Pepsi 2007 Annual Report Download - page 33

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OUR BUSINESS
Our Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Our Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Our Distribution Network . . . . . . . . . . . . . . . . . . . . . . . . . 34
Our Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Other Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Our Business Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
OUR CRITICAL ACCOUNTING POLICIES
Revenue Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Brand and Goodwill Valuations. . . . . . . . . . . . . . . . . . . . . 41
Income Tax Expense and Accruals . . . . . . . . . . . . . . . . . . . 42
Pension and Retiree Medical Plans . . . . . . . . . . . . . . . . . . 43
OUR FINANCIAL RESULTS
Items Affecting Comparability . . . . . . . . . . . . . . . . . . . . . 46
Results of Operations — Consolidated Review . . . . . . . . . 47
Results of Operations — Division Review . . . . . . . . . . . . . 49
Frito-Lay North America . . . . . . . . . . . . . . . . . . . . . . . . 50
PepsiCo Beverages North America. . . . . . . . . . . . . . . . . 51
PepsiCo International . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Quaker Foods North America . . . . . . . . . . . . . . . . . . . . 53
Our Liquidity and Capital Resources . . . . . . . . . . . . . . . . . 54
Consolidated Statement of Income . . . . . . . . . . . . 56
Consolidated Statement of Cash Flows . . . . . . . . . 57
Consolidated Balance Sheet. . . . . . . . . . . . . . . . . . 58
Consolidated Statement of Common
Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . 59
Notes to Consolidated Financial Statements
Note 1 — Basis of Presentation and Our Divisions. . . . . . . 60
Note 2 — Our Signifi cant Accounting Policies. . . . . . . . . . 63
Note 3 — Restructuring and Impairment Charges. . . . . . . 64
Note 4 — Property, Plant and Equipment and
Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . 65
Note 5 — Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Note 6 — Stock-Based Compensation . . . . . . . . . . . . . . . 69
Note 7 — Pension, Retiree Medical and Savings Plans. . . . 71
Note 8 — Noncontrolled Bottling Affi liates . . . . . . . . . . . . 75
Note 9 — Debt Obligations and Commitments. . . . . . . . . 77
Note 10 — Risk Management. . . . . . . . . . . . . . . . . . . . . . 78
Note 11 — Net Income per Common Share . . . . . . . . . . . 80
Note 12 — Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . 80
Note 13 — Accumulated Other Comprehensive Loss . . . . 81
Note 14 — Supplemental Financial Information . . . . . . . . 82
MANAGEMENT’S RESPONSIBILITY FOR
FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . . 83
MANAGEMENT’S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING. . . . . . . 83
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM . . . . . . . . . . . . . . . . . . . . . . 84
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . 85
RECONCILIATION OF GAAP AND
NON-GAAP INFORMATION . . . . . . . . . . . . . . . . . 86
GLOSSARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Management’s Discussion and Analysis Management’s Discussion and Analysis
31