Pepsi 2010 Annual Report Download - page 108

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107
Division operating profit, core results and core constant currency
results are non-GAAP financial measures as they exclude certain
items noted below. However, we believe investors should con-
sider these measures as they are more indicative of our ongoing
performance and with how management evaluates our opera-
tional results and trends.
Commodity Mark-to-Market Net Impact
In the year ended December 25, 2010, we recognized $91million
of mark-to-market net gains on commodity hedges in corpo-
rate unallocated expenses. In the year ended December26,
2009, we recognized $274 million of mark-to-market net gains
on commodity hedges in corporate unallocated expenses. We
centrally manage commodity derivatives on behalf of our divi-
sions. 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.
Merger and Integration Charges
In the year ended December 25, 2010, we incurred merger and
integration charges of $799 million related to our acquisitions
of PBG and PAS, as well as advisory fees in connection with
our acquisition of WBD, including $467 million recorded in the
PAB segment, $111 million recorded in the Europe segment,
$191million recorded in corporate unallocated expenses and
$30million recorded in interest expense. These charges also
include closing costs, one-time financing costs and advisory
fees related to the acquisitions. In addition, in the year ended
December25, 2010, we recorded $9 million of charges, repre-
senting our share of the respective merger costs of PBG and
PAS, recorded in bottling equity income. In the year ended
December26, 2009, we incurred $50 million of costs associated
with the mergers with PBG and PAS, as well as an additional
$11million of costs representing our share of the respective
merger costs of PBG and PAS, recorded in bottling equity income.
Restructuring and Impairment Charges
As a result of our previously initiated Productivity for Growth
program, in the year ended December 26, 2009, we recorded
$36million of restructuring and impairment charges.
Gain on Previously Held Equity Interests in PBG and PAS
In the first quarter of 2010, in connection with our acquisitions
of PBG and PAS, we recorded a gain on our previously held equity
interests of $958 million, comprising $735million which is non-
taxable and recorded in bottling equity income and $223million
related to the reversal of deferred tax liabilities associated with
these previously held equity interests.
Inventory Fair Value Adjustments
In the year ended December 25, 2010, we recorded $398million of
incremental costs, substantially all in cost of sales, related to fair
value adjustments to the acquired inventory and other related
hedging contracts included in PBG’s and PAS’s balance sheets at
the acquisition date, including $358million recorded in the PAB
segment and $40million recorded in the Europe segment.
Venezuela Currency Devaluation
As of the beginning of our 2010 fiscal year, we recorded a one-time
$120 million net charge related to our change to hyper inflationary
accounting for our Venezuelan businesses and the related deval-
uation of the bolivar fuerte (bolivar). $129million of this net
charge was recorded in corporate unallocated expenses, with the
balance (income of $9 million) recorded in our PABsegment.
Asset Write-O for SAP Software
In the first quarter of 2010, we recorded a $145 million charge
related to a change in scope of one release in our ongoing migra-
tion to SAP software. This change was driven, in part, by a
review of our North America systems strategy following our
acquisitions of PBG and PAS. This change does not impact our
overall commitment to continue our implementation of SAP
across our global operations over the next few years.
Foundation Contribution
In the first quarter of 2010, we made a $100 million contribution
to The PepsiCo Foundation, Inc. (Foundation), in order to fund
charitable and social programs over the next several years. This
contribution was recorded in corporate unallocated expenses.
Reconciliation of GAAP and Non-GAAP Information