UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal
year ended January 2, 2010.
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to .
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Commission File Number
001-15019
PEPSIAMERICAS, INC.
(Exact name of registrant as
specified in its charter)
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Delaware
(State or other jurisdiction
of incorporation or organization)
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13-6167838
(I.R.S. Employer
Identification Number)
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4000 RBC Plaza, 60 South Sixth Street
Minneapolis, Minnesota
(Address of principal
executive offices)
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55402
(Zip Code)
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(612) 661-4000
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.01 par value
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Each class is registered on:
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Preferred Stock, $0.01 par value
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New York Stock Exchange
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Preferred Share Purchase Rights
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
As of July 4, 2009, the aggregate market value of the
registrants common stock held by non-affiliates (assuming
for the sole purpose of this calculation, that all directors and
officers of the registrant are affiliates) was
$1,512.7 million (based on the closing sale price of the
registrants common stock as reported on the New York Stock
Exchange). The number of shares of common stock outstanding at
that date was 124,512,095 shares.
The number of shares of the registrants common stock
outstanding as of February 16, 2010 was 124,866,059.
DOCUMENTS
INCORPORATED BY REFERENCE
None
PEPSIAMERICAS,
INC.
FORM 10-K
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED JANUARY 2, 2010
TABLE OF CONTENTS
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Page
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Business
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3
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Risk Factors
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15
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Unresolved Staff Comments
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19
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Properties
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19
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Legal Proceedings
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20
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Submission of Matters to a Vote of Security Holders
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20
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PART II
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Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
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21
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Selected Financial Data
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24
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Managements Discussion and Analysis of Financial Condition
and Results of Operations
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27
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Quantitative and Qualitative Disclosures about Market Risk
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50
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Financial Statements and Supplementary Data
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52
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Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
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52
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Controls and Procedures
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53
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Other Information
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55
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PART III
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Directors, Executive Officers and Corporate Governance
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55
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Executive Compensation
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59
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Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
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84
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Certain Relationships and Related Transactions, and Director
Independence
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86
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Principal Accounting Fees and Services
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91
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PART IV
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Exhibits and Financial Statement Schedules
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92
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SIGNATURES
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93
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INDEX TO FINANCIAL INFORMATION
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F-1
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EXHIBIT INDEX
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E-1
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EX-4.7 |
EX-4.8 |
EX-10.3 |
EX-10.4 |
EX-12 |
EX-21 |
EX-24 |
EX-31.1 |
EX-31.2 |
EX-32.1 |
EX-32.2 |
2
PART I
General
On November 30, 2000, Whitman Corporation merged with the
former PepsiAmericas, Inc., and in January 2001, the combined
entity changed its name to PepsiAmericas, Inc. (referred to as
PepsiAmericas, PAS, we,
our and us).
We have entered into a merger agreement with PepsiCo, Inc.
(PepsiCo) and Pepsi-Cola Metropolitan Bottling
Company, Inc., a wholly owned subsidiary of PepsiCo
(Metro), dated August 3, 2009, pursuant to
which our company will merge with and into Metro, with Metro
continuing as the surviving company and a wholly owned
subsidiary of PepsiCo. Under the terms of the merger agreement,
PepsiCo will acquire all outstanding shares of PepsiAmericas
common stock it does not already own for the price of $28.50 in
cash or 0.5022 shares of PepsiCo common stock, subject to
proration provisions which provide that an aggregate
50 percent of the outstanding PepsiAmericas common stock
will be converted into the right to receive common stock of
PepsiCo and an aggregate 50 percent of the outstanding
PepsiAmericas common stock will be converted into the right to
receive cash. We hope to close the merger by the end of February
2010, subject to regulatory approval and the satisfaction or
waiver of other customary closing conditions.
We manufacture, distribute and market a broad portfolio of
beverage products in the United States (U.S.) and
Central and Eastern Europe (CEE), and distribute
snack foods in certain markets.
In the first six months of 2009, we manufactured and distributed
beverage products in the Caribbean, including Puerto Rico,
Jamaica and Trinidad and Tobago, with distribution rights in the
Bahamas and Barbados. On July 3, 2009, we formed a
strategic joint venture with The Central America Beverage
Corporation (CABCORP) to combine our Caribbean
operations, excluding the Bahamas, with CABCORPs Central
American operations, including Guatemala, Honduras, El Salvador
and Nicaragua. We own an 18 percent interest in the CABCORP
joint venture.
We sell a variety of brands that we bottle under licenses from
PepsiCo or PepsiCo joint ventures, which accounted for
approximately 83 percent of our total net sales in fiscal
year 2009. We account for approximately 19 percent of all
PepsiCo beverage products sold by bottlers in the U.S. In
some territories, we manufacture, package, sell and distribute
products under brands licensed by companies other than PepsiCo,
and in some territories we distribute our own brands, such as
Sandora, Sadochok and Toma.
Our distribution channels for the retail sale of our products
include supermarkets, supercenters, club stores, mass
merchandisers, convenience stores, gas stations, small grocery
stores, dollar stores and drug stores. We also distribute our
products through various other channels, including restaurants
and cafeterias, vending machines and other formats that provide
for immediate consumption of our products. In fiscal year 2009,
our largest distribution channels were supercenters and
supermarkets.
We deliver our products through these channels primarily using a
direct store delivery system. In our territories, we are
responsible for selling products, providing timely service to
our existing customers, and identifying and obtaining new
customers. We are also responsible for local advertising and
marketing, as well as executing national and regional selling
programs created by brand owners in our territories. The
bottling business is capital intensive. Manufacturing operations
require specialized high-speed equipment, and distribution
requires investment in trucks and warehouse facilities as well
as extensive placement of fountain equipment, cold drink vending
machines and coolers.
Our annual, quarterly and current reports, and all amendments to
those reports, are included on our website at
www.pepsiamericas.com, and are made available, free of charge,
as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the Securities and
Exchange Commission. Our corporate governance guidelines, code
of conduct, code of ethics and key committee charters are
available on our website and in print upon written request to
PepsiAmericas, Inc., 4000 RBC Plaza, 60 South Sixth Street,
Minneapolis, Minnesota 55402, Attention: Investor Relations.
3
Business
Segments
See Managements Discussion and Analysis of Financial
Condition and Results of Operations in Item 7 and
Note 20 to the Consolidated Financial Statements for
additional information regarding business and operating results
of our geographic segments. See Risk Factors in
Item 1A for additional information regarding specific risks
in our international operations.
Relationship
with PepsiCo
PepsiCo beneficially owned approximately 43 percent of
PepsiAmericas outstanding common stock as of the end of
fiscal year 2009. We have entered into a merger agreement with
PepsiCo and Metro, dated August 3, 2009, pursuant to which
our company will merge with and into Metro, with Metro
continuing as the surviving company and a wholly owned
subsidiary of PepsiCo. Closing of the merger is subject to
regulatory approval and the satisfaction or waiver of other
customary closing conditions.
While we manage all phases of our operations, including pricing
of our products, PepsiAmericas and PepsiCo exchange production,
marketing and distribution information, which benefits both
companies respective efforts to lower costs, improve
quality and productivity and increase product sales. We have
entered into a number of significant transactions and agreements
with PepsiCo.
We purchase concentrates from PepsiCo, pay royalties related to
Aquafina products, and manufacture, package, sell and distribute
cola and non-cola beverages under various bottling agreements
with PepsiCo. These agreements give us the right to manufacture,
package, sell and distribute beverage products of PepsiCo in
both bottles and cans, as well as fountain syrup in specified
territories. These agreements provide PepsiCo with the ability
to set prices of concentrates, as well as the terms of payment
and other terms and conditions under which we purchase such
concentrates. See Franchise Agreements for
discussion of significant agreements. We also purchase finished
beverage and snack food products from PepsiCo, as well as
products from certain affiliates of PepsiCo.
Other significant transactions and agreements with PepsiCo
include arrangements for marketing, promotional and advertising
support; manufacturing services related to PepsiCos
national account customers; procurement of raw materials; and
the acquisition of Sandora LLC (Sandora) (see
Related Party Transactions in Item 7 and
Note 21 to the Consolidated Financial Statements for
further discussion).
Products
and Packaging
Our portfolio of beverage products includes some of the
best-recognized trademarks in the world. Our three largest
brands in terms of volume are Pepsi, Mountain Dew
and Diet Pepsi. While the majority of our volume is
derived from brands licensed from PepsiCo and PepsiCo joint
ventures, we also sell and distribute brands licensed from
others, including Dr Pepper, Crush and ROCKSTAR,
as well as some of our own brands. Our top five beverage brands
in fiscal year 2009 based on volume by geographic segment are
listed below:
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U.S.
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CEE
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Pepsi
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Pepsi
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Mountain Dew
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Sadochok
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Diet Pepsi
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Sandora
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Aquafina
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Lipton Ice Tea
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Diet Mountain Dew
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Toma Water
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In addition to the beverage products described above, we
distribute snack food products in the Czech Republic and Ukraine
pursuant to a distribution agreement with Frito-Lay, Inc., a
subsidiary of PepsiCo.
Our beverages are available in different package types,
including but not limited to, aluminum cans, glass and
polyethylene terephthalate (PET) bottles, paperboard
cartons and
bag-in-box
packages for fountain use. The bottle and can packages are
available in both single-serve and multi-pack offerings.
4
Territories
We serve a significant portion of 19 states throughout the
central region of the U.S. Internationally, we serve
Central and Eastern European markets, including Ukraine, Poland,
Romania, Hungary, the Czech Republic and Slovakia. We have
distribution rights and distribute in Moldova, Estonia, Latvia
and Lithuania. We have a 20 percent equity interest in a
joint venture that owns Agrima JSC (Agrima), which
produces, sells and distributes PepsiCo products and other
beverages in Bulgaria. We have an 18 percent equity
interest in a joint venture with CABCORP, which produces, sells
and distributes PepsiCo products and other beverages in the
Caribbean and Central America. We serve areas with a total
population of more than 240 million people in these
markets. In addition, through our joint venture investment in
Sandora, we sell Sandora-branded products to third-party
distributors in Belarus, Azerbaijan, Russia and other countries
in Eastern Europe and Central Asia. In fiscal year 2009, we
derived 77 percent of our net sales from
U.S. operations and 23 percent of our net sales from
international operations (see Note 20 to the Consolidated
Financial Statements for further discussion).
Sales,
Marketing and Distribution
Our sales and marketing approach varies by region and channel to
respond to unique local competitive environments. In the U.S.,
channels with larger stores can accommodate a number of beverage
suppliers and, therefore, marketing efforts tend to focus on
increasing the amount of shelf space and the number of displays
in any given outlet. In locations where our products are
purchased for immediate consumption, marketing efforts are
aimed, not only at securing the account, but also on providing
equipment that facilitates the sale of cold beverages, such as
vending machines, coolers and fountain equipment.
Package mix is an important consideration in the development of
our marketing plans. Although some packages are more expensive
to produce and distribute, in certain channels those packages
may have higher average selling prices. For example, a packaged
product that is sold cold for immediate consumption generally
has better margins than a product that is sold to take home.
This cold drink channel includes vending machines and coolers.
We own a majority of the vending machines used to dispense our
products. We refurbish a majority of our existing cold drink
equipment in our refurbishment center in the U.S. The
refurbishment of CEE equipment is performed by third-party
vendors.
In the U.S., we distribute directly to a majority of customers
in our licensed territories through a direct store distribution
system. Our sales force is key to our selling efforts as it
continually interacts with our customers to promote and sell our
products. We operate a call center, Pepsi Connect, in Fargo,
North Dakota, to enable us to provide the level of service our
customers require in a manner that is cost effective. We utilize
Next Generation, a pre-sell system, that allows sales managers
to call accounts in advance to determine how much product and
promotional material to deliver. In fiscal year 2007, we
realigned our organization in the U.S. from a sales
organization based on geography to one built around customer
channels. This structure enables us to dedicate more resources
and sales support to channels and customers that are growing and
helps us to align more directly with the way our customers do
business. We also have ongoing supply chain initiatives, such as
Customer Optimization to the Third Power, or
CO3, that
streamline processes and allow us to quickly adapt to changing
markets.
In the U.S., the direct store distribution system is used for
all packaged goods and certain fountain accounts. We have the
exclusive right to sell and deliver fountain syrup to local
customers in our territories. We have a number of sales people
who are responsible for calling on prospective fountain
accounts, developing relationships, selling products and
interacting with customers on an ongoing basis. We also
manufacture and distribute fountain products and provide
fountain equipment service to PepsiCo customers in certain of
our territories in accordance with various agreements with
PepsiCo.
In our international markets, we use both direct store
distribution systems and third-party distributors. In these less
developed markets, small retail outlets represent a large
percentage of the market. However, with the emergence of larger,
more sophisticated retailers in CEE, the percentage of total
soft drinks sold to supermarkets and other larger accounts is
increasing. In order to optimize the infrastructure in CEE, we
use an
5
alternative sales and distribution strategy in which third-party
distributors are utilized in certain locations in an effort to
reduce delivery costs and expand our points of distribution.
Franchise
Agreements
We conduct our business primarily under franchise agreements
with PepsiCo. These agreements give us the exclusive right in
specified territories to manufacture, package, sell and
distribute PepsiCo beverages, and to use the related PepsiCo
tradenames and trademarks. These agreements require us, among
other things, to purchase concentrates for the beverages solely
from PepsiCo, at prices established by PepsiCo, to use only
PepsiCo authorized containers, packages and labeling, and to
diligently promote the sale and distribution of PepsiCo
beverages. We also have similar agreements with other brand
owners such as Dr Pepper Snapple Group, Inc.
Set forth below is a summary of our Master Bottling Agreement
with PepsiCo, pursuant to which we manufacture, package, sell
and distribute cola and non-cola beverages in the U.S. and
in certain countries outside the U.S. In addition, we have
similar arrangements with other companies whose brands we
produce and distribute. Generally, the franchise agreements
exist in perpetuity and contain operating and marketing
commitments and conditions for termination. Also set forth below
is a summary of our Master Fountain Syrup Agreement with
PepsiCo, pursuant to which we manufacture, sell and distribute
fountain syrup for PepsiCo beverages.
Master Bottling Agreement. The Master
Bottling Agreement (the Bottling Agreement) under
which we manufacture, package, sell and distribute cola and
non-cola beverages bearing the Pepsi-Cola and Pepsi
trademarks was entered into in November 2000. The Bottling
Agreement gives us the exclusive and perpetual right to
distribute cola beverages for sale in specified territories in
authorized containers, with the exception of Romania. In
Romania, our agreement has certain performance measures that, if
exceeded, enable the agreement to automatically renew. The
Bottling Agreement provides that we will purchase our entire
requirements of concentrates for cola beverages from PepsiCo at
prices, and on terms and conditions, determined from time to
time by PepsiCo. PepsiCo has no rights under the Bottling
Agreement with respect to the prices at which we sell our
products. PepsiCo may determine from time to time what types of
containers we are authorized to use.
Under the Bottling Agreement, we are obligated to:
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(1)
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maintain plants, equipment, staff and facilities capable of
manufacturing, packaging and distributing the beverages in the
authorized containers, and in compliance with all requirements
in sufficient quantities, to meet the demand of the territories;
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(2)
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make necessary adaptations to equipment to permit the successful
introduction and delivery of products in sufficient quantities;
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(3)
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undertake adequate quality control measures prescribed by
PepsiCo and allow PepsiCo representatives to inspect all
equipment and facilities to ensure compliance;
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(4)
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vigorously advance the sale of the beverages throughout the
territories;
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(5)
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increase and fully meet the demand for the cola beverages in our
territories using all approved means and spend such funds on
advertising and other forms of marketing beverages as may be
reasonably required to meet the objective; and
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(6)
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maintain such financial capacity as may be reasonably necessary
to assure our performance under the Bottling Agreement.
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The Bottling Agreement requires that we meet with PepsiCo on an
annual basis to discuss the business plan for the following
three years. At these meetings, we are obligated to present the
plans necessary to perform the duties required under the
Bottling Agreement. These include marketing, management,
advertising and financial plans.
6
The Bottling Agreement provides that PepsiCo may, in its sole
discretion, reformulate any of the cola beverages or discontinue
them, with some limitations, so long as all cola beverages are
not discontinued. PepsiCo may also introduce new beverages under
the Pepsi-Cola trademarks or any modification thereof. If
that occurs, we will be obligated to manufacture, package, sell
and distribute such new beverages with the same obligations as
then exist with respect to other cola beverages. We are
prohibited from producing or handling cola products, other than
those of PepsiCo, or products or packages that imitate, infringe
or cause confusion with the products, containers or trademarks
of PepsiCo. The Bottling Agreement also imposes requirements
with respect to the use of PepsiCos trademarks, authorized
containers, packaging and labeling.
PepsiCo can terminate the Bottling Agreement if any of the
following occur:
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(1)
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we become insolvent, file for bankruptcy or adopt a plan of
dissolution or liquidation;
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(2)
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any person or group of persons, without PepsiCos consent,
acquires the right of beneficial ownership of more than
15 percent of any class of voting securities of
PepsiAmericas, and if that person or group of persons does not
terminate that ownership within 30 days;
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(3)
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any disposition of any voting securities of one of our bottling
subsidiaries or substantially all of our bottling assets without
PepsiCos consent;
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(4)
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we do not make timely payments for concentrate purchases;
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(5)
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we fail to meet quality control standards on products, equipment
and facilities; or
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(6)
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we fail to present or carry out approved plans in all material
respects and do not rectify the situation within 120 days.
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We are prohibited from assigning, transferring or pledging the
Bottling Agreement without PepsiCos prior consent.
Master Fountain Syrup Agreement. The
Master Fountain Syrup Agreement (the Syrup
Agreement) grants us the exclusive right to manufacture,
sell and distribute fountain syrup to local customers in our
territories. The Syrup Agreement also grants us the right to act
as a manufacturing and delivery agent for national accounts
within our territories that specifically request direct delivery
without using a middleman. In addition, PepsiCo may appoint us
to manufacture and deliver fountain syrup to national accounts
that elect delivery through independent distributors. Under the
Syrup Agreement, we have the exclusive right to service fountain
equipment for all of the national account customers within our
territories. The Syrup Agreement provides that the determination
of whether an account is local or national is at the sole
discretion of PepsiCo.
The Syrup Agreement contains provisions that are similar to
those contained in the Bottling Agreement with respect to
pricing, territorial restrictions with respect to local
customers and national customers electing direct store delivery
only, planning, quality control, transfer restrictions and
related matters. The Syrup Agreement, which we entered into in
November 2000, had an initial term of five years and was
automatically renewed for an additional five-year period in
November 2005 on the same terms and conditions. The Syrup
Agreement is automatically renewable for additional five-year
periods unless PepsiCo terminates it for cause. PepsiCo has the
right to terminate the Syrup Agreement without cause at any time
upon 24 months notice. If PepsiCo terminates the
Syrup Agreement without cause, PepsiCo is required to pay us the
fair market value of our rights thereunder. The Syrup Agreement
will terminate if PepsiCo terminates the Bottling Agreement.
Advertising
We obtain the benefits of national advertising campaigns
conducted by PepsiCo and the other beverage companies whose
products we sell. We supplement PepsiCos national ad
campaigns by purchasing advertising in our local markets,
including the use of television, radio, print and billboards. We
also make extensive use of in-store,
point-of-sale
displays to reinforce national and local advertising and to
stimulate demand.
7
Raw
Materials and Manufacturing
Expenditures for concentrates constitute our largest individual
raw material cost. We buy various soft drink concentrates from
PepsiCo and other soft drink companies and mix them with other
ingredients in our plants, including water, carbon dioxide and
sweeteners. Artificial sweeteners are included in the
concentrates we purchase for diet soft drinks. Additionally, we
buy juice concentrates for our Sandora, Sadochok
and Toma juice brands.
In addition to concentrates, we purchase sweeteners, glass and
PET bottles, aluminum cans, closures, paperboard cartons,
bag-in-box
packages, syrup containers, other packaging materials and carbon
dioxide. We purchase raw materials and supplies, other than
concentrates, from multiple suppliers. PepsiCo acts as our agent
for the purchase of several such raw materials (see
Related Party Transactions in Item 7 and
Note 21 to the Consolidated Financial Statements for
further discussion of PepsiCos procurement services).
A portion of our contractual cost of cans, PET bottles and
sweeteners is subject to price fluctuations based on commodity
price changes in aluminum, PET resin, corn and sugar. We may
enter into firm price commitments for future purchases of
commodities that enable us to establish a fixed purchase price
within a defined time period. We may also use derivative
financial instruments to hedge the price risk associated with
anticipated purchases of certain raw materials and the
underlying commodities associated with them.
The inability of suppliers to deliver concentrates or other
products to us could adversely affect operating results. None of
the raw materials or supplies in use is currently in short
supply, although factors outside of our control could adversely
impact the future availability of these supplies.
Seasonality
Sales of our products are seasonal, with the second and third
quarters generating higher net sales than the first and fourth
quarters. Approximately 54 percent of our net sales in
fiscal year 2009 were generated during the second and third
quarters. Net sales in our CEE operations tend to be more
seasonal and sensitive to weather conditions than our
U.S. operations.
Competition
The carbonated soft drink and the non-carbonated beverage
markets are highly competitive. Our principal competitors are
bottlers who produce, package, sell and distribute
Coca-Cola
products. Additionally, in both the carbonated soft drink
and non-carbonated beverage markets, we also compete with
bottlers and distributors of nationally advertised and marketed
products, bottlers and distributors of regionally advertised and
marketed products, and bottlers of private label products sold
in chain stores. The industry competes primarily on the basis of
advertising to create brand awareness, price and price
promotions, retail space management, customer service, consumer
points of access, new products, packaging innovations and
distribution methods. We believe that brand recognition is a
primary factor affecting our competitive position.
Employees
We employed approximately 18,700 people worldwide as of the
end of fiscal year 2009. This included approximately
12,100 employees in our U.S. operations and
approximately 6,600 employees in our CEE operations.
Employment levels are subject to seasonal variations. We are a
party to collective bargaining agreements covering approximately
5,000 employees in the U.S. Nine agreements covering
approximately 460 employees will be renegotiated in 2010.
We regard our employee relations as generally satisfactory.
Government
Regulation
Our operations and properties are subject to regulation by
various federal, state and local governmental entities and
agencies in the U.S., as well as foreign governmental entities.
As a producer of beverage products, we are subject to
production, packaging, quality, labeling and distribution
standards in each of the countries where we have operations
including, in the U.S., those of the Federal Food, Drug and
Cosmetic Act. In the U.S., we are also subject to the Soft Drink
Interbrand Competition Act, which permits us to retain an
8
exclusive right to manufacture, distribute and sell a soft drink
product in a geographic territory if the soft drink product is
in substantial and effective competition with other products of
the same class in the same market or markets. We believe that
there is such substantial and effective competition in each of
the exclusive territories in which we operate. The operations of
our production and distribution facilities are subject to
various federal, state and local environmental laws and
workplace regulations both in the U.S. and abroad. These
laws and regulations include, in the U.S., the Occupational
Safety and Health Act, the Unfair Labor Standards Act, the Clean
Air Act, the Clean Water Act and laws relating to the
maintenance of fuel storage tanks. We believe that our current
legal and environmental compliance programs adequately address
these areas and that we are in substantial compliance with
applicable laws and regulations.
Environmental
Matters
Current Operations. We maintain
compliance with federal, state and local laws and regulations
relating to materials used in production and to the discharge of
wastes, and other laws and regulations relating to the
protection of the environment. The capital costs of such
management and compliance, including the modification of
existing plants and the installation of new manufacturing
processes, are not material to our continuing operations.
We are defendants in lawsuits that arise in the ordinary course
of business, none of which is expected to have a material
adverse effect on our financial condition, although amounts
recorded in any given period could be material to the results of
operations or cash flows for that period.
Discontinued Operations
Remediation. Under the agreement pursuant to
which we sold our subsidiaries, Abex Corporation and Pneumo Abex
Corporation (collectively, Pneumo Abex), in 1988 and
a subsequent settlement agreement entered into in September
1991, we have assumed indemnification obligations for certain
environmental liabilities of Pneumo Abex, after any insurance
recoveries. Pneumo Abex has been and is subject to a number of
environmental cleanup proceedings, including responsibilities
under the Comprehensive Environmental Response, Compensation and
Liability Act and other related federal and state laws regarding
release or disposal of wastes at
on-site and
off-site locations. In some proceedings, federal, state and
local government agencies are involved and other major
corporations have been named as potentially responsible parties.
Pneumo Abex is also subject to private claims and lawsuits for
remediation of properties previously owned by Pneumo Abex and
its subsidiaries.
There is an inherent uncertainty in assessing the total cost to
investigate and remediate a given site. This is because of the
evolving and varying nature of the remediation and allocation
process. Any assessment of expenses is more speculative in an
early stage of remediation and is dependent upon a number of
variables beyond the control of any party. Furthermore, there
are often timing considerations, in that a portion of the
expense incurred by Pneumo Abex, and any resulting obligation of
ours to indemnify Pneumo Abex, may not occur for a number of
years.
In fiscal year 2001, we investigated the use of insurance
products to mitigate risks related to our indemnification
obligations under the 1988 agreement, as amended. We oversaw a
comprehensive review of the former facilities operated or
impacted by Pneumo Abex. Advances in the techniques of
retrospective risk evaluation and increased experience (and
therefore available data) at our former facilities made this
comprehensive review possible. The review was completed in
fiscal year 2001 and was updated in fiscal year 2005.
As of the end of fiscal years 2009 and 2008, we had accrued
$30.4 million and $36.1 million, respectively, to
cover potential indemnification obligations. Of the total amount
accrued, $11.9 million was recorded in Payables and
other current liabilities on the Consolidated Balance
Sheets representing estimates of the amounts to be spent during
the next twelve months. This indemnification obligation includes
costs associated with several sites in various stages of
remediation or negotiations. At the present time, the most
significant remaining indemnification obligation is associated
with the Willits site, as discussed below, while no other single
site has significant estimated remaining costs associated with
it. The amounts exclude possible insurance recoveries and are
determined on an undiscounted cash flow basis. The estimated
indemnification liabilities include expenses for the
investigation and remediation of identified sites, payments to
third parties
9
for claims and expenses (including product liability),
administrative expenses, and the expenses of on-going
evaluations and litigation. We expect a significant portion of
the accrued liabilities will be spent during the next several
years.
Included in our indemnification obligations is financial
exposure related to certain remedial actions required at a
facility that manufactured hydraulic and related equipment in
Willits, California. Various chemicals and metals contaminate
this site. A final consent decree was issued in August 1997 and
subsequently amended in December 2000 and 2006 in the case of
the People of the State of California and the City of
Willits, California v. Remco Hydraulics, Inc. The final
consent decree established a trust (the Willits
Trust) which is obligated to investigate and clean up this
site. We are currently funding the Willits Trust and the
investigation and interim remediation costs on a
year-to-year
basis as required in the final amended consent decree. We have
accrued $8.1 million as of the end of fiscal year 2009 for
future remediation and trust administration costs, with the
majority of this amount expected to be spent over the next
several years.
Although we have certain indemnification obligations for
environmental liabilities at a number of sites other than the
site discussed above, including Superfund sites, it is not
anticipated that additional expense at any specific site will
have a material effect on us. At some sites, the volumetric
contribution for which we have an obligation has been estimated
and other large, financially viable parties are responsible for
substantial portions of the remainder. In our opinion, based
upon information currently available, the ultimate resolution of
these claims and litigation, including potential environmental
exposures, and considering amounts already accrued, should not
have a material effect on our financial condition, although
amounts recorded in a given period could be material to our
results of operations or cash flows for that period.
Discontinued Operations
Insurance. During fiscal year 2002, as part
of a comprehensive program concerning environmental liabilities
related to the former Whitman Corporation subsidiaries, we
purchased new insurance coverage related to the sites previously
owned and operated or impacted by Pneumo Abex and its
subsidiaries. In addition, a trust, which was established in
2000 with the proceeds from an insurance settlement (the
Trust), purchased and funded insurance coverage for
remedial and other costs (Finite Funding) related to
the sites previously owned and operated or impacted by Pneumo
Abex and its subsidiaries.
Essentially all of the assets of the Trust were expended by the
Trust in connection with the purchase of the insurance coverage,
the Finite Funding and related expenses. These actions were
taken to fund remediation and related costs associated with the
sites previously owned and operated or impacted by Pneumo Abex
and its subsidiaries and to protect against additional future
costs in excess of our self-insured retention. The original
amount of self-insured retention (the amount we must pay before
the insurance carrier is obligated to begin payments) was
$114.0 million of which $65.1 million has been eroded,
leaving a remaining self-insured retention of $48.9 million
as of the end of fiscal year 2009. The estimated range of
aggregate exposure related only to the remediation costs of such
environmental liabilities is approximately $16 million to
$26 million. We had accrued $17.6 million as of the
end of fiscal year 2009 for remediation costs, which is our best
estimate of the contingent liabilities related to these
environmental matters. The Finite Funding may be used to pay a
portion of the $17.6 million and thus reduces our future
cash obligations. Amounts recorded in our Consolidated Balance
Sheets related to Finite Funding were $7.6 million as of
the end of fiscal year 2009 and $9.9 million as of the end
of fiscal year 2008 and were recorded in Other
assets, net of $4.2 million recorded in Other
current assets as of the end of each respective period.
Discontinued Operations Product Liability and
Toxic Tort Claims. We also have certain
indemnification obligations related to product liability and
toxic tort claims that might emanate out of the 1988 agreement
with Pneumo Abex. Other companies not owned by or associated
with us also are responsible to Pneumo Abex for the financial
burden of all asbestos product liability claims filed against
Pneumo Abex after a certain date in 1998, except for certain
claims indemnified by us.
Four lawsuits have been filed in California, which name several
defendants including certain of our prior subsidiaries. The
lawsuits allege that we and our former subsidiaries are liable
for personal injury
and/or
property damage resulting from environmental contamination at
the Willits facility. The plaintiffs in the lawsuits are seeking
an unspecified amount of damages, punitive damages, injunctive
relief and medical
10
monitoring damages. On June 18, 2009, the Court dismissed
all remaining Avila claims. In July 2009, 592 plaintiffs
appealed various Court orders. There are currently 590
plaintiffs with appeals that are pending. We will actively
oppose these appeals, and we are actively defending these
lawsuits. At this time, we do not believe these lawsuits are
material to our business or financial condition.
As of the end of fiscal years 2009 and 2008, we had accrued
$5.3 million and $5.1 million, respectively, related
to product liability. These accruals primarily relate to
probable asbestos claim settlements and legal defense costs. We
also have additional amounts accrued for legal and other costs
associated with currently open claims and their related costs.
These amounts are included in the total liabilities of
$30.4 million accrued as of the end of fiscal year 2009. In
addition to the known and probable asbestos claims, we may be
subject to additional asbestos claims that are possible for
which no reserve had been established as of the end of fiscal
year 2009. These additional reasonably possible claims are
primarily asbestos-related and the aggregate exposure related to
these possible claims is estimated to be in the range of
$4 million to $17 million. These amounts are
undiscounted and do not reflect any insurance recoveries that we
will pursue from insurers for these claims.
Certain
Litigation Matters
Following the public announcement, on April 20, 2009, of
PepsiCos proposals on April 19, 2009 to acquire the
outstanding shares of PAS common stock that it did not already
own for $11.64 in cash and 0.223 shares of PepsiCo common
stock per share of PAS common stock and to acquire the
outstanding shares of The Pepsi Bottling Group, Inc.
(PBG) common stock that it did not already own for
$14.75 in cash and 0.283 shares of PepsiCo common stock per
share of PBG common stock, several putative stockholder class
action complaints challenging the proposals were filed against
various combinations of PepsiCo, PAS, PBG, and the individual
members of the boards of directors of PAS and PBG. One of these
complaints was amended following the public announcement of the
merger agreements to include allegations concerning one of the
proposed mergers.
Delaware
Court of Chancery
Beginning on April 22, 2009, eight putative stockholder
class action complaints challenging the April 19 proposals were
filed against various combinations of PepsiCo, PAS and PBG and
the individual members of the boards of directors of PAS and PBG
in the Court of Chancery of the State of Delaware. The
complaints alleged, among other things, that the defendants had
breached or would breach their fiduciary duties owed to the
public stockholders of PAS and PBG in connection with the April
19 proposals. On June 5, 2009, the Court of Chancery
entered orders consolidating the actions relating to
PepsiCos proposal to acquire PAS under the caption In
re PepsiAmericas, Inc. Shareholders Litigation (C.A.
No. 4530-VCS)
(the Consolidated Delaware PAS Action),
consolidating the actions relating to PepsiCos proposal to
acquire PBG under the caption In re The Pepsi Bottling Group,
Inc., Shareholders Litigation (C.A.
No. 4526-VCS)
(the Consolidated Delaware PBG Action), appointing
co-lead counsel and co-lead plaintiffs in each consolidated
action, and providing for coordination between the two
consolidated actions.
On June 19, 2009, co-lead plaintiffs in the Consolidated
Delaware PAS Action filed a verified consolidated class action
complaint. The complaint seeks, among other things, damages and
declaratory, injunctive, and other equitable relief alleging,
among other things, that the defendants have breached or will
breach their fiduciary duties owed to the public stockholders of
PAS, that the April 19 proposals and the transactions
contemplated thereunder were not entirely fair to the public
stockholders, that PepsiCo retaliated against PAS and PBG for
rejecting the April 19 proposals, that certain provisions of the
certificate of incorporation of PAS are invalid
and/or
inapplicable to the April 19 proposals and the proposed mergers,
and that PepsiCos pursuit of its acquisition of PAS
violates the Second Amended and Restated Shareholder Agreement
by and between PAS and PepsiCo, dated September 6, 2005
(the PAS Shareholder Agreement). Also on
June 19, 2009, the co-lead plaintiffs in the Consolidated
Delaware PBG Action filed a verified consolidated class action
complaint. The complaint seeks, among other things, damages and
declaratory, injunctive, and other equitable relief alleging,
among other things, that the defendants have breached or will
breach their fiduciary duties owed to the public stockholders of
PBG, that the April 19 proposals and the
11
transactions contemplated thereunder were not entirely fair to
the public stockholders, that PepsiCo had retaliated or would
retaliate against PAS and PBG for rejecting the April 19
proposals, and that certain provisions of the certificate of
incorporation of PBG are invalid
and/or
inapplicable to the April 19 proposals and the proposed mergers.
On July 23, 2009, co-lead plaintiffs in the Consolidated
Delaware PBG Action and the Consolidated Delaware PAS Action
filed separate motions for partial summary judgment concerning
their allegations relating to the certificates of incorporation
of PBG and PAS and the PAS Shareholder Agreement.
On August 31, 2009, the Court of Chancery entered a
Stipulation and Order Governing the Protection and Exchange of
Confidential Information in each of the Consolidated Delaware
PAS Action and the Consolidated Delaware PBG Action. Shortly
thereafter, defendants began producing documents to co-lead
plaintiffs in these actions. On November 20, 2009, the
parties to the Consolidated Delaware PAS Action and to the
Consolidated Delaware PBG Action entered into the Stipulation
and Agreement of Compromise, Settlement, and Release described
below.
Minnesota
State Court
Beginning on April 20, 2009, three putative stockholder
class action complaints challenging the April 19 proposals were
filed against PepsiCo, PAS, and PAS board of directors in
the District Court of the State of Minnesota, County of
Hennepin. The complaints seek, among other things, damages and
declaratory, injunctive, and other equitable relief alleging,
among other things, that the defendants have breached or will
breach their fiduciary duties owed to the public stockholders,
that PepsiCo possessed material, non-public information
concerning PAS, and that the April 19 proposals and the
transactions contemplated thereunder were not entirely fair to
the public stockholders. On June 24, 2009, the parties to
the three Minnesota actions entered into a stipulation
consolidating and staying the Minnesota actions in favor of the
Consolidated Delaware PAS Action. On June 29, 2009, the
court entered an order consolidating and staying the Minnesota
actions pending resolution of the Consolidated Delaware PAS
Action.
On September 23, 2009, one of the plaintiffs in the
Minnesota actions filed a notice of dismissal voluntarily
dismissing the action captioned Leone v. PepsiAmericas,
Inc.
(No. 27-CV-099196).
On November 20, 2009, the parties to the two remaining
Minnesota actions entered into the Stipulation and Agreement of
Compromise, Settlement, and Release described below.
New
York State Court
Westchester
County Actions
Beginning on April 29, 2009, two putative stockholder class
action complaints challenging the April 19 proposals were filed
against various combinations of PepsiCo, PAS, PBG, and the
members of PBGs board of directors in the Supreme Court of
the State of New York, County of Westchester. The complaints
seek, among other things, damages and declaratory, injunctive,
and other equitable relief alleging, among other things, that
the defendants have breached or will breach their fiduciary
duties owed to the public stockholders of PAS and PBG, that the
April 19 proposals and the transactions contemplated thereunder
were not entirely fair to the public stockholders of PAS and
PBG, and that the defensive measures implemented by PBG were not
being used to maximize stockholder value. On June 8, 2009,
the defendants filed motions to dismiss or stay the actions in
favor of the previously filed actions pending in the Delaware
Court of Chancery.
On October 19, 2009, the parties to the two Westchester
County actions entered into a stipulation staying the
Westchester County actions in favor of the Consolidated Delaware
PAS Action and the Consolidated Delaware PBG Action. On
October 21, 2009, the court entered an order staying the
two Westchester County actions pending resolution of the
Consolidated Delaware PAS Action and the Consolidated Delaware
PBG Action. On November 20, 2009, the parties to the two
Westchester County actions entered into the Stipulation and
Agreement of Compromise, Settlement, and Release described below.
New York
County Action
On May 8, 2009, a putative stockholder class action
complaint was filed against PBG and the members of PBGs
board of directors other than John C. Compton and Cynthia M.
Trudell in the Supreme Court of the
12
State of New York, County of New York. The complaint alleged
that the defendants had breached their fiduciary duties owed to
the public stockholders of PBG by depriving those stockholders
of the full and fair value of their shares by failing to accept
PepsiCos April 19 proposal to acquire PBG or to negotiate
with PepsiCo after that proposal was made and by adopting
certain defensive measures. On June 8, 2009, the defendants
moved to dismiss or to stay this action in favor of the
previously filed actions pending in the Delaware Court of
Chancery. The plaintiff failed to file a timely opposition to
the motion. On August 10, 2009, the plaintiff filed an
amended class action complaint, adding as defendants PepsiCo,
Mr. Compton, and Ms. Trudell. The amended complaint
seeks, among other things, damages and declaratory, injunctive,
and other equitable relief alleging, among other things, that
the defendants have breached or will breach their fiduciary
duties owed to the public stockholders of PBG and that the
proposed PBG merger is not entirely fair to the public
stockholders. On August 27, 2009 the defendants again moved
to dismiss or stay this action in favor of the previously filed
actions pending in the Delaware Court of Chancery.
On October 2, 2009, the parties to this action entered into
a stipulation providing that this action should be voluntarily
stayed for 45 days while plaintiffs counsel conferred
with co-lead counsel in the Consolidated Delaware PBG Action and
that the defendants motion to dismiss or stay should be
adjourned during the voluntary stay. Also on October 2,
2009, the court entered an order staying the New York County
action for 45 days while plaintiffs counsel conferred
with co-lead counsel in the Consolidated Delaware PBG Action. On
November 20, 2009, the parties to the New York County
action entered into the Stipulation and Agreement of Compromise,
Settlement, and Release described below. On December 2,
2009, the court entered an order staying the New York County
action pending resolution of the Consolidated Delaware PBG
Action.
Settlement
of Stockholder Litigation
On November 20, 2009, the parties to the Consolidated
Delaware PAS Action and the Consolidated Delaware PBG Action, as
well as the parties to the two actions pending in the District
Court of the State of Minnesota and to the three actions pending
in the Supreme Court of the State of New York, entered into a
Stipulation and Agreement of Compromise, Settlement, and Release
(the Settlement Stipulation) to resolve all of these
actions.
Pursuant to the Settlement Stipulation, and in exchange for the
releases described below, defendants have taken or will take the
following actions: (1) PepsiCo, PAS, and PBG have included
and will continue to include co-lead counsel in the disclosure
process (including providing them with the opportunities to
review and comment on drafts of the preliminary and final proxy
statements/prospectuses before they were or are filed with the
Securities and Exchange Commission); (2) PepsiCo agreed to
reduce the termination fee set forth in the PAS merger agreement
from $71.6 million to $50 million; (3) PepsiCo
agreed to reduce the termination fee set forth in the PBG merger
agreement from $165.3 million to $115 million;
(4) PepsiCo agreed to shorten the termination fee tail set
forth in the PAS merger agreement from 12 months to
6 months; and (5) PepsiCo agreed to shorten the
termination fee tail set forth in the PBG merger agreement from
12 months to 6 months. The settlement is conditioned
on satisfaction by co-lead counsel that the disclosures made in
connection with the PAS merger and the PBG merger are not
materially omissive or misleading.
Pursuant to the Settlement Stipulation, the Consolidated
Delaware PAS Action and the Consolidated Delaware PBG Action
will be dismissed with prejudice on the merits, the plaintiffs
in the Minnesota and New York actions will voluntarily
dismiss those actions with prejudice, and all defendants will be
released from any and all claims relating to, among other
things, the PAS merger, the PBG merger, the PAS merger
agreement, the PBG merger agreement, and any disclosures made in
connection therewith. The Settlement Stipulation is subject to
customary conditions, including consummation of both the PAS
merger and the PBG merger, completion of certain confirmatory
discovery, class certification, and final approval by the Court
of Chancery of the State of Delaware following notice to the
stockholders of PAS and PBG. On December 2, 2009, the Court
of Chancery entered an order setting forth the schedule and
procedures for notice to the stockholders of PAS and PBG and the
courts review of the settlement. The Court of Chancery
scheduled a hearing for April 12, 2010, at which the court
will consider the fairness, reasonableness, and adequacy of the
settlement.
13
The settlement will not affect the form or amount of the
consideration to be received by PAS stockholders in the PAS
merger or by PBG stockholders in the PBG merger.
The defendants have denied and continue to deny any wrongdoing
or liability with respect to all claims, events, and
transactions complained of in the aforementioned litigation or
that they have engaged in any wrongdoing. The defendants have
entered into the Settlement Stipulation to eliminate the
uncertainty, burden, risk, expense, and distraction of further
litigation.
Executive
Officers of the Registrant
Our executive officers and their ages as of February 16,
2010 were as follows:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Robert C. Pohlad
|
|
|
55
|
|
|
Chairman of the Board and Chief Executive Officer
|
Kenneth E. Keiser
|
|
|
58
|
|
|
President and Chief Operating Officer
|
Alexander H. Ware
|
|
|
47
|
|
|
Executive Vice President and Chief Financial Officer
|
G. Michael Durkin, Jr.
|
|
|
50
|
|
|
Executive Vice President, U.S.
|
James R. Rogers
|
|
|
55
|
|
|
Executive Vice President, International
|
Jay S. Hulbert
|
|
|
56
|
|
|
Executive Vice President, Worldwide Supply Chain
|
Anne D. Sample
|
|
|
46
|
|
|
Executive Vice President, Human Resources
|
Kenneth L. Johnsen
|
|
|
48
|
|
|
Senior Vice President and Chief Information Officer
|
Timothy W. Gorman
|
|
|
49
|
|
|
Senior Vice President and Controller
|
Andrew R. Stark
|
|
|
46
|
|
|
Vice President and Treasurer
|
Each executive officer has been appointed to serve until his or
her successor is duly appointed or his or her earlier removal or
resignation from office. There are no familial relationships
between any director or executive officer. The following is a
brief description of the business background of each of our
executive officers.
Mr. Pohlad became Chief Executive Officer of PepsiAmericas
in November 2000, was named Vice Chairman in January 2001 and
became Chairman of the Board in January 2002. From 1987 to
present, Mr. Pohlad has also served as President of Pohlad
Companies.
Mr. Keiser was named President and Chief Operating Officer
in January 2002 with responsibilities for the global operations
of PepsiAmericas.
Mr. Ware was named Executive Vice President and Chief
Financial Officer in March 2005. From January 2003 to March
2005, Mr. Ware had served as Senior Vice President,
Planning and Corporate Development.
Mr. Durkin was named Executive Vice President, U.S. in
March 2005. Prior to this role, Mr. Durkin served as Chief
Financial Officer of PepsiAmericas since 2000. Mr. Durkin
also serves on the Board of Directors of The Schwan Food
Company, Inc. and Mesaba Aviation, Inc.
Mr. Rogers was named Executive Vice President,
International in September 2004. Prior to this appointment, he
served as Executive Vice President/General Manager of Central
Europe since August 2000.
Mr. Hulbert was named Executive Vice President, Worldwide
Supply Chain in January 2008. Prior to this appointment, he
served as Senior Vice President, Supply Chain since December
2000.
Ms. Sample was named Executive Vice President, Human
Resources in January 2008. Prior to this appointment, she served
as Senior Vice President, Human Resources since May 2001.
Mr. Johnsen was named Senior Vice President and Chief
Information Officer in March 2005. From July 2001 to
February 2005, he served as Vice President and Chief Information
Officer. From November 1997 to June 2001, he served as Chief of
Information Technology.
Mr. Gorman was named Senior Vice President and Controller
in January 2008. Prior to this appointment, he served as Vice
President and Controller since May 2003, and Vice President,
Planning and Reporting from August 1999 to May 2003.
14
Mr. Stark was named Vice President and Treasurer in July
2002. Prior to his appointment, Mr. Stark served as
Assistant Treasurer since August 1998.
The following are certain risk factors that could affect our
business, financial condition, operating results and cash flows.
These risk factors should be considered in connection with
evaluating the forward-looking statements contained in this
Annual Report on
Form 10-K
because these risk factors could cause our actual results to
differ materially from those expressed in any forward-looking
statement. The risks we have highlighted below are not the only
ones we face. If any of these events actually occur, our
business, financial condition, operating results or cash flows
could be negatively affected. We caution you to keep in mind
these risk factors and to refrain from attributing undue
certainty to any forward-looking statements, which speak only as
of the date of this report.
Our
pending merger with PepsiCo may cause disruption in our business
and, if the pending merger does not occur, we will have incurred
significant expenses, may need to pay a termination fee under
the merger agreement and our stock price may
decline.
We have entered into a merger agreement with PepsiCo and Metro,
dated August 3, 2009, pursuant to which our company will
merge with and into Metro, with Metro continuing as the
surviving company and a wholly owned subsidiary of PepsiCo.
Under the terms of the merger agreement, as of the effective
time of the merger, each outstanding share of PepsiAmericas
common stock that is not owned by PepsiCo or any of its
subsidiaries or held by our company as treasury stock will be
converted into the right to receive, at the holders
election, either 0.5022 shares of common stock of PepsiCo
or $28.50 in cash, without interest, subject to proration
provisions which provide that an aggregate 50 percent of
the outstanding PepsiAmericas common stock will be converted
into the right to receive common stock of PepsiCo and an
aggregate 50 percent of the outstanding PepsiAmericas
common stock will be converted into the right to receive cash.
We hope to close the merger by the end of February 2010, subject
to regulatory approval and the satisfaction or waiver of other
customary closing conditions.
Each share of PepsiAmericas common stock held by our company as
treasury stock, held by PepsiCo or held by Metro, in each case
immediately prior to the effective time of the merger, will be
canceled, and no payment will be made with respect to them. Each
share of PepsiAmericas common stock owned by any subsidiary of
PepsiCo other than Metro immediately prior to the effective time
of the merger will automatically be converted into the right to
receive 0.5022 of a share of PepsiCo common stock.
The announcement of the pending merger, whether or not
consummated, may result in a loss of key personnel and may
disrupt our sales and operations, which may have an impact on
our financial performance. The merger agreement generally
requires us to operate our business in the ordinary course
pending consummation of the merger, but includes certain
contractual restrictions on the conduct of our business that may
affect our ability to execute on our business strategies and
attain our financial goals. Additionally, the announcement of
the pending merger, whether or not consummated, may impact our
relationships with third parties.
The completion of the pending merger is subject to certain
conditions, including, among others (i) the absence of
certain legal impediments to the consummation of the pending
merger, (ii) subject to certain materiality exceptions, the
accuracy of the representations and warranties made by us and
PepsiCo, respectively, and compliance by us and PepsiCo with our
and its respective obligations under the merger agreement, and
(iii) the non-occurrence of a Material Adverse Effect (as
defined in the merger agreement) on our company or PepsiCo. In
addition, PepsiCos obligation to consummate the merger is
subject to the satisfaction of certain conditions to the
consummation of the PBG merger, to the extent they relate to
antitrust and competition laws.
If the merger agreement is terminated under certain
circumstances, such as if our Board of Directors recommends to
our shareholders an acquisition proposal made by a third party,
or materially breaches its obligations under the merger
agreement, then we would be required to pay PepsiCo a
termination fee of $50 million.
15
We cannot predict whether the closing conditions for the pending
merger set forth in the merger agreement will be satisfied. As a
result, there can be no assurance that the pending merger will
be completed. If the closing conditions for the pending merger
set forth in the merger agreement are not satisfied or waived
pursuant to the merger agreement, or if the transaction is not
completed for any other reason, the market price of our common
stock may decline. In addition, if the pending merger does not
occur, we will nonetheless remain liable for significant
expenses that we have incurred related to the transaction.
Additionally, we and members of our Board of Directors have been
named in a number of lawsuits relating to the pending merger as
more fully described in Item 1 and Note 19 to the
Consolidated Financial Statements. Although the parties have
entered into a settlement stipulation to resolve these actions,
the Court of Chancery must consider the fairness,
reasonableness, and adequacy of the settlement. Further action
in connection with these lawsuits or any future lawsuits may be
time-consuming and expensive.
These matters, alone or in combination, could have a material
adverse effect on our business, financial condition, results of
operations and stock price.
Our
operating results may fluctuate based on changes in marketplace
conditions, especially customer and competitor consolidation;
changes in consumer preferences, including our consumers
shift from carbonated soft drinks to non-carbonated beverages;
and unfavorable weather conditions in the territories in which
we operate.
We face intense competition in the carbonated soft drink market
and the non-carbonated beverage market and are impacted by both
customer and competitor consolidation. Our response to
marketplace competition and retailer consolidations may result
in lower than expected net pricing of our products. Retail
consolidation has increased the importance of our major
customers and further consolidation is expected. In addition,
competitive pressures may cause channel and product mix to shift
from more profitable channels and packages and adversely affect
our overall pricing. Our efforts to improve pricing may result
in lower than expected volumes. Changes in net pricing and
volume could have an adverse effect on our business, results of
operations and financial condition.
Health and wellness trends have decreased demand for sugared
carbonated soft drinks and shifted interest to diet soft drinks
and non-carbonated beverages. In the U.S., carbonated soft drink
volume, which represented approximately 82 percent of our
volume mix, declined 2 percent and 3 percent in fiscal
years 2009 and 2008, respectively. In response to changes in
consumers preferences, we have increased our emphasis on
diet carbonated soft drinks and non-carbonated beverages,
including Aquafina, SoBe, Tropicana juice
drinks, Lipton Iced Tea, and energy drinks. Our business
could be adversely impacted by a significant decline in sales of
sugared carbonated soft drinks and our inability to offset that
decline with sales of diet soft drinks and non-carbonated
beverages. Because we rely mainly on PepsiCo to provide us with
the products that we sell, if PepsiCo fails to develop
innovative products that respond to these and other consumer
trends, this could put us at a competitive disadvantage in the
marketplace and adversely affect our business and financial
results.
Our business could also be adversely affected by other consumer
trends, such as consumer health concerns about obesity, product
attributes and ingredients. Consumer preferences may change due
to a variety of factors, including the aging of the general
population, changes in social trends, changes in travel,
vacation or leisure activity patterns or worsening economic
conditions.
Additionally, our business is highly seasonal and unfavorable
weather conditions in our markets may impact sales volume. Sales
volumes in our CEE operations tend to be more sensitive to
weather conditions than our U.S. operations.
Our
business may be adversely impacted by unfavorable global and
local economic, political and regulatory developments or other
risks in the countries in which we operate.
Our operations are affected by local and global economic
environments, including inflation, recession and currency
volatility. Political and regulatory changes, some of which may
be disruptive, can interfere with our supply chain, our
customers, our distributors and our activities in a particular
location. Volatility in global
16
macroeconomic conditions has had a negative impact on our
business results. If this volatility continues to persist into
the future, the fair value of our goodwill and intangible assets
could be adversely impacted.
An
increase in the price of raw materials, natural gas and fuel or
a decrease in the availability of raw materials, natural gas and
fuel could adversely affect our financial condition. Disruption
of our supply chain also could have an adverse effect on our
business, financial condition and operating
results.
Increases in the price of ingredients, packaging materials,
other raw materials, natural gas and fuel could adversely impact
our earnings and financial condition if we are unable to pass
along these higher costs to our customers. The inability of
suppliers to deliver concentrate, raw materials, other
ingredients and products to us could also adversely affect
operating results. The inability of our suppliers to meet our
requirements could result in short-term shortages until
alternative sources of supply could be located. In particular,
we require significant amounts of aluminum cans and PET bottle
containers to support our requirements. Failure of our suppliers
to meet our purchase requirements could reduce our
profitability. In addition, we also require access to
significant amounts of water. Any sustained interruption in the
supply of these materials or any significant increase in their
prices could have a material adverse effect on our business and
financial results.
Energy prices, including the price of natural gas, gasoline and
diesel fuel, are cost drivers for our business. Sustained high
energy or commodity prices could negatively impact our operating
results and demand for our products. Events such as natural
disasters could impact the supply of fuel and could impact the
timely delivery of our products to our customers.
Our ability to make, move and sell products is critical to our
success. Damage or disruption to our supply chain, including our
manufacturing or distribution capabilities, due to weather,
natural disaster, fire or explosion, terrorism, pandemic,
strikes or other reasons could impair our ability to
manufacture, package, sell and distribute our products. Failure
to take adequate steps to mitigate the likelihood or potential
impact of such events, or to effectively manage such events if
they occur, could adversely affect our business, financial
condition and results of operations, as well as require
additional resources to restore our supply chain.
The
successful operation of our business depends upon our
relationship with PepsiCo, including its level of advertising,
bottler incentives and brand innovation. We may also have
conflicts of interest with PepsiCo.
We operate under various bottling agreements with PepsiCo that
allow us to manufacture, package, sell and distribute carbonated
and non-carbonated beverages. Our inability to comply with the
terms and conditions established in these agreements could
result in termination of bottling agreements which would have a
material adverse impact on our short-term and long-term
business. These agreements provide that we must purchase all of
the concentrates for PepsiCo beverages at prices and on terms
which are set by PepsiCo in its sole discretion. Any significant
concentrate price increases could materially affect our business
and financial results.
PepsiCos advertising campaigns and their effectiveness,
bottler incentives provided by PepsiCo, and PepsiCos brand
innovation directly impact our operations. Bottler incentives
cover a variety of initiatives to support volume and market
share growth. The level of support is negotiated regularly and
can be increased or decreased at the discretion of PepsiCo.
PepsiCo is under no obligation to continue past levels of
support in the future. Material changes in expected levels of
bottler incentive payments and other support arrangements could
adversely affect future results of operations. Furthermore, if
the sales volume of sugared carbonated soft drinks continues to
decline, our sales volume growth will increasingly depend on
product innovation by PepsiCo. Even if PepsiCo maintains a
robust pipeline of new products, we may be unable to achieve
volume growth through product and packaging initiatives.
PepsiCo also provides procurement services for certain raw
materials which result in rebates from vendors as a result of
procurement volume. Cost of goods sold may be negatively
impacted if we are unable to maintain targeted volume levels to
secure such anticipated rebates or if PepsiCo no longer provides
this service on our behalf.
17
Our relationship with PepsiCo could give rise to conflicts of
interest. These potential conflicts include balancing the
objectives of increasing sales volume of PepsiCo beverages and
maintaining or increasing our profitability. Other possible
conflicts could relate to the nature, quality and pricing of
services or products provided to us from PepsiCo or by us to
PepsiCo.
In addition, under our Master Bottling Agreement, we must obtain
PepsiCos approval to acquire any independent PepsiCo
bottler. PepsiCo has agreed not to withhold approval for any
acquisition within
agreed-upon
U.S. territories if we have successfully negotiated the
acquisition and, in PepsiCos reasonable judgment,
satisfactorily performed our obligations under the Master
Bottling Agreement.
As of the end of fiscal year 2009, PepsiCo beneficially owned
approximately 43 percent of our common stock. As a result,
PepsiCo is able to significantly affect the outcome of our
shareholder votes, thereby affecting matters concerning us.
A
negative change in our credit rating or the availability of
capital could impact borrowing costs and financial
results.
We depend, in part, upon the issuance of unsecured debt to fund
our operations and contractual commitments. A number of factors
could cause us to incur increased borrowing costs and to have
greater difficulty accessing public and private markets for
unsecured debt. These factors include the global capital market
environment and outlook, our financial performance and outlook,
and our credit ratings as determined primarily by rating
agencies. It is possible that our other sources of funds,
including available cash, bank facilities and cash flow from
operations, may not provide adequate liquidity to fund our
operations and contractual commitments.
Because
our international operations are conducted under multiple local
currencies, our operating results experience foreign currency
fluctuations.
Our international operations are exposed to foreign exchange
rate fluctuations resulting from foreign currency transactions
and translation of the operations financial results from
local currency into U.S. dollars upon consolidation. As
exchange rates vary, revenue, capital spending and other
operating results, when translated, may differ materially from
expectations.
The
cost to remediate environmental concerns associated with
previously owned subsidiaries could be materially different than
our estimates.
We are subject to federal and state requirements for protection
of the environment, including those for the remediation of
contaminated sites related to certain previously owned
subsidiaries. We routinely assess our environmental exposure,
including obligations and commitments for remediation of
contaminated sites and assessments of ranges and probabilities
of recoveries from other potentially responsible parties,
including insurance providers. Due to the regulatory
complexities and risk of unidentified contaminants on our former
properties, the potential exists for remediation costs to be
materially different from the costs we have estimated.
We
cannot predict the outcome of legal proceedings and an adverse
determination could negatively impact our financial results, nor
can we predict the nature or outcome of future legal
proceedings.
The nature of operations of certain previously owned
subsidiaries exposes us to the potential for various claims and
litigation related to, among other things, personal injury and
asbestos product liability claims. The nature of assets we
currently own and operate exposes us to the potential for
various claims and litigation related to, among other things,
personal injury and property damage. The resolution of
outstanding claims and assessments may be materially different
than what we have estimated.
In addition, litigation or other claims based on alleged
unhealthful properties of soft drinks could be filed against us
and would require our management to devote significant time and
resources to dealing with such claims. While we would not
believe such claims to be meritorious, any such claims would be
accompanied by
18
unfavorable publicity that could adversely affect the sales of
certain of our products. Our failure to abide by laws, orders or
other legal commitments could subject us to fines, penalties or
other damages, including costs associated with recalling
products. We could be required to recall products if they become
contaminated or damaged.
Increases
in the cost of compliance with applicable regulations, including
those governing the production, packaging, quality, labeling and
distribution of beverage products, could negatively impact our
financial results.
Our operations and properties are subject to various federal,
state and local laws and regulations, including those governing
the production, packaging, quality, labeling and distribution of
beverage products, environmental laws, competition laws, taxes
and accounting standards. We are also subject to the
jurisdiction of regulatory agencies of foreign countries. New
laws or regulations or changes in existing laws or regulations
could negatively impact our financial results by restricting our
ability to distribute products in certain venues or through
higher operating costs to achieve compliance.
Changes
in tax laws or in the tax status of our international operations
could increase our tax liability and negatively impact our
financial results.
We are subject to federal, state and local taxes in the
U.S. and various foreign jurisdictions. As a result, our
effective tax rate could be adversely affected by changes in the
mix of earnings in the U.S. and foreign countries with
differing statutory tax rates, legislative changes impacting
statutory tax rates, including the impact on recorded deferred
tax assets and liabilities, changes in tax laws or material
audit assessments. In addition, deferred tax balances reflect
the benefit of net operating loss carryforwards, the realization
of which will depend upon generating future taxable income in
the corresponding tax jurisdiction.
A
strike or work stoppage by our union employees, which represent
approximately one-fourth of our workforce, could disrupt our
business.
Approximately 27 percent of our employees are covered by
collective bargaining agreements with higher representation in
the U.S. at approximately 41 percent of our employee
base. These agreements expire at various dates, including some
in fiscal year 2010. Our inability to successfully renegotiate
these agreements could cause work stoppages and interruptions,
which may adversely impact our operating results. The terms and
conditions of existing or renegotiated agreements could also
increase our costs or otherwise affect our ability to fully
implement future operational changes to enhance our efficiency.
We may
be adversely affected by our ability to successfully consummate
acquisitions or integrate acquired businesses.
We may be unable to consummate, successfully integrate and
manage acquired businesses without substantial costs, delay or
difficulties.
Technology
failures could disrupt our operations and negatively impact our
business.
We rely on information technology systems to process, transmit
and store electronic information. If we do not effectively
manage our information technology infrastructure, we could be
subject to transaction errors, processing inefficiencies, the
loss of customers, and business disruptions.
|
|
Item 1B.
|
Unresolved
Staff Comments.
|
None.
Our U.S. manufacturing facilities include ten owned and one
leased combination bottling/canning plants, four owned bottling
plants and two owned canning plants. International manufacturing
facilities include four
19
owned plants in Ukraine; three owned plants in Romania; two
owned plants each in Poland, Hungary, and the Czech Republic.
The total manufacturing area is approximately 3.2 million
square feet. In addition, we operate 128 distribution facilities
in the U.S. and 48 distribution facilities in CEE.
Seventy-six of the distribution facilities are leased and almost
six percent of our U.S. production is from one leased
domestic plant. We believe all facilities are adequately
equipped and maintained and capacity is sufficient for our
current needs. We currently operate a fleet of approximately
4,900 vehicles in the U.S. and approximately 2,100 vehicles
internationally to service and support our distribution system.
In addition, we own and lease various industrial and commercial
real estate properties in the U.S.
|
|
Item 3.
|
Legal
Proceedings.
|
From approximately 1945 to 1995, various entities owned and
operated a facility that manufactured hydraulic equipment in
Willits, California. The plant site was contaminated by various
chemicals and metals. On August 23, 1999, an action
entitled Donna M. Avila, et al. v. Willits Environmental
Remediation Trust, Remco Hydraulics, Inc., M-C Industries, Inc.,
Pneumo Abex Corporation and Whitman Corporation, Case
No. C99-3941
CAL, was filed in U.S. District Court for the Northern
District of California. On January 16, 2001, a second
lawsuit, entitled Pamela Jo Arlich, et al. v. Willits
Environmental Remediation Trust, et al., Case No. C 01
0266 SI, against essentially the same defendants was filed in
the same court. The same defendants were served with a third
lawsuit, entitled Nickerman v. Remco Hydraulics, on
April 3, 2006. These three lawsuits were consolidated
(Avila/Arlich/Nickerman) before the same judge in the
U.S. District Court for the Northern District of
California. In these lawsuits, individual plaintiffs claim that
PepsiAmericas is liable for personal injury
and/or
property damage resulting from environmental contamination at
the facility. There were over 1,000 claims filed in the three
lawsuits. The Court dismissed a large portion of the claims; and
in 2006 and 2008 we settled a significant number of the claims.
There were 12 claims remaining from these lawsuits as of the end
of fiscal year 2008. On June 18, 2009, the Court dismissed
all remaining Avila/Arlich/Nickerman claims. In July
2009, 592 plaintiffs appealed various Court orders. There are
currently 590 plaintiffs with appeals that are pending. On
May 30, 2008, a fourth lawsuit with 30 plaintiffs, entitled
Whitlock, et al. v. PepsiAmericas, et al., Case
No. 3:2008cv02742 was filed. This lawsuit is based on the
same claims as the prior three lawsuits. There are currently 27
plaintiffs. We will actively oppose these appeals, and we are
actively defending these lawsuits. At this time, we do not
believe these lawsuits are material to our business or financial
condition.
We and our subsidiaries are defendants in other lawsuits in the
ordinary course of business, none of which, in the opinion of
management, is expected to have a material adverse effect on our
financial condition, although amounts recorded in any given
period could be material to the results of operations or cash
flows for that period.
See also Environmental Matters and Certain
Litigation Matters in Item 1 and Note 19 to the
Consolidated Financial Statements for further discussion.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders.
|
Not applicable.
20
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
|
Our common stock is listed and traded on the New York Stock
Exchange under the stock trading symbol PAS. The
table below sets forth the reported high and low sales prices as
reported for New York Stock Exchange Composite Transactions for
our common stock and indicates our dividends declared for each
quarterly period for the fiscal years 2009 and 2008.
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|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
High
|
|
|
Low
|
|
|
Declared
|
|
|
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
20.97
|
|
|
$
|
14.98
|
|
|
$
|
0.14
|
|
Second quarter
|
|
|
27.43
|
|
|
|
18.17
|
|
|
|
0.14
|
|
Third quarter
|
|
|
29.20
|
|
|
|
26.00
|
|
|
|
0.14
|
|
Fourth quarter
|
|
|
30.30
|
|
|
|
28.81
|
|
|
|
0.14
|
|
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
34.50
|
|
|
$
|
23.00
|
|
|
$
|
0.135
|
|
Second quarter
|
|
|
27.02
|
|
|
|
19.94
|
|
|
|
0.135
|
|
Third quarter
|
|
|
24.78
|
|
|
|
18.95
|
|
|
|
0.135
|
|
Fourth quarter
|
|
|
21.90
|
|
|
|
14.51
|
|
|
|
0.135
|
|
21
Performance
Graph
The following performance graph compares the performance of
PepsiAmericas common stock to the MidCap 400 Index and to an
index of peer companies selected by us, the Bottling Group Index
(BGI). The BGI consists of The Pepsi Bottling Group,
Inc.,
Coca-Cola
Enterprises, Inc.,
Coca-Cola
Bottling Company Consolidated,
Coca-Cola
FEMSA S.A.B. de C.V. ADRs and
Coca-Cola
Hellenic Bottling Company S.A. ADRs. The graph assumes the
return on $100 invested on January 2, 2005 until
January 2, 2010. The returns of each member of the BGI are
weighted by market capitalization and include the subsequent
reinvestment of dividends into the respective stock.
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|
|
|
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|
|
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|
|
|
|
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|
|
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|
|
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
PAS
|
|
|
100.00
|
|
|
|
111.10
|
|
|
|
102.48
|
|
|
|
171.59
|
|
|
|
105.60
|
|
|
|
152.96
|
|
MidCap 400
|
|
|
100.00
|
|
|
|
112.56
|
|
|
|
124.18
|
|
|
|
134.85
|
|
|
|
87.58
|
|
|
|
117.46
|
|
BGI
|
|
|
100.00
|
|
|
|
106.45
|
|
|
|
130.18
|
|
|
|
182.41
|
|
|
|
99.34
|
|
|
|
159.03
|
|
The closing price of our common stock on January 2, 2010
was $29.26 per share.
Shareholders
There were 7,775 shareholders of record of our common stock
as of February 16, 2010.
22
Share
Repurchase Program
We did not repurchase shares of PepsiAmericas common stock in
the fourth quarter of 2009. Our share repurchase program
activity for each of the three months and the quarter ended
January 2, 2010 was as follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Maximum Number of
|
|
|
|
|
|
|
|
|
|
Shares Purchased as
|
|
|
Shares that May Yet
|
|
|
|
Total Number of
|
|
|
|
|
|
Part of Publicly
|
|
|
Be Purchased Under
|
|
|
|
Shares Purchased
|
|
|
Average Price Paid
|
|
|
Announced Plans or
|
|
|
the Plans or
|
|
Period
|
|
(1)
|
|
|
per Share
|
|
|
Programs(2)
|
|
|
Programs(3)
|
|
|
October 4, 2009 October 31, 2009
|
|
|
|
|
|
$
|
|
|
|
|
56,201,081
|
|
|
|
8,798,919
|
|
November 1, 2009 November 28, 2009
|
|
|
|
|
|
|
|
|
|
|
56,201,081
|
|
|
|
8,798,919
|
|
November 29, 2009 January 2, 2010
|
|
|
|
|
|
|
|
|
|
|
56,201,081
|
|
|
|
8,798,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended January 2, 2010
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents shares purchased in open-market transactions pursuant
to our publicly announced repurchase program. |
|
(2) |
|
Represents cumulative shares purchased under previously
announced share repurchase authorizations by the Board of
Directors. Share repurchases began in 1999 under an
authorization for 15 million shares announced on
November 19, 1999. On December 19, 2002, the Board of
Directors authorized the repurchase of 20 million
additional shares. The Board of Directors later authorized the
repurchase of 20 million additional shares as announced on
July 21, 2005. On July 24, 2008, the Board of
Directors authorized the repurchase of 10 million
additional shares. |
|
(3) |
|
This repurchase authorization does not have a scheduled
expiration date. |
Securities
Authorized for Issuance under Equity Compensation
Plans
See Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters in Item 12
for information regarding securities authorized for issuance
under our equity compensation plans.
23
|
|
Item 6.
|
Selected
Financial Data.
|
The following table presents summary operating results and other
information of PepsiAmericas and should be read along with
Managements Discussion and Analysis of Financial
Condition and Results of Operations in Item 7, the
Consolidated Financial Statements and accompanying notes
included elsewhere in this Annual Report on
Form 10-K.
Amounts are presented in millions, except per share and employee
data.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Years
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
OPERATING RESULTS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
3,405.2
|
|
|
$
|
3,429.9
|
|
|
$
|
3,384.9
|
|
|
$
|
3,245.8
|
|
|
$
|
3,156.1
|
|
CEE
|
|
|
915.2
|
|
|
|
1,260.9
|
|
|
|
849.4
|
|
|
|
484.1
|
|
|
|
343.5
|
|
Caribbean
|
|
|
100.9
|
|
|
|
246.4
|
|
|
|
245.2
|
|
|
|
242.5
|
|
|
|
226.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide
|
|
$
|
4,421.3
|
|
|
$
|
4,937.2
|
|
|
$
|
4,479.5
|
|
|
$
|
3,972.4
|
|
|
$
|
3,726.0
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
341.1
|
|
|
$
|
333.8
|
|
|
$
|
336.9
|
|
|
$
|
330.1
|
|
|
$
|
387.7
|
|
CEE
|
|
|
41.2
|
|
|
|
146.0
|
|
|
|
95.2
|
|
|
|
20.9
|
|
|
|
1.5
|
|
Caribbean
|
|
|
(1.4
|
)
|
|
|
(6.6
|
)
|
|
|
4.0
|
|
|
|
5.0
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide
|
|
|
380.9
|
|
|
|
473.2
|
|
|
|
436.1
|
|
|
|
356.0
|
|
|
|
393.4
|
|
Interest expense, net
|
|
|
65.6
|
|
|
|
111.1
|
|
|
|
109.2
|
|
|
|
101.3
|
|
|
|
89.9
|
|
Loss from deconsolidation of business
|
|
|
25.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
|
|
13.9
|
|
|
|
7.9
|
|
|
|
0.6
|
|
|
|
11.7
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes and
equity in net earnings (loss) of nonconsolidated companies
|
|
|
275.6
|
|
|
|
354.2
|
|
|
|
326.3
|
|
|
|
243.0
|
|
|
|
298.5
|
|
Income taxes
|
|
|
99.3
|
|
|
|
107.8
|
|
|
|
112.0
|
|
|
|
90.5
|
|
|
|
108.8
|
|
Equity in net earnings (loss) of nonconsolidated companies
|
|
|
1.4
|
|
|
|
(1.1
|
)
|
|
|
|
|
|
|
5.6
|
|
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
177.7
|
|
|
|
245.3
|
|
|
|
214.3
|
|
|
|
158.1
|
|
|
|
194.6
|
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
9.2
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
177.7
|
|
|
|
236.1
|
|
|
|
212.2
|
|
|
|
158.1
|
|
|
|
194.6
|
|
Less: Net (loss) income attributable to noncontrolling interests
|
|
|
(3.5
|
)
|
|
|
9.7
|
|
|
|
0.1
|
|
|
|
(0.2
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to PepsiAmericas, Inc.
|
|
$
|
181.2
|
|
|
$
|
226.4
|
|
|
$
|
212.1
|
|
|
$
|
158.3
|
|
|
$
|
194.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
121.6
|
|
|
|
125.2
|
|
|
|
126.7
|
|
|
|
127.9
|
|
|
|
134.7
|
|
Incremental effect of stock options and awards
|
|
|
2.3
|
|
|
|
2.0
|
|
|
|
2.5
|
|
|
|
1.9
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
123.9
|
|
|
|
127.2
|
|
|
|
129.2
|
|
|
|
129.8
|
|
|
|
137.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to PepsiAmericas, Inc. common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.49
|
|
|
$
|
1.88
|
|
|
$
|
1.69
|
|
|
$
|
1.24
|
|
|
$
|
1.45
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.49
|
|
|
$
|
1.81
|
|
|
$
|
1.67
|
|
|
$
|
1.24
|
|
|
$
|
1.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.46
|
|
|
$
|
1.85
|
|
|
$
|
1.66
|
|
|
$
|
1.22
|
|
|
$
|
1.42
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.46
|
|
|
$
|
1.78
|
|
|
$
|
1.64
|
|
|
$
|
1.22
|
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
|
|
$
|
0.56
|
|
|
$
|
0.54
|
|
|
$
|
0.52
|
|
|
$
|
0.50
|
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,092.7
|
|
|
$
|
5,054.1
|
|
|
$
|
5,308.0
|
|
|
$
|
4,207.4
|
|
|
$
|
4,053.8
|
|
Long-term debt
|
|
$
|
1,990.8
|
|
|
$
|
1,642.3
|
|
|
$
|
1,803.5
|
|
|
$
|
1,490.2
|
|
|
$
|
1,285.9
|
|
Capital investments
|
|
$
|
235.7
|
|
|
$
|
248.9
|
|
|
$
|
264.6
|
|
|
$
|
169.3
|
|
|
$
|
180.3
|
|
Depreciation and amortization
|
|
$
|
184.3
|
|
|
$
|
204.3
|
|
|
$
|
204.4
|
|
|
$
|
193.4
|
|
|
$
|
184.7
|
|
24
The following items were recorded during the periods presented:
In fiscal year 2009:
|
|
|
|
|
We recorded a $17.4 million impairment charge
($7.9 million net of taxes and noncontrolling interests) on
our Sandora and Sadochok brands. This non-cash
charge resulted from our determination that the carrying amounts
of these indefinite life intangible assets exceeded their fair
value.
|
|
|
|
We recorded special charges totaling $11.1 million. In CEE,
we recorded special charges of $9.8 million related to the
restructuring of our Hungary operations, primarily for
severance, fixed asset impairments and lease termination costs.
We also recorded $1.3 million of special charges, net of
recoveries, in the Caribbean and the U.S. related to
restructuring costs.
|
|
|
|
We recorded $6.1 million of fees associated with the
pending merger with PepsiCo in Selling, delivery and
administrative (SD&A) expenses.
|
|
|
|
We recorded a $4.9 million write-down of non-operating
assets in the U.S. in SD&A expenses.
|
|
|
|
We recorded a $3.4 million loss related to our decision to
exit a multi-employer pension plan in the U.S. in
SD&A expenses.
|
|
|
|
On July 3, 2009, we formed a strategic joint venture with
CABCORP to combine our Caribbean operations, excluding the
Bahamas, with CABCORPs Central American operations. Upon
execution of the joint venture agreement, we deconsolidated our
Caribbean business resulting in a non-cash loss of
$25.8 million ($23.0 million net of taxes). This loss
included the recognition of deferred losses associated with
cumulative translation adjustments of $19.2 million and
pension losses of $6.5 million, which were previously
included in accumulated other comprehensive loss.
|
|
|
|
We recorded an
other-than-temporary
marketable securities impairment loss of $2.1 million
($1.3 million net of taxes) to write-off an equity
security, Northfield Laboratories, Inc., that was classified as
available-for-sale.
The loss was recorded in Other expense, net.
|
|
|
|
We recorded a gain of $33.0 million ($20.9 million net
of taxes) from the termination of an interest rate swap based on
our determination that interest payments associated with a
forecasted debt issuance for which the interest rate swap was
designated was probable not to occur. The gain was recorded in
Interest expense, net.
|
In fiscal year 2008:
|
|
|
|
|
Our fiscal year ends on the Saturday closest to December 31 and,
as a result, an additional week is added every five to six
years. Fiscal year 2008 consisted of 53 weeks ending on
January 3, 2009. All other periods presented in the table
above consisted of 52 weeks. Our CEE operations are based
on a calendar year ending December 31, 2008 and, therefore,
are not impacted by the 53rd week. Various estimates and
assumptions were made to quantify the impact of the additional
week of operations. The 53rd week contributed an estimated
$52.7 million to net sales, $8.9 million to operating
income and $5.7 million to net income attributable to
PepsiAmericas, Inc. in fiscal year 2008.
|
|
|
|
We recorded special charges and adjustments totaling
$23.0 million. We recorded $9.0 million of special
charges in the Caribbean, which consisted of severance and
impairment charges that included a $2.9 million impairment
charge related to an intangible asset and a $3.0 million
impairment of fixed assets. As a result of various realignment
initiatives, we recorded special charges of $4.1 million in
the U.S. and $1.3 million in CEE related to severance,
fixed asset impairment and lease termination costs. We also
recorded a legal contingency of $2.4 million in our CEE
operations. Additionally in fiscal year 2008, we determined that
we had improperly accounted for certain U.S. employee
benefit obligations in prior years. Accordingly, we recorded an
out-of-period
accounting adjustment of $6.2 million to increase the
benefit obligation as of the end of fiscal year 2008.
|
|
|
|
We recorded a discontinued operations charge of
$15.0 million ($9.2 million net of taxes) related to
revised estimates for environmental remediation, legal and
related administrative costs. In particular, we
|
25
|
|
|
|
|
revised our remediation plans at several sites during the year,
which resulted in an increase in the accrual for remediation
costs of $5.0 million, and we increased our accrual for
legal costs by $10.0 million.
|
In fiscal year 2007:
|
|
|
|
|
We recorded special charges of $6.3 million. In the U.S.,
we recorded $4.8 million of special charges primarily
related to severance and relocation costs associated with our
strategic realignment to further strengthen our customer focused
go-to-market
strategy. In CEE, we recorded special charges of
$1.5 million related to lease termination costs in Hungary
and associated severance costs.
|
|
|
|
We recorded a gain of $10.2 million related to the sale of
railcars and locomotives, which was reflected in Other
expense, net.
|
|
|
|
We recorded an
other-than-temporary
marketable securities impairment loss of $4.0 million
related to an equity security, Northfield Laboratories, Inc.,
that was classified as
available-for-sale.
The loss was recorded in Other expense, net.
|
|
|
|
We recorded a discontinued operations charge of
$3.2 million ($2.1 million net of taxes). The charge
related to revised estimates for environmental remediation,
legal and related administrative costs.
|
In fiscal year 2006:
|
|
|
|
|
We recorded special charges of $13.7 million. We recorded
special charges of $11.5 million in the U.S. related
to the strategic realignment of the U.S. sales
organization, primarily for severance, relocation and other
employee-related costs, including the acceleration of vesting of
certain restricted stock awards and consulting services incurred
in connection with the realignment initiative. In addition, we
recorded special charges in CEE of $2.2 million. The
special charges related primarily to a reduction in the
workforce and were for severance costs and related benefits.
|
|
|
|
We recorded an
other-than-temporary
marketable securities impairment loss of $7.3 million
related to an equity security, Northfield Laboratories, Inc.,
that was classified as
available-for-sale.
The loss was recorded in Other expense, net.
|
In fiscal year 2005:
|
|
|
|
|
We recorded an expense of $6.1 million related to lease
exit costs, which resulted from the relocation of our corporate
offices in the Chicago area. These costs were recorded in
SD&A expenses.
|
|
|
|
We recorded income of $16.6 million related to the proceeds
from the settlement of a class action lawsuit. The lawsuit
alleged price fixing related to high fructose corn syrup
purchased in the U.S. from July 1, 1991 through
June 30, 1995.
|
|
|
|
We recorded special charges in CEE of $2.5 million related
to a reduction in the workforce and the consolidation of certain
production facilities as we rationalized our cost structure.
These special charges were primarily for severance costs,
related benefits and asset write-downs.
|
|
|
|
We recorded an expense of $5.6 million related to a loss on
extinguishment of debt. During fiscal year 2005, we completed a
cash tender offer related to $550 million of our
outstanding debt. The total amount of securities tendered was
$388 million. The loss was recorded in Interest
expense, net.
|
|
|
|
We recorded a $5.6 million benefit associated with a real
estate tax refund concerning a previously sold parcel of land in
downtown Chicago. The gain was recorded in Other expense,
net.
|
|
|
|
We recorded a $1.1 million net benefit to net income
attributable to PepsiAmericas, Inc. related to the reversal of
valuation allowances for certain net operating loss
carryforwards offset by tax contingency requirements. This net
benefit was comprised of interest expense of $0.6 million
($0.4 million net of taxes) for the tax contingency
requirements recorded in Interest expense, net and
$1.5 million of tax benefit recorded in Income
taxes.
|
26
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
|
Forward-Looking
Statements
This Annual Report on
Form 10-K
contains certain forward-looking statements of expected future
developments, as defined in the Private Securities Litigation
Reform Act of 1995. The forward-looking statements in this
Annual Report on
Form 10-K
refers to our expectations regarding continuing operating
improvement and other matters. These forward-looking statements
reflect our expectations and are based on currently available
data; however, actual results are subject to future risks and
uncertainties, which could materially affect actual performance.
Risks and uncertainties that could affect such performance
include, but are not limited to, the following: the outcome of,
or developments concerning, our pending merger with PepsiCo,
Inc. (PepsiCo); competition, including product and
pricing pressures; changing trends in consumer tastes; changes
in our relationship
and/or
support programs with PepsiCo and other brand owners; market
acceptance of new product and package offerings; weather
conditions; cost and availability of raw materials; changing
legislation, including tax laws; cost and outcome of
environmental claims; availability and cost of capital including
changes in our debt ratings; labor and employee benefit costs;
unfavorable foreign currency rate fluctuations; cost and outcome
of legal proceedings; integration of acquisitions; failure of
information technology systems; and general economic, business,
regulatory and political conditions in the countries and
territories where we operate. See Risk Factors in
Item 1A for additional information.
These events and uncertainties are difficult or impossible to
predict accurately and many are beyond our control. We assume no
obligation to publicly release the result of any revisions that
may be made to any forward-looking statements to reflect events
or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
Executive
Overview
What We
Do
We manufacture, distribute, and market a broad portfolio of
beverage products in the U.S. and Central and Eastern
Europe (CEE). We sell a variety of brands that we
bottle under franchise agreements with various brand owners, the
majority with PepsiCo or PepsiCo joint ventures. In some
territories, we manufacture, package, sell and distribute our
own brands, such as Sandora, Sadochok and
Toma. We also distribute snack foods in certain markets.
We serve a significant portion of 19 states throughout the
central region of the U.S. In CEE, we serve Ukraine,
Poland, Romania, Hungary, the Czech Republic and Slovakia, with
distribution rights in Moldova, Estonia, Latvia and Lithuania.
In addition, we have an equity investment in Agrima JSC
(Agrima), which produces, sells and distributes
PepsiCo products and other beverages in Bulgaria.
In the first six months of 2009, we manufactured and distributed
beverage products in the Caribbean, including Puerto Rico,
Jamaica and Trinidad and Tobago, with distribution rights in the
Bahamas and Barbados. On July 3, 2009, we formed a
strategic joint venture with The Central America Beverage
Corporation (CABCORP) to combine our Caribbean
operations, excluding the Bahamas, with CABCORPs Central
American operations, including Guatemala, Honduras, El Salvador
and Nicaragua. We own an 18 percent interest in the CABCORP
joint venture.
We have entered into a merger agreement with PepsiCo and
Pepsi-Cola Metropolitan Bottling Company, Inc., a wholly owned
subsidiary of PepsiCo (Metro), dated August 3,
2009, pursuant to which our company will merge with and into
Metro, with Metro continuing as the surviving company and a
wholly owned subsidiary of PepsiCo. Under the terms of the
merger agreement, PepsiCo will acquire all outstanding shares of
PepsiAmericas common stock it does not already own for the price
of $28.50 in cash or 0.5022 shares of PepsiCo common stock,
subject to proration provisions which provide that an aggregate
50 percent of the outstanding PepsiAmericas common stock
will be converted into the right to receive common stock of
PepsiCo and an aggregate 50 percent of the outstanding
PepsiAmericas common stock will be converted into
27
the right to receive cash. We hope to close the merger by the
end of February 2010, subject to regulatory approval and the
satisfaction or waiver of other customary closing conditions.
Results
of Operations
In the discussion of our results of operations below, the number
of bottle and can cases sold is referred to as volume.
Constant territory refers to the results of operations
excluding the non-comparable territories
year-over-year.
For fiscal year 2009 comparisons, this excluded the last six
months of the Caribbean operating results in fiscal year 2008,
as we deconsolidated our Caribbean business at the end of the
second quarter of 2009. For fiscal year 2008 comparisons, this
excluded the first eight months and the first sixteen days of
September for Sandora LLC (Sandora), as we
consolidated Sandora operating results starting in mid-September
2007. Net pricing is net sales divided by the number of
cases and gallons sold for our core businesses, which include
bottles and cans (including bottle and can volume from vending
equipment sales), foodservice and export sales. Changes in net
pricing include the impact of sales price (or rate) changes, as
well as the impact of foreign currency and brand, package and
geographic mix. Net pricing and reported volume amounts exclude
contract, commissary, and vending (other than bottles and cans)
transactions. Contract sales represent sales of manufactured
product to other franchise bottlers and typically decline as
excess manufacturing capacity is utilized. Net pricing and
volume also exclude activity associated with snack food
products. Cost of goods sold per unit is the cost of
goods sold for our core businesses, excluding the impact of
unrealized gains or losses on derivatives not designated as
hedging instruments, divided by the related number of cases and
gallons sold. Changes in cost of goods sold per unit include the
impact of cost changes, as well as the impact of foreign
currency and brand, package and geographic mix.
Fiscal
Year 2009 Key Financial Results
|
|
|
|
|
Worldwide volume decreased 10.1 percent, primarily due to
volume declines in CEE and the U.S., as well as the impact of
the Caribbean deconsolidation.
|
|
|
|
Worldwide net sales decreased 10.4 percent, mainly due to
the impact of foreign currency and the Caribbean
deconsolidation. Volume declines were partially offset by net
selling price increases on a currency neutral basis across all
geographies.
|
|
|
|
Worldwide cost of goods sold per unit decreased
0.8 percent, primarily driven by the impact of foreign
currency, offset in part by higher raw material costs in the U.S.
|
|
|
|
We generated operating income of $380.9 million, which
included $42.9 million of special charges and other items
impacting comparability, including asset impairment charges and
merger related fees, as described in Items Impacting
Comparability. Operating income in fiscal year 2008 of
$473.2 million included special charges and adjustments of
$23.0 million.
|
|
|
|
We reported diluted earnings per share of $1.46 for the fiscal
year 2009, which included a negative $0.06 impact from special
charges and a combined $0.17 negative impact from other items
impacting comparability as described in
Items Impacting Comparability. This compared to
diluted earnings per share of $1.78 for the fiscal year 2008,
which included a loss from discontinued operations of $0.07, a
negative $0.14 impact from special charges and adjustments, and
an estimated positive $0.04 contribution from the
53rd week.
|
|
|
|
We estimate that the
53rd week
in fiscal 2008 contributed approximately 1 percentage point
to the year over year decline in volume, net sales, costs of
goods sold and selling, delivery and administrative
(SD&A) expenses and 1.5 percentage points
to the operating income decline.
|
|
|
|
The impact of foreign currency unfavorably impacted net sales by
5.9 percentage points and operating income by
26.7 percentage points.
|
|
|
|
The effective income tax rate increased to 36.0 percent
from 30.4 percent in fiscal year 2008 primarily due to the
impact of the deconsolidation of our Caribbean business and a
change in the geographic mix of earnings and the associated
varying statutory tax rates.
|
28
|
|
|
|
|
We generated cash flows from operating activities of
$308.6 million in fiscal year 2009, which included a
decrease of $150.0 million related to the termination of
our trade receivables securitization program. This compared to
cash flows from operating activities of $500.6 million in
fiscal year 2008, which included the benefit of the
53rd week.
|
Our Focus
in Fiscal Year 2009
Worldwide. For fiscal year 2009, diluted
earnings per share of $1.46 declined 18 percent compared to
the prior year due to significant foreign currency pressures and
volume declines as global economic conditions remained
difficult. Our disciplined pricing strategy, brand portfolio
expansion initiatives and productivity improvements helped
offset the volume softness and higher raw material costs to
drive year over year operating profit growth on a currency
neutral basis. Our organization continued its focus on cash flow
and drove improvements in working capital.
U.S. operations. Changing consumer demand
and higher raw material costs continued to challenge our
U.S. business. Carbonated soft drink volume declined
2 percent, an improvement from the prior year rate of
decline as we benefited from a renewed focus on core brands and
an expanded product portfolio. Our single-serve business was
down 5 percent due to declines in the foodservice channel,
reflecting the difficult economic environment. Non-carbonated
beverage volume declined 10 percent driven by lower volumes
in Aquafina take-home package and teas. Despite the economic
pressures, operating profits grew 2.2 percent over prior
year due to higher net pricing, productivity initiatives and
cost management. Our most significant productivity initiative,
Customer Optimization to the Third Power, or
CO3,
drove improvements in forecasting accuracy, miles driven and the
level of
out-of-stocks,
and resulted in lower SD&A expenses.
International operations. Foreign currency
headwinds and difficult economic conditions, particularly in
emerging markets, drove CEE operating profits down
71.8 percent compared to prior year. Volumes were lower by
12.8 percent, reflecting double digit volume declines in
Romania and Ukraine. We executed disciplined pricing strategies
and productivity initiatives to help mitigate the impact of
foreign currency and lower volumes. Despite these challenges, we
believe there are opportunities in the CEE markets. We expanded
our water presence in several markets, added flavored carbonated
soft drinks in Ukraine, and continued our feet on the
street sales force initiative to drive new distribution.
In addition, we continued to invest in capacity, with a new
plant in Romania and new carbonated soft drink lines in Ukraine.
The above overview should not be considered by itself in
determining full disclosure and should be read in conjunction
with the other sections of this Annual Report on
Form 10-K.
Items Impacting
Comparability
Intangible
Assets Impairment
In fiscal year 2009, we recorded a $17.4 million impairment
charge ($7.9 million net of taxes and noncontrolling
interests) on our Sandora and Sadochok brands.
This non-cash charge resulted from our determination that the
carrying amount of these indefinite life intangible assets
exceeded their fair value.
Special
Charges and Adjustments
In fiscal year 2009, we recorded special charges totaling
$11.1 million. In CEE, we recorded special charges of
$9.8 million related to the restructuring of our Hungary
operations, primarily for severance, fixed asset impairments and
lease termination costs. We also recorded $1.3 million of
special charges, net of recoveries, in the Caribbean and the
U.S. related to restructuring costs.
In fiscal year 2008, we recorded special charges and adjustments
totaling $23.0 million. We recorded special charges of
$16.8 million. In the Caribbean, we recorded
$9.0 million of special charges, which consisted of
severance and impairment charges that included a
$2.9 million impairment charge related to an intangible
asset and a $3.0 million impairment of fixed assets. As a
result of various realignment initiatives, we recorded special
charges of $4.1 million in the U.S. and
$1.3 million in CEE related to severance, fixed
29
asset impairment and lease termination costs. We also recorded a
legal contingency of $2.4 million in our CEE operations.
In fiscal year 2008, we determined that we had improperly
accounted for certain U.S. employee benefit obligations in
prior years. Accordingly, we recorded an
out-of-period
accounting adjustment of $6.2 million to increase the
benefit obligation as of the end of fiscal year 2008. This
adjustment was recorded as an increase in Payables and
other current liabilities in the Consolidated Balance
Sheet.
In fiscal year 2007, we recorded special charges of
$6.3 million. In the U.S., we recorded $4.8 million of
special charges primarily related to severance and relocation
costs associated with our strategic realignment to further
strengthen our customer focused
go-to-market
strategy. In CEE, we recorded special charges of
$1.5 million related to lease termination costs in Hungary
and associated severance costs.
PepsiCo
Merger Fees
We have entered into a merger agreement with PepsiCo, dated
August 3, 2009, whereby PepsiAmericas will merge with and
into a wholly owned subsidiary of PepsiCo, subject to regulatory
approval and the satisfaction or waiver of other customary
closing conditions. In fiscal year 2009, we recorded
$6.1 million of fees associated with the pending merger
with PepsiCo in SD&A expenses in our
U.S. geographic segment. In connection with this merger
transaction, we have retained certain external advisors and
expect to incur aggregate fees of approximately $30 million.
Non-operating
Assets Impairment
In fiscal year 2009, we recorded a $4.9 million write-down
of non-operating assets in the U.S. in SD&A
expenses.
Loss
from Multi-Employer Pension Plans
In fiscal year 2009, we recorded a $3.4 million loss
related to our decision to exit a multi-employer pension plan in
the U.S. in SD&A expenses.
Loss
from Deconsolidation of Business
On July 3, 2009, we formed a strategic joint venture with
CABCORP to combine PepsiAmericas Caribbean operations,
excluding the Bahamas, with CABCORPs Central American
operations. Upon execution of the joint venture agreement, we
deconsolidated our Caribbean business resulting in a non-cash
loss of $25.8 million ($23.0 million net of taxes).
This loss included the recognition of deferred losses associated
with cumulative translation adjustments of $19.2 million
and unrecognized pension losses of $6.5 million, which were
previously included in accumulated other comprehensive loss.
Beginning in the third quarter of 2009, earnings from the
strategic joint venture with CABCORP are recorded in
Equity in net earnings (loss) of nonconsolidated
companies on the Consolidated Statements of Income and
operating results for the Bahamas are included in our
U.S. geographic segment. Due to the timing of the receipt
of available financial information, we record equity in net
earnings from the joint venture on a one-month lag basis.
Marketable
Securities Impairment
In fiscal years 2009 and 2007, we recorded
other-than-temporary
impairment losses of $2.1 million and $4.0 million,
respectively, to write-off an equity security, Northfield
Laboratories, Inc., that was classified as
available-for-sale
on our Consolidated Balance Sheets. The losses were recorded in
Other expense, net.
Gain
from Interest Rate Swap Termination
In fiscal year 2009, we recognized a gain of $33.0 million
($20.9 million net of taxes) from the termination of an
interest rate swap based on our determination that interest
payments associated with a
30
forecasted debt issuance for which the interest rate swap was
designated was probable not to occur. The gain was recorded in
Interest expense, net.
Gain
on Sale of Non-Core Property
In fiscal year 2007, we recorded a gain of $10.2 million
related to the sale of non-core property, which consisted of
railcars and locomotives. The gain was recorded in Other
expense, net.
53rd
Week in Fiscal Year 2008
Our fiscal year ends on the Saturday closest to
December 31, and as a result, a 53rd week is added
every five or six years. Fiscal year 2008 consisted of
53 weeks while fiscal years 2009 and 2007 each consisted of
52 weeks. Our CEE operations are based on a calendar year
ending December 31 and, therefore, are not impacted by the
53rd week. Various estimates and assumptions were made to
quantify the impact of the additional week of operations. The
table below summarizes the estimated impact of the
53rd week on fiscal year 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53rd Week Impact
|
|
|
|
U.S.
|
|
|
Caribbean
|
|
|
Worldwide
|
|
|
Net sales
|
|
$
|
48.5
|
|
|
$
|
4.2
|
|
|
$
|
52.7
|
|
Cost of goods sold
|
|
|
28.4
|
|
|
|
3.2
|
|
|
|
31.6
|
|
SD&A expenses
|
|
|
11.3
|
|
|
|
0.9
|
|
|
|
12.2
|
|
Operating income
|
|
|
8.8
|
|
|
|
0.1
|
|
|
|
8.9
|
|
Net income attributable to PepsiAmericas, Inc.
|
|
|
|
|
|
|
|
|
|
|
5.7
|
|
Acquisitions
In fiscal year 2007, we formed a joint venture with PepsiCo to
acquire an interest in Sandora, the leading juice company in
Ukraine. Under the terms of the joint venture agreement, we hold
a 60 percent interest and PepsiCo holds the remaining
40 percent interest. In August 2007, the joint venture
acquired 80 percent of Sandora. In November 2007, the joint
venture completed the acquisition of the remaining
20 percent interest. Beginning in September 2007, we fully
consolidated the results of operations of the joint venture and
report the noncontrolling interest in our Consolidated Financial
Statements. Due to the timing of the receipt of available
financial information, we record results on a one-month lag
basis.
In the third quarter of 2007, we purchased a 20 percent
interest in a joint venture that owns Agrima. Agrima produces,
sells and distributes PepsiCo products and other beverages
throughout Bulgaria. Due to the timing of the receipt of
available financial information, we record results in
Equity in net earnings (loss) of nonconsolidated
companies on a one-quarter lag basis.
31
Operating
Results 2009 compared with 2008
Volume. Sales volume (decline) growth
for fiscal years 2009 and 2008 were as follows:
|
|
|
|
|
|
|
|
|
Volume
|
|
2009
|
|
|
2008
|
|
|
U.S.
|
|
|
(5.0
|
)%
|
|
|
(2.7
|
)%
|
CEE
|
|
|
(12.8
|
)%
|
|
|
34.7
|
%
|
Caribbean
|
|
|
(58.2
|
)%
|
|
|
(3.9
|
)%
|
Worldwide
|
|
|
(10.1
|
)%
|
|
|
6.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Compared to 2008
|
|
Volume Change
|
|
U.S.
|
|
|
CEE
|
|
|
Caribbean
|
|
|
Worldwide
|
|
|
Constant territory volume
|
|
|
(3.6
|
)%
|
|
|
(12.8
|
)%
|
|
|
(15.9
|
)%
|
|
|
(7.0
|
)%
|
Impact of 53rd week
|
|
|
(1.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
(0.9
|
)%
|
Deconsolidation of Caribbean
|
|
|
|
|
|
|
|
|
|
|
(42.3
|
)%
|
|
|
(2.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in volume
|
|
|
(5.0
|
)%
|
|
|
(12.8
|
)%
|
|
|
(58.2
|
)%
|
|
|
(10.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal year 2009, worldwide volume declined
10.1 percent, with constant territory volume declines
across all our geographic segments driven by difficult economic
conditions. Additionally, the deconsolidation of the Caribbean
business reduced worldwide volume by 2.2 percentage points.
Volume in the U.S. declined 5 percent in fiscal year
2009 compared to fiscal year 2008. The lapping of the
53rd week contributed an estimated 1.4 percentage
points to the volume decline. Carbonated soft drink volume
decreased 2 percent compared to the prior year period. This
decline was an improvement from the prior year rate of decline
as we benefited from a renewed focus on core brands and an
expanded product portfolio. Non-carbonated soft drinks decreased
10 percent, which reflected a continued decline in the low
margin Aquafina take-home package and teas. Single-serve volume
grew in the retail channel while softness in the foodservice
channel drove overall single-serve volume down 5 percent in
fiscal year 2009. Foodservice represents approximately
40 percent of our single-serve business.
Volume in CEE declined 12.8 percent in fiscal year 2009
compared to fiscal year 2008, reflecting continued category
softness as a result of difficult economic conditions,
particularly in our emerging markets. Additionally, volume was
adversely impacted by softness in the third-party distributor
business in Romania and the export business in Ukraine. Volume
in Poland grew modestly, reflecting a more stable economic
environment and the benefits from our feet on the
street sales force initiative that helped drive new
distribution outlets.
Volume in the Caribbean declined 58.2 percent in fiscal
year 2009 compared to the same period last year. The
deconsolidation of the Caribbean business reduced volume by
42.3 percentage points. The remaining decrease was driven
mainly by a weaker economy and competitive pressures in Puerto
Rico.
32
Net Sales. Net sales and net pricing
statistics for fiscal years 2009 and 2008 were as follows
(dollar amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
U.S.
|
|
$
|
3,405.2
|
|
|
$
|
3,429.9
|
|
|
|
(0.7
|
)%
|
CEE
|
|
|
915.2
|
|
|
|
1,260.9
|
|
|
|
(27.4
|
)%
|
Caribbean
|
|
|
100.9
|
|
|
|
246.4
|
|
|
|
(59.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide
|
|
$
|
4,421.3
|
|
|
$
|
4,937.2
|
|
|
|
(10.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Compared to 2008
|
|
Net Sales Change
|
|
U.S.
|
|
|
CEE
|
|
|
Caribbean
|
|
|
Worldwide
|
|
|
Volume impact *
|
|
|
(3.1
|
)%
|
|
|
(11.8
|
)%
|
|
|
(13.8
|
)%
|
|
|
(6.1
|
)%
|
Net price per case, excluding impact of foreign currency
|
|
|
4.1
|
%
|
|
|
7.7
|
%
|
|
|
7.0
|
%
|
|
|
5.6
|
%
|
Impact of foreign currency
|
|
|
|
|
|
|
(21.5
|
)%
|
|
|
(7.4
|
)%
|
|
|
(5.9
|
)%
|
Impact of 53rd week
|
|
|
(1.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
(1.0
|
)%
|
Deconsolidation of Caribbean
|
|
|
|
|
|
|
|
|
|
|
(43.5
|
)%
|
|
|
(2.6
|
)%
|
Non-core
|
|
|
(0.3
|
)%
|
|
|
(1.8
|
)%
|
|
|
(1.4
|
)%
|
|
|
(0.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net sales
|
|
|
(0.7
|
)%
|
|
|
(27.4
|
)%
|
|
|
(59.1
|
)%
|
|
|
(10.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The amounts in this table represent the dollar impact on net
sales due to changes in volume and are not intended to equal the
absolute change in volume. |
|
|
|
|
|
|
|
|
|
Net Pricing Growth (Decline) **
|
|
2009
|
|
|
2008
|
|
|
U.S.
|
|
|
4.1
|
%
|
|
|
4.1
|
%
|
CEE
|
|
|
(16.9
|
)%
|
|
|
12.6
|
%
|
Caribbean
|
|
|
(3.6
|
)%
|
|
|
4.6
|
%
|
Worldwide
|
|
|
(1.0
|
)%
|
|
|
4.2
|
%
|
|
|
|
** |
|
Includes the impact from deconsolidation, acquisitions and
foreign currency on core net sales. |
Net sales decreased $515.9 million, or 10.4 percent,
to $4,421.3 million in fiscal year 2009 compared to
$4,937.2 million in fiscal year 2008. The decrease was
mainly attributable to the unfavorable impact of foreign
currency, which was responsible for 5.9 percentage points
of the decline, and a decrease in volume. Strong pricing in all
geographies drove net pricing on a currency neutral basis up
5.6 percent, helping to mitigate the impact of lower
volumes, higher raw material costs and foreign currency
headwinds.
Net sales in the U.S. for fiscal year 2009 decreased
$24.7 million, or 0.7 percent, to
$3,405.2 million from $3,429.9 million in the prior
year. The decrease was due to the lapping of the
53rd
week, which we estimate contributed $48.5 million in net
sales in fiscal year 2008, and lower volumes. Net pricing grew
4.1 percent, driven mainly by rate increases to cover
higher raw material costs.
Net sales in CEE for fiscal year 2009 decreased
$345.7 million, or 27.4 percent, to
$915.2 million from $1,260.9 million in fiscal year
2008. Foreign currency contributed 21.5 percentage points
of the decrease, with the remaining decrease primarily
attributed to lower volume associated with difficult economic
conditions. This decrease was offset partly by an increase in
net pricing of 7.7 percent on a currency neutral basis,
driven by increases in rate and a positive contribution from
package mix.
Net sales in the Caribbean decreased $145.5 million, or
59.1 percent in fiscal year 2009 to $100.9 million
from $246.4 million in fiscal year 2008. The
deconsolidation of the Caribbean business reduced net sales by
43.5 percentage points. The remaining decrease in net sales
reflected a decline in constant territory volume and the
unfavorable impact of foreign currency.
33
Cost of Goods Sold. Cost of goods sold
and cost of goods sold per unit statistics for fiscal years 2009
and 2008 were as follows (dollar amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
U.S.
|
|
$
|
2,010.2
|
|
|
$
|
2,015.4
|
|
|
|
(0.3
|
)%
|
CEE
|
|
|
568.8
|
|
|
|
755.6
|
|
|
|
(24.7
|
)%
|
Caribbean
|
|
|
75.4
|
|
|
|
184.6
|
|
|
|
(59.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide
|
|
$
|
2,654.4
|
|
|
$
|
2,955.6
|
|
|
|
(10.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Compared to 2008
|
|
Cost of Goods Sold Change
|
|
U.S.
|
|
|
CEE
|
|
|
Caribbean
|
|
|
Worldwide
|
|
|
Volume impact *
|
|
|
(3.0
|
)%
|
|
|
(11.6
|
)%
|
|
|
(13.9
|
)%
|
|
|
(5.9
|
)%
|
Cost per case, excluding impact of foreign currency
|
|
|
4.6
|
%
|
|
|
|
|
|
|
6.7
|
%
|
|
|
3.7
|
%
|
Impact of foreign currency
|
|
|
|
|
|
|
(12.3
|
)%
|
|
|
(7.7
|
)%
|
|
|
(3.5
|
)%
|
Impact of 53rd week
|
|
|
(1.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
(1.0
|
)%
|
Deconsolidation of Caribbean
|
|
|
|
|
|
|
|
|
|
|
(42.8
|
)%
|
|
|
(3.2
|
)%
|
Non-core
|
|
|
(0.5
|
)%
|
|
|
(0.8
|
)%
|
|
|
(1.5
|
)%
|
|
|
(0.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cost of goods sold
|
|
|
(0.3
|
)%
|
|
|
(24.7
|
)%
|
|
|
(59.2
|
)%
|
|
|
(10.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The amounts in this table represent the dollar impact on cost of
goods sold due to changes in volume and are not intended to
equal the absolute change in volume. |
|
|
|
|
|
|
|
|
|
Cost of Goods Sold per Unit Increase (Decrease) **
|
|
2009
|
|
|
2008
|
|
|
U.S.
|
|
|
4.6
|
%
|
|
|
4.4
|
%
|
CEE
|
|
|
(13.7
|
)%
|
|
|
17.0
|
%
|
Caribbean
|
|
|
(3.4
|
)%
|
|
|
4.9
|
%
|
Worldwide
|
|
|
(0.8
|
)%
|
|
|
5.3
|
%
|
|
|
|
** |
|
Includes the impact from deconsolidation, acquisitions and
foreign currency on core cost of goods sold. |
Cost of goods sold decreased $301.2 million, or
10.2 percent, to $2,654.4 million in fiscal year 2009
from $2,955.6 million in the prior year. The decrease was
driven mainly by the decline in volume, favorable impact of
foreign currency, and the deconsolidation of the Caribbean
business. These decreases were partially offset by higher raw
material costs in the U.S. and Caribbean. Cost of goods
sold per unit on a currency neutral basis increased
3.7 percent in fiscal year 2009 compared to the same period
in 2008.
In the U.S., cost of goods sold decreased $5.2 million, or
0.3 percent, to $2,010.2 million in fiscal year 2009
from $2,015.4 million in the prior year. The decrease was
mainly driven by lower volume and lapping of the
53rd
week, partly offset by a cost of goods sold per unit increase of
4.6 percent due mainly to higher raw material costs.
In CEE, cost of goods sold decreased $186.8 million, or
24.7 percent, to $568.8 million in fiscal year 2009
compared to $755.6 million in the prior year. Foreign
currency contributed 12.3 percentage points to the decrease
in cost of goods sold, with the remaining decrease primarily
attributed to a decline in volume. There was no change in the
cost of goods sold per unit on a currency neutral basis in
fiscal year 2009 compared to fiscal year 2008. Lower juice
concentrate and packaging material costs offset increases in
other raw material costs.
In the Caribbean, cost of goods sold decreased
$109.2 million, or 59.2 percent, to $75.4 million
in fiscal year 2009 compared to $184.6 million in fiscal
year 2008. The deconsolidation of the Caribbean business reduced
cost of goods sold by 42.8 percentage points. The remaining
decrease in cost of goods sold was driven by a decline in
constant territory volume and the favorable impact of foreign
currency.
34
Selling, Delivery and Administrative
Expenses. SD&A expenses and SD&A
expense statistics for fiscal years 2009 and 2008 were as
follows (dollar amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
SD&A Expenses
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
U.S.
|
|
$
|
1,054.1
|
|
|
$
|
1,070.4
|
|
|
|
(1.5
|
)%
|
CEE
|
|
|
278.0
|
|
|
|
355.6
|
|
|
|
(21.8
|
)%
|
Caribbean
|
|
|
25.4
|
|
|
|
59.4
|
|
|
|
(57.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide
|
|
$
|
1,357.5
|
|
|
$
|
1,485.4
|
|
|
|
(8.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Compared to 2008
|
|
SD&A Expense Change
|
|
U.S.
|
|
|
CEE
|
|
|
Caribbean
|
|
|
Worldwide
|
|
|
Cost impact, excluding items listed below
|
|
|
(0.4
|
)%
|
|
|
(7.0
|
)%
|
|
|
(6.7
|
)%
|
|
|
(2.2
|
)%
|
Impact of foreign currency
|
|
|
|
|
|
|
(14.8
|
)%
|
|
|
(8.1
|
)%
|
|
|
(3.8
|
)%
|
Impact of 53rd week
|
|
|
(1.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
(0.8
|
)%
|
Deconsolidation of Caribbean
|
|
|
|
|
|
|
|
|
|
|
(42.4
|
)%
|
|
|
(1.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in SD&A expense
|
|
|
(1.5
|
)%
|
|
|
(21.8
|
)%
|
|
|
(57.2
|
)%
|
|
|
(8.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SD&A Expenses as a Percent of Net Sales
|
|
2009
|
|
|
2008
|
|
|
U.S.
|
|
|
31.0
|
%
|
|
|
31.2
|
%
|
CEE
|
|
|
30.4
|
%
|
|
|
28.2
|
%
|
Caribbean
|
|
|
25.2
|
%
|
|
|
24.1
|
%
|
Worldwide
|
|
|
30.7
|
%
|
|
|
30.1
|
%
|
In fiscal year 2009, SD&A expenses decreased
$127.9 million, or 8.6 percent, to
$1,357.5 million from $1,485.4 million in the prior
year. Foreign currency reduced SD&A expenses by
3.8 percentage points in fiscal year 2009. The
deconsolidation of the Caribbean business reduced SD&A
expenses by 1.8 percentage points. The remainder of the
decrease in SD&A expense was primarily a result of the
companys global productivity and cost containment
initiatives, as well as the impact of lower volumes.
In the U.S., SD&A expenses decreased $16.3 million, or
1.5 percent, to $1,054.1 million in fiscal year 2009
compared to $1,070.4 million in the prior year. The lapping
of the
53rd week
in fiscal year 2008 drove an estimated 1.1 percentage
points of the decline in SD&A expenses. The remainder of
the decrease was due mainly to the impact of our productivity
and cost containment initiatives and lower fuel costs, as well
as the impact of lower volumes. These cost savings offset the
$6.1 million of fees associated with the PepsiCo merger,
$4.9 million write-down of non-operating assets and
$3.4 million loss from multi-employer pension plans
included in SD&A expenses in fiscal year 2009. As a
percentage of net sales, SD&A expenses decreased to
31.0 percent compared to 31.2 percent in fiscal year
2008.
In CEE, SD&A expenses decreased $77.6 million, or
21.8 percent, to $278.0 million in fiscal year 2009
compared to $355.6 million in the prior year. Foreign
currency contributed 14.8 percentage points to the
decrease. The remaining decrease was mainly due to lower volume,
the impact of our productivity and restructuring initiatives and
lower advertising costs. As a percentage of net sales, SD&A
expenses increased to 30.4 percent compared to
28.2 percent in fiscal year 2008 primarily driven by volume
declines in fiscal year 2009.
In the Caribbean, SD&A expenses decreased
$34.0 million, or 57.2 percent, to $25.4 million
in fiscal year 2009 from $59.4 million in the prior year.
The deconsolidation of the Caribbean business reduced SD&A
expenses by 42.4 percentage points. The remaining decrease
reflected the impact of foreign currency, lower constant
territory volume and the benefits from the restructuring of the
business.
35
Operating Income (Loss). Operating
income (loss) for fiscal years 2009 and 2008 was as follows
(dollar amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
U.S.
|
|
$
|
341.1
|
|
|
$
|
333.8
|
|
|
|
2.2
|
%
|
CEE
|
|
|
41.2
|
|
|
|
146.0
|
|
|
|
(71.8
|
)%
|
Caribbean
|
|
|
(1.4
|
)
|
|
|
(6.6
|
)
|
|
|
78.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide
|
|
$
|
380.9
|
|
|
$
|
473.2
|
|
|
|
(19.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Compared to 2008
|
|
Operating Income (Loss) Change
|
|
U.S.
|
|
|
CEE
|
|
|
Caribbean
|
|
|
Worldwide
|
|
|
Operating results, excluding items listed below
|
|
|
5.0
|
%
|
|
|
14.4
|
%
|
|
|
(150.0
|
)%
|
|
|
7.7
|
%
|
Impact of foreign currency
|
|
|
|
|
|
|
(86.2
|
)%
|
|
|
75.0
|
%
|
|
|
(26.7
|
)%
|
Impact of 53rd week
|
|
|
(2.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
(1.5
|
)%
|
Deconsolidation of Caribbean
|
|
|
|
|
|
|
|
|
|
|
153.8
|
%
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in operating income (loss)
|
|
|
2.2
|
%
|
|
|
(71.8
|
)%
|
|
|
78.8
|
%
|
|
|
(19.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income decreased $92.3 million, or
19.5 percent, to $380.9 million in fiscal year 2009
compared to $473.2 million in fiscal year 2008, reflecting
the negative impact from foreign currency and the difficult
global economic conditions, particularly in our emerging markets
in CEE.
Operating income in the U.S. increased $7.3 million,
or 2.2 percent, to $341.1 million in fiscal year 2009
from $333.8 million in fiscal year 2008. The increase was
primarily due to lower costs driven by our productivity and cost
containment initiatives, as well as higher net pricing. These
factors helped offset volume declines, higher raw material
costs, losses related to the multi-employer pension plans,
impairment of non-operating assets and fees associated with the
pending PepsiCo merger, as well as the lapping of the
53rd week.
Operating income in CEE decreased $104.8 million, or
71.8 percent, to $41.2 million in fiscal year 2009
from $146.0 million in the prior year. The decline in
operating performance was mainly due to the negative impact of
foreign currency, a decrease in volume, an intangible assets
impairment charge of $17.4 million related to our
Sandora and Sadochok brands and special charges of
$9.8 million related to the restructuring of our Hungary
operations.
The operating loss in the Caribbean was $1.4 million in
fiscal year 2009, compared to $6.6 million in the prior
year. The improvement in operating results was mainly due to a
decrease in special charges of $7.5 million in fiscal year
2009 as compared with fiscal year 2008.
Interest Expense, Net and Other Expense,
Net. Interest expense, net decreased
$45.5 million in fiscal year 2009 to $65.6 million,
compared to $111.1 million in fiscal year 2008. During
fiscal year 2009, we received $33.0 million from the
termination of an interest rate swap and recorded the gain in
interest expense, net. The remaining decrease was mainly due to
lower interest rates on floating rate debt.
We recorded other expense, net, of $13.9 million in fiscal
year 2009 compared to $7.9 million reported in fiscal year
2008. Foreign currency transaction losses were $4.8 million
in fiscal year 2009 compared to foreign currency transaction
gains of $0.5 million in the prior year. In fiscal year
2009, we also recorded an
other-than-temporary
loss of $2.1 million to write-off our remaining investment
in an equity security, Northfield Laboratories, Inc., that was
classified as
available-for-sale.
Income Taxes. The effective income tax
rate, which is income tax expense expressed as a percentage of
income from continuing operations before income taxes and equity
in net earnings (loss) of nonconsolidated companies, was
36.0 percent in fiscal year 2009, compared to
30.4 percent in fiscal year 2008. The higher tax rate was
due primarily to the impact of the deconsolidation of our
Caribbean business and a change in the geographic mix of
earnings and the associated varying statutory tax rates.
36
Equity in Net Earnings (Loss) of Nonconsolidated
Companies. Equity in net earnings (loss) of
nonconsolidated companies consists of our 18 percent
interest in a joint venture with CABCORP, which was formed in
fiscal year 2009, and our 20 percent interest in a joint
venture that owns Agrima in Bulgaria. Equity in net earnings of
nonconsolidated companies was $1.4 million in fiscal year
2009, compared to equity in net loss of nonconsolidated
companies of $1.1 million in fiscal year 2008.
Loss from Discontinued Operations. In
fiscal year 2008, we recorded a charge of $15.0 million
($9.2 million net of taxes) related to revised estimates
for the cost of environmental remediation, legal and related
administrative costs.
Net Income. Net income consists of
income attributable to both PepsiAmericas, Inc. and
noncontrolling interests. Net income decreased
$58.4 million to $177.7 million in fiscal year 2009,
compared to $236.1 million in fiscal year 2008. The
discussion of our operating results, included above, and the
$25.8 million ($23.0 million net of taxes) non-cash
loss from the deconsolidation of our Caribbean business explain
the decrease in net income.
Net (Loss) Income Attributable to Noncontrolling
Interests. We fully consolidated the
operating results of Sandora and the Bahamas in our Consolidated
Statements of Income. Net (loss) income attributable to
noncontrolling interests represented 40 percent of Sandora
results and 30 percent of the Bahamas results. Net loss
attributable to noncontrolling interests was $3.5 million
in fiscal year 2009 compared to net income attributable to
noncontrolling interests of $9.7 million in fiscal year
2008, primarily reflecting the lower operating results from the
Sandora business, including the intangible assets impairment
charge recorded in fiscal year 2009.
Net Income Attributable to PepsiAmericas,
Inc. Net income attributable to
PepsiAmericas, Inc. decreased $45.2 million to
$181.2 million in fiscal year 2009, compared to
$226.4 million in fiscal year 2008. The discussion of our
operating results, included above, explains the decrease in net
income attributable to PepsiAmericas, Inc.
Operating
Results 2008 compared with 2007
Volume. Sales volume growth (decline)
for fiscal years 2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
Volume
|
|
2008
|
|
|
2007
|
|
|
U.S.
|
|
|
(2.7
|
)%
|
|
|
(1.4
|
)%
|
CEE
|
|
|
34.7
|
%
|
|
|
49.5
|
%
|
Caribbean
|
|
|
(3.9
|
)%
|
|
|
(5.0
|
)%
|
Worldwide
|
|
|
6.8
|
%
|
|
|
7.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Compared to 2007
|
|
Volume Change
|
|
U.S.
|
|
|
CEE
|
|
|
Caribbean
|
|
|
Worldwide
|
|
|
Constant territory volume
|
|
|
(4.1
|
)%
|
|
|
2.6
|
%
|
|
|
(5.9
|
)%
|
|
|
(2.5
|
)%
|
Impact of 53rd week
|
|
|
1.4
|
%
|
|
|
|
|
|
|
2.0
|
%
|
|
|
1.1
|
%
|
Acquisitions
|
|
|
|
|
|
|
32.1
|
%
|
|
|
|
|
|
|
8.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in volume
|
|
|
(2.7
|
)%
|
|
|
34.7
|
%
|
|
|
(3.9
|
)%
|
|
|
6.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal year 2008, worldwide volume increased 6.8 percent
compared to the prior year. The increase in worldwide volume was
primarily due to the incremental impact of acquisitions and
constant territory growth in CEE, partly offset by volume
declines in the U.S. and the Caribbean.
Volume in the U.S. declined 2.7 percent in fiscal year
2008 compared to fiscal year 2007 due, in part, to a decline in
carbonated soft drink volume of 3 percent. Single-serve
volume declined 4 percent due mainly to softness in the
foodservice and convenience and gas channels. The non-carbonated
beverage category declined 8 percent, driven by a
15 percent volume decline in Aquafina due primarily to
declines in take-home package
37
and an 11 percent decline in the tea category. The decrease
in volume was partly offset by the 53rd week estimated
contribution of 1.4 percentage points.
Volume in CEE increased 34.7 percent in fiscal year 2008
compared to fiscal year 2007. The increase was primarily due to
the Sandora acquisition, which contributed 32.1 percentage
points of the increase. The remaining growth in CEE was led by
high single-digit growth in Romania and mid single-digit growth
in Poland.
Volume in the Caribbean declined 3.9 percent in fiscal year
2008 compared to fiscal year 2007, driven mainly by a weaker
economy and competitive pressures in Puerto Rico, partly offset
by volume growth in Jamaica together with the 53rd week
estimated contribution of 2.0 percentage points.
Net Sales. Net sales and net pricing
statistics for fiscal years 2008 and 2007 were as follows
(dollar amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
U.S.
|
|
$
|
3,429.9
|
|
|
$
|
3,384.9
|
|
|
|
1.3
|
%
|
CEE
|
|
|
1,260.9
|
|
|
|
849.4
|
|
|
|
48.4
|
%
|
Caribbean
|
|
|
246.4
|
|
|
|
245.2
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide
|
|
$
|
4,937.2
|
|
|
$
|
4,479.5
|
|
|
|
10.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Compared to 2007
|
|
Net Sales Change
|
|
U.S.
|
|
|
CEE
|
|
|
Caribbean
|
|
|
Worldwide
|
|
|
Volume impact *
|
|
|
(3.5
|
)%
|
|
|
2.4
|
%
|
|
|
(5.0
|
)%
|
|
|
(2.1
|
)%
|
Net price per case, excluding impact of foreign currency
|
|
|
4.1
|
%
|
|
|
6.0
|
%
|
|
|
8.2
|
%
|
|
|
4.4
|
%
|
Impact of foreign currency
|
|
|
|
|
|
|
9.4
|
%
|
|
|
(3.3
|
)%
|
|
|
1.6
|
%
|
Impact of 53rd week
|
|
|
1.4
|
%
|
|
|
|
|
|
|
1.7
|
%
|
|
|
1.2
|
%
|
Acquisitions
|
|
|
|
|
|
|
32.3
|
%
|
|
|
|
|
|
|
6.1
|
%
|
Non-core
|
|
|
(0.7
|
)%
|
|
|
(1.7
|
)%
|
|
|
(1.1
|
)%
|
|
|
(1.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net sales
|
|
|
1.3
|
%
|
|
|
48.4
|
%
|
|
|
0.5
|
%
|
|
|
10.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The amounts in this table represent the dollar impact on net
sales due to changes in volume and are not intended to equal the
absolute change in volume. |
|
|
|
|
|
|
|
|
|
Net Pricing Growth **
|
|
2008
|
|
|
2007
|
|
|
U.S.
|
|
|
4.1
|
%
|
|
|
5.1
|
%
|
CEE
|
|
|
12.6
|
%
|
|
|
19.2
|
%
|
Caribbean
|
|
|
4.6
|
%
|
|
|
5.6
|
%
|
Worldwide
|
|
|
4.2
|
%
|
|
|
4.8
|
%
|
|
|
|
** |
|
Includes the impact from acquisitions and foreign currency on
core net sales. |
Net sales increased $457.7 million, or 10.2 percent,
to $4,937.2 million in fiscal year 2008 compared to
$4,479.5 million in fiscal year 2007. The increase was
mainly attributable to acquisitions, worldwide increases in net
pricing on a currency neutral basis, the favorable impact of
foreign currency and the impact of the 53rd week, partly
offset by volume declines.
Net sales in the U.S. in fiscal year 2008 increased
$45.0 million, or 1.3 percent, to
$3,429.9 million from $3,384.9 million in fiscal year
2007. The increase in net sales was primarily due to a
4.1 percent increase in net pricing primarily driven by
rate increases to cover higher raw material costs, partly offset
by a decline in volume. The 53rd week contributed an
estimated 1.4 percentage points of the increase.
Net sales in CEE in fiscal year 2008 increased
$411.5 million, or 48.4 percent, to
$1,260.9 million from $849.4 million in fiscal year
2007. The increase was primarily due to acquisitions, which
contributed
38
32.3 percentage points of the increase. Foreign currency
contributed 9.4 percentage points to the increase in net
sales. The remaining increase in net sales was due to volume
growth, partly offset by a decline in non-core sales. Net
pricing increased 6.0 percent on a currency neutral basis,
driven by rate increases and product mix.
Net sales in the Caribbean increased $1.2 million, or
0.5 percent, in fiscal year 2008 to $246.4 million
from $245.2 million in fiscal year 2007. The increase was a
result of an increase in net pricing of 4.6 percent and the
53rd week, which contributed an estimated
1.7 percentage points to net sales. The increase in net
sales was partly offset by a volume decline of 3.9 percent.
Cost of Goods Sold. Cost of goods sold
and cost of goods sold per unit statistics for fiscal years 2008
and 2007 were as follows (dollar amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
U.S.
|
|
$
|
2,015.4
|
|
|
$
|
1,982.0
|
|
|
|
1.7
|
%
|
CEE
|
|
|
755.6
|
|
|
|
491.4
|
|
|
|
53.8
|
%
|
Caribbean
|
|
|
184.6
|
|
|
|
182.8
|
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide
|
|
$
|
2,955.6
|
|
|
$
|
2,656.2
|
|
|
|
11.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Compared to 2007
|
|
Cost of Goods Sold Change
|
|
U.S.
|
|
|
CEE
|
|
|
Caribbean
|
|
|
Worldwide
|
|
|
Volume impact *
|
|
|
(3.4
|
)%
|
|
|
2.3
|
%
|
|
|
(5.0
|
)%
|
|
|
(2.1
|
)%
|
Cost per case, excluding impact of foreign currency
|
|
|
4.4
|
%
|
|
|
5.4
|
%
|
|
|
8.4
|
%
|
|
|
4.3
|
%
|
Impact of foreign currency
|
|
|
|
|
|
|
6.9
|
%
|
|
|
(3.3
|
)%
|
|
|
1.0
|
%
|
Impact of 53rd week
|
|
|
1.4
|
%
|
|
|
|
|
|
|
1.8
|
%
|
|
|
1.2
|
%
|
Acquisitions
|
|
|
|
|
|
|
41.1
|
%
|
|
|
|
|
|
|
7.6
|
%
|
Non-core
|
|
|
(0.7
|
)%
|
|
|
(1.9
|
)%
|
|
|
(0.9
|
)%
|
|
|
(0.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cost of goods sold
|
|
|
1.7
|
%
|
|
|
53.8
|
%
|
|
|
1.0
|
%
|
|
|
11.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The amounts in this table represent the dollar impact on cost of
goods sold due to changes in volume and are not intended to
equal the absolute change in volume. |
|
|
|
|
|
|
|
|
|
Cost of Goods Sold per Unit Increase **
|
|
2008
|
|
|
2007
|
|
|
U.S.
|
|
|
4.4
|
%
|
|
|
5.2
|
%
|
CEE
|
|
|
17.0
|
%
|
|
|
13.0
|
%
|
Caribbean
|
|
|
4.9
|
%
|
|
|
5.6
|
%
|
Worldwide
|
|
|
5.3
|
%
|
|
|
3.9
|
%
|
|
|
|
** |
|
Includes the impact from acquisitions and foreign currency on
core cost of goods sold. |
Cost of goods sold increased $299.4 million, or
11.3 percent, to $2,955.6 million in fiscal year 2008
from $2,656.2 million in fiscal year 2007. This increase
was driven primarily by acquisitions, higher raw material costs
and the negative impact of foreign currency. The 53rd week
contributed an estimated 1.2 percentage points of the
increase. Cost of goods sold per unit increased 5.3 percent
during fiscal year 2008 compared to fiscal year 2007.
In the U.S., cost of goods sold increased $33.4 million, or
1.7 percent, to $2,015.4 million in fiscal year 2008
from $1,982.0 million in the prior year. Cost of goods sold
per unit increased 4.4 percent in the U.S., primarily due
to higher raw material costs, as well as the impact of mix,
partly offset by a decline in volume. The 53rd week
contributed an estimated 1.4 percentage points of the
increase.
In CEE, cost of goods sold increased $264.2 million, or
53.8 percent, to $755.6 million in fiscal year 2008,
compared to $491.4 million in the prior year. The increase
was primarily due to acquisitions, which contributed
41.1 percentage points of the increase, while the impact of
foreign currency contributed
39
6.9 percentage points to the increase in cost of goods
sold. Cost of goods sold per unit increased 5.4 percent on
a currency neutral basis in fiscal year 2008 compared to fiscal
year 2007 due to higher raw material costs.
In the Caribbean, cost of goods sold increased
$1.8 million, or 1.0 percent, to $184.6 million
in fiscal year 2008, compared to $182.8 million in fiscal
year 2007. The increase was mainly driven by an increase in cost
of goods sold per unit of 4.9 percent, attributable to
higher raw material and energy costs. The 53rd week
contributed an estimated 1.8 percentage points of the
increase.
Selling, Delivery and Administrative
Expenses. SD&A expenses and SD&A
expense statistics for fiscal years 2008 and 2007 were as
follows (dollar amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
SD&A Expenses
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
U.S.
|
|
$
|
1,070.4
|
|
|
$
|
1,061.2
|
|
|
|
0.9
|
%
|
CEE
|
|
|
355.6
|
|
|
|
261.3
|
|
|
|
36.1
|
%
|
Caribbean
|
|
|
59.4
|
|
|
|
58.4
|
|
|
|
1.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide
|
|
$
|
1,485.4
|
|
|
$
|
1,380.9
|
|
|
|
7.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Compared to 2007
|
|
SD&A Expense Change
|
|
U.S.
|
|
|
CEE
|
|
|
Caribbean
|
|
|
Worldwide
|
|
|
Cost impact, excluding items listed below
|
|
|
(0.2
|
)%
|
|
|
9.0
|
%
|
|
|
3.6
|
%
|
|
|
1.6
|
%
|
Impact of foreign currency
|
|
|
|
|
|
|
11.1
|
%
|
|
|
(3.4
|
)%
|
|
|
2.0
|
%
|
Impact of 53rd week
|
|
|
1.1
|
%
|
|
|
|
|
|
|
1.5
|
%
|
|
|
0.9
|
%
|
Acquisitions
|
|
|
|
|
|
|
16.0
|
%
|
|
|
|
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in SD&A expense
|
|
|
0.9
|
%
|
|
|
36.1
|
%
|
|
|
1.7
|
%
|
|
|
7.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SD&A Expenses as a Percent of Net Sales
|
|
2008
|
|
|
2007
|
|
|
U.S.
|
|
|
31.2
|
%
|
|
|
31.4
|
%
|
CEE
|
|
|
28.2
|
%
|
|
|
30.8
|
%
|
Caribbean
|
|
|
24.1
|
%
|
|
|
23.8
|
%
|
Worldwide
|
|
|
30.1
|
%
|
|
|
30.8
|
%
|
In fiscal year 2008, SD&A expenses increased
$104.5 million, or 7.6 percent, to
$1,485.4 million from $1,380.9 million in fiscal year
2007. As a percentage of net sales, SD&A expenses decreased
to 30.1 percent during the fiscal year 2008, compared to
30.8 percent in fiscal year 2007, caused by the impact of
acquisitions and effective cost management.
In the U.S., SD&A expenses increased $9.2 million, or
0.9 percent, to $1,070.4 million in fiscal year 2008,
compared to $1,061.2 million in the prior year. SD&A
expenses increased during fiscal year 2008 due to an increase in
fuel costs, partly offset by favorable compensation and benefit
expenses and the impact of productivity initiatives. The
53rd week contributed an estimated 1.1 percentage
points of the increase.
In CEE, SD&A expenses increased $94.3 million, or
36.1 percent, to $355.6 million from
$261.3 million in the prior year. Acquisitions contributed
16.0 percentage points of the increase and foreign currency
contributed 11.1 percent. As a percentage of net sales,
SD&A expense improved to 28.2 percent compared to
30.8 percent during fiscal year 2007, primarily due to
lower overall operating costs for Sandora as compared to the
other markets in CEE.
In the Caribbean, SD&A expenses increased
$1.0 million, or 1.7 percent, to $59.4 million in
fiscal year 2008 from $58.4 million in the prior year. The
53rd week contributed an estimated 1.5 percentage
points of this increase. SD&A expenses as a percentage of
net sales of 24.1 percent in fiscal year 2008 was
comparable to the prior year results.
40
Operating Income (Loss). Operating
income (loss) for fiscal years 2008 and 2007 was as follows
(dollar amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
U.S.
|
|
$
|
333.8
|
|
|
$
|
336.9
|
|
|
|
(0.9
|
)%
|
CEE
|
|
|
146.0
|
|
|
|
95.2
|
|
|
|
53.4
|
%
|
Caribbean
|
|
|
(6.6
|
)
|
|
|
4.0
|
|
|
|
(265.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide
|
|
$
|
473.2
|
|
|
$
|
436.1
|
|
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Compared to 2007
|
|
Operating Income (Loss) Change
|
|
U.S.
|
|
|
CEE
|
|
|
Caribbean
|
|
|
Worldwide
|
|
|
Operating results, excluding items listed below
|
|
|
(3.5
|
)%
|
|
|
2.8
|
%
|
|
|
(269.9
|
)%
|
|
|
(4.6
|
)%
|
Impact of foreign currency
|
|
|
|
|
|
|
18.3
|
%
|
|
|
2.3
|
%
|
|
|
4.0
|
%
|
Impact of 53rd week
|
|
|
2.6
|
%
|
|
|
|
|
|
|
2.6
|
%
|
|
|
2.1
|
%
|
Acquisitions
|
|
|
|
|
|
|
32.3
|
%
|
|
|
|
|
|
|
7.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in operating income (loss)
|
|
|
(0.9
|
)%
|
|
|
53.4
|
%
|
|
|
(265.0
|
)%
|
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income increased $37.1 million, or
8.5 percent, to $473.2 million in fiscal year 2008,
compared to $436.1 million in fiscal year 2007.
Operating income in the U.S. decreased $3.1 million,
or 0.9 percent, to $333.8 million in fiscal year 2008,
compared to $336.9 million in fiscal year 2007. The
decrease was primarily due to lower volume, higher cost of goods
sold, higher SD&A expenses and special charges and
adjustments. The decrease was partly offset by increases in net
pricing and the contribution from the 53rd week.
Operating income in CEE increased $50.8 million, or
53.4 percent, to $146.0 million in fiscal year 2008,
compared to operating income of $95.2 million in fiscal
year 2007. This was mainly due to the beneficial impact of
acquisitions, foreign currency and increases in net pricing on a
currency neutral basis.
Operating income in the Caribbean decreased $10.6 million
to an operating loss of $6.6 million in fiscal year 2008,
compared to operating income of $4.0 million in fiscal year
2007, due to special charges and higher raw material and energy
costs.
Interest Expense, Net and Other Expense,
Net. Net interest expense increased
$1.9 million in fiscal year 2008 to $111.1 million,
compared to $109.2 million in fiscal year 2007. The
increase was mainly due to higher overall debt levels related to
acquisitions, partly offset by higher interest income.
We recorded other expense, net, of $7.9 million in fiscal
year 2008 compared to $0.6 million in fiscal year 2007.
Foreign currency transaction gains were $0.5 million in
fiscal year 2008 compared to $0.9 million in fiscal year
2007. The foreign currency transaction gains were offset by
other expenses. Fiscal year 2007 results included a
$10.2 million gain on the sale of non-core property and an
other-than-temporary
impairment loss of $4.0 million related to an equity
security that was classified as
available-for-sale.
Income Taxes. The effective income tax
rate, which is income tax expense expressed as a percentage of
income from continuing operations before income taxes and equity
in net earnings (loss) of nonconsolidated companies, was
30.4 percent in fiscal year 2008, compared to
34.3 percent in fiscal year 2007. The lower tax rate was
due primarily to favorable country mix of earnings and the
associated lower in-country tax rates. In addition, we recorded
favorable adjustments associated with the filing of our 2007
U.S. federal income tax return, an investment tax credit in
the Czech Republic and a reduction in accruals for uncertain tax
positions. These items provided 1.8 percentage points of
favorability to the effective income tax rate in fiscal year
2008.
Equity in Net Loss of Nonconsolidated
Companies. In fiscal year 2007, we purchased
a 20 percent interest in a joint venture that owns Agrima.
Equity in net loss of nonconsolidated companies was
$1.1 million in fiscal year 2008.
41
Loss on Discontinued Operations. In
fiscal year 2008, we recorded a charge of $15.0 million
($9.2 million net of taxes) related to revised estimates
for the costs of environmental remediation, legal and related
administrative costs. In particular, we revised our remediation
plans at several sites during the year resulting in a
$5.0 million increase in the accrual for remediation costs
and a $10.0 million increase in our accrual for legal
costs. These legal costs include costs associated with toxic
tort matters.
In fiscal year 2007, we recorded a charge of $3.2 million
($2.1 million net of taxes) related to revised estimates
for environmental remediation, legal and related administrative
costs.
Net Income. Net income increased
$23.9 million to $236.1 million in fiscal year 2008,
compared to $212.2 million in fiscal year 2007. The
discussion of our operating results, included above, explains
the increase in net income.
Net Income Attributable to Noncontrolling
Interests. We fully consolidated the
operating results of Sandora and the Bahamas in our Consolidated
Statements of Income. Net income attributable to noncontrolling
interests represented 40 percent of Sandora results and
30 percent of the Bahamas results during fiscal years 2008
and 2007.
Net Income Attributable to PepsiAmericas,
Inc. Net income attributable to
PepsiAmericas, Inc. increased $14.3 million to
$226.4 million in fiscal year 2008, compared to
$212.1 million in fiscal year 2007. The 53rd week
contributed an estimated $5.7 million of the increase. The
discussion of our operating results, included above, explains
the remainder of the increase in net income attributable to
PepsiAmericas, Inc.
Liquidity
and Capital Resources
Operating Activities. Net cash provided
by operating activities of continuing operations decreased by
$192.0 million to $308.6 million in fiscal year 2009
compared to $500.6 million in fiscal year 2008. In March
2009, we terminated our trade receivable securitization program,
resulting in a $150.0 million decrease in cash flows from
operating activities. The remaining decrease can mainly be
attributed to lower earnings and $21.2 million of
contributions made to our pension plans in fiscal year 2009,
offset partly by $33.0 million that we received in fiscal
year 2009 from the termination of an interest rate swap.
Investing Activities. Investing
activities in fiscal year 2009 included capital investments of
$235.7 million as compared with $248.9 million in
fiscal year 2008. In fiscal year 2009, we paid
$12.8 million in the aggregate to obtain certain
distribution rights for Crush, ROCKSTAR and Muscle
Milk. Proceeds from the sale of property and equipment and
investments in fiscal year 2009 were $21.6 million compared
to $7.7 million in fiscal year 2008. In fiscal year 2009,
we received proceeds of $15.0 million related to the sale
of a corporate aircraft.
On July 3, 2009, we formed a strategic joint venture with
CABCORP to combine our Caribbean operations, excluding the
Bahamas, with CABCORPs Central American operations. As a
result, we deconsolidated our Caribbean business resulting in a
$7.1 million reduction in cash and cash equivalents.
In fiscal year 2007, we entered into a joint venture agreement
with PepsiCo to purchase the outstanding common stock of
Sandora. Under the terms of the joint venture agreement, we hold
a 60 percent interest and PepsiCo holds the remaining
40 percent interest in the joint venture. The preliminary
purchase price of $679.4 million increased to
$680.4 million as a result of additional payments for
acquisition costs in fiscal year 2008. The total purchase price
of $680.4 million was net of cash received of
$3.0 million. Of the total purchase price, our interest was
$408.2 million. Additionally, the joint venture acquired
$72.5 million of debt as part of the acquisition, which was
retired in fiscal year 2008.
In fiscal year 2007, we purchased a 20 percent interest in
a joint venture that owns Agrima, which produces, sells and
distributes PepsiCo products and other beverages throughout
Bulgaria.
Financing Activities. Our total debt
decreased $35.0 million to $2,132.3 million as of the
end of fiscal year 2009, down from $2,167.3 million as of
the end of fiscal year 2008. During fiscal year 2009, we issued
$350 million of notes with a coupon rate of
4.375 percent due February 2014. The securities are
unsecured, senior debt obligations and rank equally in priority
with all other unsecured and unsubordinated indebtedness.
42
Net proceeds from this transaction were $345.4 million,
which reflected a discount of $2.2 million and the debt
issuance costs of $2.4 million. The net proceeds from the
issuance of the notes were used to repay commercial paper issued
by us and for other general corporate purposes. In fiscal year
2009, we repaid $150.0 million of 6.375% notes at
maturity.
In fiscal year 2007, we issued $300 million of notes with a
coupon rate of 5.75 percent due July 2012. The securities
are unsecured, senior debt obligations and rank equally in
priority with all other unsecured and unsubordinated
indebtedness. Net proceeds from this transaction were
$297.2 million, which reflected the discount reduction of
$0.8 million and the debt issuance costs of
$2.0 million. The net proceeds from the issuance of the
notes were used to fund the acquisition of Sandora, to repay
commercial paper and for other general corporate purposes. In
fiscal year 2007, we also borrowed $1.0 million in
long-term debt in the Bahamas.
We utilize revolving credit facilities both in the U.S. and
in our international operations to fund short-term financing
needs, primarily for working capital and general corporate
purposes. In the U.S., we have an unsecured revolving credit
facility under which we can borrow up to an aggregate of
$600 million. The interest rates on the revolving credit
facility, which expires in 2011, are based primarily on the
London Interbank Offered Rate. The facility is for general
corporate purposes, including commercial paper backstop. It is
our policy to maintain a committed bank facility as backup
financing for our commercial paper program. Accordingly, we have
a total of $600 million available under our commercial
paper program and revolving credit facility combined. We had
$129.5 million of commercial paper borrowings as of the end
of fiscal year 2009, compared to $365.0 million as of the
end of fiscal year 2008.
Certain wholly-owned subsidiaries maintain operating lines of
credit for general operating needs. Interest rates are based
primarily upon Interbank Offered Rates for borrowings in the
subsidiaries local currencies. The outstanding balance was
$8.0 million as of the end of fiscal year 2009 and
$1.6 million at the end of fiscal year 2008 and for each
respective date was recorded in Short-term debt, including
current maturities of long-term debt in the Consolidated
Balance Sheets.
Under our previously authorized repurchase program, we
repurchased 2.7 million shares in fiscal year 2009 for an
aggregate purchase price of $45.2 million. As of the end of
fiscal year 2009, 8.8 million shares remained available for
repurchase under the 2008 authorization. During fiscal years
2008 and 2007, we repurchased a total of 5.7 million and
2.7 million shares of our common stock, respectively, for
an aggregate purchase price of $135.0 million and
$59.4 million, respectively.
Our Board of Directors declared quarterly dividends of $0.14 per
share on PepsiAmericas common stock for each quarter in fiscal
year 2009. We paid cash dividends of $52.4 million in
fiscal year 2009, which included $51.1 million for the
first three quarterly dividends declared in fiscal year 2009 and
$1.3 million related to the vesting of restricted stock
awards. As of the end of fiscal year 2009, there was
$16.8 million payable for the fourth quarter 2009 dividend
compared to no dividend payable recorded as of the end of fiscal
year 2008. In fiscal year 2008, we paid cash dividends of
$85.0 million, which included $67.3 million for the
dividends declared in fiscal year 2008 based on a quarterly
dividend rate of $0.135 per share, $16.6 million for the
fourth quarter of 2007 dividend, and $1.1 million of
dividends that were paid as a result of the vesting of
restricted stock awards.
Our debt agreements contain a number of covenants that limit,
among other things, the creation of liens, sale and leaseback
transactions and the general sale of assets. Our revolving
credit agreement requires us to maintain an interest coverage
ratio. We are in compliance with all of our financial covenants.
We believe that our operating cash flows are sufficient to fund
our existing operations and contractual obligations for the
foreseeable future. In addition, while we have agreed to merge
with and into a wholly owned subsidiary of PepsiCo, subject to
regulatory approval and the satisfaction or waiver of other
customary closing conditions, we believe that our operating cash
flows, available lines of credit, and the potential for
additional debt and equity offerings would provide sufficient
resources to fund our future growth and expansion on a
standalone basis, although there can be no assurance that a
disruption in the worldwide capital and credit markets would not
impair our ability to access these markets on terms commercially
acceptable.
43
There are certain restrictive covenants in the merger agreement
with PepsiCo that may limit, among other things, the payment of
dividends, the repurchase of stock, acquisitions, and capital
expenditures. Accordingly, our cash will be used primarily for
debt reduction, as well as planned investment in our existing
business and payment of dividends at the current rate, during
the period in which the merger is pending.
Contractual
Obligations
The following table provides a summary of our contractual
obligations as of the end of fiscal year 2009 by due date.
Long-term debt obligations do not include amounts related to the
fair value adjustment for interest rate swaps and unamortized
discount from debt issuance. Our short-term and long-term debt,
lease commitments, purchase obligations and advertising and
exclusivity rights are more fully described in Notes 10, 11
and 19, respectively, in the Notes to the Consolidated Financial
Statements. Our interest obligations relate to our contractual
obligations under our fixed-rate long-term debt.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
Total
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
Commercial paper and notes payable
|
|
$
|
137.5
|
|
|
$
|
137.5
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Long-term debt obligations
|
|
|
1,984.0
|
|
|
|
|
|
|
|
250.0
|
|
|
|
300.0
|
|
|
|
150.0
|
|
|
|
350.0
|
|
|
|
934.0
|
|
Interest obligations
|
|
|
850.7
|
|
|
|
104.3
|
|
|
|
97.3
|
|
|
|
90.3
|
|
|
|
69.7
|
|
|
|
58.5
|
|
|
|
430.6
|
|
Advertising commitments and exclusivity rights
|
|
|
85.9
|
|
|
|
28.5
|
|
|
|
23.9
|
|
|
|
13.3
|
|
|
|
7.9
|
|
|
|
3.4
|
|
|
|
8.9
|
|
Raw material purchase obligations
|
|
|
36.0
|
|
|
|
26.5
|
|
|
|
7.4
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
1.2
|
|
Lease obligations
|
|
|
103.0
|
|
|
|
20.4
|
|
|
|
15.8
|
|
|
|
11.3
|
|
|
|
8.5
|
|
|
|
5.1
|
|
|
|
41.9
|
|
Other purchase obligations
|
|
|
7.7
|
|
|
|
7.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
3,204.8
|
|
|
$
|
324.9
|
|
|
$
|
394.4
|
|
|
$
|
415.8
|
|
|
$
|
236.1
|
|
|
$
|
417.0
|
|
|
$
|
1,416.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not included in the table above are contingent payments for
uncertain tax positions of $32.1 million. These amounts
were not included due to our inability to predict the timing of
the settlement of these amounts. Also not included in the table
above is the contribution of approximately $5 million to
$10 million that we expect to make to our pension plans in
fiscal year 2010.
We participate in a number of trustee-managed multi-employer
pension and health and welfare plans for employees covered under
collective bargaining agreements. Several factors, including
unfavorable investment performance, changes in demographics and
increased benefits to participants could result in potential
funding deficiencies, which could cause us to make higher future
contributions to these plans.
Discontinued Operations. We continue to
be subject to certain indemnification obligations, net of
insurance, under agreements related to previously sold
subsidiaries, including indemnification expenses for potential
environmental and tort liabilities of these former subsidiaries.
There is significant uncertainty in assessing our potential
expenses for complying with our indemnification obligations, as
the determination of such amounts is subject to various factors,
including possible insurance recoveries and the allocation of
liabilities among other potentially responsible and financially
viable parties. Accordingly, the ultimate settlement and timing
of cash requirements related to such indemnification obligations
may vary significantly from the estimates included in our
financial statements. As of the end of fiscal year 2009, we had
recorded $30.4 million in liabilities for future
remediation and other related costs arising out of our
indemnification obligations. This amount excludes possible
insurance recoveries and is determined on an undiscounted cash
flow basis. In addition, we have funded coverage pursuant to an
insurance policy (the Finite Funding) purchased in
fiscal year 2002, which reduces the cash required to be paid by
us for certain environmental sites pursuant to our
indemnification obligations. The Finite Funding receivable
amount recorded was $7.6 million as of the end of fiscal
year 2009, of which $4.2 million is expected to be
recovered in fiscal year 2010 based on our expenditures, and is
recorded in Other current assets in the Consolidated
Balance Sheet.
During fiscal years 2009 and 2008, we paid, net of taxes,
$2.2 million and $9.4 million, respectively, related
to such indemnification obligations, including the offsetting
benefit of insurance recovery settlements of $6.7 million
and $4.5 million, respectively. We expect to spend
approximately $11.9 million on a pre-tax
44
basis in fiscal year 2010 related to our indemnification
obligations, excluding possible insurance recoveries and the
benefit of income taxes (See Environmental Matters
in Item 1 and Note 19 to the Consolidated Financial
Statements for further discussion of discontinued operations and
related environmental liabilities).
Off-Balance
Sheet Arrangements
It is not our business practice to enter into off-balance sheet
arrangements, other than in the normal course of business, nor
is it our policy to issue guarantees to nonconsolidated
affiliates or third parties. For a description of our
off-balance sheet arrangements entered into in the normal course
of business, see Note 8 Sales of Receivables,
Note 11 Leases and Note 19
Environmental and Other Commitments and
Contingencies to the Consolidated Financial Statements.
Critical
Accounting Policies
The preparation of our Consolidated Financial Statements in
conformity with accounting principles generally accepted in the
United States of America requires management to use estimates.
We base our estimates on historical experience, available
information and various other assumptions that are believed to
be reasonable under the circumstances, the results of which form
the basis for making judgments about carrying amounts of assets
and liabilities that are not readily apparent from other
sources. Actual results could differ from those estimates, and
revisions to estimates are included in our results for the
period in which the actual amounts or revisions become known.
Presented in our notes to the Consolidated Financial Statements
is a summary of our most significant accounting policies used in
the preparation of such statements. Significant estimates in the
Consolidated Financial Statements include recoverability of
goodwill and intangible assets with indefinite lives,
environmental liabilities, income taxes, casualty insurance
costs and pension and postretirement benefits, which are
described in further detail below:
Recoverability of Goodwill and Intangible Assets with
Indefinite Lives. Goodwill and intangible
assets with indefinite useful lives are not amortized, but
instead tested annually for impairment or more frequently if
events or changes in circumstances indicate that an asset might
be impaired.
Goodwill is tested for impairment using a two-step approach at
the reporting unit level: U.S. and CEE. First, we estimate
the fair value of the reporting units primarily using discounted
estimated future cash flows. If the carrying amount exceeds the
fair value of the reporting unit, the second step of the
goodwill impairment test is performed to measure the amount of
the potential loss. Goodwill impairment is measured by comparing
the implied fair value of goodwill with its carrying
amount.
Our identified intangible assets with indefinite lives
principally arise from the allocation of the purchase price of
businesses acquired and consist primarily of trademarks and
tradenames and franchise and distribution agreements. Impairment
is measured as the amount by which the carrying amount of the
intangible asset exceeds its estimated fair value. The estimated
fair value is generally determined on the basis of discounted
future cash flows.
Considerable management judgment is necessary to estimate
discounted future cash flows in conducting an impairment
analysis for goodwill and intangible assets. The cash flows may
be impacted by future actions taken by us and our competitors
and the volatility of macroeconomic conditions in the markets in
which we conduct business. Assumptions used in our impairment
analysis, such as forecasted growth rates, cost of capital and
additional risk premiums used in the valuations, are based on
the best available market information and are consistent with
our strategic plans. An inability to achieve strategic business
plan targets in a reporting unit, a change in our discount rate
or other assumptions could have a significant impact on the fair
value of our reporting units and other intangible assets, which
could then result in a material non-cash impairment charge to
our results of operations. Volatility in global macroeconomic
conditions has had a negative impact on our business results. If
this volatility continues to persist into the future, the fair
value of our goodwill and intangible assets could be adversely
impacted. In the fourth quarter of 2009, we performed our annual
impairment valuation for goodwill and intangible assets with
indefinite lives, and there was no resulting impairment based on
our analysis.
45
During the third quarter of 2009, we completed an impairment
testing of our Sandora and Sadochok trademark and
tradenames. As a result of this testing, we recorded a
$17.4 million non-cash impairment charge ($7.9 million
net of taxes and noncontrolling interests) based upon the
findings of a strategic review of our Ukraine business. In light
of weakening macroeconomic conditions, we lowered our
expectations of the future performance, which reduced the value
of these indefinite life intangible assets. The fair value of
our Sandora and Sadochok brands was estimated
using a multi-period royalty savings method, which reflects the
savings realized by owning the brands and, therefore, not having
to pay a royalty fee to a third party.
Environmental Liabilities. We continue
to be subject to certain indemnification obligations under
agreements related to previously sold subsidiaries, including
potential environmental liabilities (see Environmental
Matters in Item 1 and Note 19 to the
Consolidated Financial Statements for further discussion). We
have recorded our best estimate of our probable liability under
those indemnification obligations. The estimated indemnification
liabilities include expenses for the remediation of identified
sites, payments to third parties for claims and expenses
(including product liability and toxic tort claims),
administrative expenses, and the expense of on-going evaluations
and litigation. Such estimates and the recorded liabilities are
subject to various factors, including possible insurance
recoveries, the allocation of liability among other potentially
responsible parties, the advancement of technology for means of
remediation, possible changes in the scope of work at the
contaminated sites, as well as possible changes in related laws,
regulations, and agency requirements. We do not discount
environmental liabilities.
Income Taxes. Our effective income tax
rate is based on income, statutory tax rates and tax planning
opportunities available to us in the various jurisdictions in
which we operate. We have established valuation allowances
against a portion of the foreign net operating losses and
state-related net operating losses to reflect the uncertainty of
our ability to fully utilize these benefits given the limited
carryforward periods permitted by the various jurisdictions. The
evaluation of the realizability of our net operating losses
requires the use of considerable management judgment to estimate
the future taxable income for the various jurisdictions, for
which the ultimate amounts and timing of such realization may
differ. The valuation allowance can also be impacted by changes
in tax regulations.
Significant judgment is required in determining our uncertain
tax positions. We have established accruals for uncertain tax
positions using managements best judgment and adjust these
liabilities as warranted by changing facts and circumstances. A
change in our uncertain tax positions, in any given period,
could have a significant impact on our results of operations and
cash flows for that period.
The effective income tax rate, which is income tax expense
expressed as a percentage of income from continuing operations
before income taxes and equity in net earnings (loss) of
nonconsolidated companies, was 36.0 percent in fiscal year
2009 compared to 30.4 percent in fiscal year 2008. The
higher tax rate was due primarily to the impact of the
deconsolidation of our Caribbean business and a change in the
geographic mix of earnings and the associated varying statutory
tax rates.
Casualty Insurance Costs. Due to the
nature of our business, we require insurance coverage for
certain casualty risks. We are self-insured for workers
compensation, product and general liability up to
$1 million per occurrence and automobile liability up to
$2 million per occurrence. The casualty insurance costs for
our self-insurance program represent the ultimate net cost of
all reported and estimated unreported losses incurred during the
fiscal year. We do not discount casualty insurance liabilities.
Our liability for casualty costs is estimated using individual
case-based valuations and statistical analyses and is based upon
historical experience, actuarial assumptions and professional
judgment. These estimates are subject to the effects of trends
in loss severity and frequency based on the best data available
to us. These estimates, however, are also subject to a
significant degree of inherent variability. We evaluate these
estimates on a quarterly basis and we believe that they are
appropriate and within acceptable industry ranges, although an
increase or decrease in the estimates or economic events outside
our control could have a material impact on our results of
operations and cash flows. Accordingly, the ultimate settlement
of these costs may vary significantly from the estimates
included in our Consolidated Financial Statements.
46
Pension and Postretirement
Benefits. Our pension and other
postretirement benefit obligations and related costs are
calculated using actuarial assumptions. Two critical
assumptions, the discount rate and the expected return on plan
assets, are important elements of plan expense and liability
measurement. We evaluate these critical assumptions annually.
Other assumptions involve demographic factors such as
retirement, mortality, turnover, health care cost trends and
rate of compensation increases.
The discount rate is used to calculate the present value of
expected future pension and postretirement cash flows as of the
measurement date. The guideline for establishing this rate is
high-quality, long-term bond rates. A lower discount rate
increases the present value of benefit obligations and increases
pension expense. The expected long-term rate of return on plan
assets is based on current and expected asset allocations, as
well as historical and expected returns on various categories of
plan assets. A
lower-than-expected
rate of return on pension plan assets will increase pension
expense. A 100 basis point increase in the discount rate
would decrease our annual pension expense by $0.8 million.
A 100 basis point decrease in the discount rate would
increase our annual pension expense by $1.0 million. A
100 basis point increase in our expected return on plan
assets would decrease our annual pension expense by
$1.9 million. A 100 basis point decrease in our
expected return on plan assets would increase our annual pension
expense by $1.9 million. See Note 14 to the
Consolidated Financial Statements for additional information
regarding these assumptions.
Related
Party Transactions
Transactions
with PepsiCo
PepsiCo is considered a related party due to the nature of our
franchise relationship and PepsiCos ownership interest in
us. As of the end of fiscal year 2009, PepsiCo beneficially
owned approximately 43 percent of PepsiAmericas
outstanding common stock. These shares are subject to a
shareholder agreement with our company. As of the end of fiscal
years 2009 and 2008, net amounts due from PepsiCo were
$11.1 million and $5.2 million, respectively. During
fiscal year 2009, approximately 83 percent of our total net
sales were derived from the sale of PepsiCo products. We have
entered into transactions and agreements with PepsiCo from time
to time. Significant agreements and transactions between our
company and PepsiCo are described below.
Pepsi franchise agreements are subject to termination only upon
failure to comply with their terms. Termination of these
agreements can occur as a result of any of the following: our
bankruptcy or insolvency; change of control of greater than
15 percent of any class of our voting securities; untimely
payments for concentrate purchases; quality control failure; or
failure to carry out the approved business plan communicated to
PepsiCo.
Bottling Agreements and Purchases of Concentrate and
Finished Product. We purchase concentrates
from PepsiCo and manufacture, package, sell and distribute cola
and non-cola beverages under various bottling agreements with
PepsiCo. These agreements give us the right to manufacture,
package, sell and distribute beverage products of PepsiCo in
both bottles and cans as well as fountain syrup in specified
territories. These agreements include a Master Bottling
Agreement and a Master Fountain Syrup Agreement for beverages
bearing the Pepsi-Cola and
Pepsi trademarks, including Diet Pepsi in the
United States. The agreements also include bottling and
distribution agreements for non-cola products in the United
States, and international bottling agreements for countries
outside the United States. These agreements provide PepsiCo with
the ability to set prices of concentrates, as well as the terms
of payment and other terms and conditions under which we
purchase such concentrates. In addition, we bottle water under
the Aquafina trademark pursuant to an agreement with
PepsiCo that provides for payment of a royalty fee to PepsiCo.
We have also entered into various transactions with joint
ventures in which PepsiCo holds an equity interest. In
particular, we purchase tea concentrate and finished beverage
products from the Pepsi/Lipton Tea Partnership, a joint venture
between PepsiCo and Unilever, in which PepsiCo holds a
50 percent interest, and finished beverage products from
the North American Coffee Partnership, a joint venture between
PepsiCo and Starbucks in which PepsiCo holds a 50 percent
interest. The table below summarizes amounts paid to PepsiCo and
affiliates for purchases of concentrate, finished beverage
products, finished snack food products and Aquafina royalty
fees, which are included in cost of goods sold.
47
Bottler Incentives and Other Support
Arrangements. We share a business objective
with PepsiCo of increasing availability and consumption of
Pepsi-Cola beverages. Accordingly, PepsiCo provides us with
various forms of bottler incentives to promote its brands. The
level of this support is negotiated regularly and can be
increased or decreased at the discretion of PepsiCo. To support
volume and market share growth, the bottler incentives cover a
variety of initiatives, including direct marketplace, shared
media and advertising support. Worldwide bottler incentives from
PepsiCo totaled approximately $230.5 million,
$248.7 million and $231.2 million for the fiscal years
ended 2009, 2008 and 2007, respectively. There are no conditions
or requirements that could result in the repayment of any
support payments we received.
Bottler incentives that are directly attributable to incremental
expenses incurred are reported as either an increase to net
sales or a reduction to SD&A expenses, commensurate with
the recognition of the related expense. Such bottler incentives
include amounts received for direct support of advertising
commitments and exclusivity agreements with various customers.
All other bottler incentives are recognized as a reduction of
cost of goods sold when the related products are sold based on
the agreements with vendors. Such bottler incentives primarily
include base level funding amounts which are fixed based on the
previous years volume and variable amounts that are
reflective of the current years volume performance.
PepsiCo also provided indirect marketing support to our
marketplace, which consisted primarily of media expenses. This
indirect support was not reflected or included in our
Consolidated Financial Statements, as these amounts were paid
directly by PepsiCo.
National Account Sales and
Services. Pursuant to the Master Fountain
Syrup Agreement, we provide manufacturing and delivery services
to PepsiCo in connection with the production of fountain syrup
for PepsiCos national account customers and commissaries.
We also provide certain manufacturing, delivery and equipment
maintenance services to PepsiCos national account
customers. Net amounts paid or payable by PepsiCo to us for
national account sales and services are summarized in the
following table.
Sandora Joint Venture. We are party to
a joint venture agreement with PepsiCo pursuant to which we hold
the outstanding common stock of Sandora, the leading juice
company in Ukraine. We hold a 60 percent interest in the
joint venture and PepsiCo holds the remaining 40 percent
interest. In fiscal year 2008, we repaid $47.5 million of
long-term debt that was acquired as part of the Sandora
acquisition. As a part of this transaction, we received
$26.0 million of cash from PepsiCo that included its
portion of the debt repayment. The joint venture financial
statements have been consolidated in our Consolidated Financial
Statements.
Other Transactions. PepsiCo provides
procurement services to us pursuant to a shared services
agreement. Under this agreement, PepsiCo acts as our agent and
negotiates with various suppliers the cost of certain raw
materials by entering into raw material contracts on our behalf.
The raw material contracts obligate us to purchase certain
minimum volumes. PepsiCo also collects and remits to us certain
rebates from the various suppliers related to our procurement
volume. In addition, PepsiCo executes certain derivative
48
contracts on our behalf and in accordance with our hedging
strategies. Payments to PepsiCo for procurement services are
reflected in the following table.
In summary, the Consolidated Statements of Income include the
following income and (expense) transactions with PepsiCo and
affiliates, which includes transaction with the Pepsi/Lipton Tea
Partnership and the North American Coffee Partnership (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bottler incentives
|
|
$
|
29.2
|
|
|
$
|
34.7
|
|
|
$
|
32.9
|
|
National account sales and services
|
|
|
228.0
|
|
|
|
230.9
|
|
|
|
223.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
257.2
|
|
|
$
|
265.6
|
|
|
$
|
256.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bottler incentives
|
|
$
|
182.3
|
|
|
$
|
190.3
|
|
|
$
|
180.7
|
|
Purchases of concentrate
|
|
|
(926.4
|
)
|
|
|
(935.1
|
)
|
|
|
(896.5
|
)
|
Purchases of finished beverage products
|
|
|
(216.1
|
)
|
|
|
(232.8
|
)
|
|
|
(211.4
|
)
|
Purchases of finished snack food products
|
|
|
(23.7
|
)
|
|
|
(26.7
|
)
|
|
|
(17.6
|
)
|
Aquafina royalty fees
|
|
|
(39.3
|
)
|
|
|
(46.6
|
)
|
|
|
(54.3
|
)
|
Procurement services
|
|
|
(4.1
|
)
|
|
|
(4.1
|
)
|
|
|
(3.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,027.3
|
)
|
|
$
|
(1,055.0
|
)
|
|
$
|
(1,003.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SD&A expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bottler incentives
|
|
$
|
19.0
|
|
|
$
|
23.7
|
|
|
$
|
17.6
|
|
Purchases of advertising materials
|
|
|
(1.5
|
)
|
|
|
(2.5
|
)
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17.5
|
|
|
$
|
21.2
|
|
|
$
|
15.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts paid or payable to the Pepsi/Lipton Tea
Partnership by us were approximately $89.8 million,
$94.7 million and $102.4 million during 2009, 2008 and
2007, respectively. Total amounts paid or payable to the North
American Coffee Partnership by us were approximately
$56.5 million, $60.2 million and $61.9 million
during 2009, 2008 and 2007, respectively. These amounts are
included in our purchases of finished beverage products in the
table above.
Transactions with Bottlers in Which PepsiCo Holds an
Equity Interest. We sell finished beverage
products to other bottlers in which PepsiCo owns an equity
interest, including The Pepsi Bottling Group, Inc. These sales
occur in instances where the proximity of our production
facilities to the other bottlers markets or lack of
manufacturing capability, as well as other economic
considerations, make it more efficient or desirable for the
other bottlers to buy finished product from us. Our sales to
other bottlers, including those in which PepsiCo owns an equity
interest, were approximately $214.3 million,
$210.8 million and $213.0 million in fiscal years
2009, 2008 and 2007, respectively. Our purchases from such other
bottlers were $0.4 million, $0.5 million and
$0.3 million in fiscal years 2009, 2008 and 2007,
respectively.
Merger Agreement with PepsiCo. We have
entered into a merger agreement with PepsiCo and Metro, dated
August 3, 2009, pursuant to which our company will merge
with and into Metro, with Metro continuing as the surviving
company and a wholly owned subsidiary of PepsiCo. Under the
terms of the merger agreement, PepsiCo will acquire all
outstanding shares of PepsiAmericas common stock it does not
already own for the price of $28.50 in cash or
0.5022 shares of PepsiCo common stock, subject to proration
provisions which provide that an aggregate 50 percent of
the outstanding PepsiAmericas common stock will be converted
into the right to receive common stock of PepsiCo and an
aggregate 50 percent of the outstanding PepsiAmericas
common stock will be converted into the right to receive cash.
We hope to close the merger by the end of February 2010, subject
to regulatory approval and the satisfaction or waiver of other
customary closing conditions.
49
Agreements
and Relationships with Dakota Holdings, LLC, Starquest
Securities, LLC and Mr. Pohlad
Under the terms of the merger agreement between Whitman
Corporation and the former PepsiAmericas, Inc. (Whitman
merger), Dakota Holdings, LLC (Dakota), a
Delaware limited liability company whose members at the time of
the Whitman merger included PepsiCo and Pohlad Companies, became
the owner of 14,562,970 shares of our common stock,
including 377,128 shares purchasable pursuant to the
exercise of a warrant. In November 2002, the members of Dakota
entered into a redemption agreement pursuant to which the
PepsiCo membership interests were redeemed in exchange for
certain assets of Dakota. As a result, Dakota became the owner
of 12,027,557 shares of our common stock, including
311,470 shares purchasable pursuant to the exercise of a
warrant. In June 2003, Dakota converted from a Delaware limited
liability company to a Minnesota limited liability company
pursuant to an agreement and plan of merger. In January 2006,
Starquest Securities, LLC (Starquest), a Minnesota
limited liability company, obtained the shares of our common
stock previously owned by Dakota, including the shares of common
stock purchasable upon exercise of the above-referenced warrant,
pursuant to a contribution agreement. Such warrant expired
unexercised in January 2006, resulting in Starquest holding
11,716,087 shares of our common stock. In February 2008,
Starquest acquired an additional 400,000 shares of our
common stock pursuant to open market purchases, bringing its
holdings to 12,116,087 shares of common stock, or
9.7 percent, as of February 16, 2010. The shares held
by Starquest are subject to a shareholder agreement with our
company.
Mr. Pohlad, our Chairman and Chief Executive Officer, is
the President and the owner of one-third of the capital stock of
Pohlad Companies. Pohlad Companies is the controlling member of
Dakota. Dakota is the controlling member of Starquest. Pohlad
Companies may be deemed to have beneficial ownership of the
securities beneficially owned by Dakota and Starquest and
Mr. Pohlad may be deemed to have beneficial ownership of
the securities beneficially owned by Starquest, Dakota and
Pohlad Companies.
Transactions
with Pohlad Companies
As of the end of fiscal year 2009, we owned a one-eighth
interest in a Challenger aircraft which we owned with Pohlad
Companies. In January 2010, we sold this one-eighth interest to
Pohlad Companies for $1.7 million, representing fair market
value as determined by an unrelated third party. This
transaction was approved in advance by our Affiliated
Transaction Committee. During fiscal year 2009, we paid
$0.1 million to International Jet, a subsidiary of Pohlad
Companies, for office and hangar rent, management fees and
maintenance in connection with the storage and operation of this
corporate jet.
Recently
Issued Accounting Pronouncements
See Note 1 of the Consolidated Financial Statements for a
summary of new accounting pronouncements that may impact our
business.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk.
|
We are exposed to commodity price risk, foreign currency
exchange risk and interest rate risk related to our ongoing
business operations. We use derivative instruments to manage
some of these risks, as discussed in Note 12 to the
Consolidated Financial Statements.
Commodity Prices. We use commodity
inputs such as aluminum for our cans, resin for our polyethylene
terephthalate (PET) bottles, natural gas, diesel
fuel, unleaded gasoline, high fructose corn syrup and sugar in
our operations. We are subject to commodity price risk because
our ability to recover increased costs through higher pricing
may be limited in the competitive environment in which we
operate. This risk is managed through the use of fixed-price
purchase orders, pricing agreements, geographic diversity and
derivatives. We use derivatives, with terms of no more than
three years, to economically hedge price fluctuations related to
a portion of our anticipated commodity purchases, primarily for
aluminum, natural gas and diesel fuel. For those derivatives
that qualify for hedge accounting, any ineffectiveness is
recorded immediately. We classify both the earnings and cash
flow impact from these derivatives consistent with the
50
underlying hedged item. Derivatives used to hedge commodity
price risk that do not qualify for hedge accounting are
marked-to-market
each period and reflected in our Consolidated Statements of
Income.
Our open commodity derivative contracts that qualify for hedge
accounting had a face value of $122.6 million as of the end
of fiscal year 2009 and $44.8 million as of the end of
fiscal year 2008. As of the end of fiscal years 2009 and 2008,
there were no open commodity derivative contracts that did not
qualify for hedge accounting.
Foreign Currency Exchange
Rates. Because we operate outside of the
U.S., we are subject to risk resulting from changes in currency
exchange rates. Currency exchange rates are influenced by a
variety of economic factors including local inflation, growth,
interest rates and governmental actions, as well as other
factors. In particular, our operations in CEE are subject to
currency exchange rate exposure associated with cost of goods
sold, particularly concentrate and packaging, which may be
purchased in either U.S. dollars or euros. Our investment
in markets outside of the U.S. has increased during the
past several years and, as such, our exposure to currency risk
has increased. Our principal exposures are the Ukrainian
hryvnya, the Romanian leu, the Polish zloty and the euro. We use
foreign currency derivative contracts to hedge the volatility of
foreign currency rates for purchases of raw materials for which
payment is settled in a currency other than our local
operations functional currency. There were no open foreign
currency derivatives as of the end of fiscal year 2009. Our
foreign currency derivatives had a total face value of
$46.1 million as of the end of fiscal year 2008.
Based on net sales, international operations represented
approximately 23 percent and 31 percent of our total
operations in fiscal years 2009 and 2008, respectively. Changes
in currency exchange rates impact the translation of the
operations results from their local currencies into
U.S. dollars. During fiscal year 2009, foreign currency had
a negative impact to net income attributable to PepsiAmericas,
Inc. of $101.2 million. During fiscal year 2008, foreign
currency had a positive impact to net income attributable to
PepsiAmericas, Inc. of $13.4 million. If the currency
exchange rates had changed by 1 percent in fiscal years
2009 and 2008, we estimate the impact on operating income would
have been approximately $6 million and $3 million,
respectively. Our estimates reflect the fact that a portion of
the international operations costs is denominated in
U.S. dollars and euros. The estimates do not take into
account the possibility that rates can move in opposite
directions and that gains in one category may or may not be
offset by losses from another category.
Interest Rates. In fiscal years 2009
and 2008, the risk from changes in interest rates was not
material to our operations because a significant portion of our
debt portfolio represented fixed-rate obligations. As of the end
of fiscal years 2009 and 2008, approximately 23 percent and
20 percent, respectively, of our debt portfolio, after the
impact of the related interest rate derivative instruments,
represented variable rate obligations. Our floating rate
exposure relates to changes in the six-month London Interbank
Offered Rate (LIBOR) and the federal funds rate.
Assuming consistent levels of floating rate debt with those held
as of the end of fiscal years 2009 and 2008, a 50 basis
point (0.5 percent) change in each of these rates would
have an impact of approximately $2.5 million and
$3.0 million, respectively, on interest expense. We had
cash equivalents throughout fiscal years 2009 and 2008,
principally invested in money market funds, which were most
closely tied to the federal funds rate. Assuming a 50 basis
point change in the rate of interest associated with our cash
equivalents as of the end of fiscal years 2009 and 2008,
interest income would not have changed by a significant amount.
51
In anticipation of long-term debt issuances, we have entered
into treasury rate lock instruments and forward starting swap
agreements. We have also entered into interest rate swap
contracts to convert a portion of our fixed-rate debt to
floating rate debt, with the objective of reducing overall
borrowing costs. There were no open interest rate swaps
designated as cash flow hedges outstanding as of the end of
fiscal year 2009. The notional amount of the interest rate swaps
designated as cash flow hedges outstanding as of the end of
fiscal year 2008 was $250 million. The notional amount of
interest rate swaps designed as fair value hedges outstanding
was $350 million as of the end of fiscal year 2009. There
were no open interest rate swaps designated as fair value hedges
outstanding as of the end of fiscal year 2008.
|
|
Item 8.
|
Financial
Statements and Supplementary Data.
|
See Index to Financial Information on
page F-1.
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure.
|
None.
52
|
|
Item 9A.
|
Controls
and Procedures.
|
Evaluation
of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures that
is designed to ensure that information required to be disclosed
in our Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the SECs
rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosures.
Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of our disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e)).
Based on this evaluation, our Chief Executive Officer and our
Chief Financial Officer concluded that, as of January 2,
2010, our disclosure controls and procedures were effective.
Changes
in Internal Control Over Financial Reporting
There were no changes in our internal control over financial
reporting that occurred during the quarter ended January 2,
2010 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Managements
Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal
control over financial reporting, as defined in Exchange Act
Rule 13a-15(f),
is a process designed by, or under the supervision of, our
principal executive and principal financial officers and
effected by our Board of Directors, management and other
personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles and includes those
policies and procedures that:
|
|
|
|
|
Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of our assets;
|
|
|
|
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that our receipts and expenditures are being made only in
accordance with authorizations of our management and
directors; and
|
|
|
|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of
our assets that could have a material effect on the financial
statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. All
internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined
to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
Our management assessed the effectiveness of our internal
control over financial reporting as of January 2, 2010. In
making this assessment, our management used the criteria set
forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated
Framework. Based on this assessment, management believes
that, as of January 2, 2010, our internal control over
financial reporting was effective based on those criteria.
KPMG LLP, an independent registered public accounting firm, has
audited the consolidated financial statements included in this
Annual Report on
Form 10-K
and, as a part of this audit, has issued their report, included
herein, on the effectiveness of our internal control over
financial reporting.
53
Report
of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
of PepsiAmericas, Inc.:
We have audited PepsiAmericas, Inc.s (the Company)
internal control over financial reporting as of January 2,
2010, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in the accompanying
Managements Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
Companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of January 2, 2010, based on criteria established in
Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of PepsiAmericas, Inc. and
subsidiaries as of the end of fiscal years 2009 and 2008, and
the related consolidated statements of income, equity and cash
flows for each of the fiscal years 2009, 2008 and 2007, and our
report dated February 22, 2010 expressed an unqualified
opinion on those consolidated financial statements.
Minneapolis, Minnesota
February 22, 2010
54
|
|
Item 9B.
|
Other
Information.
|
On February 9, 2010, our Board of Directors declared a
first quarter 2010 dividend of $0.14 per share on PepsiAmericas
common stock. The dividend is payable April 1, 2010 to
shareholders of record as of March 5, 2010.
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance.
|
Our
Directors
Our directors are elected each year at the annual meeting by our
shareholders to serve until the next annual meeting of
shareholders and until he or she is succeeded by another
qualified director who has been elected. We do not have a
classified Board of Directors. There are no familial
relationships between any director and executive officer. Set
forth below is information concerning the members of our Board
of Directors as of February 16, 2010.
Herbert
M. Baum, Chairman, President and Chief Executive Officer, The
Dial Corporation (Retired). Director since 1995.
Mr. Baum, 73, served as Chairman, President and Chief
Executive Officer of The Dial Corporation, now a subsidiary of
The Henkel Group, from August 2000 to March 2005. Prior to
joining Dial, from January 1999 to August 2000, Mr. Baum
was employed by Hasbro, Inc. as President and Chief Operating
Officer. Prior to joining Hasbro, Mr. Baum was employed by
Quaker State Corporation as its Chairman and Chief Executive
Officer from 1993 to 1998. Mr. Baum was employed by
Campbell Soup Company from 1978 to 1993, where he served in
various positions, most recently as Executive Vice President and
President, Campbell North/South America. Mr. Baum serves as
a director of US Airways. He is past chairman of the Association
of National Advertisers, The Advertising Council and the
National Food Processors Association.
Richard
G. Cline, Chairman, Hawthorne Investors, Inc. Director since
1987.
Mr. Cline, 74, served as President and Chief Operating
Officer of Nicor Inc. beginning in 1985, and became Chairman of
the Board and Chief Executive Officer in 1986. He retired as
Chief Executive Officer in May 1995 and continued to serve as
Chairman until his retirement from the company at the end of
1995. Prior to joining Nicor, Mr. Cline was an executive of
Jewel Companies, Inc. for 22 years, becoming Chairman,
President and Chief Executive Officer in 1984. He is also
Chairman of Hawthorne Investors, Inc., a private management
advisory and investment firm he founded in 1996. Additionally,
he has served as a director of Ryerson, Inc., Chairman of the
Boards of Trustees of The Northern Funds, The Northern
Institutional Funds and The Northern Multi-Manager Funds and he
is a past chairman of the Federal Reserve Bank of Chicago. From
1998 to 2000, Mr. Cline was Chairman of Hussmann
International, Inc. Mr. Cline is a director emeritus and
past president of the University of Illinois Foundation.
Michael
J. Corliss, Chief Executive Officer, Investco Financial
Corporation. Director since 2006.
Mr. Corliss, 49, is Chief Executive Officer of Investco
Financial Corporation, which he founded in 1983, and a principal
of Tarragon, LLC, both real estate development and management
firms. From 1985 to 1998, Mr. Corliss served on the board
of directors of Bank of Sumner and its holding company, Valley
Bancorporation, before it was sold in 1998 to Frontier Financial
Corporation. Mr. Corliss served on the board of directors
of Frontier Financial Corporation from 1998 to 2003. He is
principal of the Truss Company and Building Supply, Inc. and
Desert Business Park, both privately held companies. He also
serves as a Trustee and Treasurer at the University of Puget
Sound in Tacoma, Washington.
55
Pierre
S. du Pont, Former Governor, State of Delaware. Director since
1990.
Governor du Pont, 75, served as a director in the law firm of
Richards, Layton & Finger, P.A., Wilmington, Delaware,
through June 2005. A 1956 graduate of Princeton University, he
served in the U.S. Navy from 1957 to 1960 and received his
law degree from Harvard University in 1963. After six years in
business with E.I. du Pont de Nemours & Co., Inc., he
entered politics in 1968, serving in the Delaware House of
Representatives
(1968-1970),
as a member of the U.S. House of Representatives
(1971-1977),
and as Governor of the State of Delaware
(1977-1985).
Governor du Pont served as Chairman of the Hudson Institute in
1985-1986
and currently serves as Chairman of the National Center for
Policy Analysis.
Archie
R. Dykes, Director of Various Corporations. Director since
1985.
Dr. Dykes, 79, is Lead Director of PepsiAmericas. He served
as Chairman of Capital City Holdings Inc., a venture capital
organization, from 1988 to 2005. Dr. Dykes served as
Chairman and Chief Executive Officer of the Security Benefit
Group of Companies from 1980 through 1987. He served as
Chancellor of the University of Kansas from 1973 to 1980. Prior
to that, he was Chancellor of the University of Tennessee.
Dr. Dykes was Chairman of the Board and Chief Executive
Officer of Fleming Companies, Inc. until September 2004. He
assumed those roles at Fleming in March 2003 following his
service to such company as Non-Executive Chairman of the Board.
He also serves as a director of Midas, Inc. and Arbor Realty
Trust, Inc. Dr. Dykes is a member of the Board of Trustees
of the Kansas University Endowment Association, the William
Allen White Foundation and YouthFriends, Inc. He formerly served
as Vice Chairman of the Commission on the Operation of the
United States Senate and as a member of the Executive Committee
of the Association of American Universities.
Jarobin
Gilbert, Jr., President and Chief Executive Officer, DBSS Group,
Inc. Director since 1994.
Mr. Gilbert, 64, is President and Chief Executive Officer
of DBSS Group, Inc., a management, planning and international
trade advisory firm. The firm provides trade advisory services,
trade consulting and participates in negotiations. He is also a
director and a member of the audit committees of both Midas,
Inc. and Foot Locker, Inc. Mr. Gilbert serves on the board
of directors of the Harlem Partnership Circle and he is chairman
of the board of directors of Atlantic Mutual Companies. He is a
permanent member of the Council on Foreign Relations.
James
R. Kackley, President and Chief Operating Officer, Orion Energy
Systems, Inc. Director since 2004.
Mr. Kackley, 67, is President and Chief Operating Officer
and a director of Orion Energy Systems, Inc., a Wisconsin-based
energy management company. Mr. Kackley practiced as a
public accountant for Arthur Andersen from 1963 to 1999. From
1974 to 1999, he was an audit partner for the firm, dealing with
a substantial number of public and non-public companies. In
addition, in 1998 and 1999, he served as Chief Financial Officer
for Andersen Worldwide, then a professional services firm
operating in more than 100 countries. From June 1999 to May
2002, Mr. Kackley served as an adjunct professor at the
Kellstadt School of Management at DePaul University.
Mr. Kackley serves as a director, a member of the executive
committee, the audit committee financial expert, and the audit
committee chairman of Herman Miller, Inc., a Michigan-based
manufacturer of office furniture. Mr. Kackley served as a
director, a member of the nominating and governance committee,
the audit committee financial expert, and a member of the audit
committee of Ryerson, Inc. from March 2007 to October 2007.
Previously, he served on the audit committees of Northwestern
University and the Chicago Symphony Orchestra,
not-for-profit
corporations. He is currently a Life Trustee of Northwestern
University and the Museum of Science and Industry (Chicago).
Matthew
M. McKenna, President and Chief Executive Officer, Keep America
Beautiful, Inc. Director since 2001.
Mr. McKenna, 59, has served as President and Chief
Executive Officer of Keep America Beautiful, Inc., a national
nonprofit group that supports community improvement activities,
since January 2008. From August 2001 to December 2007, he was
Senior Vice President, Finance for PepsiCo. Previously he was
Senior Vice
56
President and Treasurer for PepsiCo. Prior to joining PepsiCo in
1993, he was a partner with the law firm of Winthrop, Stimson,
Putnam & Roberts in New York. He serves on the Board
of the Duke University Libraries and the Manhattan Theater Club,
not-for-profit
companies. He is also an adjunct professor at Fordham Business
School and Fordham Law School. Mr. McKenna is also a
director of Foot Locker, Inc.
Robert
C. Pohlad, Chairman and Chief Executive Officer, PepsiAmericas,
Inc. Director since 2000.
Mr. Pohlad, 55, became our Chief Executive Officer in
November 2000, was named Vice Chairman in January 2001 and
became our Chairman in January 2002. Mr. Pohlad served as
Chairman, Chief Executive Officer and a director of the former
PepsiAmericas prior to the 2000 merger of the former
PepsiAmericas and Whitman Corporation, a position he had held
since 1998. From 1987 to present, Mr. Pohlad has served as
President of Pohlad Companies. He also serves as a Trustee of
the University of Puget Sound in Tacoma, Washington, and a
member of the Deans Board of Visitors of the University of
Minnesota Medical School.
Deborah
E. Powell, M.D., Associate Vice President for New Models of
Education and Dean Emeritus, University of Minnesota Medical
School. Director since 2006.
Dr. Powell, 70, is Associate Vice President for New Models
of Education and Dean Emeritus of the Medical School, and a
McKnight Presidential Leadership Chair, at the University of
Minnesota. Dr. Powell is a board-certified surgical
pathologist and medical educator with more than 30 years of
experience in academic medicine. She received her medical degree
from Tufts University School of Medicine. Dr. Powell served
as the Vice Chair and Director of Diagnostic Pathology at the
University of Kentucky in Lexington before being named Chair of
the Department of Pathology and Laboratory Medicine at the same
institution. In 1997, she was named Executive Dean and Vice
Chancellor for Clinical Affairs at the University of Kansas
School of Medicine. She came to Minnesota in the fall of 2002 to
lead the University of Minnesota Medical School. She is past
president of the United States and Canadian Academy of Pathology
and the American Board of Pathology as well as past Chair of the
Council of Deans of the Association of American Medical
Colleges, and currently serves as Chair of the Board of
Directors of the Association of American Medical Colleges. She
is a member of the Institute of Medicine of the National Academy
of Sciences, and a member of the Scientific Management Review
Board for the National Institutes of Health.
Our
Executive Officers
Pursuant to General Instruction G(3) to
Form 10-K
and Instruction 3 to Item 401(b) of
Regulation S-K,
information regarding our executive officers is provided in
Part I of this Annual Report on
Form 10-K
under separate caption.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors
and executive officers, as well as persons who own more than
10 percent of our common stock, to file reports of
ownership and changes in ownership of our common stock with the
Securities and Exchange Commission. We have procedures in place
to assist our directors and executive officers in preparing and
filing these reports on a timely basis. Based solely on our
review of the forms furnished to us, upon our records and other
information, we believe that all required reports were timely
filed during the past year, except that three reports for
Kenneth E. Keiser setting forth the acquisition of 350 shares on
June 2, 2008, the gift of 350 shares on July 31, 2008, and the
acquisition of 350 shares on February 20, 2009, were not filed
on a timely basis.
Code of
Ethics
We have adopted a code of ethics that applies to our principal
executive officer, principal financial officer and principal
accounting officer. This code of ethics is available on our
website at www.pepsiamericas.com and in print upon written
request to PepsiAmericas, Inc., 60 South Sixth Street,
Suite 4000, Minneapolis, Minnesota 55402, Attention:
Investor Relations. Any amendment to, or waiver from, a
provision of our code of ethics will be posted to the
above-referenced website.
57
Committee
Overview
Our Board of Directors has designated an Audit Committee, a
Management Resources and Compensation Committee, and a
Governance, Finance and Nominating Committee. Our Board of
Directors also has designated an Affiliated Transaction
Committee and a Transactions Committee. The following table
shows the current membership of the committees and identifies
our independent directors, as defined in Section 303A.02 of
the New York Stock Exchange listing standards:
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Management
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Governance,
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Resources and
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Finance and
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Affiliated
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Independent
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Name
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Audit
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Compensation
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Nominating
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Transaction
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Transactions
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Director
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Herbert M. Baum
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X
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X
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X
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X
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Richard G. Cline
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X
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*
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X
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X
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X
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X
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Michael J. Corliss
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X
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X
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X
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X
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Pierre S. du Pont
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X
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X
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*
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X
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X
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X
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Archie R. Dykes
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X
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X
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X
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*
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X
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*
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X
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Jarobin Gilbert, Jr.
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X
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*
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X
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X
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X
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James R. Kackley
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X
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X
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X
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X
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Matthew M. McKenna
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X
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X
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X
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Robert C. Pohlad
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Deborah E. Powell
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X
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X
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X
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X
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* |
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Denotes committee chairperson. |
Our
Committees
Audit Committee. The members of our
Audit Committee are identified above under Committee
Overview within Item 10 of this Annual Report on
Form 10-K.
The committee was established in accordance with
Section 3(a)(58)(A) of the Exchange Act. Each member of the
committee is independent as defined in Exchange Act
Rule 10A-3,
and Section 303A.02 and Section 303A.06 of the New
York Stock Exchange listing standards. Pursuant to our listing
agreement with the New York Stock Exchange, each member of the
committee is financially literate, and one member, James R.
Kackley, has accounting or related financial management
expertise. Our Board has determined that Mr. Kackley is our
audit committee financial expert as defined by
Item 407(d)(5) of
Regulation S-K.
No member of the committee concurrently serves on more than two
other public company audit committees.
Management Resources and Compensation
Committee. The members of our Management
Resources and Compensation Committee are identified above under
Committee Overview within Item 10 of this
Annual Report on
Form 10-K.
Each member of the committee is independent as defined in
Section 303A.02 of the New York Stock Exchange listing
standards. In addition, each member of the committee is a
non-employee director as defined in
Rule 16b-3
of the Exchange Act, and is an outside director as defined in
Section 162(m) of the Internal Revenue Code.
Governance, Finance and Nominating
Committee. The members of our Governance,
Finance and Nominating Committee are identified above under
Committee Overview within Item 10 of this
Annual Report on
Form 10-K.
Each member of the committee is independent as defined in
Section 303A.02 of the New York Stock Exchange listing
standards.
Affiliated Transaction Committee. The
members of our Affiliated Transaction Committee are identified
above under Committee Overview within Item 10
of this Annual Report on
Form 10-K.
Our Affiliated Transaction Committee was established in
accordance with our By-Laws. Each member of the committee is
independent as defined in our By-Laws. This means that each
member of the committee is not, and for the last two years has
not been, (1) an officer or director of PepsiCo or an
affiliate of PepsiCo, (2) an owner of more than one percent
of the shares of PepsiCo, or (3) an owner of any ownership
interest in a party to an affiliated transaction.
58
Transactions Committee. The members of
our Transactions Committee are identified above under
Committee Overview within Item 10 of this
Annual Report on
Form 10-K.
Our Transactions Committee was established in April 2009 to
review the companys strategic alternatives, including the
proposal from PepsiCo to acquire all of the outstanding shares
of common stock of our company. Each member of the committee is
independent, as defined in the shareholder agreement between our
company and PepsiCo. This means that each member of the
committee is not, and has not been for the last two years,
(1) affiliated with PepsiCo or its affiliates, (2) a
director, officer, employee, consultant or advisor of PepsiCo or
its affiliates, or (3) an officer, employee, consultant or
advisor of our company.
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Item 11.
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Executive
Compensation.
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Compensation
Discussion and Analysis
Executive
Summary
Our company is committed to an executive compensation philosophy
based on
pay-for-performance.
Our Management Resources and Compensation Committee executes
this philosophy by linking a significant portion of total direct
compensation paid to our named executive officers to company and
individual performance. In 2009, this meant that
79.3 percent of the actual total direct compensation
provided to our named executive officers was based on the
achievement of either short-term or long-term performance goals.
Our committee ensures that compensation paid to our named
executive officers reflects our companys evolving business
priorities and the execution of its strategic plan and
initiatives by annually reviewing and adjusting the performance
measures and targets on which compensation is based. In 2009,
our committee tied the measures for the annual incentives for
our named executive officers to earnings per share and operating
cash flow. Overall our company exceeded the targets for these
measures in 2009, resulting in annual incentives paid in cash to
the named executive officers at 142.6 percent of target.
Our committee linked the pool of long-term incentives available
in 2009 to the companys achievement of its targeted
adjusted return on invested capital for 2008. We utilized
101 percent of the target for long-term incentives awarded
in February 2009, which reflected the actual adjusted return on
invested capital in 2008.
The remainder of our Compensation Discussion and Analysis is
organized into the following sections:
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Overview of our executive compensation program;
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Details of the total direct compensation paid to our named
executive officers; and
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Description of other arrangements, policies and practices
related to our executive compensation program.
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Unless the context indicates otherwise, this Compensation
Discussion and Analysis describes our executive compensation
program as in effect during 2009. We frequently review our
executive compensation program and may change or discontinue any
aspect of the program at any time.
This Compensation Discussion and Analysis contains statements
regarding our companys performance targets and goals.
These targets and goals are discussed in the limited context of
our 2009 executive compensation program and should not be
considered statements of managements expectations or
estimates of results or other guidance. We specifically caution
investors not to apply these statements to other contexts.
Our
Executive Compensation Program
Our executive compensation program is designed to:
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Attract, motivate and retain outstanding employees;
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Ensure that our pay levels are competitive;
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59
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Be simple, easy to understand and flexible;
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Create a broad sense of ownership; and
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Provide significant rewards for exceptional company and
individual performance.
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We are committed to an executive compensation philosophy that
rewards performance. Our executive compensation program fulfills
our
pay-for-performance
philosophy by:
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Recognizing individual performance when determining base salary
increases;
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Tying annual incentives to our companys
performance; and
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Basing long-term incentives both on our companys
performance and individual performance.
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With these goals in mind, our committee meets regularly
throughout the year on the same general schedule to review and
assess current compensation elements and compensation levels,
and to plan for the future in response to shifts in the economic
environment, market trends, regulations and other variables. The
agendas for the committees regular meetings are set in
advance and generally include the following items:
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At its first meeting of the year the committee approves the
payouts of annual incentives and long-term incentives based on
the companys year-end results for the prior year, conducts
executive performance reviews for the prior year, reviews tally
sheets and estimates of benefits payable on termination, sets
any salary adjustments for the current year and approves the
funding methodology for the pool of long-term incentives for the
current year. Due to the pending merger with PepsiCo, the
committee does not plan to issue long-term incentives in
February 2010.
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At its next meeting the committee approves the annual incentive
plan payout curves for the current year, approves the objectives
for the executives for the current year and conducts an
evaluation of the companys outside compensation consultant.
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At its mid-year meetings the committee reviews director
compensation, the companys peer group, the companys
compensation philosophy, applicable regulatory compliance
issues, plan updates and amendments and executive succession
planning.
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At its final meeting of the year the committee reviews
compensation and market data for the executive officers for the
current year and plan designs and merit budgets for the
following year.
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Benchmarking Against Peer Companies. To
assist with its review and analysis of our executive
compensation program, our committee benchmarks executive
compensation against a peer group of companies. Our committee
uses compensation data available from the public filings of each
member of our peer group as a reference point to provide a
framework for reviewing and analyzing our compensation program
and pay levels against potential competitors for our executive
talent.
Our peer group contains companies with the following
characteristics:
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Industry. We look for companies within the
food and beverage industry;
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Operations. We look for companies with
manufacturing and distribution capabilities;
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Size. We look for companies that are generally
50 percent to 200 percent of our companys size
based on revenue, market capitalization, assets and number of
employees;
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Performance. We exclude consistently poor
performing companies or those in bankruptcy or
reorganization; and
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Geographic scope. We look for companies with
international operations.
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Our peer group consists of the following companies:
60
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Brown-Forman Corporation (added in July
2008)
Campbell Soup Company
Coca-Cola
Bottling Co. Consolidated
Coca-Cola
Enterprises Inc.
Constellation Brands, Inc.
Dean Foods Company
Del Monte Foods Company
The Hershey Company
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Hormel Foods Corporation
McCormick & Company,
Incorporated
Molson Coors Brewing Company
The Pepsi Bottling Group, Inc.
Performance Food Group Company
(removed in July 2008)
Ralcorp Holdings, Inc.
The J. M. Smucker Company
United Natural Foods, Inc.
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Our committee annually reviews the companies included in our
peer group to ensure that each remains relevant for comparative
purposes. This review was last conducted in July 2008, at which
time the committee removed Performance Food Group Company, which
recently had become a privately-held company, and added
Brown-Forman Corporation, which has the characteristics
identified above.
In addition to benchmarking compensation against our peer group,
our committee compares the annual compensation paid to our
executives using surveys published by executive compensation
firms. The surveys used to assess 2009 compensation were 2008/09
Watson Wyatt Data Services Top Management Report, 2008 William
M. Mercer Executive Compensation Survey, 2008 Towers Perrin
General Industry Executive Database, and 2008 Towers Perrin Food
Industry Group Report. Our outside compensation consultant
adjusts the survey data using regression analysis to reflect
comparable revenue levels. Our committee uses this data to
obtain a general understanding of current compensation
practices. Our committee believes that data from both the peer
group and compensation surveys has its advantages, and that
multiple data sources provide different reference points and a
broader context for interpreting and assessing executive
compensation.
Competitive Market Review. At its last
meeting of the year our committee reviews a competitive market
assessment of the compensation provided all of our executive
officers, including our named executive officers. All key
compensation elements are assessed, including base salary,
annual cash compensation (base salary plus annual incentives),
long-term incentives, and total direct compensation (annual cash
compensation plus long-term incentives).
In connection with this assessment, our committee also reviews
an analysis of our companys financial performance as
compared to our peer group. Financial measures analyzed include
revenue growth, earnings per share growth, net income growth,
return on invested capital, and total shareholder return for the
last five years and for the current trailing
12-month
period.
Competitive compensation information is obtained from the proxy
statements of each member of our peer group and from the
published executive compensation surveys identified above. This
competitive market assessment and the analysis of our
companys financial performance as compared to our peer
group provides context for our compensation positioning within
the market. These reviews are timed to allow committee members
to ask for additional information and to raise and discuss
questions before base salary adjustments for the named executive
officers are finalized at the committees first meeting of
the next year.
Tally Sheets and Termination Benefits
Analyses. At its first meeting of the year
our committee reviews a compensation tally sheet for each named
executive officer. The tally sheets, prepared by our outside
compensation consultant, provide a five-year history of total
compensation and benefits for each named executive officer,
including base salary, annual incentives (target and actual
payouts), long-term incentives (restricted stock awards,
including dividends), perquisites, and retirement and deferred
compensation contributions. The tally sheets also summarize
realized equity value (stock option exercises and vesting of
restricted stock), current unrealized equity value, current
401(k) and deferred compensation balances and compliance with
our stock ownership guidelines.
Our committee also reviews a termination benefits analysis for
each named executive officer. This analysis estimates severance,
retirement and other benefits payable under certain scenarios,
including voluntary resignation, termination for cause,
termination without cause, termination following a change in
control of the
61
company, and termination upon disability, death or retirement.
Termination benefits are projections based on a variety of
assumptions such as termination date, base salary and target
incentive levels, stock price and present value of benefits. In
February 2010, our committee specifically reviewed the payments
to be made to our executive officers upon a change in control
and upon involuntary termination without cause or for good
reason following a change in control. Further information
regarding such payments appears elsewhere in Item 11 of
this Annual Report on
Form 10-K,
including the Potential Payments upon Termination or Change in
Control table.
Our committee uses tally sheets and termination benefits
analyses to bring together, in one place, all of the elements of
actual current and potential future compensation for our named
executive officers, as well as information about wealth
accumulation. These tools assist our committee in analyzing the
individual elements of compensation, the mix of compensation and
the aggregate total amounts of actual and projected
compensation. The committee reviews pay equity among executives
and against the market to ensure that our executive compensation
continues to meet our compensation philosophy and objectives.
After completing its most recent review, our committee
determined that compensation for each named executive officer
continues to be consistent with our companys compensation
philosophy and objectives.
Role of Consultants. Our committee has
the sole authority to retain and terminate compensation
consultants used in the evaluation of director or executive
officer compensation or employee benefit plans. The committee
also has the authority to obtain advice and assistance from
internal or external legal, accounting or other experts and
advisors to assist in carrying out its responsibilities. Our
committee has engaged Watson Wyatt Worldwide as its outside
compensation consultant.
Our committee engaged Watson Wyatt Worldwide beginning in 2004
as its outside compensation consultant. Watson Wyatt was
selected after reviewing proposals submitted by multiple
compensation consultants, based on its ability to meet the
committees needs at the most effective cost. The committee
regularly meets with Watson Wyatt and receives reports on our
compensation strategy, compensation levels and general market
practices. Specific assignments are determined by the committee,
with the advice of management. Watson Wyatt has advised the
committee on: the development and use of a competitive peer
group; market assessment and review of our Long-Term Incentive
Plan, including plan design; top five executive compensation
analysis; equity plan analysis and executive ownership analysis;
regulatory compliance matters; director compensation;
development of executive compensation tally sheets; retirement
and welfare plans; and analysis of and changes to our
compensation structure implemented in 2008.
Management has also engaged Watson Wyatt from time to time on
employee benefit matters, including actuarial work for pension
and retiree medical benefits as well as pension administration
services. Our committee has reviewed the type and amount of work
performed by Watson Wyatt on behalf of management, and has
determined that the relationship between management and Watson
Wyatt has not influenced the advice offered to the committee by
Watson Wyatt.
Role of Executive Officers. Our
committee looks to certain executive officers, including named
executive officers, for assistance with the design and
assessment of our compensation program. Our Chairman of the
Board and Chief Executive Officer, President and Chief Operating
Officer, Executive Vice President and Chief Financial Officer,
and Executive Vice President, Human Resources provide insight on
our companys business goals and results, help define
objectives for individual executives, and assess the effect on
our culture and personnel of suggested changes to our
compensation program. No executive officer is involved in
assessing or setting his or her own compensation.
Impact of Tax and Accounting Treatment on Compensation
Decisions. Our committee regularly reviews
the tax and accounting treatment of each component of
compensation paid to our named executive officers. The potential
tax and accounting treatment are factors, but not the only
factors, the committee takes into consideration when approving
compensation components and amounts.
Section 162(m) of the Internal Revenue Code generally
limits the deductibility of compensation in excess of
$1 million for the Chief Executive Officer and the four
most highly compensated employees other than the Chief Executive
Officer. Certain performance-based compensation is not subject
to this limitation. In certain
62
circumstances our committee has determined that our compensation
objectives are not furthered when compensation must be paid in a
specific manner to be tax deductible. For instance, our Annual
Incentive Plan payouts do not qualify as performance-based
compensation for purposes of Section 162(m). Our Long-Term
Incentive Plan is, however, structured and administered in a way
that restricted stock awards qualify as performance-based
compensation, which is not subject to the $1 million
limitation. Each of these plans is discussed in detail below.
Total
Direct Compensation
Total direct compensation paid to our named executive officers
consists of base salary, annual incentives (payable in cash) and
long-term incentives (payable in restricted stock). In support
of our philosophy of
pay-for-performance,
targeted total direct compensation is substantially weighted
toward performance-based pay. These elements of total direct
compensation are positioned as follows to achieve the following
objectives:
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Element of Total Direct
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Compensation
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Objectives
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Targeted Positioning
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Base Salary
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Position competitively with external market
Seek internal equity through consistent pay structures and guidelines
Reward for long-term contribution
Provide annual increases based on performance
Reflect national and local labor market conditions
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50th percentile
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Annual Incentives (payable in cash)
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Performance-based to drive and reward business results
Eligibility focused on participants who directly impact business results
Payout curves that reflect the challenge of the plan and are determined annually
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75th percentile award opportunities
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Long-Term Incentives (payable in restricted shares)
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Ensure long-term retention and rewards
for those who consistently perform to the companys high
standards
Market-based award opportunities with
performance-based grants
Coordinate with retirement programs
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Above median award opportunities
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63
For 2009, actual total direct compensation for the named
executive officers is illustrated in the chart below.
Our committee believes that the total direct compensation
provided to our named executive officers supports our
companys compensation philosophy. Targeted total direct
compensation, together with the perquisites and benefits
described below, is positioned to provide a competitive pay
package that encourages and rewards strong performance and
contributions consistent with our companys high standards.
Targeted total direct compensation is weighted so that a
significant portion of compensation is tied to both annual and
long-term performance, with performance goals reviewed and
adjusted annually in order to continually reflect our
companys evolving business priorities. The balance of
annual cash incentives and long-term equity incentives, coupled
with our share ownership guidelines, encourages our executives
to achieve our business priorities without taking unreasonable
or excessive risks that would threaten the value of the company.
Each component of total direct compensation provided to our
named executive officers is discussed in detail below.
Base Salary. Named executive officers
receive a base salary as compensation for services rendered
during the year. At the end of each year our committee previews
base salary adjustments for all salaried employees, including
the named executive officers, for the following year. The
committee first establishes an overall budget for base salary
increases. To do so, the committee considers general economic
factors, including the rates of inflation, unemployment and cost
of living, as well as salary data for our peer group and from
published compensation surveys. Once the overall budget is
established, the committee develops a general matrix for
distribution of the budget among all salaried employees. Actual
base salary adjustments for each individual are based on
performance.
The committee sets any base salary adjustments for the named
executive officers at its first meeting of the year. Before it
approves base salary adjustments for the named executive
officers, the committee considers the information provided in
the tally sheets, our companys performance during the
previous year, and the individuals job performance and
accomplishment of predetermined objectives during the previous
year. After this review, the committee approves specific base
salary adjustments for the named executive officers within the
general matrix for base salary increases.
The committee benchmarks base salary for our named executive
officers to the 50th percentile of our peer group. Actual
2009 base salaries for our named executive officers were
generally at the median of the competitive market, consistent
with this philosophy. The exception is our Chief Executive
Officer, whose base salary the committee sets well below median
based upon his stated preference.
In 2009, notwithstanding our companys strong performance
in 2008, we and many other companies were required to reanalyze
costs in the current macroeconomic environment. As part of our
companys global approach to cost containment in this
challenging environment, the committee determined that there
would be no annual base salary adjustments for the named
executive officers in March of 2009. However, as part of the
committees review of executive succession plans in late
2008, it determined that an annual base salary increase,
effective January 2009, for Mr. Durkin was warranted. For
2010, base salaries for our named executive officers increased
an average of 2.9 percent.
Annual Incentives. Named executive
officers are eligible for annual incentives, payable in cash,
under our Annual Incentive Plan (the AIP). The AIP
payout targets, which are achieved if the company meets certain
goals set out in the annual operating plan, are approved by the
committee each year. The AIP payout
64
targets were set at the 75th percentile of the
companys peer group in 2007, the last time that our
overall compensation structure was evaluated.
The AIP performance measures and their weightings are also
approved by the committee each year. The AIP performance
measures and their weightings are team-based to strengthen our
culture of accountability, integrity and respect. Additionally,
our AIP performance measures and their weightings are tied to
business results to support our philosophy of
pay-for-performance.
We believe that this team-based, quantitative approach to annual
incentive compensation ensures that we pay for performance that
drives shareholder value.
The committee also reviews and approves a schedule that details
the required company performance and resulting AIP payouts for
each performance measure. If the threshold performance goals are
met, AIP payouts equal at least 25 percent of target. The
committee maintains the discretion to vary from the formula,
either to increase or decrease an AIP payout. This process
ensures that our AIP remains consistent with our compensation
philosophy and reflects our current business priorities. Actual
AIP payouts, which can vary from 0 to 200 percent of
target, are delivered after the companys results are known
and applied to the AIP.
The table below identifies, for each named executive officer,
the 2009 AIP targets as a percentage of base salary. In December
2008, our committee approved changes to the AIP design for 2009
to foster further alignment with our global portfolio
management. As a result, company performance under the 2009 AIP
for our named executive officers was measured entirely on
worldwide results for earnings per share (60%) and operating
cash flow (40%). Each of the performance measures was subject to
adjustment for items that are unusual, infrequent, unrelated to
ongoing core operations or involve special charges. As
anticipated, the impact of foreign exchange rate movements was
neutralized based on planned rates. The committee retains the
discretion to adjust actual payouts either up or down.
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2009 Target AIP Payout as a
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Name and Position
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Percentage of Base Salary
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Robert C. Pohlad
Chairman of the Board and Chief Executive Officer
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100
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%
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Alexander H. Ware
Executive Vice President and Chief Financial Officer
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85
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%
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Kenneth E. Keiser
President and Chief Operating Officer
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95
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%
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G. Michael Durkin, Jr.
Executive Vice President, U.S.
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95
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%
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James R. Rogers
Executive Vice President, International
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75
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%
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In 2009, our company reported diluted earnings per share (EPS)
of $1.46 and net cash provided by operating activities of
continuing operations of $308.6 million. On an adjusted
basis, we attained adjusted EPS of $1.69 and adjusted operating
cash flow of $242.3 million. Management reviews results of
operations and evaluates performance on both a GAAP basis and
using adjusted comparisons. For 2009, adjusted EPS excluded the
impairment of intangible assets, special charges relating to
various restructuring initiatives, fees associated with the
pending merger with PepsiCo, Inc., impairment of non-operating
assets, loss from multi-employer pension plans, loss from
deconsolidation of business, impairment of marketable securities
and gain from interest rate swap termination. Adjusted operating
cash flow for 2009 represented net cash flow from operating
activities of continuing operations less capital investments and
the accounts receivable securitization impact plus the proceeds
from the sale of property less net cash used in discontinued
operations.
65
The table below identifies the AIP payout schedules and actual
payout percentages for cash incentives paid in February
2010 based on the companys adjusted performance for
compensatory purposes in 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 AIP Payout Schedules
|
|
|
|
|
|
|
|
|
|
Adjusted Performance for
|
|
|
Actual Payout
|
|
|
|
Target
|
|
|
Compensatory Purposes
|
|
|
Percentage for
|
|
2009 Worldwide Performance Measures
|
|
(a)
|
|
|
(b)
|
|
|
2009 Performance
|
|
|
Earnings per Share
|
|
$
|
1.84
|
|
|
$
|
1.86
|
|
|
|
104.4
|
%
|
Operating Cash Flow
|
|
$
|
173.1 million
|
|
|
$
|
240.4 million
|
|
|
|
200.0
|
%
|
|
|
|
(a) |
|
As initial 2009 targets were reviewed, our committee considered
the following: (1) EPS and operating cash flow net of the
impact of the Caribbean deconsolidation; and (2) EPS net of
the impact of the restriction on our share buy-back strategy due
to the pending PepsiCo merger. |
|
(b) |
|
Information regarding our 2009 results reported in accordance
with GAAP and our adjusted results appears in the paragraph
preceding the introduction to the above chart. When 2009
performance was compared to target, our committee considered the
following: (1) adjusted EPS including the $0.17 gain from
interest rate swap termination; (2) adjusted EPS net of a
$0.02 favorable impact of foreign currency rate movements when
compared to planned rates, offset by a $0.02 unfavorable impact
related to PepsiCo funding; and (3) adjusted operating cash
flow net of the $1.9 million impact from foreign currency
rate movements compared to planned rates. |
Long-Term Incentives. Named executive
officers are eligible for awards under our Long-Term Incentive
Plan (the LTIP). Such awards were granted annually
from 2004 to 2009 in restricted shares under our 2000 Stock
Incentive Plan. Due to the pending merger with PepsiCo, we do
not plan to issue restricted stock awards in February 2010. Had
we issued such awards, they would have originated from our 2009
Long-Term Incentive Plan, which was approved by our shareholders
in April 2009. Restricted shares awarded under the LTIP vest in
their entirety on the third anniversary of the award, although
the committee may accelerate the vesting of restricted shares if
a participant who is 55 years of age or older retires. In
addition, upon closing of our pending merger with PepsiCo,
unvested restricted stock awards will automatically vest in
full. The LTIP is structured and administered to comply with
Section 162(m) of the Internal Revenue Code so awards
qualify as performance-based compensation and are not subject to
the $1 million limitation.
Our LTIP reinforces our
pay-for-performance
philosophy because awards are tied to both our companys
performance and individual performance. In general, each
February the committee approves the companys performance
measure to be used to determine the size of the annual LTIP pool
relative to target. Achievement of our planned adjusted return
on invested capital would result in target funding. Once a
minimum level of adjusted return on invested capital is met, the
total annual pool can adjust from 90 percent to
110 percent of target.
The committee set targeted adjusted return on invested capital
for 2008 at 8.0 percent. We utilized 101 percent of
the target for long-term incentives awarded in February 2009,
which reflected the actual adjusted return on invested capital
of 8.3 percent in 2008.
After the committee defines the overall LTIP pool, it applies
grant guidelines to allocate the pool among salary grades and
then grants awards to individual participants within those
grades. Target awards for our named executive officers are
above-median. LTIP ranges for each salary grade, including those
for the named executive officers, are based on the established
target, with the threshold equal to 50 percent of target
and the maximum equal to 120 percent of target.
Individual awards for named executive officers are determined by
a variety of factors, including salary grade, tenure in the
current position, performance during the prior year, and future
leadership potential. Our committee has the discretion to award
restricted shares within a range or to award a lower number of
restricted shares. In general, our committee approves individual
awards for the named executive officers under the LTIP in
February, based on company and individual performance for the
prior year.
66
Other
Arrangements, Policies and Practices
Perquisites and Other Benefits: Our
named executive officers are eligible for certain perquisites
and other benefits. Our committee believes that these
perquisites and other benefits are reasonable and consistent
with our philosophy to attract, motivate and retain outstanding
employees while maintaining fiscal responsibility. Our committee
periodically reviews the type and amount of perquisites and
other benefits offered, which are positioned competitively with
the external market. The specific perquisites and other benefits
offered to our named executive officers are described below.
|
|
|
|
|
Standard Company Benefits: Our named executive
officers may participate in the standard company benefits we
offer to all salaried employees in the U.S. These benefits
are medical and dental insurance, and retirement savings
contributions. As with all salaried employees, our company makes
an annual contribution of 2 percent of compensation to
retirement savings, and matches employee contributions to our
401(k) plan up to 6 percent of base salary and AIP payout.
We do not have a defined benefit plan. In addition, all
employees are eligible for relocation assistance if asked to
relocate for the convenience of the company. Furthermore, all
employees age 55 years or older with at least
10 years of service have access to post-retirement medical
benefits, the costs of which are paid by the retirees. By
offering these standard benefits to the named executive
officers, our objective is to treat named executive officers
consistent with the broader employee population, to recognize
defined benefit market trends and to reflect national and local
labor market conditions to provide adequate coverage.
|
|
|
|
Executive Deferred Compensation Plan: Our
named executive officers may participate in our Executive
Deferred Compensation Plan. For a detailed description of this
plan, please review the narrative following the Summary
Compensation Table below.
|
|
|
|
Executive Long-Term Disability Program: Our
named executive officers may participate in our executive
long-term disability program. For a detailed description of this
program, please review the narrative following the Summary
Compensation Table below.
|
|
|
|
Personal Use of Company Airplane: Our Chairman
of the Board and Chief Executive Officer and our President and
Chief Operating Officer are offered the personal use of our
airplane and a second airplane in which we owned a one-eighth
interest during 2009 in order to travel most expeditiously. This
benefit allows our top two officers to devote maximum time and
attention to our business, to facilitate scheduling, to
coordinate personal and professional travel and to enhance their
availability and security while away from our offices. From time
to time, our Chairman of the Board and Chief Executive Officer
and President and Chief Operating Officer have authorized
personal use of an airplane by our Executive Vice President,
U.S. for the same reasons. We monitor the personal use of
corporate aircraft and believe this use is reasonable.
|
|
|
|
Car Allowance: Our named executive officers
are offered a market-based car allowance to cover the cost of
owning and operating an automobile.
|
|
|
|
Financial and Tax Planning Services: Our named
executive officers are offered financial and tax planning
services in order to ensure that they fully understand and
leverage our executive compensation program. These services also
reduce the time, attention and effort required for financial
planning and tax preparation.
|
|
|
|
Executive Physicals: Our named executive
officers are eligible for bi-annual, company-paid physical
examinations in order to ensure the physical health of our
senior leadership team.
|
Employment Agreements, Severance Policy and
Change-in-Control
Arrangements: We do not enter into employment
agreements with our named executive officers. Our committee has
reviewed the relative costs and benefits of these agreements,
and has determined that the benefits to be derived are not worth
the associated costs.
Until June 2009, our named executive officers were only eligible
for severance benefits under our basic severance policy. Our
basic severance policy provides for the continuation of salary
and benefits for a specified time period, plus a lump-sum tenure
payment and the payment of a prorated AIP payout, if an
67
employees position is eliminated due to a restructuring,
facility closure, or if employment is terminated under certain
other circumstances. The duration during which salary and
benefits would continue, and the amount of the tenure payment,
depend on the employees salary grade and the circumstances
of the termination. Generally, the minimum total severance,
including salary and benefits continuation and tenure payment,
for named executive officers is 52 weeks.
During the second quarter of 2009, the committee assessed the
adequacy of the foregoing severance program, including an
assessment of the merits of adopting change in control
provisions to encourage retention, continuity and engagement of
management. As a result of this assessment, the committee
adopted the Change in Control Severance Plan for Senior
Executive Employees (the Senior Executive CIC Plan),
effective June 19, 2009. The Senior Executive Plan provides
incremental payments and benefits for our seven most senior
executives that are designed to encourage participants to remain
with the company in the context of a potential change in
control. In addition, the committee adopted the Change in
Control Severance Plan for Employees (the CIC Plan),
which covers the remaining executives as well as all other
U.S. salaried employees. The CIC Plan provides incremental
payments and benefits that are designed to encourage
participants to remain with the company in the context of a
potential change in control. The committee also added AIP payout
at target to the salary continuation provided under the
companys basic severance for all executives.
The following summary of the Senior Executive CIC Plan is a
general description and is qualified in its entirety by the full
text of the Senior Executive CIC Plan, which has been filed with
the SEC. In the event of a change in control, such as the
pending merger with PepsiCo, participants in the Senior
Executive CIC Plan are not eligible for any other
company-provided severance.
Our named executive officers are participants in the Senior
Executive CIC Plan. An executive who is a participant in the
Senior Executive CIC Plan is entitled to certain severance
payments and benefits if the executives employment is
terminated under certain circumstances. The executive is
entitled to those severance payments and benefits if, during the
two-year period after a change in control, the executive is
terminated without cause or resigns for good reason,
as defined in the Senior Executive CIC Plan.
If terminated or separated from the company under the
circumstances set forth above, a participant who executes a
separation agreement is generally be entitled to the following
severance payments and benefits under the Senior Executive CIC
Plan: (a) for two years following the qualifying
termination, a monthly amount equal to the participants
base salary plus the participants monthly target AIP
payout; (b) a pro-rated lump sum amount equal to the target
AIP payout in the year of the qualifying termination multiplied
by the payout percentage attributed to the companys
forecasted (as determined by the company from time to time) or
actual, as applicable, full-year performance under the AIP (or
equivalent) for the year in which the qualifying termination
occurs; (c) for two years following the qualifying
termination, medical, dental, life and long-term disability
insurance coverage at the level provided to the participant
immediately prior to the qualifying termination date;
(d) outplacement services for up to one year with a maximum
cost of $50,000 per participant; and (e) financial and tax
planning services for the participant for the calendar year of
the qualifying termination and for the next calendar year. The
Senior Executive CIC Plan does not provide for any gross up for
any excise taxes the executive may incur as a result of a change
in control or termination of employment.
In order to obtain severance payments and benefits under the
Senior Executive CIC Plan, the executive must first execute a
separation agreement with the company that includes a waiver and
release of any and all claims against the company. The
separation agreement also provides that, for two years following
termination, the executive will not compete with the company,
solicit or hire any employee of the company or its affiliates,
solicit any customer or prospective customer of the company and
its affiliates or interfere with any relationship between the
company and its customers or prospective customers. If an
executive does not sign a separation agreement, the executive
will not be eligible for severance payments and benefits under
the Senior Executive CIC Plan.
68
We believe that it is appropriate to provide severance benefits
to our named executive officers under the Senior Executive CIC
Plan for the following reasons:
|
|
|
|
|
We generally do not enter into employment agreements or other
arrangements with our named executive officers that would
provide for post-termination benefits, so providing severance
benefits under the circumstances described above is consistent
with the competitive realities of the market.
|
|
|
|
Having a formal severance plan assists the company in the
recruitment of talented executives, since having the assurance
of fixed benefits under certain separation events can mitigate
the potential risks of leaving a prior employer or foregoing
other opportunities in order to join our company.
|
|
|
|
Providing severance benefits to named executive officers
affected by changes in management promotes the orderly
transition of responsibilities.
|
Upon a change in control of our company, the 2000 Stock
Incentive Plan and the 2009 Long-Term Incentive Plan provide
that any unvested restricted shares or unvested stock options
would vest in their entirety. In addition, if a named executive
officer has a qualifying termination of employment following a
change in control of our company, the named executive officer
may receive a lump sum distribution from our Executive Deferred
Compensation Plan and our Supplemental Pension Plan. The 2000
Stock Incentive Plan, the 2009 Long-Term Incentive Plan, the
Executive Deferred Compensation Plan and the Supplemental
Pension Plan each define change in control.
Payouts our named executive officers will receive upon closing
of our pending merger with PepsiCo, or upon termination without
cause or for good reason following our pending merger with
PepsiCo, are set forth below under Potential Payments upon
Termination or Change in Control within Item 11 of
this Annual Report on
Form 10-K.
Stock Ownership Guidelines: The
committee established in 2004 stock ownership guidelines for our
named executive officers. Our stock ownership guidelines require
named executive officers to own a number of shares of our
companys stock equal to a multiple of their base salary.
For named executive officers this multiple ranges from two and
one-half to six times their base salary. Each named executive
officer has five years to attain the stock ownership
requirement. The number of shares of company stock that must be
held is determined by multiplying the named executive
officers annual base salary rate at the end of each
calendar year by the applicable multiple, and dividing the
result by the
200-day
average closing stock price at the end of each year. Shares held
in trust and retirement accounts, and restricted shares that
have not yet vested, count toward share ownership, but
unexercised stock options do not.
As of January 2, 2010, each of our named executive officers
was in compliance with our stock ownership guidelines. We
believe that promoting share ownership aligns the interests of
our named executive officers with those of our shareholders.
69
Summary
Compensation Table
The following table sets forth information concerning the
compensation of our named executive officers for fiscal years
2009, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and Nonqual-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
ified Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Name and Principal Position
|
|
Year
|
|
|
($)(a)
|
|
|
($)
|
|
|
($)(b)
|
|
|
($)
|
|
|
($)(c)
|
|
|
($)(d)
|
|
|
($)(e)
|
|
|
($)
|
|
|
Robert C. Pohlad
|
|
|
2009
|
|
|
|
854,818
|
|
|
|
0
|
|
|
|
2,111,194
|
|
|
|
0
|
|
|
|
1,218,970
|
|
|
|
0
|
|
|
|
168,093
|
|
|
|
4,353,075
|
|
Chairman of the Board
|
|
|
2008
|
|
|
|
849,338
|
|
|
|
0
|
|
|
|
1,961,588
|
|
|
|
0
|
|
|
|
1,374,803
|
|
|
|
0
|
|
|
|
182,299
|
|
|
|
4,368,028
|
|
and Chief Executive Officer
|
|
|
2007
|
|
|
|
817,950
|
|
|
|
0
|
|
|
|
1,829,448
|
|
|
|
23,701
|
|
|
|
1,517,794
|
|
|
|
0
|
|
|
|
117,937
|
|
|
|
4,306,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexander H. Ware
|
|
|
2009
|
|
|
|
449,280
|
|
|
|
0
|
|
|
|
1,175,842
|
|
|
|
0
|
|
|
|
544,572
|
|
|
|
127
|
|
|
|
122,234
|
|
|
|
2,292,055
|
|
Executive Vice
|
|
|
2008
|
|
|
|
446,400
|
|
|
|
0
|
|
|
|
1,100,526
|
|
|
|
0
|
|
|
|
614,190
|
|
|
|
3,818
|
|
|
|
105,443
|
|
|
|
2,270,377
|
|
President and Chief Financial Officer
|
|
|
2007
|
|
|
|
423,367
|
|
|
|
0
|
|
|
|
873,951
|
|
|
|
4,808
|
|
|
|
558,412
|
|
|
|
0
|
|
|
|
74,366
|
|
|
|
1,934,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth E. Keiser
|
|
|
2009
|
|
|
|
639,170
|
|
|
|
0
|
|
|
|
2,304,338
|
|
|
|
0
|
|
|
|
865,883
|
|
|
|
0
|
|
|
|
338,221
|
|
|
|
4,147,612
|
|
President and Chief
|
|
|
2008
|
|
|
|
635,073
|
|
|
|
0
|
|
|
|
2,318,921
|
|
|
|
0
|
|
|
|
976,578
|
|
|
|
0
|
|
|
|
308,259
|
|
|
|
4,238,831
|
|
Operating Officer
|
|
|
2007
|
|
|
|
610,471
|
|
|
|
0
|
|
|
|
2,225,299
|
|
|
|
16,785
|
|
|
|
1,059,806
|
|
|
|
0
|
|
|
|
294,340
|
|
|
|
4,206,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G. Michael Durkin, Jr.
|
|
|
2009
|
|
|
|
500,000
|
|
|
|
0
|
|
|
|
1,171,796
|
|
|
|
0
|
|
|
|
677,350
|
|
|
|
1,532
|
|
|
|
132,740
|
|
|
|
2,483,418
|
|
Executive Vice
|
|
|
2008
|
|
|
|
449,913
|
|
|
|
0
|
|
|
|
1,142,903
|
|
|
|
0
|
|
|
|
317,460
|
|
|
|
20,676
|
|
|
|
154,075
|
|
|
|
2,085,027
|
|
President, U.S.
|
|
|
2007
|
|
|
|
432,833
|
|
|
|
0
|
|
|
|
1,161,903
|
|
|
|
13,987
|
|
|
|
588,073
|
|
|
|
0
|
|
|
|
100,107
|
|
|
|
2,296,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James R. Rogers
|
|
|
2009
|
|
|
|
360,645
|
|
|
|
0
|
|
|
|
577,647
|
|
|
|
0
|
|
|
|
385,710
|
|
|
|
663
|
|
|
|
90,952
|
|
|
|
1,415,617
|
|
Executive Vice President,
|
|
|
2008
|
|
|
|
357,783
|
|
|
|
0
|
|
|
|
535,397
|
|
|
|
0
|
|
|
|
363,314
|
|
|
|
4,324
|
|
|
|
88,574
|
|
|
|
1,349,392
|
|
International
|
|
|
2007
|
|
|
|
336,420
|
|
|
|
0
|
|
|
|
509,579
|
|
|
|
4,371
|
|
|
|
432,025
|
|
|
|
0
|
|
|
|
35,020
|
|
|
|
1,317,415
|
|
|
|
|
(a) |
|
Represents base pay without regard to salary-deferred elections. |
|
(b) |
|
Represents the dollar amount recognized for financial statement
reporting purposes with respect to the fiscal year for
outstanding restricted stock awards in accordance with FAS 123R.
Because of fluctuations in the price of our stock, including
stock price fluctuations experienced since the date of grant,
the amounts reported may not represent the actual amounts that
the named executive officers will actually realize from the
awards. Additional information on all outstanding stock awards
is reflected in the Outstanding Equity Awards at Fiscal Year-End
table. Each restricted stock award granted to our named
executive officers vests in its entirety on the third
anniversary of the award, but vesting will accelerate upon
closing of our pending merger with PepsiCo. We do not pay
preferential dividends on this restricted stock. The assumptions
made in the valuation are those set forth in the
Significant Accounting Policies Stock-Based
Compensation note to the consolidated financial statements
set forth in this Annual Report on
Form 10-K.
There were no forfeitures of restricted stock awards by our
named executive officers during fiscal years 2009, 2008 or 2007. |
|
(c) |
|
Represents cash compensation earned under the AIP. Awards under
this plan are paid in the year following the year in which they
are earned. |
|
(d) |
|
There was an increase in the actuarial present value of the
named executive officers accumulated benefits under our
qualified salaried or nonqualified excess pension plans from the
pension plan measurement date we used for our 2008 financial
statements (December 31, 2008) to the pension plan
measurement date we used for our 2009 financial statements
(December 31, 2009). Messrs. Pohlad and Keiser do not
participate in our qualified salaried or nonqualified
supplemental pension plan. Messrs. Ware, Durkin and Rogers
had an increase in the present value of their pension benefits
as a result of being one year closer to retirement, partially
offset by the increase in the discount rate from
6.23 percent at December 31, 2008 to 6.47 percent
at December 31, 2009. The present value of
Mr. Wares combined pension benefits increased by $127
from $22,359 to $22,486. The present value of
Mr. Durkins combined pension benefits increased by
$1,532 from $125,376 to $126,908. The present value of
Mr. Rogers combined pension benefits increased by
$663 from $27,961 to $28,624. |
Nonqualified deferred compensation is credited with investment
gain or loss based on the investment options deemed to have been
selected by the executive. As a result, such earnings are not
deemed to be above-market or preferential.
70
(e) All other compensation for fiscal year 2009 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
Company
|
|
|
|
|
Personal
|
|
|
|
|
|
Financial
|
|
Reimbursed
|
|
|
|
Contributions to
|
|
|
|
|
Use of
|
|
|
|
|
|
and Tax
|
|
for the
|
|
Executive
|
|
Executive Deferred
|
|
|
|
|
Company
|
|
Car
|
|
|
|
Planning
|
|
Payment of
|
|
Long-Term
|
|
Compensation and
|
|
|
|
|
Airplane
|
|
Allowance
|
|
Physicals
|
|
Services
|
|
Taxes
|
|
Disability
|
|
401(k) Plans
|
|
Total
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Robert C. Pohlad
|
|
|
82,350
|
|
|
|
33,600
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
7,551
|
|
|
|
44,592
|
|
|
|
168,093
|
|
Alexander H. Ware
|
|
|
0
|
|
|
|
18,600
|
|
|
|
2,204
|
|
|
|
5,127
|
|
|
|
6,581
|
|
|
|
4,644
|
|
|
|
85,078
|
|
|
|
122,234
|
|
Kenneth E. Keiser
|
|
|
168,982
|
|
|
|
28,800
|
|
|
|
0
|
|
|
|
3,845
|
|
|
|
0
|
|
|
|
7,334
|
|
|
|
129,260
|
|
|
|
338,221
|
|
G. Michael Durkin, Jr.
|
|
|
26,022
|
|
|
|
28,800
|
|
|
|
1,838
|
|
|
|
5,127
|
|
|
|
5,556
|
|
|
|
0
|
|
|
|
65,397
|
|
|
|
132,740
|
|
James R. Rogers
|
|
|
0
|
|
|
|
18,600
|
|
|
|
4,505
|
|
|
|
5,127
|
|
|
|
0
|
|
|
|
4,803
|
|
|
|
57,917
|
|
|
|
90,952
|
|
Personal Use of Company Airplane. The dollar
amounts listed represent the aggregate incremental cost for
personal use of our airplane. In calculating the aggregate
incremental cost, we determined the total hours flown for other
than business purposes (including deadhead flights that create
incremental cost) during fiscal year 2009 as well as the total
variable cost associated with the use of the airplane. We
measured total variable cost by adding the costs of the
following items: fuel, repair and maintenance, aircraft use and
flight fees, travel and entertainment expenses, various other
services (cleaning, uniforms, etc.), and supplies, less purchase
rebates. Dividing the total variable cost by the number of hours
flown, we established a variable cost per hour flown. The
entries set forth above represent the product of the sum of
hours of personal use by the named executive officers and the
variable cost per hour flown.
We reimbursed certain named executive officers for taxes
associated with spousal travel on an airplane associated with
business meetings. These reimbursed amounts were as follows:
Mr. Ware, $6,581 and Mr. Durkin, $5,556. Such amounts
are set forth in the above chart under the caption Amounts
Reimbursed for the Payment of Taxes.
Car Allowance. These entries represent amounts
paid directly to our named executive officers to facilitate
their purchases or leases of vehicles.
Physicals. During 2009, Messrs. Durkin,
Rogers and Ware made use of our executive physical program. We
paid for the cost of these physicals.
Financial and Tax Planning Services. These
entries represent half of the annual participant fees paid to a
financial planning firm on behalf of our named executive
officers. We estimate that these amounts represent the amounts
attributable to personal financial planning services. Such
amounts do not include travel and entertainment expenses
associated with participant meetings with the financial planning
firm nor do they reflect the corporate retainer we paid such
firm.
Amounts Reimbursed for the Payment of
Taxes. The nature and dollar amounts of
reimbursements for the payment of taxes are specified above
under the caption Personal Use of Company Airplane.
Executive Long-Term Disability. The amounts
set forth in this column of the above chart reflect amounts paid
on behalf of our named executive officers under our executive
long-term disability program. We offer this program in addition
to, and in coordination with, the long-term disability benefits
available through our group plan. In order to participate in the
executive long-term disability program, the named executive
officer must be at or above a certain salary grade, must be
enrolled in the voluntary long-term disability program through
our group plan and must have purchased an increased benefit
under such program providing for a total benefit of
60 percent of salary with a maximum of $10,000 per month.
Given the base salaries of our named executive officers, the
companys basic and voluntary long-term disability program
benefits are effectively capped at $10,000 per month. The
executive long-term disability program provides additional
benefits such that named executive officers are eligible to
receive 60 percent of salary. That is, subject to medical
underwriting, the benefits provided under the executive
long-term disability program provide benefits equal to
60 percent of the named executive officers base
salary when combined with the benefits provided under the basic
and voluntary group plan. The executive long-term disability
program also provides an additional catastrophic disability
benefit equal to 40 percent of salary with a maximum of
$8,000 per month that would be paid in the event of certain
serious disabilities.
71
Company Contributions to Executive Deferred Compensation and
401(k) Plans. The amounts set forth in this
column of the above chart reflect matching contributions and
basic contributions we made under such plans for fiscal year
2009. In particular, we sponsor a non-qualified Executive
Deferred Compensation Plan (the EDCP). The EDCP is a
supplemental, deferred compensation plan that provides eligible
U.S. executives with the opportunity for contributions that
could not be credited to their individual accounts under the
qualified 401(k) plan because of Internal Revenue Code
limitations. The EDCP is a defined contribution plan designed to
accumulate retirement funds for executives, and includes a
company matching contribution (up to 6 percent) and a basic
2 percent contribution similar to that of the qualified
401(k) plan. The overall maximum company contribution to the
qualified 401(k) plan and the EDCP is 8 percent of eligible
pay. Generally, executives may elect the form and timing of
their distributions from the EDCP. Employees hired before
January 1, 2004, are immediately vested in the company
contributions. Employees hired after January 1, 2004, are
vested in the company contributions made under the plan in
20 percent annual increments until the employee is
100 percent vested after five years. Annual contributions
made after the five-year period are immediately vested. The
executives and the companys contributions are
credited with investment gain or loss based on the investment
options deemed to have been selected by the executive.
Grants of
Plan-Based Awards
The following table sets forth information concerning non-equity
incentive plan awards paid in February 2010 for 2009 performance
and equity incentive plan awards granted in February 2009 to our
named executive officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
|
Estimated Future Payouts Under
|
|
|
Stock and
|
|
|
|
|
|
|
Plan Awards(a)
|
|
|
Equity Incentive Plan Awards(b)
|
|
|
Option
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Awards ($)
|
|
Name
|
|
Grant Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(c)
|
|
|
Robert C. Pohlad
|
|
|
2/26/2009
|
|
|
|
213,705
|
|
|
|
854,818
|
|
|
|
1,709,636
|
|
|
|
67,405
|
|
|
|
134,811
|
|
|
|
161,773
|
|
|
|
2,384,984
|
|
Alexander H. Ware
|
|
|
2/26/2009
|
|
|
|
95,472
|
|
|
|
381,888
|
|
|
|
763,776
|
|
|
|
34,451
|
|
|
|
68,903
|
|
|
|
82,684
|
|
|
|
1,219,989
|
|
Kenneth E. Keiser
|
|
|
2/26/2009
|
|
|
|
151,803
|
|
|
|
607,211
|
|
|
|
1,214,422
|
|
|
|
43,439
|
|
|
|
86,878
|
|
|
|
104,254
|
|
|
|
1,539,986
|
|
G. Michael Durkin, Jr.
|
|
|
2/26/2009
|
|
|
|
118,750
|
|
|
|
475,000
|
|
|
|
950,000
|
|
|
|
40,443
|
|
|
|
80,886
|
|
|
|
97,064
|
|
|
|
1,349,987
|
|
James R. Rogers
|
|
|
2/26/2009
|
|
|
|
67,621
|
|
|
|
270,484
|
|
|
|
540,968
|
|
|
|
16,476
|
|
|
|
32,953
|
|
|
|
39,544
|
|
|
|
549,986
|
|
|
|
|
(a) |
|
Represents amounts that could have been paid under our AIP for
service rendered during fiscal year 2009. The threshold entries
reflect the minimum dollar amount that would have been paid for
a certain level of performance under the plan. Had such
performance not been attained, dollar amounts would not have
been earned under our AIP. The actual amounts earned during
fiscal year 2009, and paid in February 2010, are set forth in
the Non-Equity Incentive Plan Compensation column of
the Summary Compensation Table. |
|
(b) |
|
Represents the number of shares that could have been issued
under our 2000 Stock Incentive Plan on February 26, 2009.
These numbers are calculated by dividing the threshold, target
and maximum dollar values of the estimated future payouts under
equity incentive plan awards by the average of the high and low
stock prices on the date of grant. The actual numbers of shares
issued on such date as restricted stock awards to each of our
named executive officers were as follows: Mr. Pohlad
(142,899 shares), Mr. Ware (73,097 shares),
Mr. Keiser (92,270 shares), Mr. Durkin
(80,886 shares), and Mr. Rogers (32,953 shares).
Each restricted stock award granted to our named executive
officers vests in its entirety on the third anniversary of the
award, but vesting will accelerate upon closing of our pending
merger with PepsiCo. Dividends declared and paid on shares of
our common stock are accrued at the same rate on this restricted
stock. No preferential dividends are paid. |
|
(c) |
|
Represents the grant date fair value of each such equity award
computed in accordance with FAS 123R based upon the average
of the high and low stock prices on the date of grant. There
were no forfeitures of restricted stock awards by our named
executive officers during fiscal years 2009, 2008 or 2007. |
72
For details on the criteria utilized to determine the specific
amounts payable under these plans, including the relationship to
target levels with respect to specific quantitative or
qualitative performance-related factors, please review
Compensation Discussion and Analysis above.
For details on the proportion of salary and incentive
compensation to total compensation, please review
Compensation Discussion and Analysis above.
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth information concerning
outstanding equity awards held by our named executive officers
at fiscal year end 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(a)
|
|
|
Stock Awards(b)
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
Number
|
|
|
Market
|
|
|
Equity Incentive
|
|
|
Equity Incentive
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Value of
|
|
|
Plan Awards:
|
|
|
Plan Awards:
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Number of
|
|
|
|
|
|
|
|
|
or Units
|
|
|
Shares or
|
|
|
Number of
|
|
|
Market or Payout
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Securities
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
Units of
|
|
|
Unearned Shares,
|
|
|
Value of Unearned
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
|
That
|
|
|
Stock That
|
|
|
Units or Other
|
|
|
Shares, Units or
|
|
|
|
Options
|
|
|
Options
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Rights That Have
|
|
|
Other Rights That
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Unearned Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
|
Not Vested
|
|
|
Have Not Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Robert C. Pohlad
|
|
|
122,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
18.92
|
|
|
|
2/16/2014
|
|
|
|
310,005
|
|
|
|
9,070,746
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
115,900
|
|
|
|
|
|
|
|
|
|
|
|
12.01
|
|
|
|
2/26/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
176,400
|
|
|
|
|
|
|
|
|
|
|
|
12.68
|
|
|
|
2/21/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,276
|
(c)
|
|
|
|
|
|
|
|
|
|
|
12.17
|
|
|
|
1/20/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexander H. Ware
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
171,195
|
|
|
|
5,009,166
|
|
|
|
0
|
|
|
|
0
|
|
Kenneth E. Keiser
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
212,916
|
|
|
|
6,229,922
|
|
|
|
0
|
|
|
|
0
|
|
G. Michael Durkin, Jr.
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
172,484
|
|
|
|
5,046,882
|
|
|
|
0
|
|
|
|
0
|
|
James R. Rogers
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
83,502
|
|
|
|
2,443,269
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(a) |
|
Each of the options set forth above is exercisable for one-third
of the shares purchasable thereunder on the first anniversary of
the date of grant, two-third of the shares purchasable
thereunder on the second anniversary of the date of grant and in
full on the third anniversary of the date of grant. Given that
the most recently issued options were granted on
February 16, 2004, each of the options set forth in the
table above is exercisable in full. |
|
(b) |
|
The restricted stock awards reflected above were granted on
February 22, 2007, February 28, 2008, and
February 26, 2009. Each of the restricted stock awards set
forth above vests in full on the third anniversary of the date
of grant, but vesting will accelerate upon closing of our
pending merger with PepsiCo. The market value of such restricted
stock is calculated using a stock price of $29.26 per share,
which was the closing price of one share of common stock on
December 31, 2009 (the last trading day of fiscal year
2009). |
|
(c) |
|
On January 20, 2000, we granted Mr. Pohlad an option
for the purchase of 33,276 shares. On May 22, 2001,
Mr. Pohlad gifted two-thirds of such option and, as a
result of such transfers, Mr. Pohlad retained an option for
the purchase of 11,092 shares, which he exercised in
January 2010. |
Options
to Purchase Shares
Each outstanding option to acquire our common stock granted
under an equity compensation plan or arrangement will be
converted automatically at the effective time of the PepsiCo
merger into a vested option to purchase PepsiCo common stock, on
the same terms and conditions, except that:
|
|
|
|
|
the number of shares of PepsiCo common stock subject to the new
PepsiCo option will be equal to the product of (a) the
number of shares of common stock subject to the PepsiAmericas
stock option and (b) the closing exchange ratio, rounded
down to the nearest whole share; and
|
|
|
|
the exercise price per share of PepsiCo common stock subject to
the new PepsiCo stock option will be equal to (a) the
exercise price per share of common stock under the PepsiAmericas
stock option divided by (b) the closing exchange ratio,
rounded up to the nearest cent.
|
For purposes of the option conversion, in compliance with
Section 409A of the Internal Revenue Code, PepsiCo and
PepsiAmericas agreed that the closing exchange ratio will be
equal to the quotient of (a) the
73
closing price of a share of PepsiAmericas common stock on the
business duty immediately before the PepsiCo merger divided by
(b) the closing price of a share of PepsiCo common stock on
the business day immediately before the PepsiCo merger.
Restricted
Stock Awards
The vesting of each outstanding restricted stock award granted
under an equity compensation plan or arrangement, which
represents an outstanding share of our common stock subject to
vesting and forfeiture, will be accelerated upon the change in
control. In particular, each outstanding restricted share will
be converted automatically at the effective time of the PepsiCo
merger into the merger consideration, consisting of either
0.5022 of a share of PepsiCo common stock or $28.50 in cash,
without interest, as validly elected by the holder of such
restricted stock award, subject to the same election and
proration procedures as applicable to a holder of unrestricted
common stock.
Option
Exercises and Stock Vested
The following table sets forth information concerning each
exercise of stock options and each vesting of restricted stock
for our named executive officers during fiscal year 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
|
Acquired on Exercise
|
|
|
on Exercise
|
|
|
Acquired on Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)(a)
|
|
|
Robert C. Pohlad
|
|
|
0
|
|
|
|
N/A
|
|
|
|
84,600
|
|
|
|
1,443,699
|
|
Alexander H. Ware
|
|
|
0
|
|
|
|
N/A
|
|
|
|
46,200
|
|
|
|
788,403
|
|
Kenneth E. Keiser
|
|
|
0
|
|
|
|
N/A
|
|
|
|
69,000
|
|
|
|
1,177,485
|
|
|
|
|
|
|
|
|
|
|
|
|
113,000
|
|
|
|
3,322,765
|
|
G. Michael Durkin, Jr.
|
|
|
104,400
|
|
|
|
3,087,042
|
|
|
|
53,850
|
|
|
|
918,950
|
|
James R. Rogers
|
|
|
0
|
|
|
|
N/A
|
|
|
|
18,500
|
|
|
|
315,703
|
|
|
|
|
(a) |
|
The value realized on vesting of stock awards reflects the total
pre-tax value realized. It is determined by multiplying the
number of shares that vested by $17.065, which was the average
of the high and low sales prices of our common stock on the date
of vesting (February 23, 2009), with the exception of
Mr. Keisers grant for 113,000 shares which
vested on January 1, 2010 at $29.405, the average of the
high and low sales prices of our common stock on the next
possible trading day, January 4, 2010. |
Pension
Benefits
Prior to the formation of PepsiAmericas in November 2000,
Pepsi-Cola General Bottlers, then a bottling subsidiary of
Whitman Corporation, maintained a qualified, defined benefit
pension plan and a non-qualified supplemental pension plan. We
generally froze benefit accruals under these plans as of
December 31, 2001, and no new participants were enrolled
after April 1, 2001. The plans pay benefits in optional
forms elected by the employees. The benefit formula under the
pension plans provides a normal retirement benefit equal to one
percent of final average earnings multiplied by the
participants credited service, up to a maximum of
20 years. The qualified pension plan provides a benefit on
earnings up to the qualified plan limit ($170,000 for 2001), and
the non-qualified plan provides a benefit on earnings over this
limit.
The following table describes pension benefits of our named
executive officers at fiscal year end 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
|
Present Value of
|
|
|
Payments During
|
|
|
|
|
|
Credited Service
|
|
|
Accumulated Benefit
|
|
|
Last Fiscal Year
|
|
Name
|
|
Plan Name
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
|
Robert C. Pohlad
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Alexander H. Ware
|
|
Qualified Salaried Plan
|
|
|
2.583
|
|
|
|
14,631
|
|
|
|
0
|
|
|
|
Supplemental Pension Plan
|
|
|
2.583
|
|
|
|
7,855
|
|
|
|
0
|
|
Kenneth E. Keiser
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
|
Present Value of
|
|
|
Payments During
|
|
|
|
|
|
Credited Service
|
|
|
Accumulated Benefit
|
|
|
Last Fiscal Year
|
|
Name
|
|
Plan Name
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
|
G. Michael Durkin, Jr.
|
|
Qualified Salaried Plan
|
|
|
2.667
|
|
|
|
18,505
|
|
|
|
0
|
|
|
|
Supplemental Pension Plan
|
|
|
2.667
|
|
|
|
108,403
|
|
|
|
0
|
|
James R. Rogers
|
|
Qualified Salaried Plan
|
|
|
1.333
|
|
|
|
13,114
|
|
|
|
0
|
|
|
|
Supplemental Pension Plan
|
|
|
1.333
|
|
|
|
15,510
|
|
|
|
0
|
|
Final average earnings is the average of the participants
highest earnings during 60 consecutive months out of the last
120 months worked, but not counting earnings after
December 31, 2001. Earnings recognized under each plan
include salaries, commissions, wages, cash bonuses, and overtime
pay. All other compensation is excludable. Participants in each
plan become fully vested after completion of five years of
service.
Under the qualified pension plan, the benefit is payable as a
life annuity commencing at the plans normal retirement
date, which is the first of the month coincident with or next
following the attainment of age 65 and completion of five
years of vesting service. Participants under such plan are
eligible for early retirement upon attaining age 55 and
completing five years of vesting service. Participants eligible
for early retirement are entitled to immediate commencement of
their benefit, reduced actuarially for commencement prior to
age 65. Participants eligible for early retirement with 20
or more years of vesting service receive a benefit reduced four
percent for each year that benefit payments start prior to
age 65.
Under the supplemental pension plan, the benefits vested prior
to December 31, 2004 are payable in a lump sum or
installment payments pursuant to a participants election.
Benefits vested thereafter are payable as a lump sum.
The figures shown in the table above represent the present value
as of December 31, 2009, of the benefit earned under each
plan as of that date. We determined present values based on the
following assumptions: an interest rate of 6.47 percent, an
assumed retirement age of 65, the PPA 2010 Optional Combined
Healthy Mortality Table and no pre-retirement decrements.
Nonqualified
Deferred Compensation
The following table sets forth nonqualified deferred
compensation of our named executive officers at fiscal year end
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Earnings in
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Last
|
|
|
Withdrawals/
|
|
|
Balance
|
|
|
|
in Last FY
|
|
|
in Last FY
|
|
|
FY
|
|
|
Distributions
|
|
|
at Last FYE
|
|
Name
|
|
($)(a)
|
|
|
($)(b)
|
|
|
($)(c)
|
|
|
($)
|
|
|
($)(d)
|
|
|
Robert C. Pohlad
|
|
|
0
|
|
|
|
39,692
|
|
|
|
10,018
|
|
|
|
0
|
|
|
|
260,844
|
|
Alexander H. Ware
|
|
|
159,521
|
|
|
|
65,478
|
|
|
|
124,674
|
|
|
|
0
|
|
|
|
1,115,237
|
|
Kenneth E. Keiser
|
|
|
161,575
|
|
|
|
109,660
|
|
|
|
117,300
|
|
|
|
0
|
|
|
|
1,759,385
|
|
G. Michael Durkin, Jr.
|
|
|
75,000
|
|
|
|
45,797
|
|
|
|
261,346
|
|
|
|
0
|
|
|
|
1,584,223
|
|
James R. Rogers
|
|
|
43,437
|
|
|
|
38,317
|
|
|
|
314,421
|
|
|
|
0
|
|
|
|
1,404,332
|
|
|
|
|
(a) |
|
Contributions are made through a compensation deferral election.
All amounts reflected in this column are also reported in the
column captioned Salary of the Summary Compensation
Table. |
|
(b) |
|
The contributions set forth in this column represent the
companys contributions to the Executive Deferred
Compensation Plan. All amounts reflected in this column are also
reported in the column captioned All Other
Compensation of the Summary Compensation Table. |
|
(c) |
|
Nonqualified deferred compensation is credited with investment
gain or loss based on the investment options deemed to have been
selected by the executive. As a result, such earnings are not
deemed to be above-market or preferential. |
75
|
|
|
(d) |
|
Of the amounts reported in this column, executive contributions
and employer contributions are either reported in the Summary
Compensation Table or have been reported in the Summary
Compensation Tables for previous years. |
An executive can defer up to 75 percent of salary and up to
100 percent of non-equity incentive plan compensation under
the AIP. Nonqualified deferred compensation is credited with
investment gain or loss based on the investment options deemed
to have been selected by the executive. Generally, executives
may elect the form and timing of their distributions.
Potential
Payments upon Termination or Change in Control
Upon the termination of a named executive officer, such person
may be entitled to payments or the provision of other benefits
from our company, depending on the event triggering the
termination. The events that would trigger a named executive
officers entitlement to payments or other benefits upon
termination and the value of the estimated payments and benefits
are described in the following table, assuming a termination
date and, where applicable, a change in control date of
January 2, 2010, and a stock price of $29.26 per share,
which was the closing price of one share of our common stock on
December 31, 2009 (the last trading day of fiscal year
2009). Pension benefits under the qualified, defined benefit
pension plan and the non-qualified supplemental pension plan
that are available upon termination of employment have been
previously set forth and do not appear in the following table.
Lump sum EDCP payments and enhanced supplemental pension plan
payments that are available upon closing of the pending merger
with PepsiCo are described in the narrative below but do not
appear in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert C.
|
|
|
Alexander H.
|
|
|
Kenneth E.
|
|
|
G. Michael
|
|
|
James R.
|
|
Scenario
|
|
Benefits
|
|
Pohlad
|
|
|
Ware
|
|
|
Keiser
|
|
|
Durkin, Jr.
|
|
|
Rogers
|
|
|
Involuntary Termination Without Cause
|
|
Salary Continuation
|
|
$
|
575,358
|
|
|
$
|
302,400
|
|
|
$
|
430,211
|
|
|
$
|
336,538
|
|
|
$
|
242,742
|
|
|
|
Incremental Tenure Payment
|
|
$
|
509,602
|
|
|
$
|
60,480
|
|
|
$
|
233,543
|
|
|
$
|
269,231
|
|
|
$
|
235,806
|
|
|
|
Additional Payment to Reach Full Severance Benefit
|
|
$
|
0
|
|
|
$
|
86,400
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
Pro-Rata Non-Equity Incentive Plan Award
|
|
$
|
1,218,969
|
|
|
$
|
544,572
|
|
|
$
|
865,884
|
|
|
$
|
677,350
|
|
|
$
|
385,710
|
|
|
|
Outplacement
|
|
$
|
11,250
|
|
|
$
|
9,780
|
|
|
$
|
11,250
|
|
|
$
|
11,250
|
|
|
$
|
11,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
2,315,179
|
|
|
$
|
1,003,632
|
|
|
$
|
1,540,888
|
|
|
$
|
1,294,369
|
|
|
$
|
875,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Circumstances Performance
|
|
Salary Continuation
|
|
$
|
295,898
|
|
|
$
|
155,520
|
|
|
$
|
221,251
|
|
|
$
|
173,077
|
|
|
$
|
124,839
|
|
|
|
Incremental Tenure Payment
|
|
$
|
509,602
|
|
|
$
|
25,920
|
|
|
$
|
110,626
|
|
|
$
|
269,231
|
|
|
$
|
235,806
|
|
|
|
Additional Payment to Reach Full Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
|
|
$
|
49,316
|
|
|
$
|
267,840
|
|
|
$
|
307,293
|
|
|
$
|
57,692
|
|
|
$
|
0
|
|
|
|
Pro-Rata Non-Equity Incentive Plan Award
|
|
$
|
1,218,969
|
|
|
$
|
544,572
|
|
|
$
|
865,884
|
|
|
$
|
677,350
|
|
|
$
|
385,710
|
|
|
|
Outplacement
|
|
$
|
7,107
|
|
|
$
|
5,562
|
|
|
$
|
7,107
|
|
|
$
|
7,107
|
|
|
$
|
7,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
2,080,892
|
|
|
$
|
999,414
|
|
|
$
|
1,512,161
|
|
|
$
|
1,184,457
|
|
|
$
|
753,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Circumstances Other
|
|
Salary Continuation
|
|
$
|
295,898
|
|
|
$
|
155,520
|
|
|
$
|
221,251
|
|
|
$
|
173,077
|
|
|
$
|
124,839
|
|
|
|
Incremental Tenure Payment
|
|
$
|
509,602
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
269,231
|
|
|
$
|
235,806
|
|
|
|
Outplacement
|
|
$
|
7,107
|
|
|
$
|
5,562
|
|
|
$
|
7,107
|
|
|
$
|
7,107
|
|
|
$
|
7,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
812,607
|
|
|
$
|
161,082
|
|
|
$
|
228,358
|
|
|
$
|
449,415
|
|
|
$
|
367,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause or for Good Reason
Following Change in Control
|
|
Severance Payment
|
|
$
|
3,419,268
|
|
|
$
|
1,662,336
|
|
|
$
|
2,492,763
|
|
|
$
|
1,950,000
|
|
|
$
|
1,262,258
|
|
|
|
Pro-Rata Non-Equity Incentive Plan Award
|
|
$
|
1,218,969
|
|
|
$
|
544,572
|
|
|
$
|
865,884
|
|
|
$
|
677,350
|
|
|
$
|
385,710
|
|
|
|
Lump Sum Non-Qualified Pension
|
|
$
|
0
|
|
|
$
|
12,913
|
|
|
$
|
0
|
|
|
$
|
220,511
|
|
|
$
|
28,405
|
|
|
|
Outplacement
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
|
Financial and Tax Planning
|
|
$
|
0
|
|
|
$
|
19,750
|
|
|
$
|
19,750
|
|
|
$
|
19,750
|
|
|
$
|
19,750
|
|
|
|
Accelerated Restricted Stock Awards
|
|
$
|
9,070,746
|
|
|
$
|
5,009,166
|
|
|
$
|
6,229,922
|
|
|
$
|
5,046,882
|
|
|
$
|
2,443,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
13,758,983
|
|
|
$
|
7,298,737
|
|
|
$
|
9,658,319
|
|
|
$
|
7,964,493
|
|
|
$
|
4,189,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert C.
|
|
|
Alexander H.
|
|
|
Kenneth E.
|
|
|
G. Michael
|
|
|
James R.
|
|
Scenario
|
|
Benefits
|
|
Pohlad
|
|
|
Ware
|
|
|
Keiser
|
|
|
Durkin, Jr.
|
|
|
Rogers
|
|
|
Voluntary Resignation Following Change in Control
|
|
Lump Sum Non-Qualified Pension
|
|
$
|
0
|
|
|
$
|
12,913
|
|
|
$
|
0
|
|
|
$
|
220,511
|
|
|
$
|
28,405
|
|
|
|
Accelerated Restricted Stock Awards
|
|
$
|
9,070,746
|
|
|
$
|
5,009,166
|
|
|
$
|
6,229,922
|
|
|
$
|
5,046,882
|
|
|
$
|
2,443,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
9,070,746
|
|
|
$
|
5,022,079
|
|
|
$
|
6,229,922
|
|
|
$
|
5,267,393
|
|
|
$
|
2,471,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
Accelerated Restricted Stock Awards
|
|
$
|
9,070,746
|
|
|
$
|
5,009,166
|
|
|
$
|
6,229,922
|
|
|
$
|
5,046,882
|
|
|
$
|
2,443,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
9,070,746
|
|
|
$
|
5,009,166
|
|
|
$
|
6,229,922
|
|
|
$
|
5,046,882
|
|
|
$
|
2,443,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement(a)
|
|
Accelerated Restricted Stock Awards
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
6,229,922
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
6,229,922
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability
|
|
Total:
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Resignation
|
|
Total:
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination for Egregious Cause
|
|
Total:
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
If an executive retires after age 55, we may, at our
discretion and upon approval of the Management Resources and
Compensation Committee, cause unvested restricted stock awards
to become immediately vested. |
Involuntary Termination without Cause. In the
event of an involuntary termination without cause, the named
executive officer is entitled to a payment of severance benefits
under our basic severance policy. The cash severance benefits in
this situation consist of salary continuation benefits for
35 weeks and a lump sum tenure payment in the amount of one
weeks base salary for each year of service; provided,
however, that the minimum total cash severance payment for an
executive at or above a certain level is 52 weeks of
severance pay (consisting of salary continuation, incremental
tenure payment and any additional payment required to reach
52 weeks of severance pay). An executive who is
involuntarily terminated without cause is also entitled to a
prorated AIP payout. The non-cash severance benefits in this
situation consist of medical and dental continuation at active
employee rates, and the provision of outplacement services,
during the salary continuation period. The basic severance
policy provides other benefits to the executive, but all other
benefits under the basic severance policy are available
generally to all salaried employees.
Involuntary Termination with Special
Circumstances. In the event of an involuntary
termination with special circumstances, the named executive
officer is entitled to a payment of severance benefits under our
basic severance policy, but in a lesser amount. Special
circumstances applies to any employee whose conduct casts
discredit upon our company
and/or makes
it impractical for the employee to continue to perform in his or
her role with our company but does not rise to the level of
severity of egregious cause. Involuntary terminations with
special circumstances are divided into two subcategories:
special circumstances (performance) and special circumstances
(other).
In the event of an involuntary termination with special
circumstances (performance), the named executive officer will be
entitled to a payment of severance benefits under our basic
severance policy. Special circumstances (performance) may be
involuntary termination due to unsatisfactory performance, the
employees refusal to accept a comparable position at a
different location, or other circumstances, as defined in the
basic severance policy. In the event of an executives
involuntary termination with special circumstances
(performance), the cash severance benefits to a named executive
officer will consist of salary continuation benefits for
18 weeks. An executive will be entitled to a lump sum
tenure payment of one weeks base salary for every two
years of service. The minimum total cash severance payment for
an executive at or above a certain level, including our named
executive officers, will be 52 weeks of severance pay
(consisting of salary continuation, incremental tenure payment
and any additional payment required to reach 52 weeks of
severance pay). An executive who is involuntarily terminated
with special circumstances (performance) will also be entitled
to a prorated AIP payout and the non-cash severance benefits
available to all other employees.
77
In the event of an executives involuntary termination with
special circumstances (other), the named executive officer would
receive severance consisting of salary continuation benefits for
18 weeks. A lump sum tenure payment equal to one week of
pay for every year of service would only be made if the
terminated executive completed more than 20 years of
service. There is no minimum severance amount. An executive who
is involuntarily terminated for special circumstances (other) is
eligible for the non-cash benefits generally available to all
employees, but would be ineligible to receive a prorated AIP
payout.
Termination following a Change in Control. We
do not enter into
change-in-control
agreements with our employees. However, if a change in control
results in the involuntary termination of a named executive
officer, the executive is entitled to severance benefits under
one of our two
change-in-control
severance plans. In June 2009, we adopted the Senior Executive
CIC Severance Plan which provides payments and benefits for the
seven most senior executive officers, including each of our
named executive officers, in the context of a change in control.
An executive who is a participant in the Senior Executive CIC
Severance Plan will be entitled to certain severance payments
and benefits if the executives employment is terminated
under certain circumstances. The executive is entitled to those
severance payments and benefits if, during the two-year period
after a change in control, the executive is terminated without
cause or resigns for good reason. Good reason under
the Senior Executive CIC Severance Plan is defined to mean:
|
|
|
|
|
a material diminution in the participants target total
compensation (meaning base salary, annual bonus opportunity, and
target long-term incentive compensation opportunity) other than
pursuant to a reduction of total compensation for all salaried
employees of the company and its affiliates;
|
|
|
|
a material diminution in the participants base salary,
other than pursuant to a reduction in the base salary for all
salaried employees of the company and its affiliates;
|
|
|
|
a material diminution in the participants authority,
duties, titles, or responsibilities (including budget
responsibilities), held by the participant immediately prior to
the change in control or any assignment to the participant of
duties or responsibilities that are materially inconsistent with
the participants status, offices, titles, and reporting
relationships as in effect immediately prior to the change in
control; or
|
|
|
|
any change of the participants principal place of
employment to a location more than 30 miles from the
participants place of employment immediately prior to the
change in control, or that increases the participants
commuting time by 45 minutes or more in either direction or a
material increase in the participants travel obligations.
|
If terminated or separated from our company under the
circumstances set forth above, an executive who executes an
irrevocable separation agreement would be entitled to the
following severance payments and benefits under the Senior
Executive CIC Severance Plan:
|
|
|
|
|
for two years following the qualifying termination, a monthly
amount equal to the participants base salary plus the
participants monthly target AIP payout;
|
|
|
|
a pro-rated lump sum amount equal to the target AIP payout in
the year of the qualifying termination multiplied by the payout
percentage attributed to our forecasted (as determined by our
company from time to time) or actual, as applicable, full-year
performance under the AIP (or equivalent) for the year in which
the qualifying termination occurs;
|
|
|
|
for two years following the qualifying termination, medical,
dental, life and long-term disability insurance coverage at the
level provided to the participant immediately prior to the
qualifying termination date;
|
|
|
|
outplacement services for up to one year with a maximum cost of
$50,000 per participant; and
|
|
|
|
financial and tax planning services for the participant for the
calendar year of the qualifying termination and for the next
calendar year, including necessary tax return preparation.
|
78
For purposes of Section 280G, payments under the Senior
Executive CIC Severance Plan will be reduced if the executive
would receive a greater after tax benefit than would be payable
if no reduction were to be made. The separation agreement also
provides that the executive will not solicit any employee to
leave our company and for two years following termination, will
not accept a position with The
Coca-Cola
Company or a bottling entity that sells
Coca-Cola or
Dr. Pepper Snapple Group licensed products that would cause
him to have responsibilities related to operations where we
operate.
Upon closing of the pending merger with PepsiCo, any profit
sharing and matching contributions that are unvested under the
Salaried 401(k) Plan and the EDCP immediately prior to the
effective time of the PepsiCo merger will fully vest. If an
executive officer is involuntarily terminated or resigns for
good reason within two years following the PepsiCo merger, the
executive will receive six months after termination a lump sum
distribution of the portion of his EDCP account balance vested
after December 31, 2004. In addition, if an executive
officer is terminated for any reason within three years of the
PepsiCo merger, the executive will receive six months after
termination a lump sum distribution of the portion of his EDCP
account balance vested as of December 31, 2004 and will
also receive immediately an enhanced lump sum payment from the
Supplemental Pension Plan. The enhanced lump sum payment from
the Supplemental Pension Plan is calculated by adding three
years to the executives age at termination of employment.
Lump sum payments under the EDCP and lump sum payments under the
Supplemental Pension Plan for each of our named executive
officers are set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enhanced
|
|
|
|
|
|
|
Supplemental
|
|
|
|
Lump Sum EDCP
|
|
|
Pension Plan
|
|
Name
|
|
Payment(1)
|
|
|
Payment(2)
|
|
|
Robert C. Pohlad
|
|
$
|
260,844
|
|
|
$
|
0
|
|
Alexander H. Ware
|
|
$
|
1,075,700
|
|
|
$
|
12,913
|
|
Kenneth E. Keiser
|
|
$
|
1,686,835
|
|
|
$
|
0
|
|
G. Michael Durkin, Jr.
|
|
$
|
1,554,376
|
|
|
$
|
220,511
|
|
James R. Rogers
|
|
$
|
1,378,201
|
|
|
$
|
28,405
|
|
|
|
|
(l) |
|
Values are as of January 2, 2010. |
|
(2) |
|
Values assume a termination date of January 2, 2010. |
In addition, upon a change in control of our company as defined
under the 2000 Stock Incentive Plan or the 2009 Long-Term
Incentive Plan, including the closing of our pending merger with
PepsiCo, such plans provide that any unvested restricted stock
awards or stock options would vest in their entirety. Additional
detail regarding these securities appears in the Outstanding
Equity Awards at Fiscal Year-End table.
Death, Disability and Retirement. In the event
of an executives death, we would distribute the
executives account under the EDCP in the form of a lump
sum payment without regard to the executives previous
payment elections. The executive would be entitled to the
benefit under the supplemental pension plan in accordance with
his previous payment election. Further, upon an executives
death, the 2000 Stock Incentive Plan and the 2009 Long-Term
Incentive Plan provide that any unvested restricted stock awards
or stock options would vest in their entirety. Disability does
not result in the acceleration of benefits to our executives. If
an executive retires after age 55, we may, upon Management
Resources and Compensation Committee approval, cause unvested
restricted stock awards and stock options to become immediately
vested.
Voluntary Resignation. In the event of a
voluntary resignation, a named executive officer will forfeit
any annual incentive compensation for that fiscal year and any
unvested restricted stock awards. The named executive officer
will be entitled to any vested pension benefits and the vested
balance in his or her EDCP account, and can exercise any
outstanding vested stock options within three months of the
officers last day of employment.
Involuntary Termination for Egregious
Cause. Our basic severance policy does not award
any benefits to a named executive officer who is involuntarily
terminated for egregious cause. In the event of termination for
egregious cause, a named executive officer will forfeit any
unpaid annual incentive compensation, any
79
unvested restricted stock awards, and all unexercised stock
options, whether or not vested. The named executive officer will
be entitled to any vested pension benefits and the vested
balance in his or her EDCP account.
Non-Employee
Director Compensation
Our Management Resources and Compensation Committee periodically
reviews and makes recommendations to our Board of Directors
regarding the components and amount of non-employee director
compensation. Directors who are employees of our company receive
no fees for their services as director.
Our non-employee directors each receive annual compensation as
follows:
|
|
|
|
|
a $70,000 annual retainer, paid in equal quarterly installments;
|
|
|
|
a restricted stock award for a number of shares equal to
approximately $75,000;
|
|
|
|
a meeting fee of $1,000 for each meeting of a committee on which
the director serves; and
|
|
|
|
an additional $5,000 annual retainer for each committee on which
the director serves.
|
Although our Management Resources and Compensation Committee
does not plan to award restricted stock to non-employee
directors in February 2010 given our pending merger with
PepsiCo, restricted stock awards are generally granted to our
non-employee directors each year in February. Pursuant to the
terms of such awards, directors may not sell such stock while
they serve on the Board.
In addition to the compensation described above, certain
additional annual retainers (also paid in quarterly
installments) are paid in cash as follows:
|
|
|
|
|
|
|
Additional
|
|
Position
|
|
Annual Retainer
|
|
|
Lead Director
|
|
$
|
20,000
|
|
Audit Committee Chairperson
|
|
$
|
15,000
|
|
Management Resources and Compensation Committee Chairperson
|
|
$
|
15,000
|
|
Governance, Finance and Nominating Committee Chairperson
|
|
$
|
15,000
|
|
Transactions Committee Chairperson
|
|
$
|
15,000
|
|
Affiliated Transaction Committee Chairperson
|
|
$
|
5,000
|
|
Our Board, following the recommendation of the Management
Resources and Compensation Committee, approved fee arrangements
to compensate our non-employee directors for their services in
connection with consideration and negotiation of the PepsiCo
merger and the PepsiCo merger agreement. In particular, our
Board, following the recommendation of the Management Resources
and Compensation Committee, approved the members of the
Transactions Committee receiving compensation consistent with
service on the other committees of the Board; namely, the
chairperson receives a $15,000 annual retainer, the other
committee members receive a $5,000 annual retainer, and all
committee members receive a fee of $1,000 per meeting attended.
The foregoing amounts are reflected in the bullet points and the
table set forth above. In addition, the Board, following the
recommendation of the Management Resources and Compensation
Committee, approved a one-time payment of $20,000 to each
non-employee director in recognition of the substantial time and
attention expended to deliberate and consider the PepsiCo merger
and the PepsiCo merger agreement. Finally, the Board, following
the recommendation of the Management Resources and Compensation
Committee, approved a fee of $1,000 per meeting of the
Transactions Committee that is attended by Mr. McKenna at
the Transactions Committees invitation to compensate him
for his time in consulting and advising the Transactions
Committee in connection with the consideration and negotiation
of the PepsiCo merger and the PepsiCo merger agreement.
We pay for or provide (or reimburse directors for
out-of-pocket
costs incurred for) transportation, hotel, food and other
incidental expenses related to attending Board and committee
meetings or participating in director education programs and
other director orientation or education meetings. These amounts
are not
80
reflected in the Director Compensation Table because we do not
consider them to be compensation as they are directly and
integrally related to the performance of our directors
duties.
Director
Compensation Table
The following table sets forth the compensation of our
non-employee directors for fiscal year 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
Earned
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
or
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
|
|
|
Option
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
All Other
|
|
|
|
|
|
|
Cash
|
|
|
Stock Awards
|
|
|
Awards
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)(a)
|
|
|
($)(b)
|
|
|
($)(c)
|
|
|
Compensation ($)
|
|
|
Earnings ($)
|
|
|
($)(d)
|
|
|
($)
|
|
|
Herbert M. Baum
|
|
|
144,000
|
|
|
|
74,988
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
218,988
|
|
Richard G. Cline
|
|
|
155,000
|
|
|
|
74,988
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,500
|
|
|
|
242,488
|
|
Michael J. Corliss
|
|
|
144,000
|
|
|
|
74,988
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,000
|
|
|
|
228,988
|
|
Pierre S. du Pont
|
|
|
158,000
|
|
|
|
74,988
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
232,988
|
|
Archie R. Dykes
|
|
|
181,000
|
|
|
|
74,988
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,000
|
|
|
|
265,988
|
|
Jarobin Gilbert, Jr.
|
|
|
157,000
|
|
|
|
74,988
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
231,988
|
|
Wahid Hamid(e)
|
|
|
17,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
17,500
|
|
James R. Kackley
|
|
|
145,000
|
|
|
|
74,988
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,500
|
|
|
|
232,488
|
|
Matthew M. McKenna
|
|
|
124,500
|
|
|
|
74,988
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,000
|
|
|
|
209,488
|
|
Deborah E. Powell
|
|
|
139,000
|
|
|
|
74,988
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
213,988
|
|
|
|
|
(a) |
|
Includes cash compensation deferred under our Directors
Deferred Compensation Plan (DDCP). Further details
regarding cash deferrals appear below under the caption
Directors Deferred Compensation Plan. |
|
(b) |
|
Represents the value of 4,493 shares of restricted stock
granted on February 26, 2009, based on the dollar amount
recognized for financial statement reporting purposes with
respect to fiscal year 2009 in accordance with FAS 123R.
The grant date fair value of each such equity award computed in
accordance with FAS 123R was $16.69. |
At fiscal year end 2009, our non-employee directors did not hold
any restricted stock awards in that the restricted stock awards
granted to such persons vest upon issuance. Pursuant to the
terms of such awards, directors may not, however, sell such
stock while they serve on our Board. As of fiscal year end 2009,
the following shares of common stock had originally been granted
as restricted stock awards to our non-employee directors:
|
|
|
|
|
|
|
Shares
|
|
|
Herbert M. Baum
|
|
|
18,360
|
|
Richard G. Cline
|
|
|
18,360
|
|
Michael J. Corliss
|
|
|
10,057
|
|
Pierre S. du Pont
|
|
|
18,360
|
|
Archie R. Dykes
|
|
|
18,360
|
|
Jarobin Gilbert, Jr.
|
|
|
18,360
|
|
James R. Kackley
|
|
|
15,189
|
|
Matthew M. McKenna
|
|
|
18,360
|
|
Deborah E. Powell
|
|
|
10,057
|
|
81
|
|
|
(c) |
|
We have not granted stock options to our directors since
February 2003. Our non-employee directors held the following
unexercised options at fiscal year end 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Number of Securities
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
Unexercised Options
|
|
|
Unexercised Options
|
|
|
Option Exercise
|
|
|
Option Expiration
|
|
Name
|
|
(#) Exercisable
|
|
|
(#) Unexercisable
|
|
|
Price ($)
|
|
|
Date
|
|
|
Herbert M. Baum
|
|
|
7,570
|
|
|
|
0
|
|
|
|
12.01
|
|
|
|
2/26/2010
|
|
Richard G. Cline
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Michael J. Corliss
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Pierre S. du Pont
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Archie R. Dykes
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Jarobin Gilbert, Jr.
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Wahid Hamid
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
James R. Kackley
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Matthew M. McKenna
|
|
|
7,570
|
|
|
|
0
|
|
|
|
12.01
|
|
|
|
2/26/2010
|
|
Deborah E. Powell
|
|
|
0
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Each of the options set forth above has a seven-year term and
became exercisable in full at the date of grant.
|
|
|
(d) |
|
Represents matching gifts made by the PepsiAmericas Foundation
on behalf of directors during fiscal year 2009. The foundation
matches gifts made by directors and former directors (as well as
full-time employees) to accredited, non-profit educational
institutions as well as gifts made by such persons to civic,
cultural and charitable organizations (excluding purely
religious institutions) in the United States. The foundation
matches the first $1,000 of a participants gifts to
education
two-for-one
and additional gifts
one-for-one,
up to a maximum of $10,000 from the foundation in any one year.
For gifts to civic, cultural and charitable organizations, the
foundation matches up to $2,500 per year on a
one-for-one
basis. |
|
(e) |
|
Mr. Hamid served on our Board from July 2008 until he
resigned in January 2009. |
Directors
Deferred Compensation Plan
Under the DDCP, directors may, by written election, defer
payment of up to 100 percent of their cash compensation. We
maintain a bookkeeping account for each director who has elected
to defer cash compensation to which we credit the amount
deferred, plus accrued interest thereon, compounded annually,
based upon the prime rate, as reported in The Wall Street
Journal, on December 31 of each year. Directors may elect to
receive payment of deferred cash compensation upon retirement
from the Board or on another specified date, and in a lump sum
or in monthly installments. Upon a change in control, including
the closing of our pending merger with PepsiCo, the director
would be entitled to a lump sum distribution of all such
deferred cash amounts.
The DDCP also provides that directors may, by written election,
defer payment of up to 100 percent of their equity
compensation. We maintain an account for each director who has
elected to defer equity compensation to which we credit the
number of shares deferred plus dividends accrued thereon.
Directors may elect to receive payment of deferred equity
compensation in a lump sum upon retirement from the Board or on
another specified date, provided such date is at least six
months later than the date the equity compensation is awarded.
Upon a change in control, including the closing of our pending
merger with PepsiCo, the director would be entitled to a lump
sum distribution of all such deferred equity compensation and
dividends.
82
Upon a change in control, non-employee directors receive lump
sum distributions of their entire account balances under the
DDCP. The lump sum payments under the DDCP for each non-employee
director are set forth in the table below:
|
|
|
|
|
|
|
Lump Sum DDCP
|
|
Name
|
|
Payment(1)
|
|
|
Herbert M. Baum
|
|
$
|
0
|
|
Richard G. Cline
|
|
$
|
0
|
|
Michael J. Corliss
|
|
$
|
0
|
|
Pierre S. du Pont
|
|
$
|
0
|
|
Archie R. Dykes
|
|
$
|
0
|
|
Jarobin Gilbert, Jr.
|
|
$
|
0
|
|
James R. Kackley
|
|
$
|
213,481
|
|
Matthew M. McKenna
|
|
$
|
163,856
|
|
Deborah E. Powell
|
|
$
|
134,508
|
|
|
|
|
(1) |
|
Values are as of January 2, 2010. |
Management
Resources and Compensation Committee Interlocks and Insider
Participation
The members of our Management Resources and Compensation
Committee are identified below under Management Resources
and Compensation Committee Report. None of the members was
an officer or employee of PepsiAmericas during fiscal year 2009
or in any prior year and none of the members had any
relationship requiring disclosure under Item 404 of
Regulation S-K.
There were no compensation committee interlocks as described in
Item 407(e)(4) of
Regulation S-K.
Management
Resources and Compensation Committee Report
Our Management Resources and Compensation Committee has reviewed
and discussed with management the Compensation Discussion and
Analysis that appears in this Annual Report on
Form 10-K.
Based on such review and discussion, the committee recommended
to our Board of Directors that the Compensation Discussion and
Analysis be included in this Annual Report on
Form 10-K.
The name of each person who serves as a member of the committee
is set forth below.
Richard G.
Cline, Chairman
Herbert M. Baum
Michael J. Corliss
Archie R. Dykes
James R. Kackley
Deborah E. Powell
83
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
|
The following table sets forth information, as of
February 16, 2010, with respect to the beneficial ownership
of shares of our common stock by each person who, to our
knowledge, beneficially owned more than five percent of our
common stock, by each director of our company, by each executive
officer named in the Summary Compensation Table that appears in
Item 11 of this Annual Report on
Form 10-K
and by all directors and executive officers as a group. The
table lists voting securities, including restricted stock held
by our executive officers over which such officers have sole
voting power but no investment power. Otherwise, except as
identified below, the named individual has sole voting and
investment power with respect to the listed shares and none of
the listed shares has been pledged as security. Given that our
directors are required to hold the shares of common stock they
receive as compensation while they continue to serve on our
Board of Directors, the following table includes such
directors qualifying shares. Unless otherwise stated
below, the address of each beneficial owner is 60 South Sixth
Street, Suite 4000, Minneapolis, MN 55402. Percentage of
beneficial ownership is based on 124,866,059 shares
outstanding as of February 16, 2010.
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
|
|
Nature of
|
|
|
|
|
Name and Address of
|
|
Beneficial
|
|
|
Percent of
|
|
Beneficial Owner
|
|
Ownership
|
|
|
Class
|
|
|
PepsiCo, Inc.(1)
|
|
|
54,004,000
|
|
|
|
43.2
|
%
|
700 Anderson Hill Road
|
|
|
|
|
|
|
|
|
Purchase, NY 10577
|
|
|
|
|
|
|
|
|
Starquest Securities, LLC(2)
|
|
|
12,116,087
|
|
|
|
9.7
|
%
|
3900 RBC Plaza
|
|
|
|
|
|
|
|
|
60 South Sixth Street
|
|
|
|
|
|
|
|
|
Minneapolis, MN 55402
|
|
|
|
|
|
|
|
|
Barclays Global Investors, NA(3)
|
|
|
7,819,894
|
|
|
|
6.3
|
%
|
400 Howard Street
|
|
|
|
|
|
|
|
|
San Francisco, CA 94105
|
|
|
|
|
|
|
|
|
Herbert M. Baum
|
|
|
29,930
|
|
|
|
|
*
|
Richard G. Cline
|
|
|
25,610
|
|
|
|
|
*
|
Michael J. Corliss(4)
|
|
|
61,657
|
|
|
|
|
*
|
Pierre S. du Pont
|
|
|
18,360
|
|
|
|
|
*
|
G. Michael Durkin, Jr.
|
|
|
266,554
|
|
|
|
|
*
|
Archie R. Dykes
|
|
|
27,030
|
|
|
|
|
*
|
Jarobin Gilbert, Jr.
|
|
|
18,460
|
|
|
|
|
*
|
James R. Kackley(5)
|
|
|
17,524
|
|
|
|
|
*
|
Kenneth E. Keiser
|
|
|
368,588
|
|
|
|
|
*
|
Matthew M. McKenna(6)
|
|
|
26,982
|
|
|
|
|
*
|
Robert C. Pohlad(7)
|
|
|
12,986,919
|
|
|
|
10.4
|
%
|
Deborah E. Powell(8)
|
|
|
10,161
|
|
|
|
|
*
|
James R. Rogers
|
|
|
83,502
|
|
|
|
|
*
|
Alexander H. Ware
|
|
|
227,414
|
|
|
|
|
*
|
All Current Directors and Executive Officers as a Group
(19 persons)(9)
|
|
|
14,593,275
|
|
|
|
11.6
|
%
|
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
PepsiCo may be deemed to beneficially own 54,004,000 shares
of common stock through the beneficial ownership of its wholly
owned subsidiaries as follows: (1) 33,602,096 shares
beneficially owned by Pepsi-Cola Metropolitan Bottling Company,
Inc. (Metro), (2) 10,578,951 shares
beneficially owned by Pepsi-Cola Operating Company of Chesapeake
and Indianapolis (Chesapeake),
(3) 8,752,823 shares beneficially owned by Pepsi-Cola
Bottling Company of St. Louis, Inc.
(St. Louis), (4) 794,115 shares |
84
|
|
|
|
|
beneficially owned by Midland Bottling Co.
(Midland), and (5) 276,015 shares
beneficially owned by Beverages, Foods & Service
Industries, Inc. (BFSI). PepsiCo may be deemed to
have shared voting and dispositive power with respect to the
shares of common stock owned by each of Metro, Chesapeake,
St. Louis, Midland and BFSI, and to have the power to
direct the receipt of dividends declared on the shares of common
stock held by each of Metro, Chesapeake, St. Louis, Midland
and BFSI and the proceeds from the sale of such shares of common
stock. |
The shares reported are subject to a shareholder agreement with
PepsiAmericas. See Shareholder Agreement between PepsiCo
and PepsiAmericas within Item 13 of this Annual
Report on
Form 10-K.
We have entered into a merger agreement with PepsiCo and Metro,
dated August 3, 2009, pursuant to which our company will
merge with and into Metro, with Metro continuing as the
surviving company and a wholly owned subsidiary of PepsiCo.
Closing of the merger is subject to regulatory approval and the
satisfaction or waiver of other customary closing conditions.
|
|
|
(2) |
|
The Schedule 13D filed with the SEC by Starquest
Securities, LLC (Starquest), Dakota Holdings, LLC
(Dakota), Pohlad Companies and Robert C. Pohlad on
February 12, 2010, reports that Starquest is a Minnesota
limited liability company whose members are (1) Dakota,
(2) the James O. Pohlad Trust Share of the Pohlad
Family Wealth Trust Created Under the 2000 Amendment and
Restatement of the Revocable Trust of Eloise O. Pohlad dated
October 12, 2000, as Amended, (3) the Robert C. Pohlad
Trust Share of the Pohlad Family Wealth Trust Created
Under the 2000 Amendment and Restatement of the Revocable Trust
of Eloise O. Pohlad dated October 12, 2000, as Amended,
(4) William M. Pohlad Trust Share of the Pohlad Family
Wealth Trust Created Under the 2000 Amendment and
Restatement of the Revocable Trust of Eloise O. Pohlad dated
October 12, 2000, as Amended, (5) James O. Pohlad,
(6) Robert C. Pohlad and (7) William M. Pohlad. The
Schedule 13D reports that Dakota is the controlling member
of Starquest because it possesses 100% of the voting rights and
approximately 51.4% of the equity of Starquest. The
Schedule 13D reports that Dakotas members are
(1) Pohlad Companies, (2) Robert C. Pohlad,
(3) William M. Pohlad, (4) James O. Pohlad,
(5) the Revocable Trust of Robert C. Pohlad Created Under
Agreement Dated August 9, 1991, as Amended, (6) the
Revocable Trust of William M. Pohlad Created Under Agreement
Dated April 15, 2002, as Amended, (7) the children of
James O. Pohlad, Robert C. Pohlad and William M. Pohlad,
(8) James O. Pohlad Trust Share of the 1999
Irrevocable Security Trust No. 1 of Carl R. Pohlad
Created Under Agreement dated December 20, 1999,
(9) Robert C. Pohlad Trust Share of the 1999 Irrevocable
Security Trust No. 1 of Carl R. Pohlad Created Under
Agreement dated December 20, 1999, and (10) William M.
Pohlad Trust Share of the 1999 Irrevocable Security
Trust No. 1 of Carl R. Pohlad Created Under Agreement
dated December 20, 1999. The Schedule 13D reports that
Pohlad Companies is the controlling member of Dakota because it
possesses approximately 73.3% of the voting rights of Dakota and
approximately 73.3% of the equity in Dakota. The
Schedule 13D reports that Pohlad Companies
shareholders are (1) Robert C. Pohlad, (2) William M.
Pohlad and (3) James O. Pohlad, each of whom holds a
one-third interest. The Schedule 13D reports that Robert C.
Pohlad, Chairman and Chief Executive Officer of PepsiAmericas is
the President of Pohlad Companies. The Schedule 13D reports
that Robert C. Pohlad holds an approximately 33.19% equity
interest in Dakota, directly and indirectly. The
Schedule 13D reports that Dakota may be deemed to have
beneficial ownership of the securities beneficially owned by
Starquest. The Schedule 13D reports that Pohlad Companies
may be deemed to have beneficial ownership of the securities
beneficially owned by Starquest and Dakota. The
Schedule 13D reports that Robert C. Pohlad may be deemed to
have beneficial ownership of the securities beneficially owned
by Starquest, Dakota and Pohlad Companies. |
The shares reported are subject to a shareholder agreement with
PepsiAmericas. See Shareholder Agreement among Pohlad
Companies, Dakota Holdings, LLC, Mr. Pohlad and
PepsiAmericas within Item 13 of this Annual Report on
Form 10-K.
|
|
|
(3) |
|
As set forth in the Schedule 13G filed with the SEC by
Barclays Global Investors, NA and other reporting persons on
February 5, 2009. The Schedule 13G reports that these
shares are held in trust accounts for the economic benefit of
the beneficiaries of those accounts. The Schedule 13G
reports that these shares represent 6,474,430 shares over
which sole voting power is claimed and 7,819,894 shares
aver which sole dispositive power is claimed as follows:
(1) Barclays Global Investors, NA has sole |
85
|
|
|
|
|
voting power over 4,853,056 shares and sole dispositive
power over 5,776,323 shares, (2) Barclays Global
Fund Advisors has sole voting power over
797,495 shares and sole dispositive power over
1,121,055 shares, (3) Barclays Global Investors, Ltd
has sole voting power over 340,902 shares and sole
dispositive power over 439,539 shares, (4) Barclays
Global Investors Japan Limited has sole voting power over
335,902 shares and sole dispositive power over
335,902 shares, (5) Barclays Global Investors Canada
Limited has sole voting power over 132,405 shares and sole
dispositive power over 132,405 shares, and
(6) Barclays Global Investors Australia Limited has sole
vote power over 14,670 shares and sole dispositive power
over 14,670 shares. |
|
(4) |
|
Includes 51,600 shares held by the Evergreen Capital Trust,
of which Mr. Corliss is a trustee and 100% beneficial owner. |
|
(5) |
|
Includes 6,961 shares the receipt of which previously has
been deferred pursuant to the DDCP and 335 shares issued
upon the reinvestment of cash dividends on such deferred shares. |
|
(6) |
|
Includes 5,181 shares the receipt of which previously has
been deferred pursuant to the DDCP and 419 shares issued
upon the reinvestment of cash dividends on such deferred shares. |
|
(7) |
|
Includes 12,116,087 shares held by Starquest,
102 shares held by Pohlad Companies, and
414,300 shares purchasable upon the exercise of stock
options. Excludes 192,592 shares held by the Grantor
Retained Annuity Trust created by Mr. Pohlad as shares over
which he has neither voting nor dispositive power. |
|
(8) |
|
Includes 4,493 shares the receipt of which previously has
been deferred pursuant to the DDCP and 104 shares issued
upon the reinvestment of cash dividends on such deferred shares. |
|
(9) |
|
Includes 12,116,087 shares held by Starquest,
51,600 shares held by the Evergreen Capital Trust,
102 shares held by Pohlad Companies, 466,341 shares
which directors and executive officers have the right to acquire
through exercise of stock options, and 1,219,483 shares
over which there is sole voting power but no investment power. |
Equity
Compensation Plan Information
The following table summarizes information regarding common
stock that may be issued under our existing equity compensation
plans as of the end of fiscal year 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
Securities to be
|
|
|
|
|
|
Securities
|
|
|
|
Issued upon
|
|
|
Weighted-average
|
|
|
Remaining
|
|
|
|
Exercise of
|
|
|
Exercise Price
|
|
|
Available for
|
|
|
|
Outstanding
|
|
|
of Outstanding
|
|
|
Future Issuance
|
|
|
|
Options,
|
|
|
Options,
|
|
|
Under Equity
|
|
|
|
Warrants and
|
|
|
Warrants and
|
|
|
Compensation
|
|
|
|
Rights
|
|
|
Rights
|
|
|
Plans
|
|
|
Equity compensation plans approved by security holders
|
|
|
4,121,022
|
(1)
|
|
$
|
14.89
|
(2)
|
|
|
2,063,100
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,121,022
|
|
|
|
|
|
|
|
2,063,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This number includes stock options, as well as
3,224,197 shares underlying unvested restricted stock
awards, granted or issued under stock incentive plans approved
by our shareholders. |
|
(2) |
|
The weighted average exercise price of outstanding options and
rights excludes unvested restricted stock awards. |
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence.
|
Board of
Directors and Committees
Board of Directors. Our Board of Directors is
comprised of a majority of independent directors as defined in
Section 303A.02 of the New York Stock Exchange listing
standards. In this regard, the Board has affirmatively
determined that a majority of its members has no material
relationship with our company either directly or as a partner,
shareholder or officer of an organization that has a
relationship with our company. In
86
making this determination, the Board has considered all relevant
facts and circumstances, including material relationships such
as commercial, industrial, banking, consulting, legal,
accounting, charitable and familial relationships. Our
non-independent director and our nine independent directors are
identified by name in the chart that appears under
Committee Overview within Item 10 of this
Annual Report on
Form 10-K.
Further information about our committees also appears under such
caption within Item 10 of this Annual Report on
Form 10-K.
The non-management members of the Board meet in executive
session at each regular meeting of the Board, with no members of
management present. In addition, the independent directors meet
separately in executive session at least once a year. The
non-management members of the Board have designated a
non-management director, Archie R. Dykes, as Lead Director to
preside at each executive session.
The Board has adopted Corporate Governance Guidelines that
establish a common set of expectations to assist the Board and
its committees in performing their duties in compliance with
legal and regulatory requirements. The Board has also adopted a
Code of Conduct and a Code of Ethics. The Corporate Governance
Guidelines, the Code of Conduct, and the Code of Ethics, as well
as current copies of the Audit Committee charter, the Management
Resources and Compensation Committee charter, and the
Governance, Finance and Nominating Committee charter, are all
available on our website at www.pepsiamericas.com or in print
upon written request to PepsiAmericas, Inc., 60 South Sixth
Street, Suite 4000, Minneapolis, Minnesota 55402,
Attention: Investor Relations.
Review
and Approval of Transactions with Related Persons
In February 2007, our Board of Directors adopted a written
policy for the review and approval of related person
transactions requiring disclosure under Rule 404(a) of
Regulation S-K.
This policy states that the Affiliated Transaction Committee is
responsible for reviewing and approving or disapproving all
interested transactions, which are defined as any transaction,
arrangement or relationship in which (a) the amount
involved may be expected to exceed $120,000 in any fiscal year,
(b) our company will be a participant, and (c) a
related person has a direct or indirect material interest. A
related person is defined as an executive officer, director or
nominee for director, or a greater than five percent beneficial
owner of our companys common stock, or an immediate family
member of the foregoing. The policy deems certain interested
transactions to be pre-approved, including the employment and
compensation of executive officers, the compensation paid to
directors, and transactions in the ordinary course of business
involving PepsiCo.
Background
of PepsiCo and its Subsidiaries Beneficial Ownership of
PepsiAmericas Shares
In May 1999, PepsiCo combined certain of its bottling operations
with Whitman Corporation, retaining a non-controlling ownership
interest of approximately 38.7 percent. In October 1999,
PepsiCo formed a business venture with Pohlad Companies, through
which PepsiCo retained a non-controlling ownership interest of
approximately 24 percent in the former PepsiAmericas. In
November 2000, Whitman Corporation merged with the former
PepsiAmericas, and in January 2001, the combined bottler changed
its name to PepsiAmericas. After that merger, PepsiCo owned
approximately 36.8 percent of the outstanding shares of our
common stock. As of February 16, 2010, PepsiCo or its
subsidiaries collectively owned approximately 43.2 percent
of our outstanding common stock.
Shareholder
Agreement between PepsiCo and PepsiAmericas
In September 2005, we entered into a second amended and restated
shareholder agreement with PepsiCo, which provides that PepsiCo
and its affiliates may not own more than 49 percent of our
outstanding common stock. Any acquisitions by PepsiCo that would
cause the maximum ownership percentage to be exceeded require
the consent of either a majority of the directors of our company
not affiliated with PepsiCo or the shareholders of our company
not affiliated with PepsiCo, or must be made pursuant to an
offer for all outstanding shares of our common stock at a price
meeting specific minimum-price criteria. The second amended and
restated shareholder agreement specifies that, during its term,
none of PepsiCo or its affiliates may enter into any agreement
or commitment with Robert C. Pohlad, his affiliates or his
family with respect
87
to the holding, voting, acquisition or disposition of our common
stock. The second amended and restated shareholder agreement
also restricts transfers by PepsiCo and its affiliates that
would result in a third party unaffiliated with PepsiCo owning
greater than 20 percent of the outstanding shares of our
common stock. Notwithstanding the above, the second amended and
restated shareholder agreement permits the occurrence of certain
Permitted Acquisitions. The PepsiCo merger agreement
and the transactions contemplated by it represent such a
Permitted Acquisition.
Commercial
Relationships
We conduct our business primarily under franchise agreements
with PepsiCo for a variety of PepsiCo brands. These franchise
agreements give us the exclusive right to manufacture, sell and
distribute PepsiCo beverages, and to use the related PepsiCo
tradenames and trademarks in specified territories. We accounted
for approximately 19 percent of all PepsiCo beverage
products sold by bottlers in the United States during 2009.
While we manage all phases of our operations, including pricing
of our products, our company and PepsiCo exchange production,
marketing and distribution information, which benefits both
companies respective efforts to lower costs, improve
quality and productivity and increase product sales. We have a
significant ongoing relationship with PepsiCo and have entered
into a number of significant transactions and agreements with
PepsiCo. We purchase concentrate from PepsiCo, pay royalties
related to Aquafina products, and manufacture, sell and
distribute cola and non-cola beverages under various bottling
and fountain syrup agreements with PepsiCo. These agreements
give us the right to manufacture, sell and distribute beverage
products of PepsiCo in both bottles and cans, as well as
fountain syrup in specified territories. PepsiCo has the right
under these agreements to set prices of beverage concentrate, as
well as the terms of payment and other terms and conditions
under which we purchase such concentrate. Further, pursuant to
the Master Bottling Agreement under which we manufacture,
package, sell and distribute cola and non-cola beverages bearing
the Pepsi-Cola and Pepsi trademarks, we are required to present
certain business and financial plans to PepsiCo on an annual
basis. PepsiCo is entitled to terminate the Master Bottling
Agreement upon the occurrence of certain events including, among
others, if any person or group of persons, without
PepsiCos consent, acquires the right of beneficial
ownership of more than 15 percent of any class of our
voting securities and that person or group of persons does not
terminate that ownership within 30 days. In addition, we
obtain various services from PepsiCo, including procurement of
raw materials and certain administrative services.
We also purchase finished beverage and snack food products from
PepsiCo, as well as products from certain affiliates of PepsiCo.
Other significant transactions and agreements with PepsiCo
include arrangements for marketing, promotional and advertising
support, manufacturing services related to PepsiCos
national account customers and the Sandora joint venture in
which we hold a 60 percent interest and PepsiCo holds the
remaining 40 percent interest.
Other
Transactions
We have also entered into various transactions with joint
ventures in which PepsiCo holds an equity interest. In
particular, we purchase tea concentrate and finished beverage
products from the Pepsi/Lipton Tea Partnership, a joint venture
between PepsiCo and Unilever, in which PepsiCo holds a
50 percent interest, and finished beverage products from
the North American Coffee Partnership, a joint venture between
PepsiCo and Starbucks in which PepsiCo holds a 50 percent
interest. Total amounts paid or payable to the Pepsi/Lipton Tea
Partnership by us were approximately $89.8 million and
$94.7 million during 2009 and 2008, respectively. Total
amounts paid or payable to the North American Coffee Partnership
by us were approximately $56.5 million and
$60.2 million during 2009 and 2008, respectively. These
amounts are included in our purchases of finished beverage
products.
88
Our consolidated statement of income includes the following
income and (expense) transactions with PepsiCo, which includes
transactions with the Pepsi/Lipton Tea Partnership and the North
American Coffee Partnership(1) (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
Bottler incentives
|
|
$
|
29.2
|
|
|
$
|
34.7
|
|
National account sales and services
|
|
|
228.0
|
|
|
|
230.9
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
257.2
|
|
|
$
|
265.6
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold:
|
|
|
|
|
|
|
|
|
Bottler incentives
|
|
$
|
182.3
|
|
|
$
|
190.3
|
|
Purchases of concentrate
|
|
|
(926.4
|
)
|
|
|
(935.1
|
)
|
Purchases of finished beverage products
|
|
|
(216.1
|
)
|
|
|
(232.8
|
)
|
Purchases of finished snack food products
|
|
|
(23.7
|
)
|
|
|
(26.7
|
)
|
Aquafina royalty fees
|
|
|
(39.3
|
)
|
|
|
(46.6
|
)
|
Procurement services
|
|
|
(4.1
|
)
|
|
|
(4.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,027.3
|
)
|
|
$
|
(1,055.0
|
)
|
|
|
|
|
|
|
|
|
|
Selling, delivery and administrative expenses:
|
|
|
|
|
|
|
|
|
Bottler incentives
|
|
$
|
19.0
|
|
|
$
|
23.7
|
|
Purchases of advertising materials
|
|
|
(1.5
|
)
|
|
|
(2.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17.5
|
|
|
$
|
21.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Data in table shown for our fiscal years ended January 2,
2010 and January 3, 2009. |
Transactions
with Bottlers in Which PepsiCo Holds an Equity
Interest
We sell finished beverage products to other bottlers in which
PepsiCo owns an equity interest, including The Pepsi Bottling
Group, Inc. These sales occur in instances where the proximity
of our production facilities to the other bottlers markets
or lack of manufacturing capability, as well as other economic
considerations, make it more efficient or desirable for the
other bottlers to buy finished product from us. Our sales to
such other bottlers, not included in the table above, were
approximately $214 million and $211 million in fiscal
years 2009 and 2008, respectively. Our purchases from such other
bottlers, not included in the table above, were
$0.4 million and $0.5 million in fiscal years 2009 and
2008, respectively.
Shareholder
Agreement among Pohlad Companies, Dakota Holdings, LLC,
Mr. Pohlad and PepsiAmericas
In September 2005, we entered into an amended and restated
shareholder agreement with Pohlad Companies, Dakota Holdings,
LLC (Dakota) and Robert C. Pohlad. Dakota is the
beneficial owner of approximately 9.7 percent of our common
stock as of February 16, 2010, and is under common control
with Pohlad Companies. Mr. Pohlad, our Chairman and Chief
Executive Officer, is the President and owner of one-third of
the capital stock of Pohlad Companies. Under the agreement, the
amount of our outstanding common stock that may be owned by
Pohlad Companies, Dakota and Mr. Pohlad is not limited.
However, any additional acquisition of our common stock by
Mr. Pohlad, his affiliates or his family (excluding
compensatory awards to Mr. Pohlad) requires approval of our
Affiliated Transaction Committee. The agreement specifies that,
during its term, none of Robert C. Pohlad, his affiliates or his
family may enter into any agreement or commitment with PepsiCo
or its affiliates with respect to the holding, voting,
acquisition or disposition of our common stock. Dakota, Pohlad
Companies and Mr. Pohlad are considered by us to be related
parties due to the nature of our relationships and Dakotas
ownership interest in our company. See
89
Item 12 of this Annual Report on
Form 10-K
for further information of the relationships between these
parties and their relationships to Starquest Securities, LLC
(Starquest).
Agreements
and Relationships with Dakota Holdings, LLC, Starquest
Securities, LLC and Mr. Pohlad
Under the terms of the merger agreement between the former
PepsiAmericas and Whitman Corporation, Dakota, a Delaware
limited liability company whose members at the time of such
merger included PepsiCo and Pohlad Companies, became the owner
of 14,562,970 shares of our common stock, including
377,128 shares purchasable pursuant to the exercise of a
warrant. In November 2002, the members of Dakota entered into a
redemption agreement pursuant to which the PepsiCo membership
interests were redeemed in exchange for certain assets of
Dakota. As a result, Dakota became the owner of
12,027,557 shares of our common stock, including
311,470 shares purchasable pursuant to the exercise of a
warrant. In June 2003, Dakota converted from a Delaware limited
liability company to a Minnesota limited liability company
pursuant to an agreement and plan of merger. In January 2006,
Starquest, a Minnesota limited liability company, obtained the
shares of our common stock previously owned by Dakota, including
the shares of common stock purchasable upon exercise of the
above-referenced warrant, pursuant to a contribution agreement.
Such warrant expired unexercised in January 2006, resulting in
Starquest holding 11,716,087 shares of our common stock. In
February 2008, Starquest acquired an additional
400,000 shares of our common stock pursuant to open market
purchases, bringing its holdings to 12,116,087 shares of
common stock, or approximately 9.7 percent, as of
February 16, 2010. The shares held by Starquest are subject
to the above-described shareholder agreement among Pohlad
Companies, Dakota, Mr. Pohlad and our company.
Mr. Pohlad, our Chairman and Chief Executive Officer, is
the President and the owner of one-third of the capital stock of
Pohlad Companies. Pohlad Companies is the controlling member of
Dakota. Dakota is the controlling member of Starquest. Pohlad
Companies may be deemed to have beneficial ownership of the
securities beneficially owned by Starquest and Dakota and
Mr. Pohlad may be deemed to have beneficial ownership of
the securities beneficially owned by Starquest, Dakota and
Pohlad Companies.
Transaction
with Pohlad Companies
As of the end of fiscal year 2009, we owned a one-eighth
interest in a Challenger aircraft which we owned with Pohlad
Companies. In January 2010, we sold this one-eighth interest to
Pohlad Companies for $1.7 million, representing fair market
value as determined by an unrelated third party. This
transaction was approved in advance by our Affiliated
Transaction Committee. During fiscal year 2009, we paid
$0.1 million to International Jet, a subsidiary of Pohlad
Companies, for office and hangar rent, management fees and
maintenance in connection with the storage and operation of this
corporate jet.
PepsiCo
Merger
We have entered into an Agreement and Plan of Merger dated as of
August 3, 2009 (the Merger Agreement) with
PepsiCo, and Pepsi-Cola Metropolitan Bottling Company, Inc., a
New Jersey corporation and wholly owned subsidiary of PepsiCo
(Merger Sub). The Merger Agreement provides for the
merger of PepsiAmericas with and into Merger Sub, with Merger
Sub surviving as a wholly owned subsidiary of PepsiCo.
Pursuant to the Merger Agreement, our shareholders have the
option to elect either $28.50 in cash or 0.5022 shares of
PepsiCo common stock for each share of PepsiAmericas (which had
a value of $28.50 based on PepsiCos closing share price of
$56.75 on July 31, 2009), subject to proration such that
the aggregate consideration to be paid to our shareholders shall
be 50 percent cash and 50 percent PepsiCo common
stock. We hope to close the merger by the end of
February 2010, subject to regulatory approval and the
satisfaction or waiver of other customary closing conditions.
Prior to its execution, the Merger Agreement was approved by our
Board of Directors, which based its determination to approve the
Merger Agreement on the recommendation of its Transactions
Committee. Based on the approval of the merger by a majority of
our independent directors as defined under the second amended
and restated shareholder agreement between our company and
PepsiCo, the merger will constitute a permitted
90
acquisition as defined under such shareholder agreement and,
therefore, will not trigger the Rights Agreement, dated as of
May 20, 1999, as amended, by and between our company and
Wells Fargo Bank N.A, as successor rights agent.
|
|
Item 14.
|
Principal
Accountant Fees and Services.
|
Principal
Accountant Fees and Services
KPMG was our independent registered public accounting firm for
the two most recently completed fiscal years. Aggregate fees for
professional services rendered for our company by KPMG for the
fiscal years ended January 2, 2010 and January 3, 2009
were as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
Fiscal Year Ended
|
|
|
|
January 2, 2010
|
|
|
January 3, 2009
|
|
|
Audit Fees
|
|
$
|
2,520,000
|
|
|
$
|
2,718,900
|
|
Audit-Related Fees
|
|
|
|
|
|
|
|
|
Tax Fees
|
|
|
34,707
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,554,707
|
|
|
$
|
2,718,900
|
|
|
|
|
|
|
|
|
|
|
Audit fees were for professional services rendered for the
audits of the consolidated financial statements, the issuance of
comfort letters, consents, audits of statutory financial
statements and the review of documents we filed with the
Securities and Exchange Commission. Tax fees for fiscal year
2009 related to an upgraded accounting software program. Our
Audit Committee has determined that the provision of services
covered by the foregoing fees is compatible with maintaining the
independent registered public accounting firms
independence.
Pre-Approval
Policies and Procedures of Audit Committee
Our Audit Committee is committed to ensuring the independence of
our companys independent registered public accounting firm
and directs significant attention toward the appropriateness of
the independent registered public accounting firm performing
services other than the audit. The committee has adopted
pre-approval policies and procedures in this regard.
As a matter of policy, the independent registered public
accounting firm is only engaged for non-audit-related work if
those services enhance and support the attest function of the
audit or are an extension to the audit or audit-related
services. Annually, the lead audit partner reviews with the
committee the services the independent registered public
accounting firm expects to provide in the coming year, and the
related fees. In addition, management provides the committee
with a quarterly report for the committees pre-approval of
any non-audit services that the independent registered public
accounting firm may be asked to provide in the next quarter.
The projects and categories of service are as follows:
Audit These services include the work necessary for
the independent registered public accounting firm to render an
opinion on our consolidated financial statements. Audit services
also include audit or attest services required by statute or
regulation, such as comfort letters, consents, reviews of
Securities and Exchange Commission filings, statutory audits in
non-U.S. locations
and attestation reports on internal control over financial
reporting required under the Sarbanes-Oxley Act.
Audit-Related Services These services consist
primarily of audits of benefit plans, due diligence assistance,
accounting consultation on proposed transactions and internal
control reviews.
Tax and Other Services These services consist of tax
compliance and planning issues. The committee believes that
these services are not an integral part of the examination of
our companys financial statements, and that these services
may raise a real or perceived question as to the independent
registered public accounting firms independence.
Accordingly, a very strong rationale must be presented to
support the
91
selection of the independent registered public accounting firm
for such services, and alternative service providers should also
be considered.
The Executive Vice President and Chief Financial Officer is
responsible for the implementation of the committees
pre-approval policies and procedures. Such person has authority
to engage KPMG for audit-related services on projects costing
less than $50,000, upon prior review and approval of the
committees Chairman. The Executive Vice President and
Chief Financial Officer is also responsible for ensuring that
any request for audit-related services greater than $50,000, or
any non-audit services, is submitted for authorization by the
committee.
The Audit Committee selected KPMG to audit our financial
statements for fiscal years 2009 and 2008. The Audit Committee
pre-approved the tax services provided during fiscal year 2009.
No other services from KPMG required pre-approval during fiscal
year 2009. We received no services from KPMG requiring
pre-approval during fiscal year 2008.
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules.
|
(a) See Index to Financial Information on
page F-1
and Exhibit Index on
page E-1.
(b) See Exhibit Index on
page E-1.
(c) Not applicable.
92
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 22nd day of February 2010.
PEPSIAMERICAS, INC.
|
|
|
|
By:
|
/s/ ALEXANDER
H. WARE
|
Alexander H. Ware
Executive Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
the 22nd day of February 2010.
|
|
|
|
|
Signature
|
|
Title
|
|
|
|
|
|
|
|
|
/s/ ROBERT
C. POHLAD
Robert
C. Pohlad
|
|
Chairman of the Board and Chief Executive Officer
and Director (Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ ALEXANDER
H. WARE
Alexander
H. Ware
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
|
|
|
/s/ TIMOTHY
W. GORMAN
Timothy
W. Gorman
|
|
Senior Vice President and Controller
(Principal Accounting Officer)
|
|
|
|
|
|
*
|
|
/s/ HERBERT
M. BAUM
Herbert
M. Baum
|
|
Director
|
|
|
|
|
|
*
|
|
/s/ RICHARD
G. CLINE
Richard
G. Cline
|
|
Director
|
|
|
|
|
|
*
|
|
/s/ MICHAEL
J. CORLISS
Michael
J. Corliss
|
|
Director
|
|
|
|
|
|
*
|
|
/s/ PIERRE
S. DU PONT
Pierre
S. du Pont
|
|
Director
|
|
|
|
|
|
*
|
|
/s/ ARCHIE
R. DYKES
Archie
R. Dykes
|
|
Director
|
|
|
|
|
|
*
|
|
/s/ JAROBIN
GILBERT, JR.
Jarobin
Gilbert, Jr.
|
|
Director
|
|
|
|
|
|
*
|
|
/s/ JAMES
R. KACKLEY
James
R. Kackley
|
|
Director
|
|
|
|
|
|
*
|
|
/s/ MATTHEW
M. MCKENNA
Matthew
M. McKenna
|
|
Director
|
|
|
|
|
|
*
|
|
/s/ DEBORAH
E. POWELL
Deborah
E. Powell
|
|
Director
|
|
|
|
|
|
*By:
|
|
/s/ ALEXANDER
H. WARE
Alexander
H. Ware
Attorney-in-Fact
February 22, 2010
|
|
|
93
PEPSIAMERICAS,
INC.
FINANCIAL
INFORMATION
FOR
INCLUSION IN ANNUAL REPORT ON
FORM 10-K
FISCAL
YEAR 2009
PEPSIAMERICAS,
INC.
Index to
Financial Information
|
|
|
|
|
|
|
Page
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
Financial Statement Schedules:
|
|
|
|
|
Financial statement schedules have been omitted because they are
not applicable or the required information is shown in the
consolidated financial statements or accompanying notes.
|
|
|
|
|
F-1
Report
of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
of PepsiAmericas, Inc.:
We have audited the accompanying consolidated balance sheets of
PepsiAmericas, Inc. and subsidiaries (the Company) as of the end
of fiscal years 2009 and 2008, and the related consolidated
statements of income, equity and cash flows for each of the
fiscal years 2009, 2008 and 2007. These consolidated financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of the Company as of the end of fiscal years 2009 and
2008, and the results of their operations and their cash flows
for each of the fiscal years 2009, 2008 and 2007, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of January 2, 2010, based on the
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report
dated February 22, 2010 expressed an unqualified opinion on
the effectiveness of the Companys internal control over
financial reporting.
/s/ KPMG LLP
Minneapolis, Minnesota
February 22, 2010
F-2
PEPSIAMERICAS,
INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net sales
|
|
$
|
4,421.3
|
|
|
$
|
4,937.2
|
|
|
$
|
4,479.5
|
|
Cost of goods sold
|
|
|
2,654.4
|
|
|
|
2,955.6
|
|
|
|
2,656.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,766.9
|
|
|
|
1,981.6
|
|
|
|
1,823.3
|
|
Selling, delivery and administrative expenses
|
|
|
1,357.5
|
|
|
|
1,485.4
|
|
|
|
1,380.9
|
|
Intangible assets impairment
|
|
|
17.4
|
|
|
|
|
|
|
|
|
|
Special charges and adjustments
|
|
|
11.1
|
|
|
|
23.0
|
|
|
|
6.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
380.9
|
|
|
|
473.2
|
|
|
|
436.1
|
|
Interest expense, net
|
|
|
65.6
|
|
|
|
111.1
|
|
|
|
109.2
|
|
Loss from deconsolidation of business
|
|
|
25.8
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
|
|
13.9
|
|
|
|
7.9
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes and
equity in net earnings (loss) of nonconsolidated companies
|
|
|
275.6
|
|
|
|
354.2
|
|
|
|
326.3
|
|
Income taxes
|
|
|
99.3
|
|
|
|
107.8
|
|
|
|
112.0
|
|
Equity in net earnings (loss) of nonconsolidated companies
|
|
|
1.4
|
|
|
|
(1.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
177.7
|
|
|
|
245.3
|
|
|
|
214.3
|
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
9.2
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
177.7
|
|
|
|
236.1
|
|
|
|
212.2
|
|
Less: Net (loss) income attributable to noncontrolling interests
|
|
|
(3.5
|
)
|
|
|
9.7
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to PepsiAmericas, Inc.
|
|
$
|
181.2
|
|
|
$
|
226.4
|
|
|
$
|
212.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
121.6
|
|
|
|
125.2
|
|
|
|
126.7
|
|
Incremental effect of stock options and awards
|
|
|
2.3
|
|
|
|
2.0
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
123.9
|
|
|
|
127.2
|
|
|
|
129.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to PepsiAmericas, Inc. common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.49
|
|
|
$
|
1.88
|
|
|
$
|
1.69
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.49
|
|
|
$
|
1.81
|
|
|
$
|
1.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.46
|
|
|
$
|
1.85
|
|
|
$
|
1.66
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.46
|
|
|
$
|
1.78
|
|
|
$
|
1.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
|
|
$
|
0.56
|
|
|
$
|
0.54
|
|
|
$
|
0.52
|
|
Amounts attributable to PepsiAmericas, Inc. common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
181.2
|
|
|
$
|
235.6
|
|
|
$
|
214.2
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
9.2
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to PepsiAmericas, Inc.
|
|
$
|
181.2
|
|
|
$
|
226.4
|
|
|
$
|
212.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
PEPSIAMERICAS,
INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
|
|
|
|
|
|
|
|
|
As of Fiscal Year End
|
|
2009
|
|
|
2008
|
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
193.9
|
|
|
$
|
242.4
|
|
Receivables, net
|
|
|
413.8
|
|
|
|
305.5
|
|
Inventories
|
|
|
197.5
|
|
|
|
238.5
|
|
Other current assets
|
|
|
146.8
|
|
|
|
119.7
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
952.0
|
|
|
|
906.1
|
|
Property and equipment, net
|
|
|
1,276.6
|
|
|
|
1,355.7
|
|
Goodwill
|
|
|
2,181.8
|
|
|
|
2,244.6
|
|
Intangible assets, net
|
|
|
477.7
|
|
|
|
498.6
|
|
Other assets
|
|
|
204.6
|
|
|
|
49.1
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,092.7
|
|
|
$
|
5,054.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY:
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term debt, including current maturities of long-term debt
|
|
$
|
141.5
|
|
|
$
|
525.0
|
|
Payables and other current liabilities
|
|
|
527.8
|
|
|
|
523.2
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
669.3
|
|
|
|
1,048.2
|
|
Long-term debt
|
|
|
1,990.8
|
|
|
|
1,642.3
|
|
Deferred income taxes
|
|
|
273.7
|
|
|
|
237.6
|
|
Other liabilities
|
|
|
228.6
|
|
|
|
295.0
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,162.4
|
|
|
|
3,223.1
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
PepsiAmericas, Inc. shareholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock ($0.01 par value, 12.5 million shares
authorized, no shares issued)
|
|
|
|
|
|
|
|
|
Common stock ($0.01 par value, 350 million shares
authorized, 137.6 million shares issued 2009
and 2008)
|
|
|
1,295.9
|
|
|
|
1,296.9
|
|
Retained income
|
|
|
939.8
|
|
|
|
828.2
|
|
Accumulated other comprehensive loss
|
|
|
(160.9
|
)
|
|
|
(200.8
|
)
|
Treasury stock, at cost (16.0 million shares and
14.5 million shares, respectively)
|
|
|
(343.1
|
)
|
|
|
(324.3
|
)
|
|
|
|
|
|
|
|
|
|
Total PepsiAmericas, Inc. shareholders equity
|
|
|
1,731.7
|
|
|
|
1,600.0
|
|
Noncontrolling interests
|
|
|
198.6
|
|
|
|
231.0
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
1,930.3
|
|
|
|
1,831.0
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
5,092.7
|
|
|
$
|
5,054.1
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
PEPSIAMERICAS,
INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
177.7
|
|
|
$
|
236.1
|
|
|
$
|
212.2
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
9.2
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
177.7
|
|
|
|
245.3
|
|
|
|
214.3
|
|
Adjustments to reconcile to net cash provided by operating
activities of continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
184.3
|
|
|
|
204.3
|
|
|
|
204.4
|
|
Deferred income taxes
|
|
|
19.0
|
|
|
|
(0.4
|
)
|
|
|
6.1
|
|
Loss from deconsolidation of business, net of tax
|
|
|
23.0
|
|
|
|
|
|
|
|
|
|
Intangible assets impairment
|
|
|
17.4
|
|
|
|
|
|
|
|
|
|
Special charges and adjustments
|
|
|
11.1
|
|
|
|
23.0
|
|
|
|
6.3
|
|
Cash outlays related to special charges
|
|
|
(5.2
|
)
|
|
|
(6.7
|
)
|
|
|
(14.3
|
)
|
Non-operating assets impairment
|
|
|
4.9
|
|
|
|
|
|
|
|
|
|
Loss from multi-employer pension plans
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
Marketable securities impairment
|
|
|
2.1
|
|
|
|
|
|
|
|
4.0
|
|
Gain on sale of non-core property
|
|
|
|
|
|
|
|
|
|
|
(10.2
|
)
|
Pension contributions
|
|
|
(21.2
|
)
|
|
|
(4.0
|
)
|
|
|
(0.9
|
)
|
Equity in net (earnings) loss of nonconsolidated companies
|
|
|
(1.4
|
)
|
|
|
1.1
|
|
|
|
|
|
Excess tax benefits from share-based payment arrangements
|
|
|
(2.5
|
)
|
|
|
(1.0
|
)
|
|
|
(12.5
|
)
|
Share-based compensation
|
|
|
26.9
|
|
|
|
13.6
|
|
|
|
30.3
|
|
Other
|
|
|
(9.0
|
)
|
|
|
9.3
|
|
|
|
(1.8
|
)
|
Changes in assets and liabilities, exclusive of acquisitions and
divestitures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in securitization receivables
|
|
|
(150.0
|
)
|
|
|
|
|
|
|
|
|
Decrease (increase) in remaining receivables
|
|
|
8.4
|
|
|
|
(7.8
|
)
|
|
|
(30.0
|
)
|
Decrease (increase) in inventories
|
|
|
12.3
|
|
|
|
29.2
|
|
|
|
(19.3
|
)
|
Increase in payables
|
|
|
8.2
|
|
|
|
7.8
|
|
|
|
23.5
|
|
Net change in other assets and liabilities
|
|
|
(0.8
|
)
|
|
|
(13.1
|
)
|
|
|
33.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities of continuing
operations
|
|
|
308.6
|
|
|
|
500.6
|
|
|
|
433.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital investments
|
|
|
(235.7
|
)
|
|
|
(248.9
|
)
|
|
|
(264.6
|
)
|
Distribution rights acquired
|
|
|
(12.8
|
)
|
|
|
|
|
|
|
|
|
Cash divested from deconsolidation of business
|
|
|
(7.1
|
)
|
|
|
|
|
|
|
|
|
Acquisitions and investments in nonconsolidated companies, net
of cash acquired
|
|
|
(0.3
|
)
|
|
|
(1.0
|
)
|
|
|
(685.0
|
)
|
Proceeds from sales of property and equipment and investments
|
|
|
21.6
|
|
|
|
7.7
|
|
|
|
29.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(234.3
|
)
|
|
|
(242.2
|
)
|
|
|
(920.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings of short-term debt
|
|
|
(229.3
|
)
|
|
|
75.3
|
|
|
|
105.9
|
|
Proceeds from issuance of long-term debt
|
|
|
345.4
|
|
|
|
|
|
|
|
298.2
|
|
Repayment of long-term debt
|
|
|
(155.0
|
)
|
|
|
(47.5
|
)
|
|
|
(39.0
|
)
|
Excess tax benefits from share-based payment arrangements
|
|
|
2.5
|
|
|
|
1.0
|
|
|
|
12.5
|
|
Contribution from noncontrolling interests
|
|
|
6.4
|
|
|
|
26.0
|
|
|
|
271.8
|
|
Issuance of common stock
|
|
|
7.5
|
|
|
|
3.1
|
|
|
|
61.1
|
|
Treasury stock purchases
|
|
|
(45.2
|
)
|
|
|
(135.0
|
)
|
|
|
(59.4
|
)
|
Cash dividends
|
|
|
(52.4
|
)
|
|
|
(85.0
|
)
|
|
|
(65.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(120.1
|
)
|
|
|
(162.1
|
)
|
|
|
585.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating cash flows used in discontinued operations
|
|
|
(2.2
|
)
|
|
|
(9.4
|
)
|
|
|
(10.4
|
)
|
Effects of exchange rate changes on cash and cash equivalents
|
|
|
(0.5
|
)
|
|
|
(34.2
|
)
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
(48.5
|
)
|
|
|
52.7
|
|
|
|
96.6
|
|
Cash and cash equivalents as of beginning of fiscal year
|
|
|
242.4
|
|
|
|
189.7
|
|
|
|
93.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents as of end of fiscal year
|
|
$
|
193.9
|
|
|
$
|
242.4
|
|
|
$
|
189.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
PEPSIAMERICAS,
INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Common
|
|
|
Retained
|
|
|
Income
|
|
|
Treasury
|
|
|
Shareholders
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
Common
|
|
|
Treasury
|
|
|
Stock
|
|
|
Income
|
|
|
(Loss)
|
|
|
Stock
|
|
|
Equity
|
|
|
Interests
|
|
|
Equity
|
|
|
As of Fiscal Year End 2006
|
|
|
137.6
|
|
|
|
(10.6
|
)
|
|
$
|
1,283.4
|
|
|
$
|
525.4
|
|
|
$
|
21.7
|
|
|
$
|
(225.9
|
)
|
|
$
|
1,604.6
|
|
|
$
|
0.1
|
|
|
$
|
1,604.7
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212.1
|
|
|
|
|
|
|
|
|
|
|
|
212.1
|
|
|
|
0.1
|
|
|
|
212.2
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66.6
|
|
|
|
|
|
|
|
66.6
|
|
|
|
|
|
|
|
66.6
|
|
Unrealized losses on securities, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
(0.3
|
)
|
Cash flow hedge adjustment, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
|
|
0.6
|
|
Change in unrecognized pension and postretirement cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
|
|
|
|
|
|
10.2
|
|
|
|
|
|
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
289.2
|
|
|
|
0.1
|
|
|
|
289.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
|
|
0.6
|
|
Treasury stock purchases
|
|
|
|
|
|
|
(2.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59.4
|
)
|
|
|
(59.4
|
)
|
|
|
|
|
|
|
(59.4
|
)
|
Stock compensation plans
|
|
|
|
|
|
|
3.8
|
|
|
|
9.3
|
|
|
|
|
|
|
|
|
|
|
|
81.2
|
|
|
|
90.5
|
|
|
|
|
|
|
|
90.5
|
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67.2
|
)
|
|
|
|
|
|
|
|
|
|
|
(67.2
|
)
|
|
|
|
|
|
|
(67.2
|
)
|
Contributions from noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
271.8
|
|
|
|
271.8
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.4
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of Fiscal Year End 2007
|
|
|
137.6
|
|
|
|
(9.5
|
)
|
|
$
|
1,292.7
|
|
|
$
|
670.9
|
|
|
$
|
98.8
|
|
|
$
|
(204.1
|
)
|
|
$
|
1,858.3
|
|
|
$
|
273.4
|
|
|
$
|
2,131.7
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226.4
|
|
|
|
|
|
|
|
|
|
|
|
226.4
|
|
|
|
9.7
|
|
|
|
236.1
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(229.3
|
)
|
|
|
|
|
|
|
(229.3
|
)
|
|
|
(76.1
|
)
|
|
|
(305.4
|
)
|
Unrealized gains on securities, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
0.1
|
|
Cash flow hedge adjustment, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17.2
|
)
|
|
|
|
|
|
|
(17.2
|
)
|
|
|
|
|
|
|
(17.2
|
)
|
Change in unrecognized pension and postretirement cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53.3
|
)
|
|
|
|
|
|
|
(53.3
|
)
|
|
|
|
|
|
|
(53.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73.3
|
)
|
|
|
(66.4
|
)
|
|
|
(139.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measurement date adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
0.1
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
(0.1
|
)
|
Treasury stock purchases
|
|
|
|
|
|
|
(5.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(135.0
|
)
|
|
|
(135.0
|
)
|
|
|
|
|
|
|
(135.0
|
)
|
Stock compensation plans
|
|
|
|
|
|
|
0.7
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
14.8
|
|
|
|
19.0
|
|
|
|
|
|
|
|
19.0
|
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68.9
|
)
|
|
|
|
|
|
|
|
|
|
|
(68.9
|
)
|
|
|
|
|
|
|
(68.9
|
)
|
Contributions from noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26.0
|
|
|
|
26.0
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.0
|
)
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of Fiscal Year End 2008
|
|
|
137.6
|
|
|
|
(14.5
|
)
|
|
$
|
1,296.9
|
|
|
$
|
828.2
|
|
|
$
|
(200.8
|
)
|
|
$
|
(324.3
|
)
|
|
$
|
1,600.0
|
|
|
$
|
231.0
|
|
|
$
|
1,831.0
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181.2
|
|
|
|
|
|
|
|
|
|
|
|
181.2
|
|
|
|
(3.5
|
)
|
|
|
177.7
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42.2
|
)
|
|
|
|
|
|
|
(42.2
|
)
|
|
|
(35.3
|
)
|
|
|
(77.5
|
)
|
Unrealized gains on securities, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
0.3
|
|
Cash flow hedge adjustment, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43.1
|
|
|
|
|
|
|
|
43.1
|
|
|
|
|
|
|
|
43.1
|
|
Change in unrecognized pension and postretirement cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.0
|
|
|
|
|
|
|
|
13.0
|
|
|
|
|
|
|
|
13.0
|
|
Recognition from deconsolidation of business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.7
|
|
|
|
|
|
|
|
25.7
|
|
|
|
|
|
|
|
25.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221.1
|
|
|
|
(38.8
|
)
|
|
|
182.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock purchases
|
|
|
|
|
|
|
(2.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45.2
|
)
|
|
|
(45.2
|
)
|
|
|
|
|
|
|
(45.2
|
)
|
Stock compensation plans
|
|
|
|
|
|
|
1.2
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
26.4
|
|
|
|
25.4
|
|
|
|
|
|
|
|
25.4
|
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(69.6
|
)
|
|
|
|
|
|
|
|
|
|
|
(69.6
|
)
|
|
|
|
|
|
|
(69.6
|
)
|
Contributions from noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.4
|
|
|
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of Fiscal Year End 2009
|
|
|
137.6
|
|
|
|
(16.0
|
)
|
|
$
|
1,295.9
|
|
|
$
|
939.8
|
|
|
$
|
(160.9
|
)
|
|
$
|
(343.1
|
)
|
|
$
|
1,731.7
|
|
|
$
|
198.6
|
|
|
$
|
1,930.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial Statements
|
|
1.
|
Significant
Accounting Policies
|
Nature of operations. PepsiAmericas,
Inc. (referred to herein as PepsiAmericas,
PAS, we, our, or
us) manufactures, distributes and markets a broad
portfolio of beverage products in the United States
(U.S.) and Central and Eastern Europe
(CEE). We operate under exclusive franchise
agreements with soft drink concentrate producers, including
master bottling and fountain syrup agreements with PepsiCo, Inc.
(PepsiCo) for the manufacture, packaging, sale and
distribution of PepsiCo branded products. There are similar
agreements with other companies whose brands we produce and
distribute. The franchise agreements, in most instances, exist
in perpetuity and contain operating and marketing commitments
and conditions for termination. In some territories we
distribute our own brands, such as Sandora, Sadochok
and Toma.
We distribute beverage products to various customers in our
designated territories and through various distribution
channels. We are vulnerable to certain concentrations of risk,
mostly impacting the brands we sell, as well as the customer
base to which we sell, as we are exposed to a risk of loss
greater than if we would have mitigated these risks through
diversification. Approximately 83 percent of our net sales
were derived from brands that we bottle under licenses from
PepsiCo or PepsiCo joint ventures. Wal-Mart Stores, Inc. is our
largest customer which constituted 15.4 percent,
14.9 percent and 13.6 percent of our net sales in our
U.S. operations for fiscal years 2009, 2008 and 2007,
respectively.
Principles of consolidation. The
Consolidated Financial Statements include all wholly and
majority-owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation. We have an
ownership interest in a joint venture that owns Sandora LLC
(Sandora), which is considered a variable interest
entity. Under the terms of the joint venture agreement, we hold
a 60 percent interest and PepsiCo holds the remaining
40 percent interest in the joint venture. PepsiAmericas was
determined to be the primary beneficiary and, therefore, the
joint venture financial statements have been consolidated in our
financial statements. Due to the timing of the receipt of
available financial information, the results of
Quadrant-Amroq
Bottling Company Limited (QABCL or
Romania) and Sandora are recorded on a one-month lag
basis.
The equity investment in Agrima JSC (Agrima) was
recorded under the equity method of accounting for investments
in common stock. Due to the timing of the receipt of available
financial information, we record equity in net (loss) earnings
on a one-quarter lag basis.
In the first six months of 2009, we manufactured and distributed
beverage products in the Caribbean, including Puerto Rico,
Jamaica and Trinidad and Tobago, with distribution rights in the
Bahamas and Barbados. On July 3, 2009, we formed a
strategic joint venture with The Central America Beverage
Corporation (CABCORP) to combine our Caribbean
operations, excluding the Bahamas, with CABCORPs Central
American operations, including Guatemala, Honduras, El Salvador
and Nicaragua. We own an 18 percent interest in the CABCORP
joint venture. Our earnings from the joint venture with CABCORP
are recorded under the equity method of accounting for
investments in common stock. Due to the timing of the receipt of
available financial information, we record equity in net (loss)
earnings from the joint venture on a one-month lag basis.
Use of accounting estimates. The
preparation of the accompanying consolidated financial
statements in conformity with accounting principles generally
accepted in the United States of America (GAAP)
requires management to make estimates and assumptions about
future events. These estimates and the underlying assumptions
affect the amounts of assets and liabilities reported,
disclosures about contingent assets and liabilities, and
reported amounts of revenues and expenses. Such estimates
include the value of purchase consideration, valuation of
accounts receivable, inventories, casualty insurance costs,
goodwill, intangible assets, and other long-lived assets, legal
contingencies, and assumptions used in the calculation of income
taxes, and retirement and other postretirement benefits, among
others. These estimates and assumptions are based on
managements best estimates and judgment. Management
evaluates its estimates and assumptions on
F-7
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
an ongoing basis using historical experience and other factors,
including the current economic environment, which management
believes to be reasonable under the circumstances. We adjust
such estimates and assumptions when facts and circumstances
dictate. As future events and their effects cannot be determined
with precision, actual results could differ significantly from
these estimates.
Fiscal year. Our U.S. operations
report using a fiscal year that consists of 52 or 53 weeks
ending on the Saturday closest to December 31. Our CEE
operations fiscal year ends on December 31 and, therefore,
are not impacted by the 53rd week. Our 2009 and 2007 fiscal
years consisted of 52 weeks and ended on January 2,
2010 and December 29, 2007, respectively. Our 2008 fiscal
year consisted of 53 weeks and ended January 3, 2009.
Cash and cash equivalents. Cash and
cash equivalents consist of deposits with banks and financial
institutions which are unrestricted as to withdrawal or use, and
which have original maturities of three months or less.
Inventories. Inventories are recorded
at the lower of cost or net realizable value. Inventory is
valued using the average cost method.
Derivative financial instruments. Due
to fluctuations in market prices for certain commodities, we use
derivative financial instruments to hedge against volatility in
future cash flows related to anticipated purchases of raw
materials and the underlying commodities associated with them
and to hedge against the risk of adverse movements in interest
rates and foreign currency exchange rates. We may use derivative
financial instruments to lock interest rates on future debt
issues and to convert fixed rate debt to floating rate debt. We
also use derivatives related to anticipated purchases of raw
materials for which payment of those purchases is in a currency
other than the subsidiarys functional currency. Our
corporate policy prohibits the use of derivative instruments for
trading or speculative purposes, and we have procedures in place
to monitor and control their use. See Note 12 to the
Consolidated Financial Statements for additional information
regarding derivative financial instruments.
Cash received or paid upon settlement of derivative financial
instruments designated as cash flow hedges or fair value hedges
are classified in the same category as the cash flows from items
being hedged in the Consolidated Statements of Cash Flows. Cash
flows from the settlement of commodity, foreign currency
exchange rate and interest rate derivative instruments are
included in Cash flows from operating activities in
the Consolidated Statements of Cash Flows.
Property and equipment. Depreciation is
computed on the straight-line method. When property is sold or
retired, the cost and accumulated depreciation are eliminated
from the accounts and gains or losses are recorded in operating
income. Expenditures for maintenance and repairs are expensed as
incurred. Generally, the estimated useful lives of depreciable
assets are 15 to 40 years for buildings and improvements
and 5 to 13 years for machinery and equipment.
Goodwill and intangible
assets. Goodwill and intangible assets with
indefinite lives are not amortized, but instead tested annually
for impairment or more frequently if events or changes in
circumstances indicate that an asset might be impaired. Goodwill
is tested for impairment using a two-step approach at the
reporting unit level: U.S. and CEE. First, we estimate the
fair value of the reporting unit primarily using discounted
estimated future cash flows. If the carrying amount exceeds the
fair value of the reporting unit, the second step of the
goodwill impairment test is performed to measure the amount of
the potential impairment loss. Goodwill impairment is measured
by comparing the implied fair value of goodwill with
its carrying amount. Our annual impairment evaluation for
goodwill was performed in the fourth quarter and no impairment
of goodwill was indicated.
Our identified intangible assets with indefinite lives
principally arise from the allocation of the purchase price of
businesses acquired and consist primarily of franchise and
distribution agreements and trademarks and
F-8
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
tradenames. Impairment is measured as the amount by which the
carrying amount of the intangible asset exceeds its estimated
fair value. The estimated fair value is generally determined on
the basis of discounted future cash flows. Based on our
impairment analysis performed in fiscal year 2009, the estimated
fair value of our identified intangible assets with indefinite
lives exceeded the carrying amount, except as described in
Note 4 to the Consolidated Financial Statements.
The impairment evaluation requires the use of considerable
management judgment to determine the fair value of the goodwill
and intangible assets with indefinite lives using discounted
future cash flows, including estimates and assumptions regarding
the amount and timing of cash flows, cost of capital and growth
rates.
Our definite lived intangible assets consist primarily of
franchise and distribution agreements and customer relationships
and lists. We compute amortization of definite lived intangible
assets using the straight-line method. The approximate lives
used for annual amortization are 20 years for franchise and
distribution agreements and 7 to 14 years for customer
relationships and lists.
Carrying amounts of long-lived
assets. We evaluate the carrying amounts of
our definite-lived tangible and intangible long-lived assets by
reviewing projected undiscounted cash flows. Such evaluations
are performed whenever events and circumstances indicate that
the carrying amount of an asset may not be recoverable. If the
sum of the projected undiscounted cash flows over the estimated
remaining lives of the related asset group does not exceed the
carrying amount, the carrying amount would be adjusted for the
difference between the fair value and the related carrying
amount.
Investments. Investments are included
in Other assets on the Consolidated Balance Sheets
and include investments recorded under the equity method,
available-for-sale
equity securities, securities that are not publicly traded, real
estate and other investments. The equity method of accounting is
used for investments in affiliated companies in which we have
significant influence over their operations. Our share of
earnings or losses of affiliated companies is included in the
Consolidated Statements of Income.
Available-for-sale
equity securities in investees in which we do not exercise
significant influence over their operations, are carried at fair
value, with unrecognized gains and losses, net of taxes,
recorded in Accumulated other comprehensive (loss)
income. Fair values of
available-for-sale
securities are determined based on prevailing market prices.
Unrealized losses determined to be
other-than-temporary
are recorded in Other expense, net on the
Consolidated Statements of Income. Securities that are not
publicly traded and real estate investments are carried at cost,
which management believes is lower than net realizable value.
Environmental liabilities. We are
subject to certain indemnification obligations under agreements
related to previously sold subsidiaries, including potential
environmental liabilities. We have recorded our best estimate of
the probable liability under those indemnification obligations.
The estimated indemnification liabilities include expenses for
the remediation of identified sites, payments to third parties
for claims and expenses (including product liability and toxic
tort claims), administrative expenses, and the expense of
on-going evaluations and litigation. Such estimates and the
recorded liabilities are subject to various factors, including
possible insurance recoveries, the allocation of liabilities
among other potentially responsible parties, the advancement of
technology for means of remediation, possible changes in the
scope of work at the contaminated sites, as well as possible
changes in related laws, regulations, and agency requirements.
We do not discount environmental liabilities.
Pension and postretirement
benefits. Our pension and other
postretirement benefit obligations and related costs are
calculated using actuarial assumptions. Two critical
assumptions, the discount rate and the expected return on plan
assets, are important elements of plan expense and liability
measurement. We evaluate these critical assumptions annually.
Other assumptions involve demographic factors such as
retirement, mortality, turnover, health care cost trends and
rate of compensation increases.
The discount rate is used to calculate the present value of
expected future pension and postretirement cash flows as of the
measurement date. The guideline for establishing this rate is
high-quality, long-term bond
F-9
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
rates. A lower discount rate increases the present value of
benefit obligations and increases pension expense. The expected
long-term rate of return on plan assets is based on current and
expected asset allocations, as well as historical and expected
returns on various categories of plan assets. A
lower-than-expected
rate of return on pension plan assets will increase pension
expense. See Note 14 to the Consolidated Financial
Statements for additional information regarding these
assumptions.
Revenue recognition. Revenue is
recognized when title to a product is transferred to the
customer. Payments made to customers for the exclusive rights to
sell our products in certain venues are recorded as a reduction
of net sales over the term of the agreement. Customer discounts
and allowances are reflected as a reduction of net sales based
on actual customer sales volume during the period.
Bottler incentives. PepsiCo and other
brand owners, at their sole discretion, provide us with various
forms of marketing support. To promote volume and market share
growth, the marketing support is intended to cover a variety of
initiatives, including direct marketplace, shared media and
advertising support. There are no conditions or requirements
that could result in the repayment of any support payments we
have received. Over 93 percent of the bottler incentives
received in fiscal year 2009 were from PepsiCo or its affiliates.
Bottler incentives that are directly attributable to incremental
expenses incurred are reported as either an increase to net
sales or a reduction to selling, delivery and administrative
(SD&A) expenses, commensurate with the
recognition of the related expense. Such bottler incentives
include amounts received for direct support of advertising
commitments and exclusivity agreements with various customers.
All other bottler incentives are recognized as a reduction of
cost of goods sold when the related products are sold based on
the agreements with vendors. Such bottler incentives primarily
include base level funding amounts, which are fixed based on the
previous years volume and variable amounts that are
reflective of the current years volume performance.
The Consolidated Statements of Income include the following
bottler incentives recorded as income or as a reduction of
expense (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net sales
|
|
$
|
32.4
|
|
|
$
|
39.0
|
|
|
$
|
36.3
|
|
Cost of goods sold
|
|
|
195.2
|
|
|
|
197.5
|
|
|
|
188.0
|
|
SD&A expenses
|
|
|
19.0
|
|
|
|
26.3
|
|
|
|
20.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
246.6
|
|
|
$
|
262.8
|
|
|
$
|
244.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PepsiCo also provided indirect marketing support to our
marketplace, which consisted primarily of media expenses. This
indirect support was not reflected or included in our
Consolidated Financial Statements, as these amounts were paid
directly by PepsiCo. Other brand owners provide similar types of
indirect marketing support.
Advertising and marketing costs. We are
involved in a variety of programs to promote our products.
Advertising and marketing costs are expensed in the year
incurred. Certain advertising and marketing costs incurred by us
are partially reimbursed by PepsiCo and other brand owners in
the form of marketing support. Advertising and marketing
expenses recorded in SD&A expenses were
$120.4 million, $144.8 million and $128.8 million
in fiscal years 2009, 2008 and 2007, respectively. These amounts
are net of bottler incentives of $19.0 million,
$26.3 million and $20.2 million in fiscal years 2009,
2008 and 2007, respectively.
Shipping and handling costs. We record
shipping and handling costs in SD&A expenses. Such costs
totaled $271.7 million, $305.3 million and
$291.5 million in fiscal years 2009, 2008 and 2007,
respectively.
Casualty insurance costs. Due to the
nature of our business, we require insurance coverage for
certain casualty risks. We are self-insured for workers
compensation, product and general liability up to
$1 million per occurrence and automobile liability up to
$2 million per occurrence. The casualty insurance costs for
our
F-10
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
self-insurance program represent the ultimate net cost of all
reported and estimated unreported losses incurred during the
fiscal year. We do not discount casualty insurance liabilities.
Our liability for casualty costs is estimated using individual
case-based valuations and statistical analyses and is based upon
historical experience, actuarial assumptions and professional
judgment. These estimates are subject to the effects of trends
in loss severity and frequency and are based on the best data
available to us. These estimates, however, are also subject to a
significant degree of inherent variability. We evaluate these
estimates on a quarterly basis and we believe that they are
appropriate and within acceptable industry ranges, although an
increase or decrease in the estimates or economic events outside
our control could have a material impact on our results of
operations and cash flows. Accordingly, the ultimate settlement
of these costs may vary significantly from the estimates
included in our Consolidated Financial Statements.
Stock-based compensation. We measure
the cost of employee services in exchange for an award of equity
instruments based on the grant-date fair value of the award. The
total cost is reduced for estimated forfeitures over the
awards vesting period and the cost is recognized over the
requisite service period. Forfeiture estimates are reviewed on
an annual basis. During fiscal years 2009, 2008 and 2007, the
forfeiture rate for restricted stock awards was
4.9 percent, 3.6 percent, and 3.6 percent,
respectively, and 2.0 percent for stock options during
fiscal year 2007. No compensation expense was recorded for
options in fiscal year 2009 and 2008 as all options were fully
vested.
Income taxes. Our effective income tax
rate is based on income, statutory tax rates and tax planning
opportunities available to us in the various jurisdictions in
which we operate. We have established valuation allowances
against a portion of the foreign net operating losses and
state-related net operating losses to reflect the uncertainty of
our ability to fully utilize these benefits given the limited
carryforward periods permitted by the various jurisdictions. The
evaluation of the realizability of our net operating losses
requires the use of considerable management judgment to estimate
the future taxable income for the various jurisdictions, for
which the ultimate amounts and timing of such realization may
differ. The valuation allowance can also be impacted by changes
in the tax regulations.
Significant judgment is required in determining our uncertain
tax positions. We have established accruals for uncertain tax
positions using managements best judgment and adjust these
liabilities as warranted by changing facts and circumstances. A
change in our uncertain tax positions in any given period could
have a significant impact on our results of operations and cash
flows for that period.
Foreign currency. The assets and
liabilities of our operations that have functional currencies
other than the U.S. dollar are translated at exchange rates
in effect at year end, and income statements are translated at
the weighted-average exchange rates for the year. Gains and
losses resulting from the translation of foreign currency
financial statements are recorded as a separate component of
Accumulated other comprehensive (loss) income in the
equity section of the Consolidated Balance Sheets. Foreign
currency transaction gains or losses are credited or charged to
earnings as incurred. The recent global financial downturn has
led to a high level of volatility in foreign currency exchange
rates; that level of volatility may continue and thus adversely
impact our business or financial condition.
Earnings per share attributable to PepsiAmericas,
Inc. Basic earnings per share was based upon
the weighted-average number of common shares outstanding.
Diluted earnings per share assumed the exercise of all options
which are dilutive, whether exercisable or not. The dilutive
effects of stock options and non-vested restricted stock awards
were measured under the treasury stock method. As of the end of
fiscal years 2009, 2008 and 2007, there were no antidilutive
options or antidilutive non-vested restricted stock awards.
Recently Adopted Accounting
Pronouncements. In September 2006, the
Financial Accounting Standards Board (FASB) issued
an accounting pronouncement to provide enhanced guidance when
using fair value to measure assets and liabilities. The
pronouncement defines fair value, establishes a framework for
measuring fair value in GAAP and expands disclosures about fair
value measurements. The pronouncement
F-11
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
applies whenever other pronouncements require or permit assets
or liabilities to be measured by fair value. We adopted the
pronouncement as of the beginning of fiscal year 2008 as it
relates to recurring measurements of financial assets and
liabilities. We adopted the pronouncement as it relates to
nonrecurring fair value measurement requirements for
nonfinancial assets and liabilities as of the beginning of
fiscal year 2009. These include goodwill, other intangible
assets not subject to amortization and unallocated purchase
price for recent acquisitions. See Note 13 to the
Consolidated Financial Statements for required disclosures.
In December 2007, the FASB issued a revision to an existing
accounting pronouncement to amend the guidance relating to the
use of the purchase method in a business combination. The
revised pronouncement requires that we recognize and measure the
identifiable assets acquired, the liabilities assumed and any
noncontrolling interest in the acquired business at fair value.
The revised pronouncement also requires that we recognize and
measure the goodwill acquired in the business combination or a
gain from a bargain purchase. Acquisition costs to effect the
acquisition and any integration costs are no longer considered a
component of the cost of the acquisition, but will be expensed
as incurred. The revised pronouncement became effective with
acquisitions occurring on or after the beginning of fiscal year
2009.
In December 2007, the FASB issued an accounting pronouncement to
establish accounting and reporting standards for noncontrolling
interests, sometimes called minority interest. The pronouncement
requires that the parent report noncontrolling interests in the
equity section of the balance sheet but separate from the
parents equity. The pronouncement also requires clear
presentation of net income attributable to the parent and the
noncontrolling interest on the face of the income statement. All
changes in the parents ownership interest in the
subsidiary must be accounted for consistently. Deconsolidation
of the subsidiary requires the recognition of a gain or loss
using the fair value of the noncontrolling equity investment
rather than the carrying amount. We adopted the pronouncement as
of the beginning of fiscal year 2009 and retrospectively applied
the pronouncement to prior years. See Note 2 to the
Consolidated Financial Statements for required disclosures
regarding the deconsolidation of our Caribbean business in
connection with the formation of a strategic joint venture with
CABCORP.
In March 2008, the FASB issued an accounting pronouncement to
require enhanced disclosures about an entitys derivative
and hedging activities. We adopted the pronouncement as of the
beginning of fiscal year 2009. See Note 12 to the
Consolidated Financial Statements for required disclosures.
In December 2008, the FASB issued an accounting pronouncement
that provides guidance on an employers disclosures about
plan assets of a defined benefit pension or other postretirement
plan. We adopted the pronouncement in the fourth quarter of
2009. See Note 14 to the Consolidated Financial Statements
for required disclosures.
Recently Issued Accounting Pronouncements to be Adopted in
the Future. In June 2009, the FASB issued an
accounting pronouncement that amends the guidance related to
variable interest entities. The pronouncement was issued to
address the elimination of the concept of a qualifying special
purpose entity. The pronouncement also replaces the
quantitative-based risks and rewards calculation for determining
which enterprise has a controlling financial interest in a
variable interest entity with an approach focused on identifying
which enterprise has the power to direct the activities of a
variable interest entity and the obligation to absorb losses of
the entity or the right to receive benefits from the entity.
Additionally, the pronouncement requires more timely and useful
information about an enterprises involvement with a
variable interest entity. The pronouncement will become
effective in the first quarter of 2010. We are evaluating the
impact of the pronouncement, but we currently believe it will
have no impact on our Consolidated Financial Statements.
F-12
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
Equity securities classified as
available-for-sale
are carried at fair value and included in Other
assets in the Consolidated Balance Sheets. Unrealized
gains and losses representing the difference between carrying
amounts and fair value were recorded in the Accumulated
other comprehensive loss component of equity. These
unrealized losses, net of taxes, were $0.2 million as of
the end of fiscal year 2008. In fiscal year 2009, we recorded an
other-than-temporary
loss of $2.1 million related to an equity security,
Northfield Laboratories, Inc. (Northfield) that was
classified as
available-for-sale.
The loss was recorded in Other expense, net on the
Consolidated Statement of Income.
In fiscal year 2008, investments included the equity securities
of Northfield and estimated fair value was $1.7 million. As
a result of a significant decline in the market valuation of the
equity securities of Northfield, we adjusted our investment in
Northfield in fiscal year 2007 to reflect the fair value and
recorded these adjustments into income. The realized marketable
securities impairment on the Northfield investment resulted in a
non-cash charge to income of $4.0 million in fiscal year
2007.
On July 3, 2009, we formed a strategic joint venture with
CABCORP to combine PepsiAmericas Caribbean operations,
excluding the Bahamas, with CABCORPs Central American
operations, including Guatemala, Honduras, El Salvador and
Nicaragua. Under the terms of the joint venture agreement, we
hold an 18 percent interest and CABCORP holds an
82 percent interest in the joint venture. Upon execution of
the joint venture agreement, we deconsolidated our Caribbean
business resulting in a non-cash loss of $25.8 million
($23.0 million net of taxes) that was recorded in
Loss from deconsolidation of business on the
Consolidated Statement of Income. This loss included the
recognition of deferred losses associated with cumulative
translation adjustments of $19.2 million and unrecognized
pension losses of $6.5 million, which were previously
included in Accumulated other comprehensive loss on
the Consolidated Balance Sheets.
Our initial investment in the joint venture was recorded at its
fair value of $143.0 million in Other assets on
the Consolidated Balance Sheet. To estimate the fair value of
the joint venture, we used an income approach based on a
discounted cash flow model. The discounted cash flows were based
on estimates and assumptions supported by unobservable inputs,
including pricing and volume data, anticipated growth rates and
share performance, profitability levels, inflation factors,
forward exchange rates, tax rates and discount rates. The
discount rates used considered each countrys specific risk
factors.
Beginning in the third quarter of 2009, earnings from the
strategic joint venture with CABCORP are recorded in
Equity in net earnings (loss) of nonconsolidated
companies on the Consolidated Statements of Income. Due to
the timing of the receipt of available financial information, we
record equity in net earnings (loss) from the joint venture on a
one-month lag basis.
In fiscal year 2007, we purchased a 20 percent interest in
a joint venture that owns Agrima. Agrima produces, sells and
distributes PepsiCo branded products and other beverages
throughout Bulgaria. This investment is reflected in Other
assets on the Consolidated Balance Sheet.
In fiscal year 2007, we entered into a joint venture agreement
with PepsiCo to purchase the outstanding common stock of
Sandora. Under the terms of the joint venture agreement, we hold
a 60 percent interest and PepsiCo holds the remaining
40 percent interest in the joint venture. The preliminary
purchase price of $679.4 million increased to
$680.4 million as a result of additional payments for
acquisition costs in fiscal year 2008. The total purchase price
of $680.4 million was net of cash received of
$3.0 million. Of the total purchase price, our interest was
$408.2 million. As part of the acquisition, the joint
venture acquired $72.5 million of debt, which was retired
in fiscal year 2008.
F-13
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
The following information summarizes the allocation of the final
purchase price of the Sandora acquisition (in millions):
|
|
|
|
|
Goodwill
|
|
$
|
430.6
|
|
Trademark and tradenames
|
|
|
116.0
|
|
Customer relationships and lists
|
|
|
48.2
|
|
Net assets assumed, net of cash acquired
|
|
|
142.5
|
|
Deferred tax liabilities
|
|
|
(56.9
|
)
|
|
|
|
|
|
Total
|
|
$
|
680.4
|
|
|
|
|
|
|
The following unaudited pro forma information is provided for
acquisitions assuming the Sandora acquisition occurred as of the
beginning of fiscal year 2007 (in millions, except per share
amounts):
|
|
|
|
|
|
|
2007
|
|
|
Net sales
|
|
$
|
4,713.3
|
|
Operating income
|
|
|
473.7
|
|
Net income
|
|
|
210.6
|
|
Earnings per share:
|
|
|
|
|
Basic
|
|
$
|
1.66
|
|
Diluted
|
|
|
1.63
|
|
|
|
4.
|
Goodwill
and Intangible Assets
|
The changes in the carrying amount of goodwill by geographic
segment for fiscal years 2009 and 2008 were as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
CEE
|
|
|
Caribbean
|
|
|
Total
|
|
|
Balance, fiscal year end 2007
|
|
$
|
1,824.1
|
|
|
$
|
592.8
|
|
|
$
|
15.8
|
|
|
$
|
2,432.7
|
|
Purchase accounting adjustments
|
|
|
0.2
|
|
|
|
(63.1
|
)
|
|
|
|
|
|
|
(62.9
|
)
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
(125.1
|
)
|
|
|
(0.1
|
)
|
|
|
(125.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, fiscal year end 2008
|
|
$
|
1,824.3
|
|
|
$
|
404.6
|
|
|
$
|
15.7
|
|
|
$
|
2,244.6
|
|
Deconsolidation of business
|
|
|
|
|
|
|
|
|
|
|
(15.6
|
)
|
|
|
(15.6
|
)
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
(47.1
|
)
|
|
|
(0.1
|
)
|
|
|
(47.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, fiscal year end 2009
|
|
$
|
1,824.3
|
|
|
$
|
357.5
|
|
|
$
|
|
|
|
$
|
2,181.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On July 3, 2009, we formed a strategic joint venture with
CABCORP to combine our Caribbean operations, excluding the
Bahamas, with CABCORPs Central American operations. As a
result, we deconsolidated our Caribbean business resulting in a
$15.6 million reduction in goodwill (see Note 2 to the
Consolidated Financial Statements for further discussion).
We increased goodwill by $0.2 million in fiscal year 2008
due to adjustments associated with net operating loss
carryforwards acquired in prior year acquisitions.
F-14
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
Intangible asset balances as of the end of fiscal years 2009 and
2008 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
Gross carrying amount:
|
|
|
|
|
|
|
|
|
Customer relationships and lists
|
|
$
|
52.2
|
|
|
$
|
57.3
|
|
Franchise and distribution agreements
|
|
|
11.1
|
|
|
|
3.3
|
|
Other
|
|
|
2.5
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
65.8
|
|
|
$
|
63.1
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization:
|
|
|
|
|
|
|
|
|
Customer relationships and lists
|
|
$
|
(17.1
|
)
|
|
$
|
(11.9
|
)
|
Franchise and distribution agreements
|
|
|
(2.1
|
)
|
|
|
(1.2
|
)
|
Other
|
|
|
(0.8
|
)
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(20.0
|
)
|
|
$
|
(13.7
|
)
|
|
|
|
|
|
|
|
|
|
Intangible assets subject to amortization, net
|
|
$
|
45.8
|
|
|
$
|
49.4
|
|
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
Franchise and distribution agreements
|
|
|
375.5
|
|
|
|
362.3
|
|
Trademarks and tradenames
|
|
|
56.4
|
|
|
|
86.9
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
431.9
|
|
|
$
|
449.2
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
|
$
|
477.7
|
|
|
$
|
498.6
|
|
|
|
|
|
|
|
|
|
|
In fiscal year 2009, we acquired distribution rights for
ROCKSTAR energy drinks and Muscle Milk
protein-enhanced beverages. As a result of these
acquisitions, we recorded $7.8 million of amortizable
distribution rights. We also recorded $10.6 million of
distribution rights not subject to amortization in connection
with the Crush beverage brand distribution agreement.
Sandora was acquired in fiscal year 2007 by a joint venture in
which we hold a 60 percent interest. The process of valuing
the assets, liabilities and intangibles acquired in connection
with the Sandora acquisition was completed in the second quarter
of 2008 and resulted in an allocation of $430.6 million to
goodwill, $116.0 million to trademarks and tradenames and
$48.2 million to customer relationships and lists. In
fiscal year 2007, based on our preliminary valuation, we
amortized trademarks and tradenames over 20 to 30 years and
the customer relationships and lists over 3 to 10 years.
After the final valuation of the assets, liabilities and
intangibles was completed, we assigned an indefinite life to the
trademarks and tradenames and a useful life of 7 to
10 years for the customer relationships and lists.
Amortization expense in fiscal year 2008 included a cumulative
benefit of $2.3 million related to the final Sandora
valuation.
During the third quarter of 2009, we completed an impairment
testing of our Sandora and Sadochok trademark and
tradenames. As a result of this testing, we recorded a
$17.4 million non-cash impairment charge based upon the
findings of a strategic review of our Ukraine business to
write-down these intangible assets with a carrying amount of
$73.3 million to their estimated fair value of
$56.3 million as of the end of the third quarter of fiscal
year 2009. In light of weakening macroeconomic conditions, we
lowered our expectations of the future performance, which
reduced the value of these indefinite life intangible assets.
The fair value of our Sandora and Sadochok brands
was estimated using a multi-period royalty savings method, which
reflects the savings realized by owning the brands and,
therefore, not having to pay a royalty fee to a third party.
F-15
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
In the third quarter of 2008, we initiated a strategic
restructuring of the Caribbean operations to streamline
operations and improve profitability. In the Bahamas, we no
longer produce our products locally but instead utilize a
third-party distributor and source our products from other
locations. As a result of this change in our business model in
that country, the franchise right intangible asset associated
with the Bahamas was impaired. We recorded a $2.9 million
impairment of the entire franchise right intangible asset, which
was included in Special charges and adjustments on
the Consolidated Statement of Income.
For intangible assets subject to amortization, we calculate
amortization expense over the period we expect to receive
economic benefit. Total amortization expense was
$6.9 million, $7.3 million and $6.6 million in
fiscal years 2009, 2008, and 2007, respectively. The estimated
aggregate amortization expense over each of the next five years
is expected to be $9.3 million per year.
|
|
5.
|
Special
Charges and Adjustments
|
2009 Charges. In fiscal year 2009, we
recorded special charges of $11.1 million. We recorded
$9.8 million of special charges in CEE related to the
restructuring of our Hungary operations, primarily for
severance, fixed asset impairments and lease termination costs.
We recorded $1.3 million of special charges, net of
recoveries, in the Caribbean and the U.S. related to
restructuring costs.
2008 Charges. In fiscal year 2008, we
recorded special charges and adjustments totaling
$23.0 million. We recorded special charges of
$16.8 million. In the Caribbean, we recorded
$9.0 million of special charges, which consisted of
severance and impairment charges that included a
$2.9 million impairment charge related to an intangible
asset and a $3.0 million impairment of fixed assets. As a
result of various realignment initiatives, we recorded special
charges of $4.1 million in the U.S. and
$1.3 million in CEE related to severance, fixed asset
impairment and lease termination costs. We also recorded a legal
contingency of $2.4 million in our CEE operations.
In fiscal year 2008, we determined that we had improperly
accounted for certain U.S. employee benefit obligations in
prior years. Accordingly, we recorded an
out-of-period
accounting adjustment of $6.2 million to properly state the
benefit obligation as of the end of fiscal year 2008. This
adjustment was recorded as an increase in Payables and
other current liabilities in the Consolidated Balance
Sheet, and is not included in the special charges table below.
2007 Charges. In fiscal year 2007, we
recorded special charges of $6.3 million. In the U.S., we
recorded $4.8 million of special charges primarily related
to severance and relocation costs associated with our strategic
realignment to further strengthen our customer focused
go-to-market
strategy. In CEE, we recorded special charges of
$1.5 million related to lease termination costs in Hungary
and associated severance costs.
The following table summarizes the activity associated with
special charges during the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application of
|
|
|
|
|
|
|
Beginning of
|
|
|
|
|
|
|
|
|
Non-Cash
|
|
|
End of
|
|
|
|
Fiscal Year
|
|
|
Special
|
|
|
Cash
|
|
|
Special
|
|
|
Fiscal Year
|
|
|
|
2009
|
|
|
Charges
|
|
|
Outlays
|
|
|
Charges
|
|
|
2009
|
|
|
2009 Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee-related costs
|
|
$
|
2.3
|
|
|
$
|
3.7
|
|
|
$
|
(4.4
|
)
|
|
$
|
|
|
|
$
|
1.6
|
|
Lease terminations and other costs
|
|
|
0.2
|
|
|
|
3.1
|
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
2.5
|
|
Asset write-downs
|
|
|
|
|
|
|
4.3
|
|
|
|
|
|
|
|
(4.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities
|
|
$
|
2.5
|
|
|
$
|
11.1
|
|
|
$
|
(5.2
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application of
|
|
|
|
|
|
|
Beginning of
|
|
|
|
|
|
|
|
|
Non-Cash
|
|
|
End of
|
|
|
|
Fiscal Year
|
|
|
Special
|
|
|
Cash
|
|
|
Special
|
|
|
Fiscal Year
|
|
|
|
2008
|
|
|
Charges
|
|
|
Outlays
|
|
|
Charges
|
|
|
2008
|
|
|
2008 Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee-related costs
|
|
$
|
0.2
|
|
|
$
|
7.8
|
|
|
$
|
(5.7
|
)
|
|
$
|
|
|
|
$
|
2.3
|
|
Lease terminations and other costs
|
|
|
0.9
|
|
|
|
0.3
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
0.2
|
|
Asset write-downs
|
|
|
|
|
|
|
8.7
|
|
|
|
|
|
|
|
(8.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities
|
|
$
|
1.1
|
|
|
$
|
16.8
|
|
|
$
|
(6.7
|
)
|
|
$
|
(8.7
|
)
|
|
$
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application of
|
|
|
|
|
|
|
Beginning of
|
|
|
|
|
|
|
|
|
Non-Cash
|
|
|
End of
|
|
|
|
Fiscal Year
|
|
|
Special
|
|
|
Cash
|
|
|
Special
|
|
|
Fiscal Year
|
|
|
|
2007
|
|
|
Charges
|
|
|
Outlays
|
|
|
Charges
|
|
|
2007
|
|
|
2007 Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee-related costs
|
|
$
|
9.1
|
|
|
$
|
5.4
|
|
|
$
|
(14.3
|
)
|
|
$
|
|
|
|
$
|
0.2
|
|
Vesting of restricted stock awards
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
(2.0
|
)
|
|
|
|
|
Lease terminations and other costs
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities
|
|
$
|
11.1
|
|
|
$
|
6.3
|
|
|
$
|
(14.3
|
)
|
|
$
|
(2.0
|
)
|
|
$
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total accrued liabilities remaining as of the end of the
fiscal year 2009 were comprised of severance payments, lease
terminations and other costs. We expect the remaining liability
to be paid using cash from operations during the next
12 months; accordingly, such amounts are classified as
Payables and other current liabilities in the
Consolidated Balance Sheet.
Interest expense, net, was comprised of the following (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Interest expense
|
|
$
|
70.9
|
|
|
$
|
117.9
|
|
|
$
|
112.4
|
|
Interest income
|
|
|
(5.3
|
)
|
|
|
(6.8
|
)
|
|
|
(3.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
$
|
65.6
|
|
|
$
|
111.1
|
|
|
$
|
109.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During fiscal year 2009, we recorded a $33.0 million gain
from the termination of an interest rate swap based on our
determination that interest payments associated with a
forecasted debt issuance for which the interest rate swap was
designated was probable not to occur. The gain was reclassified
from Accumulated other comprehensive loss on the
Consolidated Balance Sheets and recorded as a reduction of
interest expense.
F-17
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
Income taxes were comprised of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
65.5
|
|
|
$
|
68.1
|
|
|
$
|
78.2
|
|
Foreign
|
|
|
18.3
|
|
|
|
35.3
|
|
|
|
19.8
|
|
State and local
|
|
|
7.6
|
|
|
|
4.8
|
|
|
|
7.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
91.4
|
|
|
|
108.2
|
|
|
|
105.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
8.5
|
|
|
|
(1.6
|
)
|
|
|
0.9
|
|
Foreign
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
|
|
5.2
|
|
State and local
|
|
|
(0.3
|
)
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
7.9
|
|
|
|
(0.4
|
)
|
|
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
99.3
|
|
|
$
|
107.8
|
|
|
$
|
112.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The U.S. and foreign components of income before income
taxes and equity in net earnings (loss) of nonconsolidated
companies is set forth in the table below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
U.S.
|
|
$
|
237.5
|
|
|
$
|
202.5
|
|
|
$
|
232.5
|
|
Foreign
|
|
|
38.1
|
|
|
|
151.7
|
|
|
|
93.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
275.6
|
|
|
$
|
354.2
|
|
|
$
|
326.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below reconciles the income tax provision at the
U.S. federal statutory rate to our actual income tax
provision (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Income taxes at the federal statutory rate
|
|
$
|
96.5
|
|
|
|
35.0
|
|
|
$
|
124.0
|
|
|
|
35.0
|
|
|
$
|
114.2
|
|
|
|
35.0
|
|
State income taxes, net of federal income tax benefit
|
|
|
5.1
|
|
|
|
1.8
|
|
|
|
4.3
|
|
|
|
1.2
|
|
|
|
5.8
|
|
|
|
1.8
|
|
Foreign rate differential
|
|
|
(7.9
|
)
|
|
|
(2.9
|
)
|
|
|
(21.6
|
)
|
|
|
(6.1
|
)
|
|
|
(8.5
|
)
|
|
|
(2.6
|
)
|
Enacted rate change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.0
|
|
|
|
0.6
|
|
Caribbean restructuring
|
|
|
5.7
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items, net
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
1.1
|
|
|
|
0.3
|
|
|
|
(1.5
|
)
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
99.3
|
|
|
|
36.0
|
|
|
$
|
107.8
|
|
|
|
30.4
|
|
|
$
|
112.0
|
|
|
|
34.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-18
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
Deferred income taxes are attributable to temporary differences,
which exist between the financial statement bases and tax bases
of certain assets and liabilities. As of the end of fiscal years
2009 and 2008, deferred income taxes (including discontinued
operations) are attributable to (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Deferred compensation
|
|
$
|
20.0
|
|
|
$
|
16.9
|
|
Pension and postretirement benefits
|
|
|
18.6
|
|
|
|
26.9
|
|
U.S. state net operating loss and tax credit carryforwards
|
|
|
16.2
|
|
|
|
14.9
|
|
Provision for special charges and previously sold businesses
|
|
|
14.7
|
|
|
|
15.2
|
|
Foreign net operating loss and tax credit carryforwards
|
|
|
6.4
|
|
|
|
19.3
|
|
Unrealized net losses on investments and cash flow hedges
|
|
|
|
|
|
|
29.0
|
|
Other
|
|
|
24.3
|
|
|
|
17.0
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
100.2
|
|
|
|
139.2
|
|
Valuation allowance
|
|
|
(22.6
|
)
|
|
|
(30.4
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
77.6
|
|
|
|
108.8
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
(190.0
|
)
|
|
|
(201.9
|
)
|
Property
|
|
|
(139.3
|
)
|
|
|
(122.2
|
)
|
Other
|
|
|
(1.3
|
)
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(330.6
|
)
|
|
|
(325.7
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
(253.0
|
)
|
|
$
|
(216.9
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability included in:
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
20.7
|
|
|
$
|
20.7
|
|
Deferred income taxes
|
|
|
(273.7
|
)
|
|
|
(237.6
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
(253.0
|
)
|
|
$
|
(216.9
|
)
|
|
|
|
|
|
|
|
|
|
In connection with the merger with the former PepsiAmericas, we
became the successor to certain U.S. federal, state and
foreign net operating losses (NOLs) and tax credit
carryforwards. We have, and continue to generate, NOLs related
to certain U.S. states and certain foreign jurisdictions.
As of the end of fiscal year 2009, our foreign NOLs amounted to
$37.8 million, which expire from 2010 through 2011, except
for $24.6 million that do not expire. Utilization of state
and foreign NOLs is limited by various state and international
tax laws. We have provided a valuation allowance against all of
our state and foreign NOLs. These valuation allowances reflect
the uncertainty of our ability to fully utilize these benefits
given the limited carryforward periods permitted by the various
taxing jurisdictions.
Deferred taxes are not recognized for temporary differences
related to investments in foreign subsidiaries that are
indefinite in duration. As of the end of fiscal year 2009, we
have cumulative undistributed earnings of $237.7 million.
We adopted revised accounting pronouncements issued by the FASB
related to uncertainty in income taxes as of the beginning of
fiscal year 2007. As a result of the implementation, we recorded
a $0.6 million increase to the beginning balance in
retained income on the Consolidated Balance Sheet.
F-19
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
During fiscal years 2009 and 2008, our gross unrecognized tax
benefits decreased by $3.7 million and $0.6 million,
respectively. Of the 2009 decrease, $3.5 million was due to
tax positions from prior periods for which a deferred tax asset
was recorded.
The table below reconciles the changes in the gross unrecognized
tax benefits for fiscal years 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Balance as of the beginning of fiscal year
|
|
$
|
35.8
|
|
|
$
|
36.4
|
|
Increases due to tax positions in prior period
|
|
|
7.5
|
|
|
|
0.9
|
|
Decreases due to tax positions in prior period
|
|
|
(5.5
|
)
|
|
|
(2.8
|
)
|
Increases due to tax positions in current period
|
|
|
2.5
|
|
|
|
2.3
|
|
Lapse of statute of limitations
|
|
|
(8.2
|
)
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of the end of fiscal year
|
|
$
|
32.1
|
|
|
$
|
35.8
|
|
|
|
|
|
|
|
|
|
|
During fiscal years 2009 and 2008, the net unrecognized tax
benefits that impacted our effective tax rate increased by
$0.1 million and decreased by $1.0 million,
respectively. As of the end of fiscal year 2009, we had total
unrecognized tax benefits of $32.1 million, of which
$16.1 million (net of the federal income tax benefit on
state tax issues and interest) would favorably impact the
effective income tax rate in any future period, if recognized.
During fiscal years 2009 and 2008, we recorded $0.1 million
and $2.5 million, respectively, of gross interest related
to unrecognized tax benefits.
During the next 12 months it is reasonably possible that a
reduction of gross unrecognized tax benefits will occur in a
range of $5 million to $9 million as a result of the
resolution of positions taken on previously filed returns.
We are subject to U.S. federal income tax, state income tax
in multiple state tax jurisdictions, and foreign income tax in
our CEE tax jurisdictions. We have concluded all
U.S. federal income tax examinations for years through
2007. The following table summarizes the years that are subject
to examination for each primary jurisdiction as of the end of
fiscal year 2009:
|
|
|
|
|
Jurisdiction
|
|
Subject to Examination
|
|
|
Federal (U.S.)
|
|
|
2008
|
|
Illinois
|
|
|
2002-2008
|
|
Indiana
|
|
|
2004-2008
|
|
Iowa
|
|
|
2005-2008
|
|
Romania
|
|
|
2003-2008
|
|
Poland
|
|
|
2003-2008
|
|
Czech Republic
|
|
|
2006-2008
|
|
Ukraine
|
|
|
2006-2008
|
|
Our policy is to recognize interest and penalties related to
income tax matters in income tax expense. We had
$9.0 million, $6.5 million and $4.1 million
accrued for interest and no amount accrued for penalties as of
the end of fiscal years 2009, 2008 and 2007, respectively.
In fiscal year 2002, Whitman Finance, a special purpose entity
and wholly-owned subsidiary, entered into an agreement (the
Securitization) with a major U.S. financial
institution to sell an undivided interest in its receivables.
The Securitization involved the sale of receivables, on a
revolving basis, by our U.S. bottling subsidiaries to
Whitman Finance, which in turn sold an undivided interest in the
revolving pool of receivables
F-20
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
to the financial institution. The potential amount of
receivables eligible for sale was determined based on the size
and characteristics of the receivables pool but could not exceed
$150 million based on the terms of the agreement. Costs
related to this arrangement, including losses on the sale of
receivables, were included in Interest expense, net.
In fiscal year 2009, we terminated our trade receivables
securitization program because the program had become
uncompetitive with alternate sources of capital, which resulted
in a $150 million increase in trade receivables and a
comparable increase in debt on our Consolidated Balance Sheet.
Additionally, termination of this program resulted in a decline
in cash flows from operating activities of $150 million,
effectively offset by a corresponding increase in cash flows
from financing activities on our Consolidated Statement of Cash
Flows.
Details of certain line items on the Condensed Consolidated
Balance Sheets as of the end of fiscal years 2009 and 2008 were
as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Receivables, net:
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
$
|
376.7
|
|
|
$
|
418.0
|
|
Securitization receivables
|
|
|
|
|
|
|
(150.0
|
)
|
Funding and purchasing rebates receivables
|
|
|
38.8
|
|
|
|
39.7
|
|
Other receivables
|
|
|
12.4
|
|
|
|
11.3
|
|
Allowance for doubtful accounts
|
|
|
(14.1
|
)
|
|
|
(13.5
|
)
|
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
$
|
413.8
|
|
|
$
|
305.5
|
|
|
|
|
|
|
|
|
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Raw materials and supplies
|
|
$
|
85.1
|
|
|
$
|
117.2
|
|
Finished goods
|
|
|
112.4
|
|
|
|
121.3
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
197.5
|
|
|
$
|
238.5
|
|
|
|
|
|
|
|
|
|
|
Other current assets:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
66.0
|
|
|
$
|
56.7
|
|
Prepaid customer incentives
|
|
|
20.4
|
|
|
|
23.5
|
|
Other
|
|
|
60.4
|
|
|
|
39.5
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
146.8
|
|
|
$
|
119.7
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net:
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
72.6
|
|
|
$
|
84.1
|
|
Building and improvements
|
|
|
551.0
|
|
|
|
524.9
|
|
Machinery and equipment
|
|
|
2,219.5
|
|
|
|
2,301.1
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
2,843.1
|
|
|
|
2,910.1
|
|
Accumulated depreciation
|
|
|
(1,566.5
|
)
|
|
|
(1,554.4
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
1,276.6
|
|
|
$
|
1,355.7
|
|
|
|
|
|
|
|
|
|
|
F-21
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Payables and other current liabilities:
|
|
|
|
|
|
|
|
|
Trade payables
|
|
$
|
185.1
|
|
|
$
|
186.9
|
|
Income tax and other payables
|
|
|
21.8
|
|
|
|
16.8
|
|
Dividends payable
|
|
|
16.8
|
|
|
|
|
|
Accrued salaries and wages
|
|
|
85.1
|
|
|
|
71.3
|
|
Accrued customer incentives
|
|
|
69.0
|
|
|
|
86.9
|
|
Accrued interest
|
|
|
28.9
|
|
|
|
25.3
|
|
Other current liabilities
|
|
|
121.1
|
|
|
|
136.0
|
|
|
|
|
|
|
|
|
|
|
Payables and other current liabilities
|
|
$
|
527.8
|
|
|
$
|
523.2
|
|
|
|
|
|
|
|
|
|
|
The changes in the allowance for doubtful accounts for fiscal
years 2009, 2008 and 2007 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Balance as of the beginning of year
|
|
$
|
13.5
|
|
|
$
|
14.7
|
|
|
$
|
16.1
|
|
Provision for losses
|
|
|
5.6
|
|
|
|
3.0
|
|
|
|
0.6
|
|
Write-offs and recoveries
|
|
|
(4.8
|
)
|
|
|
(2.9
|
)
|
|
|
(3.2
|
)
|
Foreign currency translation
|
|
|
(0.2
|
)
|
|
|
(1.3
|
)
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of fiscal year
|
|
$
|
14.1
|
|
|
$
|
13.5
|
|
|
$
|
14.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The purpose of the allowance is to provide an estimate of losses
with respect to trade receivables. Our estimate in each period
requires consideration of historical loss experience, judgments
about the impact of present economic conditions, in addition to
specific losses for known accounts.
F-22
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
Long-term debt as of the end of fiscal years 2009 and 2008
consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
6.375% notes due 2009
|
|
$
|
|
|
|
$
|
150.0
|
|
5.625% notes due 2011
|
|
|
250.0
|
|
|
|
250.0
|
|
5.75% notes due 2012
|
|
|
300.0
|
|
|
|
300.0
|
|
4.50% notes due 2013
|
|
|
150.0
|
|
|
|
150.0
|
|
4.375% notes due 2014
|
|
|
350.0
|
|
|
|
|
|
4.875% notes due 2015
|
|
|
300.0
|
|
|
|
300.0
|
|
5.00% notes due 2017
|
|
|
250.0
|
|
|
|
250.0
|
|
7.44% notes due 2026
|
|
|
25.0
|
|
|
|
25.0
|
|
7.29% notes due 2026
|
|
|
100.0
|
|
|
|
100.0
|
|
5.50% notes due 2035
|
|
|
250.0
|
|
|
|
250.0
|
|
Various other debt
|
|
|
9.3
|
|
|
|
14.2
|
|
Capital lease obligations
|
|
|
13.1
|
|
|
|
15.3
|
|
Fair value adjustment from interest rate swaps
|
|
|
3.1
|
|
|
|
0.9
|
|
Unamortized discount
|
|
|
(5.7
|
)
|
|
|
(4.7
|
)
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
1,994.8
|
|
|
|
1,800.7
|
|
Less: amount included in short-term debt
|
|
|
4.0
|
|
|
|
158.4
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
1,990.8
|
|
|
$
|
1,642.3
|
|
|
|
|
|
|
|
|
|
|
Our debt agreements contain a number of covenants that limit,
among other things, the creation of liens, sale and leaseback
transactions and the general sale of assets. Our revolving
credit agreement requires us to maintain an interest coverage
ratio. We are in compliance with all of our financial covenants.
Substantially all of our debt securities are unsecured, senior
debt obligations and rank equally with all of our other
unsecured and unsubordinated indebtedness.
In fiscal 2009, we issued $350 million of notes with a
coupon rate of 4.375 percent due February 2014. The
securities are unsecured and unsubordinated obligations and rank
equally in priority with all of our existing and future
unsecured and unsubordinated indebtedness. Net proceeds from
this transaction were $345.4 million, which reflected a
discount of $2.2 million and debt issuance costs of
$2.4 million. The net proceeds from the issuance of the
notes were used to repay commercial paper and for other general
corporate purposes. The notes were issued under our automatic
shelf registration statement filed May 16, 2006.
During fiscal year 2009, we repaid $150 million at maturity
of the 6.375 percent notes due April 2009 and
$5.0 million of debt in the Bahamas. During fiscal year
2008, we repaid $47.5 million of long-term debt acquired as
part of the Sandora acquisition. Included in this payment was
$2.5 million of prepayment penalty fees.
We utilize revolving credit facilities both in the U.S. and
in our international operations to fund short-term financing
needs, primarily for working capital. In the U.S., we have an
unsecured revolving credit facility under which we can borrow up
to an aggregate of $600 million. The facility is for
general corporate purposes, including commercial paper backstop.
It is our policy to maintain a committed bank facility as backup
financing for our commercial paper program. The interest rates
on the revolving credit facility, which expires in 2011, are
based primarily on the London Interbank Offered Rate.
Accordingly, we have a total of $600 million available
under our commercial paper program and revolving credit facility
combined. There were $129.5 million and $365.0 million
of borrowings under the commercial paper program as of the end
of
F-23
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
fiscal years 2009 and 2008, respectively. The weighted-average
borrowings under the commercial paper program during fiscal
years 2009 and 2008 were $306.0 million and
$395.8 million, respectively. The weighted-average interest
rate for borrowings outstanding under the commercial paper
program during fiscal years 2009 and 2008 were 0.3 percent
and 2.7 percent, respectively.
Certain wholly-owned subsidiaries maintain operating lines of
credit for general operating needs. Interest rates are based
primarily upon Interbank Offered Rates for borrowings in the
subsidiaries local currencies. The outstanding balances
were $8.0 million and $1.6 million as of the end of
fiscal years 2009 and 2008, respectively, and were recorded in
Short-term debt, including current maturities of long-term
debt in the Consolidated Balance Sheets.
The amounts of long-term debt, excluding obligations under
capital leases, scheduled to mature in the next five years are
as follows (in millions):
|
|
|
|
|
2010
|
|
$
|
|
|
2011
|
|
|
250.0
|
|
2012
|
|
|
300.0
|
|
2013
|
|
|
150.0
|
|
2014
|
|
|
350.0
|
|
We have entered into noncancelable lease commitments under
operating and capital leases for fleet vehicles, computer
equipment (including both software and hardware), land,
buildings, machinery and equipment.
As of the end of fiscal year 2009, annual minimum rental
payments required under capital leases and operating leases that
have initial noncancelable terms in excess of one year were as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Operating
|
|
|
|
Leases
|
|
|
Leases
|
|
|
2010
|
|
$
|
3.8
|
|
|
$
|
16.6
|
|
2011
|
|
|
3.9
|
|
|
|
11.9
|
|
2012
|
|
|
3.8
|
|
|
|
7.5
|
|
2013
|
|
|
2.3
|
|
|
|
6.2
|
|
2014
|
|
|
0.2
|
|
|
|
4.9
|
|
Thereafter
|
|
|
|
|
|
|
41.9
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
14.0
|
|
|
$
|
89.0
|
|
|
|
|
|
|
|
|
|
|
Less: imputed interest
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of minimum lease payments
|
|
$
|
13.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rent expense applicable to operating leases was
$33.1 million, $35.3 million and $26.7 million in
fiscal years 2009, 2008 and 2007, respectively. A majority of
our leases provide that we pay taxes, maintenance, insurance and
certain other operating expenses.
|
|
12.
|
Financial
Instruments
|
We are exposed to certain risks relating to our ongoing business
operations. The primary risks managed by using derivative
instruments are commodity price risk, foreign currency exchange
risk and interest rate risk. We record all derivative
instruments at fair value as either assets or liabilities in our
Consolidated Balance
F-24
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
Sheets. Derivative instruments are designated and accounted for
as either a hedge of a recognized asset or liability (fair
value hedge), a hedge of a forecasted transaction
(cash flow hedge), or they are not designated as a
hedge. Cash flows from derivatives used to manage commodity,
foreign currency exchange or interest rate risks are classified
as operating activities.
For cash flow hedges, changes in fair value are deferred in
accumulated other comprehensive loss (AOCL) until
the underlying hedged item is recognized in earnings. For fair
value hedges, changes in fair value are recognized immediately
in earnings, consistent with the underlying hedged item. Hedging
transactions are limited to an underlying exposure. As a result,
any change in the value of our derivative instruments would be
substantially offset by an opposite change in the value of the
underlying hedged items. Hedging ineffectiveness and a net
earnings impact occur when the change in the value of the hedge
does not offset the change in the value of the underlying hedged
item. If the derivative instrument is terminated, we continue to
defer the related gain or loss and include it as a component of
the cost of the underlying hedged item. Upon determination that
the underlying hedged item will not be part of an actual or
forecasted transaction, we recognize the related gain or loss in
earnings immediately.
We also use derivatives for which hedge accounting is not
elected. We account for such derivatives at fair value with the
resulting gains and losses reflected in our Consolidated
Statements of Income. Our corporate policy prohibits the use of
derivative instruments for trading or speculative purposes, and
we have procedures in place to monitor and control their use.
By using derivative instruments, we expose ourselves, from time
to time, to credit risk. Credit risk is the failure of the
counterparty to perform under the terms of the derivative
contract. When the fair value of a derivative contract is
positive, the counterparty owes us, which creates credit risk
for us. We monitor our counterparty credit risk on an ongoing
basis. None of our derivative instruments contain
credit-risk-related contingent features.
Commodity Prices. We are subject to
commodity price risk because our ability to recover increased
costs through higher pricing may be limited in the competitive
environment in which we operate. This risk is managed through
the use of fixed-price purchase orders, pricing agreements,
geographic diversity and derivatives. We use derivatives, with
terms of no more than three years, to economically hedge price
fluctuations related to a portion of our anticipated commodity
purchases, primarily for aluminum, natural gas and diesel fuel.
For those derivatives that qualify for hedge accounting, any
ineffectiveness is recorded immediately. We classify both the
earnings and cash flow impact from these derivatives consistent
with the underlying hedged item. During the next 12 months,
we expect to reclassify net gains of $30.7 million related
to cash flow hedges of commodity transactions from AOCL into
earnings. Derivatives used to hedge commodity price risk that do
not qualify for hedge accounting are
marked-to-market
each period and reflected in our Consolidated Statements of
Income.
Our open commodity derivative contracts that qualify for hedge
accounting had a face value of $122.6 million as of the end
of fiscal year 2009 and $44.8 million as of the end of
fiscal year 2008. There were no open commodity derivative
contracts that did not qualify for hedge accounting as of the
end of fiscal year 2009 or fiscal year 2008.
Foreign Currency Exchange. Exchange
rate gains or losses related to foreign currency transactions
are recognized as transaction gains or losses in our
Consolidated Statements of Income as incurred. We use foreign
currency derivative contracts to hedge the volatility of foreign
currency rates for purchases of raw materials for which payment
is settled in a currency other than our local operations
functional currency. As of the end of fiscal year 2009, there
were no foreign currency derivatives outstanding. As of the end
of fiscal year 2008, foreign currency derivatives had a total
face value of $46.1 million.
Interest Rates. In anticipation of
long-term debt issuances, we enter into treasury rate lock
instruments and forward starting swap agreements. We account for
these treasury rate lock instruments and forward
F-25
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
starting swap agreements as cash flow hedges, as each hedges
against the variability of interest payments attributable to
changes in interest rates on the forecasted issuance of
fixed-rate debt. These treasury rate locks and the forward
starting swap agreements are considered highly effective in
eliminating the variability of cash flows associated with the
forecasted debt issuances. During the fourth quarter of 2009, we
terminated $250 million of interest rate swap agreements
that had qualified as cash flow hedges based on our
determination that interest payments associated with a
forecasted debt issuance for which the interest rate swap was
designated was probable not to occur. Net proceeds of
$33.0 million from this transaction was recorded in
interest expense, net in the accompanying consolidated financial
statements. There were no interest rate swaps designed as cash
flow hedges outstanding as of the end of fiscal year 2009 and at
the end of fiscal year 2008 the notional amount of interest rate
swaps outstanding was $250 million.
In fiscal year 2009, we entered into interest rate swap
contracts to convert a portion of our fixed-rate debt to
floating rate debt, with the objective of reducing overall
borrowing costs. We account for these swaps as fair value
hedges, since they hedge against the change in fair value of
fixed-rate debt resulting from fluctuations in interest rates.
For derivative instruments that are designated and qualify as a
fair value hedge, the gain or loss on the derivative as well as
the offsetting loss or gain on the hedged item attributable to
the hedged risk are recognized in current earnings. The notional
amount of the interest rate swaps designated as fair value
hedges outstanding was $350 million as of the end of fiscal
year 2009. There were no open interest rate swaps designated as
fair value hedges outstanding as of the end of fiscal year 2008.
The location and amounts of derivative fair values in our
Consolidated Balance Sheets as of the end of fiscal years 2009
and 2008 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
End of Fiscal Year 2009
|
|
|
End of Fiscal Year 2008
|
|
Derivatives Designated as
|
|
Balance Sheet
|
|
Fair
|
|
|
Balance Sheet
|
|
Fair
|
|
Hedging Instruments
|
|
Location
|
|
Value
|
|
|
Location
|
|
Value
|
|
|
Interest rate contracts
|
|
Other assets
|
|
$
|
3.1
|
|
|
Other assets
|
|
$
|
|
|
Foreign exchange contracts
|
|
Other current assets
|
|
|
|
|
|
Other current assets
|
|
|
8.9
|
|
Commodity contracts
|
|
Other current assets
|
|
|
31.4
|
|
|
Other current assets
|
|
|
|
|
Commodity contracts
|
|
Other assets
|
|
|
17.1
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset derivatives
|
|
|
|
$
|
51.6
|
|
|
|
|
$
|
8.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
End of Fiscal Year 2009
|
|
|
End of Fiscal Year 2008
|
|
Derivatives Designated as
|
|
Balance Sheet
|
|
Fair
|
|
|
Balance Sheet
|
|
Fair
|
|
Hedging Instruments
|
|
Location
|
|
Value
|
|
|
Location
|
|
Value
|
|
|
Interest rate contracts
|
|
Other liabilities
|
|
$
|
|
|
|
Other liabilities
|
|
$
|
34.3
|
|
Commodity contracts
|
|
Payables and other
|
|
|
|
|
|
Payables and other
|
|
|
|
|
|
|
current liabilities
|
|
|
0.7
|
|
|
current liabilities
|
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liability derivatives
|
|
|
|
$
|
0.7
|
|
|
|
|
$
|
39.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-26
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
The location and amounts of derivative gains and losses in our
Consolidated Statements of Income for the fiscal year 2009 and
2008 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) Recognized in Other Comprehensive
Income (Loss) on Derivatives (a)
|
|
|
Location of Gain (Loss)
|
|
Amount of Gain (Loss) Reclassified from AOCL into Income
(a)
|
|
Derivatives in Cash Flow
|
|
Fiscal Year
|
|
|
Reclassified from
|
|
Fiscal Year
|
|
Hedging Relationships
|
|
2009
|
|
|
2008
|
|
|
AOCL into Income
|
|
2009
|
|
|
2008
|
|
|
Interest rate contracts
|
|
$
|
67.3
|
|
|
$
|
(34.3
|
)
|
|
Interest expense, net
|
|
$
|
32.5
|
|
|
$
|
0.5
|
|
Foreign exchange contracts
|
|
|
1.7
|
|
|
|
12.4
|
|
|
Cost of goods sold
|
|
|
10.6
|
|
|
|
(3.5
|
)
|
Commodity contracts
|
|
|
51.0
|
|
|
|
(5.2
|
)
|
|
Cost of goods sold
|
|
|
6.3
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
120.0
|
|
|
$
|
(27.1
|
)
|
|
Total
|
|
$
|
49.4
|
|
|
$
|
(2.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The ineffective portion of the change in fair value was
$8.0 million for fiscal year 2009. The amount of
ineffectiveness was not material to our results for fiscal year
2008. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain
|
|
Amount of Gain Recognized in Income on Derivatives
|
|
Derivatives in Fair Value
|
|
Recognized in Income
|
|
Fiscal Year
|
|
Hedging Relationships
|
|
on Derivatives
|
|
2009
|
|
|
2008
|
|
|
Interest rate contracts
|
|
Interest expense, net
|
|
$
|
6.1
|
|
|
$
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss)
|
|
Amount of Gain (Loss) Recognized in Income on
Derivatives(b)
|
|
Derivatives Not Designated
|
|
Recognized in Income
|
|
Fiscal Year
|
|
as Hedging Instruments
|
|
on Derivatives
|
|
2009
|
|
|
2008
|
|
|
Commodity contracts
|
|
Cost of goods sold
|
|
$
|
(1.6
|
)
|
|
$
|
(0.4
|
)
|
Commodity contracts
|
|
SD&A expenses
|
|
|
(0.7
|
)
|
|
|
|
|
Investment contracts
|
|
SD&A expenses
|
|
|
3.4
|
|
|
|
(2.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.1
|
|
|
$
|
(3.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
|
Includes both realized and unrealized gains and losses. |
Other Financial Instruments. The
carrying amounts of other financial assets and liabilities,
including cash and cash equivalents, accounts receivable,
payables and other current liabilities, approximate fair values
due to their short maturity.
The fair value of our floating rate debt as of the end of fiscal
year 2009 and end of fiscal year 2008 approximated its carrying
amount. Our fixed-rate debt, which includes capital lease
obligations, had a carrying amount of $1,991.1 million and
an estimated fair value of $2,123.4 million as of the end
of the fiscal year 2009. Our fixed-rate debt, which includes
capital lease obligations, had a carrying amount of
$1,800.7 million and an estimated fair value of
$1,807.9 million as of fiscal year end 2008. The fair value
of the fixed-rate debt was based upon quotes from financial
institutions for instruments with similar characteristics or
upon discounting future cash flows.
|
|
13.
|
Fair
Value Measurements
|
The Fair Value Measurements and Disclosures define and establish
a framework for measuring fair value and expands disclosure
about fair value measurements. Furthermore, they specify a
hierarchy of valuation
F-27
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
techniques based upon whether the inputs to those valuation
techniques reflect assumptions other market participants would
use based upon market data obtained from independent sources
(observable inputs) or reflect our own assumptions of market
participant valuation (unobservable inputs). We have categorized
our assets and liabilities, based on the priority of the inputs
to the valuation technique, into a three-level fair value
hierarchy as set forth below. If the inputs used to measure fair
value fall within different levels of the hierarchy, the
categorization is based on the lowest level input that is
significant to the fair value measurement.
Assets and liabilities recorded on the Consolidated Balance
Sheet are categorized on the inputs to the valuation techniques
as follows:
Level 1 Assets and liabilities
whose values are based on unadjusted quoted prices for identical
assets or liabilities in an active market that the company has
the ability to access at the measurement date (examples include
active exchange-traded equity securities, listed derivatives,
and most U.S. Government and agency securities).
Level 2 Assets and liabilities
whose values are based on quoted prices in markets where trading
occurs infrequently or whose values are based on quoted prices
of assets and liabilities with similar attributes in active
markets. Level 2 inputs include the following:
|
|
|
|
|
Quoted prices for similar assets or liabilities in active
markets;
|
|
|
|
Quoted prices for identical or similar assets or liabilities in
non-active markets (examples include corporate and municipal
bonds which trade infrequently);
|
|
|
|
Inputs other than quoted prices that are observable for
substantially the full term of the asset or liability (examples
include interest rate and currency swaps); and
|
|
|
|
Inputs that are derived principally from or corroborated by
observable market data for substantially the full term of the
asset or liability (examples include certain securities and
derivatives).
|
Level 3 Assets and liabilities
whose values are based on prices or valuation techniques that
require inputs that are both unobservable and significant to the
overall fair value measurement. These inputs reflect
managements own assumptions about the assumptions a market
participant would use in pricing the asset or liability.
The following table summarizes our assets and liabilities
measured at fair value on a recurring basis as of the end of the
fiscal year 2009 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
End of
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Fiscal Year
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Deferred compensation plan assets
|
|
$
|
1.5
|
|
|
$
|
1.5
|
|
|
$
|
|
|
|
$
|
|
|
Derivative assets
|
|
|
51.6
|
|
|
|
|
|
|
|
51.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
53.1
|
|
|
$
|
1.5
|
|
|
$
|
51.6
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan liabilities
|
|
$
|
41.7
|
|
|
$
|
|
|
|
$
|
41.7
|
|
|
$
|
|
|
Derivative liabilities
|
|
|
0.7
|
|
|
|
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
42.4
|
|
|
$
|
|
|
|
$
|
42.4
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan assets and
liabilities. We maintain a self-directed,
non-qualified deferred compensation plan for certain executives
and other highly compensated employees. In addition, we maintain
F-28
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
assets for a portion of the deferred compensation plan in a
rabbi trust. Our rabbi trust funds are invested in money market
accounts, which are adjusted monthly for any accrued interest.
Our unfunded deferred compensation liability is subject to
changes in our stock price as well as price changes in other
equity and fixed-income investments. Employees deferred
compensation amounts are not directly invested in these
investment vehicles. We track the performance of each
employees investment selections and adjust the deferred
compensation liability accordingly. The fair value of the
unfunded deferred compensation liability is primarily based on
the market indices corresponding to the employees
investment selections.
Derivative assets and liabilities. We
calculate derivative asset and liability amounts using a variety
of interest rate and valuation techniques, depending on the
specific characteristics of the hedging instrument. The fair
values of our forward exchange and commodity contracts are
primarily based on observable interest rate yields, forward
foreign exchange rates and commodity rates.
|
|
14.
|
Pension
and Other Postretirement Plans
|
Company-sponsored defined benefit pension
plans. Prior to December 31, 2001,
salaried employees were provided pension benefits based on years
of service that generally were limited to a maximum of
20 percent of the employees average annual
compensation during the five years preceding retirement. Plans
covering non-union hourly employees generally provided benefits
of stated amounts for each year of service. Plan assets are
invested primarily in common stocks, corporate bonds and
government securities. In connection with the integration of the
former Whitman Corporation and the former PepsiAmericas
U.S. benefit plans during the first quarter of 2001, we
amended our pension plans to freeze pension benefit accruals for
substantially all salaried and non-union employees effective
December 31, 2001. Employees age 50 or older with 10
or more years of vesting service were grandfathered such that
they will continue to accrue benefits after December 31,
2001 based on their final average pay as of December 31,
2001. The existing U.S. salaried and non-union pension
plans were replaced by an additional employer contribution to
the 401(k) plan beginning January 1, 2002.
Postretirement benefits other than
pensions. We provide substantially all former
U.S. salaried employees who retired prior to July 1,
1989 and certain other employees in the U.S., including certain
employees in the territories acquired from PepsiCo, with certain
life and health care benefits. U.S. salaried employees
retiring after July 1, 1989, except covered employees in
the territories acquired from PepsiCo in 1999, generally are
required to pay the full cost of these benefits. Effective
January 1, 2000, non-union hourly employees are also
eligible for coverage under these plans, but are also required
to pay the full cost of the benefits. Eligibility for these
benefits varies with the employees classification prior to
retirement. Benefits are provided through insurance contracts or
welfare trust funds. The insured plans generally are financed by
monthly insurance premiums and are based upon the prior
years experience. Benefits paid from the welfare trust are
financed by monthly deposits that approximate the amount of
current claims and expenses. We have the right to modify or
terminate these benefits.
F-29
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
The following tables outline the changes in benefit obligations
and fair values of plan assets for our pension plans and
postretirement benefits other than pensions and reconcile the
pension plans funded status to the amounts recognized in
our Consolidated Balance Sheets as of the end of fiscal years
2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
Other Postretirement Plan
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Change in Benefit Obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation as of the beginning of fiscal year
|
|
$
|
198.7
|
|
|
$
|
177.4
|
|
|
$
|
18.6
|
|
|
$
|
18.4
|
|
Service cost
|
|
|
4.2
|
|
|
|
4.3
|
|
|
|
|
|
|
|
0.1
|
|
Interest cost
|
|
|
11.7
|
|
|
|
13.7
|
|
|
|
1.0
|
|
|
|
1.3
|
|
Plan participant contributions
|
|
|
|
|
|
|
|
|
|
|
1.0
|
|
|
|
1.4
|
|
Amendments
|
|
|
2.3
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
Plan transfer to CABCORP joint venture
|
|
|
(11.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss
|
|
|
(0.9
|
)
|
|
|
12.9
|
|
|
|
(1.4
|
)
|
|
|
(0.2
|
)
|
Benefits paid
|
|
|
(8.4
|
)
|
|
|
(11.3
|
)
|
|
|
(2.1
|
)
|
|
|
(2.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation as of the end of fiscal year
|
|
$
|
195.7
|
|
|
$
|
198.7
|
|
|
$
|
17.1
|
|
|
$
|
18.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Fair Value of Plan Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets as of the beginning of fiscal year
|
|
$
|
133.3
|
|
|
$
|
192.2
|
|
|
$
|
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
32.1
|
|
|
|
(52.7
|
)
|
|
|
|
|
|
|
|
|
Plan participant contributions
|
|
|
|
|
|
|
|
|
|
|
1.0
|
|
|
|
1.4
|
|
Plan transfer to CABCORP joint venture
|
|
|
(7.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
21.3
|
|
|
|
5.1
|
|
|
|
1.1
|
|
|
|
1.0
|
|
Benefits paid
|
|
|
(8.4
|
)
|
|
|
(11.3
|
)
|
|
|
(2.1
|
)
|
|
|
(2.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets as of the end of fiscal year
|
|
$
|
170.9
|
|
|
$
|
133.3
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(24.8
|
)
|
|
$
|
(65.4
|
)
|
|
$
|
(17.1
|
)
|
|
$
|
(18.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Recognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables and other current liabilities
|
|
$
|
(0.2
|
)
|
|
$
|
(0.3
|
)
|
|
$
|
(1.4
|
)
|
|
$
|
(1.5
|
)
|
Other liabilities
|
|
|
(24.6
|
)
|
|
|
(65.1
|
)
|
|
|
(15.7
|
)
|
|
|
(17.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(24.8
|
)
|
|
$
|
(65.4
|
)
|
|
$
|
(17.1
|
)
|
|
$
|
(18.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The change in benefit obligations and the change in the fair
value of plan assets in the table above reflect the
12 month period from January 1, 2009 through
December 31, 2009 and the 15 month period from
October 1, 2007 through December 31, 2008. As of the
beginning of fiscal year 2008, we were required to measure our
plans assets and liabilities as of the end of our fiscal
year instead of the previous measurement date of
September 30. As a result of the measurement date
implementation, we recorded a $0.2 million decrease to the
beginning balance in retained income on the Consolidated Balance
Sheet. As a result of the formation of a strategic joint venture
with CABCORP, we transferred the Puerto Rico Pension Plans
assets and liabilities to the CABCORP joint venture in fiscal
year 2009 (see Note 2 to the Consolidated Financial
Statements for further discussion).
F-30
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
The following table summarizes the net prior service cost
(credit) and net actuarial loss (gain) deferred into
Accumulated other comprehensive loss and
reclassified to income in fiscal year 2009 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
|
|
|
Plan
|
|
|
Plan
|
|
|
Total
|
|
|
Net Prior Service Cost (Credit), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the beginning of fiscal year
|
|
$
|
2.4
|
|
|
$
|
(0.4
|
)
|
|
$
|
2.0
|
|
Deferral of net prior service cost in accumulated other
comprehensive loss
|
|
|
1.5
|
|
|
|
|
|
|
|
1.5
|
|
Reclassification of net prior service cost to income
|
|
|
(0.4
|
)
|
|
|
0.1
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of fiscal year
|
|
$
|
3.5
|
|
|
$
|
(0.3
|
)
|
|
$
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Actuarial Loss (Gain), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the beginning of fiscal year
|
|
$
|
72.2
|
|
|
$
|
(3.2
|
)
|
|
$
|
69.0
|
|
Deferral of net actuarial losses in accumulated other
comprehensive loss
|
|
|
(11.4
|
)
|
|
|
(0.9
|
)
|
|
|
(12.3
|
)
|
Plan transfer to CABCORP joint venture
|
|
|
(6.5
|
)
|
|
|
|
|
|
|
(6.5
|
)
|
Reclassification of net actuarial (losses) gains to income
|
|
|
(2.6
|
)
|
|
|
0.6
|
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of the end of fiscal year
|
|
$
|
51.7
|
|
|
$
|
(3.5
|
)
|
|
$
|
48.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The pre-tax amount of net prior service cost and net actuarial
loss for our pension plans expected to be reclassified into
income during fiscal year 2010 are $0.7 million and
$3.9 million, respectively. The pre-tax amount of net
actuarial gain for our other postretirement plan expected to be
reclassified into income during fiscal year 2010 is
$0.8 million. The amount of net prior service credit
expected to be reclassified into income for the other
postretirement plan is not material.
Net periodic pension and other postretirement benefit costs for
fiscal years 2009, 2008 and 2007 included the following
components (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement
|
|
|
|
Pension Benefit Costs
|
|
|
Benefit Costs
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Service cost
|
|
$
|
4.2
|
|
|
$
|
3.5
|
|
|
$
|
3.4
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Interest cost
|
|
|
11.7
|
|
|
|
11.1
|
|
|
|
10.7
|
|
|
|
1.0
|
|
|
|
1.1
|
|
|
|
1.1
|
|
Expected return on plan assets
|
|
|
(15.0
|
)
|
|
|
(15.3
|
)
|
|
|
(14.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net loss
|
|
|
4.1
|
|
|
|
1.6
|
|
|
|
2.8
|
|
|
|
(1.0
|
)
|
|
|
(1.2
|
)
|
|
|
(0.8
|
)
|
Amortization of prior service cost
|
|
|
0.6
|
|
|
|
0.4
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
|
$
|
5.6
|
|
|
$
|
1.3
|
|
|
$
|
2.5
|
|
|
$
|
|
|
|
$
|
(0.1
|
)
|
|
$
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss amounts are reflected in
the Consolidated Balance Sheets net of taxes of
$30.0 million and $41.4 million as of the end of
fiscal years 2009 and 2008, respectively. We adopted the
required measurement date provisions as of the beginning of
fiscal year 2008 thereby changing our measurement date from
September 30 to December 31.
F-31
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
Pension costs are funded in amounts not less than minimum levels
required by regulation. The principal economic assumptions used
in the determination of net periodic pension cost and benefit
obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Pension
Cost:
|
|
2009
|
|
2008
|
|
2007
|
|
Discount rates
|
|
|
6.23
|
%
|
|
|
6.49
|
%
|
|
|
6.16
|
%
|
Expected long-term rates of return on assets
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit Obligation:
|
|
2009
|
|
2008
|
|
2007
|
|
Discount rates
|
|
|
6.47
|
%
|
|
|
6.23
|
%
|
|
|
6.49
|
%
|
Expected long-term rates of return on assets
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
Discount Rate. Since pension
liabilities are measured on a discounted basis, the discount
rate is a significant assumption. An assumed discount rate is
required to be used in each pension plan actuarial valuation.
The discount rate assumption reflects the market rate for high
quality (for example, rated AA- or higher by
Standard & Poors in the U.S.), fixed-income debt
instruments based on the expected duration of the benefit
payments for our pension plans as of the annual measurement date
and is subject to change each year.
A 100 basis point increase in the discount rate would
decrease our annual pension expense by $0.8 million. A
100 basis point decrease in the discount rate would
increase our annual pension expense by $1.0 million.
Expected Return on Plan Assets. The
expected long-term return on plan assets should, over time,
approximate the actual long-term returns on pension plan assets.
The expected return on plan assets assumption is based on
historical returns and the future expectation for returns for
each asset class, as well as the target asset allocation of the
asset portfolio.
A 100 basis point increase in our expected return on plan
assets would decrease our annual pension expense by
$1.9 million. A 100 basis point decrease in our
expected return on plan assets would increase our annual pension
expense by $1.9 million.
Plans with Liabilities in Excess of Plan
Assets. The following table provides
information for those pension plans with a projected benefit
obligation and accumulated benefit obligation in excess of plan
assets (in millions):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Projected benefit obligation
|
|
$
|
195.7
|
|
|
$
|
198.7
|
|
Accumulated benefit obligation
|
|
|
195.7
|
|
|
|
198.7
|
|
Fair value of plan assets
|
|
|
170.9
|
|
|
|
133.3
|
|
Plan Assets. The plans assets are
invested in the PepsiAmericas Defined Benefit Master Trust
(Master Trust). The Master Trusts investment
objectives are to seek capital appreciation with a level of
current income and long-term income growth. Broad
diversification by security and moderate diversification by
asset class are achieved by investing in domestic and
international equity index funds, domestic bond index funds and
money market funds. The Master Trusts target investment
allocations are 60 percent to 75 percent equities,
25 percent to 35 percent bonds, and up to
5 percent in other assets. The Master Trust does not hold
any of our common stock.
The index funds are stated at fair value, based on the fair
value of the underlying assets. Pricing of the index funds is
performed daily based on changes in the related index. The index
funds are not exchange-traded and, therefore, they have been
classified as Level 2 investments.
F-32
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
The fair value of the pension plans assets at
December 31, 2009, by asset category are as follows
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
End of
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Fiscal Year
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Domestic equity and other securities
|
|
$
|
90.5
|
|
|
$
|
|
|
|
$
|
90.5
|
|
|
$
|
|
|
International equity securities
|
|
|
25.9
|
|
|
|
|
|
|
|
25.9
|
|
|
|
|
|
Domestic debt securities
|
|
|
44.5
|
|
|
|
|
|
|
|
44.5
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
10.0
|
|
|
|
10.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
170.9
|
|
|
$
|
10.0
|
|
|
$
|
160.9
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic equity and other
securities. Domestic equity and other
securities are primarily investments in common collective trust
funds that are indexed to the Standard & Poors
(S&P) 500 Index and the Wilshire 4500
Completion Index. The S&P 500 Index and the Wilshire 4500
Completion Index together represent approximately
100 percent of the total U.S. equity market
capitalization.
International equity
securities. International equity securities
are investments in common collective trust funds that are
indexed to the Morgan Stanley Capital International
(MSCI) Europe Australasia Far East
(EAFE) Index. The MSCI EAFE Index is a benchmark of
international equity investments representing approximately
85 percent of the developed markets total
capitalization.
Domestic debt securities. Domestic debt
securities are investments in common collective trust funds that
are indexed to the broad U.S. bond market. The funds
contain investment grade bonds of U.S. issuers from diverse
industries, including treasury, agency, corporate,
mortgage-backed and asset-backed securities.
Health care assumptions. The principal
economic assumptions used in the determination of net periodic
benefit cost for the postretirement benefit plan were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit Cost:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Discount rates
|
|
|
6.18
|
%
|
|
|
6.34
|
%
|
|
|
5.97
|
%
|
Health care cost trend rate assumed for next year
|
|
|
9.00
|
%
|
|
|
9.00
|
%
|
|
|
9.00
|
%
|
Rate to which the cost trend rate is assumed to decline (the
ultimate rate)
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Year that the rate reached the ultimate trend rate
|
|
|
2017
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit Obligation:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Discount rates
|
|
|
5.95
|
%
|
|
|
6.18
|
%
|
|
|
6.34
|
%
|
Health care cost trend rate assumed for next year
|
|
|
8.50
|
%
|
|
|
9.00
|
%
|
|
|
9.00
|
%
|
Rate to which the cost trend rate is assumed to decline (the
ultimate rate)
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Year that the rate reached the ultimate trend rate
|
|
|
2017
|
|
|
|
2017
|
|
|
|
2012
|
|
Expected plan contributions. In fiscal
years 2009, 2008 and 2007, we made contributions to our pension
plans of $21.2 million, $4.0 million and
$0.9 million, respectively. In fiscal year 2010, we expect
to make contributions to our pension plans of approximately
$5.0 million to $10.0 million.
F-33
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
Expected benefit payments. The
following benefit payments, which reflect expected future
service, as appropriate, are expected to be paid (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
Pension
|
|
|
Postretirement
|
|
Year
|
|
Benefits
|
|
|
Benefits
|
|
|
2010
|
|
|
9.3
|
|
|
|
1.2
|
|
2011
|
|
|
9.8
|
|
|
|
1.4
|
|
2012
|
|
|
10.3
|
|
|
|
1.4
|
|
2013
|
|
|
11.1
|
|
|
|
1.4
|
|
2014
|
|
|
11.7
|
|
|
|
1.4
|
|
2015 - 2019
|
|
|
69.4
|
|
|
|
6.8
|
|
Expected benefit payments for the postretirement plan are
inclusive of a Medicare subsidy.
Company-sponsored defined contribution
plans. Substantially all U.S. salaried
employees and certain U.S. hourly employees participate in
voluntary, contributory defined contribution plans to which we
make partial matching contributions. Also, in connection with
the aforementioned freeze of our pension plans, we began making
supplemental contributions in 2002 to substantially all
U.S. salaried employees and eligible hourly
employees 401(k) accounts, regardless of the level of each
employees contributions. In addition, we make
contributions to a supplemental, non-qualified, deferred
compensation plan that provides eligible U.S. executives
with the opportunity for contributions that could not be
credited to their individual 401(k) accounts due to Internal
Revenue Code limitations. The expense recorded amounted to
$23.4 million, $23.4 million and $20.6 million in
fiscal years 2009, 2008 and 2007, respectively.
Multi-employer pension plans. We
participate in a number of multi-employer pension plans, which
provide benefits to certain union employee groups. Amounts
contributed to the plans totaled $6.1 million,
$6.3 million and $5.2 million in fiscal years 2009,
2008 and 2007, respectively. In fiscal year 2009, we recorded a
$3.4 million loss related to our decision to exit a
multi-employer pension plan in the U.S. in SD&A
expenses. Our share of contributions to the plan we exited
are expected to be made over the next twenty years.
Multi-employer postretirement medical and life
insurance. We participate in a number of
multi-employer postretirement plans, which provide health care
and survivor benefits to union employees during their working
lives and after retirement. Portions of the benefit
contributions, which cannot be disaggregated, relate to
postretirement benefits for plan participants. Total amounts
charged against income and contributed to the plans (including
benefit coverage during participating employees working
lives) amounted to $23.0 million, $21.7 million and
$19.2 million in fiscal years 2009, 2008 and 2007,
respectively.
|
|
15.
|
Stock
Repurchase Program
|
During fiscal years 2009, 2008 and 2007, we repurchased a total
of 2.7 million, 5.7 million and 2.7 million
shares of our common stock, respectively, for an aggregate
purchase price of $45.2 million, $135.0 million and
$59.4 million, respectively. The purchases of these shares
were made pursuant to the share repurchase program previously
authorized by our Board of Directors. In fiscal year 2008, our
Board of Directors authorized the repurchase of 10 million
additional shares under our previously authorized repurchase
program. As of fiscal year end 2009, the total remaining shares
authorized under the repurchase program was 8.8 million
shares.
|
|
16.
|
Share-Based
Compensation
|
Our 2000 Stock Incentive Plan (the 2000 Plan),
originally approved by shareholders in fiscal year 2000,
provides for granting incentive stock options, nonqualified
stock options, related stock appreciation rights,
F-34
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
restricted stock awards, restricted stock units, performance
awards or any combination of the foregoing. These awards have
various vesting provisions. All awards vest immediately upon a
change in control as defined by the 2000 Plan.
Generally, outstanding nonqualified stock options are
exercisable during a ten-year period beginning one to three
years after the date of grant. The exercise price of all options
is equal to the fair market value on the date of grant. We
generally use treasury stock to satisfy option exercises. There
are no outstanding stock appreciation rights under the 2000 Plan
as of the end of fiscal year 2009.
Under the 2000 Plan, restricted stock awards are granted to key
members of our U.S. and Caribbean management teams and
members of our Board of Directors. Restricted stock awards
granted to employees vest in their entirety on the third
anniversary of the award. Restricted stock awards granted to
directors vest immediately upon grant. Pursuant to the terms of
such awards, directors may not sell such stock while they serve
on the Board of Directors. Dividends are paid to the holders of
restricted stock awards upon vesting. We have a policy of using
treasury stock to satisfy restricted stock award vesting. We
measure the fair value of restricted stock based upon the market
price of the underlying common stock at the date of grant.
Restricted stock units are granted to key members of our CEE
management team. The restricted stock units are payable to these
employees in cash upon vesting at the prevailing market value of
our common stock plus accrued dividends. Restricted stock units
vest after three years, which equals the employees
requisite service period. We measure the fair value of the
restricted stock unit award liability based upon the market
price of the underlying common stock at the date of grant and
each subsequent reporting date.
Under the 2000 Plan, 14 million shares were originally
reserved for share-based awards. As of the end of fiscal year
2009, there were 2,063,100 shares available for future
grants.
Our Stock Incentive Plan (the 1982 Plan), originally
established and approved by the shareholders in 1982, has been
subsequently amended from time to time. Most recently in 1999,
the shareholders approved an allocation of additional shares to
this plan. The types of awards and terms of the 1982 Plan are
similar to the 2000 Plan. As of the end of fiscal year 2009,
only stock options were outstanding under the 1982 Plan and such
options are included in the table below.
Changes in options outstanding are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Range of
|
|
|
Average
|
|
Options
|
|
Shares
|
|
|
Exercise Prices
|
|
|
Exercise Price
|
|
|
Balance, fiscal year end 2006
|
|
|
5,243,286
|
|
|
$
|
10.81 - 22.63
|
|
|
$
|
17.11
|
|
Exercised
|
|
|
(3,404,899
|
)
|
|
|
10.81 - 22.63
|
|
|
|
17.93
|
|
Forfeited
|
|
|
(20,145
|
)
|
|
|
12.01 - 18.92
|
|
|
|
18.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, fiscal year end 2007
|
|
|
1,818,242
|
|
|
|
10.81 - 22.63
|
|
|
|
15.57
|
|
Exercised
|
|
|
(179,208
|
)
|
|
|
11.26 - 22.63
|
|
|
|
17.22
|
|
Forfeited
|
|
|
(15,455
|
)
|
|
|
12.75 - 19.53
|
|
|
|
16.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, fiscal year end 2008
|
|
|
1,623,579
|
|
|
|
10.81 - 22.63
|
|
|
|
15.38
|
|
Exercised
|
|
|
(547,664
|
)
|
|
|
11.26 - 18.92
|
|
|
|
14.23
|
|
Forfeited
|
|
|
(179,090
|
)
|
|
|
12.01 - 22.63
|
|
|
|
21.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, fiscal year end 2009
|
|
|
896,825
|
|
|
|
10.81 - 22.63
|
|
|
|
14.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Black-Scholes model was used to estimate the grant date fair
values of options. There were no options granted during fiscal
years 2009, 2008 and 2007. We recorded $0.3 million
($0.2 million net of taxes)
F-35
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
of compensation expense related to options in SD&A expenses
in the Consolidated Statements of Income for fiscal year 2007
related to the fiscal year 2004 option grant. No compensation
expense was recorded for options in fiscal years 2009 or 2008
because all outstanding options were fully vested during the
first quarter of 2007. The total intrinsic value of options
exercised during fiscal years 2009, 2008 and 2007 was
$6.7 million, $1.4 million and $33.2 million,
respectively. The total intrinsic value of fully vested options
as of the end of fiscal year 2009 was $12.9 million.
The following table summarizes information regarding stock
options outstanding and exercisable as of the end of fiscal year
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding and Exercisable
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Weighted-
|
|
Range of
|
|
Options
|
|
|
Remaining Life
|
|
|
Average
|
|
Exercise Prices
|
|
Outstanding
|
|
|
(in years)
|
|
|
Exercise Price
|
|
|
$10.81 - 12.75
|
|
|
531,209
|
|
|
|
3.2
|
|
|
$
|
12.35
|
|
14.53 - 16.48
|
|
|
48,677
|
|
|
|
2.2
|
|
|
|
16.31
|
|
18.92
|
|
|
316,939
|
|
|
|
5.1
|
|
|
|
18.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Options
|
|
|
896,825
|
|
|
|
3.8
|
|
|
|
14.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in nonvested restricted stock awards are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Range of Grant-Date
|
|
|
Grant-Date Fair
|
|
Nonvested Shares
|
|
Shares
|
|
|
Fair Value
|
|
|
Value
|
|
|
Balance, fiscal year end 2006
|
|
|
2,140,631
|
|
|
$
|
18.92 - 24.83
|
|
|
$
|
22.62
|
|
Granted
|
|
|
990,278
|
|
|
|
22.11
|
|
|
|
22.11
|
|
Vested
|
|
|
(532,352
|
)
|
|
|
18.92 - 24.31
|
|
|
|
20.00
|
|
Forfeited
|
|
|
(134,658
|
)
|
|
|
18.92 - 24.31
|
|
|
|
22.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, fiscal year end 2007
|
|
|
2,463,899
|
|
|
|
22.11 - 24.31
|
|
|
|
22.96
|
|
Granted
|
|
|
960,973
|
|
|
|
26.30
|
|
|
|
26.30
|
|
Vested
|
|
|
(731,794
|
)
|
|
|
22.52 - 26.30
|
|
|
|
22.65
|
|
Forfeited
|
|
|
(42,457
|
)
|
|
|
22.11 - 26.30
|
|
|
|
23.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, fiscal year end 2008
|
|
|
2,650,621
|
|
|
|
22.11 - 26.30
|
|
|
|
24.24
|
|
Granted
|
|
|
1,450,412
|
|
|
|
16.69
|
|
|
|
16.69
|
|
Vested
|
|
|
(852,145
|
)
|
|
|
16.69 - 26.30
|
|
|
|
23.94
|
|
Forfeited
|
|
|
(24,691
|
)
|
|
|
22.11 - 26.30
|
|
|
|
24.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, fiscal year end 2009
|
|
|
3,224,197
|
|
|
|
16.69 - 26.30
|
|
|
|
20.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average fair value (at the date of grant) for
restricted stock awards granted in fiscal years 2009, 2008 and
2007 was $16.69, $26.30 and $22.11, respectively. We recognized
compensation expense of $22.0 million ($13.9 million
net of taxes), $20.3 million ($12.8 million net of
taxes) and $18.0 million ($11.8 million net of taxes)
in fiscal years 2009, 2008 and 2007, respectively, related to
restricted stock award grants. The fair value of restricted
stock awards that vested during fiscal years 2009, 2008 and 2007
was $13.9 million, $18.7 million and
$10.6 million, respectively.
We grant restricted stock units to key members of management in
CEE. In fiscal years 2009, 2008 and 2007, we granted 209,560,
149,574 and 83,675 restricted stock units, respectively, at a
weighted-average fair value of $16.69, $26.30 and $22.11,
respectively, on the date of grant. We recognized compensation
expense of $3.9 million ($2.5 million net of taxes),
$0.2 million ($0.2 million net of taxes) and
$3.5 million
F-36
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
($2.3 million net of taxes) in fiscal years 2009, 2008 and
2007, respectively, related to restricted stock unit grants.
Based on the nature of these awards, related compensation
expense varies with the underlying value of our common stock.
There were 365,133 restricted stock units outstanding as of the
end of fiscal year 2009. During fiscal year 2009, 59,150
restricted stock units related to the 2006 grant vested, 70,710
restricted stock units related to the 2005 grant vested in 2008,
and no restricted stock units vested in 2007.
Cash retained as a result of excess tax benefits relating to
stock-based compensation is presented in cash flows from
financing activities on the Consolidated Statement of Cash
Flows. Tax benefits resulting from stock-based compensation
deductions in excess of amounts reported for financial reporting
purposes were $2.5 million, $1.0 million and
$12.5 million during fiscal years 2009, 2008 and 2007,
respectively.
As of the end of fiscal year 2009, there was $29.7 million
of total unrecognized compensation cost, net of estimated
forfeitures of $2.3 million, related to nonvested
stock-based compensation arrangements. This compensation cost is
expected to be recognized over the next 1.7 years on a
weighted-average basis, except as discussed below.
The Plan contains a change in control provision that would cause
the unvested restricted stock awards and units to be immediately
vested under certain circumstances outlined in the Plan
document. The merger agreement we entered into with PepsiCo and
Metro, dated August 3, 2009, contemplates a change in
control and, upon completion of the merger, will result in the
immediate recognition of all previously unrecognized
compensation expense as well as incremental compensation expense
based on the current fair value.
|
|
17.
|
Shareholder
Rights Plan and Preferred Stock
|
On May 20, 1999, we adopted a Shareholder Rights Plan and
declared a dividend of one preferred share purchase right (a
Right) for each outstanding share of our common
stock, par value $0.01 per share. The dividend was paid on
June 11, 1999 to the shareholders of record on that date.
Each Right entitles the registered holder to purchase from us
one one-hundredth of a share of our Series A Junior
Participating Preferred Stock, par value $0.01 per share, at a
price of $61.25 per one one-hundredth of a share of such
Preferred Stock, subject to adjustment. The Rights will become
exercisable if someone buys 15 percent or more of our
common stock or following the commencement of, or announcement
of an intention to commence, a tender or exchange offer to
acquire 15 percent or more of our common stock. In
addition, if someone buys 15 percent or more of our common
stock, each right will entitle its holder (other than that
buyer) to purchase, at the Rights $61.25 purchase price, a
number of shares of our common stock having a market value of
twice the Rights $61.25 exercise price. If we are acquired
in a merger, each Right will entitle its holder to purchase, at
the Rights $61.25 purchase price, a number of the
acquiring companys common shares having a market value at
the time of twice the Rights exercise price. The plan was
subsequently amended on August 18, 2000 in connection with
the merger agreement with the former PepsiAmericas. The
amendment to the rights agreement provides that:
|
|
|
|
|
None of Pohlad Companies, any affiliate of Pohlad Companies,
Robert C. Pohlad, affiliates of Robert C. Pohlad or the former
PepsiAmericas will be deemed an Acquiring Person (as
defined in the rights agreement) solely by virtue of
(1) the consummation of the transactions contemplated by
the merger agreement, (2) the acquisition by Dakota
Holdings, LLC of shares of our common stock in connection with
the merger, or (3) the acquisition of shares of our common
stock permitted by the Pohlad shareholder agreement;
|
|
|
|
Dakota Holdings, LLC will not be deemed an Acquiring
Person (as defined in the rights agreement) so long as it
is owned solely by Robert C. Pohlad, affiliates of Robert C.
Pohlad, PepsiCo
and/or
affiliates of PepsiCo; and
|
F-37
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
A Distribution Date (as defined in the rights
agreement) will not occur solely by reason of the execution,
delivery and performance of the merger agreement or the
consummation of any of the transactions contemplated by such
merger agreement.
|
Prior to the acquisition of 15 percent or more of our
stock, the Rights can be redeemed by the Board of Directors for
one cent per Right. Our Board of Directors also is authorized to
reduce the threshold to 10 percent. As amended, the Rights
will expire on May 20, 2010. The Rights do not have voting
or dividend rights, and until they become exercisable, they have
no dilutive effect on our per-share earnings. Based on the
recommendation of PAS transactions committee to PAS
board of directors to approve and declare advisable the merger
agreement with PepsiCo and Metro, dated August 3, 2009, and
the transactions contemplated by the merger agreement and to
recommend that PAS stockholders vote for approval of the
proposal to adopt the merger agreement, the merger has been
approved by a majority of PAS independent directors as
defined under the Second Amended and Restated Shareholder
Agreement by and between PAS and PepsiCo, dated
September 6, 2005 (the PAS Shareholder
Agreement). Therefore, the merger will constitute a
permitted acquisition as defined under the PAS
Shareholder Agreement and will not trigger distribution of the
rights under the rights agreement.
We have 12.5 million authorized shares of Preferred Stock.
There is no Preferred Stock issued or outstanding.
|
|
18.
|
Supplemental
Cash Flow Information
|
Net cash provided by operating activities reflected cash
payments and receipts for interest and income taxes as follows
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Interest paid
|
|
$
|
102.1
|
|
|
$
|
117.8
|
|
|
$
|
104.4
|
|
Interest received
|
|
|
5.3
|
|
|
|
6.8
|
|
|
|
3.1
|
|
Income taxes paid
|
|
|
83.4
|
|
|
|
70.4
|
|
|
|
115.5
|
|
Income tax refunds
|
|
|
0.6
|
|
|
|
15.9
|
|
|
|
1.9
|
|
During fiscal year 2009, we received $33.0 million from an
interest rate swap that we terminated. The gain was recorded as
a reduction to Interest expense, net in the
Consolidated Statement of Income. The cash receipt from the
interest rate swap is not reflected in the table above.
|
|
19.
|
Environmental
and Other Commitments and Contingencies
|
Current Operations. We maintain
compliance with federal, state and local laws and regulations
relating to materials used in production and to the discharge of
wastes, and other laws and regulations relating to the
protection of the environment. The capital costs of such
management and compliance, including the modification of
existing plants and the installation of new manufacturing
processes, are not material to our continuing operations.
We are defendants in lawsuits that arise in the ordinary course
of business, none of which is expected to have a material
adverse effect on our financial condition, although amounts
recorded in any given period could be material to the results of
operations or cash flows for that period.
We participate in a number of trustee-managed multi-employer
pension and health and welfare plans for employees covered under
collective bargaining agreements. Several factors, including
unfavorable investment performance, changes in demographics and
increased benefits to participants could result in potential
funding deficiencies, which could cause us to make higher future
contributions to these plans.
F-38
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
Discontinued Operations
Remediation. Under the agreement pursuant to
which we sold our subsidiaries, Abex Corporation and Pneumo Abex
Corporation (collectively, Pneumo Abex), in 1988 and
a subsequent settlement agreement entered into in September
1991, we have assumed indemnification obligations for certain
environmental liabilities of Pneumo Abex, after any insurance
recoveries. Pneumo Abex has been and is subject to a number of
environmental cleanup proceedings, including responsibilities
under the Comprehensive Environmental Response, Compensation and
Liability Act and other related federal and state laws regarding
release or disposal of wastes at
on-site and
off-site locations. In some proceedings, federal, state and
local government agencies are involved and other major
corporations have been named as potentially responsible parties.
Pneumo Abex is also subject to private claims and lawsuits for
remediation of properties previously owned by Pneumo Abex and
its subsidiaries.
There is an inherent uncertainty in assessing the total cost to
investigate and remediate a given site. This is because of the
evolving and varying nature of the remediation and allocation
process. Any assessment of expenses is more speculative in an
early stage of remediation and is dependent upon a number of
variables beyond the control of any party. Furthermore, there
are often timing considerations, in that a portion of the
expense incurred by Pneumo Abex, and any resulting obligation of
ours to indemnify Pneumo Abex, may not occur for a number of
years.
In fiscal year 2001, we investigated the use of insurance
products to mitigate risks related to our indemnification
obligations under the 1988 agreement, as amended. We oversaw a
comprehensive review of the former facilities operated or
impacted by Pneumo Abex. Advances in the techniques of
retrospective risk evaluation and increased experience (and
therefore available data) at our former facilities made this
comprehensive review possible. The review was completed in
fiscal year 2001 and was updated in fiscal year 2005.
As of the end of fiscal year 2009 and 2008, we had accrued
$30.4 million and $36.1 million, respectively, to
cover potential indemnification obligations. Of the total amount
accrued, $11.9 million was recorded in Payables and
other current liabilities on the Consolidated Balance
Sheets representing estimates of amounts to be spent during the
next twelve months. This indemnification obligation includes
costs associated with several sites in various stages of
remediation or negotiations. At the present time, the most
significant remaining indemnification obligation is associated
with the Willits site, as discussed below, while no other single
site has significant estimated remaining costs associated with
it. The amounts exclude possible insurance recoveries and are
determined on an undiscounted cash flow basis. The estimated
indemnification liabilities include expenses for the
investigation and remediation of identified sites, payments to
third parties for claims and expenses (including product
liability), administrative expenses, and the expenses of
on-going evaluations and litigation. We expect a significant
portion of the accrued liabilities will be spent during the next
several years.
Included in our indemnification obligations is financial
exposure related to certain remedial actions required at a
facility that manufactured hydraulic and related equipment in
Willits, California. Various chemicals and metals contaminate
this site. A final consent decree was issued in August 1997 and
subsequently amended in December 2000 and 2006 in the case of
the People of the State of California and the City of
Willits, California v. Remco Hydraulics, Inc. The final
consent decree established a trust (the Willits
Trust) which is obligated to investigate and clean up this
site. We are currently funding the Willits Trust and the
investigation and interim remediation costs on a
year-to-year
basis as required in the final amended consent decree. We have
accrued $8.1 million as of the end of fiscal year 2009 for
future remediation and trust administration costs, with the
majority of this amount expected to be spent over the next
several years.
Although we have certain indemnification obligations for
environmental liabilities at a number of sites other than the
site discussed above, including Superfund sites, it is not
anticipated that additional expense at any specific site will
have a material effect on us. At some sites, the volumetric
contribution for which we have an obligation has been estimated
and other large, financially viable parties are responsible for
substantial
F-39
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
portions of the remainder. In our opinion, based upon
information currently available, the ultimate resolution of
these claims and litigation, including potential environmental
exposures, and considering amounts already accrued, should not
have a material effect on our financial condition, although
amounts recorded in a given period could be material to our
results of operations or cash flows for that period.
Discontinued Operations
Insurance. During fiscal year 2002, as part
of a comprehensive program concerning environmental liabilities
related to the former Whitman Corporation subsidiaries, we
purchased new insurance coverage related to the sites previously
owned and operated or impacted by Pneumo Abex and its
subsidiaries. In addition, a trust, which was established in
2000 with the proceeds from an insurance settlement (the
Trust), purchased and funded insurance coverage for
remedial and other costs (Finite Funding) related to
the sites previously owned and operated or impacted by Pneumo
Abex and its subsidiaries.
Essentially all of the assets of the Trust were expended by the
Trust in connection with the purchase of the insurance coverage,
the Finite Funding and related expenses. These actions were
taken to fund remediation and related costs associated with the
sites previously owned and operated or impacted by Pneumo Abex
and its subsidiaries and to protect against additional future
costs in excess of our self-insured retention. The original
amount of self-insured retention (the amount we must pay before
the insurance carrier is obligated to begin payments) was
$114.0 million of which $65.1 million has been eroded,
leaving a remaining self-insured retention of $48.9 million
as of the end of fiscal year 2009. The estimated range of
aggregate exposure related only to the remediation costs of such
environmental liabilities is approximately $16 million to
$26 million. We had accrued $17.6 million as of the
end of fiscal year 2009 for remediation costs, which is our best
estimate of the contingent liabilities related to these
environmental matters. The Finite Funding may be used to pay a
portion of the $17.6 million and thus reduces our future
cash obligations. Amounts recorded in our Consolidated Balance
Sheets related to Finite Funding were $7.6 million as of
the end of fiscal year 2009 and $9.9 million as of the end
of fiscal year 2008 and were recorded in Other
assets, net of $4.2 million recorded in Other
current assets as of the end of each respective period.
Discontinued Operations Product Liability and
Toxic Tort Claims. We also have certain
indemnification obligations related to product liability and
toxic tort claims that might emanate out of the 1988 agreement
with Pneumo Abex. Other companies not owned by or associated
with us also are responsible to Pneumo Abex for the financial
burden of all asbestos product liability claims filed against
Pneumo Abex after a certain date in 1998, except for certain
claims indemnified by us.
Four lawsuits have been filed in California, which name several
defendants including certain of our prior subsidiaries. The
lawsuits allege that we and our former subsidiaries are liable
for personal injury
and/or
property damage resulting from environmental contamination at
the Willits facility. The plaintiffs in the lawsuits are seeking
an unspecified amount of damages, punitive damages, injunctive
relief and medical monitoring damages. On June 18, 2009,
the Court dismissed all remaining Avila claims. In July
2009, 592 plaintiffs appealed various Court orders. There are
currently 590 plaintiffs with appeals that are pending. We will
actively oppose these appeals, and we are actively defending
these lawsuits. At this time, we do not believe these lawsuits
are material to our business or financial condition.
As of the end of fiscal years 2009 and 2008, we had accrued
$5.3 million and $5.1 million, respectively, related
to product liability. These accruals primarily relate to
probable asbestos claim settlements and legal defense costs. We
also have additional amounts accrued for legal and other costs
associated with currently open claims and their related costs.
These amounts are included in the total liabilities of
$30.4 million accrued as of the end of fiscal year 2009. In
addition to the known and probable asbestos claims, we may be
subject to additional asbestos claims that are possible for
which no reserve had been established as of the end of fiscal
year 2009. These additional reasonably possible claims are
primarily asbestos-related and the aggregate exposure related to
these possible claims is estimated to be in the range of
$4 million to $17 million. These
F-40
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
amounts are undiscounted and do not reflect any insurance
recoveries that we will pursue from insurers for these claims.
Certain Litigation Matters. Following
the public announcement, on April 20, 2009, of
PepsiCos proposals on April 19, 2009 to acquire the
outstanding shares of PAS common stock that it did not already
own for $11.64 in cash and 0.223 shares of PepsiCo common
stock per share of PAS common stock and to acquire the
outstanding shares of The Pepsi Bottling Group, Inc.
(PBG) common stock that it did not already own for
$14.75 in cash and 0.283 shares of PepsiCo common stock per
share of PBG common stock, several putative stockholder class
action complaints challenging the proposals were filed against
various combinations of PepsiCo, PAS, PBG, and the individual
members of the boards of directors of PAS and PBG. One of these
complaints was amended following the public announcement of the
merger agreements to include allegations concerning one of the
proposed mergers.
Delaware
Court of Chancery
Beginning on April 22, 2009, eight putative stockholder
class action complaints challenging the April 19 proposals were
filed against various combinations of PepsiCo, PAS and PBG and
the individual members of the boards of directors of PAS and PBG
in the Court of Chancery of the State of Delaware. The
complaints alleged, among other things, that the defendants had
breached or would breach their fiduciary duties owed to the
public stockholders of PAS and PBG in connection with the April
19 proposals. On June 5, 2009, the Court of Chancery
entered orders consolidating the actions relating to
PepsiCos proposal to acquire PAS under the caption In
re PepsiAmericas, Inc. Shareholders Litigation (C.A.
No. 4530-VCS)
(the Consolidated Delaware PAS Action),
consolidating the actions relating to PepsiCos proposal to
acquire PBG under the caption In re The Pepsi Bottling Group,
Inc., Shareholders Litigation (C.A.
No. 4526-VCS)
(the Consolidated Delaware PBG Action), appointing
co-lead counsel and co-lead plaintiffs in each consolidated
action, and providing for coordination between the two
consolidated actions.
On June 19, 2009, co-lead plaintiffs in the Consolidated
Delaware PAS Action filed a verified consolidated class action
complaint. The complaint seeks, among other things, damages and
declaratory, injunctive, and other equitable relief alleging,
among other things, that the defendants have breached or will
breach their fiduciary duties owed to the public stockholders of
PAS, that the April 19 proposals and the transactions
contemplated thereunder were not entirely fair to the public
stockholders, that PepsiCo retaliated against PAS and PBG for
rejecting the April 19 proposals, that certain provisions of the
certificate of incorporation of PAS are invalid
and/or
inapplicable to the April 19 proposals and the proposed mergers,
and that PepsiCos pursuit of its acquisition of PAS
violates the PAS Shareholder Agreement. Also on June 19,
2009, the co-lead plaintiffs in the Consolidated Delaware PBG
Action filed a verified consolidated class action complaint. The
complaint seeks, among other things, damages and declaratory,
injunctive, and other equitable relief alleging, among other
things, that the defendants have breached or will breach their
fiduciary duties owed to the public stockholders of PBG, that
the April 19 proposals and the transactions contemplated
thereunder were not entirely fair to the public stockholders,
that PepsiCo had retaliated or would retaliate against PAS and
PBG for rejecting the April 19 proposals, and that certain
provisions of the certificate of incorporation of PBG are
invalid
and/or
inapplicable to the April 19 proposals and the proposed mergers.
On July 23, 2009, co-lead plaintiffs in the Consolidated
Delaware PBG Action and the Consolidated Delaware PAS Action
filed separate motions for partial summary judgment concerning
their allegations relating to the certificates of incorporation
of PBG and PAS and the PAS Shareholder Agreement.
On August 31, 2009, the Court of Chancery entered a
Stipulation and Order Governing the Protection and Exchange of
Confidential Information in each of the Consolidated Delaware
PAS Action and the Consolidated Delaware PBG Action. Shortly
thereafter, defendants began producing documents to co-lead
plaintiffs in these actions. On November 20, 2009, the
parties to the Consolidated Delaware PAS Action and to the
Consolidated Delaware PBG Action entered into the Stipulation
and Agreement of Compromise, Settlement, and Release described
below.
F-41
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
Minnesota
State Court
Beginning on April 20, 2009, three putative stockholder
class action complaints challenging the April 19 proposals were
filed against PepsiCo, PAS, and PAS board of directors in
the District Court of the State of Minnesota, County of
Hennepin. The complaints seek, among other things, damages and
declaratory, injunctive, and other equitable relief alleging,
among other things, that the defendants have breached or will
breach their fiduciary duties owed to the public stockholders,
that PepsiCo possessed material, non-public information
concerning PAS, and that the April 19 proposals and the
transactions contemplated thereunder were not entirely fair to
the public stockholders. On June 24, 2009, the parties to
the three Minnesota actions entered into a stipulation
consolidating and staying the Minnesota actions in favor of the
Consolidated Delaware PAS Action. On June 29, 2009, the
court entered an order consolidating and staying the Minnesota
actions pending resolution of the Consolidated Delaware PAS
Action.
On September 23, 2009, one of the plaintiffs in the
Minnesota actions filed a notice of dismissal voluntarily
dismissing the action captioned Leone v. PepsiAmericas,
Inc.
(No. 27-CV-099196).
On November 20, 2009, the parties to the two remaining
Minnesota actions entered into the Stipulation and Agreement of
Compromise, Settlement, and Release described below.
New
York State Court
Westchester
County Actions
Beginning on April 29, 2009, two putative stockholder class
action complaints challenging the April 19 proposals were filed
against various combinations of PepsiCo, PAS, PBG, and the
members of PBGs board of directors in the Supreme Court of
the State of New York, County of Westchester. The complaints
seek, among other things, damages and declaratory, injunctive,
and other equitable relief alleging, among other things, that
the defendants have breached or will breach their fiduciary
duties owed to the public stockholders of PAS and PBG, that the
April 19 proposals and the transactions contemplated thereunder
were not entirely fair to the public stockholders of PAS and
PBG, and that the defensive measures implemented by PBG were not
being used to maximize stockholder value. On June 8, 2009,
the defendants filed motions to dismiss or stay the actions in
favor of the previously filed actions pending in the Delaware
Court of Chancery.
On October 19, 2009, the parties to the two Westchester
County actions entered into a stipulation staying the
Westchester County actions in favor of the Consolidated Delaware
PAS Action and the Consolidated Delaware PBG Action. On
October 21, 2009, the court entered an order staying the
two Westchester County actions pending resolution of the
Consolidated Delaware PAS Action and the Consolidated Delaware
PBG Action. On November 20, 2009, the parties to the two
Westchester County actions entered into the Stipulation and
Agreement of Compromise, Settlement, and Release described below.
New York
County Action
On May 8, 2009, a putative stockholder class action
complaint was filed against PBG and the members of PBGs
board of directors other than John C. Compton and Cynthia M.
Trudell in the Supreme Court of the State of New York, County of
New York. The complaint alleged that the defendants had breached
their fiduciary duties owed to the public stockholders of PBG by
depriving those stockholders of the full and fair value of their
shares by failing to accept PepsiCos April 19 proposal to
acquire PBG or to negotiate with PepsiCo after that proposal was
made and by adopting certain defensive measures. On June 8,
2009, the defendants moved to dismiss or to stay this action in
favor of the previously filed actions pending in the Delaware
Court of Chancery. The plaintiff failed to file a timely
opposition to the motion. On August 10, 2009, the plaintiff
filed an amended class action complaint, adding as defendants
PepsiCo, Mr. Compton, and Ms. Trudell. The amended
complaint seeks, among other things, damages and declaratory,
injunctive, and other equitable relief alleging, among other
things, that the defendants have breached or will breach their
F-42
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
fiduciary duties owed to the public stockholders of PBG and that
the proposed PBG merger is not entirely fair to the public
stockholders. On August 27, 2009 the defendants again moved
to dismiss or stay this action in favor of the previously filed
actions pending in the Delaware Court of Chancery.
On October 2, 2009, the parties to this action entered into
a stipulation providing that this action should be voluntarily
stayed for 45 days while plaintiffs counsel conferred
with co-lead counsel in the Consolidated Delaware PBG Action and
that the defendants motion to dismiss or stay should be
adjourned during the voluntary stay. Also on October 2,
2009, the court entered an order staying the New York County
action for 45 days while plaintiffs counsel conferred
with co-lead counsel in the Consolidated Delaware PBG Action. On
November 20, 2009, the parties to the New York County
action entered into the Stipulation and Agreement of Compromise,
Settlement, and Release described below. On December 2,
2009, the court entered an order staying the New York County
action pending resolution of the Consolidated Delaware PBG
Action.
Settlement
of Stockholder Litigation
On November 20, 2009, the parties to the Consolidated
Delaware PAS Action and the Consolidated Delaware PBG Action, as
well as the parties to the two actions pending in the District
Court of the State of Minnesota and to the three actions pending
in the Supreme Court of the State of New York, entered into a
Stipulation and Agreement of Compromise, Settlement, and Release
(the Settlement Stipulation) to resolve all of these
actions.
Pursuant to the Settlement Stipulation, and in exchange for the
releases described below, defendants have taken or will take the
following actions: (1) PepsiCo, PAS, and PBG have included
and will continue to include co-lead counsel in the disclosure
process (including providing them with the opportunities to
review and comment on drafts of the preliminary and final proxy
statements/prospectuses before they were or are filed with the
Securities and Exchange Commission); (2) PepsiCo agreed to
reduce the termination fee set forth in the PAS merger agreement
from $71.6 million to $50 million; (3) PepsiCo
agreed to reduce the termination fee set forth in the PBG merger
agreement from $165.3 million to $115 million;
(4) PepsiCo agreed to shorten the termination fee tail set
forth in the PAS merger agreement from 12 months to
6 months; and (5) PepsiCo agreed to shorten the
termination fee tail set forth in the PBG merger agreement from
12 months to 6 months. The settlement is conditioned
on satisfaction by co-lead counsel that the disclosures made in
connection with the PAS merger and the PBG merger are not
materially omissive or misleading.
Pursuant to the Settlement Stipulation, the Consolidated
Delaware PAS Action and the Consolidated Delaware PBG Action
will be dismissed with prejudice on the merits, the plaintiffs
in the Minnesota and New York actions will voluntarily dismiss
those actions with prejudice, and all defendants will be
released from any and all claims relating to, among other
things, the PAS merger, the PBG merger, the PAS merger
agreement, the PBG merger agreement, and any disclosures made in
connection therewith. The Settlement Stipulation is subject to
customary conditions, including consummation of both the PAS
merger and the PBG merger, completion of certain confirmatory
discovery, class certification, and final approval by the Court
of Chancery of the State of Delaware following notice to the
stockholders of PAS and PBG. On December 2, 2009, the Court
of Chancery entered an order setting forth the schedule and
procedures for notice to the stockholders of PAS and PBG and the
courts review of the settlement. The Court of Chancery
scheduled a hearing for April 12, 2010, at which the court
will consider the fairness, reasonableness, and adequacy of the
settlement.
The settlement will not affect the form or amount of the
consideration to be received by PAS stockholders in the PAS
merger or by PBG stockholders in the PBG merger.
The defendants have denied and continue to deny any wrongdoing
or liability with respect to all claims, events, and
transactions complained of in the aforementioned litigation or
that they have engaged in any wrongdoing. The defendants have
entered into the Settlement Stipulation to eliminate the
uncertainty, burden, risk, expense, and distraction of further
litigation.
F-43
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
Advertising commitments and exclusivity
rights. We have entered into various
long-term agreements with our customers in which we pay the
customers for the exclusive right to sell our products in
certain venues. We have also committed to pay certain customers
for advertising and marketing programs in various long-term
contracts. These agreements typically range from one to ten
years. As of the end of fiscal year 2009, we have committed
approximately $85.9 million related to such programs and
advertising commitments.
Purchase obligations. Certain raw
material contracts obligate us to purchase minimum volumes. In
addition, PepsiCo has entered into various raw material
contracts on our behalf pursuant to a shared services agreement
in which PepsiCo provides procurement services to us. As of the
end of fiscal year 2009, we had total purchase obligations of
$36.0 million related to such raw material contracts.
During the first six months of 2009, we operated in one industry
located in three geographic areas U.S., CEE and the
Caribbean. On July 3, 2009, we formed a strategic joint
venture with CABCORP to combine our Caribbean operations,
excluding the Bahamas, with CABCORPs Central American
operations, including Guatemala, Honduras, El Salvador and
Nicaragua. In the U.S., we operate in 19 states. In CEE, we
operate in Ukraine, Poland, Romania, Hungary, the Czech Republic
and Slovakia and have distribution rights in Moldova, Estonia,
Latvia and Lithuania.
Upon execution of the subscription and share exchange agreement
with CABCORP, we deconsolidated our Caribbean business. Our
initial investment in the joint venture was recorded at its fair
value of $143.0 million in Other assets on the
Condensed Consolidated Balance Sheet. Beginning in the third
quarter of 2009, earnings from the strategic joint venture with
CABCORP are recorded in Equity in net earnings (loss) of
nonconsolidated companies on the Condensed Consolidated
Statements of Income and operating results for the Bahamas are
included in our U.S. geographic segment.
Operating income is inclusive of special charges and adjustments
of $11.1 million, $23.0 million and $6.3 million
in fiscal years 2009, 2008 and 2007, respectively (see
Note 5 for further discussion).
Non-operating assets are principally cash and cash equivalents,
investments, net property and miscellaneous other assets.
Long-lived assets represent net property, investments, net
intangible assets and other miscellaneous assets. Selected
financial information related to our geographic segments is
shown below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
Operating Income (Loss)
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
U.S.
|
|
$
|
3,405.2
|
|
|
$
|
3,429.9
|
|
|
$
|
3,384.9
|
|
|
$
|
341.1
|
|
|
$
|
333.8
|
|
|
$
|
336.9
|
|
CEE
|
|
|
915.2
|
|
|
|
1,260.9
|
|
|
|
849.4
|
|
|
|
41.2
|
|
|
|
146.0
|
|
|
|
95.2
|
|
Caribbean
|
|
|
100.9
|
|
|
|
246.4
|
|
|
|
245.2
|
|
|
|
(1.4
|
)
|
|
|
(6.6
|
)
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,421.3
|
|
|
$
|
4,937.2
|
|
|
$
|
4,479.5
|
|
|
|
380.9
|
|
|
|
473.2
|
|
|
|
436.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65.6
|
|
|
|
111.1
|
|
|
|
109.2
|
|
Loss from deconsolidation of business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.8
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.9
|
|
|
|
7.9
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and equity in net earnings (loss)
of nonconsolidated companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
275.6
|
|
|
$
|
354.2
|
|
|
$
|
326.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-44
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Investments
|
|
|
Depreciation and Amortization
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
U.S.
|
|
$
|
104.2
|
|
|
$
|
116.5
|
|
|
$
|
190.4
|
|
|
$
|
130.6
|
|
|
$
|
136.8
|
|
|
$
|
148.2
|
|
CEE
|
|
|
128.0
|
|
|
|
124.1
|
|
|
|
56.6
|
|
|
|
47.1
|
|
|
|
54.6
|
|
|
|
42.7
|
|
Caribbean
|
|
|
3.5
|
|
|
|
8.3
|
|
|
|
17.6
|
|
|
|
6.6
|
|
|
|
12.9
|
|
|
|
12.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
|
|
$
|
235.7
|
|
|
$
|
248.9
|
|
|
$
|
264.6
|
|
|
|
184.3
|
|
|
|
204.3
|
|
|
|
203.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
184.3
|
|
|
$
|
204.3
|
|
|
$
|
204.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
Long-Lived Assets
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
U.S.
|
|
$
|
3,551.6
|
|
|
$
|
3,173.3
|
|
|
$
|
3,076.1
|
|
|
$
|
2,968.2
|
|
CEE
|
|
|
1,389.5
|
|
|
|
1,469.8
|
|
|
|
1,026.8
|
|
|
|
1,051.8
|
|
Caribbean
|
|
|
|
|
|
|
191.3
|
|
|
|
|
|
|
|
108.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
|
|
|
4,941.1
|
|
|
|
4,834.4
|
|
|
|
4,102.9
|
|
|
|
4,128.0
|
|
Non-operating
|
|
|
151.6
|
|
|
|
219.7
|
|
|
|
37.8
|
|
|
|
20.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,092.7
|
|
|
$
|
5,054.1
|
|
|
$
|
4,140.7
|
|
|
$
|
4,148.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.
|
Related
Party Transactions
|
Transactions
with PepsiCo
PepsiCo is considered a related party due to the nature of our
franchise relationship and PepsiCos ownership interest in
us. As of the end of fiscal year 2009, PepsiCo beneficially
owned approximately 43 percent of PepsiAmericas
outstanding common stock. These shares are subject to a
shareholder agreement with our company. As of the end of fiscal
years 2009 and 2008, net amounts due from PepsiCo were
$11.1 million and $5.2 million, respectively. During
fiscal year 2009, approximately 83 percent of our total net
sales were derived from the sale of PepsiCo products. We have
entered into transactions and agreements with PepsiCo from time
to time. Significant agreements and transactions between our
company and PepsiCo are described below.
Pepsi franchise agreements are subject to termination only upon
failure to comply with their terms. Termination of these
agreements can occur as a result of any of the following: our
bankruptcy or insolvency; change of control of greater than
15 percent of any class of our voting securities; untimely
payments for concentrate purchases; quality control failure; or
failure to carry out the approved business plan communicated to
PepsiCo.
Bottling Agreements and Purchases of Concentrate and
Finished Product. We purchase concentrates
from PepsiCo and manufacture, package, sell and distribute cola
and non-cola beverages under various bottling agreements with
PepsiCo. These agreements give us the right to manufacture,
package, sell and distribute beverage products of PepsiCo in
both bottles and cans as well as fountain syrup in specified
territories. These agreements include a Master Bottling
Agreement and a Master Fountain Syrup Agreement for beverages
bearing the Pepsi-Cola and
Pepsi trademarks, including Diet Pepsi in the
United States. The agreements also include bottling and
distribution agreements for non-cola products in the United
States, and international bottling agreements for countries
outside the United States. These agreements provide PepsiCo with
the ability to set prices of concentrates, as well as the terms
of payment and other terms and conditions under which we
purchase such concentrates. In addition, we bottle water under
the Aquafina trademark pursuant to an
F-45
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
agreement with PepsiCo that provides for payment of a royalty
fee to PepsiCo. We have also entered into various transactions
with joint ventures in which PepsiCo holds an equity interest.
In particular, we purchase tea concentrate and finished beverage
products from the Pepsi/Lipton Tea Partnership, a joint venture
between PepsiCo and Unilever, in which PepsiCo holds a
50 percent interest, and finished beverage products from
the North American Coffee Partnership, a joint venture between
PepsiCo and Starbucks in which PepsiCo holds a 50 percent
interest. The table below summarizes amounts paid to PepsiCo and
affiliates for purchases of concentrate, finished beverage
products, finished snack food products and Aquafina royalty
fees, which are included in cost of goods sold.
Bottler Incentives and Other Support
Arrangements. We share a business objective
with PepsiCo of increasing availability and consumption of
Pepsi-Cola beverages. Accordingly, PepsiCo provides us with
various forms of bottler incentives to promote its brands. The
level of this support is negotiated regularly and can be
increased or decreased at the discretion of PepsiCo. To support
volume and market share growth, the bottler incentives cover a
variety of initiatives, including direct marketplace, shared
media and advertising support. Worldwide bottler incentives from
PepsiCo totaled approximately $230.5 million,
$248.7 million and $231.2 million for the fiscal years
ended 2009, 2008 and 2007, respectively. There are no conditions
or requirements that could result in the repayment of any
support payments we received.
Bottler incentives that are directly attributable to incremental
expenses incurred are reported as either an increase to net
sales or a reduction to SD&A expenses, commensurate with
the recognition of the related expense. Such bottler incentives
include amounts received for direct support of advertising
commitments and exclusivity agreements with various customers.
All other bottler incentives are recognized as a reduction of
cost of goods sold when the related products are sold based on
the agreements with vendors. Such bottler incentives primarily
include base level funding amounts which are fixed based on the
previous years volume and variable amounts that are
reflective of the current years volume performance.
PepsiCo also provided indirect marketing support to our
marketplace, which consisted primarily of media expenses. This
indirect support was not reflected or included in our
Consolidated Financial Statements, as these amounts were paid
directly by PepsiCo.
National Account Sales and
Services. Pursuant to the Master Fountain
Syrup Agreement, we provide manufacturing and delivery services
to PepsiCo in connection with the production of fountain syrup
for PepsiCos national account customers and commissaries.
We also provide certain manufacturing, delivery and equipment
maintenance services to PepsiCos national account
customers. Net amounts paid or payable by PepsiCo to us for
national account sales and services are summarized in the
following table.
Sandora Joint Venture. We are party to
a joint venture agreement with PepsiCo pursuant to which we hold
the outstanding common stock of Sandora, the leading juice
company in Ukraine. We hold a 60 percent interest in the
joint venture and PepsiCo holds the remaining 40 percent
interest. In fiscal year 2008, we repaid $47.5 million of
long-term debt that was acquired as part of the Sandora
acquisition. As a part of this transaction, we received
$26.0 million of cash from PepsiCo that included its
portion of the debt repayment. The joint venture financial
statements have been consolidated in our Consolidated Financial
Statements.
Other Transactions. PepsiCo provides
procurement services to us pursuant to a shared services
agreement. Under this agreement, PepsiCo acts as our agent and
negotiates with various suppliers the cost of certain raw
materials by entering into raw material contracts on our behalf.
The raw material contracts obligate us to purchase certain
minimum volumes. PepsiCo also collects and remits to us certain
rebates from the various suppliers related to our procurement
volume. In addition, PepsiCo executes certain derivative
F-46
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
contracts on our behalf and in accordance with our hedging
strategies. Payments to PepsiCo for procurement services are
reflected in the following table.
In summary, the Consolidated Statements of Income include the
following income and (expense) transactions with PepsiCo and
affiliates, which includes transaction with the Pepsi/Lipton Tea
Partnership and the North American Coffee Partnership (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bottler incentives
|
|
$
|
29.2
|
|
|
$
|
34.7
|
|
|
$
|
32.9
|
|
National account sales and services
|
|
|
228.0
|
|
|
|
230.9
|
|
|
|
223.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
257.2
|
|
|
$
|
265.6
|
|
|
$
|
256.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bottler incentives
|
|
$
|
182.3
|
|
|
$
|
190.3
|
|
|
$
|
180.7
|
|
Purchases of concentrate
|
|
|
(926.4
|
)
|
|
|
(935.1
|
)
|
|
|
(896.5
|
)
|
Purchases of finished beverage products
|
|
|
(216.1
|
)
|
|
|
(232.8
|
)
|
|
|
(211.4
|
)
|
Purchases of finished snack food products
|
|
|
(23.7
|
)
|
|
|
(26.7
|
)
|
|
|
(17.6
|
)
|
Aquafina royalty fees
|
|
|
(39.3
|
)
|
|
|
(46.6
|
)
|
|
|
(54.3
|
)
|
Procurement services
|
|
|
(4.1
|
)
|
|
|
(4.1
|
)
|
|
|
(3.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,027.3
|
)
|
|
$
|
(1,055.0
|
)
|
|
$
|
(1,003.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SD&A expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bottler incentives
|
|
$
|
19.0
|
|
|
$
|
23.7
|
|
|
$
|
17.6
|
|
Purchases of advertising materials
|
|
|
(1.5
|
)
|
|
|
(2.5
|
)
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17.5
|
|
|
$
|
21.2
|
|
|
$
|
15.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts paid or payable to the Pepsi/Lipton Tea
Partnership by us were approximately $89.8 million,
$94.7 million and $102.4 million during 2009, 2008 and
2007, respectively. Total amounts paid or payable to the North
American Coffee Partnership by us were approximately
$56.5 million, $60.2 million and $61.9 million
during 2009, 2008 and 2007, respectively. These amounts are
included in our purchases of finished beverage products in the
table above.
Transactions with Bottlers in Which PepsiCo Holds an
Equity Interest. We sell finished beverage
products to other bottlers in which PepsiCo owns an equity
interest, including The Pepsi Bottling Group, Inc. These sales
occur in instances where the proximity of our production
facilities to the other bottlers markets or lack of
manufacturing capability, as well as other economic
considerations, make it more efficient or desirable for the
other bottlers to buy finished product from us. Our sales to
other bottlers, including those in which PepsiCo owns an equity
interest, were approximately $214.3 million,
$210.8 million and $213.0 million in fiscal years
2009, 2008 and 2007, respectively. Our purchases from such other
bottlers were $0.4 million, $0.5 million and
$0.3 million in fiscal years 2009, 2008 and 2007,
respectively.
Merger Agreement with PepsiCo. We have
entered into a merger agreement with PepsiCo and Metro, dated
August 3, 2009, pursuant to which our company will merge
with and into Metro, with Metro continuing as the surviving
company and a wholly owned subsidiary of PepsiCo. Under the
terms of the merger agreement, PepsiCo will acquire all
outstanding shares of PepsiAmericas common stock it does not
already own for the price of $28.50 in cash or
0.5022 shares of PepsiCo common stock, subject to proration
provisions which provide that an aggregate 50 percent of
the outstanding PepsiAmericas common stock will be converted
into the right to receive common stock of PepsiCo and an
aggregate 50 percent of the outstanding
F-47
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
PepsiAmericas common stock will be converted into the right to
receive cash. We hope to close the merger by the end of
February 2010, subject to regulatory approval and the
satisfaction or waiver of other customary closing conditions.
Agreements
and Relationships with Dakota Holdings, LLC, Starquest
Securities, LLC and Mr. Pohlad
Under the terms of the merger agreement between Whitman
Corporation and the former PepsiAmericas, Inc. (Whitman
merger), Dakota Holdings, LLC (Dakota), a
Delaware limited liability company whose members at the time of
the Whitman merger included PepsiCo and Pohlad Companies, became
the owner of 14,562,970 shares of our common stock,
including 377,128 shares purchasable pursuant to the
exercise of a warrant. In November 2002, the members of Dakota
entered into a redemption agreement pursuant to which the
PepsiCo membership interests were redeemed in exchange for
certain assets of Dakota. As a result, Dakota became the owner
of 12,027,557 shares of our common stock, including
311,470 shares purchasable pursuant to the exercise of a
warrant. In June 2003, Dakota converted from a Delaware limited
liability company to a Minnesota limited liability company
pursuant to an agreement and plan of merger. In January 2006,
Starquest Securities, LLC (Starquest), a Minnesota
limited liability company, obtained the shares of our common
stock previously owned by Dakota, including the shares of common
stock purchasable upon exercise of the above-referenced warrant,
pursuant to a contribution agreement. Such warrant expired
unexercised in January 2006, resulting in Starquest holding
11,716,087 shares of our common stock. In February 2008,
Starquest acquired an additional 400,000 shares of our
common stock pursuant to open market purchases, bringing its
holdings to 12,116,087 shares of common stock, or
9.7 percent, as of February 16, 2010. The shares held
by Starquest are subject to a shareholder agreement with our
company.
Mr. Pohlad, our Chairman and Chief Executive Officer, is
the President and the owner of one-third of the capital stock of
Pohlad Companies. Pohlad Companies is the controlling member of
Dakota. Dakota is the controlling member of Starquest. Pohlad
Companies may be deemed to have beneficial ownership of the
securities beneficially owned by Dakota and Starquest and
Mr. Pohlad may be deemed to have beneficial ownership of
the securities beneficially owned by Starquest, Dakota and
Pohlad Companies.
Transactions
with Pohlad Companies
As of the end of fiscal year 2009, we owned a one-eighth
interest in a Challenger aircraft which we owned with Pohlad
Companies. In January 2010, we sold this one-eighth interest to
Pohlad Companies for $1.7 million, representing fair market
value as determined by an unrelated third party. This
transaction was approved in advance by our Affiliated
Transaction Committee. During fiscal year 2009, we paid
$0.1 million to International Jet, a subsidiary of Pohlad
Companies, for office and hangar rent, management fees and
maintenance in connection with the storage and operation of this
corporate jet.
On February 17, 2010, PepsiAmericas stockholders approved
the proposal to adopt the agreement and plan of merger, dated
August 3, 2009, among PepsiAmericas, PepsiCo and Metro.
Pursuant to the merger agreement, subject to regulatory approval
and the satisfaction or waiver of other customary closing
conditions, PepsiAmericas will merge with and into Metro, with
Metro continuing as the surviving company and a wholly owned
subsidiary of PepsiCo. The affirmative vote of the holders of a
majority of the outstanding shares of PepsiAmericas common stock
was required to approve the proposal to adopt the merger
agreement. The holders of approximately 86.5 percent of the
outstanding shares of PepsiAmericas common stock voted in favor
of the proposal to adopt the merger agreement. Of the votes
cast, approximately 99.7 percent were voted in favor of the
proposal to adopt the merger agreement.
PepsiCo and PepsiAmericas hope to close the merger, which
remains subject to regulatory approval and the satisfaction or
waiver of other customary closing conditions, by the end of
February 2010.
F-48
PEPSIAMERICAS,
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
23.
|
Selected
Quarterly Financial Data (unaudited)
(in
millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Fiscal
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Year
|
|
|
Fiscal Year 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,057.5
|
|
|
$
|
1,261.9
|
|
|
$
|
1,133.6
|
|
|
$
|
968.3
|
|
|
$
|
4,421.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
413.4
|
|
|
$
|
519.5
|
|
|
$
|
467.5
|
|
|
$
|
366.5
|
|
|
$
|
1,766.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to PepsiAmericas, Inc.
|
|
$
|
21.7
|
|
|
$
|
61.4
|
|
|
$
|
63.5
|
|
|
$
|
34.6
|
|
|
$
|
181.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
122.5
|
|
|
|
121.2
|
|
|
|
121.3
|
|
|
|
121.4
|
|
|
|
121.6
|
|
Incremental effect of stock options and awards
|
|
|
1.7
|
|
|
|
1.8
|
|
|
|
2.1
|
|
|
|
2.3
|
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
124.2
|
|
|
|
123.0
|
|
|
|
123.4
|
|
|
|
123.7
|
|
|
|
123.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to PepsiAmericas, Inc common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.18
|
|
|
$
|
0.51
|
|
|
$
|
0.52
|
|
|
$
|
0.29
|
|
|
$
|
1.49
|
|
Diluted
|
|
$
|
0.17
|
|
|
$
|
0.50
|
|
|
$
|
0.51
|
|
|
$
|
0.28
|
|
|
$
|
1.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,098.7
|
|
|
$
|
1,340.8
|
|
|
$
|
1,327.5
|
|
|
$
|
1,170.2
|
|
|
$
|
4,937.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
423.8
|
|
|
$
|
546.8
|
|
|
$
|
542.2
|
|
|
$
|
468.8
|
|
|
$
|
1,981.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to PepsiAmericas, Inc.
|
|
$
|
24.7
|
|
|
$
|
90.8
|
|
|
$
|
73.1
|
|
|
$
|
37.8
|
|
|
$
|
226.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
127.0
|
|
|
|
124.9
|
|
|
|
124.6
|
|
|
|
124.4
|
|
|
|
125.2
|
|
Incremental effect of stock options and awards
|
|
|
1.9
|
|
|
|
1.5
|
|
|
|
1.7
|
|
|
|
1.7
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
128.9
|
|
|
|
126.4
|
|
|
|
126.3
|
|
|
|
126.1
|
|
|
|
127.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to PepsiAmericas, Inc common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.19
|
|
|
$
|
0.73
|
|
|
$
|
0.66
|
|
|
$
|
0.30
|
|
|
$
|
1.88
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
0.19
|
|
|
$
|
0.73
|
|
|
$
|
0.59
|
|
|
$
|
0.30
|
|
|
$
|
1.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.19
|
|
|
$
|
0.72
|
|
|
$
|
0.65
|
|
|
$
|
0.30
|
|
|
$
|
1.85
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
0.19
|
|
|
$
|
0.72
|
|
|
$
|
0.58
|
|
|
$
|
0.30
|
|
|
$
|
1.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly and full year computations of basic and diluted
earnings per share are made independently. As such, the
summation of the quarterly amounts may not equal the total basic
and diluted earnings per share reported for the year.
F-49
PEPSIAMERICAS,
INC.
EXHIBITS
FOR
INCLUSION IN ANNUAL REPORT ON
FORM 10-K
FISCAL
YEAR ENDED JANUARY 2, 2010
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description of Exhibit
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger dated as of August 3, 2009,
among PepsiCo, Inc., PepsiAmericas, Inc. and Pepsi-Cola
Metropolitan Bottling Company, Inc. (incorporated by reference
to the Companys Definitive Schedule M14A (Proxy
Statement) (File
No. 001-15019)
filed on January 13, 2010).
|
|
2
|
.2
|
|
Waiver Letter from PepsiCo, Inc. (incorporated by reference to
the Companys Definitive Schedule M14A (Proxy
Statement) (File
No. 001-15019)
filed on January 13, 2010).
|
|
3
|
.1
|
|
Restated Certificate of Incorporation (incorporated by reference
to the Companys Registration Statement on
Form S-8
(File
No. 333-64292)
filed on June 29, 2001).
|
|
3
|
.2
|
|
By-Laws, as amended and restated on May 7, 2009
(incorporated by reference to the Companys Quarterly
Report on
Form 10-Q
(File
No. 001-15019)
filed on May 8, 2009).
|
|
4
|
.1
|
|
First Supplemental Indenture dated as of May 20, 1999,
including the Indenture dated as of January 15, 1993,
between Whitman Corporation and The First National Bank of
Chicago, as Trustee (incorporated by reference to Post-Effective
Amendment No. 1 to the Companys Registration
Statement on
Form S-8
(File
No. 333-64292)
filed on December 29, 2005).
|
|
4
|
.2
|
|
Rights Agreement, dated as of May 20, 1999, between Whitman
Corporation and First Chicago Trust Company of New York, as
Rights Agent (incorporated by reference to the Companys
Registration Statement on
Form 8-A
(File
No. 001-15019)
filed on May 25, 1999).
|
|
4
|
.3
|
|
Amendment, as of August 18, 2000, to the Rights Agreement,
dated as of May 20, 1999, between Whitman Corporation and
First Chicago Trust Company of New York, as Rights Agent
(incorporated by reference to the Companys Registration
Statement on
Form S-4
(File
No. 333-46368)
filed on September 22, 2000).
|
|
4
|
.4
|
|
Appointment of Successor Rights Agent, dated as of
September 9, 2002 (incorporated by reference to the
Companys Annual Report on
Form 10-K
(File No.
(001-15019)
filed on March 28, 2003).
|
|
4
|
.5
|
|
Amendment No. 2 to Rights Agreement between PepsiAmericas,
Inc. and Wells Fargo Bank, N.A., as Rights Agent, dated
May 7, 2009 (incorporated by reference to the
Companys Current Report on
Form 8-K
(File
No. 001-15019)
filed on May 7, 2009).
|
|
4
|
.6
|
|
Indenture dated as of August 15, 2003 between
PepsiAmericas, Inc. and Wells Fargo Bank Minnesota, National
Association, as Trustee (incorporated by reference to the
Companys Registration Statement on
Form S-3
(File
No. 333-108164)
filed on August 22, 2003).
|
|
4
|
.7
|
|
PepsiAmericas, Inc. Salaried 401(k) Plan, as amended as of
December 30, 2009.
|
|
4
|
.8
|
|
PepsiAmericas, Inc. Hourly 401(k) Plan, as amended as of
December 30, 2009.
|
|
10
|
.1
|
|
Revised Stock Incentive Plan, as amended through May 20,
1999 (incorporated by reference to the Companys Quarterly
Report on
Form 10-Q
(File
No. 001-15019)
filed on August 17, 1999).
|
|
10
|
.2
|
|
PepsiAmericas, Inc. Deferred Compensation Plan for Directors, as
Amended and Restated January 1, 2008 (incorporated by
reference to the Companys Annual Report on
Form 10-K
(File No. 001-15019)
filed on March 4, 2009).
|
|
10
|
.3
|
|
PepsiAmericas, Inc. Executive Deferred Compensation Plan, as
amended thru June 30, 2009.
|
|
10
|
.4
|
|
PepsiAmericas, Inc. Supplemental Pension Plan, as amended thru
January 1, 2008.
|
|
10
|
.5
|
|
2000 Stock Incentive Plan, as amended through February 17,
2004 (incorporated by reference to the Companys Definitive
Schedule 14A (Proxy Statement) (File
No. 001-15019)
filed on March 12, 2004).
|
|
10
|
.6
|
|
PepsiAmericas, Inc. 1999 Stock Option Plan (incorporated by
reference to the Companys Registration Statement on
Form S-8
(File
No. 333-46368)
filed on December 21, 2000).
|
|
10
|
.7
|
|
Pepsi-Cola Puerto Rico Bottling Company Qualified Stock Option
Plan (incorporated by reference to the Companys
Registration Statement on
Form S-8
(File
No. 333-46368)
filed on December 21, 2000).
|
|
10
|
.8
|
|
Pepsi-Cola Puerto Rico Bottling Company Non-Qualified Stock
Option Plan (incorporated by reference to the Companys
Registration Statement on
Form S-8
(File
No. 333-46368)
filed on December 21, 2000).
|
E-1
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description of Exhibit
|
|
|
10
|
.9
|
|
Form of Master Bottling Agreement between PepsiCo, Inc. and
PepsiAmericas, Inc. (incorporated by reference to the
Companys Annual Report on
Form 10-K
(File
No. 001-15019)
filed on March 25, 2002).
|
|
10
|
.10
|
|
Form of Master Fountain Syrup Agreement between PepsiCo, Inc.
and PepsiAmericas, Inc. (incorporated by reference to the
Companys Annual Report on
Form 10-K
(File
No. 001-15019)
filed on March 25, 2002).
|
|
10
|
.11
|
|
Amendment No. 3 to the Companys 2000 Stock Incentive
Plan (incorporated by reference to the Companys Current
Report on
Form 8-K
(File
No. 001-15019)
filed on February 25, 2005).
|
|
10
|
.12
|
|
Form of Restricted Stock Award under the Companys 2000
Stock Incentive Plan (incorporated by reference to the
Companys Annual Report on
Form 10-K
(File
No. 001-15019)
filed on February 28, 2007).
|
|
10
|
.13
|
|
Form of Restricted Stock Unit Award under the Companys
2000 Stock Incentive Plan (incorporated by reference to the
Companys Annual Report on
Form 10-K
(File
No. 001-15019)
filed on February 28, 2007).
|
|
10
|
.14
|
|
Form of Nonqualified Stock Option under the Companys 2000
Stock Incentive Plan (incorporated by reference to the
Companys Registration Statement on
Form S-8
(File
No. 333-36994)
filed on May 12, 2000).
|
|
10
|
.15
|
|
Form of Incentive Stock Option under the Companys 1999
Stock Option Plan (incorporated by reference to the
Companys Current Report on
Form 8-K
(File
No. 001-15019)
filed on February 25, 2005).
|
|
10
|
.16
|
|
Form of Restricted Stock Award under the Companys Revised
Stock Incentive Plan (incorporated by reference to the
Companys Current Report on
Form 8-K
(File
No. 001-15019)
filed on February 25, 2005).
|
|
10
|
.17
|
|
Form of Nonqualified Stock Option under the Companys
Revised Stock Incentive Plan (incorporated by reference to the
Companys Quarterly Report on
Form 10-Q
(File
No. 001-15019)
filed on August 17, 1999).
|
|
10
|
.18
|
|
Form of Stock Option Agreement under the Pepsi-Cola Puerto Rico
Bottling Company Non-Qualified Stock Option Plan (incorporated
by reference to the Companys Current Report on
Form 8-K
(File No. 001-15019)
filed on February 25, 2005).
|
|
10
|
.19
|
|
Form of Stock Option Agreement under the Pepsi-Cola Puerto Rico
Bottling Company Qualified Stock Option Plan (incorporated by
reference to the Companys Current Report on
Form 8-K
(File No. 001-15019)
filed on February 25, 2005).
|
|
10
|
.20
|
|
Second Amended and Restated Shareholder Agreement by and between
PepsiAmericas, Inc. and PepsiCo., dated September 6, 2005
(incorporated by reference to the Companys Current Report
on
Form 8-K
(File
No. 001-15019)
filed on September 7, 2005).
|
|
10
|
.21
|
|
Amended and Restated Shareholder Agreement by and between
PepsiAmericas, Inc., Pohlad Companies and Robert C. Pohlad,
dated September 6, 2005 (incorporated by reference to the
Companys Current Report on
Form 8-K
(File
No. 001-15019)
filed on September 7, 2005).
|
|
10
|
.22
|
|
U.S. $600,000,000 Five Year Credit Agreement, dated as of
June 6, 2006, among PepsiAmericas, Inc. as a borrower,
certain initial lenders and initial issuing bank, JP Morgan
Chase Bank, N.V., as a syndication agent, Bank of America, N.V.
and Wachovia Bank, National Association, as documentation
agents, Citigroup Global Markets Inc. and J.P. Morgan
Securities Inc., as joint lead arrangers, and Citibank, N.V., as
agent for the lenders (incorporated by reference to the
Companys Current Report on
Form 8-K
(File
No. 001-15019)
filed on June 8, 2006).
|
|
10
|
.23
|
|
Put and Call Option Agreement by and among PepsiAmericas, Inc.,
PepsiCo, Inc., Marina Bezzub and Agne Tumenaite dated as of
June 7, 2007 (incorporated by reference to the
Companys Quarterly Report on
Form 10-Q
(File
No. 001-15019)
filed on August 3, 2007).
|
|
10
|
.24
|
|
Shareholder Agreement (Joint Venture Agreement) between PAS
Luxembourg s.a.r.1. (PAS LuxCo) and Linkbay Limited (PepsiCo
Cyprus) and Sandora Holdings, B.V. dated as of August 14,
2007 (incorporated by reference to the Companys Annual
Report on
Form 10-K
(File
No. 001-15019)
filed on March 4, 2009).
|
E-2
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description of Exhibit
|
|
|
10
|
.25
|
|
Amended and Restated Stock Purchase Agreement by and among
PepsiAmericas, Inc., PepsiCo, Inc., Igor Yevgenovych Bezzub, and
Raimondas Tumenas dated as of August 17, 2007 (incorporated
by reference to the Companys Quarterly Report on
Form 10-Q
(File
No. 001-15019)
filed on November 1, 2007).
|
|
10
|
.26
|
|
Amended and Restated Stock Purchase Agreement by and among
PepsiAmericas, Inc., PepsiCo, Sergiy Oleksandrovych Sypko, Olena
Mykhailivna Sypko, Oleksiy Sergiyovich Sypko and Andriy
Sergiyovich Sypko dated as of August 17, 2007 (incorporated
by reference to the Companys Quarterly Report on
Form 10-Q
(File
No. 001-15019)
filed on November 1, 2007).
|
|
10
|
.27
|
|
Summary of the Material Terms of the PepsiAmericas, Inc. Annual
Incentive Plan (incorporated by reference to the Companys
Annual Report on
Form 10-K
(File
No. 001-15019)
filed on March 4, 2009).
|
|
10
|
.28
|
|
PepsiAmericas, Inc. 2009 Long-Term Incentive Plan (incorporated
by reference to the Companys Definitive Schedule 14A
(Proxy Statement) (File
No. 001-15019)
filed on March 18, 2009).
|
|
10
|
.29
|
|
Underwriting Agreement by and among PepsiAmericas, Inc., Banc of
America Securities LLC and J.P. Morgan Securities, Inc., as
representatives of the several underwriters, dated
February 9, 2009 (incorporated by reference to the
Companys Current Report on
Form 8-K
(File
No. 001-15019)
filed on February 10, 2009).
|
|
10
|
.30
|
|
Subscription and Share Agreement between PepsiAmericas, Inc. and
The Central America Bottling Corporation, dated May 16,
2009 (incorporated by reference to the Companys Current
Report on
Form 8-K
(File
No. 001-15019)
filed on May 18, 2009).
|
|
10
|
.31
|
|
Change in Control Severance Plan for Senior Executive Employees
(incorporated by reference to the Companys Current Report
on
Form 8-K
(File
No. 001-15019)
filed on June 19, 2009).
|
|
12
|
|
|
Statement of Calculation of Ratio of Earnings to Fixed Charges.
|
|
21
|
|
|
Subsidiaries of the Company.
|
|
24
|
|
|
Powers of Attorney.
|
|
31
|
.1
|
|
Chief Executive Officer Certification pursuant to Exchange Act
Rule 13a-14,
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
31
|
.2
|
|
Chief Financial Officer Certification pursuant to Exchange Act
Rule 13a-14,
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
32
|
.1
|
|
Chief Executive Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2
|
|
Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
The registrant has not attached the forms of long term debt as
exhibits to this Annual Report on
Form 10-K
in reliance on Item 601(b)(4)(iii)(A) of
Regulation S-K.
The registrant hereby undertakes to furnish such notes to the
Commission upon request. |
E-3