EX-99.1 2 q420178-kxexhibit991.htm EXHIBIT 99.1 Exhibit



Exhibit 99.1
peplogocolora17.jpg


PepsiCo Reports Fourth Quarter and Full-Year 2017 Results; Provides 2018 Financial Outlook

Reported (GAAP) Fourth Quarter and Full-Year 2017 Results

 
Fourth Quarter
Full-Year
Net revenue change
—%
1.2%
Foreign exchange impact on net revenue
1%
—%
Loss/Earnings per share (L/EPS)
$(0.50)*
$3.38
L/EPS change
Not meaningful**
(23)%
Foreign exchange impact on L/EPS
1%
(1)%
* Fourth quarter 2017 loss per share of $(0.50) compares to fourth quarter 2016 earnings per share of $0.97. Results include a $2.5 billion provisional net tax expense ($1.73 per share) as a result of the U.S. Tax Cuts and Jobs Act (TCJ Act) passed on December 22, 2017.
** L/EPS change of (152) percent compared to 2016 is considered not meaningful as a result of the $2.5 billion provisional net tax expense ($1.73 per share) recognized in the fourth quarter of 2017.

Organic/Core (non-GAAP)1 Fourth Quarter and Full-Year 2017 Results

 
Fourth Quarter
Full-Year
Organic revenue growth
2.3%
2.3%
Core EPS
$1.31
$5.23
Core constant currency EPS growth
8%
9%
PURCHASE, N.Y. - February 13, 2018 - PepsiCo, Inc. (NASDAQ: PEP) today reported results for the fourth quarter and full year 2017.
“We are pleased with our performance for the fourth quarter and full year 2017. We met or exceeded most of the financial goals we set out at the beginning of the year. We delivered these results in the midst of a dynamic retail environment and rapidly shifting consumer landscape,” said Chairman and CEO Indra Nooyi.
1 Please refer to the Glossary for the definitions of non-GAAP financial measures including “Organic,” “Core,” “Constant Currency,” “Free Cash Flow (excluding certain items)” and “Division Operating Profit.” Please refer to “2018 Guidance and Outlook” for additional information regarding PepsiCo’s full-year 2018 growth objectives and targets. PepsiCo provides guidance on a non-GAAP basis as the Company cannot predict certain elements which are included in reported GAAP results, including the impact of foreign exchange and commodity mark-to-market adjustments.


1




“The provisions of recently enacted tax legislation are expected to result in lower income taxes in 2018 for our operations in the United States, our largest market. We expect the benefits of the TCJ Act will enable us to further strengthen our business by enhancing the skills of our front line associates to ready them for the future; adding new digital and ecommerce capabilities to become more competitive; accelerating capital investments to add manufacturing capacity and make our operations more efficient; and enhancing cash returns to our shareholders over time.
“As a reflection of our confidence in the growth prospects for our business, we expect to deliver 9 percent growth in core constant currency earnings per share in 2018 and we announced today a 15 percent increase in our annualized dividend per share beginning with the June 2018 payment, representing our 46th consecutive annual increase.”

























2




Summary Fourth Quarter 2017 Performance

      Revenue      
 
 Volume
 
GAAP Reported
% Change
Percentage Point Impact
Organic
% Change
 
Organic Volume % Growth
 
Foreign Exchange Translation
Acquisitions, Divestitures and Structural Changes
53rd Reporting Week
 
Food/Snacks
Beverages
FLNA
(1)
6
5
 
3
 
QFNA
(5)
(0.5)
5
 
0.5
 
NAB
(6)
(1)
5
(3)
 
 
(2)
Latin America
6
(3)
3
 
(4)
(3)
ESSA
11
(6)
1
6
 
7
2
AMENA
5.5
6
 
5
(3)
Total
(1)
3.5
2
 
2
(2)

 
Operating Profit and EPS
 
GAAP Reported
% Change
Percentage Point Impact
Core Constant Currency
 % Change
 
 Items Affecting Comparability
Foreign Exchange Translation
FLNA
(1)
3.5
3
QFNA
(6)
5
(1)
NAB
(29)
6
(23)
Latin America
20
8
(6)
22
ESSA
3.5
(5.5)
(2)
AMENA
173
(4)
18
187
Corporate Unallocated
(31)
28
(3)
Total
9
(2)
(1)
6
 
 
 
 
 
L/EPS
(152)
161
(1)
8

Note: Rows may not sum due to rounding.
Division operating profit (a non-GAAP measure that excludes corporate unallocated costs) increased by 1 percent in the quarter and was negatively impacted by items affecting comparability (4 percentage points) and positively impacted by foreign exchange translation (0.5 percentage points). Core constant currency division operating profit (a non-GAAP measure) increased by 5 percent.
Organic revenue, core constant currency and division operating profit results are non-GAAP financial measures. Please refer to the reconciliation of GAAP and non-GAAP information in the attached exhibits and to the Glossary for definitions of “Organic,” “Core,” “Constant Currency” and “Division Operating Profit.”



3




Summary of Fourth Quarter Financial Performance:
Reported fourth quarter 2017 and 2016 results were impacted by:
A provisional net tax expense of $2.5 billion associated with the enactment of the TCJ Act in the fourth quarter of 2017. Included in the net tax expense is a provisional mandatory one-time transition tax of approximately $4.0 billion on undistributed international earnings, partially offset by a provisional benefit of $1.5 billion resulting from the required remeasurement of our deferred tax assets and liabilities to the new, lower U.S. corporate income tax rate;
Restructuring charges of $226 million which include an expansion and extension of the multi-year productivity plan we publicly announced in 2014, compared to $54 million in the prior-year period;
Commodity mark-to-market impacts;
A 2016 charge resulting from the redemption of certain senior notes in accordance with the “make-whole” redemption provisions (debt redemption charge);
A 2016 pension-related settlement charge; and
A 53rd reporting week and the reinvestment of the corresponding operating profit benefit in certain productivity and growth initiatives (incremental investments) in 2016.
See A-6 to A-8 for further details on the above items.

Reported net revenue was even with the prior year. Organic revenue, which excludes the impacts of foreign exchange translation, structural changes and the 53rd reporting week in the prior year, grew 2.3 percent.
Reported gross margin contracted 65 basis points and core gross margin contracted 50 basis points. Reported operating margin expanded 110 basis points and core operating margin expanded 90 basis points.
Reported operating profit increased 9 percent and core constant currency operating profit increased 6 percent. Items impacting reported operating profit included a pension-related settlement charge in the prior year, which contributed 14 percentage points to reported operating profit growth, partially offset by higher restructuring charges and commodity mark-to-market impacts which reduced reported operating profit growth by 10 percentage points and 2 percentage points, respectively. In addition, a gain from the refranchising of our bottling operations in Jordan (Jordan refranchising gain) contributed 6 percentage points. The benefit from the 53rd reporting week in the prior-year period was offset by incremental investments. Foreign currency translation increased reported operating profit growth by 1 percentage point.


4




The reported effective tax rate was 129.8 percent in the fourth quarter of 2017 and 22.7 percent in the fourth quarter of 2016. The fourth quarter 2017 reported tax rate reflects the impact of the provisional net tax expense of $2.5 billion as a result of the TCJ Act. The core effective tax rate was 25.0 percent in the fourth quarter of 2017 and 24.0 percent in the fourth quarter of 2016.
Reported loss per share was $0.50, a decrease of 152 percent, primarily reflecting the impact of the $2.5 billion provisional net tax expense ($1.73 per share) as a result of the TCJ Act. Foreign exchange translation positively impacted EPS by 1 percentage point.
Core EPS was $1.31, an increase of 9 percent. Excluding the impact of foreign exchange translation, core constant currency EPS increased 8 percent (see schedule A-10 for a reconciliation to reported LPS, the comparable GAAP measure).
Net cash provided by operating activities was $3.9 billion.


5




Discussion of Fourth Quarter Division Results:
In addition to the reported net revenue performance as set out in the tables on pages 3 and A-9, reported operating results were driven by the following:
Frito-Lay North America (FLNA)
Negatively impacted by the 53rd reporting week in the prior year, operating cost inflation, restructuring charges and higher raw material costs. These impacts were partially offset by productivity gains and prior-year incremental investments.
Quaker Foods North America (QFNA)
Negatively impacted by the 53rd reporting week in the prior year, operating cost inflation and restructuring charges. These impacts were partially offset by productivity gains, prior-year incremental investments and lower advertising and marketing expenses.
North America Beverages (NAB)
Negatively impacted by higher raw material costs, operating cost inflation, restructuring charges, the 53rd reporting week in the prior year and hurricane-related costs. These impacts were partially offset by productivity gains, prior-year incremental investments and lower advertising and marketing expenses.
Latin America
Positively impacted by productivity gains and prior-year incremental investments, partially offset by operating cost inflation, higher raw material costs and restructuring charges.
Europe Sub-Saharan Africa (ESSA)
Negatively impacted by operating cost inflation, higher advertising and marketing expenses, higher raw material costs and restructuring charges, offset by productivity gains.
Asia, Middle East and North Africa (AMENA)
Positively impacted by the Jordan refranchising gain, productivity gains and a gain on an asset sale in India. These impacts were partially offset by higher raw material costs (in local currency terms, driven by a weak Egyptian pound), operating cost inflation and unfavorable foreign exchange translation.


6




Summary Full-Year 2017 Performance
                                                                                                    
 
   Revenue
 
 Volume
 
GAAP Reported
% Change
Percentage Point Impact
Organic
% Change
 
Organic Volume % Growth
 
Foreign Exchange Translation
Acquisitions, Divestitures and Structural Changes



53rd Reporting Week
 
Snacks
Beverages
FLNA
2
2
3
 
1
 
QFNA
(2)
2
(1)
 
 
NAB
(2)
(1)
1
(2)
 
 
(2)
Latin America
6
(1)
0.5
5
 
(1.5)
(2)
ESSA
8
(3)
6
 
5.5
1
AMENA
(5)
10
5
 
5
(1)
Total
1
1
2
 
2
(1)

 
Operating Profit and EPS
 
GAAP Reported
% Change
Percentage Point Impact
Core Constant Currency
 % Change
 
 Items Affecting Comparability
Foreign Exchange Translation
FLNA
3.5
1
4.5
QFNA
(2)
1.5
NAB
(9)
1
(8)
Latin America
2
4
1
7
ESSA
22
(2)
20
AMENA
73
(67)
8
15
Corporate Unallocated
(9)
4
(5)
Total
7
(4)
1
5
 
 
 
 
 
L/EPS
(23)
30
1
9
Note: Rows may not sum due to rounding
Division operating profit (a non-GAAP measure that excludes corporate unallocated costs) increased by 6 percent in the year and was positively impacted by items affecting comparability (3 percentage points) and negatively impacted by foreign exchange translation (1 percentage point). Core constant currency division operating profit (a non-GAAP measure) increased by 4 percent.
Organic revenue, core constant currency results and division operating profit are non-GAAP financial measures. Please refer to the reconciliation of GAAP and non-GAAP information in the attached exhibits and to the Glossary for definitions of “Organic,” “Core,” “Constant Currency” and “Division Operating Profit.”



7




Summary of Full-Year 2017 Financial Performance:
Reported full-year 2017 and 2016 results were impacted by:
A provisional net tax expense of $2.5 billion associated with the enactment of the TCJ Act;
Restructuring charges of $295 million which include an expansion and extension of the multi-year productivity plan we publicly announced in 2014, compared to $160 million in 2016;
Commodity mark-to-market impacts;
A 2016 debt redemption charge;
A 2016 pension-related settlement charge;
A 53rd reporting week and related incremental investments in 2016; and
A prior-year impairment charge to reduce the holding value of our 5% indirect equity interest in Tingyi-Asahi Beverages Holding Co. Ltd. to its estimated fair value (charge related to the transaction with Tingyi).
See A-6 to A-8 for further details on the above items.
Reported net revenue increased 1.2 percent. Organic revenue, which excludes the impacts of foreign exchange translation, structural changes and the 53rd reporting week in the prior year, grew 2.3 percent.
Reported gross margin contracted 40 basis points and core gross margin contracted 30 basis points. Reported operating margin expanded 95 basis points and core operating margin expanded 45 basis points. Reported operating margin expansion reflects the impacts of the prior-year charge related to the transaction with Tingyi and the pension-related settlement charge. Reported and core operating margin expansions reflect the Jordan refranchising gain in the fourth quarter and a gain associated with the sale of our minority stake in Britvic plc (Britvic gain) in the second quarter of 2017.
Reported operating profit increased 7 percent and core constant currency operating profit increased 5 percent. The impacts of the charge related to the transaction with Tingyi and a pension-related settlement charge, both in the prior year, contributed 4 percentage points and 3 percentage points, respectively, to reported operating profit growth. Higher commodity mark-to-market impacts and restructuring charges reduced reported operating growth by 2 percentage points and 1.5 percentage points, respectively. Unfavorable foreign exchange translation reduced reported operating profit growth by 1 percentage point.
The reported effective tax rate was 48.9 percent in 2017 and 25.4 percent in 2016. The reported 2017 tax rate reflects the impact of the provisional net tax expense of $2.5 billion as result of the TCJ Act. The reported 2016 tax rate was negatively impacted by the charge related to the transaction with Tingyi, which had no corresponding tax benefit. The core

8




effective tax rate was 23.3 percent in 2017 and 24.5 percent in 2016. Both the 2017 reported and core tax rates reflect the positive impact of a change in the accounting for certain aspects of share-based payments to employees.
Reported EPS was $3.38, a 23 percent decrease from the prior year, primarily reflecting the $2.5 billion provisional net tax expense as a result of the TCJ Act in 2017 and partially offset by the prior-year charge related to the transaction with Tingyi, a pension-related settlement charge and the debt redemption charge. Foreign exchange translation reduced reported EPS growth by 1 percentage point.
Core EPS was $5.23, an increase of 8 percent. Excluding the impact of foreign exchange translation, core constant currency EPS increased 9 percent (see schedule A-10 for a reconciliation to reported EPS, the comparable GAAP measure).
Net cash provided by operating activities was $10 billion. Free cash flow (excluding certain items) was $7.3 billion.


9




Discussion of Full-Year 2017 Division Results:

In addition to the reported net revenue performance as set out in the tables on pages 7 and A-9, reported operating results were driven by the following:
Frito-Lay North America (FLNA)
Positively impacted by productivity gains and prior-year incremental investments, partially offset by operating cost inflation, higher raw material costs and the 53rd reporting week in the prior year.
Quaker Foods North America (QFNA)
Negatively impacted by operating cost inflation, the 53rd reporting week in the prior year and restructuring charges. These impacts were partially offset by productivity gains, lower advertising and marketing expenses and prior-year incremental investments.
North America Beverages (NAB)
Negatively impacted by operating cost inflation, higher raw material costs, the 53rd reporting week in the prior year and hurricane-related costs. These impacts were partially offset by productivity gains, lower advertising and marketing expenses, prior-year incremental investments and a gain associated with the sale of an asset.
Latin America
Positively impacted by productivity gains, partially offset by operating cost inflation, higher raw material costs and restructuring charges.
Europe Sub-Saharan Africa (ESSA)
Positively impacted by productivity gains and the Britvic gain, partially offset by operating cost inflation, higher advertising and marketing expenses and higher raw material costs.
Asia, Middle East and North Africa (AMENA)
Positively impacted by the prior-year charge related to the transaction with Tingyi, productivity gains and the Jordan refranchising gain. These impacts were partially offset by operating cost inflation, higher raw material costs (in local currency terms, driven by a weak Egyptian pound) and unfavorable foreign exchange translation.


10




2018 Guidance and Outlook

The Company provides guidance on a non-GAAP basis as the Company cannot predict certain elements which are included in reported GAAP results, including the impact of foreign exchange translation and commodity mark-to-market impacts.
For 2018, the Company expects:
Full-year organic revenue growth to be at least in line with the 2017 growth rate.
Based on current market consensus rates, foreign exchange translation to have a neutral impact on revenue and earnings per share.
A core effective tax rate in the “low 20s,” reflecting benefits of the TCJ Act.
The benefit of the TCJ Act to be substantially reinvested in initiatives to benefit the Company’s U.S.-based front line workforce and to otherwise increase the Company’s capabilities.
Core earnings per share of $5.70, a 9 percent increase compared to 2017 core earnings per share of $5.23.
Approximately $9 billion in cash from operating activities and free cash flow of approximately $6 billion, which assumes net capital spending of approximately $3.6 billion and a discretionary pension contribution of $1.4 billion.
Total cash returns to shareholders of approximately $7 billion.
The Company today announced a 15 percent increase in its annualized dividend per share to $3.71 from $3.22 per share, effective with the dividend expected to be paid in June 2018. This represents the Company’s 46th consecutive annual dividend per share increase. Total dividends to shareholders are expected to be approximately $5 billion and share repurchases are expected to be approximately $2 billion.

The Company also announced a new share repurchase program providing for the repurchase of up to $15 billion of PepsiCo common stock commencing on July 1, 2018 and expiring on June 30, 2021. This will replace the $12 billion repurchase program which commenced on July 1, 2015 and expires on June 30, 2018.


11




Conference Call:
At 7:45 a.m. (Eastern time) today, the Company will host a conference call with investors and financial analysts to discuss fourth quarter and full-year 2017 results and the outlook for 2018. Further details will be accessible on the Company’s website at www.pepsico.com/investors.

Contacts:
Investors
 
Media
 
Jamie Caulfield
 
Carrie Ratner
 
Investor Relations
 
Communications
 
914-253-3035
 
914-253-3817
 
jamie.caulfield@pepsico.com
 
carrie.ratner@pepsico.com







12




PepsiCo, Inc. and Subsidiaries
Consolidated Statement of Income
(in millions except per share amounts; unaudited, except year-ended 12/31/2016 amounts)
 
 
Quarter Ended
 
Year Ended
 
12/30/2017

 
12/31/2016

 
Change
 
12/30/2017

 
12/31/2016

 
Change
Net Revenue
$
19,526

 
$
19,515

 
 %
 
$
63,525

 
$
62,799

 
1
 %
Cost of sales
9,077

 
8,944

 
1.5
 %
 
28,785

 
28,209

 
2
 %
Gross profit
10,449

 
10,571

 
(1
)%
 
34,740

 
34,590

 
 %
Selling, general and administrative expenses
7,856

 
8,190

 
(4
)%
 
24,231

 
24,805

 
(2
)%
Operating Profit
2,593

 
2,381

 
9
 %
 
10,509

 
9,785

 
7
 %
Interest expense
(365
)
 
(594
)
 
(39
)%
 
(1,151
)
 
(1,342
)
 
(14
)%
Interest income and other
103

 
44

 
133
 %
 
244

 
110

 
122
 %
Income before income taxes
2,331

 
1,831

 
27
 %
 
9,602

 
8,553

 
12
 %
Provision for income taxes
3,026

(a) 
414

 
629
 %
 
4,694

(a) 
2,174

 
116
 %
Net (loss)/income
(695
)
 
1,417

 
(149
)%
 
4,908

 
6,379

 
(23
)%
Less: Net income attributable to noncontrolling interests
15

 
16

 
(6
)%
 
51

 
50

 
2.5
 %
Net (Loss)/Income Attributable to PepsiCo
$
(710
)
 
$
1,401

 
(151
)%
 
$
4,857

 
$
6,329

 
(23
)%
 
 
 
 
 
 
 
 
 
 
 
 
Diluted
 
 
 
 
 
 
 
 
 
 
 
Net (Loss)/Income Attributable to PepsiCo per Common Share
$
(0.50
)
 
$
0.97

 
(152
)%
 
$
3.38

 
$
4.36

 
(23
)%
Weighted-average common shares outstanding
1,421

 
1,444

 
 
 
1,438

 
1,452

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.805

 
$
0.7525

 
 
 
$
3.1675

 
$
2.96

 
 
(a) Includes the provisional impact of the TCJ Act enacted in 2017. See A-7 for additional information.


A - 1




PepsiCo, Inc. and Subsidiaries
Supplemental Financial Information
(in millions; unaudited, except year-ended 12/31/2016 amounts)
 
 
Quarter Ended
 
Year Ended
 
12/30/2017

 
12/31/2016

 
Change
 
12/30/2017

 
12/31/2016

 
Change
Net Revenue
 
 
 
Frito-Lay North America
$
4,829

 
$
4,891

 
(1
)%
 
$
15,798

 
$
15,549

 
2
 %
Quaker Foods North America
774

 
815

 
(5
)%
 
2,503

 
2,564

 
(2
)%
North America Beverages
5,902

 
6,288

 
(6
)%
 
20,936

 
21,312

 
(2
)%
Latin America
2,435

 
2,299

 
6
 %
 
7,208

 
6,820

 
6
 %
Europe Sub-Saharan Africa
3,695

 
3,333

 
11
 %
 
11,050

 
10,216

 
8
 %
Asia, Middle East and North Africa
1,891

 
1,889

 
 %
 
6,030

 
6,338

 
(5
)%
Total Net Revenue
$
19,526

 
$
19,515

 
 %
 
$
63,525

 
$
62,799

 
1
 %
 
 
 
 
 
 
 
 
 
 
 
 
Operating Profit
 
 
 
 
 
 
 
 
 
 
 
Frito-Lay North America
$
1,402

 
$
1,410

 
(1
)%
 
$
4,823

 
$
4,659

 
3.5
 %
Quaker Foods North America
186

 
197

 
(6
)%
 
642

 
653

 
(2
)%
North America Beverages
491

 
689

 
(29
)%
 
2,707

 
2,959

 
(9
)%
Latin America
267

 
223

 
20
 %
 
908

 
887

 
2
 %
Europe Sub-Saharan Africa
315

 
316

 
 %
 
1,354

 
1,108

 
22
 %
Asia, Middle East and North Africa
328

 
120

 
173
 %
 
1,073

 
619

 
73
 %
Corporate Unallocated
(396
)
 
(574
)
 
(31
)%
 
(998
)
 
(1,100
)
 
(9
)%
Total Operating Profit
$
2,593

 
$
2,381

 
9
 %
 
$
10,509

 
$
9,785

 
7
 %



A - 2




PepsiCo, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
(in millions)
 
Year Ended
 
12/30/2017

 
12/31/2016

 
(unaudited)
 
 
Operating Activities
 
 
 
Net income
$
4,908

 
$
6,379

Depreciation and amortization
2,369

 
2,368

Share-based compensation expense
292

 
284

Restructuring and impairment charges
295

 
160

Cash payments for restructuring charges
(113
)
 
(125
)
Charge related to the transaction with Tingyi (Cayman Islands) Holding Corp. (Tingyi)

 
373

Pension and retiree medical plan expenses
221

 
501

Pension and retiree medical plan contributions
(220
)
 
(695
)
Deferred income taxes and other tax charges and credits
619

 
452

Provisional net tax expense related to the TCJ Act
2,451

 

Change in assets and liabilities:
 
 
 
Accounts and notes receivable
(202
)
 
(349
)
Inventories
(168
)
 
(75
)
Prepaid expenses and other current assets
20

 
10

Accounts payable and other current liabilities
201

 
997

Income taxes payable
(338
)
 
329

Other, net
(341
)
 
64

Net Cash Provided by Operating Activities
9,994

 
10,673

 
 
 
 
Investing Activities
 
 
 
Capital spending
(2,969
)
 
(3,040
)
Sales of property, plant and equipment
180

 
99

Acquisitions and investments in noncontrolled affiliates
(61
)
 
(212
)
Divestitures
267

 
85

Short-term investments, by original maturity:
 
 
 
More than three months - purchases
(18,385
)
 
(12,504
)
More than three months - maturities
15,744

 
8,399

More than three months - sales
790

 

Three months or less, net
2

 
16

Other investing, net
29

 
9

Net Cash Used for Investing Activities
(4,403
)
 
(7,148
)
 
 
 
 
Financing Activities
 
 
 
Proceeds from issuances of long-term debt
7,509

 
7,818

Payments of long-term debt
(4,406
)
 
(3,105
)
Debt redemptions

 
(2,504
)
Short-term borrowings, by original maturity:
 
 
 
More than three months - proceeds
91

 
59

More than three months - payments
(128
)
 
(27
)
Three months or less, net
(1,016
)
 
1,505

Cash dividends paid
(4,472
)
 
(4,227
)
Share repurchases - common
(2,000
)
 
(3,000
)
Share repurchases - preferred
(5
)
 
(7
)
Proceeds from exercises of stock options
462

 
465

Withholding tax payments on Restricted Stock Units (RSUs), Performance Stock Units (PSUs) and PepsiCo Equity Performance Units (PEPunits) converted
(145
)
 
(130
)
Other financing
(76
)
 
(58
)
Net Cash Used for Financing Activities
(4,186
)
 
(3,211
)
Effect of exchange rate changes on cash and cash equivalents
47

 
(252
)
Net Increase in Cash and Cash Equivalents
1,452

 
62

Cash and Cash Equivalents, Beginning of Year
9,158

 
9,096

Cash and Cash Equivalents, End of Year
$
10,610

 
$
9,158


A - 3




PepsiCo, Inc. and Subsidiaries
Consolidated Balance Sheet
(in millions except per share amounts)

 
12/30/2017

 
12/31/2016

 
(unaudited)
 
 
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
10,610

 
$
9,158

Short-term investments
8,900

 
6,967

Accounts and notes receivable, net
7,024

 
6,694

Inventories;
 
 
 
Raw materials and packaging
1,344

 
1,315

Work-in-process
167

 
150

Finished goods
1,436

 
1,258

 
2,947

 
2,723

Prepaid expenses and other current assets
1,546

 
908

Total Current Assets
31,027

 
26,450

Property, plant and equipment, net
17,240

 
16,591

Amortizable intangible assets, net
1,268

 
1,237

Goodwill
14,744

 
14,430

Other nonamortizable intangible assets
12,570

 
12,196

Nonamortizable Intangible Assets
27,314

 
26,626

Investments in Noncontrolled Affiliates
2,042

 
1,950

Other Assets
913

 
636

Total Assets
$
79,804

 
$
73,490

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Short-term debt obligations
$
5,485

 
$
6,892

Accounts payable and other current liabilities
15,017

 
14,243

Total Current Liabilities
20,502

 
21,135

Long-term Debt Obligations
33,796

 
30,053

Other Liabilities
11,283

 
6,669

Deferred Income Taxes
3,242

 
4,434

Total Liabilities
68,823

 
62,291

 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
Preferred Stock, no par value
41

 
41

Repurchased Preferred Stock
(197
)
 
(192
)
PepsiCo Common Shareholders’ Equity
 
 
 
Common stock, par value 12/3¢ per share (authorized 3,600 shares, issued, net of repurchased
common stock at par value: 1,420 and 1,428 shares, respectively)
24

 
24

Capital in excess of par value
3,996

 
4,091

Retained earnings
52,839

 
52,518

Accumulated other comprehensive loss
(13,057
)
 
(13,919
)
Repurchased common stock, in excess of par value (446 and 438 shares, respectively)
(32,757
)
 
(31,468
)
Total PepsiCo Common Shareholders’ Equity
11,045

 
11,246

Noncontrolling interests
92

 
104

Total Equity
10,981

 
11,199

Total Liabilities and Equity
$
79,804

 
$
73,490

 

A - 4




PepsiCo, Inc. and Subsidiaries
Supplemental Share-Based Compensation Data
(in millions except dollar amounts, unaudited)
 
 
Quarter Ended
 
Year Ended
 
12/30/2017

 
12/31/2016

 
12/30/2017

 
12/31/2016

Beginning Net Shares Outstanding
1,423

 
1,436

 
1,428

 
1,448

Options Exercised, RSUs, PSUs and PEPunits Converted
2

 

 
10

 
9

Shares Repurchased
(5
)
 
(8
)
 
(18
)
 
(29
)
Ending Net Shares Outstanding
1,420

 
1,428

 
1,420

 
1,428

 
 
 
 
 
 
 
 
Weighted Average Basic
1,421

 
1,431

 
1,425

 
1,439

Dilutive Securities:
 
 
 
 
 
 
 
Options

 
6

 
7

 
7

RSUs, PSUs, PEPunits and Other

 
6

 
5

 
5

ESOP Convertible Preferred Stock

 
1

 
1

 
1

Weighted Average Diluted
1,421

 
1,444

 
1,438

 
1,452

 
 
 
 
 
 
 
 
Average Share Price for the Period
$
114.03

 
$
105.15

 
$
112.93

 
$
103.59

Growth versus Prior Year
8
%
 
7
%
 
9
%
 
7
%
 
 
 
 
 
 
 
 
Options Outstanding
19

 
25

 
21

 
27

Options in the Money
19

 
25

 
20

 
26

Dilutive Shares from Options

 
6

 
7

 
7

Dilutive Shares from Options as a % of Options in the Money
%
 
26
%
 
35
%
 
26
%
 
 
 
 
 
 
 
 
Average Exercise Price of Options in the Money
$
74.05

 
$
69.46

 
$
72.84

 
$
68.51

 
 
 
 
 
 
 
 
RSUs, PSUs, PEPunits and Other Outstanding
8

 
9

 
8

 
9

Dilutive Shares from RSUs, PSUs, PEPunits and Other

 
6

 
5

 
5

 
 
 
 
 
 
 
 
Weighted-Average Grant-Date Fair Value of RSUs and PSUs Outstanding
$
102.30

 
$
91.81

 
$
102.05

 
$
91.55

Weighted-Average Grant-Date Fair Value of PEPunits Outstanding
$
68.94

 
$
59.86

 
$
68.94

 
$
59.88

 


A - 5




Non-GAAP Measures
In discussing financial results and guidance, the Company refers to the following measures which are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP): division operating profit, core results, core constant currency results, free cash flow, free cash flow excluding certain items, and organic results. We use these non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures provides additional information to facilitate comparison of our historical operating results and trends in our underlying operating results, and provides additional transparency on how we evaluate our business. We also believe presenting these measures allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.

We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Examples of items for which we may make adjustments include: amounts related to mark-to-market gains or losses (non-cash); charges related to restructuring programs; charges or adjustments related to the enactment of new laws, rules or regulations, such as significant tax law changes; gains or losses associated with mergers, acquisitions, divestitures and other structural changes; debt redemptions; pension and retiree medical related items; amounts related to the resolution of tax positions; asset impairments (non-cash); and remeasurements of net monetary assets. See below for a description of adjustments to our U.S. GAAP financial measures included herein. 

Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.
Glossary
We use the following definitions when referring to our non-GAAP financial measures, which may not be the same as or comparable to similar measures presented by other companies:

Acquisitions and divestitures: All mergers and acquisitions activity, including the impact of acquisitions, divestitures and changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.
Beverage volume: Volume shipped to retailers and independent distributors from both PepsiCo and our bottlers.
 
Constant currency: Financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute our constant currency results, we multiply or divide, as appropriate, our current year U.S. dollar results by the current year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior year average foreign exchange rates.
Core: Core results are non-GAAP financial measures which exclude certain items from our historical results. For the periods presented, core results exclude the following items:
Commodity mark-to-market net impact: Change in market value for commodity derivatives that we purchase to mitigate the volatility in costs of energy and raw materials that we consume. The market value is determined based on average prices on national exchanges and recently reported transactions in the marketplace.
In the quarter and year ended December 30, 2017, we recognized $28 million and $15 million of mark-to-market net gains, respectively, on commodity derivatives in corporate unallocated expenses. In the quarter and year ended December 31, 2016, we recognized $60 million and $167 million of mark-to-market net gains, respectively, on commodity derivatives in corporate unallocated expenses. 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.
Restructuring and impairment charges
2014 Multi-Year Productivity Plan
In the quarter and year ended December 30, 2017, we incurred restructuring charges of $226 million and $295 million, respectively, in conjunction with the multi-year productivity plan we publicly announced in 2014 (2014 Productivity Plan). In the quarter and year ended December 31, 2016, we incurred restructuring charges of $54 million and $160 million,

A - 6




respectively, in conjunction with our 2014 Productivity Plan. The 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. To build on the successful implementation of the 2014 Productivity Plan to date, we expanded and extended the program through the end of 2019 to take advantage of additional opportunities within the initiatives described above to further strengthen our food, snack and beverage businesses.
Provisional net tax expense related to the TCJ Act
During the fourth quarter of 2017, the TCJ Act was enacted in the United States. Among its many provisions, the TCJ Act imposed a mandatory one-time transition tax on undistributed international earnings and reduced the U.S. corporate income tax rate from 35% to 21%. In the quarter and year ended December 30, 2017, we recorded a provisional net tax expense of $2.5 billion associated with the enactment of the TCJ Act. Included in the net tax expense of $2.5 billion is a provisional mandatory one-time transition tax of approximately $4 billion on undistributed international earnings. This mandatory one-time transition tax was partially offset by a provisional $1.5 billion benefit resulting from the required remeasurement of our deferred tax assets and liabilities to the new, lower U.S. corporate income tax rate.
The changes in the TCJ Act are broad and complex and we continue to examine the impact the TCJ Act may have on our business and financial results.The recorded impact of the TCJ Act is provisional and the final amount may differ from the above estimate, possibly materially, due to, among other things, changes in estimates, interpretations and assumptions we have made, changes in Internal Revenue Service interpretations, the issuance of new guidance, legislative actions, changes in accounting standards or related interpretations in response to the TCJ Act and future actions by states within the United States that have not currently adopted the TCJ Act.
Charge related to the transaction with Tingyi
In the year ended December 31, 2016, we recorded a pre- and after-tax impairment charge of $373 million to reduce the value of our 5% indirect equity interest in Tingyi-Asahi Beverages Holding Co. Ltd. to its estimated fair value.
Charge related to debt redemption
In the quarter and year ended December 31, 2016, we paid $2.5 billion to redeem all of our outstanding 7.900% senior notes due 2018 and 5.125% senior notes due 2019 for the principal amounts of $1.5 billion and $750 million, respectively, and terminated certain interest rate swaps. As a result, we recorded a pre-tax charge of $233 million to interest expense, primarily representing the premium paid in accordance with the “make-whole” redemption provisions.
Pension-related settlement charge
In the quarter and year ended December 31, 2016, we recorded a pre-tax pension settlement charge of $242 million related to the purchase of a group annuity contract.
Division operating profit: The aggregation of the operating profit for each of our reportable segments, which excludes the impact of corporate unallocated expenses.
Effective net pricing: Reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries.
Free cash flow: Net cash provided by operating activities less capital spending, plus sales of property, plant and equipment. 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.
Free cash flow is used by us primarily for financing activities, including debt repayments, dividends and share repurchases. Free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt service that are not deducted from the measure.
Free cash flow excluding certain items: Free cash flow, excluding payments related to restructuring charges, discretionary pension and retiree medical contributions, net cash received related to interest rate swaps, the tax impacts associated with each of these items, as applicable, and net cash tax benefit related to debt redemption charge. As free cash flow excluding certain items is an important measure used to monitor our cash flow performance, we believe this non-GAAP measure provides investors additional useful information when evaluating our cash from operating activities. See below for a reconciliation of this non-GAAP financial

A - 7




measure to the most directly comparable financial measure in accordance with U.S. GAAP (operating cash flow). In future years, we expect this measure to exclude payments related to the provisional mandatory transition tax liability of approximately $4 billion, which we currently expect to be paid over the period 2019 to 2026 under the provisions of the TCJ Act.

Net capital spending: Capital spending less cash proceeds from sales of property, plant and equipment.
 
Organic: A measure that adjusts for impacts of acquisitions, divestitures and other structural changes and foreign exchange translation. This measure also excludes the impact of the 53rd reporting week in 2016.

Raw material costs: Raw materials include the principal ingredients we use in our beverage, food and snack products, our key packaging materials and energy costs.

2018 guidance
Our 2018 organic revenue growth guidance excludes the impact of acquisitions, divestitures and other structural changes and foreign exchange translation. Our 2018 core tax rate guidance and 2018 core constant currency EPS growth guidance exclude the commodity mark-to-market net impact included in corporate unallocated expenses and restructuring and impairment charges. Our 2018 core constant currency EPS growth guidance also excludes the impact of foreign exchange translation. We are unable to reconcile our full year projected 2018 organic revenue growth to our full year projected 2018 reported net revenue growth because we are unable to predict the 2018 impact of foreign exchange due to the unpredictability of future changes in foreign exchange rates and because we are unable to predict the occurrence or impact of any acquisitions, divestitures or other structural changes. We are also not able to reconcile our full year projected 2018 core tax rate to our full year projected 2018 reported tax rate and our full year projected 2018 core constant currency EPS growth to our full year projected 2018 reported EPS growth because we are unable to predict the 2018 impact of foreign exchange or the mark-to-market net impact on commodity derivatives due to the unpredictability of future changes in foreign exchange rates and commodity prices. Therefore, we are unable to provide a reconciliation of these measures.

A - 8




PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information
Organic Revenue Growth Rates
Quarter and Year Ended December 30, 2017
(unaudited)

 
Percent Impact
 
GAAP
Measure
 
Non-GAAP
Measure
 
 
 
Reported
% Change
 
Organic
% Change(a)
Net Revenue Year over Year % Change
Volume
 
Effective
net pricing
 
Acquisitions and
divestitures and other structural changes
 
Foreign
exchange
translation
 
53rd reporting week(b)
 
Quarter Ended 12/30/2017
 
Quarter Ended 12/30/2017
Frito-Lay North America
3

 
2

 

 

 
(6
)
 
(1
)
 
5

Quaker Foods North America
0.5

 
(1
)
 

 
0.5

 
(5
)
 
(5
)
 

North America Beverages
(3
)
 

 
1

 

 
(5
)
 
(6
)
 
(3
)
Latin America
(4
)
 
7

 

 
3

 

 
6

 
3

Europe Sub-Saharan Africa
5

 
1

 

 
6

 
(1
)
 
11

 
6

Asia, Middle East and North Africa

 
6

 

 
(5.5
)
 

 

 
6

Total PepsiCo

 
2

 

 
1

 
(3.5
)
 

 
2

 
Percent Impact
 
GAAP
Measure
 
Non-GAAP
Measure
 
 
 
Reported
% Change
 
Organic
% Change
(a)
Net Revenue Year over Year % Change
Volume
 
Effective
net pricing
 
Acquisitions and
divestitures and other structural changes
 
Foreign
exchange
translation
 
53rd reporting week(b)
 
Year Ended 12/30/2017
 
Year Ended 12/30/2017
Frito-Lay North America
1

 
2.5

 

 

 
(2
)
 
2

 
3

Quaker Foods North America

 
(1
)
 

 

 
(2
)
 
(2
)
 
(1
)
North America Beverages
(2.5
)
 
1

 
1

 

 
(1
)
 
(2
)
 
(2
)
Latin America
(2
)
 
7

 
(0.5
)
 
1

 

 
6

 
5

Europe Sub-Saharan Africa
3

 
2

 

 
3

 

 
8

 
6

Asia, Middle East and North Africa

 
5

 

 
(10
)
 

 
(5
)
 
5

Total PepsiCo

 
3

 

 

 
(1
)
 
1

 
2

(a)
Organic percent change is a financial measure that is not in accordance with GAAP and is calculated by excluding the impact of foreign exchange translation, acquisitions, divestitures and other structural changes, as well as the 53rd reporting week in 2016, from reported growth.
(b)
Represents the impact of the exclusion of the 53rd reporting week from 2016 results.
Note – Certain amounts above may not sum due to rounding.

A - 9




PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Year over Year Growth Rates
Quarter and Year Ended December 30, 2017 (unaudited)
 
GAAP
Measure
 
 
Non-GAAP
Measure
 
 
 
Non-GAAP
Measure
 
Reported
% Change
 
Percent Impact of Items Affecting Comparability
 
Core(a)
% Change
 
Percent
Impact of
 
Core Constant
Currency
(a)
% Change
Operating Profit Year over Year % Change
Quarter Ended 12/30/2017
 
Commodity mark-to-
market net impact
 
Restructuring
and impairment
charges
(b)
 
Provisional net tax expense related to the TCJ Act
 
 Charge related to debt redemption
 
Pension-related settlement charge
 
Quarter Ended 12/30/2017
 
Foreign
exchange
translation
 
Quarter Ended 12/30/2017
Frito-Lay North America
(1
)
 

 
3.5

 
 
 

 
3

 

 
3

Quaker Foods North America
(6
)
 

 
5

 
 
 

 
(1
)
 

 
(1
)
North America Beverages
(29
)
 

 
6

 
 
 

 
(23
)
 

 
(23
)
Latin America
20

 

 
8

 
 
 

 
28

 
(6
)
 
22

Europe Sub-Saharan Africa

 

 
3.5

 
 
 

 
3.5

 
(5.5
)
 
(2
)
Asia, Middle East and North Africa
173

 

 
(4
)
 
 
 

 
169

 
18

 
187

Corporate Unallocated
(31
)
 
(5.5
)
 
(7
)
 
 
 
41

 
(3
)
 

 
(3
)
Total Operating Profit
9

 
2

 
10

 
 
 
(14
)
 
7

 
(1
)
 
6

Net Income Attributable to PepsiCo
(151
)
 
 
 
 
 
 
 
 
 
 
 
9

 
(1
)
 
8

Net Income Attributable to PepsiCo per common share - diluted
(152
)
 
 
 
 
 
 
 
 
 
 
 
9

 
(1
)
 
8

 
GAAP
Measure
 
 
Non-GAAP
Measure
 
 
 
Non-GAAP
Measure
 
Reported
% Change
 
Percent Impact of Items Affecting Comparability
Core(a)
% Change
 
Percent
Impact of
 
Core Constant
Currency
(a)
% Change
Operating Profit Year over Year % Change
Year Ended 12/30/2017
 
Commodity mark-to-
market net impact
 
Restructuring
and impairment
charges
(b)
 
Provisional net tax expense related to the TCJ Act
 
Charge related to the transaction with Tingyi
 
 Charge related to debt redemption
 
Pension-related settlement charge
 
Year Ended 12/30/2017
 
Foreign
exchange
translation
 
Year Ended 12/30/2017
Frito-Lay North America
3.5

 

 
1

 
 

 
 

 
5

 

 
4.5

Quaker Foods North America
(2
)
 

 
1.5

 
 

 
 

 

 

 

North America Beverages
(9
)
 

 
1

 
 

 
 

 
(8
)
 

 
(8
)
Latin America
2

 

 
4

 
 

 
 

 
6

 
1

 
7

Europe Sub-Saharan Africa
22

 

 
(2
)
 
 

 
 

 
20

 

 
20

Asia, Middle East and North Africa
73

 

 
(3
)
 
 
(64
)
 
 

 
6

 
8

 
15

Corporate Unallocated
(9
)
 
(13
)
 
(3
)
 
 

 
 
20

 
(5
)
 

 
(5
)
Total Operating Profit
7

 
2

 
1.5

 
 
(4
)
 
 
(3
)
 
4

 
1

 
5

Net Income Attributable to PepsiCo
(23
)
 
 
 
 
 
 
 
 
 
 
 
 
 
7

 
1

 
8

Net Income Attributable to PepsiCo per common share - diluted
(23
)
 
 
 
 
 
 
 
 
 
 
 
 
 
8

 
1

 
9

(a)
Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above items affecting comparability. See A-6 through A-7 for a discussion of each of these adjustments.
(b)
Restructuring and impairment charges include costs associated with the 2014 Multi-Year Productivity Plan. See A-6 through A-7 for a discussion of this plan.
Note – Certain amounts above may not sum due to rounding.


A - 10




PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Certain Line Items
Quarters Ended December 30, 2017 and December 31, 2016
(in millions except per share amounts, unaudited)
 
 
Quarter Ended 12/30/2017
 
Cost of sales
 
Gross profit
 
Selling, general and administrative expenses
 
Operating profit
 
Provision for income
taxes(a)
 
Net (loss)/income attributable to PepsiCo
 
Net (loss)/income attributable to PepsiCo per common share - diluted
 
Effective tax rate(b)
Reported, GAAP Measure
$
9,077

 
$
10,449

 
$
7,856

 
$
2,593

 
$
3,026

 
$
(710
)
 
$
(0.50
)
 
129.8
 %
Items Affecting Comparability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity mark-to-market net impact
1

 
(1
)
 
27

 
(28
)
 
(9
)
 
(19
)
 
(0.01
)
 
(0.1
)
Restructuring and impairment charges (c)

 

 
(226
)
 
226

 
67

 
159

 
0.11

 
0.4

Provisional net tax expense related to the TCJ Act (d)

 

 

 

 
(2,451
)
 
2,451

 
1.73

 
(105.2
)
Core, Non-GAAP Measure (e)
$
9,078

 
$
10,448

 
$
7,657

 
$
2,791

 
$
633

 
$
1,881

 
$
1.31

(f) 
25.0
 %
 
Quarter Ended 12/31/2016
 
Cost of sales
 
Gross profit
 
Selling, general and administrative expenses
 
Operating profit
 
Interest expense
 
Provision for income
taxes(a)
 
Net income attributable to PepsiCo
 
Net income attributable to PepsiCo per common share - diluted
 
Effective tax rate(b)
Reported, GAAP Measure
$
8,944

 
$
10,571

 
$
8,190

 
$
2,381

 
$
594

 
$
414

 
$
1,401

 
$
0.97

 
22.7
 %
Items Affecting Comparability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity mark-to-market net impact
30

 
(30
)
 
30

 
(60
)
 

 
(19
)
 
(41
)
 
(0.03
)
 
(0.3
)
Restructuring and impairment charges (c)

 

 
(54
)
 
54

 

 
(1
)
 
55

 
0.04
 
(0.7
)
Charge related to debt redemption

 

 

 

 
(233
)
 
77

 
156

 
0.11
 
1.2

Pension-related settlement charge

 

 
(242
)
 
242

 

 
80

 
162

 
0.11
 
1.2

Core, Non-GAAP Measure (e)
$
8,974

 
$
10,541

 
$
7,924

 
$
2,617

 
$
361

 
$
551

 
$
1,733

 
$
1.20

 
24.0
 %
(a)
Provision for income taxes is the expected tax benefit/charge on the underlying item based on the tax laws and income tax rates applicable to the underlying item in its corresponding tax jurisdiction and tax year and, in 2017, the impact of the TCJ Act is presented separately.
(b)
The impact of items affecting comparability on our effective tax rate represents the difference in the effective tax rate resulting from a higher or lower tax rate applicable to the items affecting comparability.
(c)
Restructuring and impairment charges include costs associated with the 2014 Multi-Year Productivity Plan. See A-6 through A-7 for a discussion of this plan.
(d)
Recorded a provisional net tax expense associated with the enactment of the TCJ Act. See A-7 for a discussion of this expense.     
(e)
Core results are financial measures that are not in accordance with GAAP and exclude the above items affecting comparability. See A-6 through A-7 for a discussion of each of these adjustments.
(f)
Does not sum due to impact of diluted shares and rounding.
Note – Certain amounts above may not sum due to rounding.

A - 11




PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Certain Line Items
Years Ended December 30, 2017 and December 31, 2016
(in millions except per share amounts, unaudited)
 
Year Ended 12/30/2017
 
Cost of sales
 
Gross profit
 
Selling, general and administrative expenses
 
Operating profit
 
Provision for income taxes(a)
 
Net income attributable to PepsiCo
 
Net income attributable to PepsiCo per common share - diluted
 
Effective tax rate(b)
Reported, GAAP Measure
$
28,785

 
$
34,740

 
$
24,231

 
$
10,509

 
$
4,694

 
$
4,857

 
$
3.38

 
48.9
 %
Items Affecting Comparability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity mark-to-market net impact
8

 
(8
)
 
7

 
(15
)
 
(7
)
 
(8
)
 
(0.01
)
 

Restructuring and impairment charges (c)

 

 
(295
)
 
295

 
71

 
224

 
0.16

 

Provisional net tax expense related to the TCJ Act (d)

 

 

 

 
(2,451
)
 
2,451

 
1.70

 
(25.5
)
Core, Non-GAAP Measure (e)
$
28,793

 
$
34,732

 
$
23,943

 
$
10,789

 
$
2,307

 
$
7,524

 
$
5.23

 
23.3
 %
 
Year Ended 12/31/2016
 
Cost of sales
 
Gross profit
 
Selling, general and administrative expenses
 
Operating profit
 
Interest expense
 
Provision for income taxes(a)
 
Net income attributable to noncontrolling interests
 
Net income attributable to PepsiCo
 
Net income attributable to PepsiCo per common share - diluted
 
Effective tax rate(b)
Reported, GAAP Measure
$
28,209

 
$
34,590

 
$
24,805

 
$
9,785

 
$
1,342

 
$
2,174

 
$
50

 
$
6,329

 
$
4.36

 
25.4
 %
Items Affecting Comparability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity mark-to-market net impact
78

 
(78
)
 
89

 
(167
)
 

 
(56
)
 

 
(111
)
 
(0.08
)
 
(0.2
)
Restructuring and impairment charges (c)

 

 
(160
)
 
160

 

 
26

 
3

 
131

 
0.09

 
(0.2
)
Charge related to the transaction with Tingyi

 

 
(373
)
 
373

 

 

 

 
373

 
0.26

 
(1.1
)
Charge related to debt redemption

 

 

 

 
(233
)
 
77

 

 
156

 
0.11

 
0.2

Pension-related settlement charge

 

 
(242
)
 
242

 

 
80

 

 
162

 
0.11

 
0.2

Core, Non-GAAP Measure (e)
$
28,287

 
$
34,512

 
$
24,119

 
$
10,393

 
$
1,109

 
$
2,301

 
$
53

 
$
7,040

 
$
4.85

 
24.5
 %
(a)
Provision for income taxes is the expected tax benefit/charge on the underlying item based on the tax laws and income tax rates applicable to the underlying item in its corresponding tax jurisdiction and tax year and, in 2017, the impact of the TCJ Act is presented separately.
(b)
The impact of items affecting comparability on our effective tax rate represents the difference in the effective tax rate resulting from a higher or lower tax rate applicable to the items affecting comparability.
(c)
Restructuring and impairment charges include costs associated with the 2014 Multi-Year Productivity Plan. See A-6 through A-7 for a discussion of this plan.
(d)
Recorded a provisional net tax expense associated with the enactment of the TCJ Act. See A-7 for a discussion of this expense.
(e)
Core results are financial measures that are not in accordance with GAAP and exclude the above items affecting comparability. See A-6 through A-7 for a discussion of each of these adjustments.
Note – Certain amounts above may not sum due to rounding.

A - 12




PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Operating Profit by Division
Quarters Ended December 30, 2017 and December 31, 2016
(in millions, unaudited)
 
GAAP
Measure
 
Items Affecting Comparability
 
Non-GAAP
Measure
 
Reported
 
 
Core(a)
Operating Profit
Quarter Ended 12/30/2017
 
Commodity mark-to-market
net impact
 
Restructuring and impairment charges(b)
 
Quarter Ended 12/30/2017
Frito-Lay North America
$
1,402

 
$

 
$
61

 
$
1,463

Quaker Foods North America
186

 

 
11

 
197

North America Beverages
491

 

 
55

 
546

Latin America
267

 

 
16

 
283

Europe Sub-Saharan Africa
315

 

 
34

 
349

Asia, Middle East and North Africa
328

 

 
4

 
332

Division Operating Profit
2,989

 

 
181

 
3,170

Corporate Unallocated
(396
)
 
(28
)
 
45

 
(379
)
Total Operating Profit
$
2,593

 
$
(28
)
 
$
226

 
$
2,791

 
GAAP
Measure
 
Items Affecting Comparability
 
Non-GAAP
Measure
 
Reported
 
 
Core(a)
Operating Profit
Quarter Ended 12/31/2016
 
Commodity mark-to-market
net impact
 
Restructuring and impairment charges(b)
 
Pension-related settlement charge
 
Quarter Ended 12/31/2016
Frito-Lay North America
$
1,410

 
$

 
$
12

 
$

 
$
1,422

Quaker Foods North America
197

 

 

 

 
197

North America Beverages
689