PepsiCo Reports Fourth Quarter and Full Year 2012 Results -- Fourth quarter core(1) EPS $1.09 and reported EPS $1.06

-- Full year core EPS $4.10 and reported EPS $3.92

-- Organic(1) revenue grew 5 percent in the fourth quarter and in the full year. Reported net revenue declined 1 percent for the quarter and 1.5 percent for the full year, reflecting the impact of previously announced structural changes, a 53rd week in 2011 and unfavorable foreign exchange translation

-- For 2013, company targets mid-single-digit organic revenue growth and 7 percent core constant currency(1) EPS growth

-- Company expects to return approximately $6.4 billion to shareholders through dividends and share repurchases in 2013

-- Company announces quarterly dividend increase of 5.6 percent, starting in June 2013

PURCHASE, N.Y., Feb. 14, 2013 /PRNewswire/ -- PepsiCo, Inc. (NYSE: PEP) today reported core earnings per share of $1.09 for the fourth quarter of 2012 and $4.10 for the full year, on organic revenue growth of 5 percent for both the quarter and the full year.

"In 2012, we delivered 5 percent organic revenue growth, reflecting PepsiCo's many strengths: we're well positioned in attractive and highly complementary growth categories, our portfolio is diversified with products that have broad appeal and a global footprint that is balanced, and we have an enviable portfolio of iconic brands," said Chairman and CEO Indra Nooyi.

"We also took a number of significant steps in 2012 that will even better position our business for sustainable, long-term growth; we increased our brand investment, stepped up our innovation, improved our marketplace execution and embarked on an aggressive productivity program that will contribute to our profitability and act as a funding source of future investment.

"Our recent brand-building initiatives and innovation across the portfolio, including Quaker Real Medleys, Gatorade Energy Chews, Pepsi Next and Doritos Locos Tacos, are translating into success in the marketplace."

"Just as importantly, we remain highly focused on generating attractive returns for our shareholders.  We returned $6.5 billion to shareholders in 2012 through a combination of share repurchases and dividends, and today announced an increase in our quarterly dividend that will take effect in June.

"We're encouraged by the progress we're making and expect performance in the coming year to be consistent with our long-term targets." 

(1) Please refer to the Glossary for the definitions of Non-GAAP financial measures including core, constant currency, organic and management operating cash flow.

 

Operating and Marketplace Highlights

  • Achieved 5 percent organic revenue growth in the quarter and for the full year with a good balance between volume growth(2) and price realization.
  • PepsiCo Americas Foods organic revenue grew 8 percent in the quarter driven by organic revenue gains in all divisions, including Frito-Lay North America, Quaker Foods North America and Latin America Foods. Reported net revenue increased 3.5 percent in the quarter, with declines at FLNA and QFNA due to the impact of an extra reporting week in the fourth quarter of 2011.
  • Frito-Lay North America and PepsiCo Americas Beverages market share trends in the U.S. improved sequentially in the fourth quarter reflecting disciplined execution and significant investments in advertising and marketing.
  • AMEA organic revenue grew 8 percent in the quarter driven by low-double-digit organic volume growth in snacks and mid-single-digit organic volume growth in beverages. Reported net revenue in AMEA declined 13 percent in the fourth quarter, reflecting the impact of structural changes.
  • On an organic basis, emerging and developing market revenue grew 9 percent in the quarter. On a reported basis, emerging and developing market net revenue was even with the prior year quarter, primarily due to beverage refranchisings in China and Mexico.    
  • Substantially increased advertising and marketing expense by 50 basis points to 5.7 percent of net revenue during 2012, supporting the company's long-term brand-building initiatives.
  • Delivered more than $1 billion of productivity savings during 2012 through disciplined cost management programs. The company remains on track to deliver $3 billion in productivity savings by 2015.
  • Management operating cash flow (excluding certain items) was $7.4 billion in 2012. Cash flow from operations was $8.5 billion.
  • Delivered a 20 percent reduction in net capital spending to 4.0 percent of 2012 net revenue.
  • Returned $6.5 billion to shareholders in 2012 through $3.2 billion in share repurchases and $3.3 billion in dividends.

(2) All 2012 volume growth measures reflect an adjustment to the base year (2011) for divestitures that occurred in 2012 and 2011, and exclude the impact of an extra reporting week in 2011.

Summary of Fourth Quarter Financial Performance

  • Organic revenue grew 5 percent and reported net revenue declined 1 percent. Organic revenue growth was driven by balanced volume growth and effective net pricing. Structural changes, primarily refranchisings in China and Mexico, negatively impacted reported net revenue performance by 3 percentage points. An extra reporting week in the prior year quarter negatively impacted reported net revenue performance by 3 percentage points and foreign exchange translation had less than a 1 percent unfavorable impact in the quarter. 
  • Core constant currency operating profit declined 7 percent reflecting the impact of increased commodity costs, increased advertising and marketing expense, higher pension expense, lapping gains related to certain divestitures and asset disposals in the fourth quarter of 2011, partially offset by productivity initiatives. Reported operating profit declined 1.5 percent and included the impacts of a lump sum pension settlement charge in the current year and an extra reporting week in 2011, partially offset by lower restructuring and certain impairment charges and merger and integration charges in the current year. 
  • The company's core effective tax rate was 26.7 percent, below the prior year quarter primarily due to an adjustment to deferred tax liabilities. The company's reported effective tax rate was 15.4 percent reflecting the benefit of a tax court decision. 
  • Core EPS was $1.09 and reported EPS was $1.06. Core EPS excludes a $0.14 per share tax benefit related to a tax court decision, an $0.08 per share charge related to a pension lump sum settlement, a $0.06 per share impact of certain restructuring, impairment and integration charges, and a $0.02 per share impact from mark-to-market net losses on commodity hedges. Mark-to-market gains and losses on commodity hedges are subsequently reflected in core division results when the divisions take delivery of the underlying commodity.

Summary Fourth Quarter 2012 Performance (Percent Growth)

 

 

 

 

Reported

 

Core Constant

Currencya

 

 

Organicb

Volumec

     

     Snacks

   

4.5

    Beverages

   

2

Net Revenue

(1)

 

5

Operating Profitd

(1.5)

(7)

 

EPS

19

(5)

 

 

 

 



 

 

Volumec

 

 

 

Net

Revenue

 

 

 

Operating

Profitd

 

 

 

Organic
Revenue

Core

Constant

Currency

Operating

Profit

PAF

6e

3.5

2

8

(2)

    FLNA

5

(1)

3.5

5

3

    LAF

8e

13

8

13

(4.5)

    QFNA

6

(0.5)

(17)

5

(18)

           

PAB

-

(4)

(1)

2.5

(8)

Europe

1/(1)f

1

38

3.5

(10)

AMEA

12/13f,g

(13)

(25)

8

(20)

Total Divisions

 

6/4f

 

(1)

 

2.5

 

5

 

(5)

Total PepsiCo

 

(1)

 

(1.5)

 

5

(7)

             

 

a Core constant currency results are non-GAAP financial measures that exclude certain items affecting comparability. For more information about our core constant currency results, see "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits. Please refer to the Glossary for definitions of "Core" and "Constant currency".

b Organic results are non-GAAP financial measures that adjust for impacts of acquisitions, divestitures and other structural changes, foreign exchange translation and a 53rd week in the fourth quarter of 2011. Please refer to the Glossary for additional information regarding organic results.

c Volume growth measures adjusted to exclude the impact of a 53rd week in the fourth quarter of the base year (2011).

d The reported operating profit performance was impacted by certain items excluded from our core results in both 2012 and 2011. See "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits for more information about these items. Please refer to the Glossary for the definition of "Core".

e PAF and LAF volumes include 2 percentage points and 4 percentage points of benefit, respectively, related to acquisitions.

f Snacks/Beverages. 

g AMEA beverage volume includes an estimated benefit of 6 percentage points relating to co-branded juice drinks in China, after adjustment to include co-branded juice drink volume in China for the fourth quarter of the base year (2011).

 

 

Summary Full Year 2012 Performance (Percent Growth)

 

 

Reported

 

Core Constant

 Currencya

 

Organicb

Volumec

     

     Snacks

   

3

    Beverages

   

1

Net Revenue

(1.5)

 

5

Operating Profitd

(5)

(5)

 

EPS

(3)

(5)

 
             

 

         
 



 

 

 

Volumec

 

 

 

Net

Revenue

 

 

 

Operating

Profitd

 

 

 

Organic
Revenue

Core

Constant

Currency

Operating

Profit

PAF

5e

4

(2)

7

-

    FLNA

1

2

1

4

2

    LAF

13e

9

(2)

14

4

    QFNA

1

(1)

(13)

1

(12)

           

PAB

(1)

(4.5)

(10)

1.5

(11)

Europe

3/1f,g

(1)

10

4

3

AMEA

14/10f,h

(10)

(16)

10

4

Total Divisions

 

6/2.5 f

 

(1.5)

 

(4)

 

5

 

(3)

Total PepsiCo

 

(1.5)

 

(5)

 

5

(5)

             

a Core constant currency results are non-GAAP financial measures that exclude certain items affecting comparability. For more information about our core constant currency results, see "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits. Please refer to the Glossary for definitions of "Core" and "Constant currency".

b Organic results are non-GAAP financial measures that adjust for impacts of acquisitions, divestitures and other structural changes, foreign exchange translation and a 53rd week in 2011. Please refer to the Glossary for additional information regarding organic results.

c Volume growth measures adjusted to exclude the impact of a 53rd week in the fourth quarter of the base year (2011).

d The reported operating profit performance was impacted by certain items excluded from our core results in both 2012 and 2011. See "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits for more information about these items. Please refer to the Glossary for the definition of "Core".

e PAF and LAF volumes include 3 and 9 percentage points of benefit, respectively, related to acquisitions.

f Snacks/Beverages. 

g Europe snacks and beverage volumes include 2 percentage points and 1 percentage point of benefit, respectively, related to acquisitions.

h AMEA beverage volume includes an estimated benefit of 4 percentage points relating to co-branded juice drinks in China, after adjustment to include co-branded juice drink volume in China for the fourth quarter of the base year (2011).

 

Division Operating Summaries

 

PepsiCo Americas Foods (PAF)

Organic revenue grew 8 percent in the quarter driven by 5 percentage points of organic volume growth and 3 percentage points of effective net pricing. Reported net revenue increased 3.5 percent reflecting a 4-percentage-point negative impact from the extra reporting week in 2011, and a less than 1-percentage-point unfavorable impact from foreign exchange translation. Core constant currency operating profit declined 2 percent, reflecting higher commodity costs and increased advertising and marketing investments across all PAF divisions, partially offset by productivity initiatives and effective net pricing.

For the full year, organic revenue grew 7 percent driven by 2 percentage points of organic volume growth and 5 percentage points of effective net pricing. Reported net revenue grew 4 percent reflecting a 1-percentage-point negative impact from the extra reporting week in 2011, and a 2-percentage-point unfavorable impact from foreign exchange translation. Core constant currency operating profit was even with the prior year, reflecting revenue gains and productivity initiatives, offset by higher commodity costs and increased advertising and marketing investments across all PAF divisions.

 

Frito-Lay North America (FLNA)

Organic revenue increased 5 percent in the quarter, reflecting a 5-percentage-point increase in organic volume and even effective net pricing. Reported revenue declined 1 percent reflecting the impact from the extra reporting week in the prior year quarter. For the full year, organic revenue grew 4 percent, reflecting a 1-percentage-point contribution from organic volume and 3 percentage points of effective net pricing. Full year reported revenue grew 2 percent, including 2 percentage points of negative impact from the extra reporting week in 2011.

Core constant currency operating profit grew 3 percent in the quarter, and 2 percent for the full year. These results reflect organic revenue gains and productivity initiatives, partially offset by higher commodity costs and a significant increase in advertising and marketing investments.

Latin America Foods (LAF)

Organic revenue grew 13 percent in the quarter, reflecting 3 percentage points of organic volume growth and 10 percentage points of effective net pricing. Reported net revenue also grew 13 percent in the quarter, with a 1-percentage-point benefit from acquisitions and divestitures offset by a 1-percentage-point unfavorable foreign exchange translation impact.  

Full-year organic revenue grew 14 percent, reflecting 4 percentage points of organic volume growth and 10 percentage points of effective net pricing. Reported net revenue increased 9 percent and included a 2-percentage-point benefit from acquisitions and divestitures and a 7-percentage-point unfavorable impact from foreign exchange translation.

Core constant currency operating profit declined 4.5 percent in the quarter and rose 4 percent for the full year. These results reflect revenue growth and productivity gains offset by increased advertising and marketing expense and commodity cost inflation in both periods as well as lapping a gain from the sale of a fish business in Brazil in the fourth quarter of 2011.

 

Quaker Foods North America (QFNA)

Organic revenue grew 5 percent in the quarter and 1 percent for the full year driven primarily by organic volume gains. Reported net revenue declined 0.5 percent in the quarter and 1 percent for the full year, reflecting the impact from the extra reporting week in 2011.

Core constant currency operating profit declined 18 percent for the quarter and declined 12 percent for the full year. This was driven principally by higher commodity costs and increased advertising and marketing expense in the quarter and the full year, and by lapping gains from a divestiture and an asset sale in the fourth quarter of 2011. 

 

PepsiCo Americas Beverages (PAB)

Organic revenue grew 2.5 percent in the quarter reflecting organic volume that was even with the prior year and 2.5 percentage points of effective net pricing. Non-carbonated beverages volume grew low-single-digits led by mid-single-digit volume growth at Gatorade, and CSD volume declined approximately 1 percent in the quarter. 

For the full year, organic revenue grew 1.5 percent reflecting a 1-percentage-point organic volume decline, 3 percentage points of effective net pricing, and the impact of concentrate shipment timing. 

Reported net revenue declines included the impacts of refranchising the division's Mexican bottling operation in 2011, which had a negative 2-percentage-point impact for the quarter and a negative 5-percentage-point impact for the full year, and of the extra reporting week in 2011, which had a negative 5-percentage-point impact for the quarter, and a negative 1-percentage-point impact for the year.

Core constant currency operating profit declined 8 percent in the quarter and 11 percent for the full year, primarily reflecting increased commodity costs and higher advertising and marketing expense, partially offset by favorable effective net pricing and productivity initiatives. Operating profit comparisons were also impacted by a gain associated with the refranchising of the division's Mexico bottling operation in the fourth quarter of 2011.

Europe

Organic revenue grew 3.5 percent in the quarter and 4 percent for the full year. This reflected even organic volume and 3 percentage points of effective net pricing in the quarter and even organic volume performance on 4 percentage points of effective net pricing for the full year. Continued healthy volume growth in Russia and parts of Eastern Europe partially offset softer trends in Western Europe for the quarter and the full year. 

Reported net revenue grew 1 percent in the quarter, including a 1-percentage-point unfavorable impact from foreign exchange translation, and a 1-percentage-point negative impact from the extra reporting week in 2011. Reported net revenue declined 1 percent for the full year, including a 7-percentage-point unfavorable impact from foreign exchange translation.  

Core constant currency operating profit declined 10 percent in the quarter and grew 3 percent for the full year, reflecting significantly higher marketing investments and commodity cost inflation partially offset by productivity savings. 

Asia, Middle East & Africa (AMEA)

Organic revenue grew 8 percent in the quarter, led by low double-digit organic volume growth in snacks and mid-single-digit organic volume growth in beverages.  Reported net revenue declined 13 percent reflecting a 19-percentage-point negative impact from structural changes, principally the refranchising of bottling operations in China and an unfavorable 1-percentage-point impact from foreign exchange translation.

For the full year, organic revenue grew 10 percent led by double-digit organic volume growth in snacks and mid-single-digit organic volume growth in beverages. Including structural changes and foreign exchange translation, reported net revenue declined 10 percent reflecting a 17-percentage-point negative impact from structural changes, principally the refranchising of bottling operations in China, and an unfavorable 3-percentage-point impact from foreign exchange translation.

Core constant currency operating profit declined 20 percent for the fourth quarter and was up 4 percent for the full year. These results include the impact of lapping a gain on divestiture associated with the sale of the division's minority interest in its franchise bottler in Thailand in the fourth quarter of 2011.

 

2013 Outlook

For 2013, the company expects 7 percent core constant currency EPS growth versus its fiscal 2012 core EPS of $4.10. Based on the current foreign exchange market consensus, the company expects that foreign exchange translation will have an unfavorable impact of up to 1 point on the company's full-year core EPS performance in 2013. Excluding the impact of structural changes and foreign exchange translation, organic revenue is expected to grow mid-single-digits, consistent with the company's long-term targets. The impact of structural changes, principally beverage refranchisings, are expected to reduce organic revenue growth by approximately 1 percentage point for the full year. 

For 2013, the company expects low-single-digit commodity inflation, and productivity savings of approximately $900 million. The company also expects advertising and marketing expense to increase at or above the rate of net revenue growth. Below the operating line, the company expects higher interest expense driven by increased debt balances and a core effective tax rate of approximately 27 percent.

The company is targeting over $9 billion in cash flow from operating activities and more than $7 billion in management operating cash flow (excluding certain items) in 2013.  Net capital spending is expected to be approximately $3 billion in 2013, within the company's long-term capital spending target of less than or equal to 5 percent of net revenue.

Reflecting its commitment to return capital to shareholders, the company announced a new share repurchase program providing for the repurchase of up to $10 billion of PepsiCo common stock from July 1, 2013 through June 30, 2016, which will succeed the current repurchase program that expires on June 30, 2013. The company also announced a 5.6 percent increase in its annualized dividend to $2.27 per share from $2.15 per share, to take effect with the June 2013 payment. Under these programs, the company expects to return a total of $6.4 billion to shareholders in 2013 through dividends of approximately $3.4 billion, and share repurchases of approximately $3.0 billion.

 

Conference Call

At 8 a.m. (Eastern Time) today, the company will host a conference call with investors to discuss fourth-quarter results and the outlook for 2013. Further details, including a slide presentation accompanying the call, will be accessible on the company's website at www.pepsico.com/investors in advance of the call.

 

 

 

PepsiCo, Inc. and Subsidiaries

 

Condensed Consolidated Statement of Income

 

(in millions except per share amounts, unaudited, except year-ended 12/31/2011 amounts)

 
                           
 

Quarter Ended

 

Year Ended

 

12/29/2012

 

12/31/2011

 

Change

 

12/29/2012

 

12/31/2011

 

Change

                           

Net Revenue 

$     19,954

 

$     20,158

 

(1)

%

 

$     65,492

 

$     66,504

 

(1.5)

%

                           

Cost of sales

9,654

 

9,731

 

(1)

%

 

31,291

 

31,593

 

(1)

%

Selling, general and administrative 

8,050

 

8,150

       

24,970

 

25,145

     

expenses 

(1)

%

(1)

%

Amortization of intangible assets

37

 

30

 

24

%

 

119

 

133

 

(11)

%

                           

Operating Profit 

2,213

 

2,247

 

(1.5)

%

 

9,112

 

9,633

 

(5)

%

                           

Interest expense 

(288)

 

(272)

 

6

%

 

(899)

 

(856)

 

5

%

Interest income and other 

44

 

24

 

89

%

 

91

 

57

 

61

%

                           

Income before income taxes 

1,969

 

1,999

 

(1)

%

 

8,304

 

8,834

 

(6)

%

                           

Provision for income taxes 

302

 

597

 

(49)

%

 

2,090

 

2,372

 

(12)

%

                           

Net income 

1,667

 

1,402

 

19

%

 

6,214

 

6,462

 

(4)

%

                           

Less:  Net income (loss) attributable to 

   

(13)

           

19

     

noncontrolling interests 

6

n/m

 

36

92

%

                           

Net Income Attributable to PepsiCo 

$      1,661

 

$      1,415

 

17

%

 

$      6,178

 

$      6,443

 

(4)

%

                           

Diluted

                         

  Net Income Attributable to PepsiCo per

                         

 Common Share 

$        1.06

 

$        0.89

 

19

%

 

$        3.92

 

$        4.03

 

(3)

%

  Weighted-average common shares                         

                         

     outstanding

1,564

 

1,584

       

1,575

 

1,597

     
                           

  Cash dividends declared per common

                         

    share 

$     0.5375

 

$      0.515

       

$     2.1275

 

$      2.025

     
                           
                           

n/m = not meaningful

 

A-1

 

 

PepsiCo, Inc. and Subsidiaries

 

Supplemental Financial Information

 

(in millions and unaudited, except year-ended 12/31/2011 amounts)

 
                           
 

Quarter Ended

 

Year Ended

 

12/29/2012

 

12/31/2011

 

Change

 

12/29/2012

 

12/31/2011

 

Change

Net Revenue

               
                           

Frito-Lay North America  

$      4,102

 

$      4,155

 

(1)

%

 

$    13,574

 

$   13,322

 

2

%

Quaker Foods North America 

815

 

819

 

(0.5)

%

 

2,636

 

2,656

 

(1)

%

Latin America Foods 

2,714

 

2,399

 

13

%

 

7,780

 

7,156

 

9

%

   PepsiCo Americas Foods 

7,631

 

7,373

 

3.5

%

 

23,990

 

23,134

 

4

%

                           

PepsiCo Americas Beverages 

6,078

 

6,311

 

(4)

%

 

21,408

 

22,418

 

(4.5)

%

Europe 

4,288

 

4,231

 

1

%

 

13,441

 

13,560

 

(1)

%

Asia, Middle East & Africa 

1,957

 

2,243

 

(13)

%

 

6,653

 

7,392

 

(10)

%

Total Net Revenue 

$    19,954

 

$    20,158

 

(1)

%

 

$    65,492

 

$   66,504

 

(1.5)

%

                           

Operating Profit

                         
                           

Frito-Lay North America 

$      1,114

 

$      1,076

 

3.5

%

 

$     3,646

 

$     3,621

 

1

%

Quaker Foods North America 

200

 

239

 

(17)

%

 

695

 

797

 

(13)

%

Latin America Foods 

386

 

358

 

8

%

 

1,059

 

1,078

 

(2)

%

   PepsiCo Americas Foods 

1,700

 

1,673

 

2

%

 

5,400

 

5,496

 

(2)

%

                           

PepsiCo Americas Beverages 

735

 

740

 

(1)

%

 

2,937

 

3,273

 

(10)

%

Europe 

313

 

226

 

38

%

 

1,330

 

1,210

 

10

%

Asia, Middle East & Africa 

117

 

157

 

(25)

%

 

747

 

887

 

(16)

%

Division Operating Profit 

2,865

 

2,796

 

2.5

%

 

10,414

 

10,866

 

(4)

%

                           

Corporate Unallocated

                         

   Mark-to-Market net impact (Losses)/Gains

(61)

 

(71)

 

(14)

%

 

65

 

(102)

 

n/m

 

   Merger and Integration Charges

-

 

(14)

 

n/m

   

-

 

(78)

 

n/m

 

   Restructuring and Impairment Charges

(2)

 

(74)

 

(97)

%

 

(10)

 

(74)

 

(86)

%

   Pension Lump Sum Settlement Charge

(195)

 

-

 

n/m

   

(195)

 

-

 

n/m

 

   53rdWeek

-

 

(18)

 

n/m

   

-

 

(18)

 

n/m

 

   Other 

(394)

 

(372)

 

6

%

 

(1,162)

 

(961)

 

21

%

 

(652)

 

(549)

 

19

%

 

(1,302)

 

(1,233)

 

6

%

                           

Total Operating Profit 

$      2,213

 

$      2,247

 

(1.5)

%

 

$     9,112

 

$     9,633

 

(5)

%

                           
                           

n/m = not meaningful

 

A-2

 

 

PepsiCo, Inc. and Subsidiaries

Condensed Consolidated Statement of Cash Flows

(in millions)

   

 Year Ended 

   

12/29/2012

 

12/31/2011

     

(unaudited)

   

Operating Activities

       

Net income 

 

$      6,214

 

$      6,462

Depreciation and amortization

 

2,689

 

2,737

Stock-based compensation expense 

 

278

 

326

Merger and integration charges 

 

16

 

329

Cash payments for merger and integration charges 

 

(83)

 

(377)

Restructuring and impairment charges 

 

279

 

383

Cash payments for restructuring charges 

 

(343)

 

(31)

Restructuring and other charges related to the transaction with Tingyi

   (Cayman Islands) Holding Corp. (Tingyi)

       
 

176

 

-

Cash payments for restructuring and other charges related to the

   transaction with Tingyi 

       
 

(109)

 

-

Excess tax benefits from share-based payment arrangements 

 

(124)

 

(70)

Pension and retiree medical plan contributions 

 

(1,865)

 

(349)

Pension and retiree medical plan expenses 

 

796

 

571

Deferred income taxes and other tax charges and credits 

 

321

 

495

Change in accounts and notes receivable 

 

(250)

 

(666)

Change in inventories 

 

144

 

(331)

Change in prepaid expenses and other current assets 

 

89

 

(27)

Change in accounts payable and other current liabilities 

 

548

 

520

Change in income taxes payable 

 

(97)

 

(340)

Other, net

 

(200)

 

(688)

Net Cash Provided by Operating Activities 

 

8,479

 

8,944

         

Investing Activities

       

Capital spending 

 

(2,714)

 

(3,339)

Sales of property, plant and equipment 

 

95

 

84

Acquisition of Wimm-Bill-Dann Foods OJSC (WBD), net of cash and cash

       

  equivalents acquired 

 

-

 

(2,428)

Investment in WBD 

 

-

 

(164)

Cash payments related to the transaction with Tingyi 

 

(306)

 

-

Other acquisitions and investments in noncontrolled affiliates 

 

(121)

 

(601)

Divestitures 

 

(32)

 

780

Short-term investments, net 

 

61

 

66

Other investing, net 

 

12

 

(16)

Net Cash Used for Investing Activities 

 

(3,005)

 

(5,618)

         

Financing Activities

       

Proceeds from issuances of long-term debt 

 

5,999

 

3,000

Payments of long-term debt 

 

(2,449)

 

(1,596)

Debt repurchase 

 

-

 

(771)

Short-term borrowings, net 

(1,461)

 

303

Cash dividends paid 

 

(3,305)

 

(3,157)

Share repurchases – common 

 

(3,219)

 

(2,489)

Share repurchases – preferred 

 

(7)

 

(7)

Proceeds from exercises of stock options 

 

1,122

 

945

Excess tax benefits from share-based payment arrangements 

 

124

 

70

Acquisition of noncontrolling interests 

 

(68)

 

(1,406)

Other financing 

 

(42)

 

(27)

Net Cash Used for Financing Activities 

 

(3,306)

 

(5,135)

         

Effect of exchange rate changes on cash and cash equivalents 

 

62

 

(67)

Net Increase/(Decrease) in Cash and Cash Equivalents

 

2,230

 

(1,876)

Cash and Cash Equivalents – Beginning of Year 

 

4,067

 

5,943

Cash and Cash Equivalents – End of Year

 

$      6,297

 

$      4,067

         

A-3

       

 

 

PepsiCo, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet

(in millions except per share amounts)

           
   

12/29/2012

 

12/31/2011

Assets

 

(unaudited)

   

Current Assets

       

 Cash and cash equivalents 

 

$         6,297

 

$          4,067

 Short-term investments 

 

322

 

358

 Accounts and notes receivable, net 

 

7,041

 

6,912

 Inventories

       

Raw materials 

 

1,875

 

1,883

Work-in-process 

 

173

 

207

Finished goods 

 

1,533

 

1,737

   

3,581

 

3,827

         

Prepaid expenses and other current assets 

 

1,479

 

2,277

Total Current Assets  

 

18,720

 

17,441

         

Property, plant and equipment, net 

 

19,136

 

19,698

Amortizable intangible assets, net 

 

1,781

 

1,888

         

Goodwill 

 

16,971

 

16,800

Other nonamortizable intangible assets 

 

14,744

 

14,557

Nonamortizable Intangible Assets 

 

31,715

 

31,357

         

Investments in noncontrolled affiliates 

 

1,633

 

1,477

Other assets 

 

1,653

 

1,021

Total Assets 

 

$       74,638

 

$        72,882

         

Liabilities and Equity

       

Current Liabilities

       

 Short-term obligations 

 

$         4,815

 

$          6,205

 Accounts payable and other current liabilities 

 

11,903

 

11,757

 Income taxes payable 

 

371

 

192

Total Current Liabilities 

 

17,089

 

18,154

         

 Long-term debt obligations 

 

23,544

 

20,568

 Other liabilities 

 

6,543

 

8,266

 Deferred income taxes 

 

5,063

 

4,995

Total Liabilities 

 

52,239

 

51,983

         

 Commitments and Contingencies

       
         

 Preferred stock, no par value 

 

41

 

41

 Repurchased preferred stock 

 

(164)

 

(157)

         

 PepsiCo Common Shareholders' Equity

       

Common stock, par value 12/3¢ per share (authorized 3,600 shares, issued, net 

 

26

 

26

of repurchased common stock at par value: 1,544 and 1,565 shares, respectively) 

Capital in excess of par value 

 

4,178

 

4,461

Retained earnings 

 

43,158

 

40,316

Accumulated other comprehensive loss 

 

(5,487)

 

(6,229)

Repurchased common stock, in excess of par (322 and 301 shares, respectively) 

 

(19,458)

 

(17,870)

Total PepsiCo Common Shareholders' Equity 

 

22,417

 

20,704

         

Noncontrolling interests

 

105

 

311

Total Equity 

 

22,399

 

20,899

Total Liabilities and Equity 

 

$       74,638

 

$        72,882

         

A-4

       

 

 

PepsiCo, Inc. and Subsidiaries 

Supplemental Share and Stock-Based Compensation Data 

(in millions except dollar amounts, unaudited)

                     
   

Quarter Ended

 

Year Ended

 

12/29/2012

 

12/31/2011

 

12/29/2012

 

12/31/2011

Beginning Net Shares Outstanding  

1,552

 

1,568

 

1,565

 

1,582

Options Exercised/Restricted Stock Units and PEPUnits Converted

4

 

5

 

26

 

22

Shares Repurchased  

(12)

 

(8)

 

(47)

 

(39)

Ending Net Shares Outstanding 

1,544

 

1,565

 

1,544

 

1,565

               

Weighted Average Basic 

1,546

 

1,564

 

1,557

 

1,576

Dilutive Securities:

             

  Options   

10

 

12

 

11

 

14

  Restricted Stock Units

7

 

7

 

6

 

6

  PEPUnits

-

 

-

 

-

 

-

  ESOP Convertible Preferred Stock/Other 

1

 

1

 

1

 

1

Weighted Average Diluted 

1,564

 

1,584

 

1,575

 

1,597

               

Average Share Price for the Period 

$              69.91

 

$             62.92

 

$              68.34

 

$             65.25

Growth Versus Prior Year 

11%

 

(4)%

 

5%

 

1%

               

Options Outstanding  

68

 

91

 

76

 

97

Options in the Money 

67

 

55

 

66

 

72

Dilutive Shares from Options 

10

 

12

 

11

 

14

Dilutive Shares from Options as a % of Options in the Money

15%

 

22%

 

16%

 

20%

               

Average Exercise Price of Options in the Money 

$              58.96

 

$             48.93

 

$              56.42

 

$             51.36

               

Restricted Stock Units Outstanding 

12

 

12

 

12

 

13

Dilutive Shares from Restricted Stock Units 

7

 

7

 

6

 

6

Dilutive Shares from PEPUnits 

-

 

-

 

-

 

-

               

Average Intrinsic Value of Restricted Stock Units Outstanding*

$              65.60

 

$             62.96

 

$              65.41

 

$             62.93

Average Intrinsic Value of PEPUnits Outstanding*

$              64.89

 

$                    -

 

$              64.78

 

$                     -

                     
               

* Weighted average intrinsic value at grant date.

 

A-5

 

 

PepsiCo, Inc. and Subsidiaries

Reconciliation of GAAP and Non-GAAP Information

Organic Growth

Quarters Ended December 29, 2012 and December 31, 2011

(unaudited)

                       
   

GAAP Measure

 

Percent Impact

 

Non-GAAP Measure

 
   

Reported % Change

             

Organic % Change*

 

Net Revenue Year over Year % Change

Quarter Ended 12/29/2012

 

Acquisitions and

divestitures

 

Foreign exchange 

translation

 

53rd week

 

Quarter Ended 12/29/2012

 
                       

Frito-Lay North America

(1)

 

-

 

-

 

7

 

5

 

Quaker Foods North America

(0.5)

 

-

 

(0.5)

 

5.5

 

5

 

Latin America Foods

13

 

(1)

 

1

 

-

 

13

 

   PepsiCo Americas Foods

3.5

 

-

 

-

 

4

 

8

 
                       

PepsiCo Americas Beverages

(4)

 

2

 

-

 

5

 

2.5

 
                       

Europe

1

 

-

 

1

 

1

 

3.5

 
                       

Asia, Middle East & Africa

(13)

 

19

 

1

 

-

 

8

 
                       

Total PepsiCo

(1)

 

3

 

0.5

 

3

 

5

 
                       
                       
   

GAAP Measure

 

Percent Impact

 

Non-GAAP Measure

 
   

Reported % Change

             

Organic % Change*

 

Net Revenue Year over Year % Change

Quarter Ended

12/31/2011

 

Acquisitions and divestitures

 

Foreign exchange translation

 

53rd week

 

Quarter Ended 12/31/2011

 
                       

Frito-Lay North America

13

 

-

 

-

 

(7)

 

6

 

Quaker Foods North America

4

 

-

 

-

 

(5)

 

(2)

 

Latin America Foods

7

 

-

 

6

 

-

 

13

 

   PepsiCo Americas Foods

10

 

-

 

2

 

(4.5)

 

8

 
                       

PepsiCo Americas Beverages

-

 

4

 

-

 

(5)

 

-

 
                       

Europe

32

 

(30)

 

3

 

(1)

 

4

 
                       

Asia, Middle East & Africa

16

 

-

 

1

 

-

 

17

 
                       

Total PepsiCo

11

 

(4)

 

1.5

 

(3)

 

5

 
                       
                       
 

* Organic percent change is a financial measure that is not in accordance with GAAP and is calculated by excluding the impact of acquisitions and

     divestitures, foreign exchange translation and a 53rd week in the fourth quarter of 2011 from reported growth.

 

Note - certain amounts above may not sum due to rounding.

 

A-6

 

 

PepsiCo, Inc. and Subsidiaries

 

Reconciliation of GAAP and Non-GAAP Information (cont.)

 

Organic Growth

 

Years Ended December 29, 2012 and December 31, 2011

 

(unaudited)

 
                       
   

GAAP Measure

 

Percent Impact

 

Non-GAAP Measure

 
   

Reported % Change

             

 Organic % Change*

 

Net Revenue Year over Year % Change

Year Ended 12/29/2012

 

Acquisitions and divestitures

 

Foreign exchange

translation

 

53rd week

 

Year Ended 12/29/2012

 
                       

Frito-Lay North America

2

 

-

 

-

 

2

 

4

 

Quaker Foods North America

(1)

 

-

 

-

 

2

 

1

 

Latin America Foods

9

 

(2)

 

7

 

-

 

14

 

   PepsiCo Americas Foods

4

 

(0.5)

 

2

 

1

 

7

 
                       

PepsiCo Americas Beverages

(4.5)

 

4.5

 

-

 

1

 

1.5

 
                       

Europe

(1)

 

(2)

 

7

 

-

 

4

 
                       

Asia, Middle East & Africa

(10)

 

17

 

3

 

-

 

10

 
                       

Total PepsiCo

(1.5)

 

3

 

2.5

 

1

 

5

 
                       
                       
                       
   

GAAP Measure

 

Percent Impact

 

Non-GAAP Measure

 
   

Reported % Change

             

Organic % Change*

 

Net Revenue Year over Year % Change

Year Ended 12/31/2011

 

Acquisitions and divestitures

 

Foreign exchange translation

 

53rd week

 

Year Ended 12/31/2011

 
                       

Frito-Lay North America

6

 

-

 

-

 

(2)

 

3.5

 

Quaker Foods North America

-

 

-

 

(1)

 

(2)

 

(2)

 

Latin America Foods

13

 

-

 

(2)

 

-

 

11

 

   PepsiCo Americas Foods

7

 

-

 

(1)

 

(1)

 

5

 
                       

PepsiCo Americas Beverages

10

 

** 

 

(1)

 

(1)

 

** 

 
                       

Europe

41

 

** 

 

(3)

 

-

 

** 

 
                       

Asia, Middle East & Africa

17

 

-

 

(2)

 

-

 

16

 
                       

Total PepsiCo

15

 

** 

 

(1)

 

(1)

 

** 

 
                       
                       
 

* Organic percent change is a financial measure that is not in accordance with GAAP and is calculated by excluding the impact of

      acquisitions and divestitures, foreign exchange translation and a 53rd week in the fourth quarter of 2011 from reported growth.

** It is impractical to separately determine and quantify the impact of our acquisitions of PBG and PAS from changes in our pre-existing

      beverage business since we now manage these businesses as an integrated system.

 

Note - certain amounts above may not sum due to rounding.

 

A-7

 

 

PepsiCo, Inc. and Subsidiaries

     

Reconciliation of GAAP and Non-GAAP Information (cont.)

     

Year over Year Growth Rates

     

Quarters Ended December 29, 2012 and December 31, 2011

     

(unaudited)

     
       
 

GAAP

Measure

                             

Non-GAAP

Measure

     

Non-GAAP

Measure

 
 

Reported %

Change

 

Percent Impact of Non-Core Adjustments 

 

Core* % Change

 

Percent Impact of

 

Core Constant

Currency* %

Change

 

Operating Profit Year over Year % Change

Quarter

Ended

12/29/2012

 

Commodity

mark-to-

market net

impact

 

Merger and

 integration

charges

 

Restructuring and

impairment charges

 

 

Restructuring

and other

charges

related to the

transaction with 

Tingyi

 

Pension lump

sum

settlement

charge

 

53rd week

 

Inventory fair

value

adjustments

 

Quarter Ended

12/29/2012

 

 Foreign exchange translation

 

Quarter

Ended

12/29/2012

 
                                             
                                             

Frito-Lay North America

3.5

 

-

 

-

 

(7)

 

-

 

-

 

7

 

-

 

3

 

-

 

3

 

Quaker Foods North America

(17)

 

-

 

-

 

(7)

 

-

 

-

 

5

 

-

 

(18)

 

-

 

(18)

 

Latin America Foods

8

 

-

 

-

 

(11)

 

-

 

-

 

-

 

-

 

(2.5)

 

(2)

 

(4.5)

 

   PepsiCo Americas Foods

2

 

-

 

-

 

(8)

 

-

 

-

 

5

 

-

 

(1)

 

(1)

 

(2)

 
                                             

PepsiCo Americas Beverages

(1)

 

-

 

(5)

 

(7)

 

-

 

-

 

5

 

(1)

 

(8)

 

-

 

(8)

 
                                             

Europe

38

 

-

 

(38)

 

(12)

 

-

 

-

 

3

 

-

 

(10)

 

-

 

(10)

 
                                             

Asia, Middle East & Africa

(25)

 

-

 

-

 

(3)

 

8

 

-

 

-

 

-

 

(19)

 

(1)

 

(20)

 
                                             

Division Operating Profit

2.5

 

-

 

(5)

 

(8)

 

0.5

 

-

 

5

 

-

 

(5)

 

-

 

(5)

 
                                             

Impact of Corporate Unallocated

(4)

 

-

 

(2)

 

(3)

 

-

 

8

 

-

 

-

 

(1.5)

 

-

 

(1.5)

 
                                             

Total Operating Profit

(1.5)

 

-

 

(7)

 

(12)

 

0.5

 

8

 

5

 

-

 

(7)

 

-

 

(7)

 
                                             
                                             

Net income Attributable to PepsiCo

17

                             

(6)

 

-

 

(7)

 

Net income Attributable to PepsiCo per common share - diluted

19

                             

(5)

 

(0.5)

 

(5)

 
                                             
                                             
 

GAAP

Measure

                     

Non-GAAP

Measure

     

Non-GAAP

Measure

         
 

Reported %

Change

 

Percent Impact of Non-Core Adjustments 

 

Core* % Change

 

Percent Impact of

 

Core Constant Currency* % Change

         

Operating Profit Year over Year % Change

Quarter

Ended

12/31/2011 

 

Commodity

mark-to-market net

impact

 

Merger and integration charges

 

 

Restructuring and

impairment charges

 

53rdweek

 

Inventory fair value adjustments

 

Quarter

Ended

12/31/2011

 

 Foreign exchange translation

 

Quarter

Ended

12/31/2011

         
                                             
                                             

Frito-Lay North America

10

 

-

 

-

 

8

 

(7)

 

-

 

10

 

-

 

10

         

Quaker Foods North America

9

 

-

 

-

 

8

 

(6)

 

-

 

11

 

-

 

11

         

Latin America Foods

(8)

 

-

 

-

 

12

 

-

 

-

 

4

 

7

 

12

         

   PepsiCo Americas Foods

5

 

-

 

-

 

9

 

(5)

 

-

 

9

 

2

 

11

         
                                               

PepsiCo Americas Beverages

1

 

-

 

(13)

 

11

 

(5)

 

(3)

 

(7)

 

1

 

(6)

         
                                               

Europe

-

 

-

 

13

 

26

 

(3)

 

-

 

36

 

2

 

38

         
                                               

Asia, Middle East & Africa

209

 

-

 

-

 

19

 

-

 

-

 

227

 

5

 

232

         
                                               

Division Operating Profit

7

 

-

 

(2)

 

12

 

(5)

 

(1)

 

10

 

1.5

 

12

         
                                               

Impact of Corporate Unallocated

(7)

 

5

 

(3)

 

5

 

-

 

-

 

-

 

-

 

-

         
                                               

Total Operating Profit

1

 

5

 

(5)

 

17

 

(5)

 

(1)

 

11

 

2

 

12

         
                                               
                                               

Net income Attributable to PepsiCo

4

                     

8

 

2

 

9

         

Net income Attributable to PepsiCo per common share - diluted

5

                     

9

 

2

 

11

         
                                               
                                               

* Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above adjustments.  See A-17 through A-19 for a discussion of each of these adjustments.

     
       

Note - certain amounts above may not sum due to rounding.

 

A-8

 

 

Reconciliation of GAAP and Non-GAAP Information (cont.)   

Year over Year Growth Rates

Years Ended December 29, 2012 and December 31, 2011

(unaudited)

 

GAAP

Measure

                             

Non-GAAP

Measure

     

Non-GAAP

Measure

   
 

Reported %

Change

 

Percent Impact of Non-Core Adjustments 

 

Core* % Change

 

Percent Impact of

 

Core Constant

Currency* %

Change

   

Operating Profit Year over Year % Change

Year Ended 12/29/2012

 

Commodity

mark-to-

market net

impact

 

Merger and

integration

charges

 

Restructuring

and

impairment

charges

 

 

Restructuring

and other

charges related

to the

transaction with

Tingyi

 

Pension lump

sum settlement

charge

 

53rd week

 

Inventory fair

value 

adjustments

 

 

Year Ended

12/29/2012

 

 Foreign

exchange

translation

 

Year Ended 12/29/2012

   
                                                 
                                                 

Frito-Lay North America

1

 

-

 

-

 

(1)

 

-

 

-

 

2

 

-

 

2

 

-

 

2

   

Quaker Foods North America 

(13)

 

-

 

-

 

(1)

 

-

 

-

 

2

 

-

 

(12)

 

-

 

(12)

   

Latin America Foods

(2)

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(1.5)

 

5.5

 

4

   

   PepsiCo Americas Foods 

(2)

 

-

 

-

 

(1)

 

-

 

-

 

1.5

 

-

 

(1)

 

1

 

-

   
                                                 

PepsiCo Americas Beverages 

(10)

 

-

 

(3)

 

1

 

-

 

-

 

1

 

(1)

 

(12)

 

1

 

(11)

   
                                                 

Europe

10

 

-

 

(9)

 

(3)

 

-

 

-

 

1

 

(2)

 

(3)

 

6

 

3

   
                                                 

Asia, Middle East & Africa 

(16)

 

-

 

-

 

2

 

17

 

-

 

-

 

-

 

3

 

1

 

4

   
                                                 

Division Operating Profit 

(4)

 

-

 

(2)

 

-

 

1

 

-

 

1

 

-

 

(4)

 

2

 

(3)

   
                                                 

Impact of Corporate Unallocated 

(1)

 

(2)

 

(1)

 

(1)

 

-

 

2

 

-

 

-

 

(2)

 

-

 

(2)

   
                                                 

Total Operating Profit

(5)

 

(2)

 

(3)

 

(1)

 

1

 

2

 

1

 

(0.5)

 

(7)

 

2

 

(5)

   
                                                 
                                                 

Net income Attributable to PepsiCo 

(4)

                             

(8)

 

2

 

(6)

   

Net income Attributable to PepsiCo per common share - diluted   

(3)

                             

(7)

 

2

 

(5)

   
                                                 
                                                 
   

GAAP

Measure

                                 

Non-GAAP

Measure

     

Non-GAAP

Measure

   

Reported %

Change

 

Percent Impact of Non-Core Adjustments 

 

Core* % Change

 

Percent Impact of

 

Core Constant

Currency* %

Change

Operating Profit Year over Year % Change

Year Ended 12/31/2011

 

Commodity

mark-to-

market net

impact

 

Merger and

integration

charges

 

 

Restructuring

and

impairment

charges 

 

53rdweek

 

Inventory fair value adjustments

 

Venezuela currency devaluation

 

Asset write-off

 

Foundation contribution

 

Year Ended 12/31/2011

 

 Foreign exchange

translation

 

Year Ended 12/31/2011

                                                 
                                                 

Frito-Lay North America

7

 

-

 

-

 

2

 

(2)

 

-

 

-

 

-

 

-

 

7

 

-

 

7

Quaker Foods North America

8

 

-

 

-

 

2

 

(2)

 

-

 

-

 

-

 

-

 

8

 

(0.5)

 

8

Latin America Foods

7

 

-

 

-

 

5

 

-

 

-

 

-

 

-

 

-

 

12

 

(1)

 

11

   PepsiCo Americas Foods 

7

 

-

 

-

 

3

 

(2)

 

-

 

-

 

-

 

-

 

8

 

(0.5)

 

8

                                                 

PepsiCo Americas Beverages

18

 

-

 

(13)

 

3

 

(1)

 

(12)

 

-

 

-

 

-

 

(4)

 

(0.5)

 

(4)

                                                 

Europe

15

 

-

 

1

 

4

 

(1)

 

(1)

 

-

 

-

 

-

 

18

 

(4)

 

14

                                                 

Asia, Middle East & Africa

25

 

-

 

-

 

1

 

-

 

-

 

-

 

-

 

-

 

27

 

(2.5)

 

24

                                                 

Division Operating Profit

13

 

-

 

(4)

 

3

 

(1)

 

(4)

 

-

 

-

 

-

 

7

 

(1)

 

6

                                                 

Impact of Corporate Unallocated  

3

 

2

 

(2)

 

1

 

-

 

-

 

(1.5)

 

(2)

 

(1)

 

(0.5)

 

-

 

(0.5)

                                                 

Total Operating Profit

16

 

2

 

(6)

 

4

 

(1.5)

 

(4)

 

(1.5)

 

(2)

 

(1)

 

6

 

(1)

 

5

                                                 
                                                 

Net income Attributable to PepsiCo 

2

                                 

5

 

(1)

 

4

Net income Attributable to PepsiCo per common share - diluted   

3

                                 

7

 

(1)

 

5

                                                 
                                                 

* Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above adjustments.  See A-17 through A-19 for a discussion of each of these adjustments.

 

Note - certain amounts above may not sum due to rounding.

 

A-9

 

PepsiCo, Inc. and Subsidiaries

Reconciliation of GAAP and Non-GAAP Information (cont.)

Certain Line Items

Quarters Ended December 29, 2012 and December 31, 2011

(in millions except per share amounts, unaudited)

                                 
   

GAAP Measure

 

Non-Core Adjustments

 

Non-GAAP Measure

   

Reported

 

Commodity mark-

to-market net

impact

 

Merger and

integration

charges

                 

Core*

   

Quarter

Ended

12/29/2012

     

Restructuring

and

impairment

charges

 

 

Restructuring and other charges related to the transaction with Tingyi

 

Pension lump

sum

settlement

 charge

 

Tax benefit

related to tax

court

decision

 

Quarter

Ended

12/29/2012

                                 
                                 

Cost of sales 

 

$   9,654

 

$      (43)

 

$          -

 

$          -

 

$          -

 

$          -

 

$          -

 

$   9,611

                                 

Selling, general and administrative expenses 

 

$   8,050

 

$      (18)

 

$        (4)

 

$      (86)

 

$      (13)

 

$    (195)

 

$          -

 

$   7,734

                                 

Operating profit 

 

$   2,213

 

$       61

 

$         4

 

$       86

 

$       13

 

$     195

 

$          -

 

$   2,572

                                 

Interest expense 

$    (288)

 

$          -

 

$         5

 

$          -

 

$          -

 

$          -

 

$          -

 

$    (283)

                                 

Provision for income taxes 

 

$     302

 

$       27

 

$         3

 

$       10

 

$          -

 

$       64

 

$     217

 

$     623

                                 

Net income attributable to PepsiCo 

 

$   1,661

 

$       34

 

$         6

 

$       76

 

$       13

 

$     131

 

$    (217)

 

$   1,704

                                 

Net income attributable to PepsiCo per common share - diluted 

 

$    1.06

 

$    0.02

 

$        -

 

$    0.05

 

$    0.01

 

$    0.08

 

$   (0.14)

 

$    1.09

                                 

Effective tax rate 

 

15.4%

                         

26.7%

                                 
   

GAAP Measure

 

Non-Core Adjustments

 

Non-GAAP Measure

   
   

Reported

 

 

Commodity mark-

to-market net

impact

 

Merger and

integration

charges

         

Inventory fair

value

adjustments

 

Core*

   
   

Quarter

Ended

12/31/2011

     

 

Restructuring

and

impairment

charges

 

53rd week

   

Quarter

Ended

12/31/2011

   
                                 

Cost of sales 

 

$   9,731

 

$        -

 

$        -

 

$        -

 

$    (265)

 

$        (5)

 

$   9,461

   
                                 

Selling, general and administrative expenses 

 

$   8,150

 

$      (71)

 

$    (155)

 

$    (383)

 

$    (248)

 

$        -

 

$   7,293

   
                                 

Amortization of intangible assets 

$       30

 

$        -

 

$        -

 

$        -

 

$        (1)

 

$        -

 

$       29

   
                                 

Operating profit 

 

$   2,247

 

$       71

 

$     155

 

$     383

 

$    (109)

 

$         5

 

$   2,752

   
                                 

Interest expense 

 

$    (272)

 

$        -

 

$        -

 

$        -

 

$       16

 

$        -

 

$    (256)

   
                                 

Interest income and other 

$       24

 

$        -

 

$        -

 

$        -

 

$        (1)

 

$        -

 

$       23

   
                                 

Provision for income taxes 

 

$     597

 

$       20

 

$       31

 

$       97

 

$      (30)

 

$         2

 

$     717

   
                                 

Net income attributable to PepsiCo 

 

$   1,415

 

$       51

 

$     124

 

$     286

 

$      (64)

 

$         3

 

$   1,815

   
                                 

Net income attributable to PepsiCo per common share - diluted 

 

$    0.89

 

$    0.03

 

$    0.08

 

$    0.18

 

$   (0.04)

 

$        -

 

$    1.15

   
                                 

Effective tax rate 

 

29.9%

                     

28.4%

   
                                 
                                 

*Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See A-17 through A-19 for a discussion of each of these non-core adjustments.

                                 

Note - certain amounts above may not sum due to rounding.

 

A-10

 

 

PepsiCo, Inc. and Subsidiaries

Reconciliation of GAAP and Non-GAAP Information (cont.)

Certain Line Items

Years Ended December 29, 2012 and December 31, 2011

(in millions except per share amounts, unaudited)

                                 
   

GAAP Measure

 

Non-Core Adjustments

 

Non-GAAP

 Measure

   

Reported

                         

Core*

   

Year Ended
12/29/2012

 

Commodity

mark-to-

market net

impact

 

Merger and

integration

charges

 

Restructuring

 and impairment

charges

 

 

Restructuring and

other charges

related to the

transaction with

 Tingyi

 

Pension

lump sum

settlement

charge 

 

Tax benefit

related to

tax court

decision

 

Year Ended

 12/29/2012

                                 

Cost of sales

 

$ 31,291

 

$       25

 

$          -

 

$          -

 

$          -

 

$        -

 

$        -

 

$ 31,316

                                 

Selling, general and administrative expenses

 

$ 24,970

 

$       40

 

$      (11)

 

$    (279)

 

$    (150)

 

$    (195)

 

$        -

 

$ 24,375

                                 

Operating profit

 

$   9,112

 

$      (65)

 

$       11

 

$     279

 

$     150

 

$     195

 

$        -

 

$   9,682

                                 

Interest expense

$    (899)

 

$          -

 

$         5

 

$          -

 

$          -

 

$        -

 

$        -

 

$    (894)

                                 

Provision for income taxes

 

$   2,090

 

$      (24)

 

$         4

 

$       64

 

$      (26)

 

$       64

 

$     217

 

$   2,389

                                 

Net income attributable to PepsiCo

 

$   6,178

 

$      (41)

 

$       12

 

$     215

 

$     176

 

$     131

 

$    (217)

 

$   6,454

                                 

Net income attributable to PepsiCo per common share - diluted

 

$    3.92

 

$   (0.03)

 

$    0.01

 

$    0.14

 

$    0.11

 

$    0.08

 

$   (0.14)

 

$    4.10

                                 

Effective tax rate

 

25.2%

                         

26.9%

                                 
   

GAAP Measure

 

Non-Core Adjustments

 

Non-GAAP

 Measure

   
   

Reported

 

Commodity mark-

to-market net

 impact

             

Inventory fair

value

adjustments

 

Core*

   
   

Year Ended

 12/31/2011

   

Merger and integration charges

 

 

Restructuring and impairment charges

 

53rd week

   

Year Ended

 12/31/2011

   
                                 

Cost of sales

 

$ 31,593

 

$        -

 

$        -

 

$        -

 

$    (265)

 

$      (46)

 

$ 31,282

   
                                 

Selling, general and administrative expenses

 

$ 25,145

 

$    (102)

 

$    (313)

 

$    (383)

 

$    (248)

 

$        -

 

$ 24,099

   
                                 

Amortization of intangible assets

$     133

 

$        -

 

$        -

 

$        -

 

$        (1)

 

$        -

 

$     132

   
                                 

Operating profit

 

$   9,633

 

$     102

 

$     313

 

$     383

 

$    (109)

 

$       46

 

$ 10,368

   
                                 

Interest expense

 

$    (856)

 

$        -

 

$       16

 

$        -

 

$       16

 

$        -

 

$    (824)

   
                                 

Interest income and other

$       57

 

$        -

 

$        -

 

$        -

 

$        (1)

 

$        -

 

$       56

   
                                 

Provision for income taxes

 

$   2,372

 

$       31

 

$       58

 

$       97

 

$      (30)

 

$       12

 

$   2,540

   
                                 

Noncontrolling interests

 

$       19

 

$        -

 

$        -

 

$        -

 

$        -

 

$         6

 

$       25

   
                                 

Net income attributable to PepsiCo

 

$   6,443

 

$       71

 

$     271

 

$     286

 

$      (64)

 

$       28

 

$   7,035

   
                                 

Net income attributable to PepsiCo per common share - diluted

 

$    4.03

 

$    0.04

 

$    0.17

 

$    0.18

 

$   (0.04)

 

$    0.02

 

$    4.40

   
                                 

Effective tax rate

 

26.8%

                     

26.5%

   
                                 
                                 

*Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See A-17 through A-19 for a discussion of each of these non-core adjustments.

   
                                 

Note - certain amounts above may not sum due to rounding.

 

A-11

 

 

 

PepsiCo, Inc. and Subsidiaries

Reconciliation of GAAP and Non-GAAP Information (cont.)  

Operating Profit by Division

Quarters Ended December 29, 2012 and December 31, 2011

(in millions, unaudited)

                             
   

GAAP Measure

 

Non-Core Adjustments

 

Non-GAAP Measure

   

Reported

 

Commodity mark-

to-market net

impact

     

Restructuring

and impairment

charges

     

Pension lump

sum settlement

charge

 

Core* 

Operating Profit

Quarter

Ended

12/29/2012

   

Merger and

integration

charges

   

 

Restructuring and

other charges

related to the

transaction with

Tingyi

 

Quarter Ended 12/29/2012

                             
                             

Frito-Lay North America

 

$   1,114

 

$          -

 

$          -

 

$        (2)

 

$          -

 

$          -

 

$   1,112

Quaker Foods North America

 

200

 

-

 

-

 

2

 

-

 

-

 

202

Latin America Foods

 

386

 

-

 

-

 

9

 

-

 

-

 

395

   PepsiCo Americas Foods

 

1,700

 

-

 

-

 

9

 

-

 

-

 

1,709

                             

PepsiCo Americas Beverages

 

735

 

-

 

-

 

26

 

-

 

-

 

761

                             

Europe

 

313

 

-

 

4

 

44

 

-

 

-

 

361

                             

Asia, Middle East & Africa

 

117

 

-

 

-

 

5

 

13

 

-

 

135

                             

Division Operating Profit

 

2,865

 

-

 

4

 

84

 

13

 

-

 

2,966

                             

Corporate Unallocated

 

(652)

 

61

 

-

 

2

 

-

 

195

 

(394)

                             

Total Operating Profit

 

$   2,213

 

$       61

 

$         4

 

$       86

 

$       13

 

$     195

 

$   2,572

                             
                             
   

GAAP Measure

 

Non-Core Adjustments

 

Non-GAAP Measure

   

Reported

 

Commodity mark-

to-market net

impact

         

53rd week

 

Inventory fair

value

adjustments

 

Core* 

Operating Profit

Quarter

Ended

12/31/2011

   

Merger and

integration

charges

 

 

Restructuring and impairment

 charges

 

Quarter

Ended

12/31/2011

                             
                             

Frito-Lay North America

 

$   1,076

 

$          -

 

$          -

 

$       76

 

$      (72)

 

$          -

 

$   1,080

Quaker Foods North America

 

239

 

-

 

-

 

18

 

(12)

 

-

 

245

Latin America Foods

 

358

 

-

 

-

 

48

 

-

 

-

 

406

   PepsiCo Americas Foods

 

1,673

 

-

 

-

 

142

 

(84)

 

-

 

1,731

                             

PepsiCo Americas Beverages

 

740

 

-

 

35

 

81

 

(35)

 

5

 

826

                             

Europe

 

226

 

-

 

106

 

77

 

(8)

 

-

 

401

                             

Asia, Middle East & Africa

 

157

 

-

 

-

 

9

 

-

 

-

 

166

                             

Division Operating Profit

 

2,796

 

-

 

141

 

309

 

(127)

 

5

 

3,124

                             

Corporate Unallocated

 

(549)

 

71

 

14

 

74

 

18

 

-

 

(372)

                             

Total Operating Profit

 

$   2,247

 

$       71

 

$     155

 

$     383

 

$    (109)

 

$         5

 

$   2,752

                             
                             

*Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See A-17 through A-19 for a discussion

   of each of these non-core adjustments.

 

A-12

 

  

PepsiCo, Inc. and Subsidiaries

Reconciliation of GAAP and Non-GAAP Information (cont.)  

Operating Profit by Division

Years Ended December 29, 2012 and December 31, 2011

(in millions, unaudited)

                             
   

GAAP

Measure

 

Non-Core Adjustments

 

Non-GAAP

Measure

   

Reported 

 

Commodity mark-

to-market net

impact

     

Restructuring

and impairment

charges

     

Pension lump

sum settlement

charge

 

Core* 

Operating Profit

Year Ended

12/29/2012

   

Merger and

integration

charges

   

 

Restructuring and

other charges

related to the

transaction with

Tingyi

 

 

Year Ended

12/29/2012

                             
                             

Frito-Lay North America

 

$   3,646

 

$          -

 

$          -

 

$       38

 

$          -

 

$          -

 

$   3,684

Quaker Foods North America

 

695

 

-

 

-

 

9

 

-

 

-

 

704

Latin America Foods

 

1,059

 

-

 

-

 

50

 

-

 

-

 

1,109

   PepsiCo Americas Foods

 

5,400

 

-

 

-

 

97

 

-

 

-

 

5,497

                             

PepsiCo Americas Beverages

 

2,937

 

-

 

-

 

102

 

-

 

-

 

3,039

                             

Europe

 

1,330

 

-

 

11

 

42

 

-

 

-

 

1,383

                             

Asia, Middle East & Africa

 

747

 

-

 

-

 

28

 

150

 

-

 

925

                             

Division Operating Profit

 

10,414

 

-

 

11

 

269

 

150

 

-

 

10,844

                             

Corporate Unallocated

 

(1,302)

 

(65)

 

-

 

10

 

-

 

195

 

(1,162)

                             

Total Operating Profit

 

$   9,112

 

$      (65)

 

$       11

 

$     279

 

$     150

 

$     195

 

$   9,682

                             
                             
   

GAAP

Measure

 

Non-Core Adjustments

 

Non-GAAP

Measure

   

Reported 

 

Commodity mark-

to-market net

impact

 

Merger and

integration

charges

     

53rd week

 

Inventory fair

value

adjustments

 

Core* 

Operating Profit

Year Ended

12/31/2011

     

 

Restructuring

and impairment

charges

 

Year Ended

12/31/2011

                             
                             

Frito-Lay North America

 

$   3,621

 

$          -

 

$          -

 

$       76

 

$      (72)

 

$          -

 

$   3,625

Quaker Foods North America

 

797

 

-

 

-

 

18

 

(12)

 

-

 

803

Latin America Foods

 

1,078

 

-

 

-

 

48

 

-

 

-

 

1,126

   PepsiCo Americas Foods

 

5,496

 

-

 

-

 

142

 

(84)

 

-

 

5,554

                             

PepsiCo Americas Beverages

 

3,273

 

-

 

112

 

81

 

(35)

 

21

 

3,452

                             

Europe

 

1,210

 

-

 

123

 

77

 

(8)

 

25

 

1,427

                             

Asia, Middle East & Africa

 

887

 

-

 

-

 

9

 

-

 

-

 

896

                             

Division Operating Profit

 

10,866

 

-

 

235

 

309

 

(127)

 

46

 

11,329

                             

Corporate Unallocated

 

(1,233)

 

102

 

78

 

74

 

18

 

-

 

(961)

               

.

           

Total Operating Profit

 

$   9,633

 

$     102

 

$     313

 

$     383

 

$    (109)

 

$       46

 

$ 10,368

                             
                             

*Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See A-17 through A-19 for a discussion

   of each of these non-core adjustments.

 

A-13

 

 

 

PepsiCo, Inc. and Subsidiaries

Reconciliation of GAAP and Non-GAAP Information (cont.)  

(unaudited)  

                         
                         

Net Cash Provided by Operating Activities Reconciliation (in millions) 

               
         

Year Ended

             
         

12/29/2012

             

Net Cash Provided by Operating Activities 

$               8,479

             

Capital Spending 

(2,714)

             

Sales of Property, Plant and Equipment 

95

             

Management Operating Cash Flow 

5,860

             

Discretionary Pension and Retiree Medical Contributions (after-tax) 

1,051

             

Merger and Integration Payments (after-tax) 

63

             

Payments Related to Restructuring Charges (after-tax) 

260

             

Capital Investments Related to the PBG/PAS Integration 

10

             

Capital Investments Related to the Productivity Plan 

26

             

Payments for Restructuring and Other Charges Related to  

               

   the Transaction with Tingyi

117

             

Management Operating Cash Flow excluding above Items 

$               7,387

             
                         
                         
                         

Emerging and Developing Markets Net Revenue Growth Reconciliation 

               
         

Quarter Ended 

             
         

12/29/2012

             

Reported Emerging and Developing Markets Net Revenue Growth 

-

%

           

Impact of Acquisitions and Divestitures 

7

             

Impact of Foreign Currency Translation 

1

             

Emerging and Developing Markets Organic Net Revenue Growth 

9

%

         
                         
                         

Net Cash Provided by Operating Activities Reconciliation (in billions) 

               
         

2013 Guidance

             

Net Cash Provided by Operating Activities 

$                   ~9 

             

Net Capital Spending 

~(3)

             

Management Operating Cash Flow 

~6 

             

Certain Other Items* 

~1 

             

Management Operating Cash Flow excluding Certain Other Items 

$                   ~7 

             
                         

*Certain other items include discretionary pension and retiree medical contributions, merger and integration

   payments, payments related to restructuring charges, capital investments related to the Productivity Plan and

   payments related to tax settlements.

                         

Note - certain amounts above may not sum due to rounding.

 

A-14

Cautionary Statement

Statements in this communication that are "forward-looking statements," including our 2013 guidance, are based on currently available information, operating plans and projections about future events and trends. Terminology such as "believe," "expect," "intend," "estimate," "project," "anticipate," "will" or similar statements or variations of such terms are intended to identify forward-looking statements, although not all forward-looking statements contain such terms. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in demand for PepsiCo's products, as a result of changes in consumer preferences and tastes or otherwise; changes in the legal and regulatory environment; PepsiCo's ability to compete effectively; PepsiCo's ability to grow its business in emerging and developing markets or unstable political conditions, civil unrest or other developments and risks in the countries where PepsiCo operates; unfavorable economic conditions in the countries in which PepsiCo operates; increased costs, disruption of supply or shortages of raw materials and other supplies; failure to realize anticipated benefits from our productivity plan or global operating model; disruption of PepsiCo's supply chain; damage to PepsiCo's reputation; failure to successfully complete or integrate acquisitions and joint ventures into PepsiCo's existing operations; PepsiCo's ability to hire or retain key employees or a highly skilled and diverse workforce; trade consolidation or the loss of any key customer; any downgrade of our credit ratings; PepsiCo's ability to build and sustain proper information technology infrastructure, successfully implement its ongoing business transformation initiative or outsource certain functions effectively; fluctuations in foreign exchange rates; climate change, or legal, regulatory or market measures to address climate change; failure to successfully renew collective bargaining agreements or strikes or work stoppages; any infringement of or challenge to PepsiCo's intellectual property rights; and potential liabilities and costs from litigation or legal proceedings.

For additional information on these and other factors that could cause PepsiCo's actual results to materially differ from those set forth herein, please see PepsiCo's filings with the SEC, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. PepsiCo undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

A-15

Miscellaneous Disclosures

In discussing financial results and guidance, the company may refer to certain non-GAAP measures. Reconciliations of any such non-GAAP measures to the most directly comparable financial measures in accordance with GAAP can be found in the attached exhibits, as well as on the company's website at www.pepsico.com in the "Investors" section under "Investor Presentations." Our non-GAAP measures exclude from reported results those items that management believes are not indicative of our ongoing performance and how management evaluates our operating results and trends.    

Glossary 

Acquisitions and divestitures: All mergers and acquisitions activity, including the impact of acquisitions, divestitures and changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.

Beverage volume: Volume shipped to retailers and independent distributors from both PepsiCo and our bottlers.  

Core: Core results are non-GAAP financial measures which exclude certain items from our historical results. In 2012, core results exclude the commodity mark-to-market net impact included in corporate unallocated expenses, merger and integration charges in connection with our acquisition of WBD, restructuring and impairment charges, restructuring and other charges related to the transaction with Tingyi, a pension lump sum settlement charge and a tax benefit related to a tax court decision. In 2011, core results exclude the commodity mark-to-market net impact included in corporate unallocated expenses, merger and integration charges, restructuring and impairment charges, an extra reporting week and certain inventory fair value adjustments in connection with our acquisitions of The Pepsi Bottling Group, Inc. (PBG), PepsiAmericas, Inc. (PAS) and WBD.  See above for reconciliations of this non-GAAP financial measure to the most directly comparable financial measure in accordance with GAAP. See "Reconciliation of GAAP and Non-GAAP Information" for additional information.

Constant currency: Financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period.  In order to compute our constant currency results, we multiply or divide, as appropriate, our current year U.S. dollar results by the current year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior year average foreign exchange rates.

Division operating profit: The aggregation of the operating profit for each of our reportable segments, which excludes the impact of corporate unallocated expenses.  

Effective net pricing: Reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries.

Management operating cash flow: Net cash provided by operating activities less capital spending plus sales of property, plant and equipment. See above for a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure in accordance with GAAP (operating cash flow).

Management operating cash flow, excluding certain items: Management operating cash flow, excluding: (1) discretionary pension and retiree medical contributions, (2) merger and integration payments in connection with the PBG, PAS and WBD acquisitions, (3) restructuring payments, (4) capital investments related to the bottling integration, (5) capital investments related to the productivity plan, (6) payments for restructuring and other charges related to the transaction with Tingyi and (7) the tax impacts associated with each of these items, as applicable. This non-GAAP financial measure is our primary measure used to monitor cash flow performance. See above for a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure in accordance with GAAP (operating cash flow).  See "Reconciliation of GAAP and Non-GAAP Information" for additional information.   

A-16

Mark-to-market gain or loss or net impact: Change in market value for commodity contracts that we purchase to mitigate the volatility in costs of energy and raw materials that we consume. The market value is determined based on average prices on national exchanges and recently reported transactions in the marketplace.  

Net capital spending: Capital spending less cash proceeds from sales of property, plant and equipment. 

Organic: A measure that adjusts for impacts of acquisitions, divestitures and other structural changes and foreign exchange translation.  This measure also excludes the impact of an extra reporting week in 2011.  In excluding the impact of foreign exchange translation, we assume constant foreign exchange rates used for translation based on the rates in effect for the comparable prior-year period. See the definition of "Constant currency" for additional information.

A-17

Reconciliation of GAAP and Non-GAAP Information (unaudited)

Division operating profit, core results, core constant currency results and organic results are non-GAAP financial measures as they exclude certain items noted below.  However, we believe investors should consider these measures as they are more indicative of our ongoing performance and with how management evaluates our operational results and trends. 

Commodity mark-to-market net impact

In the quarter and year ended December 29, 2012, we recognized $61 million of mark-to-market net losses and $65 million of mark-to-market net gains, respectively, on commodity hedges in corporate unallocated expenses.  In the quarter and year ended December 31, 2011, we recognized $71 million and $102 million, respectively, of mark-to-market net losses on commodity hedges in corporate unallocated expenses. We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, metals and energy. Certain of these commodity derivatives do not qualify for hedge accounting treatment and are marked to market with the resulting gains and losses recognized in corporate unallocated expenses. These gains and losses are subsequently reflected in division results when the divisions take delivery of the underlying commodity.

Merger and integration charges

In the quarter ended December 29, 2012, we incurred merger and integration charges of $9 million related to our acquisition of WBD, including $4 million recorded in the Europe segment and $5 million recorded in interest expense. In the year ended December 29, 2012, we incurred merger and integration charges of $16 million related to our acquisition of WBD, including $11 million recorded in the Europe segment and $5 million recorded in interest expense.  In the quarter ended December 31, 2011, we incurred merger and integration charges of $155 million related to our acquisitions of PBG, PAS and WBD, including $35 million recorded in the PAB segment, $106 million recorded in the Europe segment and $14 million recorded in the corporate unallocated expenses.  In the year ended December 31, 2011, we incurred merger and integration charges of $329 million related to our acquisitions of PBG, PAS and WBD, including $112 million recorded in the PAB segment, $123 million recorded in the Europe segment, $78 million recorded in corporate unallocated expenses and $16 million recorded in interest expense. These charges also include closing costs and advisory fees related to our acquisition of WBD. 

Restructuring and impairment charges

In the quarter ended December 29, 2012, we incurred merger and integration charges of $86 million in conjunction with our multi-year productivity plan (Productivity Plan), including $2 million recorded in the QFNA segment, $9 million recorded in the LAF segment, $26 million recorded in the PAB segment, $44 million recorded in the Europe segment, $5 million recorded in the AMEA segment, $2 million recorded in corporate unallocated expenses, and income of $2 million recorded in the FLNA segment representing adjustments of previously recorded amounts.  In the year ended December 29, 2012, we incurred restructuring charges of $279 million, in conjunction with our Productivity Plan, including $38 million recorded in the FLNA segment, $9 million recorded in the QFNA segment, $50 million recorded in the LAF segment, $102 million recorded in the PAB segment, $42 million recorded in the Europe segment, $28 million recorded in the AMEA segment and $10 million recorded in corporate unallocated expenses.  In the quarter and year ended December 31, 2011, we incurred restructuring charges of $383 million in conjunction with our Productivity Plan, including $76 million recorded in the FLNA segment, $18 million recorded in the QFNA segment, $48 million recorded in the LAF segment, $81 million recorded in the PAB segment, $77 million recorded in the Europe segment, $9 million recorded in the AMEA segment and $74 million recorded in corporate unallocated expenses. The Productivity Plan includes actions in every aspect of our business that we believe will strengthen our complementary food, snack and beverage businesses by leveraging new technologies and processes across PepsiCo's operations, go-to-market and information systems; heightening the focus on best practice sharing across the globe; consolidating manufacturing, warehouse and sales facilities; and implementing simplified organization structures, with wider spans of control and fewer layers of management.

Restructuring and other charges related to the transaction with Tingyi

In the quarter and year ended December 29, 2012, we recorded restructuring and other charges of $13 million and $150 million, respectively, in the AMEA segment related to the transaction with Tingyi.

Pension lump sum settlement charge

In the quarter and year ended December 29, 2012, we recorded a pension lump sum settlement charge of $195 million.

Tax benefit related to tax court decision

In the quarter and year ended December 29, 2012, we recognized a non-cash tax benefit of $217 million associated with a favorable tax court decision related to the classification of financial instruments.

53rd week impact

In 2011, we had an extra reporting week (53rd week).  Our fiscal year ends on the last Saturday of each December, resulting in an extra week of results every five or six years.  The 53rd week increased net revenue by $623 million and operating profit by $109 million in the quarter and year ended December 31, 2011.

Inventory fair value adjustments

In the quarter ended December 31, 2011, we recorded $5 million of incremental costs in cost of sales related to hedging contracts included in PBG's and PAS's balance sheets at the acquisition date. In the year ended December 31, 2011, we recorded $46 million of incremental costs in cost of sales related to fair value adjustments to the acquired inventory included in WBD's balance sheet at the acquisition date and hedging contracts included in PBG's and PAS's balance sheets at the acquisition date.

Management operating cash flow (excluding certain items)

Additionally, management operating cash flow (excluding the items noted in the Net Cash Provided by Operating Activities Reconciliation table) is the primary measure management uses to monitor cash flow performance.  This is not a measure defined by GAAP.  Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash.  As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities.  Additionally, we consider certain other items (included in the Net Cash Provided by Operating Activities Reconciliation table) in evaluating management operating cash flow which we believe investors should consider in evaluating our management operating cash flow results.

A-18

2013 guidance

Our 2013 core tax rate guidance and our 2013 core constant currency EPS guidance exclude the commodity mark-to-market net impact included in corporate unallocated expenses, merger and integration charges in connection with our acquisition of WBD, restructuring and impairment charges and a one-time charge related to the Venezuela currency devaluation. Our 2013 organic revenue guidance excludes the impact of acquisitions, divestitures and other structural changes. In addition, our 2013 organic revenue and core constant currency EPS guidance excludes the impact of foreign exchange. We are not able to reconcile our full-year projected 2013 core tax rate guidance to our full-year projected 2013 reported tax rate or our 2013 core constant currency EPS growth to our full-year projected 2013 reported EPS growth because we are unable to predict the 2013 impact of foreign exchange or the mark-to-market net impact on commodity hedges due to the unpredictability of future changes in foreign exchange rates and commodity prices. In addition, we are unable to reconcile our full-year projected 2013 organic revenue growth to our full-year projected 2013 reported net revenue growth because we are unable to predict the 2013 impact of foreign exchange due to the unpredictability of future changes in foreign exchange rates. Therefore, we are unable to provide a reconciliation of these measures. 

A-19

SOURCE PepsiCo, Inc.



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