Reconciliation of GAAP and Non-GAAP Information (unaudited)
Core 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 with how management evaluates our operational results and trends.
Commodity mark-to-market net impact
In the years ended December 29, 2012, December 25, 2010, December 26, 2009, and December 29, 2007,
we recognized net gains of $65 million, $91 million, $274 million and $19 million, respectively, on
commodity hedges in corporate unallocated expenses. In the years ended December 31, 2011, December
27, 2008 and December 30, 2006, we recognized net losses of $102 million, $346 million and $18
million, respectively, 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 recognize the cost of the underlying commodity in net income.
Merger and integration charges
In the year ended December 29, 2012, we incurred merger and integration charges of $16 million related
to our acquisition of Wimm-Bill-Dann Foods OJSC (WBD), including $11 million recorded in the Europe
segment and $5 million recorded in interest expense. In the year ended December 31, 2011, we incurred
merger and integration charges of $329 million related to our acquisitions of The Pepsi Bottling Group,
Inc. (PBG), PepsiAmericas, Inc. (PAS) and WBD, including $112 million recorded in the PepsiCo
Americas Beverages (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
include closing costs and advisory fees related to our acquisition of WBD. In the year ended December
25, 2010, we incurred merger and integration charges of $799 million related to our acquisitions of PBG
and PAS, as well as advisory fees in connection with our acquisition of WBD, including $467 million
recorded in the PAB segment, $111 million recorded in the Europe segment, $191 million recorded in
corporate unallocated expenses and $30 million recorded in interest expense. These charges also include
closing costs, one-time financing costs and advisory fees related to our acquisitions of PBG and PAS. In
addition, in the year ended December 25, 2010, we recorded $9 million of merger-related charges,
representing our share of the respective merger costs of PBG and PAS, in bottling equity income. In the
year ended December 26, 2009, we incurred $50 million of costs associated with the mergers with PBG
and PAS, as well as an additional $11 million of charges representing our share of the respective merger
costs of PBG and PAS, recorded in bottling equity income.
Restructuring and impairment charges
In the year ended December 29, 2012, we incurred restructuring charges of $279 million in conjunction
with our multi-year productivity plan (Productivity Plan), including $38 million recorded in the Frito-Lay
North America (FLNA) segment, $9 million recorded in the Quaker Foods North America (QFNA)
segment, $50 million recorded in the Latin America Foods (LAF) segment, $102 million recorded in the
PAB segment, $42 million recorded in the Europe segment, $28 million recorded in the Asia, Middle East
and Africa (AMEA) segment and $10 million recorded in corporate unallocated expenses. In the year
ended December 31, 2011, we incurred restructuring 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
Reconciliation of GAAP and Non-GAAP Information (unaudited) - Continued
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. As a result of the Productivity for Growth program, in the years
ended December 26, 2009 and December 27, 2008, we recorded $36 million and $543 million of
restructuring and impairment charges, respectively. The program included actions in all segments of the
business, including the closure of six plants to increase cost competitiveness across the supply chain,
upgrade and streamline our product portfolio and simplify the organization for more effective and timely
decision-making. In the year ended December 29, 2007, we recorded restructuring and impairment
charges of $102 million in connection with plant closings and production line rationalizations. In the year
ended December 30, 2006, we recorded restructuring and impairment charges of $67 million in
conjunction with consolidating the manufacturing network at Frito Lay by closing two plants in the U.S.,
and rationalizing other assets, to increase manufacturing productivity and supply chain efficiencies. In
the year ended December 31, 2005, we recorded restructuring charges of $83 million to reduce costs in
our operations, principally through headcount reductions.
Restructuring and other charges related to the transaction with Tingyi (Cayman Islands) Holdings Corp.
(Tingyi)
In the year ended December 29, 2012, we recorded restructuring and other charges of $150 million, in the
AMEA segment related to the transaction with Tingyi.
Pension lump sum settlement charge
In the year ended December 29, 2012, we recorded a pension lump sum settlement charge of $195
million.
Tax benefit related to tax court decision
In the year ended December 29, 2012, we recognized a non-cash tax benefit of $217 million associated
with a favorable tax court decision related to the classification of financial instruments.
53rd week
In each of the years ended December 31, 2011 and December 31, 2005, we had an extra reporting week
(53rd week). Our fiscal year ends on the last Saturday of each December, resulting in an extra 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. The 53rd week increased net revenue
by $418 million and operating profit by $75 million in the year ended December 31, 2005.
Inventory fair value adjustments
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. In the year ended December 25, 2010, we recorded $398 million of incremental costs, substantially
all in cost of sales, related to fair value adjustments to the acquired inventory and other related hedging
contracts included in PBG’s and PAS’s balance sheets at the acquisition date.
Reconciliation of GAAP and Non-GAAP Information (unaudited) - Continued
Gain on previously held equity interests
In the year ended December 25, 2010, in connection with our acquisitions of PBG and PAS, we recorded
a gain on our previously held equity interests of $958 million, comprising $735 million which is nontaxable and recorded in bottling equity income and $223 million related to the reversal of deferred tax
liabilities associated with these previously held equity interests.
Venezuela currency devaluation
As of the beginning of our 2010 fiscal year, we recorded a $120 million net charge related to our change
to hyperinflationary accounting for our Venezuelan businesses and the related devaluation of the bolivar
fuerte (bolivar). $129 million of this net charge was recorded in corporate unallocated expenses, with the
balance (income of $9 million) recorded in our PAB segment.
Asset write-off
In the year ended December 25, 2010, we recorded a $145 million charge related to a change in scope of
one release in our ongoing migration to SAP software. This change was driven, in part, by a review of
our North America systems strategy following our acquisitions of PBG and PAS.
Foundation contribution
In the year ended December 25, 2010, we made a $100 million contribution to The PepsiCo Foundation,
Inc. (Foundation), in order to fund charitable and social programs over the next several years. This
contribution was recorded in corporate unallocated expenses.
Debt repurchase
In the year ended December 25, 2010, we paid $672 million in a cash tender offer to repurchase $500
million (aggregate principal amount) of our 7.90% senior unsecured notes maturing in 2018. As a result
of this debt repurchase, we recorded a $178 million charge to interest expense, primarily representing the
premium paid in the tender offer.
PBG restructuring and impairment charges
During 2008, PBG implemented a restructuring initiative across all of its geographic segments. PBG also
recognized an asset impairment charge related to its business in Mexico. Consequently, a non-cash
charge of $138 million was included in bottling equity income as part of recording our share of PBG’s
financial results.
Tax benefits
In year ended December 29, 2007, we recognized $129 million of non-cash tax benefits related to the
favorable resolution of certain foreign tax matters. In the year ended December 30, 2006, we recorded
non-cash tax benefits of $602 million, substantially all of which related to the Internal Revenue Service’s
(IRS’s) examination of our consolidated income tax returns for the years 1998 through 2002.
PepsiCo share of PBG tax settlement
In the year ended December 30, 2006, we recorded $21 million in bottling equity income representing our
share of PBG’s non-cash tax benefits in connection with the IRS’s examination of certain of their
consolidated income tax returns.
Reconciliation of GAAP and Non-GAAP Information (unaudited) - Continued
AJCA tax charge
In 2005, we recognized a tax charge of $460 million related to our repatriation of international earnings
under the provisions of the American Jobs Creation Act (AJCA).
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) 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 management operating
cash flow which we believe investors should consider in evaluating our management operating cash flow
results.
Long-term guidance
Our long-term core constant currency operating profit and EPS guidance exclude the commodity mark-tomarket net impact included in corporate unallocated expenses. Our long-term organic revenue guidance
excludes the impact of acquisitions, divestitures and other structural changes. In addition, our long-term
organic revenue guidance and our long-term core constant currency operating profit and EPS guidance
exclude the impact of foreign exchange. We are not able to reconcile our long-term core constant
currency operating profit and EPS guidance to our projected long-term reported operating profit and EPS
growth because we are unable to predict the long-term 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. In addition, we are unable to reconcile our long-term organic revenue guidance to
our projected long-term reported net revenue growth because we are unable to predict the 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.