Pepsi to cut 750 jobs
NEW YORK (Reuters) -- PepsiCo Inc. on Tuesday said it would cut about 750 jobs as it reorganizes its North American soft drink business and international operations and closes a Frito-Lay plant in the United States as it moves to cut costs.
The reorganization comes about 18 months after the company, which is trying to revitalize sales of its trademark cola drink, consolidated its North American drinks business into one unit. Under the new plan, the company will separate the business into three units: Pepsi-Cola, Gatorade, and juice.
The company is doing the opposite for its international operations, bringing together its overseas drinks and snack businesses. Pepsi is dividing these businesses into seven different regions.
The world's No. 2 soft drink maker, which has about 142,000 employees worldwide, said it would record restructuring charges totaling about 6 cents per share in the fourth quarter for the actions.
Under the plan, Pepsi said it would close its Frito-Lay plant in Louisville, Kentucky, and shut down some other manufacturing lines, affecting 330 employees. Production from these facilities will be moved to newer and more productive plants, the company said.
Pepsi did not detail the rest of the job cuts, but said most would be in North America.
Pepsi, based in Purchase, New York, said the restructuring charge would be offset by a tax benefit of 7 cents to 8 cents per share resulting from a negotiated settlement with the U.S. Internal Revenue Service. The benefit is related to audits of the company's domestic business.
The company also said it would start expensing stock options granted to employees, a move Pepsi said would cost it 20 cents per share in a noncash charge in 2003. Rival Coca-Cola Co. began expensing its options in 2002.
The announcement came shortly before the company was scheduled to hold a meeting with investors. Wall Street analysts had expected the company would expense options and had forecast the company would raise its dividend sharply.
Pepsi also said it will shift its equity-based compensation program to a combination of restricted stock and options, from a program of just stock options.
Before the stock options expense, Pepsi said it expected 2003 earnings per share would be 1 cent to 2 cents higher than its previous estimate of $2.19. For 2004, the company said it expects earnings per share to reach a range of $2.24 to $2.28.
Analysts were expecting the company to earn between $2.18 and $2.23 per share in 2003, with a mean estimate of $2.21, according to Reuters Research, a unit of Reuters Group Plc. Wall Street earnings per share forecasts for 2004 ranged from $2.40 to $2.48, with a mean estimate of $2.45.
Pepsi said that under the reorganization, its Gatorade and juices business will now be based out of Chicago, and some members of the Tropicana juice unit's executive team will move to Chicago from Florida.
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