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PepsiCo Sees Tax Settlement Lift

The IRS tax settlement will result in a $600 million benfit in the fourth quarter.

PepsiCo (PEP) - Get PepsiCo, Inc. Report Friday lifted its full-year outlook to reflect the impacts of an audit settlement with the Internal Revenue Service and a restructuring move the company's making in the fourth quarter.

As a result of a recently completed IRS audit, the beverage and food company expects to record a noncash tax benefit of roughly $600 million, or 36 cents a share, in the fourth quarter.

PepsiCo is also closing two manufacturing sites in its Frito-Lay North America division to increase manufacturing productivity and supply chain efficiencies. The action is expected to result in mostly noncash, pretax charge of roughly $66 million, or 3 cents a share in the fourth quarter.

As a result of these two impacts, PepsiCo said it now expects full-year 2006 earnings per share (EPS) of at least $3.31 and reaffirmed its earlier EPS guidance of at least $2.98, before the two financial impacts. Analysts are expecting full-year earnings of $3 a share, according to Thomson First Call average.

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PepsiCo also reaffirmed its full-year 2006 cash flow guidance of $6.2 billion in cash from operating activities, $2.2 billion in capital spending and $3 billion in share repurchases.