Pepsi 2012 Annual Report Download - page 57

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equity income. In total, the above charges had an after-tax
impact of $648million or $0.40 per share.
Restructuring and Impairment Charges
In 2012, we incurred restructuring charges of $279million
($215million after-tax or $0.14 per share) in conjunction with
our multi-year productivity plan (Productivity Plan), includ-
ing $38million recorded in the FLNA segment, $9million
recorded in the QFNA segment, $50million recorded in the
LAF segment, $102million recorded in the PAB segment,
$42million recorded in the Europe segment, $28 million
recorded in the AMEA segment and $10million recorded in
corporate unallocated expenses.
In 2011, we incurred restructuring charges of $383mil-
lion ($286million after-tax or $0.18 per share) in conjunction
with our Productivity Plan, including $76million recorded in
the FLNA segment, $18million recorded in the QFNA seg-
ment, $48million recorded in the LAF segment, $81million
recorded in the PAB segment, $77million recorded in the
Europe segment, $9million recorded in the AMEA segment
and $74million recorded in corporate unallocated expenses.
The Productivity Plan includes actions in every aspect of
our business that we believe will strengthen our complemen-
tary food, snack and beverage businesses by leveraging new
technologies and processes across PepsiCo’s operations, go-
to-market and information systems; heightening the focus on
best practice sharing across the globe; consolidating manu-
facturing, warehouse and sales facilities; and implementing
simplified organization structures, with wider spans of control
and fewer layers of management. The Productivity Plan is
expected to enhance PepsiCo’s cost-competitiveness, provide
a source of funding for future brand-building and innovation
initiatives, and serve as a financial cushion for potential mac-
roeconomic uncertainty. As a result, we expect to incur pre-tax
charges of approximately $910million, $279million of which
was reflected in our 2012 results, $383million of which was
reflected in our 2011 results, and the balance of which will be
reflected in our 2013 through 2015 results. These charges will
consist of approximately $540million of severance and other
employee-related costs; approximately $270million for other
costs, including consulting-related costs and the termination
of leases and other contracts; and approximately $100 mil-
lion for asset impairments (all non-cash) resulting from plant
closures and related actions. These charges resulted in cash
expenditures of $343million in 2012 and $30million in 2011,
with the balance of approximately $362 million expected in
2013 through 2015. See Note 3 to our consolidated finan-
cial statements.
Restructuring and Other Charges Related to the
Transaction with Tingyi
In 2012, we recorded restructuring and other charges of
$150million ($176million after-tax or $0.11 per share) in the
AMEA segment related to the transaction with Tingyi. See
Note15 to our consolidated financial statements.
Pension Lump Sum Settlement Charge
In 2012, we recorded a pension lump sum settlement charge in
corporate unallocated expenses of $195million ($131million
after-tax or $0.08 per share). See Note7 to our consolidated
financial statements.
Tax Benet Related to Tax Court Decision
In 2012, we recognized a non-cash tax benefit of $217million
($0.14 per share) associated with a favorable tax court deci-
sion related to the classification of financial instruments. See
Note5 to our consolidated financial statements.
53rd Week
In 2011, we had an additional week of results (53rd week).
Our fiscal year ends on the last Saturday of each December,
resulting in an additional week of results every five or six years.
The 53rd week increased 2011 net revenue by $623million
and operating profit by $109million ($64million after-tax or
$0.04 per share).
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
adjustments to the acquired inventory and other related hedg-
ing contracts included in PBG’s and PAS’s balance sheets
at the acquisition date. Substantially all of these costs were
recorded in cost of sales.
Gain on Previously Held Equity Interests
In 2010, in connection with our acquisitions of PBG and PAS,
we recorded a gain on our previously held equity interests of
$958million ($0.60 per share), comprising $735million which
was 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.
Management’s Discussion and Analysis
2012 PEPSICO ANNUAL REPORT 55