Pepsi 2006 Annual Report Download - page 84

Anchor bottlers: The Pepsi Bottling Group
(PBG), PepsiAmericas (PAS) and Pepsi Bottling
Ventures (PBV).
Bottler: customers to whom we have granted
exclusive contracts to sell and manufacture cer-
tain beverage products bearing our trademarks
within a specific geographical area.
Bottler Case Sales (BCS): measure of physical
beverage volume sold from our bottlers to
independent distributors and retailers.
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 com-
prehensive multi-year effort to drive efficiencies.
It includes efforts to 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 a 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 sold to
our customers. This measure is reported on our
fiscal year basis.
Consumers: people who eat and drink
our products.
Customers: authorized bottlers and independent
distributors and retailers.
CSD: carbonated soft drinks.
Derivatives: financial instruments that we use to
manage our risk arising from changes in com-
modity 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 bev-
erages 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 (trade spending), as well as advertising
and other marketing activities.
Servings: common metric reflecting our consoli-
dated 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.
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.
Reconciliation of GAAP and Non–GAAP Information
Glossary
82
Net Income Reconciliation 2006 2005 Growth
Reported Net Income $5,642 $4,078 38%
2006 Tax Adjustments (602) –
PepsiCo Share of PBG Tax Settlement (18) –
AJCA Tax Charge – 460
Extra Week – (57)
Restructuring and Impairment Charges 43 55
Net Income Excluding above Items $5,065 $4,536 12%
2006
Diluted EPS Reconciliation 2006 2005 Growth 2004
Reported Diluted EPS $3.34 $2.39 40% $2.44
2006 Tax Adjustments (0.36) ––
PepsiCo Share of PBG Tax
Settlement (0.01) ––
AJCA Tax Charge – 0.27 –
Extra Week – (0.03) –
Restructuring and Impairment
Charges 0.03 0.03 0.06
2004 Tax Benefits – – (0.18)
Diluted EPS Excluding above Items $3.00 $2.66 13% $2.32
ROIC Reconciliation 2006
Reported ROIC 30%
2006 Tax Adjustments (3)
SFAS 158 Adoption (1)
AJCA Tax Charge (1)
ROIC Excluding above Items 26%*
* Does not sum due to rounding. Additionally, the impact on ROIC of the 2006
and 2005 restructuring and impairment charges and the extra week in 2005
rounds to zero.
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 indicative of our ongoing performance. Specifically,
investors should consider the following:
• Our 2006 and 2005 division operating profit and our 2006
division operating profit growth;
• Our 2006 net income without the impact of the 2006 Tax
Adjustments, our share of PBG’s tax settlement and restructur-
ing and impairment charges; our 2005 net income without the
impact of the AJCA tax charge, restructuring charges and the
extra week in 2005; and our 2006 net income growth without
the impact of the aforementioned items;
• Our 2006 diluted EPS without the impact of the 2006 Tax
Adjustments, our share of PBG’s tax settlement and restructur-
ing and impairment charges; our 2005 diluted EPS without the
impact of the AJCA tax charge, restructuring charges and the
extra week in 2005; our 2006 diluted EPS growth without the
impact of the aforementioned items; and our 2004 diluted
EPS without the impact of restructuring and impairment
charges and certain tax benefits; and
• Our 2006 return on invested capital (ROIC) without the impact
of the 2006 Tax Adjustments, our adoption of SFAS 158, the
AJCA tax charge, restructuring and impairment charges and
the extra week in 2005.
Operating Profit Reconciliation 2006 2005 Growth
Total PepsiCo Reported
Operating Profit $6,439 $5,922 9%
Corporate Unallocated 733 788
PepsiCo Total Division
Operating Profit $7,172 $6,710 7%
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