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77PepsiCo, Inc. 2009 Annual Report
Plan assets measured at fair value are categorized as follows:
2009 2008
Total Level 1 Level 2 Level 3 Total
U.S. plan assets
Equity securities:
PepsiCo common stock(a) $÷«332 $÷«332 $÷÷÷«– $÷– $÷«302
U.S. common stock(a) 229 229 – – 103
U.S. commingled funds(b) 1,387 – 1,387 – 513
International common stock(a) 700 700 – – 463
International commingled fund(c) 114 – 114 – 47
Preferred stock(d) 4–4– 6
Fixed income securities:
Government securities(d) 741 – 741 – 724
Corporate bonds(d) 1,214 – 1,198 16 592
Mortgage-backed securities(d) 201 – 195 6 250
Fixed income commingled fund(e) –– – – 647
Other:
Derivative instruments –– – – (9)
Contracts with insurance
companies(f) 9––9 15
Dividends and interest receivable 32 – – 32 19
Cash and cash equivalents 457 457 – – 302
Total U.S. plan assets $5,420 $1,718 $3,639 $63 $3,974
International plan assets
Equity securities:
U.S. commingled funds(b) $÷«180 $÷÷÷«– $÷«180 $÷– $÷«128
International commingled funds(c) 661 – 661 – 429
Fixed income securities:
Government securities(d) 139 – 139 – 123
Corporate bonds(d) 128 – 128 – 103
Fixed income commingled funds(e) 363 – 363 – 310
Other:
Contracts with insurance
companies(f) 29 – – 29 26
Currency commingled funds(g) 44 – 44 – 17
Cash and cash equivalents 17 17 – – 29
Total international plan assets $1,561 $÷÷«17 $1,515 $29 $1,165
(a) Based on quoted market prices in active markets.
(b) Based on the fair value of the investments owned by these funds that track various U.S. large-
and mid-cap company indices. Includes one fund that represents 25% of total U.S. plan assets.
(c) Based on the fair value of the investments owned by these funds that track various non-U.S.
equity indices.
(d) Based on quoted bid prices for comparable securities in the marketplace and broker/dealer
quotes that are not observable.
(e) Based on the fair value of the investments owned by these funds that track various
government and corporate bond indices.
(f) Based on the fair value of the contracts as determined by the insurance companies using
inputs that are not observable.
(g) Based on the fair value of the investments owned by these funds. Includes managed hedge
funds that invest primarily in derivatives to reduce currency exposure.
RETIREE MEDICAL COST TREND RATES
An average increase of 7.5% in the cost of covered retiree medical
benefits is assumed for 2010. This average increase is then projected
to decline gradually to 5% in 2014 and thereafter. These assumed
health care cost trend rates have an impact on the retiree medical
plan expense and liability. However, the cap on our share of
retiree medical costs limits the impact. A 1-percentage-point
change in the assumed health care trend rate would have the
following effects:
1% Increase 1% Decrease
2009 service and interest cost components $÷4 $÷(3)
2009 benefit liability $30 $(26)
SAVINGS PLAN
Our U.S. employees are eligible to participate in 401(k) savings plans,
which are voluntary defined contribution plans. The plans are
designed to help employees accumulate additional savings for
retirement. We make matching contributions on a portion of eligible
pay based on years of service. In 2009 and 2008, our matching
contributions were $72 million and $70 million, respectively.
For additional unaudited information on our pension and retiree
medical plans and related accounting policies and assumptions,
see “Our Critical Accounting Policies” in Management’s Discussion
and Analysis.
Note 8 Noncontrolled Bottling Affiliates
Our most significant noncontrolled bottling affiliates are PBG
and PAS. Sales to PBG represented approximately 6% of our total
net revenue in 2009 and 7% of our total net revenue in both
2008 and 2007.
See Note 15 for information regarding our pending mergers
with PBG and PAS.
THE PEPSI BOTTLING GROUP
In addition to approximately 32% and 33% of PBG’s outstanding
common stock that we owned at year-end 2009 and 2008,
respectively, we owned 100% of PBG’s class B common stock
and approximately 7% of the equity of Bottling Group, LLC,
PBG’s principal operating subsidiary.
PBG’s summarized financial information is as follows:
2009 2008 2007
Current assets $÷3,412 $÷3,141
Noncurrent assets 10,158 9,841
Total assets $13,570 $12,982
Current liabilities $÷1,965 $÷3,083
Noncurrent liabilities 7,896 7,408
Total liabilities $÷9,861 $10,491
Our investment $÷1,775 $÷1,457
Net revenue $13,219 $13,796 $13,591
Gross profit $÷5,840 $÷6,210 $÷6,221
Operating income $÷1,048 $÷÷«649 $÷1,071
Net income attributable to PBG $÷÷«612 $÷÷«162 $÷÷«532
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