Pepsi 2005 Annual Report Download - page 78

76
Anchor bottlers: The Pepsi Bottling Group
(PBG), PepsiAmericas, Inc. (PAS) and
Pepsi Bottling Ventures (PBV).
Bottler: customers who we have granted
exclusive contracts to sell and manufacture
certain beverage products bearing our trade-
marks within a specific geographical area.
Bottler funding: financial incentives we give
to our bottlers to assist in the distribution
and promotion of our beverage products.
Business Process Transformation (BPT):
our comprehensive multi-year effort to
drive efficiencies. It includes efforts to
physically consolidate, or integrate, key
business functions to take advantage of
our scale. It also includes moving to a
common set of processes that underlie
our key activities, and supporting them
with common technology application.
And finally, it includes our SAP installation,
the computer system that will link all of
our systems and processes.
Concentrate Shipments and Equivalents
(CSE): measure of our physical beverage
volume to our customers. This measure is
reported on our fiscal year basis.
Consumers: people who eat and drink
our products.
Customers: franchise bottlers and inde-
pendent distributors and retailers.
CSD: carbonated soft drinks.
Derivatives: financial instruments 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 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.
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.
Marketplace spending: sales incentives
offered through various programs to our
customers and consumers, as well as
advertising and other marketing activities.
Servings: common metric reflecting our
consolidated physical unit volume. Our
divisions’ physical unit measures are con-
verted into servings based on U.S. Food
and Drug Administration guidelines for
single-serving sizes of our products.
Smart Spot: our initiative that helps
consumers find our products that can
contribute to healthier lifestyles.
Transaction gains and losses: the impact
on our consolidated financial statements
of exchange rate changes arising from
specific transactions.
Translation adjustments: the impact of the
conversion of our foreign affiliates’ financial
statements to U.S. dollars for the purpose
of consolidating our financial statements.
Glossary
We recognized a tax charge in 2005 related to the Company’s
intention to repatriate $7.5 billion of international earnings under
the provisions of the AJCA. In addition, we recorded restructuring
charges in 2005 to reduce costs in some of our operations, princi-
pally through headcount reductions, as well as restructuring and
impairment charges in 2004 related to Frito Lay’s manufacturing
consolidation. We also recognized certain tax benefits in 2004. In
2005, we have an additional week of results (53rd week) as our
fiscal year ends on the last Saturday of each December, resulting
in an additional week of results every five or six years.
The financial measures listed below are not measures defined
by generally accepted accounting principles. However, we believe
investors should consider these measures as they are more indica-
tive of our ongoing performance. Specifically, investors should
consider the following:
• Our 2005 net income and diluted EPS amounts without the
impact of the AJCA tax charge, the 53rd week and the restruc-
turing charges, and our 2004 net income and diluted EPS
amounts without the impact of prior year tax benefits and
restructuring and impairment charges; and
• Our 2005 return on invested capital (ROIC) without the impact
of the AJCA tax charge, the restructuring and impairment
charges, the 53rd week and prior year tax benefits.
Net Income Reconciliation
Year Ended 2005 2004 Growth
Reported net income $4,078 $4,212 (3)%
Prior Year Tax Benefits –(304)
AJCA Tax Charge 460 –
53rd Week (57) –
Restructuring and Impairment Charges 55 96
Net Income Excluding Prior Year Tax
Benefits, AJCA Tax Charge, 53rd
Week and Restructuring and
Impairment Charges $4,536 $4,004 13%
Diluted EPS Reconciliation
Year Ended 2005 2004 Growth
Reported diluted EPS $ 2.39 $ 2.44 (2)%
Prior Year Tax Benefits –(0.18)
AJCA Tax Charge 0.27 –
53rd Week (0.03) –
Restructuring and Impairment Charges 0.03 0.06
Net Income Excluding Prior Year Tax
Benefits, AJCA Tax Charge, 53rd
Week and Restructuring and
Impairment Charges $ 2.66 $ 2.32 15%
ROIC Reconciliation*
Year Ended 2005
Reported ROIC 23%
AJCA Tax Charge 2
ROIC Excluding AJCA Tax Charge 25%
* Impact of restructuring and impairment charges, the 53rd
week and prior year tax benefits on ROIC rounds to zero.
Reconciliation of GAAP and Non-GAAP Information