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PepsiCo Reports Third Quarter 2012 Results



                  PepsiCo Reports Third Quarter 2012 Results

-- Third quarter reported EPS of $1.21 and core(1) EPS of $1.20

-- Company reaffirms 2012 core constant currency(1) net revenue and core
constant currency EPS guidance

-- Reflecting the impact of previously announced structural changes and
negative foreign exchange translation, reported net revenue declined 5
percent, in line with expectations. Excluding these impacts, organic(1) net
revenue grew 5 percent

-- Company expects to return more than $6 billion to shareholders through
dividends and share repurchases in 2012

-- Company expects to deliver more than $1 billion in productivity savings in
2012 and $3 billion in savings by 2015

PR Newswire

PURCHASE, N.Y., Oct. 17, 2012

PURCHASE, N.Y., Oct. 17, 2012 /PRNewswire/ -- PepsiCo, Inc. (NYSE: PEP) today
reported a decline in third quarter net revenue of 5 percent, reflecting a
negative 5-percentage-point impact from previously announced structural
changes (primarily beverage refranchisings in China and Mexico), and a
negative 5-percentage-point impact from foreign exchange translation.
 Excluding these items, third quarter net revenue grew 5 percent on an organic
basis.

(Logo:  http://photos.prnewswire.com/prnh/20120424/NY93895LOGO )

Reported EPS was $1.21 and core EPS was $1.20.  Management reaffirmed both its
2012 core constant currency net revenue and core constant currency EPS
guidance and stated that its 2012 strategic initiatives are on track.

"PepsiCo is diligently executing the strategy we set forth at the start of the
year, and we remain on track to achieve our full-year targets," said PepsiCo
Chairman and CEO Indra Nooyi.  "Our disciplined pricing and sustained
investment in brand building drove 5 percent organic net revenue growth
reflecting 1 percent organic volume growth and 4 percent effective net
pricing.

"We remain focused on our five priorities.  We will continue to invest
aggressively to build our brands, accelerate innovation to drive growth, focus
on execution and deliver our productivity agenda while returning cash to
shareholders."

^1Please refer to the Glossary for the definitions of Non-GAAP financial
measures including core, constant currency, organic and management operating
cash flow.

Operating and Marketplace Highlights

  o Achieved 5 percent organic net revenue growth with a good balance between
    volume growth and price realization.
  o Grew global snacks net revenue on a reported basis.  Grew both global
    snacks and global beverage net revenue on an organic basis.
  o Emerging and developing market net revenue declined 13 percent, primarily
    due to beverage refranchisings in China and Mexico.  On an organic basis,
    emerging and developing market net revenue grew 11 percent.
  o While reported net revenue in AMEA and Europe declined 21 percent and 6
    percent, respectively, organic net revenue grew 10 percent and 7 percent,
    respectively.
  o PAF saw balanced revenue growth driven by volume growth and effective net
    price realization.
  o Substantially increased advertising and marketing expense in the quarter,
    supporting the company's long-term brand building initiatives.
  o Activated our expanded partnership with the NFL across snacks and
    beverages with retail programming in 22 of 32 team markets and announced
    that Pepsi will be the official sponsor of the 2013 Super Bowl halftime
    show.  Doritos will again drive its highly popular Crash the Super Bowl
    program.

Summary of Third Quarter Financial Performance

  o Organic net revenue growth was 5 percent.  Reported net revenue benefited
    from 1 percentage point of volume growth and 4 percentage points of
    effective net pricing, offset by negative foreign exchange translation of
    5 percentage points.  Structural changes, primarily refranchisings in
    China and Mexico, negatively impacted reported net revenue performance by
    5 percentage points. 
  o Reported operating profit declined 4 percent and core operating profit
    declined 8 percent.  Core operating profit performance reflected the
    impact of increased commodity costs, increased advertising and marketing
    expense, higher corporate unallocated expenses reflecting increased
    pension expense and a negative 3 percentage point impact of foreign
    exchange translation.  Core operating profit excluded mark-to-market net
    gains on commodity hedges, restructuring and certain impairment charges as
    well as merger and integration charges.
  o Net interest expense was $181 million and included $24 million in
    mark-to-market gains on investments related to deferred compensation
    liabilities.  There is a corresponding offset to these gains within
    selling, general and administrative expense resulting in no net benefit to
    earnings.
  o The company's reported effective tax rate was 27 percent.  The company's
    core effective tax rate was 26.3 percent, 90 basis points above the prior
    year quarter due to an adjustment to international deferred taxes,
    partially offset by tax benefits generated from an international
    acquisition.
  o Reported EPS was $1.21 and core EPS was $1.20. Core EPS excludes a $0.04
    per share impact of certain restructuring, impairment and integration
    charges and a $0.05 per share impact from mark-to-market net gains on
    commodity hedges. Mark-to-market gains and losses are subsequently
    reflected in core division results when the divisions take delivery of the
    underlying commodity.
  o Operating cash flow was $5.1 billion year to date. Management operating
    cash flow (excluding certain items) was $4.9 billion. The company has
    returned $4.8 billion to shareholders through dividends and share
    repurchases through the end of the third quarter, and expects to return
    more than $6 billion to shareholders for the full year 2012.

              Summary Third Quarter 2012 Performance (Percent Growth)
                                              
                                                              
                                   Core      Core Constant
                      Reported               Currency^a      Organic^b
                                   USD^a
Volume^c
     Snacks           6                                      3
    Beverages         3                                      1
Net Revenue           (5)          (5)       -               5
Operating Profit^d    (4)          (8)       (5)
EPS                   (3)          (8)       (4)

 

Summary Third Quarter 2012 Business Segment Performance (Percent Growth)
                                             Core^a
                                              

                                                 Constant
                                             Currency^a 
                                     Organic                          
                                     Net
                   Net     Operating         Net     Operating       Operating
          Volume^c Revenue Profit^d  Revenue Revenue Profit
                                                                     Profit
PAF       6        2.5     (6)       6       7       (1)             (3)
    FLNA  1        3       -         3       3       1               1
    LAF   15^e     2       (21)      13      15      -               (10)
    QFNA  2        -       (13)      1       0.5     (11)            (12)
PAB       (3)      (7)     (16)      -       (6)     (13)            (15)
Europe    -/1^f    (6)     (6)       7       7       3               (7)
AMEA      13/15^f  (21)    11        10      (17)    14              13
Total                                                                 
Divisions
          6/3      (5)     (7)       5       -       (3)             (6)
Total                                                                 
PepsiCo            (5)                       -       (5)
                           (4)       5                               (8)

^aThe 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".
^bOrganic results are non-GAAP financial measures that exclude the impact of
acquisitions and divestitures and foreign exchange translation.  Please refer
to the Glossary for additional information regarding organic results.
^c  Volume growth measures reflect an adjustment to the base year (2011) for
divestitures that occurred in 2011 and 2012, as applicable.
^dThe reported operating profit performance was impacted by certain items
excluded from our core results in both 2012 and 2011.  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".
^eLAF volume included 11 percentage points of benefit related to acquisitions.
^fSnacks/Beverages.  AMEA beverage volume includes 7 points of benefit related
to co-branded juice drinks in China.

All comparisons are on a core year-over-year basis unless otherwise noted.

Division Operating Summaries

PepsiCo Americas Foods (PAF)
Organic net revenue grew 6 percent in the quarter, and reported net revenue
grew 2.5 percent. Net revenue growth was driven by effective net pricing
supported by contributions from innovation and increased media support. Core
constant currency operating profit declined 1 percent, reflecting higher
commodity costs and increased advertising and marketing investments across all
PAF divisions, partially offset by productivity initiatives.

Frito-Lay North America (FLNA)
Organic net revenue increased 3 percent driven by a 1 percent increase in
volume coupled with 2 percent effective net pricing.  Volume was negatively
impacted in the quarter by a calendar shift related to the Labor Day holiday. 
Net revenue growth was driven by the C-store, club, dollar and foodservice
channels.  Reported net revenue grew 3 percent.

Operating profit growth of 1 percent in the quarter reflected higher commodity
costs and a significant increase in advertising and marketing investments
offset by effective net pricing and productivity initiatives.

Latin America Foods (LAF)
On an organic basis, LAF net revenue grew 13 percent.  Net revenue growth
reflected 4 percentage points of organic volume growth and 9 percentage points
of effective net pricing.  Reported net revenue grew 2 percent, reflecting a
2-percentage-point benefit from acquisitions and divestitures, offset by a
13-percentage-point unfavorable foreign exchange translation impact.   

Core constant currency operating profit was even with the prior year quarter
reflecting increased advertising and marketing expense and commodity cost
inflation.

Quaker Foods North America (QFNA)
Organic net revenue grew modestly.  Reported net revenue performance was even
with the prior year quarter, reflecting 2 percentage points of volume growth
offset by lower pricing and mix. 

Core constant currency operating profit in the quarter declined 11 percent
driven principally by higher commodity costs and increased advertising and
marketing expense. 

PepsiCo Americas Beverages (PAB)
On an organic basis, net revenue was even with the prior year quarter. 
Effective net pricing increased by 3 percentage points and bottler case volume
declined 3 percent.  Volume was negatively impacted by 1 percentage point in
the quarter due to a calendar shift related to the Labor Day holiday. 
Positive volume and pricing trends continued within the convenience and gas
channel.  Reported net revenue declined 7 percent, primarily reflecting a
negative 6-percentage-point impact of the refranchising of the division's
Mexican beverage business in the fourth quarter of 2011 and a negative
1-percentage-point impact from foreign exchange translation.

Operating profit declined in the quarter primarily reflecting increased
commodity costs and higher advertising and marketing expense, partially offset
by favorable effective net pricing and savings resulting from productivity
initiatives. The refranchising of the division's Mexican beverage business
negatively impacted operating profit performance by more than 2 percentage
points.

Europe
On an organic basis, net revenue grew 7 percent with a focus on product mix
management to drive margin accretion and healthy growth in Russia partially
offset by softer trends in Western Europe.  Reported net revenue declined 6
percent, reflecting 6 percentage points of effective net pricing which was
more than offset by an unfavorable foreign exchange translation impact of 12
percentage points.  

Core constant currency operating profit grew 3 percent in the quarter with
significantly higher marketing investments and commodity cost inflation offset
by productivity savings.  Operating profit performance was negatively impacted
by 4 percentage points due to an impairment charge associated with operations
in Greece.  Operating profit performance was positively impacted by 8
percentage points attributable to net favorable adjustments of certain
operating items and favorable comparisons related to timing of concentrate
shipments in connection with our global SAP implementation in the third
quarter of 2011. 

Asia, Middle East & Africa (AMEA)
On an organic basis, net revenue grew 10 percent, led by double-digit organic
volume growth in snacks and high-single-digit organic volume growth in
beverages.  Reported net revenue declined 21 percent reflecting a
27-percentage-point negative impact from structural changes, principally the
refranchising of bottling operations in China, and a negative
4-percentage-point impact from foreign exchange translation.

Core constant currency operating profit grew 14 percent, driven by volume
growth and effective net pricing partially offset by higher commodity costs.
The impact of acquisitions and divestitures reduced operating profit by 5
percent while a favorable comparison related to timing of concentrate
shipments in connection with our global SAP implementation in the third
quarter of 2011 increased operating profit by 7 percent. 

Restructuring
As previously announced, the company has committed to a multi-year
productivity program.  The company incurred pre-tax, non-core restructuring
charges of $83 million in the third quarter of 2012 and has incurred $193
million year to date.  The company anticipates additional charges of
approximately $205 million in the balance of 2012 and $129 million from 2013
through 2015.  Charges under this program resulted in cash expenditures of
$103 million in the third quarter of 2012 and $243 million year to date.  The
company anticipates additional cash expenditures of approximately $175 million
in the remainder of 2012, with the balance of approximately $287 million of
related cash expenditures expected in 2013 through 2015. 

2012 Guidance and Outlook
Consistent with its previous guidance for 2012, the company expects a decline
in core constant currency EPS of approximately 5 percent from its fiscal 2011
core EPS of $4.40.  Based on the current foreign exchange market consensus,
foreign exchange translation would have an unfavorable impact of approximately
three percentage points on the company's full year core EPS performance in
2012.  Consistent with its previous guidance, the company expects core
constant currency net revenue growth of low-single-digits reflecting the
impact of structural changes, principally refranchisings, which are expected
to reduce core constant currency net revenue growth by approximately three
percentage points for the full year.  Excluding these structural changes, core
constant currency net revenue is expected to grow mid-single-digits,
consistent with the company's prior guidance. 

The company is targeting approximately $8 billion in cash flow from operating
activities and more than $6 billion in management operating cash flow
(excluding certain items) in 2012, which includes the favorable impact of an
expected 10 percent reduction in capital spending and improved working capital
efficiency.  The company also made a pre-tax discretionary pension and retiree
medical contribution of $1 billion in the first quarter of 2012.

Reflecting its commitment to return capital to shareholders, the company
anticipates more than $3 billion in share repurchases for 2012, and expects to
pay $3.3 billion in dividends. 

Conference Call
At 8 a.m. (Eastern Time) today, the company will host a conference call with
investors to discuss third-quarter results and the outlook for 2012. 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.

 

PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Income
(in millions except per share amounts, unaudited)
                     12 Weeks Ended                 36 Weeks Ended
                     9/8/2012    9/3/2011   Change  9/8/2012  9/3/2011  Change
Net Revenue          $ 16,652    $ 17,582   (5)%    $ 45,538  $ 46,346  (2)%
Cost of sales        7,833       8,452      (7)%    21,637    21,862    (1)%
Selling, general and
administrative       5,992       6,186      (3)%    16,920    16,995    –%

expenses
Amortization of      27          38         (29)%   82        103       (21)%
intangible assets
Operating Profit     2,800       2,906      (4)%    6,899     7,386     (7)%
Interest expense     (204)       (205)      –%      (611)     (584)     5%
Interest income and  23          (4)        n/m     47        33        42%
other
Income before income 2,619       2,697      (3)%    6,335     6,835     (7)%
taxes
Provision for income 706         686        3%      1,788     1,775     1%
taxes
Net income           1,913       2,011      (5)%    4,547     5,060     (10)%
Less: Net income     11          11         8%      30        32        (6)%
attributable to
noncontrolling
interests
Net Income
Attributable to      $ 1,902     $ 2,000    (5)%    $ 4,517   $ 5,028   (10)%
PepsiCo
Diluted
Net Income
Attributable to      $     1.21  $    1.25  (3)%    $   2.86  $   3.14  (9)%
PepsiCo per Common
Share
Average Shares       1,575       1,599              1,580     1,603
Outstanding
Cash dividends
declared per common  $ 0.5375    $  0.515           $   1.59  $   1.51
share
n/m = not meaningful
A-1

 

PepsiCo, Inc. and Subsidiaries
Supplemental Financial Information
(in millions, unaudited)
                    12 Weeks Ended                 36 Weeks Ended
                    9/8/2012    9/3/2011   Change  9/8/2012  9/3/2011   Change
Net Revenue
Frito-Lay North     $   3,269   $  3,173   3%      $  9,472  $   9,167  3%
America
Quaker Foods North  615         614        –%      1,821     1,837      (1)%
America
Latin America Foods 1,883       1,841      2%      5,066     4,757      7%
PepsiCo Americas    5,767       5,628      2.5%    16,359    15,761     4%
Foods
PepsiCo Americas    5,530       5,947      (7)%    15,330    16,107     (5)%
Beverages
Europe              3,691       3,909      (6)%    9,153     9,329      (2)%
Asia, Middle East & 1,664       2,098      (21)%   4,696     5,149      (9)%
Africa
Total Net Revenue   $ 16,652    $ 17,582   (5)%    $ 45,538  $  46,346  (2)%
Operating Profit
Frito-Lay North     $      917  $ 918      –%      $  2,532  $   2,545  (0.5)%
America
Quaker Foods North  154         177        (13)%   495       558        (11)%
America
Latin America Foods 219         275        (21)%   673       720        (7)%
PepsiCo Americas    1,290       1,370      (6)%    3,700     3,823      (3)%
Foods
PepsiCo Americas    837         992        (16)%   2,202     2,533      (13)%
Beverages
Europe              483         514        (6)%    1,017     984        3%
Asia, Middle East & 317         285        11%     630       730        (14)%
Africa
Division Operating  2,927       3,161      (7)%    7,549     8,070      (6)%
Profit
Corporate
Unallocated
Net Impact of
Mark-to-Market on   121         (53)       n/m     126       (31)       n/m
Commodity Hedges
Merger and
Integration         2           (10)       n/m     –         (64)       n/m

Charges
Restructuring and   (7)         –          n/m     (8)       –          n/m
Impairment Charges
Other               (243)       (192)      27%     (768)     (589)      30%
                    (127)       (255)      (50)%   (650)     (684)      (5)%
Total Operating     $   2,800   $   2,906  (4)%    $  6,899  $   7,386  (7)%
Profit
n/m = not meaningful
A-2

 

PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in millions, unaudited)
                                                            36 Weeks Ended
                                                            9/8/2012  9/3/2011
Operating Activities
Net income                                                  $ 4,547   $ 5,060
Depreciation and amortization                               1,837     1,877
Stock-based compensation expense                            193       222
Restructuring and impairment charges                        193       –
Cash payments for restructuring charges                     (243)     (1)
Merger and integration charges                              7         174
Cash payments for merger and integration charges            (57)      (293)
Restructuring and other charges related to the transaction  163       –
with Tingyi (Cayman Islands) Holding Corp. (Tingyi)
Cash payments for restructuring and other charges related   (98)      –
to the transaction with Tingyi
Excess tax benefits from share-based payment arrangements   (89)      (56)
Pension and retiree medical plan contributions              (1,253)   (185)
Pension and retiree medical plan expenses                   414       389
Deferred income taxes and other tax charges and credits     283       132
Change in accounts and notes receivable                     (1,300)   (1,643)
Change in inventories                                       (234)     (466)
Change in prepaid expenses and other current assets         (83)      (54)
Change in accounts payable and other current liabilities    281       142
Change in income taxes payable                              736       936
Other, net                                                  (179)     (400)
Net Cash Provided by Operating Activities                   5,118     5,834
Investing Activities
Capital spending                                            (1,409)   (1,962)
Sales of property, plant and equipment                      58        46
Acquisition of Wimm-Bill-Dann Foods OJSC (WBD), net of cash –         (2,428)
and cash equivalents acquired
Investment in WBD                                           –         (164)
Cash payments related to the transaction with Tingyi        (298)     –
Other acquisitions and investments in noncontrolled         (76)      (160)
affiliates
Divestitures                                                7         10
Short-term investments, net                                 (21)      (34)
Other investing, net                                        11        (3)
Net Cash Used for Investing Activities                      (1,728)   (4,695)
Financing Activities
Proceeds from issuances of long-term debt                   5,207     3,000
Payments of long-term debt                                  (1,357)   (1,596)
Debt repurchase                                             –         (771)
Short-term borrowings, net                                  (2,194)   56
Cash dividends paid                                         (2,470)   (2,349)
Share repurchases -- common                                 (2,328)   (1,929)
Share repurchases -- preferred                              (5)       (5)
Proceeds from exercises of stock options                    927       724
Excess tax benefits from share-based payment arrangements   89        56
Acquisition of noncontrolling interests                     (15)      (1,327)
Other financing                                             (18)      (2)
Net Cash Used for Financing Activities                      (2,164)   (4,143)
Effect of exchange rate changes on cash and cash            16        144
equivalents
Net Increase/(Decrease) in Cash and Cash Equivalents        1,242     (2,860)
Cash and Cash Equivalents – Beginning of Year               4,067     5,943
Cash and Cash Equivalents – End of Period                   $ 5,309   $ 3,083
A-3

 

PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(in millions except per share amounts)
                                                     9/8/2012     12/31/2011
Assets                                               (unaudited)
Current Assets
Cash and cash equivalents                            $     5,309  $     4,067
Short-term investments                               402          358
Accounts and notes receivable, net                   7,998        6,912
Inventories
Raw materials                                        1,930        1,883
Work-in-process                                      253          207
Finished goods                                       1,722        1,737
                                                     3,905        3,827
Prepaid expenses and other current assets            1,656        2,277
Total Current Assets                                 19,270       17,441
Property, plant and equipment, net                   18,530       19,698
Amortizable intangible assets, net                   1,799        1,888
Goodwill                                             16,701       16,800
Other nonamortizable intangible assets               14,511       14,557
Nonamortizable Intangible Assets                     31,212       31,357
Investments in noncontrolled affiliates              1,585        1,477
Other assets                                         1,621        1,021
Total Assets                                         $    74,017  $    72,882
Liabilities and Equity
Current Liabilities
Short-term obligations                               $ 4,211      $ 6,205
Accounts payable and other current liabilities       11,722       11,757
Income taxes payable                                 287          192
Total Current Liabilities                            16,220       18,154
Long-term debt obligations                           23,732       20,568
Other liabilities                                    7,551        8,266
Deferred income taxes                                4,930        4,995
Total Liabilities                                    52,433       51,983
Commitments and Contingencies
Preferred stock, no par value                        41           41
Repurchased preferred stock                          (162)        (157)
PepsiCo Common Shareholders' Equity
Common stock, par value 1^2/[3]¢ per share
(authorized 3,600                                    31           31
shares, issued 1,865 shares)
Capital in excess of par value                       4,179        4,461
Retained earnings                                    42,332       40,316
Accumulated other comprehensive loss                 (6,086)      (6,229)
Repurchased common stock, at cost (314 and 301       (18,896)     (17,875)
shares, respectively)
Total PepsiCo Common Shareholders' Equity            21,560       20,704
Noncontrolling interests                             145          311
Total Equity                                         21,584       20,899
Total Liabilities and Equity                         $    74,017  $    72,882
A-4

 

PepsiCo, Inc. and Subsidiaries
Supplemental Share and Stock-Based Compensation Data
(in millions except dollar amounts, unaudited)
                                        12 Weeks Ended      36 Weeks Ended
                                        9/8/2012  9/3/2011  9/8/2012  9/3/2011
Beginning Net Shares Outstanding        1,559     1,585     1,565     1,582
Options Exercised/Restricted Stock      9         2         22        17
Units Converted
Shares Repurchased                      (16)      (19)      (35)      (31)
Ending Net Shares Outstanding           1,552     1,568     1,552     1,568
Weighted Average Basic                  1,556     1,578     1,562     1,581
Dilutive Securities:
Options                                 12        14        12        15
Restricted Stock Units                  6         6         5         6
ESOP Convertible Preferred Stock/Other  1         1         1         1
Weighted Average Diluted                1,575     1,599     1,580     1,603
Average Share Price for the Period      $ 71.26   $ 66.17   $ 67.64   $ 66.29
Growth Versus Prior Year                8%        3%        2%        4%
Options Outstanding                     73        96        80        100
Options in the Money                    72        74        66        79
Dilutive Shares from Options            12        14        12        15
Dilutive Shares from Options as a % of
Options in the Money                    16%       20%       17%       19%
Average Exercise Price of Options in    $ 58.37   $ 52.03   $ 55.28   $ 52.11
the Money
Restricted Stock Units Outstanding      12        12        11        13
Dilutive Shares from Restricted Stock   6         6         5         6
Units
Average Intrinsic Value of Restricted
Stock Units Outstanding*                $ 65.51   $ 62.97   $ 65.33   $ 62.91
* Weighted average intrinsic value at
grant date
A-5

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information
(in millions except per share amounts, unaudited)
Operating Profit Growth
Reconciliation 
                              12 Weeks Ended
                               9/8/2012 
Reported Total Operating      (4)                  %
Profit Growth
Impact of Corporate           (4)
Unallocated
Division Operating Profit     (7)                  %*
Growth
*Does not sum due to
rounding
Operating Profit Growth
Reconciliation
                              12 Weeks Ended
                               9/8/2012                 9/3/2011      Growth
Reported Total Operating      $                        $              (4)    %
Profit                        2,800                       2,906
Mark-to-Market Net            (121)                    53
(Gains)/Losses
Merger and Integration        2                        45
Charges
Inventory Fair Value          -                        3
Adjustments
Restructuring and Impairment  83                       -
Charges
Core Total Operating Profit   $                        $              (8)    %
                              2,764                       3,007
Impact of Foreign Currency Translation                                3
Core Constant Currency Operating Profit Growth                        (5)    %
Diluted EPS Reconciliation
                              12 Weeks Ended
                               9/8/2012                 9/3/2011      Growth
Reported Diluted EPS          $                        $              (3)    %
                              1.21                          1.25
Mark-to-Market Net            (0.05)                   0.02
(Gains)/Losses
Merger and Integration        -                        0.03
Charges
Restructuring and Impairment  0.04                     -
Charges
Core Diluted EPS              $                        $           *  (8)    %
                              1.20                          1.31
Impact of Foreign Currency Translation                                4
Core Constant Currency Diluted EPS                                    (4)    %
*Does not sum due to
rounding
                              Year Ended
                                   12/31/2011 
Reported Diluted EPS          $                
                              4.03
53^rd Week                    (0.04)
Mark-to-Market Net Losses     0.04
Merger and Integration        0.17
Charges 
Restructuring and Impairment  0.18
Charges
Inventory Fair Value          0.02
Adjustments
Core Diluted EPS              $                
                              4.40
Net Cash Provided by
Operating Activities
Reconciliation
                              36 Weeks Ended
                               9/8/2012 
Net Cash Provided by          $              
Operating Activities          5,118
Capital Spending              (1,409)
Sales of Property, Plant and  58
Equipment
Management Operating Cash     3,767
Flow
Discretionary Pension and
Retiree Medical Contributions 770
(after-tax)
Payments Related to
Restructuring Charges         203
(after-tax)
Merger and Integration        44
Payments (after-tax)
Capital Investments Related   8
to the PBG/PAS Integration
Capital Investments Related   12
to the Productivity Plan
Payments for Restructuring
and Other Charges Related to
the Transaction with Tingyi   98
Management Operating Cash     $              
Flow excluding above Items    4,902
Net Cash Provided by
Operating Activities
Reconciliation (in billions)
                              2012 Guidance
Net Cash Provided by          $                  
Operating Activities          ~8 
Net Capital Spending          ~(3)
Management Operating Cash     ~5 
Flow
Certain Other Items*          ~1 
Management Operating Cash     $                  
Flow excluding Certain Other  ~6 
Items
  *Certain other items include discretionary pension and retiree medical
contributions, payments related to restructuring charges, payments for
restructuring and other charges related to the transaction with Tingyi, merger
and integration payments, capital investments related to the Productivity Plan
and capital investments related to the PBG/PAS integration
A-6

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
(unaudited)
Global Beverages Net Revenue Growth Reconciliation
                                                           12 Weeks Ended
                                                            9/8/2012 
Reported Global Beverages Net Revenue Growth.              (10)           %
Impact of Acquisitions and Divestitures                    10
Impact of Foreign Currency Translation                     4
Organic Global Beverages Net Revenue Growth                3              %* 
*Does not sum due to rounding
Global Snacks Net Revenue Growth Reconciliation
                                                           12 Weeks Ended
                                                            9/8/2012 
Reported Global Snacks Net Revenue Growth                  1              %
Impact of Foreign Currency Translation                     6
Organic Global Snacks Net Revenue Growth                   7              %
Emerging and Developing Market Net Revenue Growth Reconciliation
                                                           12 Weeks Ended
                                                            9/8/2012 
Total Reported Emerging and Developing Market 
Net Revenue Growth                                         (13)           %
Impact of Acquisitions and Divestitures                    14
Impact of Foreign Currency Translation                     10
Emerging and Developing Markets Organic Net Revenue Growth 11             %
A-7

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Certain Line Items
12 Weeks Ended September 8, 2012 and September 3, 2011
(in millions except per share amounts, unaudited)
               GAAP      Non-Core Adjustments                        Non-GAAP
               Measure                                               Measure
               Reported  Commodity       Restructuring               Core*
                         mark-           and            Merger and
               12 Weeks                                 integration  12 Weeks
                         to-market net    impairment    charges
               Ended                                                 Ended
               9/8/12     gains           charges                    9/8/12
Cost of sales  $         $               $              $            $      
                7,833        75              -            -            7,908
Selling,
general and    $         $               $              $            $      
                5,992        46             (83)        (2)            5,953
administrative
expenses
Operating      $         $               $              $            $      
profit          2,800     (121)              83          2             2,764
Provision for  $         $               $              $            $      
income taxes     706        (51)             24          -                679
Net income     $         $               $              $            $      
attributable    1,902       (70)             59          2             1,893
to PepsiCo
Net income
attributable   $         $               $              $            $      
to PepsiCo per  1.21     (0.05)           0.04           -               1.20
common share -
diluted
Effective tax  26.9%                                                 26.3%
rate
               GAAP      Non-Core Adjustments                        Non-GAAP
               Measure                                               Measure
               Reported  Commodity       Merger and     Inventory    Core*
               12 Weeks  mark-to-market  integration    fair value   12 Weeks
               Ended     net losses      charges        adjustments  Ended
               9/3/11                                                9/3/11
Cost of sales  $         $               $              $            $      
                8,452        -               -            (3)          8,449
Selling,
general and    $         $               $              $            $      
administrative  6,186     (53)            (45)             -           6,088
expenses
Operating      $         $               $              $            $      
profit          2,906      53              45              3           3,007
Interest       $         $               $              $            $      
expense         (205)        -             16              -            
                                                                     (189)
Provision for  $         $               $              $            $      
income taxes     686       19                8             1              714
Net income     $         $               $              $            $      
attributable    2,000      34              53              2           2,089
to PepsiCo
Net income
attributable   $         $               $              $            $      
to PepsiCo per  1.25      0.02            0.03             -             1.31 **
common share -
diluted
Effective tax  25.4%                                                 25.4%
rate
*Core results are financial measures that are not in accordance with GAAP and
exclude the above non-core adjustments.  See A-18 through A-20 for a discussion
of each of these non-core adjustments.
**Does not sum due to rounding.
A-8

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Certain Line Items
36 Weeks Ended September 8, 2012 and September 3, 2011
(in millions except per share amounts, unaudited)
               GAAP      Non-Core Adjustments                                       Non-GAAP
               Measure                                                              Measure
                                                                     Restructuring
                                                                     and
               Reported                                                             Core*
                         Commodity                                   other charges
                         mark-           Restructuring  Merger and
                                         and            integration   related to
                         to-market net   impairment     charges      the
               36 Weeks                  charges                                    36 Weeks
               Ended     gains                                        transaction   Ended
               9/8/12                                                with           9/8/12

                                                                      Tingyi
Cost of sales  $         $               $              $            $              $  
                21,637       68              -             -            -            21,705
Selling,
general and    $         $               $              $            $              $  
administrative  16,920       58           (193)            (7)       (137)           16,641
expenses
Operating      $         $               $              $            $              $    
profit          6,899     (126)            193              7         137            7,110
Provision for  $         $               $              $            $              $    
income taxes    1,788       (51)             54             1          (26)          1,766
Net income     $         $               $              $            $              $    
attributable    4,517       (75)           139              6         163            4,750
to PepsiCo
Net income
attributable   $         $               $              $            $              $      
to PepsiCo per  2.86     (0.05)           0.09             -         0.10            3.01    **
common share -
diluted
Effective tax  28.2%                                                                27.0%
rate
               GAAP      Non-Core Adjustments                        Non-GAAP
               Measure                                               Measure
               Reported  Commodity       Merger and     Inventory    Core*
               36 Weeks  mark-to-market  integration    fair value   36 Weeks
               Ended     net losses      charges        adjustments  Ended 9/3/11
               9/3/11
Cost of sales  $         $               $              $            $        
                21,862       -               -           (41)        21,821
Selling,
general and    $         $               $              $            $        
administrative  16,995    (31)           (158)             -         16,806
expenses
Operating      $         $               $              $            $          
profit          7,386      31             158           41           7,616
Interest       $         $               $              $            $            
expense         (584)        -            16               -         (568)
Provision for  $         $               $              $            $          
income taxes    1,775      11             27            10           1,823
Noncontrolling $         $               $              $            $            
interests          32        -               -            6             38
Net income     $         $               $              $            $          
attributable    5,028      20             147           25           5,220
to PepsiCo
Net income
attributable   $         $               $              $            $            
to PepsiCo per  3.14      0.01           0.09            0.02        3.26
common share -
diluted
Effective tax  26.0%                                                 25.8%
rate
*Core results are financial measures that are not in accordance with GAAP and
exclude the above non-core adjustments.  See A-18 through A-20 for a discussion of
each of these non-core adjustments.
**Does not sum due to rounding.
A-9

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Operating Profit by Division
12 Weeks Ended September 8, 2012 and September 3, 2011
(in millions, unaudited)
             GAAP       Non-Core Adjustments                         Non-GAAP
             Measure                                                 Measure
                        Commodity mark-  Restructuring
             Reported                    and            Merger and   Core*
                        to-market net                   integration
Operating    12 Weeks                    impairment     charges      12 Weeks
Profit       Ended      gains                                        Ended
             9/8/12                      charges                     9/8/12
Frito-Lay    $          $                $              $            $      
North        917            -                  8             -              
America                                                              925
Quaker Foods
North        154        -                1              -            155
America
Latin
America      219        -                29             -            248
Foods
   PepsiCo
Americas     1,290      -                38             -            1,328
Foods
PepsiCo
Americas     837        -                33             -            870
Beverages
Europe       483        -                (1)            4            486
Asia, Middle
East &       317        -                6              -            323
Africa
Division
Operating    2,927      -                76             4            3,007
Profit
Corporate    (127)      (121)            7              (2)          (243)
Unallocated
Total        $          $                $              $            $      
Operating     2,800      (121)               83             2           
Profit                                                                2,764
             GAAP       Non-Core Adjustments                         Non-GAAP
             Measure                                                 Measure
             Reported   Commodity        Merger and     Inventory    Core*
Operating    12 Weeks   mark-to-market   integration    fair value   12 Weeks
Profit       Ended      net losses       charges        adjustments  Ended
             9/3/11                                                  9/3/11
Frito-Lay    $          $                $              $            $      
North        918            -                  -             -              
America                                                              918
Quaker Foods
North        177        -                -              -            177
America
Latin
America      275        -                -              -            275
Foods
   PepsiCo
Americas     1,370      -                -              -            1,370
Foods
PepsiCo
Americas     992        -                24             3            1,019
Beverages
Europe       514        -                11             -            525
Asia, Middle
East &       285        -                -              -            285
Africa
Division
Operating    3,161      -                35             3            3,199
Profit
Corporate    (255)      53               10             -            (192)
Unallocated
Total        $          $                $              $            $      
Operating     2,906       53                 45             3           
Profit                                                                3,007
*Core results are financial measures that are not in accordance with GAAP and
exclude the above non-core adjustments.  See A-18 through A-20 for a
discussion of each of these non-core adjustments
A-10

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Operating Profit by Division
36 Weeks Ended September 8, 2012 and September 3, 2011
(in millions, unaudited)
            GAAP      Non-Core Adjustments                                       Non-GAAP
            Measure                                                              Measure
                                                                  Restructuring
                                                                  and
            Reported  Commodity       Restructuring                              Core*
                      mark-           and                         other charges
                                                     Merger and   related
                      to-market net   impairment     integration
            36 Weeks                                 charges      to the         36 Weeks
Operating   Ended     gains           charges                     transaction    Ended
Profit      9/8/12                                                with           9/8/12

                                                                  Tingyi
Frito-Lay   $         $               $              $            $              $    
North        2,532          -             40              -                  -   2,572
America
Quaker
Foods North 495       -               7              -            -              502
America
Latin
America     673       -               41             -            -              714
Foods
   PepsiCo
Americas    3,700     -               88             -            -              3,788
Foods
PepsiCo
Americas    2,202     -               76             -            -              2,278
Beverages
Europe      1,017     -               (2)            7            -              1,022
Asia,
Middle East 630       -               23             -            137            790
& Africa
Division
Operating   7,549     -               185            7            137            7,878
Profit
Corporate   (650)     (126)           8              -            -              (768)
Unallocated
Total       $         $               $              $            $              $    
Operating    6,899     (126)            193              7               137     7,110
Profit
            GAAP      Non-Core Adjustments                        Non-GAAP
            Measure                                               Measure
            Reported  Commodity       Merger and     Inventory    Core*
Operating   36 Weeks  mark-to-market  integration    fair value   36 Weeks
Profit      Ended     net losses      charges        adjustments  Ended 9/3/11
            9/3/11
Frito-Lay   $         $               $              $            $            
North        2,545          -               -             -           2,545
America
Quaker
Foods North 558       -               -              -            558
America
Latin
America     720       -               -              -            720
Foods
   PepsiCo
Americas    3,823     -               -              -            3,823
Foods
PepsiCo
Americas    2,533     -               77             16           2,626
Beverages
Europe      984       -               17             25           1,026
Asia,
Middle East 730       -               -              -            730
& Africa
Division
Operating   8,070     -               94             41           8,205
Profit
Corporate   (684)     31              64             -            (589)
Unallocated
Total       $         $               $              $            $            
Operating    7,386        31            158            41             7,616
Profit
*Core results are financial measures that are not in accordance with GAAP and
exclude the above non-core adjustments.  See A-18 through A-20 for a discussion
of each of these non-core adjustments
A-11

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Core Growth and Core Constant Currency Growth*
(unaudited)
                                         12 Weeks Ended
                                          9/8/2012 
                                         Net Revenue        Operating
                                                            Profit
Frito-Lay North America
Reported Growth                          3             %    -           %
Merger and Integration Charges           -                  -
Restructuring and Impairment Charges     -                  1
Core Growth                              3                  1
Impact of Foreign Currency Translation   -                  -
Core Constant Currency Growth            3             %    1           %
Quaker Foods North America
Reported Growth                          -             %    (13)        %
Merger and Integration Charges           -                  -
Restructuring and Impairment Charges     -                  1
Core Growth                              -                  (12)
Impact of Foreign Currency Translation   -                  -
Core Constant Currency Growth            0.5           %    (11)        %
Latin America Foods
Reported Growth                          2             %    (21)        %
Merger and Integration Charges           -                  -
Restructuring and Impairment Charges     -                  10
Core Growth                              2                  (10)
Impact of Foreign Currency Translation   13                 11
Core Constant Currency Growth            15            %    -           %
PepsiCo Americas Foods
Reported Growth                          2.5           %    (6)         %
Merger and Integration Charges           -                  -
Restructuring and Impairment Charges     -                  3
Core Growth                              2.5                (3)
Impact of Foreign Currency Translation   4                  2
Core Constant Currency Growth            7             %    (1)         %
PepsiCo Americas Beverages
Reported Growth                          (7)           %    (16)        %
Merger and Integration Charges           -                  (2)
Restructuring and Impairment Charges     -                  3
Core Growth                              (7)                (15)
Impact of Foreign Currency Translation   1                  1
Core Constant Currency Growth            (6)           %    (13)        %
*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 A-18 through A-20 for a discussion of each of these non-core adjustments
Note – certain amounts above may not sum due to rounding
A-12

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Core Growth and Core Constant Currency Growth*
(unaudited)
                                          12 Weeks Ended
                                           9/8/2012 
                                          Net Revenue        Operating
                                                             Profit
Europe
Reported Growth                           (6)           %    (6)        %
Merger and Integration Charges            -                  (2)
Restructuring and Impairment Charges      -                  -
Core Growth                               (6)                (7)
Impact of Foreign Currency Translation    12                 11
Core Constant Currency Growth             7             %    3          %
Asia, Middle East & Africa
Reported Growth                           (21)          %    11         %
Merger and Integration Charges            -                  -
Restructuring and Impairment Charges      -                  2
Core Growth                               (21)               13
Impact of Foreign Currency Translation    4                  1
Core Constant Currency Growth             (17)          %    14         %
Total Divisions
Division Growth                           (5)           %    (7)        %
Merger and Integration Charges            -                  (1)
Restructuring and Impairment Charges      -                  2.5
Core Growth                               (5)                (6)
Impact of Foreign Currency Translation    5                  3
Core Constant Currency Growth             -             %    (3)        %
*Core results and core constant currency results are financial measures that
are not in accordance with GAAP and exclude the above non-core adjustments. 
See A-18 through A-20 for a discussion of each of these non-core adjustments
Note – certain amounts above may not sum due to rounding
A-13

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Organic Growth*
(unaudited)
                                                   12 Weeks Ended
                                                    9/8/2012 
                                                   Net Revenue
Frito-Lay North America
Reported Growth                                    3                %
Impact of Acquisitions and Divestitures            -
Impact of Foreign Currency Translation             -
Organic Growth                                     3                %
Quaker Foods North America
Reported Growth                                    -                %
Impact of Acquisitions and Divestitures            -
Impact of Foreign Currency Translation             -
Organic Growth                                     1                %
Latin America Foods
Reported Growth                                    2                %
Impact of Acquisitions and Divestitures            (2)
Impact of Foreign Currency Translation             13
Organic Growth                                     13               %
PepsiCo Americas Foods
Reported Growth                                    2.5              %
Impact of Acquisitions and Divestitures            (1)
Impact of Foreign Currency Translation             4
Organic Growth                                     6                %
PepsiCo Americas Beverages
Reported Growth                                    (7)              %
Impact of Acquisitions and Divestitures            6
Impact of Foreign Currency Translation             1
Organic Growth                                     -                %
Europe
Reported Growth                                    (6)              %
Impact of Acquisitions and Divestitures            -
Impact of Foreign Currency Translation             12
Organic Growth                                     7                %
Asia, Middle East & Africa
Reported Growth                                    (21)             %
Impact of Acquisitions and Divestitures            27
Impact of Foreign Currency Translation             4
Organic Growth                                     10               %
Total Divisions
Reported Growth                                    (5)              %
Impact of Acquisitions and Divestitures            5
Impact of Foreign Currency Translation             5
Organic Growth                                     5                %
*Organic Results are financial measures that are not in accordance with GAAP
and exclude the impact of acquisitions and divestitures and foreign exchange
Note – certain amounts above may not sum due to rounding
A-14

Cautionary Statement
Statements in this communication that are "forward-looking statements,"
including our 2012 guidance, are based on currently available information,
operating plans and projections about future events and trends. Terminology
such as "believe," "expect," "intend," "estimate," "project," "anticipate,"
"will" or similar statements or variations of such terms are intended to
identify forward-looking statements, although not all forward-looking
statements contain such terms.  Forward-looking statements inherently involve
risks and uncertainties that could cause actual results to differ materially
from those predicted in such forward-looking statements.  Such risks and
uncertainties include, but are not limited to: changes in demand for PepsiCo's
products, as a result of changes in consumer preferences and tastes or
otherwise; PepsiCo's ability to compete effectively; unfavorable economic
conditions in the countries in which PepsiCo operates; damage to PepsiCo's
reputation; PepsiCo's ability to grow its business in developing and emerging
markets or unstable political conditions, civil unrest or other developments
and risks in the countries where PepsiCo operates; trade consolidation or the
loss of any key customer; changes in the legal and regulatory environment;
PepsiCo's ability to build and sustain proper information technology
infrastructure, successfully implement its ongoing business transformation
initiative or outsource certain functions effectively; fluctuations in foreign
exchange rates; increased costs, disruption of supply or shortages of raw
materials and other supplies; disruption of PepsiCo's supply chain; climate
change, or legal, regulatory or market measures to address climate change;
PepsiCo's ability to hire or retain key employees or a highly skilled and
diverse workforce; failure to successfully renew collective bargaining
agreements or strikes or work stoppages; failure to successfully complete or
integrate acquisitions and joint ventures into PepsiCo's existing operations;
failure to successfully implement PepsiCo's global operating model; failure to
realize anticipated benefits from our productivity plan; any downgrade of our
credit ratings; and any infringement of or challenge to PepsiCo's intellectual
property rights.

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
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

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

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

Core:  Core results are non-GAAP financial measures which exclude certain
items from our historical results.  In 2012, core results exclude the
commodity mark-to-market net impact included in corporate unallocated
expenses, restructuring and impairment charges, merger and integration charges
in connection with our acquisition of WBD and restructuring and other charges
related to the transaction with Tingyi.  In 2011, core results exclude the
commodity mark-to-market net impact included in corporate unallocated
expenses, as well as merger and integration charges and certain inventory fair
value adjustments in connection with our acquisitions of The Pepsi Bottling
Group, Inc. (PBG), PepsiAmericas, Inc. (PAS) and WBD.  In addition, full-year
2011 core results exclude an extra week of results and restructuring and
impairment charges.  See above for reconciliations of this non-GAAP financial
measure to the most directly comparable financial measure in accordance with
GAAP.  See "Reconciliation of GAAP and Non-GAAP Information" below for
additional information.

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

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

Effective net pricing: 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.  See above for a
reconciliation of this non-GAAP financial measure to the most directly
comparable financial measure in accordance with GAAP (operating cash flow). 

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

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

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

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

Organic: A measure that excludes the impact of acquisitions and divestitures
and, beginning with the second quarter 2012 results, foreign exchange
translation.  In excluding the impact of foreign exchange translation, we
assume constant foreign exchange rates used for translation based on the rates
in effect for the comparable prior-year period.  See the definition of
"constant currency" above for additional information.

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

Reconciliation of GAAP and Non-GAAP Information (unaudited)

Core results, core constant currency results, organic results and division
operating profit 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. 

53rd week impact

In 2011, we had an additional week of results (53rd week).  Our fiscal year
ends on the last Saturday of each December, resulting in an additional week of
results every five or six years.  The 53rd week increased net revenue by $623
million and operating profit by $109 million in the quarter and year ended
December 31, 2011.

Commodity mark-to-market net impact

In the 12 and 36 weeks ended September 8, 2012, we recognized $121 million and
$126 million, respectively, of mark-to-market net gains on commodity hedges in
corporate unallocated expenses.  In the 12 and 36 weeks ended September 3,
2011, we recognized $53 million and $31 million, respectively, of
mark-to-market net losses on commodity hedges in corporate unallocated
expenses.  In the year ended December 31, 2011, we recognized $102 million of
mark-to-market net losses 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.  

Restructuring and impairment charges

In the 12 weeks ended September 8, 2012, we incurred restructuring and
impairment charges of $83 million in conjunction with our multi-year
productivity plan (Productivity Plan), including $8 million recorded in the
FLNA segment, $1 million recorded in the QFNA segment, $29 million recorded in
the LAF segment, $33 million recorded in the PAB segment, $6 million recorded
in the AMEA segment, $7 million recorded in corporate unallocated expenses and
income of $1 million recorded in the Europe segment representing adjustments
of previously recorded amounts.  In the 36 weeks ended September 8, 2012 we
incurred restructuring and impairment charges of $193 million in conjunction
with our Productivity Plan, including $40 million recorded in the FLNA
segment, $7 million recorded in the QFNA segment, $41 million recorded in the
LAF segment, $76 million recorded in the PAB segment, $23 million recorded in
the AMEA segment, $8 million recorded in corporate unallocated expenses and
income of $2 million recorded in the Europe segment representing adjustments
of previously recorded amounts.  In the year ended December 31, 2011, we
incurred charges of $383 million in conjunction with our Productivity Plan,
including $76 million recorded in the FLNA segment, $18 million recorded in
the QFNA segment, $48 million recorded in the LAF segment, $81 million
recorded in the PAB segment, $77 million recorded in the Europe segment, $9
million recorded in the AMEA segment and $74 million recorded in corporate
unallocated expenses.  The Productivity Plan includes actions in every aspect
of our business that we believe will strengthen our complementary food, snack
and beverage businesses by leveraging new technologies and processes across
PepsiCo's operations, go-to-market and information systems; heightening the
focus on best practice sharing across the globe; consolidating manufacturing,
warehouse and sales facilities; and implementing simplified organization
structures, with wider spans of control and fewer layers of management.

Merger and integration charges

In the 12 weeks ended September 8, 2012, we incurred merger and integration
charges of $2 million related to our acquisition of WBD, including $4 million
recorded in the Europe segment and income of $2 million recorded in corporate
unallocated expenses representing adjustments of previously recorded amounts. 
In the 36 weeks ended September 8, 2012, we incurred merger and integration
charges of $7 million related to our acquisition of WBD, all of which were
recorded in the Europe segment.  In the 12 weeks ended September 3, 2011, we
incurred merger and integration charges of $61 million related to our
acquisitions of PBG, PAS and WBD, including $24 million recorded in the PAB
segment, $11 million recorded in the Europe segment, $10 million recorded in
corporate unallocated expenses and $16 million recorded in interest expense. 
In the 36 weeks ended September 3, 2011, we incurred merger and integration
charges of $174 million related to our acquisitions of PBG, PAS and WBD,
including $77 million recorded in the PAB segment, $17 million recorded in the
Europe segment, $64 million recorded in corporate unallocated expenses and $16
million recorded in interest expense.  These charges also include closing
costs and advisory fees related to our acquisition of WBD.  In the year ended
December 31, 2011, we incurred merger and integration charges of $329 million
related to our acquisitions of PBG, PAS and WBD, including $112 million
recorded in the PAB segment, $123 million recorded in the Europe segment, $78
million recorded in corporate unallocated expenses and $16 million recorded in
interest expense.  These charges also included closing costs and advisory fees
related to our acquisition of WBD.

Restructuring and other charges related to the transaction with Tingyi

In the 36 weeks ended September 8, 2012 we recorded restructuring and other
charges of $137 million related to the transaction with Tingyi.

Inventory fair value adjustments

In the 12 and 36 weeks ended September 3, 2011, we recorded $3 million and $41
million, respectively, of incremental costs in cost of sales related to fair
value adjustments to the acquired inventory included in WBD's balance sheet at
the acquisition date and other related hedging contracts included in PBG's and
PAS's balance sheets at the acquisition date.  In the year ended December 31,
2011, we recorded $46 million of incremental costs in cost of sales related to
fair value adjustments to the acquired inventory included in WBD's balance
sheet at the acquisition date and hedging contracts included in PBG's and
PAS's balance sheets at the acquisition date. 

Management operating cash flow (excluding certain items)

Additionally, management operating cash flow (excluding the items noted in the
Net Cash Provided by Operating Activities Reconciliation table above) 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 above) in evaluating management operating cash flow which
we believe investors should consider in evaluating our management operating
cash flow results.

2012 guidance

Our 2012 full-year core constant currency EPS guidance excludes the commodity
mark-to-market net impact included in corporate unallocated expenses,
restructuring and impairment charges, merger and integration charges, and
restructuring and other charges related to the transaction with Tingyi.  In
addition, our 2012 full-year core constant currency net revenue and EPS
guidance exclude the impact of foreign exchange.  We are not able to reconcile
our full-year projected 2012 core constant currency EPS growth to our
full-year projected 2012 results because we are unable to predict the 2012
impact 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.  In addition, we are unable to reconcile
our full-year projected 2012 core constant currency net revenue growth to our
full-year projected 2012 reported net revenue growth because we are unable to
predict the 2012 impact of foreign exchange due to the unpredictability of
future changes in foreign exchange rates.  Therefore, we are unable to provide
a reconciliation of these measures. 

SOURCE PepsiCo, Inc.

Website: http://www.pepsico.com
Contact: Investor - Jamie Caulfield, Senior Vice President, Investor
Relations, +1-914-253-3035, jamie.caulfield@pepsico.com; Media - Melisa
Tezanos, Senior Director, Media Bureau, +1-914-253-2599,
melisa.tezanos@pepsico.com
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