Basis of Presentation

9 Months Ended

Sep. 08, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Our Divisions

Basis of Presentation

Our Condensed Consolidated Statements of Income and Comprehensive Income for the 12 and 36 weeks ended September 8, 2012 and September 3, 2011, our Condensed Consolidated Statements of Cash Flows for the 36 weeks ended September 8, 2012 and September 3, 2011, our Condensed Consolidated Balance Sheet as of September 8, 2012 and our Condensed Consolidated Statements of Equity for the 36 weeks ended September 8, 2012 and September 3, 2011 have not been audited. These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the 12 and 36 weeks are not necessarily indicative of the results expected for the full year.

While our North America results are reported on a period calendar basis, most of our international operations report on a monthly calendar basis for which the months of June, July and August are reflected in our third quarter results.

In the first quarter of 2011, Quaker Foods North America (QFNA) changed its method of accounting for certain U.S. inventories from the last-in, first-out (LIFO) method to the average cost method. This change was considered preferable by management as we believe that the average cost method of accounting for all U.S. foods inventories improves our financial reporting by better matching revenues and expenses and better reflecting the current value of inventory. In addition, the change from the LIFO method to the average cost method enhances the comparability of QFNA’s financial results with our other food businesses, as well as with peer companies where the average cost method is widely used. The impact of this change on consolidated net income in the first quarter of 2011 was approximately $9 million (or less than a penny per share).

Our significant interim accounting policies include the recognition of a pro rata share of certain estimated annual sales incentives, and certain advertising and marketing costs, in proportion to revenue and volume, as applicable, and the recognition of income taxes using an estimated annual effective tax rate. Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw material handling facilities, are included in cost of sales. The costs of moving, storing and delivering finished product are included in selling, general and administrative expenses.

The following information is unaudited. Tabular dollars are in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Certain reclassifications were made to the prior year’s amounts to conform to the 2012 presentation. This report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Our Divisions

We are organized into four business units, as follows:

1. PepsiCo Americas Foods (PAF), which includes Frito-Lay North America (FLNA), Quaker Foods North America (QFNA) and all of our Latin American food and snack businesses (LAF);

2. PepsiCo Americas Beverages (PAB), which includes all of our North American and Latin American beverage businesses;

3. PepsiCo Europe, which includes all beverage, food and snack businesses in Europe and South Africa; and

4. PepsiCo Asia, Middle East and Africa (AMEA), which includes all beverage, food and snack businesses in AMEA, excluding South Africa.

Our four business units comprise six reportable segments (also referred to as divisions), as follows:

• FLNA,

• QFNA,

• LAF,

• PAB,

• Europe, and

• AMEA.

	12 Weeks Ended						36 Weeks Ended
	9/8/2012			9/3/2011			9/8/2012			9/3/2011
Net Revenue
FLNA	$	3,269		$	3,173		$	9,472		$	9,167
QFNA	615			614			1,821			1,837
LAF	1,883			1,841			5,066			4,757
PAB	5,530			5,947			15,330			16,107
Europe	3,691			3,909			9,153			9,329
AMEA	1,664			2,098			4,696			5,149
	$	16,652		$	17,582		$	45,538		$	46,346
	12 Weeks Ended						36 Weeks Ended
	9/8/2012			9/3/2011			9/8/2012			9/3/2011
Operating Profit
FLNA	$	917		$	918		$	2,532		$	2,545
QFNA	154			177			495			558
LAF	219			275			673			720
PAB	837			992			2,202			2,533
Europe	483			514			1,017			984
AMEA	317			285			630			730
Total division	2,927			3,161			7,549			8,070
Corporate Unallocated
Net impact of mark-to-market on commodity hedges	121			(53		)	126			(31		)
Restructuring and impairment charges	(7		)	—			(8		)	—
Merger and integration charges	2			(10		)	—			(64		)
Other	(243		)	(192		)	(768		)	(589		)
	$	2,800		$	2,906		$	6,899		$	7,386

	Total Assets
	9/8/2012		12/31/2011
FLNA	$	6,075	$	6,120
QFNA	1,223		1,174
LAF	4,734		4,731
PAB	31,925		31,187
Europe	18,959		18,479
AMEA	5,669		6,048
Total division	68,585		67,739
Corporate(a)	5,432		5,143
	$	74,017	$	72,882

(a) Corporate assets consist principally of cash and cash equivalents, short-term investments, derivative instruments and property, plant and equipment.