Pepsi 2015 Annual Report Download - page 162

net monetary assets of our Venezuelan businesses. $126 million
of this charge was recorded in corporate unallocated expenses,
with the balance (equity income of $21 million) recorded in our
Latin America segment. In the year ended December28, 2013, we
recorded a net charge of $111 million related to the devaluation
of the bolivar for our Venezuelan businesses. $124 million of the
2013 charge was recorded in corporate unallocated expenses, with
the balance (equity income of $13 million) recorded in our Latin
America segment.
Merger and Integration Charges
In the year ended December 28, 2013, we incurred merger and
integration charges of $10million related to our acquisition of WBD
recorded in the ESSA segment. In the year ended December 29,
2012, we incurred merger and integration charges of $16 million
related to our acquisition of WBD, including $11million recorded in
the ESSA segment and $5million recorded in interest expense.
Tax Benefi ts
In the year ended December26, 2015, we recognized a non-cash
tax benefit of $230million associated with our agreement with the
IRS resolving substantially all open matters related to the audits
for taxable years 2010 through 2011, which reduced our reserve
for uncertain tax positions for the tax years 2010 through 2011. In
the year ended December28, 2013, we recognized a non-cash tax
benefit of $209 million associated with our agreement with the
IRS resolving all open matters related to the audits for the taxable
years 2003 through 2009, which reduced our reserve for uncer-
tain tax positions for the tax years 2003 through 2012. In the year
ended December29, 2012, we recognized a non-cash tax benefit of
$217million associated with a favorable tax court decision related to
the classification of financial instruments.
Free Cash Flow (excluding certain items)
Free cash flow (excluding certain items) is the primary measure
management uses to monitor cash flow performance. This is not a
measure defined by U.S. GAAP. Since net capital spending is essential
to our product innovation initiatives and maintaining our opera-
tional capabilities, we believe that it is a recurring and necessary use
of cash. As such, we believe investors should also consider net cap-
ital spending when evaluating our cash from operating activities.
Additionally, we consider certain other items in evaluating free cash
flow that we believe investors should consider in evaluating our
free cash flow results. See pages70–71 “Our Liquidity and Capital
Resources — Free Cash Flow” in Management’s Discussion and
Analysis for a reconciliation to the most directly comparable finan-
cial measure for each reportable year in accordance with U.S. GAAP.
Core Net Return on Invested Capital
Management uses ROIC to monitor the profitability of utilized capi-
tal and core net ROIC to compare our performance over various
reporting periods on a consistent basis, because it removes from
our operating results the impact of items that are not indicative of
our ongoing performance and reflects how management evaluates
our operating results and trends. Core net ROIC is not a measure
defined by U.S. GAAP. We believe the calculation of core net ROIC
provides useful information to investors and is an additional rel-
evant comparison of our performance to consider when evaluating
our capital allocation discipline. See below and pages 71–72 “Our
Liquidity and Capital Resources — Net Return on Invested Capital”
in Management’s Discussion and Analysis for reconciliations to the
most directly comparable financial measure in accordance with
U. S . GA A P.
Net Revenue Growth Reconciliation
Year Ended
12/26/15 12/27/14 12/28/13
Reported Revenue Growth (5)% –% 1%
Impact of Foreign Exchange Translation 10 3 2
Impact of Acquisitions and Divestitures – – 1
Impact of Venezuela Deconsolidation(a) 1 – –
Organic Revenue Growth 5% 4% 4%
(a) Represents the impact of the exclusion of the fourth quarter 2014 results of our Venezuelan
businesses, which were deconsolidated effective as of the end of the third quarter of 2015.
Gross Margin Growth Reconciliation
Year Ended
12/26/15
Growth
2012–2015
Reported Gross Margin Growth 130 bps 277 bps
Commodity Mark-to- Market Net Impact 87
Core Gross Margin Growth 138 bps 283 bps
Operating Margin Growth Reconciliation
Year Ended
12/26/15
Growth
2012–2015
Reported Operating Margin Growth (112) bps (67) bps
Commodity Mark-to- Market Net Impact (12) 8
Restructuring and Impairment Charges (26) (6)
Pension- Related Settlement (Benefits)/Charges (32) (41)
Restructuring and Other Charges Related to the
Transaction with Tingyi 12 (11)
Venezuela Impairment Charges 215 215
Venezuela Remeasurement Charges (16) –
Merger and Integration Charges – (1.5)
Core Operating Margin Growth 29 bps 98 bps
Note – Certain amounts above may not sum due to rounding.
144 PEPSICO