PepsiCo Delivers Strong Financial and Operating Results for Fourth Quarter and Full-Year 2010

2/10/2011 |
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PURCHASE, N.Y., Feb. 10, 2011/PRNewswire/ --

 

PepsiCo, Inc. (NYSE: PEP) today reported volume, revenue and profit growth for the fourth quarter and full year of 2010 driven by gains across its worldwide snacks and beverage businesses, and from the acquisitions of its anchor bottlers earlier in the year.  Full-year reported earnings per share increased 4 percent to $3.91, core earnings per share increased 12 percent to $4.13 and core constant currency earnings per share grew 12 percent.  For the quarter, reported EPS declined 6 percent to $0.85, core EPS grew 17 percent to $1.05, and core constant currency EPS grew 19 percent.

"We are pleased with PepsiCo's performance in the fourth quarter and for the full year.  The underlying performance of our businesses remained solid despite a challenging macroeconomic environment," said PepsiCo Chairman and CEO Indra Nooyi.  "We posted broad-based worldwide gains in both snacks and beverages, our businesses deftly balanced a delicate price-value consumer equation, and we aggressively managed costs and productivity to deliver top-tier financial results."

Ms. Nooyi continued, "Importantly, we are entering 2011 an even-stronger, more-capable organization:  

 

"We are encouraged by the momentum of our businesses as we enter 2011, and are mindful of three realities:

 

"Our earnings outlook reflects our considered perspective on the marketplace and the macroeconomic picture, and we are confident we have the operating capability, portfolio strength and financial flexibility to effectively compete in this environment."

PepsiCo Chief Financial Officer Hugh Johnston said, "In addition to our strong fundamental operating performance in 2010, our businesses also generated strong cash flow.  The company generated $6.9 billion of management operating cash flow, excluding certain items, representing a 23 percent increase over 2009."

"We delivered more than $150 million in synergies from the bottler acquisitions in 2010, above our target for the year.  The strong pace of synergy realization and the identification of additional synergies have led us to increase our expectation for total synergies through 2012 to more than $550 million."

*Please refer to the Glossary for definitions of constant currency and core. Core results and core constant currency results are non-GAAP financial measures that exclude certain items. Additionally, management operating cash flow is a non-GAAP financial measure.  Please refer to "Reconciliation of GAAP and Non-GAAP information" in the attached exhibits for a description of these items.  All references to net income refer to net income attributable to PepsiCo.


 

Summary Fourth Quarter 2010 Performance (Percent Growth)*

 


Constant Currency*




 

Volume

Net Revenue

Core* Division Operating Profit

Net Revenue

Core* Division Operating Profit

Operating Profit

 

PAF

2

3

9

3

10

10

 

 FLNA

--

--

7

--

7

7

 

 LAF

5

11

28

9

29

29

 

QFNA

(1)

(4)

(8)

(3)

(7)

(7)

 







 

PAB

14

130

77

129

71

40

 







 

Europe

3/10**

42

13

36

9

(16)

 







 

AMEA

13/8**

16

23

19

31

31

 

Total Divisions

3/12**

37

26

37

24

14

 

Total PepsiCo






10***

 

 
             



 

Summary Full Year 2010 Performance (Percent Growth)*

 


Constant Currency*




 

Volume

Net Revenue

Core* Division Operating Profit

Net Revenue

Core* Division Operating Profit

Operating Profit

 

PAF

0.5

3

6

3.5

7

7

 

 FLNA

(1)

0.5

8

1

9

9

 

 LAF

4

10

11

11

11

11

 

 QFNA

(1)

(4)

(10)

(3)

(10)

(10)

 







 

PAB

10

102

68

102

64

28

 







 

Europe

2/10**

40

26

38

25

9

 







 

AMEA

15/7**

15

(2)

19

2

4

 

Total Divisions

2/9**

33

23

34

23

12

 

Total PepsiCo






4***

 

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

**Snacks/Beverage

*** The reported operating profit growth was impacted by certain items excluded from our core results in both 2010 and 2009.  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".


 
             


All references below to net revenue are on a constant currency basis, and to operating profit are on a core constant currency basis.  In addition, all comparisons are on a year-over-year basis unless otherwise noted.

Division Operating Summaries

PepsiCo Americas Foods (PAF)  

Frito-Lay North America (FLNA)

FLNA increased its dollar share leadership position in measured channels in salty snacks for the full year and grew operating profit 8 percent for the full year, its strongest profit growth performance in a decade.  Profit growth in the quarter and for the full year benefited from lower input costs and from strong productivity gains and cost control.

Volume grew slightly in the fourth quarter and units grew 1 percent.  Volume growth continued to be impacted by cycling the "20% More Free" promotion from 2009.  Lay's performance led growth, with strong consumer response to the activation of Lay's All Natural Ingredients, and continued strong double-digit growth in Sabra dips and spreads.

For the full year, volume declined 1 percent, with unit growth up more than 1 percent.  Volume growth was adversely impacted by cycling the "20% More Free" promotion.  Net revenue growth for the quarter and full year reflected the impacts of volume performance and effective net pricing.

Latin America Foods (LAF)

Strong performance for the quarter and full year benefited from broad-based volume gains, especially in LAF's largest businesses in Mexico and in Brazil.  Volume, revenue and operating profit growth in both the quarter and full year were driven by strong innovation, price-pack management and marketplace execution.  

Quaker Foods North America (QFNA)

Performance for the quarter and full year reflected declines in the hot cereals and ready-to-eat cereals categories, and a competitive pricing environment.  QFNA invested in improving its quality and in innovation launched in the second half of 2010 that will continue to receive marketing support in 2011.

PepsiCo Americas Beverages (PAB)

In a highly competitive environment, North America volume (excluding the impact of incremental volume from the agreement with Dr Pepper Snapple Group) grew 1 percent in the quarter behind strong performance of the company's advantaged non-carbonated beverage portfolio.  The fourth quarter of 2010 marks the company's fifth consecutive quarter of sequential improvement in organic volume performance in North America.  PAB widened its liquid refreshment beverage volume share advantage versus its primary competitor in the U.S. in measured channels for the quarter and the full year.

Volume, revenue and operating profit growth for the quarter and full year benefited from the impact of the anchor bottler acquisitions.

Europe

Snacks performance in the quarter was driven by double-digit gains in Russia and broad gains across much of Europe.  Performance in Eastern Europe was generally stronger than in the developed markets of Western Europe where macroeconomic conditions remained challenged.

Beverage volume grew 5 percent in the quarter and for the full year, excluding the impact of the anchor bottler acquisitions.  Gains were broad based, and particularly strong in Eastern Europe where the company posted double-digit gains in Russia, Turkey, the Ukraine and Poland in the quarter.  Growth for the full year was also driven by strong performance in Russia, Turkey and Poland.

Growth in snack and beverage volumes, revenue and operating profit was supported by delivering differentiated value through promotion and price-pack management, innovative marketing and broadening the portfolio into adjacencies.  Operating profit in the fourth quarter was adversely impacted by higher costs related to potato crop shortages in Russia. Volume, revenue and operating profit growth in beverages for the quarter and the full year benefited from the impact of the anchor bottler acquisitions.

For the year, the company gained value share in snacks and CSDs in Europe with particularly strong snack gains in the key emerging market of Russia.

Asia, Middle East & Africa (AMEA)

Snack and beverage volume gains for the quarter and full year were led by strong performance in key emerging markets.  

The Middle East, India and China each grew snack volumes strong double digits, and acquisitions contributed two points of snacks volume growth in the quarter and for the full year.

Beverage performance for the quarter was led by high-single-digit growth in the Middle East, 9 percent growth in China and double-digit growth in India.   For the full year, beverage volume was led by double-digit growth in India and China.

The company gained one CSD share point in China, and gained relative share versus its closest competitor in India in the most recent quarter.  The company further strengthened its position in India through the formation of a joint venture with Tata Global Beverages to develop and market hydration beverages for the India market.

Full-year operating profit was negatively impacted by the lapping of the gain from the formation of a joint venture with Calbee in Japan in the third quarter of 2009 as well as from marketplace investment spending.

Tax Rate

PepsiCo's reported tax rate was 23.0 percent for the full year versus 26.0 percent in 2009.  PepsiCo's core tax rate was 26.9 percent which compares to a core tax rate of 25.6 percent in 2009.  

Cash Flow

Full-year cash flow from operating activities was $8.4 billion.  Management operating cash flow, which is net of capital expenditures, was $5.3 billion and included: after-tax merger and integration payments of $0.3 billion; $1.0 billion of after-tax discretionary contributions to PepsiCo's pension and retiree medical plans; capital expenditures of $0.1 billion related to the bottler integration; after-tax interest costs related to a debt repurchase of $0.1 billion; and other items as set out in the attached financial schedules.  Management operating cash flow excluding these items was $6.9 billion, an increase of 23 percent from 2009.

The company returned $8 billion of cash to shareholders in 2010 through share repurchases of $5 billion and dividends of $3 billion, bringing the cash returned to shareholders over the past three years through share repurchases and dividends to $18 billion.

Guidance

For 2011, the company is targeting earnings per share growth of 7 to 8 percent on a 52-week, core constant currency basis from its fiscal 2010 core EPS of $4.13.  The company's outlook for 2011 anticipates high global commodity cost inflation, difficult macroeconomic conditions in developed markets and ongoing strategic investments in emerging markets and in brand-building activities.  The company expects to benefit from synergies from the bottling acquisitions and the acquisition of Wimm-Bill-Dann.  In addition, the company expects higher net interest expense and a core tax rate of approximately 27 percent.  Based on current spot rates, foreign exchange translation would have between a one and two point favorable impact on the company's full-year, core EPS growth.  The company anticipates share repurchases of approximately $2.5 billion in 2011.  Beyond 2011, the company expects high-single-digit core constant currency EPS growth reflecting, in part, its outlook for commodity cost inflation and macroeconomic uncertainty.

Please refer to the glossary for more information about the items excluded from the company’s fiscal 2011 core tax rate guidance and fiscal 2011 and longer-term core constant currency EPS guidance.

Anchor Bottler Synergies

The company expects total synergies of more than $550 million from the acquisitions of its anchor bottlers through 2012, with one-time costs of approximately $925 million, of which approximately $250 million is non-cash.  

The above estimates compare to the company's prior synergy targets of $400 million once fully implemented by 2012 and one-time costs of approximately $650 million.  

Conference Call

At 8 a.m. (Eastern Time) today, the company will host a conference call with investors to discuss fourth-quarter results and the outlook for full-years 2011 and beyond. Further details, including a slide presentation accompanying the call, will be accessible on the company's website at www.pepsico.com/investors in advance of the call.    

About PepsiCo

PepsiCo offers the world's largest portfolio of billion-dollar food and beverage brands, including 19 different product lines that each generate more than $1 billion in annual retail sales. Our main businesses – Frito-Lay, Quaker, Pepsi-Cola, Tropicana and Gatorade – also make hundreds of other nourishing, tasty foods and drinks that bring joy to our consumers in more than 200 countries. With annualized revenues of nearly $60 billion, PepsiCo's people are united by our unique commitment to sustainable growth, called Performance with Purpose. By dedicating ourselves to offering a broad array of choices for healthy, convenient and fun nourishment, reducing our environmental impact, and fostering a diverse and inclusive workplace culture, PepsiCo balances strong financial returns with giving back to our communities worldwide. For more information, please visit www.pepsico.com.

Cautionary Statement

Statements in this release that are "forward-looking statements," including our 2011 and longer-term guidance, are based on currently available information, operating plans and projections about future events and trends.  They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements.  Such risks and uncertainties include, but are not limited to: changes in demand for PepsiCo's products, as a result of changes in consumer preferences and tastes or otherwise; damage to PepsiCo's reputation; trade consolidation, the loss of any key customer, or failure to maintain good relationships with PepsiCo's bottling partners; PepsiCo's ability to hire or retain key employees or a highly skilled and diverse workforce; unstable political conditions, civil unrest or other developments and risks in the countries where PepsiCo operates; changes in the legal and regulatory environment; PepsiCo's ability to build and sustain proper information technology infrastructure, successfully implement its ongoing business process transformation initiative or outsource certain functions effectively; unfavorable economic conditions and increased volatility in foreign exchange rates; PepsiCo's ability to compete effectively; increased costs, disruption of supply or shortages of raw materials and other supplies; disruption of PepsiCo's supply chain; climate change or changes in legal, regulatory or market measures to address climate change; PepsiCo's ability to realize the anticipated cost savings and other benefits expected from the acquisitions of The Pepsi Bottling Group, Inc., PepsiAmericas, Inc. and Wimm-Bill-Dann Foods OJSC; failure to renew collective bargaining agreements or strikes or work stoppages; and any downgrade of PepsiCo's credit rating resulting in an increase of its future borrowing costs.

For additional information on these and other factors that could cause PepsiCo's actual results to materially differ from those set forth herein, please see PepsiCo's filings with the SEC, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.  Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made.  PepsiCo undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Miscellaneous Disclosures

Reconciliation. In discussing financial results and guidance, the company may refer to certain non-GAAP measures. Reconciliations of any such non-GAAP measures to the most directly comparable financial measures in accordance with GAAP can be found in the attached exhibits, as well as on the company's website at www.pepsico.com in the "Investors" section under "Investor Presentations." Our non-GAAP measures exclude from reported results those items that management believes are not indicative of our ongoing performance and how management evaluates our operating results and trends.    

Glossary  

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

Core: Core results are non-GAAP financial measures which exclude the following items in our historical results: the commodity mark-to-market net impact included in corporate unallocated expenses; merger and integration charges (including charges related to PBG, PAS and Wimm-Bill-Dann); restructuring and impairment charges; a one-time charge related to the change to hyperinflationary accounting and devaluation in Venezuela; an asset write-off for SAP software; a contribution to the Foundation; interest expense incurred in connection with our debt repurchase; and, with respect to our PBG and PAS mergers, certain fair value adjustments to acquired inventory and the gain on previously held equity interests in PBG and PAS.  With respect to our 2011 and longer-term guidance, our core results exclude: the commodity mark-to-market net impact included in corporate unallocated expenses; merger and integration charges related to PBG, PAS and Wimm-Bill-Dann; and the impact of the 53rd week in 2011.  For more details and reconciliations of our 2010 and 2009 core and core constant currency results and full-year 2011 core tax rate guidance and full-year 2011 and longer-term core constant currency EPS guidance, see "Reconciliation of GAAP and Non-GAAP Information" in the exhibits attached hereto.

Constant currency: Financial results (historical and projected) assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In addition, the impact on EPS growth is computed by adjusting core EPS growth by the after-tax foreign currency translation impact on core operating profit growth using PepsiCo's core effective tax rate.  

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

Effective net pricing: The combined impact of mix and price.  

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

Management operating cash flow, excluding certain items: Management operating cash flow, excluding: (1) discretionary pension and retiree medical contributions,  (2) restructuring payments in connection with our Productivity for Growth initiative, (3) merger and integration payments in connection with our PBG, PAS and WBD acquisitions, (4) a contribution to The PepsiCo Foundation, (5) capital investments related to the bottling integration, (6) interest paid related to our debt repurchase and (7) the tax impacts associated with each of these items, as applicable. See the attached exhibits for a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure in accordance with GAAP (operating cash flow).

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

Net pricing: The combined impact of list price changes, weight changes per package, discounts and allowances.  

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

Pricing: The impact of list price changes and weight changes per package.  

Transaction foreign exchange: The foreign exchange impact on our financial results of transactions, such as purchases of imported raw materials, commodities, or services, occurring in currencies other than the local, functional currency.


PepsiCo, Inc. and Subsidiaries

Summary of PepsiCo 2010 Results

(unaudited)

 

Quarter Ended 12/25/10


Year Ended 12/25/10

 


Reported

Growth (%)


Core*

Growth (%)

Core Constant

Currency* Growth

(%)



Reported

Growth (%)


Core*

Growth (%)

Core Constant

Currency* Growth (%)

 

Volume (Servings)

9

9



7

7


 

Net Revenue

37

37

37


34

34

33

 

Division Operating

  Profit

14

24

26


12

23

23

 

Total Operating

  Profit

10

24



4

24


 

Net Income

  Attributable to  

  PepsiCo

(5)

19

20


6

14

15

 

Earnings per Share

  (EPS)

(6)

17

19


4

12

12

 

*Core results and core constant currency results are financial measures that are not in accordance with Generally Accepted Accounting Principles (GAAP) and exclude the commodity mark-to-market net impact included in corporate unallocated expenses, a one-time net charge related to the currency devaluation in Venezuela, a contribution to The PepsiCo Foundation, Inc., an asset write-off charge for SAP software, certain restructuring actions in 2009 and interest expense incurred in connection with our cash tender offer to repurchase debt.  Additionally, with respect to our acquisitions of The Pepsi Bottling Group, Inc. (PBG) and PepsiAmericas, Inc. (PAS), core results also exclude our gain on previously held equity interests, merger and integration costs, as well as our share of PBG's and PAS's respective merger and integration costs, and certain inventory fair value adjustments.  Core results also exclude advisory fees in connection with our acquisition of Wimm-Bill-Dann Foods, OJSC (WBD).  Core growth, on a constant currency basis, assumes constant foreign currency exchange rates used for translation based on the rates in effect for the comparable period during 2009.  In addition, core constant currency EPS growth is computed by adjusting core EPS growth by the after-tax foreign currency translation impact on core operating profit growth using PepsiCo's core effective tax rate.  See schedules A-7 through A-8 for a discussion of these items and reconciliations to the most directly comparable financial measures in accordance with GAAP.


A – 1

 
               


PepsiCo, Inc. and Subsidiaries

Condensed Consolidated Statement of Income

(in millions, except per share amounts, and unaudited, except year-ended 12/26/09 amounts)


 

Quarter Ended


Year Ended

 

12/25/10


12/26/09


Change


 12/25/10


12/26/09


Change

 












 

Net Revenue

$18,155


$13,297


37%


$57,838


$43,232


34%

 












 

Cost of sales

8,359


6,293


33%


26,575


20,099


32%

 

Selling, general and administrative  expenses

7,526


4,949


52%


22,814


15,026


52%

 

Amortization of intangible assets

39


21


79%


117


63


85%

 












 

Operating Profit

2,231


2,034


10%


8,332


8,044


4%

 












 

Bottling equity income

7


75


(91)%


735


365


102%

 

Interest expense

(408)


(112)


267%


(903)


(397)


128%

 

Interest income

42


23


84%


68


67


1%

 












 

Income before income taxes

1,872


2,020


(7)%


8,232


8,079


2%

 












 

Provision for income taxes

511


583


(12)%


1,894


2,100


(10)%

 












 

Net income

1,361


1,437


(5)%


6,338


5,979


6%

 












 

Less:  Net income attributable to

  noncontrolling interests

(4)


3


n/m


18


33


(44)%

 












 

Net Income Attributable to PepsiCo

$ 1,365


$ 1,434


(5)%


$ 6,320


$  5,946


6%

 












 

Diluted












 

Net Income Attributable to      

  PepsiCo per Common Share

$0.85


$0.90


(6)%


$3.91


$3.77


4%

 

 Average Shares Outstanding

1,607


1,584




1,614


1,577



 












 

Cash dividends declared per common share

$0.48


$0.45




$1.89


$1.775



 

n/m = not meaningful

 

A – 2

 
                       


PepsiCo, Inc. and Subsidiaries

Supplemental Financial Information

(in millions, and unaudited, except year-ended 12/26/09 amounts)


 

Quarter Ended


Year Ended

 

12/25/10


12/26/09


Change


 12/25/10


 12/26/09


Change

 

Net Revenue












 












 

Frito-Lay North America

$ 3,891


$ 3,888


-


$13,397


$13,224


1%

 

Quaker Foods North America

566


585


(3)%


1,832


1,884


(3)%

 

Latin America Foods

2,252


2,062


9%


6,315


5,703


11%

 

  PepsiCo Americas Foods

6,709


6,535


3%


21,544


20,811


3.5%

 












 

  PepsiCo Americas Beverages

6,296


2,754


129%


20,401


10,116


102%

 












 

Europe

3,083


2,264


36%


9,254


6,727


38%

 












 

Asia, Middle East & Africa

2,067


1,744


19%


6,639


5,578


19%

 












 

Total Net Revenue

$18,155


$13,297


37%


$ 57,838


$43,232


34%

 












 

Operating Profit












 












 

Frito-Lay North America

$ 1,027


$   956


7%


$ 3,549


$  3,258


9%

 

Quaker Foods North America

175


190


(7)%


568


628


(10)%

 

Latin America Foods

388


301


29%


1,004


904


11%

 

  PepsiCo Americas Foods

1,590


1,447


10%


5,121


4,790


7%

 












 

  PepsiCo Americas Beverages

734


522


40%


2,776


2,172


28%

 












 

Europe

218


259


(16)%


1,020


932


9%

 












 

Asia, Middle East & Africa

61


46


31%


742


716


4%

 












 

Division Operating Profit

2,603


2,274


14%


9,659


8,610


12%

 












 

Corporate Unallocated












 

Net Impact of Mark-to-Market on  Commodity Hedges

33


83


(59)%


91


274


(67)%

 

   Merger and Integration Costs

(63)


(48)


32%


(191)


(49)


284%

 

Venezuela Currency Devaluation



n/m


(129)



n/m

 

Asset Write-Off for SAP Software



n/m


(145)



n/m

 

Foundation Contribution



n/m


(100)



n/m

 

   Other

(342)


(275)


24%


(853)


(791)


8%

 

(372)


(240)


54%


(1,327)


(566)


134%

 












 

Total Operating Profit

$ 2,231


$2,034


10%


$ 8,332


$ 8,044


4%

 

n/m = not meaningful

 

 

A – 3

 
                       


PepsiCo, Inc. and Subsidiaries

Condensed Consolidated Statement of Cash Flows

(in millions)


 

Year Ended

 

12/25/10


12/26/09

 


(unaudited)



 

Operating Activities





 

     Net income


$ 6,338


$ 5,979

 

     Depreciation and amortization


2,327


1,635

 

     Stock-based compensation expense


299


227

 

     Restructuring and impairment charges


-


36

 

     Cash payments for restructuring charges


(31)


(196)

 

     Merger and integration costs


808


50

 

     Cash payments for merger and integration costs


(385)


(49)

 

     Gain on previously held equity interests in PBG and PAS


(958)


-

 

     Asset write-off


145


-

 

     Non-cash foreign exchange loss related to Venezuela devaluation


120


-

 

     Excess tax benefits from share-based payment arrangements


(107)


(42)

 

     Pension and retiree medical plan contributions


(1,734)


(1,299)

 

     Pension and retiree medical plan expenses


453


423

 

     Bottling equity income, net of dividends


42


(235)

 

     Deferred income taxes and other tax charges and credits


500


284

 

     Change in accounts and notes receivable


(268)


188

 

     Change in inventories


276


17

 

     Change in prepaid expenses and other current assets


144


(127)

 

     Change in accounts payable and other current liabilities


488


(133)

 

     Change in income taxes payable


123


319

 

     Other, net


(132)


(281)

 

Net Cash Provided by Operating Activities


8,448


6,796

 





 

Investing Activities





 

Capital spending


(3,253)


(2,128)

 

Sales of property, plant and equipment


81


58

 

Acquisitions of PBG and PAS, net of cash and cash equivalents acquired


(2,833)


-

 

Acquisition of manufacturing and distribution rights from Dr Pepper Snapple Group, Inc. (DPSG)


(900)


-

 

Investment in WBD


(463)


-

 

Other acquisitions and investments in noncontrolled affiliates


(83)


(500)

 

Divestitures


12


99

 

Cash restricted for pending acquisitions


-


15

 

Short-term investments, net


(212)


55

 

Other investing, net


(17)


-

 

Net Cash Used for Investing Activities


(7,668)


(2,401)

 





 

Financing Activities





 

Proceeds from issuances of long-term debt


6,451


1,057

 

Payments of long-term debt


(59)


(226)

 

Debt repurchase


(500)


-

 

Short-term borrowings, net


2,482


(1,018)

 

Cash dividends paid


(2,978)


(2,732)

 

Share repurchases – common


(4,978)


-

 

Share repurchases – preferred


(5)


(7)

 

Proceeds from exercises of stock options


1,038


413

 

Excess tax benefits from share-based payment arrangements


107


42

 

Acquisition of noncontrolling interest in Lebedyansky from PBG


(159)


-

 

Other financing


(13)


(26)

 

Net Cash Provided by/(Used for) Financing Activities


1,386


(2,497)

 





 

Effect of exchange rate changes on cash and cash equivalents


(166)


(19)

 

Net Increase in Cash and Cash Equivalents


2,000


1,879

 

Cash and Cash Equivalents – Beginning of year


3,943


2,064

 

Cash and Cash Equivalents – End of year


$ 5,943


$ 3,943

 





 

Non-cash activity:





 

Issuance of common stock and equity awards in connection with our acquisitions of PBG and PAS, as reflected in investing and financing activities


$4,451


-

 

A-4

 
         


PepsiCo, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet

(in millions)


 





 


12/25/10


12/26/09

 

Assets


(unaudited)



 

Current Assets





 

  Cash and cash equivalents


$ 5,943


$ 3,943

 

  Short-term investments


426


192

 

  Accounts and notes receivable, net


6,323


4,624

 

  Inventories





 

    Raw materials


1,654


1,274

 

    Work-in-process


128


165

 

    Finished goods


1,590


1,179

 


3,372


2,618

 





 

  Prepaid expenses and other current assets


1,505


1,194

 

       Total Current Assets


17,569


12,571

 





 

Property, plant and equipment, net


19,058


12,671

 

Amortizable intangible assets, net


2,025


841

 





 

Goodwill


14,661


6,534

 

Other nonamortizable intangible assets


11,783


1,782

 

       Nonamortizable Intangible Assets


26,444


8,316

 





 

Investments in noncontrolled affiliates


1,368


4,484

 

Other assets


1,689


965

 

          Total Assets


$68,153


$39,848

 





 

Liabilities and Equity





 

Current Liabilities





 

  Short-term obligations


$   4,898


$      464

 

  Accounts payable and other current liabilities


10,923


8,127

 

  Income taxes payable


71


165

 

       Total Current Liabilities


15,892


8,756

 





 

Long-term debt obligations


19,999


7,400

 

Other liabilities


6,729


5,591

 

Deferred income taxes


4,057


659

 

       Total Liabilities


46,677


22,406

 





 

Commitments and Contingencies





 





 

Preferred stock, no par value


41


41

 

Repurchased preferred stock


(150)


(145)

 





 

PepsiCo Common Shareholders' Equity





 

  Common stock, par value 1 2/3 cents per share (authorized 3,600

  shares, issued 1,865 and 1,782 shares, respectively)


31


30

 

  Capital in excess of par value


4,527


250

 

  Retained earnings


37,090


33,805

 

  Accumulated other comprehensive loss


(3,630)


(3,794)

 

  Repurchased common stock, at cost (284 and 217 shares, respectively)


(16,745)


(13,383)

 

       Total PepsiCo Common Shareholders' Equity


21,273


16,908

 





 

Noncontrolling interests


312


638

 

      Total Equity


21,476


17,442

 

          Total Liabilities and Equity


$ 68,153


$ 39,848

 

A – 5

 
         


PepsiCo, Inc. and Subsidiaries

Supplemental Share and Stock-Based Compensation Data

(in millions, except dollar amounts, and unaudited)


 

Quarter Ended


Year Ended

 

12/25/10


12/26/09


12/25/10


12/26/09

 

Beginning Net Shares Outstanding

1,583


1,559


1,565


1,553

 

Shares Issued in Connection with our Acquisitions of PBG and PAS

-


-


67


-

 

Options Exercised/Restricted Stock Units Converted

8


6


26


12

 

Shares Repurchased

(9)


-


(76)


-

 

Ending Net Shares Outstanding

1,582


1,565


1,582


1,565

 








 

Weighted Average Basic

1,582


1,562


1,590


1,558

 

Dilutive securities:








 

 Options

18


17


18


13

 

 Restricted Stock Units

6


4


5


4

 

 ESOP Convertible Preferred Stock/Other

1


1


1


2

 

Weighted Average Diluted

1,607


1,584


1,614


1,577

 








 

Average Share Price for the period

$65.56


$60.91


$64.35


$55.30

 

Growth Versus Prior Year

8%


3%


16%


(16)%

 








 

Options Outstanding

106


106


112


112

 

Options in the Money

84


85


88


72

 

Dilutive Shares from Options

18


17


18


13

 

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

21%


20%


21%


18%

 








 

Average Exercise Price of Options in the Money

$50.36


$47.92


$49.14


$45.68

 








 

Restricted Stock Units Outstanding

11


6


9


6

 

Dilutive Shares from Restricted Stock Units

6


4


5


4

 








 

Average Intrinsic Value of Restricted Stock Units Outstanding*

$63.27


$60.98


$62.50


$61.03

 








 








 

*Weighted-average intrinsic value at grant date.

 

A – 6

 
               


Reconciliation of GAAP and Non-GAAP Information

(unaudited)

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

Commodity mark-to-market net impact

In the quarter and year ended December 25, 2010, we recognized $33 million and $91 million, respectively, of mark-to-market net gains on commodity hedges in corporate unallocated expenses.  In the quarter and year ended December 26, 2009, we recognized $83 million and $274 million, respectively, of mark-to-market net gains on commodity hedges in corporate unallocated expenses.  We centrally manage commodity derivatives on behalf of our divisions.  Certain of these commodity derivatives do not qualify for hedge accounting treatment and are marked to market with the resulting gains and losses recognized in corporate unallocated expenses.  These gains and losses are subsequently reflected in division results when the divisions take delivery of the underlying commodity.  

Merger and integration charges

In the quarter ended December 25, 2010, we incurred merger and integration charges of $263 million related to our acquisitions of PBG and PAS, as well as advisory fees in connection with our acquisition of WBD, including $133 million recorded in the PAB segment, $67 million recorded in the Europe segment and $63 million recorded in corporate unallocated expenses.  In the year ended December 25, 2010, we incurred merger and integration charges of $799 million related to our acquisitions of PBG and PAS, as well as advisory fees in connection with our pending acquisition of WBD, including $467 million recorded in the PAB segment, $111 million recorded in the Europe segment, $191 million recorded in corporate unallocated expenses and $30 million recorded in interest expense.  These charges also include closing costs, one-time financing costs and advisory fees related to the acquisitions.  In addition, in the year ended December 25, 2010, we recorded $9 million of charges, representing our share of the respective merger costs of PBG and PAS, recorded in bottling equity income.  In the quarter and year ended December 26, 2009, we incurred $49 million and $50 million, respectively, of costs associated with the mergers with PBG and PAS, as well as an additional $3 million and $11 million of costs in the quarter and year ended December 26, 2009, respectively, representing our share of the respective merger costs of PBG and PAS, recorded in bottling equity income.

Restructuring and impairment charges

As a result of our previously initiated Productivity for Growth program, in the year ended December 26, 2009, we recorded $36 million of restructuring and impairment charges.  

Gain on previously held equity interests in PBG and PAS

In the first quarter of 2010, in connection with our acquisitions of PBG and PAS, we recorded a gain on our previously held equity interests of $958 million, comprising $735 million which is non-taxable and recorded in bottling equity income and $223 million related to the reversal of deferred tax liabilities associated with these previously held equity interests.

Inventory fair value adjustments

In the quarter ended December 25, 2010, in the PAB segment, we recorded $24 million of incremental costs, substantially all in cost of sales, related to hedging contracts included in PBG's and PAS's balance sheets at the acquisition date.  In the year ended December 25, 2010, we recorded $398 million of incremental costs, substantially all in cost of sales, related to fair value adjustments to the acquired inventory and other related hedging contracts included in PBG's and PAS's balance sheets at the acquisition date, including $358 million recorded in the PAB segment and $40 million recorded in the Europe segment.

Venezuela currency devaluation

As of the beginning of our 2010 fiscal year, we recorded a one-time $120 million net charge related to our change to hyperinflationary accounting for our Venezuelan businesses and the related devaluation of the bolivar fuerte (bolivar).  $129 million of this net charge was recorded in corporate unallocated expenses, with the balance (income of $9 million) recorded in our PAB segment.  

                                                                                         A - 7                                                                                         

 
 


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

(unaudited)

Asset write-off for SAP software

In the first quarter of 2010, we recorded a $145 million charge related to a change in scope of one release in our ongoing migration to SAP software.  This change was driven, in part, by a review of our North America systems strategy following our acquisitions of PBG and PAS.  This change does not impact our overall commitment to continue our implementation of SAP across our global operations over the next few years.

Foundation contribution

In the first quarter of 2010, we made a $100 million contribution to The PepsiCo Foundation, Inc. (Foundation), in order to fund charitable and social programs over the next several years.  This contribution was recorded in corporate unallocated expenses.

Interest expense incurred in connection with debt repurchase

In the quarter and year ended December 25, 2010, we paid $672 million in a cash tender offer to repurchase $500 million (aggregate principal amount) of our 7.90% senior unsecured notes maturing in 2018.  As a result of this debt repurchase, we recorded a $178 million charge to interest expense, primarily representing the premium paid in the tender offer.

Management operating cash flow

Additionally, management operating cash flow is the primary measure management uses to monitor cash flow performance.  This is not a measure defined by GAAP.  Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash.  As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities.

2011 and longer-term guidance

Our 2011 core tax rate guidance and 2011 and longer-term core constant currency EPS guidance exclude the commodity mark-to-market net impact included in corporate unallocated expenses; merger and integration charges related to PBG, PAS and WBD; and the impact of the 53rd week in 2011. We are not able to reconcile our full-year projected 2011 and longer-term core constant currency EPS to our full-year projected 2011 and longer-term reported results because we are unable to predict the 2011 and longer-term impacts of foreign exchange or the mark-to-market net gains or losses on commodity hedges due to the unpredictability of future changes in foreign exchange rates and commodity prices.  Therefore, we are unable to provide a reconciliation of these measures.

                                                                                         A – 8                                                                                         

 
 


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

($ in millions, unaudited)


Operating Profit Growth Reconciliation


 

Quarter Ended


Year Ended

 

12/25/10


12/25/10

 

Division Operating Profit Growth

14%


12%

 

Impact of Corporate Unallocated

(5)


(8)

 

Reported Total Operating Profit Growth

10%*


4%

 

*Does not sum due to rounding

 
       


Effective Tax Rate Reconciliation

 

Year Ended

 

12/25/10

 

Pre-Tax Income


Income Taxes


Effective Tax Rate

 

Reported Effective Tax Rate

$8,232


$1,894


23.0%

 

Mark-to-Market Net Gains

(91)


(33)



 

Gain on Previously Held Equity Interests

(735)


223



 

Merger and Integration Charges

808


160



 

Inventory Fair Value Adjustments

398


65



 

Venezuela Currency Devaluation

120


-



 

Asset Write-Off

145


53



 

Foundation Contribution

100


36



 

Debt Repurchase

178


64



 

Core Effective Tax Rate

$9,155


$2,462


26.9%

 

 
           



 

Year Ended

 

12/26/09

 

Pre-Tax Income


Income Taxes


Effective Tax Rate

 

Reported Effective Tax Rate

$8,079


$2,100


26.0%

 

Mark-to-Market Net Gains

(274)


(101)



 

Restructuring and Impairment Charges

36


7



 

PBG/PAS Merger Costs

61


16



 

Core Effective Tax Rate

$7,902


$2,023*


25.6%

 

*Does not sum due to rounding

 
           


Net Income Attributable to PepsiCo Reconciliation

 

Year Ended



 

12/25/10


12/26/09


Growth

 

Reported Net Income Attributable to PepsiCo

$6,320


$5,946


6%

 

Mark-to-Market Net Gains

(58)


(173)



 

Restructuring and Impairment Charges

-


29



 

Merger and Integration Charges

648


44



 

Gain on Previously Held Equity Interests

(958)


-



 

Inventory Fair Value Adjustments

333


-



 

Venezuela Currency Devaluation

120


-



 

Asset Write-Off

92


-



 

Foundation Contribution

64


-



 

Debt Repurchase

114


-



 

Core Net Income Attributable to PepsiCo

$6,675


$5,846


14%

 

Impact of Foreign Currency Translation





1

 

Core Constant Currency Net Income Attributable to PepsiCo





15%

 






 

A – 9

 
           


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

($ in millions, except per share amounts, unaudited)


Diluted EPS Reconciliation


 

 

Quarter Ended



 

12/25/10


12/26/09


Growth

 

Reported Diluted EPS

$ 0.85


$ 0.90


(6)%

 

Mark-to-Market Net Gain

(0.01)


(0.03)



 

Merger and Integration Charges

0.13


0.02



 

Inventory Fair Value Adjustments

0.01


− 



 

Debt Repurchase

0.07


− 



 

Core Diluted EPS

$ 1.05


$ 0.90*


17%

 

Impact of Foreign Currency Translation





1.5

 

Core Constant Currency Diluted EPS





19%*

 

*Does not sum due to rounding.

 
           



 

Year Ended



 

12/25/10


12/26/09


Growth

 

Reported Diluted EPS

$ 3.91


$ 3.77


4%

 

Mark-to-Market Net Gain

(0.04)


(0.11)



 

Restructuring and Impairment Charges

-


0.02



 

Gain on Previously Held Equity Interests

(0.60)


-



 

Merger and Integration Charges

0.40


0.03



 

Inventory Fair Value Adjustments

0.21


-



 

Venezuela Currency Devaluation

0.07


-



 

Asset Write-Off

0.06


-



 

Foundation Contribution

0.04


-



 

Debt Repurchase

0.07


-



 

Core Diluted EPS

$ 4.13*


$ 3.71


12%

 

Impact of Foreign Currency Translation





1

 

Core Constant Currency Diluted EPS





12%*

 






 

*Does not sum due to rounding.

 
             


Net Cash Provided by Operating Activities Reconciliation

 

Year Ended


Year Ended



 

12/25/10


12/26/09


Change

 

Net Cash Provided by Operating Activities

$ 8,448


$ 6,796


24%

 

Capital Spending

(3,253)


(2,128)



 

Sales of Property, Plant and Equipment

81


58



 

Management Operating Cash Flow

5,276


4,726



 

Discretionary Pension and Retiree Medical Contributions (after-tax)

983


640



 

Payments Related to 2009 Restructuring Charges (after-tax)

20


168



 

Merger and Integration Payments (after-tax)

299


49



 

Foundation Contribution (after-tax)

64


-



 

Debt Repurchase (after-tax)

112


-



 

Capital Investments Related to the PBG/PAS Integration

138


-



 

Management Operating Cash Flow Excluding above Items

$ 6,892


$ 5,583


23%

 

A – 10

 
           


PepsiCo, Inc. and Subsidiaries

 

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

 

Certain Line Items

 

Quarter and Year Ended December 25, 2010

 

(in millions, except per share amounts, and unaudited)

 

 


GAAP

Measure


Non-Core Adjustments


Non-GAAP

Measure

 


Reported


Gain on previously

held equity

interests in PBG

and PAS



Inventory fair

value

adjustments



Merger and

integration

charges



Asset write-off

for SAP

software




Foundation

contribution


Venezuela

currency

devaluation




Debt

repurchase




Commodity mark

-to-market net gains


Core*

 


Quarter

Ended

12/25/10









Quarter

Ended

12/25/10

 




















 

Cost of sales


$      8,359


$   -


$   (24)


$         -


$    -


$    -

$    -


$           -


$            -


$       8,335

 




















 

Selling, general and administrative expenses


$      7,526


$   -


$       -


$   (263)


$    -


$    -

$    -


$           -


$         33


$       7,296

 




















 

Operating profit


$      2,231


$   -


$    24


$    263


$    -


$    -

$    -


$          -


$        (33)


$       2,485

 




















 

Interest Expense


$        (408)


$   -


$      -


$         -


$    -


$    -

$    -


$    178


$            -


$         (230)

 




















 

Provision for income taxes


$         511


$   -


$   10


$      46


$    -


$    -

$    -


$      64


$       (11)


$          620

 




















 

Net income attributable to PepsiCo


$      1,365


$   -


$   14


$    217


$    -


$    -

$    -


$    114


$       (22)


$       1,688

 




















 

Net income attributable to PepsiCo per common share - diluted


$        0.85


$   -


$ 0.01


$   0.13


$    -


$    -

$    -


$   0.07


$    (0.01)


$         1.05

 




















 




















 
                                       




GAAP

Measure


Non-Core Adjustments


Non-GAAP

Measure

 


Reported


Gain on previously

held equity

interests in PBG and

PAS



Inventory fair

value

adjustments



Merger and

integration

charges



Asset write-off

for SAP

software




Foundation

contribution


Venezuela

currency

devaluation




Debt

repurchase




Commodity mark

-to-market net gains


Core*

 


Year Ended

12/25/10









Year Ended

12/25/10

 




















 

Cost of sales


$     26,575


$         -


$      (395)


$           -


$            -


$           -

$        -


$      -


$        -


$26,180

 




















 

Selling, general and administrative expenses


$     22,814


$         -


$           (3)


$     (769)


$      (145)


$     (100)

$  (120)


$      -


$    91


$21,768

 




















 

Operating profit


$        8,332


$         -


$       398


$      769


$       145


$       100

$   120


$      -


$  (91)


$ 9,773

 




















 

Bottling equity income


$           735


$   (735)


$            -


$           9


$            -


$             -

$         -


$      -


$       -


$         9

 




















 

Interest expense


$          (903)


$          -


$            -


$         30


$            -


$             -

$         -


$ 178


$       -


$    (695)

 




















 

Provision for income taxes


$        1,894


$     223


$         65


$       160


$        53


$          36

$         -


$   64


$   (33)


$  2,462

 




















 

Net income attributable to PepsiCo


$        6,320


$    (958)


$       333


$       648


$        92


$          64

$    120


$  114


$   (58)


$  6,675

 




















 

Net income attributable to PepsiCo per common share - diluted


$          3.91


$    (0.60)


$      0.21


$       0.40


$     0.06


$      0.04

$    0.07


$  0.07


$(0.04)


$  4.13**

 




















 




















 

 *Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See schedules A-7 and A-8 for a discussion of each of these non-core adjustments.  

 

 

 **Does not sum due to rounding.  

 

 

 

A-11

 
                                       


PepsiCo, Inc. and Subsidiaries

 

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

 

Certain Line Items

 

Quarter and Year Ended December 26, 2009

 

(in millions, except per share amounts, and unaudited)

 











 


GAAP Measure


Non-Core Adjustments


Non-GAAP Measure

 


Reported


Restructuring

and impairment

charges


Merger and

integration

charges


Commodity

mark-to-market

net gains


Core*

 


Quarter

Ended

12/26/09





Quarter

Ended

12/26/09

 











 

Selling, general and administrative expenses


$  4,949


$      -


$                     (49)


$                    83


$            4,983

 











 

Operating profit


$  2,034


$      -


$                       49


$                  (83)


$            2,000

 











 

Bottling equity income


$        75


$      -


$                         3


$                    -


$                 78

 











 

Provision for income taxes


$      583


$      -


$                       16


$                  (35)


$               564

 











 

Net income attributable to PepsiCo


$   1,434


$      -


$                       36


$                  (48)


$            1,422

 











 

Net income attributable to PepsiCo per common share - diluted


$     0.90


$      -


$                    0.02


$               (0.03)


0.90**

 











 











 
                     




GAAP Measure


Non-Core Adjustments


Non-GAAP Measure

 


Reported


Restructuring and impairment charges


Merger and integration charges


Commodity mark-to-market net gains


Core*

 


Year Ended 12/26/09





Year Ended 12/26/09

 











 

Selling, general and administrative expenses


$         15,026


$    (36)


$        (50)


$       274


$     15,214

 











 

Operating profit


$           8,044


$     36


$         50


$     (274)


$       7,856

 











 

Bottling equity income


$              365


$        -


$         11


$            -


$          376

 











 

Provision for income taxes


$           2,100


$       7


$         17


$     (101)


$      2,023

 











 

Net income attributable to PepsiCo


$           5,946


$    29


$        44


$     (173)


$      5,846

 











 

Net income attributable to PepsiCo per common share - diluted


$             3.77


$ 0.02


$     0.03


$   (0.11)


$        3.71

 











 











 











 

 *Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See schedules A-7 and A-8 for a discussion of each of these non-core adjustments.  

 

 

 **Does not sum due to rounding.  

 

 

 

A-12

 
                     


PepsiCo, Inc. and Subsidiaries

 

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

 

Operating Profit by Division

 

Quarter and Year Ended December 25, 2010

 

(in millions and unaudited)

 

 


GAAP

Measure


Non-Core Adjustments


Non-GAAP

Measure

 


Reported


Inventory fair

value

adjustments


Merger and

integration

charges


Asset write-off

for SAP

software






Commodity mark-

to-market net

gains


Core*

 

Operating Profit


Quarter

Ended

12/25/10





Foundation

contribution


Venezuela

currency

devaluation



Quarter

Ended

12/25/10

 

















 

Frito-Lay North America


$    1,027


$   -


$    -


$   -


$    -


$    -


$     -


$    1,027

 

Quaker Foods North America


175


-


-


-


-


-


-


175

 

Latin America Foods


388


-


-


-


-


-


-


388

 

  PepsiCo Americas
  Foods


1,590


-


-


-


-


-


-


1,590

 

















 

PepsiCo Americas Beverages


734


24


133


-


-


-


-


891

 

















 

Europe


218


-


67


-


-


-


-


285

 

















 

Asia, Middle East & Africa


61


-


-


-


-


-


-


61

 

















 

Division Operating Profit


2,603


24


200


-


-


-


-


2,827

 

















 

Corporate Unallocated


(372)


-


63


-


-


-


(33)


(342)

 

















 

Total Operating Profit


$    2,231


$   24


$263


-


-


-


$ (33)


$  2,485

 

















 

















 
                                 




GAAP

Measure


Non-Core Adjustments


Non-GAAP

Measure

 


Reported


Inventory fair

value

adjustments


Merger and

Integration

charges


Asset write-off

for SAP

software






Commodity mark-

to-market net

gains


Core*

 

Operating Profit


Year Ended

12/25/10





Foundation

contribution


Venezuela

currency

devaluation



Year Ended

12/25/10

 

















 

















 

Frito-Lay North America


$    3,549


$     -


$    -


$    -


$    -


$    -


$    -


$   3,549

 

Quaker Foods North America


568


-


-


-


-


-


-


568

 

Latin America Foods


1,004


-


-


-


-


-


-


1,004

 

  PepsiCo Americas
  Foods


5,121


-


-


-


-


-


-


5,121

 

















 

PepsiCo Americas Beverages


2,776


358


467


-


-


(9)


-


3,592

 

















 

Europe


1,020


40


111


-


-


-


-


1,171

 

















 

Asia, Middle East & Africa


742


-


-


-


-


-


-


742

 

















 

Division Operating Profit


9,659


398


578


-


-


(9)


-


10,626

 

















 

Corporate Unallocated


(1,327)


-


191


145


100


129


(91)


(853)

 

















 

Total Operating Profit


$    8,332


$398


$769


$145


$ 100


$ 120


$  (91)


$  9,773

 

















 

















 

 *Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See schedules A-7 through A-8 for a discussion of each of these non-core adjustments.  

 

 

A-13

 
                                 


PepsiCo, Inc. and Subsidiaries

 

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

 

Operating Profit by Division

 

Quarter and Year Ended December 26, 2009

 

(in millions and unaudited)

 

 


GAAP

Measure


Non-Core Adjustments


Non-GAAP

Measure

 


Reported


Restructuring and

impairment

charges


Merger and

integration charges


Mark-to-market

net impact


Core*

 

Operating Profit


Quarter

Ended

12/26/09





Quarter

Ended

12/26/09

 











 

Frito-Lay North America


$              956


$                             -


$                             -


$                    -


$             956

 

Quaker Foods North America


190


-


-


-


190

 

Latin America Foods


301


-


-


-


301

 

  PepsiCo Americas Foods


1,447


-


-


-


1,447

 











 

PepsiCo Americas Beverages


522


-


-


-


522

 











 

Europe


259


-


1


-


260

 











 

Asia, Middle East & Africa


46


-


-


-


46

 











 

Division Operating Profit


2,274


-


-


-


2,275

 











 

Corporate Unallocated


(240)


-


48


(83)


(275)

 











 

Total Operating Profit


$           2,034


$                             -


$                          49


$                  (83)


$          2,000

 











 











 
                     




GAAP

Measure


Non-Core Adjustments


Non-GAAP

Measure

 


Reported


Restructuring and

impairment charges


Merger and

integration charges


Mark-to-market

net impact


Core*

 

Operating Profit


Year

Ended

12/26/09





Year

Ended

12/26/09

 











 











 

Frito-Lay North America


$   3,258


$   2


$      -


$     -


$    3,260

 

Quaker Foods North America


628


1


-


-


629

 

Latin America Foods


904


3


-


-


907

 

  PepsiCo Americas Foods


4,790


6


-


-


4,796

 











 

PepsiCo Americas Beverages


2,172


16


-


-


2,188

 











 

Europe


932


1


1


-


934

 











 

Asia, Middle East & Africa


716


13


-


-


729

 











 

Division Operating Profit


8,610


36


1


-


8,647

 











 

Corporate Unallocated


(566)


-


49


(274)


(791)

 











 

Total Operating Profit


$   8,044


$ 36


$   50


$  (274)


$    7,856

 











 











 

 *Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See schedules A-7 through A-8 for a discussion of each of these non-core adjustments.  

 

 

A-14

 
                     


PepsiCo, Inc. and Subsidiaries

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

Core Growth and Core Constant Currency Growth*

  (unaudited)


 

Quarter Ended


 

12/25/10


 

Net

Revenue


Operating

Profit


 

Frito-Lay North America





 

Reported Growth

-%


7%


 

Restructuring and Impairment Charges

-


-


 

Core Growth

-


7


 

Impact of Foreign Currency Translation

-


-


 

Core Constant Currency Growth

-%


7%


 





 

Quaker Foods North America





 

Reported Growth

(3)%


(7)%


 

Restructuring and Impairment Charges

-


-


 

Core Growth

(3)


(7)


 

Impact of Foreign Currency Translation

(0.5)


(0.5)


 

Core Constant Currency Growth

(4)% **


(8)%**


 





 

Latin America Foods





 

Reported Growth

9%


29%


 

Restructuring and Impairment Charges

-


-


 

Core Growth

9


29


 

Impact of Foreign Currency Translation

2


(1)


 

Core Constant Currency Growth

11%


28%


 





 

PepsiCo Americas Foods





 

Reported Growth

3%


10%


 

Restructuring and Impairment Charges

-


-


 

Core Growth

3


10


 

Impact of Foreign Currency Translation

-


(1)


 

Core Constant Currency Growth

3%


9%


 





 

PepsiCo Americas Beverages





 

Reported Growth

129%


40%


 

Restructuring and Impairment Charges

-


-


 

Merger and Integration Charges

-


26


 

Inventory Fair Value Adjustments

-


4.5


 

Core Growth

129


71**


 

Impact of Foreign Currency Translation

1


6


 

Core Constant Currency Growth

130%


77%


 





 

*Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See schedules A-7 and A-8 for a discussion of each of these non-core adjustments.


**Does not sum due to rounding.


A – 15

 
         


PepsiCo, Inc. and Subsidiaries

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

Core Growth and Core Constant Currency Growth*

  (unaudited)


 

Quarter Ended


 

12/25/10


 

Net

Revenue


Operating

Profit


 

Europe





 

Reported Growth

36%


(16)%


 

Restructuring and Impairment Charges

-


-


 

Merger and Integration Charges

-


25


 

Core Growth

36


9


 

Impact of Foreign Currency Translation

5.5


4


 

Core Constant Currency Growth

42%**


13%


 





 

Asia, Middle East & Africa





 

Reported Growth

19%


31%


 

Restructuring and Impairment Charges

-


-


 

Core Growth

19


31


 

Impact of Foreign Currency Translation

(2)


(8)


 

Core Constant Currency Growth

16%**


23%


 





 

Total Divisions





 

Reported Growth

37%


14%


 

Restructuring and Impairment Charges

-


-


 

Merger and Integration Charges

-


9


 

Inventory Fair Value Adjustments

-


1


 

Core Growth

37


24


 

Impact of Foreign Currency Translation

1


1


 

Core Constant Currency Growth

37%**


26%**


 

*Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See schedules A-7 and A-8 for a discussion of each of these non-core adjustments.


**Does not sum due to rounding.


A – 16

 
         


PepsiCo, Inc. and Subsidiaries

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

Core Growth and Core Constant Currency Growth*

(unaudited)


 

Year Ended


 

12/25/10


 

Net

Revenue


Operating

Profit


 

Frito-Lay North America





 

Reported Growth

1%


9%


 

Restructuring and Impairment Charges

-


-


 

Core Growth

1%


9%


 

Impact of Foreign Currency Translation

(1)


(1)


 

Core Constant Currency Growth

0.5%**


8%


 





 

Quaker Foods North America





 

Reported Growth

(3)%


(10)%


 

Restructuring and Impairment Charges

-


-


 

Core Growth

(3)


(10)


 

Impact of Foreign Currency Translation

(1)


(1)


 

Core Constant Currency Growth

(4)%


(10)%**


 





 

Latin America Foods





 

Reported Growth

11%


11%


 

Restructuring and Impairment Charges

-


-


 

Core Growth

11


11


 

Impact of Foreign Currency Translation

(1)


-


 

Core Constant Currency Growth

10%


11%


 





 

PepsiCo Americas Foods





 

Reported Growth

3.5%


7%


 

Restructuring and Impairment Charges

-


-


 

Core Growth

3.5


7


 

Impact of Foreign Currency Translation

(1)


(1)


 

Core Constant Currency Growth

3%**


6%


 





 

PepsiCo Americas Beverages





 

Reported Growth

102%


28%


 

Restructuring and Impairment Charges

-


(1)


 

Merger and Integration Charges

-


22


 

Inventory Fair Value Adjustments

-


16


 

Venezuela Currency Devaluation

-


-


 

Core Growth

102


64**


 

Impact of Foreign Currency Translation

-


4


 

Core Constant Currency Growth

102%


68%


 





 

*Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See schedules A-7 and A-8 for a discussion of each of these non-core adjustments.


**Does not sum due to rounding.


A – 17

 
         


PepsiCo, Inc. and Subsidiaries

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

Core Growth and Core Constant Currency Growth*

(unaudited)


 

Year Ended


 

12/25/10


 

Net

Revenue


Operating

Profit


 

Europe





 

Reported Growth

38%


9%


 

Restructuring and Impairment Charges

-


-


 

Merger and Integration Charges

-


12


 

Inventory Fair Value Adjustments

-


4


 

Core Growth

38


25


 

Impact of Foreign Currency Translation

2


1


 

Core Constant Currency Growth

40%


26%


 





 

Asia, Middle East & Africa





 

Reported Growth

19%


4%


 

Restructuring and Impairment Charges

-


(2)


 

Core Growth

19


2


 

Impact of Foreign Currency Translation

(4)


(4)


 

Core Constant Currency Growth

15%


(2)%


 





 

Total Divisions





 

Reported Growth

34%


12%


 

Restructuring and Impairment Charges

-


-


 

Merger and Integration Charges

-


7


 

Inventory Fair Value Adjustments

-


5


 

Core Growth

34


23**


 

Impact of Foreign Currency Translation

(1)


1


 

Core Constant Currency Growth

33%


23%**


 

*Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See schedules A-7 and A-8 for a discussion of each of these non-core adjustments.


**Does not sum due to rounding.


A – 18

 
         


SOURCE PepsiCo