Pepsi 2014 Annual Report Download - page 69

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49
Mark-to-Market Net Impact
We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include
agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge accounting
treatment are marked to market each period with the resulting gains and losses recorded in corporate
unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on
the underlying commodity. These gains and losses are subsequently reflected in division results when the
divisions recognize the cost of the underlying commodity in operating profit. 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 2014, we recognized $68 million ($44 million after-tax or $0.03 per share) of mark-to-market net losses
on commodity hedges in corporate unallocated expenses, with a $33 million net gain recognized in cost of
sales and a $101 million net loss recognized in selling, general and administrative expenses.
In 2013, we recognized $72 million ($44 million after-tax or $0.03 per share) of mark-to-market net losses
on commodity hedges in corporate unallocated expenses, with a $82 million net loss recognized in cost of
sales and a $10 million net gain recognized in selling, general and administrative expenses.
In 2012, we recognized $65 million ($41 million after-tax or $0.03 per share) of mark-to-market net gains
on commodity hedges in corporate unallocated expenses, with a $25 million net gain recognized in cost of
sales and a $40 million net gain recognized in selling, general and administrative expenses.
Merger and Integration Charges
In 2013, we incurred merger and integration charges of $10 million ($8 million after-tax or $0.01 per share)
related to our acquisition of Wimm-Bill-Dann Foods OJSC (WBD), all of which were recorded in the Europe
segment.
In 2012, we incurred merger and integration charges of $16 million ($12 million after-tax or $0.01 per share)
related to our acquisition of WBD, including $11 million recorded in the Europe segment and $5 million
recorded in interest expense.
Restructuring and Impairment Charges
2014 Multi-Year Productivity Plan
The multi-year productivity plan we publicly announced on February 13, 2014 (2014 Productivity Plan)
includes the next generation of productivity initiatives that we believe will strengthen our food, snack and
beverage businesses by: accelerating our investment in manufacturing automation; further optimizing our
global manufacturing footprint, including closing certain manufacturing facilities; re-engineering our go-to-
market systems in developed markets; expanding shared services; and implementing simplified organization
structures to drive efficiency. The 2014 Productivity Plan is in addition to the productivity plan we began
implementing in 2012 and is expected to continue the benefits of that plan.
In 2014 and 2013, we incurred restructuring charges of $357 million ($262 million after-tax or $0.17 per
share) and $53 million ($39 million after-tax or $0.02 per share), respectively, in conjunction with our 2014
Productivity Plan. See Note 3 to our consolidated financial statements for further information.
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