0001193125-13-159932.txt : 20130418 0001193125-13-159932.hdr.sgml : 20130418 20130418074725 ACCESSION NUMBER: 0001193125-13-159932 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20130418 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20130418 DATE AS OF CHANGE: 20130418 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: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01183 FILM NUMBER: 13768169 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 d521990d8k.htm FORM 8-K Form 8-K

 

 

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): April 18, 2013

PepsiCo, Inc.

(Exact Name of Registrant as Specified in Charter)

 

North Carolina   1-1183   13-1584302

(State or other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(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:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ 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 and 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 April 18, 2013, reporting PepsiCo’s financial results for the 12 weeks ended March 23, 2013.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

 

99.1 Press Release issued by PepsiCo, Inc., dated April 18, 2013.


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: April 18, 2013   By:  

/s/ Kelly Mahon Tullier

  Name:   Kelly Mahon Tullier
  Title:   Senior Vice President, Deputy General Counsel


INDEX TO EXHIBITS

 

99.1    Press Release issued by PepsiCo, Inc., dated April 18, 2013.
EX-99.1 2 d521990dex991.htm EX-99.1 EX-99.1

EXHIBIT 99.1

 

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

Melisa Tezanos

Senior Director, Media Bureau

914-253-2599

melisa.tezanos@pepsico.com

 

PepsiCo Reports First Quarter 2013 Results

 

   

Core1 EPS $0.77, up 12 percent. Reported EPS $0.69, a decline of 3 percent reflecting the impact of the devaluation of net monetary assets in Venezuela

 

   

Organic1 revenue grew 4.4 percent. Reported net revenue increased 1 percent reflecting the impacts of foreign currency translation and structural changes

 

   

Core operating margin expanded 80 basis points. Reported operating margin declined 70 basis points reflecting the Venezuela devaluation

 

   

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

 

   

Company reaffirms 7 percent core constant currency1 EPS growth guidance for 2013

PURCHASE, N.Y. – April 18, 2013 – PepsiCo, Inc. (NYSE: PEP) today reported core earnings per share of $0.77 for the first quarter, an increase of 12 percent on organic revenue growth of 4.4 percent.

“We’re greatly encouraged by the strong start to 2013. We delivered solid organic revenue growth and double-digit core EPS growth in the first quarter, driven by our balanced food and beverage product and global geographic portfolio. Our investments in creating this portfolio are paying off and our brand and innovation strategies are driving sustainable top-line growth,” said Chairman and CEO Indra Nooyi.

“We are driving increased marketplace execution and making higher investments in marketing and innovation to drive future growth. In the first quarter, our advertising and marketing expense increased by 11 percent, while our core operating margin increased 80 basis points.

“Importantly, we’re laser focused on ramping up the effectiveness and efficiency of every aspect of our operating system, from procurement to manufacturing to selling and

 

1 

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


distribution. For the full year 2013, we expect to deliver approximately $900 million in productivity savings as part of our three-year, $3 billion productivity program, which will fund future growth investments and further enhance our operating margins. And, we’ve already begun to identify the next tranche of productivity savings to extend beyond our current program.

“We are squarely on track to deliver on our financial commitments for 2013, and remain committed to acting with urgency and intensity to create long-term value for our shareholders.”

Operating and Marketplace Highlights

 

   

Achieved 4.4 percent organic revenue growth with a good balance between volume growth2 and price realization.

 

   

PepsiCo Americas Foods organic revenue grew 6 percent in the quarter driven by organic revenue growth in all divisions, including Frito-Lay North America, Quaker Foods North America and Latin America Foods. Reported net revenue increased 5 percent in the quarter.

 

   

Frito-Lay North America market share in the U.S. grew in the quarter, reflecting 4 percent volume growth driven by strategic investments and disciplined execution.

 

   

PepsiCo Americas Beverages core constant currency operating profit grew 4 percent in the quarter reflecting favorable effective net pricing and productivity gains. Reported operating profit was up 8 percent.

 

   

AMEA organic revenue grew 15 percent in the quarter driven by organic volume growth in both snacks and beverages. Reported net revenue in AMEA declined 14 percent, reflecting the impact of structural changes.

 

   

On an organic basis, emerging and developing market revenue grew 12 percent in the quarter. The refranchising of our beverage business in China and unfavorable foreign exchange impacted emerging and developing markets net revenue growth by 11 percentage points, resulting in 1 percent reported net revenue growth.

 

   

On an organic basis, international beverage volume grew 6 percent and international snack volume grew 5 percent.

 

   

Core gross margin expanded 130 basis points and reported gross margin expanded 100 basis points.

 

   

Core operating margin expanded 80 basis points including an 11 percent increase in advertising and marketing expense.

 

   

On track to deliver targeted $900 million of productivity savings during 2013 and $3 billion in productivity savings by 2015.

 

   

Management operating cash flow (excluding certain items) was $464 million. Cash flow from operations was $702 million.

 

   

Decreased net capital spending by $4 million in the quarter, with net capital spending of 4.0 percent of net sales over the past four quarters, an improvement of 70 basis points over the comparable prior four quarters.

 

2 

All 2013 volume growth measures reflect an adjustment to the base year for divestitures that occurred in 2012.

2


   

On track to return a total of $6.4 billion to shareholders in 2013 through approximately $3.4 billion in dividends and approximately $3.0 billion in share repurchases.

Summary of First Quarter Financial Performance

 

   

Organic revenue grew 4.4 percent and reported net revenue grew 1 percent. Organic revenue growth was driven by balanced volume growth and effective net pricing. Structural changes, primarily refranchising in China, negatively impacted reported net revenue performance by 3 percentage points and foreign exchange translation had a 0.5-percentage-point unfavorable impact in the quarter.

 

   

Core constant currency operating profit increased 9 percent reflecting solid revenue growth and productivity gains, partially offset by increased advertising and marketing expense. Reported operating profit declined 4 percent and included the impact from the devaluation of net monetary assets in Venezuela, net impact of mark-to-market adjustments on commodity hedges, and certain restructuring and integration costs.

 

   

The company’s core effective tax rate was 24.5 percent, below the prior year quarter primarily due to income mix shift and the reversal of international tax reserves, partially offset by the lapping of a 2012 tax benefit related to prepayment of Medicare subsidy liabilities. The company’s reported effective tax rate was 26.3 percent and included the impact related to the Venezuela devaluation, restructuring and integration costs and hedging losses.

 

   

Core EPS was $0.77 and reported EPS was $0.69. Core EPS excludes a $0.07 per share impact from the devaluation of net monetary assets in Venezuela, a net impact of $0.01 per share related to mark-to-market adjustments on commodity hedges, and a $0.01 impact from restructuring and integration charges. Mark-to-market gains and losses on commodity hedges are subsequently reflected in core division results when the divisions recognize the cost of the underlying commodity in net income.

 

3


Summary First Quarter 2013 Performance (Percent Growth)

 

     Reported     Core  Constant
Currencya
     Organicb  

Volume

       

Snacks

     4           4   

Beverages

     3           1   

Net Revenue

     1           4   

Operating Profitc

     (4     9      

EPS

     (3     13      

 

     Volume      Net
Revenue
    Operating
Profitc
    Organic
Revenue
     Core
Constant

Currency
Operating
Profit
 

PAF

     3           5        6        6         7   

FLNA

     4           4        6        4         5   

LAF

     1           11        18        14         25   

QFNA

     5           2        (4     2         (6

PAB

     (3)           (1     8        —           4   

Europe

     4/1d           5        10        4         14   

AMEA

     15/17d,e         (14     24        15         19   

Total Divisions

     4/3d           1        8        4         7   

Total PepsiCo

     4/3d           1        (4     4         9   

 

a

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

b 

Organic results are non-GAAP financial measures that adjust for impacts of acquisitions, divestitures and other structural changes and foreign exchange translation. For more information about our organic results, see “Reconciliation of GAAP and Non-GAAP Information” in the attached exhibits. Please refer to the Glossary for the definition of “Organic”.

c 

The reported operating profit performance was impacted by certain items excluded from our core results in both 2013 and 2012. 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”.

d 

Snacks/Beverages.

e 

AMEA beverage volume includes an estimated benefit of 6 percentage points relating to co-branded juice drinks in China, after adjustment to include co-branded juice drink volume in China for the first quarter of the base year (2012).

 

4


Division Operating Summaries

PepsiCo Americas Foods (PAF)

Organic revenue grew 6 percent in the quarter driven by 3 percentage points of organic volume growth and 3 percentage points of effective net pricing. Reported net revenue increased 5 percent reflecting a 1-percentage-point unfavorable impact from foreign exchange translation.

Core constant currency operating profit increased 7 percent, reflecting effective net pricing and productivity initiatives, partially offset by increased advertising and marketing investments.

Frito-Lay North America (FLNA)

Organic and reported net revenue each increased 4 percent in the quarter, reflecting a 4-percentage-point increase in organic volume and even effective net pricing.

Core constant currency operating profit grew 5 percent in the quarter reflecting organic revenue gains and productivity initiatives.

Latin America Foods (LAF)

Organic revenue grew 14 percent in the quarter, reflecting 1 percentage point of organic volume growth and 13 percentage points of effective net pricing. Reported net revenue grew 11 percent in the quarter, reflecting a 3-percentage-point unfavorable foreign exchange translation impact.

Core constant currency operating profit increased 25 percent. These results reflect the revenue growth and productivity gains partially offset by commodity cost inflation and increased advertising and marketing expense.

Quaker Foods North America (QFNA)

Organic revenue grew 2 percent, driven primarily by organic volume gains. Reported net revenue also grew 2 percent.

Core constant currency operating profit declined 6 percent, driven principally by increased advertising and marketing expense and investments in product innovation.

PepsiCo Americas Beverages (PAB)

Organic revenue in the quarter was even with the prior year reflecting organic volume that declined 3 percent and the negative impact of concentrate shipment timing, offset by effective net pricing. Latin America beverage volume increased 1 percent. In North America, non-carbonated beverage volume declined 1 percent, and CSD volume declined mid-single digits.

 

5


Reported net revenue declined 1 percent reflecting a less than 1-percentage-point impact of unfavorable foreign exchange translation.

Core constant currency operating profit increased 4 percent primarily reflecting favorable effective net pricing and productivity gains.

Europe

Organic revenue grew 4 percent, reflecting 2 percent organic volume growth and 2 percentage points of effective net pricing. Both snacks and beverages grew organic volume in the quarter. Reported net revenue grew 5 percent in the quarter, including a 1-percentage-point favorable impact from foreign exchange translation.

Core constant currency operating profit rose 14 percent in the quarter, reflecting organic revenue gains and continued productivity initiatives partially offset by higher commodity costs and increased advertising and marketing expense.

Asia, Middle East & Africa (AMEA)

Organic revenue grew 15 percent in the quarter, led by 15 percent organic volume growth in snacks and 10 percent organic volume growth in beverages. Reported net revenue declined 14 percent, reflecting a 27-percentage-point negative impact from structural changes, principally the refranchising of bottling operations in China, and an unfavorable 2-percentage-point impact from foreign exchange translation.

Core constant currency operating profit increased 19 percent, reflecting the organic revenue gains, partially offset by higher advertising and marketing expense.

2013 Guidance and Outlook

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

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

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

 

6


The company expects to return a total of $6.4 billion to shareholders in 2013 through dividends of approximately $3.4 billion and share repurchases of approximately $3.0 billion.

Conference Call

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

 

7


PepsiCo, Inc. and Subsidiaries

Condensed Consolidated Statement of Income

(in millions except per share amounts, and unaudited)

 

     Quarter Ended  
     3/23/2013     3/24/2012     Change  

Net Revenue

   $ 12,581      $ 12,428        1

Cost of sales

     5,834        5,889        (1 )% 

Selling, general and administrative expenses

     5,066        4,792        6

Amortization of intangible assets

     23        25        (6 )% 
  

 

 

   

 

 

   

Operating Profit

     1,658        1,722        (4 )% 

Interest expense

     (214     (198     8

Interest income and other

     27        23        18
  

 

 

   

 

 

   

Income before income taxes

     1,471        1,547        (5 )% 

Provision for income taxes

     386        414        (6 )% 
  

 

 

   

 

 

   

Net income

     1,085        1,133        (4 )% 

Less: Net income attributable to noncontrolling interests

     10        6        66
  

 

 

   

 

 

   

Net Income Attributable to PepsiCo

   $ 1,075      $ 1,127        (5 )% 
  

 

 

   

 

 

   

Diluted

      

Net Income Attributable to PepsiCo per Common Share

   $ 0.69      $ 0.71        (3 )% 

Weighted-average common shares outstanding

     1,563        1,584     

Cash dividends declared per common share

   $ 0.5375      $ 0.515     

 

A – 1


PepsiCo, Inc. and Subsidiaries

Supplemental Financial Information

(in millions, unaudited)

 

     Quarter Ended  
     3/23/2013     3/24/2012     Change  

Net Revenue

    

Frito-Lay North America

   $ 3,123      $ 3,010        4

Quaker Foods North America

     634        623        2

Latin America Foods

     1,367        1,235        11
  

 

 

   

 

 

   

PepsiCo Americas Foods

     5,124        4,868        5

PepsiCo Americas Beverages

     4,420        4,448        (1 )% 

Europe

     1,942        1,845        5

Asia, Middle East & Africa

     1,095        1,267        (14 )% 
  

 

 

   

 

 

   

Total Net Revenue

   $ 12,581      $ 12,428        1
  

 

 

   

 

 

   

Operating Profit

      

Frito-Lay North America

   $ 828      $ 780        6

Quaker Foods North America

     180        187        (4 )% 

Latin America Foods

     216        183        18
  

 

 

   

 

 

   

PepsiCo Americas Foods

     1,224        1,150        6

PepsiCo Americas Beverages

     565        525        8

Europe

     88        81        10

Asia, Middle East & Africa

     184        148        24
  

 

 

   

 

 

   

Division Operating Profit

     2,061        1,904        8

Corporate Unallocated

      

Mark-to-Market Net Impact (Losses)/Gains

     (16     84        n/m   

Restructuring and Impairment Charges

     (1     2        n/m   

Venezuela Currency Devaluation

     (124     —           n/m   

Other

     (262     (268     (2 )% 
  

 

 

   

 

 

   
     (403     (182     122
      
  

 

 

   

 

 

   

Total Operating Profit

   $ 1,658      $ 1,722        (4 )% 
  

 

 

   

 

 

   

n/m = not meaningful

 

A – 2


PepsiCo, Inc. and Subsidiaries

Condensed Consolidated Statement of Cash Flows

(in millions, unaudited)

 

     Quarter Ended  
     3/23/2013     3/24/2012  

Operating Activities

    

Net income

   $ 1,085      $ 1,133   

Depreciation and amortization

     551        555   

Stock-based compensation expense

     77        56   

Merger and integration charges

     1        2   

Cash payments for merger and integration charges

     (11     (20

Restructuring and impairment charges

     11        33   

Cash payments for restructuring charges

     (30     (44

Cash payments for restructuring and other charges related to the transaction with Tingyi (Cayman Islands) Holding Corp. (Tingyi)

     (1     —     

Non-cash foreign exchange loss related to Venezuela devaluation

     111        —     

Excess tax benefits from share-based payment arrangements

     (36     (35

Pension and retiree medical plan contributions

     (87     (1,100

Pension and retiree medical plan expenses

     149        129   

Deferred income taxes and other tax charges and credits

     (23     120   

Change in accounts and notes receivable

     (175     (71

Change in inventories

     (351     (266

Change in prepaid expenses and other current assets

     (201     (197

Change in accounts payable and other current liabilities

     (578     (960

Change in income taxes payable

     244        90   

Other, net

     (34     (115
  

 

 

   

 

 

 

Net Cash Provided by/(Used for) Operating Activities

     702        (690
  

 

 

   

 

 

 

Investing Activities

    

Capital spending

     (303     (316

Sales of property, plant and equipment

     8        17   

Acquisitions and investments in noncontrolled affiliates

     (30     (32

Divestitures

     —          9   

Short-term investments, net

     40        52   

Other investing, net

     —          13   
  

 

 

   

 

 

 

Net Cash Used for Investing Activities

     (285     (257
  

 

 

   

 

 

 

Financing Activities

    

Proceeds from issuances of long-term debt

     2,491        2,733   

Payments of long-term debt

     (1,190     (9

Short-term borrowings, net

     (153     (1,790

Cash dividends paid

     (831     (816

Share repurchases – common

     (626     (142

Share repurchases – preferred

     (2     (1

Proceeds from exercises of stock options

     449        274   

Excess tax benefits from share-based payment arrangements

     36        35   

Other financing

     (1     (1
  

 

 

   

 

 

 

Net Cash Provided by Financing Activities

     173        283   
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (172     82   

Net Increase/(Decrease) in Cash and Cash Equivalents

     418        (582

Cash and Cash Equivalents, Beginning of Year

     6,297        4,067   
  

 

 

   

 

 

 

Cash and Cash Equivalents, End of Period

   $ 6,715      $ 3,485   
  

 

 

   

 

 

 

 

A – 3


PepsiCo, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet

(in millions except per share amounts)

 

     3/23/2013     12/29/2012  
     (unaudited)        

Assets

    

Current Assets

    

Cash and cash equivalents

   $ 6,715      $ 6,297   

Short-term investments

     296        322   

Accounts and notes receivable, net

     7,234        7,041   

Inventories

    

Raw materials

     1,846        1,875   

Work-in-process

     265        173   

Finished goods

     1,809        1,533   
  

 

 

   

 

 

 
     3,920        3,581   

Prepaid expenses and other current assets

     1,745        1,479   
  

 

 

   

 

 

 

Total Current Assets

     19,910        18,720   

Property, plant and equipment, net

     18,844        19,136   

Amortizable intangible assets, net

     1,749        1,781   

Goodwill

     16,915        16,971   

Other nonamortizable intangible assets

     14,655        14,744   
  

 

 

   

 

 

 

Nonamortizable Intangible Assets

     31,570        31,715   

Investments in noncontrolled affiliates

     1,676        1,633   

Other assets

     1,606        1,653   
  

 

 

   

 

 

 

Total Assets

   $ 75,355      $ 74,638   
  

 

 

   

 

 

 

Liabilities and Equity

    

Current Liabilities

    

Short-term obligations

   $ 6,175      $ 4,815   

Accounts payable and other current liabilities

     11,244        11,903   

Income taxes payable

     575        371   
  

 

 

   

 

 

 

Total Current Liabilities

     17,994        17,089   

Long-term debt obligations

     23,225        23,544   

Other liabilities

     6,621        6,543   

Deferred income taxes

     5,051        5,063   
  

 

 

   

 

 

 

Total Liabilities

     52,891        52,239   

Commitments and Contingencies

    

Preferred stock, no par value

     41        41   

Repurchased preferred stock

     (166     (164

PepsiCo Common Shareholders’ Equity

    

Common stock, par value 12/3¢ per share (authorized 3,600 shares, issued, net of repurchased common stock at par value: 1,545 and 1,544 shares, respectively)

     26        26   

Capital in excess of par value

     4,136        4,178   

Retained earnings

     43,395        43,158   

Accumulated other comprehensive loss

     (5,607     (5,487

Repurchased common stock, in excess of par value (321 and 322 shares, respectively)

     (19,474     (19,458
  

 

 

   

 

 

 

Total PepsiCo Common Shareholders’ Equity

     22,476        22,417   

Noncontrolling interests

     113        105   
  

 

 

   

 

 

 

Total Equity

     22,464        22,399   
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 75,355      $ 74,638   
  

 

 

   

 

 

 

 

A – 4


PepsiCo, Inc. and Subsidiaries

Supplemental Share and Stock-Based Compensation Data

(in millions except dollar amounts, unaudited)

 

     Quarter Ended  
     3/23/2013     3/24/2012  

Beginning Net Shares Outstanding

     1,544        1,565   

Options Exercised/Restricted Stock Units and PEPUnits Converted

     10        8   

Shares Repurchased

     (9     (5
  

 

 

   

 

 

 

Ending Net Shares Outstanding

     1,545        1,568   
  

 

 

   

 

 

 

Weighted Average Basic

     1,544        1,568   

Dilutive Securities:

    

Options

     10        11   

Restricted Stock Units

     8        4   

PEPUnits

     —          —     

ESOP Convertible Preferred Stock/Other

     1        1   
  

 

 

   

 

 

 

Weighted Average Diluted

     1,563        1,584   
  

 

 

   

 

 

 

Average Share Price for the Period

   $ 73.67      $ 64.66   

Growth Versus Prior Year

     14     —  

Options Outstanding

     61        84   

Options in the Money

     58        54   

Dilutive Shares from Options

     10        11   

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

     17     20

Average Exercise Price of Options in the Money

   $ 60.38      $ 50.66   

Restricted Stock Units Outstanding

     15        9   

Dilutive Shares from Restricted Stock Units

     8        4   

Dilutive Shares from PEPUnits

     —          —     

Average Intrinsic Value of Restricted Stock Units Outstanding(a)

   $ 68.24      $ 64.98   

Average Intrinsic Value of PEPUnits Outstanding(a)

   $ 66.65      $ —     

 

(a) Weighted-average intrinsic value at grant date.

 

A – 5


PepsiCo, Inc. and Subsidiaries

Reconciliation of GAAP and Non-GAAP Information

Organic Growth

Quarter Ended March 23, 2013

(unaudited)

 

    Percent Impact     GAAP
Measure
    Non-GAAP
Measure
 
                            Reported
% Change
    Organic
%  Change(a)
 
Net Revenue Year over Year % Change   Volume     Effective
Net Pricing
    Acquisitions &
Divestitures
    Foreign
Exchange
Translation
    Quarter Ended
3/23/13
    Quarter Ended
3/23/13
 

Frito-Lay North America

    4        —          —          —          4        4   

Quaker Foods North America

    3        (1     —          —          2        2   

Latin America Foods

    1        13        —          (3     11        14   

PepsiCo Americas Foods

    3        3        —          (1     5        6   

PepsiCo Americas Beverages

    (5     5        —          —          (1     —     

Europe

    2        2        —          1        5        4   

Asia, Middle East & Africa

    15        —          (27     (2     (14     15   

Total PepsiCo

    1        3        (3     (0.5     1        4   

 

(a) Organic percent change is a financial measure that is not in accordance with GAAP and is calculated by excluding the impact of acquisitions and divestitures and foreign exchange translation from reported growth.

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

 

A – 6


PepsiCo, Inc. and Subsidiaries

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

Year over Year Growth Rates

Quarters Ended March 23, 2013 and March 24, 2012

(unaudited)

 

    GAAP
Measure
          Non-GAAP
Measure
          Non-GAAP
Measure
 
    Reported
% Change
    Percent Impact of Non-Core Adjustments     Core(a) %
Change
    Percent
Impact of
    Core
Constant
Currency(a)
% Change
 

Operating Profit Year over

Year % Change

  Quarter
Ended
3/23/2013
    Commodity
mark-to-
market net
impact
    Merger
and
integration
charges
    Restructuring
and
impairment
charges
    Venezuela
currency
devaluation
    Quarter
Ended
3/23/2013
    Foreign
exchange
translation
    Quarter
Ended
3/23/2013
 

Frito-Lay North America

    6        —          —          (1     —          5        —          5   

Quaker Foods North America

    (4     —          —          (3     —          (6     —          (6

Latin America Foods

    18        —          —          (1     —          17        8        25   

PepsiCo Americas Foods

    6        —          —          (1     —          5        1        7   

PepsiCo Americas Beverages

    8        —          —          (1.5     (2.5     3        —          4   

Europe

    10        —          (1     6        —          14        (0.5     14   

Asia, Middle East & Africa

    24        —          —          (5     —          18        1        19   

Division Operating Profit

    8        —          —          (1     (1     6        1        7   

Impact of Corporate
Unallocated

    (12     6        —          —          7        1        —          1.5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Profit

    (4     6        —          (1     6        7        1        9   

Net income Attributable to
PepsiCo

    (5             10        1        12   

Net income Attributable to
PepsiCo per common
share - diluted

    (3             12        1        13   
    GAAP
Measure
          Non-GAAP
Measure
          Non-GAAP
Measure
 
    Reported
% Change
    Percent Impact of Non-Core Adjustments     Core(a) %
Change
    Percent
Impact of
    Core
Constant
Currency(a)
% Change
 
Operating Profit Year over
Year % Change
  Quarter
Ended
3/24/2012
    Commodity
mark-to-
market net
impact
    Merger
and
integration
charges
    Restructuring
and
impairment
charges
    Inventory
fair value
adjustments
    Quarter
Ended
3/24/2012
    Foreign
exchange
translation
    Quarter
Ended
3/24/2012
 

Frito-Lay North America

    1        —          —          1        —          2        —          2   

Quaker Foods North America

    (12     —          —          2        —          (10     —          (10

Latin America Foods

    7        —          —          3        —          10        8        18   

PepsiCo Americas Foods

    (1     —          —          2        —          1        1        2   

PepsiCo Americas Beverages

    (6     —          (4     1.5        (2     (9     1        (9

Europe

    29        —          16        (2     (40     2.5        2        4   

Asia, Middle East & Africa

    2        —          —          6        —          7        (1     6   

Division Operating Profit

    (1     —          (0.5     2        (2     (2     1        (1

Impact of Corporate
Unallocated

    1        (3     (2.5     —          —          (4     —          (4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Profit

    —          (3     (3     2        (2     (6     1        (5

Net income Attributable to
PepsiCo

    (1             (9     1        (8

Net income Attributable to
PepsiCo per common
share - diluted

    —                  (7     1        (6

 

(a) Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above adjustments. See A-13 through A-15 for a discussion of each of these adjustments.

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

 

A – 7


PepsiCo, Inc. and Subsidiaries

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

Certain Line Items

Quarters Ended March 23, 2013 and March 24, 2012

(in millions except per share amounts, unaudited)

 

     GAAP
Measure
    Non-Core Adjustments     Non-GAAP
Measure
 
     Reported     Commodity
mark-to-
market net
impact
    Merger
and
integration
charges
    Restructuring
and
impairment
charges
    Venezuela
currency
devaluation
    Core(a)  
     Quarter
Ended
3/23/2013
            Quarter
Ended
3/23/2013
 

Cost of sales

   $ 5,834      $ (14   $ —        $ —        $ —        $ 5,820   

Selling, general and administrative expenses

   $ 5,066      $ (2   $ (1   $ (11   $ (111   $ 4,941   

Operating profit

   $ 1,658      $ 16      $ 1      $ 11      $ 111      $ 1,797   

Provision for income taxes

   $ 386      $ 5      $ —        $ 3      $ —        $ 394   

Net income attributable to PepsiCo

   $ 1,075      $ 11      $ 1      $ 8      $ 111      $ 1,206   

Net income attributable to PepsiCo per common share - diluted

   $ 0.69      $ 0.01      $ —        $ 0.01      $ 0.07      $ 0.77   

Effective tax rate

     26.3             24.5

 

     GAAP
Measure
    Non-Core Adjustments     Non-GAAP
Measure
 
     Reported     Commodity
mark-to-
market net
impact
    Merger
and
integration
charges
          Core(a)  
     Quarter
Ended
3/24/2012
        Restructuring
and
impairment
charges
    Quarter
Ended
3/24/2012
 

Cost of sales

   $ 5,889      $ 17      $ —        $ —        $ 5,906   

Selling, general and administrative expenses

   $ 4,792      $ 67      $ (2   $ (33   $ 4,824   

Operating profit

   $ 1,722      $ (84   $ 2      $ 33      $ 1,673   

Provision for income taxes

   $ 414      $ (24   $ —        $ 10      $ 400   

Net income attributable to PepsiCo

   $ 1,127      $ (60   $ 2      $ 23      $ 1,092   

Net income attributable to PepsiCo per common share - diluted

   $ 0.71      $ (0.04   $ —        $ 0.01      $ 0.69   

Effective tax rate

     26.7           26.7

 

(a) Core results are financial measures that are not in accordance with GAAP and exclude the above adjustments. See A-13 through A-15 for a discussion of each of these adjustments.

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

 

A – 8


PepsiCo, Inc. and Subsidiaries

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

Operating Profit by Division

Quarters Ended March 23, 2013 and March 24, 2012

(in millions, unaudited)

 

    GAAP
Measure
    Non-Core Adjustments     Non-GAAP
Measure
 
    Reported     Commodity
mark-to-market
net impact
    Merger and
integration
charges
    Restructuring
and
impairment
charges
    Venezuela
currency
devaluation
    Core(a)  
Operating Profit   Quarter
Ended
3/23/2013
            Quarter
Ended
3/23/2013
 

Frito-Lay North America

  $ 828      $ —        $ —        $ 2      $ —        $ 830   

Quaker Foods North America

    180        —          —          (1     —          179   

Latin America Foods

    216        —          —          4        —          220   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

PepsiCo Americas Foods

    1,224        —          —          5        —          1,229   

PepsiCo Americas Beverages

    565        —          —          —          (13     552   

Europe

    88        —          1        4        —          93   

Asia, Middle East & Africa

    184        —          —          1        —          185   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Division Operating Profit

    2,061        —          1        10        (13     2,059   

Corporate Unallocated

    (403     16        —          1        124        (262
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Profit

  $ 1,658      $ 16      $ 1      $ 11      $ 111      $ 1,797   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    GAAP
Measure
    Non-Core Adjustments     Non-GAAP
Measure
 
    Reported     Commodity
mark-to-market
net impact
    Merger and
integration
charges
    Restructuring
and
impairment
charges
    Core(a)  
Operating Profit   Quarter
Ended
3/24/2012
          Quarter
Ended
3/24/2012
 

Frito-Lay North America

  $ 780      $ —        $ —        $ 8      $ 788   

Quaker Foods North America

    187        —          —          5        192   

Latin America Foods

    183        —          —          6        189   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

PepsiCo Americas Foods

    1,150        —          —          19        1,169   

PepsiCo Americas Beverages

    525        —          —          8        533   

Europe

    81        —          2        (1     82   

Asia, Middle East & Africa

    148        —          —          9        157   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Division Operating Profit

    1,904        —          2        35        1,941   

Corporate Unallocated

    (182     (84     —          (2     (268
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Profit

  $ 1,722      $ (84   $ 2      $ 33      $ 1,673   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Core results are financial measures that are not in accordance with GAAP and exclude the above adjustments. See A-13 through A-15 for a discussion of each of these adjustments.

 

A – 9


PepsiCo, Inc. and Subsidiaries

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

(unaudited)

Gross Margin Growth Reconciliation

 

     Quarter Ended  
     3/23/2013  

Reported Gross Margin Growth

     102  bps 

Commodity Mark-to-Market Net Impact

     25   
  

 

 

 

Core Gross Margin Growth

     127  bps 
  

 

 

 

Operating Margin Growth Reconciliation

 

     Quarter Ended  
     3/23/2013  

Reported Operating Margin Growth

     (68 ) bps 

Commodity Mark-to-Market Net Impact

     81   

Merger and Integration Charges

     (1

Restructuring and Impairment Charges

     (18

Venezuela Currency Devaluation

     88   
  

 

 

 

Core Operating Margin Growth

     83  bps 
  

 

 

 

Net Cash Provided by Operating Activities Reconciliation (in millions)

 

     Quarter Ended  
     3/23/2013  

Net Cash Provided by Operating Activities

   $ 702   

Capital Spending

     (303

Sales of Property, Plant and Equipment

     8   
  

 

 

 

Management Operating Cash Flow

     407   

Discretionary Pension and Retiree Medical Contributions

     13   

Merger and Integration Payments (after-tax)

     9   

Payments Related to Restructuring Charges

     30   

Capital Investments Related to the Productivity Plan

     4   

Payments for Restructuring and Other Charges Related to the Transaction with Tingyi

     1   
  

 

 

 

Management Operating Cash Flow excluding above Items

   $ 464   
  

 

 

 

Net Cash Provided by Operating Activities Reconciliation (in billions)

 

     2013 Guidance  

Net Cash Provided by Operating Activities

   $ ~9   

Net Capital Spending

     ~(3
  

 

 

 

Management Operating Cash Flow

     ~6   

Certain Other Items(a) 

     ~1   
  

 

 

 

Management Operating Cash Flow excluding Certain Other Items

   $ ~7   
  

 

 

 

Emerging and Developing Markets Net Revenue Growth Reconciliation

 

     Quarter Ended  
     3/23/2013  

Reported Emerging and Developing Markets Net Revenue Growth

     1

Impact of Acquisitions and Divestitures

     9   

Impact of Foreign Currency Translation

     2   
  

 

 

 

Emerging and Developing Markets Organic Revenue Growth

     12
  

 

 

 

 

(a) Certain other items include discretionary pension and retiree medical contributions, merger and integration payments, payments related to restructuring charges, capital investments related to the bottling integration, capital investments related to the Productivity Plan and payments related to tax settlements.

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

 

A – 10


Cautionary Statement

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

For additional information on these and other factors that could cause PepsiCo’s actual results to materially differ from those set forth herein, please see PepsiCo’s filings with the Securities and Exchange Commission, 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

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 reflect how management evaluates our operating results and trends.

Glossary

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

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

 

A – 11


Core: Core results are non-GAAP financial measures which exclude certain items from our historical results. In 2013, core results exclude the commodity mark-to-market net impact included in corporate unallocated expenses, merger and integration charges in connection with our acquisition of WBD, restructuring and impairment charges and a charge related to the Venezuela currency devaluation. In 2012, core results exclude the commodity mark-to-market net impact included in corporate unallocated expenses, merger and integration charges in connection with our acquisition of WBD, restructuring and impairment charges, restructuring and other charges related to the transaction with Tingyi, a pension lump sum settlement charge and a tax benefit related to a tax court decision. See “Reconciliation of GAAP and Non-GAAP Information” for additional information.

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

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

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

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

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

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

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

 

A – 12


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

Reconciliation of GAAP and Non-GAAP Information (unaudited)

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

Commodity mark-to-market net impact

In the quarter ended March 23, 2013, we recognized $16 million of mark-to-market net losses on commodity hedges in corporate unallocated expenses. In the quarter ended March 24, 2012, we recognized $84 million of mark-to-market net gains on commodity hedges in corporate unallocated expenses. In the year ended December 29, 2012, we recognized $65 million of mark-to-market net gains on commodity hedges in corporate unallocated expenses. We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, metals and energy. Certain of these commodity derivatives do not qualify for hedge accounting treatment and are marked to market with the resulting gains and losses recognized in corporate unallocated expenses. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in net income.

Merger and integration charges

In the quarter ended March 23, 2013, we incurred merger and integration charges of $1 million related to our acquisition of WBD, recorded in the Europe segment. In the quarter ended March 24, 2012, we incurred merger and integration charges of $2 million related to our acquisition of WBD, recorded in the Europe segment. In the year ended December 29, 2012, we incurred merger and integration charges of $16 million related to our acquisition of WBD, including $11 million recorded in the Europe segment and $5 million recorded in interest expense.

Restructuring and impairment charges

In the quarter ended March 23, 2013, we incurred restructuring and impairment charges of $11 million in conjunction with our multi-year productivity plan (Productivity Plan), including $2 million recorded in the FLNA segment, $4 million recorded in the LAF segment, $4 million recorded in the Europe segment, $1 million recorded in the AMEA segment, $1 million recorded in corporate unallocated expenses, and income of $1 million recorded in the QFNA segment representing adjustments of previously recorded amounts. In the quarter ended March 24, 2012, we incurred restructuring and impairment charges of $33 million in conjunction with our Productivity Plan, including $8 million recorded in the FLNA segment, $5 million recorded in the QFNA segment, $6 million recorded in the LAF segment, $8 million recorded in the PAB segment, $9 million recorded in the AMEA segment, and income of $1 million and $2 million recorded in the Europe segment and in corporate unallocated expenses, respectively, representing adjustments of previously recorded amounts. In the year ended December 29, 2012, we incurred restructuring charges of $279 million in conjunction with our Productivity Plan, including $38 million recorded in the FLNA segment, $9 million recorded in the QFNA segment, $50 million recorded in the LAF segment, $102 million recorded in the PAB segment, $42 million recorded in the Europe segment, $28 million recorded in the AMEA segment and $10

 

A – 13


million recorded in corporate unallocated expenses. The Productivity Plan includes actions in every aspect of our business that we believe will strengthen our complementary food, snack and beverage businesses by leveraging new technologies and processes across PepsiCo’s operations, go-to-market and information systems; heightening the focus on best practice sharing across the globe; consolidating manufacturing, warehouse and sales facilities; and implementing simplified organization structures, with wider spans of control and fewer layers of management.

Restructuring and other charges related to the transaction with Tingyi

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

Pension lump sum settlement charge

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

Tax benefit related to tax court decision

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

Venezuela currency devaluation

In the quarter ended March 23, 2013, we recorded a $111 million net charge related to the devaluation of the bolivar fuerte for our Venezuela businesses. $124 million of this charge was recorded in corporate unallocated expenses, with the balance (equity income of $13 million) recorded in our PAB segment.

Management operating cash flow (excluding certain items)

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

2013 guidance

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

 

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revenue growth because we are unable to predict the 2013 impact of foreign exchange due to the unpredictability of future changes in foreign exchange rates. Therefore, we are unable to provide a reconciliation of these measures.

# # #

 

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