Operating profit increased 15% primarily due to the increased volume, the higher concentrate pricing and the absence of a prior year charge related to a customer bankruptcy. These gains were partially offset by higher advertising and marketing expenses, the increased customer support and higher general and administrative expenses. Excluding SoBe, advertising and marketing expenses and general and administrative expenses grew at a faster rate than sales. The SoBe acquisition did not impact operating profit growth.
Net sales increased 6% primarily due to volume gains, partially offset by a net unfavorable foreign currency impact. The net unfavorable foreign currency impact reduced the net sales growth by 4 percentage points.
BCS increased 6%. This increase reflects broad-based increases led by double-digit growth in China, Russia and Brazil. These advances were partially offset by a high single-digit decline in Mexico. Through February, total concentrate shipments to franchisees, including those bottlers in which we own an equity interest, grew 12%.
Operating profit increased 20% primarily reflecting the volume gains, partly offset by higher advertising and marketing to support the higher volume and higher general and administrative expenses.
Net sales increased 7% due to volume gains, partially offset by an unfavorable foreign currency impact. The unfavorable foreign currency impact, primarily in Europe and Canada, reduced net sales growth by 1 percentage point.
Equivalent case volume grew 7% driven by continued double-digit growth in Pure Premium nutritionals and blends, as well as growth of Twister.
Operating profit was flat compared to prior year as the volume gains were largely offset by increased energy costs, lower production leverage, lower effective net pricing and an unfavorable foreign currency impact. The net unfavorable foreign currency impact reduced operating profit growth by 2 percentage points.
Cash Flows
Our 2001 cash and cash equivalents decreased $461 million to $403 million. This decrease reflects cash used for acquisitions, including the acquisition of SoBe, dividend payments and capital spending partially funded by short-term borrowings.
Liquidity and Capital Resources
As of year-end 2000, we maintained $1.5 billion of revolving credit facilities. Of the $1.5 billion, $600 million expires in June of 2001 with the balance expiring in June of 2005. At expiration, these facilities can be extended an additional year upon the mutual consent of PepsiCo and the lending institutions. The credit facilities exist largely to support issuances of short-term debt.
Our strong cash-generating capability and financial condition give us ready access to capital markets throughout the world.
In April 2001, we issued 13.2 million shares of our repurchased capital stock to qualify for "pooling-of-interests" accounting treatment in connection with our proposed merger with The Quaker Oats Company. We received approximately $520 million in net proceeds.
Euro Conversion
On January 1, 1999, member countries of the European Union fixed conversion rates between their existing currencies (legacy currencies) and one common currency-the euro. The euro trades on currency exchanges and may be used in business transactions. Conversion to the euro eliminated currency exchange rate risk between the member countries. Beginning in January 2002, new euro-denominated bills and coins will be issued, and legacy currencies will be withdrawn from circulation. Our operating subsidiaries affected by the euro conversion have established plans to address the issues raised by the euro currency conversion. These issues include, among others, the need to adapt computer and financial systems, business processes and equipment, such as vending machines, to accommodate euro-denominated transactions and the impact of one common currency on pricing. Since financial systems and processes currently accommodate multiple currencies, the plans contemplate conversion in 2001 if not already addressed in conjunction with other system or process initiatives. We do not expect the system and equipment conversion costs to be material. Due to numerous uncertainties, we cannot reasonably estimate the long-term effects one common currency will have on pricing and the resulting impact, if any, on financial condition or results of operations.
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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 March 24, 2001 and the related condensed consolidated statements of income, comprehensive income and cash flows for the twelve weeks ended March 24, 2001 and March 18, 2000. These condensed consolidated 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 accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of PepsiCo, Inc. and Subsidiaries as of December 30, 2000, 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 2, 2001, 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 30, 2000, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
KPMG LLP
New York, New York
April 23, 2001
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PART II - OTHER INFORMATION AND SIGNATURES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits on page 23.
(b) Reports on Form 8-K
1. On January 8, 2001, we filed a Current Report on Form 8-K attaching our press
release dated January 8, 2001 announcing two strategic transactions designed
to expand the company's snack food business in Egypt and Saudi Arabia.
2. On February 5, 2001, we filed a Current Report on Form 8-K attaching (i) our
press release dated February 5, 2001 announcing our earnings results for the
fourth quarter of 2000 and (ii) prepared statements by management of PepsiCo,
Inc.
3. On February 8, 2001, we filed a Current Report on Form 8-K attaching a joint
press release from PepsiCo and Quaker, dated February 8, 2001 announcing that
the Federal Trade Commission has requested additional information in
connection with its antitrust review of PepsiCo's proposed merger with Quaker.
4. On March 27, 2001, we filed a Current Report on Form 8-K attaching a joint
press release from PepsiCo and Quaker, dated March 27, 2001 announcing that
the planned merger of PepsiCo and Quaker received European Commission
clearance.
5. On April 10, 2001, we filed a Current Report on Form 8-K attaching a press
release dated April 9, 2001 announcing our agreement to sell 13.2 million
shares of our capital stock in an offering underwritten by Merrill Lynch & Co.
6. On April 16, 2001, we filed a Current Report on Form 8-K attaching a press
release dated April 16, 2001 announcing our earnings expectation for the first
quarter of 2001.
7. On April 23, 2001, we filed a Current Report on Form 8-K attaching a press
release dated April 23, 2001 announcing our earnings for the first quarter of
2001.
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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: May 2, 2001 /S/ PETER A. BRIDGMAN
Peter A. Bridgman
Senior Vice President and
Controller
Date: May 2, 2001 /S/ LAWRENCE F. DICKIE
Lawrence F. Dickie
Vice President, Associate General
Counsel and Assistant Secretary
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INDEX TO EXHIBITS
ITEM 6 (a)
EXHIBITS
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
Exhibit 15 Letter re: Unaudited Interim Financial Information
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