Financials - PepsiCo

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Reconciliation of GAAP and Non-GAAP Information (continued) Interest Expense Incurred in Connection with 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. Management Operating Cash Flow Additionally, management operating cash flow is the primary measure management uses to monitor cash flow performance. This is not a measure defined by GAAP. Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities. 2010 Net Revenue Growth Reconciliation 2010 Reported Net Revenue Growth 34% Foreign Currency Translation (1) Constant Currency Net Revenue Growth 33% Operating Profit Reconciliation 2010 2009 Growth Total Reported Operating Profit $ 8,332 $8,044 4% Mark-to-Market Net Gains (91) (274) Merger and Integration Charges 769 50 Restructuring and Impairment Charges – 36 Inventory Fair Value Adjustments 398 – Venezuela Currency Devaluation 120 – Asset Write-Off 145 – Foundation Contribution 100 – Total Core Operating Profit 9,773 7,856 24% Impact of Other Corporate Unallocated 853 791 Core Division Operating Profit $10,626 $8,647 23% Foreign Currency Translation 0.5 Core Constant Currency Division Operating Profit Growth 23%* * Does not sum due to rounding Net Income Attributable to PepsiCo Reconciliation 2010 2009 Growth Reported Net Income Attributable to PepsiCo $6,320 $5,946 6% Mark-to-Market Net Gains (58) (173) Restructuring and Impairment Charges – 29 Merger and Integration Charges 648 44 Gain on Previously Held Equity Interests (958) – Inventory Fair Value Adjustments 333 – Venezuela Currency Devaluation 120 – Asset Write-Off 92 – Foundation Contribution 64 – Debt Repurchase 114 – Core Net Income Attributable to PepsiCo $6,675 $5,846 14% Net Cash Provided by Operating Activities Reconciliation 2010 2009 Growth Net Cash Provided by Operating Activities $ 8,448 $ 6,796 24% Capital Spending (3,253) (2,128) Sales of Property, Plant and Equipment 81 58 Management Operating Cash Flow 5,276 4,726 Discretionary Pension and Retiree Medical Contributions (after-tax) 983 640 Payments Related to 2009 Restructuring Charges (after-tax) 20 168 Merger and Integration Payments (after-tax) 299 49 Foundation Contribution (after-tax) 64 – Debt Repurchase (after-tax) 112 – Capital Investments Related to the PBG/PAS Integration 138 – Management Operating Cash Flow Excluding above Items $ 6,892 $ 5,583 23% 108 PepsiCo, Inc. 2010 Annual Report
Glossary Acquisitions: reflect all mergers and acquisitions activity, including the impact of acquisitions, divestitures and changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees. Bottlers: customers to whom we have granted exclusive contracts to sell and manufacture certain beverage products bearing our trademarks within a specific geographical area. Bottler Case Sales (BCS): measure of physical beverage volume shipped to retailers and independent distributors from both PepsiCo and our independent bottlers. Bottler funding: financial incentives we give to our independent bottlers to assist in the distribution and promotion of our beverage products. Concentrate Shipments and Equivalents (CSE): measure of our physical beverage volume shipments to independent bottlers, retailers and independent distributors. This measure is reported on our fiscal year basis. 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. Consumers: people who eat and drink our products. CSD: carbonated soft drinks. Customers: authorized independent bottlers, distributors and retailers. Derivatives: financial instruments, such as futures, swaps, Treasury locks, options and forward contracts, that we use to manage our risk arising from changes in commodity prices, interest rates, foreign exchange rates and stock prices. Direct-Store-Delivery (DSD): delivery system used by us and our independent bottlers to deliver snacks and beverages directly to retail stores where our products are merchandised. 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. Hedge accounting: treatment for qualifying hedges that allows fluctuations in a hedging instrument’s fair value to offset corresponding fluctuations in the hedged item in the same reporting period. Hedge accounting is allowed only in cases where the hedging relationship between the hedging instruments and hedged items is highly effective, and only prospectively from the date a hedging relationship is formally documented. Management operating cash flow: net cash provided by operating activities less capital spending plus sales of property, plant and equipment. It is our primary measure used to monitor cash flow performance. Mark-to-market net gain or loss or impact: the 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. Marketplace spending: sales incentives offered through various programs to our customers and consumers (trade spending), as well as advertising and other marketing activities. Servings: common metric reflecting our consolidated physical unit volume. Our divisions’ physical unit measures are converted into servings based on U.S. Food and Drug Administration guidelines for single-serving sizes of our products. Transaction gains and losses: the impact on our consolidated financial statements of exchange rate changes arising from specific transactions. Translation adjustment: the impact of converting our foreign affiliates’ financial statements into U.S. dollars for the purpose of consolidating our financial statements. 109
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Financials Management’s Discussio
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at every level: from the way our pr
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and direct marketplace support, suc
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Trade consolidation or the loss of
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that do not qualify for hedge accou
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Page 21 and 22: PepsiCo Americas Beverages % Change
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Page 41 and 42: In connection with our acquisitions
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Page 47 and 48: are outstanding), 4.375% notes due
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Financials - PepsiCo

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