0000950123-11-067009.txt : 20110721 0000950123-11-067009.hdr.sgml : 20110721 20110721074450 ACCESSION NUMBER: 0000950123-11-067009 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20110721 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20110721 DATE AS OF CHANGE: 20110721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEPSICO INC CENTRAL INDEX KEY: 0000077476 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 131584302 STATE OF INCORPORATION: NC FISCAL YEAR END: 1225 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01183 FILM NUMBER: 11978727 BUSINESS ADDRESS: STREET 1: 700 ANDERSON HILL RD CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9142532000 MAIL ADDRESS: STREET 1: 700 ANDERSON HILL ROAD CITY: PURCHASE STATE: NY ZIP: 10577-1444 FORMER COMPANY: FORMER CONFORMED NAME: PEPSI COLA CO DATE OF NAME CHANGE: 19700903 8-K 1 y92009e8vk.htm FORM 8-K e8vk
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 21, 2011
PepsiCo, Inc.
(Exact Name of Registrant as Specified in Charter)
         
North Carolina
(State or other Jurisdiction of Incorporation) 		  1-1183
(Commission File Number) 		  13-1584302
(IRS Employer Identification No.)
700 Anderson Hill Road
Purchase, New York 10577
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (914) 253-2000
N/A
(Former Name or Former Address, if Changed Since Last Report)
 
     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

 

Item 2.02. Results of Operations and Financial Condition.
The information in this Item 2.02, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise expressly stated in such filing.
Attached as Exhibit 99.1 and incorporated by reference into this Item 2.02 is a copy of the press release issued by PepsiCo, Inc. (“PepsiCo”), dated July 21, 2011, reporting PepsiCo’s financial results for the 12 and 24 weeks ended June 11, 2011.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1   Press Release issued by PepsiCo, Inc., dated July 21, 2011.

 

 

SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
  PEPSICO, INC.
 		  
Date: July 21, 2011  By:   /s/ Thomas H. Tamoney, Jr.    
    Name:   Thomas H. Tamoney, Jr.   
    Title:   Senior Vice President, Deputy General Counsel and Assistant Secretary   

 

 

         
INDEX TO EXHIBITS
99.1   Press Release issued by PepsiCo, Inc., dated July 21, 2011.

 

EX-99.1 2 y92009exv99w1.htm EX-99.1 exv99w1
EXHIBIT 99.1
(PEPSICO LOGO)
         
Purchase, New York   Telephone: 914-253-2000   www.pepsico.com
         
Contacts:
  Investor
Jamie Caulfield
Senior Vice President, Investor Relations
914-253-3035
jamie.caulfield@pepsico.com 		  Media
Jeff Dahncke
Senior Director, Media Bureau
914-253-3941
jeff.dahncke@pepsico.com
PepsiCo Delivers Solid Financial Results for Second Quarter 2011
  •   Reported EPS increased 20 percent to $1.17
 
  •   Core* EPS grew 10 percent to $1.21
 
  •   Worldwide servings grew 6 percent in the second quarter and 7 percent year to date
 
  •   Worldwide snacks volume grew 10 percent in the second quarter and 7 percent year to date
 
  •   Worldwide beverage volume grew 5 percent in the second quarter and 8 percent year to date
 
  •   Reported net revenue increased 14 percent
 
  •   Net revenue increased 8 percent excluding the impact of the Wimm-Bill-Dann transaction
 
  •   Reported net income increased 18 percent
 
  •   The Company’s updated full-year 2011 guidance is high-single-digit EPS growth on a core, 52-week basis
PURCHASE, N.Y. — July 21, 2011 — PepsiCo, Inc. (NYSE: PEP) today reported growth in volume, revenue, operating profit and earnings per share for the second quarter of 2011 driven by top-line gains across its worldwide snacks and beverage businesses, and from the acquisition of Wimm-Bill-Dann (WBD), the leading dairy and juice company in Russia.
“Our global portfolio in both snacks and beverages is growing volume and net revenue, our global snacks portfolio, in particular, posted another strong quarter with balanced top- and bottom-line growth, and we continue to enjoy robust top-line growth in key emerging markets,” said PepsiCo Chairman and CEO Indra Nooyi. “While we are satisfied with the performance of our portfolio overall, the consumer in developed markets continues to be stressed, and the competitive environment in North America beverages has been particularly challenging. We are therefore implementing previously announced incremental pricing actions in the third quarter to more fully cover input costs while continuing to support our brand-building initiatives. We remain confident in our ability to continue to profitably grow our overall business, even in this uncertain economic environment.”
Worldwide servings growth was 6 percent in the quarter and 7 percent year to date, with strength across the Company’s diverse snacks and beverage portfolio. Worldwide snacks volume increased 10 percent reflecting broad-based gains in the snacks portfolio and the impact of the WBD acquisition. Excluding the WBD impact, snacks volume gained 4 percent. Worldwide beverage volume increased 5 percent, including a 3-percentage-point impact from the WBD acquisition and
 
*   Please refer to the Glossary for the definitions of constant currency and core. Core results and core constant currency results are non-GAAP financial measures that exclude certain items. Please refer to “Reconciliation of GAAP and Non-GAAP information” in the attached exhibits for a description of these items.

 

 

despite challenging conditions in the North American beverage market. Volume performance was led by growth in emerging markets, where organic volume increased 9 percent in snacks and 4 percent in beverages.
Net revenue increased 14 percent reflecting the benefits of organic volume growth, effective net pricing, and favorable foreign exchange. Net revenue grew 8 percent on an organic basis.
Reported total operating profit increased 12 percent, reported net income increased 18 percent and reported EPS increased 20 percent.
Core operating profit increased 5 percent, reflecting the benefits of net revenue gains, synergies from the anchor bottler acquisitions, productivity, favorable foreign exchange and the impact of the acquisition of WBD, offset somewhat by higher commodity and operating costs. Core EPS of $1.21 increased 10 percent driven by operating profit growth and a lower year-over-year core income tax rate.
Summary Second Quarter 2011 Performance (Percent Growth)*
                                                 
            Constant Currency*                
                    Core*           Core*    
                    Operating           Operating   Operating
    Volume   Net Revenue   Profit   Net Revenue   Profit   Profit
PAF
     2       5       7       7       9       9  
FLNA
     2       3       6       3       6       6  
LAF
     5       11       12       18       18       18  
QFNA
     (2 )     (1 )     5       —       5.5       5.5  
 
                                                
PAB
     (1 )     —       (7 )     1       (7 )     3  
 
                                                
Europe
     40/27 **     45       16       52       23       47  
 
                                                
AMEA
     15/6 **     15       10       17       12       12  
Total Divisions
     10/5 **     11       3       14       5       11  
Total PepsiCo
                                     5       12 ***
 
*   The 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”.
 
**   Snacks/Beverage
 
***   The reported operating profit growth was impacted by certain items excluded from our core results in both 2011 and 2010. 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”.

2

 

All comparisons are on a year-over-year basis unless otherwise noted.
Division Operating Summaries
PepsiCo Americas Foods (PAF)
Frito-Lay North America (FLNA)
FLNA increased volume 2 percent in the quarter reflecting especially strong performance in the convenience, dollar and drug channels, and each of the division’s five largest trademarks — Lay’s, Tostitos, Doritos, Cheetos and Ruffles — posted revenue growth driven by strong innovation. Both gross margins and operating margins expanded in the quarter reflecting the benefits of net revenue growth and productivity.
Latin America Foods (LAF)
Volume growth in the quarter reflected gains in the division’s largest markets, Mexico and Brazil, and double-digit growth in a number of other Central and South American markets. Growth was driven by a broad innovation agenda and strong promotions and marketplace execution. Operating profit growth benefited from a legal settlement included in the prior year.
Quaker Foods North America (QFNA)
Volume performance trends improved sequentially from the first quarter of 2011, driven by growth in hot cereal. Net pricing and productivity led to strong gross margin and operating margin expansion.
PepsiCo Americas Beverages (PAB)
PAB volume declined 1 percent in the quarter and was up slightly year to date on an organic basis, driven by growth in non-carbonated beverages, offset by declines in CSDs. Non-carbonated beverage growth in the quarter and year to date was led by growth in Gatorade. CSD performance in the second quarter was hampered by difficult retail pricing comparisons with the prior year quarter.
Operating profit performance reflected inflation in commodity and other operating costs and increased brand support, offset partially by synergy benefits related to the bottling acquisitions, the settlement of promotional spending accruals and certain insurance adjustments. Effective net pricing in the quarter was not sufficient to fully offset the magnitude of cost inflation.
Europe
Organic volume increased 5 percent in both snacks and beverages, and net revenue increased 18 percent excluding the impact of the WBD acquisition. Organic snacks volume growth was led by double-digit growth in Turkey and South Africa (which is included in the Europe reporting segment). Organic beverage volume growth was balanced between Eastern and Western Europe driven by Poland, Turkey, Germany and France.
Operating profit performance benefited from organic volume growth, the impact of the WBD acquisition, effective net pricing, timing of concentrate shipments, and settlement of promotional spending accruals, offset by high levels of input cost inflation, including potato costs in Russia and spending on go-to-market initiatives in Eastern Europe.
Asia, Middle East & Africa (AMEA)
Snacks volume increased 15 percent and beverage volume grew 6 percent, led by strong performance in key emerging markets. Snacks grew double digits in the Middle East, India, China and Thailand. Beverage growth was driven by double-digit gains in India and China, offset by volume softness in some Middle East markets as political unrest led to lower on-premise beverage demand.
Operating profit reflected the volume gains, effective net pricing, timing of concentrate shipments and the recovery of a previously written-off receivable, offset by higher commodity costs.
Tax Rate
PepsiCo’s reported tax rate was 26.0 percent in the second quarter of 2011 versus a reported rate of 29.9 percent in the second quarter of 2010. The core tax rate was 26.0 percent in the second quarter of 2011, compared to a core rate of 28.9 percent in the second quarter of 2010. The reduction in the core tax rate was

3

 

driven primarily by the recognition of tax benefits related to a portion of our international business operations, the lapping of a prior year charge related to the Patient Protection and Affordable Care Act and geographic mix.
Cash Flow
Year-to-date cash flow from operating activities was $2.4 billion. Management operating cash flow, net of capital spending, was $1.2 billion, including $158 million of merger and integration payments associated with the bottler and WBD acquisitions and $50 million of capital spending related to the bottler integrations. Management operating cash flow excluding these items was $1.4 billion.
2011 Guidance
For 2011, the company is targeting high-single-digit earnings per share growth on a core, 52-week basis, including an estimated foreign exchange translation benefit of approximately 2 percentage points, from its fiscal 2010 core EPS of $4.13. The current guidance compares to the company’s previous 2011 guidance of 7 to 8 percent core constant currency EPS growth and an estimated 1 to 2 percentage point benefit from foreign exchange. The company’s updated guidance reflects higher uncertainty regarding macroeconomic and consumer trends for 2011 and anticipates high global commodity cost inflation and ongoing support of strategic initiatives in emerging markets and of its brand-building activities. The company expects to benefit from synergies from the bottler acquisitions and the acquisition of WBD. In addition, the company expects higher net interest expense as compared to the prior year and a core tax rate of approximately 27 percent. The company anticipates share repurchases of approximately $2.5 billion in 2011.
Please refer to the glossary for more information about the items excluded from the company’s 2011 core tax rate guidance, 2011 core EPS guidance and previous 2011 core constant currency EPS guidance.
Conference Call
At 8 a.m. (Eastern Time) today, the Company will host a conference call with investors to discuss second-quarter results and the outlook for 2011. 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.
About PepsiCo
PepsiCo offers the world’s largest portfolio of billion-dollar food and beverage brands, including 19 different product lines that generate more than $1 billion in annual retail sales each. Our main businesses — Quaker, Tropicana, Gatorade, Frito-Lay, and Pepsi Cola — also make hundreds of other enjoyable foods and beverages that are respected household names throughout the world. With net revenues of approximately $60 billion, PepsiCo’s people are united by our unique commitment to sustainable growth by investing in a healthier future for people and our planet, which we believe also means a more successful future for PepsiCo. We call this commitment Performance with Purpose: PepsiCo’s promise to provide a wide range of foods and beverages for local tastes; to find innovative ways to minimize our impact on the environment, including by conserving energy and water usage, and reducing packaging volume; to provide a great workplace for our associates; and to respect, support, and invest in the local communities where we operate. For more information, please visit www.pepsico.com.

4

 

Cautionary Statement
Statements in this communication that are “forward-looking statements,” including our 2011 guidance, are based on currently available information, operating plans and projections about future events and trends. They 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; damage to PepsiCo’s reputation; PepsiCo’s ability to grow its business in developing and emerging markets or unstable political conditions, civil unrest or other developments and risks in the countries where PepsiCo operates; trade consolidation or the loss of any key customer; changes in the legal and regulatory environment; PepsiCo’s ability to build and sustain proper information technology infrastructure, successfully implement its ongoing business transformation initiative or outsource certain functions effectively; unfavorable economic conditions in the countries in which PepsiCo operates; fluctuations in foreign exchange rates; PepsiCo’s ability to compete effectively; increased costs, disruption of supply or shortages of raw materials and other supplies; disruption of PepsiCo’s supply chain; climate change, or legal, regulatory or market measures to address climate change; PepsiCo’s ability to hire or retain key employees or a highly skilled and diverse workforce; failure to successfully renew collective bargaining agreements or strikes or work stoppages; and failure to successfully complete or integrate acquisitions and joint ventures into PepsiCo’s existing operations.
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.
Miscellaneous Disclosures
Reconciliation. 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
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 the following items in our historical results: the commodity mark-to-market net impact included in corporate unallocated expenses; as well as merger and integration costs and certain inventory fair value adjustments in connection with our acquisitions of The Pepsi Bottling Group, Inc. (PBG), PepsiAmericas, Inc. (PAS) and WBD. With respect to our 2011 guidance, our core results exclude: the commodity mark-to-market net impact included in corporate unallocated expenses; certain inventory fair value adjustments and merger and integration charges related to PBG, PAS and WBD; and the impact of the 53rd week. For more details and reconciliations of our 2010 core results, 2011 core and core constant currency results, full-year 2011 core tax rate guidance, full-year 2011 core EPS guidance and previous 2011 core constant currency EPS guidance, see “Reconciliation of GAAP and Non-GAAP Information” in the exhibits attached hereto.
Constant currency: Financial results (historical and projected) assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In addition, the impact on EPS growth is computed by adjusting core EPS growth by the after-tax foreign currency translation impact on core operating profit growth using PepsiCo’s core effective tax rate.

5

 

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: The combined impact of mix and price.
Management operating cash flow: Net cash provided by operating activities less capital spending plus sales of property, plant and equipment. This non-GAAP financial measure is our primary measure used to monitor cash flow performance. See the attached exhibits for a reconciliation of this 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) a discretionary pension contribution in the prior year, (2) restructuring payments in connection with our Productivity for Growth initiative, (3) merger and integration payments in connection with our PBG, PAS and WBD acquisitions, (4) a contribution to The PepsiCo Foundation in the prior year, (5) capital investments related to the bottling integration, and (6) the tax impacts associated with each of these items, as applicable. See the attached exhibits for a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure in accordance with GAAP (operating cash flow).
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 pricing: The combined impact of list price changes, weight changes per package, discounts and allowances.
Net capital spending: Capital spending less cash proceeds from sales of property, plant and equipment.
Organic: A measure that excludes the impact of acquisitions.
Pricing: The impact of list price changes and weight changes per package.
Transaction foreign exchange: The foreign exchange impact on our financial results of transactions, such as purchases of imported raw materials, commodities, or services, occurring in currencies other than the local, functional currency.
# # #

6

 

PepsiCo, Inc. and Subsidiaries
Summary of PepsiCo Second Quarter 2011 Results
(unaudited)
                                                 
    12 Weeks Ended 6/11/11     24 Weeks Ended 6/11/11  
                    Core Constant                     Core Constant  
    Reported     Core*     Currency*     Reported     Core*     Currency*  
    Growth (%)     Growth (%)     Growth (%)     Growth (%)     Growth (%)     Growth (%)  
Volume (Servings)
     6       6               7       7          
Net Revenue
     14       14       11       19       19       17  
Division Operating Profit
     11       5       3       20       5       3  
Total Operating Profit
     12       5               36       4          
Net Income Attributable to PepsiCo
     18       8       6       —       4       2  
Earnings per Share (EPS)
     20       10       8       1       5       3  
 
*    Core results and core constant currency results are financial measures that are not in accordance with Generally Accepted Accounting Principles (GAAP) and, in 2011, exclude the commodity mark-to-market net impact included in corporate unallocated expenses, as well as merger and integration costs and certain inventory fair value adjustments in connection with our acquisitions of The Pepsi Bottling Group, Inc. (PBG), PepsiAmericas, Inc. (PAS) and Wimm-Bill-Dann Foods OJSC (WBD). Core results also exclude, in 2010, the commodity mark-to-market net impact included in corporate unallocated expenses, a one-time net charge related to the change to hyperinflationary accounting and currency devaluation in Venezuela, a contribution to The PepsiCo Foundation, Inc. and an asset write-off charge for SAP software. Additionally, with respect to our acquisitions of PBG and PAS, 2010 core results also exclude our gain on previously held equity interests, merger and integration costs, as well as our share of PBG’s and PAS’s respective merger and integration costs, and certain inventory fair value adjustments. Core growth, on a constant currency basis, assumes constant foreign currency exchange rates used for translation based on the rates in effect for the comparable period during 2010. In addition, core constant currency EPS growth is computed by adjusting core EPS growth by the after-tax foreign currency translation impact on core operating profit growth using PepsiCo’s core effective tax rate. See schedules A-7 through A-16 for a discussion of these items and reconciliations to the most directly comparable financial measures in accordance with GAAP.

A - 1

 

PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Income
(in millions, except per share amounts, and unaudited)
                                                 
    12 Weeks Ended     24 Weeks Ended  
    6/11/11     6/12/10     Change     6/11/11     6/12/10     Change  
Net Revenue
   $ 16,827     $ 14,801       14 %   $ 28,764     $ 24,169       19 %
 
                                                
Cost of sales
     7,963       6,745       18 %     13,410       11,208       20 %
Selling, general and administrative expenses
     6,070       5,563       9 %     10,809       9,612       12 %
Amortization of intangible assets
     40       32       23 %     65       48       35 %
 
                                        
 
                                                
Operating Profit
     2,754       2,461       12 %     4,480       3,301       36 %
 
                                                
Bottling equity income
     —       9       n/m       —       718       n/m  
Interest expense
     (199 )     (172 )     17 %     (379 )     (326 )     17 %
Interest income
     20       2       n/m       37       8       386 %
 
                                        
 
                                                
Income before income taxes
     2,575       2,300       12 %     4,138       3,701       12 %
 
                                                
Provision for income taxes
     670       687       (2.5 )%     1,089       654       66 %
 
                                        
 
                                                
Net income
     1,905       1,613       18 %     3,049       3,047       —  
 
                                                
Less: Net income attributable to noncontrolling interests
     20       10       109 %     21       14       58 %
 
                                        
 
                                                
Net Income Attributable to PepsiCo
   $ 1,885     $ 1,603       18 %   $ 3,028     $ 3,033       —  
 
                                        
 
                                                
Diluted
                                                
Net Income Attributable to PepsiCo per Common Share
   $ 1.17     $ 0.98       20 %   $ 1.89     $ 1.87       1 %
Average Shares Outstanding
     1,605       1,634               1,605       1,620          
 
                                                
Cash dividends declared per common share
   $ 0.515     $ 0.48             $ 0.995     $ 0.93          
 
n/m   = not meaningful

A - 2

 

PepsiCo, Inc. and Subsidiaries
Supplemental Financial Information
(in millions, unaudited)
                                                 
    12 Weeks Ended     24 Weeks Ended  
    6/11/11     6/12/10     Change     6/11/11     6/12/10     Change  
Net Revenue
                                                
 
                                                
Frito-Lay North America
   $ 3,090     $ 2,992       3 %   $ 5,994     $ 5,856       2 %
Quaker Foods North America
     583       582       —       1,223       1,265       (3 )%
Latin America Foods
     1,808       1,538       18 %     2,916       2,521       16 %
 
                                    
PepsiCo Americas Foods
     5,481       5,112       7 %     10,133       9,642       5 %
 
                                                
PepsiCo Americas Beverages
     5,629       5,548       1 %     10,160       8,313       22 %
 
                                                
Europe
     3,794       2,498       52 %     5,420       3,542       53 %
 
                                                
Asia, Middle East & Africa
     1,923       1,643       17 %     3,051       2,672       14 %
 
                                                
 
                                    
Total Net Revenue
   $ 16,827     $ 14,801       14 %   $ 28,764     $ 24,169       19 %
 
                                    
 
                                                
Operating Profit
                                                
 
                                                
Frito-Lay North America
   $ 853     $ 800       6 %   $ 1,627     $ 1,528       6 %
Quaker Foods North America
     167       159       5.5 %     381       354       8 %
Latin America Foods
     274       233       18 %     445       378       18 %
 
                                    
PepsiCo Americas Foods
     1,294       1,192       9 %     2,453       2,260       9 %
 
                                                
PepsiCo Americas Beverages
     983       952       3 %     1,541       1,025       50 %
 
                                                
Europe
     407       276       47 %     470       394       19 %
 
                                                
Asia, Middle East & Africa
     299       267       12 %     445       422       5 %
 
                                    
 
                                                
Division Operating Profit
     2,983       2,687       11 %     4,909       4,101       20 %
 
                                                
Corporate Unallocated
                                                
Net Impact of Mark-to-Market on Commodity Hedges
     (9 )     (4 )     167 %     22       42       (49 )%
Merger and Integration Charges
     (12 )     (24 )     (57 )%     (54 )     (112 )     (53 )%
Venezuela Currency Devaluation
     —       —       —       —       (129 )     n/m  
Asset Write-Off
     —       —       —       —       (145 )     n/m  
Foundation Contribution
     —       —       —       —       (100 )     n/m  
Other
     (208 )     (198 )     6 %     (397 )     (356 )     12 %
 
                                    
 
     (229 )     (226 )     1 %     (429 )     (800 )     (46 )%
 
                                                
Total Operating Profit
   $ 2,754     $ 2,461       12 %   $ 4,480     $ 3,301       36 %
 
                                    
 
n/m = not meaningful

A - 3

 

PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in millions)
                 
    24 Weeks Ended  
    6/11/11     6/12/10  
    (unaudited)  
Operating Activities
                
Net income
   $ 3,049     $ 3,047  
Depreciation and amortization
     1,187       969  
Stock-based compensation expense
     146       119  
Cash payments for restructuring charges
     (1 )     (28 )
Merger and integration costs
     113       476  
Cash payments for merger and integration costs
     (207 )     (209 )
Gain on previously held equity interests in PBG and PAS
     —       (958 )
Asset write-off
     —       145  
Non-cash foreign exchange loss related to Venezuela devaluation
     —       120  
Excess tax benefits from share-based payment arrangements
     (52 )     (47 )
Pension and retiree medical plan contributions
     (116 )     (694 )
Pension and retiree medical plan expenses
     254       248  
Bottling equity income, net of dividends
     —       42  
Deferred income taxes and other tax charges and credits
     (146 )     186  
Change in accounts and notes receivable
     (1,491 )     (994 )
Change in inventories
     (742 )     40  
Change in prepaid expenses and other current assets
     (144 )     (139 )
Change in accounts payable and other current liabilities
     (65 )     (55 )
Change in income taxes payable
     849       337  
Other, net
     (281 )     (163 )
 
            
Net Cash Provided by Operating Activities
     2,353       2,442  
 
            
 
                
Investing Activities
                
Capital spending
     (1,231 )     (968 )
Sales of property, plant and equipment
     34       37  
Acquisitions of PBG and PAS, net of cash and cash equivalents acquired
     —       (2,833 )
Acquisition of manufacturing and distribution rights from Dr Pepper Snapple Group, Inc. (DPSG)
     —       (900 )
Acquisition of WBD, net of cash and cash equivalents acquired
     (2,428 )     —  
Investment in WBD
     (164 )     —  
Other acquisitions and investments in noncontrolled affiliates
     (61 )     (34 )
Short-term investments, net
     —       (37 )
Other investing, net
     (2 )     (10 )
 
            
Net Cash Used for Investing Activities
     (3,852 )     (4,745 )
 
            
 
                
Financing Activities
                
Proceeds from issuances of long-term debt
     1,754       4,216  
Payments of long-term debt
     (285 )     (26 )
Short-term borrowings, net
     (262 )     3,341  
Cash dividends paid
     (1,530 )     (1,451 )
Share repurchases — common
     (746 )     (3,308 )
Share repurchases — preferred
     (4 )     (2 )
Proceeds from exercises of stock options
     652       464  
Excess tax benefits from share-based payment arrangements
     52       47  
Acquisition of noncontrolling interests
     (1,327 )     (159 )
Other financing
     (3 )     (6 )
 
            
Net Cash (Used for)/Provided by Financing Activities
     (1,699 )     3,116  
 
            
 
                
Effect of exchange rate changes on cash and cash equivalents
     168       (227 )
 
Net (Decrease)/Increase in Cash and Cash Equivalents
     (3,030 )     586  
Cash and Cash Equivalents — Beginning of Year
     5,943       3,943  
 
            
Cash and Cash Equivalents — End of Period
   $ 2,913     $ 4,529  
 
            
 
                
Non-cash activity:
                
Issuance of common stock and equity awards in connection with our acquisitions of PBG and PAS, as reflected in investing and financing activities
     —     $ 4,451  
 
            

A - 4

 

PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(in millions except per share amounts)
                 
    6/11/11     12/25/10  
    (unaudited)          
Assets
                
Current Assets
                
Cash and cash equivalents
   $ 2,913     $ 5,943  
Short-term investments
     431       426  
Accounts and notes receivable, net
     8,283       6,323  
Inventories
                
Raw materials
     2,296       1,654  
Work-in-process
     283       128  
Finished goods
     1,960       1,590  
 
            
 
     4,539       3,372  
 
                
Prepaid expenses and other current assets
     1,751       1,505  
 
            
Total Current Assets
     17,917       17,569  
 
                
Property, plant and equipment, net
     20,854       19,058  
Amortizable intangible assets, net
     2,480       2,025  
 
                
Goodwill
     16,299       14,661  
Other nonamortizable intangible assets
     15,548       11,783  
 
            
Nonamortizable Intangible Assets
     31,847       26,444  
 
                
Investments in noncontrolled affiliates
     1,449       1,368  
Other assets
     1,133       1,689  
 
            
Total Assets
   $ 75,680     $ 68,153  
 
            
 
                
Liabilities and Equity
                
Current Liabilities
                
Short-term obligations
   $ 5,715     $ 4,898  
Accounts payable and other current liabilities
     11,433       10,923  
Income taxes payable
     909       71  
 
            
Total Current Liabilities
     18,057       15,892  
 
                
Long-term debt obligations
     21,607       19,999  
Other liabilities
     6,669       6,729  
Deferred income taxes
     4,977       4,057  
 
            
Total Liabilities
     51,310       46,677  
 
                
Commitments and Contingencies
                
 
                
Preferred stock, no par value
     41       41  
Repurchased preferred stock
     (154 )     (150 )
 
                
PepsiCo Common Shareholders’ Equity
                
Common stock, par value 12/3¢ per share (authorized 3,600 shares, issued 1,865 shares)
     31       31  
Capital in excess of par value
     4,358       4,527  
Retained earnings
     38,527       37,090  
Accumulated other comprehensive loss
     (2,254 )     (3,630 )
Repurchased common stock, at cost (284 shares)
     (16,597 )     (16,745 )
 
            
Total PepsiCo Common Shareholders’ Equity
     24,065       21,273  
 
                
Noncontrolling interests
     418       312  
 
            
Total Equity
     24,370       21,476  
 
            
Total Liabilities and Equity
   $ 75,680     $ 68,153  
 
            

A - 5

 

PepsiCo, Inc. and Subsidiaries
Supplemental Share and Stock-Based Compensation Data
(in millions, except dollar amounts, and unaudited)
                                 
    12 Weeks Ended     24 Weeks Ended  
    6/11/11     6/12/10     6/11/11     6/12/10  
Beginning Net Shares Outstanding
     1,581       1,627       1,582       1,565  
Shares Issued in Connection with our Acquisitions of PBG and PAS
     —       —       —       67  
Options Exercised/Restricted Stock Units Converted
     9       4       15       13  
Shares Repurchased
     (5 )     (37 )     (12 )     (51 )
 
                        
Ending Net Shares Outstanding
     1,585       1,594       1,585       1,594  
 
                        
 
                                
Weighted Average Basic
     1,583       1,608       1,583       1,595  
Dilutive securities:
                                
Options
     16       20       16       20  
Restricted Stock Units
     5       5       5       4  
ESOP Convertible Preferred Stock/Other
     1       1       1       1  
 
                        
Weighted Average Diluted
     1,605       1,634       1,605       1,620  
 
                        
 
                                
Average Share Price for the period
   $ 68.05     $ 65.10     $ 66.35     $ 63.64  
Growth Versus Prior Year
     5 %     27 %     4 %     24 %
 
                                
Options Outstanding
     98       119       102       116  
Options in the Money
     88       96       82       94  
Dilutive Shares from Options
     16       20       16       20  
Dilutive Shares from Options as a % of Options in the Money
     18 %     21 %     19 %     21 %
 
                                
Average Exercise Price of Options in the Money
   $ 53.92     $ 49.67     $ 52.14     $ 48.78  
 
                                
Restricted Stock Units Outstanding
     13       10       13       8  
Dilutive Shares from Restricted Stock Units
     5       5       5       4  
 
                                
Average Intrinsic Value of Restricted Stock Units Outstanding*
   $ 62.87     $ 63.04     $ 62.89     $ 61.70  
 
*   Weighted-average intrinsic value at grant date.

A - 6

 

Reconciliation of GAAP and Non-GAAP Information
(unaudited)
Net revenue excluding the impact of WBD, division operating profit, core results and core constant currency 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 ended June 11, 2011, we recognized $9 million of mark-to-market net losses on commodity hedges in corporate unallocated expenses. In the quarter ended June 12, 2010, we recognized $4 million of mark-to-market net losses on commodity hedges in corporate unallocated expenses. In the year ended December 25, 2010, we recognized $91 million of mark-to-market net gains on commodity hedges in corporate unallocated expenses. We centrally manage commodity derivatives on behalf of our divisions. 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 June 11, 2011, we incurred merger and integration charges of $58 million related to our acquisitions of PBG, PAS and WBD, including $32 million recorded in the PAB segment, $14 million recorded in the Europe segment and $12 million recorded in corporate unallocated expenses. These charges also include closing costs and advisory fees related to our acquisition of WBD. In the quarter ended June 12, 2010, we incurred merger and integration charges of $155 million related to our acquisitions of PBG and PAS, including $103 million recorded in the PAB segment, $28 million recorded in the Europe segment and $24 million recorded in corporate unallocated expenses. These charges also include closing costs, one-time financing costs and advisory fees related to our acquisitions of PBG and PAS. In the year ended December 25, 2010, we incurred merger and integration charges of $799 million related to our acquisitions of PBG and PAS, as well as advisory fees in connection with our acquisition of WBD, including $467 million recorded in the PAB segment, $111 million recorded in the Europe segment, $191 million recorded in corporate unallocated expenses and $30 million recorded in interest expense. These charges also include closing costs, one-time financing costs and advisory fees related to our acquisitions of PBG and PAS. In addition, in the year ended December 25, 2010, we recorded $9 million of charges, representing our share of the respective merger costs of PBG and PAS, recorded in bottling equity income.
Gain on previously held equity interests in PBG and PAS
In the first quarter of 2010, in connection with our acquisitions of PBG and PAS, we recorded a gain on our previously held equity interests of $958 million, comprising $735 million which is non-taxable and recorded in bottling equity income and $223 million related to the reversal of deferred tax liabilities associated with these previously held equity interests.
Inventory fair value adjustments
In the quarter ended June 11, 2011, we recorded $4 million of incremental costs in cost of sales related to fair value adjustments to hedging contracts included in PBG’s and PAS’s balance sheets at the acquisition date. In the quarter ended June 12, 2010, we recorded $76 million of incremental costs, substantially all in cost of sales, related to fair value adjustments to the acquired inventory and other related hedging contracts included in PBG’s and PAS’s balance sheets at the acquisition date. In the year ended December 25, 2010, we recorded $398 million of incremental costs, substantially all in cost of sales, related to fair value adjustments to the acquired inventory and other related hedging contracts included in PBG’s and PAS’s balance sheets at the acquisition date.
Venezuela currency devaluation
As of the beginning of our 2010 fiscal year, we recorded a one-time $120 million net charge related to our change to hyperinflationary accounting for our Venezuelan businesses and the related devaluation of the bolivar fuerte (bolivar). $129 million of this net charge was recorded in corporate unallocated expenses, with the balance (income of $9 million) recorded in our PAB segment.
Asset write-off
In the first quarter of 2010, we recorded a $145 million charge related to a change in scope of one release in our ongoing migration to SAP software. This change was driven, in part, by a review of our North America systems strategy following our acquisitions of PBG and PAS. This change does not impact our overall commitment to continue our implementation of SAP across our global operations over the next few years.

A - 7

 

Reconciliation of GAAP and Non-GAAP Information (cont.)
(unaudited)
Foundation contribution
In the first quarter of 2010, we made a $100 million contribution to The PepsiCo Foundation, Inc. (Foundation), in order to fund charitable and social programs over the next several years. This contribution was recorded in corporate unallocated expenses.
Interest expense incurred in connection with debt repurchase
In the year ended December 25, 2010, we paid $672 million in a cash tender offer to repurchase $500 million (aggregate principal amount) of our 7.90% senior unsecured notes maturing in 2018. As a result of this debt repurchase, we recorded a $178 million charge to interest expense, primarily representing the premium paid in the tender offer.
Management operating cash flow
Additionally, management operating cash flow 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.
2011 guidance
Our 2011 core tax rate guidance and our 2011 core EPS guidance exclude the commodity mark-to-market net impact included in corporate unallocated expenses; merger and integration charges related to PBG, PAS and WBD; and the impact of the 53rd week in 2011. We are not able to reconcile our full-year projected 2011 core tax rate to our full-year projected 2011 reported tax rate or our full-year projected 2011 core EPS and previous full-year projected 2011 core constant currency EPS to our full-year projected 2011 reported EPS because we are unable to predict the mark-to-market net gains or losses on commodity hedges due to the unpredictability of future changes in commodity prices. Therefore, we are unable to provide a reconciliation of these measures.

A - 8

 

Reconciliation of GAAP and Non-GAAP Information (cont.)
($ in millions, unaudited)
Operating Profit Growth Reconciliation
                 
    12 Weeks     24 Weeks  
    Ended     Ended  
    6/11/11     6/11/11  
Division Operating Profit Growth
     11 %     20 %
Impact of Corporate Unallocated
     1       16  
 
            
Reported Total Operating Profit Growth
     12 %     36 %
 
            
Operating Profit Growth Reconciliation
                         
    12 Weeks Ended        
    6/11/11     6/12/10     Growth  
Reported Total Operating Profit Growth
   $ 2,754     $ 2,461       12 %
Mark-to-Market Net Losses
     9       4          
Merger and Integration Charges
     58       155          
Inventory Fair Value Adjustments
     4       76          
 
                    
Core Total Operating Profit Growth
   $ 2,825     $ 2,696       5 %
 
                    
Effective Tax Rate Reconciliation
                         
    12 Weeks Ended  
    6/11/11  
    Pre-Tax     Income     Effective  
    Income     Taxes     Tax Rate  
Reported Effective Tax Rate
   $ 2,575     $ 670       26.0 %
Mark-to-Market Net Losses
     9       4          
Merger and Integration Charges
     58       13          
Inventory Fair Value Adjustments
     4       1          
 
                    
Core Effective Tax Rate
   $ 2,646     $ 688       26.0 %
 
                    
                         
    12 Weeks Ended  
    6/12/10  
    Pre-Tax     Income     Effective  
    Income     Taxes     Tax Rate  
Reported Effective Tax Rate
   $ 2,300     $ 687       29.9 %
Mark-to-Market Net Losses
     4       1          
Merger and Integration Charges
     155       36          
Inventory Fair Value Adjustments
     76       8          
 
                    
Core Effective Tax Rate
   $ 2,535     $ 732       28.9 %
 
                    
Diluted EPS Reconciliation
                         
    12 Weeks Ended        
    6/11/11     6/12/10     Growth  
Reported Diluted EPS
   $ 1.17     $ 0.98       20 %
Mark-to-Market Net Losses
     —       —          
Merger and Integration Charges
     0.03       0.07          
Inventory Fair Value Adjustments
     —       0.04          
 
                    
Core Diluted EPS
   $ 1.21 *   $ 1.10 *     10 %
 
                    
 
*   Does not sum due to rounding.

A - 9

 

Reconciliation of GAAP and Non-GAAP Information (cont.)
($ in millions, except per share amounts, unaudited)
Diluted EPS Reconciliation
         
    Year Ended  
    12/25/10  
Reported Diluted EPS
   $ 3.91  
Mark-to-Market Net Gains
     (0.04 )
Gain on Previously Held Equity Interests
     (0.60 )
Merger and Integration Charges
     0.40  
Inventory Fair Value Adjustments
     0.21  
Venezuela Currency Devaluation
     0.07  
Asset Write-Off
     0.06  
Foundation Contribution
     0.04  
Debt Repurchase
     0.07  
 
      
Core Diluted EPS
   $ 4.13 *
 
      
 
*   Does not sum due to rounding.
Net Cash Provided by Operating Activities Reconciliation
         
    24 Weeks  
    Ended  
    6/11/11  
Net Cash Provided by Operating Activities
   $ 2,353  
Capital Spending
     (1,231 )
Sales of Property, Plant and Equipment
     34  
 
      
Management Operating Cash Flow
     1,156  
Payments Related to 2009 Restructuring Charges
     1  
Merger and Integration Payments (after-tax)
     158  
Capital Investments Related to the PBG/PAS Integration
     50  
 
      
Management Operating Cash Flow Excluding above Items
   $ 1,365  
 
      
Growth in Total Net Revenue Reconciliation
         
    12 Weeks  
    Ended  
    6/11/11  
Growth in Total Net Revenue
     14 %
Impact of WBD
     (6 )
 
      
Growth in Total Net Revenue Excluding WBD
     8 %
 
      
Growth in Europe Net Revenue Reconciliation
         
    12 Weeks  
    Ended  
    6/11/11  
Growth in Europe Net Revenue
     52 %
Impact of WBD
     (33 )
 
      
Growth in Europe Net Revenue Excluding WBD
     18 %*
 
      
 
*   Does not sum due to rounding.

A - 10

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Certain Line Items
12 and 24 Weeks Ended June 11, 2011
(in millions, except per share amounts, and unaudited)
                                         
    GAAP                             Non-GAAP  
    Measure     Non-Core Adjustments     Measure  
    Reported                             Core*  
    12 Weeks             Merger and     Commodity     12 Weeks  
    Ended     Inventory fair     integration     mark-to-market     Ended  
    6/11/11     value adjustments     charges     net losses     6/11/11  
Cost of sales
   $ 7,963     $ (4 )   $ —     $ —     $ 7,959  
 
Selling, general and administrative expenses
   $ 6,070     $ —     $ (58 )   $ (9 )   $ 6,003  
 
Operating profit
   $ 2,754     $ 4     $ 58     $ 9     $ 2,825  
 
Provision for income taxes
   $ 670     $ 1     $ 13     $ 4     $ 688  
 
Noncontrolling interests
   $ 20     $ 1     $ —     $ —     $ 21  
 
Net income attributable to PepsiCo
   $ 1,885     $ 2     $ 45     $ 5     $ 1,937  
 
Net income attributable to PepsiCo per common share - diluted
   $ 1.17     $ —     $ 0.03     $ —     $ 1.21 **
                                         
    GAAP                             Non-GAAP  
    Measure     Non-Core Adjustments     Measure  
    Reported                             Core*  
    24 Weeks             Merger and     Commodity     24 Weeks  
    Ended     Inventory fair     integration     mark-to-market     Ended  
    6/11/11     value adjustments     charges     net gains     6/11/11  
Cost of sales
   $ 13,410     $ (38 )   $ —     $ —     $ 13,372  
 
Selling, general and administrative expenses
   $ 10,809     $ —     $ (113 )   $ 22     $ 10,718  
 
Operating profit
   $ 4,480     $ 38     $ 113     $ (22 )   $ 4,609  
 
Provision for income taxes
   $ 1,089     $ 9     $ 19     $ (8 )   $ 1,109  
 
Noncontrolling interests
   $ 21     $ 6     $ —     $ —     $ 27  
 
Net income attributable to PepsiCo
   $ 3,028     $ 23     $ 94     $ (14 )   $ 3,131  
 
Net income attributable to PepsiCo per common share — diluted
   $ 1.89     $ 0.01     $ 0.06     $ (0.01 )   $ 1.95  
 
*   Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments. See schedules A-7 and A-8 for a discussion of each of these non-core adjustments.
 
**   Does not sum due to rounding.

A - 11

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Certain Line Items
12 and 24 Weeks Ended June 12, 2010
(in millions, except per share amounts, and unaudited)
                                                                         
    GAAP                                                             Non-GAAP  
    Measure     Non-Core Adjustments     Measure  
    Reported     Gain on previously                                                     Core*  
    12 Weeks     held equity     Inventory fair     Merger and                     Venezuela     Commodity     12 Weeks  
    Ended     interests in PBG     value     integration             Foundation     currency     mark-to-market     Ended  
    6/12/10     and PAS     adjustments     charges     Asset write-off     contribution     devaluation     net losses     6/12/10  
Cost of sales
   $ 6,745     $ —     $ (73 )   $ —     $ —     $ —     $ —     $ —     $ 6,672  
 
Selling, general and administrative expenses
   $ 5,563     $ —     $ (3 )   $ (155 )   $ —     $ —     $ —     $ (4 )   $ 5,401  
 
Operating profit
   $ 2,461     $ —     $ 76     $ 155     $ —     $ —     $ —     $ 4     $ 2,696  
 
Provision for income taxes
   $ 687     $ —     $ 8     $ 36     $ —     $ —     $ —     $ 1     $ 732  
 
Net income attributable to PepsiCo
   $ 1,603     $ —     $ 68     $ 119     $ —     $ —     $ —     $ 3     $ 1,793  
 
Net income attributable to PepsiCo per common share — diluted
   $ 0.98     $ —     $ 0.04     $ 0.07     $ —     $ —     $ —     $ —     $ 1.10 **
                                                                         
    GAAP                                                             Non-GAAP  
    Measure     Non-Core Adjustments     Measure  
    Reported     Gain on previously                                                     Core*  
    24 Weeks     held equity     Inventory fair     Merger and                     Venezuela     Commodity     24 Weeks  
    Ended     interests in PBG     value     integration             Foundation     currency     mark-to-market     Ended  
    6/12/10     and PAS     adjustments     charges     Asset write-off     contribution     devaluation     net gains     6/12/10  
Cost of sales
   $ 11,208     $ —     $ (354 )   $ —     $ —     $ —     $ —     $ —     $ 10,854  
 
Selling, general and administrative expenses
   $ 9,612     $ —     $ (3 )   $ (437 )   $ (145 )   $ (100 )   $ (120 )   $ 42     $ 8,849  
 
Operating profit
   $ 3,301     $ —     $ 357     $ 437     $ 145     $ 100     $ 120     $ (42 )   $ 4,418  
 
Bottling equity income/(loss)
   $ 718     $ (735 )   $ —     $ 9     $ —     $ —     $ —     $ —     $ (8 )
 
Interest expense
   $ (326 )   $ —     $ —     $ 30     $ —     $ —     $ —     $ —     $ (296 )
 
Provision for income taxes
   $ 654     $ 223     $ 49     $ 96     $ 53     $ 36     $ —     $ (16 )   $ 1,095  
 
Net income attributable to PepsiCo
   $ 3,033     $ (958 )   $ 308     $ 380     $ 92     $ 64     $ 120     $ (26 )   $ 3,013  
 
Net income attributable to PepsiCo per common share — diluted
   $ 1.87     $ (0.60 )   $ 0.19     $ 0.23     $ 0.06     $ 0.04     $ 0.07     $ (0.02 )   $ 1.86 **
 
*   Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments. See schedules A-7 and A-8 for a discussion of each of these non-core adjustments.
 
**   Does not sum due to rounding.

A - 12

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Operating Profit by Division
12 and 24 Weeks Ended June 11, 2011
(in millions and unaudited)
                                         
    GAAP                             Non-GAAP  
    Measure     Non-Core Adjustments     Measure  
    Reported           Core*  
    12 Weeks     Inventory     Merger and     Commodity     12 Weeks  
    Ended     fair value     integration     mark-to-market     Ended  
Operating Profit   6/11/11     adjustments     charges     net losses     6/11/11  
Frito-Lay North America
   $ 853     $ —     $ —     $ —     $ 853  
Quaker Foods North America
     167       —       —       —       167  
Latin America Foods
     274       —       —       —       274  
 
                              
PepsiCo Americas Foods
     1,294       —       —       —       1,294  
 
                                        
PepsiCo Americas Beverages
     983       4       32       —       1,019  
 
                                        
Europe
     407       —       14       —       421  
 
                                        
Asia, Middle East & Africa
     299       —       —       —       299  
 
                              
 
                                        
Division Operating Profit
     2,983       4       46       —       3,033  
 
                                        
Corporate Unallocated
     (229 )     —       12       9       (208 )
 
                              
 
                                        
Total Operating Profit
   $ 2,754     $ 4     $ 58     $ 9     $ 2,825  
 
                              
 
    GAAP                             Non-GAAP  
    Measure     Non-Core Adjustments     Measure  
    Reported           Core*  
    24 Weeks     Inventory     Merger and     Commodity     24 Weeks  
    Ended     fair value     integration     mark-to-market     Ended  
Operating Profit   6/11/11     adjustments     charges     net gains     6/11/11  
Frito-Lay North America
   $ 1,627     $ —     $ —     $ —     $ 1,627  
Quaker Foods North America
     381       —       —       —       381  
Latin America Foods
     445       —       —       —       445  
 
                              
PepsiCo Americas Foods
     2,453       —       —       —       2,453  
 
                                        
PepsiCo Americas Beverages
     1,541       13       53       —       1,607  
 
                                        
Europe
     470       25       6       —       501  
 
                                        
Asia, Middle East & Africa
     445       —       —       —       445  
 
                              
 
                                        
Division Operating Profit
     4,909       38       59       —       5,006  
 
                                        
Corporate Unallocated
     (429 )     —       54       (22 )     (397 )
 
                              
 
                                        
Total Operating Profit
   $ 4,480     $ 38     $ 113     $ (22 )   $ 4,609  
 
                              
 
*   Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments. See schedules A-7 through A-8 for a discussion of each of these non-core adjustments.

A - 13

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Operating Profit by Division
12 and 24 Weeks Ended June 12, 2010
(in millions and unaudited)
                                                                 
    GAAP                                                     Non-GAAP  
    Measure     Non-Core Adjustments     Measure  
    Reported           Core*  
    12 Weeks             Merger and                     Venezuela     Commodity     12 Weeks  
    Ended     Inventory fair     integration             Foundation     currency     mark-to-market     Ended  
Operating Profit   6/12/10     value adjustments     charges     Asset write-off     contribution     devaluation     net losses     6/12/10  
Frito-Lay North America
   $ 800     $ —     $ —     $ —     $ —     $ —     $ —     $ 800  
Quaker Foods North America
     159       —       —       —       —       —       —       159  
Latin America Foods
     233       —       —       —       —       —       —       233  
 
                                                
PepsiCo Americas Foods
     1,192       —       —       —       —       —       —       1,192  
 
                                                                
PepsiCo Americas Beverages
     952       36       103       —       —       —       —       1,091  
 
                                                                
Europe
     276       40       28       —       —       —       —       344  
 
                                                                
Asia, Middle East & Africa
     267       —       —       —       —       —       —       267  
 
                                                
 
                                                                
Division Operating Profit
     2,687       76       131       —       —       —       —       2,894  
 
                                                                
Corporate Unallocated
     (226 )     —       24       —       —       —       4       (198 )
 
                                                
 
                                                                
Total Operating Profit
   $ 2,461     $ 76     $ 155     $ —     $ —     $ —     $ 4     $ 2,696  
 
                                                
                                                                 
    GAAP                                                     Non-GAAP  
    Measure     Non-Core Adjustments     Measure  
    Reported           Core*  
    24 Weeks             Merger and                     Venezuela     Commodity     24 Weeks  
    Ended     Inventory fair     integration             Foundation     currency     mark-to-market     Ended  
Operating Profit   6/12/10     value adjustments     charges     Asset write-off     contribution     devaluation     net gains     6/12/10  
Frito-Lay North America
   $ 1,528     $ —     $ —     $ —     $ —     $ —     $ —     $ 1,528  
Quaker Foods North America
     354       —       —       —       —       —       —       354  
Latin America Foods
     378       —       —       —       —       —       —       378  
 
                                                
PepsiCo Americas Foods
     2,260       —       —       —       —       —       —       2,260  
 
                                                                
PepsiCo Americas Beverages
     1,025       317       296       —       —       (9 )     —       1,629  
 
                                                                
Europe
     394       40       29       —       —       —       —       463  
 
                                                                
Asia, Middle East & Africa
     422       —       —       —       —       —       —       422  
 
                                                
 
                                                                
Division Operating Profit
     4,101       357       325       —       —       (9 )     —       4,774  
 
                                                                
Corporate Unallocated
     (800 )     —       112       145       100       129       (42 )     (356 )
 
                                                
 
                                                                
Total Operating Profit
   $ 3,301     $ 357     $ 437     $ 145     $ 100     $ 120     $ (42 )   $ 4,418  
 
                                                
 
*   Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments. See schedules A-7 through A-8 for a discussion of each of these non-core adjustments.

A - 14

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Core Growth and Core Constant Currency Growth*
(unaudited)
                 
    12 Weeks  
    6/11/11  
    Net     Operating  
    Revenue     Profit  
Frito-Lay North America
                
Reported Growth
     3 %     6 %
Merger and Integration Charges
     —       —  
 
            
Core Growth
     3       6  
Impact of Foreign Currency Translation
     (0.5 )     (0.5 )
 
            
Core Constant Currency Growth
     3 %     6 %
 
            
 
                
Quaker Foods North America
                
Reported Growth
     — %     5.5 %
Merger and Integration Charges
     —       —  
 
            
Core Growth
     —       5.5  
Impact of Foreign Currency Translation
     (1 )     (1 )
 
            
Core Constant Currency Growth
     (1 )%     5 %
 
            
 
                
Latin America Foods
                
Reported Growth
     18 %     18 %
Merger and Integration Charges
     —       —  
 
            
Core Growth
     18       18  
Impact of Foreign Currency Translation
     (7 )     (6 )
 
            
Core Constant Currency Growth
     11 %     12 %
 
            
 
                
PepsiCo Americas Foods
                
Reported Growth
     7 %     9 %
Merger and Integration Charges
     —       —  
 
            
Core Growth
     7       9  
Impact of Foreign Currency Translation
     (2 )     (2 )
 
            
Core Constant Currency Growth
     5 %     7 %
 
            
 
                
PepsiCo Americas Beverages
                
Reported Growth
     1 %     3 %
Merger and Integration Charges
     —       (7 )
Inventory Fair Value Adjustments
     —       (3.5 )
 
            
Core Growth
     1       (7 )
Impact of Foreign Currency Translation
     (1 )     (1 )
 
            
Core Constant Currency Growth
     — %     (7 )%
 
            
 
*   Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments. See schedules A-7 and A-8 for a discussion of each of these non-core adjustments.
Note — certain amounts above may not sum due to rounding.

A - 15

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Core Growth and Core Constant Currency Growth*
(unaudited)
                 
    12 Weeks  
    6/11/11  
    Net     Operating  
    Revenue     Profit  
Europe
                
Reported Growth
     52 %     47 %
Merger and Integration Charges
     —       (6 )
Inventory Fair Value Adjustments
     —       (18 )
 
            
Core Growth
     52       23  
Impact of Foreign Currency Translation
     (7 )     (7 )
 
            
Core Constant Currency Growth
     45 %     16 %
 
            
 
                
Asia, Middle East & Africa
                
Reported Growth
     17 %     12 %
Merger and Integration Charges
     —       —  
 
            
Core Growth
     17       12  
Impact of Foreign Currency Translation
     (2 )     (2 )
 
            
Core Constant Currency Growth
     15 %     10 %
 
            
 
                
Total Divisions
                
Reported Growth
     14 %     11 %
Merger and Integration Charges
     —       (3 )
Inventory Fair Value Adjustments
     —       (3 )
 
            
Core Growth
     14       5  
Impact of Foreign Currency Translation
     (3 )     (2 )
 
            
Core Constant Currency Growth
     11 %     3 %
 
            
 
*   Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments. See schedules A-7 and A-8 for a discussion of each of these non-core adjustments.
Note — certain amounts above may not sum due to rounding.

A - 16

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