Last year I described the dual goals we have unwaveringly pursued since we began our transformation back in 2007: continue to deliver the strong, consistent financial results our shareholders expect year after year, while at the same time investing in and transforming the company to ensure it is built for long-term, sustainable growth. In short, perform while we transform.
Looking back, 2012 was an important year in PepsiCo’s transformation journey. We took the necessary actions to strengthen our company. We made significant investments behind our largest global brands. And we changed our operating model — moving from a loose federation of countries and regions to a more efficient and effective model that leverages PepsiCo’s talent, capabilities and resources globally.
In 2013, we continued to reinforce these actions and began to realize the benefits. Despite a very challenging operating environment that included economic instability and uncertainty in many of our key markets around the world, we delivered on, or exceeded, each and every one of the financial goals we announced to shareholders at the beginning of the year.
Our performance in 2013 was strong:
• Our organic revenue grew 4%.
• Core constant currency earnings per share (EPS) grew 9%.
• Core gross margins improved by 90 basis points and core operating margins improved by 40 basis points, even while we increased investments in the company.
• We captured more than $900 million of productivity, exceeding our target and keeping us on track to deliver our three-year $3 billion productivity target for 2012–2014. This success gave us the confidence to extend our goal of $1 billion in annual productivity savings for five years beyond the existing goal (2015–2019).
• Core net return on invested capital (ROIC) improved 110 basis points, 60 points ahead of our target.
• Free cash flow excluding certain items was strong at $8.2 billion.
• PepsiCo increased its annual dividend for the 41st consecutive year in 2013 and returned $6.4 billion to our shareholders through share repurchases and dividends.
Organic, core and constant currency results, as well as free cash flow excluding certain items, are non-GAAP financial measures. Please refer to “Reconciliation of GAAP and Non-GAAP Information” beginning on page 141 in the printed annual report for more information about these results, including a reconciliation to the most directly comparable financial measures in accordance with GAAP.
Equally important were the investments and capacity-building initiatives we undertook over the past five years to position ourselves for superior value creation over the long term:
1. We invested to enhance the equity of our 22 billion dollar brands, which together account for more than 70% of our total revenue. Advertising and marketing (A&M) increased and now stands at 5.9% of net revenue — up from 5.2% in 2011. More importantly, this investment led to significant brand equity improvement. For example, brand equity scores for our global beverage and snack brands held or gained in 90% of our strategic markets, and six of our global brands saw brand equity hold or gain in 100% of their strategic markets. Our brand-building efforts are paying off. PepsiCo has nine of the 40 largest packaged goods trademarks in the U.S. according to IRI, and, according to Euromonitor International, nine of the top 50 packaged food and soft drink brands measured at Global Brand Name in Russia, seven of the top 50 in Mexico, and six of the top 50 in the U.K.
2. We fine-tuned and ramped up our innovation machine, increasing our rate of success of new innovations to make this one of PepsiCo’s best years ever for innovation. In fact, in 2013, PepsiCo had nine of the top 50 new food and beverage product introductions across all measured U.S. retail channels.* Additionally, six new products are on track to achieve at least $100 million each in estimated annual retail sales in the U.S.: Mountain Dew Kickstart, Tostitos Cantina tortilla chips, Starbucks Iced Coffee, Lipton Pure Leaf Tea, Muller Quaker Yogurt and Gatorade Frost Glacier Cherry. We also opened a state-of-the-art food and beverage innovation center in Shanghai, China to fuel new product, packaging and equipment innovation for our businesses throughout Asia. Innovation as a percentage of net revenue grew to 9% in 2013, and as a whole our R&D investments have increased more than 25% since 2011.
*Source: IRI MULOC; based on estimated launch-year sales for innovations launched through June 2013.
A fine-tuned innovation machine
Six new products are on track to achieve at least $100 million each in estimated annual retail sales in the U.S.: Starbucks Iced Coffee, Mountain Dew Kickstart, Tostitos Cantina tortilla chips, Gatorade Frost Glacier Cherry, Lipton Pure Leaf Tea and Muller Quaker Yogurt.
3. Our developing and emerging markets, a major investment area, continued to perform well despite significant volatility in key regions. As a group, our developing and emerging markets posted 10% organic revenue growth, with particularly strong performance in China, Pakistan, Saudi Arabia, Mexico, Brazil and Turkey. Our convenient, on-trend and affordable products, coupled with a long runway for growth in developing and emerging markets, give us confidence that they can sustain solid growth over the long term.
4. Building from our positions of strength with four of the most important nutrition platforms and brands – Quaker (grains), Tropicana (fruits and vegetables), Gatorade (sports nutrition for athletes) and Naked Juice (super-premium juices and protein smoothies) – we continued to expand our portfolio of nutritious products across multiple markets and unlock growth opportunities in new product categories, such as dairy, hummus and other fresh dips, and baked grain snacks. Over the last decade
our nutrition business revenue has grown substantially and, in 2013, represented approximately 20% of PepsiCo’s net revenue.
In 2013, we also remained focused on improving the nutritional profile of many of our social snacks and beverages. In snacks, we continued our efforts to reduce saturated fat levels and sodium content in certain key brands while dialing up our baked offerings and whole grains.
In beverages, we added new low- and zero-calorie choices and continued to work to reduce added sugar in certain key brands. We also continued to accelerate our research and technology investments in the development of sweetener innovation.
5. Our global go-to-market capability is one of PepsiCo’s most important strategic advantages, and, in 2013, we further reinforced this key differentiator in very tangible ways. We increased our number of routes in key markets and greatly improved our in-store presence for our snack and beverage portfolio. We also empowered our sales teams globally with mobile technology to help them enhance their merchandising capabilities and drive increased sales.
6. We redoubled our efforts on talent development and improved the quality of the training we offer employees by, among other actions, investing in a new foundational leadership training program and completely revamping PepsiCo University.
PepsiCo associates are highly engaged globally as reflected in our 2013 Organizational Health Survey. An impressive 89% of our professional and executive populations responded they are proud to work for PepsiCo, which is well above a respected cross-industry benchmark. We have seen sustained improvement in both employee commitment and satisfaction results over the past decade — a testament to our continued focus on making PepsiCo a great place to work.
The continued focus on execution discipline to drive results in the short term, and investments to build capabilities and advantage for the long term, has been financially rewarding for PepsiCo and our shareholders:
• Over the past decade, our net revenue compound annual growth rate was 9%.
• Today, our operating margin stands at 15%, in the top tier of our food and beverage peer group. In addition, core net return on invested capital improved 110 basis points in 2013.
• In the last 10 years, earnings per share grew at an 8% compound annual growth rate, and we returned $57 billion in cash to shareholders through a combination of dividends and share repurchases.
• PepsiCo’s Cumulative Total Shareholder Return has outpaced the S&P 500® on an annualized basis by 170 basis points since 2000.
This strong performance is the foundation upon which we will build our future. I am more confident than ever that PepsiCo today has the right model, capabilities, people and portfolio to continue to deliver for our consumers, customers and shareholders well into the future.
Delivering on our 2013 financial targets demanded the very best of the entire PepsiCo management team. The operating environment was volatile and challenging, and going forward we expect the amplitude and frequency of change only to increase.
Growth will continue to be fueled by developing and emerging markets. The growth rates of developing and emerging markets are expected to continue to outpace developed markets for the foreseeable future. And by 2030, experts estimate an additional 3 billion people may join the middle class. These trends present excellent growth opportunities, but will require significant investment and development of the right people, skills and tools to compete. We have already established strong positions in developing and emerging markets, but need to continue to invest in building our capabilities in these markets to capture these growth opportunities.
The consumer shift to more nutritious products will accelerate. Trends such as a desire for convenient, functional nutrition, local and natural ingredients, and better-for-you snack and beverage options have firmly taken hold and will continue to accelerate around the world. We anticipated these trends early on and have taken significant actions to balance our portfolio of offerings. Additionally, we have improved the nutritional profile of many of our social snacks and beverages by reducing added sugar, sodium and saturated fat in key brands. We are building from an advantaged portfolio, but need to accelerate our efforts to continue to meet this consumer demand and capture this growth opportunity.
Digital technology is disrupting every business at every point in the value chain, and the way we interact with retailers, shoppers and consumers is changing at a dramatic pace. Being a laggard is simply not an option. In a digital landscape that is incredibly dynamic, we are focusing on new digital tools, technologies and retail platforms to allow us to reach consumers differently, shift our advertising and marketing model, improve our analytics and enhance the efficiency of our sales force. Cybersecurity is also a real concern, requiring focused investment and constant diligence against threats.
We should anticipate geopolitical and social instability to be the norm, not the exception. Income inequality, competition for natural resources, and geopolitical tensions and conflict will continue to pose risks to doing business in many countries around the world. Doing business in this environment requires continued investment to keep our people safe and protect our supply chain against potential threats. Fortunately, PepsiCo’s local teams have an intimate understanding of how to do business in each community in which we operate, allowing them to adapt to changing circumstances. For example, in Egypt, amid political unrest, PepsiCo associates ensured operations were not disrupted and looked for opportunities to expand the business even in a challenging period.
Extreme weather patterns are expected to persist, forcing companies to deal with commodity scarcity and volatility. Warmer temperatures, erratic rainfall patterns, new pests, floods and wildfires all threaten the productivity and availability of agricultural inputs. Our size and scale allow us to manage our commodity supply cost and inflation risks through our centralized strategic platforms and our multiple sourcing pipelines. But managing through these fluctuations requires additional investment and contingency planning. For example, our R&D team is working on developing multiple formulations of various products to be able to cope with changes in raw material availability and price, while delivering on taste and quality.
This “new normal” will require continued focus and investment, and we are confident we have the ingredients for success: geographic diversity; a complementary, related and diverse product portfolio; an efficient and effective operating model; an experienced, top-notch management team; and a culture and ethics that are second to none.
PepsiCo’s portfolio competes in two focused, related categories: foods and beverages. Both categories have attractive global growth prospects of 5% or more, and our convenient foods and beverages businesses are fairly evenly balanced, with about half of our 2013 revenue coming from each. More importantly, our categories and products are highly complementary, sharing the same customers, consumers and occasions. It is the “related diversity” of the PepsiCo portfolio that we believe gives us an advantaged position over the competition.
The Power of PepsiCo’s Portfolio to Enable the Next Wave of Growth. Foods and beverages are consumed together, and PepsiCo’s portfolio offers delicious and convenient food and beverage options for a wide range of occasions from morning to evening. For example, our consumers might wake up to a breakfast of Quaker Real Medleys and Trop50, enjoy a Pepsi MAX and SunChips with lunch, unwind with Stacy’s pita chips, Sabra hummus and a Lipton beverage, and host a party with an array of Frito-Lay and Pepsi products. No matter the consumer or the occasion, we seek to provide a food or beverage solution.
With joint consumer insights, R&D and innovation across foods and beverages, we have capabilities that give us a leg up on the competition when it comes to knowing and developing what consumers want to eat and drink throughout the day. There are overlapping “demand moments” or “need states” that could be satisfied by a food or a beverage. Our capabilities position us to develop the best solutions, be it a food or beverage, or even something in‑between, to meet the needs of our consumers.
Our portfolio allows us to capture coincident eating and drinking occasions using joint marketing and selling. When consumers reach for a Frito-Lay snack, we want them to pair it with a refreshing Pepsi beverage or any of our other diverse beverage offerings. Our scale and relationship with our retailers allow us to create in-store destinations to influence consumer shopping patterns and decisions to increase this coincidence of purchase. For example, during the 4th of July holiday season this past year in the U.S., the combination of Pepsi and Lay’s potato chips at one major retail chain drove increases in display inventory of approximately 40% and resulting gains in sales and share over the holiday.
And having both foods and beverages allows us to launch and broadly distribute new, convergent food and beverage products — for example, foods through chilled beverage distribution, beverages through ambient food distribution and convergent products that
The Power of PepsiCo’s Portfolio for Our Customers. The retail landscape today is more competitive than ever before, including competition for share of the shopper’s basket and the retail shelf. The scale, ubiquity and related velocity of our categories make us an essential partner for retailers, who look to PepsiCo to drive a significant share of their growth. Our relationships with our retail partners enable us to support the growth of our complementary categories. For example, an existing PepsiCo beverage business in a market can enable us to enter the snacks business in that market.
And our broad portfolio has been a strong competitive advantage in foodservice. The runaway success of Doritos Locos Tacos, a culinary innovation to drive growth for a PepsiCo foodservice customer, is just one example. Doritos Locos Tacos have exceeded $1 billion in retail sales since their launch in 2012. In 2013, PepsiCo won the Buffalo Wild Wings account, giving us access to more than 1,000 locations, by demonstrating the advantages of our combined portfolio. Foodservice customers also see the advantage of partnering with PepsiCo because of our access to retail partners and the option of getting foodservice customer-inspired snacks onto the shelves in grocery stores.
The Structural Cost Benefits and Global Capability. Beyond what the customers and consumers see on the shelf, our business model drives structural cost benefits of $800 million to $1 billion across PepsiCo globally each year. These financial benefits are achieved through regional scale cost leverage obtained through procurement, supply chain, go-to-market and selling functions, and G&A. We also see significant financial benefits and savings from having corporate functions integrated globally, such as Global Procurement, R&D, Human Resources and Business Information Services.
Looking beyond direct cost savings, these global platforms create capability advantages for us across the entire value chain. For example, our global marketing capabilities allow us to increase the share of dollars that go to working A&M, facilitate the sharing of sports and talent properties, and enable “lift and shift” of brand-building models. With a global R&D function, investments made are leveraged to drive innovation across both foods and beverages.
I began this letter by talking about our focus on two goals: delivering on the short term while investing for the long term. One of the great balancing acts as CEO is to manage for both level and duration. And I believe any CEO should be able to answer the question “How are you future-proofing your company?”
As the operating environment has become more volatile and complex, this is a tall order. But I firmly believe that the goals we articulated in 2007 under Performance with Purpose hold the answer. As long as Performance with Purpose is our guide, I believe PepsiCo will continue to deliver long-term, sustainable growth.
Performance with Purpose is PepsiCo’s recognition that the company’s success is inextricably linked to society’s success. In order to do well by our shareholders, we also have to take into account the needs and concerns of a wide range of stakeholders. If our financial success comes at the expense of the environment, our consumers or our communities, we will not be viable in the long run.
In practice, Performance with Purpose means we provide a range of foods and beverages from treats to healthy eats; we find innovative ways to minimize our impact on the environment and lower our costs through energy and water conservation as well as reduced use of packaging material; we provide a safe and inclusive workplace for our employees globally; and we respect, support and invest in the local communities in which we operate.
Performance with Purpose remains our true north, and it is more important than ever. I encourage you to please take the time to read our latest Sustainability Report, which details our work and progress toward our goals around the world.
As 2014 begins, every PepsiCo associate feels an incredible sense of duty and responsibility to those who depend on us to offer sustainable financial returns over the long term. It is for these long-term investors that we run PepsiCo.
I’m confident that PepsiCo’s best days are yet to come, and I’m honored more than ever to serve as Chairman and CEO.
The New York Stock Exchange is the principal market for PepsiCo common stock, which is also listed on the Chicago and SIX Swiss Exchanges.
As of February 5, 2014, there were approximately 144,930 shareholders of record.
Dividends are usually declared in early- to mid-February, May, July and November and paid at the end of March, June and September and at the beginning of January. On February 6, 2014, the Board of PepsiCo declared a quarterly dividend of $0.5675 payable March 31, 2014 to shareholders of record on March 7, 2014. For the remainder of 2014, the dividend record dates for these payments are, subject to approval by the Board of Directors, expected to be June 6, September 5 and December 5, 2014. We have paid consecutive quarterly cash dividends since 1965.
PepsiCo was formed through the 1965 merger of Pepsi-Cola Company and Frito-Lay, Inc. A $1,000 investment in our stock on December 31, 2008 was worth about $1,760 on December 31, 2013, assuming the reinvestment of dividends into PepsiCo stock. This performance represents a compounded annual growth rate of 12%.
Per Share (in $)
The closing price for a share of PepsiCo common stock on the New York Stock Exchange was the price as reported by Bloomberg for the years ending 2009–2013. Past performance is not necessarily indicative of future returns on investments in PepsiCo common stock.
Based on calendar year end (in $)
The Annual Meeting of Shareholders will be held at the North Carolina History Center at Tryon Palace, 529 South Front Street, New Bern, North Carolina, on Wednesday, May 7, 2014, at 9:00 a.m. local time. Proxies for the meeting will be solicited by an independent proxy solicitor. This annual report is not part of the proxy solicitation.
Registered Shareholders (shares held by you in your name) should address communications concerning transfers, statements, dividend payments, address changes, lost certificates and other administrative matters to:
P.O. Box 30170
College Station, TX 77845-3170
201-680-6578 (Outside the U.S.)
Online inquiries: https://www-us.computershare.com/investor/contact
Manager Shareholder Relations
700 Anderson Hill Road
Purchase, NY 10577
In all correspondence or telephone inquiries, please mention PepsiCo, your name as printed on your stock certificate, your holder ID, your address and your telephone number.
(associates with SharePower Options) should address all questions regarding your account, outstanding options or shares received through option exercises to:
1400 Merrill Lynch Drive
Pennington, NJ 08534
Telephone: 800-637-6713 (U.S., Puerto Rico and Canada)
609-818-8800 (all other locations)
In all correspondence, please provide your account number (for U.S. citizens, this is your Social Security number), your address and your telephone number, and mention PepsiCo SharePower. For telephone inquiries, please have a copy of your most recent statement available.
PepsiCo 401(k) Plan
The PepsiCo Savings & Retirement Center at Fidelity
P.O. Box 770003
Cincinnati, OH 45277-0065
(Overseas: Dial your country’s AT&T Access Number +800-632-2014. In the U.S., access numbers are available by calling 800-331-1140. From anywhere in the world, access numbers are available online at www.att.com/traveler.)
PepsiCo Stock Purchase Program:
P.O. Box 770001
Cincinnati, OH 45277-0002
Please have a copy of your most recent statement available when calling with inquiries.
700 Anderson Hill Road
Purchase, NY 10577
345 Park Avenue
New York, NY 10154-0102
Interested investors can make their initial purchase directly through Computershare, transfer agent for PepsiCo and Administrator for the Plan. A brochure detailing the Plan is available on our website, www.pepsico.com, or from our transfer agent:
P.O. Box 30170
College Station, TX 77845-3170
201-680-6578 (Outside the U.S.)
Online inquiries: https://www-us.computershare.com/investor/contact
Other services include dividend reinvestment, direct deposit of dividends, optional cash investments by electronic funds transfer or check drawn on a U.S. bank, sale of shares, online account access, and electronic delivery of shareholder materials.
Investors and others should note that we currently announce material information to our investors using filings with the Securities and Exchange Commission, press releases, public conference calls, webcasts or our corporate website (www.pepsico.com). We may from time to time update the list of channels we will use to communicate information that could be deemed material and will post information about such changes on www.pepsico.com/investors.
PepsiCo’s Annual Report contains many of the valuable trademarks owned and/or used by PepsiCo and its subsidiaries and affiliates in the U.S. and internationally to distinguish products and services of outstanding quality. All other trademarks featured herein are the property of their respective owners.
Our Commitment: To deliver SUSTAINED GROWTH through EMPOWERED PEOPLE acting with RESPONSIBILITY and building TRUST.
We must always strive to: Care for customers, consumers and the world we live in. Sell only products we can be proud of. Speak with truth and candor. Balance short term and long term. Win with diversity and inclusion. Respect others and succeed together.
© 2014 PepsiCo, Inc.
The Annual Report was printed with Forest Stewardship Council™ (FSC®)–certified paper, the use of 100% certified renewable wind power resources and soy ink. PepsiCo continues to reduce the costs and environmental impact of annual report printing and mailing by utilizing a distribution model that drives increased online readership and fewer printed copies. You can learn more about our environmental efforts at www.pepsico.com.
Executives, All Managers and All Associates are approximate numbers as of 12/31/2013 for U.S. associates only.
Data in this chart is based on the U.S. definition for people of color.
* Does not sum due to rounding.
PepsiCo has 22 brands
that each generated $1 billion
or more in estimated annual
retail sales in 2013.
Return on PepsiCo stock investment (including dividends) and the S&P 500®.
The return for PepsiCo and the S&P 500® indices are calculated through December 31, 2013.
(in millions except per share data; all per share amounts assume dilution)
(a) Percentage changes are based on unrounded amounts.
(b) Excludes the net mark-to-market impact of our commodity hedges, merger and integration charges and restructuring and impairment charges in both years. In 2013, also excludes the Venezuela currency devaluation. In 2012, also excludes restructuring and other charges related to the transaction with Tingyi and a pension lump-sum settlement charge. See page 143 in the printed annual report “Reconciliation of GAAP and Non-GAAP Information” for a reconciliation to the most directly comparable financial measure in accordance with GAAP.
(c) Excludes net mark-to-market impact of our commodity hedges, merger and integration charges, restructuring and impairment charges and tax benefits in both years. In 2013, also excludes the Venezuela currency devaluation. In 2012, also excludes restructuring and other charges related to the transaction with Tingyi and a pension lump-sum settlement charge. See page 53 in the printed annual report “Results of Operations—Consolidated Review” in Management’s Discussion and Analysis for a reconciliation to the most directly comparable financial measure in accordance with GAAP.
(d) Includes the impact of net capital spending, and excludes discretionary pension and retiree medical payments, merger and integration payments, restructuring payments, net capital investments related to merger and integration, net capital investments related to restructuring plan and payments for restructuring and other charges related to the transaction with Tingyi in both years. In 2013, also excludes net payments related to income tax settlements. See page 65 in the printed annual report “Our Liquidity and Capital Resources” in Management’s Discussion and Analysis for a reconciliation to the most directly comparable financial measure in accordance with GAAP.
Organic, core and constant currency results, as well as free cash flow excluding certain items, 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.
In the year ended December 28, 2013, we recognized $72 million of mark-to-market net losses 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. These commodity derivatives include agricultural products, energy and metals. 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, as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in net income.
In the year ended December 28, 2013, we incurred merger and integration charges of $10 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.
In the year ended December 28, 2013, we incurred restructuring and impairment charges of $53 million in conjunction with the multi-year productivity plan we publicly announced on February 13, 2014 (2014 Productivity Plan), including $11 million recorded in the FLNA segment, $3 million recorded in the QFNA segment, $5 million recorded in the LAF segment, $10 million recorded in the PAB segment, $10 million recorded in the Europe segment, $1 million recorded in the AMEA segment and $13 million recorded in corporate unallocated expenses. The 2014 Productivity Plan includes the next generation of productivity initiatives that we believe will strengthen our food, snack and beverage businesses by accelerating our investment in manufacturing automation; further optimizing our global manufacturing footprint, including closing certain manufacturing facilities; re-engineering our go-to-market systems in developed markets; expanding shared services; and implementing simplified organization structures to drive efficiency.
In the year ended December 28, 2013, we incurred restructuring and impairment charges of $110 million in conjunction with the multi-year productivity plan we announced on February 9, 2012 (2012 Productivity Plan), including $8 million recorded in the FLNA segment, $1 million recorded in the QFNA segment, $7 million recorded in the LAF segment, $21 million recorded in the PAB segment, $50 million recorded in the Europe segment, $25 million recorded in the AMEA segment and income of $2 million recorded in corporate unallocated expenses, representing adjustments of previously recorded amounts. In the year ended December 29, 2012, we incurred restructuring charges of $279 million in conjunction with the 2012 Productivity Plan, including $38 million recorded in the FLNA segment, $9 million recorded in the QFNA segment, $50 million recorded in the LAF segment, $102 million recorded in the PAB segment, $42 million recorded in the Europe segment, $28 million recorded in the AMEA segment and $10 million recorded in corporate unallocated expenses. The 2012 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.
In the year ended December 28, 2013, we recorded a $111 million net charge related to the devaluation of the bolivar 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 the PAB segment.
In the year ended December 28, 2013, we recognized a non-cash tax benefit of $209 million associated with our agreement with the IRS resolving all open matters related to the audits for taxable years 2003 through 2009, which reduced our reserve for uncertain tax positions for the tax years 2003 through 2012. 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.
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.
In the year ended December 29, 2012, we recorded a pension lump sum settlement charge of $195 million.
Free cash flow (excluding the items noted in the Net Cash Provided by Operating Activities Reconciliation table on page 65 in the printed annual report) 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 free cash flow which we believe investors should consider in evaluating our free cash flow results.
Organic revenue growth is a non-GAAP financial measure that excludes certain items. See page 55 in the printed annual report “Results of Operations — Division Review” in Management’s Discussion and Analysis for a reconciliation to the most directly comparable financial measure in accordance with GAAP.
Core constant currency EPS growth is a non-GAAP financial measure that excludes certain items. See page 53 in the printed annual report “Results of Operations — Consolidated Review” in Management’s Discussion and Analysis for a reconciliation to the most directly comparable financial measure in accordance with GAAP.
Return on PepsiCo stock investment (including dividends), the S&P 500® and the S&P Average of Industry Groups*in U.S. dollars
This annual report contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Statements that constitute forward-looking statements within the meaning of the Reform Act are generally identified through the inclusion of words such as “aim,” “anticipate,” “believe,” “drive,” “estimate,” “expect,” “expressed confidence,” “forecast,” “future,” “goals,” “guidance,” “intend,” “may,” “plan,” “position,” “potential,” “project,” “seek,” “should,” “strategy,” “target,” “will” or similar statements or variations of such words and other similar expressions. All statements addressing our future operating performance, and statements addressing events and developments that we expect or anticipate will occur in the future, are forward-looking statements within the meaning of the Reform Act. These forward-looking statements 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 any such forward-looking statement. These risks and uncertainties include, but are not limited to, those described in “Risk Factors” in Item 1A. and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Our Business Risks” in Item 7 of our annual report on Form 10-K included herewith. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.