)
    Bottling equity income, net (59) (25)
    Depreciation and amortization 418 532
    Deferred income taxes 79 518
    Other noncash charges and credits, net 118 372
    Net change in operating working capital (445) (481)

    Net Cash Provided by Operating Activities 1,096 992

    Cash Flows - Investing Activities
    Capital spending (376) (469)
    Acquisitions and investments in unconsolidated
    affiliates (12) (347)
    Sales of businesses -- 223
    Short-term investments 13 (1,179)
    Other, net (157) (124)

    Net Cash Used for Investing Activities (532) (1,896)

    Cash Flows - Financing Activities
    Proceeds from issuances of long-term debt 100 3,259
    Payments of long-term debt (702) (378)
    Short-term borrowings 559 188
    Cash dividends paid (391) (383)
    Share repurchases (814) (506)
    Proceeds from exercises of stock options 251 158

    Net Cash (Used for) Provided by Financing
    Activities (997) 2,338

    Effect of Exchange Rate Changes on Cash and Cash
    Equivalents (3) 2

    Net (Decrease) Increase in Cash and Cash
    Equivalents (436) 1,436
    Cash and Cash Equivalents - Beginning of year 964 311

    Cash and Cash Equivalents - End of period $ 528 $ 1,747


    PepsiCo, Inc. and Subsidiaries

    Condensed Consolidated Balance Sheet

    (in millions)


                                      (Unaudited)
    6/10/00 12/25/99
    Assets

    Cash and cash equivalents $ 528 $ 964

    Short-term investments, at cost 79 92

    Other current assets 3,544 3,117

    Total Current Assets 4,151 4,173

    Property, plant and equipment, net 5,233 5,266

    Intangible assets, net 4,572 4,735

    Investments in unconsolidated affiliates 2,894 2,846

    Other assets 642 531

    Total Assets $17,492 $17,551

    Liabilities and Shareholders' Equity

    Short-term borrowings $ 242 $ 233

    Current liabilities 3,512 3,555

    Long-term debt 2,742 2,812

    Other liabilities 2,943 2,861

    Deferred income taxes 1,306 1,209

    Total Liabilities 10,745 10,670

    Shareholders' Equity 6,747 6,881

    Total Liabilities and Shareholders' Equity $17,492 $17,551