PepsiCo Reports First Quarter 2014 Results

                  PepsiCo Reports First Quarter 2014 Results  -- Core1 EPS increased 7 percent to $0.83. Core constant currency1 EPS increased 10 percent. Reported EPS increased 15 percent to $0.79  -- Organic1 revenue grew 4.0 percent in the quarter. Reported net revenue was even versus the prior-year quarter, reflecting the impacts of foreign exchange translation and structural changes  -- Core constant currency operating profit increased 7 percent. Reported operating profit increased 9 percent.  -- Company expects to return approximately $8.7 billion to shareholders through dividends and share repurchases in 2014, a 35 percent year-over-year increase  -- Company reaffirms 7 percent core constant currency EPS growth target for 2014  -- On track to deliver approximately $1 billion in annual productivity savings in 2014  PR Newswire  PURCHASE, N.Y., April 17, 2014        PURCHASE, N.Y., April 17, 2014 /PRNewswire/ --PepsiCo, Inc. (NYSE: PEP) today reported core earnings per share of $0.83 for the first quarter, an increase of 7 percent. Core constant currency EPS increased 10 percent on organic revenue growth of 4.0 percent.  PepsiCo logo  "We're pleased with our performance in the first quarter of 2014. PepsiCo delivered mid-single-digit organic revenue growth and double-digit core constant currency earnings per share growth, despite ongoing macroeconomic volatility, political instability and other challenging marketplace conditions in a number of our key markets," said Chairman and CEO Indra Nooyi.  "We continue to perform well, in part, because we have strong, balanced portfolios of brands, products and geographies that enable us to capture growth opportunities across multiple demand spaces while we responsibly manage through the volatility and challenges in other parts of the business.  "We're also benefiting from the investments we've recently made to strengthen our brands, innovate more effectively, and drive better execution; all while operating more efficiently by leveraging our global scale and capabilities.  "We remain confident in achieving our financial goals for the full year and believe that we have the right strategies in place to create long-term value for our shareholders."  ^1Please refer to the Glossary for the definitions of Non-GAAP financial measures including core, constant currency, organic and free cash flow.  Summary First Quarter 2014 Performance (Percent Growth)                     Reported  Core Constant  Organic^b                               Currency^a Volume Snacks              2                        2 Beverages           —                        — Net Revenue         —                        4 Operating Profit^c  9         7 EPS                 15        10                                                          Core                                                        Constant                          Net Revenue                   Currency                  Organic              Operating Organic   Operating                  Volume^b             Profit^c  Revenue^b Profit^a PAF             1        1           2         5         5 FLNA            3        3           4         4         6 LAF             (3)      (2)         7         9         13 QFNA            3        —           (11)      1         (9) PAB             —        —           (24)      1         (3) Europe          3/3^d    1           72        7         64 AMEA            4/(1)^d  (5)         5         6         10 Total Divisions 2/- ^ d  —           (2)       4         6 Total PepsiCo   2/- ^ d  —           9         4         7  ^a Core constant currency results are non-GAAP financial measures that exclude certain items affecting comparability. For more information about our core constant currency results, see "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits. Please refer to the Glossary for definitions of "Core" and "Constant Currency".  ^b Organic results are non-GAAP financial measures that adjust for impacts of acquisitions, divestitures and other structural changes and foreign exchange translation. For more information about our organic results, see "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits. Please refer to the Glossary for the definition of "Organic".  ^c The reported operating profit performance was impacted by certain items excluded from our core results in both 2014 and 2013. See "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits for more information about these items. Please refer to the Glossary for the definition of "Core".  ^d ^ Snacks/Beverages.  Summary of First Quarter Financial Performance:    oOrganic revenue grew 4.0 percent and reported net revenue was even versus     the prior-year quarter. Structural changes negatively impacted reported     net revenue performance by nearly half a percentage point and foreign     exchange translation had a 3-percentage-point unfavorable impact in the     quarter.   oOrganic revenue grew 5 percent for global snacks and 3 percent for global     beverages in the quarter. On a reported basis, revenue grew 1 percent for     global snacks and declined 1 percent for global beverages, reflecting     unfavorable foreign exchange translation and structural changes. Each     operating segment had organic revenue growth in the quarter.   oDeveloping and emerging market organic revenue grew 9 percent in the     quarter. On a reported basis, developing and emerging market net revenue     declined 2 percent in the quarter, reflecting structural changes and     unfavorable foreign exchange translation.   oCore gross margin expanded 40 basis points in the quarter reflecting     implementation of effective revenue management strategies and productivity     initiatives. Core operating margin expanded 50 basis points in the     quarter. Reported gross margin increased 80 basis points and reported     operating margin increased 110 basis points in the quarter.   oCore constant currency operating profit increased 7 percent and included a     $31 million one-time gain related to the sale of agricultural assets in     Europe. Reported operating profit increased 9 percent and included the net     impact of mark-to-market gains on commodity hedges, certain restructuring     costs in 2014 and the lapping of the devaluation of net monetary assets in     Venezuela in the prior-year quarter.   oThe company's core effective tax rate was 23.7 percent and the reported     effective tax rate was 24.1 percent, both below the prior-year quarter.   oCore EPS was $0.83 and reported EPS was $0.79. Core EPS includes a $0.02     impact from the one-time gain related to the sale of agricultural assets     in Europe. Core EPS excludes a net impact of $0.01 per share related to     mark-to-market net gains on commodity hedges and a $0.05 negative impact     from restructuring charges. Mark-to-market net gains and losses on     commodity hedges are subsequently reflected in core division results when     the divisions recognize the cost of the underlying commodity in operating     profit.   oCash flow provided by operating activities was $181 million.   oCompany is on track to deliver targeted $1 billion of productivity savings     in 2014.   oCompany expects to return a total of $8.7 billion to shareholders in 2014     through approximately $5.0 billion in share repurchases and $3.7 billion     in dividends.  Division Operating Summaries:  PepsiCo Americas Foods (PAF)  Organic revenue grew 5 percent in the quarter driven by 1 percentage point of organic volume growth and 4 percentage points of effective net pricing. Each division within PAF had organic revenue growth in the quarter. Reported net revenue increased 1 percent, reflecting a 4-percentage-point unfavorable impact from foreign exchange translation.  Core constant currency operating profit increased 5 percent, reflecting organic revenue gains and productivity initiatives, partially offset by increased advertising and marketing expense.  Frito-Lay North America (FLNA)  Organic revenue increased 4 percent in the quarter, reflecting a 3-percentage-point increase in organic volume and 1 percentage point of effective net pricing. Reported net revenue increased 3 percent, reflecting a 1-percentage-point unfavorable foreign exchange translation impact.  Core constant currency operating profit grew 6 percent in the quarter, reflecting organic revenue gains and productivity savings, partially offset by operating cost inflation and a double-digit increase in advertising and marketing expense.  Latin America Foods (LAF)  Organic revenue grew 9 percent in the quarter, reflecting 12 percentage points of effective net pricing, partially offset by a 3 percent volume decline. Reported net revenue declined 2 percent in the quarter, reflecting an 11-percentage-point unfavorable foreign exchange translation impact.  Organic revenue in Mexico declined low-single digits reflecting the adverse impact of the enactment of taxes on certain food products. The balance of our Latin America Foods business experienced double-digit organic revenue growth. Reported net revenue declined mid-single-digits in Mexico and increased low-single-digits in the balance of our Latin America Foods business, also reflecting the impact of unfavorable foreign exchange translation.  Core constant currency operating profit increased 13 percent reflecting organic revenue growth and productivity gains, partially offset by operating cost and commodity cost inflation.  Quaker Foods North America (QFNA)  Organic revenue increased 1 percent in the quarter. Reported net revenue was even versus the prior-year quarter, reflecting a 1-percentage-point unfavorable foreign exchange translation impact. Core constant currency operating profit declined 9 percent, reflecting the impact of oat supply disruptions, unfavorable net pricing and operating cost inflation, partially offset by productivity gains.  PepsiCo Americas Beverages (PAB)  Organic revenue increased 1 percent in the quarter, reflecting 1 percentage point of effective net pricing and even organic volume. During the quarter, PAB maintained its value market share position in the U.S. in measured channels. Reported net revenue was even versus the prior-year quarter, reflecting a 1-percentage-point impact from unfavorable foreign exchange translation.  In North America, non-carbonated beverage volume grew 2 percent, and carbonated soft drink volume declined 1 percent. Latin America beverage volume decreased 1 percent driven by volume declines in Mexico related to the enactment of taxes on certain beverage products.  Core constant currency operating profit declined 3 percent, reflecting operating cost inflation and the adverse impact of the tax in Mexico, partially offset by effective net pricing, productivity gains and adjustments recognized through the company's share of the results of a joint venture.  Europe  Organic revenue grew 7 percent, reflecting balanced volume growth and effective net pricing. Snacks and beverage volume each rose 3 percent. Reported net revenue increased 1 percent, including a 6-percentage-point unfavorable foreign exchange translation impact.  Core constant currency operating profit growth of 64 percent in the quarter included a $31 million contribution from the one-time gain on the sale of agricultural assets and reflects organic revenue growth and productivity savings, partially offset by commodity cost and operating cost inflation.  Asia, Middle East & Africa (AMEA)  Organic revenue grew 6 percent in the quarter, lapping double-digit organic growth in the prior-year quarter. Growth was driven by snacks volume growth and effective net pricing. Reported net revenue declined 5 percent, reflecting a 5-percentage-point negative impact from the refranchising of bottling operations in Vietnam and a 5-percentage-point unfavorable impact from foreign exchange translation.  Core constant currency operating profit increased 10 percent, reflecting organic revenue growth and productivity gains, partially offset by operating cost inflation.  2014 Guidance and Outlook:  Consistent with its previous guidance for 2014, the company expects 7 percent core constant currency EPS growth versus its fiscal 2013 core EPS of $4.37. Based on the current foreign exchange market consensus, the company currently expects foreign exchange translation to have an unfavorable impact of approximately 4 percentage points on full year core EPS growth in 2014.  Excluding the impact of structural changes and foreign exchange translation, organic revenue in 2014is expected to grow mid-single digits versus 2013, consistent with the company's long-term target. Based on the current foreign exchange market consensus, the company currently expects foreign exchange translation to have an unfavorable impact of approximately 3 percentage points on full year net revenue growth in 2014.  For 2014, the company expects low-single-digit commodity inflation and productivity savings of approximately $1 billion. The company expects higher interest expense driven by increased debt balances and a core effective tax rate of approximately 25 percent.  The company is targeting over $10 billion in cash flow from operating activities and more than $7 billion in free cash flow (excluding certain items) in 2014. Net capital spending is expected to be approximately $3 billion in 2014, within the company's long-term capital spending target of less than or equal to 5 percent of net revenue.  The company expects to return a total of $8.7 billion to shareholders in 2014 through dividends of approximately $3.7 billion and share repurchases of approximately $5.0 billion.  Conference Call:  At 8 a.m. (Eastern Time) today, the company will host a conference call with investors and financial analysts to discuss first-quarter 2014 results and the outlook for 2014. Further details, including a slide presentation accompanying the call, will be accessible on the company's website at www.pepsico.com/investors.  PepsiCo, Inc. and Subsidiaries Condensed Consolidated Statement of Income (in millions except per share amounts, and unaudited)                                                12 Weeks Ended                                                3/22/2014   3/23/2013   Change Net Revenue                                    $  12,623   $  12,581   —     % Cost of sales                                  5,747       5,834       (1.5) % Selling, general and administrative expenses   5,048       5,066       —     % Amortization of intangible assets              21          23          (9)   % Operating Profit                               1,807       1,658       9     % Interest expense                               (201)       (214)       (6)   % Interest income and other                      10          27          (62)  % Income before income taxes                     1,616       1,471       10    % Provision for income taxes                     389         386         1     % Net income                                     1,227       1,085       13    % Less: Net income attributable to               11          10          10    % noncontrolling interests Net Income Attributable to PepsiCo             $  1,216    $  1,075    13    % Diluted Net Income Attributable to PepsiCo per Common  $  0.79     $  0.69     15    % Share Weighted-average common shares outstanding     1,540       1,563 Cash dividends declared per common share       $  0.5675   $  0.5375 A - 1    PepsiCo, Inc. and Subsidiaries Supplemental Financial Information (in millions, unaudited)                                      12 Weeks Ended                                      3/22/2014   3/23/2013   Change Net Revenue Frito-Lay North America              $  3,219    $  3,123    3    % Quaker Foods North America           634         634         —    % Latin America Foods                  1,338       1,367       (2)  % PepsiCo Americas Foods               5,191       5,124       1    % PepsiCo Americas Beverages           4,426       4,420       —    % Europe                               1,961       1,942       1    % Asia, Middle East & Africa           1,045       1,095       (5)  % Total Net Revenue                    $  12,623   $  12,581   —    % Operating Profit Frito-Lay North America              $  862      $  828      4    % Quaker Foods North America           160         180         (11) % Latin America Foods                  232         216         7    % PepsiCo Americas Foods               1,254       1,224       2    % PepsiCo Americas Beverages           429         565         (24) % Europe                               152         88          72   % Asia, Middle East & Africa           194         184         5    % Division Operating Profit            2,029       2,061       (2)  % Corporate Unallocated Commodity Mark-to-Market Net Impact  34          (16) Restructuring and Impairment Charges 3           (1) Venezuela Currency Devaluation       —           (124) Other                                (259)       (262)                                      (222)       (403)       (45) % Total Operating Profit               $  1,807    $  1,658    9    % A - 2    PepsiCo, Inc. and Subsidiaries  Condensed Consolidated Statement of Cash Flows  (in millions, unaudited)                                                         12 Weeks Ended                                                         3/22/2014   3/23/2013 Operating Activities Net income                                              $  1,227    $  1,085 Depreciation and amortization                           532         551 Stock-based compensation expense                        72          77 Cash payments for merger and integration charges        —           (11) Restructuring and impairment charges                    98          11 Cash payments for restructuring charges                 (25)        (30) Non-cash foreign exchange loss related to Venezuela     —           111 devaluation Excess tax benefits from share-based payment            (47)        (36) arrangements Pension and retiree medical plan expenses               119         149 Pension and retiree medical plan contributions          (84)        (87) Deferred income taxes and other tax charges and credits 62          (23) Change in accounts and notes receivable                 (358)       (175) Change in inventories                                   (406)       (351) Change in prepaid expenses and other current assets     (234)       (201) Change in accounts payable and other current            (813)       (578) liabilities Change in income taxes payable                          175         244 Other, net                                              (137)       (34) Net Cash Provided by Operating Activities               181         702 Investing Activities Capital spending                                        (355)       (303) Sales of property, plant and equipment                  7           8 Acquisitions and investments in noncontrolled           (24)        (30) affiliates Divestitures                                            85          — Short-term investments, net                             59          40 Other investing, net                                    5           — Net Cash Used for Investing Activities                  (223)       (285) Financing Activities Proceeds from issuances of long-term debt               1,990       2,491 Payments of long-term debt                              (1,652)     (1,190) Short-term borrowings, net                              2,125       (153) Cash dividends paid                                     (888)       (831) Share repurchases – common                              (1,249)     (626) Share repurchases – preferred                           (2)         (2) Proceeds from exercises of stock options                171         449 Excess tax benefits from share-based payment            47          36 arrangements Other financing                                         —           (1) Net Cash Provided by Financing Activities               542         173 Effect of exchange rate changes on cash and cash        (36)        (172) equivalents Net Increase in Cash and Cash Equivalents               464         418 Cash and Cash Equivalents, Beginning of Year            9,375       6,297 Cash and Cash Equivalents, End of Period                $  9,839    $  6,715 A - 3    PepsiCo, Inc. and Subsidiaries  Condensed Consolidated Balance Sheet  (in millions except per share amounts)                                                       3/22/2014    12/28/2013                                                       (unaudited) Assets Current Assets Cash and cash equivalents                             $   9,839    $  9,375 Short-term investments                                247          303 Accounts and notes receivable, net                    7,262        6,954 Inventories Raw materials                                         1,794        1,732 Work-in-process                                       235          168 Finished goods                                        1,719        1,509                                                       3,748        3,409 Prepaid expenses and other current assets             2,189        2,162 Total Current Assets                                  23,285       22,203 Property, plant and equipment, net                    18,129       18,575 Amortizable intangible assets, net                    1,593        1,638 Goodwill                                              16,310       16,613 Other nonamortizable intangible assets                14,053       14,401 Nonamortizable Intangible Assets                      30,363       31,014 Investments in noncontrolled affiliates               1,890        1,841 Other assets                                          2,233        2,207 Total Assets                                          $   77,493   $  77,478 Liabilities and Equity Current Liabilities Short-term obligations                                $   7,832    $  5,306 Accounts payable and other current liabilities        11,625       12,533 Total Current Liabilities                             19,457       17,839 Long-term debt obligations                            24,240       24,333 Other liabilities                                     4,811        4,931 Deferred income taxes                                 6,092        5,986 Total Liabilities                                     54,600       53,089 Commitments and Contingencies Preferred stock, no par value                         41           41 Repurchased preferred stock                           (173)        (171) PepsiCo Common Shareholders' Equity Common stock, par value 1 ^2/[3 ]¢ per share (authorized 3,600 shares, issued, net of repurchased  25           25 common stock at par value: 1,519 and 1,529 shares, respectively) Capital in excess of par value                        3,942        4,095 Retained earnings                                     46,770       46,420 Accumulated other comprehensive loss                  (5,940)      (5,127) Repurchased common stock, in excess of par value (347 (21,892)     (21,004) and 337 shares, respectively) Total PepsiCo Common Shareholders' Equity             22,905       24,409 Noncontrolling interests                              120          110 Total Equity                                          22,893       24,389 Total Liabilities and Equity                          $   77,493   $  77,478 A - 4    PepsiCo, Inc. and Subsidiaries Supplemental Share and Stock-Based Compensation Data (in millions except dollar amounts, unaudited)                                                       12 Weeks Ended                                                       3/22/2014    3/23/2013 Beginning Net Shares Outstanding                      1,529        1,544 Options Exercised and Restricted Stock Units          5            10 Converted Shares Repurchased                                    (15)         (9) Ending Net Shares Outstanding                         1,519        1,545 Weighted Average Basic                                1,524        1,544 Dilutive Securities: Options                                               9            10 Restricted Stock, PEPUnits and Other                  6            8 ESOP Convertible Preferred Stock                      1            1 Weighted Average Diluted                              1,540        1,563 Average Share Price for the Period                    $  81.09     $  73.67 Growth Versus Prior Year                              10        %  14        % Options Outstanding                                   49           61 Options in the Money                                  49           58 Dilutive Shares from Options                          9            10 Dilutive Shares from Options as a % of Options in the 19        %  17        % Money Average Exercise Price of Options in the Money        $  63.00     $  60.38 Restricted Stock, PEPUnits and Other Outstanding      13           15 Dilutive Shares from Restricted Stock, PEPUnits and   6            8 Other Average Intrinsic Value of Restricted Stock Units     $  74.14     $  68.24 Outstanding ^(a) Average Intrinsic Value of PEPUnits Outstanding ^(a)  $  60.83     $  66.65 (a) Weighted-average intrinsic value at grant date. A - 5    PepsiCo, Inc. and Subsidiaries Reconciliation of GAAP and Non-GAAP Information Organic Growth Rates 12 Weeks Ended March 22, 2014 and March 23, 2013 (unaudited)                                                           GAAP       Non-GAAP             Percent Impact                                                           Measure    Measure                                                           Reported   Organic                                                            % Change   % Change                                                                      ^(a) Net Revenue         Effective  Acquisitions  Foreign      12 Weeks   12 Weeks Year over                      and Year %      Volume  net                      exchange     Ended      Ended Change              pricing    divestitures                          3/22/2014                                              translation  3/22/2014 Frito-Lay North       2       1          —             (1)          3          4 America Quaker Foods North 1       —          —             (1)          —          1 America Latin America     (3)     12         —             (11)         (2)        9 Foods PepsiCo Americas    1       4          —             (4)          1          5 Foods PepsiCo Americas    —       1          —             (1)          —          1 Beverages Europe      3       4          —             (6)          1          7 Asia, Middle East 2       4          (5)           (5)          (5)        6 & Africa Total       1       3          —             (3)          —          4 PepsiCo                                                           GAAP       Non-GAAP             Percent Impact                                                           Measure    Measure                                                           Reported   Organic                                                                      % Change                                                           % Change   ^(a) Net Revenue         Effective  Acquisitions  Foreign      12 Weeks   12 Weeks Year over                      and Year %      Volume  net                      exchange     Ended      Ended Change              pricing    divestitures                          3/23/2013                                              translation  3/23/2013 Frito-Lay North       4       —          —             —            4          4 America Quaker Foods North 3       (1)        —             —            2          2 America Latin America     1       13         —             (3)          11         14 Foods PepsiCo Americas    3       3          —             (1)          5          6 Foods PepsiCo Americas    (5)     5          —             —            (1)        — Beverages Europe      2       2          —             1            5          4 Asia, Middle East 15      —          (27)          (2)          (14)       15 & Africa Total       1       3          (3)           (0.5)        1          4 PepsiCo (a) Organic percent change is a financial measure that is not in accordance with GAAP and is calculated by excluding the impact of acquisitions and divestitures and foreign exchange translation from reported growth. Note – Certain amounts above may not sum due to rounding. A - 6    PepsiCo, Inc. and Subsidiaries Reconciliation of GAAP and Non-GAAP Information (cont.) Year over Year Growth Rates 12 Weeks Ended March 22, 2014 and March 23, 2013 (unaudited)                                                                             Non-                    Non-              GAAP                                                                             GAAP                    GAAP              Measure                                                                             Measure                 Measure                                                                                                     Core               Reported                                                       Core ^(a)  Percent      Constant                         Percent Impact of Non-Core Adjustments                                      Currency              % Change                                                       % Change   Impact of    ^(a)                                                                                                      % Change                         Commodity  Merger       Restructuring Operating    12 Weeks                                          Venezuela    12 Weeks   Foreign      12 Weeks Profit Year             mark-to-   and          and              Ended                                             currency     Ended      exchange     Ended over Year %             market     integration  impairment Change       3/22/2014  net                                    devaluation  3/22/2014  translation  3/22/2014                                    charges      charges                         impact Frito-Lay North        4          —          —            1              —            5          1            6 America Quaker Foods North        (11)       —          —            1              —            (10)       1            (9) America Latin America      7          —          —            (4)            —            3.5        10           13 Foods PepsiCo Americas     2          —          —            —              —            3          2            5 Foods PepsiCo Americas     (24)       —          —            15             2            (7)        3            (3) Beverages Europe       72         —          (2)          (8)            —            62         1            64 Asia, Middle East &       5          —          —            2              —            7          3            10 Africa Division Operating    (2)        —          —            4              1            3          2.5          6 Profit Impact of Corporate    11         (3)        —            1              (7)          1          —            1 Unallocated Total Operating    9          (3)        —            5              (7)          4          3            7 Profit Net Income Attributable 13                                                             5          3            9  to PepsiCo Net Income Attributable  to PepsiCo   15                                                             7          3            10 per common  share - diluted                                                                             Non-                    Non-              GAAP                                                                             GAAP                    GAAP              Measure                                                                             Measure                 Measure                                                                                                     Core               Reported                                                       Core ^(a)  Percent      Constant                         Percent Impact of Non-Core Adjustments              % Change                                                       % Change   Impact of    Currency                                                                                                     ^(a)                                                                                                      % Change                         Commodity  Merger       Restructuring Operating    12 Weeks                                          Venezuela               Foreign Profit Year             mark-to-   and          and                         12 Weeks                12 Weeks              Ended                                             currency     Ended      exchange     Ended over Year %             market     integration  impairment                  3/23/2013               3/23/2013 Change       3/23/2013  net                                    devaluation             translation                                    charges      charges                         impact Frito-Lay North        6          —          —            (1)            —            5          —            5 America Quaker Foods North        (4)        —          —            (3)            —            (6)        —            (6) America Latin America      18         —          —            (1)            —            17         8            25 Foods PepsiCo Americas     6          —          —            (1)            —            5          1            7 Foods PepsiCo Americas     8          —          —            (1.5)          (2.5)        3          —            4 Beverages Europe       10         —          (1)          6              —            14         (0.5)        14 Asia, Middle East &       24         —          —            (5)            —            18         1            19 Africa Division Operating    8          —          —            (1)            (1)          6          1            7 Profit Impact of Corporate    (12)       6          —            —              7            1          —            1.5 Unallocated Total Operating    (4)        6          —            (1)            6            7          1            9 Profit Net Income Attributable (5)                                                            10         1            12 to PepsiCo Net Income Attributable to PepsiCo   (3)                                                            12         1            13 per common share - diluted (a) 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-13 through A-14 for a discussion of each of these adjustments. Note – Certain amounts above may not sum due to rounding. A - 7    PepsiCo, Inc. and Subsidiaries Reconciliation of GAAP and Non-GAAP Information (cont.) Certain Line Items 12 Weeks Ended March 22, 2014 and March 23, 2013 (in millions except per share amounts, unaudited)                                GAAP                                  Non-GAAP                                Measure                                                                      Measure                                Reported   Non-Core Adjustments       Core ^(a)                                12 Weeks   Commodity   Restructuring  12 Weeks                                           mark-to-    and                                Ended      market net  impairment     Ended                                           impact      charges        3/22/2014                                3/22/2014 Cost of sales                  $ 5,747    $  46       $   —          $ 5,793 Selling, general and           $ 5,048    $  (12)     $   (98)       $ 4,938 administrative expenses Operating profit               $ 1,807    $  (34)     $   98         $ 1,871 Provision for income taxes     $ 389      $  (13)     $   22         $ 398 Net income attributable to     $ 1,216    $  (21)     $   76         $ 1,271 PepsiCo Net income attributable to PepsiCo per common share -     $ 0.79     $  (0.01)   $   0.05       $ 0.83 diluted Effective tax rate             24.1    %                             23.7    %                   GAAP                                                           Non-GAAP                 Measure                                                        Measure                Reported   Non-Core Adjustments                                Core ^(a)                           Commodity  Merger       Restructuring                12 Weeks   mark-to-                and            Venezuela    12 Weeks                Ended      market     and          impairment     currency     Ended                3/23/2013  net        integration  charges        devaluation  3/23/2013                           impact     charges Cost of sales  $ 5,834    $  (14)    $   —        $   —          $  —         $ 5,820 Selling, general and    $ 5,066    $  (2)     $   (1)      $   (11)       $  (111)     $ 4,941 administrative expenses Operating      $ 1,658    $  16      $   1        $   11         $  111       $ 1,797 profit Provision for  $ 386      $  5       $   —        $   3          $  —         $ 394 income taxes Net income attributable   $ 1,075    $  11      $   1        $   8          $  111       $ 1,206 to PepsiCo Net income attributable to PepsiCo per $ 0.69     $  0.01    $   —        $   0.01       $  0.07      $ 0.77 common share - diluted Effective tax  26.3    %                                                      24.5    % rate (a) Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments. See A-13 through A-14 for a discussion of each of these adjustments. Note – Certain amounts above may not sum due to rounding. A - 8    PepsiCo, Inc. and Subsidiaries Reconciliation of GAAP and Non-GAAP Information (cont.) Operating Profit by Division 12 Weeks Ended March 22, 2014 and March 23, 2013 (in millions, unaudited)                                 GAAP                                               Non-GAAP                                                     Non-Core Adjustments                                 Measure                                            Measure                                 Reported                                           Core ^(a)                                                     Commodity      Restructuring                                 12 Weeks                                           12 Weeks                                                     mark-to-       and Operating Profit                Ended                                              Ended                                                     market         impairment                                 3/22/2014                                          3/22/2014                                                     net impact     charges Frito-Lay North America         $     862           $  —           $  13           $ 875 Quaker Foods North America      160                 —              2               162 Latin America Foods             232                 —              (4)             228 PepsiCo Americas Foods          1,254               —              11              1,265 PepsiCo Americas Beverages      429                 —              86              515 Europe                          152                 —              —               152 Asia, Middle East & Africa      194                 —              4               198 Division Operating Profit       2,029               —              101             2,130 Corporate Unallocated           (222)               (34)           (3)             (259) Total Operating Profit          $     1,807         $  (34)        $  98           $ 1,871                                                                                      Non-             GAAP                        Non-Core Adjustments                                          GAAP             Measure                                                                                      Measure             Reported                                                                 Core ^(a)                                         Merger         Restructuring                        Commodity Operating   12 Weeks                    and            and             Venezuela     12 Weeks Profit      Ended      mark-to-market                                  currency      Ended             3/23/2013                   integration    impairment      devaluation   3/23/2013                        net impact                                         charges        charges Frito-Lay North       $  828     $    —           $    —         $    2          $  —          $  830 America Quaker Foods North 180        —                —              (1)             —             179 America Latin America     216        —                —              4               —             220 Foods PepsiCo Americas    1,224      —                —              5               —             1,229 Foods PepsiCo Americas    565        —                —              —               (13)          552 Beverages Europe      88         —                1              4               —             93 Asia, Middle East 184        —                —              1               —             185 & Africa Division Operating   2,061      —                1              10              (13)          2,059 Profit Corporate   (403)      16               —              1               124           (262) Unallocated Total Operating   $  1,658   $    16          $    1         $    11         $  111        $  1,797 Profit (a) Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments. See A-13 through A-14 for a discussion of each of these adjustments. A - 9    PepsiCo, Inc. and Subsidiaries Reconciliation of GAAP and Non-GAAP Information (cont.) (unaudited) Global Snacks Net Revenue Growth Reconciliation                                        12 Weeks Ended                                        3/22/2014 Reported Net Revenue Growth            1              % Impact of Foreign Exchange Translation 4 Organic Revenue Growth                 5              %    Global Beverages Net Revenue Growth Reconciliation                                         12 Weeks Ended                                         3/22/2014 Reported Net Revenue Growth             (1)            % Impact of Acquisitions and Divestitures 1 Impact of Foreign Exchange Translation  2 Organic Revenue Growth                  3              %    Developing and Emerging Markets Net Revenue Growth Reconciliation                                                             12 Weeks Ended                                                             3/22/2014 Reported Developing and Emerging Markets Net Revenue Growth (2)            % Impact of Acquisitions and Divestitures                     1.5 Impact of Foreign Exchange Translation                      10 Developing and Emerging Markets Organic Revenue Growth      9              %    Gross Margin Growth Reconciliation                                     12 Weeks Ended                                     3/22/2014 Reported Gross Margin Growth        84             bps Commodity Mark-to-Market Net Impact (47) Core Gross Margin Growth            37             bps    Operating Margin Growth Reconciliation                                       12 Weeks Ended                                       3/22/2014 Reported Operating Margin Growth      113             bps Commodity Mark-to-Market Net Impact   (39) Merger and Integration Charges        (1) Restructuring and Impairment Charges  69 Venezuela Currency Devaluation        (88) Core Operating Margin Growth          54              bps Note – Certain amounts above may not sum due to rounding. A - 10    PepsiCo, Inc. and Subsidiaries Reconciliation of GAAP and Non-GAAP Information (cont.) (unaudited) Net Revenue Year-over-Year Growth Reconciliation                GAAP Measure                                   Non-GAAP                                                               Measure                Reported Growth   Percent Impact of            Organic Growth                12 Weeks Ended    Foreign Exchange             12 Weeks Ended                3/22/2014         Translation                  3/22/2014 Mexico (Foods) (MSD)           % MSD                        % (LSD)          % LAF (excluding LSD             % DD                         % DD             % Mexico)    Diluted EPS Reconciliation                                      Year Ended                                      12/28/2013 Reported Diluted EPS                 $  4.32 Commodity Mark-to-Market Net Impact  0.03 Merger and Integration Charges       0.01 Restructuring and Impairment Charges 0.08 Venezuela Currency Devaluation       0.07 Tax Benefits                         (0.13) Core Diluted EPS                     $  4.37    Net Cash Provided by Operating Activities Reconciliation (in billions)                                                     2014                                                      Guidance Net Cash Provided by Operating Activities           $~10 Net Capital Spending                                ~(3) Free Cash Flow                                      ~7 Certain Other Items ^(a)                            ~0 Free Cash Flow Excluding Certain Other Items        $ ~7  (a) Certain other items include discretionary pension and retiree medical contributions, merger and integration payments, payments related to restructuring charges and net capital investments related to restructuring plan. Note – Certain amounts above may not sum due to rounding. A - 11    Cautionary Statement  Statements in this communication that are "forward-looking statements," including our 2014 guidance, are based on currently available information, operating plans and projections about future events and trends. Terminology such as"aim," "anticipate," "believe," "drive," "estimate," "expect," "expressed confidence," "forecast," "future," "goals," "guidance," "intend," "may," "plan," "position," "potential," "project," " seek," "should," "strategy," "target," "will" or similar statements or variations of such 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 or otherwise; changes in the legal and regulatory environment; imposition of new taxes, disagreements with tax authorities or additional tax liabilities; PepsiCo's ability to compete effectively; 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 markets where PepsiCo's products are sold; unfavorable economic conditions in the countries in which PepsiCo operates; increased costs, disruption of supply or shortages of raw materials and other supplies; failure to realize anticipated benefits from PepsiCo's productivity initiatives or global operating model; disruption of PepsiCo's supply chain; damage to PepsiCo's reputation; failure to successfully complete or integrate acquisitions and joint ventures into PepsiCo's existing operations or to complete or manage divestitures or refranchisings; PepsiCo's ability to hire or retain key employees or a highly skilled and diverse workforce; trade consolidation or the loss of any key customer; any downgrade or potential downgrade of PepsiCo's credit ratings; PepsiCo's ability to protect its information systems against a cybersecurity incident; PepsiCo's ability to build and sustain proper information technology infrastructure, successfully implement its ongoing business transformation initiative or share services for certain functions effectively; fluctuations or other changes in exchange rates; climate change, or legal, regulatory or market measures to address climate change; failure to successfully negotiate collective bargaining agreements or strikes or work stoppages; any infringement of or challenge to PepsiCo's intellectual property rights; potential liabilities and costs from litigation or legal proceedings; and other factors that may adversely affect the price of PepsiCo's common stock and financial performance.  For additional information on these and other factors that could cause PepsiCo's actual results to materially differ from those set forth herein, please see PepsiCo's filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. PepsiCo undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.  Miscellaneous Disclosures  In discussing financial results and guidance, the company may refer to certain non-GAAP measures. Reconciliations of any such non-GAAP measures to the most directly comparable financial measures in accordance with GAAP can be found in the attached exhibits, as well as on the company's website at www.pepsico.com in the "Investors" section under "Events & Presentations." Our non-GAAP measures exclude from reported results those items that management believes are not indicative of our ongoing performance and reflect how management evaluates our operating results and trends.  Glossary  Acquisitions and divestitures: All merger and acquisition 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.  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.  Core: Core results are non-GAAP financial measures which exclude certain items from our historical results. In 2014, core results exclude the commodity mark-to-market net impact included in corporate unallocated expenses and restructuring and impairment charges. In 2013, core results exclude the commodity mark-to-market net impact included in corporate unallocated expenses, merger and integration charges in connection with our acquisition of Wimm-Bill-Dann Foods OJSC (WBD), restructuring and impairment charges and a charge related to the 2013 Venezuela currency devaluation. See "Reconciliation of GAAP and Non-GAAP Information" for additional information.  A - 12  Division operating profit: The aggregation of the operating profit for each of our reportable segments, which excludes the impact of corporate unallocated expenses.  Effective net pricing: Reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries.  Free 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).  Free cash flow, excluding certain items: Free cash flow, excluding: (1) discretionary pension and retiree medical contributions, (2) merger and integration payments, (3) payments related to restructuring charges, (4) net capital investments related to restructuring plan and (5) the tax impacts associated with each of these items, as applicable. This non-GAAP financial measure is our primary measure used to monitor cash flow performance. See above for a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure in accordance with GAAP (operating cash flow). See "Reconciliation of GAAP and Non-GAAP Information" for additional information.  Mark-to-market gain or loss or net impact: Change in market value for commodity contracts that we purchase to mitigate the volatility in costs of energy and raw materials that we consume. The market value is determined based on average prices on national exchanges and recently reported transactions in the marketplace.  Net capital spending: Capital spending less cash proceeds from sales of property, plant and equipment.  Organic: A measure that adjusts for impacts of acquisitions, divestitures and other structural changes, and in the case of organic revenue, foreign exchange translation. In excluding the impact of foreign exchange translation, we assume constant foreign exchange rates used for translation based on the rates in effect for the comparable prior-year period. See the definition of "Constant currency" for additional information.  Reconciliation of GAAP and Non-GAAP Information (unaudited)  Division operating profit, core results, core constant currency results and organic results are non-GAAP financial measures as they exclude certain items noted below. However, we believe investors should consider these measures as they are more indicative of our ongoing performance and reflect how management evaluates our operational results and trends.  Commodity mark-to-market net impact  In the 12 weeks ended March 22, 2014, we recognized $34 million of mark-to-market net gains on commodity hedges in corporate unallocated expenses. In the 12 weeks ended March 23, 2013, we recognized $16 million of mark-to-market net losses on commodity hedges in corporate unallocated expenses. We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, energy and metals. Certain of these commodity derivatives do not qualify for hedge accounting treatment and are marked to market with the resulting gains and losses recognized in corporate unallocated expenses, as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit.  Merger and integration charges  In the 12 weeks ended March 23, 2013, we incurred merger and integration charges of $1 million related to our acquisition of WBD, recorded in the Europe segment.  Restructuring and impairment charges    2014 Multi-Year Productivity Plan    In the 12 weeks ended March 22, 2014, we incurred restructuring and   impairment charges of $96 million in conjunction with the multi-year   productivity plan we publicly announced on February 13, 2014 (2014   Productivity Plan), including $12 million recorded in the FLNA segment, $2   million recorded in the QFNA segment, $1 million recorded in the LAF   segment, $82 million recorded in the PAB segment, $2 million recorded in the   Europe segment, $2 million recorded in the AMEA segment and income of $5   million recorded in corporate unallocated expenses representing adjustments   of previously recorded amounts. The 2014 Productivity Plan includes the next   generation of productivity initiatives that we believe will strengthen our   food, snack and beverage businesses by accelerating our investment in   manufacturing automation; further optimizing our global manufacturing   footprint, including closing certain manufacturing facilities;   re-engineering our go-to-market systems in developed markets; expanding   shared services; and implementing simplified organization structures to   drive efficiency.  A - 13    2012 Multi-Year Productivity Plan    In the 12 weeks ended March 22, 2014, we incurred restructuring and   impairment charges of $2 million in conjunction with the multi-year   productivity plan we publicly announced on February 9, 2012 (2012   Productivity Plan), including $1 million recorded in the FLNA segment, $4   million recorded in the PAB segment, $2 million recorded in the AMEA   segment, $2 million recorded in corporate unallocated expenses and income of   $5 million recorded in the LAF segment and $2 million recorded in the Europe   segment representing adjustments of previously recorded amounts.    In the 12 weeks ended March 23, 2013, we incurred restructuring and   impairment charges of $11 million in conjunction with our 2012 Productivity   Plan, including $2 million recorded in the FLNA segment, $4 million recorded   in the LAF segment, $4 million recorded in the Europe segment, $1 million   recorded in the AMEA segment, $1 million recorded in corporate unallocated   expenses and income of $1 million recorded in the QFNA segment representing   adjustments of previously recorded amounts. The 2012 Productivity Plan   includes actions in every aspect of our business that we believe will   strengthen our complementary food, snack and beverage businesses by   leveraging new technologies and processes across PepsiCo's operations,   go-to-market and information systems; heightening the focus on best practice   sharing across the globe; consolidating manufacturing, warehouse and sales   facilities; and implementing simplified organization structures, with wider   spans of control and fewer layers of management.  Venezuela currency devaluation  In the 12 weeks ended March 23, 2013 we recorded a $111 million net charge related to the devaluation of the bolivar for our Venezuela businesses. $124 million of this charge was recorded in corporate unallocated expenses, with the balance (equity income of $13 million) recorded in our PAB segment.  Free cash flow, excluding certain items  Additionally, free cash flow (excluding the items noted in the Net Cash Provided by Operating Activities Reconciliation table) is the primary measure management uses to monitor cash flow performance. This is not a measure defined by GAAP. Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities. Additionally, we consider certain other items (included in the Net Cash Provided by Operating Activities Reconciliation table) in evaluating free cash flow which we believe investors should consider in evaluating our free cash flow results.  2014 guidance and long-term targets  Our 2014 core tax rate guidance and our 2014 core constant currency EPS guidance exclude the commodity mark-to-market net impact included in corporate unallocated expenses and restructuring and impairment charges. Our 2014 organic revenue guidance and our long-term organic revenue growth target exclude the impact of acquisitions, divestitures and other structural changes. In addition, our 2014 organic revenue guidance, our full-year projected 2014 core constant currency EPS guidance and our long-term organic revenue growth target exclude the impact of foreign exchange. We are not able to reconcile our full-year projected 2014 core tax rate guidance to our full-year projected 2014 reported tax rate or our 2014 core constant currency EPS guidance to our full-year projected 2014 reported EPS growth because we are unable to predict the 2014 impact of foreign exchange or the mark-to-market net impact on commodity hedges due to the unpredictability of future changes in foreign exchange rates and commodity prices. We are also unable to reconcile our full-year projected 2014 organic revenue guidance to our full-year projected 2014 reported net revenue growth or our long-term organic revenue growth target to our long-term net revenue growth target because we are unable to predict the 2014 and long-term 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.  A - 14    Logo- http://photos.prnewswire.com/prnh/20140415/73233  SOURCE PepsiCo  Website: http://www.pepsico.com Contact: Investor: Jamie Caulfield, Senior Vice President, Investor Relations, 914-253-3035, jamie.caulfield@pepsico.com; or Media, Jeff Dahncke, Senior Director, Media Bureau, 914-253-3941, jeff.dahncke@pepsico.com  
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