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PepsiCo Reports Strong Sales and Operating Results for 2006 Fourth Quarter and Full Year

PURCHASE, N.Y., Feb. 8 /PRNewswire-FirstCall/ -- PepsiCo reported continued strong performance in the fourth quarter of 2006. Reported net revenue increased 3% in the quarter. Excluding the impact of an extra reporting week in the prior year, net revenue increased over 7%.

Earnings of $1.06 per share grew 63% versus $0.65 per share reported in the fourth quarter of 2005. Excluding the impacts of the extra reporting week in 2005 and previously announced tax items and restructuring actions in 2006 and 2005, the Company generated earnings of $0.72 per share in 2006, an increase of 11%.

PepsiCo President and CEO Indra Nooyi said, "We are pleased with our performance for the quarter and the full year. Our international business performed particularly well, delivering double-digit revenue and operating profit growth, and Frito-Lay North America delivered robust sales and profit results. The performance demonstrated the power of PepsiCo's portfolio -- balancing opportunities and challenges across our businesses to deliver consistently strong financial results."

Ms. Nooyi continued, "We also made good progress on our key strategic initiatives: providing greater choices to consumers in the area of healthier snacks and beverages; strengthening our international presence; and advancing our business process transformation project, including our SAP systems implementation."

For the full year, reported net revenue was up 8% and, excluding the impact of the extra reporting week in 2005, net revenue increased more than 9%.

Operating margins improved compared to the prior year as pricing and lower corporate unallocated costs more than offset the impact of higher input costs. The impact of lower advertising and marketing expense was offset by higher trade spending.

Earnings per share of $3.34 for the full year 2006 included tax benefits of $0.37 per share, related principally to the Internal Revenue Service's examination of prior years' tax returns, and a charge of $0.03 per share related to Frito-Lay North America's manufacturing network consolidation. Reported results for 2005 included the net impact of a $0.27 per share charge related to the Company's repatriation of international cash, the extra reporting week and restructuring actions. Excluding all these items for 2006 and 2005, the Company's earnings were $3.00 per share in 2006, an increase of 13%.



    Items Affecting Diluted EPS Comparability

                           Fourth Quarter                  Full Year
                           2006      2005  % Growth   2006      2005  % Growth
    Reported diluted EPS  $1.06     $0.65     63%    $3.34     $2.39     40%
    Tax items*            (0.37)                     (0.37)
    Repatriation tax
     charge                                                     0.27
    Extra week                      (0.03)                     (0.03)
    Restructuring
     and impairment
     charges               0.03      0.03             0.03      0.03
    Diluted EPS
     excluding
     above items          $0.72     $0.65     11%    $3.00     $2.66     13%

    * Includes tax items of $0.36 per share reflected in provision for income
      taxes and $0.01 per share reflected in bottler equity income

Extra reporting week in 2005 and restructuring actions affected comparability of Division results.

The fourth quarter of 2005 includes an extra week of results; because the Company's fiscal year ends on the last Saturday of every December, every five or six years an extra week of results is reported in the fourth quarter. The Company recorded a pretax charge of $83 million in the fourth quarter of 2005 related to cost-reduction actions, principally headcount reductions. Of that amount, approximately $70 million was reported within Division operating results with the balance reported in corporate unallocated costs.

The Company recorded a pre-tax charge of $67 million in the fourth quarter of 2006 related to the previously announced action to consolidate the Frito- Lay North America manufacturing network from 34 sites to 32 sites.

The following table presents the 2006 Division growth rates including the impacts of the extra reporting week and the restructuring actions.



    Summary of Division Results (includes impacts of extra reporting week in
     2005 and restructuring actions)

                                % Growth Rate

                            Fourth Quarter            Full Year
                                  Net     Oper.           Net    Oper.
                       Volume   Revenue  Profit Volume  Revenue Profit
    FLNA                 (3)      0.5      (3)     1      5       3
    PBNA                 --        (6)     (9)     4      5       1
    PI                  6/7*       13      27    9/9*    14      21
    QFNA                 (6)       (6)     (2)     1      3       3
    Total Divisions     2/3*        3       2    5/6*     8       7

    *Snacks/beverages

The following table presents the 2006 Division growth rates excluding the impacts of the extra week and the restructuring charges, which the Company believes are more indicative of the Company's ongoing results. Further information on the impacts of the extra week and the restructuring actions is included in the attached financial schedules.


    Summary of Division Results (excludes impacts of extra reporting week in
    2005 and restructuring actions)

                                  % Growth Rates

                            Fourth Quarter            Full Year
                                  Net     Oper.           Net    Oper.
                       Volume   Revenue  Profit Volume  Revenue Profit

    FLNA                 3         7        8      3      7        7
    PBNA               0.5        (2)      (9)     4      6        1
    PI                 9/7*       16       26   10/9*    15       21
    QFNA                (1)       (1)       5      3      5        5
    Total Divisions    6/4*        7        7    6/7*     9        8

    *Snacks/beverages

    DISCUSSION OF FOURTH QUARTER DIVISION OPERATING RESULTS

The impacts on Division operating results of the extra reporting week in 2005 and of the restructuring actions are summarized on the accompanying schedule A-12. The following discussion of Division operating results excludes the impacts of these items.

Frito-Lay North America (FLNA) had strong revenue and profit performance.

Net revenue increased 7% in the fourth quarter, driven by broad-based volume growth and effective net pricing. Net revenue growth was led by gains in trademark Doritos, Sunchips, Tostitos, Lay's and Cheetos. Operating profit grew 8% benefiting principally from the net revenue gains.

Non-carbonated beverages drove PepsiCo Beverages North America (PBNA) volume growth.

Bottler case sales increased slightly in the quarter, driven by mid- single-digit growth in non-carbonated beverages and substantially offset by a low-single-digit decline in carbonated soft drinks (CSDs).

Within non-carbonated beverages, waters (including enhanced waters), teas and energy drinks increased strong double digits, offset somewhat by declines in Gatorade and Tropicana Pure Premium. Declines in Gatorade were largely attributable to difficult comparisons to the prior-year quarter when volumes grew more than 30%, cooler weather in the early part of the quarter, and higher trade inventories at the end of the third quarter as compared to the prior year when retail inventories were low due to capacity shortages. Tropicana Pure Premium volumes were largely impacted by the effect of increased retail prices on consumer demand.

Within CSDs, low-single-digit declines in trademarks Pepsi and Mountain Dew were partially offset by high-single-digit growth in trademark Sierra Mist. Regular CSDs in total declined low-single-digits, offset in part by a low-single digit increase in diet CSDs.

Increased trade support contributed to the decline in revenue. Operating profit was pressured by increased Gatorade supply chain costs associated with the start up of new manufacturing capacity. Tropicana Pure Premium price increases offset increased orange juice raw material costs, and the impact of lower advertising and marketing expense was partly offset by higher trade spending.

PepsiCo International (PI) posted strong gains in both snacks and beverages.

Snack volume growth of 9% was led by mid-single-digit growth at Gamesa in Mexico and strong double-digit growth in Russia, Turkey and Egypt. Beverage volume growth of 7% was led by double-digit gains in the Middle East and Argentina, and high-single-digit growth in China and Brazil. Carbonated soft drinks grew at a mid-single-digit rate and the non-carbonated beverages growth rate was in the high teens.


    PI Regional Volume Growth (excludes extra reporting week)

                                     % Growth Rate
                              Snacks                    Beverages
                       Quarter      Full Year      Quarter    Full Year
    Latin America        4              4            6           7
    Europe, Middle East
     and Africa         18             18            9          11
    Asia Pacific         9             13          5.5           9
    Total PI             9             10            7           9

Net revenue grew 16% driven by the broad-based volume gains and effective net pricing. Foreign currency contributed 2 percentage points of growth and the net impact of acquisitions and divestitures contributed 3 percentage points of growth.

Operating profit grew 26% driven by net revenue gains, and offset partially by higher energy and raw material costs. Foreign currency contributed 3 percentage points of growth and the net impact of acquisitions and divestitures reduced growth by one percentage point.

Quaker Foods North America (QFNA) profits grew 5%. Volume declined slightly in the quarter, as gains in ready-to-eat cereals and oatmeal were more than offset by single-digit declines in side dishes and Aunt Jemima syrup and mix. Net revenue declined in line with volume. Operating profit increased 5% as the impact of the net revenue decline and higher input costs were more than offset by lower selling, general and administrative costs.

DISCUSSION OF FOURTH QUARTER CORPORATE ITEMS

Corporate unallocated expenses declined by $39 million in the fourth quarter, driven by the absence in the current year of a $12 million charge related to the 2005 restructuring action, and the net favorable impact of certain other corporate items.

In the fourth quarter, bottling equity income increased by $4 million and included a gain of $21 million related to a favorable tax audit settlement at the Pepsi Bottling Group (PBG) in the current year and an $8 million benefit from the extra reporting week in the prior year. Excluding these items, bottling equity income declined by $8 million in the quarter. Gains on sales of shares in PBG in the quarter were comparable to the fourth quarter of 2005.

The Company reported a net tax benefit of $144 million in the fourth quarter, which included non-cash benefits of approximately $600 million, substantially all of which related to the Internal Revenue Service's examination of the Company's consolidated income tax returns for the years 1998 through 2002. A reconciliation of the Company's reported tax rate to its tax rate excluding these items is included in the attached schedule A-10.

2007 GUIDANCE

Company expects continued strong performance in 2007, consistent with long-term targets.

For 2007, the Company expects mid-single-digit volume and net revenue growth, with revenue growth outpacing volume growth, and EPS of at least $3.30 per share. Cash provided by operating activities in 2007 is expected to be approximately $7.0 billion, and assumes a pension contribution in 2007 of up to $150 million.

The Company anticipates net capital spending of approximately $2.6 billion and share repurchases of approximately $3.3 billion, and intends to sell approximately 9.5 million shares of PBG common stock in 2007.

About PepsiCo

PepsiCo is one of the world's largest food and beverage companies with annual revenues of more than $35 billion. Its principal businesses include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods. Its portfolio includes 17 brands that generate $1 billion or more each in annual retail sales.

Cautionary Statement

This release contains statements concerning PepsiCo's expectations for future performance. Any such forward-looking statements are inherently speculative and are based on currently available information, operating plans and projections about future events and trends. As such, they are subject to numerous risks and uncertainties. Actual results and performance may be significantly different from expectations. The Company undertakes no obligation to update any such forward-looking statements. Please see the Company's filing with the Securities and Exchange Commission, including the

Company's Annual Report on Form 10-K, for a discussion of specific risks that may affect performance.

Miscellaneous Disclosures

Conference call: At 11 a.m. (Eastern Time) today, the Company will host a conference call with investors to discuss fourth quarter 2006 results and the outlook for 2007. For details visit the Company's website at www.pepsico.com.

Reconciliation: In discussing financial results and guidance, the Company may refer to certain non-GAAP measures. A reconciliation of any such non-GAAP measures to reported financial statements can be found under "PepsiCo Financial Press Releases" on the Company's website in the "Investors" section.

As discussed in its third quarter 10-Q, the Company adopted SFAS 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132 (R) (SFAS 158) on December 30, 2006. The adoption of SFAS 158 reduced other assets by $2.0 billion, total liabilities by $0.4 billion and total common shareholders' equity by $1.6 billion. The adoption had no impact on the Company's condensed consolidated statements of income or cash flows.

"Effective net pricing" refers to the combined impact of mix and price. "Net pricing" refers to the combined impact of list price changes, discounts and allowances. "Pricing" refers to the impact of list price changes.

Bottler Volume: Volume for products sold by the Company's bottlers is reported by the Company on a monthly basis, with the fourth quarter comprising September through December.

Sales of PBG shares are made pursuant to a 10b5-1 trading plan.

Acquisition impacts to PI regional volume growth: For the quarter, acquisitions contributed 7 points to Europe, Middle East and Africa (EMEA) snacks and 2.5 points to total snacks. For the year, acquisitions contributed 6 points to EMEA snacks, 1 point to Asia Pacific snacks, 2 points to total snacks and 1 point to EMEA beverages.



                        PepsiCo, Inc. and Subsidiaries
                  Condensed Consolidated Statement of Income
                   (in millions, except per share amounts)

                                           Quarter Ended      Year Ended
                                       12/30/06  12/31/05  12/30/06  12/31/05
                                            (unaudited)      (unaudited)

    Net Revenue                          $10,383  $10,096   $35,137  $32,562

    Costs and Expenses
     Cost of sales                         4,744    4,477    15,762   14,176
     Selling, general and administrative
      expenses                             4,072    4,133    12,774   12,314
     Amortization of intangible assets        54       47       162      150

    Operating Profit                       1,513    1,439     6,439    5,922

    Bottling Equity Income                   131      127       616      557
    Interest Expense                         (67)     (95)     (239)    (256)
    Interest Income                           63       71       173      159

    Income before Income Taxes             1,640    1,542     6,989    6,382

    (Benefit)/Provision for Income Taxes    (144)     434     1,347    2,304

    Net Income                            $1,784   $1,108    $5,642   $4,078

    Diluted
      Net Income per Common Share          $1.06    $0.65     $3.34    $2.39
      Average Shares Outstanding           1,681    1,700     1,687    1,706



                        PepsiCo, Inc. and Subsidiaries
                      Supplemental Financial Information
                                (in millions)

                                       Quarter Ended          Year Ended
                                    12/30/06   12/31/05  12/30/06   12/31/05
    Net Revenue                         (unaudited)          (unaudited)

    Frito-Lay North America           $3,242     $3,225    $10,844   $10,322

    PepsiCo Beverages North America    2,461      2,624      9,565     9,146

    PepsiCo International              4,129      3,660     12,959    11,376

    Quaker Foods North America           551        587      1,769     1,718

    Total Net Revenue                $10,383    $10,096    $35,137   $32,562


    Operating Profit

    Frito-Lay North America             $718       $741     $2,615    $2,529

    PepsiCo Beverages North America      398        439      2,055     2,037

    PepsiCo International                477        375      1,948     1,607

    Quaker Foods North America           165        168        554       537

    Division Operating Profit          1,758      1,723      7,172     6,710

    Corporate                           (245)      (284)      (733)     (788)

    Total Operating Profit            $1,513     $1,439     $6,439    $5,922



                        PepsiCo, Inc. and Subsidiaries
                Condensed Consolidated Statement of Cash Flows
                                (in millions)

                                                              Year Ended
                                                         12/30/06   12/31/05
    Operating Activities                               (unaudited)
      Net income                                           $5,642     $4,078
        Depreciation and amortization                       1,406      1,308
        Stock-based compensation expense                      270        311
        Excess tax benefits from share-based
         payment arrangements                                (134)         -
        Cash payments for merger-related costs
         and restructuring charges                              -        (22)
        Pension and retiree medical plan
         contributions                                       (131)      (877)
        Pension and retiree medical plan expenses             544        464
        Bottling equity income, net of dividends             (479)      (411)
        Deferred income taxes and other tax
         charges and credits                                 (510)       440
        Other non-cash charges and credits, net                32        145
        Change in accounts and notes receivable              (330)      (272)
        Change in inventories                                (186)      (132)
        Change in prepaid expenses and other
         current assets                                       (37)       (56)
        Change in accounts payable and other
         current liabilities                                  223        188
        Change in income taxes payable                       (295)       609
        Other, net                                             69         79
    Net Cash Provided by Operating Activities               6,084      5,852

    Investing Activities
      Snack Ventures Europe (SVE) minority interest
       acquisition                                              -       (750)
      Capital spending                                     (2,068)    (1,736)
      Sales of property, plant and equipment                   49         88
      Investment in finance assets                            (25)         -
      Other acquisitions and investments in noncontrolled
       affiliates                                            (522)      (345)
      Cash proceeds from sale of The Pepsi Bottling Group
       (PBG) stock                                            318        214
      Divestitures                                             37          3
      Short-term investments, net                           2,017       (991)
    Net Cash Used for Investing Activities                   (194)    (3,517)

    Financing Activities
      Proceeds from issuances of long-term debt                51         25
      Payments of long-term debt                             (157)      (177)
      Short-term borrowings, net                           (2,341)     1,848
      Cash dividends paid                                  (1,854)    (1,642)
      Share repurchases - common                           (3,000)    (3,012)
      Share repurchases - preferred                           (10)       (19)
      Proceeds from exercises of stock options              1,194      1,099
      Excess tax benefits from share-based payment            134          -
       arrangements
    Net Cash Used for Financing Activities                 (5,983)    (1,878)

    Effect of Exchange Rate Changes on Cash and Cash
     Equivalents                                               28        (21)
    Net (Decrease)/Increase in Cash and Cash
     Equivalents                                              (65)       436

    Cash and Cash Equivalents - Beginning of year           1,716      1,280
    Cash and Cash Equivalents - End of year                $1,651     $1,716



                        PepsiCo, Inc. and Subsidiaries
                     Condensed Consolidated Balance Sheet
                                (in millions)

                                                        12/30/06    12/31/05
    Assets                                             (unaudited)
    Current Assets
       Cash and cash equivalents                          $1,651      $1,716
       Short-term investments, at cost                     1,171       3,166

       Accounts and notes receivable, net                  3,725       3,261

       Inventories
         Raw material                                        860         738
         Work-in-process                                     140         112
         Finished goods                                      926         843
                                                           1,926       1,693

       Prepaid expenses and other current assets             657         618
            Total Current Assets                           9,130      10,454

    Property, plant and equipment, net                     9,687       8,681
    Amortizable intangible assets, net                       637         530

    Goodwill                                               4,594       4,088
    Other nonamortizable intangibles                       1,212       1,086
            Nonamortizable Intangible Assets               5,806       5,174

    Investments in noncontrolled affiliates                3,690       3,485
    Other assets                                             980       3,403
               Total Assets                              $29,930     $31,727

    Liabilities and Shareholders' Equity
    Current Liabilities
       Short-term obligations                               $274      $2,889
       Accounts payable and other current liabilities      6,496       5,971
       Income taxes payable                                   90         546
            Total Current Liabilities                      6,860       9,406

    Long-term debt obligations                             2,550       2,313
    Other liabilities                                      4,624       4,323
    Deferred income taxes                                    528       1,434
            Total Liabilities                             14,562      17,476

    Commitments and Contingencies

    Preferred stock, no par value                             41          41
    Repurchased preferred stock                             (120)       (110)

    Common Shareholders' Equity
       Common stock                                           30          30
       Capital in excess of par value                        584         614
       Retained earnings                                  24,837      21,116
       Accumulated other comprehensive loss               (2,246)     (1,053)
                                                          23,205      20,707
       Less: Repurchased common stock                     (7,758)     (6,387)
            Total Common Shareholders' Equity             15,447      14,320
               Total Liabilities and Shareholders'
                Equity                                   $29,930     $31,727




                        PepsiCo, Inc. and Subsidiaries
                      Supplemental Share and Option Data
    (in millions of shares, except average share and exercise prices, and
                                  unaudited)

                                         Quarter ended        Year ended
                                       12/30/06  12/31/05  12/30/06  12/31/05
    Beginning Net Shares Outstanding     1,647    1,661      1,656     1,679
    Options Exercised                        4       11         31        31
    Shares Repurchased                     (12)     (16)       (48)      (54)
    Ending Net Shares Outstanding        1,639    1,656      1,639     1,656

    Weighted Average Basic               1,642    1,659      1,649     1,669
    Dilutive securities:
      Options                               32       36         32        32
      Restricted Stock Units                 5        3          4         3
      ESOP Convertible Preferred
       Stock/Other                           2        2          2         2
    Weighted Average Diluted             1,681    1,700      1,687     1,706

    Average Share Price for the period  $63.39    $57.87    $61.08    $55.46
    Growth Versus Prior Year               10%                 10%

    Options Outstanding                    128       150       137       163
    Options in the Money                   127       150       137       160
    Dilutive Shares from Options            32        36        32        32
    Dilutive Shares from Options as a %
     of Options in the Money               25%       24%       24%       21%


    Average Exercise Price of Options
     in the Money                       $44.19    $42.07    $43.93    $41.44



                        PepsiCo, Inc. and Subsidiaries
                  Condensed Consolidated Statement of Income
            (in millions, except per share amounts, and unaudited)
                              COMPARABLE BASIS*

                                           Quarter Ended       Year Ended
                                       12/30/06  12/31/05  12/30/06  12/31/05

    Net Revenue                          $10,383   $9,678   $35,137  $32,144

    Costs and Expenses
     Cost of sales                         4,744    4,300    15,762   13,999
     Selling, general and administrative
      expenses                             4,005    3,884    12,707   12,065
     Amortization of intangible assets        54       47       162      150

    Operating Profit                       1,580    1,447     6,506    5,930

    Bottling Equity Income                   110      118       595      548
    Interest Expense                         (67)     (90)     (239)    (251)
    Interest Income                           63       68       173      156

    Income before Income Taxes             1,686    1,543     7,035    6,383

    Provision for Income Taxes               479      445     1,970    1,847

    Net Income                            $1,207   $1,098    $5,065   $4,536

    Diluted
      Net Income per Common Share          $0.72    $0.65     $3.00    $2.66
      Average Shares Outstanding           1,681    1,700     1,687    1,706


    * Excludes the impact of restructuring and impairment charges, the extra
      week  in 2005, the American Jobs Creation Act (AJCA) tax charge in 2005,
      certain non-cash tax benefits in 2006 and our share of PBG's tax
      settlement in 2006.  See schedules A-8 through A-12 for a discussion of
      these items and reconciliations to the most directly comparable
      financial measures in accordance with Generally Accepted Accounting
      Principles (GAAP).



                        PepsiCo, Inc. and Subsidiaries
                      Supplemental Financial Information
                         (in millions and unaudited)
                              COMPARABLE BASIS*

                                       Quarter Ended          Year Ended
                                    12/30/06   12/31/05  12/30/06   12/31/05
    Net Revenue

    Frito-Lay North America           $3,242     $3,040    $10,844   $10,137

    PepsiCo Beverages North America    2,461      2,515      9,565     9,037

    PepsiCo International              4,129      3,568     12,959    11,284

    Quaker Foods North America           551        555      1,769     1,686

    Total Net Revenue                $10,383     $9,678    $35,137   $32,144


    Operating Profit

    Frito-Lay North America             $785       $729     $2,682    $2,517

    PepsiCo Beverages North America      398        440      2,055     2,038

    PepsiCo International                477        377      1,948     1,609

    Quaker Foods North America           165        157        554       526

    Division Operating Profit          1,825      1,703      7,239     6,690

    Corporate                           (245)      (256)      (733)     (760)

    Total Operating Profit            $1,580     $1,447     $6,506    $5,930


    * Excludes the impact of restructuring and impairment charges and the
      extra week in 2005.  See schedules A-8 through A-12 for a discussion of
      these items and reconciliations to the most directly comparable
      financial measures in accordance with GAAP.


               Reconciliation of GAAP and Non-GAAP Information
                        ($ in millions and unaudited)

In the fourth quarter of 2006, we recorded non-cash tax benefits of $602 million ("2006 Tax Adjustments"), substantially all of which related to the Internal Revenue Service's (IRS's) examination of our consolidated income tax returns for the years 1998 through 2002. In the fourth quarter of 2006, PBG also recorded non-cash tax benefits in connection with the IRS's examination of certain of their consolidated income tax returns. We recorded our share of these tax benefits in bottling equity income in the fourth quarter of 2006. In addition, in the fourth quarter of 2006, we recorded restructuring and impairment charges in conjunction with consolidating the manufacturing network at Frito Lay from 34 sites to 32 sites, and rationalizing other assets, to increase manufacturing productivity and supply chain efficiencies.

In the third quarter of 2005, we recognized a tax charge related to our intention to repatriate $7.5 billion of international earnings under the provisions of the AJCA. This tax charge was adjusted slightly in the fourth quarter of 2005. In addition, we recorded restructuring charges in the fourth quarter of 2005 to reduce costs in our operations, principally through headcount reductions. In 2005, we had an extra week of results as our fiscal year ends on the last Saturday of each December, resulting in an extra week of results every five or six years.

The financial measures listed below are not measures defined by GAAP. However, we believe investors should consider these measures as they are more indicative of our ongoing performance. Specifically, investors should consider the following with respect to our quarterly and full year results:

     -- Our 2005 net revenue and 2006 net revenue growth excluding the impact
        of the extra week in 2005;

     -- Our 2006 and 2005 division operating profit;

     -- Our 2006 division operating profit and division operating profit
        growth and 2005 division operating profit without the impact of
        restructuring and impairment charges and the extra week in 2005;

     -- Our 2006 bottling equity income without the impact of our share of
        PBG's tax settlement and our 2005 bottling equity income without the
        impact of the extra week in 2005;

     -- Our 2006 effective tax rate without the impact of restructuring and
        impairment charges, the 2006 Tax Adjustments and our share of PBG's
        tax settlement; and our 2005 effective tax rate without the impact of
        the AJCA tax charge, restructuring charges and the extra week in 2005;

     -- Our 2006 net income without the impact of the 2006 Tax Adjustments,
        our share of PBG's tax settlement and restructuring and impairment
        charges; and our 2005 net income without the impact of the AJCA tax
        charge, restructuring charges and the extra week in 2005; and

     -- Our 2006 diluted EPS without the impact of the 2006 Tax Adjustments,
        our share of PBG's tax settlement and restructuring and impairment
        charges; our 2005 diluted EPS without the impact of the AJCA tax
        charge, restructuring charges and the extra week in 2005; and our 2006
        diluted EPS growth without the impact of the aforementioned items.


    Net Revenue Reconciliation

                                               Quarter   Quarter
                                                Ended     Ended
                                              12/30/06  12/31/05     Growth
    Reported Net Revenue                       $10,383   $10,096          3%
    Extra Week                                       -      (418)
    Net Revenue Excluding Extra Week           $10,383    $9,678          7%


                                                 Year      Year
                                                Ended     Ended
                                              12/30/06  12/31/05     Growth
    Reported Net Revenue                       $35,137   $32,562          8%
    Extra Week                                       -      (418)
    Net Revenue Excluding Extra Week           $35,137   $32,144          9%



           Reconciliation of GAAP and Non-GAAP Information (cont.)
                        ($ in millions and unaudited)

    Operating Profit Reconciliation
                                                        Quarter     Quarter
                                                         Ended       Ended
                                                       12/30/06     12/31/05
    Reported Total Operating Profit                      $1,513       $1,439
    Corporate Unallocated                                   245          284
    Division Operating Profit                             1,758        1,723
    Extra Week                                                -          (90)
    Restructuring and Impairment Charges                     67           70
    Division Operating Profit Excluding Above Items      $1,825       $1,703


                                                         Year         Year
                                                         Ended       Ended
                                                       12/30/06     12/31/05
    Reported Total Operating Profit                      $6,439       $5,922
    Corporate Unallocated                                   733          788
    Division Operating Profit                             7,172        6,710
    Extra Week                                                -          (90)
    Restructuring and Impairment Charges                     67           70
    Division Operating Profit Excluding Above Items      $7,239       $6,690


    Operating Profit Growth Reconciliation
                                                       Quarter        Year
                                                        Ended        Ended
                                                       12/30/06     12/30/06
    Total Operating Profit Growth                            5%          9%
    Impact of Corporate Unallocated                         (3)          (2)
    Division Operating Profit Growth                         2%          7%


    Bottling Equity Income Reconciliation
                                                        Quarter     Quarter
                                                         Ended       Ended
                                                       12/30/06     12/31/05
    Reported Bottling Equity Income                        $131        $127
    PepsiCo Share of PBG Tax Settlement                     (21)           -
    Extra Week                                                -          (8)
    Bottling Equity Income Excluding Above Items           $110        $118*
    * Based on unrounded amounts.


                                                         Year         Year
                                                         Ended       Ended
                                                       12/30/06     12/31/05
    Reported Bottling Equity Income                        $616         $557
    PepsiCo Share of PBG Tax Settlement                     (21)           -
    Extra Week                                                -           (8)
    Bottling Equity Income Excluding Above Items           $595         $548*
    * Based on unrounded amounts.




           Reconciliation of GAAP and Non-GAAP Information (cont.)
                        ($ in millions and unaudited)

    Effective Tax Rate Reconciliation (Quarter Ended 12/31/05)

                                              Pre-tax     Income   Effective
                                               Income      Taxes    Tax Rate
    Reported Effective Tax Rate                $1,542        $434     28.1%
    AJCA Tax Charge                                 -           8
    Extra Week                                    (82)        (23)
    Restructuring Charges                          83          26
    Effective Tax Rate Excluding Above Items    $1,543       $445      28.8%


    Effective Tax Rate Reconciliation (Year Ended 12/31/05)

                                               Pre-tax     Income   Effective
                                                Income     Taxes    Tax Rate
    Reported Effective Tax Rate                 $6,382     $2,304     36.1%
    AJCA Tax Charge                                  -       (460)
    Extra Week                                     (82)       (23)
    Restructuring Charges                           83         26
    Effective Tax Rate Excluding Above Items    $6,383     $1,847      28.9%


    Effective Tax Rate Reconciliation (Quarter Ended 12/30/06)

                                              Pre-tax     Income    Effective
                                               Income      Taxes     Tax Rate
    Reported Effective Tax Rate                $1,640       ($144)    (8.8%)
    Restructuring and Impairment Charges           67          24
    2006 Tax Adjustments                            -         602
    PepsiCo Share of PBG Tax Settlement           (21)         (3)
    Effective Tax Rate Excluding Above Items    $1,686       $479      28.4%


    Effective Tax Rate Reconciliation (Year Ended 12/30/06)

                                               Pre-tax     Income   Effective
                                                Income     Taxes     Tax Rate
    Reported Effective Tax Rate                 $6,989     $1,347     19.3%
    Restructuring and Impairment Charges            67         24
    2006 Tax Adjustments                             -        602
    PepsiCo Share of PBG Tax Settlement            (21)        (3)
    Effective Tax Rate Excluding Above Items    $7,035     $1,970      28.0%



           Reconciliation of GAAP and Non-GAAP Information (cont.)
                        ($ in millions and unaudited)

    Net Income Reconciliation
                                                       Quarter      Quarter
                                                        Ended        Ended
                                                       12/30/06     12/31/05
    Reported Net Income                                  $1,784       $1,108
    2006 Tax Adjustments                                   (602)           -
    PepsiCo Share of PBG Tax Settlement                     (18)           -
    AJCA Tax Charge                                           -           (8)
    Extra Week                                                -          (57)
    Restructuring and Impairment Charges                     43           55
    Net Income Excluding Above Items                     $1,207       $1,098


                                                          Year        Year
                                                         Ended       Ended
                                                        12/30/06    12/31/05
    Reported Net Income                                   $5,642      $4,078
    2006 Tax Adjustments                                    (602)          -
    PepsiCo Share of PBG Tax Settlement                      (18)          -
    AJCA Tax Charge                                            -         460
    Extra Week                                                 -         (57)
    Restructuring and Impairment Charges                      43          55
    Net Income Excluding Above Items                      $5,065      $4,536



           Reconciliation of GAAP and Non-GAAP Information (cont.)
Reported Percentage Growth Rates and Percentage Growth Rates Excluding Impact
            of Extra Week and Restructuring and Impairment Charges
                                 (unaudited)


                            Quarter Ended 12/30/06      Year Ended 12/30/06

                                     Net   Operating          Net   Operating
                           Volume  Revenue  Profit   Volume  Revenue   Profit
    Frito Lay North
     America
    Reported growth           (3)    0.5         (3)     1       5         3
    Impact on growth of:
      Extra week               6       6          6      2       2         2
      2006 restructuring
       and impairment          -       -          9      -       -         3
      2005 restructuring       -       -       (4.5)     -       -        (1)
    Growth excluding above
     items                     3       7          8      3       7         7

    PepsiCo Beverages
     North America
    Reported growth            -      (6)        (9)     4       5         1
    Impact on growth of:
      Extra week               1       4          5      -       1         1
      2005 restructuring       -       -         (5)     -       -        (1)
    Growth excluding above
     items                   0.5      (2)        (9)     4       6         1

    PepsiCo International
    Reported growth          6/7*     13         27    9/9*     14        21
    Impact on growth of:
      Extra week             3/0*    2.5          4    1/0*      1         1
      2005 restructuring       -       -         (4)     -       -        (1)
    Growth excluding above
     items                   9/7*     16         26   10/9*     15        21

    Quaker Foods North
     America
    Reported growth           (6)     (6)        (2)     1       3         3
    Impact on growth of:
      Extra week               6       6          6      2       2         2
    Growth excluding above
     item                     (1)     (1)         5      3       5         5

    Total Divisions
    Reported growth          2/3*      3          2    5/6*      8         7
    Impact on growth of:
      Extra week           4.5/0*      4          5  1.5/0*      1         1
      2006 restructuring
       and impairment          -       -          4      -       -         1
      2005 restructuring       -       -         (4)     -       -        (1)
    Growth excluding above
     items                   6/4*      7          7    6/7*      9         8

    *snacks/beverages

    Note: Schedule does not sum in all instances due
     to rounding.

Source: PepsiCo

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