Pepsi 2011 Annual Report Download - page 42

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Inventory Fair Value Adjustments
In 2011, we recorded $46million ($28million after- tax or $0.02per
share) of incremental costs in cost of sales related to fair value
adjustments to the acquired inventory included in WBD’s balance
sheet at the acquisition date and hedging contracts included in
PBG’s and PAS’s balance sheets at the acquisition date.
In 2010, we recorded $398million ($333million after- tax or
$0.21per share) of incremental costs related to fair value adjust-
ments to the acquired inventory and other related hedging
contracts included in PBG’s and PAS’s balance sheets at the acqui-
sition date. Substantially all of these costs were recorded in cost
of sales.
Venezuela Currency Devaluation
As of the beginning of our 2010 scal year, we recorded a one- time
$120million net charge related to our change to hyperinationary
accounting for our Venezuelan businesses and the related devalu-
ation of the bolivar. $129million of this net charge was recorded in
corporate unallocated expenses, with the balance (income of $9mil-
lion) recorded in our PAB segment. In total, this net charge had an
after- tax impact of $120million or $0.07 per share.
Asset Write- O
In 2010, we recorded a $145million charge ($92million after- tax or
$0.06 per share) related to a change in scope of one release in our
ongoing migration 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 over-
all commitment to continue our implementation of SAP across our
global operations over the next few years.
Foundation Contribution
In 2010, we made a $100million ($64million after- tax or $0.04 per
share) contribution to The PepsiCo Foundation, Inc., in order to fund
charitable and social programs over the next several years. This con-
tribution was recorded in corporate unallocated expenses.
Debt Repurchase
In 2010, we paid $672million in a cash tender oer to repurchase
$500million (aggregate principal amount) of our 7.90% senior
unsecured notes maturing in 2018. As a result of this debt repur-
chase, we recorded a $178million charge to interest expense
($114million after- tax or $0.07 per share), primarily representing
thepremium paid in the tender oer.
Non- GAAP Measures
Certain measures contained in this Annual Report are nancial mea-
sures that are adjusted for items aecting comparability (see “Items
Aecting Comparability” for a detailed list and description of each
of these items), as well as, in certain instances, adjusted for foreign
currency. These measures are not in accordance with Generally
Accepted Accounting Principles (GAAP). Items adjusted for cur-
rency assume foreign currency exchange rates used for translation
based on the rates in eect for the comparable prior- year period.
In order to compute our constant currency results, we multiply or
divide, as appropriate, our current year U.S. dollar results by the
current year average foreign exchange rates and then multiply or
divide, as appropriate, those amounts by the prior year average
foreign exchange rates. We believe investors should consider these
non- GAAP measures in evaluating our results as they are more
indicative of our ongoing performance and with how manage-
ment evaluates our operational results and trends. These measures
are not, and should not be viewed as, a substitute for U.S. GAAP
reporting measures.
Results of Operations— Consolidated Review
In the discussions of net revenue and operating prot below,
eective net pricing reects the year- over-year impact of discrete
pricing actions, sales incentive activities and mix resulting from
selling varying products in dierent package sizes and in dierent
countries. Additionally, acquisitions and divestitures reect all merg-
ers and acquisitions activity, including the impact of acquisitions,
divestitures and changes in ownership or control in consolidated
subsidiaries and nonconsolidated equity investees.
Servings
Since our divisions each use dierent measures of physical unit
volume (i.e., kilos, gallons, pounds and case sales), a common serv-
ings metric is necessary to reect our consolidated physical unit
volume. Our divisions’ physical volume measures are converted into
servings based on U.S. Food and Drug Administration guidelines for
single- serving sizes of our products.
In 2011, total servings increased 6% compared to 2010. Excluding
the impact of the 53rd week, total servings increased 5% compared
to 2010. In 2010, total servings increased 7% compared to 2009. 2011
servings growth reects an adjustment to the base year (2010) for
divestitures that occurred in 2011, as applicable.
Management’s Discussion and Analysis
PepsiCo, Inc.  Annual Report
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