[PepsiCo Logo]
Peter Bridgman
February 12, 2002
Safe Harbor Statement
This material contains certain “forward looking” statements. These statements are based on management’s current expectations and are naturally subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained herein. PepsiCo is not under any obligation to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
[PepsiCo Logo]
Peter Bridgman
February 12, 2002
Summary of Changes
| • | Accounting Changes | ||
| – | Trade Spending and A&M Classification (EITF 01-09) | ||
| – | Amortization of Goodwill and Intangibles (FAS 142) | ||
| • | Other Changes | ||
| – | Snack Ventures Europe (SVE) Consolidation | ||
| – | Other | ||
Trade Spending and A&M Classification (EITF 01-09)
| • | Reclassifies Customer Support Payments from Selling Expenses to Revenue Discounts | ||
| – | Franchise Bottler Funding | ||
| – | Customer Agreements | ||
| • | Reduces PepsiCo 2001 Revenues by $3.4B | ||
| – | Consistent with other Consumer Product Companies | ||
| – | No impact to Operating Profit | ||
Amortization of Goodwill and
Intangible Assets (FAS 142)
| • | Freezes amortization of all Goodwill and Perpetual Brands | ||
| • | We applied rigorous criteria to identify Perpetual Brands | ||
| – | Brands with long history, solid market share | ||
| • | We evaluated lives of Other Intangible Assets | ||
| – | Brand history, market share, macro economic environment, etc. | ||
| – | 3–10 year life | ||
| – | Accelerated amortization in some cases | ||
| • | Our Equity Investees have also estimated the impact of FAS 142 | ||
| – | Goodwill and Acquired Franchise Rights | ||
| • | Overall 2001 after-tax impact estimated at $104 MM or 6¢ a share | ||
| – | $23 MM Operating Profit increase | ||
| – | $65 MM Bottler Equity Income increase | ||
| – | 0.8% reduction in tax rate; all non-cash | ||
Snack Ventures Europe Consolidation
| • | We own 60% SVE but have not previously consolidated results | ||
| – | Recognize 60% of SVE Net Income in FLI operating profit | ||
| – | Accounting determined with SEC and auditors | ||
| • | We have reevaluated accounting following changes in SVE operations | ||
| – | Appropriate to fully consolidate results | ||
| – | Reflect with effect from January 2002 | ||
| • | Consolidation has no impact on EPS or Net Income | ||
| – | 100% Revenue, Operating Profit, Interest & Taxes will be consolidated | ||
| – | 40% Minority Interest recorded as FLI Operating Expense | ||
| • | No impact to volume | ||
Other Changes
| • | Reallocation of certain costs or business between Operating Segments | ||
| – | Better align performance responsibilities | ||
| • | No impact to total PepsiCo results | ||
| – | Revenue, Operating Profit, etc. unchanged | ||
“Old Basis” Financial Results
and “New Basis” Financial Results
"Old Basis" Financial Results = The 2001 results we reported last week
Exclude Quaker Transaction Costs
and Restructuring Costs
Equivalent to $1.66 EPS
"New Basis" Financial Results = The $1.66 EPS we reported last
week, adjusted by the $0.06 per share
impact of Accounting and Other
Changes
Equivalent to $1.72 EPS
Financials: Revenues
($MM)
FLNA FLI PCNA PBI GTNA QFNA Total
------ ------ ------ ------ ------ ------ ------
2001 "Old Basis" 9,374 5,130 3,842 2,582 4,016 1,991 26,935
EITF(01-09) (1,158) (231) (653) (639) (317) (425) (3,423)
SVE 706 706
Other (69) 69 0
2001 "New Basis" 8,216 5,536 3,189 2,012 3,699 1,566 24,218
Financials: Segment Operating Profit
($MM)
FLNA FLI PCNA PBI GTNA QFNA Total
------ ------ ------ ------ ------ ------ ------
2001 "Old Basis" 2,056 627 927 221 530 415 4,776
FAS 142 18 (50) (21) 69 7 23
SVE 14 14
Other (2) 4 12 (14) 0
2001 "New Basis" 2,056 657 881 212 585 422 4,813
Financials: Bottling Equity Income
$MM
2001 "Old Basis" 160
FAS 142 65
2001 "New Basis" 225
Financials: Tax Rate
2001 2001
"Old Basis "New Basis"
Pretax Income 4,414 4,513
Tax Provision 1,412 1,408
Tax Rate 32.0% 31.2%
Financials: Earnings per Share
$
2001 "Old Basis" 1.66
FAS 142 0.06
2001 "New Basis" 1.72
| • | You will need to recalibrate key measures |
2001 2001
"Old Basis "New Basis"
- Capex as % of Sales 4.9% 5.5%
- Corporate Unallocated 1.4% 1.5%
as % of Sales
- Line of Business Operating
Profit as % of Sales 17.7% 19.9%
Cash Flow and Balance Sheet
| • | Cash Flow | ||
| – | No Significant Changes | ||
| – | FAS 142 and other changes have no cash flow impact | ||
| – | Tax Rate change entirely non-cash | ||
| • | Balance Sheet | ||
| – | No significant changes | ||
| » Equity investment replaced by increase to appropriate asset/liability offset by Minority Interest Liability | |||
| » No impact to ROIC | |||
2001 P&L Restatements
Comparable Reported
FAS 142 X
EITF 01-09 X X
SVE X
Other X X
Q & A’s