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PepsiCo Reports Fourth Quarter and Full-Year 2016 Results; Provides 2017 Financial Outlook

Mittwoch, 15.02.2017 12:35 von PR Newswire

PR Newswire

PURCHASE, N.Y., Feb. 15, 2017 /PRNewswire/ --

 

Reported (GAAP) Fourth Quarter and Full-Year 2016 Results



Fourth Quarter

Full-Year

Net revenue change

5.0%

(0.4)%

Foreign exchange impact on net revenue

(2)%

(3)%

EPS

$0.97

$4.36

EPS change

(17)%

19%

Foreign exchange impact on EPS

(3)%

(3)%

 

Organic/Core (non-GAAP)1 Fourth Quarter and Full-Year 2016 Results





Fourth Quarter

Full-Year

Organic revenue growth

3.7%

3.7%

Core EPS

$1.20

$4.85

Core constant currency EPS growth

15%

9%

 

PepsiCo, Inc. (NYSE: PEP) today reported results for the fourth quarter and full year 2016.

"We concluded 2016 with another strong quarter of operating performance, capping off a successful year. We met or exceeded every financial goal we set for 2016, while delivering a good balance between revenue performance and productivity," said Chairman and CEO Indra Nooyi. "Looking ahead to 2017, we expect solid financial performance despite anticipated continued macroeconomic challenges. Further, reflecting our commitment to providing attractive cash returns to shareholders, we are increasing our dividend per share for the 45th consecutive year, beginning with our June 2017 payment."

 

1

Please refer to the Glossary for the definitions of non-GAAP financial measures including "Core," "Constant currency," "Organic," "Free Cash Flow" and "Division Operating Profit." Please refer to "2017 Guidance and Outlook" for additional information regarding PepsiCo's full-year 2017 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.

 

Summary Fourth Quarter 2016 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

10

--

--

(7)

3


1


QFNA

5

--

--

(6)

--


1


NAB

8

--

(1)

(5)

2



1

Latin America

--

8

1

--

9


4

(3)

ESSA

1.5

4

--

(1)

5


3

1

AMENA

(1.5)

7

--

--

5


8

3

Total

5

2

--

(3.5)

4


3

1

 








Operating Profit and EPS


GAAP Reported

% Change

Percentage Point Impact

Core Constant Currency

 % Change


 Items Affecting Comparability

Foreign Exchange Translation

FLNA

9

--

--

10

QFNA

10

(0.5)

--

9

NAB

8

5

--

13

Latin America

4

(10)

17

11

ESSA

43

(19)

7

31

AMENA

(13)

(10)

(3)

(26)

Corporate Unallocated

(29)

41

--

12

Total

6

6

2

15






EPS

(17)

30

3

15

 

Note: Rows may not sum due to rounding.


Division operating profit (a non-GAAP measure that excludes corporate unallocated costs) increased by 10 percent in the quarter and was positively impacted by items affecting comparability (2 points) and negatively impacted by foreign exchange translation (2 points). Core constant currency division operating profit (a non-GAAP measure) increased by 11 percent (may not sum due to rounding).


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."


PepsiCo's fiscal year ends on the last Saturday of each December, resulting in an additional week of results every five or six years. PepsiCo's fourth quarter 2016 includes 17 weeks of results and its 2016 fiscal year includes 53 weeks of results.

 

Summary of Fourth Quarter Financial Performance:

  • Reported fourth quarter results were impacted by:
    • A 53rd reporting week and the reinvestment of the corresponding operating profit benefit in certain productivity and growth initiatives (incremental investments); and
    • A charge resulting from the redemption of certain senior notes in accordance with the "make-whole" redemption provisions (debt redemption charge).

  • Reported year-ago results were impacted by:
    • A non-cash tax benefit associated with our agreement with the IRS which reduced our reserve for uncertain tax positions.

  • Reported fourth quarter and year-ago results were also impacted by:
    • Pension-related settlements;
    • Restructuring charges in conjunction with the multi-year productivity plans we publicly announced in 2014 and 2012; and
    • Commodity mark-to-market impacts.

  • See A-11 for further details on the above items.

  • Reported net revenue increased 5.0 percent. Foreign exchange translation had a 2 percentage point unfavorable impact on reported net revenue and the 53rd reporting week had a 3.5 percentage point favorable impact. Organic revenue, which excludes the impacts of foreign exchange translation, structural changes and the 53rd reporting week, grew 3.7 percent.

  • Reported gross margin contracted 15 basis points and reported operating margin expanded 15 basis points. Core gross margin contracted 25 basis points and core operating margin expanded 90 basis points. Reported and core operating margin expansion reflect the implementation of effective revenue management strategies and productivity gains.

  • Reported operating profit increased 6 percent and core constant currency operating profit increased 15 percent. The impact of the pension-related settlement charge in the current year and pension-related settlement benefits in the prior year had an 11-percentage-point unfavorable impact on reported operating profit growth. Foreign exchange translation negatively impacted reported operating profit growth by 2 percentage points. The net impacts of restructuring charges and the commodity mark-to-market adjustments increased reported operating profit growth by 3 and 2.5 percentage points, respectively. The 53rd reporting week contributed 5 percentage points to reported operating profit growth, offset by incremental investments of 5 percentage points.

  • The reported effective tax rate was 22.7 percent in 2016 and 11.2 percent in 2015 (due to the non-cash tax benefit associated with the tax settlement referred to above). The core effective tax rate was 24.0 percent in 2016 and 22.5 percent in 2015.

  • Reported EPS was $0.97, a 17 percent decline from the prior year, reflecting the impacts of pension-related settlements, the debt redemption charge this year, as well as the year-ago non-cash tax benefit. Foreign exchange translation negatively impacted reported EPS by 3 percentage points.

  • Core EPS was $1.20, an increase of 13 percent. Excluding the impact of foreign exchange translation, core constant currency EPS increased 15 percent (see schedule A-10 for a reconciliation to reported EPS, the comparable GAAP measure).

Discussion of Fourth Quarter Division Results:

In addition to the reported net revenue performance as set out in the tables on pages 2 and A-9, reported operating results were driven by the following:

Frito-Lay North America (FLNA)
Positively impacted by productivity gains and lower raw material costs, partially offset by operating cost inflation. The 53rd reporting week contributed 7 percentage points to reported operating profit growth, partially offset by incremental investments, which reduced reported operating profit growth by 4 percentage points.

Quaker Foods North America (QFNA)
Positively impacted by a prior year impairment charge related to our dairy joint venture and ceasing its operations (9 percentage points), as well as lower raw material costs and productivity gains. These gains were partially offset by operating cost inflation and higher advertising and marketing expenses. The 53rd reporting week contributed 5.5 percentage points to reported operating profit growth, partially offset by incremental investments, which reduced reported operating profit growth by 4 percentage points.

North America Beverages (NAB)
Positively impacted by productivity gains and lower raw material costs, partially offset by operating cost inflation. The pension-related settlement benefit in the prior year had a 5-percentage-point unfavorable impact on reported operating profit growth. The 53rd reporting week contributed 7 percentage points to reported operating profit growth, partially offset by incremental investments, which reduced reported operating profit growth by 3 percentage points.

Latin America
Positively impacted by productivity gains and the impact of efficiency initiatives recorded in the prior year, partially offset by operating cost inflation, higher raw material costs (in local currency terms, driven by a strong U.S. dollar), higher advertising and marketing expenses, and adverse foreign exchange translation. Incremental investments reduced reported operating profit growth by 13 percentage points. Lower restructuring charges versus the prior year had a 10-percentage-point favorable impact on reported operating profit growth.

Europe Sub-Saharan Africa (ESSA)
Positively impacted by productivity gains, partially offset by operating cost inflation, higher raw material costs (in local currency terms, driven by a strong U.S. dollar), adverse foreign exchange translation and higher advertising and marketing expenses. Lower restructuring charges versus the prior year had a 19-percentage-point favorable impact on reported operating profit growth. The 53rd reporting week contributed 1.5 percentage points to reported operating profit growth, partially offset by incremental investments, which reduced reported operating profit growth by 1 percentage point.

Asia, Middle East and North Africa (AMENA)
Negatively impacted by operating cost inflation, higher raw material costs (in local currency terms, driven by a strong U.S. dollar), a charge associated with a recent tax law change as well as the net impact of efficiency initiatives. These impacts were partially offset by productivity gains, lower advertising and marketing expenses and favorable foreign exchange translation. Lower restructuring charges versus the prior year had a 10-percentage-point favorable impact on reported operating profit performance.

Summary Full-Year 2016 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

5

--

--

(2)

3.5


1.5


QFNA

1

--

--

(2)

--


--


NAB

3

--

--

(1.5)

2



1

Latin America

(17)

11

15

--

9


3

(2)

ESSA

(3)

7

--

--

4


3

2

AMENA

(1)

5

--

--

5


7

4

Total

--

3

2

(1)

4


3

2

 








Operating Profit and EPS


GAAP Reported

% Change

Percentage Point Impact

Core Constant Currency

 % Change


 Items Affecting Comparability

Foreign Exchange Translation

FLNA

8

--

--

8

QFNA

16

--

--

16

NAB

6

3

--

9

Latin America

n/m2

n/m2

14

(9)

ESSA

2.5

(3)

6

6

AMENA

(34)

31

2

(1.5)

Corporate Unallocated

1

8

--

9

Total

17

(13)

3

7






EPS

19

(13)

3

9

 

Note: Rows may not sum due to rounding


2 n/m= Not meaningful due to the impact of impairment charges associated with a change in accounting for our Venezuela operations in the prior year.


Division operating profit (a non-GAAP measure that excludes corporate unallocated costs) increased by 15 percent in the year and was positively impacted by items affecting comparability (12 points) and negatively impacted by foreign exchange translation (2.5 points). Core constant currency division operating profit (a non-GAAP measure) increased by 6 percent (may not sum due to rounding).


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."


PepsiCo's fiscal year ends on the last Saturday of each December, resulting in an additional week of results every five or six years. PepsiCo's 2016 fiscal year includes 53 weeks of results.

 

Summary of Full-Year 2016 Financial Performance:

  • Reported full-year 2016 results were impacted by:
    • A 53rd reporting week offset by the corresponding incremental investments;
    • A debt redemption charge; and
    • An impairment charge to reduce the holding value of our 5% indirect equity interest in Tingyi-Asahi Beverages Holding Co. Ltd. (TAB) to its estimated fair value (charge related to the transaction with Tingyi).

  • Reported prior-year results were impacted by:
    • An impairment charge related to our Venezuelan businesses;
    • The deconsolidation of our Venezuelan subsidiaries;
    • A non-cash tax benefit associated with our agreement with the IRS which reduced our reserve for uncertain tax positions; and
    • A charge related to a write-off of the recorded value of a call option to increase our holding in TAB (charge related to the transaction with Tingyi)

  • Reported full-year and prior-year results were also impacted by:
    • Pension-related settlements;
    • Restructuring charges in conjunction with the multi-year productivity plans we publicly announced in 2014 and 2012; and
    • Commodity mark-to-market impacts.

  • See A-10 for further details on the above items.

  • Reported net revenue declined 0.4 percent. Foreign exchange translation had a 3-percentage-point unfavorable impact and the Venezuela deconsolidation had a 2-percentage-point unfavorable impact on the reported net revenue change. Organic revenue, which excludes the impacts of foreign exchange translation, structural changes and the 53rd reporting week, grew 3.7 percent.

  • Reported gross margin expanded 65 basis points and reported operating margin expanded 235 basis points. Reported operating margin expansion benefited from the impact of the 2015 Venezuela impairment charges. Core gross margin expanded 50 basis points and core operating margin expanded 80 basis points. Reported and core operating margin expansion reflect the implementation of effective revenue management strategies and productivity gains, partially offset by incremental investments.

  • Reported operating profit increased 17 percent and core constant currency operating profit increased 7 percent. The 2015 Venezuela impairment charges had a 17-percentage-point favorable impact on reported operating profit growth, and the Venezuela deconsolidation had a 2-percentage-point unfavorable impact on reported operating profit growth. The commodity mark-to-market net impact favorably impacted reported operating profit by 2 percent. The net impact of charges related to the transaction with Tingyi and the pension-related settlements each had a 4 percentage-point unfavorable impact on reported operating profit growth. The 53rd reporting week positively contributed 1 percentage point to reported operating profit growth, more than fully offset by incremental investments, which reduced reported operating profit growth by 2 percentage points.

  • The reported effective tax rate was 25.4 percent in 2016 and 26.1 percent in 2015. The core effective tax rate was 24.5 percent in 2016 and 24.3 percent in 2015.

  • Reported EPS was $4.36, a 19 percent increase from the prior year, primarily reflecting the impact of the 2015 Venezuela impairment charges. Foreign exchange translation negatively impacted reported EPS by 3 percentage points.

  • The 2015 Venezuela impairment charges and the Venezuela deconsolidation had a net 26-percentage-point favorable impact on reported EPS growth and the Venezuela deconsolidation had a 2.5-percentage-point unfavorable impact on core EPS growth.

  • Core EPS was $4.85, an increase of 6 percent from the prior year. 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).

  • Cash flow provided by operating activities was $10.4 billion. Free cash flow (excluding certain items) was $7.8 billion.

Discussion of Full-Year 2016 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 lower raw material costs, partially offset by operating cost inflation and higher advertising and marketing expenses. The 53rd reporting week contributed 2 percentage points to reported operating profit growth, partially offset by incremental investments, which reduced reported operating profit growth by 1.5 percentage points.

Quaker Foods North America (QFNA)
Positively impacted by prior year impairment charges related to our dairy joint venture and ceasing of its operations (17 percentage points), as well as productivity gains and lower raw material costs, partially offset by higher advertising and marketing expenses and operating cost inflation. The 53rd reporting week contributed 2 percentage points to reported operating profit growth, partially offset by incremental investments, which reduced reported operating profit growth by 1.5 percentage points.

North America Beverages (NAB)
Positively impacted by productivity gains and lower raw material costs, partially offset by operating cost inflation and higher advertising and marketing expenses. Pension-related benefits in the prior year reduced reported operating profit by 2.5 percentage points. The 53rd reporting week contributed 1.5 percentage points to reported operating profit growth, partially offset by incremental investments, which reduced reported operating profit growth by 1 percentage point.

Latin America
Positively impacted by the 2015 Venezuela impairment charges and the impact of efficiency initiatives (4 percentage points) as well as current year productivity gains. These impacts were partially offset by operating cost inflation, the impact of the Venezuela deconsolidation (which reduced reported operating profit growth by 19 percentage points), higher raw material costs (in local currency terms, driven by a strong U.S. dollar), adverse foreign exchange translation and higher advertising and marketing expenses. Incremental investments reduced reported operating profit growth by 4 percentage points.

Europe Sub-Saharan Africa (ESSA)
Positively impacted by productivity gains, partially offset by higher raw material costs (in local currency terms, driven by a strong U.S. dollar), operating cost inflation, higher advertising and marketing expenses and adverse foreign exchange translation. Incremental investments reduced reported operating profit growth by 2 percentage points.

Asia, Middle East and North Africa (AMENA)
Negatively impacted by the net impact of charges related to the transaction with Tingyi (32 percentage points), operating cost inflation and higher advertising and marketing expenses, partially offset by productivity gains. Additionally, the impact from a prior-year gain related to the refranchising of a portion of our beverage business in India negatively impacted reported operating profit performance by 4 percentage points. This impact was partially offset by a prior-year impairment charge associated with a joint venture in the Middle East which positively contributed 3 percentage points to reported operating profit performance.

2017 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 and commodity mark-to-market adjustments.

The Company expects 2017 organic revenue growth of at least 3 percent. Based on current market consensus rates, foreign exchange translation is expected to negatively impact reported net revenue growth by approximately 3 percentage points and the 53rd week in 2016 is expected to negatively impact reported net revenue growth by 1 percentage point.

The Company expects 2017 core earnings per share of $5.09, driven by the following expectations and factors:



2016 core earnings per share

$4.85

Expected core constant currency EPS growth

8%

Negative impact of foreign currency translation3

(3)%

Expected 2017 core earnings per share

$5.09

 

Further, the Company expects:

  • Approximately $10 billion in cash flow from operating activities and approximately $7 billion in free cash flow (excluding certain items); and
  • Net capital spending of approximately $3 billion.

The Company also announced a 7 percent increase in its annualized dividend to $3.22 per share from $3.01 per share, effective with the dividend expected to be paid in June 2017. Total dividends to shareholders are expected to be approximately $4.5 billion in 2017. In addition, the Company anticipates share repurchases of approximately $2 billion, resulting in expected total cash returned to shareholders of approximately $6.5 billion in 2017.

 

3

Based on current foreign exchange market consensus rates.

 

Conference Call:

At 8 a.m. (Eastern time) today, the Company will host a conference call with investors and financial analysts to discuss fourth quarter and full-year 2016 results and the outlook for 2017. Further details will be accessible on the Company's website at www.pepsico.com/investors

 

 

 

PepsiCo, Inc. and Subsidiaries
Consolidated Statement of Income
(in millions except per share amounts; unaudited, except year-ended 12/26/2015 amounts)
























Quarter Ended


Year Ended


12/31/2016



12/26/2015



Change


12/31/2016



12/26/2015



Change

Net Revenue

$

19,515



$

18,585



5

%


$

62,799



$

63,056



%

Cost of sales (a)

8,944



8,487



5

%


28,209



28,731



(2)

%

Gross profit (a)

10,571



10,098



5

%


34,590



34,325



1

%

Selling, general and administrative expenses (a)

8,169



7,836



4

%


24,735



24,538



1

%

Venezuela impairment charges





%




1,359



n/m


Amortization of intangible assets

21



22



(7)

%


70



75



(7)

%

Operating Profit

2,381



2,240



6

%


9,785



8,353



17

%

Interest expense

(594)



(317)



88

%


(1,342)



(970)



38

%

Interest income and other

44



28



58

%


110



59



85

%

Income before income taxes

1,831



1,951



(6)

%


8,553



7,442



15

%

Provision for income taxes

414



218



90

%


2,174



1,941



12

%

Net income

1,417



1,733



(18)

%


6,379



5,501



16

%

Less: Net income attributable to noncontrolling interests

16



15



8

%


50



49



2

%

Net Income Attributable to PepsiCo

$

1,401



$

1,718



(18)

%


$

6,329



$

5,452



16

%













Diluted












Net Income Attributable to PepsiCo per Common Share

$

0.97



$

1.17



(17)

%


$

4.36



$

3.67



19

%

Weighted-average common shares outstanding

1,444



1,470





1,452



1,485
















Cash dividends declared per common share

$

0.7525



$

0.7025





$

2.9600



$

2.7625




 

n/m – Not meaningful

(a)

Reclassifications were made to prior years' amounts to conform to the current year presentation, including the presentation of certain functional support costs associated with the manufacturing and production of our products within cost of sales. These costs were previously included in selling, general and administrative expenses. These reclassifications resulted in an increase in cost of sales of $347 million for the full years 2015 with corresponding reductions to gross profit and selling, general and administrative expenses in the same year. The quarterly impact of these reclassifications increased cost of sales by $61 million, $84 million, $95 million and $107 million for the quarters ended March 21, 2015, June 13, 2015, September 5, 2015 and December 26, 2015, respectively, with corresponding reductions to gross profit and selling, general and administrative expenses in the same periods. These reclassifications reflect changes in how we are classifying costs of certain support functions as a result of ongoing productivity and efficiency initiatives. These reclassifications had no impact on our consolidated net revenue, operating profit, net interest expense, provision for income taxes, net income or earnings per share.

 

A - 1

PepsiCo, Inc. and Subsidiaries
Supplemental Financial Information
(in millions and unaudited, except year-ended 12/26/2015 amounts)
























Quarter Ended


Year Ended


12/31/2016



12/26/2015



Change


12/31/2016



12/26/2015



Change

Net Revenue




Frito-Lay North America

$

4,891



$

4,456



10

%


$

15,549



$

14,782



5

%

Quaker Foods North America

815



775



5

%


2,564



2,543



1

%

North America Beverages

6,288



5,847



8

%


21,312



20,618



3

%

Latin America

2,299



2,307



%


6,820



8,228



(17)

%

Europe Sub-Saharan Africa

3,333



3,283



1.5

%


10,216



10,510



(3)

%

Asia, Middle East & North Africa

1,889



1,917



(1.5)

%


6,338



6,375



(1)

%

Total Net Revenue

$

19,515



$

18,585



5

%


$

62,799



$

63,056



%













Operating Profit












Frito-Lay North America

$

1,410



$

1,292



9

%


$

4,659



$

4,304



8

%

Quaker Foods North America

197



179



10

%


653



560



16

%

North America Beverages

689



639



8

%


2,959



2,785



6

%

Latin America

223



214



4

%


887



(206)



n/m


Europe Sub-Saharan Africa

316



221



43

%


1,108



1,081



2.5

%

Asia, Middle East & North Africa

120



139



(13)

%


619



941



(34)

%

Corporate Unallocated

(574)



(444)





(1,100)



(1,112)




Total Operating Profit

$

2,381



$

2,240



6

%


$

9,785



$

8,353



17

%


n/m – Not meaningful due to the impact of impairment charges associated with a change in accounting for our Venezuela operations in the prior year.

 

A - 2

 

 

PepsiCo, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

(in millions)










Year Ended


12/31/2016



12/26/2015



(unaudited)



Operating Activities




Net income

$

6,379



$

5,501


Depreciation and amortization

2,368



2,416


Share-based compensation expense

284



295


Restructuring and impairment charges

160



230


Cash payments for restructuring charges

(125)



(208)


Charges related to the transaction with Tingyi (Cayman Islands) Holding Corp. (Tingyi)

373



73


Venezuela impairment charges



1,359


Excess tax benefits from share-based payment arrangements

(139)



(133)


Pension and retiree medical plan expenses

501



467


Pension and retiree medical plan contributions

(695)



(205)


Deferred income taxes and other tax charges and credits

452



78


Change in assets and liabilities:




Accounts and notes receivable

(349)



(461)


Inventories

(75)



(244)


Prepaid expenses and other current assets

10



(50)


Accounts payable and other current liabilities

997



1,692


Income taxes payable

329



55


Other, net

(66)



(285)


Net Cash Provided by Operating Activities

10,404



10,580






Investing Activities




Capital spending

(3,040)



(2,758)


Sales of property, plant and equipment

99



86


Acquisitions and investments in noncontrolled affiliates

(212)



(86)


Reduction of cash due to Venezuela deconsolidation



(568)


Divestitures

85



76


Short-term investments, by original maturity:




More than three months - purchases

(12,504)



(4,428)


More than three months - maturities

8,399



4,111


Three months or less, net

16



3


Other investing, net

9



(5)


Net Cash Used for Investing Activities

(7,148)



(3,569)






Financing Activities




Proceeds from issuances of long-term debt

7,818



8,702


Payments of long-term debt

(3,105)



(4,095)


Debt redemptions

(2,504)




Short-term borrowings, by original maturity:




More than three months - proceeds

59



15


More than three months - payments

(27)



(43)


Three months or less, net

1,505



53


Cash dividends paid

(4,227)



(4,040)


Share repurchases - common

(3,000)



(5,000)


Share repurchases - preferred

(7)



(5)


Proceeds from exercises of stock options

465



504


Excess tax benefits from share-based payment arrangements

139



133


Other financing

(58)



(52)


Net Cash Used for Financing Activities

(2,942)



(3,828)


Effect of exchange rate changes on cash and cash equivalents

(252)



(221)


Net Increase in Cash and Cash Equivalents

62



2,962


Cash and Cash Equivalents, Beginning of Year

9,096



6,134


Cash and Cash Equivalents, End of Year

$

9,158



$

9,096


 

A - 3

 

 

PepsiCo, Inc. and Subsidiaries

Consolidated Balance Sheet

(in millions except per share amounts)










12/31/2016



12/26/2015



(unaudited)



Assets




Current Assets




Cash and cash equivalents

$

9,158



$

9,096


Short-term investments

6,967



2,913


Accounts and notes receivable, net

6,694



6,437


Inventories




Raw materials and packaging

1,315



1,312


Work-in-process

150



161


Finished goods

1,258



1,247



2,723



2,720


Prepaid expenses and other current assets

1,547



1,865


Total Current Assets

27,089



23,031


Property, plant and equipment, net

16,591



16,317


Amortizable intangible assets, net

1,237



1,270


Goodwill

14,430



14,177


Other nonamortizable intangible assets

12,196



11,811


Nonamortizable Intangible Assets

26,626



25,988


Investments in noncontrolled affiliates

1,950



2,311


Other assets

636



750


Total Assets

$

74,129



$

69,667






Liabilities and Equity




Current Liabilities




Short-term debt obligations

$

6,892



$

4,071


Accounts payable and other current liabilities

14,243



13,507


Total Current Liabilities

21,135



17,578


Long-term debt obligations

30,053



29,213


Other liabilities

6,669



5,887


Deferred income taxes

5,073



4,959


Total Liabilities

62,930



57,637






Commitments and Contingencies








Preferred stock, no par value

41



41


Repurchased preferred stock

(192)



(186)


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: 1,428 and 1,448 shares, respectively)

24



24


Capital in excess of par value

4,091



4,076


Retained earnings

52,518



50,472


Accumulated other comprehensive loss

(13,919)



(13,319)


Repurchased common stock, in excess of par value (438 and 418 shares, respectively)

(31,468)



(29,185)


Total PepsiCo Common Shareholders' Equity

11,246



12,068


Noncontrolling interests

104



107


Total Equity

11,199



12,030


  Total Liabilities and Equity

$

74,129



$

69,667


 

 

A - 4

 

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


















Quarter Ended


Year Ended


12/31/2016



12/26/2015



12/31/2016



12/26/2015


Beginning Net Shares Outstanding

1,436



1,462



1,448



1,488


Options Exercised, Restricted Stock Units (RSUs), Performance Stock Units

  (PSUs) and PepsiCo Equity Performance Units (PEPunits) Converted



4



9



12


Shares Repurchased

(8)



(18)



(29)



(52)


Ending Net Shares Outstanding

1,428



1,448



1,428



1,448










Weighted Average Basic

1,431



1,454



1,439



1,469


Dilutive Securities:








Options

6



8



7



8


RSUs, PSUs, PEPunits and Other

6



7



5



7


ESOP Convertible Preferred Stock

1



1



1



1


Weighted Average Diluted

1,444



1,470



1,452



1,485










Average Share Price for the Period

$

105.15



$

98.12



$

103.59



$

96.74


Growth Versus Prior Year

7

%


3

%


7

%


9

%









Options Outstanding

25



31



27



35


Options in the Money

25



30



26



33


Dilutive Shares from Options

6



8



7



8


Dilutive Shares from Options as a % of Options in the Money

26

%


27

%


26

%


27

%









Average Exercise Price of Options in the Money

$

69.46



$

65.39



$

68.51



$

64.85










RSUs, PSUs, PEPunits and Other Outstanding

9



10



9



11


Dilutive Shares from RSUs, PSUs, PEPunits and Other

6



7



5



7










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

$

91.81



$

84.03



$

91.55



$

82.66


Weighted-Average Grant-Date Fair Value of PEPunits Outstanding

$

59.86



$

62.77



$

59.88



$

62.89


 

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); gains or losses associated with mergers, acquisitions, divestitures and other structural changes; charges related to restructuring programs; asset impairments (non-cash); amounts related to the resolution of tax positions; pension and retiree medical related items; debt redemptions; 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 contracts 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 31, 2016, we recognized $60 million and $167 million of mark-to-market net gains, respectively, on commodity hedges in corporate unallocated expenses. In the quarter and year ended December 26, 2015, we recognized $1 million and $11 million of mark-to-market net gains, respectively, on commodity hedges 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 31, 2016, we incurred restructuring charges of $54 million and $160 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 26, 2015, we incurred restructuring charges of $75 million and $169 million, 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. The 2014 Productivity Plan is in addition to the productivity plan we began in 2012 and is expected to continue the benefits of that plan.

A - 6

2012 Multi-Year Productivity Plan

In the quarter and year ended December 26, 2015, we incurred restructuring charges of $42 million and $61 million, respectively, in conjunction with the multi-year productivity plan we publicly announced in 2012 (2012 Productivity Plan). The 2012 Productivity Plan included actions in every aspect of our business that we believed would strengthen our complementary food, snack and beverage businesses by: leveraging new technologies and processes across PepsiCo's operations, go-to-market and information systems; heightening the focus on best practice sharing across the globe; consolidating manufacturing, warehouse and sales facilities; and implementing simplified organization structures, with wider spans of control and fewer layers of management. The 2012 Productivity Plan has enhanced PepsiCo's cost-competitiveness and provided a source of funding for future brand-building and innovation initiatives.

Charges 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. (TAB) to its estimated fair value. 

In the year ended December 26, 2015, we recorded a pre- and after-tax charge of $73 million related to a write-off of the recorded value of a call option to increase our holding in TAB to 20%.

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 settlements

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.

In the quarter and year ended December 26, 2015, we recorded pre-tax pension-related settlement benefits of $30 million and $67 million, respectively, associated with the settlement of pension-related liabilities from previous acquisitions.

Venezuela impairment charges

In the year ended December 26, 2015, we recorded pre- and after-tax charges of $1.4 billion related to the impairment of investments in our wholly-owned Venezuelan subsidiaries and beverage joint venture.

Venezuela deconsolidation

Conditions in Venezuela, including restrictive exchange control regulations and reduced access to U.S. dollars through official currency exchange markets, have resulted in an other-than-temporary lack of exchangeability between the Venezuelan bolivar and the U.S. dollar. The exchange restrictions and other conditions have significantly impacted our ability to effectively manage our businesses in Venezuela, including limiting our ability to import certain raw materials and to settle U.S. dollar-denominated obligations, and have restricted our ability to realize the earnings generated out of our Venezuelan businesses. We expect these conditions will continue for the foreseeable future.

As a result of these factors, we concluded that, effective as of the end of the third quarter of 2015, we did not meet the accounting criteria for control over our wholly-owned Venezuelan subsidiaries and we no longer had significant influence over our beverage joint venture with our franchise bottler in Venezuela. Therefore, effective at the end of the third quarter of 2015, we deconsolidated our Venezuelan subsidiaries and began accounting for our investments in our Venezuelan subsidiaries and joint venture using the cost method of accounting. We reduced the value of the cost method investments to their estimated fair values, resulting in a full impairment. The factors that led to our conclusions at the end of the third quarter of 2015 continued to exist through the end of 2016.

A - 7

Beginning with the fourth quarter of 2015, our financial results have not included the results of our Venezuelan businesses. We do not have any guarantees related to our Venezuelan entities, and our ongoing contractual commitments to our Venezuelan businesses are not material. We will recognize income from dividends and sales of inventory to our Venezuelan entities, which have not been and are not expected to be material, to the extent cash in U.S. dollars is received. We did not receive any cash in U.S. dollars from our Venezuelan entities during the fourth quarter of 2015 or fiscal year 2016. We will continue to monitor the conditions in Venezuela and their impact on our accounting and disclosures.

Tax benefit

In the year ended December 26, 2015, we recognized a non-cash tax benefit of $230 million associated with our agreement with the IRS resolving substantially all open matters related to the audits for taxable years 2010 through 2011, which reduced our reserve for uncertain tax positions for the tax years 2010 through 2011.

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: (1) payments related to restructuring charges, (2) discretionary pension and retiree medical contributions, (3) net cash received related to interest rate swaps, (4) the tax impacts associated with each of these items, as applicable, and (5) 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 measure to the most directly comparable financial measure in accordance with U.S. GAAP (operating cash flow).

Net capital spending: Capital spending less cash proceeds from sales of property, plant and equipment.

Organic: A measure that adjusts for impacts of foreign exchange translation as well as the impact from acquisitions, divestitures and other structural changes, including the Venezuela deconsolidation, for the comparable period. The Venezuela deconsolidation impact excludes the results of our Venezuelan businesses for 2015. This measure also excludes the impact of the 53rd reporting week in 2016. We believe organic revenue provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior year.

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.

2017 guidance

Our 2017 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 2017 core constant currency EPS growth guidance also excludes the impact of foreign exchange translation. Our 2017 organic revenue growth guidance excludes the impact of acquisitions, divestitures and other structural changes and foreign exchange translation. Our 2017 organic revenue growth guidance also excludes the impact of a 53rd reporting week in 2016. We are not able to reconcile our full year projected 2017 core constant currency EPS growth to our full year projected 2017 reported EPS growth because we are unable to predict the 2017 impact of foreign exchange or the mark-to-market net impact on commodity hedges due to the unpredictability of future changes in foreign exchange rates and commodity prices. We are also unable to reconcile our full year projected 2017 organic revenue growth to our full year projected 2017 reported net revenue growth because we are unable to predict the 2017 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. 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 31, 2016
(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


Foreign

exchange

translation


53rd reporting week


Quarter Ended 12/31/2016


Quarter Ended 12/31/2016

Frito-Lay North America

2



2







7



10



3


Quaker Foods North America

1



(1)







6



5




North America Beverages

1



1



1





5



8



2


Latin America

2



6



(1)



(8)







9


Europe Sub-Saharan Africa

1



4





(4)



1



1.5



5


Asia, Middle East & North Africa

5







(7)





(1.5)



5


Total PepsiCo

2



2





(2)



3.5



5



4





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


Foreign
exchange
translation


Venezuela

deconsolidation (b)


53rd reporting week


Year Ended 12/31/2016


Year Ended 12/31/2016

Frito-Lay North America

2



2









2



5



3.5


Quaker Foods North America



(1)









2



1




North America Beverages

1



1









1.5



3



2


Latin America

3



7



(1)



(11)



(14)





(17)



9


Europe Sub-Saharan Africa

1.5



2.5





(7)







(3)



4


Asia, Middle East & North Africa

6



(1)





(5)







(1)



5


Total PepsiCo

2



2





(3)



(2)



1





4




(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, including the Venezuela deconsolidation, and the 53rd reporting week from reported growth.

(b)

Represents the impact of the exclusion of the 2015 results of our Venezuelan businesses, which were deconsolidated effective as of the end of the third quarter of 2015.

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 31, 2016 (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 12/31/2016


Commodity mark-to-

market net

impact


Restructuring
and
impairment
charges (b)


Charge related to debt redemption


Pension-related settlements


Quarter Ended
12/31/2016


Foreign

exchange

translation


Quarter Ended 12/31/2016

Frito-Lay North America

9









10





10


Quaker Foods North America

10





(0.5)





9





9


North America Beverages

8








5


13





13


Latin America

4





(10)





(5.5)



17



11


Europe Sub-Saharan Africa

43





(19)





23



7



31


Asia, Middle East & North Africa

(13)





(10)





(23)



(3)



(26)


Corporate Unallocated

(29)



(14)






55


12





12


Total Operating Profit

6



(2.5)



(3)




11


12



2



15


Net Income Attributable to PepsiCo

(18)











11



3



13


Net Income Attributable to PepsiCo per
common share - diluted







(17)











13



3



15





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 12/31/2016


Commodity mark-to-

market net

impact


Restructuring
and
impairment
charges (b)


Charges related to the transaction with Tingyi


Charge related to debt redemption


Pension-related settlements


Venezuela impairment charges


Year Ended 12/31/2016


Foreign
exchange
translation


Year Ended 12/31/2016

Frito-Lay North America

8












8




8


Quaker Foods North America

16












16




16


North America Beverages

6









2.5




9




9


Latin America

n/m





4






n/m



(23)



14


(9)


Europe Sub-Saharan Africa

2.5





(3)










6


6


Asia, Middle East & North Africa

(34)





(2)



32






(4)



2


(1.5)


Corporate Unallocated

1



(14)







22




9




9


Total Operating Profit

17



(2)



(1)



4



4


(17)



5



3


7


Net Income Attributable to PepsiCo

16















4



3


7


Net Income Attributable to PepsiCo per

common share - diluted

19















6



3


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-8 for a discussion of each of these adjustments.

(b)

Restructuring and impairment charges for the quarter and year ended December 31, 2016 include costs associated with the 2014 Multi-Year Productivity Plan. Restructuring and impairment charges for the quarter and year ended December 26, 2015 include costs associated with the 2014 and 2012 Multi-Year Productivity Plans. See A-6 through A-8 for a discussion of these plans.

Note – Certain amounts above may not sum due to rounding.

n/m – Not meaningful due to the impact of impairment charges associated with a change in accounting for our Venezuela operations in the prior year.

 

A - 10

 

 

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Certain Line Items
Quarters Ended December 31, 2016 and December 26, 2015
(in millions except per share amounts, unaudited)





































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



$

8,169



$

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 (d)

$

8,974



$

10,541



$

7,903



$

2,617



$

361



$

551



$

1,733



$

1.20



24.0

%

 






Quarter Ended 12/26/2015





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




$

8,487



$

10,098



$

7,836



$

2,240



$

218



$

1,718



$

1.17



11.2

%

Items Affecting Comparability



















Commodity mark-to-market net impact




17



(17)



(16)



(1)



(1)








Restructuring and impairment
charges (c)








(117)



117



22



95



0.06


(0.2)


Pension-related settlement benefit








30



(30)



(11)



(19)



(0.01)


(0.2)


Tax benefit












230



(230)



(0.16)


11.8


Core, Non-GAAP Measure (d)




$

8,504



$

10,081



$

7,733



$

2,326



$

458



$

1,564



$

1.06



22.5

%



(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.

(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 for the quarter ended December 31, 2016 include costs associated with the 2014 Multi-Year Productivity Plan. Restructuring and impairment charges for the quarter ended December 26, 2015 include costs associated with the 2014 and 2012 Multi-Year Productivity Plans. See A-6 through A-8 for a discussion of these plans.

(d)

Core results are financial measures that are not in accordance with GAAP and exclude the above items affecting comparability. See A-6 through A-8 for a discussion of each of these adjustments.

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 31, 2016 and December 26, 2015
(in millions except per share amounts, unaudited)









































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



$

24,735



$

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 (d)

$

28,287



$

34,512



$

24,049



$

10,393



$

1,109



$

2,301



$

53



$

7,040



$

4.85



24.5

%






































Year Ended 12/26/2015


Cost of

sales


Gross

profit


Selling,

general and

administrative

expenses


Venezuela

impairment

charges


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

$

28,731



$

34,325



$

24,538



$

1,359



$

8,353



$

1,941



$

5,452



$

3.67



26.1

%

Items Affecting Comparability


















Commodity mark-to-market net impact

(18)



18



29





(11)



(3)



(8)






Restructuring and impairment

    charges (c)





(230)





230



46



184



0.12



(0.1)


Charge related to the transaction with Tingyi





(73)





73





73



0.05



(0.2)


Pension-related settlement benefits





67





(67)



(25)



(42)



(0.03)



(0.1)


Venezuela impairment charges







(1,359)



1,359





1,359



0.91



(4.4)


Tax benefits











230



(230)



(0.15)



3.1


Core, Non-GAAP Measure (d)

$

28,713



$

34,343



$

24,331



$



$

9,937



$

2,189



$

6,788



$

4.57



24.3

%



(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.

(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 for the year ended December 31, 2016 include costs associated with the 2014 Multi-Year Productivity Plan. Restructuring and impairment charges for the year ended December 26, 2015 include costs associated with the 2014 and 2012 Multi-Year Productivity Plans. See A-6 through A-8 for a discussion of these plans.

(d)

Core results are financial measures that are not in accordance with GAAP and exclude the above items affecting comparability. See A-6 through A-8 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 31, 2016 and December 26, 2015
(in millions, unaudited)






















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





16





705


Latin America

223





(1)





222


Europe Sub-Saharan Africa

316





22





338


Asia, Middle East & North Africa

120





3





123


Division Operating Profit

2,955





52





3,007


Corporate Unallocated

(574)



(60)



2



242



(390)


Total Operating Profit

$

2,381



$

(60)



$

54



$

242



$

2,617
























GAAP

Measure


Items Affecting Comparability


Non-GAAP

Measure


Reported



Core (a)

Operating Profit

Quarter Ended 12/26/2015


Commodity mark-to-market

net impact


Restructuring and impairment charges (b)


Pension-related settlement benefit


Quarter Ended 12/26/2015

Frito-Lay North America

$

1,292



$



$

6



$



$

1,298


Quaker Foods North America

179





1





180


North America Beverages

639





14



(30)



623


Latin America

214





20





234


Europe Sub-Saharan Africa

221





52





273


Asia, Middle East & North Africa

139





22





161


Division Operating Profit

2,684





115



(30)



2,769


Corporate Unallocated

(444)



(1)



2





(443)


Total Operating Profit

$

2,240



$

(1)



$

117



$

(30)



$

2,326




(a)

Core results are financial measures that are not in accordance with GAAP and exclude the above items affecting comparability. See A-6 through A-8 for a discussion of each of these adjustments.

(b)

Restructuring and impairment charges for the quarter ended December 31, 2016 include costs associated with the 2014 Multi-Year Productivity Plan. Restructuring and impairment charges for the quarter ended December 26, 2015 include costs associated with the 2014 and 2012 Multi-Year Productivity Plans. See A-6 through A-8 for a discussion of these plans.

 

A - 13

 

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Operating Profit by Division
Years Ended December 31, 2016 and December 26, 2015
(in millions, unaudited)


























GAAP

Measure


Items Affecting Comparability


Non-GAAP

Measure


Reported



Core (a)

Operating Profit

Year Ended 12/31/2016


Commodity mark-to-market

net impact


Restructuring and

impairment

charges (b)


Charge related to the transaction with Tingyi


Pension-related settlement charge


Year Ended 12/31/2016

Frito-Lay North America

$

4,659



$



$

13



$



$



$

4,672


Quaker Foods North America

653





1







654


North America Beverages

2,959





35







2,994


Latin America

887





27







914


Europe Sub-Saharan Africa

1,108





60







1,168


Asia, Middle East & North Africa

619





14



373





1,006


Division Operating Profit

10,885





150



373





11,408


Corporate Unallocated

(1,100)



(167)



10





242



(1,015)


Total Operating Profit

$

9,785



$

(167)



$

160



$

373



$

242



$

10,393
































GAAP

Measure


Items Affecting Comparability

Non-GAAP

Measure


Reported


Core (a)

Operating Profit

Year Ended 12/26/2015


Commodity mark-to-market

net impact


Restructuring and

impairment

charges (b)


Charge related to the transaction with Tingyi


Pension-related settlement benefits


Venezuela impairment charges


Year Ended 12/26/2015

Frito-Lay North America

$

4,304



$



$

26



$



$



$



$

4,330


Quaker Foods North America

560





3









563


North America Beverages

2,785





33





(67)





2,751


Latin America

(206)





36







1,359



1,189


Europe Sub-Saharan Africa

1,081





89









1,170


Asia, Middle East & North Africa

941





30



73







1,044


Division Operating Profit

9,465





217



73



(67)



1,359



11,047


Corporate Unallocated

(1,112)



(11)



13









(1,110)


Total Operating Profit

$

8,353



$

(11)



$

230



$

73



$

(67)



$

1,359



$

9,937




(a)

Core results are financial measures that are not in accordance with GAAP and exclude the above items affecting comparability. See A-6 through A-8 for a discussion of each of these adjustments.

(b)

Restructuring and impairment charges for the year ended December 31, 2016 include costs associated with the 2014 Multi-Year Productivity Plan. Restructuring and impairment charges for the year ended December 26, 2015 include costs associated with the 2014 and 2012 Multi-Year Productivity Plans. See A-6 through A-8 for a discussion of these plans.

 

A - 14

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
(unaudited)









Division Operating Profit Growth Reconciliation







Quarter Ended



Year Ended



12/31/2016



12/31/2016


Reported Operating Profit Growth

6


%


17


%

Impact of Corporate Unallocated

4




(2)



Division Operating Profit Growth

10




15



Restructuring and Impairment Charges

(3)




(1)



Pension-Related Settlements

1




1



Charges Related to the Transaction with Tingyi




3



Venezuela Impairment Charges




(15)



Core Division Operating Profit Growth

9




3



Foreign Exchange Translation

2




2.5



Core Constant Currency Division Operating Profit Growth

11


%


6


%


Gross Margin Growth Reconciliation









Quarter Ended



Year Ended



12/31/2016



12/31/2016


Reported Gross Margin Growth

(16)


bps


64


bps

Commodity Mark-to-Market Net Impact

(7)




(15)



Core Gross Margin Growth

(23)


bps


49


bps


Operating Margin Growth Reconciliation









Quarter Ended



Year Ended



12/31/2016



12/31/2016


Reported Operating Margin Growth

15


bps


234


bps

Commodity Mark-to-Market Net Impact

(31)




(25)



Restructuring and Impairment Charges

(35)




(11)



Pension-Related Settlements

140




49



Charges Related to the Transaction with Tingyi




48



Venezuela Impairment Charges




(215)



Core Operating Margin Growth

89


bps


79


bps






Impact of Venezuela Impairment Charges and Deconsolidation on EPS Growth Reconciliation












Year Ended







12/31/2016


Impact of Venezuela Impairment Charges and Deconsolidation on Reported Diluted EPS Growth





26


%

Impact of Venezuela Impairment Charges on Reported Diluted EPS Growth





(28)



Impact of Venezuela Deconsolidation on Core Diluted EPS Growth





(2.5)


%



Note – Certain amounts above may not sum due to rounding.

 

A - 15

 

 

 

PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
(unaudited)


Net Cash Provided by Operating Activities Reconciliation (in millions)









Year Ended


12/31/2016

Net Cash Provided by Operating Activities

$

10,404

Capital Spending

(3,040)

Sales of Property, Plant and Equipment

99

Free Cash Flow

7,463

Payments Related to Restructuring Charges

125

Discretionary Pension Contributions

459

Net Cash Received Related to Interest Rate Swaps

(5)

Net Cash Tax Benefit Related to Discretionary Pension Contributions

(151)

Net Cash Tax Benefit Related to Restructuring Charges

(22)

Net Cash Tax Benefit Related to Debt Redemption Charge

(83)

Free Cash Flow Excluding Above Items

$

7,786





Net Cash Provided by Operating Activities Reconciliation (in billions)











2017

Guidance


Net Cash Provided by Operating Activities

$

~

10


Net Capital Spending


~

3


Free Cash Flow


~

7


Discretionary Pension Contributions


~


Net Cash Tax Benefit Related to Discretionary Pension Contributions


~


Payments Related to Restructuring Charges


~


Net Cash Tax Benefit Related to Restructuring Charges


~


Free Cash Flow Excluding Certain Other Items

$

~

7




Note – Certain amounts above may not sum due to rounding.


 

A - 16

 

Cautionary Statement

Statements in this communication that are "forward-looking statements," including our 2017 guidance, are based on currently available information, operating plans and projections about future events and trends. Terminology such as "aim," "anticipate," "believe," "drive," "estimate," "expect," "expressed confidence," "forecast," "future," "goal," "guidance," "intend," "may," "objective," "outlook," "plan," "position," "potential," "project," "seek," "should," "strategy," "target," "will" or similar statements or variations of such terms are intended to identify forward-looking statements, although not all forward looking statements contain such terms. Forward-looking statements 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 PepsiCo's products, as a result of changes in consumer preferences or otherwise; changes in the legal and regulatory environment; imposition of new or increased taxes aimed at PepsiCo's products; imposition of labeling or warning requirements on PepsiCo's products; changes in laws related to packaging and disposal of PepsiCo's products; PepsiCo's ability to compete effectively; unstable political conditions, civil unrest or other developments and risks in the markets where PepsiCo's products are made, manufactured, distributed or sold; PepsiCo's ability to grow its business in developing and emerging markets; unfavorable economic conditions in the countries in which PepsiCo operates; the ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption; increased costs, disruption of supply or shortages of raw materials and other supplies; business disruptions; product contamination or tampering or issues or concerns with respect to product quality, safety and integrity; damage to PepsiCo's reputation or brand image; failure to successfully complete or integrate acquisitions and joint ventures into PepsiCo's existing operations or to complete or manage divestitures or refranchisings; changes in estimates and underlying assumptions regarding future performance that could result in an impairment charge; increase in income tax rates, changes in income tax laws or disagreements with tax authorities; failure to realize anticipated benefits from PepsiCo's productivity initiatives or global operating model; PepsiCo's ability to recruit, hire or retain key employees or a highly skilled and diverse workforce; loss of any key customer or changes to the retail landscape; any downgrade or potential downgrade of PepsiCo's credit ratings; PepsiCo's ability to implement shared services or utilize information technology systems and networks effectively; fluctuations or other changes in exchange rates; climate change or water scarcity, or legal, regulatory or market measures to address climate change or water scarcity; failure to successfully negotiate collective bargaining agreements, or strikes or work stoppages; infringement of intellectual property rights; potential liabilities and costs from litigation or legal proceedings; and other factors that may adversely affect the price of PepsiCo's publicly traded securities and financial performance.

For additional information on these and other factors that could cause PepsiCo's actual results to materially differ from those set forth herein, please see PepsiCo's filings with the Securities and Exchange Commission, including its 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.

 

A - 17

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/pepsico-reports-fourth-quarter-and-full-year-2016-results-provides-2017-financial-outlook-300407820.html

SOURCE PepsiCo, Inc.