Pepsi 2012 Annual Report Download - page 107

Core results, core constant currency results and division oper-
ating 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 evalu-
ates our operational results and trends.
Commodity Mark-to-Market Net Impact
In the year ended December 29, 2012, we recognized
$65 million of mark-to-market net gains 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 deriv-
atives on behalf of our divisions. These commodity derivatives
include agricultural products, metals and energy. 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 unallo-
cated expenses. These gains and losses are subsequently
reflected in division results when the divisions take delivery of
the underlying commodity.
Merger and Integration Charges
In the year ended December29, 2012, we incurred merger and
integration charges of $16million related to our acquisition of
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 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 include clos-
ing costs and advisory fees related to our acquisition of WBD.
Restructuring and Impairment Charges
In the year ended December29, 2012, we incurred restructur-
ing charges of $279million, in conjunction with our multi-year
productivity plan (Productivity Plan), including $38million
recorded in the FLNA segment, $9million recorded in the
QFNA segment, $50 million recorded in the LAF segment,
$102million recorded in the PAB segment, $42million recorded
in the Europe segment, $28 million recorded in the 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mil-
lion 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 bev-
erage 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.
Restructuring and Other Charges Related to the
Transaction with Tingyi
In the year ended December29, 2012, we recorded restruc-
turing and other charges $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 Benet 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favor-
able tax court decision related to the classification of
financial instruments.
rd Week Impact
In 2011, we had an extra reporting week (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 mil-
lion and operating profit by $109 million in the year ended
December31, 2011.
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 adjust-
ments 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) 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
Reconciliation of GAAP and Non- GAAP Information
2012 PEPSICO ANNUAL REPORT 105