Breaking News Bar

Business News and Information

PepsiCo Reports Strong Sales and Operating Results for 2007 Fourth Quarter and Full Year

PURCHASE, N.Y., Feb. 7 /PRNewswire-FirstCall/ -- PepsiCo (NYSE:PEP) reported continued strong operating performance in the fourth quarter of 2007. Net revenue increased 17% in the quarter and reported operating profit increased 9%; core division operating profit, excluding restructuring items, increased 11%. Reported EPS was $0.77 including the impact of restructuring actions and certain tax benefits; excluding these items, core EPS was $0.80. For the year, net revenue increased 12%, reported operating profit and core division operating profit both grew 10% and core EPS grew 13% to $3.38; reported EPS of $3.41 grew 2%, largely reflecting the lapping of tax benefits in 2006.

PepsiCo Chairman and CEO Indra Nooyi said, "Our strong top- and bottom-line results in 2007 once again demonstrated the balance and strength of our global portfolio. All of our segments posted solid results for the year."

"As we begin 2008, I am confident we have the right strategies in place to deliver full year performance consistent with our long-term profit guidance," Ms. Nooyi continued. "Our brands are some of the best loved trademarks in the world, and we're continually adding to their vitality through exceptional innovation and unmatched go-to-market execution. We will fully leverage these advantages -- together with enhanced productivity across the business system and effective net pricing -- to address the challenge of accelerating input cost inflation. The new organization is ready to take the best of PepsiCo across our divisions and geographies to generate profitable growth, expand our global footprint and make Performance with Purpose the driving force behind everything we do."

FULL YEAR 2007 RESULTS

PepsiCo grew worldwide revenue 12% for the full year, driven by snack volume growth of 6% and beverage volume growth of 4%. PepsiCo International (PI) led volume growth with 9% snack growth and 8% beverage growth. Frito-Lay North America (FLNA) delivered 3% volume growth driven by strong momentum in Doritos and the Smart Spot eligible products. Volume in PepsiCo Beverages North America (PBNA) was flat compared with the prior year. Each of the divisions utilized a combination of pricing and mix to balance commodity cost inflation, while maintaining top-line momentum.

Core division operating profit was up 10%, with every division contributing to profit growth for the year. Strong profit performance allowed PepsiCo to make important investments to drive future marketplace growth and system transformation.

Foreign currency translation contributed about 2 points of growth to net revenue and operating profit. Acquisitions and divestitures added 3 points to net revenue and had no impact on operating profit. For the full year, the reported tax rate was 25.9%; the comparable tax rate was 27.6%.

Cash from operations was $6.9 billion, up 14%, and net capital expenditures were $2.4 billion. Management operating cash flow grew 12% to $4.6 billion. Cash returned to shareholders was up 34%, comprised of $2.2 billion in dividends and $4.3 billion in share repurchases.

ITEMS AFFECTING COMPARABILITY OF RESULTS

The following table presents the 2007 growth rates and shows division operating profit on an "as reported" and "core" basis, which excludes the impact of both the previously announced plant closings and production line rationalizations (about $0.03 per share) as well as costs associated with the recent divisional reorganization ($0.01 per share). In the fourth quarter, the Company recorded a pre-tax charge of $102 million related to these restructuring actions. EPS is also shown "as reported" and "core," with the latter excluding the impact of both restructuring charges and certain tax items. In the third quarter, the Company reported non-cash tax benefits totaling $115 million related to the resolution of certain foreign tax matters and an additional non-cash tax benefit of $14 million related to the same matter in the fourth quarter. The Company believes the core results are more indicative of the Company's ongoing results.


    Summary of PepsiCo 2007 Results
                                                          % Growth Rate
                                                    Fourth Quarter  Full Year
    Volume (Servings)                                     5             4
    Net Revenue                                          17            12

    As Reported
    Division Operating Profit                             9             9
    EPS                                                 (29)            2

    Core
    Division Operating Profit                            11            10
    EPS                                                   8            13


    Items Affecting Diluted EPS Comparability


                                Fourth Quarter              Full Year
                            2007    2006 % Growth    2007     2006   % Growth
    Reported diluted EPS   $0.77   $1.09    -29%    $3.41    $3.34      2%
    Tax items              (0.01)  (0.37)           (0.08)   (0.37)
    Restructuring and
     impairment charges     0.04    0.03             0.04     0.03
    Diluted EPS excluding
     above items*          $0.80   $0.74      8%    $3.38    $3.00     13%

    *Certain amounts do not sum due to rounding

DISCUSSION OF FOURTH QUARTER DIVISION OPERATING RESULTS

The impact on division operating results of the restructuring actions are summarized on the accompanying schedule A-10. The following discussion of division operating results excludes the impact of these actions.


    Summary of Division Results (core operating profit excludes impact
     of restructuring actions)
                                     % Growth Rates
                                                                As Reported
                       Fourth Quarter         Full Year       Operating Profit
                           Net    Core          Net   Core
                    Vol-   Rev-   Oper.   Vol-  Rev-  Oper.    Fourth    Full
                    ume    enue   Profit  ume   enue  Profit   Quarter   Year
    FLNA             3       8      7      3      7     7        13        9
    PBNA             1      15     19      0      7     7        17        6
    QFNA             3       8      3      2      5    2.5        3       2.5
    PI              8/9*    26     12     9/8*   22    18         1       15
    Total
     Divisions     5.5/5*   17     11     6/4*   12    10         9        9

    *Snacks/Beverages

Frito-Lay North America (FLNA) revenue and operating profit growth continued strong.

Net revenue increased 8% in the fourth quarter, driven by 3% volume growth and effective net pricing. Revenue growth was led by double-digit growth in SunChips, multipacks and dips. Trademark Lay's and Doritos grew revenue mid- single-digits. For the quarter, our portfolio of savory snacks continued to gain both volume and value share. The Quaker snacks portfolio grew revenue double-digits, led by Chewy Granola bars and Quakes Rice Cakes.

Operating profit grew 7%, reflecting the revenue gains, partially offset by higher commodity costs and double-digit increases in marketing investments.

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

Beverage volume increased 1% in the quarter, reflecting high-single-digit growth in non-carbonated beverages partially offset by a low-single-digit decline in carbonated soft drinks (CSD). Within non-carbonated beverages, Gatorade, Lipton ready-to-drink teas, enhanced waters and energy drinks each increased double digits; trademark Aquafina grew mid-single-digits. Our portfolio of juice and juice drinks declined low-single-digits as a result of the ongoing effect of previous price increases.

Net revenue grew 15%, driven by growth in finished goods beverages and effective net pricing primarily at Tropicana. Acquisitions contributed 2.5 percentage points of growth.

Operating profit grew 19%, reflecting revenue gains and partially offset by higher input costs. The net impact of lower amortization expenses and acquisitions contributed 4 percentage points to growth.

Quaker Foods North America (QFNA) profit grew 3%.

Volume grew 3% in the quarter based on improved trends in oatmeal and ready-to-eat cereals. Net revenue increased 8% driven by volume growth and effective net pricing. Operating profit increased 3% as the revenue gains were partially offset by higher input costs and increased SAP costs.

PepsiCo International (PI) posted broad-based gains in snacks and beverages.

Snack volume growth of 8% was led by double-digit growth in Russia, the Middle East, Turkey and India. Gamesa volume grew mid-single-digits. Volume at both Walkers and Sabritas declined by less than 1%; in both cases, the volume trend improved sequentially and net revenue growth was positive. Acquisitions contributed nearly 2 points to total snacks growth.

Beverage volume grew 9%, with double-digit growth in the Middle East, China, Brazil, Argentina, India and Russia partially offset by declines in Mexico, Thailand and Spain. In total, CSDs grew at a high-single-digit rate, posting growth in each of the division's four largest trademarks - Pepsi, 7-Up, Mirinda and Mountain Dew. Non-carbonated beverages grew at a double- digit rate, led by Lipton ready-to-drink teas and the addition of Sandora juice and juice drinks. Acquisitions contributed 2 points to total beverage growth.


    PI Regional Volume Growth
                                                  % Growth Rate
                                          Snacks                Beverages
                                                 Full                    Full
                                   Quarter       Year       Quarter      Year
    Latin America                      5           6           4           4
    Europe, Middle East and Africa     8           9          14          11
    Asia Pacific                      21          20           8           8
    Total PI                           8           9           9           8

Organic net revenue grew 10%, reflecting broad-based volume gains and also effective net pricing. In total, net revenue grew 26%, including over 7 percentage points of growth from foreign currency and 8 percentage points from consolidations and the net impact of acquisitions and divestitures.

Operating profit grew 12%, despite increased raw material costs. PI took the opportunity to make significant incremental investments in the quarter -- reducing operating profit by about 10 percentage points -- predominantly to drive continued growth in key businesses, particularly in emerging markets, and to implement SAP internationally. Foreign currency translation contributed 7 percentage points of growth. Consolidations together with the net of acquisitions and divestitures had no net impact.

Higher tax rate impacted EPS growth.

Corporate unallocated expenses increased $26 million in the quarter based on previously announced research and development spending. Net interest expense increased $24 million, reflecting higher net debt balances and lower gains on investments used to hedge deferred compensation expenses.

For the quarter, the reported tax rate was 29.8% versus -7.5% in the prior year. Excluding the impact of net tax benefits recorded in both years, the comparable quarterly tax rate was 30.6% versus 28.4% last year. The higher comparable tax rate, related to volatility in connection with the prior adoption of FIN 48 and the impact of recent tax law changes in Mexico, reduced core EPS growth by more than 3 percentage points.

2008 GUIDANCE

Company expects 2008 performance to be consistent with long-term targets. For 2008, the Company expects 3% to 5% volume growth, mid-to-high single digit net revenue growth and EPS of at least $3.72. The Company expects total worldwide input cost inflation to be in the mid-single-digit range. The tax rate is expected to be about 27.5%.

Cash provided by operating activities is expected to be approximately $7.6 billion and capital spending about $2.7 billion. The Company intends to repurchase approximately $4.3 billion in shares; it also intends, over time, to continue to sell PBG common stock to an ownership level of 35% and, as previously announced, to sell PAS common stock, over time, to the ownership level at the time of the merger with Whitman Corporation in 2000 of about 37%.

As a result of the previously announced reorganization, the Company will begin reporting six business segments -- Frito-Lay North America, Quaker Foods North America, Latin America Foods, PepsiCo Americas Beverages, UK/Europe and Middle East/Africa/Asia -- in the first quarter of 2008, up from four segments in 2007.

About PepsiCo

PepsiCo (NYSE:PEP) is one of the world's largest food and beverage companies, with 2007 annual revenues of more than $39 billion. The Company employs approximately 185,000 people worldwide, and its products are sold in approximately 200 countries. Its principal businesses include: Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods. The PepsiCo portfolio includes 17 brands that generate $1 billion or more each in annual retail sales. PepsiCo's commitment to sustainable growth, defined as Performance with Purpose, is focused on generating healthy financial returns while giving back to communities the Company serves. This includes meeting consumer needs for a spectrum of convenient foods and beverages, reducing the Company's impact on the environment through water, energy and packaging initiatives, and supporting its employees through a diverse and inclusive culture that recruits and retains world-class talent. PepsiCo is listed on the Dow Jones North America Sustainability Index and the Dow Jones World Sustainability Index. For more information, please visit www.pepsico.com.

Cautionary Statement

This release contains statements concerning PepsiCo's expectations for future performance, including our 2008 guidance. These "forward-looking statements" are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in demand for our products, as a result of shifts in consumer preferences or otherwise; our ability to maintain our reputation; our ability to build and sustain our information technology infrastructure and successfully implement our Business Process Transformation Initiative; fluctuations in the cost and availability of raw materials; our ability to compete effectively; disruption of our supply chain; trade consolidation, the loss of any key customer, or failure to maintain good relationships with our bottling partners; changes in the legal or regulatory environment; our ability to hire or retain key employees or to outsource certain functions effectively; unfavorable economic, environmental or political conditions in the countries where we operate; and market risks arising from changes in commodity prices, foreign exchange rates and interest rates. For additional information on these and other factors that could cause our actual results to materially differ from those set forth herein, please see our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. PepsiCo undertakes no obligation to update any forward looking statements, whether as a result of new information, future events or otherwise.

Miscellaneous Disclosures

Conference Call: At 11 a.m. (Eastern Time) today, the Company will host a conference call with investors to discuss fourth-quarter 2007 results and the outlook for 2008. For details, visit the Company's website at www.pepsico.com and click on the "Investors" tab.

Reconciliation: In discussing financial results and guidance, the Company may refer to certain non-GAAP measures. Reconciliations of any such non-GAAP measures to the most directly comparable financial measures in accordance with GAAP can be found under "PepsiCo Financial Press Releases" on the Company's website at www.pepsico.com in the "Investors" section.

Beverage volume: Volume shipped to retailers and independent distributors from both PepsiCo and our bottlers. Volume for products sold by PepsiCo's bottlers is reported by PepsiCo on a monthly basis, with the fourth quarter comprising September, October, November and December.

Concentrate Shipment Equivalents (CSE): CSE represents PepsiCo's physical beverage volume shipments to bottlers, retailers and independent distributors.

"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.

Sales of PBG and PAS shares are made pursuant to 10b5-1 trading plans.

Acquisition impacts to PI regional volume growth: For the quarter, acquisitions contributed 8 points to Asia Pacific snacks, 1.5 points to Latin America snacks, nearly 2 points to total PI snacks, 4 points to EMEA beverages and 2 points to total PI beverages. For the year, acquisitions contributed 1 point to EMEA snacks, 7 points to Asia Pacific snacks, 0.5 points to Latin America snacks, 2 points to total PI snacks, 1 point to EMEA beverages and 1 point to total PI beverages.



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

                                           Quarter Ended       Year Ended
                                        12/29/07  12/30/06 12/29/07  12/30/06
                                            (unaudited)   (unaudited)

    Net Revenue                          $12,346  $10,570   $39,474  $35,137

    Costs and Expenses
     Cost of sales                         5,784    4,830    18,038   15,762
     Selling, general and administrative
      expenses                             4,811    4,097    14,208   12,711
     Amortization of intangible assets        21       54        58      162

    Operating Profit                       1,730    1,589     7,170    6,502

    Bottling Equity Income                    95      113       560      553
    Interest Expense                         (71)     (67)     (224)    (239)
    Interest Income                           43       63       125      173

    Income before Income Taxes             1,797    1,698     7,631    6,989

    Provision/(Benefit) for Income Taxes     535     (128)    1,973    1,347

    Net Income                            $1,262   $1,826    $5,658   $5,642

    Diluted
      Net Income Per Common Share          $0.77    $1.09     $3.41    $3.34
      Average Shares Outstanding           1,645    1,681     1,658    1,687



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

                                       Quarter Ended         Year Ended
                                    12/29/07   12/30/06  12/29/07   12/30/06
    Net Revenue                         (unaudited)     (unaudited)

    Frito-Lay North America           $3,510     $3,242    $11,586   $10,844

    PepsiCo Beverages North America    2,819      2,461     10,230     9,565

    PepsiCo International              5,421      4,316     15,798    12,959

    Quaker Foods North America           596        551      1,860     1,769

    Total Net Revenue                $12,346    $10,570    $39,474   $35,137


    Operating Profit

    Frito-Lay North America             $811       $718     $2,845    $2,615

    PepsiCo Beverages North America      464        398      2,188     2,055

    PepsiCo International                560        556      2,322     2,016

    Quaker Foods North America           169        165        568       554

    Division Operating Profit          2,004      1,837      7,923     7,240

    Corporate                           (274)      (248)      (753)     (738)

    Total Operating Profit            $1,730     $1,589     $7,170    $6,502




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


                                                               Year Ended
                                                         12/29/07    12/30/06
    Operating Activities                                (unaudited)
      Net income                                           $5,658     $5,642
      Depreciation and amortization                         1,426      1,406
      Stock-based compensation expense                        260        270
      Excess tax benefits from share-based payment
       arrangements                                          (208)      (134)
      Pension and retiree medical plan contributions         (310)      (131)
      Pension and retiree medical plan expenses               535        544
      Bottling equity income, net of dividends               (441)      (442)
      Deferred income taxes and other tax charges and
       credits                                                118       (510)
      Change in accounts and notes receivable                (405)      (330)
      Change in inventories                                  (204)      (186)
      Change in prepaid expenses and other current assets     (16)       (37)
      Change in accounts payable and other current
       liabilities                                            500        223
      Change in income taxes payable                          128       (295)
      Other, net                                             (107)        64
    Net Cash Provided by Operating Activities               6,934      6,084

    Investing Activities
      Capital spending                                     (2,430)    (2,068)
      Sales of property, plant and equipment                   47         49
      Proceeds from (Investment in) finance assets             27        (25)
      Acquisitions and investments in noncontrolled
       affiliates                                          (1,320)      (522)
      Cash proceeds from sale of The Pepsi Bottling Group
       (PBG) stock                                            315        318
      Divestitures                                              -         37
      Short-term investments, net                            (383)     2,017
    Net Cash Used for Investing Activities                 (3,744)      (194)

    Financing Activities
      Proceeds from issuances of long-term debt             2,168         51
      Payments of long-term debt                             (579)      (157)
      Short-term borrowings, net                             (395)    (2,341)
      Cash dividends paid                                  (2,204)    (1,854)
      Share repurchases - common                           (4,300)    (3,000)
      Share repurchases - preferred                           (12)       (10)
      Proceeds from exercises of stock options              1,108      1,194
      Excess tax benefits from share-based payment
       arrangements                                           208        134
    Net Cash Used for Financing Activities                 (4,006)    (5,983)

    Effect of Exchange Rate Changes on Cash and Cash
     Equivalents                                               75         28
    Net Decrease in Cash and Cash Equivalents                (741)       (65)

    Cash and Cash Equivalents - Beginning of year           1,651      1,716
    Cash and Cash Equivalents - End of year                  $910     $1,651



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


                                                        12/29/07    12/30/06
    Assets                                             (unaudited)
    Current Assets
       Cash and cash equivalents                            $910      $1,651
       Short-term investments                              1,571       1,171

       Accounts and notes receivable, net                  4,389       3,725

       Inventories
         Raw materials                                     1,056         860
         Work-in-process                                     157         140
         Finished goods                                    1,077         926
                                                           2,290       1,926

       Prepaid expenses and other current assets             991         657
            Total Current Assets                          10,151       9,130

    Property, plant and equipment, net                    11,228       9,687
    Amortizable intangible assets, net                       796         637

    Goodwill                                               5,169       4,594
    Other nonamortizable intangible assets                 1,248       1,212
            Nonamortizable Intangible Assets               6,417       5,806

    Investments in noncontrolled affiliates                4,354       3,690
    Other assets                                           1,682         980
               Total Assets                              $34,628     $29,930

    Liabilities and Shareholders' Equity
    Current Liabilities
       Short-term obligations                                 $-        $274
       Accounts payable and other current liabilities      7,602       6,496
       Income taxes payable                                  151          90
            Total Current Liabilities                      7,753       6,860

    Long-term debt obligations                             4,203       2,550
    Other liabilities                                      4,613       4,624
    Deferred income taxes                                    714         528
            Total Liabilities                             17,283      14,562

    Commitments and Contingencies

    Preferred stock, no par value                             41          41
    Repurchased preferred stock                             (132)       (120)

    Common Shareholders' Equity
       Common stock                                           30          30
       Capital in excess of par value                        450         584
       Retained earnings                                  28,184      24,837
       Accumulated other comprehensive loss                 (841)     (2,246)
                                                          27,823      23,205
       Less: Repurchased common stock                    (10,387)     (7,758)
            Total Common Shareholders' Equity             17,436      15,447
               Total Liabilities and Shareholders'
                Equity                                   $34,628     $29,930



                        PepsiCo, Inc. and Subsidiaries
             Supplemental Share and Stock-Based Compensation Data
             (in millions, except dollar amounts, and unaudited)

                                          Quarter ended       Year ended
                                        12/29/07 12/30/06  12/29/07 12/30/06
    Beginning Net Shares Outstanding      1,610    1,647    1,639     1,656
    Options Exercised/Restricted Stock
     Units Converted                         10        4       30        31
    Shares Repurchased                      (15)     (12)     (64)      (48)
    Ending Net Shares Outstanding         1,605    1,639    1,605     1,639

    Weighted Average Basic                1,608    1,642    1,621     1,649
    Dilutive securities:
      Options                                31       32       31        32
      Restricted Stock Units                  5        5        4         4
      ESOP Convertible Preferred
       Stock/Other                            1        2        2         2
    Weighted Average Diluted              1,645    1,681    1,658     1,687

    Average Share Price for the period   $73.84    $63.39  $68.23    $61.08
    Growth Versus Prior Year                 16%       10%     12%       10%

    Options Outstanding                     109       128     121       137
    Options in the Money                    109       127     118       137
    Dilutive Shares from Options             31        32      31        32
    Dilutive Shares from Options as a
     % of Options in the Money               29%       25%     26%       24%

    Average Exercise Price of Options
     in the Money                        $47.43    $44.19  $46.35    $43.93

    Restricted Stock Units Outstanding        7         8       8         8
    Dilutive Shares from Restricted
     Stock Units                              5         5       4         4

    Average Intrinsic Value of
     Restricted Stock Units
      Outstanding*                       $58.63    $53.38  $58.51    $53.09

    * Weighted-average intrinsic value at grant date




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


                                           Quarter Ended       Year Ended
                                        12/29/07 12/30/06  12/29/07  12/30/06

    Net Revenue                          $12,346  $10,570   $39,474  $35,137

    Costs and Expenses
     Cost of sales                         5,784    4,830    18,038   15,762
     Selling, general and administrative
      expenses                             4,709    4,030    14,106   12,644
     Amortization of intangible assets        21       54        58      162

    Operating Profit                       1,832    1,656     7,272    6,569

    Bottling Equity Income                    95       92       560      532
    Interest Expense                         (71)     (67)     (224)    (239)
    Interest Income                           43       63       125      173

    Income before Income Taxes             1,899    1,744     7,733    7,035

    Provision for Income Taxes               581      495     2,134    1,970

    Net Income                            $1,318   $1,249    $5,599   $5,065

    Diluted
      Net Income Per Common Share          $0.80    $0.74     $3.38    $3.00
      Average Shares Outstanding           1,645    1,681     1,658    1,687

*Excludes the impact of restructuring and impairment charges recorded in 2007 and 2006, certain non-cash tax benefits recorded in 2007 and 2006 and our share of PBG's tax benefits recorded in 2006. See schedules A-8 through A-10 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
                                    12/29/07   12/30/06  12/29/07   12/30/06
    Net Revenue

    Frito-Lay North America           $3,510     $3,242    $11,586   $10,844

    PepsiCo Beverages North America    2,819      2,461     10,230     9,565

    PepsiCo International              5,421      4,316     15,798    12,959

    Quaker Foods North America           596        551      1,860     1,769

    Total Net Revenue                $12,346    $10,570    $39,474   $35,137


    Operating Profit

    Frito-Lay North America             $839       $785     $2,873    $2,682

    PepsiCo Beverages North America      475        398      2,199     2,055

    PepsiCo International                623        556      2,385     2,016

    Quaker Foods North America           169        165        568       554

    Division Operating Profit          2,106      1,904      8,025     7,307

    Corporate                           (274)      (248)      (753)     (738)

    Total Operating Profit            $1,832     $1,656     $7,272    $6,569

*Excludes the impact of restructuring and impairment charges recorded in 2007 and 2006. See schedules A-8 through A-10 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
                                 (unaudited)

In the third and fourth quarter of 2007, we recognized $115 million and $14 million, respectively, of non-cash tax benefits related to the favorable resolution of certain foreign tax matters. Additionally, in the fourth quarter of 2007, we recorded restructuring and impairment charges in connection with previously announced plant closings and production line rationalizations, as well as costs associated with the recent divisional reorganization.

In the fourth quarter of 2006, we recorded non-cash tax benefits of $602 million, 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 by closing two plants in the U.S., and rationalizing other assets, to increase manufacturing productivity and supply chain efficiencies.

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 and with how management evaluates our operational results and trends. Specifically, investors should consider the following with respect to our quarterly and full year results:

    -- Our 2007 and 2006 division operating profit;
    -- Our 2007 and 2006 division operating profit and total operating profit
       without the impact of restructuring and impairment charges; and our
       2007 division operating profit growth and total operating profit growth
       without the impact of the aforementioned items;
    -- Our 2007 effective tax rate without the impact of the tax benefits and
       restructuring and impairment charges; and our 2006 effective tax rate
       without the impact of the tax benefits, our share of PBG's tax benefits
       and restructuring and impairment charges; and
    -- Our 2007 diluted EPS without the impact of the tax benefits and
       restructuring and impairment charges; our 2006 diluted EPS without the
       impact of the tax benefits, our share of PBG's tax benefits and
       restructuring and impairment charges; and our 2007 diluted EPS growth
       without the impact of the aforementioned items.

Additionally, management operating cash flow and management operating cash flow growth are the primary measures management uses to monitor cash flow performance. They are not measures defined by GAAP. Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities.



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

    Operating Profit Growth Reconciliation


                                                Quarter      Year
                                                 Ended      Ended
                                               12/29/07   12/29/07
    Total Operating Profit Growth                   9%        10%
    Impact of Corporate Unallocated                 -         (1)
    Division Operating Profit Growth                9          9
    Impact of Restructuring and Impairment
     Charges                                      1.5          -
    Division Operating Profit Growth
     Excluding Above Items                         11%*       10%*

    * Does not sum due to rounding.

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


                                              Pre-tax     Income    Effective
                                               Income      Taxes    Tax Rate
    Reported Effective Tax Rate                $1,698       ($128)    (7.5%)
    Restructuring and Impairment Charges           67          24
    Tax Benefits                                    -         602
    PepsiCo Share of PBG Tax Benefits             (21)         (3)
    Effective Tax Rate Excluding Above Items    $1,744       $495      28.4%


    Effective Tax Rate Reconciliation (Quarter Ended 12/29/07)


                                               Pre-tax     Income   Effective
                                                Income     Taxes     Tax Rate
    Reported Effective Tax Rate                 $1,797       $535     29.8%
    Restructuring and Impairment Charges           102         32
    Tax Benefits                                     -         14
    Effective Tax Rate Excluding Above Items    $1,899       $581     30.6%


    Effective Tax Rate Reconciliation (Year Ended 12/29/07)


                                               Pre-tax     Income   Effective
                                                Income     Taxes     Tax Rate
    Reported Effective Tax Rate                 $7,631     $1,973     25.9%
    Restructuring and Impairment Charges           102         32
    Tax Benefits                                     -        129
    Effective Tax Rate Excluding Above Items    $7,733     $2,134     27.6%


    Management Cash Flow Reconciliation

                                                   Year Ended
                                               12/29/07   12/30/06     Growth

    Net Cash Provided by Operating Activities   $6,934     $6,084       14%
    Capital spending                            (2,430)    (2,068)
    Sales of property, plant and equipment          47         49
    Management Operating Cash Flow              $4,551     $4,065       12%



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


                             Quarter Ended 12/29/07     Year Ended 12/29/07
                                      Net   Operating           Net  Operating
                            Volume  Revenue  Profit   Volume  Revenue  Profit
    Frito-Lay North
     America
    Reported growth            3       8        13       3       7        9
    Impact on growth of:
     2007 restructuring
      and impairment           -       -         4       -       -        1
     2006 restructuring
      and impairment           -       -        (9)      -       -       (3)
    Growth excluding above
     items                     3       8         7       3       7        7

    PepsiCo Beverages
     North America
    Reported growth            1      15        17       -       7        6
    Impact on growth of:
     2007 restructuring
      and impairment           -       -         3       -       -      0.5
    Growth excluding above
     items                     1      15        19       -       7        7

    PepsiCo International
    Reported growth          8/9*     26         1     9/8*     22       15
    Impact on growth of:
     2007 restructuring
      and impairment           -       -        11       -       -        3
    Growth excluding above
     items                   8/9*     26        12     9/8*     22       18

    Total Divisions
    Reported growth        5.5/5*     17         9     6/4*     12        9
    Impact on growth of:
     2007 restructuring
      and impairment           -       -       5.5       -       -        1
     2006 restructuring
      and impairment           -       -        (4)      -       -       (1)
    Growth excluding above
     items                 5.5/5*     17        11     6/4*     12       10

    *snacks/beverages

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

Source: PepsiCo

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
 
bottom clear