Notes to Consolidated Financial Statements

Note 2 - Acquisitions and Investments in Unconsolidated Affiliates

At the end of the third quarter in 1998, we completed the acquisitions of Tropicana Products, Inc. from The Seagram Company Ltd. for $3.3 billion in cash and The Smith¹s Snackfoods Company (TSSC) in Australia from United Biscuits Holdings plc for $270 million in cash. In addition, acquisitions and investments in unconsolidated affiliates included the remaining ownership interest in various bottlers and purchases of various other international salty snack food businesses. Acquisitions for the year aggregated $4.5 billion in cash. The results of operations of all acquisitions are generally included in the consolidated financial statements from their respective dates of acquisition. The acquisitions were accounted for under the purchase method and the purchase prices were largely funded by the issuance of one year notes and commercial paper. The purchase prices have been allocated based on the estimated fair value of the assets acquired and liabilities assumed. The excess purchase prices over the fair value of the net assets acquired of approximately $3.2 billion was allocated to goodwill and are amortized on a straight-line basis over 40 years.

The following table presents the unaudited pro forma combined results of PepsiCo and Tropicana as if the acquisition had occurred at the beginning of our fiscal years 1998 and 1997. The aggregate impact of other acquisitions in these periods was not material to our net sales, income or income per share from continuing operations.

		Unaudited
	1998		1997
Net Sales	$	23,674	$	22,851
Income from Continuing Operations	$	1,939	$	1,427
Income Per Share from Continuing Operations	$	1.28	$	0.91

These pro forma amounts reflect the inclusion of the results of Tropicana for 1997 and the first three quarters of 1998 prior to the acquisition date as well as the results that are already included in the historical financial statements from the date of acquisition. In addition, the pro forma amounts include the amortization of the goodwill arising from the allocation of the purchase price and interest expense on the debt issued to finance the purchase. The pro forma information does not necessarily present what the combined results would have been for these periods and is not intended to be indicative of future results.

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