Pepsi 2009 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2009 Pepsi annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 110

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110

50 PepsiCo, Inc. 2009 Annual Report
Management’s Discussion and Analysis
consolidated subsidiaries and (2) the loss of control of subsidiaries.
We adopted the accounting provisions of the new guidance on a
prospective basis as of the beginning of our 2009 fiscal year, and
the adoption did not have a material impact on our financial
statements. In addition, we adopted the presentation and disclosure
requirements of the new guidance on a retrospective basis in the
first quarter of 2009.
In June 2009, the FASB amended its accounting guidance on
the consolidation of variable interest entities (VIE). Among other
things, the new guidance requires a qualitative rather than a
quantitative assessment to determine the primary beneficiary
of a VIE based on whether the entity (1) has the power to direct
matters that most significantly impact the activities of the VIE
and (2) has the obligation to absorb losses or the right to receive
benefits of the VIE that could potentially be significant to the VIE.
In addition, the amended guidance requires an ongoing recon-
sideration of the primary beneficiary. The provisions of this new
guidance are effective as of the beginning of our 2010 fiscal year,
and we do not expect the adoption to have a material impact
on our financial statements.
OUR FINANCIAL RESULTS
ITEMS AFFECTING COMPARABILITY
The year-over-year comparisons of our financial results are
affected by the following items:
2009 20082007
Operating profit
Mark-to-market net impact (gain/(loss)) $÷274 $«(346) $÷÷19
Restructuring and impairment charges $÷«(36) $«(543) $«(102)
PBG/PAS merger costs $÷«(50) ––
Bottling equity income
PBG/PAS merger costs $÷«(11) ––
Net income attributable to PepsiCo
Mark-to-market net impact (gain/(loss)) $÷173 $«(223) $÷÷12
Restructuring and impairment charges $÷«(29) $«(408) $÷«(70)
Tax benefits –– $÷129
PepsiCo share of PBG restructuring and
impairment charges –$«(114) –
PBG/PAS merger costs $÷«(44) ––
Net income attributable to PepsiCo per
common share—diluted
Mark-to-market net impact (gain/(loss)) $«0.11 $(0.14) $«0.01
Restructuring and impairment charges $(0.02) $(0.25) $(0.04)
Tax benefits –– $«0.08
PepsiCo share of PBG restructuring and
impairment charges –$(0.07) –
PBG/PAS merger costs $(0.03) ––
Mark-to-Market Net Impact
We centrally manage commodity derivatives on behalf of our
divisions. These commodity derivatives include energy, fruit and
other raw materials. 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
unallocated expenses. These gains and losses are subsequently
reflected in division results when the divisions take delivery of
the underlying commodity. Therefore, the divisions realize the
economic effects of the derivative without experiencing any
resulting mark-to-market volatility, which remains in corporate
unallocated expenses.
In 2009, we recognized $274 million ($173 million after-tax
or $0.11 per share) of mark-to-market net gains on commodity
hedges in corporate unallocated expenses.
In 2008, we recognized $346 million ($223 million after-tax
or $0.14 per share) of mark-to-market net losses on commodity
hedges in corporate unallocated expenses.
In 2007, we recognized $19 million ($12 million after-tax or
$0.01 per share) of mark-to-market net gains on commodity
hedges in corporate unallocated expenses.
Restructuring and Impairment Charges
In 2009, we incurred a charge of $36 million ($29 million after-tax
or $0.02 per share) in conjunction with our Productivity for Growth
program that began in 2008. The program includes actions in all
divisions of the business, including the closure of six plants that
we believe will increase cost competitiveness across the supply
chain, upgrade and streamline our product portfolio, and simplify
the organization for more effective and timely decision-making.
These initiatives were completed in the second quarter of 2009.
In 2008, we incurred a charge of $543 million ($408 million
after-tax or $0.25 per share) in conjunction with our Productivity
for Growth program.
In 2007, we incurred a charge of $102 million ($70 million after-tax
or $0.04 per share) in conjunction with restructuring actions primarily
to close certain plants and rationalize other production lines.
Tax Benefits
In 2007, we recognized $129 million ($0.08 per share) of non-cash
tax benefits related to the favorable resolution of certain foreign
tax matters.
88045_pepsico-09ar_33-59_R1.indd 50 2/24/10 4:49 PM