PepsiCo Reaches Agreement to Distribute Certain Dr Pepper Snapple Group Brands
09 December 2009 - 8:00AM
PR Newswire (US)
Company updates guidance for 2009 and reaffirms guidance for 2010
PURCHASE, N.Y., Dec. 8 /PRNewswire-FirstCall/ -- PepsiCo (NYSE:PEP)
said today that it has reached an agreement with Dr Pepper Snapple
Group, Inc. (DPS) to manufacture and distribute certain DPS
products following completion of PepsiCo's acquisition of its two
anchor bottlers, The Pepsi Bottling Group, Inc. (PBG) and
PepsiAmericas, Inc. (PAS). Under the terms of the agreement, DPS
will receive an upfront payment of $900 million payable upon
closing of the acquisitions. In exchange, PepsiCo will be entitled
to manufacture and distribute Dr Pepper and certain other DPS
products in the territories where they are currently distributed by
PBG and PAS. The agreement between PepsiCo and DPS, which will
replace existing agreements PBG and PAS have with DPS, will have an
initial term of 20 years, with automatic 20 year renewals
thereafter. "We are delighted that we have reached a mutually
beneficial agreement with Dr Pepper Snapple Group to continue to
distribute their products," said Indra K. Nooyi, PepsiCo's Chairman
and Chief Executive Officer. "PepsiCo is fully committed to
vigorously expand, flawlessly distribute and grow Dr Pepper
Snapple's brands in its appointed territories." Under the new
agreement, PepsiCo will distribute: Dr Pepper, Crush and Schweppes
brands in the United States; Dr Pepper, Crush, Schweppes, Vernors
and Sussex brands in Canada; and Squirt and Canada Dry brands in
Mexico. The agreement was anticipated after PepsiCo and its
bottlers earlier this year reached an agreement under which PepsiCo
would acquire the two anchor bottlers. PepsiCo is on track to
complete the acquisitions, subject to regulatory and stockholder
approval. The company filed its Form S-4 Registration Statements in
preliminary form on October 1, 2009 and expects to close on the
proposed transactions by the end of the first quarter of 2010.
Concurrent with the announcement, PepsiCo has filed with the SEC
amendments to its preliminary registration statements on Form S-4
relating to the acquisitions to disclose updated financial and
other information. Fiscal 2009 and 2010 Guidance In its fiscal 2009
fourth quarter, PepsiCo has begun to step-up investments in
targeted areas that will support improved growth and profitability
in 2010 and beyond. For example, PepsiCo is making infrastructure
investments in developing markets, such as China, to drive
increased penetration and distribution of both carbonated and
non-carbonated beverages. It has also increased investments in
differentiated science-based R&D to accelerate the company's
health and wellness transformation. For fiscal 2009 PepsiCo expects
constant currency net revenue to be up about five percent. The
company also expects division operating profit to increase about
six to seven percent and EPS to increase about five to six percent,
each in core constant currency, off of its fiscal 2008 core EPS of
$3.68. Based on current spot rates, foreign exchange translation
would represent about a five percentage point adverse impact to
PepsiCo's full-year, core constant currency EPS. For fiscal 2010
the company reaffirms its target of 11 to 13 percent growth for
core constant currency EPS off of expected fiscal 2009 core EPS.
This target excludes one-time costs to achieve the synergies
associated with its acquisitions of PBG and PAS and assumes the
company completes the acquisitions by the end of the first quarter
of 2010. Please refer to the glossary for more information about
the items excluded from the company's fiscal 2009 and 2010 constant
currency core EPS guidance. The company has not yet received
regulatory or PBG or PAS shareholder approval for the acquisitions
or resolved all comments from the Securities and Exchange
Commission on its Form S-4 Registration Statements. In addition,
the company is still in the process of completing its annual
planning process and its integration planning. Any of these
factors, as well as the risks described under "Cautionary
Statement" later in this release, the risks described in our most
recent annual report on Form 10-K and subsequent reports on Forms
10-Q and 8-K and in the company's Form S-4 Registration Statements
with respect to the acquisitions could materially adversely impact
the company's ability to achieve these results. About PepsiCo
PepsiCo offers the world's largest portfolio of billion-dollar food
and beverage brands, including 18 different product lines that each
generate more than $1 billion in annual retail sales. Our main
businesses - Frito-Lay, Quaker, Pepsi-Cola, Tropicana and Gatorade
- also make hundreds of other tasty foods and drinks that bring joy
to our consumers in over 200 countries. With more than $43 billion
in 2008 revenues, PepsiCo employs 198,000 people who are united by
our unique commitment to sustainable growth, called Performance
with Purpose. By dedicating ourselves to offering a broad array of
choices for healthy, convenient and fun nourishment, reducing our
environmental impact, and fostering a diverse and inclusive
workplace culture, PepsiCo balances strong financial returns with
giving back to our communities worldwide. For more information,
please visit http://www.pepsico.com/. Cautionary Statement This
communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. PepsiCo, Inc. ("PepsiCo") and The Pepsi
Bottling Group, Inc. ("PBG") have filed with the Securities and
Exchange Commission ("SEC") a registration statement on Form S-4
containing a proxy statement/prospectus and other documents with
respect to the proposed acquisition of PBG. A definitive proxy
statement/prospectus will be mailed to shareholders of PBG after
the registration statement is declared effective. The registration
statement has not yet become effective. PepsiCo and PepsiAmericas,
Inc. ("PAS") have filed with the SEC a registration statement on
Form S-4 containing a proxy statement/prospectus and other
documents with respect to the proposed acquisition of PAS. A
definitive proxy statement/prospectus will be mailed to
shareholders of PAS after the registration statement is declared
effective. The registration statement has not yet become effective.
INVESTORS AND SECURITY HOLDERS OF PBG AND PAS ARE URGED TO READ THE
APPLICABLE DEFINITIVE PROXY STATEMENT/PROSPECTUS AND OTHER
DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY IN THEIR
ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. Investors and security holders will be able
to obtain free copies of the registration statements and the proxy
statements/prospectuses and other documents filed with the SEC by
PepsiCo, PBG or PAS through the website maintained by the SEC at
http://www.sec.gov/. Copies of the documents filed with the SEC by
PepsiCo will be available free of charge on PepsiCo's internet
website at http://www.pepsico.com/ or by contacting PepsiCo's
Investor Relations Department at 914-253-3035. Copies of the
documents filed with the SEC by PBG will be available free of
charge on PBG's internet website at http://www.pbg.com/ or by
contacting PBG's Investor Relations Department at 914-767-7216.
Copies of the documents filed with the SEC by PAS will also be
available free of charge on PAS's internet website at
http://www.pepsiamericas.com/ or by contacting PAS's Investor
Relations Department at 612-661-3883. Statements in this release
that are "forward-looking statements", including PepsiCo's 2009 and
2010 guidance, are based on currently available information,
operating plans and projections about future events and trends.
They inherently involve risks and uncertainties that could cause
actual results to differ materially from those predicted in such
forward-looking statements. Such risks and uncertainties include,
but are not limited to: PepsiCo's ability to consummate the
acquisitions of PBG and PAS and to achieve the synergies and value
creation contemplated by the proposed acquisitions; PepsiCo's
ability to promptly and effectively integrate the businesses of
PBG, PAS and PepsiCo; the timing to consummate the proposed
acquisitions and any necessary actions to obtain required
regulatory approvals; the diversion of management time on
transaction-related issues; changes in demand for PepsiCo's
products, as a result of shifts in consumer preferences or
otherwise; increased costs, disruption of supply or shortages of
raw materials and other supplies; unfavorable economic conditions
and increased volatility in foreign exchange rates; PepsiCo's
ability to build and sustain proper information technology
infrastructure, successfully implement its ongoing business process
transformation initiative or outsource certain functions
effectively; damage to PepsiCo's reputation; trade consolidation,
the loss of any key customer, or failure to maintain good
relationships with PepsiCo's bottling partners, including as a
result of the proposed acquisitions; PepsiCo's ability to hire or
retain key employees or a highly skilled and diverse workforce;
changes in the legal and regulatory environment; disruption of
PepsiCo's supply chain; unstable political conditions, civil unrest
or other developments and risks in the countries where PepsiCo
operates; and risks that benefits from PepsiCo's Productivity for
Growth initiative may not be achieved, may take longer to achieve
than expected or may cost more than currently anticipated. For
additional information on these and other factors that could cause
PepsiCo's actual results to materially differ from those set forth
herein, please see PepsiCo's filings with the SEC, including its
most recent annual report on Form 10-K and subsequent reports on
Forms 10-Q and 8-K. Investors are cautioned not to place undue
reliance on any such forward-looking statements, which speak only
as of the date they are made. All information in this communication
is as of December 8, 2009. PepsiCo undertakes no obligation to
update any forward-looking statements, whether as a result of new
information, future events or otherwise. Glossary Core: Core
results are non-GAAP financial measures. Core guidance for
full-year 2009 excludes the commodity mark-to-market net impact
included in corporate unallocated expenses, costs of $36 million
($29 million, after-tax) associated with the Productivity for
Growth initiative and the merger costs. Core EPS guidance for
full-year 2010 excludes the commodity mark-to-market net impact
included in corporate unallocated expenses, estimated one-time
costs of approximately $250 million to achieve synergies, the gain
or loss on previously held equity interests in PBG and PAS, the
post-merger one-time impact to earnings of fair value adjustments
to acquired inventory, any additional restructuring or integration
costs and transaction costs related to the proposed acquisitions of
PBG and PAS. For more details and reconciliations of our 2009 and
2010 constant currency core guidance, see "Reconciliation of GAAP
and Non-GAAP Information" below. Constant currency: Financial
results (historical and projected) assuming constant foreign
currency exchange rates used for translation based on the rates in
effect for the comparable prior-year period. In addition, the
impact on EPS growth is computed by adjusting core EPS growth by
the after-tax foreign currency translation impact on core operating
profit growth using PepsiCo's core effective tax rate. Division
operating profit: The aggregation of the operating profit for each
of our reportable segments, which excludes the impact of corporate
unallocated expenses. Transaction foreign exchange: The foreign
exchange impact on our financial results of transactions, such as
purchases of imported raw materials, commodities, or services,
occurring in currencies other than the local, functional currency.
Reconciliation of GAAP and Non-GAAP Information We are not able to
reconcile our full-year projected 2009 constant currency or core
constant currency results to our full-year projected 2009 reported
results because we are unable to predict the 2009 full-year impact
of foreign exchange or the mark-to-market net gains or losses on
commodity hedges due to the unpredictability of future changes in
foreign exchange rates and commodity prices. Therefore, we are
unable to provide a reconciliation of these measures. Because the
company expects to close on the proposed acquisitions of PBG and
PAS by the end of the first quarter of 2010, the company's fiscal
2009 guidance does not include the impact of the proposed
acquisitions. We are not able to reconcile our full-year projected
2010 core constant currency EPS to our full-year projected 2010
reported results because we are unable to predict the 2010
full-year impact of foreign exchange or the mark-to-market net
gains or losses on commodity hedges due to the unpredictability of
future changes in foreign exchange rates and commodity prices.
Additionally, with respect to our proposed transactions with PBG
and PAS, we are unable to predict the 2010 full-year impact of the
gain or loss on previously held equity interests in PBG and PAS,
the post-merger one-time impact to earnings of fair value
adjustments to acquired inventory, any additional restructuring or
integration costs and transaction costs related to the proposed
acquisitions of PBG and PAS due to the uncertainty of the amounts
and/or timing of such items. Therefore, we are unable to provide a
reconciliation of these measures. DATASOURCE: PepsiCo CONTACT: Dave
DeCecco, Director, Media Bureau, +1-914-253-2655, , or Lynn A.
Tyson, SVP, Investor Relations, +1-914-253-3035, , both of PepsiCo
Web Site: http://www.pepsico.com/
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