PepsiCo Reports Third Quarter 2012 Results -- Third quarter reported EPS of $1.21 and core(1) EPS of $1.20

-- Company reaffirms 2012 core constant currency(1) net revenue and core constant currency EPS guidance

-- Reflecting the impact of previously announced structural changes and negative foreign exchange translation, reported net revenue declined 5 percent, in line with expectations. Excluding these impacts, organic(1) net revenue grew 5 percent

-- Company expects to return more than $6 billion to shareholders through dividends and share repurchases in 2012

-- Company expects to deliver more than $1 billion in productivity savings in 2012 and $3 billion in savings by 2015

PURCHASE, N.Y., Oct. 17, 2012 /PRNewswire/ -- PepsiCo, Inc. (NYSE: PEP) today reported a decline in third quarter net revenue of 5 percent, reflecting a negative 5-percentage-point impact from previously announced structural changes (primarily beverage refranchisings in China and Mexico), and a negative 5-percentage-point impact from foreign exchange translation.  Excluding these items, third quarter net revenue grew 5 percent on an organic basis.

(Logo:  http://photos.prnewswire.com/prnh/20120424/NY93895LOGO )

Reported EPS was $1.21 and core EPS was $1.20.  Management reaffirmed both its 2012 core constant currency net revenue and core constant currency EPS guidance and stated that its 2012 strategic initiatives are on track.

"PepsiCo is diligently executing the strategy we set forth at the start of the year, and we remain on track to achieve our full-year targets," said PepsiCo Chairman and CEO Indra Nooyi.  "Our disciplined pricing and sustained investment in brand building drove 5 percent organic net revenue growth reflecting 1 percent organic volume growth and 4 percent effective net pricing.

"We remain focused on our five priorities.  We will continue to invest aggressively to build our brands, accelerate innovation to drive growth, focus on execution and deliver our productivity agenda while returning cash to shareholders."

1Please 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 net revenue growth with a good balance between volume growth and price realization.
  • Grew global snacks net revenue on a reported basis.  Grew both global snacks and global beverage net revenue on an organic basis.
  • Emerging and developing market net revenue declined 13 percent, primarily due to beverage refranchisings in China and Mexico.  On an organic basis, emerging and developing market net revenue grew 11 percent.
  • While reported net revenue in AMEA and Europe declined 21 percent and 6 percent, respectively, organic net revenue grew 10 percent and 7 percent, respectively.
  • PAF saw balanced revenue growth driven by volume growth and effective net price realization.
  • Substantially increased advertising and marketing expense in the quarter, supporting the company's long-term brand building initiatives.
  • Activated our expanded partnership with the NFL across snacks and beverages with retail programming in 22 of 32 team markets and announced that Pepsi will be the official sponsor of the 2013 Super Bowl halftime show.  Doritos will again drive its highly popular Crash the Super Bowl program.

Summary of Third Quarter Financial Performance

  • Organic net revenue growth was 5 percent.  Reported net revenue benefited from 1 percentage point of volume growth and 4 percentage points of effective net pricing, offset by negative foreign exchange translation of 5 percentage points.  Structural changes, primarily refranchisings in China and Mexico, negatively impacted reported net revenue performance by 5 percentage points. 
  • Reported operating profit declined 4 percent and core operating profit declined 8 percent.  Core operating profit performance reflected the impact of increased commodity costs, increased advertising and marketing expense, higher corporate unallocated expenses reflecting increased pension expense and a negative 3 percentage point impact of foreign exchange translation.  Core operating profit excluded mark-to-market net gains on commodity hedges, restructuring and certain impairment charges as well as merger and integration charges.
  • Net interest expense was $181 million and included $24 million in mark-to-market gains on investments related to deferred compensation liabilities.  There is a corresponding offset to these gains within selling, general and administrative expense resulting in no net benefit to earnings.
  • The company's reported effective tax rate was 27 percent.  The company's core effective tax rate was 26.3 percent, 90 basis points above the prior year quarter due to an adjustment to international deferred taxes, partially offset by tax benefits generated from an international acquisition.
  • Reported EPS was $1.21 and core EPS was $1.20. Core EPS excludes a $0.04 per share impact of certain restructuring, impairment and integration charges and a $0.05 per share impact from mark-to-market net gains on commodity hedges. Mark-to-market gains and losses are subsequently reflected in core division results when the divisions take delivery of the underlying commodity.
  • Operating cash flow was $5.1 billion year to date. Management operating cash flow (excluding certain items) was $4.9 billion. The company has returned $4.8 billion to shareholders through dividends and share repurchases through the end of the third quarter, and expects to return more than $6 billion to shareholders for the full year 2012.


Summary Third Quarter 2012 Performance (Percent Growth)









 

Reported

 

Core

USDa

 

Core Constant
Currencya

 

Organicb

Volumec





     Snacks

6



3

    Beverages

3



1

Net Revenue

(5)

(5)

-

5

Operating Profitd

(4)

(8)

(5)


EPS

(3)

(8)

(4)














 




Summary Third Quarter 2012 Business Segment Performance (Percent Growth)










Corea






 

    Constant Currencya 



 


Volumec

 

Net Revenue

 

Operating Profitd

Organic
Net

Revenue

 

Net Revenue

 

Operating Profit

 

Operating

Profit

PAF

6

2.5

(6)

6

7

(1)

(3)

    FLNA

1

3

-

3

3

1

1

    LAF

15e

2

(21)

13

15

-

(10)

    QFNA

2

-

(13)

1

0.5

(11)

(12)









PAB

(3)

(7)

(16)

-

(6)

(13)

(15)

Europe

-/1f

(6)

(6)

7

7

3

(7)

AMEA

13/15f

(21)

11

10

(17)

14

13

Total Divisions

 

6/3

 

(5)

 

(7)

 

5

 

-

 

(3)

 

(6)

Total PepsiCo


(5)

 

(4)

 

5

-

(5)

 

(8)












aThe above core results and core constant currency results are non-GAAP financial measures that exclude certain items affecting comparability.  For more information about our core results and core constant currency results, see "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits.  Please refer to the Glossary for definitions of "Constant Currency" and "Core".
bOrganic results are non-GAAP financial measures that exclude the impact of acquisitions and divestitures and foreign exchange translation.  Please refer to the Glossary for additional information regarding organic results.
c Volume growth measures reflect an adjustment to the base year (2011) for divestitures that occurred in 2011 and 2012, as applicable.
dThe 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".
eLAF volume included 11 percentage points of benefit related to acquisitions.
fSnacks/Beverages.  AMEA beverage volume includes 7 points of benefit related to co-branded juice drinks in China.

All comparisons are on a core year-over-year basis unless otherwise noted.

Division Operating Summaries

PepsiCo Americas Foods (PAF)
Organic net revenue grew 6 percent in the quarter, and reported net revenue grew 2.5 percent. Net revenue growth was driven by effective net pricing supported by contributions from innovation and increased media support. Core constant currency operating profit declined 1 percent, reflecting higher commodity costs and increased advertising and marketing investments across all PAF divisions, partially offset by productivity initiatives.

Frito-Lay North America (FLNA)
Organic net revenue increased 3 percent driven by a 1 percent increase in volume coupled with 2 percent effective net pricing.  Volume was negatively impacted in the quarter by a calendar shift related to the Labor Day holiday.  Net revenue growth was driven by the C-store, club, dollar and foodservice channels.  Reported net revenue grew 3 percent.

Operating profit growth of 1 percent in the quarter reflected higher commodity costs and a significant increase in advertising and marketing investments offset by effective net pricing and productivity initiatives.

Latin America Foods (LAF)
On an organic basis, LAF net revenue grew 13 percent.  Net revenue growth reflected 4 percentage points of organic volume growth and 9 percentage points of effective net pricing.  Reported net revenue grew 2 percent, reflecting a 2-percentage-point benefit from acquisitions and divestitures, offset by a 13-percentage-point unfavorable foreign exchange translation impact.   

Core constant currency operating profit was even with the prior year quarter reflecting increased advertising and marketing expense and commodity cost inflation.

Quaker Foods North America (QFNA)
Organic net revenue grew modestly.  Reported net revenue performance was even with the prior year quarter, reflecting 2 percentage points of volume growth offset by lower pricing and mix. 

Core constant currency operating profit in the quarter declined 11 percent driven principally by higher commodity costs and increased advertising and marketing expense. 

PepsiCo Americas Beverages (PAB)
On an organic basis, net revenue was even with the prior year quarter.  Effective net pricing increased by 3 percentage points and bottler case volume declined 3 percent.  Volume was negatively impacted by 1 percentage point in the quarter due to a calendar shift related to the Labor Day holiday.  Positive volume and pricing trends continued within the convenience and gas channel.  Reported net revenue declined 7 percent, primarily reflecting a negative 6-percentage-point impact of the refranchising of the division's Mexican beverage business in the fourth quarter of 2011 and a negative 1-percentage-point impact from foreign exchange translation.

Operating profit declined in the quarter primarily reflecting increased commodity costs and higher advertising and marketing expense, partially offset by favorable effective net pricing and savings resulting from productivity initiatives. The refranchising of the division's Mexican beverage business negatively impacted operating profit performance by more than 2 percentage points.

Europe
On an organic basis, net revenue grew 7 percent with a focus on product mix management to drive margin accretion and healthy growth in Russia partially offset by softer trends in Western Europe.  Reported net revenue declined 6 percent, reflecting 6 percentage points of effective net pricing which was more than offset by an unfavorable foreign exchange translation impact of 12 percentage points.  

Core constant currency operating profit grew 3 percent in the quarter with significantly higher marketing investments and commodity cost inflation offset by productivity savings.  Operating profit performance was negatively impacted by 4 percentage points due to an impairment charge associated with operations in Greece.  Operating profit performance was positively impacted by 8 percentage points attributable to net favorable adjustments of certain operating items and favorable comparisons related to timing of concentrate shipments in connection with our global SAP implementation in the third quarter of 2011. 

Asia, Middle East & Africa (AMEA)
On an organic basis, net revenue grew 10 percent, led by double-digit organic volume growth in snacks and high-single-digit organic volume growth in beverages.  Reported net revenue declined 21 percent reflecting a 27-percentage-point negative impact from structural changes, principally the refranchising of bottling operations in China, and a negative 4-percentage-point impact from foreign exchange translation.

Core constant currency operating profit grew 14 percent, driven by volume growth and effective net pricing partially offset by higher commodity costs. The impact of acquisitions and divestitures reduced operating profit by 5 percent while a favorable comparison related to timing of concentrate shipments in connection with our global SAP implementation in the third quarter of 2011 increased operating profit by 7 percent. 

Restructuring
As previously announced, the company has committed to a multi-year productivity program.  The company incurred pre-tax, non-core restructuring charges of $83 million in the third quarter of 2012 and has incurred $193 million year to date.  The company anticipates additional charges of approximately $205 million in the balance of 2012 and $129 million from 2013 through 2015.  Charges under this program resulted in cash expenditures of $103 million in the third quarter of 2012 and $243 million year to date.  The company anticipates additional cash expenditures of approximately $175 million in the remainder of 2012, with the balance of approximately $287 million of related cash expenditures expected in 2013 through 2015. 

2012 Guidance and Outlook
Consistent with its previous guidance for 2012, the company expects a decline in core constant currency EPS of approximately 5 percent from its fiscal 2011 core EPS of $4.40.  Based on the current foreign exchange market consensus, foreign exchange translation would have an unfavorable impact of approximately three percentage points on the company's full year core EPS performance in 2012.  Consistent with its previous guidance, the company expects core constant currency net revenue growth of low-single-digits reflecting the impact of structural changes, principally refranchisings, which are expected to reduce core constant currency net revenue growth by approximately three percentage points for the full year.  Excluding these structural changes, core constant currency net revenue is expected to grow mid-single-digits, consistent with the company's prior guidance. 

The company is targeting approximately $8 billion in cash flow from operating activities and more than $6 billion in management operating cash flow (excluding certain items) in 2012, which includes the favorable impact of an expected 10 percent reduction in capital spending and improved working capital efficiency.  The company also made a pre-tax discretionary pension and retiree medical contribution of $1 billion in the first quarter of 2012.

Reflecting its commitment to return capital to shareholders, the company anticipates more than $3 billion in share repurchases for 2012, and expects to pay $3.3 billion in dividends. 

Conference Call
At 8 a.m. (Eastern Time) today, the company will host a conference call with investors to discuss third-quarter results and the outlook for 2012. 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)














12 Weeks Ended


36 Weeks Ended


9/8/2012


9/3/2011


Change


9/8/2012


9/3/2011


Change













Net Revenue

$ 16,652


$ 17,582


(5)%


$ 45,538


$ 46,346


(2)%













Cost of sales

7,833


8,452


(7)%


21,637


21,862


(1)%

Selling, general and administrative

expenses

5,992


6,186


(3)%


16,920


16,995


–%

Amortization of intangible assets

27


38


(29)%


82


103


(21)%













Operating Profit

2,800


2,906


(4)%


6,899


7,386


(7)%













Interest expense

(204)


(205)


–%


(611)


(584)


5%

Interest income and other

23


(4)


n/m


47


33


42%













Income before income taxes

2,619


2,697


(3)%


6,335


6,835


(7)%













Provision for income taxes

706


686


3%


1,788


1,775


1%













Net income

1,913


2,011


(5)%


4,547


5,060


(10)%













Less: Net income attributable to

11


11


8%


30


32


(6)%

noncontrolling interests
























Net Income Attributable to PepsiCo

$ 1,902


$ 2,000


(5)%


$ 4,517


$ 5,028


(10)%













Diluted












Net Income Attributable to PepsiCo per Common Share

$     1.21


$    1.25


(3)%


$   2.86


$   3.14


(9)%

Average Shares Outstanding

1,575


1,599




1,580


1,603















Cash dividends declared per common share












$ 0.5375


$  0.515




$   1.59


$   1.51















n/m = not meaningful












A-1

 

PepsiCo, Inc. and Subsidiaries

Supplemental Financial Information

(in millions, unaudited)














12 Weeks Ended


36 Weeks Ended


9/8/2012


9/3/2011


Change


9/8/2012


9/3/2011


Change

Net Revenue




















Frito-Lay North America

$   3,269


$  3,173


3%


$  9,472


$   9,167


3%

Quaker Foods North America

615


614


–%


1,821


1,837


(1)%

Latin America Foods

1,883


1,841


2%


5,066


4,757


7%

PepsiCo Americas Foods

5,767


5,628


2.5%


16,359


15,761


4%













PepsiCo Americas Beverages

5,530


5,947


(7)%


15,330


16,107


(5)%

Europe

3,691


3,909


(6)%


9,153


9,329


(2)%

Asia, Middle East & Africa

1,664


2,098


(21)%


4,696


5,149


(9)%

Total Net Revenue

$ 16,652


$ 17,582


(5)%


$ 45,538


$  46,346


(2)%













Operating Profit
























Frito-Lay North America

$      917


$ 918


–%


$  2,532


$   2,545


(0.5)%

Quaker Foods North America

154


177


(13)%


495


558


(11)%

Latin America Foods

219


275


(21)%


673


720


(7)%

PepsiCo Americas Foods

1,290


1,370


(6)%


3,700


3,823


(3)%













PepsiCo Americas Beverages

837


992


(16)%


2,202


2,533


(13)%

Europe

483


514


(6)%


1,017


984


3%

Asia, Middle East & Africa

317


285


11%


630


730


(14)%

Division Operating Profit

2,927


3,161


(7)%


7,549


8,070


(6)%













Corporate Unallocated












Net Impact of Mark-to-Market on Commodity Hedges

121


(53)


n/m


126


(31)


n/m

Merger and Integration

Charges

2


(10)


n/m



(64)


n/m

Restructuring and Impairment Charges

(7)



n/m


(8)



n/m

Other

(243)


(192)


27%


(768)


(589)


30%


(127)


(255)


(50)%


(650)


(684)


(5)%













Total Operating Profit

$   2,800


$   2,906


(4)%


$  6,899


$   7,386


(7)%

























n/m = not meaningful





















A-2

 

PepsiCo, Inc. and Subsidiaries

Condensed Consolidated Statement of Cash Flows

(in millions, unaudited)


36 Weeks Ended


9/8/2012


9/3/2011

Operating Activities




Net income

$ 4,547


$ 5,060

Depreciation and amortization

1,837


1,877

Stock-based compensation expense

193


222

Restructuring and impairment charges

193


Cash payments for restructuring charges

(243)


(1)

Merger and integration charges

7


174

Cash payments for merger and integration charges

(57)


(293)

Restructuring and other charges related to the transaction with Tingyi (Cayman Islands) Holding Corp. (Tingyi)

163


Cash payments for restructuring and other charges related to the transaction with Tingyi

(98)


Excess tax benefits from share-based payment arrangements

(89)


(56)

Pension and retiree medical plan contributions

(1,253)


(185)

Pension and retiree medical plan expenses

414


389

Deferred income taxes and other tax charges and credits

283


132

Change in accounts and notes receivable

(1,300)


(1,643)

Change in inventories

(234)


(466)

Change in prepaid expenses and other current assets

(83)


(54)

Change in accounts payable and other current liabilities

281


142

Change in income taxes payable

736


936

Other, net

(179)


(400)

Net Cash Provided by Operating Activities

5,118


5,834





Investing Activities




Capital spending

(1,409)


(1,962)

Sales of property, plant and equipment

58


46

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

(298)


Other acquisitions and investments in noncontrolled affiliates

(76)


(160)

Divestitures

7


10

Short-term investments, net

(21)


(34)

Other investing, net

11


(3)

Net Cash Used for Investing Activities

(1,728)


(4,695)





Financing Activities




Proceeds from issuances of long-term debt

5,207


3,000

Payments of long-term debt

(1,357)


(1,596)

Debt repurchase


(771)

Short-term borrowings, net

(2,194)


56

Cash dividends paid

(2,470)


(2,349)

Share repurchases -- common

(2,328)


(1,929)

Share repurchases -- preferred

(5)


(5)

Proceeds from exercises of stock options

927


724

Excess tax benefits from share-based payment arrangements

89


56

Acquisition of noncontrolling interests

(15)


(1,327)

Other financing

(18)


(2)

Net Cash Used for Financing Activities

(2,164)


(4,143)





Effect of exchange rate changes on cash and cash equivalents

16


144

Net Increase/(Decrease) in Cash and Cash Equivalents

1,242


(2,860)

Cash and Cash Equivalents Beginning of Year

4,067


5,943

Cash and Cash Equivalents End of Period

$ 5,309


$ 3,083









A-3

 

PepsiCo, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet

(in millions except per share amounts)







9/8/2012


12/31/2011


Assets

(unaudited)




Current Assets





Cash and cash equivalents

$     5,309


$     4,067


Short-term investments

402


358


Accounts and notes receivable, net

7,998


6,912


Inventories





Raw materials

1,930


1,883


Work-in-process

253


207


Finished goods

1,722


1,737



3,905


3,827







Prepaid expenses and other current assets

1,656


2,277


Total Current Assets

19,270


17,441







Property, plant and equipment, net

18,530


19,698


Amortizable intangible assets, net

1,799


1,888







Goodwill

16,701


16,800


Other nonamortizable intangible assets

14,511


14,557


Nonamortizable Intangible Assets

31,212


31,357







Investments in noncontrolled affiliates

1,585


1,477


Other assets

1,621


1,021


Total Assets

$    74,017


$    72,882







Liabilities and Equity





Current Liabilities





Short-term obligations

$ 4,211


$ 6,205


Accounts payable and other current liabilities

11,722


11,757


Income taxes payable

287


192


Total Current Liabilities

16,220


18,154







Long-term debt obligations

23,732


20,568


Other liabilities

7,551


8,266


Deferred income taxes

4,930


4,995


Total Liabilities

52,433


51,983







Commitments and Contingencies










Preferred stock, no par value

41


41


Repurchased preferred stock

(162)


(157)







PepsiCo Common Shareholders' Equity





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

31


31


shares, issued 1,865 shares)


Capital in excess of par value

4,179


4,461


Retained earnings

42,332


40,316


Accumulated other comprehensive loss

(6,086)


(6,229)


Repurchased common stock, at cost (314 and 301 shares, respectively)

(18,896)


(17,875)


Total PepsiCo Common Shareholders' Equity

21,560


20,704







Noncontrolling interests

145


311


Total Equity

21,584


20,899


Total Liabilities and Equity

$    74,017


$    72,882














A-4

 

PepsiCo, Inc. and Subsidiaries

Supplemental Share and Stock-Based Compensation Data

(in millions except dollar amounts, unaudited)














12 Weeks Ended


36 Weeks Ended


9/8/2012


9/3/2011


9/8/2012


9/3/2011

Beginning Net Shares Outstanding

1,559


1,585


1,565


1,582

Options Exercised/Restricted Stock Units Converted

9


2


22


17

Shares Repurchased

(16)


(19)


(35)


(31)

Ending Net Shares Outstanding

1,552


1,568


1,552


1,568









Weighted Average Basic

1,556


1,578


1,562


1,581

Dilutive Securities:








Options


12


14


12


15

Restricted Stock Units

6


6


5


6

ESOP Convertible Preferred Stock/Other

1


1


1


1

Weighted Average Diluted

1,575


1,599


1,580


1,603









Average Share Price for the Period

$ 71.26


$ 66.17


$ 67.64


$ 66.29

Growth Versus Prior Year

8%


3%


2%


4%









Options Outstanding

73


96


80


100

Options in the Money

72


74


66


79

Dilutive Shares from Options

12


14


12


15

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










16%


20%


17%


19%









Average Exercise Price of Options in the Money

$ 58.37


$ 52.03


$ 55.28


$ 52.11









Restricted Stock Units Outstanding

12


12


11


13

Dilutive Shares from Restricted Stock Units

6


6


5


6




















Average Intrinsic Value of Restricted Stock Units Outstanding*










$ 65.51


$ 62.97


$ 65.33


$ 62.91









* Weighted average intrinsic value at grant date






























A-5

 

PepsiCo, Inc. and Subsidiaries

Reconciliation of GAAP and Non-GAAP Information

(in millions except per share amounts, unaudited)














Operating Profit Growth Reconciliation 














12 Weeks Ended













 9/8/2012 








Reported Total Operating Profit Growth

(4)

%






Impact of Corporate Unallocated

(4)








Division Operating Profit Growth

(7)

%*



















*Does not sum due to rounding























Operating Profit Growth Reconciliation














12 Weeks Ended










 9/8/2012 



 9/3/2011 



Growth


Reported Total Operating Profit

$               2,800



$              2,906



(4)

%

Mark-to-Market Net (Gains)/Losses

(121)



53





Merger and Integration Charges

2



45





Inventory Fair Value Adjustments

-



3





Restructuring and Impairment Charges

83



-





Core Total Operating Profit

$               2,764



$              3,007



(8)

%

Impact of Foreign Currency Translation

3


Core Constant Currency Operating Profit Growth

(5)

%














Diluted EPS Reconciliation















12 Weeks Ended










 9/8/2012 



 9/3/2011 



Growth


Reported Diluted EPS

$                 1.21



$                1.25



(3)

%

Mark-to-Market Net (Gains)/Losses

(0.05)



0.02





Merger and Integration Charges

-



0.03





Restructuring and Impairment Charges

0.04



-





Core Diluted EPS

$                 1.20



$                1.31

*


(8)

%

Impact of Foreign Currency Translation

4


Core Constant Currency Diluted EPS

(4)

%














*Does not sum due to rounding




























Year Ended













     12/31/2011 








Reported Diluted EPS

$                 4.03








53rd Week

(0.04)








Mark-to-Market Net Losses

0.04








Merger and Integration Charges 

0.17








Restructuring and Impairment Charges

0.18








Inventory Fair Value Adjustments

0.02








Core Diluted EPS

$                 4.40





















Net Cash Provided by Operating Activities Reconciliation














36 Weeks Ended













 9/8/2012 








Net Cash Provided by Operating Activities

$               5,118








Capital Spending

(1,409)








Sales of Property, Plant and Equipment

58








Management Operating Cash Flow

3,767








Discretionary Pension and Retiree Medical Contributions (after-tax)

770








Payments Related to Restructuring Charges (after-tax)

203








Merger and Integration Payments (after-tax)

44








Capital Investments Related to the PBG/PAS Integration

8








Capital Investments Related to the Productivity Plan

12








Payments for Restructuring and Other Charges Related to









the Transaction with Tingyi

98








Management Operating Cash Flow excluding above Items

$               4,902





















Net Cash Provided by Operating Activities Reconciliation (in billions)














2012 Guidance








Net Cash Provided by Operating Activities

$                   ~8 








Net Capital Spending

~(3)








Management Operating Cash Flow

~5 








Certain Other Items*

~1 








Management Operating Cash Flow excluding Certain Other Items

$                   ~6 





















  *Certain other items include discretionary pension and retiree medical contributions, payments related to restructuring charges, payments for restructuring and other charges related to the transaction with Tingyi, merger and integration payments, capital investments related to the Productivity Plan and capital investments related to the PBG/PAS integration



A-6

 

PepsiCo, Inc. and Subsidiaries

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

(unaudited)









Global Beverages Net Revenue Growth Reconciliation








12 Weeks Ended







 9/8/2012 


Reported Global Beverages Net Revenue Growth.

(10)

%

Impact of Acquisitions and Divestitures

10


Impact of Foreign Currency Translation

4


Organic Global Beverages Net Revenue Growth

3

%* 








*Does not sum due to rounding











Global Snacks Net Revenue Growth Reconciliation








12 Weeks Ended







 9/8/2012 


Reported Global Snacks Net Revenue Growth

1

%

Impact of Foreign Currency Translation

6


Organic Global Snacks Net Revenue Growth

7

%








Emerging and Developing Market Net Revenue Growth Reconciliation







12 Weeks Ended







 9/8/2012 


Total Reported Emerging and Developing Market 



Net Revenue Growth

(13)

%

Impact of Acquisitions and Divestitures

14


Impact of Foreign Currency Translation

10


Emerging and Developing Markets Organic Net Revenue Growth

11

%















A-7

 

PepsiCo, Inc. and Subsidiaries

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

Certain Line Items

12 Weeks Ended September 8, 2012 and September 3, 2011

(in millions except per share amounts, unaudited)













GAAP Measure


Non-Core Adjustments


Non-GAAP Measure



Reported


Commodity mark-

to-market net

 gains


Restructuring and

 impairment

 charges


Merger and integration charges


Core*



12 Weeks

Ended 9/8/12





12 Weeks

Ended 9/8/12













Cost of sales

$      7,833


$                 75


$                 -


$             -


$         7,908













Selling, general and

administrative expenses

$      5,992


$                 46


$                (83)


$           (2)


$         5,953













Operating profit 

$      2,800


$              (121)


$                 83


$            2


$         2,764













Provision for income taxes

$         706


$                (51)


$                 24


$            -


$            679













Net income attributable to PepsiCo

$      1,902


$                (70)


$                 59


$            2


$         1,893













Net income attributable to PepsiCo per common share - diluted

$        1.21


$             (0.05)


$              0.04


$            -


$           1.20













Effective tax rate

26.9%








26.3%














GAAP Measure


Non-Core Adjustments


Non-GAAP Measure



Reported


Commodity mark-to-market net losses


Merger and integration charges


Inventory fair value adjustments


Core*



12 Weeks Ended 9/3/11





12 Weeks Ended 9/3/11













Cost of sales

$      8,452


$                 -


$                 -


$             (3)


$         8,449













Selling, general and administrative expenses

$      6,186


$              (53)


$              (45)


$              -


$         6,088













Operating profit 

$      2,906


$               53


$               45


$              3


$         3,007













Interest expense

$        (205)


$                 -


$               16


$              -


$           (189)













Provision for income taxes

$         686


$               19


$                 8


$              1


$            714













Net income attributable to PepsiCo

$      2,000


$               34


$               53


$              2


$         2,089













Net income attributable to PepsiCo per common share - diluted

$        1.25


$            0.02


$            0.03


$              -


$           1.31

**












Effective tax rate

25.4%








25.4%













*Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See A-18 through A-20 for a discussion of each of these non-core adjustments.












**Does not sum due to rounding.




























A-8

 

PepsiCo, Inc. and Subsidiaries

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

Certain Line Items

36 Weeks Ended September 8, 2012 and September 3, 2011

(in millions except per share amounts, unaudited)















GAAP Measure


Non-Core Adjustments

Non-GAAP Measure



Reported


Commodity mark-

to-market net

gains


Restructuring and impairment charges


Merger and integration charges


Restructuring and

other charges

 related to the

 transaction with

 Tingyi


Core*



36 Weeks Ended 9/8/12






36 Weeks Ended 9/8/12















Cost of sales

$    21,637


$                 68


$                 -


$              -


$                -


$    21,705















Selling, general and administrative expenses

$    16,920


$                 58


$              (193)


$              (7)


$             (137)


$    16,641















Operating profit

$      6,899


$              (126)


$               193


$               7


$              137


$      7,110















Provision for income taxes

$      1,788


$                (51)


$                 54


$               1


$               (26)


$      1,766















Net income attributable to PepsiCo

$      4,517


$                (75)


$               139


$               6


$              163


$      4,750















Net income attributable to PepsiCo per common share - diluted

$        2.86


$             (0.05)


$              0.09


$              -


$             0.10


$        3.01

**














Effective tax rate

28.2%










27.0%
















GAAP Measure


Non-Core Adjustments


Non-GAAP Measure





Reported


Commodity mark-to-market net losses


Merger and integration charges


Inventory fair value adjustments


Core*





36 Weeks Ended 9/3/11





36 Weeks Ended 9/3/11

















Cost of sales

$    21,862


$                 -


$                 -


$          (41)


$         21,821

















Selling, general and administrative expenses

$    16,995


$              (31)


$           (158)


$              -


$         16,806

















Operating profit

$      7,386


$               31


$            158


$           41


$           7,616

















Interest expense

$        (584)


$                 -


$              16


$              -


$             (568)

















Provision for income taxes

$      1,775


$               11


$              27


$           10


$           1,823

















Noncontrolling interests

$           32


$                 -


$                 -


$             6


$                38

















Net income attributable to PepsiCo

$      5,028


$               20


$            147


$           25


$           5,220

















Net income attributable to PepsiCo per common share - diluted

$        3.14


$            0.01


$           0.09


$        0.02


$             3.26

















Effective tax rate

26.0%








25.8%

















*Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See A-18 through A-20 for a discussion of each of these non-core adjustments.















**Does not sum due to rounding.






























A-9

 

PepsiCo, Inc. and Subsidiaries

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

Operating Profit by Division

12 Weeks Ended September 8, 2012 and September 3, 2011

(in millions, unaudited)












GAAP Measure


Non-Core Adjustments


Non-GAAP Measure


Reported


Commodity mark-

to-market net

gains


Restructuring and

impairment

charges


Merger and integration charges


Core*

Operating Profit

12 Weeks Ended 9/8/12





12 Weeks Ended 9/8/12





















Frito-Lay North America

$         917


$                   -


$                   8


$                -


$               925

Quaker Foods North America

154


-


1


-


155

Latin America Foods

219


-


29


-


248

   PepsiCo Americas Foods

1,290


-


38


-


1,328











PepsiCo Americas Beverages

837


-


33


-


870











Europe

483


-


(1)


4


486











Asia, Middle East & Africa

317


-


6


-


323











Division Operating Profit

2,927


-


76


4


3,007











Corporate Unallocated

(127)


(121)


7


(2)


(243)











Total Operating Profit

$      2,800


$              (121)


$                 83


$               2


$            2,764






















GAAP Measure


Non-Core Adjustments

Non-GAAP Measure


Reported


Commodity mark-to-market net losses


Merger and integration charges


Inventory fair value adjustments


Core*

Operating Profit

12 Weeks Ended 9/3/11





12 Weeks Ended 9/3/11











Frito-Lay North America

$         918


$                   -


$                   -


$                -


$               918

Quaker Foods North America

177


-


-


-


177

Latin America Foods

275


-


-


-


275

   PepsiCo Americas Foods

1,370


-


-


-


1,370











PepsiCo Americas Beverages

992


-


24


3


1,019











Europe

514


-


11


-


525











Asia, Middle East & Africa

285


-


-


-


285











Division Operating Profit

3,161


-


35


3


3,199











Corporate Unallocated

(255)


53


10


-


(192)











Total Operating Profit

$      2,906


$                 53